Nuvo Pharmaceuticals™ Announces 2016 Third Quarter Results

- Nuvo continues to generate net income and cash from operating activities -

- Nuvo to Host Conference Call/Audio Webcast November 11th at 8:00 a.m. ET -

MISSISSAUGA, ON, Nov. 10, 2016 /CNW/ - Nuvo Pharmaceuticals Inc. (Nuvo or the Company) (TSX:NRI), formerly Nuvo Research Inc., a commercial healthcare company with a portfolio of commercial products and pharmaceutical manufacturing capabilities, today announced its financial and operational results for the third quarter ended September 30, 2016.  For further details on the results, please refer to Nuvo's Management, Discussion and Analysis (MD&A) and Condensed Consolidated Interim Financial Statements which are available on the Company's website (www.nuvopharmaceuticals.com).

Third Quarter and Business Update (1)

Pennsaid® 2%

  • U.S. prescriptions of Pennsaid 2% were 103,000 in the third quarter of 2016 compared to 97,000 prescriptions in the third quarter of 2015 according to IMS Health. For the first nine months of 2016, U.S. prescriptions of Pennsaid 2% were 338,000 compared to 204,000 for the first nine months of 2015.

  • In November, the Company commenced a new placebo-controlled, multi-centre Phase 3 trial (the Trial) in Germany to study Pennsaid 2% for the treatment of acute ankle sprains. Topline results of the Trial are expected to be available in Q2 2017. The Trial will be conducted to support regulatory applications for marketing approval of Pennsaid 2% for the treatment of acute pain in the E.U., Canada and Australia.

Management Appointment

  • In September, the board of directors of the Company appointed Mary-Jane Burkett to the position of Vice President and Chief Financial Officer. Ms. Burkett joined Nuvo in 2012 and most recently was the Corporate Controller.

Q3 Financial Summary

  • Total revenue in the third quarter of 2016 was $5.5 million, consistent with the third quarter of 2015. Total revenue for first nine months of 2016 was $21.5 million compared to $12.8 million for the comparative nine-month period.

  • Adjusted EBITDA(2) decreased to $1.4 million for the third quarter of 2016 compared to $2.6 million for the third quarter of 2015. For the first nine months of 2016, Adjusted EBITDA was $7.6 million compared to $4.0 million for the comparative nine-month period.

  • Net income from continuing operations for the third quarter of 2016 was $1.3 million compared to $2.1 million for the third quarter of 2015. Net income from continuing operations was $5.7 million for the first nine months of 2016 compared to $3.6 million for the comparative nine-month period.

  • Cash and short-term investments were $17.4 million at September 30, 2016 compared to $16.0 million at June 30, 2016.

(1) The financial information presented herein reflects results from continuing operations with Nuvo's previously disclosed segment, Crescita, presented as a discontinued operation.

(2) Adjusted EBITDA is a non-IFRS financial measure defined by the Company below.

 

"This quarter demonstrates the anticipated non-linear growth of our Pennsaid 2% U.S. revenue due to Horizon's product ordering patterns," said John London, Nuvo's President & CEO.  "We believe the most important long-term indicators of Pennsaid 2% U.S. growth are prescription trends and Horizon's dedication to the brand.  After prescriptions declined in June and July, a typical seasonal trend, U.S. prescriptions have steadily increased in each of August, September and October.  Horizon continues to treat Pennsaid 2% as an important product and believes that Pennsaid 2% should continue to grow in the U.S."  Mr. London added, "Our Q3 financial results demonstrate that even at lower sales levels, Nuvo is still profitable and generating cash."

Pennsaid® 2%

Pennsaid 2% Phase 3 Trial
The Company's Pennsaid 2% Phase 3 Trial (the Trial) is being conducted in Germany and commenced in November of this year.  The Trial is being conducted to support regulatory applications for marketing approval of Pennsaid 2% for the treatment of acute pain in the E.U., Canada and Australia.  The Company believes that most other jurisdictions will base their marketing approval on the current U.S. Food and Drug Administration (FDA) approval of Pennsaid 2% for the treatment of the pain of osteoarthritis (OA) of the knee and will not require additional clinical efficacy data.  The Company expects the Trial to be completed and topline results available in Q2 2017.  The Trial will cost approximately $1.5 million to be paid by the Company over the second half of 2016 and the first half of 2017.

Out-licensing Update
Nuvo is in a number of active discussions with potential commercial licensees of Pennsaid 2% for various global territories.  Nuvo anticipates signing licensing agreements covering multiple countries beginning in 2017.  Nuvo projects that incremental revenue from licensing agreements signed in 2017 will commence in 2018 and 2019, subject to obtaining regulatory approvals for Pennsaid 2% in the related territories.

