Q1 2024 Journey Medical Corp Earnings Call
Operator: 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.
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.
Operator: 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 Jaclyn Jaffe, the company's Senior Director of Corporate Operations. Jaclyn, please go ahead.
Do 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 dropping the company's senior director of corporate operations.
Jacqueline: Glynn. Please go ahead.
Jaclyn Jaffe: Good afternoon, and thank you for participating in today's conference call. Joining me from Journey Medical's leadership team are Claude Maraoui, co-founder, president, and chief executive officer; Joseph Benesch, chief financial officer; Dr. Srinivas Sidgiddi, vice president of research and development; and Ramsey Alloush, 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.
Jaclyn Jaffe: 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 The Nash Chief Financial Officer, Dr. Sweeney said Giddy, Vice President of research and development and Ramsey L is Germany.
Jaclyn Jaffe: Counsel and corporate Secretary, who will be joining for the Q&A portion of the call.
Jaclyn Jaffe: 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.
Jaclyn Jaffe: During this call management will be making forward looking statements, including statements that address among other things journey medical its 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.
Jaclyn Jaffe: Really 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 Companys press release that accompanies this call, particularly the cautionary statements in it.
Jaclyn Jaffe: 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.
Jaclyn Jaffe: 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 'twenty 'twenty four except as required.
Jaclyn Jaffe: 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 13, 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 Maraoui, Co-Founder, President, and Chief Executive Officer of Journey Medical.
Jaclyn Jaffe: Wired 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 Marelli Co founder President and Chief Executive Officer of journey medical.
Claude Maraoui: Thanks, Jaclyn, 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.
Claude Maraoui: Thanks, Jack and good afternoon to everyone on the call today.
Claude Maraoui: I am pleased to report on the progress that we've made a journey medical.
Claude Maraoui: This growth was driven primarily by strong revenues from Qbrexa and AXA. 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 TRX,
Claude Maraoui: We'll begin with the positive results that we delivered in Q1.
Claude Maraoui: During the period, we generated revenue of $13 million, which is a 7% increase over the first quarter of last year.
Claude Maraoui: This growth was driven primarily by strong revenues up to Brexit and the Accutane.
Claude Maraoui: These two products together contributed over $10.8 million in revenue in Q1, 'twenty 'twenty four versus $8 7 million in Q1 2023.
Claude Maraoui: This represents year over year growth of 24%.
Claude Maraoui: Looking at the T Rx as to Brexit grew by approximately 1800 prescriptions when compared to Q1 of 2023 and Accutane grew by 29000 prescriptions when compared to Q1 2023 show.
Claude Maraoui: 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 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.
Claude Maraoui: <unk> strong progress for both brands.
Claude Maraoui: Additionally.
Claude Maraoui: Both Q Brexit and Accutane gained market share in their respective categories.
Claude Maraoui: This was achieved through a combination of efforts by our sales and marketing team and our trade and access group.
Claude Maraoui: In particular, 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.
Claude Maraoui: Particularly <unk>.
Claude Maraoui: Our reach has expanded both with prescriber adoption of our brands and the expansion of our pharmacy network.
Claude Maraoui: Our expectation is for these brands to continue to grow throughout the remainder of 2024.
Claude Maraoui: Our strategic pivot to significantly reduce SG&A expenses during 2023 in order to achieve profitability has shown to be a success.
Claude Maraoui: 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, Amzik, and Zilkci made up more than 90% of our revenue. And importantly, these brands generated a positive contribution given our optimized commercial infrastructure.
Claude Maraoui: 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 'twenty.
'twenty three.
Claude Maraoui: Looking at the performance of our four core commercial brands during the quarter you broke so hockey team M. Seekins oxy make up more than 90% of our revenue and importantly, these brands generated a positive contribution given our optimized commercial.
Claude Maraoui: Infrastructure.
Claude Maraoui: 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.
