Nuvo Research Announces 2013 Third Quarter Results

              Nuvo Research Announces 2013 Third Quarter Results

PR Newswire

MISSISSAUGA, ON, Oct. 30, 2013

MISSISSAUGA, ON, Oct. 30, 2013 /PRNewswire/ - Nuvo Research Inc. (TSX: NRI), a
specialty pharmaceutical company dedicated to building a portfolio of products
for the topical treatment of pain and the development of its immune modulating
drug candidate WF10, today announced its financial and operational results for
the third quarter ended September 30, 2013.

Third Quarter and Recent Corporate Developments:

  *In July 2013, the Company sold the exclusive rights to market and sell
    Synera in the U.S. for its current indication to Galen US Incorporated
    (Galen) for US$4.5 million (Galen Upfront Payment) received on closing,
    royalties of 10% of net sales and sales milestone payments of US$5.0
    million upon gross annual U.S. sales reaching US$25.0 million and an
    additional US$5.0 million upon gross annual U.S. sales reaching US$50.0
    million;

  *In July 2013, the Company amended its loan arrangements with Paladin Labs
    Inc.; whereby, the Company drew upon the second $4.0 million loan tranche
    and may draw an additional third tranche of $4.0 million upon the
    achievement of predefined milestones (Amended Paladin Debt);

  *In August 2013, Mallinckrodt Inc. (Mallinckrodt), the Company's U.S.
    marketing licensee for Pennsaid^® and Pennsaid 2%, advised Nuvo that the
    U.S. Food and Drug Administration (FDA) had accepted for filing and review
    the New Drug Application (NDA) for Pennsaid 2%, submitted by Mallinckrodt
    on August 7, 2013. The FDA indicated to Mallinckrodt that it expects to
    respond to the NDA by February 7, 2014;

  *In August 2013, the Company commenced legal action against Mallinckrodt
    asserting that it had breached its contractual obligations to Nuvo as set
    out in a Licensing Agreement pursuant to which Nuvo licensed to
    Mallinckrodt the rights to market and sell Pennsaid and Pennsaid 2% in the
    U.S. The Company is seeking damages of not less than $100M and a
    declaration that it is entitled to terminate the Licensing Agreement which
    would result in the rights to market and sell Pennsaid and/or Pennsaid 2%
    in the U.S. reverting to the Company. The Company has not terminated the
    Licensing Agreement which continues pending the Court's decision; and

  *In October 2013, Galderma Pharma S.A. (Galderma), the Company's global
    marketing partner for Pliaglis, received approval for the marketing and
    sale of Pliaglis in Brazil which entitles the Company to a US$2.0 million
    milestone payment (Pliaglis Milestone Payment) that it expects to receive
    in early 2014.

Pennsaid U.S.
According to IMS Health, a provider of dispensed prescription data, during the
third quarter of  2013, U.S.  prescriptions of  Pennsaid were  34,000 with  an 
average 1.30  bottles of  Pennsaid dispensed  per script.  This represents  a 
decrease of approximately 6%  over the number of  prescriptions in the  second 
quarter of 2013.

Operating Results
Revenue, consisting  of  product sales,  royalties,  license fee  revenue  and 
research and other contract revenue for  the three months ended September  30, 
2013 was $9.1  million compared  to $3.5 million  for the  three months  ended 
September 30, 2012. The significant increase in the quarter was  attributable 
to the  Galen  Upfront Payment  and  the Pliaglis  Milestone  Payment.  Total 
revenue for the nine months ended September 30, 2013 was $14.7 million  versus 
$21.1 million a year ago.

The Company reported a negative gross margin on product sales of $0.3  million 
for the three months ended September  30, 2013 unchanged from the  comparative 
period. The negative gross margin on product sales was attributable to  lower 
product sales  of WF10  and Synera  that  were offset  by an  improved  margin 
related to higher Pennsaid product sales. For the nine months ended September
30, 2013,  the  Company reported  a  negative  gross margin  of  $0.5  million 
compared to  a positive  gross  margin of  $1.3  million for  the  comparative 
periods in 2012.

Total operating expenses  for the three  and nine months  ended September  30, 
2013 were $4.6 million  and $13.1 million compared  to $5.2 million and  $17.2 
million for the three and nine months ended September 30, 2012. The  decrease 
in operating expenses  was primarily due  to lower sales  and marketing  (S&M) 
costs.

