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What changed in Journey Medical Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Journey Medical Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+323 added−364 removedSource: 10-K (2024-03-29) vs 10-K (2023-03-31)

Top changes in Journey Medical Corp's 2023 10-K

323 paragraphs added · 364 removed · 231 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

114 edited+30 added−56 removed136 unchanged
Biggest changeFood and Drug Administration (“FDA”) for sale in the United States, include: ● Qbrexza® (a medicated cloth towelette for the treatment of primary axillary hyperhidrosis), acquired and launched in May 2021; ● Accutane® (an oral isotretinoin drug for the treatment of severe recalcitrant nodular acne), licensed in July 2020 and launched in March 2021; ● Amzeeq® (minocycline) topical foam, 4% (a topical formulation of minocycline for the treatment of inflammatory lesions of non-nodular moderate to severe acne vulgaris in adults and children 9 years and older), acquired and launched in January 2022; ● Zilxi® (minocycline) topical foam, 1.5% (a topical minocycline treatment for inflammatory lesions due to rosacea in adults), acquired and launched in January 2022. ● Ximino® (an oral minocycline drug for the treatment of moderate to severe acne), acquired and launched in August 2019; ● Exelderm® Cream and Solution (a broad-spectrum antifungal intended for topical use), acquired and launched in October 2018; and ● Targadox® (an oral doxycycline drug for adjunctive therapy for severe acne), licensed in March 2015 and launched in October 2016.
Biggest changeOur Market, Products and Relevant Disease States As of December 31, 2023, our major actively marketed products, which have been approved by the FDA for sale in the United States, include: ● Qbrexza® (a medicated cloth towelette for the treatment of primary axillary hyperhidrosis), acquired and launched in May 2021; ● Accutane® (an oral isotretinoin drug for the treatment of severe recalcitrant nodular acne), licensed in July 2020 and launched in March 2021; ● Amzeeq® (minocycline) topical foam, 4% (a topical formulation of minocycline for the treatment of inflammatory lesions of non-nodular moderate to severe acne vulgaris in adults and children nine years and older), acquired and launched in January 2022; ● Zilxi® (minocycline) topical foam, 1.5% (a topical minocycline treatment for inflammatory lesions of rosacea in adults), acquired and launched in January 2022; ● Exelderm® Cream and Solution (a broad-spectrum antifungal intended for topical use), acquired and launched in October 2018; ● Targadox® (an oral doxycycline drug for adjunctive therapy for severe acne), licensed in March 2015 and launched in October 2016; and ● Luxamend® (a water-based emulsion formulated to provide an optimally moist healing environment for superficial wounds; minor cuts or scrapes; dermal ulcers; donor sites; first- and second-degree burns, including sunburns; and radiation dermatitis), acquired in 2021 and launched in 2023.
Fungal Infections of the Skin and the Current Standard of Care Fungal skin infections, collectively referred to as dermatomycoses, are common infections caused by ringworms (tinea) and include such conditions as athlete’s foot, jock itch and ringworm of the body. Tinea pedis, commonly known as athlete’s foot, is a form of ringworm that usually develops between the toes.
Fungal Infections of the Skin and the Current Standard of Care Fungal skin infections, collectively referred to as dermatomycoses, are common infections caused by ringworms (tinea) and include conditions such as athlete’s foot, jock itch and ringworm of the body. Tinea pedis, commonly known as athlete’s foot, is a form of ringworm that usually develops between the toes.
Pursuant to the DFD-29 Agreement, we agreed to make an upfront payment of $10.0 million, comprised of a $2 million payment upon execution and $8 million which was paid on September 29, 2021, 90 days following execution, with additional contingent regulatory, commercial, and corporate-based milestone payments, totaling up to $158.0 million.
Pursuant to the DFD-29 Agreement, we agreed to make an upfront payment of $10.0 million, comprised of a $2.0 million payment upon execution and $8.0 million which was paid on September 29, 2021, 90 days following execution, with additional contingent regulatory, commercial, and corporate-based milestone payments, totaling up to $158.0 million.
A Phase 2 study (DFD-29-CD-002) in 205 subjects with papulopustular rosacea, demonstrated that DFD-29 (40 mg) was significantly superior to placebo and Oracea®, on the co-primary endpoints of IGA treatment success and absolute inflammatory lesion count reduction. The study also showed DFD-29 was well-tolerated and safe.
A Phase 2 study (DFD-29-CD-002) in 205 subjects with papulopustular rosacea, demonstrated that DFD-29 (40 mg) was significantly superior to placebo and Oracea®, on the co-primary endpoints of IGA treatment success and absolute inflammatory lesion count reduction. The study also showed DFD-29 was well-tolerated.
Anti-Itch Product Agreement On December 18, 2020, we entered an asset purchase agreement for our Anti-itch Product (the “Anti-itch APA”) with Sun Pharmaceutical Industries, Inc. (“Sun”). Pursuant to the Anti-itch APA, total consideration is $4.0 million, comprised of an upfront payment of $2.0 million, payable upon execution.
Anti-Itch Product Agreement On December 18, 2020, we entered into an asset purchase agreement for our Anti-itch Product (the “Anti-itch APA”) with Sun Pharmaceutical Industries, Inc. (“Sun”). Pursuant to the Anti-itch APA, total consideration is $4.0 million, comprised of an upfront payment of $2.0 million, payable upon execution.
Due to the risks associated with reliance on third-party manufacturing risk, as part of our current and future strategy of licensing, acquiring, or the future development of assets, we currently, and will continue to, secure manufacturing agreements with either a counterparty to a transaction, with one or more of our contract manufacturers or additional contract manufacturers.
Due to the risks associated with reliance on third-party manufacturing, as part of our current and future strategy of licensing, acquiring, or the future development of assets, we currently, and will continue to, secure manufacturing agreements with either a counterparty to a transaction, with one or more of our contract manufacturers or additional contract manufacturers.
Our strategic approach leverages our management team’s experience with the capabilities of our field sales force to drive performance based on prescribing habits, brand preferences, promotional strategies and profit optimization while focusing on customer service excellence for our providers and their patients.
Our strategic approach leverages our management team’s experience with the capabilities of our field sales force to drive performance based on prescribing habits, brand preferences, promotional strategies and profit optimization while focusing on customer service excellence for our providers and their patients. ● Performance and experience of our accomplished field sales force .
These laws are potentially applicable to us as both a manufacturer and a supplier of products reimbursed by federal healthcare programs, and they also apply to physicians and other potential purchasers of our products.
These laws are applicable to us as both a manufacturer and a supplier of products reimbursed by federal healthcare programs, and they also apply to physicians and other potential purchasers of our products.
Accutane belongs to a class of drugs that affects all four major pathogenic processes in acne: increased sebum production, irregular follicular desquamation, propionibacterium acnes proliferation and inflammation. Accutane has achieved a strong market position and is well known in the dermatology community. The oral isotretinoin market had over 2 million prescriptions in 2022 according to Symphony Health.
Accutane belongs to a class of drugs that affects all four major pathogenic processes in acne: increased sebum production, irregular follicular desquamation, propionibacterium acnes proliferation and inflammation. Accutane has achieved a strong market position and is well known in the dermatology community. The oral isotretinoin market had over 2 million prescriptions in 2023 according to Symphony Health.
The topical antifungal market had more than 11 million prescriptions in 2022 according to Symphony Health. Pruritus (Itch) and the Current Standard of Care Pruritus or itch is defined as an unpleasant sensation of the skin that provokes the urge to scratch. It is a characteristic feature of many skin diseases and an unusual sign of some systemic diseases.
The topical antifungal market had more than 11 million prescriptions in 2023 according to Symphony Health. Pruritus (Itch) and the Current Standard of Care Pruritus or itch is defined as an unpleasant sensation of the skin that provokes the urge to scratch. It is a characteristic feature of many skin diseases and an unusual sign of some systemic diseases.
The license agreement with Rose U included a sublicense of certain data and an assignment of certain regulatory filings which Rose U had obtained from Stiefel Laboratories (“Stiefel”). In connection with the license agreement, we assumed Rose U’s obligations to Stiefel to use commercially reasonable efforts to develop and commercialize products using the licensed patent rights, know-how and data.
The license agreement with Rose U includes a sublicense of certain data and an assignment of certain regulatory filings which Rose U had obtained from Stiefel Laboratories (“Stiefel”). In connection with the license agreement, we assumed Rose U’s obligations to Stiefel to use commercially reasonable efforts to develop and commercialize products using the licensed patent rights, know-how and data.
Moreover, our breach of an existing license or failure to obtain a license to technology required to commercialize our products may seriously harm our business. We also may need to commence litigation to enforce any patents issued to us or to determine the scope and validity of third-party proprietary rights. Litigation would involve substantial costs.
Moreover, our breach of an existing license or failure to obtain a license to technology required to commercialize our products may seriously harm our business. We also may need to commence litigation to enforce any patents issued to us or to determine the scope and validity of third-party proprietary rights. Litigation could involve substantial costs.
We make available free of charge through our Internet website our annual reports on Form 10-K, quarterly reports on Form 10-K and current reports on Form 8-K, and any amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC.
We make available free of charge through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC.
As of December 31, 2022, the last-to-expire issued patent relating to Qbrexza that we license under the license agreement with Rose U expires in 2029. Accutane Agreement On July 29, 2020, we entered into a license and supply agreement for Accutane® (“Accutane Agreement”) with DRL.
As of December 31, 2023, the last-to-expire issued patent relating to Qbrexza that we license under the license agreement with Rose U expires in 2029. Accutane Agreement On July 29, 2020, we entered into a license and supply agreement for Accutane® (the “Accutane Agreement”) with DRL.
Pursuant to the Accutane Agreement, we agreed to pay $5.0 million, comprised of an upfront payment of $1.0 million paid upon execution, with additional milestone payments totaling $4.0 million. To date, we have paid $3.0 million of the additional milestone payments. Three additional milestone payments totaling $17.0 million are contingent upon the achievement of certain net sales milestones.
Pursuant to the Accutane Agreement, we agreed to pay $5.0 million, comprised of an upfront payment of $1.0 million paid upon execution, with additional milestone payments totaling $4.0 million. To date, we have paid all of the additional milestone payments. Three additional milestone payments totaling $17.0 million are contingent upon the achievement of certain net sales milestones.
Qbrexza has Orange Book-listed patents that extend through February of 2033. The PAH market had approximately 450,000 prescriptions in 2022 according to Symphony Health, excluding over-the-counter (“OTC”) clinical strength anti-perspirants.
Qbrexza has Orange Book-listed patents that extend through February of 2033. The PAH market had approximately 450,000 prescriptions in 2023 according to Symphony Health, excluding over-the-counter (“OTC”) clinical strength anti-perspirants.
Pruritus may be localized or generalized and can occur as an acute or chronic condition. Itch can be caused by a number of conditions, including skin conditions such as dry skin, eczema, psoriasis, scabies, 10 Table of Contents parasites, burns, scars, insect bites and hives. Depending on the cause of itchiness, skin may appear normal, red, rough or bumpy.
Pruritus may be localized or generalized and can occur as an acute or chronic condition. Itch can be caused by a number of conditions, including skin conditions such as dry skin, eczema, psoriasis, scabies, parasites, burns, scars, insect bites and hives. Depending on the cause of itchiness, skin may appear normal, red, rough or bumpy.
A sub-antimicrobial dose of doxycycline (i.e., 40 mg taken once daily) as oral formulation has been approved for the treatment of only inflammatory lesions (papules and pustules) of rosacea and is available under the proprietary name Oracea® in the US. Oracea is generally considered to be the current standard of care.
A low dose of doxycycline (i.e., 40 mg taken once daily) as oral formulation has been approved for the treatment of only inflammatory lesions (papules and pustules) of rosacea and is available under the proprietary name Oracea® in the US. Oracea is generally considered to be the current standard of care.
In addition, Journey will pay VYNE 10% of any upfront 14 Table of Contents payment received by Journey from a licensee or sublicensee of the products in any territory outside of the United States, subject to exceptions for certain jurisdictions as detailed in the APA. There are no subsequent milestone payments or royalties beyond the aforementioned payments.
In addition, Journey will pay Vyne 10% of any upfront payment received by Journey from a licensee or sublicensee of the products in any territory outside of the United States, subject to exceptions for certain jurisdictions as detailed in the APA. There are no subsequent milestone payments or royalties beyond the aforementioned payments.
A number of states have adopted or are considering various pricing actions, 23 Table of Contents such as those requiring pharmaceutical manufacturers to publicly report proprietary pricing information, limit price increases or to place a maximum price ceiling or cap on certain products. Existing and proposed state pricing laws have added complexity to the pricing of pharmaceutical drug products.
A number of states have adopted or are considering various pricing actions, such as those requiring pharmaceutical manufacturers to publicly report proprietary pricing information, limit price increases or to place a maximum price ceiling or cap on certain products. Existing and proposed state pricing laws have added complexity to the pricing of pharmaceutical drug products.
The federal Anti-Kickback Statute and implementing regulations provide for certain exceptions for “safe harbors” for certain discounting, rebating or personal services arrangements, among other things. However, the lack of uniform court interpretation of the Anti-Kickback Statute, coupled with novel 24 Table of Contents enforcement theories by government authorities, make compliance with the law difficult.
The federal Anti-Kickback Statute and implementing regulations provide for certain exceptions for “safe harbors” for certain discounting, rebating or personal services arrangements, among other things. However, the lack of uniform court interpretation of the Anti-Kickback Statute, coupled with novel enforcement theories by government authorities, make compliance with the law difficult.
Anticholinergics are a class of pharmaceutical products that exert their effect by blocking the action of acetylcholine, a neurotransmitter that transmits signals within the nervous 8 Table of Contents system that are responsible for the activation of sweat glands. Qbrexza is applied directly to the skin and is designed to block underarm sweat production by inhibiting sweat gland activation.
Anticholinergics are a class of pharmaceutical products that exert their effect by blocking the action of acetylcholine, a neurotransmitter that transmits signals within the nervous system that are responsible for the activation of sweat glands. Qbrexza is applied directly to the skin and is designed to block underarm sweat production by inhibiting sweat gland activation.
A Phase 1 PK study (DFD-29-CD-001) in 24 healthy subjects demonstrated the systemic exposure of minocycline from DFD-29 (minocycline HCl) ER capsules 40 mg was much lower than that seen with the approved antibiotic dose of minocycline (not a head-to-head study).
In a Phase 1 PK study (DFD-29-CD-001) in 24 healthy subjects, the systemic exposure of minocycline from DFD-29 (minocycline HCl) ER capsules 40 mg was much lower than that seen with the approved antibiotic dose of minocycline, although this was not a head-to-head study.
