EMERYVILLE, Calif.--(BUSINESS WIRE)--NovaBay® Pharmaceuticals, Inc. (NYSE MKT: NBY), a biopharmaceutical company focusing on commercializing its prescription Avenova lid and lash hygiene product for the domestic eye care market, reports financial results for the three months ended March 31, 2016, and provides a business update.
“Total sales for the quarter reached $1.7 million, up 5% sequentially; however, under our new pharmacy channel strategy, sales for the quarter on a non-GAAP basis would have grown by 44% to $2.3 million, as we still needed to work through the lower-priced inventory held in our distributors’ network at the end of 2015,” said Mark M. Sieczkarek, NovaBay’s Chairman and Interim President and CEO. “We sold through the entire remaining lower-priced inventory during the first quarter and all retail pharmacy sales are now under the new pricing model.
“I’m pleased to report on our recent progress that supports our goal to achieve positive cash flow from operations by the end of the year,” Mr. Sieczkarek said. “We implemented a multi-pronged marketing strategy aimed at increasing Avenova sales by calling on the more lucrative, and reimbursed, ophthalmology channel. This strategy was designed to benefit consumers, the healthcare system and ultimately our shareholders through increased revenues and margins. We also closed the first tranche of an $11.8 million private placement. We expect that this financing and the exercise of related warrants will provide the necessary capital for us to reach positive cash flow by the end of the year.
“We also presented clinical validation of Avenova’s effectiveness at the premier ARVO conference. It is exceptionally gratifying that Avenova is the only commercial product shown in a multicenter clinical study to substantially reduce bacteria that can cause blepharitis,” he explained. “Although we have substantial anecdotal evidence, laboratory studies and patient testimonials about the effectiveness of Avenova for the management of blepharitis, we now have the clinical validation that many eye care specialists were seeking before beginning to prescribe Avenova to their patients.”
First Quarter 2016 Financial Results
NovaBay reported total net sales on a GAAP basis for the first quarter of 2016 of $1.7 million, up 220% from $538,000 for the first quarter of 2015. The increase was primarily due to higher sales of Avenova, which was commercially launched in August 2014. Gross profit margin as a percentage of total net sales was 64% for the first quarter of 2016, compared with 72% for the prior-year period, with the decline primarily due to the product mix of Avenova and NeutroPhase® sales. On a non-GAAP basis, first quarter of 2016 gross profit margin as a percentage of total net sales was 76% and of Avenova sales was 85%.
The net loss for the first quarter of 2016 was $5.1 million, or $1.24 per share, compared with a net loss for the first quarter of 2015 of $4.6 million, or $2.13 per share. The higher net loss in the first quarter of 2016 was a result of final expenses to close out prior R&D and clinical programs, the residual expenses of the Company’s restructuring implemented in the fourth quarter of 2015, $1.2 million increase in sales and marketing expense and the impact of a non-cash loss in the fair value of warrant liability. R&D expenses were $933,000 and general and administrative expenses were $1.7 million for the first quarter of 2016, compared with $1.6 million and $1.6 million, respectively, for the prior-year period. First quarter of 2016 operating expenses for R&D and general and administrative expenses included approximately $800,000 in one-time charges related to the close out of previously completed clinical trials and professional fees for the various financial transactions undertaken during the quarter. It is therefore expected that quarterly operating expenses for the remainder of 2016 will be lower. Non-cash loss on the change of fair value of warrant liability was $385,000 for the first quarter of 2016, compared with a $34,000 gain for the first quarter of 2015.
Cash, cash equivalents and short-term investments were $1.4 million as of March 31, 2016, compared with $2.4 million as of December 31, 2015. The Company used approximately $4.9 million in cash to fund operations during the first quarter of 2016. In January 2016, NovaBay secured an additional $1.4 million bridge loan and in February 2016, the Company completed a private placement raising net proceeds of $2.6 million.
On May 3, 2016, NovaBay received stockholder approval for the sale of common stock and warrants in a private placement to accredited investors for $11.8 million in two tranches. The Company closed the first tranche on May 5, 2016, with gross proceeds of $7.8 million, and the second tranche is scheduled to close on July 31, 2016, for additional gross proceeds of $4.0 million.
