NBY - Earnings call transcript Q3 2019 | NovaBay Pharmaceuticals, Inc.

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Operator

Welcome to the NovaBay Pharmaceuticals Third Quarter 2019 Conference Call. At this time, all participants are in a listen-only mode.

Following management's prepared remarks, we will hold a Q&A session. [Operator Instructions] As a reminder, this conference is being recorded today, November 7, 2019.

I would now like to turn the conference over to Jody Cain. ma’am. ahead go Please

Jody Cain

Cain Thank Jody in for today's call. with is you LHA. participating This

NovaBay Justin Chief Pharmaceuticals Chief from me Joining are and Raleigh, Executive Hall, Jason the Officer. Company's Financial Officer; and President

by Securities to like within comments this Forward-Looking listeners I management of would include Federal remind will meaning made that during call Laws. the Statements

results. actual materially different be These involve and risks to Forward-Looking uncertainties any results anticipated Statements that could cause from

only with the by For obligation live broadcast, call and to law. filings of circumstances, to please of November no update review the date risks Furthermore, or or undertakes statements those any contains NovaBay is as accurate of revise conference uncertainties, and reflect a and Securities the required X, content list as description the that this events Commission. Exchange XXXX. NovaBay's except of information

like call now, turn And to to would Justin Hall. I the over

Justin.

Justin Hall

thank to are brighter at economics us joining NovaBay. cash expanding good marketing you, and for strength in we several us. everybody position a initiatives branding and with for new you enhancing our outlook the on following excited that and recent I'm the future towards a path profitability. business our significantly financings, Thank afternoon launching keep With Jodi, aimed for share

capitalizing We and organization establish peer by broadening as are our for leveraging product and our commercial relationships on our well optometrists. applications additional offerings hypochlorous ophthalmologists as acid formulation, with

in moment had we the actions that already I initiatives we a report be discuss place I'm have to announcing fully will and of to a number that pleased future. in expect in additional strategic

lid Avenova’s new through an non-prescription is one direct-to-consumer to Our position spray as channel. build our the sales lash goal and number

a advantages FDA based product have our acid hypochlorous that we patented is formulation. distinct Avenova, In cleared pure on with

just best to sufferers. that the reinforce bacterial is spray treat is is the infections that doctors Avenova Our only Feedback lid XX% hypochlorous lash product of market. Avenova advantage patients our eyes that, the belief dry on and affects approximately pure and from competitive marketing edge and chronic all

quarter from the second sales our generated Avenova unit salesforce. smaller that reviewing It unit significantly we were third this of our In results, volume quarter XXXX. encouraging despite is of up XX%

the force in may from nationwide. our recall size people by of XX% reduced to March XX sales we that going You XX

is that XX. XX So our salesforce just going to from

The reduction Avenova’s the NovaBay. commercial increasing patient aimed make accessibility under that was of part economics a new and enhancing at sense experience more strategy, for

dollar had were the and industry discussed, offer significant products health our drugs higher industry plans have maintain branded and prescription previously wide, care sales As including trend deductible Avenova, to a more of affordability customers. where for impact on rebates towards coupons we to negative compelled

and prescription strong volume In quarter. of com. Avenova a have the since through In accounted XX% our is short Amazon. time for we sales of shifts on all and channel sales without Avenova stabilize momentum Direct in new launch early to available of June, the this unit revenue, announced commercial strength we Avenova part to Direct. about in prescription channel unit third this the consumers As for sales launch, U.S. the seen

their that and pharmacies transition which our through sell care channel through However, to the found including and channel period, in initial during patients. sell units prescription those to specialist this margin sold higher partner directly Avenova we buy the previously eye

are We Direct. to Avenova transitioning

previously quarter That eight year six announced guidance I unit through second prior despite quarter volume. from revenue sales Due reach to was for the and that Avenova to the XXXX higher lower Amazon. gross-to-net the of the was said to the roughly equivalent million. to down to on-track com affirm we wanted XXXX revenue pricing remain on our

rapid and improve and strategy quarter. efficient increased through through Amazon.com’s We third the accessibility direct-to-consumer the patient our to advanced Avenova distribution. across we product during sales essence, access In Board the

This channel trend consumers and trips forego time the marketing This to consuming allowing to pharmacy. to directly pharmaceuticals offset environment. deductible them to doctor visits on helps capitalizes in high also a healthcare the of consumers, costs

another closer unit revenue in moving quarter to our realized from in to operating in lower of the down for strategic gross-to-net the due of mainly prior for year, an while NovaBay indication We shift profitability, revenue, expenses which resulted were our a operating sales XX% quarter goal progress. slight impacted This organization. also a the versus prior year, loss Avenova our is narrowing reduction in the

will turn our financial to Jason performance more I things review Now, over in to detail.

