Nuvo Pharmaceuticals Inc.

Thank you. Good morning, everyone, and thank you for joining our call today.

On the call with me this morning from Nuvo Pharmaceuticals is, Kelly Demerino, Nuvo's Interim Chief Financial Officer; and Tina Loucaides, Nuvo's Vice President, Secretary & 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 would like to remind everyone that some of the statements made during this presentation may be considered forward looking.

The company cautions investors, that result of future operations may differ from those anticipated. We urge you to review the cautionary statements and other information contained in the company's filing on SEDAR, including our annual information form for fiscal 2019, which identifies certain factors that could cause actual results to differ materially from those projected in any forward-looking statements made during the meeting.

Copies of the annual information form and other filings are available online. The agenda for today's discussion is as follows; I will provide an overview of the company's investment highlights and our COVID-19 initiatives.

Kelly will discuss the financial results for the second quarter and year-to-date, which were announced earlier today, as well as provide a cash and capital structure update. I will then present a business update.

Our business continues to evolve since we closed the Aralez transaction at the end of 2018. It's clear, we have successfully executed on our plans to diversify our business with multiple growing and sustainable revenue streams.

We have over 20 marketed products, generating revenue globally, with our year-over-year gains in adjusted total revenue and adjusted EBITDA realized during the first-half of 2020, demonstrating 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 two new SKUs of NeoVisc 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 and Pennsaid 2% business internationally. And most importantly, we have the right people in place to manage and oversee the execution of our growth plans.

Our business is profitable and generating free cash flow. We have a manageable debt facility with an attractive 3.5% coupon rate, and built-in repayment mechanisms to naturally reduce our leverage over time.

As you all know, the global COVID-19 pandemic did not go away during the second quarter. Nuvo continues to operate as an essential business, and we have made changes to our operations to ensure our employees remain safe and healthy.

During the second quarter, our office staff in both Canada and Ireland and our Canadian sales force continues to work remotely. Although our office sites have recently reopened with enhanced safety measures in place.

Our sales force has been able to call on physicians and other health care providers, utilizing video conferencing technologies. These virtual promotional activities have been effective thus far, as we've continue to grow our Blexten and Cambia businesses on a year-over-year basis.

Our manufacturing facility in Varennes, Québec adheres to stringent COVID-19 protocols, while continuing to supply our global partners, wholesalers pharmacies and ultimately patients with our healthcare products. Kelly will now take you through our financial results for the second quarter and year-to-date.

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

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

For a description of how Nuvo defines these non-IFRS financial measures, as well as the reconciliation of these measures, please refer to Slide 26 and 27 of this presentation, which will be posted on the Nuvo website, as well as Nuvo’s management discussion and analysis filed on SEDAR. Adjusted total revenue was $18 million and $37 million for the three and six months ended June 30, 2020, compared to $19.1 million and $36.2 million for the comparative three and six month period.

The $1.1 million decrease in adjusted total revenue in the current quarter was due to a decrease of $1.2 million of revenue and the production in service business segment, combined with the $0.5 million decrease in the commercial business segment, partially offset by a $0.6 million increase in the licensing and royalty business segment. The commercial business segment revenues saw a continued organic growth of its key promoted products, Blexten and Cambia.

Aggregate revenue declined in the quarter year-over-year, as wholesaler and pharmacy demand normalized from the increase, which occurred in the three months ended March 31, 2020. The possibility of future supply disruptions resulted in forward buying, linked to the COVID-19 pandemic.

The revenue increased in the three months ended March 31, 2020, and reduced revenue in the three months ended June 30, of 2020, as the stockpiling effect reversed. It is anticipated that the COVID-19 pandemic will impact the timing of revenue in future quarters, and the company will continue to monitor the market dynamics accordingly.

For the three months ended June 30, 2020, the production and service business segment revenue decreased, as a result of a decrease in the company's Pennsaid product sales, and the absence of contract revenue related to transition services, that were included in the competitive three month period. These decreases were partially offset by an increase in the Licensing and Royalty business segment, as a onetime non-recurring U.S.

$1.8 million milestone payment was received from Takeda, relating to the license of Japanese Yosprala patent. Offsetting this increase was a reduction in adjusted total revenue, primarily due to a decline of $1.7 million of royalty payments, based on net sales of Vimovo by the company's U.S.

partner, Horizon Therapeutics PLC. As royalty payments are no longer based on a minimum quarterly royalty payments, since the generic version of Vimovo launched in the U.S., in Q1 of this year.

We anticipate a continued reduction in quarterly royalty revenue, received from Vimovo sales in the U.S. throughout the remainder of the year, as generics Vimovo market share increases.

