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back to headlinesprint storyemail story 07/29/2010 05:00:08 PM EDT -- Canada Newswire Nuvo Research announces 2010 second quarter financial results
MISSISSAUGA, ON, July 29 /CNW/ - Nuvo Research Inc. (TSX: NRI), a drug development company focused on the research and development of drug products that are delivered into and through the skin using its topical and transdermal drug delivery technologies, and on the development of its immune modulating drug candidate WF10, today announced its financial and operational results for the quarter ended June 30, 2010. Key Corporate Developments: "We are pleased with Covidien's launch of Pennsaid in the United States," said Dan Chicoine, Chairman and Co-Chief Executive Officer of Nuvo Research. "Covidien has indicated that Pennsaid is doing well in the marketplace. While it is early in the process, we are optimistic that Pennsaid will continue its upward sales trend in the U.S. We are also encouraged that it appears that Pennsaid's commercial launch is expanding the overall U.S. topical NSAID market. An expanding market creates heightened awareness and acceptance among physicians and patients about the benefits of this relatively new U.S. drug class, which could result in increased future Pennsaid sales and revenue for Nuvo." Operating Results Revenue consisting of product sales, royalties, license fee revenue and research and other contract revenue for the three months ended June 30, 2010 increased 57% to $4.2 million compared to $2.7 million for the three months ended June 30, 2009. The increase was primarily attributable to the launch of Pennsaid in the United States in late April 2010 as the Company recorded $1.3 million in Pennsaid product sales and royalty revenue earned on the net sales of Pennsaid in the U.S. Although early in the launch, management is encouraged by the market data and metrics for prescriptions, average units dispensed per prescription, patient days dispensed and the qualitative feedback received from our U.S. licensee Covidien. Revenue for the six months ended June 30, 2010 increased by 44% to $8.3 million compared to $5.8 million for the six months ended June 30, 2009 primarily due to the U.S. launch. Gross margin on product sales increased to $1.2 million for the three months ended June 30, 2010 compared to $0.6 million for the three months ended June 30, 2009. The increase in gross margin is primarily attributable to higher Pennsaid sales as a result of the U.S. launch and the negative impact that the planned eight-week shutdown of the Pennsaid manufacturing facility had on the comparative period. For the six months ended June 30, 2010, gross margin on product sales was $2.3 million compared to $1.9 million for the six months ended June 30, 2009. The increase in gross margin is primarily attributable to higher Pennsaid sales, partially offset by the significant weakening of the euro and British pound against the Canadian dollar. Total operating expenses, excluding foreign currency gains and losses, for the three and six months ended June 30, 2010 were $4.8 million and $9.3 million versus $3.1 million and $7.9 million for the three and six months ended June 30, 2009. The increase in the quarter and six-month period relates primarily to higher selling, general and administrative expenses (SG&A), research and development (R&D) expenses offset by lower net interest expense and amortization. R&D expenses were $2.2 million and $4.5 million for the three and six months ended June 30, 2010, an increase compared to $0.9 million and $3.8 million for the three and six months ended June 30, 2009. The increase observed this quarter versus a year ago is primarily related to a $0.9 million reimbursement payment received from Covidien in June 2009 for specific R&D costs incurred prior to the Effective Date under the terms of the U.S. Licensing Agreement. The remaining increase in the three and six-month periods primarily related to establishing the Pain Group in the U.S. and conducting the Phase 2 allergic rhinitis trial for WF10, which is partially funded by the SAB, in Leipzig, Germany. SG&A expenses increased to $2.5 million and $4.5 million for the three and six months ended June 30, 2010 compared to $1.9 million and $3.4 million for the three and six months ended June 30, 2009. The increase in both periods is primarily related to an increase in compensation costs. During the quarter, the Compensation Committee retained the services of Radford, the leading executive compensation consultant to the life sciences industry in North America to help establish an executive and senior management compensation philosophy and to make compensation recommendations. The recommendations were implemented in the quarter. Also contributing to the increase is consulting, professional fees and other fees relating to the Company's business development activities aimed at expanding its drug development pipeline. Net interest income was $13,000 for the three months ended June 30, 2010 compared to net interest expense of $218,000 for the three months ended June 30, 2009. For the six months ended June 30, 2010, net interest expense was $21,000 compared to $430,000 for the six months ended June 30, 2009. The decrease in both periods is attributable to lower non-cash accretion charges and cash interest payments on the convertible debentures as all outstanding debentures were converted into common shares during 2009 and the first quarter of 2010. Net loss was $2.9 million and $5.9 million for the three and six months ended June 30, 2010 compared to $1.7 million and $4.5 million for the three months ended June 30, 2009. The larger net loss in both periods is attributable to higher SG&A, R&D expenses and foreign currency losses that were only partially offset by a higher gross margin, U.S. royalty revenue and lower interest expense. Cash and cash equivalents were $32.9 million as at June 30, 2010, a $9.2 million decrease from $42.1 million as at December 31, 2009, primarily as a result of the $5.9 million loss and a $2.1 million investment in non-cash working capital primarily related to the U.S. launch of Pennsaid. Cash used in operations was $3.2 million and $6.0 million for the three and six months ended June 30, 2010 compared to $2.0 million and $4.9 million for the three and six months ended June 30, 2009. The increase in cash used in operations is primarily attributable to the higher net loss in both periods. Net cash used in investing activities totaled $370,000 and $604,000 for the three and six months ended June 30, 2010 compared to $148,000 and $203,000 for the three and six months ended June 30, 2009. The additions in the three and six months ended June 30, 2010 primarily represent the purchase of production automation and laboratory equipment. Net cash used in financing activities totaled $14,000 and $33,000 for the three and six months ended June 30, 2010 and related primarily to scheduled capital lease payments. For the three and six months ended June 30, 2009, cash provided by financing activities totaled $3.2 million and $5.3 million and was primarily attributed to proceeds received upon the exercise of warrants as part of and subsequent to the early warrant incentive program. About Nuvo Research Inc. Nuvo is primarily focused on the research and development of drug products delivered into and through the skin using its topical and transdermal drug delivery technologies, and on the development of its immune modulating drug candidate WF10. Nuvo's lead product is Pennsaid, a topical non-steroidal anti-inflammatory drug (NSAID), which is sold in Canada, several European countries and the United States. Nuvo intends to leverage its skin-penetrating technologies to create a portfolio of topical and transdermal products targeting a variety of indications. Nuvo is a publicly traded, Canadian pharmaceutical company headquartered in Mississauga, Ontario. Nuvo's Pain Group is located in West Chester, Pennsylvania. Its manufacturing facilities are located in Varennes, Québec and Wanzleben, Germany, and its research and development centers are located in San Diego, California and Leipzig, Germany. 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, 2009. 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 %SEDAR: 00002418E
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