Journey Medical Corporation (Nasdaq: DERM) (“Journey Medical” or
the “Company”), a commercial-stage pharmaceutical company that
focuses on the development and commercialization of pharmaceutical
products for the treatment of dermatological conditions, today
announced financial results and recent corporate highlights for the
third quarter and nine months ended September 30, 2022.
Claude Maraoui, Journey Medical’s Co-Founder,
President and Chief Executive Officer said, “While our sales
revenue for the third quarter of 2022 of $16.1 continues to be
negatively impacted primarily by the effect of Targadox generic
competition versus the third quarter of 2021, we still expect to
report record revenue for the full year 2022. Also, we are pleased
to have enrolled 75% of patients throughout the U.S. and Europe in
our two DFD-29 Phase 3 studies for the treatment of papulopustular
rosacea. We anticipate announcing top-line data from the trials in
the first half of 2023 and expect to file a New Drug Application
(“NDA”) shortly thereafter in the second half of 2023. After
approval, we anticipate that DFD-29 will achieve peak annual net
sales exceeding $100 million. We believe that this program,
together with our eight branded and three authorized generic
products that help treat common skin conditions, position Journey
Medical for sales growth in the coming years. Journey Medical also
expects to launch another product in the upcoming months.”
Financial Results:
- Revenues were $16.1 million for the
third quarter of 2022, compared to revenues of $19.6 million for
the third quarter of 2021, representing a decline of $3.5 million.
The decline in revenue was primarily attributed to a combination
of, the continued generic competition of Targadox, that represented
a $4.0 million reduction versus the prior year, and a $0.6 million
increase in the net revenue of Accutane, which was 17% favorable
versus the third quarter of 2021.
- Selling, general and administrative
expenses were $15.6 million for the third quarter of 2022, compared
to $10.8 million for the third quarter of 2021, with the increase
primarily resulting from the expansion of the sales force,
marketing expenses related to the expanded product portfolio of
four products (Accutane, Qbrexza, Amzeeq and Zilxi), and
professional fees associated with being a public company.
- Research and development expenses
were $2.8 million in the third quarter of 2022, compared to $0.7
million in the third quarter of 2021, reflecting ongoing clinical
trial expenses to develop DFD-29. These expenses have increased and
are a result of the enrollment of additional patients in the two
Phase 3 trials.
- Net loss was ($10.1) million, or
($0.57) per share basic and diluted, for the third quarter of 2022,
compared to a net loss of ($10.6) million, or ($1.16) basic and
diluted per share, for the third quarter of 2021.
- Non-GAAP Adjusted EBITDA (Adjusted
Operating Net Income (loss)) was ($4.0) million, or ($0.23) per
share basic and diluted, for the third quarter of 2022, compared to
Non-GAAP Adjusted EBITDA (Adjusted Operating Net Income of $1.3
million, or $0.14 per share basic and $0.12 per share diluted, for
the third quarter of 2021. Non-GAAP Adjusted EBITDA (Adjusted
Operating Net Income (loss)) and Non-GAAP Adjusted EBITDA (Adjusted
Operating Net Income (loss)) per share basic and 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 the heading “Reconciliation of
GAAP to Non-GAAP Adjusted EBITDA (Adjusted Operating Net Income
(loss)).”
- At September 30, 2022, cash and
cash equivalents totaled $34.9 million, compared to $49.1 million
on December 31, 2021.
Recent Corporate
Highlights:
- To date, Journey Medical has
achieved 75% enrollment in its DFD-29 Phase 3 clinical program for
the treatment of papulopustular rosacea. The two DFD-29 Phase 3
clinical studies are still on target to complete enrollment in
2022, with top-line data readout expected in the first half of
2023. Journey Medical plans to submit the NDA for DFD-29 in the
second half of 2023 and FDA approval is anticipated in the second
half of 2024. In the Phase 2 clinical trials, DFD-29 (40mg)
demonstrated nearly double the efficacy when compared against
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 August 2022, $5.0 million was
drawn from the Company’s term loan facility with East West Bank.
The additional $5.0 million is part of the Company’s operating plan
and additional working capital.