Claude Maraoui: We put the revenues generated from these products have surpassed our SG&A expenses with the exception of one time occurrences.
Claude Maraoui: As our NDA filing fee for DFT 29.
Claude Maraoui: 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.
Claude Maraoui: 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.
Claude Maraoui: Looking ahead into 2024.
Claude Maraoui: 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.
Took place in 2023.
Claude Maraoui: 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 D. F. D 29.
Claude Maraoui: From a macro perspective, our primary emphasis as an organization is to.
Claude Maraoui: Continued preparing for the impending launch of our DFT 29 product candidate.
Claude Maraoui: 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 will be over 4 million total prescriptions written for rosacea, which is a 5% increase over 2022. We believe that DFD 29 provides a significant growth opportunity for the company as well as for our shareholders. The clinical trial results for both of our Phase 3 studies were positive.
Claude Maraoui: <unk> 29 is a novel oral therapy for the treatment of rosacea.
Claude Maraoui: Best in class potential.
Claude Maraoui: There are approximately 16 and a half million patients that suffer from rosacea and the United States.
Claude Maraoui: In 2023, there were over 4 million total prescriptions written for rosacea.
Claude Maraoui: Which is a 5% increase over 2022.
We believe that D. F. D 29 provides a significant growth opportunity for the company as well as for our shareholders.
Claude Maraoui: The clinical trial results for both our phase III studies were positive.
Claude Maraoui: On both of the co-primary endpoints, IGA success, which is the investigator's global assessment, and the reduction of inflammatory lesions associated with rosacea, VFD-29 demonstrated statistical superiority to both placebo and oration. Current Standard of Care and Market-Leading Oral Treatment for Rosacea. To provide color around the DFD 29 market opportunity, Oratia estimated over $300 million in annual TRX sales in 2023.
Claude Maraoui: On both of the co primary endpoints Iga success, which is investigator global assessment and the reduction of inflammatory lesions associated.
Claude Maraoui: With rosacea.
Claude Maraoui: D F. B 29 demonstrated statistical superiority to both placebo and DAU ratio.
Claude Maraoui: Current standard of care and market, leading oral treatment for rosacea.
Claude Maraoui: Yeah.
Claude Maraoui: To provide color around the D. S D 29 market opportunity or ratio had over $300 million in annual key Rx sales in 2023.
Claude Maraoui: 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 oratia 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.
Claude Maraoui: We believe that based on DFT twenty-nine superior efficacy as demonstrated in our phase III clinical trials. There is a significant opportunity to take market share from a ratio as well as from other topical treatments that are commonly prescribed to treat rosacea.
Claude Maraoui: Additionally, DFT twenty-nine demonstrated the ability to significantly reduce erythema.
Claude Maraoui: Where the skin redness associated with rosacea.
Claude Maraoui: We believe this is a meaningful clinical results from our phase III clinical trials that can differentiate DFT 29th product profile if approved <unk>.
Claude Maraoui: And can help accelerate both prescriber and patient adoption.
Claude Maraoui: The Phase 3 results also demonstrated a favorable safety and tolerability profile for DFD-29, 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. The first was a survey conducted with prescribers of rosacea treatment to measure the likelihood of adoption of DFD29. Second, was a survey of 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.
Claude Maraoui: The phase III results also demonstrated a favorable safety and Tolerability profile for D. S. D 29 with safety results that were similar to placebo.
Claude Maraoui: 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.
Claude Maraoui: First was a survey conducted with prescribers of rosacea treatments.
Claude Maraoui: The likelihood of adoption of D. S D 29.
Second was a survey of the payers that represent a majority of commercial insurance plans.
Claude Maraoui: Measure their willingness to include D. F D 29 on their formulary.
Claude Maraoui: I am pleased to report that the feedback was positive for both sets of participants.
