Executive Summary

Q1 FY2019 revenue was $4.4M, up 20% sequentially and 14% year over year; gross margin fell to 40% on mix shift toward low‑margin Latin America shipments .
Non‑GAAP EBITDA loss improved sequentially to $(3.08)M from $(3.72)M in Q4, though slightly worse than $(2.84)M last year; net loss per share was $(0.55) .
Management highlighted rapid adoption of the new mail‑order, direct‑to‑patient channel (20% of Rx units in June; 28% in July) and expects ~60% of U.S. prescriptions via home delivery by year‑end 2018 .
Catalyst path: continued U.S. dermatology growth (new acne cleanser, Ceramax lotion), Brazil commercialization (first products in-market in 60–90 days), and improving mix as Invekra low‑margin supply sunsets longer term—but a recent extension of the Invekra agreement to late fall 2020 tempers near‑term margin relief .

What Went Well and What Went Wrong

What Went Well

Strong rebound in revenue: “Total revenue was $4.4 million, up 14% YoY and 20% vs March quarter,” driven by U.S. dermatology and Latin America .
Launch momentum and approvals: FDA clearance for post‑laser gel; antimicrobial label additions; Acuicyn relaunch; UAE approvals broaden international addressable market .
Mail‑order channel adoption: “1,500 prescriptions in July (28% of factory units)… we forecast home delivery ~60% of U.S. scripts by YE 2018” .

What Went Wrong

Margin compression: Gross profit margin declined to 40% vs 46% prior year, primarily due to a higher mix of low‑margin sales to Invekra in Latin America .
EBITDA vs prior year: Non‑GAAP EBITDA loss of $(3.08)M vs $(2.84)M last year, reflecting lower gross margin and higher cash opex (marketing/legal) .
Invekra extension: Q1 call disclosed the Latin America supply agreement has been extended by two years to late fall 2020, prolonging lower margin mix and delaying margin improvement .

Financial Results

Metric	Q3 FY2018 (Dec 31, 2017)	Q4 FY2018 (Mar 31, 2018)	Q1 FY2019 (Jun 30, 2018)
Total Revenues ($USD Millions)	$4.843	$3.655	$4.369
Gross Profit ($USD Millions)	$2.368	$1.332	$1.731
Gross Profit Margin (%)	49%	36%	40%
Non-GAAP EBITDA ($USD Millions)	$(2.383)	$(3.717)	$(3.084)
EPS (Basic & Diluted, $USD)	$(0.73) (continuing)	$(0.93) (continuing)	$(0.55)
Cash & Equivalents ($USD Millions)	$8.625	$10.066	$7.685

Segment/Product geography breakdown (Product Revenues):

Geography ($USD Millions)	Q3 FY2018	Q4 FY2018	Q1 FY2019
United States	$2.883	$1.362	$1.971
Latin America	$0.772	$0.912	$1.079
Europe & Rest of World	$0.992	$0.995	$1.045
Total Product Revenues	$4.647	$3.269	$4.095

Key operating KPIs:

KPI	Q3 FY2018	Q4 FY2018	Q1 FY2019
U.S. Dermatology Gross Revenue ($USD)	$4.241	$2.816	$3.616
U.S. Dermatology Net Revenue ($USD)	$2.207	$0.779	$1.207
Cash Operating Expenses (non-GAAP, $USD Millions)	$4.862	$5.149	$4.915
Mail-Order Adoption (% of Rx factory units)	n/a	n/a	June: 20%; July: 28%

Notes: EBITDA and cash operating expenses are non‑GAAP measures defined and reconciled in the company’s exhibits .

Consensus vs Actual (estimates unavailable):

Metric	Q1 FY2019 Actual	Consensus Estimate
Revenue ($USD Millions)	$4.369	N/A (consensus unavailable via S&P Global)
EPS ($USD)	$(0.55)	N/A (consensus unavailable via S&P Global)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Gross Margin Target	Medium-term at breakeven	Low‑70% expected at breakeven (Q3 call)	High‑60% to low‑70% as derm grows; Latin America mid‑high teens margin dilutive	Maintained/narrowed range
Cash Operating Expenses	FY2019 run-rate	$4.3–$4.6M per quarter ex‑June (Q3 call)	Expected to remain relatively flat (and flat to down in later call)	Maintained
U.S. Rx via Home Delivery	CY2018 YE	Program initiated; managed care push (Q4 PR)	~60% of U.S. scripts via home delivery by YE 2018	Raised specificity
Invekra (Latin America) Supply Timeline	Through FY2020	Prior end date Oct 2018; post‑Oct pricing to rise if continued	Extended two years to late fall 2020	Extended (negative near‑term margins)
Brazil Launch Timing (NC Group/U.SK)	H2 2018	License signed Jun 2018; minimums defined	First products in market within 60–90 days; initial orders received	Timeline clarified/accelerating

