DERM - NASDAQ

Ladies and gentlemen, thank you for standing by. Good afternoon, and welcome to Journey Medical's Full Year 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 conference 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; Joseph Benesch Chief Financial Officer; and Ramsey Alloush, Chief Operating Officer and General Counsel. 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, Wednesday, March 25, 2026. 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. 2025 was a milestone year for Journey Medical as we successfully launched Emrosi, our internally developed best-in-class oral treatment for the inflammatory lesions of rosacea. Emrosi was made available to pharmacies in late March of last year, and our promotional activities began in early April. I am pleased to report that during the 3 quarters of 2025 in which Emrosi was commercially available, the product achieved $14.7 million in net sales. With regard to our full year 2025 performance, we delivered total net product revenue growth of 11%, and we improved our gross margin by nearly 3.5 percentage points compared to the 2024 period. Importantly, our business was able to make solid financial progress despite pressure on our Accutane franchise and other legacy products due to generic competition. With regards to our focus on improving profitability of the business, I am pleased to report that we generated positive adjusted EBITDA as well as positive EBITDA in the fourth quarter of 2025. Given our expectation for continued sales growth and additional leverage from our established commercial sales organization, we expect to remain adjusted EBITDA positive in 2026 and the foreseeable future. With our solid cash position of approximately $24 million, I believe that Journey is well positioned to execute on our business plan and grow sales and profitability with the resources that we have in place. One of the key highlights for 2025 is the strong prescription volume that we generated with Emrosi. Total Emrosi prescriptions were approximately 53,000 since promotion began in April of last year, which we believe is a very strong start. In the fourth quarter alone, total prescription volume for Emrosi grew nearly 50% sequentially compared to the third quarter last year, and growth is continuing in Q1 of this year. Our sales organization continues to promote the superior efficacy of Emrosi compared to the only other branded oral rosacea treatment, Oracea, in addition to Emrosi's placebo-like safety and tolerability profile. Notably, the extremely positive head-to-head results against Oracea and placebo in Emrosi's Phase III clinical trials are playing out in the real world. Physician feedback continues to be very positive, and the rising refill rate for Emrosi continues to demonstrate that patients are pleased with the results. Emrosi's superior efficacy and rapid onset of action compared to Oracea with effects seen in as little as 2 weeks are key benefits that we believe are supporting the demand and patient refill behavior. Along with the high satisfaction rate that we are seeing with our current customers, we continue to expand adoption of Emrosi in more dermatology practices. We ended 2025 with approximately 3,200 unique prescribers of Emrosi, reaching our initial goal of prescribers in the top deciles that routinely write for Oracea and similar products. While we were able to meet our initial prescriber target quite rapidly, we continue to increase this number. And today, we are disclosing that over 3,500 unique dermatology prescribers have now written at least 1 script for Emrosi. I'll now provide some additional color on our managed care and market access progress for Emrosi as this is an important component of the value inflection that we expect in 2026. Prescription demand continues to track ahead of reported revenue. That dynamic is primarily driven by the timing of downstream health plan coverage decisions and formulary implementation cycles, which are progressing as expected for a newly launched branded dermatology product. At present, approximately 100 million commercial covered lives have access to Emrosi. This includes contracts in place with 2 of the top 3 group purchasing organizations in