Journey Medical Corporation (Nasdaq: DERM) (“Journey Medical” or
“the Company”), a commercial-stage pharmaceutical company that
primarily focuses on the selling and marketing of FDA approved
prescription pharmaceutical products for the treatment of
dermatological conditions, today announced financial results and
recent corporate highlights for the first quarter ended March 31,
2023.
Claude Maraoui, Journey Medical’s Co-Founder,
President and Chief Executive Officer, said, “Since Journey
Medical’s inception, we have made significant investments and have
committed to building out our commercial product portfolios and
infrastructure to position ourselves for future revenue growth. Our
total revenues for the first quarter of 2023 were $12.2 million.
Despite higher unit sales volumes from period-to-period for
Accutane®, Amzeeq®, Zilxi® and Exelderm®, our net product revenues
for the first quarter were unfavorably impacted by higher
gross-to-net adjustments and lower unit sales volumes for Qbrexza®,
Targadox® and Ximino®. However, in April, we have already seen a
bounce back in our product net revenues and lower gross-to-net
adjustments from the isolated occurrences in the first quarter,
particularly for Qbrexza. For the remainder of 2023, we look
forward to a return to revenue growth, further reductions in
selling, general and administrative (“SG&A”) expenses from our
previous guidance of $5.0 - $7.0 million to result in SG&A
annual savings in excess of $12.0 million when compared to 2022, as
well as achieving clinical milestones in our Phase 3 clinical
trials evaluating DFD-29 for the treatment of papulopustular
rosacea (“PPR”). We expect a topline data read out from the DFD-29
Phase 3 clinical trials in June of 2023 and to file a New Drug
Application (“NDA”) in the second half of 2023.”
Financial Results:
- Total net product revenues were
$12.2 million for the first quarter of 2023, compared to net
product revenues of $20.8 million for the first quarter of 2022.
Higher unit sales volumes from period-to-period for Accutane,
Amzeeq, Zilxi and Exelderm were offset by lower unit sales volumes
of Qbrexza, Targadox and Ximino. In addition, all products
were unfavorably impacted by higher gross-to-net adjustments
compared to the first quarter of 2022.
- Cost of goods sold decreased by
$1.8 million to $6.4 million for the three-month period ended March
31, 2023, from $8.2 million for the three-month period ended March
31, 2022. The decrease is mainly due to a $2.0 million decrease in
Journey’s royalty payments, primarily related to Qbrexza and
Targadox royalties as a result of decreased net product revenues.
In addition, the Qbrexza royalty percentage contractually decreased
by 10% in May 2022. Beginning in May 2023, Qbrexza royalties will
be further reduced by an additional 12.5%, which is expected to
contribute to improved gross margins in 2023.
- Selling, general and administrative
expenses decreased by $1.4 million, to $13.3 million for the
three-month period ended March 31, 2023, from $14.7 million for the
three-month period ended March 31, 2022. The decrease of 10% is
primarily attributable to a decrease in legal costs associated with
the Company’s patent litigation settlements in 2022 and expense
reduction efforts primarily in sales force and marketing. These
expense reduction efforts are part of an overall cost reduction
initiative that the Company implemented at the beginning of 2023,
which is designed to improve operational efficiencies, optimize
expenses, and reduce overall costs. Specifically, the initiative is
intended to reduce selling, general and administrative expenses to
better align costs with the current revenue-generating
capabilities. In connection with the cost reduction initiative, the
Company effected a headcount reduction to its salesforce and
implemented marketing cost cuts in the first quarter of 2023. The
Company incurred one-time costs of approximately $0.5 million of
termination benefits to the impacted employees, including severance
payments and benefits. The Company anticipates that its selling,
general and administrative expenses will decrease for 2023 as it
continues to focus on further expense optimization.
- Research and development costs were
$2.0 million in the first quarter of 2023, compared to $1.3 million
in the first quarter of 2022, reflecting the Company’s ongoing
clinical trial expenses to develop our DFD-29 product
candidate.
- Net loss was $10.1 million, or
$0.57 per share basic and diluted, for the first quarter of 2023,
compared to a net loss of $1.4 million, or $0.08 per share basic
and diluted, for the first quarter of 2022.
- The Company’s non-GAAP results in
the table below reflect Adjusted EBITDA of $(5.3 million), or
$(0.30) per share basic and diluted, for the first quarter of 2023,
compared to Adjusted EBITDA of $2.3 million, or $0.13 per share
basic and $0.11 per share diluted for the first quarter of 2022.
