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Nuvo announces 2008 fourth quarter and year-end financial results
MISSISSAUGA, ON, Feb. 27 /CNW/ - Nuvo Research Inc. (TSX: NRI), a
Canadian drug development company focused on the research and development of
drug products that are delivered to and through the skin using its topical and
transdermal drug delivery technologies, today announced its financial and
operational results for the year and the fourth quarter ended December 31,
2008.
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Key Corporate Developments:
- Presented positive Phase 3 study results for Pennsaid in a poster
presentation at the 2008 American College of Rheumatology Scientific
Meeting in San Francisco
- Initiated a warrant incentive program that has the potential to
generate up to $9 million for the Company
- Successfully completed all Pennsaid(R) studies necessary to resubmit
the application for Pennsaid approval to the United States Food and
Drug Administration (FDA). The FDA confirmed that it has accepted
this filing as a complete response to its Approvable Letter for
Pennsaid dated December 28, 2006 and provided the Company with a date
of August 5, 2009 (the "PDUFA Date") pursuant to the Prescription
Drug User Fee Act by which the FDA intends to advise Nuvo on
Pennsaid's approvability
- Announced that the Company's High Throughput Experimentation Platform
was selected as a 2009 Edison Award Finalist
"We are highly optimistic about Pennsaid's potential for approval and are
continuing discussions with potential United States licensing partners," said
Henrich Guntermann, President and Chief Executive Officer of Nuvo Research.
Financial Results:
(thousands of Canadian dollars)
Three months Three months
ended ended Year ended Year ended
December 31, December 31, December 31, December 31,
2008 2007 2008 2007
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Revenue $ 3,117 $ 2,207 $ 10,727 $ 7,178
Net loss $ (2,413) $ (3,332) $(10,552) $(12,376)
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Revenue, consisting of product sales, license fee revenue, and research
and other contract revenue, for the three-months ended December 31, 2008
increased 41% to $3.1 million compared with $2.2 million for the three-months
ended December 31, 2007. The increase was attributable to many factors
including a $0.5 million increase in product sales of both Pennsaid and WF10
based products, the recognition of additional licensing fee revenue and
research revenue earned on a collaboration agreement with a Fortune Global 500
company that develops and markets skin care products. For the year, revenue
increased 49% to $10.7 million versus $7.2 million. This is primarily due to
higher Pennsaid product sales in Greece where 2008 was the first full year of
selling the product in this market after its launch during the second quarter
of 2007 and an increase of $1.2 million in licensing fee revenue.
Gross margin on product sales was $1.0 million for the three-months ended
December 31, 2008 compared to $0.6 million for the comparable quarter in 2007.
The increase in gross margin is primarily attributable to a 22% increase in
Pennsaid product sales to new quarterly high. For the year, gross margin
increased to $3.2 million compared to $1.5 million for the year ending
December 31, 2007. The increase in gross margin is primarily attributable to
the 37% increase in Pennsaid sales, the 24% increase in WF10 based product
sales and significant improvements and efficiencies achieved in the Pennsaid
manufacturing process, partially offset by price increases in the raw
materials used to compound and package Pennsaid and the strengthening US
dollar. The overall gross margin percentage was 40% in 2008 versus 26% in
2007.
Total operating expenses for the three-month period ended December 31,
2008 increased to $4.9 million versus $4.2 million for the three-months ended
December 31, 2007. The $0.7 million increase in operating expenses is due to
higher research and development expenses, the $0.2 million impairment charge
recorded against certain of the Company's intangible assets and increases in
selling, general and administrative costs and net interest expense, partially
offset by $0.1 million foreign exchange gain in 2008. Total operating expenses
for year ended December 31, 2008 were $17.0 million, an increase of 8%
compared to $15.7 million for the year ended December 31, 2007. The increase
from 2007 relates to an increase in net interest expense and higher research
and development spending, offset partially by lower SG&A costs. This
highlights the impact of the Company's efforts during the third and fourth
quarters of 2007 to focus its resources on research activities rather than
administrative costs.
Research and development expenses increased by 17% to $2.5 million for
the three months ended December 31, 2008 compared to $2.1 million for the
three months ended December 31, 2007. For the year ended December 31, 2008,
research and development costs increased 11% to $9.3 million compared to $8.3
million for the year ended December 31, 2007. The majority of the spending in
the fourth quarter and the year related to the completion of the Short and
Long-Term Studies required to address the conditions raised in the Approvable
Letter, costs associated with the Phase 2 trial of WF10 as an adjuvant therapy
for pancreatic cancer, the preclinical development of the Company's pipeline
candidates and costs relating to expanding the Company's research capabilities
in San Diego and a pain advisory conference hosted by the Company.
