NovaBay Pharmaceuticals Reports 2022 Fourth Quarter and Full Year Financial Results

Rhea-AI Summary

NovaBay Pharmaceuticals reported a strong financial performance for the fourth quarter and full year 2022, with net product revenue increasing by 15% in Q4 to $3.6 million, and by 41% year-over-year to $14.4 million. The significant growth was fueled by a 143% surge in wound care revenue and successful digital marketing optimization, leading to lower marketing expenses. However, gross margin for Q4 declined to 48% from 53% due to higher sales of lower margin products, and the company recorded a net loss of $8.2 million in Q4, driven primarily by a $6.7 million non-cash impairment charge related to DERMAdoctor assets.

Positive

• Product sales increased by 15% for Q4 and 41% for the year.
• Wound care revenue surged by 143% year-over-year.
• Digital marketing optimization reduced expenses by 4% while increasing revenue.

Negative

• Net loss attributable to common stockholders was $8.2 million in Q4.
• Gross margin declined to 48% in Q4 from 53% in the prior year.
• Non-cash impairment charges of $6.7 million impacted financial results.

• Product sales increased 15% for the quarter and 41% for the year, driven by increasingly diversified revenue streams
• Wound care revenue increased 143% year over year
• Digital marketing program optimization continued to drive higher product sales on lower marketing spend
• Eyecare portfolio recently expanded with the introduction of the Avenova^® oral supplement and Eyeganics Organic Tears

Conference call begins at 4:30 p.m. Eastern time today

EMERYVILLE, Calif.--(BUSINESS WIRE)-- NovaBay^® Pharmaceuticals, Inc. (NYSE American: NBY) reports financial results for the three and 12 months ended December 31, 2022 and provides a business update. Financial results for 2022 include DERMAdoctor^®, which NovaBay acquired on November 5, 2021.

“Product sales for the fourth quarter increased 15% over the prior-year period, with continued increases in Avenova Spray unit sales through the online channel. Our Avenova companion products and our wound care products contributed more towards our overall sales than ever before,” said Justin Hall, NovaBay CEO. “Importantly, for the full year 2022 we lowered marketing spend by 4% while increasing revenue by 41%. We accomplished this by optimizing digital marketing programs for new and existing products in the direct-to-consumer sales channel.

“We recently added a differentiated, high-quality OTC product to our eyecare portfolio, further reinforcing NovaBay as a one-stop destination for customers seeking relief from the symptoms of dry eye and other common eye frustrations,” he added. “Our new oral supplements are formulated with the rare maqui berry, which is shown to be highly effective for relief of dry eye symptoms. We also began co-promoting Eyeganics Organic Tears, the only USDA-certified organic lubricating drop for those affected by chemicals found in certain other artificial tears. We now offer a broader selection of best-in-class products in our core eyecare segment.”

Fourth Quarter Financial Results

Net product revenue for the fourth quarter of 2022 was $3.6 million, an increase of 15% from $3.2 million for the prior-year period, and included $2.1 million of Avenova-branded product sales, $1.0 million of DERMAdoctor product sales and $0.1 million of PhaseOne^® and $0.3 million of NeutroPhase^® branded wound care product sales.

Gross margin on net product revenue for the fourth quarter of 2022 was 48%, compared with 53% for the fourth quarter of 2021, with the decrease primarily due to higher sales of lower margin skincare and wound care products.

Sales and marketing expenses were $1.9 million for the fourth quarter of 2022, compared with $2.2 million for the fourth quarter of 2021. The decrease reflected lower Avenova digital advertising and related consulting expenses, partially offset by the addition of sales and marketing expenses for DERMAdoctor. General and administrative (G&A) expenses for the fourth quarter of 2022 were relatively flat at $2.4 million for the fourth quarter of 2022, compared with $2.7 million for the fourth quarter of 2021. Research and development (R&D) expenses for the fourth quarter of 2022 were $66 thousand, compared with $9 thousand for the prior-year period, with the increase due mainly to new product development under the DERMAdoctor brand.

NovaBay recorded non-cash impairment charges of $6.7 million due to the reduced value of DERMAdoctor’s goodwill, intangible, and other assets. There were no comparable charges in the fourth quarter of 2021.

Non-cash gain on changes in fair value of warrant liability for the fourth quarter of 2022 was $1.0 million, compared with a non-cash gain for the fourth quarter of 2021 of $4.6 million. Non-cash gain on changes in fair value of contingent liability for the fourth quarter of 2022 was $0.3 million. There was no comparable item for the fourth quarter of 2021.

Other expense, net for the fourth quarter of 2022 was $98 thousand, compared with other expense, net for the fourth quarter of 2021 of $1.6 million.

Net loss attributable to common stockholders for the fourth quarter of 2022 was $8.2 million, or $4.33 per share, compared with a net loss attributable to common stockholders for the fourth quarter of 2021 of $0.9 million, or $0.69 per share, with the change mostly due to the non-cash impairment charges to goodwill, intangible, and other assets.