Adjusted EBITDA, Adjusted EBITDA per share basic and Adjusted
EBITDA per share diluted are non-GAAP financial measures, each of
which are reconciled to the most directly comparable financial
measures calculated in accordance with GAAP below under “Use of
Non-GAAP Measures.”
- At March 31, 2023, the Company had
$26.1 million in cash and cash equivalents and restricted cash as
compared to $32.0 million of cash and cash equivalents at December
31, 2022. At March 31, 2023, the Company reclassified $8.75 million
of cash from cash and cash equivalents to restricted cash on the
Company’s condensed consolidated balances to reflect the minimum
cash requirement pursuant to an amendment to the Company’s Loan and
Security Agreement with East West Bank (“EWB”).
Recent Corporate
Highlights:
- In March 2023, Journey Medical
announced completion of treatment in the Phase 1 clinical trial
assessing the impact of DFD-29 (Minocycline Modified Release
Capsules 40 mg) on the microbial flora of healthy adults. No
significant safety issues were observed during the study.
- In January 2023, Journey Medical
completed enrollment in its DFD-29 Phase 3 clinical program for the
treatment of PPR and achieved the “Last Patient Out” milestone in
May 2023. Topline data from the DFD-29 Phase 3 clinical studies are
expected to be announced in June of 2023. Journey Medical plans to
file its NDA for DFD-29 in the second half of 2023 and expects
potential approval from the U.S. Food and Drug Administration in
the second half of 2024.
- In the Phase 2 clinical trials, DFD-29 (40mg) demonstrated
nearly double the efficacy when compared to Oraycea® (European
equivalent of Oracea®) on both co-primary endpoints. For the first
co-primary endpoint, Investigator’s Global Assessment (“IGA”)
treatment success, Oraycea only had a 33.33% IGA treatment success
rate, while DFD-29 achieved a 66.04% IGA treatment success rate.
For the second co-primary endpoint, the change in total
inflammatory lesion count, Oraycea only had a 10.5 reduction in
inflammatory lesions, while DFD-29 achieved a 19.2 reduction in
inflammatory lesions.
- In May 2023, the Company entered
into an amendment of its credit facility with EWB. As part of the
amendment, Journey Medical paid down $10 million of the $20 million
outstanding under the term loan and closed the revolving facility.
The remaining amounts outstanding under the term loan will be due
on July 1, 2024, and the Company will maintain a minimum required
cash balance of $8.75 million in deposit accounts with EWB, which
increases to $10.0 million on August 31, 2023. The minimum required
cash balance is included as a separate line item, “restricted
cash,” in the Company’s condensed consolidated balance sheet at
March 31, 2023. In addition, the Company is no longer subject to
financial covenants that were previously part of the facility. The
Company continues to monitor its spending by reducing 2023
expenses, in line with its overall cost reduction initiative. In
addition to reductions in sales force and marketing expenses, the
Company may pursue additional cash resources through public or
private equity or debt financings.
Conference Call and Webcast
InformationJourney Medical management will conduct a
conference call and audio webcast on May 22, 2023, at 4:30 p.m.
ET.
To listen to the conference call, interested
parties within the U.S. should dial 1-866-777-2509 (domestic) or
1-412-317-5413 (international). All callers should dial in
approximately 10 minutes prior to the scheduled start time and ask
to be joined into the Journey Medical conference call. Participants
can register for the conference here:
https://dpregister.com/sreg/10178597/f951c8551f.
Please note that registered participants will receive their dial-in
number upon registration.
A live audio webcast can be accessed on the News
and Events page of the Investors section of Journey Medical’s
website, www.journeymedicalcorp.com, and will remain available for
replay for approximately 30 days after the meeting.
About Journey Medical
CorporationJourney Medical Corporation (Nasdaq: DERM)
(“Journey Medical”) is a commercial-stage pharmaceutical company
that primarily focuses on the selling and marketing of FDA approved
prescription pharmaceutical products for the treatment of
dermatological conditions through its efficient sales and marketing
model. The company currently markets eight branded and three
generic products that help treat and heal common skin conditions.
The Journey Medical team comprises industry experts with extensive
experience in developing and commercializing some of dermatology’s
most successful prescription brands. Journey Medical is located in
Scottsdale, Arizona and was founded by Fortress Biotech, Inc.
(Nasdaq: FBIO). Journey Medical’s common stock is registered under
the Securities Exchange Act of 1934, as amended, and it files
periodic reports with the U.S. Securities and Exchange Commission
(“SEC”). For additional information about Journey Medical, visit
www.journeymedicalcorp.com.
