Journey Medical Corporation

Ladies and gentlemen, thank you for standing by. Good afternoon and welcome to Journey Medical's first quarter 2024 financial results and corporate update conference call. At this time, all participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. Participants of this call are advised that the audio of this conference call is being broadcast live over the internet and is also being recorded for playback purposes. A webcast replay of the call will be available approximately one hour after the end of the call for approximately 30 days. I would now like to turn the call over to Jacqueline Jaffe, the company's Senior Director of Corporate Operations. Jacqueline, please go ahead.

Good afternoon, and thank you for participating in today's conference call. Joining me from Journey Medical's leadership team are Claude Marawi, Co-Founder, President, and Chief Executive Officer, Joseph Binesh, Chief Financial Officer, Dr. Srini Sidgiddi, Vice President of Research and Development, and Ramzi Alush, General Counsel and Corporate Secretary, who will be joining for the Q&A portion of the call. 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, Monday, May 13th, 2024. 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 Morawi, co-founder, president, and chief executive officer of Journey Medical.

Thanks, Jacqueline, and good afternoon to everyone on the call today. I am pleased to report on the progress that we've made at Journey Medical. I will begin with the positive results that we delivered in Q1. During the period, we generated revenue of $13 million, which is a 7% increase over the first quarter of last year. This growth was driven primarily by strong revenues of Cubrexa and Accutane. These two products together contributed over $10.8 million in revenue in Q1 2024 versus $8.7 million in Q1 2023. This represents year-over-year growth of 24%. Looking at the TRXs, Cubrexa grew by approximately 1,800 prescriptions when compared to Q1 of 2023, and Accutane grew by 29,000 prescriptions when compared to Q1 2023, showing strong progress for both brands. Additionally, both Cubrexa and Accutane gained market share in their respective categories. This was achieved through a combination of efforts by our sales and marketing team and our trade and access group. Particularly, our reach has expanded both with prescriber adoption of our brands and the expansion of our pharmacy network. Our expectation is for these brands to continue to grow throughout the remainder of 2024. Our strategic pivot to significantly reduce SG&A expenses during 2023 in order to achieve profitability has shown to be a success. This was most recently evidenced by our performance during the first quarter where we were able to achieve 7% revenue growth and profitability in our base business with only 35 territories versus the 59 territories that we had in Q1 of 2023. Looking at the performance of our four core commercial brands during the quarter, Jubrexa, Accutane, Amzeek, and Zulxy make up more than 90% of our revenue. And importantly, these brands generated a positive contribution given our optimized commercial infrastructure. Simply put, The revenues generated from these products have surpassed our SG&A expenses with the exception of one-time occurrences, such as our NDA filing fee for DFD 29. Historically, Q1 is typically our softest quarter as we are affected by seasonality in our business as well as insurance deductible resets. that take place throughout the first quarter of each year. Looking ahead into 2024, we continue to expect growth from our core brands and further expect to benefit from additional incremental expense reductions as a result of our cost optimization efforts that took place in 2023. We believe that these dynamics position us to achieve sustained profitability on an adjusted EBITDA basis and highlight the potential future leverage of our business, particularly with the anticipated launch of DFD 29. From a macro perspective, our primary emphasis as an organization is to continue preparing for the impending launch of our DFD 29 product candidate. DFD 29 is a novel oral therapy for the treatment of rosacea with best-in-class potential. There are approximately 16.5 million patients that suffer from rosacea in the United States. In 2023, there were over 4 million total prescriptions written for rosacea, which is a 5% increase over 2022. We believe that DFD29 provides a significant growth opportunity for the company as well as for our shareholders. The clinical trial results for both our Phase III studies were positive on both of the co-primary endpoints, IGA success, which is investigator global assessment, and the reduction of inflammatory lesions associated with rosacea. DFD29 demonstrated statistical superiority to both placebo and Oratia, current standard of care and market leading oral treatment for rosacea. To provide color around the DFD29 market opportunity, Oratia had over $300 million in annual TRX sales in 2023. We believe that based on DFD29's superior efficacy as demonstrated in our phase three clinical trials, there is a significant opportunity to take market share from oracea as well as from other topical treatments that are commonly prescribed to