NovaBay Pharmaceuticals Reports First Quarter 2020 Financial Results

NovaBay Pharmaceuticals, Inc. (NYSE American: NBY) reports financial results for the three months ended March 31, 2020 and provides a business update.

“First quarter net product revenue of $1.9 million increased 30% over the prior year as we benefitted from higher Avenova unit sales and from initial KN95 masks sales,” said Justin Hall, President and CEO of NovaBay Pharmaceuticals. “Online sales for the first time accounted for more than half of all Avenova sales for the quarter, up from 35% for the fourth quarter of 2019. We are making significant progress with our strategy to diversify our product offerings and sales channels in an effort to offset changes in industrywide prescription reimbursement that have impacted Avenova sales in past years.

“During this economic slowdown, we tapped into our global healthcare supply network to secure in-demand items that we can offer at reasonable prices. We are nearing the milestone of selling one million KN95 masks, which includes several large orders sold at discounted pricing. Most of these sales occurred in April,” he added. “We also have submitted the fluorecare rapid, point-of-care COVID-19 antibody test for Emergency Use Authorization (EUA) with the U.S. Food and Drug Administration (FDA) for sale to U.S. healthcare professionals, which follows our recently announced distribution agreement. While our business faces considerable uncertainty from the COVID-19 pandemic, the nimbleness of our organization enabled us to quickly add the masks to our existing product offerings and submit the test kits for FDA EUA approval. I’m pleased to report that our entire organization is prepared to support a return to full operations following the lifting of shelter-in-place restrictions.”

NovaBay also announced the appointment of Andy Jones as Chief Financial Officer and Treasurer effective May 4, 2020. “I am honored to be joining the team at such an exciting time in the company’s development,” said Mr. Jones. “Recent events, including the diversification of product offerings and sales channels, demonstrate the forward thinking nature of the NovaBay team. I look forward to using my experience to support these and future initiatives to achieve continued success.”

Because the regulatory landscape for the test kits has been changing so rapidly, NovaBay cannot assure a timeline for FDA review and/or clearance for commercial marketing under EUA, or if clearance will be granted at all.

First Quarter Financial Results

Net product revenue for the first quarter of 2020 was $1.9 million, a 30% increase from $1.5 million for the first quarter of 2019. The increase is due to higher Avenova unit sales, partially offset by a lower net selling price largely due to a decrease in insurance coverage by national payors. In response to this pricing dynamic, in June 2019 NovaBay launched Avenova sales on Amazon.com, which is helping to stabilize Avenova unit sales but at a lower net selling price. First quarter net sales also included $176,000 in sales of KN95 masks and $173,000 from a shipment of NeutroPhase to NovaBay’s distribution partner China Pioneer Pharma Holdings. Gross margin on net product revenue was 69% for the first quarter of 2020, compared with 77% for the prior-year period, with the decrease due to lower Avenova gross-to-net pricing.

Operating expenses for the first quarter of 2020 were $2.8 million, a 45% decline from $5.2 million for the first quarter of 2019, reflecting the strategic shift in the U.S. commercial organization undertaken in March 2019 that included a major salesforce reduction, partially offset by an increase in direct marketing expenses focused on increasing sales of Avenova. Sales and marketing expenses for the first quarter of 2020 were $1.6 million, a 56% decline from $3.5 million for the first quarter of 2019 reflecting lower headcount, partially offset by an increase in direct marketing expenses. General and administrative (G&A) expenses for the first quarter of 2020 were $1.3 million, a 20% decline from $1.6 million for the first quarter of 2019 due to the departure of the Company’s interim CEO/CFO and reduction in headcount, both during the first quarter of 2019. Research and development (R&D) expenses for the first quarter of 2020 were $9,000, compared with $85,000 for the first quarter of 2019.

Operating loss for the first quarter of 2020 was $1.5 million, a 62% improvement from $4.1 million for the first quarter of 2019.

Non-cash gain on the change of fair value of warrant liability for the first quarter of 2020 was $137,000, compared with a non-cash loss of $57,000 for the first quarter of 2019.

