Nuvo Pharmaceuticals Inc.

Thank you. Good morning.

Thank you for joining our call today. On the call with me this morning from Nuvo Pharmaceuticals is Mary-Jane Burkett, Nuvo’s Vice President and Chief Financial Officer and Tina Loucaides, Nuvo’s Vice President, Secretary and General Counsel.

This morning’s call makes reference to a presentation on our website that should be viewed concurrently. If you have not downloaded this presentation, I would invite you to do so now by visiting www.nuvopharmaceuticals.com and scrolling down to the bottom of the page.

You can then click on the link. Before we begin, I will remind you that certain matters discussed in today’s conference call or answers that may be given to questions asked could constitute forward-looking statements that are subject to risks or uncertainties relating to Nuvo’s future financial and business performance.

Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect results are detailed in Nuvo’s periodic and annual disclosure documents as well as the news release that we issued this morning, and you can access these documents in the SEDAR database under www.sedar.com.

Except as required by law, Nuvo is under no obligation to update any forward-looking statements discussed today, and investors are cautioned not to place undue reliance on these statements. The agenda for today’s discussion is as follows.

I will provide a business overview of the quarter. Mary-Jane will discuss the financial results for the fourth quarter and the year, which were announced earlier today as well as providing a cash and capital structure update.

I will then present a pipeline and business segment update. 2019 was a transformative year for Nuvo, with the closing of the Aralez transaction at the end of 2018.

We've successfully integrated the Aralez business with Nuvo during the year. The additional business segments and revenue streams we acquired have resulted in significant year-over-year increases in adjusted total revenue and adjusted EBITDA.

We are well positioned to acquire and launch additional commercial products in Canada and abroad in the coming years. We also advanced our product pipeline with a number of regulatory submissions during 2019, and we anticipate Canadian and Global Commercial launches during 2020.

Turning to the next slide, 2019 resulted in completion of a number of important milestones for our business. Notably in Q2, we submitted a marketing authorization application for Pennsaid 2% to the Australian authorities and submitted the marketing authorization application for SUVEXX to Health Canada.

We also identified significant synergies and restructuring savings to our operating expenses, following the US Federal Court's decision to invalidate two of our patents protecting Vimovo in the United States. Q3 saw the approval of Pennsaid 2% in India, marking the first Nuvo marketing authorization for Pennsaid 2% in an Asian market.

Q4 saw the US Court of Appeals uphold the validity of the 917 patents protecting the Pennsaid 2% business in the United States through October 2027. Year-to-date in 2020, we've continued to execute on our debt repayment plans with the early repayment of our US $6 million bridge loan to Deerfield.

We also closed an in-licensing transaction to introduce new line extensions to our NeoVisc business in Canada. And finally, we obtained approval for Pennsaid 2% in Switzerland.

I will now turn the call over to Mary-Jane, who will take you through our financial results for the quarter and year.

Thanks, Jesse. Today's presentation includes reference to certain financial measures that do not have a standardized meaning under IFRS.

These measures include adjusted total revenues and adjusted EBITDA. Nuvo believes that shareholders, investment analysts and other readers find such measures helpful in understanding Nuvo’s financial performance.

For a discussion of how Nuvo defines these non-IFRS financial measures as well as a reconciliation of these measures, please refer to Slides 23 and 24 of this presentation as well as Nuvo’s management discussion and analysis filed on SEDAR. Adjusted total revenue increased to $19.6 million and $74.7 million for the three months and year ended December 31, 2019 compared to $4.8 million and $20.5 million to the three months and year ended December 31, 2018.

As a result of the Aralez transactions, the company now recognizes three operating segments, the commercial business, that production and service business and the licensing and royalty business. The $64.3 million increase in adjusted total revenue in the current year was primarily attributable to the addition of revenue related to the Aralez transaction, which provided an incremental $35.6 million of total revenue contributed from the commercial business segment and $18.8 million attributable to arrange the mobile royalties.