Full Year Financial Results

Net product revenue for 2022 was $14.4 million, an increase of 41% from $10.2 million for 2021, with the increase primarily reflecting the addition of DERMAdoctor.

Gross margin on net product revenue for 2022 was 54%, compared with 64% for 2021, with the decline primarily due to increased sales of lower margin skincare and wound care products.

For 2022, sales and marketing expenses decreased by 4%, and G&A expenses increased by 3%, both compared with 2021. R&D expenses were $174 thousand for 2022, versus $44 thousand for 2021.

Non-cash loss on the modification of common stock warrants for 2022 was $1.9 million, non-cash retained earnings reduction due to adjustment to the Series B preferred stock conversion price was $5.7 million, and other expense was $276 thousand-each predominantly related to the warrant reprice transaction completed in September 2022 (the “2022 Warrant Reprice Transaction”). Adjustments to the fair value of warrant liabilities for 2022 resulted in a non-cash gain of $5.4 million compared with a non-cash gain of $4.6 million for 2021. Adjustments to the fair value of contingent liability for 2022 resulted in a non-cash gain of $0.6 million, with no comparable adjustment for 2021.

The net loss attributable to common stockholders for 2022 was $16.3 million, or $10.10 per share, compared with a net loss attributable to common stockholders for 2021 of $6.6 million, or $4.81 per share. The net loss in 2022 included non-cash impairment charges of $6.7 million due to the reduced value of DERMAdoctor’s goodwill, intangible, and other assets.

NovaBay had cash and cash equivalents of $5.4 million as of December 31, 2022, compared with $7.5 million as of December 31, 2021.

Conference Call

NovaBay management will host an investment community conference call today beginning at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss the Company’s financial and operational results and answer questions. Participants can pre-register for the conference call here. Callers who pre-register will be given a conference passcode and unique PIN to gain immediate access to the call and bypass the live operator. Participants may pre-register at any time, including up to and after the call start time.

Stockholders and other interested parties may also participate in the conference call by dialing 866-777-2509 from within the U.S. or 412-317-5413 from outside the U.S., and requesting the NovaBay Pharmaceuticals call.

A live webcast of the call will be available here and will be archived for 90 days. A replay of the call will be available beginning two hours after the call ends through April 13, 2023 by dialing 877-344-7529 from within the U.S., 855-669-9658 from Canada or 412-317-0088 from outside the U.S. and Canada, and entering the conference identification number 6368470.

About NovaBay Pharmaceuticals, Inc.:

NovaBay Pharmaceuticals, Inc. develops and sells scientifically created and clinically proven eyecare, skincare and wound care products. NovaBay’s leading product, Avenova^® Antimicrobial Lid & Lash Solution, is proven in laboratory testing to have broad antimicrobial properties as it removes foreign material including microorganisms and debris from the skin around the eye, including the eyelid. Avenova Antimicrobial Lid & Lash Solution is available direct to consumer primarily through online distribution channels such as Amazon, and is also available by prescription and dispensed by eyecare professionals for blepharitis and dry-eye disease. DERMAdoctor^® offers more than 30 OTC dermatologist-developed skincare products through the DERMAdoctor website, well-known traditional and digital beauty retailers, and international distributors. NovaBay also manufactures and sells effective, yet gentle and non-irritating wound care products. The PhaseOne^® brand is distributed through commercial partners in the U.S. for professional use only, and the NeutroPhase^® brand is distributed in China by Pioneer Pharma (Hong Kong) Company Ltd.

Forward-Looking Statements

This release contains information about management's view of the Company's future expectations, plans and prospects that constitute forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historic or current facts. Such forward-looking statements are based upon management’s current expectations, assumptions, estimates, projections and beliefs. These statements include, but are not limited to, statements regarding our business strategies, commercial progress, current and potential future product offerings, the continuing integration of DERMAdoctor, expanded access to our products, and any future revenue, and the timing of such revenue, that may result from selling these products, as well as generally the Company’s expected future financial results. These statements involve risks, uncertainties and other factors that may cause actual results or achievements to be materially different and adverse from those expressed in or implied by these forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, risks and uncertainties relating to the integration of DERMAdoctor’s business with the Company’s business (and further related impairments to goodwill), the size of the potential market for our products, the Company’s products not being able to penetrate one or more targeted markets and the Company’s ability to continue as a going concern and revenues (or the execution on capital raise opportunities) not being sufficient to meet the Company’s cash needs. Other risks relating to NovaBay’s business, including risks that could cause results to differ materially from those projected in the forward-looking statements in this press release, are detailed in NovaBay’s latest Form 10-K/Q filings with the Securities and Exchange Commission, especially under the heading “Risk Factors.” The forward-looking statements in this release speak only as of this date, and NovaBay disclaims any intent or obligation to revise or update publicly any forward-looking statement except as required by law.

