Journey Medical Corp (DERM) 2023 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Good afternoon and welcome to JOURNEY Medical's First Quarter 2023 financial results and corporate update conference call. (Operators instruction).

So I would now like to turn the call over to Matt levy of CORE IR, the company's Investor Relations firm. Please go ahead, sir.

Good afternoon, and thank you for participating in today's conference call. Joining me from 30 Medical Corporation's leadership team are Claude Maraoui, Co-Founder, President and Chief Executive Officer, and Joseph Benesch, Interim Chief Financial Officer.

During this call, management will be making forward-looking statements, including statements that address, among other things, drilling Medical's expectations for future performance, operational results, financial condition and 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 Genie Medical's most recently filed periodic reports on Form 10 K and Form 10 Q.

The Form eight K filed with the SEC to date in the Company's press release that accompanies this call, particularly the cautionary statements. In 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 contents of this call contain time-sensitive information that is accurate only as of today, May 22nd, 2023. Except as required by law, duty 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 Morelli, Co-Founder, President and Chief Executive Officer of Journey Medical.

Thanks, Matt. Good afternoon, and thanks to everyone for joining our first quarter 2023 conference call. Since journeys inception, we have made significant investments and have committed to enhancing our commercial product portfolio and infrastructure to position ourselves for future revenue growth.

For the first quarter of 2023, our total revenues were $12.2 million, which is lower than expected despite higher unit sales volumes and gross sales from period to period for ACCUTANE and ZILXI. and EXELDERM. Our net product revenues for first quarter were unfavourably impacted by higher gross to net adjustments and lower unit sales volumes for QBREXZA, TARGADOX and XIMINO.

However, in April, we have already seen a bounce back in our product net revenues and lower gross to net adjustments from the isolated occurrences from the first quarter, particularly for QBREXZA for the remainder of 2023, we plan on achieving major clinical milestones in our Phase three clinical trials evaluating DFD-29 for the treatment of popular pustular rosacea.

During the first quarter of 2023, we made significant progress in achieving our goal of commercializing DFD-29. We achieved 100% enrolment in the clinical trials in January 2023 and reached the last patient out milestone in May of 2023.

We expect the top line data readout from the DFD-29 Phase three clinical trials in June of 2023 and anticipate filing a new drug application in the second half of 2023. In addition, we announced completion of treatment in our Phase-1 clinical trial assessing the impact of DFD-29 on the microbial Flora with no significant safety issues noted during the study.

The market opportunity for DFD-29 is immense with an estimated 16 million people in the U.S. suffering from rosacea. And as many as $415 million worldwide. The realization market continues to grow and has 3.6 million prescriptions in 2022, up from $3.4 million prescriptions in 2021. According to Symphony data.

The Phase-2 trial results for DFD-29 demonstrated nearly double the efficacy overage Rose or ratio, which is the current market leader and standard of care with respect to both co-primary endpoints in the study, which were first, the reduction of inflammatory lesion count.

And second, the investigator global assessment success. Our ratio had approximately 300 million in prescription sales in 2022. According to Symphony data, once approved and launched, we believe that DFD-29 will be able to achieve US net sales in excess of $100 million annually, which to put in context, would eclipse Journey's total revenue of $73.7 million in fiscal year 2022.

With the anticipated sequential revenue growth beginning in the second quarter and ongoing efforts to maximize internal efficiencies, we expect our commercial operations to return to operating profitability through the combination of revenue growth and expense optimization, our goal for Journey's to be non-GAAP adjusted EBITDA positive for fiscal 2023.

Our plan on reducing SG&A is currently on track to exceed $12 million, beating our previous guidance of $5 million to $7 million. Our strategic focus on the continued expansion of our product portfolio through in-licensing, acquiring and developing novel dermatology products and future product candidates, combined with our industry-leading sales force, continues to be the cornerstone of our future growth.

With that, I'll now turn the call over to Joe will review our financial results for the first quarter.

Thank you, Clive, and hello, everyone. I will now review the Company's financial results for the first quarter of 2023. Our net product revenues for the first quarter of 2023 were $12.2 million, reflecting an $8.6 million decrease from the prior year quarter, while unit volumes and gross revenues were higher for ACCUTANE, ZILXI and EXELDERM.