Adjusted EBITDA increased to $8.6 million and $27.2 million for the three months and year ended December 31, 2019 compared to negative $4.5 million, and negative $3.1 million for the comparative three months, and year ended December 31, 2018. The increase in adjusted EBITDA for the current year was primarily attributable to an increase in gross profit of $36.7 million less inventory steps up expense of $5 billion, as a result of the Aralez transaction.

Offset by an increase in general and administrative expenses of $1.6 million and an increase in sales and marketing expenses of $9.8 million. Gross profit on total revenue was $13.1 million or 67% and $43.1 million or 62% for the three months and year-ended December 31, 2019, compared to a gross profit of $2.4 million, or 52% and $11.4 million or 57% for the comparative period.

The increase in gross profit for the current quarter and year it was primarily attributable to an increase in gross margin on product sales and an increase in license revenue, both as the result of the Aralez transaction. The company generated cash from operating activities of $8.3 million and group's cash on hand by $4.5 million during Q4 2019 to $23 million at December 31, 2019.

In January 2020, the company repaid its bridge loan, a component of the Deerfield financing, which carried a coupon interest rate of 12.5%. The company's remaining loan US$60 million, amortization loan and $52.5 million convertible loans, each carry a coupon rate of 3.5%.

Nuvo will make regular payments towards its amortization loan in 2020, in accordance with the Deerfield financing agreement and associated amendments. At December 31, 2019 the company had 11.4 million shares outstanding attached to the company's amortization loan are 25.6 million warrants issued to Deerfield at a $3.53 Canadian strike price.

The company's convertible loans may be converted into common shares of the company at field option at US$2.70 per share conversion. The company's amortization and convertible loan mature, and outstanding warrants expire on December 31, 2024.

I will now turn the call back to Jesse.

Thanks, Mary-Jane. In February 2019, we submitted our registration dossier to Health Canada for SUVEXX.

A prescription medication indicated for the acute treatment of migraine attacks with or without aura in adults. We anticipate obtaining Health Canada approval for SUVEXX before the end of Q1 this year.

That's just over a year after acquiring this asset in the Aralez transaction. Once final approval is obtained, we anticipate launching this innovative and clinically differentiated treatment for acute migraine into the approximately 130 million Canadian acute migraine treatment market in the second half of this year.

SUVEXX has been successfully studied in 13 Phase 3 clinical trials covering patients suffering from acute migraine, menstrual migraine, and patients and tolerance of or nonresponsive to other currently approved migraine medicines. Along with the anticipated SUVEXX approval, we continue to advance our product pipeline towards commercialization.

The Blexten license agreement which was also acquired as part of the Aralez transaction includes the Canadian rights for pediatric dosage formats. We anticipate filing the Blexten pediatric registration dossier to Health Canada during the first half of this year, where the regulatory decision anticipated by mid-2021.

Blexten pediatric is anticipated to be indicated for the treatment of seasonal allergic rhinitis and chronic spontaneous urticaria in children. As previously mentioned, we recently in licensed line extensions for our NeoVisc business, which is part of our commercial product portfolio in Canada.

Our commercial team anticipates launching these new line extensions. Subject of course, to receiving Health Canada approval during the second quarter of 2020.

The line extensions include a low volume single injection presentation called NeoVisc 1 and a new triple dose injection presentation called NeoVisc Plus. NeoVisc is an injectable supplement used to replenish the synovial fluid in the joints of patients with osteoarthritis.

Our key growth assets, Blexten and Cambia have continued to perform as expected throughout Q4. Blexten's fourth quarter performance reflects the traditional seasonal decline in the oral antihistamine market at the end of the year as the colder weather reduces seasonal allergens.

However, Blexten demonstrated continued year-over-year growth of total prescriptions or TRX and TRX market share during the quarter. Blexten's Q4 2019, TRX increased 51% over Q4 2018 and full year 2019 TRX increased 61% over the comparable period in 2018.

Blexten Q4 2019, TRX market share has increased to 13.6% compared to 10.3% for Q4 2018 and full year market share increased to 13.3% from 9.5% in the comparable period in 2018. Blexten continues to capture the market share of our number one competitor Cetirizine also known as Reactine.

