DERM - NASDAQ

Ladies and gentlemen, thank you for standing by. Good afternoon, and welcome to Journey Medical's Second Quarter 2025 Financial Results and Corporate Update Conference Call. [Operator Instructions] 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 this call will be available approximately 1 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. Please go ahead, Jaclyn.

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; and Joseph Benesch, Chief Financial Officer. Joining for the Q&A portion of the call will be Ramsey Alloush, Chief Operating Officer and General Counsel; Dr. Srini Sidgiddi, Vice President of Research and Development; and Louis Donati, Director of Market Access. During this call, management will be making forward-looking statements, including statements that address among other things, Journey Medical's expectations for future performance, operational results, financial condition and the receipt of regulatory approvals. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in Journey Medical's most recently filed periodic reports on Form 10-K and Form 10-Q, the Form 8-K filed with the SEC today and the company's press release that accompanies this call, particularly the cautionary statements in it. Today's conference call includes non-GAAP financial measures that Journey Medical believes can be useful in evaluating its performance. You should not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP. For a reconciliation of this non-GAAP financial measure to net loss, its most directly comparable GAAP financial measure, please see the reconciliation table located in the company's earnings press release. The content of this call contains time-sensitive information that is accurate only as of today, Tuesday, August 12, 2025. 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.

Thank you, Jaclyn, and good afternoon to everyone on the call today. The second quarter of 2025 marks the first full quarter since we introduced EMROSI, our best-in-class oral rosacea treatment into the market. Today, I am pleased to report that our second quarter net product revenue of $15 million included approximately $2.8 million of EMROSI sales, surpassing our prior year quarter sales and contributing to a notable improvement in the business gross profit margins. Our strategic initiatives aimed at optimizing operations and controlling our overall operating expenses have further enhanced progress toward our goal of becoming sustainably EBITDA positive later this year. We continue to execute on the launch with EMROSI prescriptions increasing at an impressive pace as we gain additional traction with dermatology prescribers. Patients have positive experiences with the product, and we continue to expand the number of covered lives with health plan access to EMROSI. As anticipated, Accutane sales were pressured due to aggressive pricing from generic competition. Sales of the product declined compared to the prior year period. However, we were pleased to see our growth brands more than offsetting the decline. While we work to stabilize our Accutane business, we remain focused on the growth of EMROSI and QBREX

Thank you, Claude, and good afternoon to everyone on the call. The total net revenue for the second quarter of 2025 was $15 million compared to $14.9 million for the second quarter of 2024. Second quarter of 2025 includes $2.8 million of incremental net product revenue related to the U.S. commercial launch of EMROSI. This was offset by a decrease in Accutane revenue of $2.3 million, driven by generic competition. Our gross margin increased to 67% for the second quarter of 2025 from 61% in the prior period. The lower overall product cost of goods mainly related to product sales mix, notably EMROSI and Accutane. R&D costs were nil in the second quarter of 2025 compared to $900,000 in the second quarter of 2024. The second quarter of 2024 included EMROSI pre-approval project expenses. Looking now to our SG&A expenses. SG&A increased by $1.6 million to $11.9 million for the second quarter of 2025 and $10.3 million for the second quarter of 2024. The increase is mainly due to the incremental operational activities related to the launch and commercialization of EMROSI. Continuing to our net loss for the period. Net loss to common shareholders was $3.8 million or $0.16 per share basic and diluted for the second quarter of 2025 compared to a net loss to common shareholders of $3.4 million or $0.17 per share basic and diluted for the second quarter of 2024. Second quarter of 2024 includes EMROSI pre-approval project expenses. We ended the second quarter of 2025 with $20.3 million in cash compared to the same $20.3 million at December 31, 2024, which reflects minimal cash burn for the year-to-date period. Thank you very much. I will now turn the call back over to Claude.

