NovaBay Pharmaceuticals Reports 2015 Fourth Quarter and Full Year Financial Results

Avenova sales reach record $1.6 million for the quarter and $4 million for the year

Company on track to reach positive cash flow from operations by end of 2016

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

EMERYVILLE, Calif.--()--NovaBay® Pharmaceuticals, Inc. (NYSE MKT: NBY), a biopharmaceutical Company focusing on commercializing its prescription Avenova® Lid and Lash Cleanser for the domestic eye care market, reports financial results for the three and 12 months ended December 31, 2015, and provides a business update.

“At the end of 2015, managed care plans were reimbursing about 67% of all prescriptions written for Avenova, double the rate of about 38% in Q1 of 2015”

Fourth Quarter 2015 versus Third Quarter 2015 Avenova Highlights

  • 41% increase in sales to a record $1.6 million
  • 29% increase in the number of optometrists and ophthalmologists purchasing for their practices, to nearly 2,600
  • 49% increase in distributor volume to nearly 21,000 units
  • 29% increase in retail pharmacy orders to more than 3,500 units

“We are reporting another strong quarter with Avenova sales up sharply from the preceding quarter and substantial gains in all key areas that support a successful launch. We closed out a highly productive year with significant Avenova sales growth in each successive quarter and $4 million in sales for the product’s first full year of commercialization,” said Mark M. Sieczkarek, NovaBay’s Chairman and Interim President and CEO. “In the coming quarters, we expect to benefit from reduced research and development, clinical and other expenses as a result of a restructuring we implemented last November. We have reduced our anticipated 2016 expenses by more than $6 million from 2015 levels and believe we are on track to reach our goal of positive cash flow from operations in 2016.

“We also continue to benefit from more patients refilling their prescriptions,” he added. “This is important as patient and physician testimonials indicate that the best results for managing chronic blepharitis and dry eye come from continual, regular use. With the goal of building a strong reorder rate and an estimated addressable market of approximately 41 million Americans, we have ample opportunity for growth.

“At the end of 2015, managed care plans were reimbursing about 67% of all prescriptions written for Avenova, double the rate of about 38% in Q1 of 2015,” said Mr. Sieczkarek. “Increasing reimbursement coverage is a key strategic initiative as we build our prescription business. Importantly, it also supports our ability to align product pricing accordingly, which we believe provides us with substantial revenue upside.”

Avenova Quarter-over-Quarter Sales Growth in 2015

  • 41% increase fourth quarter from third quarter
  • 39% increase third quarter from second quarter
  • 73% increase second quarter from first quarter
  • 112% increase first quarter from the fourth quarter of 2014

Fourth Quarter 2015 Financial Results

NovaBay reported total net sales of $1.6 million for the fourth quarter of 2015, up $1.1 million from $491,000 for the fourth quarter of 2014. The increase was due to growing sales of Avenova, which was commercially launched in August 2014, partially offset by a decrease in collaboration revenue. Product revenue (including sales of Avenova and NeutroPhase®) for the fourth quarter of 2015 reached $1.6 million, up from $385,000 for the fourth quarter of 2014. Other revenue for the fourth quarter of 2015 was $48,000, compared with $106,000 for the prior-year period. Gross profit as a percentage of total net sales was 64% for the fourth quarter of 2015, up from 40% for the prior-year period.

The net loss for the fourth quarter of 2015 was $4.2 million, or $1.26 per share, compared with a net loss for the fourth quarter of 2014 of $4.5 million, or $2.17 per share. The per-share net loss reflects the effect of a 1-for-25 reverse stock split effected in December 2015. The lower net loss in the fourth quarter of 2015 was a result of increased product revenue and reduced spending on research and development, offset by higher spending on sales and marketing and the impact of a higher non-cash gain in fair value of warrants. Research and development expenses were $1.2 million and sales, general and administrative expenses were $6.0 million for the fourth quarter of 2015, compared with $2.4 million and $2.7 million, respectively, for the prior-year period. Non-cash gain in the fair value of warrants was $2.0 million for the fourth quarter of 2015, compared with $451,000 for the fourth quarter of 2014.

Full Year 2015 Financial Results

Total net sales for 2015 increased by $3.3 million to $4.4 million from $1.1 million for 2014. Product revenue for 2015 reached $4.1 million, compared with $684,000 for 2014. Other revenue for 2015 was $235,000, compared with $370,000 for the prior year. Gross profit as a percentage of total net sales increased to 71% from 54% for 2014.

The net loss for 2015 was $19.0 million, or $6.82 per share, compared with a net loss for 2014 of $15.2 million, or $7.65 per share. The higher net loss for 2015 reflected increased spending on sales and marketing activities for Avenova, partially offset by lower spending on research and development. Research and development expenses were $6.0 million and sales, general and administrative expenses were $18.1 million for 2015, compared with $9.5 million and $7.9 million, respectively, for 2014. NovaBay reported a non-cash gain in fair value of warrants of $2.1 million for 2015 versus $1.7 million for 2014.

