Q4 2023 Journey Medical Corp Earnings Call
Good afternoon, ladies and gentlemen, and thank you for standing by.
Welcome to the journey Medical's fourth quarter and full year.
2020, three financial results and corporate update conference call.
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I would now like to turn the call over to.
Jacqueline Jackie.
<unk> senior director of corporate operations.
Please go ahead Jeff.
Good afternoon, and thank you for participating in today's conference call. Joining me from journey Medicals leadership team, our quad morale. He co founder President and Chief Executive Officer, Joseph Panache Interim Chief Financial Officer, Dr. Sweeney said Giddy, Vice President of research and development and ran.
<unk> 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 medicals 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.
T really from those statements for more information about these risks please refer to the risk factors described in journey Medicals. The 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. The 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. A reconciliation of this non-GAAP financial measure to its most directly comparable.
GAAP financial measure please see the reconciliation table located in the Companys earnings press release.
The content of this call contains time sensitive information that is accurate only as of today Thursday March 21st 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 is now.
My pleasure to turn the call over to climb rally co founder President and Chief Executive Officer of journey medical.
Thanks, Jaclyn and good afternoon to everyone on the call today.
I'm very pleased to report the strong progress that we made in 2023 across each of our business initiatives.
Begin with.
We generated $79 $2 million in total revenue last year.
7% increase from 2022, and an all time high for the company since inception.
We achieved this with the $19 million upfront license payment that we received in September from a ruble in exchange for the rights to develop and market Q Brooks CEO and certain Asian countries. In addition to the solid contribution from our product portfolio.
I'd like to note that we were able to deliver the top line growth.
The continued erosion of the target ox franchise due to generic competition as well as the discontinuation of zoom Minto in the third quarter of 2023.
At the beginning of 2023 we set a goal to reduce our annual SG&A expense by $12 million and later in the year, we raised our guidance on this initiatives.
I am delighted to report that by the end of the year, we lowered our annual SG&A expense by approximately $15 $6 million as a direct result of our cost reduction efforts.
In 'twenty 'twenty four we believe that we will be able to reduce our SG&A expense by an additional 2 million to $5 million, resulting in a total cost reduction of approximately $20 million from the 2022 SG&A expense base.
Currently our four core products Q break show Accutane N Zeke and silk C represent approximately 90% of our product revenue.
As a result of our expense reduction efforts related to our legacy brands and our strategic focus on these four core brands.
We expect that these brands will contribute positively to cash flow in 2024.
In addition to reducing our operating expenses, we also strengthen the patent protection around our core product portfolio.
As a result of our recent patent litigation settlements, we have a strong runway of patent exclusivity for <unk> with current and patent exclusivity to 2030.
And Zeke with patent exclusivity to 2031 <unk>.
Silk C with patent exclusivity to 2027.
Stabilizing our commercial business was a key strategic objective in 2023 that we believe has and will continue to contribute to shareholder value for years to come as we execute on our growth plan.
Moving into product development and another milestone event from 'twenty to 'twenty three we completed our two pivotal phase III trials for DFT 29.
Novel oral therapy for the treatment of rosacea.
The execution by our clinical team was 10th mountain achieving this milestone.
I am pleased with the quality of the clinical trials and the team's ability to meet all of its planned timelines without any significant issues.
So a big thanks to the team.
The results from both trials were highly positive and allows us.
Can you just show extreme optimism regarding both the market potential and opportunity for DFT 29.
On both of the co primary endpoints Iga success, and the reduction of inflammatory lesions associated with rosacea.
D F D 29 demonstrated statistical superiority to placebo and a ratio the current standard of care in the market leading treatment.
To provide context and illustrate the DFT 29 market opportunity.
Or ratio had approximately $300 million in annual T. Rx sales in 2023.
With DFT superior efficacy results as demonstrated in our phase III clinical trials we.
We believe there is significant opportunity to take share from a ratio as well as the other topical agents that are commonly prescribed to treat rosacea.
Impressively <unk>.
<unk> 29 also demonstrated the ability to significantly reduce erythema or the skin redness associated with rosacea.
