Nuvo Research Inc.
Nuvo Research Inc. has been red hot this past month and is expected to continue. StocksHaven Investments has identified Nuvo Research as its top candidate for undervalued biotech pre-PDUFA. With a current PPS below $1.00 CAD, and their product Pennsaid, a new and innovative treatment for osteoarthritis having expected net sales of $200-400 million in the U.S., Nuvo Research (TSE:NRI), (PINK:NRIFF) could see extensive gains leading prior to their expected FDA decision on Aug/5/09 as investors gain confidence in the company once again.
The company’s stock has been sizzling, in fact it has been so hot, it is up 120% from May/19/09 – June/16/09.
According to a recent Wall Street Journal press release, the Canadian biotech, formerly called Dimethaid, has twice been denied approval of its Pennsaid topical pain killer by the U.S. Food and Drug Administration. But since receiving an approvable letter at the end of 2006, it’s spent about C$12 million conducting additional safety studies it hopes will finally satisfy the regulator.
“We have answered all of (FDA’s) questions and there should be no issues with the data that we have submitted,” Daniel Chicoine, chairman of Nuvo, told Dow Jones.
About: Nuvo Research Inc. (Nuvo) is a Canadian drug development company 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. The Company refers to and manages these activities as two business and research segments: topical and transdermal drug delivery, and immune system regulation. The Company’s lead product Pennsaid, is used to treat the pain and symptoms associated with knee osteoarthritis (OA). Pennsaid has been approved for marketing and sales in the countries, including Canada, the United Kingdom, as well as certain European countries.
Main Product: Pennsaid
Pennsaid®, the Corporation’s lead product, is used to treat the pain and stiffness associated with knee osteoarthritis (OA). The drug combines a transdermal carrier (containing dimethyl sulfoxide, popularly known as DMSO) with diclofenac sodium, a leading NSAID, and delivers the active drug through the skin directly to the pain site. While, conventional oral NSAIDs have some serious systemic side effects such as gastrointestinal bleeding and cardiovascular problems, Nuvo’s clinical trials suggest that some of these systemic side effects occur less frequently with topically applied Pennsaid®.
The American College of Rheumatology (ACR) estimates that over 70 million Americans are affected by arthritis and musculoskeletal disorders and may have a substantial impact on an individuals quality of life and use of health-care resources. According to The Arthritis Society, arthritis and disorders of the musculoskeletal system are a leading cause of work-related disability.
The ACR estimates that nearly 21 million Americans are living with OA and many are experiencing limitation in motion as a result. While the disease can affect any age group, it is more common among those over 45, and the incidence is expected to rise as the population ages. In fact, 70% of people over the age of 70 have X-ray evidence of the disease. However, only half ever develop symptoms. Women are affected more often than men, especially with OA of the fingers and the knees.
A number of existing pharmaceutical products treat the pain associated with OA. The goal, according to the ACR, is to “include control of pain and improvement in function and health-related quality of life, with avoidance, if possible, of toxic effects of therapy.” The U.S. osteoarthritis market is estimated to have annual sales of approximately US$4 billion. Of the many products on the market, most fall into one of the following categories:
- over-the-counter oral medications that are accessible without a doctor’s prescription, such as acetaminophen and low-dose NSAIDs (Advil®, Motrin®, Aleve®);
- oral, full-dose, NSAIDs which are available only by prescription;
- oral COX-2 selective NSAIDs which are available only by prescription; and
- oral narcotics, such as opioid analgesics which are available only by prescription.
Unlike these oral medications, Pennsaid® is a topical NSAID solution available only by prescription.
Phase III Study Results:
Nuvo’s Phase 3 trial results can be seen in Study 112, which enrolled 775 patients in the U.S. and Canada with symptoms of primary osteoarthritis of the knee. Patients in this five-arm, double-blind, 12-week trial applied a topical solution and took an oral pill. The five arms were: 1) Pennsaid plus oral placebo, 2) topical placebo containing a small amount of DMSO for blinding purposes (DMSO facilitates delivery of diclofenac to the knee) plus oral placebo, 3) topical vehicle-control (containing the same concentration of DMSO as in Pennsaid) plus oral placebo, 4) topical placebo plus oral diclofenac and 5) Pennsaid plus oral diclofenac.
Pennsaid (arm 1) was superior to placebo (arm 2) with statistically significant improvement in all three primary clinical endpoints required by the FDA: pain relief (p=0.019), improvement in physical function (p=0.046) and improved patient overall health assessment (POHA) (p(less than)0.0001).
Additional results from the trial show that Pennsaid (arm 1) was superior to vehicle control (arm 3) (pain, p=0.009; physical function, p=0.026; POHA, p=0.016). There was no difference between vehicle control (arm 3) and placebo (arm 2) indicating that DMSO alone is ineffective against the symptoms of knee osteoarthritis (p greater than 0.05). There was no difference between Pennsaid (arm 1) and oral diclofenac (arm 4) for all three efficacy endpoints (p greater than 0.05). Arm 5 was included in the trial at the FDA’s request to review the side effect profile of Pennsaid if combined with an oral NSAID. This combination showed no increased incidence of the usual systemic side effects, just the expected additive profiles of Pennsaid alone plus oral diclofenac alone.
Balance Sheet & Financial Analysis:
For any biotech company, the most important aspect of business is to ensure they have enough current assets or liquidity in order to maintain ongoing operations with research and development. From Nuvo’s balance sheet, having CAD $18.32M places them in a very favourable position to ensure business stability while waiting on the PDUFA for their product Pennsaid.
Moreover, Nuvo has recently announced a licensing agreement with Covident where it will receive a one-time upfront payment and could receive additional development and sales milestone payments over the next several years. Covidien is the largest supplier of controlled pain medications in the United States based on number of prescriptions. Nuvo develops transdermal and topical therapeutic products designed to reduce side effects.
The one-time upfront payment will be expensed in Covidien’s fiscal third quarter. In addition, Covidien will pay Nuvo a royalty on sales of products developed and commercialized under this license agreement. Covidien anticipates launch of the first product from this agreement in the first half of calendar 2010.
In conclusion, Nuvo seems prime to take advantage of their past failures with the FDA and make success of their third opportunity. With two to three hundred million sales from its osteoarthritis treatment, Nuvo, upon approval will quickly become one of the most successful biopharma companies in the industry.
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Disclosure: Short-Term Position
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