Merger and Acquisition (M&A) Transactions
Nuvo is in active discussions relating to potential M&A transactions to acquire additional, accretive commercial assets to further diversify the Company's product portfolio (including Pennsaid, Pennsaid 2% and the HLT Patch) and maximize the Company's manufacturing capabilities at our GMP approved site in Varennes, Québec.  Nuvo is charting a course to further diversify its revenue streams through a combination of organic growth from Pennsaid 2%, international licensing and financially responsible M&A transactions.

Q3 Financial Review

Table of Selected Financial Results
For further details on the results, please refer to Nuvo's Management, Discussion and Analysis (MD&A) and Consolidated Financial Statements which are available on the Company's website (www.nuvopharmaceuticals.com).


Three months ended

Nine months ended


September 30,

2016

September 30,

2015

 

Change

September 30,

2016

September 30,

2015


Change

(from continuing operations, Canadian
dollars in millions, except gross margin)

$

$

$

$

$

$

Product Sales

5.0

5.0

-

19.6

11.5

8.1

Gross Margin % on Product Sales

49%

50%

(1%)

55%

42%

13%

Other Revenue

0.5

0.5

-

1.8

1.3

0.5

Total Operating Expenses

4.4

3.8

0.6

15.3

9.9

5.4

Net Income (loss)

1.3

2.1

(0.8)

5.7

3.6

2.1

Adjusted EBITDA

1.4

2.6

(1.2)

7.6

4.0

3.6

 

Total revenue, consisting of product sales, royalties and contract revenue for the three months ended September 30, 2016 was $5.5 million consistent with the comparative three-month period.  Total revenue for the nine months ended September 30, 2016 was $21.5 million compared to $12.8 million for the comparative nine-month period.

Total operating expenses comprised of cost of goods sold (COGS), research and development (R&D) expenses, general and administrative (G&A) expenses and net interest income were $4.4 million for the three months ended September 30, 2016, an increase from $3.8 million for the three months ended September 30, 2015.  Total operating expenses for the nine months ended September 30, 2016 increased to $15.3 million from $9.9 million in the comparative nine-month period.

COGS was consistent at $2.5 million for the three months ended September 30, 2016 and 2015.  Gross margin on product sales was $2.5 million or 49% for the three months ended September 30, 2016 versus $2.5 million or 50% for the three months ended September 30, 2015.  COGS for the nine months ended September 30, 2016 was $8.8 million compared to $6.7 million for the nine months ended September 30, 2015 with the increase attributable to higher product sales.  Gross margin on product sales was $10.8 million or 55% for the nine months ended September 30, 2016 compared to a gross margin of $4.8 million or 42% for the nine months ended September 30, 2015.

R&D expenses were $0.4 million for the three months ended September 30, 2016 compared to $0.3 million for the three months ended September 30, 2015.  The increase in spending in the three months ended September 30, 2016 related to the Trial for the treatment of acute ankle sprains.  R&D expenses incurred in the three months ended September 30, 2015 related entirely to a similar trial conducted in 2015.  R&D expenses were $0.8 million for the nine months ended September 30, 2016 compared to $1.0 million for the nine months ended September 30, 2015. 

G&A expenses were $1.5 million for the three months ended September 30, 2016 compared to $1.1 million for the three months ended September 30, 2015.  In the current three-month period, a $0.4 million decrease in stock-based compensation (SBC) was more than offset by $0.1 million for transition services fees provided by Crescita, $0.4 million of professional fees incurred by the Company for a merger transaction the Company is no longer pursuing and an increase in general corporate costs primarily related to the allocation of certain corporate G&A costs to Crescita in the comparative three-month period.  G&A expenses were $5.8 million for the nine months ended September 30, 2016 compared to $2.5 million for the nine months ended September 30, 2015. 

The Company experienced a net foreign currency gain of $0.1 million for the three months ended September 30, 2016 compared to a net foreign currency gain of $0.4 million for the three months ended September 30, 2015.  For the nine months ended September 30, 2016, the Company experienced a net foreign currency loss of $0.5 million compared to a net foreign currency gain of $0.7 million in the comparative nine-month period. 

Net income from continuing operations was $1.3 million for the three months ended September 30, 2016 compared to $2.1 million for the three months ended September 30, 2015.  The decrease in net income from continuing operations was primarily related to an increase in G&A expenses, a decrease in net interest income and a lower foreign exchange gain.  Net income from continuing operations was $5.7 million for the nine months ended September 30, 2016 compared to $3.6 million for the nine months ended September 30, 2015.

