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Derma Sciences Reports First Quarter Financial Results

Companies mentioned in this article: Derma Sciences, Inc.

PRINCETON, N.J. -- (BUSINESS WIRE) -- Derma Sciences, Inc. (Nasdaq:DSCI), a tissue regeneration company focused on advanced wound and burn care, today reported financial and operating results for the three months ended March 31, 2014. Highlights of the first quarter of 2014 and recent weeks include:

  • Advanced Wound Care (AWC) product sales increased 11.5% to $8.4 million, led by MEDIHONEY®, TCC-EZ® and XTRASORB®
  • Traditional Wound Care (TWC) product sales increased 1.2% to $11.4 million
  • Total net sales increased 5.3% to $19.8 million
  • Added 24 people to the global sales and marketing organization
  • Initiated a direct-to-patient program to further drive enrollment in the DSC127 Phase 3 studies for diabetic foot ulcer healing
  • Recorded the first sales of AMNIOEXCEL®

Management Commentary

“We undertook several initiatives during the quarter in support of our goal of advanced wound care leadership,” commented Edward J. Quilty, chairman and chief executive officer. “We licensed placental-derived wound care products in January to provide new offerings for our expanded AWC sales organization and entrée into the large and growing skin substitute market. At the same time, our anchor MEDIHONEY and TCC-EZ products, along with XTRASORB, posted double-digit growth. As we previously disclosed, sales during the quarter were impacted by severe winter weather that resulted in reduced patient volume at wound centers. Also, integrating new sales representatives and related professionals had a temporary moderating effect on sales growth as territories were realigned for better coverage. Importantly, growth in sales of AWC products has begun to show strength in recent weeks, our sales organization is performing well and we expect to meet our sales goals for the year.”

Mr. Quilty added, “Our AWC product line was very well received at last month’s Spring Symposium on Advanced Wound Care. Our products were featured in a number of posters and presentations at this important gathering of wound care clinicians, including key opinion leaders presenting positive experiences with MEDIHONEY in the healing of chronic wounds. Two authors also previewed two key publications that will be available later this year concluding that more off-loading is needed for the management of diabetic foot ulcers and that total contact casting is the preferred method. We also introduced AMNIOEXCEL® and a leading podiatrist presented our first three patient cases involving five wounds treated with this product, showing favorable results including complete healing of a wound previously treated with a competing skin substitute. We have a comprehensive plan to address each Medicare Administrative Contractor in order to secure reimbursement for our AMNIOEXCEL products, including the initiation of our clinical trial program. We are looking forward to having two leading physicians who have used our AMNIO products present their clinical findings, along with other key opinion leaders speaking about our other lead products at an investor day in New York City on June 17th.

“DSC127 is of utmost importance to us given the enormous market potential and unmet clinical need. We made steady progress in enrolling patients in our Phase 3 clinical trials during the quarter, with a successful pilot direct-to-patient media campaign that we are now scaling up in size and geographic reach. New sites in South Africa and the U.S. support our expectations for both the timing and the cost of these trials. These are the largest-ever clinical trials for diabetic foot ulcers and our goal is to generate the data required for U.S. regulatory approval,” Mr. Quilty added.

Financial Results

Net sales for the first quarter of 2014 were $19.8 million, up 5.3% from $18.8 million for the first quarter of 2013. This included AWC product sales of $8.4 million, up 11.5% over $7.5 million in the prior-year quarter, and TWC product sales of $11.4 million, up 1.2% over $11.3 million in the prior year. AWC sales were negatively impacted by severe winter weather during the quarter, which resulted in reduced patient flow to a number of wound care centers. TWC results reflect improved Canadian sales.

Gross profit for the first quarter of 2014 was $6.9 million, or 34.9% of net sales, compared with gross profit for the first quarter of 2013 of $6.7 million, or 35.7% of net sales. The lower gross margin reflects higher manufacturing costs and unfavorable sales mix partially offset by increased sales of higher-margin AWC products.

Selling, general and administrative expense for the first quarter of 2014 was $13.0 million, compared with $9.9 million for the first quarter of 2013. The increase was principally due to higher expenditures associated with AWC growth initiatives (including incremental BioD start-up costs) and higher timing and growth-related equity based compensation expense.

Research and development expense for the first quarter of 2014 was $4.2 million, compared with $3.0 million in the first quarter of 2013. The increase was principally attributable to the ramp up of clinical trial activity.

The net loss for the first quarter of 2014 was $10.3 million, or $0.46 per share, compared with a net loss for the first quarter of 2013 of $6.2 million, or $0.38 per share. The increase in net loss was principally due to higher operating expenses.

During the first quarter of 2014, the Company raised net proceeds of approximately $80.6 million from an underwritten offering of 7.5 million shares of common stock.

As of March 31, 2014, Derma Sciences had cash, cash equivalents and investments of $92.4 million (excluding a $6.5 million investment in Comvita common stock held as a long-term investment), compared with $23.0 million as of December 31, 2013.

Financial and DSC127 Guidance

Derma Sciences affirms guidance for 2014 net sales to be approximately $92.0 million, organic sales growth of AWC products to be in excess of 30% and TWC revenue growth to be between 2% and 5%. The Company also affirms expectations for the total cost of the DSC127 Phase 3 program up to the filing of a New Drug Application with the U.S. Food and Drug Administration to be approximately $55.0 million to $60.0 million. Derma Sciences expects trial enrollment will be completed in mid-2015 with top-line data readout early in 2016. The Company expects enrollment to reach the halfway point near the end of 2014.