Forward-Looking StatementsThis
press release may contain “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
As used below and throughout this press release, the words “the
Company”, “we”, “us” and “our” may refer to Journey Medical. Such
statements include, but are not limited to, any statements relating
to our growth strategy and product development programs and any
other statements that are not historical facts. The words
“anticipate,” “believe,” “estimate,” “may,” “expect,” “will,”
“could,” “project,” “intend” and similar expressions are generally
intended to identify forward-looking statements. Forward-looking
statements are based on management’s current expectations and are
subject to risks and uncertainties that could negatively affect our
business, operating results, financial condition and stock price.
Factors that could cause actual results to differ materially from
those currently anticipated include: the fact that our products and
product candidates are subject to time and cost intensive
regulation and clinical testing and as a result, may never be
successfully developed or commercialized; a substantial portion of
our sales derive from products that may become subject to
third-party generic competition, the introduction of new competitor
products, or an increase in market share of existing competitor
products, any of which could have a significant adverse impact on
our operating income; we operate in a heavily regulated industry,
and we cannot predict the impact that any future legislation or
administrative or executive action may have on our operations; our
revenue is dependent mainly upon sales of our dermatology products
and any setback relating to the sale of such products could impair
our operating results; competition could limit our products’
commercial opportunity and profitability, including competition
from manufacturers of generic versions of our products; the risk
that our products do not achieve broad market acceptance, including
by government and third-party payors; our reliance third parties
for several aspects of our operations; our dependence on our
ability to identify, develop, and acquire or in-license products
and integrate them into our operations, at which we may be
unsuccessful; the dependence of the success of our business,
including our ability to finance our company and generate
additional revenue, on the successful development and regulatory
approval of the DFD-29 product candidate and any future product
candidates that we may develop, in-license or acquire; clinical
drug development is very expensive, time consuming, and uncertain
and our clinical trials may fail to adequately demonstrate the
safety and efficacy of our current or any future product
candidates; our competitors could develop and commercialize
products similar or identical to ours; risks related to the
protection of our intellectual property and our potential inability
to maintain sufficient patent protection for our technology and
products; our business and operations would suffer in the event of
computer system failures, cyber-attacks, or deficiencies in our or
our third parties’ cybersecurity; the substantial doubt about our
ability to continue as a going concern; the effects of major public
health issues, epidemics or pandemics on our product revenues and
any future clinical trials; our potential need to raise additional
capital; Fortress controls a voting majority of our common stock,
which could be detrimental to our other shareholders; as well as
other risks described in Part I, Item 1A, “Risk Factors,” in our
Annual Report on Form 10-K for the year ended December 31, 2022,
subsequent Reports on Form 10-Q, and our other filings we make with
the SEC. We expressly disclaim any obligation or undertaking to
release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in our
expectations or any changes in events, conditions or circumstances
on which any such statement is based, except as may be required by
law, and we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.
Company Contact:Jaclyn Jaffe
(781) 652-4500ir@jmcderm.com
Media Relations Contact:Tony
Plohoros6 Degrees(908) 591-2839tplohoros@6degreespr.com
JOURNEY
MEDICAL CORPORATION |
Unaudited
Condensed Consolidated Balance Sheets |
($ in thousands
except for share and per share amounts) |
|
|
|
|
|
March 31, |
|
December 31, |
|
2023 |
|
2022 |
ASSETS |
|
|
|
Current
assets |
|
|
|
Cash and cash equivalents |
$ |
17,349 |
|
|
$ |
32,003 |
|
Accounts receivable, net of reserves |
|
27,616 |
|
