Ladies and gentlemen, thank you for standing by. Good afternoon, and welcome to Journey Medical's 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. 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 one hour after the end of the call for approximately thirty days. I would now like to turn the call over to Jaclyn Jaffe, the company's Senior Director of Corporate Operations. Please go ahead.

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 Randy Alush, General Counsel and Corporate Secretary, Dr. Srinivas Sidgiddi, Vice President of Research and Development, and Louis Dennady, 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, 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-Ks, and Form 10-Q, the Form 8-Ks filed with the SEC today, 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 26, 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, 2024 was a pivotal year for Journey Medical as we delivered on all of our guidance ranges for the year and positioned the company to launch MROSI, our best-in-class oral treatment for rosacea. We reported annual revenue of $56 million in 2024, and the fourth quarter marked the sixth consecutive quarter that the company achieved positive non-GAAP adjusted EBITDA. Additionally, we submitted our new drug application for MROSI in early 2024 and received an on-time first cycle approval from the FDA in November. In 2024, we also paid out a total of $22 million in FDA filing fees and milestone payments to Dr. Reddy Labs. These one-time payments completed our financial obligations associated with MROSI's regulatory fees and development milestones in the United States for the rosacea indication. As a result, this clears the way for MROSI's commercial debut and our ability to increase our product revenues and operating cash flow as the product gains traction in the market. Despite these payments, our balance sheet remains strong ahead of the launch with $20.3 million in cash as of December 31st. We believe that Journey is well-positioned ahead of the MROSI launch, given that our current commercial organization is already targeting that treat the vast majority of rosacea patients. This means that MROSI sales have the potential to generate significant operating leverage for the business. Given the market opportunity for MROSI, which is entering a $1 billion-plus treatment category, with superior Phase 3 clinical results against the current oral standard of care, we believe that the product can be transformational to our business. Other accomplishments in 2024 include presentations of MROSI clinical data at key medical congresses, such as the American Academy of Dermatology Annual Conference in March, the…

Thank you, Claude. And hello, everyone. I'd like to start by saying that we are pleased to have met all of our financial guidance ranges for 2024. As a reminder, for the full year, we anticipated product sales in the range of $55 million to $60 million, SG&A expense in the range of $39 million to $42 million, and R&D expense in the range of $9 million to $10 million. For this year, given the upcoming launch of MROSI, and the variability that goes along with any drug launch, we plan to offer 2025 financial guidance later in the year. After we assess initial MROSI's prescription demand, we have conducted additional payer contract negotiations. Moving to our financial results for 2024, our total net product revenue in 2024 was $55.1 million, which compares to the $59.7 million that we reported in 2023. The decrease was primarily due to overall higher rebate costs across our product portfolio and lower unit volumes mainly from our legacy products. Total revenues for 2024 were $56.1 million. This includes a $1 million milestone payment that was triggered upon Cutia receiving market authorization for AmZEEK in China. Under the Cutia agreement, Journey is also entitled to royalties on sales of AmZEEK in the licensed territory. Full year 2023 total revenues of $79 million include a $19 million upfront licensing payment and $500,000 in royalties that we received from our partner Maruho Limited. Our cost of goods sold decreased by $2 million or 9% to $20.9 million for the full year 2024. The lower cost of goods was mainly due to decreased product royalty stemming from contractual royalty decreases in 2023 and the discontinuation of Zomino in 2023. Research and development expenses increased by $2.3 million to $9.9 million for the full year 2024. The increase was…

Thank you, Joe. We executed well in 2024, ending the year on a high note and setting up our business for a transformational year in 2025. MROSI is now approved and ready for launch, and the entire company is energized as we prepare to go to market with a product that is clearly superior to the current standard of care and addresses an unmet need for improving the treatment of rosacea patients. As the first internally developed asset for the company, MROSI fits directly into our current dermatology commercial model, with no need to add to our sales force to promote the product. As such, we have the financial and organizational resources. We believe that MROSI will become a major growth driver for Journey Medical, given its potential to achieve peak annual sales of an estimated $200 million in the United States and $100 million internationally, providing significant operating leverage to our business. An exciting year lies ahead with several potential catalysts to create value, including the launch of MROSI and subsequent ramp prescriptions for the product, two additional peer-reviewed publications and medical conference presentations anticipated during the year, an anticipated increase in covered lives gaining during 2025, our financial progress as we drive the business towards sustainable positive EBITDA and profitability, and the potential for business development activity which may include licensing the commercial rights to our products outside the U.S. to create additional shareholder value. We at Journey Medical are looking forward to a productive 2025, and we are laser-focused on driving value for patients, our physician customers, and our shareholders. Thank you. Operator, we are now ready to open the lines for Q&A.

