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Nuvo announces first quarter 2008 financial results

MISSISSAUGA, ON, May 1 /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 three months ended March 31, 2008.

Key Corporate Developments:

- Pennsaid product sales more than tripled to $1.7 million;

- Successful launch continued in Greece with Pennsaid capturing over

30% of its market during the first quarter, placing it first in

its class by revenue;

- The Company continued to make substantial progress regarding the

studies to be provided to the FDA to address the conditions raised

in the Approvable Letter for Pennsaid, a topical non-steroidal

anti-inflammatory drug (NSAID) used to treat the pain and

stiffness associated with knee osteoarthritis (OA); and,

- The Company believes it will be in a position to file a complete

resubmission of its Pennsaid application to the FDA in early 2009

and be eligible to receive final marketing approval six months


"We are extremely optimistic about Nuvo's future. We have a post-Phase III product that is unlicensed for the large and growing U.S. OA market and we remain confident that we will be in a position to file a complete resubmission of our application for Pennsaid approval in early 2009," said Henrich Guntermann, President and Chief Executive Officer, "In addition, our high throughput screening and MMPE technology is creating a promising pipeline of transdermal drug candidates."

Financial Results:

(thousands of Canadian dollars)

Three Three


Items not involving current cash flows:

Amortization 205 211

Deferred revenue recognized (261) (276)

Stock-based compensation and payments 150 295

Accretion of interest on debentures 207 145

Other (352) (12)

Net change in non-cash working capital balances (626) 160





Acquisition of property, plant and equipment (27) -

Proceeds from sale of assets 28 -





Issuance of common shares, net of related costs - 5,330

Repayments of long term debt and capital lease

obligations (44) (328)




Effect of exchange rate changes on cash and cash

equivalents 261 (5)



Net increase (decrease) in cash and cash

equivalents during the period (2,730) 2,033

Cash and cash equivalents, beginning of period 21,791 11,213





Interest paid 26 43


months months

ended ended

March 31, March 31,

2008 2007


Revenue $ 2,236 $ 978

Net loss $ (2,271) $ (3,487)


Revenue for the three-months ended March 31, 2008 increased 128% to $2.2 million compared with $1.0 million for the three-months ended March 31, 2007. The increase was primarily attributable to a $1.1 million increase in Pennsaid product sales to the Company's Greek distributor which launched the product during the second quarter of 2007 and a 65% increase in sales of WF10 based products to $0.2 million. Overall product sales for Pennsaid increased 214% to $1.7 million compared to $0.6 million in 2007. As a result of the increased sales volumes gross margin on product sales improved to $0.9 million during the first quarter of 2008 as compared to a loss of $0.1 million in the first quarter of 2007.

Total operating expenses, excluding foreign currency gains and losses, for the three-months ended March 31, 2008 of $3.7 million were unchanged versus a year ago. While unchanged in aggregate the change in mix between categories of expenditures highlights the impact of the Company's efforts during the third and fourth quarters of 2007 to focus its resources on research activities rather than administrative costs. During the first quarter of 2008, research and development expenditures represented 57% of operating expenses (before currency gains and losses) versus 47% in the first quarter of 2007.

Research and development costs were $2.1 million for the three-months ended March 31, 2008 an increase of 21% compared with $1.7 million for the three-months ended March 31, 2007. The majority of spending for the period related to the on-going studies to address the conditions raised by the FDA in the Pennsaid Approvable Letter and the costs of the Company's research facility in San Diego as it expands its capabilities. During the first quarter, the Company made excellent progress towards completing several of the Short and Long Term Studies required for its resubmission. The Company expects that it will spend approximately $12 million on external costs to address all approvable letter issues. However, as the FDA has agreed to allow the longest study to be completed post approval, a portion of these costs will be spent after the approval of Pennsaid. To date, the Company has spent approximately $5 million, of which $1 million was expensed in the quarter ended March 31, 2008.

SG&A expenses decreased by 22% to $1.1 million for the three-months ended March 31, 2008, compared to $1.4 million for the three-months ended March 31, 2007. The decrease is primarily attributable to activities undertaken during the third and fourth quarters of 2007 including the closure of the Company's international marketing office in Barbados and staff reductions at the corporate head office.

The net loss for the three-months ended March 31, 2008 declined by 35% to $2.3 million from $3.5 million for the three-months ended March 31, 2007. The Company was able to reduce the net loss as the increased margin generated from higher product sales, foreign currency gains and reductions in SG&A costs more than offset higher research and development expenditures.

Cash and cash equivalents were $19.1 million as at March 31, 2008, compared to $21.8 million as at December 31, 2007. The decrease is almost entirely attributable to cash used by operating activities.

Cash used in operations was $2.3 million for the three-months ended March 31, 2008 compared to $3.1 million for the three-months ended March 31, 2007, a decrease of 26% that was the result of the significantly reduced net loss during the quarter. However, overall cash used in operating activities only decreased slightly to $2.9 million for the three-months ended March 31, 2008 versus $3.0 million for the three-months ended March 31, 2007. The improvement is small as the positive impact of the reduced net loss was almost entirely offset by an investment in non-cash working capital during the quarter to support higher sales volumes through increased levels of accounts receivable and inventory.

