2020
Annual Report
Nuvo Pharmaceuticals® Inc. d/b/a Miravo Healthcare™
Management’s Discussion and Analysis (MD&A)
March 5, 2021 / The following information should be read in conjunction with Nuvo Pharmaceuticals Inc. d/b/a Miravo
Healthcare (Miravo or the Company) Consolidated Financial Statements for the year ended December 31, 2020, which
were prepared in accordance with International Financial Reporting Standards (IFRS). Additional information about the
Company, including the annual Consolidated Financial Statements and Annual Information Form (AIF), can be found on
SEDAR at www.sedar.com (under Nuvo Pharmaceuticals Inc.).
Unless otherwise noted, all amounts in the MD&A, the Consolidated Financial Statements and related Notes are
expressed in thousands of Canadian dollars, except per share amounts.
This MD&A contains “forward-looking information”. Please see the discussion under Forward-looking Statements below.
The Company uses non-IFRS financial performance measures in this MD&A. For a detailed reconciliation of the non-
IFRS measures used in this MD&A, please see the discussion under Non-IFRS Measures below.
Key Developments
Three months ended December 31, 2020 include the following:
• Adjusted total revenue(1) was $17.3 million, a decrease of 12% compared to $19.6 million for the three months
ended December 31, 2019.
• Adjusted EBITDA(1) was $6.2 million, a decrease of 28% compared to $8.6 million for the three months ended
December 31, 2019.
• The Company’s Commercial Business segment includes the promoted products - Blexten® and Cambia®.
Revenue related to these products was $6.6 million, an increase of 28% compared to revenue of $5.1 million for
the three months ended December 31, 2019. Canadian prescriptions of Blexten and Cambia increased by 28%
and 16% compared to the three months ended December 31, 2019.
• Principal loan repayments of $3.7 million (US$2.8 million).
Year ended December 31, 2020 include the following:
• Adjusted total revenue(1) was $71.0 million, a decrease of 5% compared to $74.7 million for the year ended
December 31, 2019.
• Adjusted EBITDA(1) was $28.4 million, an increase of 4% compared to $27.2 million for the year ended December
31, 2019.
• Revenue related to Blexten and Cambia was $25.2 million, an increase of 33% compared to revenue of $19.0
million for the year ended December 31, 2019. Canadian prescriptions of Blexten and Cambia increased by
35% and 17% compared to the year ended December 31, 2019.
• Principal loan repayments of $22.4 million (US$16.8 million).
(1) Non-International Financial Reporting Standards (IFRS) financial measure defined by the Company below.
Business Update
As a result of the COVID-19 pandemic, the Company has made changes to operations to promote a healthy and
safe environment for its employees, while the business continues to supply global partners, wholesalers,
pharmacies, and ultimately patients, with our healthcare products. The Commercial Business segment had
continued organic growth of its key promoted products - Blexten and Cambia. The possibility of future supply
disruptions resulted in forward buying linked to the COVID-19 pandemic, which increased revenue in the three
1 | P a g e
months ended March 31, 2020, reduced revenue in the three months ended June 30, 2020 and stabilized in the
second half of the year, as the pandemic progressed and buying patterns returned to normal. It is anticipated
that the COVID-19 pandemic may continue to impact the timing of revenue in future quarters and the Company
will monitor market dynamics accordingly.
In February 2021, Nuvo Pharmaceuticals (Ireland) DAC trading as Miravo Healthcare (Miravo Ireland) entered
into an exclusive license and supply agreement (the License Agreement) with The Mentholatum Company for
the exclusive right to commercialize the Resultz® formula and technology in the United States under the
Mentholatum® brand. Miravo Ireland will earn revenue from The Mentholatum Company pursuant to the License
Agreement. It is anticipated that The Mentholatum Company will launch Resultz during the summer of 2021.
Resultz is currently manufactured by the Company's contract manufacturing partner in Europe.
In January 2021, the Company launched NeoVisc® + 2 mL and NeoVisc® ONE 4 mL in Canada. Both NeoVisc+
and NeoVisc ONE were issued a Medical Device License by Health Canada in September 2020 for the treatment
of pain and improvement of joint functionality in patients affected by degenerative (age-related changes) or
mechanical arthropathy (related to overuse) of the knee.
In January 2021, the Company’s exclusive partner for Pennsaid® 2% in Switzerland, Gebro Pharma AG (Gebro
Pharma), launched the product into the Swiss market. The Company will begin to earn royalty revenue on net
sales of Pennsaid 2% in Switzerland beginning in the first quarter of 2021.
In December 2020, Miravo Ireland entered into an exclusive license and supply agreement with Orion
Corporation (Orion) for the exclusive right to package, distribute, market and sell Suvexx® in Finland, Sweden,
Denmark, Norway, Poland, Hungary, Latvia, Lithuania and Estonia (the Territory). Orion will be responsible for
obtaining and maintaining the marketing authorizations for Suvexx in the Territory and will also manage all
Territory specific commercial activities. Miravo Ireland will receive up to €1.7 million in upfront consideration,
regulatory and sales-based milestone payments, as well as royalties on net sales of Suvexx in the Territory and
revenue pursuant to the supply of product. Suvexx is currently manufactured by the Company's contract
manufacturing partner in the United States.
In December 2020, Nuvo Pharmaceuticals announced it would begin doing business as (d/b/a) Miravo
Healthcare. The Company did not change its legal name or those of its wholly owned subsidiaries. The
corporate rebranding reflects Nuvo’s evolution into a growing, multi-asset Company, which was transformed by
the acquisition of the Aralez Pharmaceuticals Canada business at the end of 2018. Miravo consolidates the
Nuvo and Aralez brands under one common name.
•
•
•
•
•
• During the year ended December 31, 2020, the Company repaid $22.4 million (US$16.8 million) of the Deerfield
Loans - $4.5 million (US$3.5 million) to discharge the Bridge Loan which bore interest at 12.5% and $17.9 million
(US$13.3 million) against the Amortization Loan which bears interest at 3.5%. As of December 31, 2020, the
total remaining principal balances of the Deerfield Loans consisted of $59.4 million (US$46.7 million) on the
Amortization Loan and $66.8 million (US$52.5 million) on the Convertible Loan, both of which bear interest at
3.5%.
Total debt principal repayments
US$
Interest rate
Original Debt
Bridge Loan Amortization Loan Convertible Loan
Total
%
12.5
3.5
3.5
- cash value per Deerfield Facility Agreement
Principal payments
- November 10, 2019 - December 31, 2020
Outstanding cash value of debt
- December 31, 2020
$
$
$
6,000
(6,000)
60,000
52,500
118,500
(13,320)
-
(19,320)
-
46,680
52,500
99,180
The Company’s outstanding loans, as shown below, carry coupon interest rates of 3.5% per annum.
Total debt as at December 31, 2020:
US$
Debt - cash value per Deerfield Facility Agreement
IFRS present value adjustment (interest and principal)
Debt - IFRS value
CDN$
Debt - cash value per Deerfield Facility Agreement
IFRS present value adjustment (interest and principal)
Debt - IFRS value
Non-IFRS Financial Measures
Amortization Loan
Convertible Loan
$
46,680
(6,254)
40,426
$
52,500
(11,458)
41,042
Amortization Loan
Convertible Loan
$
59,433
(7,980)
51,453
$
66,843
(14,599)
52,244
The Company discloses non-IFRS measures (such as adjusted total revenue, adjusted EBITDA and adjusted EBITDA
per share) that do not have standardized meanings prescribed by IFRS. The Company believes that shareholders,
investment analysts and other readers find such measures helpful in understanding the Company’s financial performance
and in interpreting the effect of the Aralez Transaction and the Deerfield Financing (described below) on the Company.
Non-IFRS financial measures do not have any standardized meaning prescribed by IFRS and may not have been
calculated in the same way as similarly named financial measures presented by other companies. These measures
should be considered as supplemental in nature and not as a substitute for related financial information prepared in
accordance with IFRS.
Adjusted Total Revenue
The Company defines adjusted total revenue as total revenue, plus amounts billed to customers for existing contract
assets, less revenue recognized upon recognition of a contract asset. Management believes adjusted total revenue is
a useful supplemental measure to determine the Company’s ability to generate cash from its customer contracts used
to fund its operations.
The following is a summary of how adjusted total revenue is calculated:
Total revenue
Add:
Amounts billed to customers for existing contract assets
Deduct:
Revenue recognized upon recognition of a contract asset
Adjusted total revenue
Three months ended
December 31
Twelve months ended
December 31
2020
2019
2020
2019
$
$
$
$
17,283
19,593
73,775
69,546
48
-
51
-
17,331
19,644
2,680
5,178
(5,496)
70,959
-
74,724
Adjusted total revenue was $71.0 million for the year ended December 31, 2020 compared to $74.7 million for the year
ended December 31, 2019. The $3.7 million decrease in adjusted total revenue in the current year was primarily
attributable to a decrease of $5.4 million of revenue in the Production and Service Business segment, combined with a
decrease of $2.2 million in the Licensing and Royalty Business segment, partially offset by a $3.9 million increase in
revenue from the Commercial Business segment. The Commercial Business segment revenue had continued organic
growth of its key promoted products - Blexten and Cambia. Adjusted total revenue for the three months ended December
31, 2020 decreased to $17.3 million compared to $19.6 million for the three months ended December 31, 2019. The
possibility of future supply disruptions resulted in forward buying linked to the COVID-19 pandemic, which increased
revenue in the three months ended March 31, 2020, reduced revenue in the three months ended June 30, 2020 and
stabilized in the second half of the year, as the pandemic progressed and buying patterns returned to normal. The
COVID-19 pandemic may impact the timing of revenue in future quarters and the Company will continue to monitor
market dynamics accordingly.
For the year ended December 31, 2020, adjusted revenue decreased in the Licensing and Royalty Business segment,
primarily due to a reduction of $5.0 million in U.S. and rest of world net sales of Vimovo, partially offset by milestone and
royalty revenues related to the Yosprala intellectual property in Japan of $3.0 million. The reduction in the U.S. net sales
of Vimovo was due to the launch of a generic version of Vimovo in March 2020, which resulted in the Company no longer
receiving a guaranteed minimum annual royalty payment of US$7.5 million (US$1.9 million per quarter) from Horizon
Therapeutics plc (Horizon). The Company now receives a royalty of 10% based on U.S. net sales of Vimovo. The
Production and Service Business segment revenue decreased as a result of a decrease in the Company’s Pennsaid 2%
product sales.
Adjusted EBITDA
EBITDA refers to net income (loss) determined in accordance with IFRS, before depreciation and amortization, net
interest expense (income) and income tax expense (recovery). The Company defines adjusted EBITDA as EBITDA,
plus amounts billed to customers for existing contract assets, inventory step-up expenses, stock-based compensation
expense, Other Expenses (Income), less revenue recognized upon recognition of a contract asset and other income.
Management believes adjusted EBITDA is a useful supplemental measure to determine the Company’s ability to
generate cash available for working capital, capital expenditures, debt repayments, interest expense and income taxes.
The following is a summary of how EBITDA and adjusted EBITDA are calculated:
Net income (loss)
Add back:
Income tax expense (recovery)
Net interest expense
Depreciation and amortization
EBITDA
Add back:
Amounts billed to customers for existing contract assets(1)
Stock-based compensation
Deduct:
Revenue recognized upon recognition of a contract asset(1)
Other Expenses (Income):
Change in fair value of derivative liabilities(2)
Change in fair value of contingent and variable consideration
Impairment(3)
Foreign currency loss (gain)
Inventory step-up
Other losses (gains)
Adjusted EBITDA
Three months ended
December 31
Year ended
December 31
2020
$
2,399
(435)
2,422
2,291
6,677
48
53
-
587
208
1,583
(2,586)
352
(680)
6,242
2019
$
2020
$
(418)
(4,129)
29
3,142
2,312
5,065
51
114
1,152
11,441
9,256
17,720
2,680
261
2019
$
3,399
28
10,305
9,546
23,278
5,178
457
-
(5,496)
-
401
1,856
159
(1,081)
875
1,130
8,570
11,728
1,794
1,583
(1,145)
1,411
(2,093)
28,443
(31,070)
1,216
23,780
(2,598)
4,979
2,022
27,242
(1)
In the year ended December 31, 2020, the Company recognized a contract asset of $5.0 million, recorded net of withholding tax, representing
the present value, discounted at 1.7%, relating to future milestone payments for the Yosprala product. The contract asset and associated
revenue represents the present value of $5.0 million (US$3.6 million) in milestone payments, net of withholding tax, during the term of this
license agreement, including $2.5 million (US$1.8 million), net of withholding tax, triggered by regulatory approval in Japan, which Miravo
Ireland received in the year ended December 31, 2020 resulting in a reduction to the contract asset of $2.5 million. Miravo Ireland is also
contractually entitled to receive a second US$1.8 million, net of withholding tax, milestone payment on May 31, 2022 provided the licensed
intellectual property remains valid and enforceable.
(3)
(2) For the year ended December 31, 2020, an increase in the share price combined with an increase in the volatility, partially offset by a decrease
in the risk-adjusted discount rate, resulted in an increase in value of the Company’s derivative liabilities and the Company recognized a net
non-cash charge of $11.7 million on the change in fair value of derivative liabilities.
In the year ended December 31, 2020, the Company recognized a non-cash $1.6 million impairment charge related to certain intangible assets
in the Commercial Business and Licensing and Royalty Business segments. In the year ended December 31, 2019, the Company recognized
a $22.4 million impairment charge related to the Vimovo contract asset. In July 2019, the Company received notice that the the United States
Court of Appeals for the Federal Circuit (Court of Appeals) had denied the Company's and Horizon’s request to reconsider the May 2019
decision with respect to the validity of Vimovo Patent Nos. 6,926,907 and 8,557,285 in the U.S. In October, a petition to the Supreme Court of
the United States (Supreme Court) was filed to request to have the decision of the Court of Appeals reconsidered. The Supreme Court denied
that petition on January 13, 2020. On February 18, 2020, Dr. Reddy's Laboratories Inc. (Dr. Reddy’s) second-filed Abbreviated New Drug
Application (ANDA) for Vimovo in the U.S. received U.S. Food and Drug Administration (FDA) approval. Dr. Reddy’s launched a generic
version of Vimovo in the U.S. in March 2020. Miravo will continue to receive a 10% royalty on net sales of Vimovo by its U.S. partner, subject
to a step-down provision in the event that generic competition achieves a certain market share. Miravo’s US$7.5 million minimum annual
royalty due for Vimovo net sales in the U.S. ceased with the launch of a generic Vimovo in the U.S. In the year ended December 31, 2019,
the Company recorded impairment of $1.4 million of certain intangible assets in the Commercial Business and Licensing and Royalty Business
segments.
Adjusted EBITDA was $28.4 million for the year ended December 31, 2020 compared to $27.2 million for the year ended
December 31, 2019. The increase in the current year was primarily attributable to a decrease in sales and marketing
and general and administrative (G&A) expenses (net of amortization), partially offset by a decrease in gross profit of $4.2
million (net of revenue recognized upon recognition of contract assets, amounts billed to customers for existing contract
assets and inventory-step up expenses). The 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 due to the receipt of the Canada Emergency
Wage Subsidy and changes in product mix. Adjusted EBITDA for the three months ended December 31, 2020 was $6.2
million compared to $8.6 million for the three months ended December 31, 2019.
Adjusted EBITDA Per Common Share
The Company defines adjusted EBITDA per common share as adjusted EBITDA divided by the average number of
issued and outstanding common shares of the Company as follows:
Adjusted EBITDA
Adjusted EBITDA per common share
Average number of common shares outstanding
- basic
Three months ended
December 31
Year ended
December 31
2020
2019
2020
2019
$
6,242
0.55
$
8,570
0.75
$
$
28,443
27,242
2.50
2.39
11,388
11,388
11,388
11,388
Adjusted EBITDA per common share was $2.50 for the year ended December 31, 2020 compared to adjusted EBITDA
per common share of $2.39 for the year ended December 31, 2019. Adjusted EBITDA per common share was $0.55
for the three months ended December 31, 2020 compared to adjusted EBITDA per common share of $0.75 for the three
months ended December 31, 2019.
The Company’s Business
Miravo is a publicly traded, Canadian healthcare company with global reach and a diversified portfolio of prescription
and non-prescription products.
Miravo’s head office is located in Mississauga, Ontario, Canada, its international operations are headquartered in Dublin,
Ireland and its manufacturing facility is located in Varennes, Québec, Canada. The Varennes facility operates in a Good
Manufacturing Practices (GMP) environment respecting the U.S., Canada and E.U. GMP regulations and is regularly
inspected by Health Canada and the FDA.
As at December 31, 2020, the Company employed a total of 99 full-time employees across its manufacturing facility in
Varennes, Québec, corporate office, Commercial Business in Mississauga, Ontario and international headquarters in
Dublin, Ireland.
Global Presence
Products generating revenue
Products partnered
Unpartnered
Intellectual Property
The Company protects its intellectual property by means of a combination of patents, data exclusivity, trademarks, rights,
licenses, non-disclosure agreements and contractual provisions. Miravo currently holds over one hundred patents in a
number of jurisdictions and has several patent applications pending. Additionally, the Company holds commercial
licenses and cross-licenses to access third-party intellectual property.
Operating Segments
The Company has three operating segments: Commercial Business, Production and Service Business and Licensing
and Royalty Business.
Commercial Business
The Commercial Business segment is comprised of products commercialized by the Company in Canada. This segment
includes the Company’s promoted products - Blexten, Cambia, Suvexx, NeoVisc and the Canadian business for Resultz,
as well as a number of mature assets. The Company sells its products to wholesalers who in turn supply retail and
hospital pharmacies across Canada.
The Company’s promoted products are primarily prescribed by Canadian healthcare professionals, including
neurologists, pain and migraine specialists, dermatologists, allergists, primary care physicians, prescribing pharmacists
and nurse practitioners, which the Company’s in-house commercial team calls on and supports through various
educational and product detailing activities. The mature assets are prescribed to treat patients across a broad range of
therapeutic areas, including pain management, cardiology, gastroenterology, antihyperlipidemic/metabolic agents,
dermatology and various non-prescription medicines. These mature assets receive no or minimal promotional support,
and in some cases, have lost market exclusivity and now compete with generic alternatives.
The Company’s approved products related to the Commercial Business segment are as follows:
Distributed by Miravo in Canada
Product
Description
Product
Description
Second-generation antihistamine
for the treatment of seasonal
allergies and urticaria (hives).
Treatment of moderate to severe
acute migraine with or without
aura in adults.
Pesticide-free topical treatment of
head lice infestations.
Relief for tension-type
headaches.
Indicated for the cleansing of the
colon in preparation for
colonoscopy.
Laxative for the treatment of
occasional constipation and,
irregularity.
Probiotic for the management
and relief of chronic constipation
and associated abdominal pain
and cramps
Iron supplement for the
prevention and treatment of iron
deficiency.
Treatment of mild to moderate acute
migraine with or without aura in adults
18 years and older.
Viscosupplementation for knee
osteoarthritis
Once daily treatment for patients with
high cholesterol or high levels of
triglycerides.
Antihypertensive agent
Instillation for the treatment of mild to
severe GAG layer damage of the
urinary bladder.
Once daily treatment for psoriasis and
other keratinization disorders.
Fully resorbable, antibiotic, collagen
“haemostat” for surgical implantation
during surgery to reduce the risk of
surgical site infections.
1.
Products are available in Canada and not promoted in any capacity
Production and Service Business
The Production and Service Business segment includes revenue from the sale of products manufactured by Miravo from
its manufacturing facility in Varennes, Québec or contracted by Miravo Ireland from its international headquarters in
Dublin, Ireland, as well as service revenue for testing, development and related quality assurance and quality control
services provided by the Company. Key revenue streams in this segment, include Pennsaid 2%, Pennsaid and the bulk
drug product for the Heated Lidocaine/Tetracaine (HLT) Patch, as well as ad hoc service agreements for testing,
development and related quality assurance and quality control services.
The Company currently supplies Pennsaid 2% to Horizon for the U.S. market and to Gebro Pharma for the Swiss market,
and is actively engaged in ongoing partnering efforts for Pennsaid 2% in the rest of the world. The Company will continue
to focus on identifying license partners for Resultz in key unpartnered territories around the world, which will result in
production revenue. Miravo believes its Production and Service Business segment has continued growth potential, as
Miravo has the in-house capabilities and capacity to produce Pennsaid 2% and Resultz for new license partners.
Licensing and Royalty Business
The Licensing and Royalty Business segment includes the revenue generated from the licensing of the intellectual
property and the ongoing royalties received under these exclusive licensing agreements. The Company’s Licensing and
Royalty Business segment revenue is primarily generated from:
• Net sales of Vimovo in the U.S. through the Company’s partner Horizon;
• Net sales of Vimovo in various ex-U.S. markets, including Europe, Canada and South America by the Company’s
partner Grunenthal GmbH (Grunenthal);
• Net sales of Resultz in select European markets by the Company’s various European license partners (See table
below for full details); and
• Net sales of Cabpirin related to the licensing of the Company’s Yosprala intellectual property in the Japanese
market.
The Company’s out-licensing efforts for Pennsaid 2%, Resultz, Suvexx and Yosprala are targeted on all markets that
remain unlicensed with a particular focus on Europe, the Middle East and Asia. The Company enters into exclusive,
long-term licensing agreements with strategic partners in specific geographies. Miravo believes its Licensing and Royalty
Business segment has continued growth potential, as Pennsaid 2%, Resultz and Suvexx products are protected by
patents that provide licensees with market exclusivity and protection from generic competition, as well as favourable
product profiles (See Commercial Products below).
The Company’s approved products related to the Production and Service Business and Licensing and Royalty Business
are segmented as follows:
Product
Description
Segments
Licensee or Distributor
Territories
Pesticide-free topical
treatment of head lice
infestations.
Production and
Service Business
Licensing and
Royalty Business
Treatment of acute
migraine
Licensing and
Royalty Business
Fagron Belgium NV
Heumann Pharma GmbH & Co.
Generica KG
Reckitt Benckiser (Brands) Limited
Sato Pharmaceutical Co., Ltd.
The Mentholatum Company
Currax Holdings USA LLC
Orion Corporation
Topical treatment of
osteoarthritic pain in a
more convenient
format.
Topical treatment of
osteoarthritic pain.
Oral treatment for relief
of arthritis symptoms
with a reduced risk of
developing gastric
ulcers.
Topical patch used to
help prevent pain
associated with needle
sticks and other
superficial skin
procedures.
Once daily treatment to
help in the prevention
of heart attacks and
strokes with a reduced
risk of developing
gastric ulcers.
Instillation for the
treatment of mild to
severe GAG layer
damage of the urinary
bladder.
Production and
Service Business
Licensing and
Royalty Business
Production and
Service Business
Licensing and
Royalty Business
Licensing and
Royalty Business
Horizon Therapeutics plc
Paladin Labs Inc..
Sayre Therapeutics PVT Ltd
Gebro Pharma AG
Paladin Labs Inc.
Vianex S.A.
Recordati S.p.A.
Horizon Therapeutics plc
Grunenthal GmbH
Licensing and
Royalty Business
Production and
Service Business
Galen US Incorporated
Eurocept International B.V.
Licensing and
Royalty Business
Genus Lifesciences Inc.
Takeda Pharmaceutical Company
Limited
Licensing and
Royalty Business
Aspire Pharmaceuticals
The Aralez Transaction
On December 31, 2018, the Company announced the acquisition of a portfolio of more than 20 revenue-generating
products from Aralez Pharmaceuticals Inc. (Aralez) (the Aralez Transaction). The Aralez Transaction included the
acquisition of Aralez Pharmaceuticals Canada Inc. (Aralez Canada), a growing business that included the products
Cambia, Blexten, as well as the Canadian distribution rights to Resultz, and provides a platform for the Company to
acquire and launch additional commercial products in Canada. The Company also acquired the worldwide rights and
royalties from licensees for Vimovo, Yosprala and Suvexx/Treximet.
The aggregate purchase price paid by the Company to Aralez for the Aralez Transaction was $146.4 million (US$110
million, subject to certain working capital and indebtedness adjustments). The Company satisfied the purchase price
through the Deerfield Financing (See The Deerfield Financing below).
Growth Strategy
The Company intends to further expand its Canadian and international businesses through continued organic growth of
existing products, targeted in-licensing and acquisition opportunities, which leverage the Company’s in-house
commercial, scientific and manufacturing infrastructure and out-licensing of distribution rights for Miravo’s proprietary
products - Pennsaid 2%, Resultz, Suvexx and Yosprala in global markets. The Company plans to continue to build on
its commercial presence in Canada and will look to utilize a network of license and distribution partners for its products
in global markets. The Company targets global and regional pharmaceutical companies that have therapeutic area
expertise and established commercial infrastructure as potential license and distribution partners.
To achieve its strategic objectives, the Company focuses on leveraging its competitive advantages through its in-house
capabilities:
• Attracting, developing, pursuing and consummating transactions to in-license or acquire accretive, growth-
oriented products;
• Creating intellectual property portfolios that provide defense against generic threats;
• Launching new products in Canada;
• Managing complex relationships with regulators to register new products in Canada, the U.S., Europe and other
global markets; and
• Developing innovative processes to enhance the quality and efficiency of manufacturing operations.
Commercial Products
Products Commercialized by Miravo
Blexten
Blexten is a second-generation antihistamine drug for the symptomatic relief of allergic rhinitis and chronic spontaneous
urticaria. Blexten exerts its effect through its highly selective inhibition of peripheral histamine H1 receptors and has an
efficacy comparable to cetirizine and desloratadine. In comparative studies, Blexten demonstrated somnolence rates
similar to placebo representing a potentially non-sedating effect at therapeutic doses. It was developed in Spain by Faes
Farma, S.A. (Faes). Bilastine, (the active ingredient in Blexten), is approved in Canada and over 100 countries
worldwide, including Japan and most European countries. In 2014, Miravo entered into an exclusive license and supply
agreement with Faes for the exclusive right to sell bilastine in Canada, which is sold under the brand name Blexten. The
exclusive license is inclusive of prescription and non-prescription rights for Blexten, as well as adult and pediatric
presentations in Canada.
In April 2016, Health Canada approved Blexten (bilastine 20 mg oral tablet) for the treatment of the symptoms of seasonal
allergic rhinitis and chronic spontaneous urticaria (such as itchiness and hives). Blexten was commercially launched in
Canada in December 2016. Miravo is contracted to pay additional milestone payments of approximately €0.3 million
and $0.8 million to Faes if certain sales targets or other milestone events are achieved over the life of the license and
supply agreement term.
Cambia
Cambia (diclofenac potassium for oral solution) is a patent protected, nonsteroidal anti-inflammatory drug (NSAID) and
is currently the only prescription NSAID approved and available in Canada for the acute treatment of migraine with or
without aura in adults 18 years of age or older. In 2010, Miravo signed a license agreement with Nautilus Neurosciences,
Inc. (Nautilus) for the exclusive rights to develop, register, promote, manufacture, use, distribute, market and sell Cambia
in Canada. Since 2011, three separate amendments to the license agreement have been executed. The license was
assigned by Nautilus to Depomed, Inc. (Depomed) in December 2013. Depomed has subsequently been renamed
Assertio Therapeutics Inc. The Company pays a tiered royalty on net sales of Cambia and future sales-based milestone
payments of up to US$5.3 million may be payable over time.
Cambia was approved by Health Canada in March 2012 and was commercially launched to specialists in Canada in
October 2012 and broadly to all primary care physicians in February 2013.
Suvexx
Suvexx (sumatriptan/naproxen sodium) is a patent protected migraine medicine that was developed by Aralez’s wholly
owned subsidiary POZEN, Inc. (POZEN) in collaboration with Glaxo Group Limited, d/b/a GSK (GSK). The product is
formulated with POZEN's patented technology (now owned by Miravo) of combining a triptan, sumatriptan 85 mg, with
an NSAID, naproxen sodium 500 mg and GSK's RT Technology in a single tablet. The Company received Health
Canada approval for Suvexx in the first quarter of 2020 and the product was commercially launched in Canada in
September 2020.
NeoVisc Line Extension
In January 2020, Miravo closed a licensing transaction bringing new line extensions to the NeoVisc Canadian
business. NeoVisc is an injectable viscosupplement used by orthopedic surgeons, sports medicine physicians and
healthcare practitioners to replenish synovial fluid in the joints of patients with osteoarthritis. NeoVisc ONE is a low
single-dose injection volume (only 4ml) viscosupplement. The reduction of injection volume makes administration of
NeoVisc ONE easier for healthcare professionals and more comfortable for patients. Neovisc+ consists of a three (2 ml)
injection dosing system that is administered to a patient over the course of a few weeks. In some patients, a three dose
treatment may provide longer relief. Both NeoVisc+ and NeoVisc ONE were issued a Medical Device License by Health
Canada in September 2020. The new and improved NeoVisc formats launched in Canada in January 2021.
Other Commercialized Products in Canada
The Company also markets: Resultz®, Bezalip® SR, Proferrin®, Fiorinal®1, Fiorinal® C1, Viskazide®, Visken®, Collatamp®
G, PegaLAX®, Mutaflor®, MoviPrep®, Uracyst® and Soriatane™.
1.
Products are available in Canada and not promoted in any capacity
Fiorinal
On October 30, 2019, Miravo received an amended application for authorization to institute a class action against a
group of 34 defendants, including Miravo, that manufacture, market, and/or distribute opioids in Québec. The claim is
for $30, plus interest for compensatory damages for each class member, $25.0 million from each defendant for punitive
damages and pecuniary damages for each class member. The proposed class is all natural persons in Québec who
have been prescribed and consumed any one or more of the opioids manufactured, marketed, distributed and/or sold by
the defendants between 1996 and the present day and who suffer or have suffered from opioid use disorder. The
proposed class includes any direct heirs of any deceased persons who met the above-description and excludes certain
persons subject to a prior settlement agreement. The amended application is currently pending before the Superior
Court in the Province of Québec. The Company has never promoted or made any claims outside of the approved Health
Canada label and believes that the claim is without merit and intends to vigorously defend the matter.