Conference Call and Webcast

Derma Sciences management will host a conference call at 11:00 a.m. Eastern time today to discuss first quarter financial results and answer questions. In addition, management will provide a business update and discuss recent and upcoming milestones.

To access the conference call, U.S. participants should dial (888) 563-6275 and international participants should dial (706) 634-7417. All participants should provide the passcode 36897409. Individuals can listen to the live conference call at www.dermasciences.com.

Following the conclusion of the conference call, a replay will be available through May 14, 2014 and can be accessed by dialing (855) 859-2056 from within the U.S. or (404) 537-3406 from outside the U.S. All listeners should provide passcode 36897409. The webcast will be available for 30 days.

About Derma Sciences, Inc.

Derma Sciences is a tissue regeneration company focused on advanced wound and burn care. It offers a line of products with patented technologies to help better manage chronic and hard-to-heal wounds, many of which result from diabetes and poor vascular functioning. Its MEDIHONEY® product is the leading brand of honey-based dressings for the management of wounds and burns. The product has been shown in clinical studies to be effective in a variety of indications. TCC-EZ® is its gold-standard total contact casting system for diabetic foot ulcers. Other novel products introduced into the $14 billion global wound care market include XTRASORB® for better management of wound exudate, and BIOGUARD® for barrier protection against microbes and other contaminants. Derma Sciences entered the $500 million market for skin substitute products by licensing AMNIOEXCEL® and AMNIOMATRIX® in the first quarter of 2014. AMNIOEXCEL was introduced to customers in March 2014 and AMNIOMATRIX will be launched in the second quarter. Its pharmaceutical wound care products include DSC127, which is in Phase 3 clinical trials for the healing of diabetic foot ulcers. This drug candidate is also part of a BARDA grant program for the healing/prevention of tissue damage due to ionizing radiation exposure. The patented API peptide used in DSC127 is also in preclinical testing for scar prevention/reduction. Derma Sciences also offers a full line of traditional dressings.

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 -

       

DERMA SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)

             

Three Months Ended
March 31,

      2014     2013
Net Sales $ 19,787,034       $ 18,789,746  
Cost of sales       12,874,709         12,085,281  
Gross Profit       6,912,325         6,704,465  

Operating Expenses

       
Selling, general and administrative   13,049,555         9,853,085  
Research and development       4,183,599         2,993,166  

Total operating expenses

      17,233,154         12,846,251  
Operating loss       (10,320,829 )       (6,141,786 )
Other (income) expense, net       (39,251 )       88,804  
Loss before income taxes   (10,281,578 )       (6,230,590 )
Income tax (benefit) provision       (11,563 )       14,188  
Net Loss       (10,270,015 )       (6,244,778 )
Other Comprehensive Loss
Foreign currency translation adjustment (202,612 ) (49,685 )
Unrealized loss on equity securities       (376,675 )       -  
Total other comprehensive loss       (579,287 )       (49,685 )
Comprehensive Loss     $ (10,849,302 )     $ (6,294,463 )
Net loss per common share - basic and diluted     $ (0.46 )     $ (0.38 )
Shares used in computing net loss per common share – basic and diluted       22,564,611         16,593,677  
 

 

       

DERMA SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

             

March 31,
2014

December 31,
2013

ASSETS            
Current Assets        
Cash and cash equivalents $ 57,147,565       $ 6,501,586  
Short-term investments   35,240,000         15,478,000  
Accounts receivable, net   7,710,432         7,332,756  
Inventories   18,147,149         16,472,640  
Prepaid expenses and other current assets       4,021,983         3,746,753  
Total current assets   122,267,129         49,531,735  
Long-term investments   6,485,465         7,858,140  
Equipment and improvements, net   2,994,424         2,953,469  
Identifiable intangible assets, net   15,290,852         14,635,998  
Goodwill   13,457,693         13,457,693  
Other assets       145,706         139,318  
Total Assets     $ 160,641,269       $ 88,576,353  
LIABILITIES AND STOCKHOLDERS’ EQUITY            
Current Liabilities        
Accounts payable $ 5,502,752       $ 4,522,508  
Accrued expenses and other current liabilities       2,178,428         4,969,225  
Total current liabilities   7,681,180         9,491,733  
Long-term liabilities   229,744         242,325  
Deferred tax liability       1,679,021         1,694,147  
Total Liabilities       9,589,945         11,428,205  
Stockholders’ Equity        
Convertible preferred stock, $.01 par value; shares authorized 1,468,750;
issued and outstanding 73,332 at March 31, 2014 and
December 31, 2013 (liquidation preference of
$3,222,368 at March 31, 2014)   733         733  
Common stock, $.01 par value; shares authorized 35,000,000;
issued and outstanding 25,151,416 at March 31, 2014 and
17,347,071 at December 31, 2013   251,514         173,471  
Additional paid-in capital   224,739,042         140,064,607  
Accumulated other comprehensive income   500,861         1,080,148  
Accumulated deficit       (74,440,826 )       (64,170,811 )
Total Stockholders’ Equity       151,051,324         77,148,148  
Total Liabilities and Stockholders’ Equity     $ 160,641,269       $ 88,576,353  
 


Copyright © Business Wire 2014
Contact:

Derma Sciences, Inc.
John Yetter, 609-514-4744
Chief Financial Officer
jyetter@dermasciences.com
or
LHA
Kim Sutton Golodetz, 212-838-3777
kgolodetz@lhai.com
or
Bruce Voss, 310-691-7100
bvoss@lhai.com
or
Media
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