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Avenova Purchasing Information
For NovaBay Avenova purchasing information:
Please call 800-890-0329 or email sales@avenova.com
Avenova.com

DERMAdoctor Purchasing Information
For DERMAdoctor purchasing information:
Please call 877-337-6237 or email service@dermadoctor.com
DERMAdoctor.com

NOVABAY PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value amounts)
		December 31,				December 31,
		2022				2021
ASSETS
Current assets:
Cash and cash equivalents		$	5,362			$	7,504
Accounts receivable, net of allowance for doubtful accounts ($19 and $0 at December 31, 2022 and December 31, 2021, respectively)			1,973				1,668
Inventory, net of allowance for excess and obsolete inventory and lower of cost or estimated net realizable value adjustments ($499 and $641 at December 31, 2022 and December 31, 2021, respectively)			3,437				3,220
Prepaid expenses and other current assets			560				778
Total current assets			11,332				13,170
Operating lease right-of-use assets			1,831				411
Property and equipment, net			119				193
Goodwill			348				4,528
Other intangible assets, net			2,280				5,200
Other assets			489				476
TOTAL ASSETS		$	16,399			$	23,978
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Current liabilities:
Accounts payable		$	1,080			$	1,045
Accrued liabilities			2,724				2,092
Line of credit			—				105
Operating lease liabilities			453				200
Total current liabilities			4,257				3,442
Operating lease liabilities-non-current			1,588				246
Warrant liability			—				9,558
Contingent earnout liability			—				561
Total liabilities			5,845				13,807
Commitments & contingencies
Stockholders' equity:
Preferred stock, $0.01 par value; 5,000 shares authorized;
Series B preferred stock; 12 and 14 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively			570				680
Series C preferred stock; 2 and no shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively			2,403				—
Common stock, $0.01 par value; 150,000 and 100,000 shares authorized, 2,035 and 1,365 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively			652				478
Additional paid-in capital			165,081				150,900
Accumulated deficit			(158,152	)			(141,887	)
Total stockholders' equity			10,554				10,171
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	16,399			$	23,978

NOVABAY PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
						Three Months Ended December 31,									Year Ended December 31,
							2022					2021				2022					2021
Sales:
Product revenue, net						$	3,631				$	3,167			$	14,374				$	10,180
Other revenue, net							12					5				30					24
Total sales, net							3,643					3,172				14,404					10,204
Cost of goods sold							1,888					1,495				6,623					3,689
Gross profit							1,755					1,677				7,781					6,515
Operating expenses:
Research and development							66					9				174					44
Sales and marketing							1,938					2,150				7,798					8,093
General and administrative							2,440					2,713				7,489					7,240
Goodwill, intangible, and other asset impairment							6,737					-				6,737					-
Total operating expenses							11,181					4,872				22,198					15,377
Operating loss							(9,426	)				(3,195	)			(14,417	)				(8,862	)
Non-cash loss on modification of common stock warrants							-					-				(1,922	)				-
Non-cash gain on changes in fair value of warrant liability							976					4,615				5,446					4,615
Non-cash gain on changes in fair value of contingent liability							342					-				561					-
Other expense, net							(98	)				(1,579	)			(276	)				(1,577	)
Loss before provision for income taxes							(8,206	)				(159	)			(10,608	)				(5,824	)
Provision for income taxes							—					-				—					-
Net loss						$	(8,206	)			$	(159	)		$	(10,608	)			$	(5,824	)
Less: Preferred deemed dividend							-					735				-					735
Less: Retained earnings reduction related to preferred stock down round feature triggered							-					-				5,657					-
Net loss attributable to common stockholders						$	(8,206	)			$	(894	)		$	(16,265	)			$	(6,559	)
Net loss per share attributable to common stockholders (basic and diluted)						$	(4.33	)			$	(0.69	)		$	(10.10	)			$	(4.81	)
Weighted-average shares of common stock used in computing net loss per share attributable to common stockholders (basic and diluted)							1,893					1,295				1,610					1,365

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230330005709/en/

NovaBay Contact

Justin Hall

Chief Executive Officer and General Counsel

510-899-8800

jhall@novabay.com

Investor Contact

LHA Investor Relations

Jody Cain

310-691-7100

jcain@lhai.com

Source: NovaBay Pharmaceuticals, Inc.

FAQ

What were NovaBay Pharmaceuticals' Q4 2022 product sales results?

NovaBay Pharmaceuticals reported Q4 2022 net product revenue of $3.6 million, a 15% increase from the previous year.

How did NovaBay perform in 2022 compared to 2021?

In 2022, NovaBay's net product revenue increased by 41% to $14.4 million, driven largely by the acquisition of DERMAdoctor.

What was the net loss reported by NovaBay in Q4 2022?

The net loss attributable to common stockholders was $8.2 million, or $4.33 per share, for Q4 2022.

How did marketing expenses impact NovaBay's financial results?

Marketing expenses decreased by 4% in 2022, contributing to higher revenue despite the net loss.

What is the current gross margin for NovaBay?

For Q4 2022, NovaBay reported a gross margin of 48%, down from 53% in Q4 2021.