PRINCETON, N.J.–(BUSINESS WIRE)–
Derma Sciences, Inc. (Nasdaq: DSCI – News), a medical device and pharmaceutical
company focused on advanced wound care, today reported financial and
operating results for the three months ended March 31, 2012. Highlights
of the first quarter of 2012 and recent weeks include:
-
Net sales were $15.3 million, up 6% over the prior-year first quarter
-
Advanced wound care product sales were $4.5 million, up 25% over the
prior-year quarter
-
Advanced wound care products accounted for 29% of net sales, up from
25% of net sales a year ago, led by 38% growth in MEDIHONEY sales
-
Traditional wound care product sales were $10.8 million, in line with
the prior-year quarter
-
Gross margin was 32%, up approximately 100 basis points from the first
quarter of 2011
-
Net loss was $2.5 million or $0.24 per share, compared with $0.5
million or $0.08 per share in the prior-year quarter, reflecting
higher sales and marketing costs associated with advanced wound care
growth initiatives, acquisition costs and higher research and
development expense
-
Completed expansion of U.S. advanced wound care sales force during the
quarter; the U.S. sales organization now stands at 50
-
Held a successful meeting with the U.S. Food and Drug Administration
(FDA) regarding further development of DSC127; made continued progress
towards initiation of Phase 3 clinical trials with DSC127 during 2012
-
Hired Vice President, Clinical and Product Development to guide DSC127
development program
-
Closed on the acquisition of MedEfficiency, further strengthening the
Company’s proprietary advanced wound care product line
-
Raised net proceeds of $17.8 million at market via an equity offering
to fund the advanced wound care and pharmaceutical products growth
strategy
Management Commentary
“The past few months have been a period of rapid growth in our
infrastructure as we built out and expanded our sales resources, added
support staff and completed a significant acquisition,” said Edward J.
Quilty, chief executive officer of Derma Sciences. “Year-over-year
growth in advanced and traditional wound care products was in line with
our stated growth objectives and growth compared with the fourth quarter
of 2011 was consistent with our expectations. We expect to meet our
overall sales growth objectives for the full year.”
Mr. Quilty added, “Our traditional wound care products performed as
expected during the first quarter. Although gross margins in this
segment of our business are lower than those of the advanced wound care
business, these products provide positive cash flow that we use to
support our advanced wound care growth initiatives. Our objective with
this business segment is to maintain it and grow it modestly as
circumstances dictate.”
“We completed our acquisition of MedEfficiency last month and are in the
midst of the integration process. The TCC-EZ product is an important
component of our strategy to be the leading supplier of products for the
treatment of chronic wounds in general and diabetic foot ulcers in
particular. To date, we have integrated the former head of the
MedEfficiency sales team and four of its direct sales representatives
into our U.S. advanced wound care sales team. All members of the Derma
Sciences sales team have been trained on the MedEfficiency product line
and are actively selling the products. Work on integrating the former
MedEfficiency supply chain and administrative support resources into
Derma Sciences is underway. We believe this acquisition represents a
significant growth opportunity for Derma Sciences and that it will serve
to accelerate the timeline to profitability of our business, excluding
our Phase 3 RD spending.
“As previously reported, we had a very constructive meeting with the FDA
in February concerning our progress to date with DSC127. Our toxicology
and Chemistry, Manufacturing and Control work started in the third
quarter of 2011 and led by a number of seasoned consultants, continues
on plan with significant progress being made on both fronts. During the
first quarter we evaluated a number of firms and selected a Clinical
Research Organization (“CRO”) to oversee and conduct the Phase 3
clinical trials, along with a firm that will be responsible for the
trials’ data management and statistical evaluation of its results. We
are presently finalizing contracts with these firms. Additionally, we
are pleased to announce that George Omburo, Ph.D. has joined Derma
Sciences as Vice President – Clinical and Product Development, a new
position, to oversee and manage our DSC127 development program. Dr.
Omburo has more than 13 years of clinical drug development experience
with several large multi-national pharmaceutical companies. Hiring Dr.