Rose U may terminate the license in certain 15 Table of Contents circumstances if we experience certain insolvency events or if we commit a material breach of the license agreement or if we cause Rose U to be in material breach of its license agreement with Stiefel, subject in each case to applicable cure provisions.
Rose U may terminate the license in certain circumstances if we experience certain insolvency events or if we commit a material breach of the license agreement or if we cause Rose U to be in material breach of its license agreement with Stiefel, subject in each case to applicable cure provisions.
The tetracycline class, which includes minocycline, doxycycline, sarecycline and tetracycline, is particularly effective in treatment for more severe forms of acne due to its antibacterial and anti-inflammatory properties. Targadox is gluten-free, lactose-free, animal byproduct-free, and GMO-free. The oral doxycycline market had more than 25 million prescriptions in 2022 according to Symphony Health.
The tetracycline class, which includes minocycline, doxycycline, sarecycline and tetracycline, is particularly effective in treatment for more severe forms of acne due to its antibacterial and anti-inflammatory properties. Targadox is gluten-free, lactose-free, animal byproduct-free, and GMO-free. The oral doxycycline market had more than 27 million prescriptions in 2023 according to Symphony Health.
This decentralized approach allows us to maximize our brand equity across our product portfolio through strategic relationships directly with pharmacies and allows us to provide exceptional customer service and access to patients and physicians. 12 Table of Contents ● Active business development initiative . Business development plays a vital role in our growth strategy as we look to build scale.
This decentralized approach allows us to maximize our brand equity across our product portfolio through strategic relationships directly with pharmacies and allows us to provide exceptional customer service and access to patients and physicians. ● Active business development initiative . Business development plays a vital role in our growth strategy as we look to build scale.
DFD-29 Patents With regard to DFD-29, we have an exclusive license to one U.S. patent family including 2 issued U.S. patents, 1 allowed U.S. patent application, and one U.S. continuation application, as well as 8 foreign pending patent applications (one in each of Australia, Canada, Europe, Japan, Korea, Mexico, New Zealand, and South Africa) covering methods of treating an inflammatory skin condition by selecting and administering an oral composition comprising reduced dose of minocycline and the relevant pharmacokinetic parameters, and we intend to pursue composition-of-matter patents, where possible, and dosage and formulation patents, as well as method-of-use patents on novel indications for known compounds.
DFD-29 Patents With regard to DFD-29, we have an exclusive license to one U.S. patent family including three issued U.S. patents and one U.S. continuation application, as well as one issued foreign patent (Mexico) and eight foreign pending patent applications (one in each of Australia, Canada, Europe, Japan, Korea, and South Africa; and two in New Zealand) covering methods of treating an inflammatory skin condition by selecting and administering an oral composition comprising reduced dose of minocycline and the relevant pharmacokinetic parameters, and we intend to pursue composition-of-matter patents, where possible, and dosage and formulation patents, as well as method-of-use patents on novel indications for known compounds.
Since inception, we have made significant investments to build out our commercial product portfolios, which we believe, coupled with our experienced dermatology sales leadership team and our recently expanded field sales force, will position our business for growth.
Since inception, we have made significant investments to build out our commercial product portfolios, which we believe, coupled with our experienced dermatology sales leadership team and our seasoned field sales force, will position our business for growth.
We consider our relations with our employees to be good and have not experienced any work stoppages, slowdowns or other serious labor problems that have materially impeded our business operations. 13 Table of Contents Our human capital management objectives include, as applicable, identifying, recruiting, retaining, incentivizing, and integrating our new and existing employees.
We consider our relations with our employees to be good and have not experienced any work stoppages, slowdowns or other serious labor problems that have materially impeded our business operations. Our human capital management objectives include, as applicable, identifying, recruiting, retaining, incentivizing, and integrating our new and existing employees.
Item 1. Business OVERVIEW We are a commercial-stage pharmaceutical company founded in October 2014 that focuses on the development and commercialization of pharmaceutical products for the treatment of dermatological conditions. Our current portfolio includes eight branded and three authorized generic prescription drugs for dermatological conditions that are marketed in the U.S.
Item 1. Business OVERVIEW We are a commercial-stage pharmaceutical company founded in October 2014 that focuses on the development and commercialization of pharmaceutical products for the treatment of dermatological conditions. Our current portfolio includes seven branded and two authorized generic prescription drugs for dermatological conditions that are marketed in the U.S.
The Acquisition included two FDA-approved products (Amzeeq and Zilxi), and a development-stage dermatology program (FCD105), along with the Molecule Stabilizing Technology proprietary platform. DFD-29 Agreement On June 29, 2021, we entered into a license, collaboration, and assignment agreement with Dr. Reddy’s Laboratories, Ltd.
The Acquisition included two FDA-approved products (Amzeeq® and Zilxi®), and a development-stage dermatology program (FCD105), along with the Molecule Stabilizing Technology proprietary platform. 14 Table of Contents DFD-29 Agreement On June 29, 2021, we entered into a license, collaboration, and assignment agreement with Dr. Reddy’s Laboratories, Ltd.
The net payment reflects a milestone payment of $10 million to us from our exclusive licensing partner in Maruho, offset by a $7.5 million payment to Dermira, pursuant to the terms of the Asset Purchase Agreement between us and Dermira.
The net payment reflected a milestone payment of $10.0 million to us from our exclusive licensing partner in Maruho, offset by a $7.5 million payment to Dermira, pursuant to the terms of the asset purchase agreement between us and Dermira.
The current U.S. market size for treatment of acne is considerable and estimated at approximately $3 billion annually, according to the American Medical Association. Accutane® for the Treatment of Severe Recalitrant Nodular Acne Accutane® (isotretinoin 10mg, 20mg, 30mg, and 40mg capsules USP) is indicated for the treatment of severe recalcitrant nodular acne.
The current U.S. market size for treatment of acne is considerable and estimated at approximately $3 billion annually, according to the American Medical Association. 8 Table of Contents Accutane® for the Treatment of Severe Recalcitrant Nodular Acne Accutane® (isotretinoin 10mg, 20mg, 30mg, and 40mg capsules USP) is indicated for the treatment of severe recalcitrant nodular acne.
Royalties in the low-double digits based on net sales, subject to specified reductions are also due. The term of the Accutane Agreement is ten years and renewable upon mutual agreement. We are required to pay royalties during the term of the Accutane Agreement. The agreement contains customary representations, warranties, and indemnities.
Royalties in the low-double digits based on net sales, subject to specified reductions, are also due. The term of the Accutane Agreement is ten years and renewable upon mutual agreement. The agreement contains customary representations, warranties, and indemnities.
Research and Development As discussed above, on June 29, 2021, we obtained the global rights for the development and commercialization of DFD-29, a late-stage development modified release oral minocycline that is being evaluated for the treatment of inflammatory lesions of rosacea.
Research and Development As discussed above, on June 29, 2021, we obtained the global rights from DRL for the development and commercialization of DFD-29, a late-stage development modified release oral minocycline that is being developed for the treatment of inflammatory lesions of rosacea.
Acne and the Current Standard of Care Acne, also known as acne vulgaris, is a common skin disorder characterized by a blockage of hair follicles, which are clogged with oil and dead skin cells. According to the AAD, acne is the most common skin condition in the US, affecting up to 50 million individuals annually.
Acne and the Current Standard of Care Acne, also known as acne vulgaris, is a common skin disorder characterized by a blockage of hair follicles, which are clogged with oil and dead skin cells. According to the American Academy of Dermatology (“AAD”), acne is the most common skin condition in the US, affecting up to 50 million individuals annually.
Four of our marketed products, Qbrexza, Amzeeq, Zilxi, and Ximino, as well as DFD-29, currently have patent protection. 17 Table of Contents Qbrexza Patents We own or have an exclusive license to 22 issued U.S. patents and 41 issued foreign patents, which include granted European patent rights that have been validated in selected European Patent Organization (“EPO”) member states (Switzerland, Germany, Spain, France, Great Britain, Ireland, and Italy), Australia, Canada, Mexico, Israel, Japan, Hong Kong, Korea, and New Zealand, Singapore, and South Africa, and six pending U.S. patent applications, one pending Patent Cooperation Treaty application, and 16 pending foreign patent applications.
Three of our marketed products, Qbrexza, Amzeeq, and Zilxi, as well as DFD-29, currently have patent protection. 17 Table of Contents Qbrexza Patents We own or have an exclusive license to twenty two issued U.S. patents and forty one issued foreign patents, which include granted European patent rights that have been validated in selected European Patent Organization (“EPO”) member states (Switzerland, Germany, Spain, France, Great Britain, Ireland, and Italy), Australia, Canada, Mexico, Israel, Japan, Hong Kong, Korea, and New Zealand, Singapore, and South Africa, and six pending U.S. patent applications, one pending Patent Cooperation Treaty application, and sixteen pending foreign patent applications.
We consistently evaluate both strategic add-on deals that leverage our existing infrastructure, as well as more transformative assets that would require building out or restructuring our field sales force. We have extensive relationships in the industry that help us stay abreast of developments in our space and continually monitor new opportunities.
We consistently evaluate both synergistic acquisitions that leverage our existing infrastructure, as well as more transformative assets that would require building out or restructuring our field sales force. We have extensive relationships in the industry that help us stay abreast of developments in our space and continually monitor new opportunities.
Through December 31, 2022, we have paid $4.0 million and have no additional payments. The Anti-itch APA contains customary representations, warranties, and indemnities. There are no subsequent milestone payments or royalties beyond the aforementioned payments. We intend to launch this product during the second half of 2023.
Through December 31, 2023, we have paid $4.0 million and have no additional payment obligations. The Anti-itch APA contains customary representations, warranties, and indemnities. There are no subsequent milestone payments or royalties beyond the aforementioned payments. We intend to launch this product during the second half of 2024 or first half of 2025.
Antihistamines are also effective in treating some types of itch, but they too have drawbacks with continued use. We plan on launching our Anti-itch Product through our field sales force during the second half of 2023.
Antihistamines are also effective in treating some types of itch, but they too have drawbacks with continued use. We plan on launching our Anti-itch Product through our field sales force during the second half of 2024 or first half of 2025.
We are not including the information on our website as a part of, nor incorporating it by reference into, this report. Additionally, the SEC maintains a website that contains annual, quarterly, and current reports, proxy statements, and other information that issuers (including us) file electronically with the SEC.
We are not including the information on our website as a part of, nor incorporating it by reference into, this report. Additionally, the SEC maintains a website that contains annual, quarterly, and current reports, proxy statements, and other information that issuers (including us) file electronically with the SEC. The SEC’s website address is http://www.sec.gov.
We believe 9 Table of Contents that the combination of a well-established antibiotic in a well-tolerated, easy to use foam makes Amzeeq a very attractive treatment option for patients. The topical acne market had almost 20 million prescriptions in 2022 according to Symphony Health, presenting significant unmet needs of patients and healthcare providers to be addressed.
We believe that the combination of a well-established antibiotic in a well-tolerated, easy to use foam makes Amzeeq a very attractive treatment option for patients. The topical acne market had almost 21 million prescriptions in 2023 according to Symphony Health, presenting significant unmet needs of patients and healthcare providers to be addressed.
According to The National Rosacea Society, it is estimated that rosacea affects well over 16 million Americans and as many as 415 million people worldwide. Rosacea is most frequently seen in adults between 30 and 50 years of age.
According to The National Rosacea Society, it is estimated that rosacea affects well over 16 million Americans (F1000Research 2018, 7(F1000 Faculty Rev):1885) and as many as 415 million people worldwide. Rosacea is most frequently seen in adults between 30 and 50 years of age.
Among the conditions of approval is the requirement that a manufacturer’s quality control and manufacturing procedures conform to cGMP. Manufacturers must expend significant time, money and effort to ensure continued compliance, and the FDA conducts periodic inspections to certify compliance.
As part of the approval process, the FDA must inspect and approve each manufacturing facility. Among the conditions of approval is the requirement that a manufacturer’s quality control and manufacturing procedures conform to cGMP. Manufacturers must expend significant time, money and effort to ensure continued compliance, and the FDA conducts periodic inspections to certify compliance.
Each of these individuals have deep-rooted and longstanding customer relationships in their respective territories. We have strategically optimized our sales outreach to cover over 80% of dermatologists in the top 50 U.S. metropolitan statistical areas and over 70% of the overall dermatology prescribing market.
Our current seasoned field sales force has deep-rooted and longstanding customer relationships in their respective territories. We have strategically optimized our sales outreach to cover over 80% of dermatologists in the top 50 U.S. metropolitan statistical areas and over 70% of the overall dermatology prescribing market.
We acquired global rights to DFD-29, including in the U.S. and Europe, except that DRL has retained certain rights to the program in select markets including Brazil, Russia, India and China.
We acquired global rights to DFD-29, including in the U.S. and Europe, except that DRL has retained certain rights to the program in select markets including Brazil, Russia, India, China and the Commonwealth of Independent States (“CIS”) countries.
We believe that the facilities of our third-party service providers are in substantial compliance with applicable environmental laws and regulations and we do not believe that future compliance will have a material adverse effect on our business, financial condition, results of operations or cash flows. Employees and Human Capital Management Our current headcount is 80 employees and contractors.
We believe that the facilities of our third-party service providers are in substantial compliance with applicable environmental laws and regulations, and we do not believe that future compliance costs will have a material adverse effect on our business, financial condition, results of operations or cash flows.
We are subject to, and required to be in compliance with, the DQSA. Our Company remains in compliance with the requirements promogulated by the DSCSA and intends on remaining vigilant with regards to any potential modifications to the act. For purposes of our business, we are considered both manufacturers and re-packagers under the act.
Our Company remains in compliance with the requirements promogulated by the DSCSA and intends on remaining vigilant with regards to any potential modifications to the act. For purposes of our business, we are considered both manufacturers and re-packagers under the act. Currently, we are in compliance with the DSCSA as it relates to our business and operations.
On February 11, 2022, we announced that our exclusive licensing partner in Japan, Maruho Co., Ltd. (“Maruho”), received marketing and manufacturing approval for Rapifort® Wipes 2.5% (Qbrexza®), for the treatment of primary axillary hyperhidrosis, triggering a net $2.5 million milestone payment to us.
On February 11, 2022, we announced that Maruho received marketing and manufacturing approval for Rapifort Wipes 2.5% (Qbrexza), for the treatment of primary axillary hyperhidrosis, triggering a net $2.5 million milestone payment to us.
There can be no assurance that any of our patents, licenses or other intellectual property rights will afford us any protection from competition or that our confidentiality agreements will not be breached, that we will have adequate remedies for any breach, that others will not independently develop equivalent proprietary information or that other third parties will not otherwise gain access to our trade secrets and other intellectual property.
