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NUVO RESEARCH ANNOUNCES 2011 FIRST QUARTER RESULTS

Friday, May 27, 2011 General News J E 4
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MISSISSAUGA, ON, May 26, 2011 /PRNewswire/ - Nuvo Research Inc. (TSX: NRI), a specialty pharmaceutical company dedicated to building a portfolio of products primarily for the treatment of pain and the development of its immune modulating drug candidate WF10, today announced its financial and operational results for the first quarter ended March 31, 2011.

First Quarter and Recent Corporate Developments:

  • Completed the acquisition of ZARS Pharma, Inc., adding Pliaglis® and Synera® to the Company's topical pain product portfolio.  The acquisition makes Nuvo a leader in the topical pain therapeutics space and moves the Company closer to profitability.
  • Pennsaid U.S. prescriptions increased approximately 6% quarter-over-quarter, to a record 34,000.
  • Nuvo's U.S. licensee, Mallinckrodt Inc., a Covidien (NYSE: COV) company, completed enrollment of its Phase 2 study of Pennsaid Gel during the quarter.  The trial remains on track to conclude in the second quarter of 2011.
  • Resumed receiving royalties based on Pennsaid Canadian sales.  Nuvo had previously presold royalties relating to Pennsaid Canadian sales prior to January 1, 2011.
  • The Company continues to analyze its WF10 program to determine the optimal path forward to maximize its successful Phase 2 results in the treatment of severe allergic rhinitis.
  • Ended the first quarter with $27.1 million in cash and equivalents as a result of continued cost containment measures.
  • Subsequent to the acquisition of ZARS, appointed Theodore Stanley, M.D. to the Board of Directors of the Company.

"While the acquisition of ZARS is a major step forward for Nuvo, we are also excited by record U.S. Pennsaid prescriptions, the continued development progress of Pennsaid Gel and the resumption of royalty revenue for Canadian Pennsaid sales," said Dan Chicoine, Chairman and Co-Chief Executive Officer of Nuvo Research.  "In the near-term, we will focus on the integration of ZARS to maximize the commercial value of Pliaglis and Synera and to determine which of the pre-commercial stage opportunities in our newly expanded portfolio offer the best return on investment."

Pennsaid U.S. During the first quarter of 2011 U.S. sales of Pennsaid grew 6% quarter-over-quarter to a record 34,000 prescriptions according to IMS Health.  Since the launch of the product in the U.S. by Covidien in late April 2010 sales have increased in each successive quarter.  Data from IMS Health indicate that for each prescription filled, approximately 1.3 bottles of Pennsaid were dispensed in the quarter.

Operating Results Revenue, consisting of product sales, royalties, license fee revenue and research and other contract revenue for the three months ended March 31, 2011 decreased slightly to $3.8 million compared to $4.1 million for the three months ended March 31, 2010.  The 2010 comparative period includes a significant quantity of low margin Pennsaid samples sold to Covidien as they prepared for the U.S. launch.  In the current period the inclusion of royalty revenue earned on the sale of Pennsaid in the U.S. and Canada which was higher than the amortized license fees recognized in prior periods offset a portion of the decline in product sales revenue.

Gross margin percentage increased to 37% for the three months ended March 31, 2011 compared to 31% for the three months ended March 31, 2010 due to the significant decline in the number of low margin marketing samples that were sold to Covidien in the comparable period in 2010 to support the U.S. launch of Pennsaid.

Total operating expenses, which include R&D and SG&A expenses, increased 5% for the three months ended March 31, 2011 to $4.6 million versus $4.4 million for the comparable period in 2010.

R&D expenses were $2.1 million for the first quarter of 2011 compared to $2.3 million for the prior year period.  The decrease in the quarter related to the Company's cost containment efforts, including closure of the Company's San Diego research facility at the end of January 2011, offset somewhat by the costs associated with preclinical work.

SG&A expenses increased to $2.5 million for the first quarter of 2011 compared to $2.0 million for the first quarter of 2010.  The increase was a result of $0.7 million in consulting, professional and other fees incurred related to the ZARS acquisition.

