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Executives

Dan McFadden – Director Public and IR

Hoji Alimi – Founder and CEO

Greg Gust – Analyst

Bob Miller – CFO

Analysts

Laura Engel – Stonegate

Echo He – Maxim Group

Jack Wallace – Sidoti & Company

Bob Robbins – Robbins Capital Management

Prashant Mehta – NetGain

Oculus Innovative Sciences, Inc. (OCLS) F1Q13 Earnings Call August 2, 2012 4:30 PM ET

Operator

Good afternoon and welcome to the Oculus Innovative Sciences fiscal first quarter 2013 conference call. My name is Stefani and I will be your coordinator for today's call. AT this time all participants are in a listen-only mode. At the end of the call we will be holding a question-and-answer session with the company management. (Operator Instructions) As a reminder, this call is being recorded for replay purposes. I will now turn the call over to Mr. Dan McFadden. Please proceed sir.

Dan McFadden

Thank you Stephanie. Good afternoon and thank you for joining us. With me on the call are our Founder and CEO, Hoji Alimi, Mr. Greg Gust, dermatology industry analyst and our Chief Financial Officer, Bob Miller. We will open the call with Hoji’s discussion of the business highlights since the last earnings call and the company's execution on a strategic business plan. Next Mr. Gust will provide an overview of the dermatology markets and the role that Microcyn based products can play in these areas. Finally Bob Miller will review the financials and then we will take the questions.

This afternoon Oculus issued a press release detailing fiscal first quarter 2013 financial results and recent corporate developments. A copy of the press release can be downloaded from our website which is www. oculusis.com/ or you can call Investor Relations at 425-753-2105 and we’ll be happy to assist you.

Before we begin I'll remind listeners that this conference call contains forward-looking statements within the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by use of words as expect, to expand, would and anticipate amongst others. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially including risk inherent in the development and commercialization of potential products, the risk that potential clinical studies or trials will not proceed as anticipated or may not be sufficient or successful to meet regulatory standards, or receive the regulatory clearances or approvals, the company’s future capital needs and its ability to obtain additional funding and other risks detailed from time to time in the company’s filings with the Securities and Exchange Commission including the Quarterly Report on Form 10-Q and the Annual Report on Form 10-K. Identified product applications and/or uses are intended to highlight potential applications for the investment community and does infer that the company's market in for these indications. The company does not provide any assurances that such applications will receive regulatory approvals and Oculus disclaims any obligation to update these forward-looking statements.

Having said that, I will now turn the call over to Hoji Alimi, CEO and Founder.

Hoji Alimi

Thank you. Good afternoon. I am Hoji Alimi, CEO and Co-Founder of Oculus. And today on the call we have Greg Gust, former analyst with knowledge of the dermatology markets as well Bob Miller our CFO on the call with me.

As many of our shareholders are aware, Microcyn based products have commercialized both domestically as well as also in the United States to a number of partners with exception of obviously Mexico where we have our own direct sales force. These types of collaborative partnership strategy has helped generated record revenue quarter for Oculus with the highest revenues in our history which we reported revenues up 4.1 million and we were only 22,000 negative to reach EBITDA breakeven.

In the key timeframe we have signed a drug partner for the acne indication. We have initiated a scar management trial as well a cost reduction asserting to support the sale of wound care products in the United States in the hospital markets. And we are seeing a strong brand; I should say in the US dermatology sale of our products and as our partner is moving dermatologists from trialing the products to adopting the products. But all in all, a very highly strong quarter for us. A very meaningful market (ph) that we can truly point to that is going to create shareholder values.

During this quarter, we also initiated a clinical trial for scar management. This indication is already partnered with Amneal Quinnova and once the trial is completed and we receive the FDA clearance for that indication, and Amneal Quinnova will be in best Oculus for the cost of this trial, but more importantly is sales force will be ready to launch horoscope management in the US market.

In this trial we are targeting to enroll 40 patients, primarily to evaluate their scar improvements and we are using this according to monotype Vancouver scar scale or be refer to as VSS. The Oakland enroll our first patient pretty much (inaudible) and a target completed trial is in the first half of the next calendar year. So we view this as a potential catalyst for next year.

