2018 Investor Presentation

Transcription

1 2018 Investor Presentation

2 FORWARD LOOKING STATEMENT This presentation includes forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of while these statements are made to convey to the public the company s progress, business opportunities and growth prospects, readers and listeners are cautioned that such forward-looking statements represent management's opinion. Whereas management believes such representation to be true and accurate, based on information and data available to the company at this time, actual results may differ materially from those described. The company's operations and business prospects are always subject to risk and uncertainties. Important factors that may cause actual results to differ are set forth in the company s periodic filings with the US Securities and Exchange Commission. 2

3 Sonoma Pharmaceuticals: Focus on prescription dermatology market Key Investment Points: 1. Attractive prescription dermatology market historically 3x to 6x of net revenue 2. Established track record of high dermatology prescription growth 3. Experienced, best-in-class, dermatology sales team 4. Proprietary, effective, non-steroid, nonantibiotic products 6 product lines 5. Path to profitability 3

4 Financial Metrics Market Cap (8/24/18) $12.4M FY 2018 Net Revenue $16.7M Cash (6/30/18) $7.7M Revenue growth over last year 30% Strong product revenue growth for FY 2018 = 31% Total revenue for Q4 FY 2018 = $4.4M No material debt outstanding Shares outstanding = 6.457M + 1.4M warrants 4

5 Prescription Dermatology Market Profitable for Investors Large addressable markets Dermatologists are high prescribers and early adopters Favorable product pricing and elasticity expected to produce strong margins Generally, dermatology products covered by private insurance Concentrated market can be covered by targeted sales force 6-9 month sales ramp to breakeven for sales force investment High market valuations for dermatology revenue 3x - 6x revenue 5

6 Large Addressable Dermatology Markets Breakdown of Surgical Skin Procedures in the U.S. Cosmetic 6.0MM Moles 3.4MM Reconstructive 3.9MM Potential dermatology indications & annual topical Total Prescriptions Core Focus: (TRx) Topical Dermatitis 6.9M 2016 prescriptions $1.3B addressable market Trauma 9.0MM Elective (Office) 9.6MM Elective (Hospitals) 10.4MM Total: 42.3MM Source: Mattson Jack Group Survey, US Anti-Scarring Market by the Nemetz Group December 2009, LifeSci Advisors Secondary Focus: Systemic Acne 6.9M 2017 prescriptions $3.6B addressable market Future Focus: Topical Acne 8.6M 2017 prescriptions $2.8B addressable market 6

7 KEY DERMATOLOGY PROBLEM: Topical Steroids & Antibiotics Have Safety & Resistance Issues Topical Steroids: Good anti-inflammatory BUT Safety issues in pediatric / geriatric populations & on open skin Limited time of use for 2-3 weeks Not antimicrobial Topical Antibiotics: Good, narrow antimicrobial BUT Limited time of use 7-10 days Bacterial resistance & side effects Narrow spectrum antimicrobial Limited anti-inflammatory Large opportunity for a new topical product, which combines: => anti-inflammatory + antimicrobial + safe + no resistance 7

8 The New SOLUTION - HOCl Hypochlorous Acid No Regret Treatment Characteristics of HOCl safe combination of steroids and antibiotics: 1. Anti-inflammatory & anti-itch similar to steroids quick acting and no side effects 2. Antimicrobial kills bacteria, certain fungi & key viruses broad spectrum and no resistance due to mode of action 3. No Side Effects safe to use around eyes, nose, mouth & open skin 4. Therapeutic: vasodilator, helps heal broken skin Results: Reduces inflammation, itch, infection, scarring and helps heals broken skin with without side effects and without resistance Evidence: Validated by over 35 clinical studies and scientific articles. 8

9 Sonoma s Solutions LEVICYN is a hypochlorous acid (HOCl) based topical prescription product to relieve the symptoms of atopic dermatitis. Celacyn is a hypochlorous-acid (HOCl) based topical prescription product for the management of old and new hypertrophic and keloid scars resulting from burns, surgical procedures and wounds. Sebuderm is indicated to manage and relieve the burning, stinging, erythema, scaling and pain experienced with various types of dermatoses, including Seborrhea and Seborrheic Dermatitis. The gentle, fast-acting, and efficacious approach to remove scale and itch. Ceramax helps manage dry itchy skin, minor skin irritations, rashes, and inflammation caused by various skin conditions, including atopic dermatitis and allergic contact dermatitis. MONDOXYNE NL is an oral tetracycline antibiotic used for the treatment of certain bacterial infections. It contains doxycycline, a broad-spectrum antibacterial synthetically derived from oxytetracycline, and works by slowing the growth of bacteria to treat severe acne. 9