Net loss for the quarter declined significantly to $2.4 million compared to $6.5 million for the quarter ended March 31, 2010.  The $4.1 million improvement relates primarily to the absence, in 2011, of a $3.5 million loss recognized on the early redemption of debentures and a foreign currency gain in 2011 versus a loss in the quarter ended March 31, 2010.

Cash and cash equivalents were $27.1 million as at March 31, 2011.

Cash used in operating activities of $1.1 million was significantly lower than the $5.1 million of cash used in operating activities for the three-month period ended March 31, 2010.  The improvement was primarily a result of new, cash-based revenue streams in the current quarter, while the licensing fees recognized in the prior period were non-cash.  In addition, the recovery of $1.1 million in non-cash working capital in the current quarter compared to an investment of $2.3 million in the comparative period also led to lower cash utilization.

Management to Host Conference Call Management will host a conference call to discuss the first quarter results on May 27, 2011 at 8:30 am EST.  Following management's presentation, there will be a question and answer session, at which time the operator will direct participants to the correct procedure for submitting questions. To participate in the conference call, please dial 647-427-7450 or 1-888-231-8191. 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 Friday, June 3, 2011 by calling 416-849-0833 or 1-800-642-1687, reference number 63140440.

A live audio webcast of the conference call will be available through www.nuvoresearch.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 Research Inc. Nuvo Research is a publicly traded, Canadian specialty pharmaceutical company, headquartered in Mississauga, Ontario.  The Company is building a portfolio of products for the treatment of pain through internal research and development and by in-licensing and acquisition. The Company's Pain Group, located in West Chester, Pennsylvania, is focused on the development and commercialization of topically delivered pain products.  The company's product portfolio includes Pennsaid, Pliaglis and Synera.  Pennsaid, a topical non-steroidal anti-inflammatory drug (NSAID), is used to treat the signs and symptoms of osteoarthritis of the knee.  Pennsaid is sold in the United States by Mallinckrodt Inc., a Covidien company (NYSE: COV), in Canada by Paladin Labs Inc. (TSX:PLB) and in several European countries. Pliaglis is a topical local anesthetic cream, which is U.S. Food and Drug Administration (FDA) approved to provide topical local analgesia for superficial dermatological procedures.  ZARS has licensed worldwide marketing rights to Pliaglis to Galderma Pharma S.A., a global specialty pharmaceutical company focused on dermatology.  Synera is a topical patch that combines lidocaine, tetracaine and heat, approved in the United States to provide local dermal analgesia for superficial venous access and superficial dermatological procedures and in Europe, for surface anaesthesia of normal intact skin. ZARS currently markets Synera in the United States and its licensing partner, EuroCept International B.V., has initiated a pan-European launch of Synera (under the name Rapydan) in several European countries.  Through its subsidiary, Nuvo Research AG, based in Leipzig, Germany, the Company is also developing the compound WF10, for the treatment of immune related diseases.  For more information, please visit www.nuvoresearch.com.

Forward-Looking Statements

This document contains forward-looking statements. Some forward-looking statements may be identified by words like "expects", "anticipates", "plans", "intends", "indicates" or similar expressions. 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. Nuvo 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 Nuvo's Annual Information Form for the year ended December 31, 2010. Nuvo 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

NUVO RESEARCH INC. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
Unaudited As at March 31, 2011 As at December 31, 2010 As at January 1, 2010
(Canadian dollars in thousands) $ $ $
ASSETS      
CURRENT      
Cash and cash equivalents 27,115 28,269 42,102
Accounts receivable 2,649 3,100 2,086
Inventories 1,581 1,716 2,069
Other current assets 570 2,143 450

TOTAL CURRENT ASSETS

31,915 35,228 46,707
       
Property, plant and equipment 1,901 2,016 1,805

TOTAL ASSETS

33,816 37,244 48,512
       
LIABILITIES AND EQUITY      
CURRENT      
Accounts payable and accrued liabilities 3,197 4,203 4,589
Deferred revenue 966 1,056 2,241
Current portion of finance lease obligations 3 63 79
Current portion of debentures - - 3,038