treat rosacea. Additionally, DFD29 demonstrated the ability to significantly reduce erythema. or the skin redness associated with rosacea. We believe this is a meaningful clinical result from our Phase III clinical trials that can differentiate DFD29's product profile, if approved, and can help accelerate both prescriber and patient adoption. The Phase III results also demonstrated a favorable safety and tolerability profile for DFD29. with safety results that were similar to placebo. Based on the full set of clinical trial results, we recently conducted and completed a fresh round of market research which focused on two critical groups. First was a survey conducted with prescribers of rosacea treatments to measure the likelihood of adoption of DFD29. Second was a survey of the payers that represent a majority of commercial insurance plans to measure their willingness to include DFD 29 on their formulary. I am pleased to report that the feedback was positive for both sets of participants. Favorable responses were driven by statistical superiority of DFD 29 when compared head-to-head versus Oratia in reducing inflammatory lesions and IgA success, as well as statistical significant reduction in clinicians' erythema assessment score of DFD29 versus placebo. Healthcare prescribers overwhelmingly confirmed their willingness to adopt and prescribe DFD29 for their rosacea patients an adoption rate of 79%. In our industry, this is an astoundingly high rate and translates into an approximate 8 out of 10 rosacea prescriptions going to DFD29. This rate exceeded even our own internal expectations and gives us the confidence in a successful DFD29 launch. Given the 16.5 million rosacea sufferers in the United States and over 4 million prescriptions written annually, the prescriber adoption rate captured in our market research makes us even more excited about DFD's market potential. With respect to the payer market research results, the data shows most, if not almost all, PBMs, GPOs, and other managed care organizations are likely to contract with us to provide coverage for DFD29 for over 200 million lives. As a result of this market research, we are even more confident that DFD29 will have high acceptance among prescribers and that negotiations with payers for formulary inclusion and reimbursement will be favorable after DFD 29 is approved. We will provide additional details on prelaunch activities later in the year as we finalize the launch plans, pricing, and product positioning for DFD 29. To recap on our regulatory activities in Q1, we submitted our new drug application for DFD 29 on January 4th and the application was accepted by the FDA on March 13th, whereby FDA provided us with key timelines of the review process and a PDUFA date of November 4th of this year. Given the impressive efficacy and safety data generated from the DFD Phase III head-to-head clinical trial program, we remain highly confident that FDA will provide us with an approval by the PDUFA date. Regarding intellectual property, DFD 29 has a robust patent profile. We currently have three Orange Book listable patents to provide exclusivity until 2039. As a result, we anticipate having market exclusivity without generic intrusion, for the foreseeable future. To conclude on our discussion of DFD29, we believe the achievement of superior efficacy and safety results will pave the way for a new rosacea treatment paradigm, which would significantly enhance the value of our company, as well as the value that we bring to the dermatology prescribers and patients alike. Moving into our business development efforts, we continue to evaluate opportunities to enhance shareholder value. A primary focus for the company is to continue to outlicense our intellectual property and related technologies to interested and capable companies outside of the United States. In 2023, we entered into an outlicensing agreement with Marujo, which resulted in a $19 million upfront licensing payment for the rights to develop and commercialize Q-Brexa in certain Asian countries. We will continue to explore opportunities to exploit and monetize our IP and technologies globally for Q-Brexa, AMSEC, and Xilxi, as well as DFD29. Second, we continue to survey the dermatology landscape for new product opportunities that we can acquire or in-license FDA-approved products as well as late-stage product candidates. That would allow us to leverage our focused commercial infrastructure. In this regard, our first priority would be to bring in commercially available FDA-approved prescription dermatology products that would fit directly into our existing commercial footprint. As a secondary focus, we will continue evaluating late stage product candidates that have demonstrated strong clinical trial results in therapeutic areas in dermatology where there are unmet treatment needs that we believe we can best serve patients. Executing on one or more of these opportunities would allow us to bring in additive revenue with minimal investment in our infrastructure, adding to both our top and bottom lines. And with that, I will now turn the call over to our Chief Financial Officer, Joe Benesch, to review our financial results for the first quarter of 2024. Thank you, Clyde.