In addition, we are successfully as I said, I mentioned earlier executed an acne drug agreement with AmDerma. Based on this agreement, they will drive and all the necessary clinical trials and regulatory efforts regarding this acne indication. The agreement includes payments associated with the successful completion of each milestone and Greg Gust on this call will take a few minutes to explain the market and how Microcyn Technology can play a role in that market for treatment of acne. Looking forward, Oculus has established minimum revenue targets associated with each partner and these minimums increase each year as a commercialization of our products mature over time. All in all today, there are over 40 products in the US consumer markets, three in the US dermatology markets and seven products in the US acute hospital markets and we have well over 20 different products in international markets commercially.

In addition, we continue working on our projected pipeline for the upcoming year and our goal is to increase our revenues and expand our IT portfolio by increasing our product formulations and indications on all these respected markets. We are in various stages of discussions currently with potential new partners regarding new territories and product formulation. These potential partnership agreements could enable us to expand into new markets and resulting new products and obviously revenues which we can see to be a market catalyst.

We plan to communicate with the market as we finalize this agreement and we believe that climbing of this partnership also in parallel one can result or challenge with NASDAQ and second, it will continue to improve our bottom line and reduce our reliance on capital markets, expanded net surgical clinical studies and you're targeting such as the surgical news. We opted the market, a profit even to deal with fine lines and in a moment again, I will ask Greg to spend a little time on the dermatology indications including acne on that front. But focusing primarily for a minute on the surgical markets. The surgical markets remains to be the largest market as it relates to the usual marketing based products in open wound or incision sites. This product formulation is finalized and be now pertaining our clinical strategy to open discussions with FDA. There's regulated plans and approval and commercialization of this specific surgical formulation will provide a significant shareholder value.

So if I can summarize, we had a fantastic strong for the quarter, we reported 4.1 million total revenue for the quarter. We were only $22,000 negative to reach EBITDA breakeven. We had a growth rate of 142% in US product sales. We found that acne joint agreements with AmDerma, we initiated our FDA for Microcyn in management of scars. You have seen market adoption of seven new products in US hospital markets and three specific products in US dermatology markets. And in order to continue this type of growth, we are investing in more products and formulation that can be appropriated in market via apartments in all these market segments.

I will now turn the call to Mr. Greg Gust, if I can take a minute and give a little bit of background about Greg. He's the former senior research analyst who covered the specialty pharmaceuticals at ROTH Capital Partners. He began his career in Valeant Pharmaceuticals where has spent 15 years in marketing prescriptions, dermatology and urology products in US markets and currently Greg is working for us as a consultant focusing on developing matters sign technology for the prescription drug space. Greg?

Greg Gust

Thanks Hoji. First of all, I just want to start off by saying that the recent progress that's been made in the development of Microcyn Technology in the prescription space is very encouraging and it's something that I believe has a lot of potential. I believe this product could potentially address significant medical issues revolving around safety and emerging resistance to bacteria to traditional anti-biotic agents especially in the field of dermatology. The reason I like dermatology for a company of this type is a number of reasons. The main one is the fact that unlike other specialties, you have a limited manageable prescriber base of about 8,000 physicians which account for disproportionately large number of prescriptions for patient and this allows a relatively small sales force to achieve the region frequency required to influence prescriber behavior quickly.

Another attractive thing about the specialty is that many conditions such as acne are treated by several agents simultaneously, meaning you don't necessarily happen to splice prescriptions from the largest established players in order to gain traction. Dermatology is an innovative specialty where physicians are more willing to try new things such as, as suggested by Microcyn Technology and importantly, especially and this becomes more important every day. Dermatology is a large cash pay component, which makes it relatively resistant to changes in managed care reimbursement policy and that helps mitigate a significant concern that many investors have had in this specialty pharmaceutical space right now.

The two major areas which I think have presented leading candidates for the development of Microcyn and dermatology are acne and then to also atopic dermatitis for which the company's partners have recently introduced some products.

I think probably the biggest opportunity in dermatology for Microcyn is in the acne space. Firstly because it's quite large for a specialty market, representing 40 million prescriptions a year with a retail value of about 6.5 billion according to Wolters Kluwer which is a leading data provider. And also because I see Microcyn Technology is uniquely positioned to meet significant medical needs that have been hot topics among thought leaders in dermatology for many years now. Specifically, the issue of antibiotic resistance to the current field of topical antibiotics which seems to become more significant every year and then also, safety profile to some of the staples of medical treatment in the field of acne like benzoyl peroxide.