These agreements may not, however, provide protection for our trade secrets in the event of unauthorized disclosure of such information. 19 Table of Contents There can be no assurance that any of our patents, licenses or other intellectual property rights will afford us any protection from competition, that our confidentiality agreements will not be breached, that we will have adequate remedies for any breach, that others will not independently develop equivalent proprietary information or that other third parties will not otherwise gain access to our trade secrets and other intellectual property.
Pursuant to these agreements with Rose U and the related agreement with Stiefel with respect to Qbrexza, we are obligated to pay Rose U low-to-mid single-digit royalties on net product sales and low double-digit royalties on sublicense fees and certain milestone, royalty and other contingent payments received from sublicensees, to the extent such amounts are in excess of the milestone and royalty payments we are obligated to pay Rose U directly upon the events or sales triggering such payments.
Pursuant to these agreements with Rose U and the related agreement with Stiefel with respect to Qbrexza, we are obligated to pay Rose U low-to-mid single-digit royalties on net product sales and low double-digit royalties on sublicense fees and certain milestone, royalty and other contingent payments received from sublicensees, to the extent such amounts are in excess of the milestone and royalty payments we are obligated to pay Rose U directly upon the events or sales triggering such payments. 15 Table of Contents We are permitted to grant sublicenses to the licensed rights and may assign the agreements upon our acquisition or that of our assets that relate to the license agreement.
Other Healthcare Laws and Compliance Requirements In the United States, our activities are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including the Centers for Medicare and Medicaid Services (formerly the Health Care Financing Administration), other divisions of the United States Department of Health and Human Services, the United States Department of Justice and individual United States Attorney offices within the Department of Justice, and state and local governments.
Other Healthcare Laws and Compliance Requirements In the United States, our activities are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including the Centers for Medicare and Medicaid Services (formerly the Health Care Financing Administration), other divisions of the United States Department of Health and Human Services, the United States Department of Justice and individual United States Attorney offices within the Department of Justice, and state and local governments. 25 Table of Contents Drug Quality and Security Act (“DQSA”) DQSA was enacted by Congress on November 27, 2013.
The remaining $7.0 million will be made starting on the second anniversary and for the next four anniversaries of the Ximino APA thereafter. In addition, we are obligated to pay royalties in the mid-single digits based on net sales of Ximino, subject to specified reductions until the end of 2022. The Ximino APA contains customary representations, warranties, and indemnities.
Pursuant to the terms of the Ximino APA, the remaining $7.0 million is due on the second anniversary and for the next four anniversaries of the Ximino APA thereafter. In addition, we are obligated to pay royalties in the mid-single digits based on net sales of Ximino, subject to specified reductions until the end of 2022.
Violations of the FDCA or regulatory requirements at any time during the product development process, approval process, or marketing and sale following approval may result in agency enforcement actions, including withdrawal of approval, recall, seizure of products, warning letters, injunctions, fines and/or civil or criminal penalties. Any agency enforcement action could have a material adverse effect on our business.
Violations of the FDCA or regulatory requirements at any time during the product development process, approval process, or marketing and sale following approval may result in agency enforcement actions, including withdrawal of approval, recall, seizure of products, warning letters, untitled letters, Form 483s, injunctions, fines and/or civil or criminal penalties.
Pharmaceutical Coverage, Pricing and Reimbursement Sales of any pharmaceutical product depend, in part, on the extent to which such product will be covered by third-party payors, such as federal, state, and foreign government healthcare programs, commercial insurance, and managed healthcare organizations, and the level of reimbursement for such product by third-party payors.
Any agency enforcement action could have a material adverse effect on our business. 23 Table of Contents Pharmaceutical Coverage, Pricing and Reimbursement Sales of any pharmaceutical product depend, in part, on the extent to which such product will be covered by third-party payors, such as federal, state, and foreign government healthcare programs, commercial insurance, and managed healthcare organizations, and the level of reimbursement for such product by third-party payors.
If we are not able to come into compliance of this rule, our wholesale distributor customers may not accept our returns on our behalf. ​
If we are not able to come into compliance of this rule, our wholesale distributor customers may not accept our returns on our behalf. We are subject to, and required to be in compliance with, the DQSA.
Fortress has a talented and experienced business development team, comprised of scientists, doctors, and finance professionals, who identify, evaluate, and propose for our consideration promising products and product candidates.
Fortress has a talented and experienced business development team, comprised of scientists, doctors, and finance professionals, who identify, evaluate, and propose for our consideration promising products and product candidates. We have a nine-year operating history and we are a majority owned subsidiary of Fortress.
The tetracycline class of antibiotics (minocycline and doxycycline) are considered to be effective options for treatment of papulopustular rosacea, likely due to anti-inflammatory activities that are usually manifested at doses much lower than those prescribed for treatment of bacterial infections.
The rosacea market had 3.8 million prescriptions in 2023 according to Symphony Health. 10 Table of Contents The tetracycline class of antibiotics (minocycline and doxycycline) are considered to be effective options for the treatment of papulopustular rosacea, likely due to anti-inflammatory activities that are usually manifested at doses much lower than those prescribed for treatment of bacterial infections.
Additional Intellectual Property and Proprietary Right Protection We also use other forms of protection, such as trademark, copyright, and trade secret protection, to protect our intellectual property, particularly where we do not believe patent protection is appropriate or obtainable.
The three issued U.S. patents will expire in 2039. 18 Table of Contents Additional Intellectual Property and Proprietary Right Protection We also use other forms of protection, such as trademark, copyright, and trade secret protection, to protect our intellectual property, particularly where we do not believe patent protection is appropriate or obtainable.
We own 11 of the issued U.S. patents, three of the pending U.S. patent applications, 18 of the issued foreign patents, and six of the pending foreign applications, and have exclusively licensed from Rose U worldwide rights to four of the issued U.S. patents, one pending U.S. patent application, ten issued foreign patents, and two pending foreign patent applications.
We own fourteen of the issued U.S. patents, both of the pending U.S. patent applications, twenty of the issued foreign patents, and two of the pending foreign applications, and have exclusively licensed from Rose U worldwide rights to four of the issued U.S. patents, seventeen issued foreign patents, and one pending foreign patent applications.
This provides dispensers three additional years to comply with this requirement. 25 Table of Contents Although the rule regarding wholesale distributor verification of saleable returned products does not directly apply to our Company, we will be required to assist our wholesale distributor customers by setting in place mechanics that would allow for traceability of returns in the supply chain.
Although the rule regarding wholesale distributor verification of saleable returned products does not directly apply to our Company, we are required to assist our wholesale distributor customers by setting in place mechanics that would allow for traceability of returns in the supply chain.
We have ongoing discussions with an array of companies, including traditional large pharma, mid-size specialty pharma companies and smaller companies that focus on research and development, although we have not entered into any definitive agreements or arrangements. ● Focus on cost management and efficient capital allocation . We have operated in a cost-conscious and capital efficient manner since inception.
We regularly engage in discussions with an array of companies, including traditional large pharma, mid-size specialty pharma companies and smaller companies that focus on research and development, although we have not entered into any definitive agreements or arrangements.
This threshold was achieved in 2020 and paid in early 2021. We are obligated to pay royalties in the low-double digits based on net sales of Exelderm until the end of 2023, and no additional licensing or milestone payments are required. We commenced sales of this product in August 2018.
We were obligated to pay royalties in the low-double digits based on net sales of Exelderm until the end of 2023, and no additional licensing or milestone payments are required.
PHRMA Code and April 3, 2003 Department of Health and Human Services Office of Inspector General, OIG Compliance Program for Pharmaceutical Manufacturers We have established and implemented a corporate compliance program designed to prevent, detect and correct violations of state and federal healthcare laws, including laws related to advertising and promotion of our products that are in compliance with the PHRMA Code and the Health and Human Services Office of Inspector General (“OIG”) Compliance Program requirements for Pharmaceutical Manufacturers.
PHRMA Code and April 3, 2003 Department of Health and Human Services Office of Inspector General, OIG Compliance Program for Pharmaceutical Manufacturers We have established and implemented a corporate compliance program designed to prevent, detect and correct violations of state and federal healthcare laws, including laws related to advertising and promotion of our products that are in compliance with the PHRMA Code and the Health and Human Services Office of Inspector General (“OIG”) Compliance Program requirements for Pharmaceutical Manufacturers. 24 Table of Contents Healthcare Fraud, Waste and Abuse We are subject to various federal, state and local laws targeting fraud and abuse in the healthcare industry, violations of which can lead to civil and criminal penalties, including fines, imprisonment and exclusion from participation in federal healthcare programs.
We are a majority owned subsidiary of Fortress. Fortress is a biopharmaceutical company dedicated to acquiring, developing and commercializing pharmaceutical and biotechnology products and product candidates at its majority-owned and majority-controlled subsidiaries and joint ventures, and at entities founded by Fortress and in which it maintains significant minority ownership positions.
There are no assurances that these historical trends will continue in the future. Relationship with Fortress General Fortress is a biopharmaceutical company dedicated to acquiring, developing and commercializing pharmaceutical and biotechnology products and product candidates at its majority-owned and majority-controlled subsidiaries and joint ventures, and at entities founded by Fortress and in which it maintains significant minority ownership positions.
The issued U.S. and foreign patents relating to Zilxi will expire between 2030 and 2037 and the pending U.S. and foreign patent applications relating to Zilxi will expire between 2030 and 2037. ● Other Patents related to molecular stabilizing platform but not products directly are 11 issued U.S. patents, 3 pending U.S. patent applications, and 2 pending foreign applications (Canada and Taiwan) as well as 1 pending PCT application.
The issued U.S. and foreign patents relating to Zilxi will expire between 2030 and 2037 and the pending U.S. and foreign patent applications relating to Zilxi will expire between 2030 and 2037. ● The other patents related to molecular stabilizing platform but not products directly are sixteen issued U.S. patents, three pending U.S. patent applications, and five issued foreign patents (Canada, Israel, and Mexico).
Ximino® for the Treatment of Inflammatory Lesions of Non-Nodular Moderate to Severe Acne Ximino® (minocycline hydrochloride extended-release 45mg, 90mg, and 135mg capsules) is indicated for the treatment of inflammatory non-nodular lesions (pimples and red bumps) associated with moderate to severe acne. Minocycline is part of a class of oral antibiotics known as tetracyclines.
Ximino® for the Treatment of Inflammatory Lesions of Non-Nodular Moderate to Severe Acne During fiscal 2022 and part of fiscal 2023, we marketed and sold Ximino® (minocycline hydrochloride extended-release 45mg, 90mg, and 135mg capsules), which is indicated for the treatment of inflammatory non-nodular lesions (pimples and red bumps) associated with moderate to severe acne.
The issued U.S. and foreign patents relating to Amzeeq will expire between 2030 and 2037 and the pending U.S. and foreign patent applications relating to Amzeeq will expire between 2030 and 2037. ● There are 8 issued U.S. patents, 9 issued foreign patents (Australia, Canada, Israel, Mexico, South Africa), 2 pending U.S. patent applications and 4 pending foreign applications (India, EPO, Canada), all relating to Zilxi.
The issued U.S. and foreign patents relating to Amzeeq will expire between 2030 and 2037 and the pending U.S. and foreign patent applications relating to Amzeeq will expire between 2030 and 2037. ● There are fourteen issued U.S. patents, fifteen issued foreign patents (Australia, Canada, Europe, Israel, Mexico, United Kingdom, South Africa), four pending U.S. patent applications and one pending foreign application (Canada), all relating to Zilxi.
To successfully compete for business with managed care and pharmacy benefits management organizations, we 20 Table of Contents must often demonstrate that our products offer not only medical benefits, but also cost advantages as compared with other forms of care. Generic products generally face intense competition from other generic equivalents (including authorized generics) and therapeutically similar branded or generic products.
To successfully compete for business with managed care and pharmacy benefits management organizations, we must often demonstrate that our products offer not only medical benefits, but also cost advantages as compared with other forms of care.
Among rosacea patients with severe symptoms, 88% said the disorder had adversely affected their professional interactions, and 51% said they had missed work because of their condition. The rosacea market had 3.6 million prescriptions in 2022 and 3.4 million prescriptions in 2021 according to Symphony Health.
Among rosacea patients with severe symptoms, 88% said the disorder had adversely affected their professional interactions, and 51% said they had missed work because of their condition.
Three of our marketed products, Accutane, Targadox, and Exelderm, do not have patent protection and/or otherwise not eligible for patent protection. As part of our development and acquisition strategy, we place a strong emphasis on the patent protection for potential products.
As part of our development and acquisition strategy, we place a strong emphasis on the patent protection for potential products.
Of these patents and patent applications: There are 15 issued U.S. patents, 28 issued foreign patents (AU, CA, selected EP member states, Mexico, Japan, Hong Kong, Korea, New Zealand, Singapore, and South Africa), four pending U.S. patent applications and eight pending foreign applications (in Canada, the European Patent Office, Mexico, Japan, Hong Kong, and Korea) as well as one pending PCT application, all relating to Qbrexza.
Of these patents and patent applications: There are eighteen issued U.S. patents, thirty seven issued foreign patents (AU, CA, selected EP member states, Mexico, Japan, Hong Kong, Korea, New Zealand, Singapore, and South Africa), two pending U.S. patent applications and three pending foreign applications (in Israel and Hong Kong), all relating to Qbrexza.
The principal purpose of our equity incentive plan is to attract, retain, and motivate selected employees, consultants, and directors through the granting of share-based compensation awards and cash-based bonus awards.
The principal purpose of our equity incentive plan is to attract, retain, and motivate selected employees, consultants, and directors through the granting of share-based compensation awards and cash-based bonus awards. Geographic Areas All of our product revenues are generated from operations or otherwise earned within the U.S.
OTC products typically include known antifungal ingredients such as clotrimazole, miconazole, terbinafine or ketoconazole. Prescription treatments are often reserved for more serious infection or for those in hard-to-treat areas.
Where difficult to administer topically, oral options (such as for toenail fungus or oral thrush) or suppositories (such as for vaginal yeast infections) have proven to be more effective. OTC products typically include known antifungal ingredients such as clotrimazole, miconazole, terbinafine or ketoconazole. Prescription treatments are often reserved for more serious infection or for those in hard-to-treat areas.
For the first two years, we are required to pay royalties on sales ranging from the mid-thirty to the mid-twenty percent and, thereafter royalties ranging from the lower teen digits to the upper teen digits are payable on net sales of Qbrexza products. Subject to certain reductions, royalties are payable for a period of eight years.
Thereafter, we are required to pay royalties on Qbrexza net sales ranging from the lower teen digits to the upper teen digits, which are payable for a period of eight years ending in 2029, subject to certain reductions. The Qbrexza APA contains customary representations, warranties, and indemnities.
We are permitted to grant sublicenses to the licensed rights and may assign the agreements upon our acquisition or that of our assets that relate to the license agreement. We may terminate the license agreement if Rose U experiences certain insolvency events or if Rose U commits a material breach of the license agreement, subject to applicable cure provisions.