the United States. These agreements provide the framework for broader downstream payer adoption as individual health plans complete their internal review and P&T processes. As we mentioned on our third quarter earnings call, we anticipate contracting with the third major GPO by late Q1 or early Q2 of this year, and we remain on track to meet this objective. Importantly, we are not solely focused on breadth of coverage, but also the quality of coverage, including tier positioning, step edit requirements and prior authorization criteria to ensure that the value of Emrosi's differentiated clinical profile is appropriately recognized. As coverage expands and formulary policies mature throughout 2026, we expect to see improved reimbursement rates, reduced reliance on our co-pay bridging program and an increase in Emrosi sales and overall operating margin expansion. Our sales professionals continue to focus on building new prescription demand for Emrosi as we believe it is important to broadly develop positive physician and patient experiences with the brand. In addition, critical mass and prescription volume also factors into the evaluation of reimbursement and pricing policies with the downstream health plans. Along with the strong prescription demand, our market access discussions are supported by several important clinical and publication milestones. These are Emrosi's head-to-head superiority data versus Oracea, the publication of Emrosi's Phase III efficacy and safety results in JAMA Dermatology and the updated treatment algorithms from the National Rosacea Society. These third-party validations are meaningful in payer evaluations, particularly as plans assess clinical differentiation and long-term health economic impact. We believe that Emrosi's rapid onset of action, placebo-like tolerability and superior facial clearing and lesion reduction profile position it well for continued formulary inclusions. As these initiatives materialize, we expect a meaningful inflection in revenue conversion relative to prescription demand. While we have commented on our expectations for positive EBITDA this year, we plan to offer more detailed financial guidance later in the year once we have better clarity on the downstream health plan adoption of Emrosi. I mentioned earlier that Emrosi's positive Phase III clinical trial results were published in JAMA Dermatology and that the National Rosacea Society updated their treatment algorithms, highlighting Emrosi's position as an effective therapy for rosacea treatment. Both of these publications were issued in the first half of 2025 and support Emrosi's superior clinical efficacy in treating rosacea, its favorable safety profile and the product's convenient once-daily oral dosing. This year, we expect to announce up to 3 new journal publications on Emrosi. We also believe that Emrosi has potential to be incorporated into the consensus treatment guidelines for rosacea, which should support further market and health plan adoption. In addition, we remain active at key dermatology medical conferences across the United States to build awareness and momentum behind the Emrosi brand. Last year, we presented clinical data at 2 medical conferences, the Society of Dermatology Physicians Associates Summer Conference in June and the 2025 Fall Clinical Dermatology Conference in October. We plan to attend an exhibit at this year's American Academy of Dermatology meeting at the end of this month, where we kicked off Emrosi's launch last year. Given the market penetration that we have achieved so far with rosacea prescribers, we believe that this large-scale conference will help us further increase brand awareness and prescriber adoption of Emrosi. Additionally, we expect to exhibit and potentially present a clinical data later this year at other dermatology conferences. With regard to our broader product offering, we plan to launch 1 or 2 additional incremental dermatology products later this year. We believe that the launch of these products can also benefit from our dermatology conference presence in addition to direct promotion by our sales organization. And with that, I'll turn the call over to our CFO, Joe Benesch, to review our 2025 financial results.