Cash, cash equivalents and short-term investments were $2.4 million as of December 31, 2015, compared with $5.4 million as of December 31, 2014. The Company used approximately $4.5 million in cash to fund operations during the fourth quarter of 2015. In January 2016, NovaBay secured a $1.4 million loan and in February 2016, the Company completed a private placement raising proceeds of $2.83 million. Although the Company recently completed these financings, it will require additional capital to fund its operations in 2016. To achieve this, NovaBay intends to continue its historical financing strategy to raise additional capital to fund its operations and meet ongoing obligations, with the goal of positive cash flow from operations by December 2016. However, NovaBay can provide no assurance that it will be able to raise capital or that if it is able to raise capital, it will be on terms favorable to NovaBay and its shareholders.

Conference Call

NovaBay management will host an investment community conference call today, March 3, 2016, 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 59218506.

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 March 9, 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 59218506.

About NovaBay Pharmaceuticals, Inc.: Going Beyond Antibiotics

NovaBay Pharmaceuticals is a biopharmaceutical Company focusing on the commercialization of prescription Avenova® Lid and Lash Cleanser 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 AmerisourceBergen.

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 the anticipated market acceptance of our products, future sales of our products, the ability to raise capital, and the Company’s expected future financial results. Forward-looking statements can be identified with words like (and variations of): “estimate,” “believe,” and “intend.” 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 PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except shares and per share data)
   
 
December 31,
  2015     2014  
 
ASSETS
Current assets:
Cash and cash equivalents $ 2,385 $ 5,429
Accounts receivable, net of allowance for doubtful accounts ($40 and $0 at December 31, 2015 and December 2014, respectively) 536 273
Inventory, net 1,345 521
Prepaid expenses and other current assets   261     729  
Total current assets 4,527 6,952
Property and equipment, net 395 436
Other assets   155     149  
TOTAL ASSETS $ 5,077   $ 7,537  
 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Liabilities:
Current liabilities:
Accounts payable $ 2,483 $ 1,865
Accrued liabilities 1,980 1,055
Deferred revenue   170     425  
Total current liabilities 4,633 3,345
Deferred revenues - non-current 2,248 2,000
Deferred rent 189 171
Notes payable, related party 1,655
Warrant liabilities   1,450     173  
Total liabilities   10,175     5,689  
 
Stockholders' equity (deficit):
Preferred stock: 5,000 shares authorized; none outstanding at December 31, 2015 and 2014
Common stock, $0.01 par value; 240,000 shares authorized; 3,486 and 2,066 shares issued and outstanding at December 31, 2015 and 2014, respectively 35 21
Additional paid-in capital 85,387 73,374
Accumulated other comprehensive loss
Accumulated deficit   (90,520 )   (71,547 )
Total stockholders' equity (deficit)   (5,098 )   1,848  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 5,077   $ 7,537  
 
NOVABAY PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(in thousands, except per share data)
       
 
Three Months Ended Year Ended
December 31, December 31,
  2015       2014     2015       2014  
Sales:
Product Revenue $ 1,587 $ 385 $ 4,146 $ 684
Other Revenue   48       106     235       370  
Total Net Sales 1,635 491 4,381 1,054
 
Product Cost of Goods Sold   591       296     1,261       486  
Gross Profit 1,044 195 3,120 568
 
Research & development 1,239 2,433 6,045 9,511
Sales, general & administrative   5,951       2,663     18,089       7,935  
Total Operating Expenses   7,190       5,096     24,134       17,446  
Operating Loss (6,146 ) (4,901 ) (21,014 ) (16,878 )
 
Non cash gain (loss) on changes in fair value of warrants 1,976 451 2,149 1,664
Other income (expense), net   (32 )     (26 )   (96 )     22  
 
Loss before income taxes (4,202 ) (4,476 ) (18,961 ) (15,192 )
Benefit from (provision for) income tax   (2 )     8     (12 )     (2 )
Net loss (4,204 ) (4,468 ) (18,973 ) (15,194 )
 
Change in Unrealized gains on available for sale securities         9           15  
Comprehensive loss $ (4,204 )   $ (4,459 ) $ (18,973 )   $ (15,179 )
 
Loss per share (basic and diluted) $ (1.26 ) $ (2.17 ) $ (6.82 ) $ (7.65 )
 
Basic and Diluted Shares used in loss per share calculation 3,337 2,060 2,784 1,985

Contacts

NovaBay Contacts
For NovaBay Avenova purchasing information, please contact:
Email us
Call us: 1-800-890-0329
www.Avenova.com
or
From the Company
Thomas J. Paulson
Chief Financial Officer
510-899-8809
Contact Tom
or
Investor Contact
LHA
Jody Cain
310-691-7100
Jcain@lhai.com

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