Products Out-licensed and/or Manufactured by Miravo
Pennsaid 2%
Pennsaid 2% is a follow-on product to original Pennsaid (described below). Pennsaid 2% is a topical pain product that
combines a dimethyl sulfoxide (DMSO) based transdermal carrier with 2% diclofenac sodium, a leading NSAID,
compared to 1.5% for original Pennsaid. Pennsaid 2% is more viscous, is supplied in a metered dose pump bottle and
has been approved in the U.S. for twice daily dosing compared to four times a day for Pennsaid. This provides Pennsaid
2% with potential advantages over Pennsaid and other competitor products and with patent protection. Miravo owns the
worldwide rights to Pennsaid 2%, excluding the U.S. rights owned by Horizon.
United States
Pennsaid 2% was approved on January 16, 2014 in the U.S. and launched by the Company’s then U.S. Pennsaid and
Pennsaid 2% licensee, Mallinckrodt Inc. (Mallinckrodt) in February 2014 for the treatment of pain of osteoarthritis of the
knee. In September 2014, the Company reached a settlement related to its litigation with Mallinckrodt. Under the terms
of the settlement agreement, Mallinckrodt returned the U.S. sales and marketing rights to Pennsaid and Pennsaid 2% to
Miravo. In October 2014, Miravo sold the U.S. rights to Pennsaid 2% to Horizon for US$45.0 million. Under the terms
of this agreement, the Company earns revenue from the manufacturing and sale of Pennsaid 2% to Horizon.
Miravo records revenue from Horizon when it ships Pennsaid 2% commercial bottles and product samples to Horizon
for the U.S. market. The Company earns product revenue from Horizon pursuant to a long-term, exclusive supply
agreement, as well as contract service revenue.
Rest of World
Gebro Pharma has the exclusive rights to register, distribute, market and sell Pennsaid 2% in Switzerland and
Liechtenstein. In January 2020, Gebro Pharma received marketing authorization for Pennsaid 2% from Swissmedic, the
overseeing Swiss regulatory authority. Gebro Pharma launched Pennsaid 2% in Switzerland in January 2021. The
Company is eligible to receive milestone payments and royalties on net sales of Pennsaid 2% in Switzerland and
Liechtenstein and will earn product revenue from the supply of Pennsaid 2% to Gebro Pharma on an exclusive basis
from its manufacturing facility in Varennes, Québec.
Sayre Therapeutics PVT Ltd (Sayre Therapeutics) has the exclusive rights to distribute, market and sell Pennsaid 2% in
India, Sri Lanka, Bangladesh and Nepal. Sayre Therapeutics filed their application for regulatory approval with the Drug
Controller General of India in December 2017. In September 2019, the Company received notice that the Drug Controller
General of India had approved the sale of Pennsaid 2% as a prescription medication. The Company and Sayre are
evaluating commercial launch options in India as a result of changing market conditions, including increased competition
and lower market pricing. The Company is eligible to receive milestone payments and royalties on net sales of Pennsaid
2% in India, Sri Lanka, Bangladesh and Nepal and will earn product revenue from the supply of Pennsaid 2% to Sayre
Therapeutics on an exclusive basis from its manufacturing facility in Varennes, Québec, if Pennsaid 2% is launched in
these territories.
Paladin Labs Inc. (Paladin) has exclusive rights to market and sell Pennsaid 2% in Canada. Pennsaid 2% has not been
submitted for approval and is not commercially launched in Canada.
Unlicensed Territories
The Company is pursuing Pennsaid 2% registrations in select European territories that will accept the existing clinical
and technical data package. The Company has submitted its regulatory dossier for Pennsaid 2% to the Austrian Agency
for Health and Food Safety acting as the Reference Member State (RMS). As part of this decentralized procedure,
Miravo also submitted its Pennsaid 2% dossier to the Concerned Member States (CMS) of Greece and Portugal. As of
December 31, 2020, the Company withdrew the marketing authorization application for Pennsaid 2% for commercial
reasons.
Pennsaid
Pennsaid, the Company’s first commercialized topical pain product, is used to treat the signs and symptoms of
osteoarthritis of the knee. Pennsaid is a combination of a DMSO-based transdermal carrier and 1.5% diclofenac sodium
and delivers the active drug through the skin at the site of pain. While conventional oral NSAIDs expose patients to
potentially serious systemic side effects such as gastrointestinal bleeding and cardiovascular risks, Miravo’s clinical trials
suggest that some of these systemic side effects occur less frequently with topically applied Pennsaid. Pennsaid is
currently sold in Canada by Paladin, in Italy by Recordati S.p.A. and in Greece by Vianex S.A.
Resultz
United States
The Company acquired the U.S. product and intellectual property rights from Piedmont Pharmaceuticals LLC (Piedmont)
in January 2018. Resultz was cleared as a 510 (k) Exempt class 1 medical device for the treatment of lice by the FDA
in May 2017 and has not yet been commercially launched in the U.S. In February 2021, Miravo Ireland entered into an
exclusive License Agreement with The Mentholatum Company for the exclusive right to commercialize the Resultz
formula and technology in the United States under the Mentholatum® brand. Miravo Ireland will earn revenue from The
Mentholatum Company pursuant to the License Agreement. It is anticipated that The Mentholatum Company will launch
Resultz during the summer of 2021. The COVID-19 pandemic has created some uncertainty regarding the traditional
seasonal demand for head lice treatments. Due to physical distancing regulations currently being enforced, many
children in the U.S. are not physically attending school or daycare and are not able to participate in group activities, the
traditional environments where head lice outbreaks occur. The License Agreement has been structured with an 18-
month term, which will allow both parties to reassess market dynamics related to the COVID-19 pandemic and to
determine if a longer-term agreement is warranted in a post-pandemic commercial environment. Resultz is currently
manufactured by the Company's contract manufacturing partner in Europe.
Rest of World (excluding the U.S. and Canada)
The Company acquired the global, ex-U.S. product and intellectual property rights from Piedmont in December
2017. Resultz is approved and marketed in France, Spain, Portugal, Belgium, Netherlands, Germany, Ireland, the
United Kingdom, Russia and Australia through a network of existing license agreements and global licensees which
include Reckitt Benckiser, Fagron Belgium NV (Fagron) and Heumann Pharma GmbH & Co. (Heumann). Resultz is
also pending registration in Japan, where the local license is held by Sato Pharmaceutical Co. Ltd. Resultz is a CE
marked, Class I medical device for the treatment of lice, which does not require a prescription. The Company recognized
a contingent and variable consideration related to the ex-U.S. acquisition of Resultz for $2.2 million as at December 31,
2020.
rights
the exclusive
Fagron has
in Belgium, the
Netherlands and Luxembourg (BeNeLux) as a Class I medical device for the human treatment of head lice infestation.
Resultz is cleared for marketing in BeNeLux. Miravo Ireland received upfront consideration, is eligible to receive royalties
on net sales of Resultz in BeNeLux and will earn revenue from Fagron pursuant to an exclusive supply
agreement. Fagron launched Resultz in BeNeLux in the second half of 2018. Resultz is currently manufactured by the
Company's contract manufacturing partner in Europe.
register, distribute, market and sell Resultz
to
Heumann has the exclusive rights to distribute, market and sell Resultz in Germany. Resultz is considered a Class I
medical device in Germany. Miravo Ireland received upfront consideration, is eligible to receive milestone payments and
royalties on net sales of Resultz in Germany and will earn revenue from Heumann pursuant to an exclusive supply
agreement. Heumann launched Resultz in Germany in October 2020. Resultz is currently manufactured by the
Company's contract manufacturing partner in Europe.
Vimovo
Vimovo (naproxen/esomeprazole magnesium) is the brand name for a proprietary fixed-dose combination of enteric-
coated naproxen, a pain-relieving NSAID, and immediate-release esomeprazole magnesium, a proton pump inhibitor, in
a single delayed-release tablet. POZEN developed Vimovo in collaboration with AstraZeneca. On April 30, 2010, the
FDA approved Vimovo for the relief of the signs and symptoms of OA, rheumatoid arthritis, and ankylosing spondylitis
and to decrease the risk of developing gastric ulcers in patients at risk of developing NSAID-associated gastric ulcers.
Vimovo is currently commercialized in the U.S. by Horizon and by Grunenthal in various rest of world territories,
including Canada, Europe and select additional countries.
United States
Under the terms of the license agreement with Horizon, Miravo Ireland currently receives a 10% royalty on net sales of
Vimovo sold in the U.S. A guaranteed minimum annual royalty payment of US$7.5 million (US$1.9 million per quarter)
ceased when Dr. Reddy's launched a generic version of Vimovo in the U.S. during the first quarter of 2020. Horizon’s
royalty payment obligation with respect to Vimovo expires on the later of (a) the last to expire of certain patents covering
Vimovo, and (b) ten years after the first commercial sale of Vimovo in the U.S. which occurred in 2010. The 10% royalty
on net sales of Vimovo by its U.S. partner is subject to a step-down provision in the event that generic competition
achieves a certain market share. Horizon and Miravo Ireland have reached litigation settlements with five other generic
companies: (i) Teva Pharmaceuticals Industries Limited (formerly known as Actavis Laboratories FL, Inc., which itself
was formerly known as Watson Laboratories, Inc. - Florida) and Actavis Pharma, Inc. (collectively, Actavis Pharma) (ii)
Lupin; (iii) Mylan Pharmaceuticals Inc., Mylan Laboratories Limited, and Mylan Inc. (collectively, Mylan); Ajanta Pharma
Ltd. and Ajanta Pharma USA, Inc. (collectively, Ajanta); and Anchen Pharmaceuticals, Inc. (Anchen). Certain of these
settlement agreements include provisions allowing generic versions of Vimovo to enter the U.S. market as a
consequence of Dr. Reddy’s launching their generic version of Vimovo in March 2020. When the Company acquired the
Vimovo patents as part of the Aralez Transaction, the Company anticipated that the US$7.5 million (US$1.9 million per
quarter) annual minimum royalty payments would cease in 2022.
Dr. Reddy’s launch of a generic version of Vimovo is “at risk” to Dr. Reddy’s, as there is pending patent infringement
litigation in the United States District Court for the District of New Jersey (the Court) against Dr. Reddy’s in the U.S.,
involving issued U.S. Patent Nos. 8,858,996 and 9,161,920 (the ‘996 and ‘920 Patents) owned by Miravo Ireland that
cover Vimovo. In this litigation, Dr. Reddy’s is arguing that these issued patents are invalid and unenforceable. In
October 2020, Dr. Reddy’s filed a motion for summary judgment requesting that the Court find the ‘996 and ‘920 Patents
invalid. The Court denied this motion in February 2021, and as a result, the pending litigation against Dr. Reddy’s
invoivng the ‘996 and ‘920 Patents continues. In the event Miravo Ireland’s patents are found by the Court to be valid
and infringed, Miravo Ireland and Horizon may be entitled to damages from Dr. Reddy’s.
Rest of World (excluding the U.S)
Grunenthal holds the rights to commercialize Vimovo outside of the U.S. and Japan and pays Miravo Ireland a 10%
royalty on net sales. Grunenthal’s royalty payment obligation with respect to Vimovo expires on a country-by-country
basis upon the later of (a) expiration of the last-to-expire of certain patent rights related to Vimovo in that country, and
(b) ten years after the first commercial sale of Vimovo in such country. The royalty rate may be reduced to the mid-
single digits in the event of a loss of market share as a result of certain competing products. Canada is the only country
where a generic naproxen/esomeprazole magnesium product was approved and commercialized in 2017, prior to the
Company purchasing this royalty stream.
Suvexx/Treximet
Suvexx/Treximet (sumatriptan/naproxen sodium) is a migraine medicine that was developed by the Aralez wholly owned
subsidiary POZEN in collaboration with GSK. The product is formulated with POZEN's patented technology (now owned
by Miravo) of combining a triptan, sumatriptan 85 mg, with an NSAID, naproxen sodium 500 mg and GSK's RT
Technology in a single tablet.
United States
In 2008, the FDA approved Treximet (the U.S. brand name) for the acute treatment of migraine attacks with or without
aura in adults. Treximet is currently commercialized in the U.S. by Currax Holdings USA LLC.
Rest of World (excluding the U.S)
Orion holds the exclusive license and supply agreement (the License Agreement) for the right to package, distribute,
market and sell Suvexx in Finland, Sweden, Denmark, Norway, Poland, Hungary, Latvia, Lithuania and Estonia (the
Territory). Orion will be responsible for obtaining and maintaining the marketing authorizations for Suvexx in the Territory
and will also manage all Territory specific commercial activities. Miravo Ireland will receive up to €1.7 million in upfront
consideration, regulatory and sales-based milestone payments, as well as royalties on net sales of Suvexx in the Territory
and revenue pursuant to the supply of product. Suvexx is currently manufactured by the Company's contract
manufacturing partner in the United States.
Yosprala
Yosprala is currently the only prescription fixed-dose combination of aspirin (acetylsalicylic acid), an anti-platelet agent,
and omeprazole, a proton-pump inhibitor, in the U.S. It is indicated for patients who require aspirin for secondary
prevention of cardiovascular and cerebrovascular events and who are at risk of developing aspirin associated gastric
ulcers. Yosprala is designed to support both cardio- and gastro-protection for at-risk patients through the proprietary
Intelli-COAT system, which is formulated to sequentially deliver immediate-release omeprazole (40 mg) followed by a
delayed-release, enteric-coated aspirin core in either 81 mg or 325 mg dose strengths. Yosprala was approved by the
FDA in September 2016 and was commercially launched in the U.S. in October 2016. Yosprala is currently
commercialized in the U.S. by Genus Lifesciences Inc. (Genus). The Company will receive a single-digit royalty on net
sales in the U.S. by Genus until July 2023.
The intellectual property related to Yosprala was licensed to Takeda Pharmaceutical Company Limited (Takeda) in May
2017, on a non-exclusive basis for the Japanese market. In March 2020, Miravo Ireland received notice from Takeda
that Japan’s Ministry of Health, Labor and Welfare (the MHLW) approved Cabpirin. Cabpirin is a fixed dose combination
of vonoprazan fumarate and low-dose aspirin which is protected by Miravo Ireland's Japanese patent for the Yosprala
formulation. In the year ended December 31, 2020, Miravo Ireland received $2.5 million (US$1.8 million), in milestone
payments, net of withholding tax of 10%, triggered by the MHLW approval. Miravo Ireland is also contractually entitled
to receive a second US$1.8 million milestone payment, net of withholding tax of 10% on May 31, 2022 provided the
licensed intellectual property remains valid and enforceable. Miravo Ireland will receive a single-digit royalty on net sales
of Cabpirin in Japan until patent expiry on May 31, 2022.
Miravo Ireland is entitled to retain 50% of all royalty and milestone revenues generated from the Yosprala intellectual
property on a global basis, with the remaining 50% to be paid to the estate of POZEN.
The Heated Lidocaine/Tetracaine Patch
The HLT Patch is a topical patch that combines lidocaine, tetracaine and heat, using Miravo’s proprietary Controlled
Heat-Assisted Drug Delivery (CHADD™) technology. The CHADD unit generates gentle heating of the skin and in a
well-controlled clinical trial has demonstrated that it contributes to the efficacy of the HLT Patch by improving the flux
rate of lidocaine and tetracaine through the skin. The HLT Patch resembles a small adhesive bandage in appearance
and for its currently approved indication is applied to the skin 20 to 30 minutes prior to painful medical procedures, such
as venous access, blood draws, needle injections and minor dermatologic surgical procedures. The HLT Patch is
marketed in the U.S. by Galen US Incorporated (Galen) under the brand name Synera. In Europe, the HLT Patch is
marketed by the Company’s European-based licensee, Eurocept International B.V. (Eurocept) under the brand name
Rapydan. The HLT Patch is manufactured by a third-party contract manufacturing organization for Galen and Eurocept.
Currently, Miravo manufactures the bulk drug product for both parties.
Product Pipeline
Products
Phase 2
Phase 3
Regulatory
Submission
Preparation
Regulatory
Submission
Approved
Blexten
Pediatric
Suvexx
in the Nordics
Blexten Pediatric
Miravo’s original license agreement for Blexten included Canadian rights for the pediatric dosage formats. Blexten
pediatric dosing consists of either an oral syrup formulation (2.5mg/ml) and an orally dispersible tablet formulation (10mg
tablets). Miravo filed the pediatric dossier to Health Canada during the second quarter of 2020 and the dossier was
accepted for review during the fourth quarter. A regulatory decision from Health Canada is anticipated by late summer
2021.
Blexten Ophthalmic
In April 2018, Miravo executed an amendment to add an ophthalmic formulation of Blexten, currently under development,
to the portfolio. The ophthalmic version of Blexten provides physicians the ability to treat patients suffering from ocular
symptoms such as itchy, watery or red eyes related to seasonal allergies with a highly effective, non-drowsy and long-
lasting formulation. The Company is examining the dossier for its suitability for filing a New Drug Submission for Blexten
ophthalmic with Health Canada.
Selected Financial Information
Operations
Product sales
License revenue
Contract revenue
Total Revenue
Cost of goods sold
Gross profit(1)
Sales and marketing expenses
General and administrative expenses
Amortization of intangibles
Net interest expense (income)
Total operating expenses
Other expenses (income)
Income (loss) before income taxes
Income tax expense (recovery)
Net income (loss)
Unrealized gain (loss) on translation of foreign operations
Total comprehensive income (loss)
Year ended
December 31, 2020
Year ended
December 31, 2019
Year ended
December 31, 2018
$
$
$
52,200
21,519
56
73,775
23,309
50,466
8,928
12,893
8,314
11,441
41,576
11,867
(2,977)
1,152
(4,129)
100
(4,029)
51,884
15,758
1,904
69,546
26,472
43,074
9,796
17,840
8,356
10,305
46,297
(6,650)
3,427
28
3,399
(432)
2,967
17,569
2,262
167
19,998
8,638
11,360
-
16,238
1,989
(32)
18,195
(495)
(6,340)
(187)
(6,153)
370
(5,783)
Total assets
Total non-current financial liabilities(2)
151,765
109,348
163,129
110,257
204,412
152,296
Share Information
Net income (loss) per common share
- basic
- diluted
Dividends declared per-share, common shares
Year ended
December 31, 2020
Year ended
December 31, 2019
Year ended
December 31, 2018
(0.36)
(0.36)
-
0.30
(0.51)
-
(0.54)
(0.54)
-
(1) Gross profit increased during the year ended December 31, 2019 as compared to the year ended December 31, 2018, as a result of the Aralez
Transaction effective December 31, 2018.
(2) Non-current financial liabilities are the sum of the long-term portion of long-term debt, other obligations and derivative liabilities.
Non-IFRS Measures(1)
Adjusted total revenue
Adjusted EBITDA
Adjusted EBITDA per common share
- basic
Average number of common shares outstanding
- basic
Year ended
December 31, 2020
$
Year ended
December 31, 2019
$
70,959
28,443
2.50
11,388
74,724
27,242
2.39
11,388
(1) Adjusted EBITDA, adjusted total revenue and adjusted EBITDA per common share are Non-IFRS measures. See Non-IFRS Measures above for
a reconciliation of non-IFRS measures to IFRS.
Results of Operations
80,000
s
d
n
a
s
u
o
h
T
$
60,000
40,000
20,000
0
Product Sales
License Revenue Contract Revenue Total Revenue
FY 2020
FY 2019
Total Revenue
Total revenue is comprised of product sales, license revenue and contract revenue. Total revenue was $73.8 million for
the year ended December 31, 2020 compared to $69.5 million for the year ended December 31, 2019.
Product sales, which represent the Company’s sales to wholesalers, licensees and distributors, were $52.2 million for
the year ended December 31, 2020 compared to $51.9 million for the year ended December 31, 2019. The Commercial
Business segment revenue had continued organic growth of its key promoted products - Blexten and Cambia. The
possibility of future supply disruptions resulted in forward buying linked to the COVID-19 pandemic, which increased
revenue in the three months ended March 31, 2020, reduced revenue in the three months ended June 30, 2020 and
stabilized in the second half of the year, as the pandemic progressed and buying patterns returned to normal. It is
anticipated that the COVID-19 pandemic may continue to impact the timing of revenue in future quarters and the
Company will monitor market dynamics accordingly.
License revenue was $21.5 million for the year ended December 31, 2020 compared to $15.8 million for the year ended
December 31, 2019. The Company receives license revenue from its exclusive licensing agreements with global
partners related to net sales of Vimovo, Resultz, Pennsaid, the HLT Patch, Yosprala and Treximet in certain
territories. The Company acquired the Vimovo, Yosprala and Treximet royalty streams as part of the Aralez Transaction.
The increase in the current year included milestone revenue received due to regulatory approval in Japan related to the
Yosprala intellectual property totalling $5.6 million, for which there was no comparable milestone revenue in the year
ended December 31, 2019.
Contract revenue is mainly derived from ad hoc service agreements for testing, development and related quality
assurance and quality control services provided by the Company. During the year ended December 31, 2019, the
Company’s subsidiary, Miravo Ireland, provided transition services to two companies totalling $1.4 million.
Adjusted total revenue decreased to $71.0 million for the year ended December 31, 2020 compared to $74.7 million for
the year ended December 31, 2019. Adjusted total revenue is a non-IFRS measure (See Non-IFRS Financial Measures
above).
Canada Emergency Wage Subsidy
During the year ended December 31, 2020, the Company recorded $1.2 million in government assistance resulting from
the Canada Emergency Wage Subsidy. The funding was recorded as a reduction of the related salary expenditures
with $0.4 million recorded in sales and marketing expense, $0.4 million recorded in G&A expenses and $0.4 million
recorded in cost of goods sold (COGS).
Cost of Goods Sold
COGS for the year ended December 31, 2020 was $23.3 million compared to $26.5 million for the year ended December
31, 2019. Excluding the impact of the Canada Emergency Wage Subsidy in the current year, gross margin on product
sales for the year ended December 31, 2020 was $28.9 million or 55% compared to $25.4 million or 49% for the year
ended December 31, 2019.
The increase in gross margin was the result of a reduction in inventory step-up expense as well as changes in product
mix. COGS for the year ended December 31, 2020, included $1.4 million of inventory step-up expense [$5.0 million for
the year ended December 31, 2019]. The Production and Service Business segment product sales decreased 30% for
the year ended December 31, 2020 compared to the year ended December 31, 2019, while the product sales in the
Commercial Business segment for the year ended December 31, 2020 increased 11% compared to the year ended
December 31, 2019.
Gross Profit
s
d
n
a
s
u
o
h
T
$
60,000
50,000
40,000
30,000
20,000
10,000
0
Full Year
2020
2019
Gross profit on total revenue was $50.5 million or 68% for the year ended December 31, 2020 compared to $43.1 million
or 62% for the year ended December 31, 2019. The increase in gross profit for the current year was primarily attributable
to an increase in license revenue and gross margin on product sales (See Total Revenue and Cost of Goods Sold
above).
Operating Expenses
s
d
n
a
s
u
o
h
T
$
50,000
40,000
30,000
20,000
10,000
0
Sales &
marketing
expenses
General &
administrative
expenses
Amortization of
intangibles
Net interest
expense
(income)
Total
FY 2020
FY 2019
Total operating expenses includes sales and marketing expenses, G&A expenses, amortization of intangibles and net
interest expense. Total operating expenses for the year ended December 31, 2020 were $41.6 million, a decrease from
$46.3 million for the year ended December 31, 2019. The decrease in total operating expenses for the current year was
a result of the Company’s June 2019 restructuring, the Canada Emergency Wage Subsidy, a reduction in certain
promotional and travel costs due to a partial transition to online promotional platforms, as well as variations in the timing
of sales and marketing and G&A costs.
Sales and Marketing
The Company incurred $8.9 million in expenses for sales and marketing for the year ended December 31, 2020
compared to $9.8 million for the year ended December 31, 2019. The current year includes $0.4 million in Canada
Emergency Wage Subsidy [$nil for the year ended December 31, 2019]. For the current year, the decrease in sales and
marketing expenses was the result of the Company’s June 2019 restructuring, the Canada Emergency Wage Subsidy,
a reduction in certain promotional and travel costs due to a partial transition to online promotional platforms, as well as
variations in the timing of expenses. Sales and marketing expenses relate to the Company’s dedicated commercial
efforts to promote Blexten, Cambia, Suvexx, NeoVIsc and the Canadian business for Resultz (See Operating Segments
above).
General and Administrative
G&A expenses were $12.9 million for the year ended December 31, 2020 compared to $17.8 million for the year ended
December 31, 2019. The current year includes $0.4 million in Canada Emergency Wage Subsidy [$nil for the year ended
December 31, 2019]. For the current year, G&A expenses decreased, primarily due to the Company’s June 2019
restructuring, the Canada Emergency Wage Subsidy and variations in the timing of G&A costs,.
Amortization of Intangibles
For the year ended December 31, 2020, the Company recognized non-cash costs of $8.3 million for amortization of
intangibles compared to $8.4 million in the comparative year. In the current year and comparative year, amortization
related to the licenses and patents acquired in the Aralez Transaction and the Resultz patents.
Net Interest Expense
Net interest expense for the year ended December 31, 2020 was $11.4 million compared to net interest expense of $10.3
million for the year ended December 31, 2019. The Company’s Amortization Loan and Convertible Loan, all components
of the Deerfield Financing, are carried at amortized cost with effective interest rates of 10.20% and 10.13%, respectively.
The Company’s Bridge Loan had an effective interest rate of 9.7% and was repaid in the year ended December 31,
2020. For the year ended December 31, 2020, the Company recognized $11.9 million of interest expense on financial
instruments measured at amortized cost, which was partially offset by $0.4 million of accreted interest income on contract
assets and $0.1 million of interest income on cash held in the Company’s bank accounts. For the year ended December
31, 2019, the Company recognized $12.8 million of interest expense on financial instruments measured at amortized
cost, which was partially offset by $2.3 million of accreted interest income on contract assets and $0.2 million of interest
income on cash held in the Company’s bank accounts.
Cash interest paid
Non cash interest expense
Total interest expense
Year ended
December 31, 2020
Year ended
December 31, 2019
$
5,010
6,915
11,925
$
5,796
6,960
12,756
The Deerfield Financing requires the Company to make quarterly interest payments on outstanding loans. The coupon
rate for the Amortization Loan and the Convertible Loan is 3.5%. The coupon rate for the Bridge Loan was 12.5%.
During the year ended December 31, 2020, the Company made payments of $5.0 million to certain funds managed by
Deerfield Management Company, L.P. (Deerfield) for interest due. During the year ended December 31, 2019, the
Company made payments of $5.8 million to Deerfield for interest due under the Deerfield Financing. During the year
ended December 31, 2020, the Company repaid the outstanding balance of $4.5 million (US$3.5 million) of the original
US$6.0 million Bridge Loan and made principal payments of $17.9 million (US$13.3 million) applied to the Amortization
Loan.
Other Expenses (Income)
During the year ended December 31, 2020, the Company recognized non-cash other expenses of $11.9 million
compared to non-cash other income of $6.6 million for the year ended December 31, 2019.
Change in fair value of derivative liabilities (gain)
Change in fair value of contingent and variable consideration
Impairment
Foreign currency gain
Other losses (gains)
Total other expenses (income)
Year ended
December 31, 2020
Year ended
December 31, 2019
$
11,728
1,794
1,583
(1,145)
(2,093)
11,867
$
(31,070)
1,216
23,780
(2,598)
2,022
(6,650)
The Company holds two derivative liabilities related to the Deerfield Financing - the conversion feature embedded in the
Convertible Loan and the warrants (Warrants). These derivative liabilities are measured at fair value at each reporting
period. As a result of the increase in the share price combined with an increase in the volatility, partially offset by a
decrease in the risk-adjusted discount rate, the value of the Company’s derivative liabilities increased and the Company
recognized a net non-cash charge of $11.7 million on the change in fair value of derivative liabilities for the year ended
December 31, 2020 [ $31.1 million recovery for the year ended December 31, 2019]. During the year ended December
31, 2020, the Company recognized a $0.3 million gain on foreign exchange related to the conversion feature [$0.3 million
gain for the year ended December 31, 2019].
During the year ended December 31, 2020, excluding the impact of foreign exchange changes, the Company recognized
a $1.8 million non-cash loss on the change in fair value of contingent and variable consideration compared to a loss of
$1.2 million for the year ended December 31, 2019. The Company reassesses the value of contingent consideration
related to Resultz and Yosprala at each reporting period. The ex-U.S. Resultz acquisition included contingent
consideration related to meeting certain milestones in partnered markets, payable only if those targets are achieved, as
well as variable consideration based on annual royalties earned in the non-partnered markets. The contingent and
variable consideration related to the ex-U.S. acquisition of Resultz was $2.2 million as at December 31, 2020, a decrease
of $0.6 million for the year ended December 31, 2020. The Yosprala purchase agreement included contingent
consideration in the form of 50% of the lifetime net earnings from monetization of the Yosprala product. In the year
ended December 31, 2019, the Yosprala contingent consideration related to the U.S. market was reduced to $nil as a
result of a change in estimates. As at December 31, 2018, the closing date of the Aralez Transaction, and December
31, 2019, the Yosprala contingent consideration relating to the Japanese market had a fair value of $nil. As at March
31, 2020, the fair value increased to $2.6 million as a result of changes in estimates. During the remainder of 2020, the
Yosprala contingent consideration relating to the Japanese market was reduced to $1.1 million as a result of payments
made and changes in estimates.