|
|
28,208 |
|
Inventory |
|
13,278 |
|
|
|
14,159 |
|
Prepaid expenses and other current assets |
|
2,477 |
|
|
|
3,309 |
|
Total
current assets |
|
60,720 |
|
|
|
77,679 |
|
|
|
|
|
Intangible assets, net |
|
26,128 |
|
|
|
27,197 |
|
Operating lease right-of-use asset, net |
|
167 |
|
|
|
189 |
|
Restricted cash |
|
8,750 |
|
|
|
- |
|
Other assets |
|
88 |
|
|
|
95 |
|
Total assets |
$ |
95,853 |
|
|
$ |
105,160 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
Current
liabilities |
|
|
|
Accounts payable |
$ |
43,658 |
|
|
$ |
36,570 |
|
Due to related party |
|
370 |
|
|
|
413 |
|
Accrued expenses |
|
17,375 |
|
|
|
19,388 |
|
Accrued interest |
|
165 |
|
|
|
160 |
|
Income taxes payable |
|
35 |
|
|
|
35 |
|
Line of credit |
|
3,000 |
|
|
|
2,948 |
|
Term loan, short-term (net of discount of $86) |
|
9,914 |
|
|
|
- |
|
Deferred cash payment (net of discount of $9) |
|
- |
|
|
|
4,991 |
|
Installment payments – licenses, short-term |
|
2,288 |
|
|
|
2,244 |
|
Operating lease liability, short-term |
|
93 |
|
|
|
83 |
|
Total
current liabilities |
|
76,898 |
|
|
|
66,832 |
|
|
|
|
|
Term loan,
long-term (net of debt discount of $71 and $174) |
|
9,929 |
|
|
|
19,826 |
|
Installment
payments – licenses, long-term |
|
1,450 |
|
|
|
1,412 |
|
Operating
lease liability, long-term |
|
84 |
|
|
|
108 |
|
Total liabilities |
|
88,361 |
|
|
|
88,178 |
|
|
|
|
|
Stockholders' equity |
|
|
|
Common stock, $.0001 par value, 50,000,000 shares authorized,
11,834,362 and 11,765,700 shares issued and outstanding as of March
31, 2023 and December 31, 2022, respectively |
|
1 |
|
|
|
1 |
|
Common stock - Class A, $.0001 par value, 50,000,000 shares
authorized, 6,000,000 shares issued and outstanding as of March 31,
2023 and December 31, 2022 |
|
1 |
|
|
|
1 |
|
Additional paid-in capital |
|
86,128 |
|
|
|
85,482 |
|
Accumulated deficit |
|
(78,638 |
) |
|
|
(68,502 |
) |
Total stockholders' equity |
|
7,492 |
|
|
|
16,982 |
|
Total liabilities and stockholders' equity |
$ |
95,853 |
|
|
$ |
105,160 |
|
JOURNEY
MEDICAL CORPORATION |
Unaudited
Condensed Consolidated Statements of Operations |
($ in thousands
except for share and per share amounts) |
|
|
Three-Month
Periods Ended |
|
March 31, |
|
2023 |
|
2022 |
Revenue: |
|
|
|
|
|
Product revenue, net |
$ |
12,165 |
|
|
$ |
20,796 |
|
Other revenue |
|
48 |
|
|
|
2,500 |
|
Total
revenue |
|
12,213 |
|
|
|
23,296 |
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
Cost of goods sold – product revenue |
|
6,449 |
|
|
|
8,203 |
|
Research and development |
|
2,033 |
|
|
|
1,266 |
|
Selling, general and administrative |
|
13,292 |
|
|
|
14,715 |
|
Total
operating expenses |
|
21,774 |
|
|
|
24,184 |
|
Loss from
operations |
|
(9,561 |
) |
|
|
(888 |
) |
|
|
|
|
|
|
Other expense (income) |
|
|
|
|
|
Interest income |
|
(122 |
) |
|
|
(3 |
) |
Interest expense |
|
650 |
|
|
|
389 |
|
Foreign exchange transaction losses |
|
47 |
|
|
|
- |
|
Total other
expense (income) |
|
575 |
|
|
|
386 |
|
Loss
before income taxes |
|
(10,136 |
) |
|
|
(1,274 |
) |
|
|
|
|
|
|
Income tax
expense |
|
- |
|
|
|
104 |
|
Net
Loss |
$ |
(10,136 |
) |
|
$ |
(1,378 |
) |
|
|
|
|
|
|
Net loss per
common share: |
|
|
|
|
|
Basic and diluted |
$ |
(0.57 |
) |
|
$ |
(0.08 |
) |
Weighted
average number of common shares: |
|
|
|
|
|
Basic and diluted |
|
17,807,194 |
|
|
|
17,318,344 |
|
Use of Non-GAAP Measures:
In addition to the GAAP financial measures as
presented in our Form 10-Q that will be filed with the SEC, the
Company has, in this press release, included certain non-GAAP
measurements, including Adjusted EBITDA, Adjusted EBITDA per share
basic and Adjusted EBITDA per share diluted. We define Adjusted
EBITDA as net income (loss) excluding interest, taxes and
depreciation, less certain other non-cash and infrequent items not
considered to be normal, recurring operating expenses, including,
share-based compensation expense, amortization of acquired
intangible assets, inventory step-ups from the purchases of
intangibles assets and products, severance, non-core research and
development expense and foreign exchange transaction losses. In
particular, we exclude the following matters for the reasons more
fully described below:
- Share-Based Compensation
Expense: We exclude share-based compensation from our
adjusted financial results because share-based compensation
expense, which is non-cash, fluctuates from period to period based
on factors that are not within our control, such as our stock price
on the dates share-based grants are issued.
