Participants

Jaclyn Jaffe; IR Contact Officer; Journey Medical Corp

Claude Maraoui; President, Chief Executive Officer, Director; Journey Medical Corp

Joseph Benesch; Interim Chief Financial Officer, Corporate Controller; Journey Medical Corp

Louis Donati; Director of Market Access; Journey Medical Corp

Srinivas Sidgiddi; Vice President of Research & Development; Journey Medical Corp

Thomas Flaten; Analyst; Lake Street Capital Markets

Scott Henry; Analyst; Alliance Global Partners.

Brandon Folkes; Analyst; Rodman and Renshaw

Jason Wittes; Analyst; Roth

Kalpit Patel; Analyst; B. Riley Securities

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Good afternoon and welcome to Journey Medical's 2024 Financial Results and Corporate Update Conference Call (Operator Instructions)
I would now like to turn the call over to Jaclyn Jaffe, the Company's Senior Director of Corporate Operations. Please go ahead.

Jaclyn Jaffe

Good afternoon, and thank you for participating in today's conference call. Joining me from Journey Medical's leadership team are Claude Maraoui, Co-Founder, President and Chief Executive Officer; and Joseph Benesch, Chief Financial Officer. Joining for the Q&A portion of the call will be Ramsey Alloush, General Counsel and Corporate Secretary; Dr. Srini Sidgiddi, Vice President of Research and Development; and Louis Donati, Director of Market Access.
During this call, management will be making forward-looking statements, including statements that address, among other things, Journey Medical's expectations for future performance, operational results, financial condition and the receipt of regulatory approvals. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements.
For more information about these risks, please refer to the risk factors described in Journey Medical's most recently filed periodic reports on Form 10-K and Form 10-Q, the Form 8-K filed with the SEC today, and the company's press release that accompanies this call, particularly the cautionary statements in it.
Today's conference call includes non-GAAP financial measures that Journey Medical believes can be useful in evaluating its performance. You should not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP. For a reconciliation of this non-GAAP financial measure to net loss, its most directly comparable GAAP financial measure, please see the reconciliation table located in the company's earnings press release.
The content of this call contains time sensitive information that is accurate only as of today, Wednesday, March 26, 2025. Except as required by law, Journey Medical disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call.
It is now my pleasure to turn the call over to Claude Maraoui, Co-Founder, President and Chief Executive Officer of Journey Medical.

