UPDATE: Maxim Group Downgrades NovaBay Pharmaceuticals (NBY) to Hold

(Updated - March 7, 2016 12:57 PM EST)

Maxim Group downgraded NovaBay Pharmaceuticals (NYSE: NBY) from Buy to Hold and removed its price target (prior $6). Analyst Jason Kolbert said Avenova sales are not growing fast enough, and he thinks the company will raise cash again soon.

"NovaBay reported sales of $1.6M, up from Q3 sales of $1.1M, which, given where this company is with Avenova (slow launch), is good sequential growth. One concern we have is the growth in SG&A, from $4.3, to $6.0M, which may explain the sequential sales increase. R&D dropped from $1.9, to $1.2M (which we expected), as the focus has shifted to generating revenues. NovaBay used $4.5M in Q4," said Kolbert.

"Cash, cash equivalents, and short-term investments were $2.4 million at the end of the quarter. In January 2016, NovaBay secured a $1.4 million loan, and, in February 2016, the company completed a private placement, raising proceeds of $2.83 million. We expect the company will raise cash again soon. Given the market conditions, we would expect this to be another structured (dilutive) transaction, but we hope that we are wrong and management can find a strategic," continued the analyst.

Kolbert added, "Our model has been too aggressive. We adjusted our model and actually lowered our R&D, SG&A and raised 2016 & 2017 revenues but we can't hit break even. In addition we have sharply lowered our out-year revenue assumptions, which had been high ($80M peak annual). We don't see this company being cash flow positive for the next few years. Annual sales of $4.1M in a market with 41M patients in our minds is not a successful launch. This combined with a weak balance sheet and the probability of a dilutive raise ahead, suggest to us it is prudent to downgrade to a Hold rating as we look for clarity on product growth, spending, and the balance sheet."

For an analyst ratings summary and ratings history on NovaBay Pharmaceuticals click here. For more ratings news on NovaBay Pharmaceuticals click here.

Shares of NovaBay Pharmaceuticals closed at $0.10 yesterday.

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