- Pennsaid® 2% U.S. prescriptions
increased from Q1 -
- Cash and short-term investments increased to
$20.0 million with no debt -
- Nuvo to Host Conference Call/Audio Webcast
August 10 at 8:00 a.m. ET -
MISSISSAUGA, ON, Aug. 9, 2017 /PRNewswire/ - Nuvo
Pharmaceuticals Inc. (Nuvo or the Company) (TSX:NRI), a commercial
healthcare company with a portfolio of commercial products and
pharmaceutical manufacturing capabilities, today announced its
financial and operational results for the second quarter ended
June 30, 2017. 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).
Second Quarter 2017 and Business Update
- U.S. prescriptions of Pennsaid 2% increased to 111,000 in the
second quarter of 2017 from 105,000 prescriptions in the first
quarter of 2017 according to IMS Health.
- In May 2017, the Company
announced the United States District Court for the District of
New Jersey had upheld the validity
of one of the claims in Horizon's U.S. patent covering Pennsaid 2%.
The Defendant, Actavis Laboratories UT, Inc. (Actavis) had admitted
that its proposed generic version of Pennsaid 2% would infringe the
patent and was attempting to challenge the patent's validity. The
Court's judgment prevents Actavis from launching a generic version
of Pennsaid 2% in the United
States until at least October 17,
2027 – the expiration date of the patent.
- In May 2017, the Company
announced the results of a placebo-controlled, multi-centre Phase 3
trial (2016 Pennsaid 2% Trial) in Germany to study Pennsaid 2% for the treatment
of acute ankle sprains. The 2016 Pennsaid 2% Trial was conducted to
support regulatory applications for marketing approval of Pennsaid
2% in the E.U., Canada and
Australia. The 2016 Pennsaid 2%
Trial failed to meet its primary endpoint. The Company does not
plan to conduct another clinical study of Pennsaid 2% for the
treatment of acute ankle sprains. It is reviewing the possibility
of using existing data that supported the U.S. Food and Drug
Administration (FDA) approval of Pennsaid and Pennsaid 2% for the
treatment of osteoarthritis (OA) to support applications for
approval of Pennsaid or Pennsaid 2% for the treatment of OA in
select E.U. territories, Canada
and Australia.
Second Quarter Financial Summary(1)
- Total revenue for the three months ended June 30, 2017 was $3.1
million compared to $8.1
million for the three months ended June 30, 2016.
- Adjusted EBITDA(2) decreased to $(0.1) million for the three months ended
June 30, 2017 compared to
$3.2 million for the three months
ended June 30, 2016.
- Net loss from continuing operations was $0.2 million for the three months ended
June 30, 2017 or $(0.02) per share compared to net income from
continuing operations of $2.5 million
or $0.22 per share for the three
months ended June 30, 2016.
- Cash and short-term investments increased to $20.0 million as at June
30, 2017 compared to $17.6
million as at December 31,
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- International Financial Reporting Standards (IFRS) financial
measure defined by the Company below.
|
"The key development in the quarter was the enhancement of the
long-term security of our main source of revenue as a result of
Horizon's successful court defense of one of the Pennsaid 2% U.S.
patents," said John London, Nuvo's
CEO. "As expected, our second quarter financial results were
negatively impacted by our previously announced shut down of
non-serialized commercial bottle production of Pennsaid 2% to
facilitate compliance by Nuvo and Horizon with the U.S. Federal
Drug Chain Security Act."
Growth Strategy
The Company's focus, in the short-term, is to continue to
monetize Pennsaid 2% through out-licensing to commercial partners
in international markets, while at the same time, identifying new
opportunities to acquire additional, accretive, late or
commercial-stage products or businesses to further diversify the
Company's existing product portfolio and revenue streams, and to
better utilize the Company's manufacturing facility in Varennes, Québec.
Licensing and Product Acquisitions
Nuvo is in active discussions relating to potential
transactions to license or acquire additional, accretive commercial
assets to further diversify the Company's product portfolio and
maximize the Company's manufacturing capabilities at our FDA
approved site in Varennes, Québec.