One of the biggest issues potentially addressed, as I mentioned earlier, was the resistance of acne causing bacteria to existing antibiotics. Historically, the bacterial component of acne was attacked with topical antibiotics such as azithromycin which became noticeably less effective as years progressed in the emergence of peripheral mycin resistance bacteria. So, physicians began prescribing another agent clindamycin which is currently the topical antibiotic which dominates this segment of the market.

Now there is significant concern about resistance emerging clindamycin prompting the industry to respond with different strategies to combat it because we don't have another agent to go to. The most successful strategy today has been to combine it with other anti-infective such as benzoyl peroxide which would kill any clindamycin resistant bacteria which might be present by using a defense mechanism. There has also been a one new topical antibiotic introduced recently, topical dapsone which has done reasonably well. It's grown to 150 million in sales but it does have some significant safety concerns and it seems to be more effective in the inflammatory component of acne rather than the anti-bacterials.

Now Microcyn Technology which has the strategy where the emergence of antibiotic resistance could potentially be eliminated once and for all and it allows physicians more flexibility to prescribe agents other than the ones they are forced to use in combination right now with the leading drugs that are combined with the anti-infectives. They are certainly a novel approach; I think it suggests significant commercial potential, at this indication. If I were to make an estimated guess of the addressable market, I would probably focus on the topical antibiotics segment which represents about 10 million dispensed prescriptions annually and I would probably price it about 100% net per prescription at the manufacturer level.

One of the other significant concerns potentially addressed by Microcyn and I think this is going to be more significant than the other counter space, is the fact that it has a considerably better safety profile in the treatment of acne than benzoyl peroxide. Benzoyl peroxide is very effective and is widely prescribed but it use is often limited by the fact that it causes dry and irritation at the site of application which often requires adjusting the dose down or even eliminating the treatment entirely in particularly sensitive patients. The superior safety profile of Microcyn in these particular areas which has been well establish suggest that this might be an agent that might replace to a certain extent benzoyl peroxide.

Now I am moving on to atopic dermatitis. It's another area with significant potential. We've already seen some traction here by the company's marketing partners that share in the space especially in pediatric populations. atopic dermatitis is a very common complaint seen by primary care physicians who thus far have been limited to treating the condition symptomatically with moisturizers and (inaudible) or the potent topical immune response modifiers such as protopic and elidel which has some safety concerns associated with them which is always a concern especially in pediatrics.

Now Microcyn offers the potential for not only symptomatic relief but I think some of you may be familiar with the research that supports the hypothesis that may also the underlined disease state. And added to the benign safety profile which has been established for Microcyn and I can see a lot of potential interest by the medical community for a product of this type. Specifically besides just that, especially the HydroGel formulation is intriguing because it has a potential for broader use in any skin condition where pruritus, common known as itching is associated with it. This is an on-label application which I believe could yield near-term benefits to the brand that we probably only began to see results on.

Now looking to the future outside of the prescription space, I think there's potential for Microcyn Technology displace benzoyl peroxide for suggest a very significant future potential in the over-the-counter market which I mentioned earlier. The over-the-counter market is currently dominated by benzoyl peroxide based product such as proactive solution which is a very well-known consumer brand which alone has reached sales in excess of $0.5 in US. So I can imagine an agent of something of the Microcyn type representing a marketable next-generation agent in the segment.

Another significant opportunity which we haven't really touched on here lies in the surgical space that Hoji talked about that briefly. (Inaudible) facing emergent bacterial resistance issues are routinely used in millions of shelters each year. So I think when you consider all these things in total, it’s a lot of information to digest and suggest a very compelling opportunity for Microcyn Technology and dermatology and beyond. A proposition which has lent considerable support by the fact that innovative companies like AmDerma and Onset have stepped up to make the significant investment required to develop it. There's a lot to watch here. I'm really excited about to see how these programs develop. There's been a real absence of novelty in this area for quite some time and I can definitely see significant potential for revenue growth in this area.

So now I am going to turn the call over to Bob Miller, CFO to discuss our financial results.

Bob Miller

Thank you Greg. Our review of the guidance was provided for the first quarter of fiscal year 2013 and then summarize our financial results for the first quarter. As we do in our guidance for the first quarter ended June 30, 2012. First of all as Hoji mentioned earlier, and as stated in our press release, our total revenue for the quarter was 4.1 million, well above our guidance greater than 3.3 million. Secondly, our cash operating expenses of 3 million were close to the low end of $3 to $3.2 million range. And third, the actual EBITDA was a negative as Hoji mentioned, of 22,000 versus a guidance of less than 1 million. EBITDA is always the most difficult number to estimate by the way.