In the year ended December 31, 2020, the Company also recorded impairment of $1.6 million of certain intangible assets
in the Commercial Business and Licensing and Royalty Business segments. In the year ended December 31, 2019, the
Company recognized a $22.4 million impairment charge related to the Vimovo contract asset. In July 2019, the Company
received notice that the United States Court of Appeals had denied the Company's and Horizon’s request to reconsider
the May 2019 decision with respect to the validity of the Vimovo Patent Nos. 6,926,907 and 8,557,285 in the U.S. As a
result of this decision, a generic version of Vimovo was launched in the first quarter of 2020. In the year ended December
31, 2019, the Company also recorded impairment of $1.4 million of certain intangible assets in the Commercial Business
and Licensing and Royalty Business segments.
The Company recognized foreign currency gains of $1.1 million and $2.6 million during the years ended December 31,
2020 and 2019, respectively. In the current year, the strengthening of the Canadian dollar against the U.S. dollar
decreased the carrying value of the Company’s long-term debt.
During the year ended December 31, 2020, the Company recognized non-cash other gains of $2.1 million, primarily
related to the changes in the assumptions regarding the timing and amount of debt repayments due to forecast excess
cash flows and deferral assumptions related to the amendment to the financing agreement dated June 25, 2019 with
Deerfield. The Company recognized other losses of $2.0 million, primarily related to the modification of the long-term
debt as a result of the amendment during the year ended December 31, 2019. The amendment permits the Company
to defer a portion of the mandatory minimum quarterly repayments. The permitted deferral is the difference between
one quarter of the then existing US$7.5 million (US$1.9 million per quarter) minimum annual royalty due from Vimovo
sales in the U.S. and the actual amount of royalties received in the applicable quarter.
Net Income (Loss) and Total Comprehensive Income (Loss)
Net income (loss) before income taxes
Income tax expense
Net income (loss)
Unrealized gain (loss) on translation of foreign operations
Total comprehensive income (loss)
Year ended
December 31, 2020
Year ended
December 31, 2019
$
(2,977)
1,152
(4,129)
100
(4,029)
$
3,427
28
3,399
(432)
2,967
Income Tax Expense
During the year ended December 31, 2020, the Company recognized an income tax expense of $1.2 million compared
to an income tax expense of $28 for the year ended December 31, 2019. The increase in the current year was a result
of taxable income in Miravo Ireland and non-recoverable withholding tax related to the Takeda milestone payment.
Net Income (Loss)
s
d
n
a
s
u
o
h
T
$
4,000
3,000
2,000
1,000
0
-1,000
-2,000
-3,000
-4,000
-5,000
Full Year
2020
2019
Net loss for the year ended December 31, 2020 was $4.1 million compared to net income of $3.4 million for the year
ended December 31, 2019. In the current year, gross profit increased by $7.4 million, total operating expenses
decreased by $4.7 million and other expenses (See Other Expenses (Income)) increased by $18.5 million.
Total Comprehensive Income (Loss)
Total comprehensive loss was $4.0 million for the year ended December 31, 2020 compared to total comprehensive
income of $3.0 million for the year ended December 31, 2019. The current year included unrealized gains of $0.1 million
on the translation of foreign operations compared to $0.4 million of unrealized losses in the comparative year.
Net Income (Loss) Per Common Share
Net income (loss) from per common share
- basic
- diluted
Average number of common shares outstanding
- basic
- diluted
Year ended
December 31, 2020
$
Year ended
December 31, 2019
$
(0.36)
(0.36)
11,388
11,388
0.30
(0.51)
11,388
43,457
Net loss per common share was $0.36 for the year ended December 31, 2020 compared to net income per common
share of $0.30 for the year ended December 31, 2019. On a diluted basis, net loss per common share was $0.36 for
the year ended December 31, 2020 compared to net loss per common share of $0.51 for the year ended December 31,
2019.
The weighted average number of common shares outstanding on a basic basis was 11.4 million for the year ended
December 31, 2020, unchanged from the comparative year.
The weighted average number of common shares outstanding on a diluted basis was 11.4 million for the year ended
December 31, 2020 and 43.5 million for the year ended December 31, 2019. As at December 31, 2020, there were no
potentially dilutive instruments in a dilutive position. As at December 31, 2019, the dilutive impact of the Warrants and
convertible debt increased the weighted average number of common shares outstanding by 32.1 million.
Operating Segments
IFRS 8 - Operating Segments (IFRS 8) requires operating segments to be determined based on internal reports that are
regularly reviewed by the chief operating decision maker for the purpose of allocating resources to the segment and to
assessing its performance. For the year ended December 31, 2020, the Company had three operating segments:
Commercial Business, Production and Service Business and Licensing and Royalty Business.
Operating Segments
The Commercial Business segment is comprised of products commercialized by the Company in Canada. This segment
includes the Company’s promoted products - Blexten, Cambia, Suvexx, NeoVisc and the Canadian business for Resultz,
as well as a number of mature assets.
The Production and Service Business segment, includes revenue from the sale of products manufactured by or
contracted by Miravo from its manufacturing facility in Varennes, Québec or its international headquarters in Dublin,
Ireland, as well as service revenue for testing, development and related quality assurance and quality control services
provided by the Company. Key revenue streams in this segment, include Pennsaid 2%, Pennsaid and the bulk drug
product for the HLT Patch, as well as transition services provided by Miravo Ireland to two companies.
The Licensing and Royalty Business segment, includes the revenue generated by the licensing of intellectual property
and ongoing royalties from exclusive licensing agreements with global partners. Key revenue streams in this segment
include royalties from the Company’s Vimovo, Yosprala, and Resultz license agreements.
Total Revenue by Operating Segment
s
d
n
a
s
u
o
h
T
$
80,000
60,000
40,000
20,000
0
Commercial
Business
Production &
Service Business
Licensing &
Royalty Business
Total
FY 2020
FY 2019
Selected Segmented Financial Information
Commercial Business
Revenue
Cost of Sales
Gross profit
Gross profit %
Year ended
December 31, 2020
Year ended
December 31, 2019
$
39,449
15,854
23,595
60%
$
35,578
17,860
17,718
50%
Change
$
3,871
(2,006)
5,877
10%
During the year ended December 31, 2020, the Company’s Commercial Business segment contributed $39.4 million or
53% of the Company’s total revenue [$35.6 million or 51% during the year ended December 31, 2019] and $23.6 million
or 47% of the Company’s gross profit [$17.7 million or 41% during the year ended December 31, 2019]. COGS for the
year ended December 31, 2020 included $1.4 million of inventory step-up expense [$5.0 million for the year ended
December 31, 2019].
For the year ended December 31, 2020, the increase in the Commercial Business segment revenue was a result of
continued organic growth of its key promoted products - Blexten and Cambia. The possibility of future supply disruptions
resulted in forward buying linked to the COVID-19 pandemic, which increased revenue in the three months ended March
31, 2020, reduced revenue in the three months ended June 30, 2020 and stabilized in the second half of the year, as
the pandemic progressed and buying patterns returned to normal. It is anticipated that the COVID-19 pandemic may
continue to impact the timing of revenue in future quarters and the Company will monitor market dynamics accordingly.
Production and Service Business
Revenue
Cost of Sales
Gross profit
Gross profit %
Year ended
December 31, 2020
$
Year ended
December 31, 2019
$
12,807
7,455
5,352
42%
18,210
8,612
9,598
53%
Change
$
(5,403)
(1,157)
(4,246)
(11%)
During the year ended December 31, 2020, the Company’s Production and Service Business segment contributed $12.8
million or 17% of the Company’s total revenue [$18.2 million or 26% during the year ended December 31, 2019] and
$5.4 million or 11% of the Company’s gross profit [$9.6 million or 22% during the year ended December 31, 2019].
The decrease in the Production and Service Business segment revenue during the year ended December 31, 2020 was
the result of a decrease in the Company’s Pennsaid product sales, as well as a decrease of $1.9 million in contract
revenue. The comparable year included contract revenue for one-time transition services provided by Miravo Ireland to
two companies totalling $1.4 million.
During the year ended December 31, 2020, the Production and Service Business segment gross profit decreased by
$4.2 million over the comparative year. The decrease in gross profit for the current year was attributable to a decrease
in the Company’s Pennsaid 2% product sales, as well as a decrease in contract revenue for one-time transition services
provided to two companies in the comparative year.
Licensing and Royalty Business
Revenue
Cost of Sales
Gross profit
Gross profit %
Year ended
December 31, 2020
$
Year ended
December 31, 2019
$
21,519
-
21,519
100%
15,758
-
15,758
100%
Change
$
5,761
-
5,761
0.0%
During the year ended December 31, 2020, the Company’s Licensing and Royalty Business segment contributed $21.5
million or 29% of the Company’s total revenue [$15.8 million or 23% during the year ended December 31, 2019] and
$21.5 million or 43% of the Company’s gross profit [$15.8 million or 37% during the year ended December 31, 2019].
Revenue increased by $5.8 million for the year ended December 31, 2020 compared to the year ended December 31,
2019. The increase in the current year, included milestone revenue received due to regulatory approval in Japan related
to the Yosprala intellectual property totalling $5.6 million, for which there was no comparable milestone revenue in the
year ended December 31, 2019; and an increase of $0.6 million in royalty revenue related to U.S. net sales of Vimovo.
The increase was partially offset by a decrease of $0.4 million in royalty revenue related to rest of world sales of Vimovo.
For the six months ended June 30, 2019, the royalty revenue related to U.S. net sales of Vimovo of $2.8 million was
recorded as a reduction to the contract asset (See Adjusted EBITDA calculation above).
The Yosprala intellectual property milestone revenue was recorded as a contract asset based on the present value of
the milestone payments and will be reduced when the payments are received. In the three months ended March 31,
2020, the Company recognized additions to contract assets in the amount of $5.6 million (US$4.0 million) in milestone
payments. In the three months ended June 30, 2020, one milestone payment was triggered by regulatory approval in
Japan, which resulted in a reduction to the contract asset of $2.5 million. Miravo Ireland is entitled to retain 50% of all
royalty and milestone revenues generated from the Yosprala intellectual property on a global basis, with the remaining
50% to be paid to the estate of POZEN.
Financial Position
Financial Position
Working capital
Contract assets
Long-lived assets
Right-of-use assets
Long-term debt (including current portion)
Other obligations (including current portion)
Derivative liabilities
Total equity
As at
December 31, 2020
As at
December 31, 2019
$
10,654
2,845
104,409
1,027
103,697
4,719
13,665
20,362
$
14,423
402
115,026
573
123,377
3,408
2,229
24,130
Working Capital
The Company defines the working capital above as total current assets (excluding cash and contract assets), less
accounts payable and accrued liabilities and current income tax liabilities. The $3.8 million decrease in working capital
from December 31, 2019 to December 31, 2020 was primarily due to the following factors:
Inventory increased $1.6 million as a result of the timing of purchases and supply chain management.
• Accounts receivable decreased $6.9 million related to the timing of receipts of royalty payments.
•
• Other current assets increased $0.9 million, primarily due to the timing of purchases.
• Accounts payable and accrued liabilities decreased by $1.4 million, primarily attributable to the timing of
payments.
• Current income tax liabilities increased by $0.7 million, due to taxable income in Miravo Ireland.
Contract Assets
Contract assets represent the present value of current and future guaranteed minimum sales-based royalties, upfront
fees and milestone payments that are expected to be received over the life of the licensing agreements. The Company’s
contract assets are subject to estimation regarding the likelihood of the minimum guaranteed sales-based royalties.
Contract asset balances are reduced as the contractual minimums are realized throughout the life of the agreement. In
the year ended December 31, 2020, the Company recognized a contract asset of $5.0 million (US$3.6 million), recorded
net of withholding tax, representing the discounted present value, related to future milestone payments for the Yosprala
product. This addition included $2.5 million (US$1.8 million), net of withholding tax, triggered by regulatory approval in
Japan, which Miravo Ireland received in the three months ended June 30, 2020, which resulted in a reduction to the
contract asset of $2.5 million. Miravo Ireland is also contractually entitled to receive a second US$1.8 million, net of
withholding tax, milestone payment on May 31, 2022 provided the licensed intellectual property remains valid and
enforceable.
Long-lived Assets
Long-lived assets consist of property, plant and equipment (PP&E), intangible assets and goodwill. The $9.0 million
decrease for the year ended December 31, 2020 was primarily related to $9.1 million of intangible assets and PP&E
amortization and a reduction of $0.5 million due to foreign exchange translation, partially offset by an increase in the
balance due to additions of PP&E and software totalling $0.6 million.
Right-of-use Assets
Right-of-use assets consist of leased assets, which under IFRS 16 - Leases (IFRS 16), are accounted for as a right-of-
use asset with a corresponding lease liability. The Company adopted IFRS 16 on January 1, 2019.
On February 26, 2020, the Company renegotiated its premises leases, which resulted in the surrender of two of its leases
and the signing of a new lease. The renegotiation has been accounted for as a single lease modification, as it was
completed with the overall objective of consolidating the premises leased by the Company and all leases were entered
into with the same head lessor. As part of the renegotiation, the Company agreed to pay a termination fee of $0.2 million
in order to be released from the remaining future lease obligation for both base rent and operating cost recovery of $0.5
million. During the year ended December 31, 2020, the decrease in the area under lease due to the modification has
resulted in a decrease to the right-of-use asset of $0.1 million and the increase in the lease term and a corresponding
increase in lease payments resulted in an increase to the right-of-use asset of $0.7 million. Depreciation expense of
$0.2 million was recorded in the year ended December 31, 2020. Depreciation expense of $0.3 million was recorded in
the year ended December 31, 2019.
Long-term Debt
Long-term debt includes the long-term carrying values of the Company’s Bridge Loan, Amortization Loan and Convertible
Loan. No new loan facilities were entered into during the year ended December 31, 2020. As payments are made, and
interest is accreted, the net impact reduces the long-term debt balance over time. During the year ended December 31,
2020, the Company repaid the outstanding balance of the Bridge Loan.
The Company agreed to an amendment to the financing agreement dated June 25, 2019 to provide, among other things,
for a payment deferral mechanism in the event that Vimovo U.S. market exclusivity is lost. The amendment allows the
Company the option to defer a portion of the mandatory minimum quarterly repayments by the difference between one
quarter of the then existing US$7.5 million (US$1.9 million per quarter) minimum annual 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 had been expected (2022) prior to the Court of Appeals decision. A generic version of
Vimovo entered the U.S. market in the three months ended March 31, 2020. The amount of any principal repayment
deferred would, until repaid in accordance with the amendment, be subject to an interest rate of 12.5% per annum. The
carrying value of the debt includes assumptions regarding the deferral option when estimating the timing of payments.
During the year ended December 31, 2020, the Company made interest payments of $5.0 million and principal payments
of $22.4 million to Deerfield under the Deerfield Financing. The Company chose not to defer any amount of the minimum
payment due for the year ended December 31, 2020.
Other Obligations
The Company recognized $3.3 million in contingent and variable consideration as at December 31, 2020 [December 31,
2019 - $2.8 million], which represented the present value of the Company’s probability-weighted estimate of the cash
outflow related to the ex-U.S. Resultz acquisition and the profits earned from Yosprala. As at December 31, 2020, the
Company recognized $1.5 million [December 31, 2019 - $0.6 million] of lease obligations related to IFRS 16.
As at December 31, 2020, the contingent consideration liability related to the ex-U.S. Resultz acquisition and the Aralez
Transaction. The ex-U.S. Resultz acquisition included additional contingent consideration based on meeting certain
milestones in partnered markets, payable only if those targets are achieved, as well as variable consideration based on
annual royalties earned in non-partnered markets. The Aralez Transaction included contingent consideration in the form
of 50% of the lifetime net earnings from monetization of the Yosprala product. The fair value of contingent consideration
initially recognized represented the present value of the Company’s probability-weighted estimate of cash outflows
related to the monetization of the Yosprala product in the U.S. market. At December 31, 2019, the fair value of contingent
consideration for the Japanese market was $nil based on the present value of the Company’s probability-weighted
estimate of cash outflows related to the monetization of the Yosprala product. Contingent consideration related to profits
earned from Yosprala for the Japanese market increased to $2.6 million (US$1.8 million) in the three months ended
March 31, 2020, as the Japanese licensee of Yosprala obtained regulatory approval which triggered two milestone
payments due to Miravo Ireland of US$2.0 million each, less related costs. This resulted in the recognition of $5.5 million
(US$3.9 million) in license revenue for the three months ended March 31, 2020. Miravo Ireland received the first $2.5
million (US$1.8 million) milestone payment, net of withholding tax in the three months ended June 30, 2020, and the
second milestone payment is to be received no later than May 31, 2022, provided the licensed intellectual property
remains valid and enforceable. The receipt of the milestone payments and quarterly royalties related to the Yosprala
intellectual property triggered payments of $1.2 million to the estate of POZEN in the year ended December 31, 2020.
Derivative liabilities
The Company’s derivative liabilities include the conversion feature embedded in the Convertible Loan and the
Warrants. No conversions or Warrant exercises occurred during the year ended December 31, 2020. These derivative
liabilities are measured at fair value at each reporting period, which increase as the Company’s share price increases
and interest rates decrease. As a result of the increase in the share price in the year ended December 31, 2020,
combined with an increase in the volatility and partially offset by a decrease in the risk-adjusted discount rate, the value
of the Company’s derivative liabilities increased by $11.7 million, excluding the impact of foreign exchange. For the year
ended December 31, 2019, the value of the Company’s derivative liabilities decreased by $30.9 million, excluding the
impact of foreign exchange, due to a decrease in the share price in the year, combined with a reduction in the risk-
adjusted discount rate.
Fluctuations in Operating Results
The Company anticipates that its quarterly and annual results of operations will be impacted for the foreseeable future
by several factors, including the level and timing of product sales to the Company’s customers, licensees and distributors,
the timing and amount of royalties, milestones and other payments made or received pursuant to current and future
licensing arrangements, interest costs associated with servicing the Deerfield Financing, revaluation of derivative
liabilities and fluctuations in foreign exchange rates.
Liquidity and Capital Resources
Net income (loss)
Items not involving current cash flows
Cash provided by operations
Net change in non-cash working capital
Payment of contingent consideration
Cash provided by operating activities
Cash used in investing activities
Cash used in financing activities
Effect of exchange rates on cash
Net change in cash during the year
Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of the year
Year ended
December 31, 2020
$
Year ended
December 31, 2019
$
(4,129)
24,819
20,690
4,810
(1,168)
24,332
(748)
(22,689)
(107)
788
23,019
23,807
3,399
13,033
16,432
(14,069)
-
2,363
(2,630)
(3,743)
(1,045)
(5,055)
28,074
23,019
Cash and Cash Equivalents
Cash and cash equivalents were $23.8 million as at December 31, 2020 compared to $23.0 million as at December 31,
2019.
Cash Provided by Operations
Cash provided by operations was $20.7 million for the year ended December 31, 2020 compared to cash provided by
operations of $16.4 million for the year ended December 31, 2019.
Cash Provided by Operating Activities
Overall cash provided by operating activities was $24.3 million for the year ended December 31, 2020 compared to cash
provided by operating activities of $2.4 million for the year ended December 31, 2019.
In the current year, the $4.8 million provided by non-cash working capital was primarily attributable to a decrease of $7.6
million of accounts receivable as a result of timing of receivables, a decrease of $2.4 million of contract assets due to
transfers to accounts receivable and an increase of $0.7 million due to income tax payable; offset by an increase of $3.5
million of inventories as a result of the timing of purchases and a decrease of $1.4 million of accounts payable and
accrued liabilities, primarily due to the timing of payments.
Cash Used in Investing Activities
Net cash used in investing activities was $0.7 for the year ended December 31, 2020 compared to net cash used in
investing activities of $2.6 million for the year ended December 31, 2019. In the current year, the Company’s net cash
used in investing activities included the acquisition of PP&E of $0.6 million and software of $0.2 million.
Cash Used in Financing Activities
Net cash used in financing activities was $22.7 million for the year ended December 31, 2020 compared to net cash
used in financing activities of $3.7 million for the year ended December 31, 2019. During the year ended December 31,
2020, the Company repaid $22.4 million of debt to Deerfield and paid $0.3 million as cash payments for lease liabilities.
Capital Structure
The Company’s stated strategy is to expand its Canadian and international business through targeted in-licensing and
acquisition opportunities. To execute this strategy, the Company may need to access the additional capacity under its
senior secured term loan facility or seek alternate sources of financing.
The Company expects to continue to be able to meet all obligations as they become due using some or all of the following
sources of liquidity: cash flow generated from operations, existing cash and cash equivalents on hand, and additional
borrowing capacity under its senior secured term loan facility. In addition, subject to market conditions, the Company
may raise funding through equity financing. The Company believes that its capital structure will provide it with financial
flexibility to pursue future growth strategies. However, the Company’s ability to fund operating expenses and debt service
requirements will depend on, among other things, future operating performance, which will be affected by general
economic, industry, financial and other factors, including the impact of COVID-19 and other factors beyond the
Company’s control. See “Risk Factors”.
Selected Quarterly Information
The following is selected quarterly financial information for the Company over the last eight quarterly reporting periods.
Product sales
License revenue
Contract revenue
Sales and marketing expenses
General and administrative
expenses
Net income (loss)
Net income (loss) per common
share
- basic
- diluted
Non-IFRS Measures
Adjusted total revenue
Adjusted EBITDA
Adjusted EBITDA per common
share
- basic
Q4
2020
$
12,876
4,373
34
2,352
Q3
2020
$
13,597
2,997
7
1,643
Q2
2020
$
12,253
3,277
-
2,703
Q1
2020(1)
$
13,474
10,872
15
2,230
3,461
2,399
2,684
(2,832)
2,808
(1,967)
3,940
(1,729)
Q4
2019
$
13,317
6,043
233
1,968
3,941
(418)
Q3
2019
$
14,102
4,646
75
1,955
3,584
4,425
Q2
2019
$
13,235
2,655
690
3,043
Q1
2019
$
11,230
2,414
906
2,830
5,125
6,796
5,190
(7,404)
0.21
0.05
(0.25)
(0.25)
(0.17)
(0.17)
(0.15)
(0.15)
(0.04)
(0.04)
0.39
0.10
0.60
(0.52)
(0.65)
(5.50)
17,331
6,242
16,669
6,565
18,046
7,646
18,913
7,990
19,644
8,570
18,889
7,784
19,078
5,663
17,112
5,225
0.55
0.58
0.67
0.70
0.75
0.68
0.50
0.46
(i)
Includes restated figures for the three months ended March 31, 2020.
Fourth Quarter Results
Three months ended
December 31, 2020
Three months ended
December 31, 2019
Product sales
License revenue
Contract revenue
Total revenue
Cost of goods sold
Gross profit
Sales and marketing
General and administrative expenses
Amortization of intangibles
Net interest expense
Total operating expenses
Other expense (income)
Income tax expense (recovery)
Net income (loss)
Other comprehensive income (loss)
Total comprehensive income (loss)
$
12,876
4,373
34
17,283
5,877
11,406
2,352
3,461
2,095
2,422
10,330
(888)
(435)
2,399
(631)
1,768
$
13,317
6,043
233
19,593
6,499
13,094
1,968
3,941
1,967
3,142
11,018
2,465
29
(418)
414
(4)
Operating Results
Total revenue for the three months ended December 31, 2020 was $17.3 million compared to $19.6 million for the three
months ended December 31, 2019. The decrease in revenue for the current quarter was primarily attributable to a $1.7
million decrease related to a reduction in the U.S. Vimovo royalties, primarily as a result of the generic entry of Vimovo
in March 2020 and a $1.0 million reduction in the Company’s Pennsaid product sales, partially offset by a $0.6 million
increase in the Company’s Commercial Business product sales.
COGS for the three months ended December 31, 2020 was $5.9 million compared to $6.5 million for the three months
ended December 31, 2019. The decrease in COGS in the current quarter was primarily attributable to the reduction of
the inventory step-up expense for the sale of inventory that was acquired by the Company as part of the Aralez
Transaction. COGS for the three months ended December 31, 2020 included $0.4 million of inventory step-up expense
for the sale of inventory that was acquired by the Company as part of the Aralez Transaction compared to $0.9 million
for the three months ended December 31, 2019.
The Company incurred $2.4 million in expenses for sales and marketing activities during the three months ended
December 31, 2020 compared to $2.0 million for the comparative three-month period. The increase in sales and
marketing expenses for the current quarter was related to the variations in the timing of expenses. Sales and marketing
expenses related to the Company’s dedicated commercial efforts to promote Blexten, Cambia, Suvexx, NeoVisc and the
Canadian business for Resultz. (See Operating Segments above).
G&A expenses decreased to $3.5 million for the three months ended December 31, 2020 compared to $3.9 million for
the three months ended December 31, 2019. The decrease in G&A expenses for the current quarter was related to the
variations in the timing of expenses.
Net interest expense was $2.4 million for the three months ended December 31, 2020 compared to net interest expense
of $3.1 million for the three months ended December 31, 2019. The Company’s Amortization Loan and Convertible
Loan, all components of the Deerfield Financing, are carried at amortized cost with effective interest rates of 10.20% and
10.13%, respectively. The Company’s Bridge Loan had an effective interest rate of 9.7% and was repaid in the year
ended December 31, 2020. For the three months ended December 31, 2020, the Company recognized $2.8 million of
interest expense on financial instruments measured at amortized cost, which was partially offset by $0.4 million of interest
income related to contract asset interest accretion.
Total operating expenses for the three months ended December 31, 2020 decreased to $10.3 million compared to $11.0
million for the three months ended December 31, 2019. The decrease in operating expenses for the current quarter was
related to the variations in the timing of expenses, as well as the Canada Emergency Wage Subsidy, which reduced
operating expenses by $0.1 million for the three months ended December 31, 2020.
Other expenses (income) primarily consists of the change in fair value of derivative liabilities due to the increase in the
share price in the current quarter, change in fair value of contingent and variable consideration and net foreign currency
gains or losses in both the current and comparative quarters, which will vary based on fluctuations in foreign currency
rates.
Net income was $2.4 million for the three months ended December 31, 2020 compared to a net loss of $0.4 million for
the three months ended December 31, 2019. The decrease in net loss was primarily related to an increase in Other
expenses (income).
Liquidity
Net income (loss)
Items not involving current cash flows
Cash provided by operations
Net change in non-cash working capital
Payment of contingent consideration
Cash provided by operating activities
Cash used in investing activities
Cash used in financing activities
Effect of exchange rates on cash
Net change in cash
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Three months ended
December 31, 2020
Three months ended
December 31, 2019
$
2,399
3,587
5,986
1,507
(33)
7,460
(637)
(3,680)
3,143
(444)
2,699
21,108
23,807
$
(418)
7,432
7,014
1,275
8,289
(7)
(3,356)
4,926
(378)
4,548
18,471
23,019
Cash was $23.8 million as at December 31, 2020, an increase of $0.8 million compared to $23.0 million as at December
31, 2019. In the current quarter, cash increased due to cash provided by operating activities, partially offset by cash
used in investing activities and cash used in financing activities.
Cash provided by operating activities was $7.5 million for the three months ended December 31, 2020 compared to $8.3
million for the three months ended December 31, 2019. In the current quarter, $7.5 million of cash was provided by
operating activities, including a $1.5 million recovery in non-cash working capital.
Net cash used in investing activities was $0.6 for the three months ended December 31, 2020 compared to net cash
used in investing activities of $7 for the three months ended December 31, 2019. In the current three-month period, the
Company’s net cash used in investing activities included investments in leasehold improvements and software.
Net cash used in financing activities was $3.7 million for the three months ended December 31, 2020 compared to $3.4
million for the three months ended December 31, 2019. In the current quarter, the Company made a $3.7 million principal
repayment towards its Amortization Loan.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Financial Instruments at Amortized Cost
For year ended December 31, 2020, the Company recognized $78 in interest income from financial assets held at
amortized cost [December 31, 2019 - $0.2 million].
For year ended December 31, 2020, the Company recognized $11.9 million in interest expense from financial liabilities
held at amortized cost [December 31, 2019 - $12.8 million].
Credit Risk
The Company, in the normal course of business, is exposed to credit risk from its global customers, most of whom are
in the pharmaceutical industry. The accounts receivable and contract assets are subject to normal industry risks in each
geographic region in which the Company operates. The Company attempts to manage these risks prior to the signing
of distribution or licensing agreements by dealing with creditworthy customers; however, due to the limited number of
potential customers in each market, this is not always possible. In addition, a customer’s creditworthiness may change
subsequent to becoming a licensee or distributor and the terms and conditions in the agreement may prevent the
Company from seeking new licensees or distributors in these territories during the term of the agreement.
As at December 31, 2020, the Company’s largest customer represented 30% [December 31, 2019 - 49%] of accounts
receivable. Pursuant to their collective terms, accounts receivable, net of allowance, were aged as follows:
Current
0 - 30 days past due
31 - 60 days past due
Over 60 days past due(i)
(i)
See “loss allowance provision” below.
December 31, 2020
$
7,018
463
2
5
December 31, 2019
$
9,064
777
60
4,486
7,488
14,387
The loss allowance provision for the Production and Service Business segment as at December 31, 2020 was determined
using reference to expected loss rates and management judgment as follows:
Expected loss rate
Gross carrying amount
%
$
Current
0%
33
Less than 181
days past due
0%
268
181 to 270
days past due
25%
-
271 to 365
days past due
50%
-
More than 365
days past due Total
100%
-
301
The loss allowance provision for the Commercial Business and Licensing and Royalty Business segments as at
December 31, 2020 was determined using reference to expected loss rates and management judgment as follows:
Expected loss rate
Gross carrying amount
Loss allowance provision
%
$
$
Current
0%(i)
7,063
(76)
Less than 61
days past due
0%(i)
215
-
61 to 120
days past due
25%
-
(15)
121 to 180
days past due
50%
-
-
More than 181
days past due
100%
-
-
Total
7,278
(91)
(i)
Loss allowance provision balance consists of credit memos and purchase deductions on invoices that take time to be processed. As a result,
loss provision is 0%.