We may terminate the license agreement if Rose U experiences certain insolvency events or if Rose U commits a material breach of the license agreement, subject to applicable cure provisions.
Our major competitors, including Galderma Laboratories, Almirall, Verrica Pharmaceuticals, MC2 Therapeutics, Novan Therapeutics, Sun Pharma, Leo Pharma, Arcutis Biotherapeutics, Mayne Pharma, Dermavant Sciences, Botanix Pharmaceuticals, and Ortho Dermatologics, among others, vary depending on therapeutic and product category, dosage strength and drug-delivery systems, among other factors.
Accordingly, we face pressure to continually seek out technological innovations and to market our products effectively. Our major competitors, including Galderma Laboratories, Almirall, Novan Therapeutics, Leo Pharma, Mayne Pharma, Botanix Pharmaceuticals, and Ortho Dermatologics, among others, vary depending on therapeutic and product category, dosage strength and drug-delivery systems, among other factors.
The term of the Targadox Agreement is ten years and automatically renews for three-year periods unless either party provides notice of its intent not to 16 Table of Contents renew at least 180 days prior to the expiration of the applicable term.
Further payments will be made based on a revenue sharing arrangement and no additional licensing or milestone payments are required. The term of the Targadox Agreement is ten years and automatically renews for three-year periods unless either party provides notice of its intent not to renew at least 180 days prior to the expiration of the applicable term.
Through this collaboration, the parties will work together to complete the development of DFD-29, which includes conducting two Phase III studies to assess the efficacy, safety and tolerability of oral DFD-29 for the treatment of rosacea and the regulatory submission of a new drug application (“NDA”) under Section 505(b)(2) of the United States Federal Food, Drug and Cosmetic Act (“FDCA”).
Through this collaboration, the parties were required to work together to complete the development of DFD-29, which included conducting two Phase III studies to assess the efficacy, safety and tolerability of oral DFD-29 for the treatment of rosacea and the January 4, 2024 regulatory submission of an NDA under Section 505(b)(2) of the FDCA.
Amzeeq, Zilxi & the Molecular Stabilizing Technology Platform We own 25 issued U.S. patents and 10 issued foreign patents, and 7 pending U.S. patent applications, 1 pending Patent Cooperation Treaty application, and 6 pending foreign patent applications.
Amzeeq, Zilxi & the Molecular Stabilizing Technology Platform Patents We own thirty nine issued U.S. patents and twenty issued foreign patents, and nine pending U.S. patent applications, and two pending foreign patent applications.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe degree of market acceptance of our products or any other potential product candidate we may develop, license or acquire will depend on a number of factors, including: ● the success of any potential clinic studies during the drug development process; ● limitations or warnings contained in the product’s FDA-approved labeling; ● changes in the standard of care for the targeted indications for any current or future product candidates, which could reduce the marketing impact of any superiority claims that we could make following FDA approval; ● ability to be listed on formularies (lists of recommended or approved medicines and other products) and reimbursement lists by demonstrating the qualities and treatment benefits of our products within their approved indications; and ● potential advantages over, and availability of, alternative treatments. 34 Table of Contents Our ability to effectively promote and sell our products and any other current or future product candidates we may develop, license or acquire in the marketplace will also depend on pricing and cost effectiveness, including our ability to produce a product at a competitive price and achieve acceptance of the product onto formularies, as well as our ability to obtain sufficient third-party coverage or reimbursement.
Biggest changeThe degree of market acceptance of our products or any other potential product candidate we may develop, license or acquire will depend on a number of factors, including: ● the success of any potential clinical studies during the drug development process; ● limitations of use, contraindications, or warnings contained in the product’s FDA-approved labeling; ● changes in the standard of care for the targeted indications for any current or future product candidates, which could reduce the marketing impact of any superiority claims that we could make following FDA approval; 35 Table of Contents ● ability to be listed on formularies (lists of recommended or approved medicines and other products) and reimbursement lists by demonstrating the qualities and treatment benefits of our products within their approved indications; and ● potential advantages over, and availability of, alternative treatments.
Even if we do achieve sustainable profitability, we may not be able to maintain or increase profitability on a quarterly or annual basis. Our failure to remain profitable would depress our value and could impair our ability to raise capital, expand our business, maintain initiate any research and development efforts, diversify our product offerings or even continue our operations.
Even if we do achieve sustainable profitability, we may not be able to maintain or increase profitability on a quarterly or annual basis. Our failure to remain profitable would depress our value and could impair our ability to raise capital, expand our business, maintain or initiate any research and development efforts, diversify our product offerings or even continue our operations.
Further, for a period of (10) ten years from the date of the first issuance of shares of Class A Common Stock, the holders of record of the shares of Class A Common Stock (or other capital stock or securities issued upon conversion of or in exchange for the Class A Common Stock), exclusively and as a separate class, shall be entitled to appoint or elect the majority of the directors of Journey.
Further, for a period of ten (10) years from the date of the first issuance of shares of Class A Common Stock, the holders of record of the shares of Class A Common Stock (or other capital stock or securities issued upon conversion of or in exchange for the Class A Common Stock), exclusively and as a separate class, shall be entitled to appoint or elect the majority of the directors of Journey.
In addition, we, any partner with which we currently or may in the future collaborate, the FDA, an institutional review board (“IRB”) or other regulatory authorities, including state and local agencies and counterpart agencies in foreign countries, may suspend, delay, require modifications to or terminate our clinical trials at any time, for various reasons, including: ● discovery of serious or unexpected adverse events, toxicities, or side effects experienced by study participants or other safety issues; ● lack of effectiveness of any product candidate during clinical trials or the failure of a product candidate to meet specified endpoints; 41 Table of Contents ● slower than expected rates of subject recruitment and patient enrollment in clinical trials resulting from numerous factors, including the prevalence of other companies’ clinical trials for their product candidates for the same indication, such as atopic dermatitis; ● difficulty in retaining subjects who have initiated participation in a clinical trial but may withdraw at any time due to adverse side effects from the therapy, insufficient efficacy, fatigue with the clinical trial process or for any other reason; ● difficulty in obtaining IRB approval for studies to be conducted at each site; ● delays in manufacturing or obtaining, or inability to manufacture or obtain, sufficient quantities of materials for use in clinical trials; ● inadequacy of or changes in our manufacturing process or the product formulation or method of delivery; ● changes in applicable laws, regulations and regulatory policies; ● delays or failure in reaching agreement on acceptable terms in clinical trial contracts or protocols with prospective CROs, clinical trial sites and other third-party contractors; ● inability to add a sufficient number of clinical trial sites; ● uncertainty regarding proper dosing; ● failure of our contract research organizations (“CROs”) or other third-party contractors to comply with contractual and regulatory requirements or to perform their services in a timely or acceptable manner; ● failure by us, our employees, our CROs or their employees or any partner with which we may collaborate or their employees to comply with applicable FDA or other regulatory requirements relating to the con-duct of clinical trials or the handling, storage, security and recordkeeping for drug and biologic products; ● scheduling conflicts with participating clinicians and clinical institutions; ● failure to design appropriate clinical trial protocols; ● inability or unwillingness of medical investigators to follow our clinical protocols; ● difficulty in maintaining contact with subjects during or after treatment, which may result in incomplete data; or ● insufficient data to support regulatory approval.
In addition, we, any partner with which we currently or may in the future collaborate, the FDA, an institutional review board (“IRB”) or other regulatory authorities, including state and local agencies and counterpart agencies in foreign countries, may suspend, delay, require modifications to or terminate our clinical trials at any time, for various reasons, including: ● discovery of serious or unexpected adverse events, toxicities, or side effects experienced by study participants or other safety issues; ● lack of effectiveness of any product candidate during clinical trials or the failure of a product candidate to meet specified endpoints; ● slower than expected rates of subject recruitment and patient enrollment in clinical trials resulting from numerous factors, including the prevalence of other companies’ clinical trials for their product candidates for the same indication, such as atopic dermatitis; ● difficulty in retaining subjects who have initiated participation in a clinical trial but may withdraw at any time due to adverse side effects from the therapy, insufficient efficacy, fatigue with the clinical trial process or for any other reason; ● difficulty in obtaining IRB approval for studies to be conducted at each site; ● delays in manufacturing or obtaining, or inability to manufacture or obtain, sufficient quantities of materials for use in clinical trials; ● inadequacy of or changes in our manufacturing process or the product formulation or method of delivery; ● changes in applicable laws, regulations and regulatory policies; ● delays or failure in reaching agreement on acceptable terms in clinical trial contracts or protocols with prospective CROs, clinical trial sites and other third-party contractors; 43 Table of Contents ● inability to add a sufficient number of clinical trial sites; ● uncertainty regarding proper dosing; ● failure of our contract research organizations (“CROs”) or other third-party contractors to comply with contractual and regulatory requirements or to perform their services in a timely or acceptable manner; ● failure by us, our employees, our CROs or their employees or any partner with which we may collaborate or their employees to comply with applicable FDA or other regulatory requirements relating to the con-duct of clinical trials or the handling, storage, security and recordkeeping for drug and biologic products; ● scheduling conflicts with participating clinicians and clinical institutions; ● failure to design appropriate clinical trial protocols; ● inability or unwillingness of medical investigators to follow our clinical protocols; ● difficulty in maintaining contact with subjects during or after treatment, which may result in incomplete data; or ● insufficient data to support regulatory approval.
The clinical success of our current and any future product candidates will depend on a number of factors, including the following: ● our ability to raise additional capital on acceptable terms, or at all; 40 Table of Contents ● timely completion of our clinical trials, which may be significantly slower or cost more than we currently anticipate and will depend substantially upon the performance of third-party contractors as well as our ability to timely recruit and enroll patients in our clinical trials, which may be delayed due to numerous factors, including the prevalence of other companies’ clinical trials for their product candidates for the same or similar indications; ● whether we are required by the FDA or similar foreign regulatory agencies to conduct additional clinical trials or other studies beyond those planned to support the approval and commercialization of our current or any future product candidates; ● acceptance of our proposed indications and primary endpoint assessments relating to the proposed indications of our current or any future product candidates by the FDA and similar foreign regulatory authorities; ● our ability to demonstrate to the satisfaction of the FDA and similar foreign regulatory authorities the safety, efficacy and acceptable risk to benefit profile of our current or any future product candidates; ● the prevalence, duration and severity of potential side effects experienced with our current or any future product candidates; ● the timely receipt of necessary marketing approvals from the FDA and similar foreign regulatory authorities; ● achieving and maintaining, and, where applicable, ensuring that our third-party contractors achieve and maintain, compliance with our contractual obligations and with all regulatory requirements applicable to our current or any future product candidates; ● our ability to successfully obtain the substances and materials used in our current or any future product candidates from third parties and to have finished products manufactured by third parties in accordance with regulatory requirements and in sufficient quantities for preclinical and clinical testing; ● the ability of third parties with whom we contract to manufacture clinical trial supplies of our current or any future product candidates, remain in good standing with regulatory agencies and develop, validate and maintain commercially viable manufacturing processes that are compliant with cGMP; and ● a continued acceptable safety profile during clinical development of our current or any future product candidates.
The clinical success of our current and any future product candidates will depend on a number of factors, including the following: ● our ability to raise additional capital on acceptable terms, or at all; ● timely completion of our clinical trials, which may be significantly slower or cost more than we currently anticipate and will depend substantially upon the performance of third-party contractors as well as our ability to timely recruit and enroll patients in our clinical trials, which may be delayed due to numerous factors, including the prevalence of other companies’ clinical trials for their product candidates for the same or similar indications; ● whether we are required by the FDA or similar foreign regulatory agencies to conduct additional clinical trials or other studies beyond those planned to support the approval and commercialization of our current or any future product candidates; ● acceptance of our proposed indications and primary endpoint assessments relating to the proposed indications of our current or any future product candidates by the FDA and similar foreign regulatory authorities; ● our ability to demonstrate to the satisfaction of the FDA and similar foreign regulatory authorities the safety, efficacy and acceptable risk to benefit profile of our current or any future product candidates; ● the prevalence, duration and severity of potential side effects experienced with our current or any future product candidates; ● the timely receipt of necessary marketing approvals from the FDA and similar foreign regulatory authorities; 42 Table of Contents ● achieving and maintaining, and, where applicable, ensuring that our third-party contractors achieve and maintain, compliance with our contractual obligations and with all regulatory requirements applicable to our current or any future product candidates; ● our ability to successfully obtain the substances and materials used in our current or any future product candidates from third parties and to have finished products manufactured by third parties in accordance with regulatory requirements and in sufficient quantities for preclinical and clinical testing; ● the ability of third parties with whom we contract to manufacture clinical trial supplies of our current or any future product candidates, remain in good standing with regulatory agencies and develop, validate and maintain commercially viable manufacturing processes that are compliant with cGMP; and ● a continued acceptable safety profile during clinical development of our current or any future product candidates.
The FDA and foreign regulatory bodies have substantial discretion in the drug approval process, including the ability to delay, limit or deny approval of product candidates for many reasons, including: ● the FDA or the applicable foreign regulatory body may disagree with the design, implementation, choice of dose, analysis plans or interpretation of the outcome of one or more clinical trials; ● the FDA or the applicable foreign regulatory body may not deem a product candidate safe and effective for its proposed indication, or may deem a product candidate’s safety or other perceived risks to out-weigh its clinical or other benefits; ● the FDA or the applicable foreign regulatory body may not find the data from preclinical studies and clinical trials, including the number of subjects in the safety database, sufficient to support approval, or the results of clinical trials may not meet the level of statistical or clinical significance required by the FDA or the applicable foreign regulatory body for approval; ● the FDA or the applicable foreign regulatory body may disagree with our interpretation of data from pre-clinical studies or clinical trials performed by us or third parties, or with the interpretation of any partner with which we may collaborate; ● the data collected from clinical trials may not be sufficient to support the submission and approval of an NDA, BLA or other applicable regulatory filing; ● the FDA or the applicable foreign regulatory body may require additional preclinical studies or clinical trials; ● the FDA or the applicable foreign regulatory agency may identify deficiencies in the formulation, manufacturing, quality control, labeling or specifications of our current or any future product candidates; ● the FDA or the applicable foreign regulatory agency may require clinical trials in pediatric patients in order to establish pharmacokinetics or safety for this more drug-sensitive population; ● the FDA or the applicable foreign regulatory agency may grant approval contingent on the performance of costly additional post-approval clinical trials; 44 Table of Contents ● the FDA or the applicable foreign regulatory agency may grant approval but impose substantial and costly post-approval requirements; ● the FDA or the applicable foreign regulatory agency may approve our current or any future product candidates for a more limited indication or a narrower patient population than we originally requested; ● the FDA or applicable foreign regulatory agency may not approve the labeling that we believe is necessary or desirable for the successful commercialization of our current or any future product candidates; ● the FDA or the applicable foreign regulatory body may not approve of the manufacturing processes, controls or facilities of third-party manufacturers or testing labs with which we contract; or ● the FDA or the applicable foreign regulatory body may change its approval policies or adopt new regulations in a manner rendering our clinical data or regulatory filings insufficient for approval.