Our sales force is doing an excellent job of expanding the prescriber base for Blexten and we expect ongoing year-over-year growth and market share gains in the prescription antihistamine market in the quarters to come. Turning to our second key growth product, Cambia and innovative prescription treatment for acute migraine.

Cambia, which is the only prescription end set approved in Canada to treat acute migraine acts fast and begins to work in as little as 15 minutes. Cambia Q4 2019 TRX increased 23% over Q4 2018 and full year 2019 TRX increased 28% over the full year 2018.

Cambia Q4 2019 TRX market share has increased to 4.4% compared to 3.7% for Q4 2018 and full year 2019 market share increased to 4.3% compared to 3.5% for the full year of 2018. We anticipate continued prescription growth of Cambia consistent with historical trends.

With respect to our U S Vimovo business. I'd like to provide a brief recap on the current situation.

A generic version of the Vimovo did not launch in the United States during 2019. As a result, Nuvo Ireland received the US$7.5 million minimum annual royalty on the U.S.

sales of the Vimovo. During 2019, the United States Court of Appeals for the Federal Circuit denied our en banc petition and determine the two of our patents, the 907 and the 285 patents related to the Vimovo were invalid.

We filed a petition to the U.S. Supreme Court to reconsider the Court of Appeals decision.

However, the petition was denied. Last week, Dr.

Reddy's laboratories, or Dr. Reddy's received final U.S.

Food and Drug Administration, or FDA approval for one of its abbreviated new drug applications for a generic version of the Vimovo and we anticipate a launch of generic Vimovo could occur during 2020. This launch would be at risk as Nuvo Ireland does own additional valid and enforceable patents, namely the 996 patent and the 920 patents that protect Vimovo.

In November 2019, the United States District Court for the District of New Jersey denied a motion for summary judgment filed by Dr. Reddy’s.

As a result of the patent infringement litigation against Dr. Reddy’s involving the 996 patents and the 920 patents will continue.

We anticipate this infringement litigation to go to trial in mid-2021. The other generic Vimovo applicants except the most recent ANDA filer, which is subject to a 30-month stay has entered into settlement agreements with Nuvo Ireland and our U.S.

partner, which currently restricts them from entering the U.S. market until after Dr.

Reddy’s launches. If Dr.

Reddy’s launches a generic version of Vimovo in the United States, then other generic companies may also be able to obtain final FDA approval to launch. Nuvo Ireland and its U.S.

partner will continue to consider all legal strategies and opportunities to protect this revenue stream as long as possible. Once a generic competitor enters the market, we will no longer be entitled to our minimum annual royalty payment from our U.S.

partner, which as mentioned before amounts to US$7.5 million a year. But we will continue to receive a 10% royalty on net sales, which is subject to a step-down provision once the generic competition achieves a certain market share percentage.

Turning to our licensing and royalty business segment, we anticipate with the recent approvals, Pennsaid 2% in India and Switzerland, commercial launches will occur in these territories later this year. We will also see a commercial launch of results in Germany and time for this year summer headlight season.

We remain in late stage discussions with the U.S. partner for results and continue to anticipate a commercial launch in 2020.

Nuvo will earn royalty revenue from all of these partnerships. These commercial launches are also anticipated to have a positive impact on our production and service business segment.

Our manufacturing facility in Varennes, Québec will be producing and supplying the finished Pennsaid 2% product for Switzerland and India and is also prepared to manufacture results of finished product for the U.S. market.

Manufacturing for our results business in Europe is handled by our European based contract manufacturing partner. Nuvo earns revenue on the supply of finished product to our partners for both Pennsaid 2% and results.

Reflecting back on how our business has evolved since we closed the Aralez transaction just over a year ago, it is clear we have successfully executed on our plans to diversify our business with multiple growing and sustainable revenue streams. With over 20 marketed products generating revenue globally.

One only needs to look at our impressive year-over-year gains and adjusted total revenue and adjusted EBITDA to see the positive impact this transaction has had on our business. We will continue to grow our existing business organically through the efforts of our commercial sales and marketing team and also with the introduction of new products like SUVEXX and NeoVisc 1 in Canada.

