Obagi Medical Products, Inc, a leader in topical aesthetic and therapeutic skin systems, with ongoing success in the physician-dispensed market, has ceased selling SoluCLENZ Rx Gel which had been sold through pharmacies since August 2008.
"Our patented solubilized benzoyl peroxide (BPO) technology that is in our acne product lines has been shown to provide an enhanced efficacy profile compared to the leading BPO/antibiotic combination acne product in more than 15 clinical studies and publications. This novel BPO technology has drawn the interest and product adoption of key opinion leaders and top acne prescribing dermatologists as evidenced by the success of the Obagi CLENZIderm MD brand in the physician-dispense channel," said Steve Carlson, president and CEO.
"Despite the compelling clinical evidence, distribution of a single prescription product through the pharmacy channel and the ongoing investment is simply becoming cost-prohibitive in this current economic climate," Carlson continued. "As the market leader in the topical physician-dispensed category, Obagi's strength lies in the sales and marketing strategies and infrastructure to support this business, and exiting the pharmacy channel will allow us to increase focus to support our physician base. The CLENZIderm product line is very successful for us and we will continue to promote and sell the solubilized BPO as part of the CLENZIderm brand. Additionally, based on the robust clinical data, we are in preliminary discussions with several potential strategic partners to license and market our patented soluble BPO technology in their respective, non physician-dispense distribution channels."
Obagi has incurred a loss related to its investment in the pharmacy channel that in 2008 negatively impacted EPS by approximately $0.07 and in the first quarter 2009 will negatively impact EPS by $0.03. The company expects to take reserves in the amount of $1.3 to $1.8 million on a pre-tax basis related to cancelling various contracts, writing off inventory and terminating the contract sales force. Based on GAAP rules, approximately $0.9 million will be recorded as a non-cash, pre-tax charge during the first quarter 2009 relating to writing off inventory and prepaid deposits. The balance of the reserves will be recorded in the second quarter 2009 as the company terminates certain vendor contracts.
Obagi Medical Products develops and commercializes skin health products for the dermatology, plastic surgery, and related aesthetic markets.