The FDA and foreign regulatory bodies have substantial discretion in the drug approval process, including the ability to delay, limit or deny approval of product candidates for many reasons, including: ● the FDA or the applicable foreign regulatory body may disagree with the design, implementation, choice of dose, analysis plans or interpretation of the outcome of one or more clinical trials; ● the FDA or the applicable foreign regulatory body may not deem a product candidate safe and effective for its proposed indication, or may deem a product candidate’s safety or other perceived risks to out-weigh its clinical or other benefits; ● the FDA or the applicable foreign regulatory body may not find the data from preclinical studies and clinical trials, including the number of subjects in the safety database, sufficient to support approval, or the results of clinical trials may not meet the level of statistical or clinical significance required by the FDA or the applicable foreign regulatory body for approval; ● the FDA or the applicable foreign regulatory body may disagree with our interpretation of data from pre-clinical studies or clinical trials performed by us or third parties, or with the interpretation of any partner with which we may collaborate; ● the data collected from clinical trials may not be sufficient to support the submission and approval of an NDA, BLA or other applicable regulatory filing; ● the FDA or the applicable foreign regulatory body may require additional preclinical studies or clinical trials; ● the FDA or the applicable foreign regulatory agency may identify deficiencies in the formulation, manufacturing, quality control, labeling or specifications of our current or any future product candidates; ● the FDA or the applicable foreign regulatory agency may require clinical trials in pediatric patients in order to establish pharmacokinetics or safety for this more drug-sensitive population; ● the FDA or the applicable foreign regulatory agency may grant approval contingent on the performance of costly additional post-approval clinical trials; ● the FDA or the applicable foreign regulatory agency may grant approval but impose substantial and costly post-approval requirements; ● the FDA or the applicable foreign regulatory agency may approve our current or any future product candidates for a more limited indication or a narrower patient population than we originally requested; ● the FDA or applicable foreign regulatory agency may not approve the labeling that we believe is necessary or desirable for the successful commercialization of our current or any future product candidates; ● the FDA or the applicable foreign regulatory body may not approve of the manufacturing processes, controls or facilities of third-party manufacturers or testing labs with which we contract; or ● the FDA or the applicable foreign regulatory body may change its approval policies or adopt new regulations in a manner rendering our clinical data or regulatory filings insufficient for approval.
Factors that may inhibit our efforts to maintain our current products’ marketing and sales organizations and/or commercialize any future products on our own include: ● our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel; ● the inability of sales personnel to obtain access to physicians and other healthcare providers or persuade adequate numbers of physicians and other healthcare providers to prescribe any future products; ● the lack of complementary or other products to be offered by sales personnel, which may put us at a competitive disadvantage from the perspective of sales efficiency relative to companies with more extensive product lines; and ● unforeseen costs and expenses associated with creating an independent sales and marketing organization. 35 Table of Contents We are dependent on third parties to supply raw materials used in our products, to manufacture our products, and to provide services for certain core aspects of our business.
Factors that may inhibit our efforts to maintain our current products’ marketing and sales organizations and/or commercialize any future products on our own include: ● our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel; ● the inability of sales personnel to obtain access to physicians and other healthcare providers or persuade adequate numbers of physicians and other healthcare providers to prescribe any future products; ● the lack of complementary or other products to be offered by sales personnel, which may put us at a competitive disadvantage from the perspective of sales efficiency relative to companies with more extensive product lines; and ● unforeseen costs and expenses associated with creating an independent sales and marketing organization. 36 Table of Contents We are dependent on third parties to supply raw materials used in our products, to manufacture our products, and to provide services for certain core aspects of our business.
The establishment, development, and/or expansion of a field sales force, either by us or certain of our partners or vendors, or the establishment of a contract field sales force to market any products for which we may have or receive marketing approval, is expensive and time-consuming and could delay any such product launch or compromise the successful commercialization of such products.
The establishment, development, and/or expansion of a field sales force, either by us or certain of our partners or vendors, or the establishment of a field sales force to market any products for which we may have or receive marketing approval, is expensive and time-consuming and could delay any such product launch or compromise the successful commercialization of such products.
Any of these events could prevent us from achieving or maintaining market acceptance of any current or future product candidate or could substantially increase our commercialization costs and expenses, which could delay or prevent us from generating significant revenues. All of our current and future products will remain subject to substantial regulatory scrutiny even after receiving regulatory approval.
Any of these events could prevent us from achieving or maintaining market acceptance of any current or future product candidate or could substantially increase our development and commercialization costs and expenses, which could delay or prevent us from generating significant revenues. All of our current and future products will remain subject to substantial regulatory scrutiny even after receiving regulatory approval.
Our future funding requirements will depend on many factors, including, but not limited to: ● the potential for delays in our efforts to seek regulatory approval for any current or future product candidates, and any costs associated with such delays; ● the costs of maintaining and/or establishing a commercial organization to sell, market and distribute our products and/or current or future product candidates; ● the rate of progress and costs of our efforts to prepare for the submission of NDA or BLA for any product candidates that we may in-license or acquire in the future, and the potential that we may need to conduct additional clinical trials to support applications for regulatory approval; ● the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights associated with any current or future product candidates, including any such costs we may be required to expend if licensors are unwilling or unable to do so; ● the cost and timing of securing sufficient supplies of our products and current or future product candidates from our contract manufacturers in preparation for commercialization, manufacture, and/or sale; ● the effect of competing technological and market developments; ● the terms and timing of any collaborative, licensing, co-promotion or other arrangements that we may establish; ● the potential that we may be required to file a lawsuit to defend our patent rights or regulatory exclusivities from challenges by companies seeking to market generic versions of our branded products; and ● the success of sales efforts of our current products and/or the commercialization of any current or future product candidates.
Our future funding requirements will depend on many factors, including, but not limited to: ● the potential for delays in our efforts to seek regulatory approval for any current or future product candidates, and any costs associated with such delays; ● the costs of maintaining and/or establishing a commercial organization to sell, market and distribute our products and/or current or future product candidates; ● the rate of progress and costs of our efforts to prepare for the submission of NDA or BLA for any product candidates that we may in-license or acquire in the future, and the potential that we may need to conduct additional clinical trials to support applications for regulatory approval; 53 Table of Contents ● the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights associated with any current or future product candidates, including any such costs we may be required to expend if licensors are unwilling or unable to do so; ● the cost and timing of securing sufficient supplies of our products and current or future product candidates from our contract manufacturers in preparation for commercialization, manufacture, and/or sale; ● the effect of competing technological and market developments; ● the terms and timing of any collaborative, licensing, co-promotion or other arrangements that we may establish; ● the potential that we may be required to file a lawsuit to defend our patent rights or regulatory exclusivities from challenges by companies seeking to market generic versions of our branded products; and ● the success of sales efforts of our current products and/or the commercialization of any current or future product candidates.
We anticipate that our expenses will increase substantially if: ● our current or any future product candidates are approved for commercial sale, due to our ability to establish the necessary commercial infrastructure to launch this product candidate without substantial delays, including hiring sales and marketing personnel and contracting with third parties for warehousing, distribution, cash collection and related commercial activities; ● we acquire or in-license new products for development and/or sale; ● we are required by the FDA, or foreign regulatory authorities, to perform studies in addition to those currently expected; ● there are any delays in completing our clinical trials or the development of our current or any future product candidates; ● we execute other collaborative, licensing or similar arrangements that require us to make payments and/ or expend funds; ● there are variations in the level of expenses related to our future development programs; ● there are any product liability or intellectual property infringement lawsuits in which we may become involved; ● there are any regulatory developments affecting our products, current or future product candidates, or the product candidates of our competitors; and ● the level of underlying demand for our products and wholesalers’ buying patterns.
We anticipate that our expenses will increase substantially if: ● our current or any future product candidates are approved for commercial sale, due to our ability to establish the necessary commercial infrastructure to launch this product candidate without substantial delays, including hiring sales and marketing personnel and contracting with third parties for warehousing, distribution, cash collection and related commercial activities; ● we acquire or in-license new products for development and/or sale; ● we are required by the FDA, or foreign regulatory authorities, to perform studies in addition to those currently expected; 52 Table of Contents ● there are any delays in completing our clinical trials or the development of our current or any future product candidates; ● we execute other collaborative, licensing or similar arrangements that require us to make payments and/ or expend funds; ● there are variations in the level of expenses related to our future development programs; ● there are any product liability or intellectual property infringement lawsuits in which we may become involved; ● there are any regulatory developments affecting our products, current or future product candidates, or the product candidates of our competitors; or ● the level of underlying demand for our products and wholesalers’ buying patterns.
Regardless of merit or eventual outcome, liability claims may result in: ● termination of clinical trial sites or entire trial programs or withdrawal of clinical trial participants; ● regulatory investigations by governmental authorities related to regulatory issues or alleged non-compliances; ● litigation costs and potential monetary awards to patients or other claimants; 37 Table of Contents ● harm to our reputation and/or decreased demand for our products and corresponding revenue loss; ● reduced resources of our management to pursue our business strategy; and ● the inability to commercialize our current products or any current or future product candidates.
Regardless of merit or eventual outcome, liability claims may result in: ● termination of clinical trial sites or entire trial programs or withdrawal of clinical trial participants; ● regulatory investigations by governmental authorities related to regulatory issues or alleged non-compliances; ● litigation costs and potential monetary awards to patients or other claimants; 38 Table of Contents ● harm to our reputation and/or decreased demand for our products and corresponding revenue loss; ● reduced resources of our management to pursue our business strategy; and ● the inability to commercialize our current products or any current or future product candidates.
Further, our ability to effectively market and sell any future products that we may develop will depend our ability to establish and maintain sales and marketing capabilities or to enter into agreements with third parties to market, distribute and sell any such products.
Further, our ability to effectively market and sell any future products that we may develop will depend on our ability to establish and maintain sales and marketing capabilities or to enter into agreements with third parties to market, distribute and sell any such products.
Our information technology and other internal infrastructure systems, including corporate firewalls, servers, data center facilities, lab equipment, and connection to the internet, face the risk of breakdown or other damage or interruption from service interruptions, system malfunctions, natural disasters, terrorism, war, and telecommunication and electrical failures, as well as security breaches from inadvertent or intentional actions by our employees, contractors, consultants, business partners, and/or other third parties, or from cyber-attacks by malicious third parties (including the deployment of harmful malware, ransomware, denial-of-service attacks, social 49 Table of Contents engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information), each of which could compromise our system infrastructure or lead to the loss, destruction, alteration, disclosure, or dissemination of, or damage or unauthorized access to, our data or data that is processed or maintained on our behalf, or other assets.
Our information technology and other internal infrastructure systems, including corporate firewalls, servers, data center facilities, lab equipment, and connection to the internet, face the risk of breakdown or other damage or interruption from service interruptions, system malfunctions, natural disasters, terrorism, war, and telecommunication and electrical failures, as well as security breaches from inadvertent or intentional actions by our employees, contractors, consultants, business partners, and/or other third parties, or from cyber-attacks by malicious third parties (including the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information), each of which could compromise our system infrastructure or lead to the loss, destruction, alteration, disclosure, or dissemination of, or damage or unauthorized access to, our data or data that is processed or maintained on our behalf, or other assets.
Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions. 38 Table of Contents Risks Related to our Growth A significant part of our future growth may depend on our ability to identify and acquire or in-license products, and if we do not successfully identify and acquire or in-license related product candidates or integrate them into our operations, we may have limited growth opportunities.
Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions. 39 Table of Contents Risks Related to our Growth A significant part of our future growth may depend on our ability to identify and acquire or in-license products, and if we do not successfully identify and acquire or in-license related product candidates or integrate them into our operations, we may have limited growth opportunities.
The majority of states also have statutes or regulations similar to these federal laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor; ● federal civil and criminal false claims laws and civil monetary penalty laws, including the federal False Claims Act, which impose criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; 30 Table of Contents ● the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; ● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and their respective implementing regulations, which impose obligations on covered healthcare providers, health plans, and healthcare clearinghouses, as well as their business associates that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; ● the federal Open Payments program, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services (“CMS”), information related to “payments or other transfers of value” made to physicians, which is defined to include doctors, dentists, optometrists, podiatrists and chiropractors, and teaching hospitals and applicable manufacturers and applicable group purchasing organizations to report annually to CMS ownership and investment interests held by the physicians and their immediate family members.; ● Increased OIG scrutiny on the sale of our products through specialty pharmacies by means of direct investigation or by issuance of unfavorable Opinion Letters which may curtail or hinder the sales of our products based on risk of enforcement upon our-selves or our buyers; ● analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; ● state and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and ● state and foreign laws governing the privacy and security of health information in certain circum-stances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
The majority of states also have statutes or regulations similar to these federal laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor; ● federal civil and criminal false claims laws and civil monetary penalty laws, including the federal False Claims Act, which impose criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; ● the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; 31 Table of Contents ● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and their respective implementing regulations, which impose obligations on covered healthcare providers, health plans, and healthcare clearinghouses, as well as their business associates that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; ● the federal Open Payments program, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services (“CMS”), information related to “payments or other transfers of value” made to physicians, which is defined to include doctors, dentists, optometrists, podiatrists, chiropractors, physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, certified nurse-midwives and teaching hospitals and applicable manufacturers and applicable group purchasing organizations to report annually to CMS ownership and investment interests held by the physicians and their immediate family members; ● Increased OIG scrutiny on the sale of our products through specialty pharmacies by means of direct investigation or by issuance of unfavorable Opinion Letters which may curtail or hinder the sales of our products based on risk of enforcement upon our-selves or our buyers; ● analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; ● state and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and ● state and foreign laws governing the privacy and security of health information in certain circum-stances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
We are an EGC and, for as long as we continue to be an EGC, we may continue to avail ourselves of exemptions from various reporting requirements applicable to other public companies.
We are an EGC and, as long as we continue to be an EGC, we may continue to avail ourselves of exemptions from various reporting requirements applicable to other public companies.
If we need to enter into alternative arrangements, that could delay any future product development activities. 36 Table of Contents Our reliance on any third parties for research and development activities will reduce our own control over these activities but will not relieve us of our responsibilities.
If we need to enter into alternative arrangements, that could delay any future product development activities. 37 Table of Contents Our reliance on any third parties for research and development activities will reduce our own control over these activities but will not relieve us of our responsibilities.