Net cash used in financing activities totaled $44,000 for the three-months ended March 31, 2008, compared with net cash provided by financing activities of $5.0 million for the three-months ended March 31, 2007. During the quarter financing activities consisted solely of scheduled long term debt and capital lease payments. In the comparable period last year, net cash provided by financing activities totaled $5.0 million and consisted of $5.3 million in proceeds from the exercise of warrants offset by $328,000 in debt repayments.

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

About Pennsaid

Pennsaid(R) is a topical non-steroidal anti-inflammatory drug (NSAID) used for the treatment of osteoarthritis and is currently approved for sale in Canada and several European countries. Pennsaid(R) allows the diclofenac solution to be delivered to a specific site via the surface of the skin and thus limits complications associated with systemic delivery. According to published clinical trials, Pennsaid(R) is as effective as the maximum daily dose of comparable oral medication at relieving pain and stiffness associated with osteoarthritis of the knee, as well as improving overall well-being. There are more than 21 million Americans suffering from osteoarthritis, a very painful and debilitating condition, and the United States market for this condition is estimated at US$4 billion annually In December 2006, the U.S. Food and Drug Administration issued an approvable letter that indicated Pennsaid(R) is approvable subject to Nuvo satisfying certain conditions.

About Nuvo Research Inc.

Nuvo is a Canadian drug development company primarily focused on the research and development of drug products that are delivered to and through the skin. Nuvo is also involved in research and development activities involving WF10, a chlorite-based, immunomodulating drug through its 60% interest in Dimethaid AG.

Nuvo believes it is uniquely positioned to research and develop new drug product candidates for delivery to and through the skin using its multiplexed molecular penetration enhancers ("MMPE(TM)"s), that interact with the skin and enhance its permeability thereby allowing certain drug molecules to pass into and through the skin to proximate tissues and its high throughput experimentation systems that allow its scientists to rapidly screen combinations of existing molecular penetration enhancers ("MPE(TM)s") with large numbers of potential drug formulations to measure their ability to permeabilize and permeate the skin. Nuvo's lead product Pennsaid(R), a topical non-steroidal anti-inflammatory drug (NSAID) utilizes the Company's technology to treat the symptoms of osteoarthritis of the knee locally. Nuvo intends to leverage its technologies to create a portfolio of topical and transdermal products targeting a variety of indications. Nuvo Research Inc. is a publicly traded company headquartered in Mississauga, Ontario, with manufacturing facilities in Varennes, Quebec and Wanzleben, Germany and a research and development facility in San Diego, California. For more information, please visit

This release may contain forward-looking statements, subject to risks and uncertainties beyond management's control. Actual results could differ materially from those expressed here. Risk factors are discussed in the Company's annual information form filed with the securities commissions in each of the provinces of Canada. The Company undertakes no obligation to revise forward-looking statements in light of future events.

Summary financial statements attached:



As at As at

March 31, December 31,

2008 2007

Unaudited Audited

(thousands of Canadian dollars) $ $




Cash and cash equivalents 19,061 21,791

Accounts receivable 2,189 1,802

Other receivable 579 579

Inventories 1,382 1,042

Prepaid expenses and other 902 789



Restricted cash 89 79

Property, plant and equipment 2,273 2,475

Intangible assets 87 90


TOTAL ASSETS 26,562 28,647





Accounts payable and accrued liabilities 3,044 2,994

Short term loan 637 587

Deferred revenue 1,200 1,211

Current portion of long term debt and capital

lease obligations 104 94

Current portion of debentures 500 500



Deferred revenue 4,919 5,169

Long term debt and capital lease obligations 202 222

Debentures 2,213 2,006





Common shares 187,890 187,877

Warrants 11,243 11,243

Contributed surplus 5,807 5,670

Accumulated other comprehensive income 114 114

Deficit (191,311) (189,040)









Three-months ended

Unaudited March 31, March 31,

(thousands of Canadian dollars 2008 2007

except per share amounts) $ $



Product sales 1,975 702

Cost of goods sold 1,084 755


Gross margin (loss) on product sales 891 (53)

Other revenue

Licensing fees 250 250

Research and other contract revenue 11 26


1,152 223



Research and development 2,104 1,746

Selling, general and administrative expenses 1,124 1,447

Stock-based compensation 150 163

Amortization of property, plant, and equipment

and intangibles 205 211

Foreign currency (gain) loss (279) 10

Interest expense 303 266

Interest income (184) (133)


3,423 3,710




Deficit, beginning of year (189,040) (176,664)


DEFICIT, END OF PERIOD (191,311) (180,151)



Average number of basic and diluted common

shares outstanding for the period (millions) 299.5 192.7


Net loss per common share - basic and diluted $(0.01) $(0.02)





Three-months ended

March 31, March 31,

Unaudited 2008 2007

(thousands of Canadian dollars) $ $



Net loss (2,271) (3,487)<

SOURCE Nuvo Research Inc.
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