Thank you, Claude, and good afternoon to everyone. I will now walk you through our financial results for the full year 2025. Total revenues for the year were $61.9 million, representing a 10% increase compared to $56.1 million for 2024. The increase reflects incremental net product revenue related to the successful U.S. commercial launch of Emrosi. Turning to margins. Gross margin for 2025 was 66.2% compared to 62.8% in 2024. The improvement reflects a favorable product mix with higher margin contributions from Emrosi and QBREX

Thank you, Joe. To summarize, 2025 was a transformational year for Journey Medical as Emrosi had a strong market debut and became our flagship commercial product. We generated approximately 53,000 total prescriptions for Emrosi in 2025 after launching the product in April, and scripts continue to show strong sequential growth as we head toward the product's first year on the market. Notably, the run rate for Emrosi total prescriptions exiting 2025 calculates to over 126,000 annually. We are continuing to expand the base of unique prescribers for Emrosi after meeting our initial goal of 3,200 dermatology writers in 2025. With approximately 15,000 dermatologists in the U.S., 17 million Americans suffering from rosacea and over 6 million rosacea prescriptions written in 2025, we believe there is significant room for Emrosi to grow and become a leading dermatology brand. Importantly, the growing base of Emrosi prescribers enables more and more patients to experience Emrosi's best-in-class efficacy and rapid onset of action relative to Oracea, the only other branded oral rosacea treatment. In the third quarter, we saw approximately 1 refill for every new prescription written for Emrosi. And at the end of 2025, the ratio was at 1.4 refills to each new prescription. Given the chronic nature of rosacea, characterized by frequent episodes of relapse, the long-term value of each rosacea patient can be significant to our business. We believe the prescription trends so far demonstrate that we are making good progress and that initial patient experiences are converting into long-term brand loyalty. As a result, we expect the ratio of refills to new Emrosi prescriptions to continue to grow. While our base business came under some pressure last year due to competitive challenges, we continue to grow our sales, expand our gross margin, and we achieved our objective of becoming EBITDA positive exiting 2025. In 2026, we expect to continue improving upon the financial performance as adoption of Emrosi grows, downstream health plan coverage increases and Emrosi sales accelerate and track more closely with prescription growth trends. While we focus on building the Emrosi franchise, we also plan to launch up to 2 niche dermatology products this year to augment our base business and our revenue growth. We believe that this year, we will demonstrate the leverage that we have in our business, given our established dermatology commercial infrastructure and Emrosi's significant growth potential. And with our solid balance sheet, we believe that we are in a strong position to deliver on our business plan and execute on our core objectives, which are as follows: to improve the lives of patients, offer dermatology 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.

Thank you. [Operator Instructions] First question comes from Scott Henry with Alliance Global Partners.

A lot of progress and certainly profitability is a huge accomplishment. So congratulations for that. I did just want to dig in a little bit on the Emrosi prescriptions. I guess, first, just the trends. Q1 has been kind of flattish, but it did kind of tick up in December. So I don't know if some people bought ahead of time and the trends just taking time to flow out. Obviously, the co-pays reset. I just want to get your thoughts on Q1 prescriptions. And more importantly, do you think you've kind of finally got back up to a steady state where we should expect growth on a weekly basis?

Scott, thanks for the question. Yes, I think as we leave Q4 and enter Q1, as you mentioned, there certainly is the new insurance deductible resets. So that typically will slow patient visits to their doctor. I think you add that as well to the severe storms up and down the East Coast. They were pretty brutal and severe. I think that's a factor as well. And then overall, even in February, you've got shorter months. And so all of these compounded, it's hard to really compare Q4, which typically would be one of the strongest quarters, to Q1 as a reset. I can tell you, like you also just mentioned, March has come back in very strong. And we still anticipate and expect that our Q1 total prescriptions will surpass our Q4 number. So we haven't lost any steam at all, and we continue to expect substantial growth with Emrosi moving forward.

And do you feel that sequentially, your momentum is building, so Q2 should be well stronger than Q1? Is that your kind of internal feel at this point in time?

Yes. You're going to see a nice build and momentum with this. Again, if you think about it, 53,000 scripts in just 9 months. When we look at Q4 with the 27,000 annualized, you're looking at 126,000 scripts for the year, and we certainly expect to be well past that overall. So we've got momentum on our side. This is a phenomenal message. The efficacy is established. We have superiority against Oracea. We're focused on Oracea. And the fact that it has -- Emrosi has rapid onset, not only as early as 2 weeks, Scott, but we work in half the time that Oracea does. So in 8 weeks, we are equivalent to Oracea in 16 weeks of therapy. So that really catches the attention of HCPs and dermatologists. And the fact that we have this great proprietary formulation, the lowest strength minocycline on the market, 25% immediate release, 75% extended release, so we call it modified release, and it's really working well. It's offering safety like placebo side effects. So I think all of that together is really good. I will add one more thing. We are planning to increase our sales force in single digits here, and that should be ramped up no later than the first part of Q3. So we'll also have extra people on the ground across the states.