Claude Maraoui: 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 a statistically significant reduction in clinicians' erythema assessment score of DFD-29 versus placebo. Healthcare prescribers overwhelmingly confirmed their willingness to adopt and prescribe DFD-29 for the rosacea patient, with an Adoption Rate of In our industry, this is an astoundingly high rate and translates into an approximate eight out of ten rosacea prescriptions going to DFD 29.
Claude Maraoui: Favorable responses were driven by statistical superiority of DFT twenty-nine when compared head to head versus a ratio in reducing inflammatory lesions and Iga success.
Claude Maraoui: As well as statistically significant reduction in clinicians erythema assessment score of D. F D 29 versus placebo.
Claude Maraoui: Health care prescribers overwhelmingly confirm their willingness to adopt and prescribed DFT 29 for the rosacea patients and adoption rate of 79%.
Claude Maraoui: In our industry. This is an astoundingly high rate and translates into an approximate eight out of 10 rosacea prescriptions going to D. F D 29.
Claude Maraoui: This rate exceeded even our own internal expectations and gives us confidence in a successful DFD 29 launch. Given the 16 and a half 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 pay or 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 DFD 29 for over 200 million lives.
Claude Maraoui: This rate exceeded even our own internal expectations and gives us the confidence in a successful DFT 29 launch.
Claude Maraoui: Given the 16 and a half million rosacea sufferers in the United States and over 4 million prescriptions written annually.
Claude Maraoui: Prescriber adoption rate captured in our market research makes us even more excited about dft's market potential.
Claude Maraoui: With respect to the payer market research results. The data shows most if not almost all P. B M. G. P. O's and other managed care organizations are likely to contract with us to provide coverage for DFT twenty-nine for over two.
Claude Maraoui: 100 million lives.
Claude Maraoui: As a result of this market research, we are even more confident that DFD 29 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 13, whereby the FDA provided us with key timelines for the review process and a PDUFA date of November 4th this year.
Claude Maraoui: As a result of this market research we are even more confident DFT 29 will have high acceptance among prescribers and that negotiations with payers for formulary inclusion and reimbursement will be favorable after D. F. D 29 is approved.
Claude Maraoui: We will provide additional details on prelaunch activities later in the year as we finalize the launch plans pricing and product positioning for D. F. D 29.
Claude Maraoui: To recap on our regulatory activities in Q1, we submitted our new drug application for D. F. D 29 on January four.
Claude Maraoui: And the application was accepted by the FDA on March 13th whereby F. D. A provided us with key timelines of the review process and the producer date of November 4th of this year.
Claude Maraoui: Given the impressive efficacy and safety data generated from the DFD phase three 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.
Claude Maraoui: Given the impressive efficacy and safety data generated from the D. F D phase III head to head clinical trial program. We remain highly confident the F. D. A will provide us with an approval by the <unk> date.
Claude Maraoui: Regarding intellectual property D. F. D 29 has a robust patent profile.
Claude Maraoui: Currently have three Orange book listed both patents provide exclusivity until 'twenty 39.
Claude Maraoui: As a result, we anticipate having market exclusivity without generic intrusion for the foreseeable future.
Claude Maraoui: To conclude 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 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 outright licensing agreement with Maruho, which resulted in a $19 million upfront licensing payment for the rights to develop and commercialize Q-BREXA in certain Asian countries.
Claude Maraoui: To conclude our discussion of DFT 29, we believe the achievement of superior efficacy and safety results will pave the way for a new rosacea treatment paradigm.
Claude Maraoui: Which would significantly enhance the value of our company as well as the value that we bring to the dermatology prescribers and patients alike.
Claude Maraoui: Moving to our business development efforts, we continue to evaluate opportunities to enhance shareholder value.
Claude Maraoui: 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.
Claude Maraoui: In 2023, we entered into an out licensing agreement with Meru Ho, which resulted in a $19 million upfront licensing payment for the rights to develop and commercialize Q Brooks, so and certain Asian countries.