We have operational infrastructure to support and grow our business, a profitable manufacturing operation with spare capacity to handle anticipated future growth of our results in Pennsaid 2% businesses internationally and most importantly, we have the right team in place to manage and oversee the execution of our growth plans. Our business is profitable and generating free cash flow.

We have a debt facility with an attractive 3.5% coupon rate and built-in repayment mechanisms to naturally reduce our leverage overtime. Overall, we are pleased with our financial results last year, and the achievement of the various corporate development milestones in 2019, and year to date.

Thank you for your continued support. That ends our formal remarks.

I will now turn this back to the operator for questions. Thank you.

Good morning. Got a couple of questions, the first one is the approval that ready Scott for their generic for Vimovo.

Would they have requested the final approval indicating that they are ready to large or is this just a matter of timing and process of the FDA, they would have got the approval without a specific request?

Tina, did you want to take that one?

Sure. Hi, David.

We are we don't really have some insight to exactly DRL strategy, but they would have likely requested final approval from the FDA after the Court of Appeals decision. They were probably trying to get approval for their first ended before they lost their exclusivity, which we believe they ended up using their exclusivity because FDA didn't give them approval and time.

And also, the approval that they did get wasn't with respect to ANDA one, they actually had a second filed ANDA, and they received approval on the second file ANDA.

Okay, can you give more clarity on what the step-down provision will be and what market share will trigger it to take you below the 10% royalty, if they do launch?

So, we haven't, obviously publicly disclosed that. But typically in these scenarios, this is sort of a standard provision and most license agreements, when a generic version of a product enters the market or in some cases when patents expire, the royalty percentage is reduced by a reasonable amount to compensate for the reduced potential value of that business and so in this case, the royalty rate goes down to a single digit royalty.

And as far as the market share is concerned, it's once the generic competitors achieve a meaningful penetration of the market.

Okay, let's question the approvals for sorry, the expected launches four Pennsaid 2% in India and Switzerland. Can you remind us is Pennsaid 1.5% already sold most countries are these new markets for the Pennsaid franchise?

What kind of revenue opportunity for Nuvo do you expect from it? And then I thought there were other European approvals that you were expecting maybe coming out of the Switzerland approval.

Can you talk about those?

Sure. So, first of all, I guess you've got three questions there.

So, we'll so Pennsaid, original Pennsaid or Pennsaid 1.5 was not approved in Switzerland or in India previously. So, these are new markets for Pennsaid 2%.

In terms of the revenue potential, what I can say is, is that the value of the topical Diclofenac and Diclofenac of course is the active ingredient in Pennsaid. So, the value of the topical Diclofenac market in Switzerland is around 24 million to 28 million Swiss francs a year, and the value of that market in India is comparable.

And so, these are the markets, that's the size of the market that we're entering into. And then - sorry, what was your last question?

Other European approvals flowing out of the Switzerland approval?

So, Switzerland was a separate approval process because Switzerland as you know, is not part of the European Union. So, they have their own registration procedure.

So, the other EU procedure that we're pursuing is the application that we filed to Austria and so we do continue to anticipate a review decision on the Austrian review of Pennsaid 2% at some point this quarter.

And then how quickly could you get approvals from other countries on the basis of that, or would it be automatic?

So, are you talking in terms of the Swiss approval or in terms of the European approval?

The Austrian approval, if they approve, is that automatically that approved for the rest of Europe?

No. So as we've discussed before, that approval also includes or that registration procedure also includes a review by originally with Italy, with Portugal and with Greece so that those would be the four markets that are being considered in the original in the original round, and the reason for that is those are the markets were original Pennsaid was approved.

And then if we're looking to expand into other markets in Europe, that would require a subsequent submission. So, a brand-new application because we'd be looking at markets where Pennsaid original Pennsaid was never approved.

Okay, and original Pennsaid was approved in Austria then?

Yes, it was.

Okay. Okay.

Thank you.

Okay. Thanks for your questions.

Okay, well, thank you very much everyone for taking the time to join us for the call this morning. And as always, if you have any further questions, feel free to reach out to us through the IR link on our website and we'd be happy to address any questions you might have.

Thanks a lot.