We will now begin the question and answer session. If you would like to withdraw your question, please press star and then two. Our first question comes from Thomas Flaten with Lake Street Capital Markets. Please go ahead.

Thank you. Hey, good afternoon. Thanks for taking the questions. Claude, just first on payer coverage, what do you think we should be expecting as you exit 2025? I know you said there'd be a nice ramp, but, you know, relative to the 24% that you have now, do you think we should be ending the year?

Yeah. Hi, Thomas. You know, our goal obviously is to obtain as many covered lives as possible. The expectation to peak commercial coverage should take anywhere from twelve to say eighteen months. I do have our market access lead with us here, Louis Dennady. I'm gonna pass that to him and let him give you a little more detail.

I appreciate the question, by the way. Our market access team is working actively, obviously, on commercial coverage as well as the Medicare line of business. So out of the 188 million lives commercially across the US, anticipation is that April 1, July 1, and October 1, and so forth, we will have that ramp-up period with peak coverage twelve to eighteen months out. The anticipation again is based on a lot of the high demand through the field. Because the more demand, the better coverage we will get. And the head-to-head studies will back up that demand also because the payers are very happy with the head-to-head study. So to give you a specific target right now, let's just wait a few months until we get more intel from the demand from the field. And I'm actively working with the GTOs and PBMs to obviously let them know of the head-to-head studies. So give us a few more months. We will report back. But again, peak coverage is twelve to eighteen months out.

Great. I appreciate that. And then from your interactions with KOLs and other doctors at AAD, you know, how important did they view the erythema data? And depending on that, you know, what are you doing to get that data into the hands of physicians given that it didn't end up in the label?

Yeah. I guess a couple of things there. First of all, the AAD had significant interest from our providers and PAs as well. The erythema, interesting enough, was not the key subject at all. The head-to-head performance really is catching people and saying, okay, let me listen to more. Tell me about the safety. They did not hit the erythema whatsoever. Outside of that, we also have held already today, Thomas, we've done three ad boards. We've done a scientific ad board already. And, overwhelmingly, the response again, the head-to-head is really what's capturing people's interest and why they want to prescribe MROSI moving forward. And that's really one of the reasons why we believe we anticipate this to becoming the new standard of care. In terms of erythema, to answer your question, we have our head of medical affairs on as well. And that's Dr. Srinivas Sidgiddi. And he can speak more about that. Srini?

Sure, Claude. Thank you so much. I hope I'm audible. Thomas, thanks for the question. First of all, we are very pleased with the JAMA publication presentation. The JAMA publication covers the co-primary endpoints as well as all the secondary endpoints. And erythema was one of the secondary endpoints which showed success against placebo. And that data being in a journal like JAMA is really very important, and we are fortunate to get this out at the right time. With the high impact factor, the high credibility, and the wide readership of JAMA Dermatology, there will be natural visibility of the erythema data from the Phase 3 studies. And the medical affairs group is well trained to answer specific questions related to erythema from the dermatology prescribers about the Phase 3 results on erythema or any other clinical data related to those studies. As a result, we expect that the JAMA Derm publication will have a huge impact in disseminating the erythema data.

Sorry. Go ahead. So the other part I would invite you if you haven't yet and as well as all the other listeners, the MROSI website really has phenomenal before and after photos and I would invite you to take a look and see the, you know, baseline versus the finished results of the patients at week sixteen. It's pretty dramatic and there's really great indication of how powerful it is to your question specifically.

Got it. Thanks for taking the questions. I appreciate it.

And the next question comes from Scott Henry with AGP. Please go ahead.

Thank you and good afternoon. I don't know if I missed it, but in or if your plan is to do it later. But do you have any thoughts on 2025 guidance or a plan for initiating that?

Yeah. Give us a few more months. This is really mostly related to the 2024 and us hitting all of our guidance that we gave. So we're gonna let the launch of MROSI really begin here. We've got our national sales meeting set up next week, and then we'll have the full force of the commercial team out there. You know, for physicians to hear their voice and learn about MROSI. So we're gonna wait a little bit before we give guidance. So at this point, just please be patient with that.

Okay. Fair enough. And then as far as the early days because you have filled some prescriptions, would you say that the reimbursement environment, has it been in line with expectations? Has it been better? Has it been worse? I know you have very few data points. But I'd like to ask the question just to see if there's anything there to focus on.