Jason Raleigh

the for you, the with is for third our Net period. QX prior quarter of price Justin. everyone, were top-line. Avenova. Good a with million lower primarily XXXX The to net year due starting of sales $X.X compared selling Thank afternoon, million $X.X decrease

$XXX,XX. reviewing QX pharmacy sales our direct into Avenova Avenova sales XXXX by Direct XX% were Avenova million In were the channel, and $X.X retail were sales. channel of through Sales through in-office sales our channel or $XXX,XXX

to XXXX $X.X on $X.X XXXX for the due Operating for XX% our to compared XX% reduction of year shift operating third ago, a ago the reflecting U.S. strategic commercial in is XXXX expenses third decrease mix. XXXX. with the organization year the in the previously stated revenue March in of was our force. quarter million million in-line reduce This XX% the related expectations with in decreased Gross product from product period, margin quarter net in expenses to with to

in and In was decrease year were reviewing of XXXX and $XX,XXX headcount by ago and XXXX third for compared $X.X reduction with G&A period. related QX marketing prior costs. in the million $X.X sales sales the expenses XXXX employee due the from to for expenses decline year million, XX% $XX,XXX The were $X.X expense for the million line period. primarily QX a were item, R&D expense quarter and

improvement million, The third Operating with XXXX. on which was million, XXXX. for from $X.X was loss of for a the fair an warrant non-cash third for gain X.X quarter of $XXX,XXX of for million liability QX compares QX X.X XXXX the value which quarter non-cash is the XXXX gain

associated completed so or XXXX, quarter convertible the notes third that the with period. embedded loss convertible there for for note is gain XXXX March derivatives with Non-cash prior comparable the $XXX,XXX. in gain no was of the year The are associated on loan

Other of income was expenses for prior other the XXX,XXX compared year with period. $X,XXX of XXXX third quarter in

on issued due expenses the notes in issued related were other to to The March in The cost interest promissory issuance note XXXX. discount February of the XXXX. convertible amortization in

loss common or per or warrants share. series of net the per quarter XXXX costs August the third XXXX compares related loss and A This - stock $X.XX $XXX,XXX net quarter a $X.X with issuance the to preferred In of $X.XX stock We in XXXX. reported million of for issuance preferred share. third for a

million our for XXXX nine-months to XX, the XX, nine-months Turning $X.X XX% XXXX with nine-months with Margin nine-months September the for for nine-months XXXX. results, Gross XXXX. first of net on compared September for product of ended the million the first the revenue compared ended XX% sales were was $X.X

Operating first expense R&D the for of expense and and million XX% including nine-months XXXX. first of $XX.X $XX.X nine-months expense $XXX,XXX. $X.X sales for decreased XXXX the to $X.X marketing And from million G&A million million of of of expense

first XXXX a XXXX nine-months was note Non-cash the value Non- gain cash the nine-months the of for the derivatives fair compared on embedded nine-months $XXX,XXX. the non-cash of on gain with convertible XXXX liability of of $XXX,XXX. $XXX,XXX the of first for warrant associated was first on gain with

$X.X XXXX the a with million million was per with income the million the The expense on XXXX per net nine-months or $X.X Other for the of XXXX period compared compared $X same of nine-months net September $X.XX ended for share share. of or of XX, other $X.XX XXXX. $XX,XXX loss nine-months for first loss was of

In through We $X.X common a we had of registered stock reviewing in our August a placement and convertible sheet, $X cash as preferred equivalents direct offering balance million XX, September and million private cash stock. XXXX. of raised of of

outlook. are affirming lastly, XXXX And our we

be to We XXXX in in million to at expect net the $X reduction reduction March are to of significant levels. we million range due operating expecting $X sales a in from our force the expenses for XXXX in the XXXX, XXXX

call I that back Justin. to will turn With the

Justin Hall

with some share initiatives would starting to I to business that strategic our Jason. we you build with Avenova. in have Thanks, like place now

growth continue com. to expect on channel to our sales greatest direct for our Amazon. Avenova through We come

prescription established nationwide. prescribing XX,XXX doctors more an with have We than base

are business the and Now base, current we steps are new our our we next taking customer with that stabilizing Avenova reaching customers.

