2 Fast Growing Wound Care Companies With Upcoming Milestones

| About: Derma Sciences (DSCI)

I recently noticed intensive insider buying in NovaBay Pharmaceuticals (NYSEMKT:NBY). The stock is currently up marginally since my article on the company. In this article, I will look at two additional wound care companies and compare them against each other. The two other companies are Derma Sciences (NASDAQ:DSCI) and Oculus Innovative Sciences (NASDAQ:OCLS). Here is a look at these two companies.

Products & Science

Derma: The company has full lines of products in the following categories: Advanced Wound Care, Traditional Wound Care, Burn Care, Skin Care and Bathing, Specialty Securement and Closure Devices, and First Aid. Regarding advanced wound care, the lines include market leading Medihoney line of Active Leptospermum Honey dressings, Xtrasorb Super Absorbent Polymer Dressings for highly exuding wounds, Bioguard Barrier Dressings for prophylactic infection prevention, Algicell Ag for wounds with high bioburden, and TCC-EZ - a gold standard total contact casting system for the management of diabetic foot ulcers.

Oculus: The company's principal platform, Microcyn Technology, is capable of producing a potent broad-spectrum antimicrobial designed to treat a wide range of pathogens, including viruses, fungi, spores and antibiotic-resistant strains of bacteria such as Methicillin-resistant Staphylococcus aureus [MRSA] and Vancomycin-resistant Enterococcus [VRE], all of which cause disease or inhibit the healing in both acute and chronic wounds. Independent laboratory testing confirms that the Microcyn Technology is effective at inactivating H1N1 swine flu. Microcyn is a non-irritating, shelf-stable solution containing oxychlorine compounds; its safety profile has been established as comparable to saline through treatment of over three million patients to date, and efficacy has been validated via more than 30 clinical studies. The company has currently more than 60 different Microcyn-based products in diversified markets.

Commercial activity

Derma: The company markets its products principally through direct sales representatives in the United States, Canada and the United Kingdom, and through independent distributors within other select international markets. The company's U.S. distribution facilities are located in St. Louis, Missouri and Houston, Texas. The company utilizes third party distributors for distribution in Canada, Europe and the Far East. Derma has manufacturing facilities in Toronto, Canada and Nantong, China.

Oculus: The company is generating revenue through established and scalable commercial operations, including manufacturing in Mexico and the United States, and product sales via partners in the U.S., EU, Mexico, China, India and select Middle East countries.


Derma: The company owns or licenses over 50 United States patents, corresponding foreign patents and patent applications.

Oculus: The company has an intellectual property portfolio of 24 issued patents and more than 100 patents pending around the world.


Derma: In the United States, Derma's traditional wound care products compete in a commodity oriented marketplace with Covidien (COV), Medline, Medical Action (NASDAQ:MDCI) and a number of others. In the advanced wound care products marketplace, Derma competes principally with Convatec, Smith & Nephew (NYSE:SNN), Molnlycke and Systagenix. Derma's adhesive bandage and related first aid products compete with Medline, ASO and Dynerex in the medical market, Medline and ASO in the industrial market, ASO, Medline and Liberty in the private label market and Johnson & Johnson (NYSE:JNJ), 3M (NYSE:MMM) and Medline in the retail market. The market for wound closure strips and catheter fasteners is characterized by a wide range of generic competition. The most dominant competitor in the suture strip market is 3M. Derma's skin care products compete in a commodity oriented marketplace with Medline, Provon and a number of others.

Oculus: The wound and skin care market is highly competitive. Oculus competes with a number of large, well-established and well-funded companies that sell a broad range of wound care products, including topical anti-infectives and antibiotics, as well as some advanced wound technologies, such as skin substitutes, growth factors and sophisticated delayed release silver-based dressings. The company believes the principal competitive factors in its target market are related to improved patient outcomes, such as shortened time in the hospital, accelerated healing time, lack of adverse events, safety of products, ease of use, stability, pathogen killing and cost effectiveness.

Regulatory approvals

Derma: The company has five approved Advanced Wound Care products. Derma also has approved products in Traditional Wound Care, Burn Care, Skin Care and Bathing, Specialty Securement and Closure Devices, and First Aid. The company has begun Phase 3 clinical trials in diabetic foot ulcer healing with DSC127, based on excellent Phase 2 data. The company is hoping to report Phase 3 trial results in early 2015.

Oculus: The company received the CE Mark in November 2004 and additional international approvals in China, Canada, Mexico and India. To date, Microcyn-based products have received seven FDA 510[k] clearances. Many of these clearances are for use as a medical device in wound cleaning, or debridement, lubricating, moistening and dressing, including traumatic wounds and acute and chronic dermal lesions. The company intends to pursue additional regulatory approvals in Europe, China, India and Mexico for its Microcyn Technology tissue care products and plans to initiate commercialization upon obtaining these approvals. The company does not have the necessary regulatory approvals to market Microcyn as a drug or as a medical device with an antimicrobial or wound healing indication in the United States. In the future, the company expects to apply with the U.S. Food and Drug Administration for clearance as an antimicrobial in a liquid and a hydrogel form.


Derma: The company reported the third-quarter financial results on November 12 with the following highlights:

Revenue $19.6 million
Net loss $3.1 million
Cash $15.6 million

On December 11, 2012, Derma closed a $33.8 million financing deal.

Oculus: The company reported the fiscal 2013 third-quarter, which ended December 31, financial results on February 13 with the following highlights:

Revenue $3.5 million
Net loss $1.9 million
Cash $6.6 million
Debt $1.5 million


Derma: The company expects 30% to 40% advanced wound care sales growth in 2013, and as a result the company's operating business, excluding DSC127 development expenses, is expected to achieve positive cash flow. Derma's traditional wound care products are on track to meet annual sales growth objective of 2% to 4%.

Oculus: The company's guidance for the quarter ending March 31, 2013 is total revenue to be in the $3.6 million to $3.8 million range, cash operating expenses to be approximately $2.8 million and EBITDAS to be less than $500,000 negative. The company forecasts a product revenue growth range of 25% to 30% for the full fiscal year 2013.

Upcoming catalysts


  • Phase III study results from the DSC127 trial for healing diabetic foot ulcers are expected in early 2005.
  • Begin the second DSC127 pivotal Phase 3 trial (1Q13)
  • Launch Medihoney in South Korea (1Q13)
  • Launch Medihoney HCS in the EU (1Q13)
  • Begin development work with DSC127 in scar reduction (1H13)


  • Spin off Ruthigen from Oculus later this year.
  • Initiation of clinical trials for RUT58-60 later in 2013.
  • Expand product reach, not only in Mexico, but into larger markets, including Brazil, Argentina, rest of Latin America and South America.
  • Announce top line data for scars management trial in the next, hopefully, 60 days.
  • Oculus' partner, Quinnova, is launching 3 new Microcyn-based products over the next 9 months.

Insider Ownership

  • Derma: The company has a 4.73% insider ownership. There have been zero insider buy transactions and there have been two insider sell transactions during the past six months.
  • Oculus: The company has a 2.96% insider ownership. There have been four insider buy transactions and there have not been any insider sell transactions during the past six months.


Derma should have enough cash to complete the Phase III trials for DSC127. Oculus board of directors unanimously approved a plan to spin off the company's novel drug RUT58-60 as a separate company to be called Ruthigen in January 2013. The Spin-off is expected to occur in 2013, which should help Oculus to turn profitable as early as this year. Oculus is trading at a P/S multiple of 1.69 and Derma has a P/S multiple of 2.25, which makes Oculus more attractive currently.

Disclosure: I am long NBY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.