TOTAL CURRENT LIABILITIES

4,166 5,322 9,947

Deferred revenue

654 739 1,080

Finance lease obligations

10 11 65

TOTAL LIABILITIES

4,830 6,072 11,092
       

EQUITY

     
Equity attributable to owners of the parent      
Common shares 216,975 216,864 210,086
Contributed surplus 12,916 12,885 12,543
Accumulated other comprehensive income (160) (257) -
Deficit (199,851) (197,617) (185,209)
  29,880 31,875 37,420
Non-controlling interest (894) (703) -

TOTAL EQUITY

28,986 31,172 37,420
TOTAL LIABILITIES AND EQUITY 33,816 37,244 48,512

NUVO RESEARCH INC. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE LOSS
Unaudited Three Months Ended March 31, 2011 Three Months Ended March 31, 2010
(Canadian dollars in thousands, except per share and share figures) $ $

REVENUE

   
Product sales 2,581 3,267
Cost of goods sold 1,617 2,248
Gross margin on product sales 964 1,019
     
Other revenue    
Royalties 1,120 -
Licensing fees 85 560
Research and other contract revenue 39 224
  2,208 1,803
EXPENSES    
Research and development 2,099 2,342
Selling, general and administrative expenses 2,517 2,023
  4,616 4,365
Foreign currency loss (gain) (12) 358
Interest expense 1 60
Interest income (54) (26)

Loss on early redemption of debentures

- 3,547
Net loss before income taxes (2,343) (6,501)

Income taxes

22 -

NET LOSS

(2,365) (6,501)

Other comprehensive income (loss)

   

Unrealized gains (losses) on translation of foreign operations

37 (115)

TOTAL COMPREHENSIVE LOSS

(2,328) (6,616)
     

Net loss attributable to:

   

Owners of the parent

(2,234) (6,230)

Non-controlling interest

(131) (271)
  (2,365) (6,501)

Total comprehensive loss attributable to:

   

Owners of the parent

(2,137) (6,435)

Non-controlling interest

(191) (181)
  (2,328) (6,616)

Net Loss per common share - basic and diluted

$(0.01) $(0.02)

Average number of common shares outstanding - basic and diluted (millions)

418.4 400.7

NUVO RESEARCH INC. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

Unaudited

Three months ended March 31, 2011 Three months ended March 31, 2010
(Canadian dollars in thousands)

$

$

OPERATING ACTIVITIES    
Net loss (2,365) (6,501)
Items not involving current cash flows:    
  Loss on early redemption of debentures - 3,547
  Depreciation 153 112
  Deferred license revenue recognized (85) (560)
  D  Deferred royalty revenue, net of royalties earned (73) -
  S  Stock-based compensation 172 23
  Accretion of interest on debentures - 31
  Unrealized foreign exchange loss 13 414
  Deferred proceeds on research contracts - 33
  Other - (1)
  (2,185) (2,902)
Net change in non-cash working capital 1,099 (2,290)

CASH USED IN OPERATING ACTIVITIES

(1,086) (5,192)
INVESTING ACTIVITIES    
Acquisition of property, plant and equipment (33) (234)

CASH USED IN INVESTING ACTIVITIES

(33) (234)
FINANCING ACTIVITIES    
Issuance of common shares 29 -
Repayments of finance lease obligations (60) (19)

CASH USED IN FINANCING ACTIVITIES

(31) (19)
Effect of exchange rate changes on cash and cash equivalents (4) (403)
Net change in cash and cash equivalents during the period (1,154) (5,848)
Cash and cash equivalents, beginning of period 28,269 42,102

CASH AND CASH EQUIVALENTS, END OF PERIOD

27,115 36,254

Interest paid

2 53

Interest received

52 23

Income taxes paid

22 -

 

 

 

SOURCE Nuvo Research Inc.

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