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

February 04, 2011 | About:
10qk

10qk

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Oculus Innovative Sciences Inc. (OCLS) filed Quarterly Report for the period ended 2010-12-31.

Oculus Innovatv has a market cap of $54.5 million; its shares were traded at around $2.06 with and P/S ratio of 7.3. Mutual Fund and Other Gurus that owns OCLS: 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 23% from the prior year period with 41% growth in the smaller 120 and 240 ml units, partially offset by 4% decline in the 5 liter units. Due to the higher margins of the smaller units, our sales force has focused on promoting the growth of the smaller units sold to pharmacies. The unit sales of our 120 & 240-milliliter presentation, which is primarily sold to pharmacies in Mexico, increased 33% from the prior year to a monthly average of 46,621 units compared to 35,095 in the same period last year.

We reported gross profit from our Microcyn products business of $1,078,000, or 54% of product revenues, during the three months ended December 31, 2010, compared to a gross profit of $621,000, or 46%, in the prior year period. The improved gross margins represent higher margins in U.S., partially offset by lower gross margins in Europe and Rest of World and Mexico. The higher margins in the U.S. are due to higher units sold and product mix for certain U.S. sales. Mexico s margins excluding their export sales were 71% during the quarter ended December 31, 2010, compared to 80% in the prior year period due to lower pricing and volume of the 5 liter product.

Revenue in Mexico increased 5% from the prior year period, which had abnormally high sales last year, caused by the swine flu epidemic in Mexico in the first fiscal quarter last year. Total sales of our 120 & 240-milliliter presentation, which is primarily sold to pharmacies in Mexico, increased 4% from the prior year. The average prices increased while the number of units sold was about flat. Sales to hospitals increased 8% with price increases offsetting a decline in units sold. We believe that during the nine months ended December 31, 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 $4,071,000, or 64% of product revenues, during the nine months ended December 31, 2010, compared to a gross profit of $2,463,000, or 57%, 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 75% during the nine months ended December 31, 2010, compared to 80% in the prior year period due to the high volume last year caused by the swine flu epidemic.

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