Journey Medical Corporation

Ladies and gentlemen, thank you for standing by. Good day and welcome to Journey Medical second 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 conference specialist by pressing the star key followed by zero. Participants on 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 this call will be available approximately one hour after the end of the call for approximately 30 days. I would like to turn the conference over to Ms. Jacqueline Jaffe, the Company Senior Director of Corporate Operations. Please go ahead, ma'am.

Good afternoon, and thank you for participating in today's conference call. Joining me from Journey Medical's leadership team are Claude Merawi, Co-Founder, President, and Chief Executive Officer, Joseph Finesh, 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 and 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 reconciliation of this non-GAAP financial measure to net loss, it's the 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, August 12th, 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.

Thank you, Jacqueline, and good afternoon to everyone on the call today. I am pleased to report on the ongoing progress that we are making at Journey Medical. Our second quarter results were solid with 14.9 million in net product revenue. We believe that our second quarter performance demonstrates that we remain on track to meet our 2024 annual revenue guidance range of 55 to $60 million. We also believe that our second quarter results highlight the strength of our base business as we await the November 4th PDUFA date for DFD 29, our product candidate for Rosacea. With our core portfolio of prescription dermatology brands generating operating cash and our direct commercial organization already calling on physicians that generate greater than 90% of prescriptions written in our dermatology network, We believe we are well prepared to leverage the DFD29 opportunity. Looking at the TRXs for our top brands, Qbrexa grew by approximately 4,000 prescriptions when compared to Q2 of 2023, and Accutane grew by 17,000 prescriptions during the same period. Qbrexa and Accutane together contributed $12.6 million in net product revenue for Q2 this year. Additionally, we are pleased to report that both Qbrexa 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. In particular, our reach has expanded with both prescriber adoption of our brands and the expansion of our pharmacy network. Looking at the quarterly performance of our four core commercial brands, Cubrexa, Accutane, Amzik, and Zilxy during this quarter, these products accounted for more than 90% of our revenue. Importantly, we generated a positive contribution from our core product portfolio with the support of our optimized commercial infrastructure. Simply put, The revenues generated from these products have surpassed our operating expenses, excluding one-time prelaunch expenses for DFD 29, such as the NDA filing fee of $4.1 million and the recent milestone payment that we made to Dr. Reddy's of $3 million for NDA acceptance. In addition to our solid top line results, we delivered non-GAAP adjusted EBITDA of $300,000 in the second quarter. I am very pleased to report that this is the fourth consecutive quarter that we achieved positive adjusted EBITDA results. Our strategic initiative to significantly reduce SG&A expenses, including the rationalization of our sales and marketing headcount, has been a key factor in improving our profitability while maintaining our product revenue base from 2023. Since the beginning of 2023, when this initiative began, we have reduced our total expenses by approximately $22 million, enabling us to contain our costs and retain more cash generated from our sales. Importantly, our financial discipline puts us in a strong position to leverage the anticipated launch of DFD 29, with the goal to become sustainably cash flow positive in the coming quarters and EBITDA positive in 2025. Given that, we remain focused in our two main objectives for the year. First, achieving our financial guidance and continuing to improve our profitability. and second, preparing for the anticipated approval and launch of DFD29. With approximately 16.5 million people suffering from rosacea and more than 4 million prescriptions filled in the United States alone each year to treat this condition, we believe that DFD29 provides a significant growth opportunity for the company. As many of you recall, The clinical trial results for both our Phase III DFD29 studies were very positive and clinically compelling. On both co-primary endpoints, IgA success and a reduction of inflammatory lesions associated with rosacea, DFD29 demonstrated statistical superiority to both placebo and oracea, the current standard of care and market-leading oral treatment for rosacea. We believe that the head-to-head superiority demonstrated in our Phase III clinical trials will carry significant weight with prescribers and health plans as we initially positioned EFD29 against Oratia, which had over $300 million in annual TRX sales in 2023. Additionally, in our Phase III trials, EFD29 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 program that can differentiate DFD29's product profile, if approved, and can help accelerate both prescriber and patient adoption. The market for rosacea treatments in the United States for both oral and topical products is approximately $1.2 billion annually. With the anticipated indication of erythema in DFD29's label, we believe DFD29 will be positioned to take share of the broader rosacea treatment market. Our phase three results also demonstrated a favorable safety and tolerability profile for DFD29, with results that were similar to placebo. This gives us high confidence in the DFD29's clinical and regulatory package, as well as the potential for market approval later this year. As you may recall, earlier this year we conducted market research in which we surveyed prescribers of rosacea treatments and leading commercial insurance plans to assess the adoption potential of DFD29. The feedback was very positive for both sets of participants, given the statistical significant Phase III results against placebo and aurasia, as well as the positive erythema results. Healthcare prescribers expressed a strong willingness to prescribe DFD29 for their rosacea patients, with an adoption rate of 79%. This was a compelling result. which exceeded our own internal expectations. For our survey of payers, which collectively represented over 200 million covered lives, the interviews showed that most, if not all, PBMs, GPOs, and other managed care organizations are likely to contract with us to provide coverage for DFD29. We believe that this market research demonstrates that DFD29 will have high acceptance among prescribers and the negotiations with payers for formulary inclusion and reimbursement will be favorable, assuming DFD29 is approved. A key component of our value creation strategy has been to focus on building a portfolio of specialty dermatology products with strong intellectual property. As a result of our patent litigation settlements in 2022 and 2023, we have a strong runway of patent exclusivity for Q-Brexa with current patent exclusivity to 2030, M-ZEIT with current patent exclusivity to 2031, and ZILTSI with current patent exclusivity to 2027. Importantly, DFD 29 will also add to our portfolio providing exclusivity until 2039. As a result, we anticipate having market exclusivity without generic intrusion for the foreseeable future. With our focus on the prescription dermatology segment, we have a strong presence and track record in the business development community for dermatology products. As a result, we have a robust effort for evaluating opportunities to enhance shareholder value. A primary focus for the company is to continue to out-license our intellectual property and related technologies to interested and capable companies outside of the United States, similar to the Marujo transaction for the rights to Cubebrexa in certain Asian countries. This out-licensing transaction resulted in $19 million of non-dilutive capital to the company last year. We will continue to explore to monetize our IP and technologies globally for Q-Brexa, Amzeek, and Xilxi, as well as DFD29 in the future. Additionally, we will continue to survey the dermatology landscape for revenue-generating product opportunities that we can acquire or in-license to leverage our focused commercial infrastructure. And we will also continue to evaluate late-stage product candidates that have demonstrated strong clinical trial results in dermatology indications and where we can satisfy unmet market needs for our physician customers and their patients. We believe that executing on one or more of these product opportunities would allow us to bring in additional revenue with minimal investment. adding to both our top and bottom lines. And with that, I will now turn the call over to our CFO, Joe Benesch, to review our financial results for the second quarter.