We will also rely upon various medical institutions, clinical investigators and 42 Table of Contents contract laboratories to conduct our trials in accordance with our clinical protocols and all applicable regulatory requirements, including the FDA’s regulations and GCPs, which are meant to protect the rights, integrity, and confidentiality of study subjects and to define the roles of clinical trial sponsors, administrators and monitors, and state regulations governing the handling, storage, security and recordkeeping for drug and biologic products.
We will also rely upon various medical institutions, clinical investigators and contract laboratories to conduct our trials in accordance with our clinical protocols and all applicable regulatory requirements, including the FDA’s regulations and GCPs, which are meant to protect the rights, integrity, and confidentiality of study subjects and to define the roles of clinical trial sponsors, administrators and monitors, and state regulations governing the handling, storage, security and recordkeeping for drug and biologic products.
Targadox faces AB rated generic competition. Exelderm may face AB rated generic competition in the future. Generic versions are generally significantly less expensive than branded versions, and, where available, may be required to be utilized before or in preference to the branded version under third-party reimbursement programs, or substituted by pharmacies.
Exelderm may face AB rated generic competition in the future. Generic versions are generally significantly less expensive than branded versions, and, where available, may be required to be utilized before or in preference to the branded version under third-party reimbursement programs, or substituted by pharmacies.
In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including: ● restrictions on such products or their manufacturers or manufacturing processes; ● restrictions on the labeling or marketing of a product; ● restrictions on product distribution or use; ● requirements to conduct post-marketing studies or clinical trials; 29 Table of Contents ● warning letters; ● withdrawal of the products from the market; ● refusal to approve pending applications or supplements to approved applications that we submit; ● recall of products; ● fines, restitution or disgorgement of profits; ● suspension or withdrawal of marketing or regulatory approvals; ● suspension of any ongoing clinical trials; ● denial of permits to import or export our products; ● product seizure; or ● injunctions or the imposition of civil or criminal penalties.
In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including: ● restrictions on such products or their manufacturers or manufacturing processes; ● restrictions on the labeling or marketing of a product; ● restrictions on product distribution or use; ● requirements to conduct post-marketing studies or clinical trials; ● warning letters, untitled letters, or Form 483s; 30 Table of Contents ● withdrawal of the products from the market; ● refusal to approve pending applications or supplements to approved applications that we submit; ● recall of products; ● fines, restitution or disgorgement of profits; ● suspension or withdrawal of marketing or regulatory approvals; ● suspension of any ongoing clinical trials; ● denial of permits to import or export our products; ● product seizure; or ● injunctions or the imposition of civil or criminal penalties.
Patient enrollment is affected by other factors, including: ● the severity of the disease under investigation; ● the eligibility criteria for a study; ● the perceived risks and benefits of the product candidate under study; ● the efforts to facilitate timely enrollment in clinical trials; ● the patient referral practices of physicians; ● the ability to monitor patients adequately during and after treatment; and ● the proximity and availability of clinical trial sites for prospective patients.
Patient enrollment is affected by other factors, including: ● the severity of the disease under investigation; ● the eligibility criteria for a study; ● the perceived risks and benefits of the product candidate under study; ● the efforts to facilitate timely enrollment in clinical trials; ● the patient referral practices of physicians; ● the ability to monitor patients adequately during and after treatment; and 34 Table of Contents ● the proximity and availability of clinical trial sites for prospective patients.
Protection under the Hatch-Waxman Act will not prevent the filing or approval of another full NDA. However, the NDA applicant would be required to conduct its own pre-clinical and adequate and well-controlled clinical trials to independently demonstrate safety and effectiveness. Generic drug companies may submit applications seeking approval to market generic versions of our products.
Protection under the Hatch-Waxman Act will not prevent the filing or approval of another full NDA. However, the NDA applicant would be required to conduct its own pre-clinical and adequate and well-controlled clinical trials to independently demonstrate safety and effectiveness. 48 Table of Contents Generic drug companies may submit applications seeking approval to market generic versions of our products.
Furthermore, if the information technology systems of our third-party vendors and other contractors and consultants become subject to disruptions or security breaches, we may have insufficient recourse against such third parties and we may 50 Table of Contents have to expend significant resources to mitigate the impact of such an event, and to develop and implement protections to prevent future events of this nature from occurring.
Furthermore, if the information technology systems of our third-party vendors and other contractors and consultants become subject to disruptions or security breaches, we may have insufficient recourse against such third parties and we may have to expend significant resources to mitigate the impact of such an event, and to develop and implement protections to prevent future events of this nature from occurring.
If one or more of these analysts ceases coverage of our company or fails to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline. 57 Table of Contents Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.
If one or more of these analysts ceases coverage of our company or fails to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline. Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.
Even if we do received approval, it may be contingent on the performance of costly post-marketing clinical trials to verify whether or not the drug provides the anticipated clinical benefit, in order to maintain the approval.
Even if we do receive approval, it may be contingent on the performance of costly post-marketing clinical trials to verify whether or not the drug provides the anticipated clinical benefit, in order to maintain the approval.
The FDA or applicable foreign regulatory agencies may ask us to conduct additional costly and time-consuming clinical trials in order to obtain marketing approval or approval to enter into an advanced phase of development, or may change the requirements for approval even after such agency has reviewed and commented on the design for the clinical trials.
The FDA or applicable foreign regulatory agencies may ask us to conduct additional costly and time-consuming clinical trials in order to obtain marketing approval or 46 Table of Contents approval to enter into an advanced phase of development, or may change the requirements for approval even after such agency has reviewed and commented on the design for the clinical trials.
Factors that could cause fluctuations in the trading price of our common stock include the following: ● significant volatility in the market price and trading volume of companies in our industry; 55 Table of Contents ● announcements of new solutions or technologies, commercial relationships, acquisitions, or other events by us or our competitors; ● price and volume fluctuations in the overall stock market from time to time; ● changes in how customers perceive the benefits of our products and future offerings; ● the public’s reaction to our press releases, other public announcements, and filings with the SEC; ● fluctuations in the trading volume of our shares or the size of our public float; ● actual or anticipated changes or fluctuations in our results of operations or financial projections; ● changes in actual or future expectations of investors or securities analysts; ● litigation involving us, our industry, or both; ● governmental or regulatory actions or audits; ● regulatory developments applicable to our business, including those related to privacy in the United States or globally; ● general economic conditions and trends; ● major catastrophic events in our domestic and foreign markets; and ● departures of key employees.
Factors that could cause fluctuations in the trading price of our common stock include the following: ● significant volatility in the market price and trading volume of companies in our industry; ● announcements of new solutions or technologies, commercial relationships, acquisitions, or other events by us or our competitors; ● price and volume fluctuations in the overall stock market from time to time; ● changes in how customers perceive the benefits of our products and future offerings; ● the public’s reaction to our press releases, other public announcements, and filings with the SEC; ● fluctuations in the trading volume of our shares or the size of our public float; ● actual or anticipated changes or fluctuations in our results of operations or financial projections; ● changes in actual or future expectations of investors or securities analysts; ● litigation involving us, our industry, or both; ● governmental or regulatory actions or audits; ● regulatory developments applicable to our business, including those related to privacy in the United States or globally; ● general economic conditions and trends; ● major catastrophic events in our domestic and foreign markets; and ● departures of key employees. 57 Table of Contents Risks Related to our Relationship with Fortress Biotech, Inc.
Political changes, including war or 39 Table of Contents other conflicts, some of which may be disruptive, could interfere with our supply chain, our customers and all of our activities in a particular location. ​ Our operating history may make it difficult to evaluate our business and prospects as it relates to clinical trials or regulatory approvals.
Political changes, including war or other conflicts, some of which may be disruptive, could interfere with our supply chain, our customers and all of our activities in a particular location. ​ Our operating history may make it difficult to evaluate our business and prospects as it relates to clinical trials or regulatory approvals.
We cannot provide assurances that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials or preclinical studies complies with applicable GCP and GLP requirements. In addition, our clinical trials must generally be conducted with products manufactured and produced under cGMP regulations.
We cannot provide assurances that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials or preclinical studies complies with applicable GCP and GLP requirements. In addition, our clinical trials must generally be conducted with products manufactured and produced under cGMP 44 Table of Contents regulations.
In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval 27 Table of Contents commitments that render the approved product not commercially viable.
In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.
Such manufacturer must comply with cGMP requirements enforced by the FDA and applicable foreign regulatory bodies through facilities inspection programs and review of submitted technical information. 43 Table of Contents We may be unable to obtain regulatory approval for our current or any of our future product candidates under applicable regulatory requirements.
Such manufacturer must comply with cGMP requirements enforced by the FDA and applicable foreign regulatory bodies through facilities inspection programs and review of submitted technical information. We may be unable to obtain regulatory approval for our current or any of our future product candidates under applicable regulatory requirements.
Because of the uncertainty inherent in any patent or other litigation involving proprietary rights, we and our licensors may not be successful in defending against intellectual property claims raised by third parties, which could have a material adverse effect on our results of operations.
Because of the uncertainty inherent in any patent or other litigation involving proprietary rights, we and our licensors may not be successful in defending against intellectual property claims raised by third parties, which could have a material adverse effect on our results of 49 Table of Contents operations.
In the aggregate, our patents are of material importance to our business taken as a whole. We seek to protect our proprietary position by filing or obtaining licenses under patent applications in the United States and abroad related to our products and any other current or future 45 Table of Contents product candidates.
In the aggregate, our patents are of material importance to our business taken as a whole. We seek to protect our proprietary position by filing or obtaining licenses under patent applications in the United States and abroad related to our products and any other current or future product candidates.
If we fail to do so, our results of operations, financial condition or cash flows may be materially adversely affected. 26 Table of Contents Any disruptions to the capabilities, composition, size or existence of our field sales force may have a significant adverse impact on our existing revenue stream.
If we fail to do so, our results of operations, financial condition or cash flows may be materially adversely affected. Any disruptions to the capabilities, composition, size or existence of our field sales force may have a significant adverse impact on our existing revenue stream.
Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than 48 Table of Contents we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace.
Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace.
Likewise, we rely on third parties for the manufacture of our drug candidates or any future drug candidates and to conduct clinical trials, and similar events relating to their systems and operations could also have a material adverse effect on our business and lead to regulatory agency actions.
Likewise, we rely on third parties for the manufacture of our drug candidates or any future drug candidates and to conduct clinical trials, and similar events relating to 51 Table of Contents their systems and operations could also have a material adverse effect on our business and lead to regulatory agency actions.
In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (the “PPACA” 31 Table of Contents or collectively, the “ACA”), was signed into law, which substantially changed the way healthcare is financed by both governmental and private insurers in the United States.
In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (the “PPACA” or collectively, the “ACA”), was signed into law, which substantially changed the way healthcare is financed by both governmental and private insurers in the United States.
Any reduction in reimbursement from Medicare or other government healthcare programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate 32 Table of Contents revenue, attain profitability or commercialize our products.
Any reduction in reimbursement from Medicare or other government healthcare programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our products.
If our current or future product candidates receive(s) marketing approval, the accompanying label may limit the approved use of our drug in this way, which could limit sales of the product. The marketing approval process, both in the United States and abroad, is time consuming and expensive.
If our current or future product candidates receive(s) marketing approval, the accompanying label may limit the approved use of our drug in this way, which could limit sales of the product. 27 Table of Contents The marketing approval process, both in the United States and abroad, is time consuming and expensive.
Our competitors may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner. 46 Table of Contents The issuance of a patent does not foreclose challenges to its inventorship, scope, validity or enforceability.
Our competitors may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner. The issuance of a patent does not foreclose challenges to its inventorship, scope, validity or enforceability.
The realization of any of the foregoing risks related to our acquisition and in-license strategy could materially adversely affect our business, results of operations, financial condition or cash flows. Our growth is subject to economic and political conditions.
The realization of any of the foregoing risks related to our acquisition and in-license strategy could materially adversely affect our business, results of operations, financial condition or cash flows. 40 Table of Contents Our growth is subject to economic and political conditions.
As of December 31, 2022, our major marketed products that have been approved by the FDA for sale in the United States include Qbrexza®, Accutane®, Amzeeq®, Zilxi®, Ximino®, Exelderm® and Targadox®. However, our business remains dependent on the successful development and regulatory approval of additional product candidates.
As of December 31, 2023, our major marketed products that have been approved by the FDA for sale in the United States include Qbrexza®, Accutane®, Amzeeq®, Zilxi®, Exelderm®, Targadox® and Luxamend®. However, our business remains dependent on the successful development and regulatory approval of additional product candidates.
Therefore, we cannot know with certainty whether we or our licensors were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions.
Therefore, we cannot know with certainty whether we or our licensors were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, 47 Table of Contents or that we were the first to file for patent protection of such inventions.
Further, we are only permitted to promote our products for those indications specifically approved by the FDA and we are restricted from making communications regarding uses not approved and described in the product’s labeling. If our promotional activities fail to comply with these regulations or guidelines, we may be subject to advisory or enforcement action by these authorities.
Further, we are only permitted to promote our products for those indications specifically approved by the FDA and there are restrictions around making communications regarding uses not approved and described in the product’s labeling. If our promotional activities fail to comply with these regulations or guidelines, we may be subject to advisory or enforcement action by these authorities.
A decline in our value could also cause you to lose all or part of your investment. 51 Table of Contents We may need additional funding and may be unable to raise capital when needed, which would force us to delay, reduce or eliminate any future product development programs or commercialization, manufacture and/or sales efforts.
A decline in our value could also cause you to lose all or part of your investment. We may need additional funding and may be unable to raise capital when needed, which would force us to delay, reduce or eliminate any future product development programs or commercialization, manufacturing and/or sales efforts.
These setbacks have been caused by, among other things, findings made while clinical trials were underway and safety or efficacy observations made in clinical trials, including previously unreported adverse events.
These 45 Table of Contents setbacks have been caused by, among other things, findings made while clinical trials were underway and safety or efficacy observations made in clinical trials, including previously unreported adverse events.
Any claims we assert against perceived infringers could provoke counterclaims alleging that our IP rights are invalid, unenforceable, or not infringed or that we have infringed 47 Table of Contents upon misappropriated others’ intellectual property.
Any claims we assert against perceived infringers could provoke counterclaims alleging that our IP rights are invalid, unenforceable, or not infringed or that we have infringed upon misappropriated others’ intellectual property.
Compliance with these rules and 54 Table of Contents regulations increases our legal and financial compliance costs, makes some activities more difficult, time-consuming or costly and increases demand on our systems and resources.
Compliance with these rules and regulations increases our legal and financial compliance costs, makes some activities more difficult, time-consuming or costly and increases demand on our systems and resources.
Four of our marketed products, Qbrexza, Amzeeq, Zilxi, and Ximino, as well as DFD-29, currently have patent protection. Three of our marketed products, Accutane, Targadox, and Exelderm, do not have patent protection or otherwise are not eligible for patent protection. Accutane currently competes in the Isotretinoin market with five other therapeutic equivalent (“AB rated”) products.