Research and development (R&D)  expenses were consistent  at $1.7 million  for 
the three months ended September 30, 2013 and 2012. In the quarter,  expenses 
related to  the advancement  of  the WF10  development program  were  entirely 
offset by  lower  external drug  spending  on  the HLT  Patch.  R&D  expenses 
decreased to  $5.1  million for  the  nine  months ended  September  30,  2013 
compared to $5.3 million for the nine months ended September 30, 2012.

S&M expenses were $0.3 million and $0.6 million for the three and nine  months 
ended September 30,  2013 compared to  $1.2 million and  $4.6 million for  the 
comparative periods in 2012. In the quarter, the Company sold the U.S. rights
to Synera  to Galen  and  incurred termination  costs  of $0.2  million.  The 
comparative period included marketing costs  related to the Company's  efforts 
to sell Synera in the U.S.

General and  administrative (G&A)  expenses were  $2.3 million  for the  three 
months ended September 30, 2013 compared to $2.2 million for the three  months 
ended September 30, 2012.  The small increase in  G&A expenses in the  quarter 
related to increased amortization  expense on the  intangible assets and  fees 
related to the Mallinckrodt litigation. Partially offsetting these  increases 
was a reduction  in operating costs  related to the  closing of the  Company's 
office in Salt Lake City. G&A expenses were unchanged at $7.0 million for the
nine months ended September 30, 2013 and September 30, 2012.

Net loss  for the  three months  ended  September 30,  2013 was  $2.9  million 
compared to $2.0 million  for the three months  ended September 30, 2012.  In 
the quarter, the increase in revenue related to the Galen Upfront Payment  and 
the Pliaglis  Milestone Payment  and the  decrease in  operating expenses  was 
entirely offset by  the $6.4  million impairment charge  on intangible  assets 
(see ZARS  Impairment  Charge below).  In  addition, the  comparative  period 
included a $1.2 million gain related to the revaluation of the ZARS contingent
consideration. Net loss for the nine months ended September 30, 2013 was $8.4
million compared to $2.4 million for the nine months ended September 30, 2012.

Cash and cash equivalents were $14.6 million as at September 30, 2013 compared
to $12.1  million as  at  December 31,  2012.  The US$2.0  million  milestone 
payment for Pliaglis is not due from Galderma until the first quarter of 2014.

Cash provided by operating activities for the three months ended September 30,
2013 was $3.7 million  compared to cash used  in operating activities of  $1.7 
million for the three  months ended September 30,  2012. The increase in  cash 
provided by operations was  attributable to the receipt  of the Galen  Upfront 
Payment. For the  nine-month period,  cash used in  operating activities  was 
$0.1 million compared to $6.1 million a year ago.

Net cash provided by financing activities  totaled $3.5 million for the  three 
months ended  September  30, 2013  compared  to  net cash  used  in  financing 
activities of $0.7  million for the  three months ended  September 30,  2012. 
During the quarter, Paladin advanced the  second tranche of the loan  facility 
in the  amount  of  $4.0  million  on closing  of  the  Amended  Paladin  Debt 
arrangement. Net cash provided by  financing activities was $2.7 million  for 
the nine months ended September 30, 2013 compared to $3.2 million in the prior
period.

The number  of  common  shares  outstanding  as  at  September  30,  2013  was 
8,745,828.

ZARS Impairment Charge
The Company reviewed the carrying  values of the intangible assets  recognized 
from the acquisition of ZARS for  potential impairment at September 30,  2013, 
as commercial efforts for both Pliaglis and Synera have not met expectations.
Indications for  impairment did  exist, and  management determined  that  each 
asset was impaired. The Company recorded an impairment charge of $6.1 million
for Pliaglis and $0.3 million for Synera.

Advance Notice By-Law
The Board of Directors  of the Company has  approved a By-Law ("By-Law  Number 
2") that requires advance notice to the Company when director nominations  are 
made by shareholders of the Company, other than nominations made by or at  the 
direction or  request of  one  or more  shareholders  pursuant to  a  proposal 
submitted to  the Company  in accordance  with the  Business Corporations  Act 
(Ontario) (the "Act") or a requisition  of meeting submitted to the  directors 
in  accordance  with  the  Act.  For  an  effective  nomination  to  occur,  a 
shareholder is  required  to provide  the  Company with  certain  information, 
enumerated in  By-Law  Number 2,  about  the nominating  shareholder  and  its 
proposed nominees in the time frame set out below.