During the year ended December 31, 2020, the Company recorded $nil bad debt reversal in total comprehensive income
(loss) [December 31, 2019 - $0.1 million]. For the year ended December 31, 2020, the impairment of accounts receivable
was assessed based on the expected credit losses model in compliance with IFRS 9. Individual receivables that were
known to be uncollectible were written off by reducing the carrying amount directly.
For contract assets within the scope of IFRS 15, the Company recognizes an asset to the extent contractual minimums
established in certain customer licensing agreements are deemed fixed consideration. After analysis of historical default
rates and forward-looking estimates, the Company’s contract assets were considered to have low credit risk, and as a
result, the Company has not recognized a loss allowance as at December 31, 2020 [December 31, 2019 - $nil].
The Company’s cash and cash equivalents subject the Company to a concentration of credit risk. As at December 31,
2020, the Company had $23.8 million deposited with three financial institutions in various bank accounts. These financial
institutions are major banks located in Canada, the U.S. and Ireland, which the Company believes lessens the degree
of credit risk. All of these financial institutions are considered to have low credit risk and, therefore, the provision
recognized during the current year was limited to 12 months of expected losses. The Company has not recognized a
loss allowance as at December 31, 2020 [December 31, 2019 - $nil].
The Company has not noted a significant change in the credit risk of the financial instruments related to the recent novel
coronavirus (COVID-19) pandemic,
Financial Instruments
IFRS 7 requires disclosure of a three-level hierarchy that reflects the significance of the inputs used in making fair value
measurements. All assets and liabilities for which fair value is measured or disclosed in these Consolidated Financial
Statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is
significant to the fair value measurement as a whole:
• Level 1 - Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets
• Level 2 - Observable inputs other than quoted prices in Level 1, such as quoted prices for similar assets and
liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not
active or other inputs that are observable or can be corroborated by observable market data
• Level 3 - Significant unobservable inputs that are supported by little or no market activity
The Company reviews the fair value hierarchy classification on a quarterly basis. Changes to the ability to observe
valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The
Company did not have any transfer of assets and liabilities between Level 1, Level 2 and Level 3 of the fair value hierarchy
during the year ended December 31, 2020.
As at December 31, 2020, the Company’s financial assets and liabilities consisted of cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities, contingent and variable consideration, long-term debt and
derivative liabilities. The Company has determined the estimated fair values of its financial instruments based on
appropriate valuation methodologies. However, considerable judgment is required to develop these estimates.
Accordingly, these estimated values are not necessarily indicative of the amounts the Company could realize in a current
market exchange. The estimated fair value amounts can be materially affected by the use of different assumptions or
methodologies.
The Company’s cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are measured
at amortized cost and their fair values approximate carrying values. Cash and cash equivalents are Level 1, while the
other short-term financial instruments are Level 3.
The fair values of the Loans are Level 3 measurements determined using a discounted cash flow model that considers
the present value of the contractual cash flows using a risk-adjusted discount rate. The Company recognized $103.7
million for the Amortization Loan and host liability of the Convertible Loan as at December 31, 2020 [December 31, 2019
- $123.4 million]. During year ended December 31, 2020, the Company repaid the $4.5 million (US$3.5 million)
outstanding balance of the US$6.0 million Bridge Loan.
The conversion feature that accompanies the Company’s Convertible Loan is considered a Level 3 liability. The value
is determined as the difference between the fair value of the hybrid Convertible Loan contract, determined using an
income approach with a binomial-lattice model and the fair value of the host liability contract, determined using a
discounted cash flow model. The Company recognized $5.7 million for the conversion feature as at December 31, 2020
[December 31, 2019 - $0.8 million].
The fair values of the prepayment option that allows the Company to make prepayments against the Bridge Loan or
Amortization Loan at any time is considered a Level 3 financial instrument. The fair value of the prepayment option
bifurcated from the Amortization Loan was a derivative asset with a nominal value as at December 31, 2020 and is
presented net of the non-current portion of the long-term debt. The fair value of this option was determined using a
binomial-lattice model.
The fair value of the Company’s Warrants is revalued at each reporting period using the Black-Scholes option pricing
model. As at December 31, 2020, the Company recognized a $8.0 million derivative liability related to outstanding
Warrants [December 31, 2019 - $1.4 million]. These Warrants are Level 3.
Level 3 liabilities include the fair value of contingent and variable consideration related to the acquisition of the ex-U.S.
rights to Resultz and the Aralez Transaction.
Risk Factors
The following is a discussion of liquidity risk and market risk and related mitigation strategies that have been identified.
Credit risk has been discussed in the Company’s assessment of impairment under IFRS 9. This is not an exhaustive list
of all risks nor will the mitigation strategies eliminate all risks listed.
Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulties in meeting its financial obligations as they become
due.
As at December 31, 2020, the Company’s financial liabilities had undiscounted contractual maturities (including interest
payments where applicable) as summarized below:
Accounts payable and accrued liabilities
Other obligations
Senior secured Amortization Loan
Senior secured Convertible Loan
Total
$
8,314
5,022
64,293
76,337
153,966
Current
Within 12
Months
$
8,314
334
14,919
2,372
25,939
Non-current
1 to 2
Years
$
-
2,610
27,891
4,744
35,245
2 to 5
Years
$
-
801
21,484
69,221
91,506
> 5
Years
$
-
1,277
-
-
1,277
The Company’s ability to satisfy its debt obligations will depend principally upon its future operating performance. The
Company’s inability to generate sufficient cash flows to satisfy its debt service obligations or to refinance its obligations
on commercially reasonable terms could have a materially adverse impact on the Company’s business, financial
condition or operating results.
The Deerfield Facility Agreement contains customary representations and warranties and affirmative and negative
covenants, including, among other things, an annual financial covenant based on minimum levels of net sales per fiscal
year and a mandatory quarterly repayment requirement under the Amortization Loan and the Bridge Loan equal to the
greater of (i) 50% of excess cash flows (as defined in the Deerfield Facility Agreement) for such quarter, or (ii) US$2.5
million, commenced with the quarter ended March 31, 2019, provided that, solely with respect to the first four fiscal
quarters after the closing date, the US$2.5 million quarterly minimum is not applicable as long as US$10.0 million in
principal repayments have been made over such four fiscal quarters. The Company agreed to an amendment to the
financing agreement dated June 25, 2019, to provide, among other things, for a payment deferral mechanism in the
event that Vimovo U.S. market exclusivity is lost. The amendment allows the Company to defer a portion of the
mandatory minimum quarterly principal repayments by the difference between one quarter of the US$7.5 million (US$1.9
million per quarter) minimum annual 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 had been expected (2022) prior
to the Court of Appeals decision. A generic version of Vimovo entered the U.S. market in the year ended December 31,
2020. The amount of any deferred principal repayment would, until repaid in accordance with the amendment, be subject
to an interest rate of 12.5% per annum. To-date, the Company has not availed itself of the deferral mechanism.
As a result of changes in the assumptions regarding the timing of loan payments, the Amortization Loan was revalued
and gains of $2.4 million were recorded for the year ended December 31, 2020. As a result of the amendment to the
agreement dated June 25, 2019, as well as changes in the assumptions regarding the timing of payments, the
Amortization Loan and Bridge Loan were revalued resulting in a loss on modification for the year ended December 31,
2019 of $2.2 million.
Due to the impact of the COVID-19 pandemic on the economic environment, the Company has reviewed the working
capital requirements needed as a result of managing the supply chain and changes in demand. The Company
anticipates that its current cash of $23.8 million as at December 31, 2020, together with the cash flows generated from
operations, will be sufficient to execute its current business plan for the next 12 months and to meet its current debt
obligations.
Interest Rate Risk
The Company’s policy is to minimize interest rate cash flow risk exposures on its long-term financing. The Company’s
loans and borrowings and lease obligations are at fixed interest rates.
The fair value of the Company’s prepayment option on the Amortization Loan and Bridge Loan and the Company’s
derivative liabilities are impacted by market rate changes.
Currency Risk
The Company operates globally, which gives rise to a risk that income and cash flows may be adversely affected by
fluctuations in foreign currency exchange rates. The Company is primarily exposed to the U.S. dollar, euro and British
Pound (GBP), but also transacts in other foreign currencies. The Company currently does not use financial instruments
to hedge these risks. The significant balances in foreign currencies were as follows:
Cash
Accounts receivable
Contract assets
Loans and borrowings
Derivative liabilities
Accounts payable and
accrued liabilities
Other obligations
U.S. Dollar
Euro
British Pound
Dec. 31,
2020
$
7,214
3,145
1,964
(81,468)
(4,452)
(803)
(1,882)
Dec. 31,
2019
$
7,565
8,960
-
(9
4,976)
(644)
(405)
(1,456)
(76,282)
(80,956)
Dec. 31,
2020
€
1,444
133
Dec. 31,
2019
€
630
319
-
-
-
-
-
-
(281)
(552)
744
(785)
(1,010)
(846)
Dec. 31,
2020
£
1,147
48
183
-
-
-
-
1,378
Dec. 31,
2019
£
619
37
234
-
-
(22)
-
868
Based on the aforementioned net exposure as at December 31, 2020, and assuming that all other variables remain
constant, a 10% appreciation or depreciation of the Canadian dollar against the U.S. dollar would have an effect of $9.7
million on total comprehensive income (loss), a 10% appreciation or depreciation of the Canadian dollar against the euro
would have an effect of $0.1 million on total comprehensive income (loss) and a 10% appreciation or depreciation of the
Canadian dollar against the GBP would have an effect of $0.2 million on total comprehensive income (loss).
In terms of the U.S. dollar, the Company has five significant exposures: its U.S. dollar-denominated cash held in its
Canadian operations, its U.S. dollar-denominated loans and borrowings and derivative liabilities held in its Canadian and
European operations, its net investment and net cash flows in its European operations, the cost of purchasing raw
materials either priced in U.S. dollars or sourced from U.S. suppliers and payments made to the Company under its U.S.
dollar-denominated licensing arrangements.
The Company does not currently hedge its U.S. dollar cash flows. The Company funds its U.S. dollar-denominated
interest expense and loan obligations using the Company’s U.S. dollar-denominated cash and cash equivalents and
payments received under the terms of the licensing and supply agreements. Periodically, the Company reviews its
projected future U.S. dollar cash flows and if the U.S. dollars held are insufficient, the Company may convert a portion
of its other currencies into U.S. dollars. If the amount of U.S. dollars held is excessive, they may be converted into
Canadian dollars or other currencies, as needed for the Company’s other operations.
In terms of the euro, the Company has three significant exposures: its euro-denominated cash held in its Canadian
operations, sales of Pennsaid by the Canadian operations to European distributors and the cost of purchasing raw
materials priced in euros.
The Company does not currently hedge its euro cash flows. Sales to European distributors for Pennsaid are primarily
contracted in euros. The Company receives payments from the distributors in its euro bank accounts and uses these
funds to pay euro-denominated expenditures and to fund the day-to-day expenses of the Miravo Ireland operations as
required. Periodically, the Company reviews the amount of euros held, and if they are excessive compared to the
Company’s projected future euro cash flows, they may be converted into U.S. or Canadian dollars. If the amount of
euros held is insufficient, the Company may convert a portion of other currencies into euros.
In terms of the GBP, the Company has three significant exposures: its euro-denominated cash held in its Canadian
operations and euro operations, the cost of purchasing raw materials or services priced in GBP and payments made to
the Company under its GBP-denominated licensing arrangements and minimum royalties received and accounted for
as a contract asset in GBP.
The Company does not currently hedge its GBP cash flows. The Company receives payments from the distributors in
its GBP bank accounts and uses these funds to pay GBP-denominated expenditures and to fund the day-to-day
expenses of the Miravo Ireland operations as required. Periodically, the Company reviews the amount of GBP held, and
if they are excessive compared to the Company’s projected future GBP cash flows, they may be converted into U.S. or
Canadian dollars. If the amount of GBP held is insufficient, the Company may convert a portion of other currencies into
GBP.
Market Risk
The Company’s derivative liabilities, the Warrants and the conversion feature that accompanies the Company’s
Convertible Loan, are impacted by a variety of valuation inputs, including changes in the Company’s share price. As at
December 31, 2020, a $1.00 increase in the Company’s share price would increase the value of the Warrants by $15.1
million and an increase to the conversion feature of $10.7 million, with a corresponding loss of $25.8 million recognized
in income for the change in fair value of derivative liabilities. As at December 31, 2020, a further $1.00 increase in the
Company’s share price for a total adjustment of $2.00 would further increase the value of the Warrants by $17.5 million
and increase the value of the conversion feature by $12.7 million, with a corresponding additional loss of $30.2 million
recognized in income for change in fair value of derivative liabilities.
The Company has not noted a significant change in the market risk due to changes to the Company’s share price as a
result of the impact of the COVID-19 pandemic on the economic environment.
Contractual Obligations
The following table lists the Company’s contractual obligations for the twelve months ending December 31 as follows:
Variable lease payments
Lease liability (principal and interest)
Deerfield Financing(1)
Purchase commitments
Other obligations(2)
2021
$
241
225
17,291
2,922
10,196
30,875
2022
$
223
226
16,544
4,380
2,287
23,660
2023
$
223
238
16,092
3,578
1,430
21,561
2024
$
223
238
90,704
4,318
1,812
97,295
2026 and
thereafter
$
2025
$
223
239
-
-
248
710
1,097
1,277
-
-
223
2,597
Total
$
2,230
2,443
140,631
15,198
16,196
176,698
(1)
Included in the Deerfield Financing is the Convertible Loan in the principal amount of US$52.5 million, convertible into 19,444,444 common shares
of the Company at a conversion price of US$2.70.
(2) Other obligations include accounts payable and accrued liabilities and contingent and variable consideration.
The Deerfield Financing
On December 31, 2018, the Company and Miravo Ireland, as borrowers, and Aralez Canada, as guarantor, entered into
the Deerfield Facility Agreement with Deerfield, as agent and certain funds managed by Deerfield, as lenders, to fund
the purchase price of the Aralez Transaction (the Deerfield Financing).
The Deerfield Financing consisted of (i) a 6-year, amortizing loan made available to Miravo Ireland in the principal amount
of US$60 million with an interest rate of 3.5% per annum (the Amortization Loan), (ii) an 18-month Bridge Loan made
available to the Company in the principal amount of US$6.0 million with an interest rate of 12.5% per annum (the Bridge
Loan), (iii) a 6-year, Convertible Loan made available to the Company in the principal amount of US$52.5 million with an
interest rate of 3.5% per annum, initially convertible into 19,444,444 common shares of the Company at a conversion
price of US$2.70 (the Convertible Notes), and (iv) 25,555,556 million common share purchase Warrants, each such
Warrant initially exercisable for one common share of the Company for a period of six years from the date of issuance
at an exercise price of $3.53 per share.
Each quarter, the Company shall pay to the lenders the greater of US$2.5 million or 50% of the Company’s excess cash
flows (a defined term in the Deerfield Facility Agreement), which is applied in the following order: (a) any unpaid fees
and transaction costs; (b) proportionately to any accrued and unpaid interest related to these Loans; (c) any unpaid
principal of the Bridge Loan, including the applicable prepayment fee; (d) any unpaid principal of the Amortization Loan,
including the applicable prepayment fee; and (e) any other obligations owing to the lenders, administrative agent or other
secured parties (the Waterfall Provisions).
In 2019, the Company was permitted to delay the minimum principal payments if a minimum of US$10 million in
aggregate was paid by the payment date of December 31, 2019. During the three months ended March 31, 2020, the
Company made principal loan repayments of $4.5 million (US$3.5 million) applied to the Bridge Loan and $7.0 million
(US$5.2 million) applied to the Amortization Loan. As a result of the Waterfall Provisions, the first US$6.0 million,
including those payments made in 2019, were applied to the Bridge Loan. During the three months ended March 31,
2020, the Company repaid the $4.5 million (US$3.5 million) outstanding balance of the US$6.0 million Bridge Loan. The
remaining US$4.0 million in respect of the 2019 minimum principal payment was paid in the three months ended March
31, 2020, which was applied to the Amortization Loan, and included in the total $7.0 million (US$5.2 million) Amortization
Loan payment. Quarterly principal payments are to be made on the Amortization Loan until December 31, 2024.
The Company agreed to an amendment to the financing agreement dated June 25, 2019 to provide, among other things,
for a payment deferral mechanism in the event that Vimovo U.S. market exclusivity is lost. The amendment allows the
Company to defer a portion of the mandatory minimum quarterly repayments by the difference between one quarter of
the then existing US$7.5 million (US$1.9 million per quarter) minimum annual 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 had been expected (2022) prior to the Court of Appeals decision. A generic version of Vimovo entered the
U.S. market in the three months ended March 31, 2020 resulting in such loss of exclusivity. The amount of any principal
repayment deferred would, until repaid in accordance with the amendment, be subject to an interest rate of 12.5% per
annum. To-date, the Company has not availed itself of the deferral mechanism. The carrying value of the debt includes
assumptions regarding the deferral option when estimating the timing of payments. As a result of changes in the
assumptions regarding the timing of the payments, gains of $2.4 million were recorded in the year ended December 31,
2020. As a result of both the modification of debt due to the amendment and changes in the assumptions regarding the
timing of the payments, losses of $2.2 million were recorded for the year ended December 31, 2019.
Litigation
From time-to-time, during the ordinary course of business, the Company may be threatened with, or may be named as,
a defendant in various legal proceedings, including lawsuits based upon product liability, personal injury, breach of
contract and lost profits or other consequential damage claims.
On October 30, 2019, the Company received an application for an industry-wide class action in the Superior Court of
Québec. In the application, the Company was named as a defendant, along with 33 other defendants which includes a
group of companies that manufacture, market, and/or distribute opioids in Québec. The claim is for $30, plus interest for
compensatory damages for each class member, $25.0 million from each defendant for punitive damages and pecuniary
damages for each class member. The Company believes that the claim is without merit and intends to vigorously defend
the matter.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
Related Party Transactions
For the year ended December 31, 2020, there were no related party transactions.
Outstanding Share Data
The number of common shares outstanding as at December 31, 2020 was 11.4 million. The Company had no preferred
shares issued and outstanding as at December 31, 2020.
As at December 31, 2020, there were 1.6 million options outstanding of which 1.1 million have vested. The Company
also has 25.6 common share purchase Warrants outstanding, each exercisable for one common share of the Company
at an exercise price of $3.53 per share. The Convertible Loan is convertible into 19.4 million common shares of the
Company at a conversion price of US$2.70 per share.
Critical Accounting Policies and Estimates
The preparation of the Consolidated Financial Statements in conformity with IFRS requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenue and expenses
during the reporting periods. Management has identified accounting estimates that it believes are most critical to
understanding the Consolidated Financial Statements and those that require the application of management’s most
subjective judgments, often requiring the need to make estimates about the effect of matters that are inherently uncertain
and may change in subsequent periods. The Company’s actual results could differ from these estimates and such
differences could be material. All significant accounting policies are disclosed in Note 2, Basis of Preparation and Note
3, Summary of Significant Accounting Policies of the Company’s Consolidated Financial Statements for the year ended
December 31, 2020 found on SEDAR at www.sedar.com (under Nuvo Pharmaceuticals Inc.).
Recent Accounting Pronouncements
Accounting Standards Issued But Not Yet Applied
Certain new standards, interpretations, amendments, and improvements to existing standards were issued by the IASB
or IFRS Interpretations Committee that are mandatory for fiscal periods beginning on or after January 1, 2021.
(a) Amendments to IAS 1, Classification of Liabilities as Current or Non-current (IAS 1)
In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the requirements for
classifying liabilities as current or non-current. The amendments clarify:
• What is meant by a right to defer settlement
• That a right to defer must exist at the end of the reporting period
• That classification is unaffected by the likelihood that an entity will exercise its deferral right
• That only if an embedded derivative in a convertible liability is itself an equity instrument would the terms of
a liability not impact its classification
The amendments are effective for annual reporting periods beginning on or after January 1, 2023 and must be
applied retrospectively. The amendments to IAS 1 are not expected to have a significant impact on the
Company’s Consolidated Financial Statements.
(b) Amendments to IFRS 7 - Financial Instruments: Disclosure (IFRS 7); IFRS 9; IAS 39, Financial Instruments:
Recognition and Measurement; IFRS 4 - Insurance Contracts; and IFRS 16
In August 2020, the IASB published IBOR Reform Phase 2 which address issues that might affect financial
reporting after the reform of an interest rate benchmark, including its replacement with alternative benchmark
rates. For financial instruments at amortized cost, the amendments introduce a practical expedient such that if
a change in the contractual cash flows is as a result of IBOR reform and occurs on an economically equivalent
basis, the change will be accounted for by updating the effective interest rate with no immediate gain or loss
recognized. The amendments also provide temporary relief that allow the Company's hedging relationships to
continue upon replacement of the existing interest rate benchmark with the alternative risk-free rate resulting
from IBOR reform. The relief requires the Company to amend hedge designations and hedge documentation.
Updates to hedging documentation must be made by the end of the reporting period in which a replacement
takes place. The amendments are effective for annual periods beginning on or after January 1, 2021, with earlier
application permitted. Management is in the process of assessing the impact of these amendments on contracts
in scope, including our IBOR-based financial instruments and hedge relationships, if any.
(c) Reference to the Conceptual Framework – Amendments to IFRS 3
In May 2020, the IASB issued Amendments to IFRS 3 Business Combinations. The amendments are intended
to replace a reference to the Framework for the Preparation and Presentation of Financial Statements, issued in
1989, with a reference to the Conceptual Framework for Financial Reporting issued in March 2018 without
significantly changing its requirements. The Board also added an exception to the recognition principle of IFRS
3 to avoid the issue of potential ‘day 2’ gains or losses arising for liabilities and contingent liabilities that would
be within the scope of IAS 37 or IFRIC 21 Levies, if incurred separately. At the same time, the Board decided
to clarify existing guidance in IFRS 3 for contingent assets that would not be affected by replacing the reference
to the Framework for the Preparation and Presentation of Financial Statements. The amendments are effective
for annual reporting periods beginning on or after 1 January 2022 and apply prospectively.
(d) Property, Plant and Equipment: Proceeds before Intended Use - Amendments to IAS 16
In May 2020, the IASB issued Property, Plant and Equipment - Proceeds before Intended Use, which prohibits
entities deducting from the cost of an item of property, plant and equipment, any proceeds from selling items
produced while bringing that asset to the location and condition necessary for it to be capable of operating in the
manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the
costs of producing those items, in profit or loss. The amendment is effective for annual reporting periods
beginning on or after January 1, 2022 and must be applied retrospectively to items of property, plant and
equipment made available for use on or after the beginning of the earliest period presented when the entity first
applies the amendment. The amendments are not expected to have a material impact on the Company.
(e) Onerous Contracts – Costs of Fulfilling a Contract - Amendments to IAS 37
In May 2020, the IASB issued amendments to IAS 37 to specify which costs an entity needs to include when
assessing whether a contract is onerous or loss-making. The amendments apply a “directly related cost
approach”. The costs that relate directly to a contract to provide goods or services include both incremental
costs and an allocation of costs directly related to contract activities. G&A costs do not relate directly to a contract
and are excluded unless they are explicitly chargeable to the counterparty under the contract. The amendments
are effective for annual reporting periods beginning on or after January 1, 2022. The Company will apply these
amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting
period in which it first applies the amendments. The amendments are not expected to have a material impact on
the Company.
Management’s Responsibility for Financial Reporting
The Company’s management maintains appropriate information systems, procedures and controls to ensure that
information used internally and disclosed externally is complete, accurate, reliable and timely. Disclosure controls and
procedures (DCP) are designed to provide reasonable assurance that (i) material information relating to the Company is
made known to management by others, particularly during the period in which the filings are being prepared, and (ii)
information required to be disclosed by the Company in its filings under Canadian securities legislation is recorded,
processed, summarized and reported in a timely manner. The system of DCP includes, among other things, the
Company’s Corporate Disclosure and Code of Conduct and Business Ethics policies, the review and approval
procedures of the Corporate Disclosure Committee and continuous review and monitoring procedures by senior
management.
Management is also responsible for the design of internal controls over financial reporting (ICFR) within the Company,
in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with IFRS.
As of the end of the period covered by this MD&A, the Chief Executive Officer and the Chief Financial Officer of the
Company have reviewed and evaluated the Company’s DCP (as that term is defined in National Instrument 52-109 –
Certification of Disclosures in Issuers’ Annual and Interim Filings (NI 52-109)) and, based upon that review and
evaluation, concluded that those DCP were effective and met the requirements thereof. Nevertheless, management
recognizes that any controls and procedures, no matter how well designed and operated, can only provide reasonable
assurance and not absolute assurance of achieving the desired control objectives.
NI 52-109 requires the Chief Executive Officer and Chief Financial Officer to certify that they are responsible for
establishing and maintaining ICFR for the Company and that those internal controls have been designed and are effective
in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with IFRS. The Chief Executive Officer and Chief Financial Officer are
also responsible for disclosing any changes to the internal controls for the Company that have materially affected, or are
reasonably likely to materially affect, the Company’s ICFR.
Management, including the Chief Executive Officer and Chief Financial Officer, does not expect that the disclosure
controls or internal controls over financial reporting of the Company will prevent or detect all errors and all fraud or will
be effective under all potential future conditions. A control system is subject to inherent limitations and, no matter how
well designed and operated, can provide only reasonable, not absolute, assurance that the control systems objectives
will be met.
Further, the design of a control system must reflect that there are resource constraints, and the benefits of controls must
be considered relative to their costs. Inherent limitations include the realities that judgments in decision making can be
faulty, and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by
individual acts of some persons, by collusion of two or more people or by management override of the controls. Due to
the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be
detected. The design of any control system is also based in part upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential
conditions. Projections of any evaluations of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
The Chief Executive Officer and Chief Financial Officer have evaluated the design and operating effectiveness of the
internal controls over financial reporting of the Company and concluded that, as of December 31, 2020, and subject to
the inherent limitations described above, internal controls over financial reporting were appropriately designed and were
operating effectively in accordance with the framework and criteria used by the Company.
There have been no changes in the ICFR of the Company during the period of this MD&A that have materially affected,
or are reasonably likely to materially affect, the Company’s ICFR.
Risk Factors
Prospects for companies in the biotechnology and pharmaceutical industry generally may be regarded as uncertain given
the nature of the industry and, accordingly, investments in biotechnology and pharmaceutical companies should be
regarded as speculative. An investor should carefully consider the information contained in this MD&A, in addition to the
risk factors discussed in the Company’s AIF under the heading “Risk Factors”, which section is hereby incorporated herein
by reference. The disclosures in this MD&A are subject to the risk factors outlined in the AIF. Additional risks and
uncertainties not presently known to the Company or that the Company believes to be immaterial may also adversely
affect the Company’s business. If any one or more of the risks occur as outlined in the AIF, the Company’s business,
financial condition and results of operations could be seriously harmed. Further, if the Company fails to meet the
expectations of the public market in any given period, the market price of the Company’s common shares could decline.
Before making an investment decision, each prospective investor should carefully consider the risk factors included in the
AIF and other public documents.
Forward-looking Statements
This MD&A contains “forward-looking information” as defined under Canadian securities laws (collectively, forward-
looking statements). This document should be read in conjunction with material contained in the Company’s
Consolidated Financial Statements for the year ended December 31, 2020 along with the Company’s other publicly filed
documents. Forward-looking statements appear in this MD&A and include, but are not limited to, statements which
reflect management’s expectations regarding objectives, plans, goals, strategies, future growth, results of operations,
performance, business prospects, opportunities and macroeconomic and industry trends.
The words “plans”, “expects”, “does not expect”, “goals”, “seek”, “strategy”, “future”, “estimates”, “intends”, “anticipates”,
“does not anticipate”, “projected”, “believes” or variations of such words and phrases or statements to the effect that
certain actions, events or results “may”, “will”, “could”, “would”, “should”, “might”, “likely”, “occur”, “be achieved” or
“continue” and similar expressions identify forward-looking statements. In addition, any statements that refer to
expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking
statements. Forward-looking statements are not historical facts but instead represent management’s expectations,
estimates and projections regarding future events or circumstances. Such forward-looking statements are qualified in
their entirety by the inherent risks, uncertainties and changes in circumstances surrounding future expectations which
are difficult to predict and many of which are beyond the control of the Company.
Forward-looking statements are necessarily based on a number of estimates and assumptions that, while considered
reasonable by management of the Company as of the date of this MD&A, are inherently subject to significant business,
economic and competitive uncertainties and contingencies. The Company’s estimates, beliefs and assumptions, which
may prove to be incorrect, include the various assumptions set forth herein, including, but not limited to, the Company’s
future growth potential, results of operations, future prospects and opportunities, the competitive landscape, industry
trends, legislative or regulatory matters, future levels of indebtedness, availability of capital and current economic
conditions.
