Novan, Inc.

For the three months ended March 31, 2023, Novan reported net product sales of $2.4 million, license and collaboration revenue of $0.6 million, total cost of goods sold of $1.3 million, R&D expense of $4.8 million, SG&A expense of $10 million, and consolidated net loss of $14.1 million versus $13.4 million in the prior-year period. The company ended the quarter with $12.5 million of cash and $13.8 million of accounts receivable. RHOFADE contributed $1.1 million of net product sales, WYNZORA $0.5 million, MINOLIRA $0.3 million, and other products $0.4 million. Management said RHOFADE units sold were down 28% year over year in Q1 due to a manufacturing delay and stock-out, but volume rebounded in mid-April after restocking. The company is not yet providing Q2 or full-year 2023 revenue or EBITDA guidance, and said existing cash plus expected product receipts should fund planned operating needs only into the late second quarter of 2023.

Paula Brown Stafford emphasized that the company’s priority is the berdazimer gel NDA, calling it Novan’s most significant milestone to date and framing the product as a potential first-line therapy for molluscum if approved. Her tone was optimistic but cautious: she repeatedly tied launch preparation to funding availability and said commercial efforts would be scaled based on cash. She also highlighted the market need, saying the product could address a large underserved population and that the company is continuing FDA dialogue while preparing supply and launch infrastructure.

John Gay focused on the quarter’s financial bridge, noting the quarter’s reported revenue was affected by the timing of the EPI Health acquisition and by a RHOFADE manufacturing delay that reduced units sold. He said gross-to-net pressure rose because of higher payer rebates, a shift to preferred coverage, higher patient assistance costs, and deductible resets. He also laid out liquidity clearly: $12.5 million of cash at quarter-end, a $6 million registered direct offering, a $5 million Sato upfront payment, use of a $15 million accounts receivable back-factoring facility, and a burn profile that implies funding only into late Q2 2023 without additional capital. He added that R&D is expected to be flat year over year and that the company is pursuing multiple financing and strategic alternatives while trying to conserve cash.

Analysts focused heavily on the commercial portfolio’s volatility, especially the RHOFADE stock-out, gross-to-net pressure, and whether Q1 weakness would fully reverse in Q2; management said demand rebounded in mid-April and that some of the Q1 issue was timing-related. Questions also centered on whether the legacy product portfolio is a bridge to SB206 and how much pre-launch work can be done given cash constraints; management said SB206 is the long-term value driver, but current products still matter and hiring for sales is frozen. On SB206, Paula Brown Stafford said the company already received the information it typically gets in a day-74 letter through the day-60 communication and confirmed the PDUFA date of January 5, 2024. Analysts also asked about Japan rights for RHOFADE with Sato; management said the clock on those discussions runs to the end of Q2 and that Sato still needs some development work before launch.