Nuvo will continue to actively seek appropriately priced
bolt-on or transformative transactions that are strategically
aligned with the Company's business plan and will deliver
shareholder value.
Pennsaid 2% Out-licensing
Despite the failure of the 2016 Pennsaid 2% Trial, Nuvo continues
to be in active discussions with potential commercial licensees of
Pennsaid 2% for various global territories. Nuvo anticipates
signing licensing agreements covering multiple countries throughout
the second half of 2017 and 2018. Nuvo projects that
incremental revenue from licensing agreements signed in 2017 will
commence in late 2018 or early 2019, subject to obtaining
regulatory approvals for Pennsaid 2% in the related
territories.
Pennsaid 2% U.S. Update
Court Decision Upholding Validity of a Pennsaid 2% Patent
In May, the United States District Court for the District of
New Jersey upheld the validity of
one of the claims in Horizon's U.S. patents covering Pennsaid
2%, which a generic company, Actavis Laboratories UT (Actavis) had
challenged. The court decision prevents Actavis from launching
a generic version of Pennsaid 2% in the
United States until 2027 when that patent expires.
(There are other Horizon patents that cover Pennsaid 2% that expire
as late as 2030 that were not the subject of this trial).
Actavis was the first company to file an application for
approval of a generic version of Pennsaid 2% with the FDA.
This first filer status typically prevents other generic companies
from entering the market until after the first filer has had the
opportunity to sell its generic version for 180 days. Actavis
has appealed the trial decision and another similar court challenge
filed by another generic pharmaceutical company, Lupin is pending;
however, it is our view that the most likely result is that
Pennsaid 2% will enjoy at least 10 more years of U.S. commercial
sales without generic competition.
Federal Drug Supply Chain Security Act Compliance
The Federal Drug Supply Chain Security Act (DSCSA) rules require
all manufacturers of drug products sold in the U.S. to serialize
each individual drug package to enhance drug traceability in the
event of an adverse event and to prevent drug counterfeiting.
In order to be in compliance with the DSCSA, the Company has
purchased new packaging equipment and technology systems in
coordination with Horizon. The Company commenced the process
of installing and qualifying the new packaging equipment at its
manufacturing plant in Varennes,
Québec for commercial production; however, on June 30, after the Company had stopped commercial
production of non-serialized commercial bottles for Horizon, the
FDA announced that it was extending the date for serialization
compliance by one year to November
27, 2018. As a result of this change, Horizon has
requested that the Company deliver some non-serialized commercial
bottles before the qualification process is completed. The
Company expects to complete qualification and be fully compliant
with the DSCSA before the end of this year. As a result of
these timing changes, the Company expects that some commercial
production and revenue may shift to earlier in 2017 than was
previously anticipated.
Horizon Adjustment of Sales and Marketing Resources
When Horizon released its Q1 results, it indicated that due to
reimbursement pricing pressures, the profitability of its primary
care group that sells Pennsaid 2% and other drug products had
decreased. As a result, Horizon indicated that it was
reallocating resources to better align its costs and profits.
The reallocation included a reduction in the size of Horizon's
primary care sales force that markets Pennsaid 2% to
physicians. Nuvo gets paid a fixed price per commercial
bottle supplied to Horizon and is not directly impacted by any
reduction in Horizon's profitability. As prescription volumes
increased in Q2 compared to Q1, the Company has not yet seen a
negative impact from Horizon's sales force reduction that might
impact Horizon's typical commercial bottle ordering patterns.
The Company expects Horizon's cost reallocation initiatives to also
result in a decrease in the number of product samples Horizon
distributes to physicians. A reduction in sample product
orders from Horizon will have a negative impact on the Company's
future financial results.