Thank you, Joe. We delivered solid performance in the second quarter with EMROSI leading the way. While it is still in the early days of the launch, prescription volumes have shown strong initial uptake and are expected to continue on this path. We continue to educate physicians on EMROSI's best-in-class product profile through our marketing efforts, conference attendance and data presentations. We are also continuing to leverage the favorable peer-reviewed article in JAMA Dermatology, highlighting the positive Phase III clinical results of EMROSI as well as the updated treatment algorithms from the National Rosacea Society, citing EMROSI's utility in the treatment of rosacea, both of which were published earlier this year. These efforts are showing tangible results with the number of unique prescribers nearly tripling since May. Importantly, our strong early ramp in payer coverage, our patient assistance program and the availability of EMROSI in the vast majority of dermatologists preferred pharmacies also demonstrate our ability to execute on key launch tactics and ensure that patients receiving a prescription of EMROSI are able to get that prescription filled. Given our execution thus far and the initial traction we are seeing, we believe that we are on pace to achieve our launch objectives and facilitate EMROSI in becoming the standard of care in the treatment of rosacea. For the second half of the year, we remain focused on expanding the base of EMROSI prescribers, growing prescription volume, expanding payer access and converting more of the prescription volume into revenue. We are confident that the prescription ramp for EMROSI will continue to build momentum and enable us to generate strong revenue growth going forward. This will enable us to further leverage our established dermatology infrastructure and our fixed costs, increase our margins and accelerate our path to profitability. In closing, I believe that we are well positioned to achieve our core objectives, which are to improve the lives of patients, offer health care providers innovative treatment options and create long-term value for our shareholders. Thank you. Operator, we are now ready to open the lines for Q&A.

[Operator Instructions] The first question comes from the line of Thomas Flaten with Lake Street Capital Markets.

Congrats on a solid and EMROSI performance. Claude, you mentioned coverage being 65% or so. What is your goal for the end of the year?

So thanks, Thomas. Good to talk to you. The managed care and the payer percentage, I'm going to pass that along to Ramsey Alloush, our CEO, to answer that.

Thomas, thanks for the question. So in terms of coverage, yes, we did disclose that we're at 100-plus million lives, about that 65% or so. We haven't publicly disclosed what that target is going to be. We are continuing to grow that. What I can tell you is that's the quantity side. So we're building out the framework. It covers, again, over 100 million lives. So that's access to the EMROSI drug. We're also working on the quality. So that's getting it on formularies, getting that implementation. That takes a bit more time as well, right? So it's a two-pronged approach. They run parallel. So we'll continue to increase the quantity coverage as the year goes on, but it's also equally as important to get the quality so we can convert that into revenue.

Awesome. And then maybe one for Joe. You had a nice step-up in gross margins. Can you just give us a sense of how you see that evolving over the course of the year? Should we assume incremental improvements in gross margin over the second half of the year?

Yes. Thanks, Thomas. So product mix is really the driver of the gross margin. EMROSI is a very low-cost product. So we expect this to continue. We believe it represents a reasonable baseline going forward. So as EMROSI [indiscernible] a larger percent of our margins, with the sales mix, we expect the margins to improve.

Got it. And then just one quick final one for me. What do you need to see or at what point do you think you'll be comfortable giving guidance for the year and then looking into next year, certainly?

Yes. Thomas, as you're aware, we just finished our first quarter right now, and it's really early in the start of a brand-new launch. So we're going to wait a few more quarters before we give hard guidance in that. So it's real early, and it's going to just take a little bit more time.

Next question comes from the line of Scott Henry with AGP.

Congratulations on a great start for EMROSI. It's been impressive. A couple of questions. First, if we just take the revenue for the quarter and divide it by the prescriptions, that generates a revenue per script of around $375, depending exactly what numbers you use. I think the expectation would be around perhaps $300 net revenue per script. Just -- but there's a lot of noise in the earlier quarters. Just curious your thoughts on what we could expect for a net revenue per script given some of the data that you've seen over the past quarter.

Scott, I would tell you that I wouldn't recommend just doing that simple math on volume and the reported sales. We still have a significant proportion of scripts utilizing our patient assistance program and coupons, and there could be significant delays in reimbursement from payers. So at this point, we're not going to give guidance to that ASP.