We current to firm or have online beyond of sales population to Avenova. accomplished reach branding engaged and online drive

reduce including service. bacteria other to effective Avenova We on many is use, communications, to and found ocular have supportive use. and not testimonials we impurities bleach for that use and antibiotic. long-term our to the Avenova easy importantly a hypochlorous proven free clinically products an is from in the Avenova acid most Yet, eye for safe that is soothing

eye territories treatment the a begin XX-day be is In month, the we that later another System. innovative distributing will in Atlantic dry NuLids an This this beginning evaluating we initiative in six trial region. of will Mid for

The is scurf FDA in production NuLids safely home eye eyelashes removes [bloodphoritus] device eyelids an handheld (Ph) approved patients. for accumulated meibomian use from gland cordless effectively stimulating and dry while that the System and and

produced in is reducing substantially eyes. This results scratchy, that product exceptional that dry with has or associated itchy, ending feeling gritty

year XX either being satisfied patient with or survey one fully satisfied day XX% shows that a after data reported of In NuLids. patients fact, very trial,

be using the complementary using and that should in System fact have to the we highly Avenova NuLids anybody We System as also believed Avenova. used NuLids

having as reinvigorating see effect also a We product on this our call. addition the sales of

buy treatment using directly patients of our optometrist NuLids new ophthalmologist reduce Eye channel new offer for revenue from to source dry and specialist the sell eyes. a sale of to are from annoying and patients. a and symptoms We and benefit bloodphoritus benefit to to care

CelleRx CelleRx direct-to-consumer unique U.S. this through the a the the formulation based week, own launch cleanser announced our on we solution website same also and pure skin acid hypochlorous CelleRx.com. in as our wound Avenova. topical of is Earlier

surgery has As be skincare, and CelleRx to to biofilm aesthetic dermatology acute impair investment this requires of plastic designed discomfort minimal been clean to and advantages the commercially shown make product healing. by against ease effective specifically CelleRx following and NovaBay procedures. wound gently is Among it bacterial for which such it only viable. infection

hypochlorous a micro acid a is surgeries spectrum Additionally, a see of is laser human We variety market to CelleRx as that removal, broad treatment laser and hair tissue. be for potent removal opportunities chemical post laser cosmetic antimicrobial tattoo demogration. pure for safe liposuction, resurfacing, agent including peels, known to

Our commercial plan and in is brand XXXX the our aimed coming initial broader We look creating this for at to awareness seeding the unveiling forward marketing and in step to soft up strategy launch early product channel. months.

So we been a and affordability in of positive current able changes only deductible have to Avenova, environment the competitive increase experience. increase to protect patient and the rapidly accessibility, not sales summary, and make also market, high in but

our expanding We base we are customer on broader Amazon.com. initiatives, our have successfully and business through efforts raised funds marketing to support for sales expanding focused Avenova

We Avenova. are to established complimentary our organization offerings evaluate product commercial leveraging to

We introduced are capitalizing market. on effectively the our CelleRx proprietary to cost to technology dermatology

that Importantly, high unit we maintain shift our are and from to away expenses ability evidence our seeing sales. strategic

And we are we targeting seeking initiatives to including have additional and line effective organization cost care domestic eye complimentary strategic and extensions products and other our establish professionals. for that commercial with leverage future we growth are opportunities future product relationships underway

thank With of business and for we are I your you for attention. questions. that overview ready now our Operator, our plans.

Operator

Instructions] [Operator

Jason Raleigh

will Francisco While for investors XX. to in to mention we JP San I Conference XX and we Morgan be the Healthcare January analysts are during want meeting waiting with questions, from that

meeting, If a XXX-XXX-XXXX. schedule you at please LHA would contact to like

Operator

Ladenburg Cohen Thalmann. And is our first with question Jeffrey from

Jeffrey Cohen

Justin Jason, are Hi you. and how

Jason Raleigh

are how you Very good, Jeff.

Jeffrey Cohen

fine. Just

So questions handful you. of for

Firstly, can or about I'm you where a $X OpEx you this for bit. numbers quarterly term? saying million This plan near-term like medium little the feel about talk

Jason Raleigh

Yes.

So, yes. short is answer

Jeffrey Cohen

same. long the answer is imagine I Okay,

Okay.

Jason Raleigh

of probably in that Yes. The is things but variety salesforce additional any hires not we a either. affect that, field don't long answer and is reduction could anticipate a there the

Jeffrey Cohen

as with say coming addition CelleRx Okay. And the you the or that additional now well.

Jason Raleigh

what will we for going a and brands native that Correct. Yes. are call dedicated sales we to field be product. not have any reps digitally CelleRx

Jeffrey Cohen

was there - you as Okay, of time the perfect. why to see And that then the months, evaluations three product units could that was a in short-ish is hoping that gain far were the particular just as for number from about surprise that was you it but folks could nature? the evaluations you talk

Jason Raleigh

were need. we a need gain think I we product, this feedback that to is it three-months complimentary that and and than Well, in right market feedback off the of bat think because interested we perfectly the market that will lot don't I more very

We started so next performing going size reps with top six territories think of a our months. get in are to and we three good top I in producing sample the

out go week next going We six the then to are doing they are field after for into a and training that.

