Derma Sciences Reports First Quarter 2008 Results

Thursday, May 15, 2008 General News
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PRINCETON, N.J., May 15 Derma Sciences, Inc.(OTC Bulletin Board: DSCI), a provider of advanced wound-care products,announced results today for the first quarter ended March 31, 2008. For thequarter, sales were up 47 percent from the previous year, including sales fromthe newly acquired First Aid Division. The Company reported a loss consistentwith earlier guidance, due primarily to higher than expected integration costsassociated with its First Aid Division.

For the quarter, the Company reported sales of $11.7 million, compared tosales in the first quarter of the previous year of $8.0 million. Grossmargins declined to 27 percent from the previous year's 35 percent, due to theadditional integration costs causing temporary downward margin pressure on theFirst Aid Division's products and a shortfall in expected overhead absorptionin the company's manufacturing facility in Toronto. This shortfall wasprimarily due to timing related issues on two large private label orders.SG&A costs were up significantly, consistent with the Company's growthstrategy that was implemented in the second half of 2007. The Company reporteda loss of $1.4 million or $0.04 loss per share, vs. a loss of $138,953 or$0.01 loss per share in the first quarter of 2007.

CEO Ed Quilty commented, "We are seeing gratifying growth in our salesfrom our proprietary branded business for products such as our MEDIHONEY(TM).We continued to expand the sales force, as our strategic plan specifies, andat the end of the quarter we had 10 sales reps and one clinical nurse, versusa year-earlier sales force of 2 sales reps. MEDIHONEY sales were $319,179 forthe quarter -- on target for the product's projected first full quarter ofsales. There have been over 800 clinical evaluations within the US and Canadasince the product was launched last fall. Also, we have two additional 510Kclearances for line extensions that we will bring to market in Q2, and we areconfident that we will have MEDIHONEY into the OTC market by the end of theyear.

"Although we have had some manufacturing cost issues in our new First Aiddivision, we are successfully navigating through those and are nearing ourlong-term cost structure goals. We are confident once our integration iscomplete that we will be able to layer consistent strong sales growth ontothis division."

Quilty continued, "We are gearing up to launch our novel MOBILITY1(TM)intermittent pneumatic compression device later this year, and are in variousphases of negotiation with several other companies for thelicensing/distribution of novel wound care products we intend to launch overthe next eighteen months. These new products will help to leverage ourgrowing sales force, and will allow us to return to profitability morequickly.

"Lastly, we continue to make progress with our products under development.The Phase II protocol for DSC127, our novel angiotensin analog for woundhealing and scar prevention, is almost complete and will be submitted to theFDA shortly thereafter. With regard to our novel GUARDION(TM) line of barrierdressings, the most recent communications with the FDA give us confidence thatwe are close to marketing clearance. We look forward to having thisbest-in-class product, with effectiveness against superbugs such as MRSA, inthe market by the end of the year."

CFO John Yetter pointed out that on April 2, the Company completed aprivate placement of $6.1 million with a group of institutional investors, andthat the funds from this placement give the Company the financial resources toexecute its growth plans.

Quilty said that the Company believes that both its principal productsegments will continue to grow quickly, and referenced recent announcements ofcontracts with MedAssets and Amerinet, large group purchasing organizations.He pointed out that while the Company's proprietary branded products are morevisible to th


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