Okay. And just one more question, which is a little bit in the weeds. The challenge in predicting revenue for any quarter is heavily dependent on how much revenue comes in per script, which can be a function of inventory and many other things. And I think Q2, it was about [ 380 ], which was a big inventory build. So we have a lot higher number. Q3 was, using my numbers, was about [ 270 ], which is, I think, where we thought it would kind of stay because that's around where you would expect with a gross to net adjustment. But Q4, it came in at closer to [ 180 ]. So a lot lower revenue per script. So kind of 3 questions go into that. One, why do you think it is? Is that the co-pay? Is there something unique that happened? Two, where do you think it goes to in terms of -- is [ 270 ] still an achievable target? And three, when do we think we get to that steady state? Revenue per script, hard to predict in the short term, but easier to predict in the long term. Just so any color you could give there would be appreciated.

Sure. Yes, absolutely. So using your methodology in terms of calculating what the script level was for Q4, I believe you mentioned [ 180 ]. That is not a good indicator in terms of our long-term net pricing. And certainly, I would not use that number there. As we look at the progress we've made throughout the year, and the first quarter was Q2 for us commercially when we launched. We had about 7,000-plus prescriptions. We moved that up in Q3 up to 18,000 prescriptions. And then we hit 27,000 prescriptions in Q4 to close out the year. So the commercial team and the marketing team have done an excellent job going out there and getting adoption and so forth with acceptance with our physician base. And it's really provided very good patient experiences that dermatologists are seeing. So we've really accelerated the ramp on the prescriptions. And what you're really seeing is simply a function of reimbursement. So the mix of reimbursed prescriptions and those that come under our co-pay bridging program were more in -- portion of the scripts were not being reimbursed and therefore, hit our co-pay assistance program. So that's really what you see there. In 2026, we've said that we've signed up 2 of the 3 top GPOs. We expect the third GPO here to come on board imminently. So that's a good positive for us. And again, reimbursement will change that mix in that gross to net. Also, I would tell you that with the launch in April and our 1-year anniversary coming up, a lot of the plans have the new-to-market block or the new-to-market moratorium. And that will be lifted and allow us to have, again, more impact as we move through 2026. So we believe coverage is going to come on this year, and it's going to be a breakthrough year for Emrosi for sales as well as profitability. So that gross to net has a lot of upward pressure on it.

The next question comes from Mayank Mamtani with B. Riley Securities.

On the last point, Claude, on the gross to net with 2 of 3 GPOs coming on board and the third imminently also coming on board, can you maybe just give us a little bit more color like you did on your full year expectation? Again, I understand you may not give us revenue guidance, but like you gave us the script volume expectation for this year relative to what you analyzed in the fourth quarter. What is sort of your base case gross to net for this year now that you're sort of going to get past the 1-year mark. It would be helpful if you can maybe bracket something quantitatively.

Sure. So I guess 2 parts to your question. In terms of managed care and health care plans, I'm going to have Ramsey Alloush, our Chief Operating Officer, jump in and give you some background on that.

Yes. Sure, Mayank. And just to briefly answer your question, we expect -- I'm not going to speak really quantitatively, but we do expect improvement throughout 2026, gradual quarter-over-quarter. And as we hit certain milestones with national formularies and getting adoption for Emrosi to become a covered drug on formulary, we expect, again, incremental gain in terms of gross to net. The first year of any launch, as Claude mentioned, you're typically going to have new-to-market block and these moratoriums where payers and plans are really going to want to see the drug play out. They're going to want to see how it's looking in the real world, what demand looks like, and they want to assess it financially as well. So our first 12 months was really focused on what we like to call Phase I, which is the GPO contracting, and we contracted with the 2 largest in 2025 with the third year to come on board. And that really grants us, if you will, access, which is really the framework, the universe of commercial lives, which once we sign this third GPO, we'll have access to over 150 commercial lives. Now access and coverage are 2 different things, right? Access is the framework. Coverage, we define a little bit more narrowly. Coverage is where you have these national plans that can now adopt under the GPO contracts and actually do. And what we like to consider a frictionless type of a transaction where you're likely to get a patient to adjudicate all the way through to a prescription is what we call quality coverage, and that's a single-step therapy or through any oral and potentially or any topical or not a double step, but a single step through either one of those. And so now that we've reached sort of that 1-year anniversary mark, we've already sort of preempted in terms of these national formularies that we're having discussions with. We have continued negotiations, continued clinical. I think from the clinical side, it's a no-brainer. And so where they're assessing it is what is the budget going to be, what's the budget impact, what does financial modeling look like, adding Emrosi. Of course, it behooves the GPO to have Emrosi on formulary for their plan participants because these are rebate dollars for them. So that helps them and that helps the system. So that's the way they look at it. And so we do expect incremental growth here on the gross to net, and that's really a function, as Claude mentioned, of reimbursement, which ultimately will put less and less pressure on the co-pay. But during the launch, of course, you're going to have demand lag -- revenue lag your demand. We're focused on wide stream adoption. The commercial team has done an excellent job with doctors, with new patients, refills and so on and so forth. Our job is on the back end, really, as you mentioned, that gross to net and optimizing that. Unfortunately, in the ecosystem, we don't really control timing. So from a timing perspective, Phase I is nearly complete here with the third to come on board. And really, the hard work will continue getting formulary coverage for Emrosi, and that's where you'll start to see improvement in gross to net in '26 and throughout '27 and beyond.