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2: Q3 FY2018; Q-1: Q4 FY2018)	Current Period (Q1 FY2019)	Trend
Distribution & Insurance	Identified deductible reset impact; planning mail‑order program and managed care push	Mail‑order execution: 900 June Rx (20% units), 1,500 July (28%); target ~60% by YE 2018	Improving channel control; net revenue predictability rising
Margins	Gross margin 36%; long‑term target low‑70% at breakeven; Invekra low margin dilutive	Gross margin 40%; Latin America margins mid‑high teens; derm 75–80%+; overall target high‑60 to low‑70	Near‑term pressure; long‑term improving mix
Product Performance	Ceramax fastest seller; strong derm script growth	New antimicrobial facial cleanser and Ceramax lotion launching; acne cleanser study results forthcoming	Expanding derm portfolio
Regulatory/Approvals	Multiple FDA antimicrobial label additions; UAE approvals	Post‑laser gel clearance; antimicrobial label adds; Acuicyn relaunch	Broader labels supporting commercial push
Regional Expansion	Brazil approvals; partner selection underway	Brazil license signed; first shipments imminent	Latin America growth beyond Invekra
Investor Relations/Capital	Liquidity concerns; conference attendance	Continued microcap conferences; selective press releases (material only)	Ongoing outreach

Management Commentary

“We had a bounce back quarter… total revenue was $4.4 million, up 14% YoY and 20% sequential.”
On mail‑order: “We forecast… 60% of our prescriptions will flow through this direct patient delivery program by the end of 2018.”
On margins: “Latin America margins… mid‑high teens… as our derm business grows (75–80%+ margins)… overall margins should be in the high 60% to low 70%.”
On Brazil: “We’ve already received two significant orders… products to hit market in Brazil within 60–90 days.”
On Invekra: “Contractually, we’ve extended for an additional two years that expires late fall 2020.”

Q&A Highlights

Reimbursement path: engaging consultants; building financial/clinical arguments to payors; price‑per‑gram comparisons to drive coverage .
Distribution economics: home delivery lowers wholesaler fees (~8% vs ~12%) and narrows the gross‑to‑net gap by reducing rebates on cash‑pay scripts .
Margins mix: derm >75–80% vs Latin America mid‑high teens; overall margin to improve as derm mix rises, but Invekra extension delays immediate relief .
Brazil commercialization: initial orders received; launch in 60–90 days, expanding Latin America revenue beyond Mexico .
IR strategy: active microcap conference schedule; focus on material releases and execution; openness to insider open‑market buys .

Estimates Context

Wall Street consensus estimates were unavailable via S&P Global at the time of retrieval; as a result, beat/miss analysis versus consensus cannot be provided (consensus unavailable via S&P Global).
Given reported gross margin compression from mix (Latin America) and the disclosed extension of the Invekra agreement to late 2020, models may need to temper near‑term gross margin assumptions; conversely, rising mail‑order penetration and U.S. dermatology launches support revenue trajectory .

Key Takeaways for Investors

Revenue rebound is intact; watch mix: strong U.S. dermatology plus Brazil should offset low‑margin Latin America over time, but Invekra extension pushes margin normalization into 2020–2021 .
Mail‑order is a structural lever: rising adoption should reduce rebates, tighten gross‑to‑net, and improve predictability of net revenue—key to EBITDA path .
New launches (antimicrobial acne cleanser, Ceramax lotion) and label expansions are incremental drivers of U.S. derm growth; monitor uptake and script trends .
Brazil commercialization is near‑term: initial shipments within 60–90 days provide an international growth vector beyond Invekra; track partner execution and minimums .
Cash discipline remains important: cash $7.7M at quarter end; management targeting relatively flat cash opex while scaling derm .
Without consensus estimates, trading set‑ups hinge on narrative/catalysts: home‑delivery updates, Brazil ramp, product launch news, and any margin mix commentary can drive stock reactions .
Non‑GAAP framing matters: EBITDA improved sequentially; continued progress requires sustaining U.S. derm growth and channel optimization .

Sources: Company 8‑K press releases and exhibits for Q1 FY2019 and prior quarters; Q1 FY2019 earnings call transcript; Q3 FY2018 earnings materials .

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