Yeah. Definitely. The distribution into the pharmacy channel is there. So we're glad to say that we've got that checked off and ready to go for the full launch here in the next couple of weeks. In terms of coverage and reading into that, it's just too early to tell. We're definitely seeing prescriptions coming in. We certainly have some coverage happening. I would tell you that, you know, around the 20% mark right now in terms of getting adoption on formularies is probably on target and what I would utilize at this point as of today.

Okay. And should we expect reported revenues in Q1? I know you'll fill some scripts, but sometimes there's a lag there. Should we look for just modest? Small amounts in Q1?

Yeah. That's correct, Scott. Just I would tell you that Q2 will have a meaningful, you know, revenues starting to begin with MROSI in Q2. I wouldn't expect much in Q1.

Makes sense. And then for the fourth quarter, if my math is correct, the revenue was down sequentially from Q3. Somewhat notably. I know you talked about some of the reasons. My question is, when we think about the base business, is it more reflective of all the quarters in 2024? Or is there, you know, a step down in the fourth quarter of 2024 that we should think about continuing into 2025?

Yeah. I'll start out, and then I'm gonna hand this off to Joe. If you take a look at the last several years, I think the base business has been relatively steady. We've got some legacy brands that continue to erode. When we look at our base business, our core four, it's been pretty consistent. Joe, if you wanted to add to that, please.

Yeah. And I think, you know, when we look at the first quarter, the first quarter is always gonna be a little bit lower, right, because of rate resets that go through our P&L. But I think you could look at the full year 2024 that's more representative of the true business.

Okay. So down at the products you would say have kind of reset at lower levels? I mean, mostly, I'm thinking QBREXZA and Accutane are main drivers there.

Yeah. QBREXZA continues to perform well for us. We continue to see script growth year over year. And, you know, it's holding very solid. It obviously has some new competition out there. But again, the prescriptions continue to show very good positive signs. Again, when you look year over year, we're growing that product. With Accutane, as we've stated in the past, we're a couple of new entries towards the second and third quarter of 2024. We did see some slowdown with Accutane. We've stabilized that business relatively well, and we believe we're gonna have performance with Accutane.

Okay. Great. And just one accounting question. I see the loss recovery of $4.553 million. Was that in the fourth quarter? Is that related to the cyber attack? And also on the accounting side, the $15 million approval milestone, how should we think about that being? I thought we may see it expensed in the fourth quarter, but it doesn't look like it. How should we account for that going forward?

Right. So to your first question, Scott, the $4.6 million crypto was the recovery. We received the cash in December. So we're happy to put that through our P&L. And for the second question, the $15 million, we are capitalizing that as an intangible asset, and we will amortize that over the life of the patent, which is through 2039.

Okay. And will that be amortized through the acquired intangible assets line, which is now broken it out? Or it will create lower down?

No. It'll be right in that line.

Okay. Great. Thank you for taking the questions.

You're welcome.

And the next question comes from Brandon Folkes with Rodman and Renshaw. Please go ahead.

Hi. Thanks for taking my questions and congratulations on all the progress. Maybe just two from me. Firstly, how do you think about pricing across the portfolio? You know, obviously, talking about more of the legacy portfolio here in 2025. And then, you know, just kind of with the MROSI launch, with the operating leverage you do have in your business, do you think about capital allocation in 2025 and, you know, maybe beyond that as well? Thank you.

Joe, would you like to take that?

Sure. Calvin, as far as capital allocation, you know, we're good with cash. Yeah. We're very comfortable with our cash at this point.

And can you speak to the other part of the question, please? Pricing across the base business or legacy portfolio in 2025? Just sort of what are you seeing? Obviously, there's competitor interaction. So maybe just a, you know, whether you want to go product by product or just sort of holistically across the portfolio, you know. Do we think about kind of net pricing in 2025?

So in 2025, go ahead. Go ahead, Claude.

Yeah. I mean, just generally, Brandon, with our legacy brands, when we look at Exelderm and Targadox, I think our pricing is going to be holding steady. We don't see much of a difference between one year to the next. The fact is, you know, those brands do have their competitive generics out there, especially with Targadox. So, you know, there's some erosion in the volume of the scripts more so than it is a pricing game with that. The one benefit is too with Exelderm is we no longer have the obligation of paying royalties, so our margins for that product have actually gotten better.

And then, you know, in terms of our remainder, our core four, as I've been calling it in 2024, we believe that net pricing should remain the same as you've seen.

