Oxygen Biotherapeutics (Nasdaq:OXBT) is scaling back global sales and marketing plans for its only commercialized product to focus on just two U.S. states following the termination of agreements with distributors in Switzerland and Mexico.
Instead of selling its skin care product Dermacyte in select global markets, Oxygen said it will now focus on selling in North Carolina and South Florida, a move that will cost the Morrisville-based company significantly less money.
The attempt to sell Dermacyte globally failed in part because the international distributors simply didn’t buy enough of the product. Oxygen reached an agreement with Dermacyte Switzerland for exclusive rights to distribute Dermacyte in the European Union, Switzerland and Russia that called for the distributor to buy 40,000 units by the end of 2011. Boosting that purchase to 60,000 units would give the distributor the option to expand the agreement to South America.
Oxygen reached a separate deal in 2011 with Mexican company Comercial Uni2 to buy 10,000 units of Dermacyte by the end of that year. Central America could be added to the agreement if purchase milestones were reached. But in a securities filing, Oxygen said both distributors breached the contracts by failing to buy enough Dermactye. No termination fees or payments were triggered by the action.
Oxygen Biotherapeutics’ products work by enhancing delivery of oxygen to damaged tissue. The company is in mid-stage clinical trials for Oxycyte, an experimental traumatic brain injury treatment. Dermacyte is a cosmetic product, not a therapeutic treatment. But the topical cream, which began shipping in the second quarter of 2010, is Oxygen’s only commercialized product. In the company’s fiscal second quarter ended October 31, Dermacyte generated just $27,415 in revenue, down 24 percent compared to the second quarter of 2010. In its quarterly report, Oxygen attributed the revenue decrease to a reduction in its sales force as refocused its sales efforts.
Oxygen doesn’t say why the distributors did not buy enough Dermacyte. But President and CFO Michael Jebsen suggests competitive pressures in the crowded cosmetics played a role. In a statement, Jebsen said “the shotgun approach to promotion is too costly and challenging in this highly competitive anti-aging skin care market.” Oxygen will now focus on “local, grassroots efforts” to promote the brand along with online sales. Oxygen said in its quarterly report that it has hired a North Carolina based sales director and added sales people in South Florida and Southern California.
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