Prescription Medicines sales consist of sales of Stendra® in the U.S. for the treatment of male ED. Stendra® is primarily sold directly to the three main customers as described above, which collectively accounted for approximately 88% of Stendra® net sales for the three months ended March 31, 2022. Individually, sales to the three main customers, accounted for 35%, 27%, and 25%, respectively, of Stendra® gross sales for the three months ended March 31, 2022.
Medical Device sales consist of domestic and international sales of men’s health products for the treatment of ED. The men’s health products do not require a prescription and include Vacuum Erection Devices (“VEDs and related accessories”).
Net sales were $1,610,437, or 40% lower during the three months ended March 31, 2022 than in the same period in 2021 consisting of a $1,675,879 decrease in the net sales of Stendra® offset by a $65,442 increase in Medical Device Sales. The decrease in net sales of Stendra® was primarily due to increased coupon redemptions to support higher wholesale demand as the Company worked to resolve its supply chain challenges and increased wholesaler returns related to the sale of short-dated product. The increase in net sales for Medical Devices included an increase in international sales of VED systems partially offset by a decreased in domestic sales of VED systems.
Cost of Sales
Cost of sales for the three months ended March 31, 2022, were $472,340, composed of $138,181 of cost of sales for our Prescription Medicines segment and $334,159 for our Medical Devices segment.
Cost of sales for the three months ended March 31, 2021 were $643,386, composed of $389,281 of cost of sales for our Prescription Medicines segment and $254,105 for our Medical Devices segment.
Cost of sales for the Prescription Medicine segment for the three months ended March 31, 2022 consisted of 55% royalty expenses, 41% third-party product cost of sales, 2% inventory obsolescence and 2% 3PL order fulfillment and shipping expenses.
Cost of sales for the Medical Device segment for the three months ended March 31, 2022 consisted of 90% raw materials and 10% production labor.
Cost of sales decreased by $171,046 or 27% during the three months ended March 31, 2022 compared to the same period 2021. For the three months ended March 31, 2022 and 2021, cost of sales as a percentage of net sales were 19% and 16%, respectively. The increase in cost of sales as a percentage of net sales was a result of an increased sales order fulfillment costs (on a per unit basis).
Gross Profit
Gross profit for the three months ended March 31, 2022 was $1,992,829, or 81% of net sales, composed of $1,386,587 of gross profit from Prescription Medicines and $606,242 from Medical Devices. Gross profit for the three months ended March 31, 2021 was $3,432,220, or 84% of net sales, composed of $2,811,366 of gross profit from Prescription Medicines and $620,854 from Medical Devices. The decrease in gross profit was driven by the factors noted above.
Operating Expenses
Selling, general and administrative
Selling, general and administrative expenses for the three months ended March 31, 2022, were $3,897,738, composed of $1,711,019 of selling, general and administrative expenses of our Prescription Medicines segment, $663,591 of selling, general and administrative expenses of our Medical Devices segment and $1,523,128 of general corporate expenses.
Selling, general and administrative expenses for the three months ended March 31, 2021 were $3,881,717, composed of $1,734,333 of selling, general and administrative expenses of our Prescription Medicines segment, $546,995 of selling, general and administrative expenses of our Medical Devices segment and $1,600,389 of general corporate expenses.
Selling, general and administrative expenses for both segments include selling, marketing and regulatory expenses. Unallocated general corporate expenses include costs that were not specific to a particular segment but are general to the group, including expenses incurred for administrative and accounting staff, general liability and other insurance, professional fees and other similar corporate expenses.