Journey Medical Corp. Q2 FY2024 earnings call

• Second quarter results were solid with $14.9 million in net product revenue and on track to meet 2024 annual revenue guidance of $55M to $60M.
• Delivered non-GAAP adjusted EBITDA of $300,000 in Q2, fourth consecutive quarter of positive adjusted EBITDA.
• SG&A expenses reduced by approximately $22 million since 2023, contributing to profitability.
• DFD-29 has a PDUFA date of November 4, 2024, with positive Phase III results vs placebo and Oracea.
• Core brands have patent exclusivity until 2039, providing market exclusivity.
• Focus on out-licensing IP and evaluating acquisition/in-licensing opportunities for dermatology products.

Journey Medical's second quarter 2024 net product revenue was $14.9 million. The core commercial brands QBREXZA, Accutane, AMZEEQ, and ZILXI accounted for more than 90% of revenue. QBREXZA grew by approximately 4,000 prescriptions compared to Q2 2023, and Accutane grew by 17,000 prescriptions. QBREXZA and Accutane together contributed $12.6 million in net product revenue for Q2. The company generated positive adjusted EBITDA of $300,000 in Q2, the fourth consecutive quarter of positive adjusted EBITDA.

• Remain on track to meet or exceed 2024 revenue guidance.
• Aim to be sustainably cash flow positive in coming quarters and EBITDA positive in 2025.
• Anticipate DFD-29 approval in November 2024, targeting Q2 2025 launch.

• Generic competition for Oracea may impact market dynamics, but not seen as critical for DFD-29 negotiations.
• Regulatory approval timing and market adoption risks for DFD-29.

Q: Maybe one related to DFD-29. And looks like for Oracea, there was a generic entry a little sooner than we had anticipated, and it looks like there was a launch in April-May time frame. So a question for you is, does that in any sense, impact your internal forward estimates for DFD-29 launch?

A: Claude Maraoui says Lupin came out in April of this year, with a similar price to Oracea, and it does not seen as a critical factor in any headway.

Q: And then assuming you guys get FDA approval here in November, what early metrics would you recommend investors to focus on in the first few quarters of launch that might be useful.

A: Claude Maraoui mentions to look at prescriptions, physician adoption, and market share vs Oracea and the generic.

Q: And how should we think about the SG&A ramp for fiscal year 2025. And as a follow-up, do you expect to give forward guidance maybe starting next year when you're in your launch phase?

A: Claude Maraoui says they have been preparing for DFD launch and will plan on giving guidance as they get closer to the launch next year.

Q: For starters, gross margins, as expected, ticked up in 2Q relative to first quarter. Would you expect a continued increase in gross margins in the third quarter and fourth quarter of the year?

A: Joseph Benesch says margins will continue to grow as onetime expenses are behind us and product mix is favorable.

Q: And then on SG&A, it looked like about $8.4 million in first quarter, $10.3 million in second quarter, which one of those numbers do you think is more reflective of what we should expect going forward?

A: Joseph Benesch says it will be right in between, around $9 million, in line with guidance.

Q: And with regards to DFD-29, the erythema, the data there is strong and you want to get it in the label. When we think about that, in the label? Should we think about the data being in the label? Or could this potentially be a client within the indications?

A: Srini Sidgiddi says the data for erythema will be in the label as part of the indication.

Q: AMZEEQ, ZILXI was there -- how did they perform relative to the first quarter? Was there some growth there?

A: Claude Maraoui says there was growth with both brands combined.

Q: On DFD-29, this -- excuse me, external poll you took of purchasers and reimbursers. What is that -- what kind of confidence that give you out of the gate in terms of where you might be with reimbursement in the purchasers? And in terms of how many years that you think it might take to get full penetration of the DFD-29 opportunity?

A: Claude Maraoui says the survey showed 220 million covered lives and they aim for close to that coverage, with uptake taking 6-12 months.

Q: And in terms of -- there may be a question about this before, but in terms of SG&A and specifically sales force build. It sounds like roughly $9 million is the right SG&A number for this year. My understanding was there might be a little bit of growth in that next year with the launch of DFD-29 specifically, you may add additional sales people. Is that the right way to think about it? Or is sort of this rate is kind of the rate we should anticipate even going into next year?

A: Claude Maraoui says they'll stay with current sales configuration, maybe 5 sales additions by end of 2025, and Joseph Benesch says SG&A will be consistent with minimal swings.