Nuvo Pharmaceuticals Inc NRIFF

Q1 Notes

[consultant99]

Q1 results were helped by a favourable $1 million reduction in G & A expenses; the lower share price at the end of March reduced the accrual for Stock Based Compensation.

The volume drop-off in P2% prescriptions was (3.6)% versus Q1 2016 - Pharma therefore did not see the same drop off in earnings for supply as Horizon did in retailing (a slightly lower volume and lower price).

Going forward there is some concern as to the level of resources Horizon will use for marketing P2% and if their plans will reduce the volume of bottles sold (direct impact on Pharma).

The biggest short term issue for Pharma is that Horizon will not take ANY commercial bottles of P2% until the new serialization equipment is installed at the plant. So management expects a Q2 LOSS and Q3 reduction in revenues - (they did not offer an opinion as to profitability).
[Did management act fast enough to get and install the equipment - operating the plant is one of the few activities that management has total control over?]

While management had previously indicated that Horizon would be reducing the purchases of commercial format bottles starting in Q2 this new revelation of zero sales is new and could easily have been responsible for a portion of the recent sell-off if it had been leaked.

In Q1 the marketing rights for India were sold but despite the PR that stated Pharma received a payment I could find no entry in the results. Perhaps the only indication was in the table of Geographic locations for Q1 revenues which had $13 k for "Other" which very well might have been for India. No analyst asked the question on the conference call - maybe a shareholder will at the AGM.

Jessie indicated that the recently announced marketing deal is not expected to deliver revenues until late 2018 or early 2019. Further while the Russians now have regulatory approval they are still in the discussion phase as to strategy and plans to launch P2% - that is disappointing to hear.

There was some degree of optimism from Jessie that Nuvo was close to signing a manufacturing deal. In addition they are waiting for the results of the Phase III trial to begin selling ROW marketing rights - due out later in May.

The G & A expense has been creaping up relative to what was indicated just after the split last year. That is eating into profitability. So is the reduction in sales to Horizon.

The company needs to grow revenues and the best hope of anything sustainable is some type of low risk manufacturing deal.

Once the Phase III trial is completed some R & D expenses will fall-off and some incremental revenues will be earned form the sale of ROW rights.

I am disappointed it seems to be taking so long to get Russian sales flowing.

I am also disappointed the company is not webcasting the AGM today. I hope that if someon attends they can provide a summary of anything new that arises at the meeting.