Okay. No, that's -- I mean that makes sense. There will be a lot of noise certainly in these first couple of quarters. One of the other trends I wanted to get your thoughts on was how we should think about the summer seasonality for the rosacea market. I mean, typically, derm see less patients in the summer. They're out in the sun, their skin is drier. Do you think that is correct and perhaps that bodes well going into the fall months?

I think the market has been stable. There is some seasonality with it, to your point there. But overall, I would expect -- right now, we are at a good pace. Our ramp is moving along nicely. week-over-week, month-over-month, we're seeing some really good growth because it is a brand-new launch within EMROSI. So I don't think the seasonality is going to come into play much at all at this point. And I think as the product matures well into year 2, 3, I think that would become more of a factor.

Yes. I was thinking more that it could be a tailwind coming out of the summer, meaning you've got a good launch going in one of the tougher seasons. So that could be a nice tailwind when we get into the fall. But I appreciate your comments.

No, I agree with that. Yes.

Okay. Great. And then final question, just could we get -- Joe, maybe you could give us a number for QBREX

For the year or the quarter?

For the quarter.

Right. $6.9 million for the quarter.

Next question comes from the line of Mayank Mamtani with B. Riley Securities.

Congrats on the strong start to EMROSI launch. Also a follow-up to a prior question. The impressive NRx volume growth that we're seeing, trying to reconcile that with the sales you have here, $2.8 million and then the $2.1 million stocking you had in 1Q. Can you maybe just give a little bit more color on the -- how the payer rebating and also maybe any stocking dynamics we should be aware of? And then I have a follow-up.

Yes. I mean I'll take one part of that. Early when we first got all of our inventory needed to launch the product successfully, we did do a stocking of the channel, if you will, in Q1, late March of this year. And now you're just seeing the ramp picking up. And just moving along in its cycle and the internal expectations that we've expected. In terms of the payer and the co-pay assistance program, that dynamic is going to change over the next several quarters and evolve. We expect as more managed care and the different plans sign up, we're going to have less utilization of the co-pay assistance program and more coming in through the managed care program. So that's evolving right now. And as we pick up volume with prescriptions, again, as we're seeing from month to month to month, that dynamic will change as well.

Yes. And just to add to that, the demand that's getting driven right now is really assisting us in our negotiations with managed care -- we did announce, I think, in July that we signed up with one of the largest GPOs, and we are in late-stage discussions with the other 2. But it does take time, right, for implementation with the plans, with the pharmacies to start to see that covered prescription volume go up. So we're monitoring that. We're working the channels top to bottom with the plans, right? There are a number of plans, so many, and we're being diligent with all of that. So again, it will all convert to dollars. It just -- it does take time. We launched, I think, April 7. And so we're pleased with the progress that we've accomplished to date.

Great. And then on the 10% market share that you report among high-volume dermatologists target initial segments, what's the -- is there like a year-end goal that you have? And are you able to share any early refill kind of adherence trends for EMROSI and maybe put in context what we may have seen with ORACEA when they launched.

Yes. So I'm going to speak in generalities here because we just haven't given guidance. And again, the launch is off to a great start, right? We're 3, 4 months into it now. So the 10% NRxs in June is fantastic. We see that continuing to grow. in terms of NRx to TRx refills, we're seeing a strong uptake. And again, that is growing as well from month to month. Not going to give specific ratios quite yet on that. And then the NRx and TRx expectations, if we continue going the way we are, we'll certainly meet all of our goals that we want and that EMROSI is delivering. I think the key is to take away, one, we went from 660 unique prescribers to well over 1,800 prescribers. These are prescribers that we targeted. There was about 3,200 that we've looked at and have gone after. So we've done a great job in getting access to them and getting them to give trial to the product, -- we're getting exceptional feedback in terms of how patients are responding when they come back in. And I think another dynamic that's important is that right now, we are getting EMROSI filled for the most part with new patients coming in with rosacea. So that's really been what's been bringing this good strong uptake. I think once they get really comfortable with that, we're hoping and expect to start seeing conversion from ORACEA over to EMROSI. And lastly, Mayank, the launch of ORACEA was 20 years ago. So it's very difficult for us, especially with the whole landscape of payers and managed care to really look at that on the same playing field. So we're not looking at that as a strong analog to consider.