Oculus Innovative Sciences Reports FY 2009 Financial Results and Discusses Worldwide Revenue Growth Prospects

Business Wire, June 11, 2009

PETALUMA, Calif. -- Oculus Innovative Sciences, Inc. (NASDAQ:OCLS):

Q4 & FY 2009:

• Q4 2009 (Ending March 31, 2009) Revenue of $1.5 Million, Up 59% over Q4 2008
• Total FY 2009 Revenue of $5.4 million, Up 42% over FY 2008

Projections:

• Projected Q1 2010 (Ending June 30, 2009) Revenue of $1.8 Million
• Projected Quarterly Revenue of $2.8 -$3.0 Million Required for Targeted March 2010 Cash Breakeven
• Projected $45-$60 Million in Annual Revenues by FY 2013 with 20% Operating Profitability
• Expect to Receive Two Additional FDA Clearances on New Microcyn Product Formulations

Milestones:

• Secured FDA Clearances for Two Microcyn® Products including New Reimbursable Wound HydroGel
• Conference Call Begins at 4:30 p.m. (EDT) Today

Oculus Innovative Sciences, Inc. (NASDAQ:OCLS) today announced financial and operating results for the fourth quarter of fiscal year 2009, ended March 31 2009. During the quarter the company increased Microcyn®-based product revenue by 63% with increases in Europe, Mexico, India, China and the United States. As a result of the cost reduction programs implemented earlier in the year, operating expenses declined $3.0 million in the fourth quarter, compared to the same period last year. Oculus is targeting cash breakeven by the month of March 2010.

Oculus reported total revenue of $1.5 million in the fourth quarter of fiscal 2009, an increase of 59% over $926,000 in the fourth quarter of fiscal 2008. Product revenue was $1.2 million, up 63% from $736,000 in the prior year primarily due to higher sales in Mexico, China and Europe. Service revenue was $278,000, up 46% from the fourth quarter of fiscal 2008.

The company’s Microcyn-based product sales growth of 63% for the quarter reflects strong growth in Europe, India, Mexico, China and the United States. The sales growth rate in Mexico in local currency was 90%; however due to the 33% drop in the value of the peso, this resulted in a dollar-translated sales growth in Mexico of 42%. This devaluation in the peso also reduced Oculus’ overall fourth quarter product revenue growth from 99% to 63%. European and rest-of-world revenue growth of 160% reflects increases in China, India, Slovakia, Middle East and Singapore. In China, initial sales represent a product commercialization strategy that included sampling and introductory pricing.

“With the introduction of new products, such as the Microcyn Skin & Wound HydroGel, which recently received FDA clearance, we expect global revenues to continue to grow at a 50% to 100% annual rate. Our objective is to achieve cash breakeven by March of this coming year and annual revenue of $45 to $60 million by fiscal year 2013 with operating profitability of 20%,” said Hoji Alimi, founder and CEO of Oculus. “We are also targeting additional growth as the result of opportunities for the Microcyn Technology in markets outside of wound care including dermatology, ophthalmology, respiratory infections and animal health care.”

The gross margin on product revenue for the fourth quarter of fiscal 2009 was 60%, up from 34% in the comparable quarter a year ago, primarily due to lower expenses in Europe as well as increased sales volume worldwide. The gross margins were 75% and 44% in Mexico and Europe respectively. To reduce costs and improve gross margins, Oculus intends to consolidate its European manufacturing facility into its U.S. operations, while maintaining a sales office in Europe. Oculus management believes the consolidation of manufacturing will increase overall gross margins from 60% to approximately 75% in the second half of this fiscal year.

Operating expenses in the fourth fiscal quarter of 2009 were $3.0 million, down $3.0 million or 50%, compared with $6.0 million in the fourth fiscal quarter of 2008. This decrease was partially due to $600,000 in lower outside clinical costs and reduced staffing in the United States. As a result of this cost reduction program, Oculus lowered its U.S. headcount from 56 people as of June 30, 2008, to 26 as of March 31, 2009. During the fourth quarter of 2009, these cost reductions were partially offset by higher expenses of $290,000 related to the company’s product launch into the U.S. wound care markets.

The net loss for the fiscal 2009 fourth quarter was $2.2 million, or $0.13 per share, compared with the net loss for the fiscal 2008 fourth quarter of $4.5 million, or $0.34 per share. Non-cash stock-compensation expenses for the quarter were $151,000, compared with $422,000 in the same quarter last year.

As of March 31, 2009, Oculus had unrestricted cash and cash equivalents of $1.9 million, compared with $18.8 million as of March 31, 2008. Pursuant to the previously announced strategic agreement with Vetericyn, Inc. entered into in February of this year, Oculus received an additional $2 million of the Vetericyn investment on June 1, 2009.