Pennsaid^®

Pennsaid, the Company's lead product, is used to treat the pain and symptoms associated with knee osteoarthritis (OA). The drug combines a 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. While conventional oral NSAIDs expose patients to potentially serious systemic side effects such as gastrointestinal bleeding and cardiovascular problems, Nuvo's clinical trials suggest that some of these systemic side effects occur less frequently with topically applied Pennsaid.

A National Institute of Health (NIH) epidemiology publication reported that 26.9 million American adults aged 25 and older suffer with clinical OA and it is estimated that in the next 20 years this number will reach 40 million. In adults, arthritis is one of the leading causes of disability and is among the most common conditions resulting in work limitations. According to the Arthritis Foundation (AF) most Americans are unaware of the seriousness of arthritis and the substantial negative impact it can have on an individual's quality of life and use of health-care resources. They estimate that it costs the U.S. economy more than $128 billion annually. According to the AF, knee osteoarthritis, the most frequent form of lower extremity arthritis, contributes to 418,000 knee replacement procedures annually and in 2006 accounted for $19 billion in hospital charges.

A number of existing pharmaceutical products treat the pain associated with OA. The goal, according to the American College of Rheumatology (ACR), is "control of pain and improvement in function and health-related quality of life, with avoidance, if possible, of toxic effects of therapy." The global OA prescription drug 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 such as ibuprofen and naproxen (Advil^®, Motrin^®, Aleve^®);
• oral, full-dose, NSAIDs which are available only by prescription;
• topical NSAIDs, of which only one is approved by the FDA to treat the pain of OA and is available by prescription only;
oral COX-2 selective NSAIDs which are available only by prescription; and
oral narcotics, such as opioid analgesics which are available only by prescription.

Pennsaid is a topical NSAID solution available only by prescription where approved. It has been approved for sale and marketing in Canada, several Caribbean nations and a number of European countries, including Greece, Italy and the United Kingdom.

In June 2009, Nuvo entered into a license and development agreement with Mallinckrodt Inc., a subsidiary of Covidien (NYSE:COV), a leading global provider of healthcare products, granting it exclusive rights to market and sell Pennsaid, and its follow-on product, Pennsaid Plus, in the United States.

On November 4, 2009, the U.S. Food and Drug Administration (FDA) approved Nuvo's New Drug Application for Pennsaid. The approval allows Covidien to market and sell Pennsaid in the United States which they plan to commence in the first half of 2010.