Turning to our guidance for the quarter ending June 30, 2012. Due to the current discussions with new potential partners which Hoji alluded to a little bit earlier, we did not feel it was appropriate to provide guidance for this quarter at this time. As soon as we execute one of these agreements, we will have an investor call to discuss the transaction and the financial implication.

Moving now to the results of our first fiscal quarter on the June 30, 2012. Product revenues increased 1.1 million or 41% for the increases in the United States, Middle East and Singapore partially offset by declines in Europe, India and China. Product revenue in the United States increased 1.2 million or 142% to almost equally to 1 higher royalty fees received from our partner Innovacyn and higher unit growth in their sales. And two, higher unit growth related to new product launches in the dermatology market by AmDerma partners. The revenue to Oculus on Innovacyn increased 574,000 or almost 100% to 1.1 million from 568,000 in the same period last year.

Revenue growth to our dermatology partners which had strong unit growth and heavy sampling as three new products launched in the prior quarters. The revenue from the prescription business mostly from AmDerma side, increased 629,000 or over 200% to 892,000 primarily driven by as we mentioned, the growth in sales to dermatologists. More specifically, Onset launched the first Microcyn based dermatology kit in February 2011 and their second kit, a year later in February 2012. In addition AmDerma launched two Microcyn based dermatology products in February 2012 as well. In total, they have about 60 sales people selling throughout the United States. A number of trade units sold to dermatologists by AmDerma and Onset, in total for the last three quarters ending December 2011, March 2012 and June 2012 were on a rounded basis, 2,500, 5,200 and 13,500 units respectively according to an independent third party database.

We are pleased with the progress, growth and clinical success of our Microcyn based products in the dermatology market. We are looking forward as Greg covered before to our introduction and clinical process in the acne market. As Greg pointed out earlier, is focusing only on the topical antibiotic markets which has 10 million strips a year, on an average price of $100 per strip. We think this is a very big market and a very attractive market for us.

While the dollar revenue growth in Mexico was flat, the peso or local currency growth, the reais growth for the quarter was 15%. This 15% increase was driven by a 33% growth and the sales of the 120/240 ml and gel presentations partially offset by a 19% decline in the five meter products caused by the variability in sales to hospitals.

Our growth profitability for the quarter ended June 30, was 74% compared to 71% for the same period last year. Improvement in gross profitability due to higher sales and higher gross profitability in the United Sates.

Operating expense minus non-cash expenses during the quarter were 3 million down 5% from 3.1 million in the same period last year caused mostly by lower salary related costs during this quarter. EBITDA as we pointed out several times for the quarter end of June was very close to breakeven at a negative 22,000 compared to a negative 1.1 million for the same period last year and a negative 900,000 for the quarter ending March 31, 2012.

As of June 30, 2011 we had cash was about 4.4 million compared to 3.4 million as of March 31, 2012. In the last earnings call we provided revenue growth rate guidance for our three business groups, for our full fiscal year 2013. How did we do for the first quarter of fiscal year 2013 compared to our full fiscal year guidance. Number one, for the Innovacyn group which includes the animal healthcare and (inaudible) products. We provided revenue growth guidance of 0 to 20% for the full fiscal year. For the first quarter we achieved a growth rate of about 100%, most which we do the high royalty compared to the same period last year. The unit growth of the Innovacyn fell in the middle of that range. Also going forward on July 1, 2012 the royalty rate will be comparable with that of last year.

Number two, for the Rx U.S. group which includes in Innovacyn U.S. markets such as dermatology and wound care. We are providing revenue guidance of 40% to 60% for the full fiscal year. We achieved a revenue growth of over 200% for the quarter but we have not changed the fiscal year guidance at this time. As we mentioned this reflects the growth of AmDerma and Onset in the dermatology market, the three products license. Number three, for the international group assuming no new partnership transactions, we are providing revenue growth guidance of 15% to 25% for the full fiscal year. We achieved a growth of negative 5% for the first quarter that if adjusted for foreign exchanges in the peso and the euro the local currency growth would have been 8% but due to the variability in our international sales we would not change the full year fiscal guidance this time.

For the total product revenue growth for the full fiscal year assuming many partnership transactions we are providing a product revenue guidance of 15% to 30% growth. As you know we achieved product revenue growth for the first fiscal quarter of 41% above our guidance but still not alter our fiscal year guidance at this time.