SG&A expenses increased by 9% to $1.6 million for the three months ended
December 31, 2008 compared to $1.5 million for the three months ended December
31, 2007. During the quarter, the impact of lower ongoing personnel costs and
the savings associated with closing the Company's international marketing
office in Barbados were more than offset by increased spending on business
development activities as the Company expanded efforts to sign a U.S. licensee
for Pennsaid and higher professional fees related to the Squire Tax
Reassessment. For the year ended December 31, 2008, SG&A costs decreased 5% to
$5.2 million compared to $5.5 million for the year ended December 31, 2007.
The decrease is primarily attributable to activities undertaken during the
third and fourth quarters of 2007, including the closure of the Company's
international marketing office in Barbados and staff reductions at the
corporate head office, offset partially by additional severance costs incurred
as the Company continued to strengthen its team, increased spending on
business development activities, incurred higher professional fees and the
costs related to the Squire Tax Reassessment.
For the three months ended December 31, 2008, the net loss decreased to
$2.4 million from $3.3 million for the three months ended December 31, 2007.
Included in the results for the quarter is a non-cash gain of $0.9 million
from the change in the estimate of the amount of the liability related to the
loans from Leadenhall. Excluding the impact of this item, the net loss would
have declined slightly to $3.3 million in the current quarter compared to $3.4
million a year ago. For the year ended December 31, 2008, the net loss
declined by 15% to $10.6 million from $12.4 million for the year ended
December 31, 2007.
Cash and cash equivalents on hand at December 31, 2008 of $15.2 million
were $3.7 million less than the $18.9 million at September 30, 2008. The
decrease is almost entirely attributable to cash used by operating activities.
Cash used in operating activities of $4.2 million was higher than the
$2.7 million used in the three-month comparative period ended December 31,
2007 due primarily to a higher investment in non-cash working capital during
the fourth quarter of 2008. The significant investment in non-cash working
capital relates primarily to the significant increase in accounts receivable
attributable to the achieving record quarterly sales of Pennsaid to Europe
during the fourth quarter of 2008. For the year ended December 31, 2008 funds
used in operating activities decreased to $9.1 million from $12.3 million.
Detailed financial statements and the MD&A are available at
www.nuvoresearch.com or www.sedar.com.
Notice of Annual and Special Meeting
Nuvo will be holding its Annual and Special Meeting of Shareholders on
Thursday, April 30, 2009 at 9:00 a.m. (EST) at the Gallery of the Toronto
Stock Exchange (TSX) Broadcast & Conference Centre, The Exchange Tower, 130
King Street West, Toronto, Ontario, Canada.
About Pennsaid
Pennsaid is a topical non-steroidal anti-inflammatory drug used for the
treatment of osteoarthritis. Pennsaid allows the active ingredient,
diclofenac, to be delivered to a specific site via the surface of the skin and
thus limits complications associated with systemic delivery. According to
published clinical trials, Pennsaid is as effective as the maximum daily dose
of comparable oral medication at relieving pain and stiffness associated with
osteoarthritis of the knee, as well as improving overall well-being. There are
more than 27 million Americans suffering from osteoarthritis, a very painful
and debilitating condition, and the United States market for this condition is
estimated at US$4 billion annually.
About Nuvo Research Inc.
Nuvo is focused on the research and development of drug products
delivered to and through the skin using its topical and transdermal drug
delivery technologies. Nuvo's lead product is Pennsaid, a topical
non-steroidal anti-inflammatory drug used for the treatment of osteoarthritis.
Nuvo intends to leverage its skin-penetrating technologies to create a
portfolio of topical and transdermal products targeting a variety of
indications.
Nuvo Research Inc. is a publicly traded, Canadian pharmaceutical company
headquartered in Mississauga, Ontario, with manufacturing facilities in
Varennes, Québec and Wanzleben, Germany and a research and development Center
in San Diego, California. For more information, please visit
www.nuvoresearch.com.
These forward-looking statements, by their nature, necessarily involve
risks and uncertainties that could cause actual results to differ materially
from those contemplated by the forward-looking statements. The Company
considers the assumptions on which these forward-looking statements are based
to be reasonable at the time they were prepared, but caution that these
assumptions regarding future events, many of which are beyond the control of
the Company, may ultimately prove to be incorrect. Factors and risks, which
could cause actual results to differ materially from current expectations, are
discussed in the annual report, as well as in the Company's Annual Information
Form for the year ended December 31, 2007. The Company disclaims any intention
or obligation to update or revise any forward-looking statements whether a
result of new information or future events, except as required by law. For
additional information on risks and uncertainties relating to these
forward-looking statements, investors should consult the Company's ongoing
quarterly filings, annual report and Annual Information Form and other filings
found on SEDAR at www.sedar.com.
