Market Overview

NovaBay Pharmaceuticals Reports Second Quarter 2018 Financial Results

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Conference call begins today at 4:30 p.m. Eastern time

NovaBay®
Pharmaceuticals, Inc.
(NYSE:NBY), a biopharmaceutical
company focusing on commercializing prescription Avenova® for
the domestic eye care market, reports financial results for the three
and six months ended June 30, 2018 and provides a business update.

Net product revenue for the second quarter of 2018 was $2.8 million,
compared with $4.1 million for the second quarter of 2017, with the
decrease due to delays in hiring new sales representatives and
increasing managed care coverage for Avenova.

"We see ample market opportunity with Avenova and we're addressing areas
of improvement that make us optimistic about returning to double-digit
net sales growth in 2019," said Mark M. Sieczkarek, NovaBay's Chairman,
President and CEO. "Among these, we've expanded our salesforce for the
higher seasonality quarters, recently adding seven sales representatives
with significant direct experience promoting ophthalmic products. We are
deploying our entire salesforce more efficiently by targeting sales
calls on high Avenova prescribers in areas of higher reimbursement with
the aim to increase unit volume and net product revenue per unit. We
also are making inroads with our program to obtain new or improved
reimbursement for Avenova with meetings scheduled with a select group of
top managed care organizations before the end of this year.

"Our outlook is for net sales to increase sequentially in each
successive quarter through the remainder of 2018," he added. "We will
begin benefitting at the beginning of 2019 as our newer sales
representatives become increasingly productive and we execute on our
managed care strategy."

Second Quarter Financial Results

Net sales for the second quarter of 2018 were $2.8 million, compared
with $4.1 million for the second quarter of 2017. Gross margin on net
product revenue was 83% for the second quarter of 2018, compared with
83% for the prior-year period.

Sales and marketing expenses for the second quarter of 2018 were $3.0
million, compared with $3.4 million for the second quarter of 2017, with
the decrease due primarily to a reduction in the number of sales
representatives and lower marketing expenses. G&A expenses for the
second quarter of 2018 were $1.4 million, compared with $1.7 million for
the prior-year period, with the decrease due primarily to lower
stock-based compensation expense and lower professional services and
consulting fees. R&D expenses for the second quarter of 2018 were
$61,000, compared with $70,000 for the second quarter of 2017.

The operating loss for the second quarter of 2018 was $2.1 million,
compared with an operating loss of $1.8 million for the second quarter
of 2017.

Non-cash gain on the change of fair value of warrant liability for the
second quarter of 2018 was $0.5 million, compared with a non-cash gain
of $15,000 for the second quarter of 2017.

The net loss for the second quarter of 2018 was $1.6 million, or $0.09
per share, compared with a net loss for the second quarter of 2017 of
$1.7 million, or $0.11 per share.

Six Month Financial Results

Net sales for the six months ended June 30, 2018 were $5.7 million,
compared with $7.8 million for the six months ended June 30, 2017. Gross
margin on net product revenue was 87% for the first half of 2018,
compared with 84% for the first half of 2017.

The operating loss for the first six months of 2018 was $4.5 million, a
20% decrease from an operating loss of $5.5 million for the comparable
period in 2017. For the six months ended June 30, 2018, sales and
marketing expenses decreased 10% to $6.4 million, G&A expenses decreased
38% to $3.0 million, and R&D expenses decreased 19% to $0.1 million, all
compared with the six months ended June 30, 2017.

Non-cash gain on the change of fair market of warrant liability for the
first six months of 2018 was $0.7 million, compared with a non-cash loss
of $0.2 million for the first six months of 2017.

The net loss for the six months ended June 30, 2018 was $3.7 million, or
$0.22 per share, compared with a net loss for the six months ended June
30, 2017 of $5.7 million, or $0.38 per share.

NovaBay reported cash and cash equivalents of $6.8 million as of June
30, 2018, compared with $3.2 million as of December 31, 2017. In
February 2018, the company raised net proceeds of $5.6 million through a
private placement of common stock.

The Company used $2.0 million in cash to fund operations in the first
six months of 2018, an improvement from $3.6 million used to fund
operations in the first six months of 2017. The decrease was primarily
due to a lower net loss and favorable changes in working capital.