Joseph M. Benesch: We will continue to explore opportunities to exploit and monetize our IP and technologies globally for Q-BREXA, AMZEQ, and Zolci, 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.
Claude Maraoui: We will continue to explore opportunities to exploit and monetize our IP and technologies globally for Q Brexit M seek Enzo C as well as D F 'twenty nine.
Claude Maraoui: Yeah.
Claude Maraoui: 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.
Joseph M. Benesch: 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.
Claude Maraoui: As a secondary focus we will continue evaluating late stage product candidates.
Claude Maraoui: <unk> demonstrated strong clinical trial results in therapeutic areas in dermatology, where there are unmet treatment needs that we believe we can best serve patients.
Claude Maraoui: Executing on one or more of these opportunities would allow us to bring an additive revenue with minimal investment and our infrastructure, adding to both our top and bottom line.
Claude Maraoui: And with that I will now turn the call over to our Chief Financial Officer, Joe <unk> to review our financial results for the first quarter of 'twenty 'twenty four.
Joseph M. Benesch: Thank you, Claude. Good afternoon to everyone on the call. Our total net revenue for the first quarter of 2024 was $13 million, compared to $12.2 million for the first quarter of 2023. This increase is primarily due to increases in net product revenues for Cubrexa and Accutane, as we continue to focus our marketing efforts on these products. A gross profit margin increased slightly year-over-year, driven by higher... R&D expense increased by $5.9 million from the prior year quarter, given by a $4.1 million DFT29 application to the FDA in January and the $3 million expense for a contractual milestone payment triggered by the FDA's acceptance of our DFD 29 application in March. These one-time expenses were offset by lower DFE 29 clinical trial costs. The project winds down and eventually concludes. Looking now at our SDNA.
Joe: Thank you Claude and good afternoon to everyone on the call.
Joseph M. Benesch: FG&A decreased by $4.7 million, or 35% from the prior year quarter, as a result of our continued expense management. This is in addition to the $15.6 million reduction in STDs from 2022 to 2023 that will be reported at year end, continuing our net loss for the period. Net loss to common shareholders was $10.4 million, or 53 cents per share basic and diluted for the first quarter of 2024, compared to a net loss to common shareholders of $10.1 million, or $0.57 per share basic and diluted for the first quarter of 2023. The loss of the period was substantially due to one-time charges for the FDA application fee and the milestone payment discussed previously.
Joe: Our total net revenue for the first quarter of 2024 was $13 million.
Joe: Compared to $12 2 million for the first quarter of 2023.
Joe: The increase was primarily due to increases in net product revenues for Q Brookstone hockey team.
Speaker Change: You need to focus our marketing efforts on these products.
Speaker Change: Our gross profit margin increased slightly year over year, driven by higher sales.
Speaker Change: R&D expense increased.
Speaker Change: By $5 $9 million from the prior year quarter.
Speaker Change: Driven by a $4 1 million DFT 29 application fee payment.
Speaker Change: In January.
Speaker Change: $3 million expense for a contractual milestone payment triggered by the Fda's acceptance of our DFT 29 application in March.
Speaker Change: These one time expenses were offset by lower DFT 29 clinical trial expenses as the project winds down and eventually concludes.
Speaker Change: Looking now to our SG&A expenses.
Speaker Change: SG&A decreased by $4 7, million% to 35% from the prior year quarter.
Speaker Change: As a result of our continued expense management efforts.
Speaker Change: This is in addition to the $15 $6 million reduction in SG&A in 'twenty 'twenty to 'twenty to 'twenty three that we reported at year end.
Speaker Change: Continuing to our net loss for the periods.
Speaker Change: Net loss to common shareholders was $10 4 million or 53 per share basic and diluted for the first quarter of 2024.
Speaker Change: Compared to a net loss to common shareholders of $10 $1 million or <unk> 57 per share basic and diluted for the first quarter of 2023.
