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Affirms 2017 revenue guidance
Conference call begins today at 4:30 p.m. Eastern time
NovaBay® Pharmaceuticals, Inc. (NYSE MKT: NBY), a biopharmaceutical company focusing on commercializing prescription Avenova® for lid and lash hygiene in the domestic eye care market, reports financial results for the three and six months ended June 30, 2017 and provides a business update.
“We had record Avenova unit volume through the pharmacy channel during the second quarter, along with an 80% increase in revenue through this channel over the prior year. Our planned shift of sales to the higher-margin pharmacy channel from our legacy in-office direct sales channel continued into the second quarter, and resulted in Avenova sales growth of 48% year-over-year. Importantly, total revenue increased 79% for the first half of 2017 as we continue to be confident in reaching our revenue guidance for the year,” said Mark M. Sieczkarek, NovaBay’s President and CEO. “Our focus on the ophthalmology channel continues to pay off with gross margin on Avenova sales reaching 89%, in line with our expectations for the year. We carefully managed and reduced our cash burn while investing in sales and marketing initiatives to support continued growth, and we continue to believe that our current financial resources will be sufficient to fund operations and our growth strategy throughout 2017.
“As part of our ongoing strategy to make Avenova accessible to an ever-growing number of patients, I am pleased to announce that during the second quarter we teamed up with MedVantx and the world’s largest retailer. Our new partnership provides patients with the option of home delivery of Avenova in all 50 states or pick up at one of thousands of in-store pharmacies across the U.S.
“We expanded our sales organization early this year and we expect our sales to continue to increase as our newer sales representatives gain tenure and become more productive,” he added. “We are affirming revenue guidance for 2017 including our outlook for total sales of $19 million, which represents a 60% increase over 2016.”
Key Second Quarter Metrics
Second Quarter 2017 Financial Results
Net sales for the second quarter of 2017 increased 55% to $4.1 million from $2.7 million for the second quarter of 2016. Total gross profit margin improved to 83% for the second quarter of 2017 from 82% for the second quarter of 2016. The gross profit margin on Avenova sales for the second quarter of 2017 improved to 89% from 85% for the prior-year period.
Operating loss for the second quarter of 2017 improved 22% to $1.8 million from $2.2 million for the second quarter of 2016. Sales and marketing expenses for the second quarter of 2017 were $3.4 million compared with $2.9 million for the prior-year period, with the increase primarily due to an increase in the number of sales representatives and increased sampling and marketing programs. G&A expenses for the second quarter of 2017 were $1.7 million compared with $1.3 million for the prior-year period, with the increase primarily resulting from higher stock-based compensation expense and increased expenses to support the employee salesforce, partially offset by lower lease expenses. R&D expenses declined to $70,000 for the second quarter of 2017 from $0.3 million for the second quarter of 2016, primarily due to the Company’s focus on Avenova commercialization.
Non-cash gain on the change of fair value of warrant liability for the second quarter of 2017 was $15,000 compared with a non-cash loss of $424,000 for the second quarter of 2016.
The net loss for the second quarter of 2017 was $1.7 million, or $0.11 per share on a basic basis, compared with a net loss for the second quarter of 2016 of $2.7 million, or $0.36 per share on a basic basis.
Six-Month 2017 Financial Results
Net sales for the six months ended June 30, 2017 were $7.8 million, up 79% from $4.4 million for the six months ended June 30, 2016. Total gross profit margin was 84% for the first half of 2017, compared with 75% for the first half of 2016. Gross profit margin on Avenova sales was 89% the first half of 2017, compared with 82% for the first half of 2016.
Operating loss for the first six months of 2017 was $5.5 million, a 20% improvement from $6.9 million for the comparable period in 2016. Sales and marketing expenses for the six months ended June 30, 2017 increased 19% to $7.1 million and G&A expenses increased 62% to $4.8 million, both compared with the six months ended June 30, 2016. R&D expenses for the first six months of 2017 decreased 89% to $0.1 million compared with the first six months of 2016.
Non-cash loss on the change of fair value of warrant liability for the first six months of 2017 was $220,000 compared with a non-cash loss of $809,000 for the first six months of 2016.
The net loss for the six months ended June 30, 2017 was $5.7 million, or $0.38 per share on a basic basis, compared with a net loss for the six months ended June 30, 2016 of $7.8 million, or $1.35 per share on a basic basis.
NovaBay reported cash and cash equivalents of $5.7 million as of June 30, 2017, compared with $9.5 million as of December 31, 2016.
The Company used $1.6 million in cash to fund operations during the second quarter of 2017, a significant improvement from $2.7 million used during the second quarter of 2016. The decrease in cash usage was primarily due to higher sales of Avenova.
2017 Financial Outlook
NovaBay is affirming total sales and gross profit margin guidance for 2017. The Company’s expectations are as follows:
NovaBay management will host an investment community conference call today beginning at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss the Company’s financial and operational results and to answer questions. Shareholders and other interested parties may participate in the conference call by dialing 800-608-8202 from within the U.S. or 702-495-1913 from outside the U.S., with the conference identification number 56306358.