Claude Maraoui

Thank you, Jaclyn, and good afternoon to everyone on the call today.
2024 was a pivotal year for Journey Medical as we delivered on all of our guidance ranges for the year and position the company to launch Emrosi, our best in class oral treatment for rosacea. We reported annual revenue of $56 million in 2024 and the fourth quarter marked the sixth consecutive quarter that the company achieved positive non-GAAP adjusted EBITDA. Additionally, we submitted our new drug application for Emrosi in early 2024 and received an on time first cycle approval from the FDA in November.
In 2024, we also paid out a total of $22 million in FDA filing fees and milestone payments to Dr. Reddy Labs. These onetime payments completed our financial obligations associated with Emrosi's regulatory fees and development milestones in the United States for the rosacea indication. As a result, this clears the way for Emrosi’s commercial debut and our ability to increase our product revenues and operating cash flow as the product gains traction in the market.
Despite these payments, our balance sheet remains strong ahead of the Emrosi launch with $20.3 million in cash as of December 31. We believe that Journey is well-positioned ahead of the Emrosi launch. Given that our current commercial organization is already targeting the same dermatology prescribers that treat the vast majority of rosacea patients. This means that Emrosi sales have potential to generate significant operating leverage for the business.
Given the market opportunity for Emrosi, which is entering $1 billion plus treatment category with superior Phase 3 clinical results against the current oral standard of care. We believe that the product can be transformational to our business.
Other accomplishments in 2024 include presentations of Emrosi clinical data at key medical congresses, such as the American Academy of Dermatology Annual Conference in March, the Dermatologic Education Foundation, Nurse Practitioner and Physician Assistant Conference in July, and the Fall Clinical Dermatology Conference in October. And in November 2024, our licensed partner, Cutia Therapeutics, received regulatory approval to market Amzeeq in China, which triggered a $1 million milestone payment to Journey.
Continuing the business momentum from last year, 2025 is off to a strong start. Earlier this month, we hosted an exhibit booth at the 2025 AAD Conference in Orlando, Florida. The AAD meeting attracts more than 20,000 attendees, including top dermatology KOLs and high prescribing physicians, nurse practitioners and physician assistants.
Our exhibit booth at the conference was very productive in terms of foot traffic and the time that attendees spent in our exhibit to learn about Emrosi’s recent FDA approval and our superior head to head Phase 3 results against rosacea. Notably, dermatologists were interested in Emrosi’s low dose modified release formulation comprised of 10 milligram immediate release and 30 milligrams of extended release minocycline, as well as the product's favorable safety and tolerability profile.
We also have served significant attendee interest in the before and after photos of patients in our Phase 3 clinical trials, which were a focal point in our exhibit. Many dermatologists already know Journey, our current products and the strong customer service that we provide including our co-pay assistance and access programs. We believe that the AAD meeting was highly successful and generated significant customer interest heading into the Emrosi launch.
Our national sales meeting kicks off next week and with our launch quantities in place, we recently began shipping Emrosi inventory into the distribution channel and have already begun seeing prescriptions dispensed. As a result, we are well prepared to execute on a robust launch in early April.
On our pre-commercial update call in February, we noted approximately 12% commercial payer coverage for Emrosi at the time. Due to our initial market access efforts, which began immediately after Emrosi’s FDA approval last November. As an update, we now have coverage of approximately 20% of the 188 million commercial lives and 4% of the 58 million Medicare lives, enabling those patients access to Emrosi through their health insurance plans.
We expect the number of payers and covered lives to increase substantially throughout the remainder of this year and into 2026. So far, we believe that the early progress is promising and we expect to report on the ramp-up in payer coverage throughout the year.
Earlier this month, our Phase 3 results from Emrosi were published in a peer reviewed article in the Journal of the American Medical Association or JAMA Dermatology, one of the most well recognized journals in medicine. Notably, this journal has among the highest impact factors in the dermatology field. The paper focused on the head to head clinical superiority of Emrosi on both of our co-primary endpoints against rosacea and placebo with very high statistical significance.
As well, the publication noted that Emrosi’s Phase 3 results met all of the secondary endpoints, including a statistically significant benefit in reducing erythema or the retinas associated with rosacea compared to placebo. The publication also noted the favorable safety profile of Emrosi. We believe that the JAMA publication is a significant positive that coincides well with our launch and can create additional awareness of Emrosi’s benefits as we roll the drug out into the market.
In addition to the JAMA article, we anticipate two more publications on Emrosi this year, with one focusing on the microbiology study that we conducted, which demonstrates the drug's sub antimicrobial effects and the other on the quality of life improvement for patients taking Emrosi to treat their rosacea symptoms. As well, Journey is planning to attend, exhibit and present at additional dermatology focused medical congresses throughout 2025.
With that, I will now turn the call over to our CFO, Joe Benesch, to review our financial results for 2024.