Speaker Change: The loss of the period was substantially due to one time charges for the FDA application fee and the milestone payment discussed previously.
Joseph M. Benesch: Turning now to our non-GAAP, our non-GAAP-adjusted EBITDA for the first quarter of 2024 resulted in a positive $11,000, reflecting our third consecutive positive non-GAAP-adjusted EBITDA. This compares to a non-GAAP-adjusted EBITDA loss of $5.3 million for the first quarter of 2023. While the first quarter was only slightly positive, we do expect non-gap adjusted EBITDA to increase more significantly throughout the remainder of 2024. We ended the first quarter of 2024 with $24.1 million in cash, compared to $27.4 million at December 31, 2023.
Turning now to our non-GAAP results.
Speaker Change: Our non-GAAP adjusted EBITDA for the first quarter of 'twenty 'twenty four resulted in income of positive $11000.
Speaker Change: Afflicting, our third consecutive non-GAAP adjusted EBITDA positive quarter.
Speaker Change: This compares to a non-GAAP adjusted EBITDA loss of $5 $3 million for the first quarter 2023.
Speaker Change: While the first quarter was only slightly positive we do expect non-GAAP adjusted EBITDA to increase more significantly throughout the remainder of 2024.
Speaker Change: We ended the first quarter of 'twenty 'twenty, four with $24 $1 million in cash compared to $27 4 million at December 31, 2023.
Joseph M. Benesch: Cash Learned for the Quarter reflects our cash outlay for the one-time FDA application fee payment of $4.1 million, although offset by positive cash flow from operations. Lastly, we are on track to meet and potentially exceed the financial guidance that we communicated at year end, which is to achieve net revenues in the range of $55 to $60 million and SG&A expense in the range of $39 to $42 million. R&D expenses in the range of $9 to $10 million. Thank you very much. I will now turn the call back over to Claude.
Speaker Change: Cash burn for the quarter reflects our cash outlay for the one time FDA application fee payment of $4 $1 million.
Speaker Change: Offset by positive cash flow from operations.
Speaker Change: Lastly, we are on track to meet and potentially exceed the financial guidance that we communicated at year end.
Speaker Change: Which is to achieve net revenues in the range of $55 million to $60 million.
Speaker Change: SG&A expense in the range of $39 million to $42 million.
Speaker Change: R&D expense in the range of $9 million to $10 million.
Speaker Change: Thank you very much I will now turn the call back over to Claude.
Claude: Thank you Joe.
Claude Maraoui: The first quarter results demonstrate the strength of our base business as we delivered year over year growth and generated our third consecutive quarter of positive, non gap adjusted EBITDA by strengthening the IP around her portfolio and right sizing our operating expenses. Advancing DFD 29 towards U.S. market approval, and bringing in non-dilutive capital from our business development initiative. I believe that the company is now stronger than ever, and we are ready for the next growth phase in our journey. Thank you. Operator, we are now ready to open the lines for Q&A. Thank you very much.
Claude: The first quarter results demonstrate the strength of our base business as we delivered year over year growth and generated our third consecutive quarter of positive non-GAAP adjusted EBITDA.
Claude: By strengthening the IP around our portfolio.
Claude: Right sizing our operating expenses.
Claude: Advancing DFT 29 towards U S market approval.
Claude: And bringing in non dilutive capital from our business development initiatives.
Claude: I believe that the company is now stronger than ever and we are ready for the next growth phase in our journey.
Speaker Change: Thank you operator, we are now ready to open the lines for Q&A.
Speaker Change: Thank you very much we will now begin the question and answer session.
Operator: We will now begin the question and answer session. To ask a question, you may press star and one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing. So with all your questions, you may press star, then two. We will now pause momentarily to assemble our roster. Today's first question comes from the line of Scott Henry with Alliance Global Partner. Please go ahead.
To ask a question you May press Star then one on your telephone keypad.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the chi.
Speaker Change: So enjoy your question you May Press Star then two.
