REDONDO BEACH, CA--(Marketwired - Dec 1, 2016) - SECFilings.com, a leading financial news and information portal offering free real time public company filing alerts, announces the publication of an article examining the turnaround efforts of Oculus Innovative Sciences (NASDAQ: OCLS).
Since charting a course to reinvent its business model two years ago, Oculus Innovative Sciences hasn't pulled any punches about how it expects to achieve success. Front and center in the plan has been the U.S. dermatology market. In order to capture as much of this market as possible, Oculus needed more control, which meant ending existing relationships and bringing its sales force in-house. Management made it clear that it intended to leverage non-core operations, which primarily were made up of ex-U.S. derm and animal care product sales, to reach a cash flow positive position with its U.S. derm business.
If a company is measured by its promises, then Oculus is standing tall in its turnaround effort, as it has yet to deliver an unimpressive quarterly report with respect to meeting its goals.
Keeping the pace of introducing one new product to the market about every quarter, Oculus now has 15 clearances from the U.S. Food and Drug Administration to commercialize products based upon its core Microcyn® Technology or selective technology in-licensed from partners. New product launches are on the horizon, including treatments for skin descaling and post-Mohs procedure and atopic dermatitis (eczema).
Q2 Fiscal 2017: Seeing the Vision Take Shape
Oculus recently released the results from its second quarter of fiscal year 2017, ended September 30, 2016. The results mirrored growth from each quarter since the re-build started two years, driven by the main objective of growth in U.S. dermatology.
During the quarter, total revenue rose to $4.11 million, up from $4.05 million in the year prior quarter. While the headline increase was only about 1.5 percent, the improvement was the result of increased U.S. sales offsetting declining international revenue. Product revenue in the U.S. totaled $1.7 million, representing an increase of 43 percent from Q2 fiscal 2016.
For the first six months of fiscal 2017, total revenue was up $185,000 to $7.9 million. Aligned with the overall plan, product revenue in the U.S. was the horse pulling the cart, gaining $1.1 million, or 56 percent, from the comparable period in fiscal 2016. Sales from Europe and rest of world chipped in with 29 percent growth, while Latin American sales fell 19 percent mostly due to an 18 percent drop in the value of the Mexican peso.
Enough Cash to Reach Breakeven
In the turnaround strategy, the first major milestone is reaching breakeven in the U.S. derm business. This is no small feat, considering that Oculus adopted a plan that essentially stripped this sales channel to zilch before launching eight new products into the medical dermatology market through a direct sales force. Moreover, even a highly experienced salesperson takes time to cover their own costs. Oculus has articulated that it takes about nine months to reach breakeven on a sales force investment.
Now about 24 months into the turnaround, Oculus is reaching a key tipping point. In order to get there, Oculus management demonstrated its commitment to the U.S. markets as the value driver and future of the company by selling its Latin American business to Invekra S.A.P.I. de C.V. of Mexico in October for $19.5 million in cash plus royalties on certain net sales for the next 10 years.
In the deal, Oculus sold to Invekra all of its assets related to its Microdacyn®-based products sold throughout Latin America and the Caribbean, while maintaining rights to sales of dermatology products in Brazil, the second largest derm market in the world outside the U.S.
While the cash didn't make it to the books for the September quarter, it does mean that Oculus entered November with about $21 million in unrestricted cash and cash equivalents with another $1.5 million expected early in 2017. In the conference call discussing the latest quarter, Oculus CEO Jim Schutz conveyed that the cash is "more than three times the amount of money we need to achieve commercial breakeven and operating profitability company-wide." Mr. Schutz also noted that Oculus is already breakeven in all of its non-core businesses (hospital sales, animal health sales, contract lab sales and international sales.)
Despite some spikes here and there, the market has been slow to reward Oculus with a market valuation that is typical for the industry, which generally runs at 3x-6x revenue. In fact, with a market capitalization of $19.75 million as on Friday's close, Oculus is valued beneath its cash value, considering it has essentially no debt.
The takeaway from the most recent conference call is that not only did management meet their guidance yet again, but actually greatly outperformed by putting the company in its best financial position ever and aligning for corporate breakeven sooner than most should have expected.
Follow the link to read the whole article: http://analysis.secfilings.com/articles/132-oculus-innovative-sciences-one-ups-itself-meets-expectations-yet-again
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