Pennsaid^® (1.5% w/w diclofenac sodium solution)

Pennsaid^®, the Corporation's primary product, is used to treat the pain and stiffness associated with knee osteoarthritis ("OA"). The drug combines its transdermal carrier (containing dimethyl sulfoxide, popularly known as "DMSO") with diclofenac sodium, a leading NSAID, and delivers the active drug through the skin directly to the pain site. Nuvo's clinical trials suggest that Pennsaid^® reduces some of the serious side effects associated with conventional oral NSAID treatment, such as gastrointestinal bleeding and cardiovascular side effects.

Arthritis and musculoskeletal disorders are among the most frequently occurring chronic conditions and may have a substantial impact on an individual's quality of life and use of health-care resources. According to The Arthritis Society, arthritis and disorders of the musculoskeletal system are a leading cause of work-related disability.

The American College of Rheumatology ("ACR") offers the following description:

"OA is the most common form of arthritis in the United States. Patients with OA have pain (that typically worsens with weight bearing and activity and improves with rest), as well as morning stiffness and gelling of the involved joint after periods of inactivity. On physical examination, they often have tenderness on palpation, bony enlargement, crepitus of motion, and/or limitation of joint motion. Unlike the case with rheumatoid arthritis (RA) and other systemic inflammatory arthritides, inflammation and joint effusion, if present, is usually mild and localized to one or two affected joints."

The ACR estimates that more than 30 million Americans suffer from OA. While the disease can affect any age group, it is more common among those over 45, and the incidence is expected to rise as the population ages.

A number of existing pharmaceutical products treat the pain associated with OA. The goal, according to the ACR, is to "include control of pain and improvement in function and health-related quality of life, with avoidance, if possible, of toxic effects of therapy." The U.S. osteoarthritis market is estimated to have annual sales of approximately US$4 billion. Of the many products on the market, most fall into one of the following categories:

• over-the-counter oral medications that are accessible without a doctor's prescription, such as acetaminophen and low-dose NSAIDs (Advil^®, Motrin^®, Aleve^®);
• oral, full-dose, NSAIDs which are available only by prescription;
oral COX-2 selective NSAIDs which are available only by prescription; and
oral narcotics, such as opioid analgesics which are available only by prescription.

Unlike these oral medications, Pennsaid^® is a topical NSAID solution available only by prescription.