Speaker Change: We will now pause momentarily to assemble our roster.
Speaker Change: Okay.
Speaker Change: Today's first question comes from the line of Scott Henry with Alliance Global Partners. Please go ahead.
Scott Robert Henry: Thank you and good afternoon. First, Joe, congratulations on losing the interim title of CFL. Thanks guys. Unknown Speaker, Show, you know, starting on the numbers. Cogs was a little higher relative to Q4. I thought we were going to start to see more consistent numbers there. Was there a reason, or is there a reset in the COGS line that we should still be factoring in?
Scott Robert Henry: Thank you and good afternoon.
Scott Robert Henry: First Joe congratulations on losing the interim title.
Scott Robert Henry: CFO.
Scott Robert Henry: Right here.
Scott Robert Henry: Hi.
Scott Robert Henry: So starting on the numbers.
Scott Robert Henry: Cogs.
Scott Robert Henry: Was a little higher relative to Q4.
Scott Robert Henry: I thought we were going to start to see more consistent numbers. There was was there a reason or is there a reset in the Cogs line that we should still be factoring in.
Joseph M. Benesch: Yeah, thanks, Scott. And thanks for the congrats. I really appreciate it. Transcribed by https://otter.ai. That's the first piece.
Speaker Change: Yeah, Thanks, Scott and thanks for the congrats I really appreciate it.
Scott Robert Henry:
Speaker Change: Really in the margins were a little bit lower.
Speaker Change: Due to product mix.
Speaker Change: That's the first piece product mix.
Joseph M. Benesch: Product mix, you know, higher-margin products was pretty prevalent in the first quarter. And also, we had some isolated freight costs, isolated testing costs, and we had some raw material obsolescence that came through the first quarter. You know, moving through the second quarter, and third quarter, things should go back to normal.
Speaker Change: Go to the higher margin products was was pretty prevalent in the first quarter.
Speaker Change: Also we have some isolated.
Speaker Change: Isolated freight costs isolated testing costs, and we had some raw material obsolescence that came through the first quarter moving to the second quarter third quarter things should go back to normal.
Joseph M. Benesch: Okay, and by normal, we should get to, you know, a 40 or, I guess, a 60% plus gross margin?
Speaker Change: Okay, and then and by normal we should get to.
Speaker Change: You know a 40 or I guess, the 60% plus gross margin.
Joseph M. Benesch: Exactly, back where we were in the December realm or the fourth quarter realm.
Speaker Change: Exactly back to where we were like in the December realm, or the fourth quarter realm.
Scott Robert Henry: Okay, great. There were also some comments as to Qbrexa and Accutane being the main growth drivers of the current product portfolio. Do you have any thoughts on which one of those two would be the larger growth asset? I would think it would be Qbrexa, but the script numbers were pretty strong for Accutane.
Speaker Change: Okay.
Speaker Change: Great. There were also some comments as to EQ Brexit Accutane.
Speaker Change: Being.
Speaker Change: The main growth drivers of the current product portfolio.
Speaker Change: Do you have any thoughts on which one of those two would be that the larger growth as it I would think it would be Q Brexit.
Speaker Change: But the script numbers were pretty strong crack ethane just.
Speaker Change: Wanted to get your sense on that.
Scott Robert Henry: Just want to get your sense of it.
Speaker Change: Sure Yeah, Hi, Scott, it's Claude I'll start out.
Claude: You know Accutane and <unk> are certainly key drivers for us as we continue to move forward like you said, we're approximately 29000 prescription increase.
Claude Maraoui: Sure. Yeah. Hi Scott. It's Claude.
Claude Maraoui: I'll start out. You know, Accutane and Qbrexa are certainly key drivers for us as we continue to move forward. Like you said, approximately 29,000 prescription increases year over year, same quarter, so just tremendous growth there. We had just a little shy of 2,000 prescriptions in growth with Qbrexa. So, you know, I'll start out with Accutane first since it had the largest demand increase.