The Company cautions readers not to place undue reliance on these statements, as forward-looking statements involve
significant risks and uncertainties. Forward-looking statements should not be read as guarantees of future performance
or results and will not necessarily be accurate indications of whether or not the times at or by which such performance
or results will be achieved. A number of factors could cause actual results to differ materially from the results discussed
in the forward-looking statements, including, but not limited to: the Company’s ability to execute its growth strategies; the
impact of changing conditions in the regulatory environment and drug development processes; increasing competition
in the industries in which Miravo operates; the Company’s ability to meet its debt commitments; the impact of unexpected
product liability matters; the impact of ongoing litigation involving the Company and/or its products; the impact of changes
in relationships with customers and suppliers; the degree of intellectual property protection currently afforded to the
Company’s products; including the invalidation of any of the Company’s current patents and the outcome of any litigation
or other proceedings seeking to challenge or protect such patents; the scope of the impact of patent litigation or other
proceedings involving the Company’s products; the timing of any launch of generic products that compete with the
Company’s products and the scope of their impact on the Company’s product sales and royalty payments; the degree of
market acceptance of the Company’s products; changes in prevailing economic conditions; developments and changes
in applicable laws and regulations; the impact of COVID-19 on the operation, business and financial results of the
Company; and such other factors discussed under “Risk Factors” in the Company’s most recent AIF.
If any risks or uncertainties described above or otherwise materialize, or if the opinions, estimates or assumptions
underlying the forward-looking statements prove incorrect, actual results or future events might vary materially from those
anticipated in the forward-looking statements. The opinions, estimates or assumptions referred to above and described
in greater detail under “Risk Factors” in the AIF should be considered carefully by readers. Although management has
attempted to identify important risk factors that could cause actual results to differ materially from those contained in
forward-looking statements, there may be other risk factors not presently known that management believes are not
material that could also cause actual results or future events to differ materially from those expressed in such forward-
looking statements.
All forward-looking statements are based only on information currently available to the Company and are made as of the
date of this MD&A. Except as expressly required by applicable Canadian securities law, the Company assumes no
obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future
events or otherwise. All forward-looking statements in this MD&A are qualified by these cautionary statements.
Additional Information
Additional information relating to the Company, including the Company’s most recently filed AIF and Management
Information Circular, can be found on SEDAR at www.sedar.com (under Nuvo Pharmaceuticals Inc.).
Management Report
The accompanying Consolidated Financial Statements have been prepared by management and
approved by the Board of Directors of the Company. Management is responsible for the information and
representations contained in these Consolidated Financial Statements and the accompanying
Management’s Discussion and Analysis. These Consolidated Financial Statements have been prepared
in accordance with International Financial Reporting Standards (IFRS). The significant accounting
policies followed by the Company are set out in Note 3, Summary of Significant Accounting Policies to
these Consolidated Financial Statements.
To assist management in discharging these responsibilities, the Company maintains a system of
procedures and internal controls, which are designed to provide reasonable assurance that its assets are
safeguarded, that transactions are executed in accordance with management’s authorization, and that
the financial records form a reliable base for the preparation of accurate and timely financial information.
The Company’s external auditors are appointed by the shareholders. They independently perform the
necessary tests of accounting records and procedures to enable them to report their opinion as to the
fairness of the Consolidated Financial Statements and their conformity with IFRS.
The Board of Directors ensures that management fulfils its responsibilities for financial reporting and
internal control. The Board of Directors exercises this responsibility through an Audit Committee
composed of three Directors, all of whom are not involved in the day-to-day operations of the Company.
The Audit Committee meets quarterly with management, and with external auditors to review audit
recommendations and any matters that the auditors believe should be brought to the attention of the
Board of Directors. The Audit Committee reviews the Consolidated Financial Statements and
Management’s Discussion and Analysis and recommends their approval to the Board of Directors.
/s/ Jesse F. Ledger
/s/ Kelly A. Demerino
Jesse F. Ledger
President & Chief Executive Officer
March 5, 2021
Kelly A. Demerino
Interim Chief Financial Officer
March 5, 2021
NUVO PHARMACEUTICALS INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Canadian dollars in thousands)
ASSETS
CURRENT
Cash and cash equivalents
Accounts receivable
Inventories
Other current assets
Contract assets
TOTAL CURRENT ASSETS
NON-CURRENT
Contract assets
Right-of-use assets
Property, plant and equipment
Intangible assets
Goodwill
TOTAL ASSETS
LIABILITIES AND EQUITY
CURRENT
Accounts payable and accrued liabilities
Current portion of long-term debt
Current portion of other obligations
Current income tax liabilities
TOTAL CURRENT LIABILITIES
Long-term debt
Other obligations
Derivative liabilities
Deferred income tax liabilities
TOTAL LIABILITIES
EQUITY
Common shares
Contributed surplus
Accumulated other comprehensive income (loss) (AOCI)
Deficit
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
Note 24, Commitments and Contingencies
See accompanying Notes.
On behalf of the Nuvo Board of Directors:
Notes
3, 25
3, 25
3, 6
7
3, 25, 26
3, 25, 26
8
3, 9
3, 5, 10
3, 5, 11
15
5, 12
5, 14
23
12
14
13
23
16
16, 17
As at
December 31, 2020
$
As at
December 31, 2019
$
23,807
7,488
9,490
2,699
251
43,735
2,594
1,027
3,478
73,486
27,445
151,765
8,314
12,337
396
709
21,756
91,360
4,323
13,665
299
131,403
184,764
16,153
37
(180,592)
20,362
151,765
23,019
14,387
7,927
1,795
90
47,218
312
573
3,888
83,558
27,580
163,129
9,678
18,385
372
8
28,443
104,992
3,036
2,229
299
138,999
184,764
15,892
(63)
(176,463)
24,130
163,129
/s/ Anthony E. Dobranowski
/s/ Daniel N. Chicoine
Anthony E. Dobranowski
Director
Daniel N. Chicoine
Director
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
NUVO PHARMACEUTICALS INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)(i)
(Canadian dollars in thousands, except per share
and share figures)
REVENUE
Product sales
License revenue
Contract revenue
Total revenue
Cost of goods sold
Gross profit
OPERATING EXPENSES
Sales and marketing expenses
General and administrative expenses
Amortization of intangibles
Net interest expense
Total operating expenses
OTHER EXPENSES (INCOME)
Change in fair value of derivative liabilities (gain)
Change in fair value of contingent and variable consideration
(gain)
Impairment
Foreign currency gain
Other losses (gains)
Net income (loss) before income taxes
Income tax expense
NET INCOME (LOSS)
Other comprehensive loss to be reclassified to net loss
in subsequent periods
Unrealized gain (loss) on translation of foreign operations
TOTAL COMPREHENSIVE INCOME (LOSS)
Net income (loss) per common share
- basic
- diluted
Average number of common shares outstanding
(in thousands)
- basic
- diluted
See accompanying Notes.
Notes
26, 27
26, 27
26, 27
6, 21, 27, 30
21, 27, 30
21, 27, 30
10, 27
18, 27
13, 27
14, 27
3, 5, 10, 26, 27
19, 27
3, 23, 27
20
20
20
20
Year ended
December 31, 2020
Year ended
December 31, 2019
$
$
52,200
21,519
56
73,775
23,309
50,466
8,928
12,893
8,314
11,441
41,576
11,728
1,794
1,583
(1,145)
(2,093)
(2,977)
1,152
(4,129)
100
(4,029)
(0.36)
(0.36)
11,388
11,388
51,884
15,758
1,904
69,546
26,472
43,074
9,796
17,840
8,356
10,305
46,297
(31,070)
1,216
23,780
(2,598)
2,022
3,427
28
3,399
(432)
2,967
0.30
(0.51)
11,388
43,457
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
NUVO PHARMACEUTICALS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Common Shares
Contributed
Surplus
AOCI
Deficit
Total
(Canadian dollars in thousands,
except for number of shares)
Notes
Balance, December 31, 2018
Stock option compensation expense
Unrealized loss on translation of foreign
operations
Net income
Balance, December 31, 2019
Stock option compensation expense
Unrealized gain on translation of foreign
operations
Net loss
Balance, December 31, 2020
000s
16, 17
11,388
-
-
-
11,388
-
-
-
11,388
$
16, 17
184,764
-
-
-
184,764
-
-
-
184,764
$
$
$
$
16, 17
15,435
457
-
-
15,892
261
-
-
16,153
369
-
(179,862)
-
(432)
-
(63)
-
100
37
-
3,399
(176,463)
-
-
(4,129)
(180,592)
20,706
457
(432)
3,399
24,130
261
100
(4,129)
20,362
See accompanying Notes.
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
NUVO PHARMACEUTICALS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Canadian dollars in thousands)
OPERATING ACTIVITIES
Net income (loss)
Items not involving current cash flows:
Depreciation and amortization
Impairment
Contract asset additions
Contract asset change in estimate
Accreted non-cash interest, net and amortization of deferred
financing fees
Change in fair value of long-term debt
Change in fair value of derivative liabilities
Equity-settled stock-based compensation
Unrealized foreign exchange gain
Change in fair value of contingent and variable consideration
Modification of debt
Change in allowance for doubtful accounts
Inventory write-down
Inventory step-up expense
Lease disposal
Disposal of fixed assets
Net change in non-cash working capital
Payment of contingent consideration
CASH PROVIDED BY OPERATING ACTIVITIES
INVESTING ACTIVITIES
Acquisition of property, plant and equipment
Acquisition of intangible assets
Aralez acquisition
CASH USED IN INVESTING ACTIVITIES
FINANCING ACTIVITIES
Principal payment on debt
Cash payment of lease liabilities
CASH USED IN FINANCING ACTIVITIES
Effect of exchange rate changes on cash
Net change in cash during the year
Cash and cash equivalents, beginning of year
CASH AND CASH EQUIVALENTS, END OF YEAR
See accompanying Notes.
Supplemental Cash Flow Information
Interest received(i)
Interest paid(i)
Income taxes paid
Year ended
December 31, 2020
$
Year ended
December 31, 2019
$
Notes
21
3, 5, 10
3, 26
3
12
12
13
17
14
6
6
9
22
14
12
(4,129)
9,256
1,583
(5,496)
561
6,491
(2,434)
11,728
261
(1,015)
1,794
-
(74)
573
1,411
-
180
20,690
4,810
(1,168)
24,332
(555)
(193)
-
(748)
(22,436)
(253)
(22,689)
(107)
788
23,019
23,807
75
5,010
102
3,399
9,546
23,780
-
-
4,228
-
(31,070)
457
(2,457)
1,216
2,166
(107)
333
4,979
(38)
-
16,432
(14,069)
-
2,363
(83)
-
(2,547)
(2,630)
(3,354)
(389)
(3,743)
(1,045)
(5,055)
28,074
23,019
220
5,796
41
(i)
Amounts have been reflected as operating cash flows in the Consolidated Statements of Cash Flows.
See accompanying Notes.
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
NUVO PHARMACEUTICALS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Unless noted otherwise, all amounts shown are in thousands of Canadian dollars, except per share
amounts.
1. NATURE OF BUSINESS
Nuvo Pharmaceuticals® Inc. d/b/a Miravo Healthcare™ (Miravo or the Company) is a Canadian focused, healthcare
company with global reach and a diversified portfolio of commercial products. The Company’s products target
several therapeutic areas, including pain, allergy, neurology and dermatology. The Company’s strategy is to in-
license and acquire growth-oriented, complementary products for Canadian and international markets. The
Company’s registered office and principal place of business is located at 6733 Mississauga Road, Suite 800,
Mississauga, Ontario, Canada, L5N 6J5, its international operations are located in Dublin, Ireland and its
manufacturing facility is located in Varennes, Québec, Canada. The Varennes facility operates in a Good
Manufacturing Practices (GMP) environment respecting the U.S., Canada and E.U. GMP regulations and is
regularly inspected by Health Canada and the U.S. Food and Drug Administration (FDA).
The Aralez Transaction
On December 31, 2018, the Company announced the acquisition of a portfolio of more than 20 revenue-generating
products from Aralez Pharmaceuticals Inc. (Aralez) (the Aralez Transaction). The Aralez Transaction included the
acquisition of Aralez Pharmaceuticals Canada Inc. (Aralez Canada), a growing business that included the products
Cambia® and Blexten®, as well as the Canadian distribution rights to Resultz®, and provided a platform for the
Company to acquire and launch additional commercial products in Canada. The Company also acquired the
worldwide rights and royalties from licensees for Vimovo, Yosprala and Suvexx®/Treximet. For further details,
please refer to the annual Consolidated Financial Statements of the Company for the year ended December 31,
2018, which are available on SEDAR at www.sedar.com (under Nuvo Pharmaceuticals Inc.).
The Deerfield Financing
The aggregate purchase price paid by the Company for the Aralez Transaction was $146.4 million (US$110 million,
subject to certain working capital and indebtedness adjustments). The Company satisfied the purchase price
through funding provided by certain funds managed by Deerfield Management Company, L.P. (Deerfield), a global,
healthcare-specialized investor (the Deerfield Financing) (See Note 12, Loans and Borrowings and Note 13,
Derivative Liabilities).
2. BASIS OF PREPARATION
Statement of Compliance
These Consolidated Financial Statements have been prepared by management in accordance with International
Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).
The policies applied to these Consolidated Financial Statements are based on IFRS, which have been applied
consistently to all periods presented. These Consolidated Financial Statements were issued and effective as at
March 5, 2021, the date the Board of Directors approved these Consolidated Financial Statements.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Measurement
These Consolidated Financial Statements have been prepared under the historical cost convention, except for the
revaluation of certain financial assets and financial liabilities to fair value. Items included in the financial statements
of each consolidated entity in the Company are measured using the currency of the primary economic environment
in which the entity operates (the functional currency). These Consolidated Financial Statements are presented in
Canadian dollars, which is the Company’s functional currency and presentation currency.
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
Use of Estimates and Judgments
Estimates
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date,
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are described below. The Company based its assumptions and estimates on parameters
available when these Consolidated Financial Statements were prepared. Existing circumstances and assumptions
about future developments; however, may change due to market changes or circumstances arising that are beyond
the control of the Company. Such changes are reflected in the assumptions when they occur.
(i)
Contract Assets:
The Company’s contract assets are subject to estimation regarding the likelihood of the minimum
guaranteed sales-based royalties. In the year ended December 31, 2020, the Company recognized a
contract asset of $5.0 million, recorded net of withholding tax, representing the present value, discounted
at 1.7%, relating to future milestone payments for the Yosprala product. The contract asset and associated
revenue represents the present value of $5.0 million (US$3.6 million) in milestone payments, net of
withholding tax, during the term of this license agreement, including $2.5 million (US$1.8 million), net of
withholding tax, triggered by regulatory approval in Japan, which Nuvo Pharmaceuticals (Ireland) DAC
trading as Miravo Healthcare (Miravo Ireland) received in the year ended December 31, 2020 resulting in
a reduction to the contract asset of $2.5 million. Miravo Ireland is also contractually entitled to receive a
second US$1.8 million, net of withholding tax, milestone payment on May 31, 2022 provided the licensed
intellectual property remains valid and enforceable.
In July 2019, the Company received notice that the United States Court of Appeals for the Federal
Circuit (Court of Appeals) had denied the Company’s and Horizon Therapeutics plc’s (Horizon) request to
reconsider the May 2019 decision with respect to the validity of Vimovo U.S. Patent Nos. 6,926,907 and
8,557,285 in the U.S. In October 2019, a petition to the Supreme Court of the United States was filed to
request to have the decision of the Court of Appeals reconsidered. The Supreme Court denied that petition
on January 13, 2020. On February 18, 2020, Dr. Reddy’s Laboratories Inc. (Dr. Reddy’s) second-filed
abbreviated new drug application (ANDA) for Vimovo in the U.S. received FDA approval and Dr. Reddy’s
launched a generic version of Vimovo in the U.S. in the three months ended March 31, 2020. As a generic
version of Vimovo entered the U.S. market, the Company will continue to receive a 10% royalty on net sales
of Vimovo by its U.S. partner, subject to a step-down provision in the event that generic competition
achieves a certain market share. The Company’s US$7.5 million (US$1.9 million per quarter) minimum
annual royalty due for Vimovo net sales in the U.S. ceased in the first quarter of 2020 with the launch of a
generic Vimovo in the U.S. As at June 30, 2019, the Company wrote off its contract asset attributable to
its Vimovo U.S. royalty and on June 30, 2019 recognized a $23.6 million impairment charge, of which $22.4
million was reversed from the related contract asset balance with the remainder recorded as an increase
in liabilities. This increase in liabilities was subsequently reversed in the year ended December 31, 2019,
as a generic version of Vimovo did not launch in 2019.
(ii) Revenue Recognition and Returns
As is typical in the pharmaceutical industry, the Company’s royalty streams are subject to a variety of sales
deductions, including rebates, discounts, incentives and product returns. Sales deductions are typically
estimates resulting from judgments about future events and uncertainties and rely on management
assumptions. Sales deductions are recorded in the same period that the revenues are recognized.
The provision for sales returns is an estimate used in the recognition of revenue. The Company has a return
policy that allows wholesalers to return product within a specified period prior to, and subsequent to, the
expiration date. Provisions for returns are recognized in the period in which the underlying sales are
recognized, as a reduction of product sales revenue. The Company estimates provisions for returns based
upon historical return data of each product to determine return percentages and current market conditions,
representing management’s best estimate. As historical experience may not always be an accurate indicator
of future returns, the Company continually monitors return provisions and makes adjustments when it
believes that actual product returns may differ from established reserves.
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
(iii) Determination of Amortized Cost for Debt Liabilities
The Company’s Amortization Loan, Bridge Loan and host liability of the Convertible Loan (the Loans) are
initially measured at fair value using a discounted cash flow model that considers the present value of the
contractual cash flows using a risk-adjusted discount rate. The discounted cash flow model requires
management to estimate the timing of debt repayments and the effective interest rate related to the debts.
For financial liabilities held at amortized cost, when the Company revises its estimates and timing of
payments, it will adjust the gross carrying amount of the amortized cost of a financial liability to reflect actual
and revised estimated contractual cash flows. The Company recalculates the gross carrying amount of the
amortized cost of the financial liability as the present value of the estimated future contractual cash flows
that are discounted at the financial instrument’s original effective interest rate. The adjustment is recognized
in income.
The Company has made assumptions regarding the timing of the payments, which may differ significantly
depending upon quarterly excess cash flows and whether the quarterly payment deferral mechanism
included within the financing agreement is utilized. The quarterly deferral mechanism allows the Company
to defer a portion of the mandatory minimum quarterly repayments by the difference between one quarter of
the US$7.5 million (US$1.9 million per quarter) minimum annual royalty due from Vimovo sales in the U.S.
and the actual amount of royalties received in the applicable quarter as a result of the loss of Vimovo U.S.
market exclusivity.
(iv) Determination of Fair Value for Derivative Liabilities
The fair value of the Company’s warrants (Warrants) (See Note 12, Loans and Borrowings) are initially
recognized and subsequently revalued at each reporting period using the Black-Scholes option pricing
model. The conversion feature that accompanies the Company’s Convertible Loan is valued by determining
the difference between the fair value of the hybrid Convertible Loan contract, determined using an income
approach with a binomial lattice model and the fair value of the host liability contract, determined using a
discounted cash flow model. The Warrants and conversion feature are measured at fair value through profit
and loss at each period-end (See Note 13, Derivative Liabilities).
(v)
Impairment of Non-financial Assets
Impairment exists when the carrying value of an asset or cash-generating unit (CGU) exceeds its
recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The
value in use calculations are based on discounted cash flow (DCF) models. The cash flows are derived
from the budget and do not include restructuring activities that the Company is not yet committed to or
significant future investments that will enhance the performance of the assets of the CGU being tested. The
recoverable amount is sensitive to the discount rate used for the DCF model, as well as the expected future
cash-inflows and outflows and the growth rate used for extrapolation purposes. These estimates are most
relevant to goodwill and other intangibles recognized by the Company. The key assumptions used to
determine the recoverable amount for the different CGUs, including a sensitivity analysis, are disclosed and
further explained in Note 10, Intangible Assets and Note 11, Goodwill.
(vi) Useful Lives of Intangible Assets
Management estimates the useful lives of intangible assets based on the period during which the assets are
expected to be available for use and also estimates their recoverability to assess if there has been an
impairment. The amounts and timing of recorded expenses for amortization and impairments of intangible
assets for any period are affected by these estimates. The estimates are reviewed at least annually and are
updated if expectations change as a result of commercial obsolescence, generic threats and legal or other
limits to use. It is possible that changes in these factors may cause significant changes in the estimated
useful lives of the Company’s intangible assets in the future.
(vii) Valuation of Inventory
The Company estimates future product sales when establishing appropriate provisions for inventory. In
making these estimates, the Company considers the product life of inventory and the profitability of recent
sales of inventory. In many cases, products sold by the Company turn quickly and inventory on-hand values
are low, which reduces the risk of inventory obsolescence. Management relies on expiry dates in the
determination of realizable value of inventory (See Note 6, Inventories).
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
(viii) Employee Stock Options
The Company measures the cost of share-based payments, either equity or cash-settled, with employees
by reference to the fair value of the equity instrument or underlying equity instrument at the date on which
they are granted. In addition, cash-settled, share-based payments are revalued to fair value at every
reporting date.
Estimating fair value for share-based payments requires management to determine the most appropriate
valuation model for a grant, which is dependent on the terms and conditions of each grant. In valuing certain
types of stock-based payments, such as incentive stock options and share appreciation rights, the Company
uses the Black-Scholes option pricing model.
Several assumptions are used in the underlying calculation of fair values of the Company’s stock options
and share appreciation rights using the Black-Scholes option pricing model, including the expected life of
the option, stock-price volatility and forfeiture rates (See Note 17, Stock-based Compensation and Other
Stock-based Payments).
(ix) Contingent Consideration
Contingent consideration, resulting from business combinations, is valued at fair value at the acquisition date
as part of the business combination. When the contingent consideration meets the definition of a financial
liability, it is subsequently remeasured to fair value at each reporting date. The determination of the fair
value is based on discounted cash flows. The key assumptions take into consideration the probability of
meeting each performance target and the discount factor (See Note 14, Other Obligations).
Judgments
In the process of applying the Company’s accounting policies, management has made the following judgments,
which have the most significant effect on the amounts recognized in these Consolidated Financial Statements.
(x) Functional Currency
The Company and its subsidiary companies use judgment when determining its functional currency. This
determination includes an assessment of the indicators as prescribed in International Accounting Standards
21, The Effects of Changes on Foreign Exchange Rates (IAS 21). However, applying the factors in IAS 21
does not always result in a clear indication of functional currency. Where IAS 21 factors indicate differing
functional currencies, management uses judgment in the ultimate determination of the functional currency.
(xi) Determination of Groups of CGUs
The determination of the Company’s CGUs, group of CGUs and their associated assets involves judgment
and is based on how senior management monitors the operations of the Company. The Company has
determined that the lowest aggregation of assets that generate largely independent cash inflows, include
individual patents, brands and licenses. For purposes of the Company’s goodwill impairment testing, the
Company has grouped certain CGUs to test at the operating segment level, the lowest level at which
management monitors goodwill for internal management purposes. The Company has used significant
judgment in determining the groups of CGUs. The Company allocates goodwill to the groups of CGUs that
are expected to benefit from the synergies of the business combination (See Note 11, Goodwill).
Basis of Consolidation
These Consolidated Financial Statements include the accounts of the Company and its subsidiaries as follows:
Aralez Pharmaceuticals Canada Inc.
Nuvo Pharmaceuticals (Ireland) Designated Activity Company
All significant intercompany balances and transactions have been eliminated upon consolidation.
% Ownership
100%
100%
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
Foreign Currency Translation
The Company and its subsidiary companies each determine their functional currency based on the currency of the
primary economic environment in which they operate. The Company’s functional currency is the Canadian dollar.
(i) Transactions
Transactions denominated in a currency other than the functional currency of an entity are translated at
exchange rates prevailing at the time the transaction occurred. The resulting exchange gains and losses are
included in each entity’s net income (loss) in the period in which they arise.
(ii) Translation into Presentation Currency
The Company’s foreign operations are translated into the Company’s presentation currency, which is the
Canadian dollar, for inclusion in these Consolidated Financial Statements. Foreign-denominated monetary
and non-monetary assets and liabilities of foreign operations are translated at exchange rates in effect at the
end of the reporting period, and revenue and expenses are translated at the average exchange rate for the
period (as this is considered a reasonable approximation to actual rates). The resulting translation gains and
losses are included in other comprehensive income (loss) (OCI) with the cumulative gain or loss reported in
accumulated other comprehensive income (loss) (AOCI).
When the Company disposes of its entire interest in a foreign operation or loses control or influence over a foreign
operation, the foreign currency gains or losses in AOCI related to the foreign operation are recognized in profit or
loss. If the Company disposes of part of an interest in a foreign operation that remains a subsidiary, the
proportionate amount of foreign currency gains or losses in AOCI related to the subsidiary are reallocated between
controlling and non-controlling interests.
Cash and Cash Equivalents
Cash includes cash-on-hand and current balances with banks and cash equivalents include money market mutual
funds. These are readily convertible into known amounts of cash and have an insignificant risk of changes in value.
The cost basis of cash approximates its fair value.
Inventories
Inventories include raw materials, work-in-process and finished goods. Raw materials are stated at the lower of
cost and replacement cost with cost determined on a first-in, first-out basis. Manufactured inventory (finished goods
and work-in-process) is valued at the lower of cost and net realizable value determined on a first-in, first-out basis.
Manufactured inventory cost includes the cost of raw materials, direct labour, an allocation of overhead and the
cost to acquire finished goods. The Company monitors the shelf life and expiry of finished goods to determine when
inventory values are not recoverable and a write-down is necessary.
An inventory provision is estimated by management based on expected future sales and expiry dates and is
recorded in cost of goods sold (COGS). Subsequent changes to provisions are recorded in COGS in the
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss).
Contract Assets
Contract assets represent the present value of current and future guaranteed minimum sales-based royalties,
upfront fees and milestone payments that are expected to be received over the life of the licensing agreements.
Contract asset balances are reduced as the contractual minimums are realized throughout the life of the agreement.
The timing of revenue recognition, billings and cash collections results in accounts receivable and unbilled
receivables (contract assets). Generally, billing occurs subsequent to revenue recognition, resulting in accounts
receivable. The Company’s contract assets relate to license revenue attributable to minimum guaranteed sales-
based royalties, upfront fees and milestone payments that have not been billed at the reporting date. Unbilled
receivables (contract assets) will be billed (and subsequently transferred to accounts receivable) in accordance with
the agreed-upon contractual terms.
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
Property, Plant and Equipment
Property, plant and equipment (PP&E) is recorded at cost.
The Company allocates the amount initially recognized in respect of an item of PP&E to its significant parts and
amortizes separately each such part. Depreciation of PP&E is provided for over the estimated useful lives from the
date the assets become available for use as follows:
Buildings
Leasehold improvements
Furniture and fixtures
Computer equipment
Production, laboratory and other equipment
10 - 25 years
Term of lease
5 years
1 - 3 years
3 - 12 years
Straight-line
Straight-line
Straight-line
Straight-line
Straight-line
Residual values, method of depreciation and useful lives of the assets are reviewed annually and adjusted if
appropriate.
Intangible Assets
Intangible assets acquired in a business combination are recognized separately from goodwill at their fair value at
the date of acquisition, which is considered to be at cost. Following initial recognition, intangible assets are carried
at cost, less any accumulated amortization and accumulated impairment losses. Amortization commences when
the intangible asset is available for use. For patented assets, amortization is computed on a straight-line basis over
the intangible asset’s estimated useful life, which cannot exceed the lesser of the remaining patent life and 20 years.
For license assets, amortization is computed on a straight-line basis over the intangible asset’s estimated useful
life, which management estimates based on the license period and opportunity for license renewal. The estimated
useful lives are as follows:
Brand
Patents
Licenses
Software
Indefinite life
5 - 20 years
4 - 27 years
5 years
-
Straight-line
Straight-line
Straight-line
Goodwill and Business Combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as
the aggregate of the consideration transferred, which is measured at the acquisition date fair value and the amount
of any non-controlling interest in the acquiree.
When the Company acquires a business, it assesses the classification and designation of financial assets and
liabilities assumed in accordance with the contractual terms, economic circumstances and conditions as at the
acquisition date. Any contingent consideration to be transferred by the acquirer will be recognized at fair value at
the acquisition date. All contingent consideration (unless classified as equity) is subsequently remeasured to fair
value at each reporting period-end, with the changes in fair value recognized in profit or loss.
Goodwill is initially measured at cost over the net identifiable assets acquired and liabilities assumed. If the fair
value of the net assets acquired is in excess of the aggregate consideration transferred, the Company reassesses
whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the
procedures used to measure the amounts recognized at the acquisition date. If the reassessment still results in an
excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is
recognized in net income (loss).
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. See below for a
description of the Company’s impairment testing procedures.
Impairment of Non-financial Assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If
any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s
recoverable amount. An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs of
disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
not generate cash inflows that are largely independent of those from other assets or groups of assets. When the
carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written
down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their
present value using a pretax discount rate that reflects current market assessments of the time value of money and
the risks specific to the asset.
The Company bases its impairment calculation on the most recent budgets and forecast calculations, which are
prepared separately for each of the Company’s CGUs to which the individual assets are allocated. A long-term
growth rate is calculated and applied to project future cash flows. Impairment losses of continuing operations are
recognized in the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) in expense
categories consistent with the function of the impaired asset. For assets excluding goodwill, an assessment is
made at each reporting date to determine whether there is an indication that previously recognized impairment
losses no longer exist or have decreased. If such indication exists, the Company estimates the asset’s or CGU’s
recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the
assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized.
The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed
the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized
for the asset in prior years. Such reversal is recognized in the Consolidated Statements of Income (Loss) and
Comprehensive Income (Loss).
Goodwill is tested for impairment annually as at December 31 and when circumstances indicate that the carrying
value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU
(or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying
amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future
periods.
