NovaBay Pharmaceuticals, Inc.

Welcome to the Nova Bay Pharmaceuticals third quarter 2023 financial results conference call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a question and answer session. To ask a question at that time, please press the star key followed by the number one on your touchtone phone. If anyone has difficulty hearing the conference, please press star, then zero for operator assistance. As a reminder, this conference is being recorded. I would now like to turn the conference over to Ms. Jody Kane. Please go ahead, ma'am.

This is Jody Kane with LHA. Thank you for participating in today's call. Joining me from Nova Bay are Justin Hall, Chief Executive Officer and General Counsel, and Tommy Law, Interim Chief Financial Officer. I'd like to remind listeners that comments made during this call by management will include forward-looking statements within the meaning of federal securities laws. These forward-looking statements involve risks and uncertainties that could cause actual results to be maturely different from any anticipated results. In particular, there is uncertainty about circumstances beyond the company's control that impact the broader economy. This means that results could change at any time, and the contemplated impact of circumstances that impact the broader economy on NOVA-based operations, its financial results, and its outlooks is the best estimate based upon information available for today's discussion. For a list and description of risks and uncertainties, please review NOVA-based filings with the Securities and Exchange Commission, which are available at sec.gov. Furthermore, the content of this conference call contains information that is accurate only as of the date of the live broadcast, November 9, 2023. NovaBay undertakes no obligation to revise or update any statements to reflect events or circumstances, except as required by law. And now I'd like to turn the call over to Justin Hall. Justin?

Thank you, Jody. Good afternoon, everyone, and thank you for joining us. I'm pleased to begin by reporting that NovaBay's efforts to deepen relationships with eye care professionals is proving successful. with third quarter product sales from our physician dispensed channel growing 36% over the prior year period and increasing in each consecutive quarter so far in 2023. Not only is this channel important as a standalone revenue source, it also creates a halo effect around our direct-to-consumer sales channel by establishing Avanova as a doctor-recommended brand. In fact, many of our customers on Amazon share in their reviews that they bought the product solely upon their doctor's recommendation. On the expense side, we continue to benefit from our expertise in digital marketing, reporting a 7% reduction in sales and marketing spend for the third quarter and a 12% decrease for the first nine months of the year. Our ability to manage expenses has led to a 16% reduction in operating loss year to date versus the prior year. We've made it a priority to focus on expense management and cash preservation this year with an eye towards extending our cash runway in this challenging market environment. Now, I'd like to provide some updates on each of our three verticals, eye care, skin care, and wound care, beginning with Avanova and our eye care franchise. As you're likely aware, we're in the midst of launching the Avanova Allograft, which is the newest product in our eye care portfolio. This prescription-only product was developed by Biostem Technologies to provide a protective environment or covering for the repair of the cornea and conjunctiva, helping ocular surfaces return to a healthier state. It is often used by doctors to treat patients with extreme dry eye, making it a perfect companion product for our Avanova spray. Amniotic allografts have been used for more than a century, and dehydrated amniotic membrane continues to be a widely used product as an ophthalmic covering. Avanova allograft is an ultra-thin, ultra-light structural tissue that has a distinct advantage as being the only optical membrane Allograft, manufactured using BioStem Technologies' patented six-step bio-retain process that preserves the natural integrity of the placental tissue. Avanova Allograft is easy to use, has no harsh chemicals or cryopreservants. Like all of the products in our Avanova portfolio, it is science-based, high-quality, and differentiated. Avanova Allograft represents a large market opportunity for NovaBay. The global market for this product is estimated at more than $400 million and is expected to grow at nearly 10% annually through 2030. Additionally, if a procedure using our Allograft is deemed medically necessary, Medicare will cover the cost of the product. Importantly, Avanova Allograft allows us to leverage our established relationships with eye care professionals as well as to continue to build out that network. We are actively marketing this product through a campaign targeting the universe of U.S. ophthalmologists and optometrists who have previously used allografts in their practice. In addition to email and other outreach activities, we are hosting CME-credited educational seminars for doctors who would like to learn about this particular dry eye treatment. We regularly hear from eye care professionals that dry eye is a major concern for many of their patients. So we asked our ophthalmologist and optometrist advisory boards on how we can best help them serve those patients. These discussions led to the creation of two new promotional programs aimed at further rewarding members of our physician dispense channel who help their patients manage the symptoms of chronic dry eye with Avanova branded products. Through our new Avanova loyalty program and Avanova affiliate program, thousands of eye care professionals who recommend, prescribe, and sell our Avanova spray now have access to special promotions that are specifically designed to increase awareness of the full suite of Avanova dry eye products, such as our warm eye compress, eye check, lubricating eye drops, and oral supplements. Our physician network helped make Avanova the number one doctor-recommended lid and lash cleanser on the market, and we are delighted to offer them these additional partnership opportunities. As in the past, we took advantage of Amazon's recent Prime Days, held on October 10th and 11th, to offer special pricing on select Avanova and Dermadoc products. I'm pleased to report that we had another very strong sales event. Amazon continues to be our most important sales channel, and we appreciate the opportunity to reward our current customers and attract new ones to our high-quality products. We believe that many users who take advantage of the special pricing offers to try our best-in-class products subsequently become loyal, longtime customers. As a final note about our eye care franchise, some of you have asked about recent FDA warnings regarding the use of eye drops from certain foreign manufacturers and some products being recalled and removed from store shelves. I'd like to assure you that Avanova spray and Avanova lubricant eye drops are made in the United States and are unaffected by the FDA warnings and recalls. Our products continue to be sold per usual and are completely safe for use. Now moving on to Dermadoctor and our skincare products. On our last quarterly conference call, I spoke about our new strategy to increase sales of our most popular Dermadoctor products in our most efficient sales channels. This strategy relies on significant digital marketing expertise that we've developed in transitioning to consumer sales for Avanova products. a strategy that has reduced our sales and marketing costs and aligns with our priority of managing expenses and conserving our cash resources. Each of our main four collections of differentiated science-based formulations specifically developed to treat common but overlooked skin conditions are our KP duty line that targets skin that's dry, rough, bumpy, or prone to keratosis pilaris. Also, our Kakadu C-Line that's formulated with clinical strength vitamin C for anti-aging and complexion brightening. Our Calm, Cool, and Corrected collection helps soothe and comfort irritable skin. And Total Nonsense is our ultra-sensitive brightening antiperspirant. Looking forward, we anticipate a strong finish to the year for our Dermadoc products. We're dedicating specific marketing resources to the Chinese Double 11 sales event, which is just days away. The November 11th sales event has become the world's largest 24-hour online sales event, with sales greater than Black Friday and Cyber Monday combined. We also anticipate a sales uptick with the upcoming holiday season, and we'll once again be offering special holiday gift sets with our KP Duty and Kakadusi collections. Turning now to wound care, and hopefully, as you know, we sell branded wound care products formulated with our pure proprietary hypochlorous acid through distributors. After having fulfilled large orders in Q2, we're anticipating additional orders from both our U.S. and Chinese distributors in the fourth quarter. Now I'd like to turn the conference call over to our Interim Chief Financial Officer, Tommy Law, to review our financial results. Tommy?