Summary financial statements attached:
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CONSOLIDATED BALANCE SHEETS
As at As at
December 31, December 31,
(thousands of Canadian dollars) 2008 2007
$ $
-------------------------------------------------------------------------
ASSETS
CURRENT
Cash and cash equivalents 15,219 21,791
Accounts receivable 2,294 1,802
Other receivable - 579
Inventories 1,393 1,042
Prepaid expenses and other 446 789
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TOTAL CURRENT ASSETS 19,352 26,003
Restricted cash 93 79
Property, plant and equipment 1,990 2,475
Intangible assets - 90
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TOTAL ASSETS 21,435 28,647
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities 2,736 2,994
Short-term loan - 587
Deferred revenue 2,241 1,211
Current portion of long-term debt
and capital lease obligations 181 94
Current portion of debentures - 500
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TOTAL CURRENT LIABILITIES 5,158 5,386
Deferred revenue 3,321 5,169
Long-term debt and capital lease obligations 320 222
Debentures 4,774 2,006
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TOTAL LIABILITIES 13,573 12,783
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SHAREHOLDERS' EQUITY
Common shares 189,603 187,877
Warrants 10,847 11,243
Contributed surplus 6,890 5,670
Accumulated other comprehensive income 114 114
Deficit (199,592) (189,040)
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TOTAL SHAREHOLDERS' EQUITY 7,862 15,864
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 21,435 28,647
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CONSOLIDATED STATEMENTS OF LOSS, COMPREHENSIVE LOSS AND DEFICIT
Year ended Year ended
December 31, December 31,
(thousands of Canadian dollars 2008 2007
except per share and share amounts) $ $
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REVENUE
Product sales 8,008 5,933
Cost of goods sold 4,809 4,391
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Gross margin on product sales 3,199 1,542
Other revenue
Licensing fees 2,514 1,000
Research and other contract revenue 205 245
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5,918 2,787
EXPENSES
Research and development 9,263 8,319
Selling, general and administrative expenses 5,204 5,498
Stock-based compensation 803 808
Amortization of property, plant, and equipment
and intangibles and impairment of intangibles) 1,068 869
Foreign currency gain (93) (118)
Interest expense 1,283 1,102
Interest income (497) (779)
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17,031 15,699
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Loss from operations (11,113) (12,912)
Change in estimate in contingency 860 -
Loss on extinguishment of convertible debenture (299) -
Gain on sale of assets - 536
-------------------------------------------------------------------------
NET LOSS AND TOTAL COMPREHENSIVE LOSS (10,552) (12,376)
Deficit, beginning of year (189,040) (176,664)
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DEFICIT, END OF YEAR (199,592) (189,040)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net loss per common share - basic and diluted $(0.04) $(0.05)
-------------------------------------------------------------------------
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Average number of common shares outstanding -
basic and diluted (millions) 306.3 243.1
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CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended Year ended
December 31, December 31,
(thousands of Canadian dollars) 2008 2007
$ $
-------------------------------------------------------------------------
OPERATING ACTIVITIES
Net loss (10,552) (12,376)
Items not involving current cash flows:
Amortization and impairment charge 1,068 869
Deferred revenue recognized (1,832) (1,285)
Stock-based compensation and payments 815 940
Accretion of interest on debentures 828 665
Loss on extinguishment of convertible debenture 299 -
Change in estimate in contingency (860) -
Gain on sale of assets - (536)
Other (44) (345)
Net change in non-cash working capital 149 (211)
Proceeds from licensing arrangements
and advances on research contracts 1,014 11
-------------------------------------------------------------------------
CASH USED IN OPERATING ACTIVITIES (9,115) (12,268)
-------------------------------------------------------------------------
INVESTING ACTIVITIES
Investment in term deposits with restricted use - (79)
Acquisition of property, plant and equipment (151) (222)
Proceeds from the sale of assets 28 -
-------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES (123) (301)
-------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of common shares and warrants,
net of related costs 1,115 23,854
Issue of debentures, net of related costs 1,956 -
Costs related to the November 2004 Unsecured
Convertible Debenture amendments (32) -
Repayments of debentures, long-term
debt and capital lease obligations (630) (675)
-------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES 2,409 23,179
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Effect of exchange rate changes
on cash and cash equivalents 257 (32)
-------------------------------------------------------------------------
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Net increase (decrease) in cash and
cash equivalents during the year (6,572) 10,578
Cash and cash equivalents, beginning of year 21,791 11,213
-------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR 15,219 21,791
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Interest paid 256 299
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For further information: about Nuvo, please contact: Media and Investor Relations, Adam Peeler, The Equicom Group Inc., Tel: (416) 815-0700 x225, email: apeeler@equicomgroup.com
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