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Sonoma (SNOA), Shooting Ducks in a Barrel?
This looks very much like a bargain hunters dream, with the share price dropping 20% today to $0.88, after the news of a secondary offering for up to 7.3 million shares at $1.00 which went effective 11/19/18.
The share price has been decimated from the summer of 2017 dropping like a lead balloon from $8.00 to $0.80, despite reporting good numbers (annualized at $20 million) and the extension of their skin care line of products. On 11/8/18, the Company reported total revenue of $4.9 million for the quarter ending September 30, 2018, was up 14% when compared to $4.3 million for the same period last year.
The biggest news to us was the announcement that their 'patient-friendly' home delivery mail order program, which was launched in the first quarter of FY 2019, has rapidly gained popularity, currently making up about 42% of the company’s dermatology prescription shipments during the quarter ending September 30, 2018.
So we'll look at this more as a consumer products company than a biotech play. If they can get the expense side of the equation down, the valuation could rocket higher with sales near $20 million (with 10x upside sales potential) versus a bargain hunters market valuation of only $14 million (based on 13,892,633 shares assuming all 7.3 million shares were sold and no warrant exercise). Proactive Skincare reportedly had sales of $800 million in 2010, to give you an idea of the sales potential for a popular skin care product.
The company reported gross profit related to sales of its products of $4.2 million, or 45% of total revenues, for the six months ended September 30, 2018, compared to a gross profit of $3.6 million, or 44% of total revenues, for the same period in the prior year.
Total operating expenses less non-cash expenses of $9.4 million increased $437,000, or 5%, for the six months ended September 30, 2018, as compared to the same period in the prior year. This increase was primarily due to higher marketing and legal expenses in the United States. The company believes it could be profitable over $7 million in quarterly revenues.
More to follow.
Robert Wasserman/Director of Research
Dawson James Securities
Jason Kolbert/Head of Healthcare Research
Laura Engle/Sr Research Analyst
The Benchmark Group
About Sonoma Pharmaceuticals
Sonoma Pharmaceuticals is a specialty pharmaceutical company that develops and markets solutions for the treatment of dermatological conditions and advanced tissue care. The company’s products, which are sold throughout the United States and internationally, have improved outcomes for more than five million patients globally by reducing infections, itch, pain, scarring and harmful inflammatory responses. The company's headquarters are in Petaluma, California, with manufacturing operations in the United States and Latin America. European marketing and sales are headquartered in Roermond, Netherlands. More information can be found at www.sonomapharma.com.
Except for historical information herein, matters set forth in press releases are forward-looking within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including statements about the commercial progress and future financial performance of Sonoma Pharmaceuticals, Inc. and its subsidiaries (the “Company”). These forward-looking statements are identified by the use of words such as “look forward,” “continue,” and “intend,” among others. Forward-looking statements in this press release are subject to certain risks and uncertainties inherent in the Company’s business that could cause actual results to vary, including such risks that the offering of the shares may not be completed, that the market price of the Company’s securities is volatile, that the Company has broad discretion in its use of the proceeds, that stockholders may face dilution, the Company may not be able to obtain additional funding, as well as uncertainties relative to varying product formulations and a multitude of diverse regulatory and marketing requirements in different countries and municipalities, and other risks detailed in the Company’s filings with the Securities and Exchange Commission, including the annual report on Form 10-K, filed on June 26, 2018. The Company disclaims any obligation to update these forward-looking statements, except as required by law.
Sonoma Pharmaceuticals® are trademarks or registered trademarks of Sonoma Pharmaceuticals, Inc. All other trademarks and service marks are the property of their respective owners.
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