Omburo marks a significant step forward in the development of DSC127,”
he continued.
“Our next steps are to complete and submit packages to the FDA for our
planned pharmacokinetic study, request and hold an End-of-Phase 2
meeting with the FDA and commence the Phase 3 trials by year end.”
Financial Results
Net sales for the first quarter of 2012 were $15,277,366, compared with
$14,371,271 for the first quarter of 2011, an increase of 6.3%. This
reflects 25.4% growth in sales of advanced wound care products to
$4,497,054 from $3,585,172 in the first quarter of 2011, and a 0.1%
decline in sales of traditional wound care products to $10,780,312 from
$10,786,099 in the same period last year. For the full year 2012, the
Company expects advanced wound care product sales growth to be between
30% and 40%, and traditional wound care product sales growth to be
approximately 2% to 4%.
Gross profit for the first quarter of 2012 increased 10.1% to
$4,876,160, or 31.9% of net sales, from $4,428,382, or 30.8% of net
sales, for the first quarter of 2011. The increase in gross margin
reflects increased sales of higher-margin advanced wound care products,
which accounted for 29.4% of net sales, compared with 25.0% of net sales
in the same period last year, and flat lower-margined traditional wound
care sales, partially offset by higher product costs.
Selling, general and administrative expense for the first quarter of
2012 was $6,359,090, compared with $4,738,019 for the first quarter of
2011. The increase was principally due to higher sales and marketing
expenditures associated with advanced wound care growth initiatives.
Research and development expense for the first quarter of 2012 was
$1,114,698, compared with $143,827 in the first quarter of 2011,
reflecting higher expenses associated with the ramp-up of the DSC127
Phase 3 program. The Company expects research and development expense to
be approximately $8.0 million to $10.0 million for the full year 2012.
The net loss for the first quarter of 2012 was $2,538,901 or $0.24 per
share, compared with a net loss for the first quarter of 2011 of
$547,032 or $0.08 per share. Incremental marketing and sales
growth-related expenses, and higher compensation expense and research
and development expenses were principally responsible for the larger net
loss.
As of March 31, 2012, the Company had cash and cash equivalents of
$15,680,749 and investments of $4,976,000, compared with cash and cash
equivalents of $17,110,350 and investments of $5,474,000 as of December
31, 2011. Subsequent to the close of the quarter the Company raised net
proceeds of $17,800,000 in an equity offering and acquired
MedEfficiency, Inc. for $14,500,000 in cash. The Company expects
transaction and transition costs associated with the acquisition to be
approximately $1,775,000, of which $113,675 was recorded in the first
quarter.
Conference Call and Webcast
Derma Sciences management will host a conference call to discuss first
quarter financial results and answer questions beginning at 11:00 a.m.
Eastern time today. In addition, management will provide a business
update and discuss recent and upcoming milestones.
To participate in the conference call, dial (888) 563-6275 (domestic) or
(706) 634-7417 (international). All listeners should provide the
following passcode: 77904181. Individuals interested in listening to the
live conference call via the Internet may do so by logging onto the
Company’s website, www.dermasciences.com.
Following the end of the conference call, a replay will be available
through May 23, 2012 and can be accessed by dialing (855) 859-2056
(domestic) or (404) 537-3406 (international). All listeners should
provide the following passcode: 77904181. The webcast will also be
available for 30 days.
About Derma Sciences, Inc.
Derma Sciences is a
medical technology company focused on three segments of the wound care
marketplace: pharmaceutical wound care products, advanced wound care
dressings and traditional dressings. Derma Sciences has successfully
completed the Phase 2 clinical trial in diabetic foot ulcer healing with
DSC127, an investigational pharmaceutical drug under development for
accelerated wound healing and scar reduction, and is preparing to begin
Phase 3 clinical trials. Its MEDIHONEY® product is the leading brand of
honey-based dressings for the management of wounds and burns. The
product has been shown to be effective in a variety of indications, and
was the focus of a positive large-scale, randomized controlled trial
involving 108 subjects with leg ulcers. Other novel products introduced
into the $14 billion global wound care market include XTRASORB® for
better management of wound exudate, BIOGUARD® for infection prevention
and TCC-EZ™, a gold-standard treatment for diabetic foot ulcers.