Other expense, consisting primarily of interest expense, was $186,000 for the first quarter of 2020 compared with $60,000 for the first quarter of 2019. The increase was a result of debt issued during the first quarter of 2019, which was outstanding for the entire first quarter of 2020.

The net loss attributed to common stockholders for the first quarter of 2020 was $1.6 million, or $0.06 per share, compared with a net loss for the first quarter of 2019 of $4.2 million, or $0.25 per share.

NovaBay reported cash and cash equivalents of $5.7 million as of March 31, 2020, compared with $6.9 million as of December 31, 2019.

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 7080709.

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 the call ends through 11:59 p.m. Eastern time May 28, 2020 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 7080709.

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, CELLERX for the aesthetic dermatology market and NEUTROPHASE for the wound care market. The Aganocide compounds, still under development, have target applications in the dermatology and urology markets.

Forward-Looking Statements

Except for historical information herein, matters set forth in this press release are forward-looking within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including statements about the commercial progress and future financial performance of NovaBay Pharmaceuticals, Inc. 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 current product offerings, potential future product offerings, possible regulatory clearance of any of our products or future products, and any future revenue that may result from selling these products, as well as generally the Company’s expected future financial results. 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 the size of the potential market for our products, the possibility that the available market for the Company’s products will not be as large as expected, the Company’s products will not be able to penetrate one or more targeted markets, revenues will not be sufficient to meet the Company’s cash needs, 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.

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NOVABAY PHARMACEUTICALS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except par value amounts)
			March 31,					December 31,
			2020					2019
			(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents			$	5,708				$	6,937
Accounts receivable, net of allowance for doubtful accounts ($50 and $51 at March 31, 2020 and December 31, 2019, respectively)				952					1,066
Inventory, net of allowance for excess and obsolete inventory and lower of cost or estimated net realizable value adjustments ($230 and $247 at March 31, 2020 and December 31, 2019, respectively)				552					492
Prepaid expenses and other current assets				662					886
Total current assets				7,874					9,381
Operating lease right-of-use assets				1,028					1,252
Property and equipment, net				97					110
Other assets				476					477
TOTAL ASSETS			$	9,475				$	11,220
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Liabilities:
Current liabilities:
Accounts payable			$	602				$	331
Accrued liabilities				1,326					1,778
Deferred revenue				559					—
Operating lease liabilities				774					930
Notes payable, related party				1,250					1,202
Convertible note				954					1,409
Embedded derivative liability				1					3
Warrant liability				17					34
Total current liabilities				5,483					5,687
Operating lease liabilities-non-current				406					505
Warrant liability				3,935					4,055
Total liabilities				9,824					10,247
Stockholders' (deficit) equity:
Preferred stock: 5,000 shares authorized; none issued and outstanding at March 31, 2020 and December 31, 2019				—					—
Common stock, $0.01 par value; 50,000 shares authorized; 28,239 and 27,938 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively				282					279
Additional paid-in capital				125,975					125,718
Accumulated deficit				(126,606		)			(125,024	)
Total stockholders' (deficit) equity				(349		)			973
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY			$	9,475				$	11,220

NOVABAY PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited) (in thousands except per share data)
		Three Months Ended March 31,
		2020				2019
Sales:
Product revenue, net		$	1,892			$	1,450
Other revenue, net			—				41
Total sales, net			1,892				1,491
Product cost of goods sold			581				341
Gross profit			1,311				1,150
Operating expenses:
Research and development			9				85
Sales and marketing			1,560				3,531
General and administrative			1,277				1,605
Total operating expenses			2,846				5,221
Operating loss			(1,535	)			(4,071	)
Non-cash gain (loss) on changes in fair value of warrant liability			137				(57	)
Non-cash gain on changes in fair value of embedded derivative liability			2				-
Other expense, net			(186	)			(60	)
Loss before provision for income taxes			(1,582	)			(4,188	)
Provision for income taxes			—				(1	)
Net loss and comprehensive loss		$	(1,582	)		$	(4,189	)
Net loss per share attributable to common stockholders (basic and diluted)		$	(0.06	)		$	(0.25	)
Weighted-average shares of common stock used in computing net loss per share attributable to common stockholders (basic and diluted)			27,978				17,093

 

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