Total net product revenues for the first quarter of 2023 were negatively impacted by higher gross-to-net adjustments and lower unit sales volumes due to Brexit target auctions at minimum volume increases for Accutane and Zig Hill phoenix will then contribute to an increase in net product revenue as compared to the prior year quarter.

However, this increase was offset by higher coupon rebates as a result of higher deductible rate resets, which occur at the beginning of each year. Greater discounts for Accutane and a higher managed care rebates due to increased managed care costs.

Unit volume decreases for Target auctions amino contributed further to the overall decrease in product revenue. In addition, target of return experienced increased from the prior year quarter, leading to higher than prior period returns. Target continues to be negatively affected by the impact of generic competition. It began in December of 2021.

In March 2023, we modified our Xenon target off co-pay savings programs, which will result in lower unit sales volumes. However, this will increase each brand's profitability. To Brexit unit volume decreased from the prior year quarter.

However, few Brexit gross-to-net adjustments increased from the prior year quarter as a result of higher coupon rate resets greater managed care costs and higher government rebates from increases in certain state rebate programs. Brexit also experienced higher product returns from product like sold by the Amira prior to the progress acquisition.

Cost of goods sold decreased $1.8 million from the prior year quarter, mainly due to a decrease in Q Brexit and target OXO royalties. Director royalty percentage contractually decreased by 10% in May 2022 and was further reduced by an additional 12.5% in May of this year, 2023.

R & D expenses increased by $800,000 from the prior year quarter, driven by our continuing clinical trial expenses for the development of ESD-29, SG&A expenses decreased by $1.4 million to $13.3 million for the first quarter of 2023 from 14.7 million for the first quarter of 2022, a decrease of 10% is primarily due to decrease in legal costs associated with our patent litigation settlements in 2022 and expense reduction efforts primarily in sales and marketing.

These expense reduction efforts are part of an overall cost reduction initiative we implemented. It is designed to improve operational efficiencies, optimize expenses and reduce overall costs. In connection with the cost reduction initiative we executed a headcount reduction to our sales force and implemented marketing cost cuts.

In the first quarter of 2023, we incurred one-time costs of approximately $500,000 for termination benefits due to the impact employees, including severance benefits payments continuing to our net loss for the periods, net loss to common shareholders was $10.1 million or 57¢ per share basic and diluted for the first quarter of 2023 compared to a net loss to common shareholders of $1.4 million or 8¢ per share basic and diluted for the first quarter of 2022.

Our non-GAAP adjusted EBITDA for the first quarter of 2023 resulted in a net loss of $5.3 million or 30¢ per share basic and diluted versus net income of $2.3 million, or 13¢ per share basic and 11¢ per share diluted for the first quarter of 2022. We expect sequential improvement in our non-GAAP adjusted EBITDA as we progress through 2023 and work towards our goal to be non-GAAP adjusted EBITDA positive for the fiscal year 2023.

Moving to cash. On March 31st, 2023, we had 26.1 million in cash and cash equivalents and restricted cash. Also on March 31st, 2023, we reclassified 8.75 million of cash from cash and cash equivalents from restricted cash on our balance sheet to reflect the minimum cash requirement ratio under our new amendment to our facility with East West Bank.

As a result of this recent amendment, we paid down $10 million on the term loan and closed the revolving credit facility. Also, as a result, our previous financial covenants were removed. After the term loan is paid in full, which we may pay down at a time prior to maturity without penalty, we expect that our assets will be unencumbered and available to support a new borrowing relationship, which we plan to pursue, along with our ongoing cost reduction initiatives in 2023. We may also seek to raise capital through additional debt or equity financing, including through the use of our recently filed ATM program.

Thank you.

Very much. And now I'll turn it back to Clive.

Thank you, Joe. Our strategy with our product portfolio expansion was designed to pivot during the lifecycle challenges we have faced with Target docs. We remain optimistic about the future performance of our newly launched products throughout 2023. We are also excited about the recent completion for both Phase three clinical trials for DFD-29 and near term top line results.

Additionally, we anticipate sequential net revenue growth throughout 2023 beginning in the second quarter and expect further reductions in SG&A from our previous guidance of $5million to $7 million to result in SG&A annual savings in excess of $12 million when compared to 2022.

Finally, as mentioned before, our goal continues to be achieving non-GAAP adjusted EBITDA positive for fiscal year 2023. We look forward to sharing our ongoing progress when we report our second quarter results in August. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.