Super helpful color. Go ahead.

Mayank, if I can follow up a little bit, too. You're asking for some -- to quantify a little bit. Look, the run rate annualized out of Q4 is 126,000 prescriptions running into 2026. We certainly expect to be well above that. But I think it's important to really look at NRxs and TRxs. And the current ratio in Q4 was for every 1 new prescription, we were getting 1.4 refills. So together, you're at 2.4 per patient and our 16-week clinical trials. So there was 4 months of therapy there. We believe and anticipate that the refill rates will continue to grow with this product. And I'd like you to remember that this is a chronic condition. As fantastic as Emrosi is, it's still not a cure. So patients will get symptomatic relief, they'll get their clearing, but then they will relapse and come back and have a flare-up. So the value of each of these new patients that come on in 2025, we're going to get a number of those coming back to us in 2026. It's hard to give you and quantify a number of that, but keep that in mind. And additionally, we are going out there as the field force is on a consistent day-to-day basis, asking for new prescriptions for these patients that are coming in that are actually new. So it becomes a snowball effect here over time. So time is on our side. Obviously, the long-term view, we've got great IP going out to 2039. But in the short term here in 2026, we can already take advantage of that. So those numbers are going to be real important. And right now, we're doing about 4,000 new prescriptions per month on a basis, and we expect that number to rise throughout the year.

Yes. We're definitely closely following that. And then you mentioned some presentation publications for Emrosi. Any ones we should be particularly paying attention to from a health economic standpoint or things like durability, even return patients you're seeing in real world that you just alluded to? And finally, these 2 niche derm product launches that you talked about, maybe just put the picture together on how you're thinking of marketing, overall spend beyond the sales rep incremental spend that you talked about, just so we understand how first half versus second half looks like from a bottom line standpoint?

Sure. Yes. So regarding the 2 products that we can potentially launch here, we're definitely seeing one play out. We see that happening in the second half of 2026 here and possibly 2. So that's how that outlook is doing. We're calling that part of the base business and -- in the base business in 2025, and that's all business outside of Emrosi. We did about $46 million in revenues. We expect that base business to continue to be stable. We feel like the regression that we saw in Accutane has done its part. That was about $6.5 million or so that we went down in revenues. So all prescriptions are looking strong from Q3 to Q4. It's been stable. And we have good trends right now with Accutane in Q1 of 2026. So the added product and the launch, we do have expenses already built into our budget. This would be in a P3 position and where we would have pulse promotion with this, utilizing our full and entire sales force. We're not taking our eye off of Emrosi. That will be obviously first out of the bag for us and dominating compensation programs for our representatives. The second product will continue to be QBREX

The publication presentation for Emrosi?

So yes, we're expecting 2 to 3 publications, and we're just -- those we have to keep in terms of what those aspects are. They're obviously all about Emrosi, but we'll let you know, and we should expect to see at least one of them hit here in the very near future. So we'll give you information as we can.

