Nuvo Pharmaceuticals Inc NRIFF

RE:July Investor Presentation

[consultant99]

Now that I am back from holidays I have had a chance to review the July Investor Presentation.
Here are my thoughts and observations...

The most important change from presentations made within the last year is the company is now characterized as a commercial stage healthcare company versus growing revenue and health care company

Clearly a review of the US Average Total Bottles Dispensed Weekly per month graph we can see that the Q2 2017 average is lower than the Q2, Q3 and Q4 numbers in 2016
The weekly graph further illustartes that sales are now down in five of the last six months of 2017 versus the same period of 2016.

The presentation does not address the rising Canadian dollar which is approaching 2 year highs versus the US dollar - the implication of lower bottle sales and a Canadian high dollar is that revenues are falling.

Regardless of the unfavourable fundamentals above there is a more immediate crisis caused by legislation requiring product serialization in the US. Apparently Horizon stopped taking shipments of P2% in Q2 2017 and will not restart taking product until Nuvo's production meets legislative standards identified by management as sometime in Q3.

Being a curious type I took to the internet to find out more about the issue. Apparently the Drug Supply Chain Security Act was enacted in November 2013 which legislated product seralization starting in November 2017. The obvious question is, why was the Quebec facility not ready for the legislated changes in a manner that would have allowed Horizon to continue to take product? Clearly there was sufficient lead time. In as Nuvo's revenue comes directly from the output of their plant ensuring the plant remains compliant would seem to be a no brainer.

The latest presentation also notes that management expects Horizon will rebuild inventory with serialized product. One might be tempted to assume that the level of inventory will rise to past levels but that might be wishful thinking. With lower sales and working on lower inventory levels in Q2/Q3 Horizon might choose to simply manage with less; time will tell.

Moving forward to the outlicensing of P2% it is notworthy to point out the subtle change on the slide entitled Target Licensing Agreement Structure which has dropped off the reference to the $500 K for the Russian NovaMedica license. This implies to me that the most recent transaction (India/Malaysia) came with no upfront payment to Nuvo; a review of financial data supports that theory.

Despite failure of the 2nd Phase III clinical trial for P2% there does not appear to be any changes to the UpComing P2% Potential Milestone slide.
How does the company's implement its strategy to create a global P2% franchise without a successful phase III trial?
Exactly what is the holdup in signing deals where the FDA approval is sufficent to apply for regulatory approval?

The slide on M & A Focus is broad based with no sign there are any deals waiting to be closed. This is puzzling in that Jessie was promoted on the basis of the deals he had brought to the table as VP of Business Development. If management doesn't have a deal then don't imply you do (Q3/Q4 2017 Product Acquisition completed and announce). It is one thing to want to do a deal and quite another to imply a deal is expected to be signed in Q3/Q4.

Today Pharma stock made another 52 week low at $3.90/share and combined with CTX's price of $0.55/share means that since the spin off the combined enterprise value of Nuvo Research has fallen by $(2.20)/share or (33.1)%. Despite having contracted sales and potential long-term growth opportunities Pharma shares are languishing; two failed clinical trials, declining revenues and rising expenses.

The BOD needs to intervene ASAP. The company is losing credibility and the share price is falling as a result.