Financial Results and non-GAAP Information
Condensed consolidated financial information has been presented in accordance with GAAP as well as on a non-GAAP basis. Management believes that it is useful to supplement its GAAP financial statements with this non-GAAP information because management uses such information for its operating, budgeting and financial planning purposes. These non-GAAP financial measures also facilitate management’s internal comparisons to NovaBay’s historical performance as well as comparisons to the operating results of other companies. Management believes these non-GAAP financial measures are useful to investors because they allow for greater transparency into the indicators used by management as a basis for its financial and operational decision-making.
Non-GAAP sales represents GAAP total net sales plus the potential net sales, which would have been recognized had there not been, inventory in the channel at the time of the January 1, 2016 price increase to Avenova. Non-GAAP sales are calculated using GAAP total net sales and adding the potential sales generated on the price differential between the distributor purchase price after the January 1, 2016 price increase and the distributor purchase price paid on units in the channel as of December 31, 2015 but sold during the period, less any reserves previously taken on these units to account for the estimated rebate in excess of the distributor purchase price.
Non-GAAP financial information is not prepared under a comprehensive set of accounting rules and therefore, should only be read in conjunction with financial information reported under U.S. GAAP in order to understand NovaBay’s operating performance. A reconciliation of the non-GAAP financial measures presented in this release, including non-GAAP net income (loss), non-GAAP revenue, and other measures, is provided in the tables attached to this press release.
Conference Call
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 866-239-5859 from within the U.S. or 702-495-1913 from outside the U.S., with the conference identification number 92879104.
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 May 14, 2016, 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 92879104.
About NovaBay Pharmaceuticals, Inc.: Going Beyond Antibiotics
NovaBay Pharmaceuticals is a biopharmaceutical company focusing on the commercialization of prescription Avenova® Lid and Lash Hygiene for the eye care market. Avenova is formulated with Neutrox™, which is cleared by the U.S. Food and Drug Administration (FDA) as a 510(k) medical device. Neutrox is NovaBay’s pure hypochlorous acid. Laboratory tests show that hypochlorous acid has potent antimicrobial activity in solution yet is non-toxic to mammalian cells and it also neutralizes bacterial toxins. Avenova is marketed to optometrists and ophthalmologists throughout the U.S. by NovaBay’s direct medical salesforce. It is accessible from more than 90% of retail pharmacies in the U.S. through agreements with McKesson Corporation, Cardinal Health and AmeriSource Bergen.
Forward-Looking Statements
This release contains forward-looking statements, which are based upon management’s current expectations, assumptions, estimates, projections and beliefs. These statements include, but are not limited to, statements regarding our ability to become cash flow positive by the end of 2016, future sales of our products, the ability to raise additional capital through warrant exercises, and the Company’s expected future financial results. Forward-looking statements can be identified with words like (and variations of): “estimate,” “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 the Company’s ability to obtain additional financing as necessary. 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 Contacts
For NovaBay Avenova purchasing information, please contact:
Call us: 1-800-890-0329
| NOVABAY PHARMACEUTICALS, INC. | ||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||||
| (in thousands, except shares and per share data) | ||||||||||||
| March 31, | December 31, | |||||||||||
| 2016 | 2015 | |||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 1,430 | $ | 2,385 | ||||||||
