8-K: Journey Medical Announces FDA Approval of Emrosi and Preliminary Q3 2024 Results

Journey Medical Corporation announced FDA approval for Emrosi, a rosacea treatment, and released preliminary financial results for the third quarter of 2024.

Summary

• Journey Medical reported preliminary unaudited revenue of $14.6 million for the third quarter of 2024, a decrease from $15.3 million in the same period of 2023.
• The company's gross margin increased to 63.9% in Q3 2024, up from 59% in Q3 2023.
• Research and Development expenses decreased to $0.8 million in Q3 2024, compared to $2.2 million in Q3 2023.
• Selling, general, and administrative expenses increased to $11.4 million in Q3 2024, up from $8.6 million in Q3 2023, due to platform expansion and the launch of Emrosi.
• The company reported a net loss of $2.4 million for Q3 2024, compared to a net income of $16.8 million in Q3 2023, primarily due to a $19.3 million payment received in 2023 from a licensing agreement.
• For the nine-month period ended September 30, 2024, total net product revenues were $42.5 million, compared to $44.4 million for the same period in 2023.
• R&D expenses for the nine-month period were $9.6 million, compared to $6.0 million in 2023, due to a $4.1 million FDA filing fee and a $3.0 million milestone payment.
• SG&A expenses for the nine-month period were $30.4 million, compared to $34.1 million in 2023.
• The net loss for the nine-month period was $16.2 million, compared to a net loss of $1.7 million in 2023, again impacted by the $19.3 million payment in 2023.
• Journey Medical ended the third quarter with $22.5 million in cash.
• The company expects to receive approximately $4.4 million in recovered funds from a 2021 fraud loss in the fourth quarter of 2024.
• The company maintains its 2024 financial guidance with net product revenue between $55-$60 million, SG&A expenses between $39-$42 million, and R&D expenses between $9-$10 million.
• The FDA approved Emrosi (Minocycline Hydrochloride Extended Release Capsules, 40 mg) for the treatment of rosacea on November 4, 2024.
• The approval of Emrosi triggered a $15 million milestone payment to Dr. Reddys Laboratories, Ltd. and a $5 million draw on an existing credit facility.
• Initial supply of Emrosi is expected to be available in late first quarter or early second quarter of 2025.

Sentiment

Score: 6

Explanation: The document contains both positive and negative elements. The FDA approval of Emrosi is a major positive, but the financial results show a net loss and decreased revenue compared to the previous year. The company also faces several risks, including the need for additional capital.

Positives

• The FDA approval of Emrosi is a significant milestone for the company.
• Emrosi showed strong efficacy and tolerability in clinical trials.
• The company's gross margin improved in the third quarter of 2024.
• Journey Medical is recovering $4.4 million from a previous fraud loss.
• The company maintains its 2024 financial guidance.

Negatives

• Net product revenues decreased in both the three-month and nine-month periods compared to 2023.
• The company reported a net loss for both the three-month and nine-month periods, primarily due to a one-time payment received in 2023.
• SG&A expenses increased in the third quarter of 2024 due to platform expansion and the launch of Emrosi.
• The company has a $15 million milestone payment obligation due to the FDA approval of Emrosi.

Risks

• The company's products are subject to regulatory and clinical testing risks.
• A substantial portion of sales derive from products that may face generic competition.
• The company operates in a heavily regulated industry.
• The company's revenue is dependent on sales of dermatology products.
• Competition could limit the commercial opportunity and profitability of the company's products.
• The company relies on third parties for several aspects of its operations.
• The company's success depends on the successful commercialization of Emrosi.
• Clinical drug development is expensive, time-consuming, and uncertain.
• The company faces risks related to intellectual property protection.
• The company's business could suffer from computer system failures or cyber-attacks.
• There is substantial doubt about the company's ability to continue as a going concern.
• The company may need to raise additional capital.
• Fortress controls a voting majority of the company's common stock.

Future Outlook

The company maintains its 2024 financial guidance with net product revenue between $55-$60 million, SG&A expenses between $39-$42 million, and R&D expenses between $9-$10 million. Initial supply of Emrosi is expected to be available in late first quarter or early second quarter of 2025.

Management Comments

• Claude Maraoui, Co-Founder, President, and Chief Executive Officer of Journey Medical, said, 'With approval from the FDA, Journey Medical is proud to deliver Emrosi, a unique treatment option for the millions of patients in the U.S. suffering from rosacea.'
• Claude Maraoui stated that Emrosi has the potential to become the best-in-class oral medication to treat rosacea.
• Srinivas Sidgiddi, M.D., Vice President, Research & Development at Journey Medical, added, 'Emrosi showed great efficacy and tolerability in the pivotal clinical trials.'

Industry Context

The approval of Emrosi addresses a significant need in the dermatology market, as rosacea affects millions of people worldwide. The company is positioning Emrosi as a new standard of care for rosacea, which could impact the market share of existing treatments. The company's focus on dermatology aligns with the growing demand for specialized treatments in this sector.

Comparison to Industry Standards

• Journey Medical's gross margin of 63.9% is competitive within the pharmaceutical industry, but it is important to compare this to other dermatology-focused companies.
• Companies like Galderma and Almirall, which also focus on dermatology, have similar gross margins, but their overall financial performance and product portfolios differ.
• The R&D expenses of $9.6 million for the nine-month period are significant, reflecting the investment in new product development, which is typical for pharmaceutical companies.
• The $15 million milestone payment to DRL is a common practice in the pharmaceutical industry for licensing and collaboration agreements.
• The company's net loss of $16.2 million for the nine-month period is concerning, but it is important to consider the one-time payment received in 2023 that skewed the comparison.

Related Party Transactions

• The company is contractually obligated to pay Dr. Reddys Laboratories, Ltd. contingent regulatory, commercial, and corporate-based milestone payments.
• The company has a credit agreement with SWK Funding LLC.

Stakeholder Impact

• Shareholders will be impacted by the FDA approval of Emrosi and the financial results.
• Employees will be involved in the launch of Emrosi.
• Customers (patients) will benefit from the new treatment option for rosacea.
• Suppliers will be involved in the manufacturing of Emrosi.
• Creditors will be impacted by the company's debt obligations.

Next Steps

• Journey Medical will complete the manufacturing of Emrosi for the U.S. market.
• The company will launch Emrosi in the U.S. with its commercial team.
• Journey Medical will draw $5 million from its credit facility to fund a portion of the $15 million milestone payment.
• The company will receive approximately $4.4 million in recovered funds from a 2021 fraud loss in the fourth quarter of 2024.

Key Dates

Keywords

Emrosi, rosacea, FDA approval, dermatology, pharmaceutical, clinical trials, revenue, net loss, milestone payment, research and development, SG&A, Minocycline Hydrochloride