Nuvo Pharmaceuticals™ Announces Repayment of Bridge Loan and Entitlement to Receive 2019 Vimovo U.S. Annual Minimum Royalty

On January 7, 2020 Nuvo Pharmaceuticals Inc. (Nuvo or the Company) (TSX:NRI;OTCQX:NRIFF), a Canadian focused healthcare company with global reach and a diversified portfolio of commercial products, reported the Company will repay its Bridge Loan to Deerfield Management Company, L.P. (Deerfield) during the second week of January and will receive the full US$7.5 million annual minimum royalty payment due from the 2019 sales of Vimovo in the U.S (Press release, Nuvo Pharmaceuticals, JAN 7, 2020, View Source [SID1234552826]). The Company has received US$5.6 million to-date.

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Bridge Loan to Deerfield

The US$6.0 million Bridge Loan was one component of the financing provided by Deerfield in support of the acquisition of Aralez Pharmaceuticals Canada, the U.S. and International rights to Vimovo and other related assets as announced on December 31, 2018. The Company will repay its Bridge Loan (12.5% per annum) during the second week of January, ahead of its June 2020 maturity date. The Company’s remaining loans, US$52.5 million and US$60.0 million carry coupon interest rates of 3.5% per annum.

In June 2019, the Company announced its intention to reduce annual operating expenses by approximately $7.0 million due to identified synergies and the implementation of organizational changes. The Company began to realize these synergies during the second half of 2019.

In June 2019, Deerfield and certain of its affiliated funds, as lenders, and the Company agreed to an amendment to its financing agreement to provide, among other things, for a payment deferral mechanism in the event that Vimovo U.S. market exclusivity is lost. The amendment will allow Nuvo the option to defer a portion of the mandatory minimum quarterly prepayments by the difference between one quarter of the existing US$7.5 million annual minimum royalty due from Vimovo sales in the U.S. and the actual amount of royalties received in the applicable quarter in the event Vimovo U.S. market exclusivity is lost earlier than May 2022. The amount of any deferred prepayment would, until repaid in accordance with the amendment, be subject to an interest rate of 12.5% per annum.

Vimovo U.S. Royalty

As of December 31, 2019, no generic version of Vimovo had been launched in the U.S. during 2019 and, as of the end of business on January 6, 2020, the U.S. Food and Drug Administration (FDA) had not granted final approval for a generic version of Vimovo. As a result, the Company is entitled to the US$7.5 million annual minimum royalty due from the 2019 sales of Vimovo in the U.S., as per the agreement with its U.S. commercial partner.

The Company had previously disclosed its assumption that a generic version of Vimovo would be launched in the U.S. during the second half of 2019. The Company anticipates a generic version of Vimovo will launch in the U.S. during 2020. Upon launch of a generic version of Vimovo in the U.S., Nuvo Pharmaceuticals (Ireland) DAC’s (Nuvo Ireland) US$7.5 million annual minimum royalty from its partner ceases. The royalty rate for 2020 would be calculated as 10% of net sales of Vimovo in the U.S., subject to certain step-down provisions upon achievement of generic market share thresholds. A launch of a generic version of Vimovo in the U.S. does not impact Nuvo Ireland’s global Vimovo business in markets outside of the U.S. Nuvo Ireland will continue to receive royalty payments from its global partner, Grunenthal GmbH on global net sales of Vimovo.

Any launch of a generic version of Vimovo in the U.S. is considered "at risk" as Nuvo Ireland continues to hold U.S. Patent Nos. 8,858,996 and 9,161,920 (the ‘996 and ‘920 patents) covering Vimovo in the U.S. The ‘996 and ‘920 patents are currently the subject of patent infringement litigation against Dr. Reddy’s Laboratories Inc. The parties have mutually agreed on a pretrial litigation schedule with the U.S. District Court of New Jersey through to mid-2021. The term of the ‘996 and ‘920 patents extends to May 31, 2022. Nuvo Ireland, with its commercial partner, continue to work together to vigorously defend these patents.