Journey Medical Corporation — Q1 2024 Form 10-Q
Business context and period. Unaudited results for the three months ended March 31, 2024, compared with Q1 2023. Journey Medical is a commercial-stage pharmaceutical company marketing dermatology products in the U.S.; its portfolio includes seven branded and two authorized generic prescription drugs. Fortress Biotech owned 50.43% of its outstanding common stock at quarter-end.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 / prior balance |
|---|---|---|
| Total revenue | $13.03 million | $12.21 million; up 7% |
| Gross profit / margin | $6.21 million / 47.7% | $5.76 million / 47.2% |
| Operating expenses | $23.12 million | $21.77 million |
| Operating loss | $10.09 million | $9.56 million |
| Net loss | $10.44 million; $0.53 per share | $10.14 million; $0.57 per share |
| Cash used in operations | $5.02 million | $0.96 million |
| Cash and equivalents | $24.06 million | $27.44 million at Dec. 31, 2023 |
| Current assets / liabilities | $47.01 million / $38.94 million | $56.46 million / $41.87 million at Dec. 31, 2023 |
| Term loan | $15.00 million principal; $14.68 million net carrying amount | $15.00 million principal at Dec. 31, 2023 |
Q1 product revenue growth was led by Accutane ($5.82 million, up 25%) and Qbrexza ($5.02 million, up 23%). Amzeeq declined 37% to $0.76 million, Zilxi declined 13% to $0.27 million, and other/legacy revenue declined 39% to $1.17 million. Other revenue was zero versus $48,000 a year earlier.
Research and development expense rose to $7.88 million from $2.03 million, principally reflecting a $4.0 million FDA NDA filing fee for DFD-29 and a $3.0 million milestone expense triggered by FDA acceptance of the NDA. SG&A fell 37% to $8.42 million, which management attributed to expense management and lower sales and marketing and other costs. Cost of goods sold rose 6% to $6.82 million. The reported net loss widened 3%; loss per share improved due to a higher weighted-average share count.
Material changes, outlook and risks
- Operating cash use increased to $5.02 million, with management citing working-capital changes, lower vendor payables compared with Q1 2023, inventory, and the quarterly net loss. Cash declined $3.38 million during the quarter. Financing provided $1.64 million, including $1.48 million net proceeds from issuing 289,744 shares through the ATM offering.
- The SWK term loan bears interest at three-month SOFR, subject to a 5% floor, plus 7.75%; its effective rate was 15.1% at March 31. It matures December 2027, is secured by substantially all company assets, and includes revenue and liquidity covenants. The company reported covenant compliance. Quarterly principal repayments are scheduled to begin in February 2026, subject to a revenue-based extension condition.
- Management states that recurring losses create substantial doubt about the company’s ability to continue as a going concern for at least twelve months after issuance of the financial statements. The company may pursue equity or debt financing, additional borrowing, or out-licensing, but gives no assurance financing will be available or acceptable. The remaining $5 million under the SWK facility was available to draw within 12 months of closing.
- The FDA accepted the DFD-29 NDA in March 2024; the PDUFA goal date is November 4, 2024, and management expects potential approval in the second half of 2024. DFD-29 had positive Phase 3 results. The $3 million DRL milestone was paid in April 2024. Up to $155 million in additional DFD-29 contingent milestones and sales royalties may be payable; these are contingent, not current fixed debt.
- Other material exposures include $3 million of current installment payments related to Ximino, contingent Vyne acquisition payments tied to sales milestones, product royalties, and generic competition. Management says Targadox continues to face generic erosion and Ximino sales were discontinued in September 2023. The company no longer participates in the Medicaid Drug Rebate Program, effective July 1, 2023.
- Fortress-related expenses were reported at approximately $9.36 million for Q1 2024 versus $15.0 million for Q1 2023 under the shared-services arrangement. The filing reports no material pending legal proceedings and no material change in internal control over financial reporting. No formal revenue or earnings guidance is provided.
Investor verification points
- Track cash consumption and financing needs against the disclosed going-concern warning; verify availability and terms of any new financing or SWK draw.
- Monitor DFD-29’s FDA review and November 4, 2024 PDUFA date, including the timing and funding implications of launch preparation and contingent payments.
- Assess sustainability and product mix of revenue growth, particularly Qbrexza and Accutane growth versus declines in Amzeeq, Zilxi, and legacy products, and continuing generic competition.
- Review the SWK loan’s floating interest cost, covenants, repayment schedule, and the $3 million Ximino installment obligation.
- Reconcile the reported Fortress-related expense amount and allocation, and assess dilution from ATM sales, employee equity awards, and other potential share issuance.