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Somaxon Pharmaceuticals Inc. Reports Operating Results (10-Q)

November 01, 2012 | About:
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10qk

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Somaxon Pharmaceuticals Inc. (SOMX) filed Quarterly Report for the period ended 2012-09-30.

Somaxon Pharmaceuticals, Inc. has a market cap of $11.3 million; its shares were traded at around $1.57 with and P/S ratio of 0.7.

Highlight of Business Operations:

Sales discounts and allowances totaled $1.2 million for the three months ended September 30, 2012, compared to $1.7 million for the same period in 2011. As a percentage of gross sales, the discounts and allowances were 35.1% and 31.9% for the three months ended September 30, 2012 and 2011, respectively. The increase in sales discounts as a percentage of gross product sales is primarily due to the expansion of our participation in rebate programs with managed care organizations and an increase in our allowance for product returns due to a reduction in the level of Silenor prescription activity, the introduction of the bottle configuration of Silenor into the market in the first quarter of 2012, and an increase in the days of on-hand inventory held by certain of our wholesale distributors in the second half of 2012.

We recognized cost of product sales of $0.2 million and $0.5 million for the three months ended September 30, 2012 and 2011, respectively, relating to product sales. The decrease in cost of product sales expense was due to the decline in product sales as well as the reduction in personnel and related costs resulting from cost reduction initiatives we implemented in the fourth quarter of 2011. Gross profit was $1.9 million and $3.2 million for the three months ended September 30, 2012 and 2011, respectively. Expressed as a percentage of net product sales, gross margin was 88.8% and 87.6% for the three months ended September 30, 2012 and 2011, respectively.

We recognized net product sales of $7.8 million and $12.2 million for the nine months ended September 30, 2012 and 2011, respectively. In the second quarter of 2011, we began recognizing revenue for sales of Silenor at the time of delivery of the product to our wholesale pharmaceutical distributors and our other customers resulting in a one-time increase in net product sales of $3.2 million from the recognition of previously deferred product sales revenue. Additionally, net product sales for the nine months ended September 30, 2012 declined as a result of a reduction in promotional activity resulting from the cost savings initiatives implemented by us in the fourth quarter of 2011, as well as the lower level of demand due to inventory management measures taken by our wholesaler distributors in response to the reduction in the level of Silenor prescription activity.

Sales discounts and allowances totaled $4.8 million for the nine months ended September 30, 2012, compared to $4.3 million for the same period in 2011. As a percentage of gross sales, the discounts and allowances were 37.8% and 25.9% for the nine months ended September 30, 2012 and 2011, respectively. The increase in sales discounts as a percentage of gross product sales is primarily due to the expansion of our participation in rebate programs with managed care organizations and an increase in our allowance for product returns due to a reduction in the level of Silenor prescription activity, the introduction of the bottle configuration of Silenor into the market in the first quarter of 2012, and an increase in the days of on-hand inventory held by certain of our wholesale distributors in the second half of 2012.

We recognized cost of product sales of $0.8 million and $1.5 million for the nine months ended September 30, 2012 and 2011, respectively. The decrease in cost of product sales expense was due to the decline in product sales as well as the reduction in personnel and related costs resulting from cost reduction initiatives we implemented in the fourth quarter of 2011. Gross profit was $7.0 million and $10.8 million for the nine months ended September 30, 2012 and 2011, respectively. Expressed as a percentage of net product sales, gross margin was 90.0% and 87.9% for the nine months ended September 30, 2012 and 2011, respectively.

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