Adjusted EBITDA decreased to $1.4 million for the three months ended September 30, 2016 compared to $2.6 million for the three months ended September 30, 2015.  The decrease in Adjusted EBITDA for the current three-month period was primarily related to an increase in G&A expenses, a decrease in net interest income and a lower foreign exchange gain.  Adjusted EBITDA increased to $7.6 million for the nine months ended September 30, 2016 compared to $4.0 million for the nine months ended September 30, 2015.

Cash and short-term investments were $17.4 million as at September 30, 2016 compared to $16.0 million at June 30, 2016 and $48.7 million at December 31, 2015.  The decrease in cash from December 31, 2015 related to the $35.0 million that was transferred to Crescita as part of the reorganization of the Company and expenses related to the reorganization.

The number of common shares outstanding as at September 30, 2016 was 11,503,759.

Non-IFRS Financial Measures

Adjusted EBITDA
EBITDA is a non-IFRS financial measure.  The term EBITDA does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies.  The Company defines Adjusted EBITDA as net income from continuing operations before net interest income, plus taxes, depreciation, amortization and SBC.  Management believes Adjusted EBITDA is a useful supplemental measure from which to determine the Company's ability to generate cash available for working capital, capital expenditures and income taxes.

The following is a summary of how EBITDA and Adjusted EBITDA are calculated:


Three Months ended

September 30

Nine Months ended

September 30


2016

2015

2016

2015

in thousands

$

$

$

$

Net income from continuing operations

1,251

2,109

5,670

3,627

Add back:





Net interest income

(29)

(117)

(107)

(404)

Income tax expense

-

-

-

7

Depreciation and amortization

57

59

170

213

EBITDA

1,279

2,051

5,733

3,443

Add back:





SBC

120

513

1,831

543

Adjusted EBITDA

1,399

2,564

7,564

3,986

 

Management to Host Conference Call/Webcast
Management will host a conference call to discuss the results tomorrow (Friday, November 11, 2016) at 8:00 a.m. ET.  To participate in the conference call, please dial 1 (888) 231-8191 or (647) 427-7450, reference number 89204738.  Please call in 15 minutes prior to the call to secure a line.  You will be put on hold until the conference call begins.

A taped replay of the conference call will be available two hours after the live conference call and will be accessible until November 18, 2016 by calling 1 (855) 859-2056 or (416) 849-0833, reference number 89204738.

A live audio webcast of the conference call will be available through www.nuvopharmaceuticals.com. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to hear the webcast.

About Nuvo Pharmaceuticals Inc.
Nuvo (TSX:NRI) is a commercial healthcare company with a portfolio of commercial products and pharmaceutical manufacturing capabilities.  Nuvo has three commercial products that are available in a number of countries; Pennsaid 2%, Pennsaid and the heated lidocaine/tetracaine patch.  Pennsaid 2% is sold in the U.S. by Horizon Pharma plc (NASDAQ: HZNP) and is available for partnering in certain other territories around the world.  Nuvo manufactures Pennsaid for the global market and Pennsaid 2% for the U.S. market at its FDA, Health Canada and E.U. approved manufacturing facility in Varennes, Québec.  For additional information, please visit www.nuvopharmaceuticals.com.

Forward-Looking Statements
Certain statements in this press release constitute forward-looking information and/or forward-looking statements (collectively, "forward-looking statements") within the meaning of applicable securities laws. Forward-looking statements include, but are not limited to, the future approval, marketing and sale of Pennsaid 2% in certain jurisdictions, as well as statements with respect to management's beliefs, plans, estimates, and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "believe", "should" or "plans", or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those contemplated by such statements. Factors that could cause such differences include, but are not limited to, general business and economic uncertainties and adverse market conditions; as well as other risk factors included in the Company's Management Information Circular dated December 31, 2015 and the Company's Annual Information Form dated February 17, 2016 under the heading "Risks Factors", and as described from time to time in the reports and disclosure documents filed by the Company with Canadian securities regulatory agencies and commissions. These and other factors should be considered carefully and readers should not place undue reliance on the Company's forward-looking statements. As a result of the foregoing and other factors, no assurance can be given as to any such future results, levels of activity or achievements and neither the Company nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. Although the forward-looking information contained in this press release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. All forward-looking statements in this press release are qualified by these cautionary statements. The forward-looking statements contained herein are made as of the date of this press release and, except as required by applicable law, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

SOURCE Nuvo Pharmaceuticals Inc.

For further information: Investor Relations, Email: ir@nuvopharm.com

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