Three of our marketed products, Qbrexza, Amzeeq, and Zilxi as well as DFD-29, currently have patent protection. Three of our marketed products, Accutane, Targadox, and Exelderm, do not have patent protection or otherwise are not eligible for patent protection. Accutane currently competes in the Isotretinoin market with five other therapeutic equivalent (“AB rated”) products. Targadox faces AB rated generic competition.
While we believe the terms of these arrangements are reasonable, they might not reflect terms that would have resulted from arm’s-length negotiations between unaffiliated third parties. The terms of the arrangement relate to, among other things, systems, insurance, accounting, legal, finance, tax and human resources.
We have arrangements with Fortress in connection with management and administration services for the Company. While we believe the terms of these arrangements are reasonable, they might not reflect terms that would have resulted from arm’s-length negotiations between unaffiliated third parties. The terms of the arrangement relate to, among other things, systems, insurance, accounting, legal, finance, tax and human resources.
Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our common stock is not traded on a national securities exchange.
This could have an adverse effect on the price of our common stock. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our common stock is not traded on a national securities exchange.
Fortress’ current or future financial obligations and arrangements, or an event of default thereon, may change the ownership dynamic of us by Fortress. Any default or breach by Fortress under any current or future credit agreement or arrangements may have an adverse effect on our business. Fortress has pledged as collateral to certain of its creditors equity in the Company.
Any default or breach by Fortress under any current or future credit agreement or arrangements may have an adverse effect on our business. Fortress has pledged as collateral to certain of its creditors equity in the Company.
If one or more of our current products or any future product candidate receives marketing approval and we or others later identify undesirable adverse events or side effects caused by this product, or we fail to comply with post-market regulatory requirements, a number of potentially significant negative consequences could result, including: ● regulatory authorities may require the addition of unfavorable labeling statements, specific warnings or a contraindication; ● regulatory authorities may suspend or withdraw their approval of the product, or require it to be removed from the market; ● we may be required to change the way the product is administered, conduct additional clinical trials or change the labeling of the product; or ● our reputation may suffer.
Undesirable side effects caused by any current or future product candidates could also result in the inclusion of unfavorable information in our product labeling, denial of regulatory approval by the FDA or other regulatory authorities for any or all targeted indications, and in turn prevent us from commercializing and generating revenues from the sale of such product candidate. 29 Table of Contents If one or more of our current products or any future product candidate receives marketing approval and we or others later identify undesirable adverse events or side effects caused by this product, or we fail to comply with post-market regulatory requirements, a number of potentially significant negative consequences could result, including: ● regulatory authorities may require the addition of unfavorable labeling statements, specific warnings or a contraindication; ● regulatory authorities may suspend or withdraw their approval of the product, or require it to be removed from the market; ● we may be required to change the way the product is administered, conduct additional clinical trials or change the labeling of the product; or ● our reputation may suffer.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish proprietary rights. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights.
Risks Related to our Relationship with Fortress Biotech, Inc. Fortress controls a voting majority of our common stock, which could be detrimental to our other shareholders.
Fortress controls a voting majority of our common stock, which could be detrimental to our other shareholders.
At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
The effect of Inflation Reduction Act of 2022 on our business and the pharmaceutical industry in general is not yet known. 33 Table of Contents At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of future development programs, acquisition plans or our future commercialization efforts, which could materially adversely affect our business, prospects and the trading price of our common stock. 52 Table of Contents Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish proprietary rights.
If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of future development programs, acquisition plans or our future commercialization efforts, which could materially adversely affect our business, prospects and the trading price of our common stock.
Although we presently are not taking advantage of these exemptions, we may do so in the future. Accordingly, our stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the 56 Table of Contents corporate governance requirements of Nasdaq.
Although we presently are not taking advantage of these exemptions, we may do so in the future. Accordingly, our stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of Nasdaq. Investors may find our common stock less attractive as a result of our reliance on these exemptions.
Ownership by our directors and officers, after our separation, of common stock and/or options to purchase common stock of Fortress might appear to create conflicts of interest when these directors and officers are faced with decisions that could have different implications for Fortress than for us.
Ownership by our directors and officers, after our separation, of common stock and/or options to purchase common stock of Fortress might appear to create conflicts of interest when these directors and officers are faced with decisions that could have different implications for Fortress than for us. 58 Table of Contents Fortress’ current or future financial obligations and arrangements, or an event of default thereon, may change the ownership dynamic of us by Fortress.
These provisions could also make it difficult for stockholders to elect directors that are not nominated by the 53 Table of Contents current members of our board of directors or take other corporate actions, including effecting changes in our management.
Our Third Amended and Restated Certificate of Incorporation and bylaws contain provisions that could delay or prevent a change in control of our Company. These provisions could also make it difficult for stockholders to elect directors that are not nominated by the current members of our board of directors or take other corporate actions, including effecting changes in our management.
If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock, and the price of our common stock may be more volatile.
If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock, and the price of our common stock may be more volatile. 56 Table of Contents Our shares of common stock are subject to potential delisting if we do not continue to maintain the listing requirements of Nasdaq.
Our field sales force has been and is expected to continue to be an important contributor to our commercial success. Any disruptions to our relationship with our field sales force or the professional employer organization that employs our field sales force, could materially adversely affect our product sales.
Our field sales force has been and is expected to continue to be an important contributor to our commercial success. Any disruptions to our relationship with our field sales force could materially adversely affect our product sales. We may rely on professional employer organizations and staffing organizations for the employment of our field sales force in the future.
Enrollment delays in any future clinical trials may result in increased development costs for any current or future product candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing. 33 Table of Contents We expect intense competition for our products and current or future product candidates, and new products may emerge that provide different or better therapeutic alternatives for our targeted indications.
Enrollment delays in any future clinical trials may result in increased development costs for any current or future product candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing.
Nonetheless, enforcement agencies or private plaintiffs may take the position that we are not in compliance with such requirements and, if such noncompliance is proven, the Company and, in some cases, individual employees, may be subject to significant liability, including the aforementioned administrative, civil and criminal sanctions.
Nonetheless, enforcement agencies or private plaintiffs may take the position that we are not in compliance with such requirements and, if such noncompliance is proven, the Company and, in some cases, individual employees, may be subject to significant liability, including the aforementioned administrative, civil and criminal sanctions. 32 Table of Contents We are subject to new legislation, regulatory proposals and managed care initiatives that may increase our costs of compliance and adversely affect our ability to market our products, obtain collaborators and raise capital.
If we fail to comply with our obligations in our intellectual property licenses and funding arrangements with third parties, or if we breach an agreement under which we license rights to any product or future product candidate, we could lose rights that are important to our business.
Our inability to obtain such rights on acceptable terms, or at all, could materially adversely affect our business, results of operations, financial condition or cash flows. 50 Table of Contents If we fail to comply with our obligations in our intellectual property licenses and funding arrangements with third parties, or if we breach an agreement under which we license rights to any product or future product candidate, we could lose rights that are important to our business.
We are also continuing to improve our internal control over financial reporting. We have expended, and anticipate that we will continue to expend, significant resources in order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting.
We have expended, and anticipate that we will continue to expend, significant resources in order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting. 54 Table of Contents Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes appearing elsewhere in this report on Form 10-K.
A change in these principles or interpretations could have a significant effect on our reported results of operations and could affect the reporting of transactions already completed before the announcement of a change. 59 Table of Contents The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes appearing elsewhere in this report on Form 10-K.
The majority of our sales derive from products that are without patent protection and/or are or may become subject to third-party generic competition, the introduction of new competitor products, or an increase in market share of existing competitor products, any of which could have a significant adverse impact on our operating income.
When patents covering certain of our products expire or are successfully challenged through litigation or in USPTO proceedings, if a generic company launches a competing product “at risk,” or when the regulatory or licensed exclusivity for our products expires or is otherwise lost, we may face generic competition as a result. 26 Table of Contents The majority of our sales derive from products that are without patent protection and/or are or may become subject to third-party generic competition, the introduction of new competitor products, or an increase in market share of existing competitor products, any of which could have a significant adverse impact on our operating income.
As a result, any such sale could have a material adverse effect on our business, financial condition, results of operations and cash flows. Risks Related to Development and Regulatory Approval of Our Product Candidates Our business is dependent on the successful development and regulatory approval of our current and any future product candidates.
Such measures may become necessary whether or not we are able to raise additional capital. As a result, our business, financial condition, and results of operations could be materially affected. Risks Related to Development and Regulatory Approval of Our Product Candidates Our business is dependent on the successful development and regulatory approval of our current and any future product candidates.
Our shares of common stock are subject to potential delisting if we do not continue to maintain the listing requirements of Nasdaq. We list our shares of common stock on Nasdaq under the symbol “DERM.” Nasdaq has rules for continued listing, including, without limitation, minimum market capitalization and other requirements.
We list our shares of common stock on Nasdaq under the symbol “DERM.” Nasdaq has rules for continued listing, including, without limitation, minimum market capitalization and other requirements. Failure to maintain our listing, or de-listing from Nasdaq, would make it more difficult for shareholders to sell our securities and more difficult to obtain accurate price quotations on our securities.
Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure controls or our internal control over financial reporting may be discovered in the future.
Further, weaknesses in our disclosure controls or our internal control over financial reporting may be discovered in the future.
In addition, our credit facility includes, and other debt instruments we may enter into in the future may include, provisions entitling the lenders to demand immediate repayment of all borrowings upon the occurrence of certain change of control events relating to our company, which also could discourage, delay or prevent a business combination transaction.
In addition, our credit facility includes, and other debt instruments we may enter into in the future may include, provisions entitling the lenders to demand immediate repayment of all borrowings upon the occurrence of certain change of control events relating to our company, which also could discourage, delay or prevent a business combination transaction. 55 Table of Contents Our Third Amended and Restated Certificate of Incorporation provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware is the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a chosen judicial forum for disputes with us or our directors, officers, employees or stockholders.
Investors may find our common stock less attractive as a result of our reliance on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may have received better terms from unaffiliated third parties than the terms we receive in our arrangements with Fortress.
Significant assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition, share-based compensation and income taxes. ​ 58 Table of Contents Item 1B. Unresolved Staff Comments ​ None. ​
Significant assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition, share-based compensation and income taxes. Changes in tax laws or regulations that are applied adversely to us may have a material adverse effect on our business, cash flow, financial condition or results of operations.
Removed
When patents covering certain of our products expire or are successfully challenged through litigation or in USPTO proceedings, if a generic company launches a competing product “at risk,” or when the regulatory or licensed exclusivity for our products expires or is otherwise lost, we may face generic competition as a result.
Added
If the FDA does not conclude that a product candidate satisfies the requirements for the Section 505(b)(2) regulatory approval pathway, or if the requirements for such product candidate under Section 505(b)(2) are not as we expect, the approval pathway for the product candidate will likely take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and in either case may not be successful.
Removed
We currently rely, and may continue to rely, on professional employer organizations and staffing organizations for the employment of our field sales force.
Added
The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, added Section 505(b)(2) to the FDCA.
Removed
Undesirable side effects caused by any current or future product candidates could also result in the inclusion of unfavorable information in our product labeling, denial of regulatory approval by the FDA or other regulatory authorities 28 Table of Contents for any or all targeted indications, and in turn prevent us from commercializing and generating revenues from the sale of such product candidate.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn September 2022, we amended our lease and entered into a new 25-month extension of the same office space in Scottsdale, AZ at an average annual rent of $0.1 million. The term of this amended lease commenced on January 1, 2023 and will expire on January 31, 2025. ​
Biggest changeIn September 2022, we amended our lease and entered into a new 25-month extension of the office space in Scottsdale, AZ at an average annual rent of $0.1 million. The term of this amended lease commenced on January 1, 2023 and will expire on January 31, 2025. 61 Table of Contents
Removed
In August 2020, we amended our lease and entered into a new 25-month extension of the office space in Scottsdale, AZ at an average annual rent of $0.1 million. The term of this amended lease commenced on December 1, 2020 and expired on December 31, 2022.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMine Safety Disclosures Not applicable. ​ 59 Table of Contents PART II ​
Biggest changeMine Safety Disclosures Not applicable. ​ 62 Table of Contents PART II ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThis number of holders of record also does not include stockholders whose shares may be held in trust by other entities. ​ Dividends ​ We have never paid cash dividends on any of our capital stock and currently intend to retain our future earnings, if any, to fund the development and growth of our business. ​ Securities Authorized for Issuance under Equity Compensation Plans ​ Subject to adjustment as provided in the 2015 Plan, the total aggregate number of shares of our common stock reserved and available for issuance pursuant to awards granted under the 2015 Plan is 7,642,857, of which 1,146,620 shares remain available for future issuance as of December 31, 2022. ​ Item 6. [RESERVED.] ​ 61 Table of Contents
Biggest changeThis number of holders of record also does not include stockholders whose shares may be held in trust by other entities. ​ Dividends ​ We have never paid cash dividends on any of our capital stock and currently intend to retain our future earnings, if any, to fund the development and growth of our business. ​ Item 6. [RESERVED.] ​ 63 Table of Contents
The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners and whose shares are held in street name by brokers and other nominees.
In accordance with the terms of the Sales Agreement, we may offer and sell up to 4,900,000 shares of our common stock, par value $0.0001 per share, from time to time through or to B.
Riley”), relating to shares of our common stock. In accordance with the terms of the Sales Agreement, we may offer and sell up to 4,900,000 shares of our common stock, par value $0.0001 per share, from time to time through or to B. Riley acting as our agent or principal.
Riley acting as our agent or principal. ​ 60 Table of Contents We currently intend to use the net proceeds from this offering for general corporate purposes, including working capital, research and development, payments for research and development — licenses acquired, sales and marketing activities, general administrative matters, operating expenses and capital expenditures. ​ Holders ​ As of March 29, 2023, there were approximately 164 holders of record for our common stock and 1 holder of record for our Class A common stock.
We currently intend to use the net proceeds from this offering for general corporate purposes, including working capital, research and development, payments for research and development — licenses acquired, sales and marketing activities, general administrative matters, operating expenses and capital expenditures. ​ Holders ​ As of March 28, 2024, there were approximately 44 holders of record for our common stock and 1 holder of record for our Class A common stock.
This shelf registration statement covers the offering, issuance and sale by us of up to an aggregate of $150.0 million of the Company’s common stock, preferred stock, debt securities, warrants, and units (the “2022 Shelf”). At December 31, 2022, $150.0 million remains available under the 2022 Shelf.
This shelf registration statement covers the offering, issuance and sale by us of up to an aggregate of $150.0 million of the Company’s common stock, preferred stock, debt securities, warrants, and units (the “2022 Shelf”). In connection with the 2022 Shelf, we entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. (“B.