Joseph Benesch

Thank you, Claude, and hello everyone.
I'd like to start by saying that we are pleased to have met all of our financial guidance ranges for 2024. As a reminder, for the full year, we anticipated product sales in the range of $55 million to $60 million. SG&A expense in the range of $39 million to $42 million and R&D expense in the range of $9 million to $10 million.
For this year, given the upcoming launch of Emrosi and the variability that goes along with any drug launch, we plan to offer 2025 financial guidance later in the year. After we assess initial Emrosi prescription demand, we have conducted additional payer contract negotiations.
Moving to our financial results for 2024. Our total net product revenue in 2024 was $55.1 million which compares to the $59.7 million that we reported in 2023. The decrease was primarily due to overall higher rebate costs across our product portfolio and lower unit volumes mainly from our legacy products.
Total revenues for 2024 were $56.1 million. This includes a $1 million milestone payment that was triggered upon Cutia receiving market authorization for Amzeeq in China. Under the Cutia agreement, Journey is also entitled to royalties on sales of Amzeeq in the licensed territory.
Full year 2023 total revenues of $79 million includes a $19 million upfront licensing payment and $500,000 in royalties that we received from our partner Maruho Limited. Our cost of goods sold decreased by $2 million or 9% to $20.9 million for the full year 2024. The lower cost of goods was mainly due to decreased product royalties stemming from contractual royalty decreases in 2023 and the discontinuation of Ximino in 2023.
Research and development expenses increased by $2.3 million to $9.9 million for the full year 2024. The increase was primarily driven by non-recurring payments of $4.1 million in the Emrosi NDA filing fee in January 2024 and the $3 million contractual milestone payment to Dr. Reddy’s, which was triggered by the FDA's acceptance of our NDA application for Emrosi in March 2024. These increases were offset by lower clinical trial expenses as the Emrosi Phase 3 clinical program was concluded in 2023.
Looking now to our SG&A expenses. SG&A decreased by $3.7 million or 8% to $40.2 million for the full year 2024. The year-over-year decrease was mainly due to the full realization of our expense optimization efforts that were completed in 2023.
Continuing to our net loss for the periods. Net loss to common shareholders was $14.7 million or $0.72 per share basic and diluted for the full year 2024. This compares to a net loss to common shareholders of $3.9 million or $0.21 per share of basic and diluted for the full year of 2023. The net loss in 2023 includes the license fee revenue and product related royalties of $19.5 million that we received from Maruho.
Turning now to our non-GAAP results. Our non-GAAP adjusted EBITDA for the full year 2024 was a positive $800,000 or $0.04 per share basic and $0.03 per share diluted. This compares to positive adjusted EBITDA of $15.6 million or $0.85 per share basic, $0.75 per share diluted for the full year of 2023, which includes the licensee revenue and product related royalties of $19.5 million that we received from Maruho.
At December 31, 2024, we had $20.3 million in cash and cash equivalents compared to the $27.4 million at December 31, 2023.
Thank you very much. I will now turn the call back over to Claude.

Claude Maraoui

Thank you, Joe. We executed well in 2024, ending the year on a high note and setting up our business for a transformational year in 2025. Emrosi is now approved and ready for launch. And the entire company is energized as we prepare to go-to-market with a product that is clearly superior to the current standard of care and addresses an unmet-need for improving the treatment of rosacea patients.
As the first internally developed asset for the company, Emrosi fits directly into our current dermatology commercial model with no need to add to our sales force to promote the product. As such, we have the financial and organizational resources in place to execute on a strong launch. We believe that Emrosi will become a major growth driver for Journey Medical, given its potential to achieve peak annual sales of an estimated $200 million in the United States and $100 million internationally, providing significant operating leverage to our business.
An exciting year lies ahead with several potential catalysts to create value, including the launch of Emrosi and subsequent ramp in prescriptions for the product. Two additional peer reviewed publications and medical conference presentations anticipated during the year, and anticipated increase in covered lives gaining access to Emrosi during 2025.
Our financial progress as we drive the business towards sustainable positive EBITDA and profitability and the potential for business development activity, which may include licensing the commercial rights to our products outside the U.S. to create additional shareholder value.
We at Journey Medical are looking forward to a productive 2025, and we are laser focused on driving value for patients, our physician customers and our shareholders.
Thank you. Operator, we are now ready to open the lines for Q&A.

Question and Answer Session

Operator

(Operator Instructions) Thomas Flaten with Lake Street Capital Markets.

Thomas Flaten

Thank you. Hey, good afternoon. Thanks for taking the questions. Claude, just first on payer coverage, what do you think we should be expecting as you exit 2025? I know you said there'd be a nice ramp, but relative to the 24%-ish that you have now, where do you think we should be ending the year?

Claude Maraoui

Yeah. Hi, Thomas. Our goal obviously is to obtain as many covered lives as possible. The expectation to peak commercial coverage should take anywhere from 12 to say 18 months. I do have our market access lead with us here, Louis Donati. I'm going to pass that to him and let him give you a little more detail.

Louis Donati

I appreciate the question by the way. Market access team is working actively, obviously, on commercial coverage as well as the Medicare line of business. So out of the 188 million lives commercially across the U.S., the anticipation that is April 1, July 1, October 1 and so forth, we will have that ramp up period with peak coverage 12 to 18 months out.
The anticipation again is based on a lot of the high demand through the field because the more demand, the better coverage we will get. And the head to head studies will back up that demand also because the payers are very happy with the head to head studies.
So to give you a specific target right now, let's just wait a few months until we get more intel from the demand from the field. And I'm actively working with the GPOs and PBMs to obviously let them know of the head to head studies. So give us a few more months, and we will report back. But again, peak coverage is 12 to 18 months post launch.