Leased assets
Leased assets are capitalized at the commencement date of the lease and are comprised of the initial lease liability
amount, initial direct costs incurred when entering into the lease, less any lease incentives received.
Leased liabilities
The lease liability is measured at the present value of the fixed and variable lease payments that depend on an
index or rate, net of cash lease incentives that are unpaid. Lease payments are apportioned between the finance
charges and reduction of the lease liability using the incremental borrowing rate implicit in the lease to achieve a
constant rate of interest on the remaining balance of the liability.
Lease modifications are accounted for as either a new lease with an effective date of the modification or as a change
in the accounting for the existing lease.
Financial Instruments
There are three measurement categories in which the Company classifies its financial assets:
• Amortized cost: Financial instruments that are held for collection of contractual cash flows, where those
cash flows represent solely payments of principal and interest, are measured at amortized cost. Interest
income (expense) from these financial instruments is recorded in net income (loss) using the effective
interest rate method.
• Fair value through other comprehensive income (FVOCI): Debt instruments that are held for collection of
contractual cash flows and for selling the financial instruments, where the financial instruments’ cash flows
represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying
amount are taken through OCI, except for the recognition of impairment gains or losses, interest income
and foreign exchange gains and losses that are recognized in net income (loss). When the financial
instrument is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from
equity to net income (loss) and recognized in other gains (losses). Interest income (expense) from these
financial instruments is included in interest using the effective interest rate method. Foreign exchange
gains (losses) are presented in other gains (losses) and impairment expenses in other expenses (income).
• Fair value through profit (loss) (FVTPL): Financial instruments that do not meet the criteria for amortized
cost or FVOCI are measured at FVTPL. A gain or loss on a financial instrument that is subsequently
measured at FVTPL and is not part of a hedging relationship is recognized in net income (loss) and
presented net in comprehensive income (loss) within other gains (losses) in the period in which it arises.
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
Financial liabilities are either classified as amortized cost or FVTPL. For financial liabilities held at amortized cost,
when the Company revises its estimates of payments, it will adjust the gross carrying amount of the amortized cost
of a financial liability to reflect actual and revised estimated contractual cash flows. The Company recalculates the
gross carrying amount of the amortized cost of the financial liability as the present value of the estimated future
contractual cash flows that are discounted at the financial instrument’s original effective interest rate. The
adjustment is recognized in income.
The Company classifies its financial instruments as follows:
• Cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, long-term debt and
other obligations are measured at amortized cost. Interest income and interest expense are recorded in
net income (loss), as applicable.
• Embedded derivatives, including the conversion feature of the Convertible Loan and the prepayment option
on the Bridge Loan and Amortization Loan, are separated from the host contract and accounted for
separately if the host contract is not a financial asset and certain criteria are met. The conversion feature,
prepayment option and the Warrants are initially measured at fair value and subsequently measured at
FVTPL.
Impairment of Financial Assets
The Company assesses, on a forward-looking basis, the expected credit losses associated with its financial
instruments carried at amortized cost and FVOCI. The impairment methodology applied depends on whether the
asset originated from a contract that is in the scope of IFRS 15 - Revenue from Contracts with Customers (IFRS
15) or if there have been significant increases in credit risk.
• Accounts receivable and contract assets: For accounts receivable and contract assets, the Company
applies the simplified approach to providing for expected credit losses prescribed by IFRS 9 - Financial
Instruments (IFRS 9), which requires the use of the lifetime expected loss provision for all accounts
receivable and contract assets within the scope of IFRS 15. The Company has established a provision
based on the Company’s historical credit loss experience, adjusted for forward-looking factors specific to
the debtors and the economic environment.
• Cash equivalents: For cash equivalents and short-term investments at amortized cost, the Company
applies the general approach to providing for expected credit losses. These instruments are considered to
be low credit risk, and therefore, the impairment provision is determined using a 12-month expected credit
loss basis.
Comprehensive Income
Comprehensive income (loss) is the change in equity from transactions and other events and circumstances from
non-shareholder sources. Other comprehensive income (loss) refers to items recognized in comprehensive income
(loss), but that are excluded from net income (loss) calculated in accordance with IFRS. The resulting changes
from translating the financial statements of foreign operations into Canadian dollars, the Company’s presentation
currency, are recognized in comprehensive income (loss) for the year.
Revenue Recognition
Product Sales
Revenue from product sales is recognized upon shipment of the product to the customer, provided transfer of title
to the customer occurs upon shipment and provided the Company has not retained any significant risks of
ownership or future obligations with respect to the product shipped, the price is fixed and determinable and
collection is reasonably assured.
Rights of return give rise to variable consideration. The variable consideration is estimated at contract inception
using the expected value method, as this best predicts the amount of variable consideration to which the Company
is entitled to receive. The variable consideration is constrained to the extent that it is highly probable that a
significant reversal in the amount of cumulative revenue recognized will not occur when any uncertainty is
subsequently resolved. For products that are expected to be returned, a sales return provision is recognized as a
reduction of revenue at the time control of the products is transferred to the customers.
The Company may provide discounts and rebates, to its customers, which give rise to variable consideration. The
variable consideration is constrained to the extent that it is highly probable that a significant reversal in the amount
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
of cumulative revenue recognized will not occur when any uncertainty is subsequently resolved. The application of
the constraint on variable consideration increases the amount of revenue that will be deferred. The Company
applies the most likely amount method estimating discounts and rebates provided to customers using contracted
rates. Consequently, revenue is recognized net of reserves for estimated sales discounts and rebates.
License Revenue
The Company has tied the sales-based royalties to the distinct performance obligation to which it relates - the
license of intellectual property rights to the Company’s commercial products. With the application of the sales-
based royalties exception, sales-based royalties and milestone payments contingent on sales-based thresholds are
recognized when the subsequent sales occur.
The license of intellectual property rights includes minimum guaranteed sales-based royalties and the Company
assesses the contractual minimums as fixed consideration (where a significant reversal is remote). The Company
recognizes all of the contractual minimums when control of the intellectual property rights is transferred and a
contract asset is recognized. Any sales-based royalties earned, in excess of the contractual minimums, would be
recognized in accordance with the royalty exception (when the subsequent sales occur). This can result in
significant differences in the timing of revenue recognition and the corresponding receipt of cash flows.
Contract Revenue
Revenue from contracted services is generally recognized as the contracted services are performed and the related
expenditures are incurred pursuant to the terms of the agreement and provided collectability is reasonably assured.
Government Assistance
Government assistance received under incentive programs is accounted for using the cost reduction method;
whereby, the assistance is netted against the related expense or capital expenditure to which it relates when there
is reasonable assurance that the credits will be realized.
Government assistance received under reimbursement or funding programs is accounted for using the cost
reduction method; whereby, a receivable is set up as the costs are incurred based on the terms of reimbursement
or funding program and the expected recoveries are netted against the related expense.
Net Income or Loss Per Common Share
Basic net income or loss per common share is calculated using the weighted average number of common shares
outstanding during the year.
Diluted net income or loss per common share is calculated assuming the weighted average number of common shares
outstanding during the year is increased to include the number of additional common shares that would have been
outstanding if the dilutive potential shares had been issued. The dilutive effect of warrants, stock options and
convertible debt is determined using the treasury-stock method. The treasury-stock method assumes that the
proceeds from the exercise of warrants and options are used to purchase common shares at the volume weighted
average market price during the year. The dilutive effect of convertible securities is determined using the “if-converted”
method. The “if-converted” method assumes that the convertible securities are converted into common shares at the
beginning of the period and all income charges related to the convertible securities are added back to income.
Income Taxes
Income taxes on profit or loss include current and deferred taxes. Income taxes are recognized in profit or loss except
to the extent that they relate to business combinations or items recognized directly in equity or in OCI. Current taxes
are the expected income taxes payable or recoverable on the taxable income or loss for the period, using tax rates
enacted or substantively enacted, at the reporting date and any adjustment to income taxes payable in respect of
previous years. The Company is subject to withholding taxes on certain forms of income earned under its in-licensing
agreements from foreign jurisdictions.
Deferred income taxes are generally recognized in respect of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred income
taxes are measured at the tax rates that are expected to be applied to temporary differences when they are reversed,
based on the tax laws that have been enacted or substantively enacted in the relevant jurisdiction by the reporting
date.
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
Deferred tax assets and liabilities are recognized, where the carrying amount of an asset or a liability in the
Consolidated Statements of Financial Position differs from its tax base, except for differences arising on:
• The initial recognition of goodwill;
• The initial recognition of an asset or a liability in a transaction that is not a business combination and at the
•
time of the transaction affects neither accounting or taxable profit; and
Investments in subsidiaries, branches and associates, and interests in joint ventures where the Company is
able to control the timing of the reversal of the difference and it is probable that the difference will not reverse
in the foreseeable future.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to the extent
it is probable that future taxable income will be available against which they can be utilized. Deferred tax assets are
reviewed as at each reporting date and are reduced to the extent it is no longer probable the related tax benefit will be
realized. Within the scope of IAS 12, Income Taxes, the Company recognizes its investment tax credits as a reduction
against current income tax expense.
Stock-based Compensation and Other Stock-based Payments
The Company has three stock-based compensation plans: the Share Option Plan, the Share Purchase Plan and
the Share Bonus Plan, each a component of the Company’s Share Incentive Plan. The Company’s Share
Appreciation Rights Plan was discontinued on March 1, 2016. The last tranche vested January 1, 2019 with nominal
value (See Note 17, Stock-based Compensation and Other Stock-based Payments).
Share Incentive Plan
The Company measures and recognizes compensation expense for the Share Incentive Plan based on the fair
value of the common shares or options issued.
Under the Share Option Plan, the Company issues either fixed awards or performance-based options. Options
vest either immediately upon grant or over a period of one to four years or upon the achievement of certain
performance-related measures or milestones. Each tranche in an award is considered a separate award with its
own vesting period and grant date fair value. Fair value of each tranche is measured at the date of grant using the
Black-Scholes option pricing model. Compensation expense is recognized over the tranche’s vesting period based
on the number of awards expected to vest, by increasing contributed surplus. When options are exercised, the
proceeds received by the Company, together with the fair value amount in contributed surplus, are credited to
common shares.
Under the Share Purchase Plan, consideration paid by employees on the purchase of common shares is credited
to common shares when the shares are issued. The fair value of the Company’s matching contribution, determined
based upon the trading price of the common shares, is recorded as compensation expense. These expenses are
included in stock-based compensation expense and credited to common shares.
Under the Share Bonus Plan, the fair value of the direct award of common shares, determined based upon the
trading price of the common shares, is recorded as compensation expense. These expenses are included in stock-
based compensation expense and credited to contributed surplus over the vesting period, until the common shares
are issued and the value is transferred from contributed surplus to common shares.
Issuance Costs of Debt Instruments
The Company records issuance costs of debt instruments against the fair value of the debt and will amortize the
debt issuance costs over the remaining term of the debt.
Issuance Costs of Equity Instruments
The Company records issuance costs of equity instruments against the equity instrument that was issued. For
derivative instruments, the cost of issuance is expensed immediately.
Operating Segments
IFRS 8 - Operating Segments requires operating segments to be determined based on internal reports that are
regularly reviewed by the chief operating decision maker for the purpose of allocating resources to the segment
and to assessing its performance. For the years ended December 31, 2019 and December 31, 2020, the Company
had three operating segments: Commercial Business, Production and Service Business and Licensing and Royalty
Business (See Note 27, Segment Reporting).
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
Accounting Standards Issued But Not Yet Applied
Certain new standards, interpretations, amendments, and improvements to existing standards were issued by the
IASB or IFRS Interpretations Committee that are mandatory for fiscal periods beginning on or after January 1,
2021.
(a) Amendments to IAS 1, Classification of Liabilities as Current or Non-current (IAS 1)
In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the requirements
for classifying liabilities as current or non-current. The amendments clarify:
• What is meant by a right to defer settlement
• That a right to defer must exist at the end of the reporting period
• That classification is unaffected by the likelihood that an entity will exercise its deferral right
• That only if an embedded derivative in a convertible liability is itself an equity instrument would the
terms of a liability not impact its classification
The amendments are effective for annual reporting periods beginning on or after January 1, 2023 and must
be applied retrospectively. The amendments to IAS 1 are not expected to have a significant impact on the
Company’s Consolidated Financial Statements.
(b) Amendments to IFRS 7 - Financial Instruments: Disclosure (IFRS 7); IFRS 9; IAS 39, Financial Instruments:
Recognition and Measurement; IFRS 4 - Insurance Contracts; and IFRS 16 - Leases (IFRS 16)
In August 2020, the IASB published IBOR Reform Phase 2 which address issues that might affect financial
reporting after the reform of an interest rate benchmark, including its replacement with alternative
benchmark rates. For financial instruments at amortized cost, the amendments introduce a practical
expedient such that if a change in the contractual cash flows is as a result of IBOR reform and occurs on
an economically equivalent basis, the change will be accounted for by updating the effective interest rate
with no immediate gain or loss recognized. The amendments also provide temporary relief that allow the
Trust's hedging relationships to continue upon replacement of the existing interest rate benchmark with the
alternative risk-free rate resulting from IBOR reform. The relief requires the Trust to amend hedge
designations and hedge documentation. Updates to hedging documentation must be made by the end of
the reporting period in which a replacement takes place. The amendments are effective for annual periods
beginning on or after January 1, 2021, with earlier application permitted. Management is in the process of
assessing the impact of these amendments on contracts in scope, including our IBOR-based financial
instruments and hedge relationships, if any.
(c) Reference to the Conceptual Framework – Amendments to IFRS 3
In May 2020, the IASB issued Amendments to IFRS 3 Business Combinations. The amendments are
intended to replace a reference to the Framework for the Preparation and Presentation of Financial
Statements, issued in 1989, with a reference to the Conceptual Framework for Financial Reporting issued
in March 2018 without significantly changing its requirements. The IASB also added an exception to the
recognition principle of IFRS 3 to avoid the issue of potential ‘day 2’ gains or losses arising for liabilities and
contingent liabilities that would be within the scope of IAS 37 or IFRIC 21 Levies, if incurred separately. At
the same time, the IASB decided to clarify existing guidance in IFRS 3 for contingent assets that would not
be affected by replacing the reference to the Framework for the Preparation and Presentation of Financial
Statements. The amendments are effective for annual reporting periods beginning on or after 1 January
2022 and apply prospectively.
(d) Property, Plant and Equipment: Proceeds before Intended Use - Amendments to IAS 16
In May 2020, the IASB issued Property, Plant and Equipment - Proceeds before Intended Use, which
prohibits entities deducting from the cost of an item of property, plant and equipment, any proceeds from
selling items produced while bringing that asset to the location and condition necessary for it to be capable
of operating in the manner intended by management. Instead, an entity recognizes the proceeds from
selling such items, and the costs of producing those items, in profit or loss. The amendment is effective for
annual reporting periods beginning on or after January 1, 2022 and must be applied retrospectively to items
of property, plant and equipment made available for use on or after the beginning of the earliest period
presented when the entity first applies the amendment. The amendments are not expected to have a
material impact on the Company.
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
(e) Onerous Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37
In May 2020, the IASB issued amendments to IAS 37 to specify which costs an entity needs to include
when assessing whether a contract is onerous or loss-making. The amendments apply a “directly related
cost approach”. The costs that relate directly to a contract to provide goods or services include both
incremental costs and an allocation of costs directly related to contract activities. General and administrative
(G&A) costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to
the counterparty under the contract. The amendments are effective for annual reporting periods beginning
on or after January 1, 2022. The Company will apply these amendments to contracts for which it has not
yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the
amendments. The amendments are not expected to have a material impact on the Company.
4. CHANGES IN ACCOUNTING POLICIES
Certain new standards, interpretations, amendments and improvements to existing standards were issued by the
IASB or IFRS Interpretations Committee that are mandatory for fiscal periods beginning on or after January 1,
2020.
(a) Amendments to IFRS 3: Definition of a Business
In October 2018, the IASB issued amendments to the definition of a business in IFRS 3 - Business
Combinations (IFRS 3) to help entities determine whether an acquired set of activities and assets is a
business or not. The amendments clarify the minimum requirements for a business, remove the
assessment of whether market participants are capable of replacing any missing elements, add guidance
to help entities assess whether an acquired process is substantive, narrow the definitions of a business
and of outputs, and introduce an optional fair value concentration test. New illustrative examples were
provided along with the amendments. Since the amendments apply prospectively to transactions or other
events that occur on or after the date of first application, the Company was not affected by these
amendments on the date of transition.
(b) Amendments to IAS 1 and IAS 8: Definition of Material
In October 2018, the IASB issued amendments to IAS 1, Presentation of Financial Statements and IAS 8,
Accounting Policies, Changes in Accounting Estimates and Errors to align the definition of “material”
across the standards and to clarify certain aspects of the definition. The new definition states that,
“Information is material if omitting, misstating or obscuring it could reasonably be expected to influence
decisions that the primary users of general purpose financial statements make on the basis of those
financial statements, which provide financial information about a specific reporting entity”. The
amendments to the definition of material did not have a significant impact on the Company’s Consolidated
Financial Statements.
5. BUSINESS COMBINATIONS
Aralez Transaction
On December 31, 2018, the Company acquired 100% of the issued and outstanding shares of Aralez Canada, as
well as control of a global portfolio of pharmaceutical products from Aralez.
In the year ended December 31, 2019, the consideration for the acquisition and preliminary measurement of assets
acquired and liabilities assumed was adjusted as additional information was obtained. Measurement period fair
value adjustments of $0.8 million are a result of closing working capital and indebtedness adjustments. In addition,
measurement period fair value adjustments as a result of the assessment of the sales return provision, which also
required a reclassification of accounts receivable, resulted in an adjustment in the amount of $2.3 million.
These adjustments have been accounted for retrospectively, as required under IFRS 3 as at December 31, 2018.
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
The following consolidated accounts are impacted by adjustments:
Accounts receivable
Accounts payable and accrued liabilities
Goodwill
December 31, 2018
Original
$
5,217
20,976
24,898
Measurement
period - fair value
adjustments
$
(260)
2,824
3,084
December 31, 2018
Restated
$
4,957
23,800
27,982
The Company finalized its measurement of the assets acquired and liabilities assumed as a result of the Aralez
Transaction on December 31, 2019. The consideration for the acquisition and measurement of assets acquired
and liabilities assumed, in accordance with IFRS 3, is as follows:
Fair Value of Consideration
Amount settled in cash (US$105,100)
Fair value of contingent and variable consideration (Note 14)
Plus: amounts due for cash, working capital and indebtedness adjustments
Plus: adjustment made to working capital for the period ended March 31, 2019
Total consideration transferred(i)
$
143,379
475
1,443
1,104
146,401
(i)
The US$110 million purchase price was reduced for working capital delivered on close that was less than the target working capital,
indebtedness assumed and cash assumed upon close.
Recognized Amounts of Identifiable Net Assets
Cash
Inventory
Contract asset
Property, plant and equipment
Patents
License agreements
Brands
Deferred tax asset
Total identifiable net assets
Other net working capital
Less liabilities assumed
Plus: adjustment to liabilities assumed for the year
Less: adjustment to liabilities and accounts receivable assumed for the year
Deferred tax liability
Goodwill on acquisition
$
4,908
11,051
26,152
580
33,141
51,055
1,578
7,608
136,073
(400)
(6,148)
290
(2,270)
(7,907)
26,763
Consideration Transferred
The Company satisfied the purchase price through funding provided by certain funds managed by Deerfield (See
Note 1, Nature of Business - The Deerfield Financing).
The purchase agreement included contingent consideration in the form of 50% of the lifetime net earnings from
monetization of the Yosprala product. The fair value of contingent consideration initially recognized represented
the present value of the Company’s probability-weighted estimate of cash outflows discounted at 12% (See Note
14, Other Obligations). In the year ended December 31, 2019, the liability was reduced and a recovery of $0.5
million was recorded as a result of a reduction in the estimated future royalties in the Consolidated Statements of
Income (Loss) and Comprehensive Income (Loss).
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
Identifiable Net Assets
The identifiable patents, license agreements and brands have been valued on a product-by-product basis using an
income approach. Specifically, patents and licenses were valued using a multi-period excess earnings method
discounted at 12% and 20%, respectively. Brands were valued using a relief-from-royalty method incorporating a
royalty rate of 3% and discount rates of 13% to 20%, respectively.
Patents and licenses are considered finite-lived intangible assets and are amortized over their estimated useful
lives. Amortization commenced on January 1, 2019. Useful lives are expected to range from 4 to 27 years. Brands
were concluded to be indefinite-life intangible assets, and as a result, are not being amortized.
The contract asset acquired is related to a minimum royalty the Company was entitled to receive from Horizon, as
per its license agreement for Vimovo in the U.S. The fair value of the contract asset initially recognized represents
the present value of the Company’s then future estimated minimum royalty payments discounted at a rate of 11%.
As at June 30, 2019, the Company assessed that the contract asset attributable to the Company’s U.S. Vimovo
royalty was impaired and a $23.6 million loss on the contract asset was recorded of which $22.4 million was
reversed from the related contract asset balance with the remainder recorded as an increase in liabilities. This
increase in liabilities was subsequently reversed as a generic version of Vimovo did not launch in the U.S. in 2019.
Reacquired Rights to Resultz
The Company reacquired the Canadian distribution rights to Resultz, which were previously owned by
Aralez. Management determined the fair value of these rights to be $2.5 million at acquisition date and were
recognized as license agreements in identifiable net assets acquired.
Goodwill
Goodwill is primarily related to growth expectations for Blexten, Cambia and Suvexx. Goodwill recognized will not
be deductible for income tax purposes going forward.
6. INVENTORIES
Inventories consist of the following as at:
Raw materials
Work in process
Finished goods, net of provision(i)
December 31, 2020
$
2,514
546
6,430
9,490
December 31, 2019
$
2,683
571
4,673
7,927
(i)
Includes $35 inventory step-up value for inventory acquired by the Company as part of the Aralez Transaction [December 31, 2019 - $1.4
million].
During the year ended December 31, 2020, inventories in the amount of $20.4 million were recognized as COGS
[December 31, 2019 - $24.2 million]. During the year ended December 31, 2020, inventories in the amount of $578
were written down [December 31, 2019 - $333]. During the year ended December 31, 2020, there were reversals
of prior year write-downs of $5 and there were no reversals of prior year write-downs during the year ended
December 31, 2019.
COGS for the year ended December 31, 2020 included $1.4 million of inventory step-up expense [December 31,
2019 - $5.0 million] for the sale of inventory that was acquired by the Company as part of the Aralez Transaction.
In accordance with IFRS 3, inventory was initially recognized at fair value less reasonable selling costs.
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
7. OTHER CURRENT ASSETS
Other current assets consist of the following as at:
Deposits
Prepaid expenses(i)
Other receivables
December 31, 2020
$
295
2,031
373
2,699
December 31, 2019
$
206
999
590
1,795
(i)
Included in prepaid expenses for the year ended December 31, 2020 were inventory samples of $1.1 million [December 31, 2019 - $0.3
million].
8. RIGHT-OF-USE ASSETS
The change in carrying value of the Company’s right-of-use assets was as follows:
As at January 1
Net additions
Disposal of asset
Remeasurement of asset
Depreciation expense
Foreign exchange
Balance, December 31
2020
$
573
635
-
(17)
(164)
-
1,027
2019
$
2,845
-
(1,843)
-
(338)
(91)
573
On February 26, 2020, the Company renegotiated its premises leases, which resulted in the surrender of two of its
leases and the signing of a new lease. The renegotiation has been accounted as a single lease modification, as it
was completed with the overall objective of consolidating the premises leased by the Company and all leases were
entered into with the same head lessor. As part of the renegotiation, in the year ended December 31, 2020, the
Company agreed to pay a termination fee of $0.2 million. The decrease in the area under lease due to the
modification resulted in a decrease to the right-of-use asset of $0.1 million and a decrease to the lease liability of
$0.1 million. Further, the increase in the lease term and corresponding increase in lease payments resulted in an
increase to the right-of-use asset and lease liability of $0.7 million. The modification did not result in a separate
lease.
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
9. PROPERTY, PLANT AND EQUIPMENT
PP&E consists of the following as at:
Cost
Balance, December 31, 2018
Additions
Balance, December 31, 2019
Additions (disposals)
Balance, December 31, 2020
Accumulated depreciation
Balance, December 31, 2018
Depreciation expense net of
disposals
Balance, December 31, 2019
Depreciation expense net of
disposals
Balance, December 31, 2020
Net book value as at
December 31, 2019(i)
Net book value as at
December 31, 2020(i)
Land
$
42
-
42
-
42
Buildings
$
1,630
24
1,654
-
1,654
Leasehold
Improvements
$
610
-
610
(190)
420
Furniture
&
Fixtures
$
228
-
228
5
233
Production,
Laboratory
& Other
Equipment(ii)
$
6,217
26
6,243
90
6,333
Computer
Equipment
$
262
32
294
35
329
Total
$
8,989
82
9,071
(60)
9,011
-
-
-
-
-
42
42
987
82
1,069
84
1,153
585
501
42
172
214
(214)
-
396
420
78
82
160
22
182
68
51
176
65
241
42
283
53
46
3,047
4,330
452
3,499
416
3,915
853
5,183
350
5,533
2,744
3,888
2,418
3,478
(i) As at December 31, 2020 and December 31, 2019, all of the Company’s PP&E was located in Canada.
10. INTANGIBLE ASSETS
Intangible assets consist of the following as at:
Cost
Balance, December 31, 2018
Impairment
Foreign exchange movements
Balance, December 31, 2019
Additions
Impairment
Foreign exchange movements
Balance, December 31, 2020
Accumulated amortization
Balance, December 31, 2018
Amortization expense
Foreign exchange movements
Balance, December 31, 2019
Amortization expense
Foreign exchange movements
Balance, December 31, 2020
Net book value as at December 31, 2020
Patents
$
43,797
(1,136)
(1,981)
40,680
-
(1,583)
(674)
38,423
2,015
5,449
(105)
7,359
5,433
(508)
12,284
26,139
Brand
$
2,397
(8)
(62)
2,327
-
-
(202)
2,125
-
-
-
-
-
-
-
2,125
Licenses
$
51,055
(238)
-
50,817
-
-
-
50,817
-
2,907
-
2,907
2,881
-
5,788
45,029
Software
$
-
-
-
-
193
-
-
193
-
-
-
-
-
-
-
193
Total
$
97,249
(1,382)
(2,043)
93,824
193
(1,583)
(876)
91,558
2,015
8,356
(105)
10,266
8,314
(508)
18,072
73,486
For impairment testing, goodwill acquired through business combinations and intangibles with indefinite useful lives
are allocated to the Aralez Canada, Resultz Canada and Resultz Rest of World CGUs.
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
Carrying amounts of goodwill and intangibles allocated to each CGU as at December 31, 2020:
Aralez Canada cash-generating units
Resultz Canada cash-generating units
Resultz Rest of World cash-generating units
Remaining cash-generating units
Total
Goodwill
$
26,284
290
871
-
27,445
Intangibles
$
36,114
2,124
3,947
31,301
73,486
In the year ended December 31, 2020, the impairment loss of $1.6 million represented the write-down of certain
intangible assets in the commercial and licensing and royalty segments to the recoverable amount as a result of a
change in expectations. This was recognized in the Consolidated Statements of Income (Loss) and Comprehensive
Income (Loss) as impairment. The recoverable amount as at December 31, 2020 was based on value-in-use and
was determined at the level of the CGU.
The value-in-use calculations considered forecasted cash flows of each CGU based on the current
commercialization plans for these products. Cash from product sales and royalties, net of labour and infrastructure
costs were included in determining the CGUs recoverable value. The Company’s approach for discounted cash
flow projections included consideration of prior year actuals, current market conditions and planned commercial
efforts per product.
The terminal-growth rate in a range of -2% to -10% was used for discounted cash flow projections. An after-tax
discount rate in a range of 11.82% to 21.82% was applied, which approximates the Company’s current weighted
average cost of capital.
Sensitivity Analysis
The Company’s intangible asset impairment test is sensitive to changes in assumptions. An increase of 5 basis
points to the discount rates used by the Company in the range of 12.41% to 22.91% for its intangible asset
impairment test and assuming all other variables remain constant, would not have resulted in a material change to
the value of the Company’s intangible assets. A decrease of 5 basis points to the discount rates used by the
Company in the range of 11.23% to 20.73% for its intangible asset impairment test and assuming all other variables
remain constant, would not have resulted in a material change to the value of the Company’s intangible assets.
11. GOODWILL
Goodwill consists of the following as at:
Cost
Ex-U.S. Resultz acquisition
Aralez Transaction
Foreign exchange movements, cumulative
Balance
Goodwill continuity for the year ended:
Balance, January 1
Measurement period fair value adjustments
Revised balance, January 1
Foreign exchange movements
Balance, December 31
December 31, 2020
$
1,187
26,763
(505)
27,445
December 31, 2019
$
1,187
26,763
(370)
27,580
2020
$
27,580
-
27,580
(135)
27,445
2019
$
24,898
3,084
27,982
(402)
27,580
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
Goodwill is recognized on the acquisition date when total consideration exceeds the net identifiable assets
acquired. Refer to Note 10, Intangible Assets for the Company’s annual impairment test performed at the CGU
level.
Aralez Canada CGU
The recoverable amount of the Aralez Canada CGU as at December 31, 2020 has been determined based on a
value-in-use calculation using cash flow projections and financial budgets approved by the Board of Directors. An
after-tax discount rate of 16.82% was applied, along with a terminal-growth rate in a range of -2% to -5%. It was
concluded that the carrying value did not exceed the value-in-use. As a result of this analysis, management did not
identify an impairment for this CGU.