In the case of an annual meeting  of shareholders, notice to the Company  must 
be made not less than 30 nor more than 65 days prior to the date of the annual
meeting; provided; however, that in the event that the annual meeting is to be
held on a date  that is less than  50 days after the  date on which the  first 
public announcement of the date of the annual meeting was made, notice may  be 
made not later  than the  close of  business on  the 10th  day following  such 
public announcement.

In the case of a special meeting of shareholders (which is not also an  annual 
meeting), notice to  the Company  must be  made not  later than  the close  of 
business on  the  15th  day  following  the day  on  which  the  first  public 
announcement of the date of the special meeting was made.

By-Law Number 2 is  effective immediately. Shareholders will  be asked at  the 
next shareholder meeting  to confirm  and ratify By-Law  Number 2,  a copy  of 
which has been filed under the Company's profile at www.sedar.com.

About Nuvo Research Inc.
Nuvo (TSX:NRI)  is a  specialty pharmaceutical  company focused  on  improving 
patient's lives  by developing  and commercializing  innovative products  that 
address unmet medical needs. The Company has a diverse portfolio of  products 
in the areas of topical pain and immunology.

Nuvo's marketed products include Pennsaid^® (a topical treatment for the signs
and symptoms  of  osteoarthritis  of  the knee),  Pliaglis  (a  topical  local 
anesthetic) and the  heated lidocaine/tetracaine patch  (HLT Patch).  Further 
information is available on the  company's website www.nuvoresearch.com or  by 
contacting:

Forward-Looking Statements
Certain statements in this news release constitute 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, 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 "outlook", "objective", "may", "will", "expect", "intend",
"estimate", "anticipate",  "believe",  "should",  "plans"  or  "continue",  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 the need for additional financing, the  current 
economic  environment,  dependence  on   sales  and  marketing   partnerships, 
competitive developments,  as  well as  other  risk factors  included  in  the 
Company's annual  information form  dated  March 27,  2013 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   and  completeness   of   these 
forward-looking statements. The factors  underlying current expectations  are 
dynamic and  subject  to  change. Although  the  forward-looking  information 
contained in this  news 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. Certain statements included
in this news  release may be  considered "financial outlook"  for purposes  of 
applicable securities laws, and such financial outlook may not be  appropriate 
for purposes other than this news release. All forward-looking statements  in 
this  news  release  are  qualified  by  these  cautionary  statements.   The 
forward-looking statements contained herein  are made as of  the date of  this 
news 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.


                              NUVO RESEARCH INC.
       CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
                                                        
                                     As at September 30,  As at December 31,
Unaudited                                            2013                 2012
(Canadian dollars in thousands)                        $                   $
ASSETS                                                                    
CURRENT                                                                   
Cash and cash equivalents                         14,646              12,149
Accounts receivable                                3,904               3,771
Inventories                                        1,053               1,156
Other current assets                                 694               1,056
TOTAL CURRENT ASSETS                              20,297              18,132
                                                                         
Property, plant and equipment                      1,479               1,614
Intangible assets                                  1,891               8,739
TOTAL ASSETS                                      23,667              28,485
                                                                         
LIABILITIES AND EQUITY                                                    
CURRENT                                                                   
Accounts payable and accrued                       3,723               3,360
liabilities
Current portion of deferred revenue                  143                 341
Current portion of finance lease                   1,994               1,900
and other obligations
TOTAL CURRENT LIABILITIES                          5,860               5,601
Deferred revenue                                       -                  57
Finance lease and other obligations                3,953               1,358
TOTAL LIABILITIES                                  9,813               7,016
                                                                         
EQUITY                                                                    
Common shares                                    228,772             228,705
Contributed surplus                               13,720              13,495
Accumulated other comprehensive                      949                 420
income
Deficit                                        (229,587)           (221,151)
TOTAL EQUITY                                      13,854              21,469
TOTAL LIABILITIES AND EQUITY                      23,667              28,485
                                                        

                                                              
                              NUVO RESEARCH INC.
            CONDENSED CONSOLIDATED INTERIM STATEMENTS OF LOSS AND
                             COMPREHENSIVE LOSS 
                                      
                                        Three Months Ended Nine Months Ended
Unaudited                                  September 30,      September 30,
                                                      2012               2012
                                           2013 (restated)    2013 (restated)
(Canadian dollars in thousands,        
except per share and share figures)            $          $       $          $
REVENUE                                                                  
Product sales                               831      1,012   3,105      6,781
Cost of goods sold                        1,102      1,327   3,594      5,505
Gross margin                              (271)      (315)   (489)      1,276
                                                                        
