NovaBay Pharmaceuticals, the Emeryville-based eyecare company, is experiencing a fascinating phenomenon. Their latest earnings transcript reveals an intriguing trend that seems to have flown under the radar of most analysts: a potential synergy between their physician dispensed channel and their booming online sales.

While the company's decision to divest from their skincare segment, DERMAdoctor, is grabbing headlines, a deeper dive into NovaBay's Q1 2024 earnings transcript <a href="https://seekingalpha.com/symbol/NBY" alt="NovaBay Q1 2024 Earnings Transcript">Q1 2024 Earnings Transcript</a> suggests something far more compelling is afoot. It appears that their physician dispensed channel, long considered a valuable but secondary avenue for sales, is subtly but powerfully fueling their online success.

Consider this: NovaBay achieved record-breaking sales of their flagship Avenova product on Amazon, their primary online sales channel, in March and April 2024. This surge occurred despite the absence of major promotional events like Amazon Prime Day, which historically boosted sales. What's even more intriguing is the revelation that a significant portion of these online sales originated from prescribers in 2023 – a whopping 24%, up from 14% in 2022.

These figures paint a fascinating picture. It seems that doctors, by recommending Avenova to their patients, are acting as powerful, albeit silent, influencers for the brand's online sales. This 'halo effect', as CEO Justin Hall aptly terms it, is quietly driving a wave of new customer acquisition and retention for NovaBay.

Imagine this scenario: a patient suffering from dry eye visits their ophthalmologist seeking relief. The doctor, trusting the efficacy of Avenova's hypochlorous acid formulation, recommends the spray as part of a comprehensive treatment regimen. The patient, experiencing the product's benefits firsthand, seeks a convenient and cost-effective way to repurchase Avenova. Enter the world of online retailers like Amazon, where one-click purchasing and subscription services make replenishing a breeze.

This hypothesis is further supported by Hall's own statements during the earnings call. He explicitly acknowledges the strategic shift away from a solely direct-to-consumer approach in favor of a synergistic model that leverages physician recommendations to drive online sales. He emphasizes the importance of "converting customers from our physician-dispensed channel and from the doctor's office into our OTC channel."

Here's where it gets interesting: this strategy appears to be a win-win for both NovaBay and the partnering physicians. Doctors, through their trusted recommendations, gain a valuable tool to effectively manage their patient's dry eye. In turn, NovaBay benefits from a powerful, cost-effective customer acquisition strategy that bypasses the expensive world of online advertising.

While the company hasn't explicitly broken down their revenue by sales channel, the strong correlation between the rise in prescriber-driven sales and the record-breaking Amazon figures is hard to ignore. It suggests that a silent eCommerce revolution, fueled by doctor recommendations, might be the true driver behind NovaBay's impressive online sales growth.

This silent revolution could prove particularly significant in the context of the recent co-marketing agreement with Eyenovia, a company specializing in innovative ophthalmic products. Under this agreement, NovaBay will leverage its network of eyecare professionals to market Eyenovia's newly approved Clobetasol, a first-in-class steroid for post-operative inflammation. Conversely, Eyenovia's nationwide salesforce will promote Avenova to a wider audience of ophthalmic surgeons, further amplifying the reach of NovaBay's flagship product.

This strategic partnership is poised to further solidify the physician-dispensed channel as a powerful engine for online growth. By strategically targeting ophthalmic surgeons, a group known for their influence on patient choices, NovaBay has the potential to significantly expand the Avenova brand's presence within the dry eye market.

Growth of Prescriber-Driven Online Sales

This chart illustrates the significant increase in NovaBay's online sales that are driven by physician recommendations, highlighting the growing influence of the physician-dispensed channel.

NovaBay's success might hold a key lesson for other companies operating in the healthcare and consumer goods space: leverage the power of trusted intermediaries. Doctors, by virtue of their expertise and the trust they command, are uniquely positioned to drive both customer acquisition and brand loyalty. This silent revolution, playing out subtly in the realm of doctor recommendations and online sales, might be the key to unlocking sustainable and profitable growth in the world of eCommerce.

"Fun Fact: Hypochlorous acid, the active ingredient in Avenova, is naturally produced by our white blood cells to fight infection. This natural defense mechanism is now harnessed in a convenient spray format to help manage dry eye symptoms."