Resultz Canada CGU
The recoverable amount of the Resultz Canada CGU as at December 31, 2020 has been determined based on a
value-in-use calculation using cash flow projections and financial budgets approved by the Board of Directors. An
after-tax discount rate of 11.82% was applied along with a terminal-growth rate of -5%. It was concluded that the
carrying value did not exceed the value-in-use. As a result of this analysis, management did not identify an
impairment for this CGU.
Resultz Rest of World CGU
The recoverable amount of the Resultz Rest of World CGU as at December 31, 2020 has been determined based
on a value-in-use calculation using cash flow projections and financial budgets approved by the Board of Directors.
An after-tax discount rate of 16.82% was applied along with a terminal-growth rate of -5%. It was concluded that
the carrying value did not exceed the value-in use. As a result of this analysis, management did not identify an
impairment for this CGU.
Sensitivity analysis
The Company’s goodwill impairment test is sensitive to changes in assumptions. An increase or decrease of 5
basis points to the discount rates used by the Company, assuming all other variables remain constant, for its
goodwill impairment test would not have resulted in a material change to the value of the Company’s Aralez Canada
CGUs, Resultz Canada and Resultz Rest of World.
12. LOANS AND BORROWINGS
The Company financed the Aralez Transaction through funding provided by Deerfield on December 31, 2018. The
Company received total proceeds of $161.7 million (US$118.5 million) from Deerfield in exchange for issuing the
Amortization Loan, the Bridge Loan, the Convertible Loan and Warrants. In addition to these freestanding
instruments, there were two embedded derivatives requiring bifurcation: the conversion feature in the Convertible
Loan (See Note 13, Derivative Liabilities) and the prepayment option in the Amortization Loan.
The Company’s loans and borrowings were measured at amortized cost as follows:
CURRENT
Bridge Loan (i)
Amortization Loan (ii)
NON-CURRENT
Amortization Loan (ii)
Convertible Loan – debt host (iii)
December 31, 2020
$
December 31, 2019
$
-
12,337
12,337
39,116
52,244
91,360
4,493
13,892
18,385
54,572
50,420
104,992
The Loans are guaranteed by Aralez Canada and cross-guaranteed by each of the Company and Miravo Ireland
as to each other’s obligations and are secured by a first ranking charge over substantially all property of each of the
Company, Miravo Ireland and Aralez Canada.
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
The Amortization Loan, Bridge Loan and Convertible Loan were issued on December 31, 2018. Interest on these
Loans is accrued and paid on a quarterly basis. Any repayment of principal on the Amortization Loan and Bridge
Loan prior to their respective payment terms is considered a prepayment to which a 0.25% prepayment fee applies.
Early repayment is not permitted for the Convertible Loan.
The Company has the right to prepay the Amortization Loan and Bridge Loan at any time. The fair value of the
prepayment option bifurcated from the Amortization Loan was a derivative asset with a nominal value as at
December 31, 2020 and is presented net of the non-current portion of the long-term debt. The prepayment option
on the Bridge Loan was deemed to be clearly and closely related to the host and no bifurcation was required. During
the year ended December 31, 2020, the Company repaid the $4.5 million (US$3.5 million) outstanding balance of
the US$6.0 million Bridge Loan.
Each quarter, the Company is required to pay to the lenders the greater of US$2.5 million or 50% of the Company’s
excess cash flows, a defined term in the facility agreement with Deerfield (Deerfield Facility Agreement), which is
applied in the following order: (a) any unpaid fees and transaction costs; (b) proportionately to any accrued and
unpaid interest related to these Loans; (c) any unpaid principal of the Bridge Loan, including the applicable
prepayment fee; (d) any unpaid principal of the Amortization Loan, including the applicable prepayment fee; and (e)
any other obligations owing to the lenders, administrative agent or other secured parties (the Waterfall Provisions).
In the year ended December 31, 2019, the Company was permitted to delay the minimum principal payments if a
minimum of US$10 million in aggregate was paid by the payment date of the fourth quarter. During the year ended
December 31, 2020, the Company made principal loan repayments of $4.5 million (US$3.5 million) applied to the
Bridge Loan and $17.9 million (US$13.3 million) applied to the Amortization Loan. As a result of the Waterfall
Provisions, the first US$6.0 million, including those payments made in 2019, were applied to the Bridge Loan. The
remaining US$4.0 million in respect of the 2019 minimum principal payment was paid in the three months ended
March 31, 2020, which was applied to the Amortization Loan, and was included in the total $17.9 million (US$13.3
million) Amortization Loan payment. Quarterly principal payments are to be made on the Amortization Loan until
December 31, 2024.
The Company agreed to an amendment to the financing agreement dated June 25, 2019 to provide, among other
things, for a payment deferral mechanism in the event that Vimovo U.S. market exclusivity is lost. The amendment
allows the Company to defer a portion of the mandatory minimum quarterly repayments by the difference between
one quarter of the then existing US$7.5 million (US$1.9 million per quarter) minimum annual 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 had been expected (2022) prior to the Court of Appeals decision. A
generic version of Vimovo entered the U.S. market in the year ended December 31, 2020. The amount of any
principal repayment deferred would, until repaid in accordance with the amendment, be subject to an interest rate
of 12.5% per annum. To-date, the Company has not availed itself of the deferral mechanism. The carrying value
of the debt includes assumptions regarding the deferral option when estimating the timing of payments. As a result
of changes in the assumptions regarding the timing of the payments in the current and comparative years, and a
modification of debt in the comparative year, a gain on revaluation of long-term debt of $2.4 million was recorded
in Other Losses (Gains) in the year ended December 31, 2020 [December 31, 2019 – a loss of $2.2 million].
(i) Bridge Loan
The Bridge Loan was issued on December 31, 2018 in the principal amount of $8.2 million (US$6.0 million). The
carrying value reflects an allocation of transaction costs, which reduced the carrying value of the respective liability
and are reflected in the calculation of interest expense under the effective interest rate method. During the year
ended December 31, 2020, the Company repaid the outstanding balance of the Bridge Loan.
The change in the carrying value of this liability was as follows:
As at January 1
Prepayment
Interest accretion during the year
Modification on prepayment and debt amendment
Foreign currency movement
Balance, December 31
2020
$
4,493
(4,528)
(8)
-
43
-
2019
$
7,986
(3,354)
(214)
361
(286)
4,493
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
(ii) Amortization Loan
The Amortization Loan was issued on December 31, 2018 in the principal amount of $81.9 million (US$60 million).
The carrying value reflects an allocation of transaction costs, which reduced the carrying value of the respective
liability and are reflected in the calculation of interest expense under the effective interest rate method.
The change in the carrying value of this liability was as follows:
As at January 1
Principal repayment
Interest accretion during the year
Change in fair value of long-term debt
Modification on debt amendment
Foreign currency movement
Balance, December 31
2020
$
68,464
(17,908)
3,851
(2,434)
-
(520)
51,453
2019
$
65,985
-
3,940
-
1,805
(3,266)
68,464
(iii) Convertible Loan
The Convertible Loan was issued on December 31, 2018 in the principal amount of $71.6 million (US$52.5 million),
convertible at any time at the option of the holder into 19,444,444 common shares of the Company at a conversion
price of US$2.70 per share. Interest is payable on a quarterly basis and any debenture not converted will be repaid
on December 31, 2024. The fair value of the conversion feature as at December 31, 2020 in the amount of $5.7
million has been classified as a derivative financial liability, as described in Note 13, Derivative Liabilities. The
carrying value reflects an allocation of transaction costs, which reduces the carrying value of the respective liability
and are reflected in the calculation of interest expense under the effective interest rate method.
The change in carrying value of this liability was as follows:
As at January 1
Interest accretion during the year
Foreign currency movement
Balance, December 31
13. DERIVATIVE LIABILITIES
2020
$
50,420
2,966
(1,142)
52,244
2019
$
50,236
2,640
(2,456)
50,420
The Company’s derivative liabilities are measured at fair value through profit or loss and are summarized below:
Conversion feature on Convertible Loan
Warrants
December 31, 2020
$
5,664
8,001
13,665
December 31, 2019
$
837
1,392
2,229
During the year ended December 31, 2020, the Company recognized non-cash charges of $11.7 million on the
change in fair value of derivative liabilities [December 31, 2019 - $31.1 million recovery]. During the year ended
December 31, 2020, the Company recognized a gain on foreign exchange of $0.3 million [December 31, 2019 -
$0.3 million gain].
Conversion feature
The conversion feature is embedded in the Convertible Loan described in Note 12, Loans and Borrowings and
allows the holder to convert the outstanding principal amount of the debentures into common shares of the
Company at any time at a conversion price of US$2.70 per share, subject to a restriction that the holder shall not
ultimately hold more than 4.985% of the total number of common shares of the Company at any one time.
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
Warrants
On December 31, 2018, the Company issued 25,555,556 Warrants with a total fair value of $19.1 million (US$14.0
million). Each Warrant is exercisable at the option of the holder for one common share of the Company at an
exercise price of $3.53 per Warrant and expires December 31, 2024. Any exercise is subject to a restriction that
the holder shall not ultimately hold more than 4.985% of the total number of common shares of the Company at any
one time. The fair value of the Warrants is determined using the Black-Scholes option pricing model. The Warrants
contain contingent settlement provisions that would require the Company to settle the Warrants as a financial liability
in certain circumstances, some of which are beyond the control of both the Company and the holder, such as
bankruptcy or insolvency, which requires the Warrants to be classified as derivative liabilities.
There are three methods of Warrant settlement, all at the option of the holder. The first method of settlement
requires the holder to remit the exercise price of $3.53 per Warrant and the Company will issue a common share
of the Company. The second method results in the $3.53 per Warrant strike price being applied as a payment
against the principal balance of the Amortization Loan outstanding. The third method of exercise applies to those
Warrants classified as Flexible Exercise Shares (FES). Warrants considered FES can be exercised without upfront
remuneration to the Company. Instead, the Company issues fractional shares equal to the difference between the
current share price and the $3.53 exercise price of the Warrant. As at December 31, 2020, 8,266,667 of the
25,555,556 Warrants outstanding were classified as FES.
Following a Major Transaction (as defined in the Deerfield Facility Agreement), subject to certain conditions, the
Warrants will become exercisable for an additional number of common shares determined in accordance with the
terms of the Warrants, subject to continued application of the 4.985% cap, except that in the case of certain Major
Transactions involving the conversion of the common shares into the right to receive cash, securities or other assets
(either under the Major Transaction or a subsequent liquidation of the Company), a holder of Warrants is permitted
to exercise the Warrants (without the application of the 4.985% cap) for the additional number of common shares
described above immediately prior to and conditional upon completion of the Major Transaction, such that the holder
ultimately receives the cash, securities or other assets, as applicable, in exchange for such common shares on the
same terms as other holders of common shares. See the Deerfield Facility Agreement and the forms of Convertible
Notes and Warrants filed under the Company’s profile on www.sedar.com (under Nuvo Pharmaceuticals Inc.).
Inputs to fair value models
Key assumptions used in determining the fair values of the Company’s derivative liabilities at initial recognition and
period-end are summarized below as at:
Conversion Feature
Issue date
Valuation date
Share price
Risk-free interest rate
Discount for lack of marketability
Dividend yield
Volatility factor
Expected life
Warrants
Issue date
Valuation date
Share price
Risk-free interest rate
Discount for lack of marketability
Dividend yield
Volatility factor
Expected life
December 31, 2018
December 31, 2020
$0.91
0.26%
10.00%
0%
91.5%
4 years
December 31, 2018
December 31, 2019
$0.45
1.69%
28.00%
0%
70.00%
5 years
December 31, 2018
December 31, 2020
$0.91
0.32%
10.00%
0%
91.5%
4 years
December 31, 2018
December 31, 2019
$0.45
1.67%
28.00%
0%
70.00%
5 years
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
14. OTHER OBLIGATIONS
Other obligations consist of the following as at:
Contingent and variable consideration related to the
ex-U.S. acquisition of Resultz
Contingent and variable consideration related to the acquisition of Aralez
Lease obligations(i)
Less amounts due within one year
Long-term balance
December 31, 2020 December 31, 2019
$
$
2,180
1,074
1,465
(396)
4,323
2,814
-
594
(372)
3,036
(i) As at December 31, 2020, the Company recognized $1.5 million [December 31, 2019 - $0.6 million] of lease obligations related to IFRS 16
– Leases (IFRS 16).
As at December 31, 2020, the contingent consideration liability related to the ex-U.S. Resultz acquisition and the
Aralez Transaction. The ex-U.S. Resultz acquisition included additional contingent consideration based on meeting
certain milestones in partnered markets, payable only if those targets are achieved, as well as variable consideration
based on annual royalties earned in non-partnered markets. The Aralez Transaction included contingent
consideration in the form of 50% of the lifetime net earnings from monetization of the Yosprala product. The fair
value of contingent consideration initially recognized represented the present value of the Company’s probability-
weighted estimate of cash outflows related to the monetization of the Yosprala product in the U.S. market. As at
December 31, 2019, the fair value of contingent consideration for the Japanese market was $nil based on the
present value of the Company’s probability-weighted estimate of cash outflows related to the monetization of the
Yosprala product. Contingent consideration related to profits earned from Yosprala, related to the Japanese market,
increased to $2.6 million (US$1.8 million) in the three months ended March 31, 2020, as the Japanese licensee of
Yosprala obtained regulatory approval, which triggered two milestone payments due to Miravo Ireland of US$2.0
million each, less related costs. This resulted in the recognition of $5.5 million (US$3.9 million) in license revenue
for the three months ended March 31, 2020 (See Note 26, Revenue). Miravo Ireland received the first $2.5 million
(US$1.8 million) milestone payment, net of withholding tax in the three months ended June 30, 2020, and the
second milestone payment is to be received no later than May 31, 2022, provided the licensed intellectual property
remains valid and enforceable. The receipt of these milestone payments trigger payment of the contingent
consideration. In the three months ended June 30, 2020, the Company made a contingent consideration payment
of $1.1 million.
Contingent and Variable Consideration
The change in the carrying value of this liability was as follows:
As at January 1
Recognition of contingent consideration in relation to the Aralez Transaction
Remeasurement of contingent consideration in relation to the ex-U.S. acquisition
of Resultz
Payments during the year
Additions to contingent consideration in relation to the Aralez Transaction
Change in estimates in relation to the contingent consideration in relation to the
Aralez Transaction
Interest Accretion
Foreign exchange
Balance, December 31
2020
$
2,814
2,548
(710)
(1,168)
171
(561)
76
84
3,254
2019
$
1,667
-
1,698
-
-
(475)
-
(76)
2,814
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
Lease Obligations
The change in the carrying value of this liability was as follows:
As at January 1
Transition to IFRS 16
Disposal of obligation (i)
Modification of lease (Note 8)
Payments during the year
Interest expense during the year
Remeasurement
Lease Incentive
Foreign exchange
Balance, December 31
2020
$
594
-
-
632
(253)
89
(17)
420
-
1,465
2019
$
5
2,805
(1,880)
-
(389)
128
-
-
(75)
594
(i)
In the year ended December 31, 2019, the Company transferred the lease obligation for the leased property in Ireland to an outside party
resulting in a gain on disposal of $38.
15. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities for the year ended December 31, 2020, included $3.2 million of accrued
royalties, rebates and returns [December 31, 2019 - $3.2 million].
16. CAPITAL STOCK
Authorized
• Unlimited first and second preferred shares, non-voting, non-participating, issuable in series, number,
designation, rights, privileges, restrictions and conditions are determinable by the Company’s Board of
Directors.
• Unlimited common shares, voting, without par value.
17. STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS
The Company has three stock-based compensation plans: the Share Option Plan, the Share Purchase Plan and
the Share Bonus Plan, each a component of the Company’s Share Incentive Plan.
Share Incentive Plan
On May 11, 2020, the Company’s shareholders approved a resolution affirming, ratifying and approving the Share
Incentive Plan and approving all of the unallocated common shares issuable pursuant to the Share Incentive Plan.
The Toronto Stock Exchange (TSX) requires that the Company’s Share Incentive Plan, along with any unallocated
options, rights or other entitlements, receive shareholder approval at the Company’s annual meeting every three
years.
The maximum number of common shares that will be reserved for issuance under the Share Incentive Plan shall
be 15% of the total number of common shares outstanding from time-to-time. The allocation of such maximum
percentage among the three sub plans comprising the Share Incentive Plan shall be determined by the Board of
Directors from time-to-time (provided that the maximum number of common shares that may be issued under the
Share Bonus Plan shall not exceed a fixed number of common shares equal to 3% of the number of common shares
outstanding immediately following the arrangement, which was 344,615).
As at December 31, 2020, the number of common shares available for issuance under the Share Incentive Plan
was 136,337.
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
Share Option Plan
Under the Share Option Plan, the Company may grant options to purchase common shares to officers, directors,
employees or consultants of the Company or its affiliates. Options issued under the Share Option Plan are granted
for a term not exceeding ten years from the date of grant. All options issued to-date have a life of ten years. In
general, options have vested either immediately upon grant or over a period of one to four years or upon the
achievement of certain performance-related measures or milestones. Under the provisions of the Share Option
Plan, the exercise price of all stock options shall not be less than the closing price of the common shares on the
last trading date immediately preceding the grant date of the option.
The following is a schedule of the options outstanding as at:
Balance, December 31, 2018
Granted
Forfeited
Expired
Balance, December 31, 2019
Granted
Expired
Balance, December 31, 2020
Options
000s
1,189
328
(53)
(42)
1,422
275
(125)
1,572
Range of
Exercise Price
$
1.53 - 11.18
0.63 - 2.30
2.30 - 3.80
3.80 - 11.18
0.63 - 11.18
0.57 - 0.68
1.53 - 11.18
0.57 - 5.75
Weighted Average
Exercise Price
$
4.64
2.14
2.51
6.09
4.10
0.58
5.33
3.38
The fair value of each tranche is measured at the date of grant using the Black-Scholes option pricing model.
Options were valued with a calculated forfeiture rate of 7% [December 31, 2019 - 7%] and the remaining model
inputs for options granted during the year ended December 31, 2020 were as follows:
Options
000s
240
35
Grant Date
March 27, 2020
May 13, 2020
Share
Price
$
0.57
0.68
Exercise
Price
$
0.57
0.68
Risk-free
Interest Rate
%
1.22
0.38
Expected
Life
(years)
5 - 7
5 - 7
Volatility
Factor
%
69 - 71
69 - 72
Fair Values
$
0.34 - 0.38
0.38 - 0.42
The following table summarizes the outstanding and exercisable options held by directors, officers, employees and
consultants as at December 31, 2020:
Exercise
Price Range
$
0.57 - 1.53
1.54 - 2.65
2.66 - 5.08
5.09 - 5.75
Options
000s
350
402
341
479
1,572
Outstanding
Remaining
Contractual Life
years
8.36
6.42
4.85
5.84
6.34
Exercisable
Weighted Average
Exercise Price
$
0.72
2.41
4.12
5.63
3.38
Vested
Options
000s
138
267
269
429
1,103
Weighted Average
Exercise Price
$
0.92
2.49
4.27
5.62
3.94
Share Purchase Plan
Under the Share Purchase Plan, eligible officers or employees of the Company may contribute up to 10% of their
annual base salary to the plan to purchase the Company’s common shares. The Company matches each
participant’s contribution by issuing the Company’s common shares having a value equal to the aggregate amount
contributed by each participating employee.
During the years ended December 31, 2020 and 2019, there was no issuance of shares under the Share Purchase
Plan.
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
Summary of Stock-based Compensation
Stock-based compensation, under the Share Option Plan, for the year ended December 31, 2020 was $0.3 million
[December 31, 2019 - $0.5 million], which included $31 in COGS for the year ended December 31, 2020 [December
31, 2019 - $41] and $0.2 million in G&A expenses for the year ended December 31, 2020 [December 31, 2019 -
$0.4 million].
18. NET INTEREST EXPENSE
Interest expense on financial liabilities measured at amortized cost(i)
Interest income on contract assets
Interest income on cash and cash equivalents
Net interest expense (income)
Year ended
December 31, 2020
$
Year ended
December 31, 2019
$
11,925
(406)
(78)
11,441
12,756
(2,265)
(186)
10,305
(i)
The Deerfield Financing requires the Company to make quarterly interest payments on outstanding loans. The coupon rate for the
Amortization Loan and the Convertible Loan is 3.5%. The coupon rate for the Bridge Loan was 12.5%. During the year ended December
31, 2020, the Company repaid the outstanding balance of $4.5 million (US$3.5 million) of the original US$6.0 million Bridge Loan, paid
$17.9 million (US$13.3 million) in principal payments applied to the Amortization Loan and made cash payments of $5.0 million (US$3.8
million) to Deerfield for interest due. The Company chose not to defer any amount of the minimum payment due for the year ended
December 31, 2020.
19. OTHER LOSSES (GAINS)
Loss (gain) on valuation of long-term debt
Loss on disposal of fixed assets
Other losses (gains)
Other losses (gains)
Year ended
December 31, 2020
$
Year ended
December 31, 2019
$
(2,434)
180
161
(2,093)
2,165
-
(143)
2,022
The Company agreed to an amendment to the financing agreement dated June 25, 2019, to provide, among other
things, for a payment deferral mechanism in the event that Vimovo U.S. market exclusivity is lost. The amendment
allows the Company to defer a portion of the mandatory minimum quarterly principal repayments by the difference
between one quarter of the existing US$7.5 million minimum annual 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 had been expected (2022) prior to the Court of Appeals decision. The amount of any principal
repayment deferred would, until repaid in accordance with the amendment, be subject to an interest rate of 12.5%
per annum. As a result of changes in the assumptions regarding the timing and amount of debt repayments, a gain
on revaluation of long-term debt of $2.4 million was recorded in the year ended December 31, 2020 [December 31,
2019 - $nil]. As a result of a modification of long-term debt related to the amendment, a gain (loss) on modification
of $nil was recorded in the year ended December 31, 2020 [December 31, 2019 - loss of $2.2 million].
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
20. NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed as follows:
Basic income (loss) per share:
Net income (loss)
Average number of shares outstanding during the year
Basic income (loss) per share
Net income (loss)
Dilutive effect of:
Warrants
Convertible Loan
Stock options
Net loss, assuming dilution
Average number of shares outstanding during the year
Dilutive effect of:
Warrants
Convertible Loan
Stock options
Weighted average common shares outstanding,
assuming dilution
Diluted loss per share
Year ended
December 31, 2020
$
Year ended
December 31, 2019
$
(4,129)
11,388
(0.36)
(4,129)
-
-
-
(4,129)
11,388
-
-
-
11,388
(0.36)
3,399
11,388
0.30
3,399
(15,415)
(9,965)
-
(21,981)
11,388
12,625
19,444
-
43,457
(0.51)
The following table presents the maximum number of shares that would be outstanding if all dilutive and potentially
dilutive instruments were exercised or converted as at:
Common shares issued and
outstanding
Stock options outstanding (Note 17)
Warrants (Note 13)
Convertible Loan (Note 12)
Year ended December 31, 2020
Year ended December 31, 2019
Weighted Average
Exercise Price
$
n/a
4.10
3.53
US2.70
Units
Outstanding
000s
11,388
1,572
25,556
19,444
57,960
Weighted Average
Exercise Price
$
n/a
4.10
3.53
US2.70
Units
Outstanding
000s
11,388
1,422
25,556
19,444
57,810
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
21. EXPENSES BY NATURE
The Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) include the following expenses
by nature:
(a) Employee costs, excluding Canada Emergency Wage Subsidy:
Short-term wages, bonuses and benefits
Share-based payments
Termination benefits
Total employee costs
Included in:
Cost of goods sold
Sales and marketing
General and administrative expenses
Total employee costs
Year ended
December 31, 2020
$
13,615
242
-
13,857
Year ended
December 31, 2019
$
15,666
339
753
16,758
3,156
4,055
6,646
13,857
3,087
5,073
8,598
16,758
Employee costs, net of Canada Emergency Wage Subsidy payments:
Short-term wages, bonuses and benefits
Share-based payments
Termination benefits
Total employee costs
Included in:
Cost of goods sold
Sales and marketing
General and administrative expenses
Total employee costs
(b) Depreciation and amortization:
Amortization of intangibles
Cost of goods sold
General and administrative expenses
Total depreciation and amortization
Year ended
December 31, 2020
$
12,380
242
-
12,622
Year ended
December 31, 2019
$
15,666
339
753
16,758
2,731
3,692
6,199
12,622
3,087
5,073
8,598
16,758
Year ended
December 31, 2020
$
Year ended
December 31, 2019
$
8,314
434
508
9,256
8,356
470
720
9,546
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
22. NET CHANGE IN NON-CASH WORKING CAPITAL
Net change in non-cash working capital consists of:
Accounts receivable(i)
Inventories
Contract assets
Other current assets
Accounts payable and accrued liabilities(ii)
Current income taxes payable
Net change in non-cash working capital
Year ended
December 31, 2020
$
Year ended
December 31, 2019
$
7,595
(3,547)
2,374
(902)
(1,411)
701
4,810
(8,971)
508
4,990
1,176
(11,698)
(74)
(14,069)
(i)
(ii)
For the year ended December 31, 2020, the decrease in accounts receivable primarily related to the timing of receipt of accrued royalties.
For the year ended December 31, 2019, the decrease in accounts payable and accrued liabilities primarily related to the Company settling
final consideration associated with the Aralez Transaction, indebtedness acquired with the Aralez Transaction and the settlement of
transaction costs accrued as at December 31, 2018.
23. INCOME TAXES
Deferred Tax Assets and Liabilities
Deferred income taxes represent the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A significant
component of deferred tax assets (liabilities) is the accounting value of indefinite lived intangible assets in excess
of tax basis for the year ended December 31, 2020 of $(0.3) million [December 31, 2019 - $(0.3) million].
A deferred income tax asset has not been recognized for certain temporary differences that may be available to
reduce income subject to tax in a taxation period subsequent to the period covered by these Consolidated Financial
Statements. The tax effected amounts of such temporary differences that have not been recognized in the
Consolidated Statements of Financial Position or Consolidated Statements of Income (Loss) and Comprehensive
Income (Loss) are as follows:
Investment tax credits
Accounting value of PP&E and intangibles in excess of tax basis
Financing costs, deferred revenue and other
Capital losses
Non-capital and operating losses
Other
Year ended
December 31, 2020
Year ended
December 31, 2019
$
1,737
(3,864)
312
12,640
9,123
(208)
19,740
$
1,730
(2,453)
812
12,664
8,804
31
21,588
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
A reconciliation between the Company’s statutory and effective tax rates is presented below:
Statutory rate
Items not deducted for tax
Utilization of previously unrecognized deferred tax assets
Foreign rate differences
Withholding taxes
Other
Year ended
December 31, 2020
Year ended
December 31, 2019
%
26.50
(142.41)
47.88
37.63
(9.37)
0.16
(39.61)
%
26.64
(206.02)
85.04
95.71
-
(0.57)
0.80
The Company has net capital losses of $47.7 million in Canada available to offset net taxable capital gains in future
years that have not been recognized [December 31, 2019 - $47.8 million].
Government Assistance
A portion of the Company’s research and development expenditures are eligible for Canadian federal investment
tax credits that it may carry forward to offset any future Canadian federal income taxes payable as follows:
Year of Credit
2004
2005
2006
2007
2008
2009
2010
2011
2012
2014
2015
2016
Amount
$
Year of Expiry
149
130
121
340
234
142
395
208
43
80
494
27
2,363
2024
2025
2026
2027
2028
2029
2030
2031
2032
2034
2035
2036
The benefits of these non-refundable Canadian federal investment tax credits have not been recognized in these
Consolidated Financial Statements.
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
Non-capital Losses
Year of Losses
2011
2012
2013
2014
2015
2016
2017
2018
2019
2019
2020
Amount
$
2,040
-
-
145
11,414
7,523
978
126
2,501
16,810
5,026
46,563
Year of Expiry
2031
2032
2033
2034
2035
2036
2037
2038
2039
Indefinite
2040
As at December 31, 2020, the Company has not recognized the benefits of Canadian and foreign non-capital losses
of $30.0 million and $16.7 million, respectively [December 31, 2019 - $28.1 million and $17.8 million, respectively].
24. COMMITMENTS AND CONTINGENCIES
The Company has minimum future payments under variable lease payment obligations, purchase commitments,
minimum royalties and anticipated milestones for the 12 months ending December 31 as follows:
2021
2022
2023
2024
2025
2026 and thereafter
$
4,936
5,076
3,977
6,030
471
1,320
21,810
For the year ended December 31, 2020, payments for lease obligations totalled $0.3 million [December 31, 2019 -
$0.3 million].
Under the terms of the Pennsaid 2% U.S. Asset Sale with Horizon, the Company is contractually obligated to
manufacture Pennsaid 2% for the U.S. market to December 2029 and, unless terminated, the supply agreement
will renew for successive two-year terms, thereafter. The agreement provides for tiered pricing based on volumes
of product shipped. The Company is also required to maintain certain raw material inventory levels. The Company
has additional long-term supply contracts where the Company is contractually obligated to manufacture Pennsaid
2% and Pennsaid for its customers.
The Company has a long-term supply agreement with a third-party manufacturer for the supply of dimethyl sulfoxide,
one of the key raw materials in Pennsaid 2% and Pennsaid, which expires in December 2022. The agreement
automatically renews for successive three-year terms, unless terminated in writing by either party at least 12 months
prior to the expiration of the current term. The agreement requires the Company to purchase 100% of its dimethyl
sulfoxide requirements from the third-party manufacturer at specified pricing, but does not contain any minimum
purchase commitments.
The Company has a long-term supply agreement with a third-party manufacturer for Blexten. The agreement
automatically renews for successive five-year terms, unless terminated in writing by either party at least 12 months
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
prior to the expiration of the current term in 2024. The agreement requires the Company to purchase 100% of its
Blexten requirements from the third-party manufacturer at specified pricing.