We believe this is a meaningful clinical results for our phase III program that can differentiate DFT 29th product profile if approved.
And can help accelerate both prescriber and patient adoption.
Also importantly, DFT 29 demonstrated a safety and tolerability profile in our phase III trials that was similar to placebo.
We continue to expect the D. F. D 29 will be able to achieve peak annual net sales of $300 million with $200 million of those sales being achieved in the U S alone.
Currently DFT 29 has three Orange book listed patents.
Expected to provide exclusivity until 'twenty 39.
So we anticipate that we will have market exclusivity without generic intrusion for the foreseeable future.
We believe that the achievement of these 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 physicians and patients alike.
Looking back at our timeline of events, we submitted our NDA for DFT 29 at the beginning of January and we received an NDA acceptance from the FDA on March 13.
Based on the acceptance letter that we received from the F. D. A no potential filing review issues were identified and there are no plans at this time to convene an advisory panel meeting to discuss the application.
The FDA has established a producer date of November for 'twenty, 'twenty, four and we plan on continuing to invest the proper resources to prepare for an NDA approval and commercial launch of DFT 29 in early 'twenty 'twenty five.
On the market access front, we are continuing our research and discussions with payers and physicians and preparation of our DFT twenty-nine watch.
So far I am pleased with the initial feedback that we've received regarding expected product acceptance and anticipated product reimbursement.
We will provide more details on this later in the year as we solidify our launch plans.
Looking at our financials from 'twenty to 'twenty, three we paid off our debt facility, which had a balance of $20 million and in late 2023, we entered into a new credit agreement with S. W. K holdings to access up to 20 million non dilutive debt.
Capital.
The terms on the S. W. K loan are less restrictive and give us more flexibility than the debt. We retired in the middle of last year.
So far we have drawn down 15 million on USW U K facility and another 5 million remains available for us to draw down in the future.
We reported over $27 million in cash at the end of 2023.
And with the recent reductions in our cost structure. We believe that we are well positioned this year to invest in and prepare for the anticipated launch of D. F. D 29.
We believe that D. F. D 29 has the potential to become the standard of care for rosacea treatment and offer significant sales growth and financial leverage to our business.
Lastly, I'd like to review the success and the opportunities from our business development initiatives.
There are two areas that we're focused on in this vein.
First we are working to continue out licensing our IP and related technologies to companies outside of the United States.
Our license agreement with Meru whole last year provides an example of how we successfully executed on this strategy.
And now it gets to this transaction, we believe that Q Brexit or other patented products and D. F. D 29 may provide attractive near term opportunities for our companies in other countries.
King to exclusively and license our proprietary products.
Second we continue to survey the dermatology landscape for new product opportunities.
This involves acquiring and or in licensing F. D. A approved or late stage product candidates that would allow us to achieve synergies by leveraging our focused commercial infrastructure.
Our first priority in this area is to bring in on market F. D. A approved prescription dermatology products that would fit directly into our existing commercial footprint.
Executing on one or more of these acquisitions or in licensing opportunities would allow us to bring an additive revenue with minimal investment.
Adding to both the topline and the Bottomline.
And with that I will now turn the call over to our CFO, Joe <unk> to review our financial results for 2023.
Thank you Claude.
Hello, everyone I would like to start by reviewing the full year financial results for 2023.
Now I'll provide financial guidance for 2024.
Our total net revenues for the full year 2023 was $79 $2 million.
Compared to $73 $7 million for the full year 2022.
This reflects an increase of $5 4 million or 7% over the prior year.
The increase was mainly due to the execution of the new license agreement with Meru, how in Asia with.
We generated revenue of $19 million during the third quarter of 2023.
Our gross profit margins in 2023 increased by 22%.
As a contractual royalty obligations to <unk> have decreased.
The reduction in royalties for Q Brexit decreased by 50% began in May 2023.
Furthermore, our actual dorm royalty to Sun ended in the fourth quarter of 2023.
These contractual royalty reductions are expected to lead to further improvement in our margins going forward through 2024.
