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Oculus Innovative Sciences Inc. Reports Operating Results (10-Q)

November 04, 2010 | About:
Barel Karsan

10qk

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Oculus Innovative Sciences Inc. (OCLS) filed Quarterly Report for the period ended 2010-09-30.

Oculus Innovative Sciences Inc. has a market cap of $40.6 million; its shares were traded at around $1.6 with and P/S ratio of 5.4. OCLS is in the portfolios of Chuck Royce of Royce& Associates.

Highlight of Business Operations:

In the fourth quarter of 2007, we completed a Phase II randomized clinical trial, which was designed to evaluate the effectiveness of Microcyn in mildly infected diabetic foot ulcers with the primary endpoint of clinical cure or improvement in signs and symptoms of infection according to guidelines of Infectious Disease Society of America. We used 15 clinical sites and enrolled 48 evaluable patients in three arms, using Microcyn alone, Microcyn plus an oral antibiotic, and saline plus an oral antibiotic. We announced the results of our Phase II trial in March 2008. In the clinically evaluable population of the study, the clinical success rate at visit four (test of cure) for patients treated with Microcyn alone was 93.3% compared to 56.3% for the Levofloxacin plus saline-treated patients. This study was not statistically powered, but the high clinical success rate (93.3%) and the p-value (0.033) would suggest the difference is meaningfully positive for the Microcyn-treated patients. Also, for this set of data, the 95.0% confidence interval for the Microcyn-only arm ranged from 80.7% to 100.0% while the 95.0% confidence interval for the Levofloxacin and saline arm ranged from 31.9% to 80.6%; the confidence intervals do not overlap, thus indicating a favorable clinical success for Microcyn compared to Levofloxacin. At visit three (end of treatment) the clinical success rate for patients treated with Microcyn alone was 77.8% compared to 61.1% for the Levofloxacin plus saline-treated patients.

Revenue in Mexico increased 18% from the prior year period with strong price increases, partially offset by a unit decline in the 5 liter units. Last year, the 5 liter units were higher than normal, due to the swine flu epidemic in Mexico. Sales of our 120 & 240-milliliter presentation, which is primarily sold to pharmacies in Mexico, increased 11% from the prior year to a monthly average of 38,896 units compared to 35,122 in the same period last year. Sales to hospitals increased 21% with strong price increases, partially offset by a small decline in units sold.

We reported gross profit from our Microcyn products business of $1,644,000, or 72% of product revenues, during the three months ended September 30, 2010, compared to a gross profit of $802,000, or 57%, in the prior year period. The improved gross margins represent higher margins in U.S. and Mexico, partially offset by lower gross margins in Europe and Rest of World. The higher margins in the U.S. are due to improved product mix for certain U.S. sales. Mexico s margins were 82% during the quarter ended September 30, 2010, compared to 79% in the prior year period due to better pricing and increased volume of certain products.

Revenue in Mexico decreased 2% from the prior year period with abnormally high sales last year, caused by the swine flu epidemic in Mexico in the first fiscal quarter last year. Sales of our 120 & 240-milliliter presentation, which is primarily sold to pharmacies in Mexico, decreased 12% from the prior year to a monthly average of 40,328, units compared to 45,907 in the same period last year. Sales to hospitals increased 15% with price increases offsetting a decline in units sold. We believe that during the six months ended September 30, 2009, the swine flu epidemic in Mexico resulted in sales of $300,000 to $400,000 higher than normal.

We reported gross profit from our Microcyn products business of $2,993,000, or 69% of product revenues, during the six months ended September 30, 2010, compared to a gross profit of $1,842,000, or 62%, in the prior year period. The higher gross margins represent higher margins in U.S. and Europe and Rest of World, offset by lower gross margins in Mexico. The higher margins in the U.S. are due to improved product mix for certain U.S. sales. Mexico s margins were 78% during the six months ended September 30, 2010, compared to 81% in the prior year period due to the high volume last year caused by the swine flu epidemic.

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