- Non-core and Short-term Research
and Development Expense: We exclude research and development
costs incurred in connection with our DFD-29 product candidate,
which is the only product in our portfolio not currently approved
for marketing and sale, because we do not consider such costs to be
normal, recurring operating expenses that are core to our long-term
strategy. Instead, our long-term strategy is focused on the
marketing and sale of acquired and/or licensed FDA-approved
dermatological products.
- Amortization of Acquired Intangible
assets: We exclude the impact of certain amounts recorded in
connection with the acquisitions of intangible assets that are
either non-cash or not normal, recurring operating expenses due to
their nature, variability of amounts, and lack of predictability as
to occurrence and/or timing. These amounts may include non-cash
items such as the amortization of acquired intangible assets and
amortization of step-ups of acquisition accounting adjustments to
inventories.
Adjusted EBITDA per share basic and Adjusted
EBITDA per share diluted are determined by dividing the resulting
Adjusted EBITDA by the number of shares outstanding on an actual
and fully diluted basis.
Management believes use of these non-GAAP
measures provide meaningful supplemental information regarding the
Company’s performance because (i) it allows for greater
transparency with respect to key measures used by management in its
financial and operational decision-making, (ii) it excludes the
impact of non-cash or, when specified, non-recurring items that are
not directly attributable to the Company’s core operating
performance and that may obscure trends in the Company’s core
operating performance and (iii) it is used by institutional
investors and the analyst community to help analyze the Company's
results. However, Adjusted EBITDA, Adjusted EBITDA per share basic,
Adjusted EBITDA per share diluted and any other non-GAAP financial
measures should be considered as a supplement to, and not as a
substitute for, or superior to, the corresponding measures
calculated in accordance with GAAP. Further, non-GAAP financial
measures used by the Company and the manner in which they are
calculated may differ from the non-GAAP financial measures or the
calculations of the same non-GAAP financial measures used by other
companies, including the Company’s competitors.
The table below provides a reconciliation from
GAAP to non-GAAP measures:
JOURNEY
MEDICAL CORPORATION |
Reconciliation of GAAP to Non-GAAP Adjusted
EBITDA |
($ in thousands
except for share and per share amounts) |
|
|
|
Three-month periods ended |
|
|
March 31, |
|
|
2023 |
|
2022 |
GAAP Net Loss |
|
$ |
(10,136 |
) |
|
$ |
(1,378 |
) |
|
|
|
|
|
EBITDA: |
|
|
|
|
Interest |
|
|
528 |
|
|
|
386 |
|
Taxes |
|
|
- |
|
|
|
104 |
|
Depreciation |
|
|
- |
|
|
|
- |
|
Amortization of acquired intangible assets |
|
|
1,069 |
|
|
|
1,017 |
|
EBITDA |
|
|
(8,539 |
) |
|
|
129 |
|
|
|
|
|
|
Non-GAAP Adjusted EBITDA: |
|
|
|
|
Share-based compensation |
|
|
646 |
|
|
|
773 |
|
Inventory
step-up expense |
|
|
- |
|
|
|
140 |
|
Non-core
& short-term R&D |
|
|
1,999 |
|
|
|
1,266 |
|
Foreign exchange transaction losses |
|
|
47 |
|
|
|
- |
|
Severance |
|
|
526 |
|
|
|
- |
|
Non-GAAP Adjusted EBITDA |
|
$ |
(5,321 |
) |
|
$ |
2,308 |
|
|
|
|
|
|
Net
loss per common share Basic: |
|
|
|
|
GAAP Net
loss |
|
$ |
(0.57 |
) |
|
$ |
(0.08 |
) |
Non-GAAP
Net (loss) gain |
|
$ |
(0.30 |
) |
|
$ |
0.13 |
|
|
|
|
|
|
Net
loss per common share Diluted: |
|
|
|
|
GAAP Net
loss |
|
$ |
(0.57 |
) |
|
$ |
(0.08 |
) |
Non-GAAP
Net (loss) gain |
|
$ |
(0.30 |
) |
|
$ |
0.11 |
|
|
|
|
|
|
Weighted
average number of common shares Basic: |
|
|
17,807,194 |
|
|
|
17,318,344 |
|
Weighted
average number of common shares Diluted: |
|
|
17,807,194 |
|
|
|
20,341,996 |
|
The weighted average number of common shares
Basic in the above table is used to calculate both GAAP and
Non-GAAP basic and diluted loss per share for the three-month
periods ended March 31, 2023, and GAAP basic and diluted loss per
share for the three-month period ended March 31, 2022, as the net
loss for these periods is antidilutive and the effect would be to
reduce the loss per share.
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