Release Date: May 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Journey Medical Corp (DERM, Financial) reported a revenue of $13 million in Q1 2024, marking a 7% increase from the previous year, driven by strong sales of Trebex and Accutane.
- Prescription growth for Trebex and Accutane was significant, with Trebex growing by approximately 1,800 prescriptions and Accutane by 29,000 compared to Q1 2023.
- The company successfully reduced SG&A expenses by 35% from Q1 2023, contributing to profitability in its base business.
- Journey Medical Corp (DERM) is preparing for the launch of DFD. 29, a promising treatment for rosacea, which showed superior efficacy in Phase 3 trials and has potential for significant market share capture.
- The company entered into a lucrative out-licensing agreement with Morocco, generating a $19 million upfront payment for the rights to develop and commercialize Trebex in certain Asian countries.
Negative Points
- Despite overall revenue growth, the first quarter is typically the softest for Journey Medical Corp (DERM) due to seasonality and insurance deductible resets.
- R&D expenses increased by $5.9 million from the previous year, largely due to a $4.1 million FDA application fee for DFD. 29.
- Net loss to common shareholders was $10.4 million in Q1 2024, although this was slightly improved from a net loss of $10.1 million in Q1 2023.
- The company experienced isolated higher costs in COGS due to product mix, freight, testing costs, and raw material obsolescence.
- While non-GAAP adjusted EBITDA was positive at $11,000 in Q1 2024, this was only a marginal improvement and the company anticipates needing further adjustments to maintain profitability.
Q & A Highlights
Q: Could you provide some insights into the higher COGS relative to Q4 and whether there is a reset in the COGS line that should be considered?
A: (Joseph Benesch - CFO, Corporate Controller) The margins were slightly lower due to product mix and higher margin products being prevalent in Q1. There were also isolated freight and testing costs, along with some raw material obsolescence. Moving into Q2 and Q3, we expect things to normalize to around 60% plus gross margin, similar to Q4 of the previous year.
Q: Between Accutane and Qbrexza, which do you see as the larger growth asset for the company?
A: (Claude Maraoui - CEO) Both Accutane and Qbrexza are key growth drivers. Accutane had a significant prescription increase and is gaining market share, now close to 17%. Qbrexza also shows strong potential, especially as we move into warmer months which typically increase demand. We anticipate continued growth for both, with Accutane potentially showing strong double-digit growth and Qbrexza in the mid to high single digits.
Q: Regarding DFD.29, have there been any initial conversations with payers about the drug's profile, and what has been the feedback?
A: (Claude Maraoui - CEO) We've conducted market research with payers covering over 220 million lives, presenting them with Phase 3 clinical trial results and product attributes. The response has been overwhelmingly positive, indicating a strong likelihood of achieving good coverage for DFD.29 once approved.
Q: Is the company still on track to potentially break even or turn cash flow positive in fiscal year 2024?
A: (Joseph Benesch - CFO, Corporate Controller) Yes, our guidance remains unchanged. We have factored in DFD.29 launch costs, but the core business is currently contribution positive. We are working towards being non-GAAP EBITDA positive by year-end as anticipated.
Q: Can you comment on how you plan to disseminate the data from the surveys conducted on DFD.29?
A: (Claude Maraoui - CEO) We used a third-party market research company and plan to include some of the survey results in our upcoming presentations, which will be available on our website.
Q: What are the main drivers behind the increase in net revenue for Q1 2024 compared to Q1 2023?
A: (Joseph Benesch - CFO, Corporate Controller) The increase in net revenue is primarily due to higher product revenues from Accutane and Qbrexza, driven by focused marketing efforts and significant prescription growth for these products.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