Thomas Flaten

Great. I appreciate that. And then from your interactions with KOLs and other doctors at AAD, how important did they view the erythema data? And depending on that, what are you doing to get that data into the hands of physicians given that it didn't end up in the label?

Claude Maraoui

Yeah. I guess a couple of things there. First of all, the AAD had significant interest from our providers and PAs as well. The erythema, interesting enough, was not the key subject at all. The head to head performance really is catching people and saying, okay, let me listen to more. Tell me about the safety. They did not hit the erythema whatsoever.
Outside of that, we also have held already to date, Thomas, we've done three ad boards. We've done overwhelmingly the response again, the head to head is really what's capturing people's interest and why they want to prescribe Emrosi moving forward. And that's really one of the reasons why we believe we anticipate this to becoming the new standard of care.
In terms of erythema, to answer your question, we have our Head of Medical Affairs on as well, and that's Dr. Srinivas Sidgiddi and he can speak more about that. Srini?

Srinivas Sidgiddi

Sure, Claude. Thank you so much. I hope I'm audible. Thomas, thanks for the question. First of all, we are very pleased with the JAMA publication and the data presented there. As Claude mentioned in his presentation, the JAMA publication covers the co-primary endpoints as well as all the secondary endpoints. And erythema was one of the secondary endpoints, which showed success against placebo.
And that data being in a journal JAMA Derm is really very important and we are fortunate to get this out at the right time. With the high impact factor, the high credibility and the wide readership of JAMA Dermatology, there will be natural visibility of the erythema data from the Phase 3 studies.
And the medical affairs group is well trained to answer specific questions related to erythema from the dermatology prescribers about the Phase 3 results on erythema or any other clinical data related to those studies. As a result, we expect that the JAMA Derm publication will have a huge impact in disseminating the erythema data.

Thomas Flaten

Sorry, go ahead.

Claude Maraoui

The one last thing I'd to say is that Yes, Tom. So the other part I would invite you if you haven't yet and as well as all the other listeners, the Emrosi website really has phenomenal before and after photos. And I would invite you to take a look and see the baseline versus the finished results of the patients at week 16. It's pretty dramatic and there's really great indication of how powerful it is to your question specifically.

Thomas Flaten

Got it thanks for taking the questions. I appreciate it.

Operator

Scott Henry from Alliance Global Partners.

Srinivas Sidgiddi

Thank you and good afternoon. I don't know if I missed it, but or if your plan is to do it later, but do you have any thoughts on 2025 guidance or a plan for initiating that?

Claude Maraoui

Yeah. Give us a few more months. This is really mostly related to the 2024 and us hitting all of our guidance that we gave. So we're going to let the launch of Emrosi really begin here. We've got our national sales meeting set up next week and then we'll have the full force of the commercial team out there for physicians to hear their voice and learn about Emrosi. So we're going to wait a little bit before we give guidance. So at this point, just please be patient with that.

Scott Henry

Okay, fair enough. And then as far as the early days, because you have filled some prescriptions. Would you say that the reimbursement environment has it been in line with expectations? Has it been better? Has it been worse? I know you have very few data points, but I'd to ask the question just to see if there's anything there to focus on.

Claude Maraoui

Yeah, definitely. The distribution into the pharmacy channel is there, so we're glad to say that we've got that checked off and ready to go for the full launch year in the next couple of weeks. In terms of coverage and reading into that, it's just too early to tell. We're definitely seeing the prescriptions coming in. We certainly have some coverage happening.
I would tell you that around the 20% mark right now in terms of getting adoption on formularies is probably on target and what I would utilize at this point as of today.

Scott Henry

Okay. And should we expect reported revenues in Q1? I know you'll fill some scripts, but sometimes there's a lag there. Should we look for just modest small amounts in Q1?