A live webcast of the call will be available at http://novabay.com/investors/events and will be archived for 90 days.
A replay of the call will be available beginning two hours after call completion through 11:59 p.m. Eastern time September 9, 2017 by dialing 855-859-2056 from within the U.S. or 404-537-3406 from outside the U.S. and entering the conference identification number 56306358.
Avenova is NovaBay Pharmaceuticals’ main commercial focus. Data from a multicenter clinical study show that Avenova reduced bacterial load, the underlying cause of blepharitis, on ocular skin surface by more than 90%. Laboratory tests show that hypochlorous acid has potent antimicrobial activity in solution yet is non-toxic to mammalian cells and also neutralizes bacterial toxins. Avenova is marketed to optometrists and ophthalmologists throughout the U.S. by NovaBay’s direct salesforce. It is accessible from more than 90% of retail pharmacies in the U.S. through agreements with McKesson Corporation, Cardinal Health and AmerisourceBergen.
About NovaBay Pharmaceuticals, Inc.: Going Beyond Antibiotics®
NovaBay Pharmaceuticals, Inc. is a biopharmaceutical company focusing on commercializing and developing its non-antibiotic anti-infective products to address the unmet therapeutic needs of the global, topical anti-infective market with its two distinct product categories: the NEUTROX® family of products and the AGANOCIDE® compounds. The Neutrox family of products includes AVENOVA® for the eye care market, NEUTROPHASE® for wound care market, and CELLERX® for the aesthetic dermatology market. The Aganocide compounds, still under development, have target applications in the dermatology and urology markets.
This release contains forward-looking statements that are based upon management’s current expectations, assumptions, estimates, projections and beliefs. These statements include, but are not limited to, statements regarding our expected annual revenue, expected operating losses, gross margin, the future sales of our products, what we believe to be sufficient future financial resources, and generally the Company’s expected future financial results. Forward-looking statements can be identified with words like (and variations of): “believe,” and “expect.” These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or achievements to be materially different and adverse from those expressed in or implied by the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, risks and uncertainties relating to difficulties or delays in manufacturing, distributing, and selling the Company’s products, unexpected adverse side effects or inadequate therapeutic efficacy of our product, the uncertainty of patent protection for the Company’s intellectual property, and any potential regulatory problems. Other risks relating to NovaBay’s business, including risks that could cause results to differ materially from those projected in the forward-looking statements in this press release, are detailed in NovaBay’s latest Form 10-K and Form 10-Q filings with the Securities and Exchange Commission, especially under the heading "Risk Factors." The forward-looking statements in this release speak only as of this date, and NovaBay disclaims any intent or obligation to revise or update publicly any forward-looking statement except as required by law.
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|NOVABAY PHARMACEUTICALS, INC.|
|CONDENSED CONSOLIDATED BALANCE SHEETS|
|June 30,||December 31,|
|Cash and cash equivalents||$||5,722||$||9,512|
|Accounts receivable, net of allowance for doubtful accounts ($48 and $10 at June 30, 2017 and December 31, 2016, respectively)||3,601||2,120|
|Inventory, net of allowance for excess and obsolete inventory and lower of cost or estimate net realizable value adjustments of $149and $196 at June 30, 2017 and December 31, 2016, respectively)||672||873|
|Prepaid expenses and other current assets||972||1,966|
|Total current assets||10,967||14,471|
|Property and equipment, net||462||371|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Total current liabilities||4,735||4,323|
|Deferred revenues - non-current||1,997||1,986|
|Stockholders' equity :|
|Preferred stock: 5,000 shares authorized; none outstanding at June 30, 2017 and December 31, 2016||—||—|
Common stock, $0.01 par value; 240,000, shares authorized 15,309 and 15,269 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively
|Additional paid-in capital||112,477||110,619|
|Total stockholders' equity||3,209||7,101|
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY||$||12,070||$||15,381|
|NOVABAY PHARMACEUTICALS, INC.|
|CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS|
|(In thousands, except per share data)|
|Three Months Ended||Six Months Ended|
|June 30,||June 30,|
|Product revenue, net||$||4,094||$||2,654||$||7,788||$||4,309|
|Total sales, net||4,122||2,663||7,823||4,382|
|Product cost of goods sold||698||479||1,286||1,090|
|Research and development||70||278||132||1,211|
|Sales and marketing||3,376||2,853||7,116||5,997|
|General and administrative||1,735||1,293||4,823||2,975|
|Total operating expenses||5,181||4,424||12,071||10,183|
|Non-cash gain (loss) on changes in fair value of warrant liability||15||(424||)||(220||)||(809||)|
|Other income (expense), net||4||(24||)||6||(65||)|
|Loss before provision for income taxes||(1,738||)||(2,688||)||(5,748||)||(7,765||)|
|Provision for income tax||-||(2||)||(1||)||(2||)|
|Net loss and comprehensive loss||
|Net loss per share attributable to common stockholders (basic and diluted)||$||(0.11||)||$||(0.36||)||$||(0.38||)||$||(1.35||)|
|Weighted-average shares of common stock outstanding used in computing net loss per share of common stock||15,308||7,407||15,296||5,746|
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