10 Antimicrobial Solutions for atopic dermatitis and eczema 10

11 Before and After 10 weeks 11

12 Differentiated, Effective Solutions for atopic dermatitis and eczema Ceramax with Lipogrid Technology has been designed to control release and penetrate deep. Ceramax contains selected lipids and a lipid precursor designed to easily penetrate the bilayers of the skin by blending with the natural lipid building blocks. Fluorescent microscopy shows the lipids in Lipogrid Technology penetrate beyond the stratum corneum (SC) into the epidermis (E) 1 12

13 % of Improvement Over Baseline at 12 weeks Differentiated, Effective Solutions for hypertrophic and keloid scars CELACYN OUTPERFORMED SILICONE SCAR GEL IN DOUBLE BLIND, RANDOMIZED CLINICAL STUDY END POINTS 120% 100% 80% 60% 40% 20% 0% Vascularity Pliability Height Vancouver Pain Itch Celacyn Silicone Scar Gel 13

14 Baseline Day of surgery Post 14 days Post 60 days

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16 Differentiated, Effective Solutions for Severe Acne Antibacterial Adjunct Therapy for Severe Acne MONDOXYNE NL is an oral tetracycline antibiotic used for the treatment of certain bacterial infections. It contains doxycycline, a broad-spectrum antibacterial synthetically derived from oxytetracycline, and works by slowing the growth of bacteria. Slowing the bacteria s growth allows the body s immune system to destroy the bacteria. It may be used in combination with other medicines to treat severe acne. Product Features: Contains tried, true and proven doxycycline monohydrate Neutral ph for less stomach upset Easy-to-swallow capsules Savings for insured patients Low cost in comparison to brands, comparable to generics Insured patients Insured non-covered patients Cash patients 16

17 Differentiated, Effective Solutions for scaling associated with dermatitis Loyon For the Management of Scaling and Itch LOYON is indicated to manage and relieve the itching, erythema, and scaling experienced with various types of dermatoses, including seborrhea and seborrheic dermatitis. LOYON is now approved for your adult and pediatric patients with moderate-tosevere scaling associated with seborrheic dermatitis and psoriasis capitas. 17

18 Before Treatment Day 7 19 year old male, pronounced scalp scaling Treatment with LOYON 1 x daily for 7 days 18

19 Before Treatment Day 7 35 year old female, application of LOYON 1 X daily without concomitant anti-inflammatory treatment 19

20 Launching late Antimicrobial Facial Cleanser Recently announced excellence results of study for management of acne: Statistically significant reduction of 64% in inflammatory lesions and 43% in non-inflammatory lesions Equal to or better than BPO without irritation or side effects U.S. = Launching as Antimicrobial Facial Cleanser Brazil = Launching as topical Acne treatment 20

21 Study Results for Antimicrobial Facial Cleanser in U.S. 21

22 Results of Acne Product, Launched in Brazil Tirado-Sánchez A, Ponce-Olivera: Efficacy and Tolerance of Superoxidized Solution in the Treatment of Mild to Moderate Inflammatory Acne. A Double-Blinded, Placebo- Controlled, Parallel-Group, Randomized, Clinical Trial. J Derm Treatment 20, (5) ,

23 Prescriptions Filled (Third Party Data) for Dermatology Total Dispensed Prescriptions 25,000 Average Quarter over Quarter Growth for Last 8 Quarters = 6% 20,000 19,660 19,632 17,180 17,195 17,451 15,000 13,835 13,794 13,147 11,787 10,000 5, ,106 1, Sep-14 Dec-14 3,767 2,724 1,043 Mar-15 5,666 3,361 2,305 Jun-15 7,162 4,059 3,103 6,736 3,769 2, Sep-15 Dec-15 8,624 8,686 7,635 7,953 6,935 6,656 6,954 6,287 5,793 6,072 5,612 5,199 5,266 4,809 4,275 4,513 4,443 4,698 4,103 3,979 3,339 2,487 2,459 2,665 1,839 1,871 1,657 1,894 2,093 1,671 1,845 1,084 1,267 1,546 1,708 1,763 1,143 1,167 1,218 1, , Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Levicyn Celacyn Mondoxyne Ceramax Sebuderm Loyon Total Jun

24 TRx MBS Dollars $5,000,000 $4,500,000 Factory Units times (WAC) for 12/2014 through 06/2018 Prescriptions Filled by Dermatology Product Lines $4,657,482 $4,000,000 $4,184,274 $3,500,000 $3,000,000 $2,500,000 $2,344,857 $2,268,053 $3,159,061 $2,828,493 $3,616,163 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 $0 Sep-14 Dec-14 Mar-15 Jun-15 $1,795,033 $1,741,256 $1,346,018 $1,397,080 $1,329,614 $1,174,078 $1,072,466 $961,293 $1,012,060 $807,439 $814,114 $827,691 $936,113 $1,045,486 $874,709 $891,664 $800,496 $795,746 $748,500 $631,328 $377,433 $439,642 $499,821 $560,899 $660,662 $639,605 $475,092 $475,097 $497,232 $495,888 $519,773 $409,624 $431,591 $486,676 $198,010 $211,614 $243,399 $278,952 $282,851 $301,008 $317,183 $362,426 $297,445 $335,966 $120,024 $170,590 $231,840 $155,025 $119,184 $199,185 $229,181 $273,874 $319,630 $193,083 $193,616 $184,678 $203,757 $0 $0 $0 $4,560 $0 $6,864 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Levicyn Celacyn Mondoxyne Ceramax Sebuderm Total 24 24

