Guardion Health Sciences, Inc.

Guardion reported Q2 revenue of $1.19 million, up 356% from Q2 last year, versus last year’s $261,000. The company said medical foods sales increased 26% year over year, while medical device sales declined 75% to 76% year over year due to temporary office and distributor closures. On a six-month basis, medical devices gross margin was 56% versus 63% a year ago, and medical foods/nutraceuticals gross margin was 47% versus 61% a year ago. Operating expenses fell to $1.25 million from $2.98 million, aided by a $1.05 million non-cash benefit from the prior CEO resignation; accrued salary tied to that event was $325,000, with approximately $311,000 still to be paid after June 30, 2020. The company said year-to-date cash used was approximately $4 million, inventory increased by about $607,000 to $1.24 million, warrant exercises generated $4.55 million year-to-date, and ending cash was $11.6 million. No formal forward guidance was provided; management said revenue and expenses will likely remain lumpy, they do not expect deals of the Malaysia order size every quarter, and they are focusing on the CSV-2000, medical foods, and nutraceutical opportunities.

Dr. Evans emphasized Guardion’s proprietary technology and said the company is gaining a foothold in ocular health. He highlighted the first published paper on the company’s formula, which showed 300% to 400% higher blood absorption of key ingredients and thicker macular pigment versus AREDS2 gel caps, and said the company is starting new studies at universities to further validate the product. He also stressed the strategic value of the new CSV-2000 device as a way to treat, test, and measure benefits in a single model.

Andy Schmidt focused on the financial structure of the business and the sources of quarter-to-quarter volatility. He said gross margin pressure came from lower unit sales and product mix in devices, and from the large Malaysian order in medical foods being sold at distribution/volume pricing. He also explained the $1.05 million non-cash benefit from the prior CEO resignation, the $250,000 of consultant fees, approximately $4 million of year-to-date cash use, $1.24 million of inventory, $4.55 million of warrant proceeds, and the $11.6 million cash balance at June 30, 2020.

There was no formal analyst Q&A in the transcript; the discussion was management’s prepared remarks. The main issues addressed were the reliance on a single large Malaysia order, the decline in device sales due to COVID-19 closures, and how margins change based on mix and distribution pricing. Management also clarified that expenses and revenues will likely remain lumpy and said it is shifting resources away from the discontinued Trans-Cranial Doppler product toward VectorVision, medical foods, and nutraceuticals.