R&D expenses decreased by $3 $4 million to $7 $5 million for the full year 2023.
This compares to the $10 $9 million that we reported for the full year of 2022.
The decrease is related to lower clinical trial expenses developed USD 29, its a clinical trial work has been completed.
And we are now advancing to expected FDA approval.
Looking now to our SG&A expenses.
SG&A decreased by $15 $6 million or 26% to $43 $9 million for the full year 2023.
This compares to the $59 $5 million that we reported for the full year 2022.
The decrease was mainly due to our expense reduction efforts, primarily in sales and marketing and other SG&A areas.
We plan to continue to reduce expenses and rightsize our business in areas outside of sales and marketing in 2024 as appropriate.
Continuing to our net loss for the periods.
Net loss to common shareholders was $3 $9 million or 21 per share basic and diluted for the full year 2023.
This compares to a net loss to common shareholders of $29 6 million or $1 69 per share basic and diluted for the full year 2022.
Turning now to our non-GAAP results.
Our non-GAAP adjusted EBITDA for the full year 2023 resulted in a net income of $15 $6 million were <unk> 85 per share basic.
75 per share diluted.
This compares to a net loss of $7 $3 million or <unk> 42 per share basic and diluted for the full year of 2022.
At December 31, 2023, we had $27 $4 million in cash and cash equivalents, which compares to $32 million at December 31 2022.
Moving to our financial expectations for this year.
'twenty 'twenty four we anticipate net product revenue in the range of $55 million to $60 million.
SG&A expenses were.
See a range of $39 million to $42 million for the year.
And for R&D expense, we expect to be in the range of $9 million to $10 million.
Thank you very much and now I'll turn it back to Claude.
Thank you Joe journey medical is in its third year as a public company and I believe that we have delivered on our goal of positioning the business for success.
We have a solid lineup of dermatology products with strong patent protection.
We have right sized our cost infrastructure, so that our base business is now contributing positively and we are ready to leverage future anticipated topline growth.
Most notably we now have a product candidate for rosacea treatment under FDA review with very positive head to head phase III clinical trial results against the market leader as well as long dated patent protection.
I am extremely pleased with the accomplishments that journey has achieved to date and I am excited for 2024 and the opportunities that we see to continue creating value for our shareholders and the dermatology community.
Thank you.
Operator, we are now ready to open the lines for Q&A.
Ladies and gentlemen at this time, we'll begin the question and answer session if.
If you'd like to ask a question you may do so by pressing star and then one using a touchtone telephone to withdraw your question you May press Star two.
If you are using a speakerphone.
Please pickup your handset prior to pressing the numbers to ensure the best sound quality.
Once again that is star and then one to join the question queue.
We will pause momentarily to assemble the roster.
Our first question today comes from Scott Henry from Alliance Global Partners. Please go ahead with your question.
Thank you good afternoon, and congratulations on the accepted filing for D. F D 29.
Hi.
Couple of questions I guess, starting on the staying on DFT 29.
Can you tell me do you have a could you talk about what rights you have outside the U S. A and within those rights what timelines you may have for bringing the product internationally.
Internationally to the market.
Sure Hey, Scott. This is Claude Thank you for the question I'm going to pass the first part of this over to Ramzi <unk>, Our general counsel he can be specific with that too.
Sure. Thank Claude Hey, Scott. Thanks for the question. So in terms of the rights for D. F. D 29, we have rights globally, but for the BRIC countries of Brazil, Russia, India, China, as well, but yeah, yeah its countries.
So that's the rights that we have in terms of timeline I know you know we're looking right now obviously at the United States as our primary focus but there is there is.
Some emphasis now in Europe, potentially and then obviously, we're looking at a potential.
Potential deals with other partners in other territories in Asia et cetera, nothing definitive at the time, but I I can pass it to screen. If you wanted to talk a little bit about what a timeline could could look like if we engage in in Europe.
Okay, well that's helpful. So the idea would be to partner it and perhaps monetize some of those rights, what well also contribute or maintaining a contribution from them.
Absolutely.
