THIS ARTICLE ONLY REFLECTS MY OWN OPINIONS AND IS NOT A TRADING ADVICE. ALWAYS DUE YOUR OWN DUE DILLIGENCE BEFORE COMMITTING TO ANY INVESTMENT AND NEVER INVEST MORE THAN YOU CAN LOOSE ESPECIALLY IN THE PENNY STOCK MARKET.
What’s up with Nuvo Research ?
Well, not a lot based upon their news releases (or should I mention the absence of)
How can you imagine that a corporation that gets a FDA clearance to sell their main product in the US is still so quiet about it.
They got their approval on November 4th 2009 and since that time only 4 press releases: 1 for their annual results , 1 to announce that they now have 2 CEO, 1 for early redemption of convertible bonds and 1 for their 1st patient enrolled in their study of WF10.
Since the FDA approval they have not post anything about Pennsaid. This is almost totally incredible and unacceptable. Does that mean nothing has or can be said about that product?
It is also very important to note that their shares have slid by over 50% during that period.
I don’t get it.
I agree that sometimes too much information is like none (they leared that lesson some years ago) but they need some professional advice as to how to get their message across the world.
We are in a communication world and in 2010. Why not use Facebook or at least a complete web site updated on time (when they got fda approval, it took them couple of days before updating their site)
Can we blame their IR person: NO they only act upon news from the corporation they represents.
But from now on, where are they going?
Nuvo Research is (as their name indicate) a research company in the pharmaceutical market and principally devoted to the pain area and they are not too concern about the selling of their products explaining why every country selling Pennsaid have a licensed distributor. It is worth telling that Greece, Canada and USA they have great companies and well recognized in the selling of pharmaceutical market. All of them have royalties to pay to Nuvo except for the Canadian distributor Paladin who paid in advance their royalties in 2008 (1 M$) and will not add a penny until January 2011. After that they will pay some undisclosed amounts to Nuvo on every sale made.
No details have been given concerning the % of royalties that they will received but must be in the 5-10% as it is a current standard in that market and nobody ever confirm the actual % for competitive reasons I presume.
That being said, will Nuvo sits on their Pensaid and wait for money to comes in or do they have another product(s) coming down the pipeline?
WF10 is something worth looking at for its numerous possibilities on the immune system regulation.
The first product called Oxoferin is a topical wound healing agent, and a diluted version of WF10 and without going into all technical details here that product seems to act on the immune system to achieve a faster wounds healing.
You can find all details here:
www.nuvoresearch.com/pipeline/oxoferin.asp
It is already marketed in parts of Europe, Asia and South America under several trade names including Oxoferin and Oxovasin and they have signed an agreement to sell in some parts of Russia later this year or in 2011 and also have exclusive agreement for distribution in Malaysia, Cambodia, Philippines, Vietnam and Singapore.
The only problem with this product is that they will have to find an improved formula because their patent’s has expired.
But WF10 seems to be very interesting in other areas like pancreas cancer as explained in more details here:
www.nuvoresearch.com/pipeline/wf10.asp
So WF10 could be a great pipeline drug but I do not see any revenues coming from it in a near future (except low royalties from Oxoferin / Oxovasin .
Another segment of Nuvo is FQUBED inc that not a lot of people talks about and unfortunately not a lot of info is available on them anyways.
So what 2010 will looks like for Nuvo is in my opinion only to be based upon Pennsaid and its acceptance in the US market even if they seems to be one the great research company based on the transdermal transmission of products in the pain area avoiding most of the dangerous side effects patients are used to with other products.
It has been said that the market only in US is a couple of billions$ per year and honestly the only way to evaluate a company is revenues.
Let’s see how it goes and how I think 2010 will looks like.
First of all they have about 46M$ in the bank (when you include receivable accounts) that they could use for whatever reasons they want except the following: dividend and shares buy back. These will not happen because of Canadian regulations as they do not meet the test to do any of those 2 things.
So what’s left: buying rights for new drugs in pipeline or buying companies that went bankrupt for their unused income taxes credits? Target companies could be like Chemokine Therapeutics who went belly up last year but still have unused income tax credits and many drugs in their pipeline. With 53 million shares valued 0,05 you see what I mean. Many other companies had the same problem and I think that they would have the choice.
Other possibilities would be to buy the rights to any Phase 2 treatment drug in the pain field business.
Last possibility would be a JV with a major company involved in a phase 3 drug that would benefit from their transdermal system.
On the transdermal side of their business, they may have the choice as if proved safe with Pennsaid, imagine what they could do for other drugs with lethal effects.
Do you believe also that they do not know what their first shipment to the US will be ? If so, why do they increased their inventory by over 700K$ recently: have sales diminished that much, can’t they control their inventory or do they know that first US order will be over 1M$ ?
Another point interesting to highlight is that they are now virtually debt free. That will save them about 750K$ in interest and fees in 2010.
R&D will also be lowered due to the fact that Covident now pays for all expenses related to Pennsaid and Pennsaid + development. This will be another 2-3 M$ in savings.
There are also no more existing warrants to dilute the stock again. Good thing for actual shareholders.
The infamous ‘going concern’ still exist and will be there for a long time as they still have a 185M$ in accumulated deficit and will not fade away in 2010. They are penalized a lot as they cannot included a good will amount in their shareholders equity. They will definitely redo the test to remove that but they will need more than milestone payment to get it out. So expect at least another year of going concern…
They will be also a great candidate for a takeover. For example, would Covident pay Nuvo 100M$ in milestone when you could buy the company for less than this amount right now. I know that take over needs shareholder approval and I think the price could be around 0,50 cents MUCH less than the real value of Nuvo. But because the stock has been spiralling downward for a long time now, a 0,50 offer would get the deal accepted for any major candidate like Coviden.
Here are my expectations for 2010:
Revenues about 25M$ including any milestone from Coviden plus other licensing fees and taking into consideration that US sales will only be for 8 months. Expect much greater revenues in 2011 nearing 70M$ and more milestone payments. Do not forget that Paladin will start again royalties’ payment in 2011.
There should be more licensing agreement for other countries during last quarter of 2010 and beginning of 2011.
More testing of WF 10 in the last quarters of 2010 and beginning of 2011
Net earnings of 0,06 per share in 2010 as expenses would be greatly diminished compared to last year in R&D and 0,11 earnings per share in 2011.
As a conclusion, NRI shares should be worth about 0,84 cents on a 14 to 1 EPS ratio in 2010 and closer to 1,40$ in 2011 unless a takeover is already in the makings.
This is enough to conclude that NRI is still on my TOP list for 2010 as those calculations are not very aggressive and full details regarding the milestone payments have not been disclose.
Disclosure: I am still long on NRI
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