Adjusted EBITDA increased $7.6 million and $15.6 million for the three and six months ended June 30, 2020, compared to $5.7 million and $10.9 million for the comparative three and six months period. The increase in the current quarter was primarily due to the decrease of $2.6 million in general and admin expenses and sales and marketing expenses, which is net of amortization, largely as a result of the company's June 2019 restructuring.

This was partially offset by a decrease in gross profit at $0.7 million, which is net of revenue recognition of contract assets, amounts sold to customers for existing contract assets and inventory-step up expenses. This decline in gross profit was due to a decrease in adjusted total revenue, partially offset by an increase in gross margin percentage on product sales.

Gross profit on total revenue was $10 million or 64% and $28.9 million or 72% for the three and six months ended June 30, 2020, compared to a gross profit of $9.6 million or 58% and $18.7 million or 60% for the three and six months ended June 30, 2019. The increase in the gross profit for the current three and six months period was primarily due to an increase in license revenue and gross margin on product sales.

At June 30, 2020, the company had cash on hand of $17.2 million. In January 2020 the company repaid the outstanding balance of the bridge loan, a component of the Deerfield Financing which carried a coupon interest rate of 12.5%.

The company's remaining loans the U.S. $52.3 million amortization loan and the U.S.

$52.5 million convertible loan, each carry a coupon interest rate of 3.5%. Nuvo will make regular repayments towards this amortization loan in 2020, in accordance with Deerfield Financing agreement and associated amendment.

Since January 1, 2020, the company has repaid U.S. $11.2 million of debt.

In our financial statement, we're required to report our amortization and convertible loan value, as well as the interest payable in accordance with IFRS standards. This next slide provides a reconciliation between the IFRS accounting value under the amortized cost asset of outstanding debt, compared to the actual cash value of the debt.

As of June 30, 2020, the cash value which represents the remaining principle payments of the amortization loan and convertible loan was $71.2 million and $71.5 million, respectively, or $52.3 million and $52.5 million in U.S. dollars.

Since January 1, 2020, we have repaid 21% of the original combined value of the $6 million bridge loan, which is now entirely repaid, and the $60 million amortization loan. The $52.5 million convertible loan remains outstanding as is not prepayable.

As of June 30, 2020, year-to-date the company has repaid the outstanding balance of the bridge loan in the amount of $4.5 million, and paid $10.5 million towards the amortization loan, or $3.5 million and $7.7 million in U.S. dollars respectively.

As of August 6, 2020, 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 CAD3.53 strike price. The company's convertible loan may be converted into common shares of the company at Deerfield's option, at $2.70 per share conversion.

Nuvo shares closed the day on August 6 at $0.79 per share. The company's amortization and convertible loans mature and outstanding warrants expire on December 31, 2024.

Jesse will now continue with our business updates.

Thanks Kelly. Our growth strategy is driven by five key elements.

First, we are focused on the continued organic growth of our existing products, and targeted in licensing or acquisition of accretive growth oriented products, which leverage the company's in-house, commercial, scientific and manufacturing infrastructure. Second, we plan to further expand our Canadian business with the commercial launch of new products like, Suvexx, which will be launched in September.

Third, our scientific affairs team is continually working with our partners and regulators to move our pipeline forward with the registration of new products worldwide. Fourth, our manufacturing facility in Varennes, Québec has developed and will continue to refine processes, to enhance the quality and efficiency of our manufacturing operations.

Finally, the company holds 117 patents globally, and has five patent applications pending. We continued to develop a strong patent portfolio to protect our products.

On February 27, 2020, Health Canada issued a notice of compliance or an approval for Suvexx, a prescription medication indicated for the acute treatment of migraine attacks, with or without aura in adults. This approval came just over a year, after requiring this asset in the Aralez Transaction.

We will launch this innovative and clinically differentiated treatment for acute migraine, in the approximately $130 million Canadian acute migraine treatment market in September of this year. Suvexx has been successfully studied in 13 Phase III clinical trials, covering patients suffering from acute migraine, menstrual migraine and patients intolerant of or non-responsive to other currently approved migraine medicines.

I'm pleased to report we have launched quantities of Suvexx in-house, and have ramped up prelaunch commercial activities. Our sales force will hit the ground running in September, when Suvexx becomes available in pharmacies for patients with a prescription.

We continue to advance our product pipeline towards commercialization. We filed the Blexten pediatric registration dossier with Health Canada in June of this year, and anticipate a regulatory decision by mid-2021.

Blexten pediatric is anticipated to be indicated for the treatment of seasonal allergic rhinitis and chronic spontaneous urticaria in children, and will help to further strengthen our relationships with allergists, dermatologists and primary care physicians who treat allergy and urticaria patients. We recently in licensed line extensions for our NeoVisc business, which is part of our commercial product portfolio in Canada.