| Accounts receivable, net of allowance for doubtful accounts ($71 and $40 at March 31, 2016 and December 31, 2015, respectively) | 1,497 | 536 | ||||||||||
| Inventory | 1,201 | 1,345 | ||||||||||
| Prepaid expenses and other current assets | 433 | 261 | ||||||||||
| Total current assets | 4,561 | 4,527 | ||||||||||
| Property and equipment, net | 370 | 395 | ||||||||||
| Other assets | - | 155 | ||||||||||
| TOTAL ASSETS | $ | 4,931 | $ | 5,077 | ||||||||
| LIABILITIES AND STOCKHOLDERS' (DEFICIT) | ||||||||||||
| Liabilities: | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 1,820 | $ | 2,483 | ||||||||
| Accrued liabilities | 2,019 | 1,980 | ||||||||||
| Deferred revenue | 189 | 170 | ||||||||||
| Total current liabilities | 4,028 | 4,633 | ||||||||||
| Deferred revenues - non-current | 3,115 | 2,248 | ||||||||||
| Deferred rent | 189 | 189 | ||||||||||
| Notes payable, related party | 3,063 | 1,655 | ||||||||||
| Warrant liability | 1,835 | 1,450 | ||||||||||
| Total liabilities | 12,230 | 10,175 | ||||||||||
| Stockholders' (deficit): | ||||||||||||
| Common stock, $0.01 par value; 240,000 shares authorized; 5,075 and 3,486 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively | 51 | 35 | ||||||||||
| Additional paid-in capital | 88,248 | 85,387 | ||||||||||
| Accumulated deficit | (95,598 | ) | (90,520 | ) | ||||||||
| Total stockholders' (deficit) | (7,299 | ) | (5,098 | ) | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) | $ | 4,931 | $ | 5,077 | ||||||||
| NOVABAY PHARMACEUTICALS, INC. | ||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | ||||||||||||
| (unaudited) | ||||||||||||
|
|
Three Months Ended |
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|
|
March 31, |
|||||||||||
| 2016 | 2015 | |||||||||||
| Sales: | ||||||||||||
| Product revenue | $ | 1,655 | $ | 492 | ||||||||
| Other revenue | 64 | 46 | ||||||||||
| Total net sales | 1,719 | 538 | ||||||||||
| Product cost of goods sold | 611 | 148 | ||||||||||
| Gross profit | 1,108 | 390 | ||||||||||
| Research and development | 933 | 1,583 | ||||||||||
| Sales and marketing | 3,144 | 1,914 | ||||||||||
| General and administrative | 1,655 | 1,554 | ||||||||||
| Total operating expenses | 5,732 | 5,051 | ||||||||||
| Operating Loss | (4,624 | ) | (4,661 | ) | ||||||||
| Non cash (loss) gain on changes in fair value of warrant liability | (385 | ) | 34 | |||||||||
| Other expense, net | (68 | ) | (11 | ) | ||||||||
| Loss before provision for income taxes | (5,077 | ) | (4,638 | ) | ||||||||
| Provision for income tax | - | (2 | ) | |||||||||
| Net loss and comprehensive loss | $ | (5,077 | ) | $ | (4,640 | ) | ||||||
| Net loss per share attributable to common stockholders (basic and diluted) | $ | (1.24 | ) | $ | (2.13 | ) | ||||||
| Weighted-average shares of common stock outstanding used in computing net loss per share of common stock | 4,086 | 2,175 | ||||||||||
| NOVABAY PHARMACEUTICALS, INC. | ||||||||||
| Reconciliation of GAAP to Non-GAAP Financial Information | ||||||||||
| (Unaudited) | ||||||||||
| (In thousands) | ||||||||||
| Three Months Ended | ||||||||||
| March 31, | ||||||||||
| 2016 | 2015 | |||||||||
| Product sales (GAAP) | $ | 1,655 | $ | 492 | ||||||
| Non-GAAP Adjustment: | ||||||||||
| Net sales generated on the price differential between the distributor purchase price after the January 1, 2016 price increase and the distributor purchase price paid on units in the channel as of December 31, 2015 sold during the period | $ | 630 | $ | - | ||||||
| Adjusted product sales (Non-GAAP) | $ | 2,285 | $ | 492 | ||||||
| Other revenue | $ | 64 | $ | 46 | ||||||
|
Other revenue (GAAP and Non-GAAP) |
$ | 64 | $ | 46 | ||||||
| Total net sales (GAAP) | $ | 1,719 | $ | 538 | ||||||
| Non-GAAP Adjustment: | ||||||||||
| Net sales generated on the price differential between the distributor purchase price after the January 1, 2016 price increase and the distributor purchase price paid on units in the channel as of December 31, 2015 sold during the period | $ | 630 | $ | - | ||||||
| Total net sales (Non-GAAP) | $ | 2,349 | $ | 538 | ||||||
| Product cost of goods sold (GAAP and Non-GAAP) | 611 | 148 | ||||||||
| Gross profit (Non-GAAP) | $ | 1,738 | $ | 390 | ||||||