25 TRX MBS DOLLARS 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 $500,000 Factory Units in Dollars at WAC For 12/2014 through 06/ 2018 Prescriptions Filled by Dermatology Product Lines Average Quarter over Quarter Growth for Last 4/ 6 Quarters: Total Prescription Units Sold Quarterly Growth of 11%/ 13% Ceramax (skin repair) Quarterly Growth of 28%/12% Mondoxyne (acne) Quarterly Growth of 1%/25% Celacyn (scar) Quarterly Growth of 8%/ 15% Levicyn (dermatitis) Quarterly Growth of 39%/ 26% Total Q1 $1.3 Total mmq1 $ % mm + 40% $155,025 $120,024 $439,642 Total Q1 $3.2 mm + 39% Total Total Q3 Q3 Total Q4 Total Q4 $2.3 mm $2.3 mm $2.3 mm$2.3 mm + 31% + 31% -3% -3% Total Total Q2 Q2 $1.8 $1.8 mm mm 33% $475, % $362,426 $317,183 $170,590 $499,821 $231,840 $560,899 $497,232 $475,097 $631,328 $807,439 $1,072,466 $814,114 Total Q2 $4.2 mm + 32% Total Q1 $3.2 mm + 39% $297,445 $660,662 $827,691 Total Q2 Total $4.2 Q3mm $4.6 + mm 32% + 11% $335,966 $1,012,060 $936,113 Total Q3 $4.6 mm + 11% $748,500 Total Q1 $3.8 mm 35% Total Q4 $2.8 mm $795,746-39% $1,045,486 $1,741,256 $1,174,078 $1,397,080 Total Q4 $2.8 mm -39% $431,591 $495,888 $639,605 $874,709 Total Q1 $3.6 mm 28% $486,676 $519,773 $891,664 $1,329,614 $0 Sep-14 Source: IMS Health NPA Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Total Q3 Total Q4 $2.3 mm $2.3 mm + 31% -3% Dec-17 Mar-18 Levicyn Celacyn Mondoxyne Ceramax Sebuderm Loyon 25 Jun-18 25

26 Problem & Solution in March Quarter? Problem: 1. In January reset of the health care plans with new deductible 2. Decline in wholesaler inventory without replenishment 3. High rebate cost as % of Gross Revenue Solutions: 1. Broaden delivery method use mail order pharmacies 2. Approach managed care providers with our economic & safety benefits 3. Focus of sales reps on selling insured prescriptions Align territory, doctor, patient and product Align incentive compensation 26

27 What are Characteristics of Profitability? Quarterly total revenue of $6.5 to $7.0 million High growth in Dermatology sales Improve productivity of the sales reps Focus on growing profitable revenue insured prescriptions. Price increases Cash operating expenses to remain in flat range June quarter is higher with annual audit costs Timing 27

28 Path to Achieve Profitability Increase productivity of the current sales reps 28 sales reps and 5 managers Focusing on high return territories Launching New Products Ceramax extensions, facial cleanser and around the eye rinse Growing sales of current high margined products Alevicyn, SebuDerm, Ceramax, Celacyn, Mondoxyne & Loyon Growing with Price Increases, still below competitive products Expect to increase dermatology product prices by 10% to 20% in 2018 Incremental revenue and cash from new international partnerships 28

29 Experienced Board of Directors & Management Team Jerry McLaughlin Lead Independent Director Russell Harrison Director Board of Directors Sharon Barbari Director Jay Birnbaum, Ph.D. Director Management Team Jim Schutz Chief Executive Officer and Director Robert Miller Chief Financial Officer Marc Umscheid Chief Operating Officer Jeff Day President of Sonoma Derm 29

30 78 Employees with significant HealthCare/Dermatology Experience Leadership team Sales team 278+ years in Healthcare 126+ years in Dermatology 525+ years in Healthcare 330+ years in Dermatology 28 Sales Representatives 5 Sales Managers Avg. Salesperson = 10.3 years experience in dermatology 30

31 Why Sonoma? 1) Market: Attractive dermatology prescription market typically valued at 3x to 6x of revenue 2) Three Year Track Record: 7-10% average growth quarter over quarter for last eight quarters 3) Team: 33 experienced, best in class, dermatology sales team 4) Competitive product advantage with 6 product lines: Proprietary, effective, non-steroidal, non-antibiotic products (HOCl) 5) Future: Continued strong growth & path to profitability Valuation: Market cap ~ $12M Cash = $7.7M; Revenue for FY 2018= $16.7M 31 31

32 THANK YOU 32