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 800-608-8202 from within the U.S. or
702-495-1913 from outside the U.S., with the conference identification
number 1078758.

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 August 13 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 1078758.

About Avenova®

Avenova is an eye care product formulated with our proprietary, stable
and pure form of hypochlorous acid. It has proven in laboratory testing
to have broad antimicrobial properties as a preservative in solution as
it removes foreign material including microorganisms and debris from the
skin on the eyelids and lashes without burning or stinging. 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.

Forward-Looking Statements

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 business strategies and future focus, our
estimated future revenue, and generally the Company's expected future
financial results. Forward-looking statements can be identified with
words like (and variations of): "outlook," and "optimistic." 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, obtaining adequate
insurance reimbursement for the Company's products, 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-Q/K 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.

Socialize and Stay informed on NovaBay's
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NovaBay Contacts
For NovaBay
Avenova+ purchasing information:
Please call us toll free:
1-800-890-0329 or email sales@avenova.com
www.Avenova.com

 

NOVABAY PHARMACEUTICALS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except par value amounts)

         

June 30,

December 31,
  2018     2017  
ASSETS
Current assets:
Cash and cash equivalents $ 6,833 $ 3,199
Accounts receivable, net of allowance for doubtful accounts ($11 and
$13 at June 30, 2018 and December 31, 2017, respectively)
2,024 3,629
Inventory, net of allowance for excess and obsolete inventory and
lower of cost or estimated net realizable value adjustments of $138
and $140 at June 30, 2018 and December 31, 2017, respectively)
317 504
Prepaid expenses and other current assets   1,598     1,663  
Total current assets 10,772 8,995
Property and equipment, net 351 471
Other assets   582     613  
TOTAL ASSETS $ 11,705   $ 10,079  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Current liabilities:
Accounts payable $ 329 $ 466
Accrued liabilities 2,665 1,672
Deferred revenue   62     2,841  
Total current liabilities 3,056 4,979
Deferred revenues - non-current - 534
Deferred rent 237 286
Warrant liability 785 1,489
Other liabilities   198     197  
Total liabilities   4,276     7,485  
 
Stockholders' equity :
Preferred stock: 5,000 shares authorized; none outstanding at June
30, 2018 and December 31, 2017
Common stock, $0.01 par value; 50,000 and 240,000, shares authorized
at June 30, 2018 and December 31, 2017, respectively; 17,089 and
15,385 shares issued and outstanding at June 30, 2018 and December
31, 2017, respectively
171 154
Additional paid-in capital 119,433 113,514
Accumulated deficit   (112,175 )   (111,074 )
Total stockholders' equity   7,429     2,594  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,705   $ 10,079  
 

NOVABAY PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)

(Unaudited)

(in thousands except per share data)

       
Three Months Ended Six Months Ended
June 30, June 30,
    2018         2017       2018         2017  
Sales:            
Product revenue, net $ 2,794 $ 4,094 $ 5,728 $ 7,788
Other revenue -   28   13   35  
Total sales, net 2,794 4,122 5,741 7,823
 
Product cost of goods sold 479   698   730   1,286  
Gross profit 2,315   3,424   5,011   6,537  
 
Research and development 61 70 107 132
Sales and marketing 2,977 3,376 6,373 7,116
General and administrative 1,360   1,735   2,982   4,823  
Total operating expenses 4,398   5,181   9,462   12,071  
Operating loss (2,083 ) (1,757 ) (4,451 ) (5,534 )
 
Non cash gain (loss) on changes in fair value of warrant liability 490 15 704 (220 )
Other income, net 5   4   9   6  
 
Loss before provision for income taxes (1,588 ) (1,738 ) (3,738 ) (5,748 )
Provision for income tax (1 ) -   (1 ) (1 )
Net loss and comprehensive loss $ (1,589 ) $ (1,738 ) $ (3,739 ) $ (5,749 )
 
Net loss per share attributable to common stockholders, basic $ (0.09 ) $ (0.11 ) $ (0.22 ) $ (0.38 )
Net loss per share attributable to common stockholders, diluted $ (0.12 ) $ (0.11 ) (0.26 ) (0.38 )
Weighted-average shares of common stock outstanding used in
computing net loss per share of common stock
Basic 17,089 15,308 16,750 15,296
Diluted 17,292 15,308 16,985 15,296

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