Oculus Innovative Sciences Inc. Reports Operating Results (10-Q)
Oculus Innovative Sciences Inc. has a market cap of $47 million; its shares were traded at around $1.91 with and P/S ratio of 8.8. 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 according to guidelines of Infectious Disease Society of America, 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. 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.
Total revenues were $1,613,000 during the quarter ended December 31, 2009 compared to $1,221,000 in the prior year period. Product revenues increased $358,000 due to higher sales in the U.S., Europe, Mexico, India and Singapore. Product growth worldwide was 36% with the largest increases in the U.S. and Europe/ROW. Revenue in Mexico increased 10% over the prior year period. Sales of our 240-milliliter presentation, which is primarily sold to pharmacies in Mexico, increased 15% over the prior year to a monthly average of 33,000 units with a combination of both unit growth and higher selling prices. Sales to hospitals decreased 4% as a result of lower unit sales which was partially offset by higher average selling prices. The peso to U.S. dollar exchange rate had a negligible impact on the sales results when compared to the prior year period. Europe/ROW revenue increased $58,000, up 51% over the prior year period, due to higher sales in Europe, India and Singapore. The normal quarterly shipment to China of $150,000 will be shipped and recognized in the next quarter. Product revenue in the U.S. increased $222,000 with strong increases in human and animal wound care, mostly related to television advertising and sales initiatives sponsored by Innovacyn
We reported gross profit from our Microcyn products business of $621,000, or 46% of product revenues, during the three months ended December 31, 2009, compared to a gross profit of $686,000, or 69%, in the prior year period. The decrease in gross margin was primarily due to increased shipping costs to Europe and higher manufacturing costs in U.S. as we were manufacturing in two U.S. locations during the current quarter. We also incurred losses due to the write off of excess and obsolete inventory of $74,000. Mexico s margins were 80% during the quarter ended December 31, 2009, compared to 77% in the prior year period.
Total revenues were $5,132,000 during the nine months ended December 31, 2009, up 31%, compared to $3,913,000 in the prior year period. Product revenue increased $1,109,000, or 34%, compared to the same period last year primarily due to higher sales in the U.S., Europe, and Mexico. Adjusted for the 18% drop in the value of the peso during the nine months ended December 31, 2009, product growth in Mexico would have been 41% and product growth worldwide would have been 51%. Increased revenue related to the sale of our 240-milliliter presentation in Mexico, sold primarily to pharmacies, was the result of increased demand from the swine flu epidemic in Mexico and normal sales growth. Unit sales of our 240-milliliter presentation in Mexico for the nine months ended December 31, 2009, increased 37% to a monthly average of 42,000 units, up from 30,000 in the same period last year; unit sales of our 5-liter presentation increased 31%, partially offset by lower selling prices. Europe/ROW revenue increased $225,000, up 42%, over the prior year with higher sales from China, India, Netherlands, Slovakia and Singapore. Product revenue in the U.S. increased $377,000 with strong increases in human and animal wound care, primarily related to television advertising and other sales initiatives sponsored by Innovacyn.
We reported gross profit from our Microcyn products business of $2,463,000, or 57% of product revenues, during the nine months ended December 31, 2009, compared to a gross profit of $2,021,000, or 63%, in the prior year period. Mexico s margins improved to 80% during the nine months ended December 31, 2009, compared to 74% in the prior year period with a higher unit volume in the first quarter of the current period due to increased sales related to the H1N1 epidemic. During the nine months ended December 31, 2009, gross margins in Europe and U.S. are relatively low as we have been transferring our manufacturing from Europe to the U.S., sustaining costs in multiple locations, and incurring severance and higher shipping costs in the European cost of goods sold.
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