Nuvo Research® Announces 2015 Fourth Quarter & Year-End Results

- Quarter Highlighted by growth in Product Sales and Gross Margin -

MISSISSAUGA, ON, Feb. 17, 2016 /CNW/ - Nuvo Research Inc. (TSX:NRI), a life sciences company with growing revenues and a diverse portfolio of topical products, today announced its financial and operational results for the fourth quarter and year ended December 31, 2015.

Fourth Quarter and Recent Corporate Developments: 

Financial Highlights

  • Product sales increased in the quarter to $7.2 million from $5.2 million in Q3 and $1.6 million in the comparative period in 2014;

  • Total Revenue, consisting of product sales, royalties, license fee revenue and research and other contract revenue for the three months ended December 31, 2015 was $7.8 million compared to $3.4 million for the three months ended December 31, 2014;

  • Gross margin on product sales in the quarter increased to $3.9 million or 55% from $2.6 million or 51% in Q3 compared to a negative margin of $15,000 or (1%) in the comparative period in 2014;

  • Net income for the three months ended December 31, 2015 was $0.3 million compared to a net loss of $6.1 million for the three months ended December 31, 2014; and

  • Cash and short-term investments were $48.7 million at December 31, 2015 compared to $50.8 million at the end of Q3 and $58.3 million at December 31, 2014.

Corporate Developments

Proposed Reorganization of the Company

  • The Company will hold a special meeting of shareholders on February 18, 2016 at which shareholders will be asked to approve the previously announced reorganization of Nuvo into two separate publicly traded companies. If approved, one company, Nuvo Pharmaceuticals Inc. (Nuvo Pharma) would be a revenue and EBITDA generating commercial healthcare company to be owned 100% by Nuvo shareholders. The second company, Crescita Therapeutics Inc. (Crescita) would be a drug development company also initially owned 100% by Nuvo shareholders. Completion of the reorganization is subject to a number of conditions including shareholder and court approval. If the proposed transaction is approved by shareholders and all other conditions are satisfied, Nuvo expects the transaction to be completed in Q1 2016.

Disposal of Immunology Group

  • In February 2016, Nuvo's Board of Directors unanimously approved a proposal to initiate a divestiture or orderly wind down of the Company's Immunology Group. While the Company continues to explore a possible sale of the Immunology Group, if a divestiture transaction does not materialize, the wind down of the Immunology operations is expected to be completed by the end of 2016.

Pennsaid® 2%

  • According to IMS Health, U.S. prescriptions of Pennsaid 2% increased from approximately 97,000 in Q3 to 116,000 in Q4. Under the terms of an exclusive manufacturing agreement, the Company earns revenue from U.S. product sales of Pennsaid 2% to Horizon Pharma plc (Horizon), which acquired the U.S. Pennsaid 2% rights from the Company in Q4 2014. Since its launch by Horizon on January 1, 2015, U.S. prescriptions for Pennsaid 2% have increased significantly from 18,000 prescriptions in Q4 2014 when it was being marketed by the Company's former U.S. licensee. Approximately 320,000 Pennsaid 2% prescriptions were dispensed in the year ended December 31, 2015 compared to 59,000 prescriptions in the year ended December 31, 2014;

  • In February 2016, the Company amended its manufacturing agreement with Horizon for the production of Pennsaid 2% to extend the term to December 31, 2029 from the initial term which ended on December 31, 2022. The amendment included volume-tiered pricing;

  • In November 2015, NovaMedica LLC advised the Company that their Pennsaid 2% clinical trial was successful and that they have submitted their application to obtain regulatory approval in Russia; and

  • In July 2015, the Company initiated a Phase 3 clinical trial in Germany of Pennsaid 2% for the treatment of acute pain to support regulatory approval applications for Pennsaid 2% in Canada and the E.U. Topline results are expected in Q1 2016.

Pliaglis

  • In December 2015, the Company reacquired the Pliaglis development and marketing rights for the U.S., Canada and Mexico.

WF10™

  • In December 2015, the Company announced topline results of the phase 2 WF10 trial. Patients dosed with WF10 did not report a reduction in symptoms that was significantly better than patients dosed with a saline placebo at any of the endpoints being measured in the trial. Management believes that the results do not justify the further development of WF10 for the treatment of allergic rhinitis and has discontinued all WF10 development.

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.nuvoresearch.com).