Claude Maraoui

Yeah. That's correct, Scott. Just I would tell you that Q2 will have a meaningful revenue starting to begin with Emrosi in Q2. I wouldn't expect much in Q1.

Scott Henry

Makes sense. And then for fourth quarter, if my math is correct, the revenue was down sequentially from Q3, somewhat notably. I know you talked about some of the reasons. My question is, when we think about the base business, is it more reflective of all the quarters in 2024 or is there a step down in fourth quarter '24 that we should think about continuing into 2025?

Claude Maraoui

Yes. I'll start out and then I'm going to hand this off to Joe. If you take a look at the last several years, I think the base business has been relatively steady. We've got some legacy brands that continue to erode. When we look at our base business, our core four, it's been pretty consistent. Joe, if you wanted to add to that, please.

Joseph Benesch

Yeah. And I think when we look at the first quarter, the first quarter is always going to be a little bit lower, right, because of rate resets that go through our P&L. But I think you could look at the full year 2024 and that's more representative of the true business.

Scott Henry

Okay. So none of the products you would say have reset at lower levels. Mostly I'm thinking Qbrexza and Accutane are the main drivers there.

Joseph Benesch

Yeah. Qbrexza continues to perform well for us. We continue to see script growth year-over-year and it's holding very solid. It obviously has some new competition out there. But again, the prescriptions continue to show very good positive signs. Again, when you look year-over-year, we're growing that product.
With Accutane, as we've stated in the past, there were a couple of new entries towards the second and third quarter of 2024. We did see some slowdown with Accutane. We've stabilized that business relatively well and we believe we're going to have good performance with Accutane.

Scott Henry

Okay, great. And just one accounting question. I see the loss recovery of 4,553. Was that in fourth quarter? Is that related to the cyber-attack? And also on the accounting side, the $15 million approval milestone, how should we think about that being? I thought we may see it expensed in the fourth quarter, but it doesn't look it. How should we account for that going forward?

Joseph Benesch

Right. So to your first question, Scott, the $4.6 million crypto, it was the recovery. We received the cash in December, so we're happy to put that through our P&L. And for the second question, the $15 million we are able to capitalize that as an intangible asset and we will amortize that over the life of the patent, which is through 2039.

Scott Henry

Okay. And will that be amortized through the acquired intangible assets line, which is now broken it out, or it will be lower down?

Joseph Benesch

No. It'll be right in that line.

Operator

Brandon Folkes with Rodman and Renshaw.

Brandon Folkes

Hi, thanks for taking my questions and congratulations on all the progress. Maybe just two from me. Firstly, how do you think about pricing across the portfolio? Obviously talking about more the legacy portfolio here in 2025? And then just with the Emrosi launch with the operating leverage you do have in your business, how do you think about capital allocation in 2025 and maybe beyond that as well?

Claude Maraoui

Sure. Joe, would you like to take that?

Joseph Benesch

Sure. As far as capital allocation, we're good with cash. We're very comfortable with our cash at this point. And can you speak to the other part of the question, please?

Brandon Folkes

Pricing across the base business or legacy portfolio in 2025, just what are you seeing? Obviously there's competitor interaction, so maybe just whether you want to go product by product or just holistically across the portfolio, how do we think about net pricing in 2025?

Joseph Benesch

So in 2025 go ahead, Claude.

Claude Maraoui

Yeah. I mean just generally, Brandon, with our legacy brands, when we look at Exelderm and Targadox, I think our pricing is going to be holding steady. We don't see much of a difference between one year to the next. The fact is those brands do have their competitive generics out there, especially with Targadox. So there's some erosion in the volume of the scripts more so than it is a pricing game with that.
The one benefit is too with Exelderm is we no longer have the obligation of paying royalties, so our margins for that product have actually gotten better. And then in terms of our remainder, our core four as I've been calling it in 2024, we believe that net pricing should remain the same as you've seen.

Brandon Folkes

Great, thanks very much.

Operator

Jason Wittes from Roth Capital.

Jason Wittes

Hi. Thanks for taking the questions. In terms of sort of the milestones for the Emrosi launch that you guys are looking for internally, at least the things that I guess the bottlenecks, reimbursement and getting into formulas are I would think would be the main thing to track. Obviously at least from our checks with physicians there seems to be a lot of interest in the drug from the physician side.
But I assume just that logistics of those other two items are what's going to determine the outlook for 2025. Is that the right way to think about it?

