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Press Release

Nuvo Pharmaceuticals™ Announces 2017 Fourth Quarter and Year-End Results

Nuvo Pharmaceuticals
Posted on: 23 Mar 18

- Nuvo to Host Conference Call/Audio Webcast March 23 at 8:30 a.m. ET -

MISSISSAUGA, ON, March 23, 2018 /PRNewswire/ - Nuvo Pharmaceuticals Inc. (Nuvo or the Company) (TSX:NRI ; OTCQX:NRIFF), a commercial healthcare company with a portfolio of commercial products and pharmaceutical manufacturing capabilities, today announced its financial and operational results for the fourth quarter and year ended December 31, 2017.  For further details on the results, please refer to Nuvo's Management, Discussion and Analysis (MD&A) and Consolidated Financial Statements which are available on the Company's website (www.nuvopharmaceuticals.com).  All figures are in Canadian dollars, unless otherwise noted.

Fourth Quarter 2017 and Business Update

Pennsaid® 2%

U.S. prescriptions of Pennsaid 2% were 110,000 in the fourth quarter of 2017 compared to 108,000 prescriptions in the third quarter of 2017. According to IMS Health/IQVIA, for the year ended December 31, 2017, U.S. prescriptions of Pennsaid 2% were 434,000 compared to 457,000 for the year ended December 31, 2016.
 

In December 2017, the Company entered into a license and distribution agreement with Gebro Pharma AG (Gebro Pharma) for the exclusive right to register, distribute, market and sell Pennsaid 2% in Switzerland and Liechtenstein.

Resultz®

In January 2018, the Company's wholly owned subsidiary, Nuvo Pharmaceuticals (Ireland) Limited (Nuvo Ireland) acquired the U.S. product and intellectual property rights to Resultz from Piedmont Pharmaceuticals LLC (Piedmont). The acquisition included all U.S. product and intellectual property rights. Resultz was cleared as a Class 1 medical device by the U.S. Food and Drug Administration (FDA) in May 2017 and has not yet been commercially launched in the U.S. Nuvo anticipates commercializing Resultz in the U.S. through a licensing partner and has already initiated discussions with potential licensees.
 

In December 2017, the Company acquired the global, ex-U.S. product and intellectual property rights to Resultz from Piedmont. The transaction included existing royalty streams in France, Spain, Portugal, Belgium, Ireland and the United Kingdom, Canada, Russia, Australia, and Israel which are generated from a network of existing global licensees and license agreements that were assumed by Nuvo.

Corporate Developments

In November 2017, the Toronto Stock Exchange (TSX) approved the Company's notice of intention to make a normal course issuer bid for a portion of its outstanding common shares as appropriate opportunities arise from time-to-time. Pursuant to the notice, Nuvo is authorized to acquire up to a maximum of 919,819 of its common shares, or approximately 10% of the public float of 9,198,191 as of November 30, 2017, for cancellation over the next 12 months. Nuvo believes that the repurchase of a portion of outstanding common shares is an appropriate use of available cash and is in the best interest of Nuvo and its shareholders.
 

On November 28, 2017, the Company's common shares commenced trading on the OTCQX® market in the United States under the symbol "NRIFF". Nuvo's common shares will continue to trade on the TSX under the symbol "NRI".
 

In November 2017, the Board of Directors of the Company appointed Jesse Ledger to the position of President & Chief Executive Officer. Mr. Ledger had previously held the position of President. Mr. Ledger assumed the CEO role from John London who was appointed the Company's Executive Chairman and continues to serve on its Board of Directors.

Fourth Quarter and Full Year Financial Summary(1) 

As previously disclosed, the Company's supply of commercial bottles of Pennsaid 2% to its U.S. partner Horizon Pharma plc (Horizon) throughout 2017 was affected by the installation of new packaging equipment to facilitate compliance with the U.S. Federal Drug Supply Chain Security Act and Horizon's plan to draw down existing inventory during the installation process. Supply of Pennsaid 2% physician samples was negatively affected by the changes Horizon made to its commercial operation in 2017.
 

Total revenue for the year ended December 31, 2017 was $17.5 million compared to $27.0 million for the year ended December 31, 2016. Total revenue was $4.5 million for the three months ended December 31, 2017 compared to $5.6 million for the three months ended December 31, 2016.
 

Adjusted EBITDA(2) decreased to $2.2 million for the year ended December 31, 2017 compared to $8.9 million in the comparative year. Adjusted EBITDA decreased to $36,000 for the three months ended December 31, 2017 compared to $1.3 million for the three months ended December 31, 2016.
 

Net income from continuing operations was $1.6 million for the year ended December 31, 2017 compared to $7.4 million in the comparative year. Net loss from continuing operations was $0.2 million for the three months ended December 31, 2017 compared to net income from continuing operations of $1.7 million for the three months ended December 31, 2016.
 

Cash and short-term investments were $10.4 million as at December 31, 2017 compared to $17.7 million as at September 30, 2017. The decrease was primarily related to the US$7.0 million ($8.8 million) that was paid to Piedmont to acquire the ex-U.S. product and intellectual property rights to Resultz.

(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.

"Pennsaid 2% prescriptions remained steady in the fourth quarter with a small increase over the third quarter 2017, but down slightly in 2017 compared to 2016.  Considering the changes our U.S. partner Horizon made to their commercial business in 2017, we are pleased that prescriptions of Pennsaid were not significantly affected," said Jesse Ledger, Nuvo's President & CEO.  "During the quarter, we shipped the first batches of serialized Pennsaid 2% commercial bottles to Horizon, within the timelines we had expected and well in advance of the FDAs revised deadline for implementation of the U.S. Federal Drug Supply Chain Security Act in November 2018."