For more information please visit www.dermasciences.com.
Forward-Looking Statements
Statements contained in
this news release that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the generality
of the foregoing, words such as “may,” “will,” “expect,” “believe,”
“anticipate,” “intend,” “could,” “estimate” or “continue” are intended
to identify forward-looking statements. Readers are cautioned that
certain important factors may affect the Company’s actual results and
could cause such results to differ materially from any forward-looking
statements that may be made in this news release or that are otherwise
made by or on behalf of the Company. Factors that may affect the
Company’s results include, but are not limited to, product demand,
market acceptance, impact of competitive products and prices, product
development, completion of an acquisition, commercialization or
technological difficulties, the success or failure of negotiations and
trade, legal, social and economic risks. Additional factors that could
cause or contribute to differences between the Company’s actual results
and forward-looking statements include but are not limited to, those
discussed in the Company’s filings with the U.S. Securities and Exchange
Commission.
(Tables to follow)
Three Months Ended
2012
2011
Net Sales
$
15,277,366
$
14,371,271
Cost of sales
10,401,206
9,942,889
Gross Profit
4,876,160
4,428,382
Operating Expenses
Selling, general and administrative
6,359,090
4,738,019
Research and development
1,114,698
143,827
Total operating expenses
7,473,788
4,881,846
Operating loss
(2,597,628
)
(453,464
)
Other (income) expense, net:
Interest (income) expense
(5,079
)
93,629
Other income, net
(54,884
)
(73,429
)
Total other (income) expense, net
(59,963
)
20,200
Loss before income taxes
(2,537,665
)
(473,664
)
Income tax expense
1,236
73,368
Net Loss
$
(2,538,901
)
$
(547,032
)
Net loss per common share – basic and diluted
$
(0.24
)
$
(0.08
)
Shares used in computing net loss per common share – basic and
diluted
10,610,111
6,634,187
March 31,
December 31,
2012
2011
ASSETS
Current Assets
Cash and cash equivalents
$
15,680,749
$
17,110,350
Short-term investments
4,976,000
5,225,000
Accounts receivable, net
5,160,583
6,267,839
Inventories
12,225,940
10,530,721
Prepaid expenses and other current assets
2,173,865
2,099,197
Total current assets
40,217,137
41,233,107
Long-term investments
-
249,000
Equipment and improvements, net
3,464,887
3,489,194
Identifiable intangible assets, net
6,175,966
6,403,044
Goodwill
7,119,726
7,119,726
Other assets
130,971
129,821
Total Assets
$
57,108,687
$
58,623,892
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable
$
3,808,151
$
3,999,993
Accrued expenses and other current liabilities
2,793,663
2,377,634
Total current liabilities
6,601,814
6,377,627
Long-term liabilities
235,433
252,684
Deferred tax liability
1,180,801
1,146,047
Total Liabilities
8,018,048
7,776,358
Shareholders’ Equity
Convertible preferred stock, $.01 par value; 1,468,750 shares
authorized; issued and outstanding: 73,332 shares at March 31,
2012 and December 31, 2011 (liquidation preference of
$3,222,368 at March 31, 2012)
733
733
Common stock, $.01 par value; 18,750,000 shares authorized; issued
and outstanding: 10,645,876 at March 31, 2012 and 10,577,632
at December 31, 2011
106,459
105,776
Additional paid-in capital
78,076,804
77,374,821
Accumulated other comprehensive income –
cumulative translation adjustments
1,581,871
1,502,531
Accumulated deficit
(30,675,228
)
(28,136,327
)
Total Shareholders’ Equity
49,090,639
50,847,534
Total Liabilities and Shareholders’ Equity
$
57,108,687
$
58,623,892
Article source: http://finance.yahoo.com/news/derma-sciences-reports-first-quarter-114700921.html
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