- Wire Security Fraud update –
Regarding the cybersecurity breach that resulted in losses of $9.5
million in September of 2021, the federal government has been able
to seize a significant amount of cryptocurrency assets associated
with the breach. Once the cryptocurrency has been converted back
into U.S. dollars, Journey Medical will receive a notification
letter to initiate the return of the cash to the Company. This
process could take as long as 6 months or more to complete.
Conference Call and Webcast
InformationJourney Medical management will conduct a
conference call and audio webcast at 4:30 p.m. ET on November 10,
2022.
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/10172735/f4f2b41486. 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 focused on identifying, acquiring,
developing and strategically commercializing innovative,
differentiated dermatology products through its efficient sales and
marketing model. The company currently markets eight products that
help treat and heal common skin conditions. The Journey Medical
team is comprised of industry experts with extensive experience
commercializing some of the most successful prescription
dermatology 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 and Section
21E of the Securities Exchange Act of 1934, as amended. As used
below and throughout this press release, the words “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: risks relating to our growth strategy; our
ability to obtain, perform under and maintain financing and
strategic agreements and relationships; risks relating to the
results of research and development activities; uncertainties
relating to preclinical and clinical testing; risks relating to the
timing of starting and completing clinical trials, including
disruptions that may result from hostilities in Europe; our
dependence on third-party suppliers; risks relating to the COVID-19
outbreak and its potential impact on our employees’ and
consultants’ ability to complete work in a timely manner and on our
ability to obtain additional financing on favorable terms or at
all; our ability to attract, integrate and retain key personnel;
the early stage of products under development; our need for
substantial additional funds; government regulation; patent and
intellectual property matters; competition; potential recovery of
funds lost from previously disclosed cyber security breaches; as
well as other risks described in Part I, Item 1A, “Risk Factors,”
in our Annual Report on Form 10-K filed on March 28, 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(Dollars in thousands except for share and per share
amounts)
|
September 30, |
|
December 31, |
|
|
2022 |
|
|
|
2021 |
|
ASSETS |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
34,891 |
|
|
$ |
49,081 |
|
Accounts receivable, net of reserves |
|
28,533 |
|
|
|
23,112 |
|
Inventory |
|
15,230 |
|
|
|
9,862 |
|
Prepaid expenses and other current assets |
|
942 |
|
|
|
2,438 |
|
Total current assets |
|
79,596 |
|
# |
|
84,493 |
|
|
|
|
|
Intangible assets, net |
|
28,424 |
|
|
|
12,552 |
|
Operating lease right-of-use asset, net |
|
22 |
|
|
|
89 |
|
Other assets |
|
103 |
|
|
|
150 |
|
Total
assets |
$ |
108,145 |
|
|
$ |
97,284 |
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
Current liabilities |
|
|
|
Accounts payable |
$ |
33,626 |
|
|
$ |
22,812 |
|
Due to related party |
|
74 |
|
|
|
641 |
|
Accrued expenses |
|
17,783 |
|
|
|
22,733 |
|
Accrued interest |
|
125 |
|
|
|
- |
|
Income taxes payable |
|
22 |
|
|
|
8 |
|
Line of credit |
|
- |
|
|
|
812 |
|
Deferred cash payment (net of discount of $76) |
|
4,924 |
|
|
|
- |
|
Installment payments – licenses, short-term |
|
4,198 |
|
|
|
4,510 |
|
Operating lease liability |
|
25 |
|
|
|
98 |
|
Total current liabilities |
|
60,777 |
|
|
|
51,614 |
|
|
|
|
|
Term loan (net of debt
discount of $190) |
|
19,810 |
|
|
|
- |
|
Installment payments –
licenses, long-term |
|
