Obagi Medical Products Inc. (OMPI) filed Quarterly Report for the period ended 2009-09-30.
OBAGI MEDICAL PRODUCTS develops and commercializes skin health products for the dermatology plastic surgery and related aesthetic markets. Using its Penetrating Therapeutics technologies Obagi Medical's products are designed to improve penetration of agents across the skin barrier for common and visible skin conditions in adult skin including chloasma melasma senile lentigines acne vulgaris and sun damage. Obagi's products are only available through physicians. Obagi Medical Products Inc. has a market cap of $232 million; its shares were traded at around $10.59 with a P/E ratio of 21.7 and P/S ratio of 2.2.
Highlight of Business Operations:
Physician dispensed sales decreased $1.4 million, to $23.4 million during the three months ended September 30, 2009, as compared to $24.8 million during the three months ended September 30, 2008. Although revenue from our Elasticity and Therapeutic lines remained flat, we experienced a decline in other product categories as follows: (i) a decline in Nu-Derm sales of $1.7 million due to the continued slowdown of the economy; and (ii) a $0.3 million decline in Vitamin C sales. These declines were partially offset by an increase in the Other category of $0.6 million. The growth in the Other category was primarily attributable to the launch of Refissa™ in September, which contributed $0.4 million. Licensing fees increased by $0.3 million due to the launch of a new product by our Japan partner Rohto during the three months ended September 30, 2009.
Selling, general and administrative. Selling, general and administrative expenses consist primarily of salaries and other personnel-related costs, professional fees, insurance costs, stock-based compensation, depreciation and amortization not attributable to products sold, warehousing costs, advertising, travel expense and other selling expenses. Selling, general and administrative expenses decreased $1.4 million to $13.6 million during the three months ended September 30, 2009, as compared to $15.0 million for the three months ended September 30, 2008. This decrease was primarily due to the following: (i) a $0.6 million decrease in professional fees, consisting primarily of a reduction in legal and consulting expenses; (ii) a $0.6 million decrease in Other marketing principally as a result of cost cutting initiatives; (iii) a $0.4 million decrease in expenses related to our SoluCLENZ product as a result of our exit from the pharmacy Rx channel; (iv) a $0.2 million decrease in rent and related expenses due to the relocation of our corporate headquarters during the quarter ended September 30, 2008; (v) a $0.2 million decrease in noncash compensation primarily as a result of vesting of restricted stocks for certain employees; and (vi) a $0.1 million decrease in promotions and training expenses; but was partially offset by (i) a $0.5 million increase in salaries and related expenses primarily due to commissions, bonus and severance of $0.1 million; (ii) a $0.1 million increase in advertising expenses; and (iii) a $0.1 million increase in other expenses. As a percentage of net sales, selling, general and administrative expenses in the three months ended September 30, 2009 was 55% as compared to 58% for the three months ended September 30, 2008.
Interest income and Interest expense. Interest income declined to $34,000 for the three months ended September 30, 2009 from $0.1 million for the three months ended September 30, 2008. We earn interest income from the investment of our cash balance into higher interest rate yielding certificate of deposit. Although our average cash and cash equivalents, including short term investments, increased from $23.7 million for the three months ended September 30, 2008 to $28.0 million for the three months ended September 30, 2009, our weighted average interest rate decreased from 1.76% during the three months ended September 30, 2008 to 0.53% during the three months ended September 30, 2009. Interest expense was $17,000 during the three months ended September 30, 2009, as compared to $28,000 for the three months ended September 30, 2008. The decline was attributable to lower amortization of debt issuance costs related to our line of credit entered into in November 2008 in the three months ended September 30, 2009, as compared to our previous line of credit that was in place during the three months ended September 30, 2008.
Physician dispensed sales decreased $5.9 million to $69.9 million during the nine months ended September 30, 2009, as compared to $75.8 million during the nine months ended September 30, 2008. The decline was due to the following: (i) a decline in Nu-Derm sales of $4.9 million; (ii) a $2.8 million decline in Elasticity sales, as a result of the U.S. economic slowdown and the increased promotional activity surrounding the launch of our ELASTIderm Décolletage product in 2008 as compared to the nine months ended September 30, 2009; and (iii) a sales decline of $0.7 million in the Vitamin C category; offset in part by (i) a sales increase in the Therapeutic category of $1.9 million; and (ii) a sales increase of $0.6 million in our Other category. The Therapeutic category increase was primarily attributable to the launch of our Rosaclear system, which contributed $2.2 million in sales and SoluCLENZ, which contributed $0.4 million during the nine months ended September 30, 2009 but was partially offset by a decline of approximately $0.7 million in our CLENZIderm system sales. The Other category increase was primarily attributable to the launch of Refissa, part of our tretinoin system, which contributed $0.4 million. Licensing fees increased by $0.1 million.
Our aggregate sales decline of $6.0 million in the U.S. was partially offset by a $0.3 million increase from our International markets and licensing fees. The increase in international sales was primarily in the Therapeutic and Other categories and primarily came from two regions: (i) an increase of $0.9 million from Europe and Other, and (ii) an increase of $0.6 million from the Far East Region; offset by (i) a decrease of $1.2 million from the Middle East, and (ii) a decrease of $0.1 million from the Americas. Our licensing fees increase $0.1 million. We believe, depending upon its duration and severity, that a continued global economic slow down may negatively impact our future net sales.
Selling, general and administrative. Selling, general and administrative expenses consist primarily of salaries and other personnel-related costs, professional fees, insurance costs, stock-based compensation, depreciation and amortization not attributable to products sold, warehousing costs, advertising, travel expense and other selling expenses. Selling, general and administrative expenses increased $0.6 million to $43.9 million during the nine months ended September 30, 2009, as compared to $43.3 million for the nine months ended September 30, 2008. This increase was primarily due to the following: (i) a $1.8 million increase in expenses related to our SoluCLENZ product line, of which $1.0 million was due to the distribution and support of the product in the pharmacy Rx channel and $0.8 million was due to the write off of nonrefundable deposits and the accrual of other contract termination costs; (ii) a $0.4 million increase in promotional expenses; (iii) a $0.4 million increase in other expenses primarily related to taxes; (iv) a $0.3 million increase in volume driven activities; (v) a $0.3 million increase in salaries and related expenses, primarily related to severance costs; (vi) a $0.2 million increase in depreciation and amortization, primaril
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