NeoVisc is an injectable viscosupplement used to replenish the synovial fluid in the joints of patients with osteoarthritis. Our commercial team anticipates receiving Health Canada approval, during the second-half of 2020, and launching these new line extensions shortly thereafter.

The line extensions include a low volume single injection presentation, called NeoVisc One and a new triple injection presentation called NeoVisc+. Our key growth assets, Blexten and Cambia have continued to perform as expected during the second quarter, in spite of COVID-19 impacts that were highlighted by Kelly earlier.

Blexten's second quarter performance reflects the traditional seasonal growth in the oral antihistamine market, primarily associated with the arrival of pollen and other environmental allergens in the spring, and the continuation of allergy season throughout the warmer months. Blexten demonstrated continued year-over-year growth of total prescriptions or TRX, and TRX market share during the quarter.

Blexten Q2 and year-to-date 2020 TRX increased 34% and 42% over the same periods in 2019. Blexten Q2, 2020 TRX market share increased to 16.1% compared to 13.8% for the comparable period in 2019.

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.

I would like to remind everyone that Blexten will enjoy market exclusivity in Canada through October, 2024. Turning to our second key growth product.

Cambia is an innovative prescription treatment for acute migraine. Cambia, which is the only prescription NSAID approved in Canada to treat acute migraine, acts fast and begins to work in as little as 15 minutes.

Cambia Q2 and year-to-date 2020 TRX increased 11% and 20% over the comparative periods in 2019. Cambia Q2, 2020 TRX market share increased to 4.8% compared to 4.2% in the comparable quarter in 2019.

We anticipate continued prescription growth of Cambia, consistent with historical trends. Cambia will also benefit from patent protection in Canada through mid-2026.

We anticipate that Pennsaid 2% will launch in Switzerland in the fourth quarter of this year. The launch of Pennsaid 2% in India is under review as a result of a changing competitive landscape.

We will also see a commercial launch of results in Germany during the second-half of this year. 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 is also prepared to manufacture results finished product for the U.S.

market. Manufacturing for our Resultz 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 Pennsaid 2% and Resultz. To-date in 2020, we have achieved some important milestones, and despite the current challenging environment due to the COVID-19 pandemic, we remain optimistic that the anticipated milestones for the second-half of the year will come to fruition, despite some minor delays, as is the case in NeoVisc One and NeoVisc+, as well as the German launch for Resultz.

During the second quarter, Takeda's Cabpirin, our drug that relies on our Yosprala IP was approved in Japan, triggering $1.8 million milestone payment to Nuvo Ireland. In June, we submitted the dossier for the pediatric versions of Blexten, including both an oral syrup and an orally disintegrating rapid dissolve tablet to Health Canada.

Upon acceptance for review, we anticipate the review decision and subsequent launch in Canada, if approved in 2021. In September, we expect to launch Suvexx, which received Health Canada approval in February this year.

Preparations are now underway for the commercial launch of Resultz in Germany in the fourth quarter, through our commercial partner Heumann. Germany is the largest headlights market in Europe, and will be the largest market we have launched Resultz in to-date.

We also anticipate announcing a partner for Resultz in the U.S. market during the second-half of this year.

We anticipate that AGES, the Austrian Health Authority will complete their review of the Pennsaid 2% registration dossier. If the dossier is approved, we anticipate commercial launches of Pennsaid 2% in a number of select EU markets in 2021.

During Q4, we anticipated review decision by Health Canada for the new formulation of NeoVisc. If approved, we plan to launch NeoVisc in Canada in early 2021.

Finishing off 2020, our licensing partner Gebro Pharma, anticipates launching Pennsaid 2% in Switzerland. Of course, throughout all of this activity, we continue to review and evaluate new business development opportunities, to enhance our product pipeline in Canada and to expand our Licensing and Manufacturing business internationally.

That ends our formal remarks. We are now pleased to answer questions that you may have with respect to the company, its financial results and its operations.

Hi. Yes.

I just had a quick question about share repurchase plan. I'm aware that the Deerfield's financing agreement doesn't allow any payment of dividends until 2024.

But are there any plans for Nuvo to issue any share buyback plans? Thank you.

Thanks for the question. So, share buybacks are always one of the elements of capital allocation that are available to us, and we're continually reviewing how we allocate our capital between new business development, debt repayment, and the possibility of share buybacks.

And so it's something that we discuss with the Board. And if it's something that that would seem to make sense, then, as in the past, we've put these in place.

But at this point in time, we continue to evaluate the options and what's going to drive shareholder value the most between debt repayment, business development transactions and other sort of capital allocation initiatives.

Thank you.

Okay. Well, thanks everyone for listening into the call today.

I appreciate you taking the time out of your lovely summer day. And enjoy the rest of the summer, while we have it.

Thanks. Take care.