1,374 |
|
|
|
3,627 |
|
Total
liabilities |
|
81,961 |
|
|
|
55,241 |
|
|
|
|
|
Stockholders'
equity |
|
|
|
Common stock, $.0001 par value, 50,000,000 shares authorized,
11,642,659 and 11,316,344 shares issued and outstanding as of
September 30, 2022 and December 31, 2021, respectively |
|
1 |
|
|
|
1 |
|
Common stock - Class A, $.0001 par value, 50,000,000 shares
authorized, 6,000,000 shares issued and outstanding as of September
30, 2022 and December 31, 2021 |
|
1 |
|
|
|
1 |
|
Additional paid-in capital |
|
84,042 |
|
|
|
80,915 |
|
Accumulated deficit |
|
(57,860 |
) |
|
|
(38,874 |
) |
Total stockholders' equity |
|
26,184 |
|
|
|
42,043 |
|
Total liabilities and
stockholders' equity |
$ |
108,145 |
|
|
$ |
97,284 |
|
JOURNEY MEDICAL
CORPORATIONUnaudited Condensed Consolidated
Statements of Operations(Dollars in thousands except for
share and per share amounts)
|
|
Three-Month
Periods Ended |
|
|
Nine-Month
Periods Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Product revenue, net |
$ |
16,043 |
|
|
$ |
19,610 |
|
|
$ |
55,074 |
|
|
$ |
45,617 |
|
|
Other revenue |
|
73 |
|
|
|
- |
|
|
|
2,629 |
|
|
|
- |
|
|
Total
Revenue |
|
16,116 |
|
|
|
19,610 |
|
|
|
57,703 |
|
|
|
45,617 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold – product revenue |
|
7,221 |
|
|
|
11,167 |
|
|
|
23,057 |
|
|
|
22,559 |
|
|
Research and development |
|
2,812 |
|
|
|
718 |
|
|
|
6,687 |
|
|
|
747 |
|
|
Research and development - licenses acquired |
|
- |
|
|
|
76 |
|
|
|
- |
|
|
|
13,819 |
|
|
Selling, general and administrative |
|
15,575 |
|
|
|
10,755 |
|
|
|
45,481 |
|
|
|
24,776 |
|
|
Wire transfer fraud loss |
|
- |
|
|
|
9,540 |
|
|
|
- |
|
|
|
9,540 |
|
|
Total
operating expenses |
|
25,608 |
|
|
|
32,256 |
|
|
|
75,225 |
|
|
|
71,441 |
|
|
Loss from
operations |
|
(9,492 |
) |
|
|
(12,646 |
) |
|
|
(17,522 |
) |
|
|
(25,824 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense |
|
|
|
|
|
|
|
- |
|
|
|
|
|
Interest income |
|
(3 |
) |
|
|
- |
|
|
|
(10 |
) |
|
|
- |
|
|
Interest expense |
|
559 |
|
|
|
1,373 |
|
|
|
1,402 |
|
|
|
2,936 |
|
|
Foreign exchange transaction losses |
|
22 |
|
|
|
- |
|
|
|
22 |
|
|
|
- |
|
|
Change in fair value of derivative liability |
|
- |
|
|
|
2 |
|
|
|
- |
|
|
|
184 |
|
|
Total other
expense |
|
578 |
|
|
|
1,375 |
|
|
|
1,414 |
|
|
|
3,120 |
|
|
Loss
before income taxes |
|
(10,070 |
) |
|
|
(14,021 |
) |
|
|
(18,936 |
) |
|
|
(28,944 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense (benefit) |
|
10 |
|
|
|
(3,375 |
) |
|
|
50 |
|
|
|
(6,701 |
) |
|
Net
Loss |
$ |
(10,080 |
) |
|
$ |
(10,646 |
) |
|
$ |
(18,986 |
) |
|
$ |
(22,243 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per
common share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
$ |
(0.57 |
) |
|
$ |
(1.16 |
) |
|
$ |
(1.09 |
) |
|
$ |
(2.43 |
) |
|
Weighted
average number of common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
17,618,064 |
|
|
|
9,161,333 |
|
|
|
17,464,561 |
|
|
|
9,160,344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Securities
and Exchange Commission (“SEC”), the Company has, in this press
release, included certain non-GAAP measurements, including Adjusted
EBITDA (Adjusted Operating Net Income (loss)), Adjusted Operating
Net Income (loss) per share basic and Adjusted Net Income (loss)
per share diluted. We define Adjusted EBITDA (Adjusted Operating
Net Income (loss)) as net income (loss) excluding interest, taxes
and depreciation, less certain other non-cash items, namely,
share-based compensation expense, amortization of acquired
intangible assets, inventory step-ups from the purchases of
intangibles assets and products, as more fully described as
follows:
- 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 costs associated with non-core
and short-term related research and development because we do not
consider such costs to be normal, recurring operating expenses that
are core to our long-term strategy.