Okay, and shifting gears and I know, it's early but when we think of 2025.
How should we think about the incremental launch costs for D. F. D 29, both from a sales force expansion and from expansion of our promote.
Promotional resources thank.
Thank you.
Sure Scott So yeah. We're we're very excited we we believe that we will be getting the approval in right at November 4th of this year and in terms of timing for the launch of D. F. D 29.
It'll be in Q1 at the at the latest early Q2, so from that standpoint, right now when you take a look at our commercial footprint.
Our sales group our sales team right now in the rosacea market.
As well as our other markets covers 80% of the top msas across the country.
And then when you take a look at that further and look into the areas that we cover including rosacea hyper high.
Drove CIS in acne.
We are controlling about 75% of the prescriptions total prescriptions in the marketplace.
Higher than that in rosacea. So I think we've got a good good baseline right here.
You know, we we will take a look at it as we get approval. That's when we'll be able to begin our negotiations with the various pbms and managed care plans and as we start to get more acceptance and you can see us most likely expanding.
As we go through this over the next six to 18 months plus so where we are right now we're about 35 representatives, we feel very good about starting off with our coverage with them from the get go and as we increase our covered lives.
You'll see us expand.
That expansion if I had a guess here we're going to certainly do a study to make sure that we have it right could go up as high as 45 to 50 individuals.
Okay, great. Thank you for that color and a final question just on the core products, particularly to Brexit and accutane. Unlike any other we'll see the numbers in the 10-K, but any anything notable as far as trend changes going into 'twenty 'twenty four.
Thank you.
Sure Yeah. So those are our top two are products that are our sales force and marketing team focuses on I can tell you. Our you know I'll start out with the Accutane really tremendous growth if we look at our IMS.
Restrictions, it's 27% growth year over year from from 22 to 23. So we've really had a nice surge in prescription volume levels, there and in terms of another indicator with with Q Brexit again, when you take a look between 'twenty two versus 'twenty three.
Three we had approximately 6% plus increase in prescription levels. So.
I think the the marketing messages and the emphasis with the sales force continues to to move those products. We're looking for core growth with the with those two brands as well as silk C and M. Zeke in 2025.
Okay, great. Thank you for taking the questions certainly.
Yeah.
Speaker Change: Once again, if you would like to ask a question. Please press star and then one.
Our next question comes from I'll call it.
The tell from B Riley Securities. Please go ahead with your question.
Oh.
Well tell Pete <unk>.
Tom Thanks for taking the questions.
In the past you've communicated a bump.
The same way I was.
Secondary end point.
Could the potential and he'd be included on the label for DSD Armstrong now.
Now you have the official M D a acceptance.
Speaker Change: S E D.
Additional guidance on that.
Last October the finding.
Yeah. Thank you for the question and a pleasure to meet you I'll start off and then I'm going to pass it on to doctors szigeti, who can give more detail.
The two phase III clinical trials of the evidence and and and numbers are statistical superiority are really very very strong. So we do feel rather comfortable.
And confident that we should be able to get this erythema indication as part of the label and I'm going to pass it on to Srinivasan here to get into more detail.
Thanks, Claude Hi, a J, that's a very good question and I.
I would like to say that the the secondary endpoints were discussed with the F. B before these studies started and are these endpoints have been adjusted for a multiplicity, which is a status pickled concept by which it means that and endpoint can be accessed on behalf of the previous end.
<unk> is successful and when the endpoint side of multiplicity. Adjusted these endpoints can end up in the label so having been discussed with the F. D. A V.
We are sure that this this endpoint a he's very likely to end up on the label.
Speaker Change: FDA accepts the data.
Oh, Thank you that's very helpful.
Thank you.
And and I think there was another part of that question, which was about any indication by the F. D. A on the edit them upfront.
So far there is no no particular indication from the FDA I think that.
Yeah. Good so far we are on course.
Great.
Yes.
Thanks.
And ladies and gentlemen.
And showing no additional questions will be concluding today's question and answer session as well as today's conference call. We do thank everyone for joining.
You may now disconnect your lines.