Claude Maraoui

I think you're tracking correctly. I think there were two areas that we need to focus in on. One was supply and we're glad to say that we've got ample supply and more supply on the way. So we feel real good with that. The distribution part has been taken care of and the backup supplies again are we're in a good position there. So I think you can put that one on the side.
Secondly, in terms of getting more formulary coverage, we feel really good and the progress that we've done already, I think shows a good indicator in where things are going. We've had great conversations with all the major plans. And I keep saying it, but it's so meaningful. These small molecules, there's not too many head to head comparisons. And when you're able to demonstrate statistical significance with a highly efficacious product, the plans are certainly interested and we feel very good in terms of being able to get on these formularies.
The one area is Louis just said earlier, it takes anywhere between 12 to 18 months and we will see good progress on a quarterly basis and better coverage as we go. So it's have a little patience in this game, but on all accounts it looks very promising from that point as well.

Jason Wittes

Okay. That's helpful. Thank you. And I guess you put out $100 million international opportunity for Emrosi. Is that something that you're going to look to outlicense at some point? I assume that's kind of the goal here. How should we think about that?

Claude Maraoui

Yes. In terms of finding the right partner to outlicense to is exactly what we're looking at. We certainly want to focus our efforts here in the United States. We've got a real good handle on that and that's where our focus is going to be.
But our business development strategy is to outlicense this and I think as we continue to see early success onward in 2025, I think it makes it even that much more tempting for partners outside to look at Emrosi as a very viable product on an international basis.

Jason Wittes

Got it, thanks. I'll jump back in queue.

Operator

Kalpit Patel from B. Riley Securities.

Kalpit Patel

Hey, good afternoon. And thanks for taking the questions. Maybe a few on the market access and launch related questions. You mentioned that the peak coverage for Emrosi, you would expect 12 to 18 months from the day of the launch. I guess, what exactly is the peak coverage percentage? That's question number one.
And then, the second question is, in terms of the covered lives, you gave a new updated 20% and 4% number for the different groups. What percentage of those are unrestricted versus single step edits?

Claude Maraoui

Thanks, Kalpit. Louis, would you to take that one, please?

Louis Donati

Sure. Hi, Kal. It's Lou, by the way. Thanks for the call and thanks for the question. So, peak coverage, again, trying to get ahead of it is maybe doing a disservice to what we're trying to do early on because I don't want to give you a number right now, 12 to 18 months down the road. All I can say is we've prepped the market early fall through today, and right now, about 20% commercial coverage is where the forecast should be.
Actually ahead of forecast in my opinion. I expect Emrosi because again we keep on talking about head to head studies and demand. I really believe this will be a really good product to the market rosacea and we will get the coverage that we anticipated. But just give us a few months to get out there with the field force, and we can report back, number one. Number two, the 20% commercial coverage, and that includes federal employees and health exchange out of the 188 million lives.
There's a mixed bag of unrestricted access and restricted access. So the good news is the payer response has been very positive, and there are some payers that are actually adopting the Emrosi currently in an unrestricted position with no utilization management. And that is prior authorization and no step. So the response has been very well received.
Again, give us some time as the market access team may get out there. Once we get the demand from the field that is definitely going to help our discussions long term. But, just give us a few more months, and we will report back. Okay?

Kalpit Patel

Okay. Got it. And a couple of follow ups here. Is the step edits that's being mandated by some of these payers, should we assume that that's, generic ratio, or does it also include off label antibodies?

Louis Donati

Primarily, the payer response has been if to get to Emrosi, if there's going to be a step edit, it's going to be through generic and generic or oral agent. It could be minocycline and or doxycycline. The drug policies will vary, but generic oral agents would be the step.

Kalpit Patel

Got it. Okay. And then, last question from me. After you guys announced your pricing and launched the drug here, has there been any pricing moved by Galderma for their branding rosacea?

Claude Maraoui

Yes. Actually, though, we have not seen any market movement in terms of pricing, Kalpit, since we've launched.

Kalpit Patel

Okay. Got it. Thank you very much for taking the questions.

Operator

This concludes our question-and-answer session. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.