Great. Thanks very much.

And the next question comes from Jason Wittes with Roth Capital. Please go ahead.

Thanks for taking the questions. In terms of sort of the milestones for the MROSI launch that, you know, you guys are looking for internally, at least the things that, I guess, the bottlenecks. I mean, reimbursement and getting in the formulary is, I would think, would be sort of the main thing to track. Obviously, at least from texts with physicians, there seems to be a lot of interest in the drug from the physician side. And I assume just that logistics of those other two items are kind of what's going to determine the outlook for 2025. Is that the right way to think about it?

I think you're tracking correctly. I think there were two areas that we need to focus in on. One was supply, and glad to say that we've got ample supply and more supply on the way. So we feel real good with that. The distribution part has been taken care of, and the backup supplies again are we're in a good position there. So I think you can put that one on the side. Secondly, in terms of, you know, getting more formulary coverage, we feel really good, and the progress that we've done already shows a good indicator in where things are going. You know, we've had great conversations with all the major plans, and, you know, I keep saying it, but it's so meaningful. These small molecules, there's not too many head-to-head comparisons. And when you're able to demonstrate statistical significance with a highly efficacious product, the plans are certainly interested, and we feel very good in terms of being able to get on these formularies. The one area is, like Louis just said earlier, it takes anywhere between twelve to eighteen months, and we will see good progress on a quarterly basis and better coverage as we go. So it's, you know, have a little patience in this game. But on all accounts, it looks very promising from that point as well.

Okay. That's helpful. Thank you. And I guess you mentioned you put out a $100 million international opportunity for MROSI. Is that something that you're going to look to out-license at some point? I assume that's kind of the goal here, or how should we think about that?

Yes. In terms of finding the right partner to out-license to is exactly what we're looking at. We certainly want to focus our efforts here in the United States. We've got a real good handle on that, and that's where our focus is going to be. But our business development strategy is to out-license this, and I think as we continue to see early success onboard in 2025, I think it makes it even that much more tempting for partners outside to look at MROSI as a very viable product on an international basis.

Got it. Thanks. I'll jump back in queue.

And the next question comes from Kalpit Patel with B. Riley Securities. Please go ahead.

Thank you for taking the questions. Maybe a few on the market access and launch-related questions. You mentioned that the peak coverage for MROSI you would expect twelve to eighteen months from the day of the launch. I guess, what exactly is the peak coverage percentage? That's the question number one. And then the second question is, in terms of the covered lives, you gave a new updated 20% and 4% number for the different groups. What percentage of those are unrestricted versus single synthetic?

Thanks, Kalpit. Louis, would you like to take that one, please?

Hi, Kalpit. It's Louis, by the way. Thanks for the call. And thanks for the question. So peak coverage again, trying to get ahead of it is maybe doing a disservice to what we're trying to do early on because I don't want to give you a number right now. Twelve to eighteen months down the road, all I can say is we've prepped the market early fall through today, and right now, about 20% commercial coverage is where the forecast should be. Actually, actually ahead of forecast in my opinion. I expect MROSI because, again, we keep on talking about head-to-head studies and demand. I really believe this will be a really good product to the market for rosacea, and we will get the coverage that we anticipated. But just give us a few months to get out there with the field force, we can report back, number one. Number two, the 20% commercial coverage and that includes federal employees and health exchange. Out of the 188 million lives, there's a mixed bag of unrestricted access and restricted access. So the good news is the payer response has been very positive. And there are some payers that are actually adopting MROSI currently in an unrestricted position with no utilization management. And that is prior authorization and no steps. So the response has been very well received. Again, give us some time as the market access team gets out there. Once we get the demand from the field, that is definitely going to help our discussions long term. But just give us a few more months, and we will report back. Okay?

Okay. Got it. And a couple of follow-ups here. Is the step that is being mandated by some of these payers, should we assume that that's a generic ORATIA or does it also include off-label antibiotics?

Primarily, the payer response has been if to get to MROSI, if there's going to be a step added, it's going to be through generic oral agents. It could be minocycline and/or doxycycline. The drug policies will vary. But generic oral agents would be the step.

Got it. Okay. And then last question for me. You know, after you guys announce your pricing and launch the drug here, has there been any pricing moves by Galderma for their brand name ORATIA?

Yeah. Actually, no, we have not seen any market movement in terms of pricing, Kalpit, since we've launched.

Okay. Got it. Thank you very much for taking the questions.

This concludes our question and answer session. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.