Other revenue                                                            
Royalties                                 1,472      1,356   4,337      7,006
Licensing fees                            6,828      1,099   6,998      7,167
Research and other contract revenue           6         33     268        132
Net revenue                               8,035      2,173  11,114     15,581
OPERATING EXPENSES                                                       
Research and development expenses         1,748      1,653   5,128      5,310
Sales and marketing expenses                310      1,208     649      4,602
General and administrative expenses       2,328      2,233   6,970      7,039
Interest expense                            220        150     431        250
Interest income                            (26)        (5)    (50)       (15)
Total operating expenses                  4,580      5,239  13,128     17,186
OTHER EXPENSES (INCOME)                                                  
Impairment of intangible assets           6,358          -   6,358          -
Litigation settlement                         -      (277)       -      (277)
Loss (gain) on ZARS contingent         
consideration                                  -    (1,150)       -        460
Foreign currency loss (gain)                 16        319    (20)        429
Net loss before income taxes            (2,919)    (1,958) (8,352)    (2,217)
Income taxes                                 27         48      84        174
NET LOSS                                (2,946)    (2,006) (8,436)    (2,391)
Other comprehensive income (loss)                                        
Unrealized gains (losses) on           
translation of foreign
operations                             (139)      (786)     529      (788)
TOTAL COMPREHENSIVE LOSS                (3,085)    (2,792) (7,907)    (3,179)
Net loss per common share -                                              
Basic and diluted                    (0.34)     (0.23)  (0.97)     (0.27)
Average number of common shares        
outstanding
(in thousands)
basic and diluted                      8,746      8,732   8,746      8,731
                                                       


                              NUVO RESEARCH INC.
           CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
                                      
                                         Three months ended Nine months ended
Unaudited                                  September 30       September 30
                                                       2012               2012
                                          2013 (restated)    2013 (restated)
(Canadian dollars in thousands)               $          $       $          $
OPERATING ACTIVITIES                                                     
Net loss                                (2,946)    (2,006) (8,436)    (2,391)
Items not involving current cash
flows:                                                                   
   Impairment of intangible assets       6,358          -   6,358          -
    Loss (gain) on ZARS contingent                                         460
   consideration                             -    (1,150)       -
   Depreciation and amortization           451        154   1,153        517
    Deferred license revenue                                           (1,007)
   recognized                             (85)       (85)   (256)
    Deferred royalty revenue, net of                                     (316)
   royalties earned                          -      (218)       -
   Stock-based compensation                226         87     329        576
   Unrealized foreign exchange loss          5        336      25        315
    Interest and accretion of                                               55
   long-term other obligations              15       (42)      48
   Other                                   (2)        (2)    (13)         14
                                         4,022    (2,926)   (792)    (1,777)
Net change in non-cash working capital    (352)      1,227     711    (4,345)
CASH PROVIDED (USED) IN OPERATING
ACTIVITIES                                3,670    (1,699)    (81)    (6,122)
INVESTING ACTIVITIES                                                     
Acquisition of property, plant and
equipment                                 (116)       (23)   (189)       (38)
Proceeds on disposal of property,
plant and equipment                           -          8       -          8
CASH USED IN INVESTING ACTIVITIES         (116)       (15)   (189)       (30)
FINANCING ACTIVITIES                                                     
Proceeds from other obligations           4,000          -   4,000      4,000
Repayment of finance lease and other
obligations                               (481)      (692) (1,346)      (861)
Issuance of common shares                     -          -       -         22
CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES                                3,519      (692)   2,654      3,161
Effect of exchange rate changes on
cash and cash equivalents                    10      (200)     113      (243)
Net change in cash and cash
equivalents during the period             7,083    (2,606)   2,497    (3,234)
Cash and cash equivalents, beginning
of period                                 7,563     14,096  12,149     14,724
CASH AND CASH EQUIVALENTS, END OF
PERIOD                                   14,646     11,490  14,646     11,490
                                                                        
Interest paid                               158        152     347        152
Interest received                            20          6      40         21
Income taxes paid                            29         54      77        160
                                             





SOURCE Nuvo Research Inc.

Contact:

Investor Relations
Email:ir@nuvoresearch.com
 
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