Obagi Medical Products Releases 3Q 2009 Earnings

In a release on November 5, the Company noted that net sales were $24.9 million in the third quarter of 2009, a decline of 4 percent from $26.0 million a year ago. Gross margin was 78.9 percent in the third quarter of 2009, compared with 80.3 percent a year ago. This was due primarily to a newly initiated rebate program tied to the use of NuDerm or Condition & Enhance systems in conjunction with cosmetic procedures, which impacted gross margins by 1 percent, and which has been fully accrued for.

Operating expense declined to $14.7 million, compared with $16.1 million a year ago, and operating income was $4.9 million, or 20 percent of sales, compared with $4.8 million, or 18 percent of sales, a year ago.

Business Highlights of the Third Quarter and Subsequent Weeks:

- Added 427 new accounts during the quarter compared to 389 in the second quarter 2009, as a result of the Company's continued investment in promotional activities. This brings the number of active accounts to 6,130 as of September 30, which is up 9 percent from a year ago.

- Introduced a second new product for 2009 in select accounts, Refissa Tretinoin Emollient Cream, 0.05 percent in mid-September. Refissa is FDA-approved for specific use to diminish fine facial wrinkles and fade irregular pigmentation due to sun damage and smooth tactile roughness. The Company plans to position Refissa to be used to further enhance the effectiveness of NuDerm, Condition & Enhance and Obagi-C Rx Systems.

- Launched ELASTIderm successfully in Japan thru Rohto Pharmaceuticals, Obagi's retail consumer partner, contributing to an increase in approximately $200,000 in licensing fees from the same period in 2008.

- Generated $5.0 million of cash from operations for the third quarter of 2009 bringing the Company's cash and short-term investment balance to $31.2 million at September 30. No shares were repurchased through the Company's stock buyback program during the quarter.

Obagi Medical Products' President and Chief Executive Officer Steve Carlson said, "We are seeing additional signs that support our conservative optimism for our future business. Namely, this quarter's growth in new accounts, which represents the second largest quarter increase in the Company's history and a sequential increase of 10 percent, as well as feedback from physicians that they are seeing an increase in patient traffic are indicators that consumer demand for aesthetic procedures is improving. In addition, while continuing our investment in sales promotions to drive customer demand, we have effectively managed costs and lowered SG&A expenses by $1.4 million, or 9 percent, from the same period last year."

Introducing Fourth Quarter 2009 Financial Guidance

Based on current market conditions, continued economic uncertainty and the Company's historical seasonality pattern, the Company expects revenue for the fourth quarter of 2009 to be between $25.0 and $27.0 million and earnings to be $0.16 - $0.18 per fully diluted share on 22.0 million fully diluted shares outstanding.

Strengthened Balance Sheet and Cash Flow

As of September 30, the Company was debt free with cash and cash equivalents, including short term investments, totaling $31.2 million, up from $19.9 million at December 31, 2008. Additionally, the Company generated $5.0 million in cash flow from operations during the third quarter of 2009 and $13.9 million since December 31, 2008.

Obagi Medical Products develops and commercializes skin health products for the dermatology, plastic surgery, and related aesthetic markets.

((Comments on this story may be sent to health@closeupmedia.com))

For full details on Obagi Medical Products Inc (OMPI) OMPI. Obagi Medical Products Inc (OMPI) has Short Term PowerRatings at TradingMarkets. Details on Obagi Medical Products Inc (OMPI) Short Term PowerRatings is available at This Link.