This concludes my remarks and now I will turn it back to Hoji, for questions.

Hoji Alimi

Again in short the other call it quarter, its highest revenue 4.1 million, and after drug deal two clinical trials on the way and you know moving forward what you are building is both drugs as well as revenue top-line catalyst for the company that I really believe is going to create a higher shareholder value moving forward for the company and our shareholders. With that operator we can open up to Q&A.

Question-and-Answer Session

Operator

(Operator Instructions). Our first question comes from Laura Engel from Stonegate. Your line is open.

Laura Engel – Stonegate

Wanted to see, I know you are not running any guidance for the second quarter but as far as that we can -- SG&A, I know you get some detail that there was lower stock comp expense and some lower salaries, I guess can you just give us any additional color on where this reductions came from and how sustainable they are going forward for this fiscal year.

Bob Miller

As you can see by going from 3.1 down to 3, the decline were not that significant, even though we are not giving guidance for the quarter earning in September we would expect our operating expenses to be pretty close to the same in terms of where they have been. So, I think that’s something that if anything changes then we would let you know that, if we had a transaction that came out.

Laura Engel – Stonegate

There was a 2.8 number in earnings release as I was looking out for SG&A, 2.8 million.

Bob Miller

Yes I am tax loss, the operating expenses minus -- generally have been returning to the operating expenses the whole lot operating expenses minus non-cash items, so we take out the stock comp charge just because as you know, as you pointed out that came down significantly during the quarter compared to last year, we sort of tried to take that out so as looking at apples-to-apples.

Laura Engel – Stonegate

And I guess we got a lot of detail on the U.S. product sales, any thoughts as far as next I know adjusted you were showing you know some positive growth you know what you see as far as that momentum continuing and then what can you tell us about Europe and this continued decrease that you are seeing out of that region.

Bob Miller

In terms of Europe, we tend to get fairly large orders for like the Middle-East or even China or even India. Europe is fairly constant itself because we sell to a larger number of countries and the variability will change but over stays really constant the other like the deliveries to the Middle-East, sometimes we get a very large delivery and one quarter and then get very little in the next quarter so there is some variation that is caused by that. Though we would expect that to increase like we said over the 15% to 25% in that range over all that -- that obviously includes Mexico where we do have a generally a fairly steady increase year-over-year, one time local currency basis.

Laura Engel – Stonegate

Okay and then I guess looking at the U.S. again lots of detail on the dermatology markets, what don’t you tell about?

Hoji Alimi

About that? Laura I think we lost you. I will try to respond to that, as you can see we have got good strong growth on the last three quarters in terms of Unit growth as published by the independent third party database information or about 2500 or 5200 to about 13,500 and it should last three quarters. Those were ramps we were at couple of ramps; we would expect that maybe to continue but not quite at the same rate but those are shown but still continue to see good growth.

Operator

Our next question comes from Echo He from Maxim Group. Your line is open.

Echo He – Maxim Group

I just wonder, could you or Hoji could you explain more about the scar treatment trial and what kind of enrollment do you have and what’s the chart (ph) design and from the end point and timeline et cetera.

Hoji Alimi

So in terms of the trial is based on the clinical protocol that you have often rolling that’s what 40 patients in that study, you are excluding any significant old scars in that study because we are targeting a specific scars and is at four clinical sites of the states, our AVIA (ph) tool is that much completed, three other locations we are waiting for the four and currently doing patients and stand nearly we are hoping a jurisdiction enrollment any day. The trial is expected to go through the early part of next calendar year and then we will be announcing top line data and then by middle of next calendar year then we will be ready for the FDA submission and the key thing Echo, the (inaudible) set early is already partner so the sales force, we have time to train and they have been very familiar with our technology already. They are getting significantly positive feedback, all the indications on our product line so it will be just added product but, the key thing is we view it as a sexy market, officially been getting traffic (inaudible) and so on. So this year significant market opportunity for this products.

Echo He – Maxim Group

Does this have an agreement with the FDA or you have some other…

Hoji Alimi

This is a 510(k) NE (ph) application and as you know FDA has shifted its position on a lot of the 510(k) not just related to Oculus but to the industry and now they are requiring clinical studies but yes we got the guidance from FDA exactly what they are looking for and that’s how the trial was designed.

