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Nuvo announces 2009 first quarter financial results

MISSISSAUGA, ON, April 30 /PRNewswire-FirstCall/ - Nuvo Research Inc. (TSX: NRI), a Canadian drug development company focused on the research and development of drug products that are delivered to and through the skin using its topical and transdermal drug delivery technologies, today announced its financial and operational results for the quarter ended March 31, 2009.

    Recent Corporate Developments:

    -   Successfully completed all Pennsaid(R) studies necessary to resubmit
        the application for Pennsaid approval to the United States Food and
        Drug Administration (FDA). The FDA confirmed that it has accepted
        this filing as a complete response to its Approvable Letter for
        Pennsaid dated December 28, 2006 and pursuant to the Prescription
        Drug User Fee Act provided the Company with a date of August 5, 2009
        (the PDUFA Date) by which the FDA intends to advise Nuvo on
        Pennsaid's approvability

    -   Received net proceeds of $3.7 million from the exercise of warrants
        under the warrant incentive program

    -   Was awarded the bronze medal in the Science and Medical category of
        the 2009 Edison Awards for the Company's High Throughput
        Experimentation platform

    -   Was advised that PAIN(R) , the world's leading publication on pain
        research and treatments and the official journal of the International
        Association for the Study of Pain will be publishing an article
        outlining the successful results of the Company's 112 efficacy trial
        in its June 2009 issue

"With our PDUFA Date rapidly approaching, we remain highly optimistic about Pennsaid's potential for approval and are continuing discussions with potential United States licensing partners," said Henrich Guntermann, President and Chief Executive Officer of Nuvo Research.

    Financial Results:
    (thousands of Canadian dollars)
                                                  Three months  Three months
                                                         ended         ended
                                                      March 31,     March 31,
                                                          2009          2008
    Revenue                                         $    3,047    $    2,236
    Net loss                                        $   (2,868)   $   (2,271)

Revenue, consisting of product sales, license fee revenue, and research and other contract revenue, for the three months ended March 31, 2009 increased 36% to $3.0 million compared with $2.2 million for the three months ended March 31, 2008. The increase was attributable to many factors including a $0.3 million increase in Pennsaid product sales, the recognition of additional licensing fee revenue and research revenue earned on a collaboration agreement with a Fortune Global 500 company that develops and markets skin care products.

Gross margin on product sales was $1.2 million for the three months ended March 31, 2009 compared to $0.9 million for the comparable quarter in 2008. The increase in gross margin is primarily attributable to an 18% increase in Pennsaid product sales, a 38% increase in WF10 based product sales and significant improvements and efficiencies achieved in the Pennsaid manufacturing process, partially offset by price increases in the raw materials used to compound and package Pennsaid and the stronger U.S. dollar. The overall gross margin percentage was 52% in 2009 versus 45% in 2008.

Total operating expenses, excluding foreign exchange currency gains for the three-month period ended March 31, 2009 increased to $4.8 million versus $3.7 million for the three months ended March 31, 2008. The $1.1 million increase in operating expenses is due to higher research and development expenses, increases in selling, general and administrative costs and higher net interest expense, partially offset by lower amortization charges and stock-based compensation.

Research and development expenses increased by 39% to $2.9 million for the three months ended March 31, 2009 compared to $2.1 million for the three months ended March 31, 2008. In the quarter, the Company's expenditures related to the completion of the studies and preparation of all data and documents necessary for filing the Company's Complete Response to the Pennsaid Approvable Letter that occurred on February 4, 2009. The FDA accepted the resubmission for review and set August 5, 2009 as the PDUFA Date, the date by which they will advise Nuvo of their decision regarding Pennsaid's approvability. The Company also incurred expenditures for preclinical development of the Company's early stage pipeline candidates and costs relating to the recently expanded research and formulation development activities in San Diego.

SG&A expenses increased 21% to $1.4 million for the three months ended March 31, 2009 compared to $1.1 million for the three months ended March 31, 2008. The increase in the quarter was attributable to costs incurred from the ongoing licensing activities in the U.S. and $0.1 million recognized under the new Deferred Share Unit Plan, a share-based compensation plan for non-employee directors under which directors are allotted a portion of and can elect to receive a portion of their cash compensation in deferred share units.

For the three months ended March 31, 2009, net loss was $2.9 million, an increase over the $2.3 million net loss for the three months ended March 31, 2008. For the period, higher research and development costs to complete the Pennsaid resubmission, a reduced foreign exchange gain, higher SG&A costs and higher net interest expense more than offset the increased gross margin generated from higher product sales and operating efficiencies.

Cash and cash equivalents on hand at March 31, 2009 of $14.2 million were only $1.0 million less than the $15.2 million on hand at December 31, 2008. The decrease is attributable to cash used in operations, partially offset by $2.2 million in proceeds received from the 2009 Warrant Incentive Program.

Cash used in operating activities of $3.2 million was higher than the $2.9 million used in the three-month comparative period ended March 31, 2008. The $0.3 million increase in cash used in operations was primarily due to the larger loss in the quarter offset somewhat by a lower investment in non-cash working capital.

Cash provided by financing activities totaled $2.1 million for the three months ended March 31, 2009, compared with net cash used in financing activities of $44,000 for the three months ended March 31, 2008. During the current quarter, the Company received $2.2 million in net proceeds from the 2009 Warrant Incentive Program. These proceeds were slightly offset by scheduled debt repayments of $62,000 during the quarter versus $44,000 in 2008.