Mr. Ledger added, "We also made considerable progress in our goal to further diversify our product portfolio and revenue streams with the global ex-U.S. acquisition of Resultz and its related royalty stream in December, followed by the acquisition of the U.S. Resultz rights in January.  We now have an additional best in class product in our portfolio that offers significant international growth potential for our business."

Growth Strategy

The Company's focus, in the short-term, is to continue to maximize the value of Pennsaid 2% and Resultz through out-licensing to commercial partners in international markets, 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.

Acquisition of U.S. Rights to Resultz
In January 2018, the Company's wholly owned subsidiary, Nuvo Ireland acquired the U.S. rights to Resultz (50% isopropyl myristate, 50% cyclomethicone D5 topical solution lice and egg removal kit) from Piedmont.  The acquisition included all U.S. product and intellectual property rights.  Resultz was cleared as a Class 1 medical device by the FDA in May 2017 and has not yet been commercially launched in the U.S.  Nuvo anticipates commercializing Resultz in the U.S. through a licensing partner and has already initiated discussions with potential licensees.  Under the terms of the agreement, US$1.5 million ($1.9 million) was paid to Piedmont.  The transaction includes a single-digit royalty payable by Nuvo Ireland on net sales through 2034.  Nuvo, through its Nuvo Ireland subsidiary, has also obtained a right of first refusal to license or acquire certain related assets from Piedmont targeting other human indications. 

Acquisition of Global, ex-U.S. Rights to Resultz
In December 2017, the Company acquired the global, ex-U.S. product and intellectual property rights to Resultz from Piedmont. The transaction included existing royalty streams in France, Spain, Portugal, Belgium, Ireland and the United Kingdom, Canada, Russia, Australia and Israel (collectively the Royalty Markets), generated from a network of existing global licensees and license agreements that were assumed by Nuvo.  Current global licensees include Reckitt Benckiser Group PLC, Aralez Pharmaceuticals Inc., Lapidot Medical and Takeda Belgium.  Resultz is also pending registration in Japan, where the local license is held by Sato Pharmaceutical Co. Ltd.  Resultz is protected by a portfolio of 40 issued patents globally.  Resultz is currently approved for sale under its European Conformity (CE) mark as a class 1 medical device, but not yet partnered or generating revenue in all remaining E.U. territories.  Under the terms of the agreement, Nuvo paid US$7.0 million ($8.8 million) on close to Piedmont.  The transaction also included a single-digit royalty payable by Nuvo on net sales generated from non-Royalty Markets through 2023 and potential added future consideration in the form of payments for achieving certain aggregate annual net sales-based milestones. 

Pennsaid 2% Out-licensing
In December 2017, the Company entered into a license and distribution agreement with Gebro Pharma for the exclusive right to register, distribute, market and sell Pennsaid 2% in Switzerland and Liechtenstein.  Nuvo will provide Gebro Pharma with its existing Pennsaid 2% regulatory dossier and the FDA approval of Pennsaid 2%, which Gebro Pharma will use to support its application for regulatory approvals in Switzerland and Liechtenstein.  Gebro anticipates meeting with Swissmedic, the Swiss regulatory approval organization, towards the end of Q2 or early Q3 2018 for scientific advice regarding an application for Swiss regulatory approval.  The Company is eligible to receive milestone payments and royalties on net sales of Pennsaid 2% in Switzerland and Liechtenstein and will earn product revenue from Gebro Pharma pursuant to an exclusive supply agreement from its manufacturing facility in Varennes, Québec.

In December 2017, the Company's Indian partner, Sayre Therapeutics PVT LTD submitted its marketing authorization application for Pennsaid 2% to the Drug Controller General of India.  If regulatory approval is obtained as anticipated, the Company expects commercial launches of Pennsaid 2% will commence in late 2018 or early 2019.  The Company received an upfront payment and is eligible to receive milestone payments and a double-digit royalty on net sales.  Nuvo will supply Pennsaid 2% to Sayre Therapeutics on an exclusive basis from its manufacturing facility in Varennes, Québec.

Nuvo anticipates 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

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 rules, 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 requested that the Company deliver non-serialized commercial bottles during the third quarter before the qualification process was completed.  The Company completed its qualification and was fully compliant with the DSCSA rules during the fourth quarter.

Horizon Adjustment of Sales and Marketing Resources
When Horizon released its Q1 2017 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.  With prescription volumes relatively consistent quarter-to-quarter in fiscal 2017, the Company has not yet seen a significant negative effect from Horizon's sales force reduction that might impact Horizon's typical commercial bottle ordering patterns moving forward.  Horizon's cost reallocation initiatives have resulted in a decrease in the number of product samples Horizon distributes to physicians.  A reduction in sample product orders from Horizon had a negative impact on the Company's 2017 financial results. 

Fourth Quarter and Full Year Financial Review

Table of Selected Financial Results
For further details on the results, please refer to Nuvo's MD&A and the Consolidated Financial Statements which are available on the Company's website (www.nuvopharmaceuticals.com).

For more information:
www.prnewswire.com/news-releases/nuvo-pharmaceuticals-announces-2017-fourth-quarter-and-year-end-results-677728033.html

Editor's Details

Mike Wood
PharmiWeb.com
www.pharmiweb.com
editor@pharmiweb.com

Last updated on: 23/03/2018

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