Echo He – Maxim Group

On the drug along that development line what are the ongoing process between your company and the FDA?

Hoji Alimi

Currently did very first step Echo was to make sure we updated formulation that we need to meet the FDA requirements. So the current products that we have in the market, they are not appropriate for use in the surgical indication. So there we are the formulation is complete we are currently working with several opinion leaders to identify as is a 44 million patient population. So we need to pick a smaller patient population and design the trial along that and we have a very good idea of what we want to do. So we expect to open up this questions in fall with the FDA, get their feedback and start designing the profiles and all is we want to get is Pre IND filing done in the meeting this year to discuss the trial designed very similar to what we did for our diabetic ulcer. We want to get their approval so that once we conduct the trial there are no surprises.

Echo He – Maxim Group

Okay is that diabetic ulcer is one of the potential indication.

Hoji Alimi

So there is a thing of being up diabetic also because either doing files in that indication but we obviously have perused a medical device to pursue that market and we have been successful in partner that. The point I am trying to make is we have the experiences getting their peers blind and disrupting with a step by step and going after that trial. So that’s exactly what we are going to do for the surgical indication and surgical is a drug.

Echo He – Maxim Group

I see what you mean, okay this surgical so you are keen to use surgical as your initial indication for this on this drug track of this regular -- do you mean that the surgical indication is your initial consideration to put Microcyn product into this drug approval process.

Hoji Alimi

So where we are right now we have 7 FDA (inaudible) as device and we are commercializing both in dermatology and wound care, now AmDerma is going after acne as a drug, they are going to fund that entire drug trial and we get marks on these payments in addition to that we are going after costs going after the surgical indication as a drug currently.

Operator

And our next question comes from Jack Wallace from Sidoti & Company. Your line is open.

Jack Wallace – Sidoti & Company

Is it safe to assume that the upfront fee with AmDerma was partially received in this quarter or is it that something you guys see common at this point?

Hoji Alimi

It was not received, at this point it was a credit to a prior payment as it turned out, so actually received earlier.

Jack Wallace – Sidoti & Company

And then most of my other questions have been answered, one last one about the gross margin, it looks like you have got a positive movement with the gross margin, do you see the margin expanding moving forward or again that’s something you can comment on?

Hoji Alimi

On the margin we would see to continuing we get 74% and we have been a little bit lower in that in the past, we would see in the 74 to 76% range and we have generally said at some point as we grow we would end up being in like a 75% to 80%. I think 75% is a good number for us.

Operator

Our next question comes From Bob Robbins from Robbins Capital Management. Your line is open.

Bob Robbins – Robbins Capital Management

My question is about the decision that you have made not to raise your guidance, obviously I can understand that one quarter doesn’t make a year and it's early but for example your total product revenue growth guidance of 15% to 30% but the first quarter was 41% gain why wouldn’t you raise the high end of that, is there anything in particular other than normal seasonality which of course is accounted for in this four quarter comparisons that would cause not to raise your fiscal year guidance. It seems like you are getting some internal fundamental momentum that you cited that’s taking on greater importance than normal risks of not making -- not exceeding your guidance.

Bob Miller

I would say that your first point that was one made, one is the first quarter and it's little early to start changing things and as you can see some of us we were on the high side and some of them we were on the low side and we didn’t really change either one.

I think it's a little early, at this point the other thing is I would rather be conservative rather than aggressive and changing our guidance and if we continue to get this kind of growth rate for the second quarter then you know we would think about modifying it. Does that answer your question?

Operator

(Operator Instructions). Our next question comes from George Dahl from Newport Coast Securities. Your line is open.

George Dahl – Newport Coast Securities

I would think while all the numbers are good and moving up it's the fact that people are beginning to realize how good the product really is and with each success and each different field that you are going into becomes more and more obvious because really have discovered and invented or created an outstanding product.

I think that people should not lose sight of here, you can talk about numbers all you want to results are what are going to drive this company forward and the results are going to drive the numbers no matter what anybody things that’s my own opinion.

Hoji Alimi

I think in the past you know I have had this question by their analyst or shareholders some already focused on drugs and drug trials and some are only focus on revenue but what we are trying to do is build a viable business for long term that includes both and I think as the technology performed in all these avenues I think it's just commonsense, in the flight (ph) they are going to turn.

George Dahl – Newport Coast Securities

If you have not seen how the product works and all you are looking at how the numbers and you are missing it really big plus.