Second Quarter 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 Condensed Consolidated
Interim Financial Statements which are available on the Company's
website (www.nuvopharmaceuticals.com).
|
Three months
ended
|
Six months
ended
|
|
June
30,
2017
|
June 30,
2016
|
Change
|
June
30,
2017
|
June 30,
2016
|
Change
|
(from continuing
operations, Canadian dollars in
thousands, except gross margin)
|
$
|
$
|
$
|
$
|
$
|
$
|
Product
Sales
|
2,786
|
7,317
|
(4,531)
|
9,439
|
14,642
|
(5,203)
|
Gross Margin % on
Product Sales
|
48%
|
57%
|
(9%)
|
55%
|
57%
|
(2%)
|
Other
Revenue
|
314
|
789
|
(475)
|
643
|
1,306
|
(663)
|
Total Operating
Expenses
|
3,247
|
5,608
|
(2,361)
|
7,963
|
10,986
|
(3,023)
|
Net Income
(Loss)
|
(203)
|
2,491
|
(2,694)
|
1,993
|
1,239
|
754
|
Adjusted
EBITDA
|
(114)
|
3,176
|
(3,290)
|
2,184
|
6,165
|
(3,981)
|
Total revenue, consisting of product sales, royalties and
contract and other revenue for the three months ended June 30, 2017 was $3.1
million compared to $8.1
million for the three months ended June 30, 2016. The decrease in total
revenue was primarily related to a decrease in product sales.
Total revenue for the six months ended June
30, 2017 was $10.1 million
compared to $15.9 million for the
comparative six-month period.
Total operating expenses for the three months ended June 30, 2017 decreased to $3.2 million compared to $5.6 million for the three months ended
June 30, 2016. The decrease in
operating expenses was primarily attributable to a decrease in cost
of goods sold (COGS) and general and administrative (G&A)
expenses. Total operating expenses for the six months ended
June 30, 2017 decreased to
$8.0 million from $11.0 million in the comparative six-month
period.
COGS decreased to $1.5 million for
the three months ended June 30, 2017
compared to $3.2 million for the
three months ended June 30, 2016.
The decrease in COGS was attributable to a decrease in
product sales. The decrease in product sales during the
current quarter reduced the gross margin on product sales to
$1.3 million or 48% compared to
$4.2 million or 57% in the
comparative quarter. For the six months ended June 30, 2017, COGS was $4.2 million compared to $6.3 million in the comparative six-month period.
Gross margin on product sales for the six months ended
June 30, 2017 was $5.2 million or 55% compared to $8.3 million or 57% for the six months ended
June 30, 2016.
R&D expenses were consistent quarter-over-quarter at
$0.2 million for the three months
ended June 30, 2017 and 2016.
R&D expenses were $0.5 million
for the six months ended June 30,
2017 compared to $0.4 million
for the comparative six-month period. The increase in
spending in the current six-month period related to the 2016
Pennsaid 2% Trial for the treatment of acute ankle
sprains.
G&A expenses decreased to $1.6
million for the three months ended June 30, 2017 from $2.3
million for the three months ended June 30, 2016. In the current quarter, the
decrease of $0.7 million was
primarily attributable to a decrease in stock-based compensation
(SBC) expenses. In the comparative three-month period, the
Company recognized a $0.7 million SBC
expense primarily related to the adjustment to market value for the
outstanding share appreciation rights (SARs). G&A
expenses were $3.3 million for the
six months ended June 30, 2017
compared to $4.4 million for the six
months ended June 30, 2016.
The Company earned net interest income of $34,000 for the three months ended June 30, 2017 compared to $22,000 for the three months ended June 30, 2016. The increase in net interest
income in the current quarter related to interest earned on the
$5.0 million of short-term
investments. Net interest income was $72,000 for the six months ended June 30, 2017 compared to $78,000 for the comparative six-month
period.
For the three months ended June 30,
2017, the Company experienced a net foreign currency loss of
$56,000 compared to a net foreign
currency loss of $32,000 in the
comparative quarter. For the six months ended June 30, 2017, the Company experienced a net
foreign currency loss of $0.1 million
compared to a net foreign currency loss of $0.6 million in the comparative six-month
period.