Under certain licensing agreements for the Heated Lidocaine/Tetracaine (HLT) Patch, Resultz, Blexten, Cambia
and Durela®, the Company is required to make royalty payments ranging from 1% to 30% for annual net sales and
certain milestones payments.
Under certain exclusive distribution agreements, the Company is required to make minimum royalty payments to a
company of $0.3 million per year and 30% incremental royalty payments on net receipts above the minimum
payments for Soriatane™.
During the current and comparative years, the Company leased property for offices in Canada and Ireland. The
Company expenses the lease payments for short-term leases and low-value leases as incurred. There are no
financial covenants imposed by any of the leases.
Interest expense on lease liabilities
Expenses related to variable lease payments not classified as lease
obligations
Total cash outflow for leases classified as lease obligations
Year ended
December 31, 2020
$
89
Year ended
December 31, 2019
$
128
207
253
238
389
The Company did not have any sale and leaseback transactions during the year ended December 31, 2020.
The Company’s future cash outflows may change due to variable lease payments, renewal options, termination
options, residual value guarantees and leases not yet commenced to which the Company is committed, but are not
reflected in the lease obligations.
The following is a maturity analysis for undiscounted lease payments that are reflected in the lease obligations as
at December 31, 2020:
Less than 1 year
1 to 2 years
2 to 3 years
3 to 4 years
Beyond 4 years
$
184
226
238
238
1,516
2,402
On October 30, 2019, the Company received an application for an industry-wide class action in the Superior Court
of Québec. In the application, the Company was named as a defendant, along with 33 other defendants, which
includes a group of companies that manufacture, market, and/or distribute opioids in Québec. The claim is for $30,
plus interest for compensatory damages for each class member, $25.0 million from each defendant for punitive
damages and pecuniary damages for each class member. The financial impact cannot be estimated at this time,
as the class has not yet been defined by the court. The Company believes that the claim is without merit and
intends to vigorously defend the matter.
25. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Financial Instruments at Amortized Cost
For year ended December 31, 2020, the Company recognized $78 in interest income from financial assets held at
amortized cost [December 31, 2019 - $0.2 million].
For year ended December 31, 2020, the Company recognized $11.9 million in interest expense from financial
liabilities held at amortized cost [December 31, 2019 - $12.8 million].
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
Credit Risk
The Company, in the normal course of business, is exposed to credit risk from its global customers, most of whom
are in the pharmaceutical industry. The accounts receivable and contract assets are subject to normal industry
risks in each geographic region in which the Company operates. The Company attempts to manage these risks
prior to the signing of distribution or licensing agreements by dealing with creditworthy customers; however, due to
the limited number of potential customers in each market, this is not always possible. In addition, a customer’s
creditworthiness may change subsequent to becoming a licensee or distributor and the terms and conditions in the
agreement may prevent the Company from seeking new licensees or distributors in these territories during the term
of the agreement.
As at December 31, 2020, the Company’s largest customer represented 30% [December 31, 2019 - 49%] of
accounts receivable. Pursuant to their collective terms, accounts receivable, net of allowance, were aged as
follows:
Current
0 - 30 days past due
31 - 60 days past due
Over 60 days past due(i)
(i)
See “loss allowance provision” below.
December 31, 2020
$
7,018
463
2
5
7,488
December 31, 2019
$
9,064
777
60
4,486
14,387
The loss allowance provision for the Production and Service Business segment as at December 31, 2020 was
determined using reference to expected loss rates and management judgment as follows:
Expected loss rate
Gross carrying amount
%
$
Current
0%
33
Less than 181
days past due
0%
268
181 to 270
days past due
25%
-
271 to 365
days past due
50%
-
More than 365
days past due Total
100%
-
301
The loss allowance provision for the Commercial Business and Licensing and Royalty Business segments as at
December 31, 2020 was determined using reference to expected loss rates and management judgment as follows:
Expected loss rate
Gross carrying amount
Loss allowance provision
%
$
$
Current
0%(i)
7,063
(76)
Less than 61
days past due
0%(i)
215
-
61 to 120
days past due
25%
-
(15)
121 to 180
days past due
50%
-
-
More than 181
days past due
100%
-
-
Total
7,278
(91)
(i)
Loss allowance provision balance consists of credit memos and purchase deductions on invoices that take time to be processed. As a
result, loss provision is 0%.
During the year ended December 31, 2020, the Company recorded $nil bad debt reversal in total comprehensive
income (loss) [December 31, 2019 - $0.1 million]. For the year ended December 31, 2020, the impairment of
accounts receivable was assessed based on the expected credit losses model in compliance with IFRS 9. Individual
receivables that were known to be uncollectible were written off by reducing the carrying amount directly.
For contract assets within the scope of IFRS 15, the Company recognizes an asset to the extent contractual
minimums established in certain customer licensing agreements are deemed fixed consideration. After analysis of
historical default rates and forward-looking estimates, the Company’s contract assets were considered to have low
credit risk, and as a result, the Company has not recognized a loss allowance as at December 31, 2020 [December
31, 2019 - $nil].
The Company’s cash and cash equivalents subject the Company to a concentration of credit risk. As at December
31, 2020, the Company had $23.8 million deposited with three financial institutions in various bank accounts. These
financial institutions are major banks located in Canada, the U.S. and Ireland, which the Company believes lessens
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
the degree of credit risk. All of these financial institutions are considered to have low credit risk and, therefore, the
provision recognized during the current year was limited to 12 months of expected losses. The Company has not
recognized a loss allowance as at December 31, 2020 [December 31, 2019 - $nil].
The Company has not noted a significant change in the credit risk of the financial instruments related to the recent
novel coronavirus (COVID-19) pandemic,
Financial Instruments
IFRS 7 requires disclosure of a three-level hierarchy that reflects the significance of the inputs used in making fair
value measurements. All assets and liabilities for which fair value is measured or disclosed in these Consolidated
Financial Statements are categorized within the fair value hierarchy, described as follows, based on the lowest level
input that is significant to the fair value measurement as a whole:
• Level 1 - Unadjusted quoted prices at the measurement date for identical assets or liabilities in active
markets
• Level 2 - Observable inputs other than quoted prices in Level 1, such as quoted prices for similar assets
and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that
are not active or other inputs that are observable or can be corroborated by observable market data
• Level 3 - Significant unobservable inputs that are supported by little or no market activity
The Company reviews the fair value hierarchy classification on a quarterly basis. Changes to the ability to observe
valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The
Company did not have any transfer of assets and liabilities between Level 1, Level 2 and Level 3 of the fair value
hierarchy during the year ended December 31, 2020.
As at December 31, 2020, the Company’s financial assets and liabilities consisted of cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities, contingent and variable consideration, long-term debt
and derivative liabilities. The Company has determined the estimated fair values of its financial instruments based
on appropriate valuation methodologies. However, considerable judgment is required to develop these estimates.
Accordingly, these estimated values are not necessarily indicative of the amounts the Company could realize in a
current market exchange. The estimated fair value amounts can be materially affected by the use of different
assumptions or methodologies.
The Company’s cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are
measured at amortized cost and their fair values approximate carrying values. Cash and cash equivalents are
Level 1, while the other short-term financial instruments are Level 3.
The fair values of the Loans are Level 3 measurements determined using a discounted cash flow model that
considers the present value of the contractual cash flows using a risk-adjusted discount rate. The Company
recognized $103.7 million for the Amortization Loan and host liability of the Convertible Loan as at December 31,
2020 [December 31, 2019 - $123.4 million]. During year ended December 31, 2020, the Company repaid the $4.5
million (US$3.5 million) outstanding balance of the US$6.0 million Bridge Loan.
The conversion feature that accompanies the Company’s Convertible Loan is considered a Level 3 liability. The
value is determined as the difference between the fair value of the hybrid Convertible Loan contract, determined
using an income approach with a binomial-lattice model and the fair value of the host liability contract, determined
using a discounted cash flow model, as described in Note 13, Derivative Liabilities. The Company recognized $5.7
million for the conversion feature as at December 31, 2020 [December 31, 2019 - $0.8 million].
The fair values of the prepayment option that allows the Company to make prepayments against the Bridge Loan
or Amortization Loan at any time is considered a Level 3 financial instrument. The fair value of the prepayment
option bifurcated from the Amortization Loan was a derivative asset with a nominal value as at December 31, 2020
and is presented net of the non-current portion of the long-term debt (See Note 12, Loans and Borrowings). The
fair value of this option was determined using a binomial-lattice model.
The fair value of the Company’s Warrants is revalued at each reporting period using the Black-Scholes option
pricing model. As at December 31, 2020, the Company recognized a $8.0 million derivative liability related to
outstanding Warrants [December 31, 2019 - $1.4 million]. These Warrants are Level 3.
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
Level 3 liabilities include the fair value of contingent and variable consideration related to the acquisition of the ex-
U.S. rights to Resultz and the Aralez Transaction.
Risk Factors
The following is a discussion of liquidity risk and market risk and related mitigation strategies that have been
identified. Credit risk has been discussed in the Company’s assessment of impairment under IFRS 9. This is not
an exhaustive list of all risks nor will the mitigation strategies eliminate all risks listed.
Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulties in meeting its financial obligations as they
become due.
As at December 31, 2020, the Company’s financial liabilities had undiscounted contractual maturities (including
interest payments where applicable) as summarized below:
Accounts payable and accrued liabilities
Other obligations
Senior secured Amortization Loan
Senior secured Convertible Loan
Total
$
8,314
5,022
64,293
76,337
153,966
Current
Within 12
Months
$
8,314
334
14,919
2,372
25,939
Non-current
1 to 2
Years
$
-
2,610
27,891
4,744
35,245
2 to 5
Years
$
-
801
21,484
69,221
91,506
> 5
Years
$
-
1,277
-
-
1,277
The Company’s ability to satisfy its debt obligations will depend principally upon its future operating performance.
The Company’s inability to generate sufficient cash flows to satisfy its debt service obligations or to refinance its
obligations on commercially reasonable terms could have a materially adverse impact on the Company’s business,
financial condition or operating results.
The Deerfield Facility Agreement contains customary representations and warranties and affirmative and negative
covenants, including, among other things, an annual financial covenant based on minimum levels of net sales per
fiscal year and a mandatory quarterly repayment requirement under the Amortization Loan and the Bridge Loan
equal to the greater of (i) 50% of excess cash flows (as defined in the Deerfield Facility Agreement) for such quarter,
or (ii) US$2.5 million, commenced with the quarter ended March 31, 2019, provided that, solely with respect to the
first four fiscal quarters after the closing date, the US$2.5 million quarterly minimum is not applicable as long as
US$10.0 million in principal repayments have been made over such four fiscal quarters. The Company agreed to
an amendment to the financing agreement dated June 25, 2019, to provide, among other things, for a payment
deferral mechanism in the event that Vimovo U.S. market exclusivity is lost. The amendment allows the Company
to defer a portion of the mandatory minimum quarterly principal repayments by the difference between one quarter
of the US$7.5 million (US$1.9 million per quarter) minimum annual 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 had been expected (2022) prior to the Court of Appeals decision. A generic version of Vimovo entered
the U.S. market in the year ended December 31, 2020. The amount of any deferred principal repayment would,
until repaid in accordance with the amendment, be subject to an interest rate of 12.5% per annum. To-date, the
Company has not availed itself of the deferral mechanism.
As a result of changes in the assumptions regarding the timing of loan payments, the Amortization Loan was
revalued and gains of $2.4 million were recorded for the year ended December 31, 2020. As a result of the
amendment to the agreement dated June 25, 2019, as well as changes in the assumptions regarding the timing of
payments, the Amortization Loan and Bridge Loan were revalued resulting in a loss on modification for the year
ended December 31, 2019 of $2.2 million.
Due to the impact of the COVID-19 pandemic on the economic environment, the Company has reviewed the
working capital requirements needed as a result of managing the supply chain and changes in demand. The
Company anticipates that its current cash of $23.8 million as at December 31, 2020, together with the cash flows
generated from operations, will be sufficient to execute its current business plan for the next 12 months and to meet
its current debt obligations.
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
Interest Rate Risk
The Company’s policy is to minimize interest rate cash flow risk exposures on its long-term financing. The
Company’s loans and borrowings and lease obligations are at fixed interest rates.
The fair value of the Company’s prepayment option on the Amortization Loan and Bridge Loan and the Company’s
derivative liabilities are impacted by market rate changes.
Currency Risk
The Company operates globally, which gives rise to a risk that income and cash flows may be adversely affected
by fluctuations in foreign currency exchange rates. The Company is primarily exposed to the U.S. dollar, euro and
British Pound (GBP), but also transacts in other foreign currencies. The Company currently does not use financial
instruments to hedge these risks. The significant balances in foreign currencies were as follows:
Cash
Accounts receivable
Contract assets
Loans and borrowings
Derivative liabilities
Accounts payable and
accrued liabilities
Other obligations
U.S. Dollar
Euro
British Pound
Dec. 31,
2020
$
7,214
3,145
1,964
(81,468)
(4,452)
(803)
(1,882)
Dec. 31,
2019
$
7,565
8,960
-
(94,976)
(644)
(405)
(1,456)
(76,282)
(80,956)
Dec. 31,
2020
€
1,444
133
-
-
-
(281)
(552)
744
Dec. 31,
2019
€
630
319
-
-
-
(785)
(1,010)
(846)
Dec. 31,
2020
£
1,147
48
183
-
-
-
-
1,378
Dec. 31,
2019
£
619
37
234
-
-
(22)
-
868
Based on the aforementioned net exposure as at December 31, 2020, and assuming that all other variables remain
constant, a 10% appreciation or depreciation of the Canadian dollar against the U.S. dollar would have an effect of
$9.7 million on total comprehensive income (loss), a 10% appreciation or depreciation of the Canadian dollar against
the euro would have an effect of $0.1 million on total comprehensive income (loss) and a 10% appreciation or
depreciation of the Canadian dollar against the GBP would have an effect of $0.2 million on total comprehensive
income (loss).
In terms of the U.S. dollar, the Company has five significant exposures: its U.S. dollar-denominated cash held in
its Canadian operations, its U.S. dollar-denominated loans and borrowings and derivative liabilities held in its
Canadian and European operations, its net investment and net cash flows in its European operations, the cost of
purchasing raw materials either priced in U.S. dollars or sourced from U.S. suppliers and payments made to the
Company under its U.S. dollar-denominated licensing arrangements.
The Company does not currently hedge its U.S. dollar cash flows. The Company funds its U.S. dollar-denominated
interest expense and loan obligations using the Company’s U.S. dollar-denominated cash and cash equivalents
and payments received under the terms of the licensing and supply agreements. Periodically, the Company reviews
its projected future U.S. dollar cash flows and if the U.S. dollars held are insufficient, the Company may convert a
portion of its other currencies into U.S. dollars. If the amount of U.S. dollars held is excessive, they may be
converted into Canadian dollars or other currencies, as needed for the Company’s other operations.
In terms of the euro, the Company has three significant exposures: its euro-denominated cash held in its Canadian
operations, sales of Pennsaid by the Canadian operations to European distributors and the cost of purchasing raw
materials priced in euros.
The Company does not currently hedge its euro cash flows. Sales to European distributors for Pennsaid are
primarily contracted in euros. The Company receives payments from the distributors in its euro bank accounts and
uses these funds to pay euro-denominated expenditures and to fund the day-to-day expenses of the Miravo Ireland
operations as required. Periodically, the Company reviews the amount of euros held, and if they are excessive
compared to the Company’s projected future euro cash flows, they may be converted into U.S. or Canadian dollars.
If the amount of euros held is insufficient, the Company may convert a portion of other currencies into euros.
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
In terms of the GBP, the Company has three significant exposures: its euro-denominated cash held in its Canadian
operations and euro operations, the cost of purchasing raw materials or services priced in GBP and payments made
to the Company under its GBP-denominated licensing arrangements and minimum royalties received and
accounted for as a contract asset in GBP.
The Company does not currently hedge its GBP cash flows. The Company receives payments from the distributors
in its GBP bank accounts and uses these funds to pay GBP-denominated expenditures and to fund the day-to-day
expenses of the Miravo Ireland operations as required. Periodically, the Company reviews the amount of GBP
held, and if they are excessive compared to the Company’s projected future GBP cash flows, they may be converted
into U.S. or Canadian dollars. If the amount of GBP held is insufficient, the Company may convert a portion of other
currencies into GBP.
Market Risk
The Company’s derivative liabilities, the Warrants and the conversion feature that accompanies the Company’s
Convertible Loan, are impacted by a variety of valuation inputs (See Note 13, Derivative Liabilities), including
changes in the Company’s share price. As at December 31, 2020, a $1.00 increase in the Company’s share price
would increase the value of the Warrants by $15.1 million and an increase to the conversion feature of $10.7 million,
with a corresponding loss of $25.8 million recognized in income for the change in fair value of derivative
liabilities. As at December 31, 2020, a further $1.00 increase in the Company’s share price for a total adjustment
of $2.00 would further increase the value of the Warrants by $17.5 million and increase the value of the conversion
feature by $12.7 million, with a corresponding additional loss of $30.2 million recognized in income for change in
fair value of derivative liabilities.
The Company has not noted a significant change in the market risk due to changes to the Company’s share price
as a result of the impact of the COVID-19 pandemic on the economic environment.
26. REVENUE
In the following table, revenue is disaggregated by primary geographic market, major categories of revenue and
timing of revenue recognition as follows:
Year ended December 31
2020
$
2019
$
2020
$
2019
$
2020
$
2019
$
2020
$
2019
$
United States
International
Canada
Total
Primary categories of revenue
Product sales
License revenue
Contract revenue
Timing of revenue recognition
Transferred over time
Transferred at a point in time
10,125 14,104
2,390
5,351 15,332
56
1,825
1,977 39,685 35,803 52,200 51,884
418 21,519 15,758
9,989
1,904
56
79
149
-
-
6,038
-
16,163 21,280 17,778 12,045 39,834 36,221 73,775 69,546
-
1,367
16,163 19,913 17,778 12,045 39,834 36,221 73,775 68,179
1,367
-
-
-
-
-
16,163 21,280 17,778 12,045 39,834 36,221 73,775 69,546
Accounts Receivable and Contract Assets
Accounts receivable
Contract assets
December 31, 2020 December 31, 2019
$
14,387
402
$
7,488
2,845
The timing of revenue recognition, billings and cash collections result in accounts receivable and unbilled
receivables (contract assets). Generally, receipt of payment occurs subsequent to billing and revenue recognition,
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
resulting in accounts receivable. The Company’s contract assets relate to license revenue attributable to minimum
guaranteed sales-based royalties, upfront fees and milestone payments, which have not been billed at the reporting
date. Unbilled receivables (contract assets) will be billed (and subsequently transferred to accounts receivable) in
accordance with the agreed-upon contractual terms.
Significant changes in the contract assets’ current and long-term balance during the year were as follows:
Balance, December 31
Additions to contract assets
Transfers to accounts receivable
Interest accretion
Change in estimates
Vimovo impairment
Foreign exchange movements
Balance, December 31
2020
$
402
5,573
(2,651)
407
(572)
-
(314)
2,845
2019
$
26,752
-
(2,898)
-
-
(22,398)
(1,054)
402
In the year ended December 31, 2020, the Company recognized additions to contract assets in the amount of $5.6
million related to the Yosprala milestones in the Japanese market (See Note 14, Other Obligations). The contract
asset and associated revenue represents the present value of $5.6 million (US$4.0 million) in milestone payments
during the term of this agreement, including $2.8 million (US$2.0 million) triggered by regulatory approval in Japan,
which Miravo Ireland received in the year ended December 31, 2020 resulting in a reduction to the contract asset
of $2.6 million.
The Company’s contract assets are subject to estimation regarding the likelihood of the minimum guaranteed sales-
based royalties. In July 2019, the Company received notice that the Court of Appeals had denied the Company’s
and Horizon’s request to reconsider the May 2019 decision with respect to the validity of Vimovo U.S. Patent Nos.
6,926,907 and 8,557,285 in the U.S. On February 18, 2020, Dr. Reddy’s second-filed ANDA for Vimovo in the U.S.
received FDA approval and a generic Vimovo launched in the three months ended March 31, 2020. The Company’s
US$7.5 million (US$1.9 million per quarter) minimum annual royalty due for Vimovo net sales in the U.S. ceased
upon the launch of a generic Vimovo in the U.S. The Company will continue to receive a 10% royalty on net sales
of Vimovo by its U.S. partner, subject to a step-down provision in the event that generic competition achieves a
certain market share.
In the year ended December 31, 2019, the Company had written off its contract asset attributable to its Vimovo U.S.
royalty and recognized a $23.6 million non-cash impairment charge.
Significant Customers
For the year ended December 31, 2020, the Company’s four largest customers generating product sales
represented 88% [December 31, 2019 - 87%] of total product sales and the Company’s largest customer
represented 32% [December 31, 2019 - 30%] of total product sales.
27. SEGMENT REPORTING
Operating Segments
The Company has three operating segments: Commercial Business, Production and Service Business and
Licensing and Royalty Business.
The Commercial Business segment is comprised of products commercialized by the Company in Canada. This
segment includes the Company’s promoted products - Blexten, Cambia, Suvexx, NeoVisc and the Canadian
business for Resultz, as well as a number of mature assets.
The Production and Service Business segment includes revenue from the sale of products manufactured by the
Company from its manufacturing facility in Varennes, Québec or contracted by Miravo Ireland from its international
headquarters in Dublin, Ireland, as well as service revenue for testing, development and related quality assurance
and quality control services provided by the Company. Key revenue streams in this segment include Pennsaid 2%,
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
Pennsaid, the bulk drug product for the HLT Patch, as well as transition services provided by Miravo Ireland to two
companies during the year ended December 31, 2019.
The Licensing and Royalty Business segment includes the revenue generated by the licensing of intellectual
property and ongoing royalties from exclusive licensing agreements with global partners. Key revenue streams in
this segment include royalties from the Company’s Vimovo, Yosprala, Resultz and HLT Patch license agreements.
The Corporate and Other total includes overhead and financing costs incurred by the Company to support its public
company infrastructure and the three operating segments.
Year ended December 31, 2020
Total revenue
Cost of goods sold
Gross profit
Sales and marketing expenses
General and administrative expenses
Interest expense (income)
Depreciation and amortization, excluded
from cost of goods sold
Other expenses
Income tax expense
Segment net income (loss)
Total segment assets(i)
(i) As at December 31, 2020
Year ended December 31, 2019
Total revenue
Cost of goods sold
Gross profit
Sales and marketing expenses
General and administrative expenses
Interest expense (income)
Depreciation and amortization, excluded
from cost of goods sold
Other income
Income tax expense
Segment net income (loss)
Total segment assets(i)
(i) As at December 31, 2019
Commercial
Business
$
39,449
15,854
23,595
8,928
-
-
Production
and Service
Business
$
12,807
7,455
5,352
-
-
-
Licensing
and Royalty
Business
$
21,519
-
21,519
-
-
(406)
-
-
-
14,667
94,183
-
-
-
5,352
10,476
-
-
-
21,925
41,791
Commercial
Business
$
35,578
17,860
17,718
9,796
-
-
-
-
Production
and Service
Business
$
18,210
8,612
9,598
-
-
-
-
-
Licensing
and Royalty
Business
$
15,758
-
15,758
-
(2,265)
-
-
-
7,922
95,968
9,598
10,387
18,023
53,151
Corporate
and Other
$
-
-
-
-
12,893
11,847
8,314
11,867
1,152
(46,073)
5,315
Corporate
and Other
$
-
-
-
-
17,840
12,570
8,356
(6,650)
28
(32,144)
3,623
Total
$
73,775
23,309
50,466
8,928
12,893
11,441
8,314
11,867
1,152
(4,129)
151,765
Total
$
69,546
26,472
43,074
9,796
17,840
10,305
8,356
(6,650)
28
3,399
163,129
28. KEY MANAGEMENT COMPENSATION
Key management personnel are those persons having authority and responsibility for planning, directing and
controlling the activities of the Company, including directors. In 2020, key management included the Company’s
President & Chief Executive Officer, Vice President & Chief Financial Officer, Interim Chief Financial Officer, Vice
President, Secretary & General Counsel, Vice President Operations & Chief Scientific Officer, Vice President, Sales
& Marketing, the Executive Chairman and non-employee directors. In 2019, key management included the
Company’s President & Chief Executive Officer, Vice President & Chief Financial Officer, Vice President, Secretary
& General Counsel, Vice President Operations & Chief Scientific Officer, Vice President, Sales & Marketing, the
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
Executive Chairman and non-employee directors. Compensation for the Company’s key management personnel
was as follows:
Short-term wages, bonuses and benefits
Share-based payments
Total key management compensation
Included in:
Sales and marketing
General and administrative expenses
Total key management compensation
29. CAPITAL MANAGEMENT
Year ended
December 31, 2020
$
2,615
219
2,834
Year ended
December 31, 2019
$
3,541
399
3,940
415
2,419
2,834
488
3,452
3,940
The Company currently defines its capital to include its cash and cash equivalents, long-term debt (including current
portion), derivative liabilities and shareholders’ equity excluding AOCI.
The Company’s objectives when managing capital are:
(a) To allow the Company to respond to changes in economic and marketplace conditions;
(b) To give shareholders sustained growth in shareholder value by increasing equity; and
(c) To maintain a flexible capital structure that optimizes the cost of capital at acceptable levels of risk.
In the past, the Company has financed its business primarily through its operations, the net proceeds received from
the sale of common shares and warrants, issuance of secured debt and convertible debentures, finance lease
obligations and investment income earned on cash balances and short-term investments. The Company continues
to manage its capital structure and will maintain or adjust its capital structure to facilitate the execution of the
Company’s objectives or in light of changes in the economic environment.
The Company’s capital is comprised of debt and shareholders’ equity as follows:
Cash and cash equivalents and restricted cash
Long-term debt, including current portion
Derivative liabilities
Shareholders’ equity, excluding AOCI
30. GOVERNMENT GRANTS
December 31, 2020
$
23,807
103,697
13,665
20,325
161,494
December 31, 2019
$
23,019
123,377
2,229
24,130
172,755
In April 2020, the Government of Canada announced the Canada Emergency Wage Subsidy (CEWS) in order to
help employers keep and/or return employees to work in response to challenges posed by the COVID-19 pandemic.
In the third quarter of 2020, the Company determined that it met the employer eligibility criteria and applied for the
CEWS. As at December 31, 2020, the Company recorded $1.2 million in government assistance resulting from
the Canada Emergency Wage Subsidy. The funding has been recorded as a reduction of the related salary
expenditures with $0.4 million recorded in sales and marketing expense, $0.4 million recorded in G&A expenses
and $0.4 million recorded in COGS. There are no unfulfilled conditions or other contingencies attaching to the
current CEWS.
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
31. SUBSEQUENT EVENT
In February 2021, Miravo Ireland entered into an exclusive License Agreement with The Mentholatum Company for
the exclusive right to commercialize the Resultz formula and technology in the United States under the
Mentholatum® brand. Miravo Ireland will earn revenue from The Mentholatum Company pursuant to the License
Agreement. It is anticipated that The Mentholatum Company will launch Resultz during the summer of 2021. The
License Agreement has been structured with an 18-month term, which will allow both parties to reassess market
dynamics related to the COVID-19 pandemic and to determine if a longer-term agreement is warranted in a post-
pandemic commercial environment. Resultz is currently manufactured by the Company's contract manufacturing
partner in Europe.
Consolidated Financial Statements (audited)
Nuvo Pharmaceuticals Inc. d/b/a Miravo Healthcare
Corporate Information
HEAD OFFICE
6733 Mississauga Road, Suite 800
Mississauga, Ontario, Canada L5N 6J5
Tel. (905) 673-6980
Fax. (905) 673-1842
Email: info@miravohealth.com
Website: www.miravohealthcare.com
INVESTOR RELATIONS
Email: ir@miravohealth.com
AUDITORS
Ernst & Young LLP
Toronto, Canada
LEGAL COUNSEL
Goodmans LLP
Toronto, Canada
STOCK EXCHANGE LISTING
The Toronto Stock Exchange
Symbol: MRV
OTCQX
Symbol: MRVFF
TRANSFER AGENT/REGISTRAR
Common Shares
AST Trust Company (Canada)
P.O. Box 700, Station B
Montreal, QC
H3B 3K3
Canada
Telephone: 1-800-387-0825
or outside Canada and U.S. 416-682-3860
Fax: 1-888-249-6189 or
outside Canada and U.S. 514-985-8843
Email: inquiries@astfinancial.com
Website: www.astfinancial.com/ca
CORPORATE GOVERNANCE
The Company’s website www.miravohealthcare.com contains the Company’s corporate governance
documents including Articles and By-laws, Committee Charters and Key Position Descriptions and
Corporate Policies and Practices.
Board of Directors and Executive Officers
Robert Harris
Executive Chairman
Chair of the Transaction Committee
David A. Copeland, BMath, CPA, CA
Lead Director
Chair of the Audit Committee
Daniel N. Chicoine, BComm, CPA, CA
Director
Jesse F. Ledger, BBA
President & Chief Executive Officer
John C. London, LLB, LLM
Vice Chairman
Anthony E. Dobranowski, BSc, MBA, CPA, CA
Director
Chair of the Compensation, Corporate
Governance & Nominating Committee
Mary-Jane E. Burkett, CPA, CA, HBA
Vice President & Chief Financial Officer
(maternity leave)
Katina K. Loucaides, MSc, LLB
Vice President, Secretary & General Counsel
Kelly A. Demerino, CPA, CA, CIA
Interim Chief Financial Officer