Claude: Year over year same quarter so.
Claude: Just tremendous growth there and we had just.
Claude: Just a little shy of 2000 prescriptions and growth with Q Brooks.
Claude: So you know I'll start out with Accutane first since it had the largest demand increase.
Claude: This is sort of threatening known market.
Claude Maraoui: This isotretinoin market is growing. We're penetrating more and more into the market share area. We're looking at now close to 17% plus market share, so that's a very good sign. We don't anticipate hitting a ceiling with that.
<unk> is growing.
Claude: We're penetrating more and more into the market share.
Claude: Area, we're looking at now close to 17% plus market share. So that's a very good sign we don't anticipate hitting a ceiling with that I think if you take a look at our best quarter ever. It was about 75070 3000 prescriptions and here.
Claude Maraoui: I think if you take a look at our best quarter ever, it was about 75,000, 73,000 prescriptions, and here we are at 93,000. So, if you just take a run with Qbrexa in terms of market share gains. We are; it is a seasonal drug. The winter is typically a slower time for us in terms of picking up demand. So as we get into the warmer months that we're into right now in this calendar year, our momentum seems to be picking up with that and we have stronger demand.
Claude: We are at 93000.
Claude: So if you just take a take a run rate of that you're still showing a strong double digit growth moving into this year here was accutane.
Claude: Our Q Brexit in terms of market share gains.
Claude: We are it is a seasonal drug the.
Claude: The winter is typically a slower time for us in terms of picking up demand.
Claude: So as we get into the warmer months that we're into right now in this calendar year, our momentum seems to be picking up with that and having stronger demand.
Claude Maraoui: So I think our sales team, as well as our marketing promotion, is working very effectively. This is all about getting awareness out there about the product, as well as just constant education. So most people still don't have the full understanding and that there's a benefit for what they're ailing with. So yeah, more growth. I would tell you that Qbrexa should be in the mid to high single digits as we keep going and could venture into the double digits. So both those will drive our growth.
Claude: Demand, so I think our shelves.
Claude: Jim as well as our marketing promotion is working very effectively this is all about getting awareness out there with the product.
As well as just constant education. So most people still don't have the full understanding and that there's a benefit for what their ailing with so yeah more and more growth I would tell you that Q breakfast should be in the mid to high single digits as we keep going.
Claude: And could venture into the double digits. So the both of those will drive our growth.
Scott Robert Henry: Okay, great. Thank you, Claude.
Claude: Okay, great. Thank you Claude.
Speaker Change: And then.
Scott Robert Henry: And then... Just shifting over quickly to DFD 29, I heard a lot of great color on the surveys that you have run with clinicians. Should we look for that to be published somewhere, or perhaps you'll include some slides in your presentation? I'm just wondering how you're gonna disseminate some of that data.
Speaker Change: Just shifting over quickly to DFT 29, I heard a lot of great color on the surveys that you have have run with clinicians.
Speaker Change: Where are we I mean should we look for that to be published somewhere or perhaps you'll include some slides in your presentation.
Claude: I'm, just wondering how youre going to disseminate some of that data.
Scott Robert Henry: Yeah, sure. Scott, we used a third-party independent market research company. Indigent, you probably well know it.
Yeah sure Scott, we use a third party independent market Research company indigent, you, probably well know what and we certainly will have some slides in the very near future included in our duck as we go so that will be posted on our web.
Claude Maraoui: And we certainly will have some slides in the very near future included in our deck as we go, that will be posted on our website.
Right.
Scott Robert Henry: Okay, great. Well, thank you for taking the questions.
Speaker Change: Okay great.
Speaker Change: Thank you for taking the questions.
Speaker Change: Blue.
Operator: Thank you. The next question is from Kalpit Patel with Be Riley Securities. Please go ahead.
Speaker Change: Thank you. The next question is from top at Battle with B Riley Securities. Please go ahead.