Net loss from continuing operations was $0.2 million for the three months ended
June 30, 2017 compared to net income
from continuing operations of $2.5
million for the three months ended June 30, 2016. The decrease in the current
quarter was attributable to a $2.8
million reduction in gross margin on product sales and a
$0.5 million decrease in contract and
other revenue, partially offset by a decrease in G&A
expenses. Net income from continuing operations was
$2.0 million for the six months ended
June 30, 2017 compared to
$4.4 million for the six months ended
June 30, 2016.
Adjusted EBITDA decreased to $(0.1)
million for the three months ended June 30, 2017 compared to $3.2 million for the three months ended
June 30, 2016. In the current
quarter, a decrease in Adjusted EBITDA primarily related to a
decrease in gross margin. Adjusted EBITDA decreased to
$2.2 million for the six months ended
June 30, 2017 compared to
$6.2 million for the comparative
six-month period.
Cash and short-term investments were $20.0 million as at June
30, 2017 compared to $17.6
million as at December 31,
2016. The increase in cash and short-term investments was
primarily attributable to an increase in cash provided by
operations.
The number of common shares outstanding as at June 30, 2017 was 11,550,897.
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 income
tax expense, 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 June 30
|
Six Months Ended
June 30
|
|
2017
|
2016
|
2017
|
2016
|
in
thousands
|
$
|
$
|
$
|
$
|
Net income
(loss) from continuing operations
|
(203)
|
2,491
|
1,993
|
4,419
|
Add back:
|
|
|
|
|
|
Net interest
income
|
(34)
|
(22)
|
(72)
|
(78)
|
|
Depreciation and
amortization
|
58
|
55
|
112
|
113
|
EBITDA
|
(179)
|
2,524
|
2,033
|
4,454
|
Add back:
|
|
|
|
|
|
SBC
|
65
|
652
|
151
|
1,711
|
Adjusted
EBITDA
|
(114)
|
3,176
|
2,184
|
6,165
|
Management to Host Conference Call/Webcast
Management
will host a conference call to discuss the results tomorrow
(Thursday, August 10, 2017) at
8:00 a.m. ET. To participate in
the conference call, please dial 1 (888) 231-8191 or (647)
427-7450, reference number 51804247. 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
August 17, 2017 by calling 1 (855)
859-2056 or (416) 849-0833, reference number 51804247.
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
This Press Release
contains "forward-looking statements" within the meaning of
applicable securities laws. Forward-looking statements can be
identified by words such as: "anticipate," "intend," "plan,"
"goal," "seek," "believe," "project," "estimate," "expect,"
"strategy," "future," "likely," "may," "should," "will" and similar
references to future periods.
Forward-looking statements are neither historical facts nor
assurances of future performance. Instead, they are based only on
the Company's current beliefs, expectations and assumptions
regarding the future of its business, future plans and strategies,
projections, anticipated events and trends, the economy and other
future conditions. Because forward-looking statements relate to the
future, they are subject to inherent uncertainties, risks and
changes in circumstances that are difficult to predict and many of
which are outside of the Company's control. Nuvo's actual results
and financial condition may differ materially from those indicated
in the forward-looking statements. Therefore, readers should not
rely on any of these forward-looking statements. Important factors
that could cause Nuvo's actual results and financial condition to
differ materially from those indicated in the forward-looking
statements include, among others, the risk factors included in
Nuvo's most recent Annual Information Form dated March 1, 2017 under the heading "Risks Factors",
and as described from time to time in the reports and disclosure
documents filed by Nuvo with Canadian securities regulatory
agencies and commissions. These and other factors should be
considered carefully and readers should not place undue reliance on
Nuvo'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 none of Nuvo or any
other person assumes responsibility for the accuracy and
completeness of these forward-looking statements.
Any forward-looking statement made by the Company in this
Press Release is based only on information currently available to
it and speaks only as of the date on which it is made. Except as
required by applicable securities laws, Nuvo undertakes no
obligation to publicly update any forward-looking statement,
whether written or oral, that may be made from time to time,
whether as a result of new information, future developments or
otherwise.
SOURCE Nuvo Pharmaceuticals Inc.