Three months ended

Year ended


December 31,

2015

December 31,

2014

Change

December 31,

2015

December 31,

2014

Change

(Canadian dollars in thousands,
except gross margin and per share figures)

$

$

$

$

$

$

Product Sales

7,166

1,586

5,580

19,208

6,470

12,738

Gross Margin % on Product Sales

55%

(1%)


47%

14%


Other Revenue

677

1,841

(1,164)

2,144

6,587

4,443

Operating Expenses

7,860

8,697

(837)

29,425

27,080

2,345

Net income (loss)

296

(6,143)

6,439

(7,120)

38,590

(45,710)

Per share - basic

0.03

(0.58)


(0.65)

3.85


Per share - diluted

0.03

(0.56)


(0.65)

3.71


Q4 Financial Highlights
Total revenue, consisting of product sales, royalties, license fee revenue and research and other contract revenue for the three months ended December 31, 2015 was $7.8 million compared to $3.4 million for the three months ended December 31, 2014.  The increase in revenue primarily related to an increase in Pennsaid 2% product sales in the U.S., slightly offset by a decrease in royalty revenue from Pennsaid and Pennsaid 2% in the U.S. as the Company no longer earns a royalty on net sales in the U.S market.  Total revenue for the year was $21.4 million compared to $13.1 million in the comparative period.

Total operating expenses for the three months ended December 31, 2015 decreased to $7.9 million compared to $8.7 million for the three months ended December 31, 2014.  The decrease in operating expenses was primarily due to a decrease in stock-based compensation (SBC) expenses, partially offset by an increase in cost of goods sold (COGS) and the costs related to the proposed reorganization of the Company.  Total operating expenses for the year ended December 31, 2015 were $29.4 million compared to $27.1 million for the year ended December 31, 2014.

COGS for the three months ended December 31, 2015 was $3.2 million compared to $1.6 million for the three months ended December 31, 2014.  The increase in COGS was primarily related to an increase in Pennsaid 2% product sales to Horizon.  The increase in product sales improved the gross margin to $3.9 million or 55% for the three months ended December 31, 2015 compared to a negative margin of $15,000 or (1)% for the three months ended December 31, 2014.  For the year ended December 31, 2015, COGS increased to $10.3 million compared to $5.5 million for the year ended December 31, 2014.  The gross margin on product sales was 47% for the year ended December 31, 2015 compared to 14% for the year ended December 31, 2014.

Research and development (R&D) expenses decreased to $2.2 million for the three months ended December 31, 2015 compared to $2.8 million for the three months ended December 31, 2014.  The decrease in the quarter was primarily attributable to a reduction in SBC expenses.  R&D expenses were $10.3 million for the year ended December 31, 2015 compared to $8.1 million for the year ended December 31, 2014.

General and administrative (G&A) expenses decreased to $2.5 million for the three months ended December 31, 2015 compared to $4.3 million for the three months ended December 31, 2014.  The decrease in the quarter was primarily related to a decrease in SBC expenses, slightly offset by an increase in professional fees associated with the proposed reorganization of the Company.  G&A expenses decreased to $9.3 million for the year ended December 31, 2015 compared to $13.0 million for the year ended December 31, 2014.

Other income was $0.3 million for the three months ended December 31, 2015 which was related to foreign exchange gain.  In the comparative period, the Company recognized other expenses of $0.8 million primarily related to an impairment charge of $1.7 million on intangible assets that was partially offset by a $0.5 million foreign exchange gain and a gain related to the sale of unused land at the Company's manufacturing site in Varennes, Québec.  Other income was $1.0 million for the year ended December 31, 2015 compared to $52.6 million for the year ended December 31, 2014, which included the gain on the litigation settlement.

Net income for the three months ended December 31, 2015 was $0.3 million compared to a net loss of $6.1 million for the three months ended December 31, 2014.  The improvement in the quarter related to an increased gross margin on product sales and lower SBC expenses that was only slightly offset by costs associated with the proposed reorganization of the Company.  The Company incurred a net loss of $7.1 million for the year ended December 31, 2015 compared to net income of $38.6 million in the comparative year, which included the gain on the litigation settlement.

Cash and short-term investments was $48.7 million at December 31, 2015 compared to $58.3 million at December 31, 2014. 

The number of common shares outstanding as at December 31, 2015 was 11,145,709.

About Nuvo Research Inc.
Nuvo (TSX:NRI) is a growing specialty pharmaceutical company with a diverse portfolio of products and technologies for pain and topical indications.  Nuvo's products range from FDA approved, commercial products to development stage drug candidates and technology platforms.  For additional company information visit www.nuvoresearch.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 statements concerning the Company's future objectives, strategies to achieve those objectives, plans for and timing of the potential development of the Company's product candidates, the proposed reorganization of the Company into two separate publicly traded companies, 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", "proposed", "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; uncertainties that may delay or negatively impact the proposed reorganization or cause the proposed reorganization to not occur, including the failure to obtain any required approvals; risks relating to the Company's ability to successfully identify, negotiate, implement and/or integrate potential acquisitions of businesses or products; as well as other risk factors included in 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. This list is not exhaustive of the factors that may impact the Company's forward-looking statements.  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 or completeness of these forward-looking statements. Although the forward-looking statements contained in this press release are 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 Research Inc.

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

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