The next question comes from Brandon Folkes with H.C. Wainwright.

Congrats on the progress. Maybe the first one from me. Can you just help us understand the inventory movement in Emrosi and the broader portfolio in 4Q? I know you talked about the overall working capital balance at year-end. So I'd just be interested in terms of inventory in the channel at year-end across the portfolio. And then I'll ask the same one now, and it sort of tacks on to what's been asked already. How do gross to net now at this stage of the launch compared to your expectations prior to launch and when we had talked about and framed peak sales in the past. Any way to characterize sort of where you are on the gross to net now versus how you thought about gross to nets and how that would track before launch?

Okay. Sure. So we'll take the first part regarding the inventory. Very much on track with units sold and prescriptions on demand. So -- and that's pretty much across the entire line. So that is well within standards. Then on the second part, you mentioned gross to net and where it's come to our expectations. I think we're on track, certainly. So far today's numbers, [ 280 ] as the average for 2025. That certainly is within line and expectation. So that's certainly meeting our internal expectations. And again, that's what was just mentioned here on the call by another analyst. So that's number one because we don't typically give out our gross to net numbers. In terms of where we expect our gross to net, right now, I would tell you that the expectation moving forward is an increase due to the reimbursement progress that we're going to make with the downstream health care plans. So the expectation is upward pressure as we move forward into 2026. Joe, if there's anything else you'd like to add on that?

No, I think just to expand on what you said, our real goal is to maximize the gross to net and optimize the gross to net, optimize the margins and optimize the over product contributions from all products into the EBITDA and adjusted EBITDA numbers. So just to expand on what you said.

Yes. And finally, I think you asked about the peak sales regarding Emrosi. Look, we're very bullish. We see this product as becoming one of the leading branded dermatology products out there in medical therapeutics. This is a ripe target market, 17 million people suffer from this, well over 6 million prescriptions are being written for this target market on an annual basis, and we're just really getting going here and our adopter base in terms of where we ended the year hitting our target of 32 unique prescribers. We've broken our targets into deciles. We've made some really strong penetration in those, especially the decile 6 through 10. So we feel pretty good about how we're moving along here. And being added to the potential guidelines of the National Rosacea Society in the upcoming months, I think, is just more validation for the brand and acceptance. So I think it's looking really positive as we continue to move forward.

And one just clarification, if I may. You mentioned upward pressure. Are you talking about net revenue per script going up or gross to net going up?

Yes, meaning that as reimbursement goes up, less subsidies from our co-pay assistance program will be utilized. So the profitability of an Emrosi script would be going up. Gross to net would be going up in a positive manner.

The next question comes from Thomas Flaten with Lake Street Capital Markets.

Joe, there was a pretty substantial increase in accounts receivable in the fourth quarter. Is that cash we can expect you to recognize as we go through '26? It was just an unusual number for you guys. Any commentary on that?

Yes. So really, I can't tell you. Some of the [ accounts ] we have collected most but not all of that cash, so it will impact our first quarter. I think it was just more of a timing thing at year-end. Nothing major there, just the timing of the orders.

Got it. And then sticking with Joe, as Emrosi continues to gain better coverage, [ GTMs ] improve, and it becomes a bigger component of your revenue line, how should we think about gross margins as we roll through '26?

Yes. So really happy with the margins and how they're progressing. Of course, the product sales mix is always going to be the biggest driver. So as Emrosi and QBREX

Great. And then, Claude, the product launches that you mentioned, are these products you already have in-house? Is it [ BD ] on the come? And anything you can do to characterize kind of conditions they serve, overall market size that you're addressing? Anything just to give us some more context would be great.

Yes. I would look at them as really incremental product additions into the portfolio to really assist in helping the base business. And again, that's defined as everything outside of Emrosi really grow and expand in the internal product that we've been developing as well as an additional licensing deal. So in terms of the categories, I'll get into that later in the year as we come closer to launch, Thomas.