Hoji Alimi

I know that it works because I have seen it work on friends of mine, we cured strep infections, we have cured flesh eating virus and I have seen it work, months and months ago the acne problem because I had a friend of mine whose son had bad acne and I gave him a bottle of Microcyn, he used it and it clears his acne so I knew a long time ago that worked, so if you -- guys are out there just looking at numbers and try to look results of how this product really works to help people and once you do that you are going to become more and more enthused by what this company really does and why this stock is sitting at the level is just absurd.

Bob Miller

We would agree with you but you know if you actually travel outside of the states you can see that this product has made a huge difference in a very large number of patients, we are standard of care in Mexico, I probably mentioned that before, there are number of countries in Europe where this standard of care, there are a number of smaller territories in the far-east where standard of care, we have made a tremendous difference, now yes that’s not we are not standard of care in the United States but we certainly like to do everything to get there.

Operator

Our next question comes from Prashant Mehta from NetGain. Your line is open.

Prashant Mehta – NetGain

I liked the overview which Greg gave on acne, the only question I had on that was seems like you guys are not trying to replace the current medications on the market but you would supplement Microcyn would supplement that current medication, is that correct?

Hoji Alimi

Let Greg talk about it but just quick comment actually we are replacing significant amount of top-line for antibiotics for treatment of acne. So we are actually replacing either top antibiotics that they were showing resistance issues or they are having safety issues but let Greg, Greg are you online?

Greg Gust

Yes I am still online.

Hoji Alimi

Would kindly pick this one?

Prashant Mehta – NetGain

Before Greg’s get on my quick question you might be doing that in combination, my simple question was do you know guys know how Microcyn acts in combination to existing medications?

Hoji Alimi

We know does it act, we know how it acts in combination with antibiotics because we have seen it with systematic antibiotic Prashant because physicians in most cases I am talking from a wound care point of view, they put a patient at systematic antibiotics because they are worried about because they are worried about potential deep tissue infection. There are particle whether it's Microcyn or topical antibiotics will not penetrate deep down in the tissue. But what it does we do replace the topical antiseptics with topical antibiotics and we do so for use of systematic antibiotics because the sooner you close or you irradiate acne the less antibiotic is then used overtime.

Let Greg talk about them, he knows in that area than us.

Hoji Alimi

Greg you have any comments?

Greg Gust

I don’t have any comments about using Microcyn in combination with other products, generally that doesn’t seem to be a concern with dermatologist treating acne. You never say it like okay, well, I mean this new combination trendmill and Benzoyl peroxide came out and is that going to interfere with my clindamycin that I use, for some maybe I should come up but I have not heard that has been a significant concern to dermatologist and then also the fact that it's actually quite nice because when you are trying to launch a product in the space I mean you are going up against the big established players, Galderma, Medicis, Stifle, which have had relationships going back decades with the dermatologist and are very, very difficult to displace. Now if you can go in there and just kind of like sneaking in alongside of them, it actually makes your job a lot easier to get traction quickly. So I actually see that whole polypharmacy approach the dermatology take as an asset rather than obstacle.

Prashant Mehta – NetGain

In fact my question was directed towards that in a way it's not just a medication but how the companies play together. It's kind of interesting.

Greg Gust

Yes.

Operator

Our next question is a follow-up from Bob Robbins from Robbins Capital Management. Your line is open.

Bob Robbins – Robbins Capital Management

You just mentioned a few minutes ago that Microcyn is a standard of wound care in some countries in Europe, could you tell us which ones and give us some highlights about that.

Hoji Alimi

This is my just because of the amount of sales that we have in those countries, one is Slovakina countries is one area and the other one is Italy. We sell lot of product in both those countries and it's used for a lot of different applications but I was talking more specifically about wound treatment. We have some real opinion leaders especially Italy that have convinced a lot of people without basically by showing them the effect in the product as I think was mentioned earlier.

Operator

(Operator Instructions). I am showing no further questions. I will now turn the call back over to Dan McFadden for closing remarks.

Dan McFadden

Actually we will turn it over to Hoji Alimi, he will say it for us.

Hoji Alimi

Well again I would like to thank everyone for being on this call, it was a fantastic quarter and I am going to thank my team without this quarter wouldn’t have happened and of course reporting much more successes along the way and talk to you guys on the next earnings call. Thank you.

Operator

Ladies and gentlemen that does conclude today’s conference. You may all disconnect and have a wonderful day.

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