- 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 Operating Net Income (loss) per share
basic and Adjusted Net Income (loss) per share diluted are
determined by dividing the resulting Adjusted EBITDA (Adjusted
Operating Net Income (loss)) 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 EBTIDA (Adjusted Operating Net Income
(loss)), Adjusted Operating Net Income (loss) per share basic,
Adjusted Net Income (loss) 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
(Adjusted Operating Net Income (loss))(Dollars in
thousands except for share and per share amounts)
|
|
Three-month periods ended |
|
Nine-month periods ended |
|
|
September 30, |
|
September 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
GAAP Net Loss |
|
$ |
(10,080 |
) |
|
$ |
(10,646 |
) |
|
$ |
(18,986 |
) |
|
$ |
(22,243 |
) |
|
|
|
|
|
|
|
|
|
EBITDA: |
|
|
|
|
|
|
|
|
Interest |
|
|
556 |
|
|
|
1,373 |
|
|
|
1,392 |
|
|
|
2,936 |
|
Taxes |
|
|
10 |
|
|
|
(3,375 |
) |
|
|
50 |
|
|
|
(6,701 |
) |
Depreciation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Amortization of acquired intangible assets |
|
|
1,016 |
|
|
|
658 |
|
|
|
3,050 |
|
|
|
1,983 |
|
EBITDA |
|
|
(8,498 |
) |
|
|
(11,990 |
) |
|
|
(14,494 |
) |
|
|
(24,025 |
) |
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjusted EBITDA (Adjusted Operating Net (loss) gain
): |
|
|
|
|
|
|
|
Share-based
compensation |
|
|
1,438 |
|
|
|
8 |
|
|
|
2,985 |
|
|
|
41 |
|
Change in
fair value of derivative liabilities |
|
|
- |
|
|
|
2 |
|
|
|
- |
|
|
|
184 |
|
Inventory
step-up expense |
|
|
214 |
|
|
|
3,001 |
|
|
|
525 |
|
|
|
4,239 |
|
Wire
transfer fraud loss |
|
|
- |
|
|
|
9,540 |
|
|
|
- |
|
|
|
9,540 |
|
R&D |
|
|
2,778 |
|
|
|
718 |
|
|
|
6,653 |
|
|
|
747 |
|
Foreign
exchange transaction losses |
|
|
22 |
|
|
|
- |
|
|
|
22 |
|
|
|
- |
|
Severance |
|
|
27 |
|
|
|
- |
|
|
|
27 |
|
|
|
260 |
|
Non-GAAP Adjusted EBITDA (Adjusted Operating Net (loss)
gain ) |
|
$ |
(4,019 |
) |
|
$ |
1,279 |
|
|
$ |
(4,282 |
) |
|
$ |
(9,014 |
) |
|
|
|
|
|
|
|
|
|
Net
loss per common share Basic: |
|
|
|
|
|
|
|
|
GAAP Net
loss |
|
$ |
(0.57 |
) |
|
$ |
(1.16 |
) |
|
$ |
(1.09 |
) |
|
$ |
(2.43 |
) |
Non-GAAP
Net (loss) gain |
|
$ |
(0.23 |
) |
|
$ |
0.14 |
|
|
$ |
(0.25 |
) |
|
$ |
(0.98 |
) |
|
|
|
|
|
|
|
|
|
Net
loss per common share Diluted: |
|
|
|
|
|
|
|
|
GAAP Net
loss |
|
$ |
(0.57 |
) |
|
$ |
(0.98 |
) |
|
$ |
(1.09 |
) |
|
$ |
(2.43 |
) |
Non-GAAP
Net (loss) gain |
|
$ |
(0.23 |
) |
|
$ |
0.12 |
|
|
$ |
(0.25 |
) |
|
$ |
(0.98 |
) |
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares Basic: |
|
|
17,618,064 |
|
|
|
9,161,333 |
|
|
|
17,464,561 |
|
|
|
9,160,344 |
|
Weighted
average number of common shares Diluted: |
|
|
17,618,064 |
|
|
|
10,892,050 |
|
|
|
17,464,561 |
|
|
|
9,160,344 |
|
The weighted average number of shares of common
stock outstanding used to calculate both basic and diluted income
loss per share is the same for the three-month period ended
September 30, 2022 and the nine-month periods ended September 30,
2022 and 2021 since the Company reported a net loss for these
periods.
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