Detailed financial statements and the MD&A are available at or

Notice of Annual and Special Meeting

Nuvo will be holding its Annual and Special Meeting of Shareholders on Thursday, April 30, 2009 at 9:00 a.m. (EST) at the Gallery of the Toronto Stock Exchange (TSX) Broadcast & Conference Centre, The Exchange Tower, 130 King Street West, Toronto, Ontario, Canada.

About Pennsaid

Pennsaid, the Company's lead product, is used to treat the pain and symptoms associated with knee osteoarthritis. Pennsaid combines a transdermal carrier (containing dimethyl sulfoxide, popularly known as "DMSO") with diclofenac sodium, a leading non-steroidal anti-inflammatory drug ("NSAID"), and delivers the active drug through the skin directly to the site of pain. While, conventional oral NSAIDs expose patients to potentially serious systemic side effects such as gastrointestinal bleeding and cardiovascular risks, Nuvo's clinical trials suggest that some of these systemic side effects occur less frequently with topically applied Pennsaid. There are more than 27 million Americans suffering from osteoarthritis and the United States market for this condition is estimated at US$4 billion annually.

About Nuvo Research Inc.

Nuvo is focused on the research and development of drug products delivered to and through the skin using its topical and transdermal drug delivery technologies. Nuvo's lead product is Pennsaid, a topical NSAID used for the treatment of osteoarthritis of the knee. 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, with manufacturing facilities in Varennes, Quebec and Wanzleben, Germany and a research and development center in San Diego, California. For more information, please visit

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. The Company 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 the Company's Annual Information Form for the year ended December 31, 2008. The Company 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

                             NUVO RESEARCH INC.
                         CONSOLIDATED BALANCE SHEETS

                                                         As at         As at
                                                      March 31,  December 31,
                                                          2009          2008
                                                     Unaudited       Audited
    (thousands of Canadian dollars)                          $             $
    Cash and cash equivalents                           14,176        15,219
    Accounts receivable                                  1,673         2,294
    Inventories                                          1,968         1,393
    Prepaid expenses and other                             501           446
    TOTAL CURRENT ASSETS                                18,318        19,352

    Restricted cash                                         92            93
    Property, plant and equipment                        1,896         1,990
    TOTAL ASSETS                                        20,306        21,435

    Accounts payable and accrued liabilities             2,517        2,736
    Deferred revenue                                     2,264        2,241
    Current portion of long-term debt and
     capital lease obligations                             178          181
    TOTAL CURRENT LIABILITIES                            4,959        5,158
    Deferred revenue                                     2,761        3,321
    Long-term debt and capital lease
     obligations                                           263          320
    Debentures                                           4,922        4,774
    TOTAL LIABILITIES                                   12,905       13,573

    Common shares                                      193,830      189,603
    Warrants                                             8,895       10,847
    Contributed surplus                                  7,022        6,890
    Accumulated other comprehensive income                 114          114
    Deficit                                           (202,460)    (199,592)
    TOTAL SHAREHOLDERS' EQUITY                           7,401        7,862
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY          20,306       21,435

                             NUVO RESEARCH INC.

                                                          Three-months ended
    Unaudited                                         March 31,     March 31,
    (thousands of Canadian dollars except                 2009          2008
     per share and share amounts)                            $             $
    Product sales                                        2,383         1,975
    Cost of goods sold                                   1,134         1,084
    Gross margin on product sales                        1,249           891

    Other revenue

    Licensing fees                                         560           250
    Research and other contract revenue                    104            11
                                                         1,913         1,152

    Research and development                             2,934         2,104
    Selling, general and administrative expenses         1,363         1,124
    Stock-based compensation                               132           150
    Amortization of property, plant, and
     equipment and intangibles                             149           205
    Foreign currency gain                                   (9)         (279)
    Interest expense                                       246           303
    Interest income                                        (34)         (184)
                                                         4,781         3,423
    NET LOSS AND TOTAL COMPREHENSIVE LOSS               (2,868)       (2,271)

    Deficit, beginning of period                      (199,592)     (189,040)
    DEFICIT, END OF PERIOD                            (202,460)     (191,311)
    Net loss per common share - basic and diluted   $    (0.01)   $    (0.01)
    Average number of common shares outstanding
     - basic and diluted (millions)                      319.6         299.5

                             NUVO RESEARCH INC.

                                                          Three-months ended
                                                      March 31,     March 31,
    Unaudited                                             2009          2008
    (thousands of Canadian dollars)                          $             $
    Net loss                                            (2,868)       (2,271)
    Items not involving current cash flows:
      Amortization                                         149           205
      Deferred revenue recognized                         (560)         (261)
      Stock-based compensation and payments                132           150
      Deferred stock unit expense                           94             -
      Accretion of interest on debentures                  148           207
      Other                                                 16          (352)
    Net change in non-cash working capital                (300)         (626)
    Advances on research contracts                          23             -
    CASH USED IN OPERATING ACTIVITIES                   (3,166)       (2,948)
    Acquisition of property, plant and equipment           (55)          (27)
    Proceeds from the sale of assets                         -            28
    CASH USED IN INVESTING ACTIVITIES                      (55)            1
    Issuance of shares, net of related costs             2,196             -
    Repayments of long-term debt and capital
     lease obligations                                     (62)          (44)
    CASH PROVIDED BY FINANCING ACTIVITIES                2,134           (44)
    Effect of exchange rate changes on cash
     and cash equivalents                                   44           261
    Net change in cash and cash equivalents
     during the period                                  (1,043)       (2,730)
    Cash and cash equivalents, beginning of period      15,219        21,791
    CASH AND CASH EQUIVALENTS, END OF PERIOD            14,176        19,061
    Interest paid                                           95            26

SOURCE Nuvo Research Inc.
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