Kalpit R. Patel: Yeah, hey, good afternoon. Thanks for taking the questions. Maybe starting with DFT29, have you had any initial conversations with payers on, you know, the drug's profile? I know you probably need to wait until the drug is approved to have any official contracts signed, but just, you know, wanted to know if you had any color on preliminary dialogue with payers.
Top: Yeah, Hey, good afternoon, thanks for taking the questions maybe starting.
Top: With DFT 29.
Top: Have you had any initial conversations with.
Battle: Payers on.
Top: The drug's profile I know you'd probably need to wait until the drug is approved to have any official.
Top: Contract signed but just.
Top: I wanted to know if you had any color on.
Top: Preliminary dialogue with payers.
Claude Maraoui: Yeah, absolutely, Kalpit. We certainly have done the market research that was also done recently, so it's fresh, new. We looked at payers that included lives of over 220 million covered lives nationally, so a very good, broad sample. They looked at phase three clinical trials. We offered all the various product attributes, the proposition value, and overwhelmingly, in terms of acceptance and being able to negotiate and get that covered, that way, we have the access and ability to do the pull through with our sales and marketing promotion. The overwhelming response is very, very positive. We will be able to get good coverage on DFD 29, and as you mentioned, we won't be able to negotiate with payers until after approval.
Speaker Change: Yeah, absolutely Calvert, we certainly have have done market research that was also done recently, so it's fresh new we are.
Speaker Change: Looked at over the payers that included lives of over 220 million covered.
Speaker Change: Covered lives nationally so a very a good broad sample.
Speaker Change: They looked at the phase III clinical trials, we are offered to all the various product attributes the proposition value and overwhelmingly in terms of acceptance and being able to negotiate and get that covered that way we have the access.
Speaker Change: And ability to do the pull through with our sales and marketing promotion overwhelming response is very very positive we will be able to get good coverage on on DFT 29, and as you mentioned, we won't be able to.
Speaker Change: Negotiate with payers until after the approval.
Kalpit R. Patel: Okay, got it. All right. And then you previously guided that you would potentially break even or even turn cash flow positive in fiscal year 2024. Can you comment on whether this guidance is still unchanged as of today?
Speaker Change: Okay got it.
Speaker Change: Alright, and then you <unk>.
Speaker Change: Previously guided that you would potentially breakeven or you've been turn cash flow positive.
Speaker Change: In fiscal year 2024.
Speaker Change: Can you comment if this guidance is still.
Speaker Change: Change as of today.
Kalpit R. Patel: Joe, would you like to handle that, please? Sure, so thanks.
Speaker Change: Joe would you like to handle that please.
Joseph M. Benesch: Sure, so thanks Kalpit. The guidance is definitely unchanged.
Speaker Change: Sure.
Joe: Thanks, Kelvin the guidance is definitely unchanged.
Joseph M. Benesch: Basically, we have some DSD-29 launch costs in our budget. If you pull all those launch costs out, and pull some of the non-cash stuff out, the core business is contribution positive at this time. So we continue to work towards that. And by year end, we believe we're going to be non-GAAP EBITDA positive. As we just... Okay, perfect. Thank you very much.
Joe: Basically we have some DSD 29 launch costs in our budget.
Joe: As you pull all those launch costs out some of the noncash stuff out the core businesses as contribution positive at this time.
Joe: So we.
Joe: We continue to work towards that and so you know by year end, we believe what we're gonna be non non non-GAAP EBITDA positive as we as we suspected.
Speaker Change: Okay perfect. Thank you very much.
Speaker Change: Thanks.
Operator: Thank you very much. Seeing no further lines in the queue, this concludes our question and answer session. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines and have a great day.
Speaker Change: Thank you very much thing no further lines in the queue. This concludes our question and answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines and have a great day.
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Speaker Change: Okay.
Speaker Change: [music].