that it, So, away agreement complimentary in of if we have like right larger is then truly a really after if going medical going are it possibly new will and I six to patients and doctors like to back the it know site think option hopefully. from whether negotiating the we NuLids

Jeffrey Cohen

Okay, our and price standpoint, follow lot is revenue line done, is on perhaps you the and would would separate if from item? particular out a that be breaking like transfer a look on the that

Jason Raleigh

Yes, the it is say just walking marketplace we now, be right if have away a the out also than we it turns really success, you know a that, to completely. but could hard really it option if foothold it, have with in runaway of more that don't

it really say. it So to hard ranges and is really

Jeffrey Cohen

then talk the and about launch you could Got were self CelleRx it, you discussing. okay,

and of January place how I as launch, a mean could launch and least versus where status better current far the as for define taking February, that and you of that as force is So the manufacturing as what the onsite, the far toward full soft kind online? launch would soft is look production, the at

Jason Raleigh

Sure. market in jump to headfirst a new without dermatology didn't us and Yes, market we some the one research. want is for doing so

here set the It our from CelleRx manufactured office is far not up. is manufacturing California. So all corporate of in

next are that we KOLs and So that running is do three our are right to manufacturing on-board the the towards that side over to is and make set right that going, already want up from targeting months. but two in a up to marketing we the sure it we we places going get

before And marketing this and that headfirst. marketplace of this get bit will get very start some identified more once in get the putting but and in we a out that, have we sort focused feedback wanted I towards KOLs the and little there hands at market laser money least of jumping to

Jeffrey Cohen

it. Got

particularly more amongst is awareness syndromes? just aesthetics of it So a general

Jason Raleigh

those to and you in is really is, hard make can't if It get we and that it product we have put to hands. sure want KOLs on-board on-board KOLs their

product so soft we and some wanted it in their giving could feedback. us they the that do to get selling to So launch, we could start patients hands,

Jeffrey Cohen

me I but looks on mean a Okay, strong, - side the margins and then lastly of for we were margin anticipated. like the little it they what is shy remain

versus is an accurate we going is it to previously increases like channel Is as think hamper I margins sounding slightly thought. the online that that what statement?

Jason Raleigh

September saw a cannibalization retail That in the Amazon pharmacy is bit from true. of from channels. the We more month little

will So it is, that is QX. be where the difference for but is probably where it

Jeffrey Cohen

my Okay. That taking is questions. it Thanks for me. for

Jason Raleigh

Alright. Thanks.

Operator

next is Ed with Our Ascendiant. Woo question from

Edward Woo

is for Thanks the should we initiatives out near-term? would CelleRx, My product more my new are and taking you in guys rolling ask question. NuLids question with the

Justin Hall

the We in will have some new near-term. extensions product line

Edward Woo

these Great. require And investment investment of you pretty be actually more will operating that than or minimal some what right have now? will

Justin Hall

line right be a infrastructure. cost now so product Everything extension, really a to whole is doing leveraging low our the that sort on infrastructure that game we cost a current are our is of lot. have to No The Yes. will is of going current good very question. name capitalizing nothing

Edward Woo

transitioning Alright last see is that Direct where over do Do you to still mentioned Avenova had selling my quarters? that transition you a you are on the is lot next sounds this of that from Amazon, through Then Direct. done transition more question couple good. higher the feel you Avenova channels or price you the

Justin Hall

and sales we just especially were where reimbursements started between just their exact mix Avenova have seen to deductibles strong saw RX only kick Well, because product, channels. in, so patient an the typically of four was the QX insurance really what a years past we in filled

I'm already else. for channels, will this Avenova you sure I everybody now through this, but share is know So sold for

pharmacy partner We channel, have pharmacy and direct-to-consumer buy a channel, retail channel, channel. a then a a sell and

change future of I to quarter-by-quarter. mix those, The going think is

I in retail and because but pharmacy that channel looking pharmacy the is think again. out strongest, hold channel to QX in those the to drop, we have will start patient are they up partner QX see the then filling if tends deductibles biggest probably just beyond reset QX are

sort quarter-by-quarter. be to So it of going is different

Edward Woo

you you. my and Great. thank luck. guys answering Well wish good Thank you for questions

Justin Hall

Terrific. Thanks Ed.

Operator

Instructions] [Operator

Justin Hall

to I forward joining next look March today to NovaBay. the quarter and would like everybody in Thank to financial call discuss have the day. great thank in for the We fourth us a our updating you and Well, interest results on your further full-year In XXXX. for meantime, you.

Operator

please you that for your disconnect you Ladies concluded and gentlemen thank ask and lines. We your for that call conference today. participation your

NovaBay Pharmaceuticals (NBY) 10 Nov 192019 Q3 Earnings call transcript