Subject to adjustment as provided in the 2015 Plan, the total aggregate number of shares of our common stock reserved and available for issuance pursuant to awards granted under the 2015 Plan is 7,642,857, of which 1,146,620 shares remain available for future issuance as of December 31, 2022. ​ Sales of Unregistered Securities ​ None. ​ Use of Proceeds from Sales of Registered Securities ​ On December 30, 2022, we filed a shelf registration statement on Form S-3 (File No. 333-269079), which was declared effective by the SEC on January 26, 2023.
Our board of directors has adopted an incentive plan, allowing for the grant of equity and cash-based awards to our employees and directors. ​ Sales of Unregistered Securities ​ None. ​ Use of Proceeds from Sales of Registered Securities ​ On December 30, 2022, we filed a shelf registration statement on Form S-3 (File No. 333 - 269079), which was declared effective by the SEC on January 26, 2023.
Removed
Our board of directors has adopted an incentive plan, allowing for the grant of equity and cash-based awards to our employees and directors. ​ Securities Authorized for Issuance under Equity Compensation Plans ​ The following table provides certain information as of December 31, 2022, with respect to all of our equity compensation plans in effect on that date: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ ​ ​ ​ ​ ​ ​ securities ​ ​ ​ ​ ​ ​ ​ ​ remaining ​ ​ ​ ​ ​ ​ ​ ​ available for ​ ​ Number of ​ ​ ​ ​ future issuance ​ ​ securities to be ​ ​ ​ ​ under equity ​ ​ issued upon ​ Weighted-average ​ compensation ​ ​ exercise of ​ exercise price of ​ plans (excluding ​ ​ outstanding ​ outstanding ​ securities reflected Plan Category options (1) options in column 1) (2) Equity compensation plans approved by security holders ​ 2,960,000 ​ $ 1.76 ​ 1,146,620 (1) Reflects the number of shares of common stock to be issued upon exercise of outstanding options under our Journey Medical 2015 Stock Plan.
Added
During 2023, we issued 748,703 shares of common stock under the 2022 Shelf, generating net proceeds of $4.5 million. At December 31, 2023, 4,151,297 shares remain available for issuance under the Sales Agreement.
Removed
This figure does not include 2,261,048 outstanding restricted stock units that were issued under the Journey Medical 2015 Stock Plan. (2) Reflects 1,146,620 shares available for future issuance under the Journey Medical 2015 Stock Plan.
Removed
In connection with the 2022 Shelf, have entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley, relating to shares of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAs a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K, have reduced disclosure obligations regarding executive compensation, and smaller reporting companies are permitted to delay adoption of certain recent accounting pronouncements discussed in Note 2 See Note 2, “Basis of Presentation and Summary of Significant Accounting Policies” in our consolidated financial statements, appearing under Part II, Item 8 and beginning at page F-1 of this Annual Report on Form 10-K. ​ 64 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2022 and 2021 The following table summarizes our results of operations for the years ended December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, Change ($ in thousands, except per share data) 2022 2021 $ % ​ Revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product revenue, net ​ $ 70,995 ​ $ 63,134 ​ $ 7,861 ​ 12 % Other revenue ​ ​ 2,674 ​ ​ — ​ ​ 2,674 ​ 100 % Total revenue ​ ​ 73,669 ​ ​ 63,134 ​ ​ 10,535 ​ 17 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of goods sold - product revenue ​ ​ 30,775 ​ ​ 32,084 ​ ​ (1,309) ​ (4) % Research and development ​ ​ 10,943 ​ ​ 2,739 ​ ​ 8,204 ​ 300 % Research and development - licenses acquired ​ ​ — ​ ​ 13,819 ​ ​ (13,819) ​ (100) % Selling, general and administrative ​ ​ 59,468 ​ ​ 39,833 ​ ​ 19,635 ​ 49 % Wire transfer fraud loss ​ ​ — ​ ​ 9,540 ​ ​ (9,540) ​ (100) % Total operating expenses ​ ​ 101,186 ​ ​ 98,015 ​ ​ 3,171 ​ 3 % Loss from operations ​ ​ (27,517) ​ ​ (34,881) ​ ​ 7,364 ​ (21) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest income ​ ​ (60) ​ ​ (2) ​ ​ (58) ​ 2,900 % Interest expense ​ ​ 2,019 ​ ​ 7,034 ​ ​ (5,015) ​ (71) % Foreign exchange transaction losses ​ ​ 89 ​ ​ — ​ ​ 89 ​ 100 % Change in fair value of derivative liability ​ ​ — ​ ​ 447 ​ ​ (447) ​ (100) % Total other expense ​ ​ 2,048 ​ ​ 7,479 ​ ​ (5,431) ​ (73) % Loss before income taxes ​ ​ (29,565) ​ ​ (42,360) ​ ​ 12,795 ​ (30) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income tax expense ​ ​ 63 ​ ​ 1,634 ​ ​ (1,571) ​ (96) % Net Loss ​ $ (29,628) ​ $ (43,994) ​ $ 14,366 ​ (33) % ​ Revenues The following table reflects our revenue by product for the years ended December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ Change ($in thousands) 2022 2021 $ % ​ Qbrexza® ​ $ 26,715 ​ $ 17,056 ​ $ 9,659 ​ 57 % Accutane® ​ 18,373 ​ 10,053 ​ 8,320 ​ 83 % Targadox® ​ 7,972 ​ 22,378 ​ (14,406) ​ (64) % Amzeeq® ​ 7,242 ​ — ​ 7,242 ​ 100 % Ximino® ​ ​ 4,957 ​ ​ 8,247 ​ ​ (3,290) ​ (40) % Zilxi® ​ ​ 2,273 ​ ​ — ​ ​ 2,273 ​ 100 % Exelderm® ​ ​ 3,463 ​ ​ 5,363 ​ ​ (1,900) ​ (35) % Other branded revenue ​ ​ — ​ ​ 37 ​ ​ (37) ​ (100) % Total net product revenue ​ $ 70,995 ​ $ 63,134 ​ $ 7,861 ​ 12 % Other revenue ​ 2,674 ​ — ​ 2,674 ​ 100 % Total revenue ​ $ 73,669 ​ $ 63,134 ​ $ 10,535 ​ 17 % ​ Total revenues increased $10.5 million, or 17%, to $73.7 million for the year ended December 31, 2022, from $63.1 million for the year ended December 31, 2021.
Biggest changeAs a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K, have reduced disclosure obligations regarding executive compensation, and smaller reporting companies are permitted to delay adoption of certain recent accounting pronouncements discussed in Note 2 See Note 2, “Basis of Presentation and Summary of Significant Accounting Policies” in our consolidated financial statements, appearing under Part II, Item 8 and beginning at page F-1 of this Annual Report on Form 10-K. ​ 65 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 The following table summarizes our results of operations for the years ended December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, Change ($ in thousands, except per share data) 2023 2022 $ % ​ Revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product revenue, net ​ $ 59,662 ​ $ 70,995 ​ $ (11,333) ​ (16) % Other revenue ​ ​ 19,519 ​ ​ 2,674 ​ ​ 16,845 ​ 630 % Total revenue ​ ​ 79,181 ​ ​ 73,669 ​ ​ 5,512 ​ 7 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of goods sold - product revenue ​ ​ 26,660 ​ ​ 30,775 ​ ​ (4,115) ​ (13) % Research and development ​ ​ 7,541 ​ ​ 10,943 ​ ​ (3,402) ​ (31) % Selling, general and administrative ​ ​ 43,910 ​ ​ 59,468 ​ ​ (15,558) ​ (26) % Loss on impairment of intangible assets ​ ​ 3,143 ​ ​ — ​ ​ 3,143 ​ 100 % Total operating expenses ​ ​ 81,254 ​ ​ 101,186 ​ ​ (19,932) ​ (20) % Loss from operations ​ ​ (2,073) ​ ​ (27,517) ​ ​ 25,444 ​ (92) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest income ​ ​ (322) ​ ​ (60) ​ ​ (262) ​ 437 % Interest expense ​ ​ 1,698 ​ ​ 2,019 ​ ​ (321) ​ (16) % Foreign exchange transaction losses ​ ​ 183 ​ ​ 89 ​ ​ 94 ​ 106 % Total other expense ​ ​ 1,559 ​ ​ 2,048 ​ ​ (489) ​ (24) % Loss before income taxes ​ ​ (3,632) ​ ​ (29,565) ​ ​ 25,933 ​ (88) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income tax expense ​ ​ 221 ​ ​ 63 ​ ​ 158 ​ 251 % Net Loss ​ ​ (3,853) ​ ​ (29,628) ​ ​ 25,775 ​ (87) % ​ Revenues The following table reflects our revenue by product for the years ended December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ Change ($in thousands) 2023 2022 $ % ​ Qbrexza® ​ $ 25,410 ​ $ 26,715 ​ $ (1,305) ​ (5) % Accutane® ​ 20,168 ​ 18,373 ​ 1,795 ​ 10 % Amzeeq ​ 6,201 ​ 7,242 ​ (1,041) ​ (14) % Targadox® ​ 3,204 ​ 7,972 ​ (4,768) ​ (60) % Exelderm® ​ ​ 2,395 ​ ​ 3,463 ​ ​ (1,068) ​ (31) % Zilxi ​ ​ 1,962 ​ ​ 2,273 ​ ​ (311) ​ (14) % Ximino® ​ ​ 287 ​ ​ 4,957 ​ ​ (4,670) ​ (94) % Luxamend® ​ ​ 35 ​ ​ — ​ ​ 35 ​ 100 % Total net product revenue ​ $ 59,662 ​ $ 70,995 ​ $ (11,333) ​ (16) % ​ 66 Table of Contents Total net product revenues decreased $11.3 million, or 16%, to $59.7 million for the year ended December 31, 2023, from $71.0 million for the year ended December 31, 2022.
We record gross-to-net sales accruals for chargebacks, distributor service fees, prompt pay discounts, sales returns, coupons, managed care rebates, government rebates, and other allowances customary to the pharmaceutical industry.
Gross - to - Net Sales Accruals We record gross-to-net sales accruals for chargebacks, distributor service fees, prompt pay discounts, sales returns, coupons, managed care rebates, government rebates, and other allowances customary to the pharmaceutical industry.
The following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Please see the section titled “Special Cautionary Note Regarding Forward-Looking Statements” elsewhere in this Annual Report on Form 10-K for more information.
The following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Please see the section titled “Special Cautionary Notice Regarding Forward-Looking Statements” elsewhere in this Annual Report on Form 10-K for more information.
These policies relate to the more significant areas involving management’s judgments and estimates. Revenue Recognition Our gross product revenues are subject to a variety of deductions, which generally are estimated and recorded in the same period that the revenues are recognized. Such variable consideration represents chargebacks, coupons, discounts, other sales allowances, governmental rebate programs and sales returns.
These policies relate to the more significant areas involving management’s judgments and estimates. Revenue Recognition Our gross product revenues are subject to a variety of deductions, which generally are estimated and recorded in the same period that the revenues are recognized. Such variable consideration represents chargebacks, coupons, discounts, other sales allowances and sales returns.
Overview We are a commercial-stage pharmaceutical company founded in October 2014 that focuses on the development and commercialization of pharmaceutical products for the treatment of dermatological conditions. Our current portfolio includes eight branded and three authorized generic prescription drugs for dermatological conditions that are marketed in the U.S.
Overview We are a commercial-stage pharmaceutical company founded in October 2014 that focuses on the development and commercialization of pharmaceutical products for the treatment of dermatological conditions. Our current portfolio includes seven branded and two authorized generic prescription drugs for dermatological conditions that are marketed in the U.S.
Financial Statements and Supplementary Data. The information required by this Item is set forth in the financial statements and notes thereto beginning at page F-1 of this Annual Report on Form 10-K. ​ Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. ​ None. ​ 70 Table of Contents
The information required by this Item is set forth in the financial statements and notes thereto beginning at page F-1 of this Annual Report on Form 10-K. ​ Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. ​ None. ​ 71 Table of Contents
This 2022 Shelf covers the offering, issuance and sale by us of up to an aggregate of $150.0 million of our common stock, preferred stock, debt securities, warrants, and units (the “2022 Shelf”). At December 31, 2022, $150.0 million remains available under the 2022 Shelf. In connection with the 2022 shelf, we have entered into the Sales Agreement with B.
This shelf registration statement covers the offering, issuance and sale by us of up to an aggregate of $150.0 million of our common stock, preferred stock, debt securities, warrants, and units (the “2022 Shelf”). In connection with the 2022 shelf, we have entered into the Sales Agreement with B.
Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Actual results may differ from these estimates under different assumptions or conditions. 63 Table of Contents While our significant accounting policies are described in greater detail in Note 2, “Basis of Presentation and Summary of Significant Accounting Policies” in our consolidated financial statements, appearing under Part II, Item 8 and beginning at page F-1 of this Annual Report on Form 10-K, we believe that the following accounting policies and estimates are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements in understanding our historical and future performance.
While our significant accounting policies are described in greater detail in Note 2, “Basis of Presentation and Summary of Significant Accounting Policies” in our consolidated financial statements, appearing under Part II, Item 8 and beginning at page F-1 of this Annual Report on Form 10-K, we believe that the following accounting policies and estimates are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements in understanding our historical and future performance.
Recent Accounting Pronouncements See Note 2, “Basis of Presentation and Summary of Significant Accounting Policies” in our consolidated financial statements, appearing under Part II, Item 8 and beginning at page F-1 of this Annual Report on Form 10-K for information about recent accounting pronouncements, the timing of their adoption, if applicable, and our assessment, if any, of their potential impact on our financial condition and results of operations.
The potential of our estimates to vary differs by program, product, type of customer and geographic location. 64 Table of Contents Recent Accounting Pronouncements See Note 2, “Basis of Presentation and Summary of Significant Accounting Policies” in our consolidated financial statements, appearing under Part II, Item 8 and beginning at page F-1 of this Annual Report on Form 10-K for information about recent accounting pronouncements, the timing of their adoption, if applicable, and our assessment, if any, of their potential impact on our financial condition and results of operations.
Riley, relating to shares of our common stock. In accordance with the terms of the Sales Agreement, we may offer and sell up to 4,900,000 shares of our common stock, par value $0.0001 per share, from time to time through or to B. Riley acting as our agent or principal.
Riley relating to shares of our common stock in an at-the-market sales program. In accordance with the terms of the Sales Agreement, we may offer and sell up to 4,900,000 shares of our common stock, from time-to-time through B. Riley acting as our agent or principal.
Coupons, however, can have a significant impact on year-over-year individual product revenue growth trends. If any of our ratios, factors, assessments, experiences, or judgments are not indicative or accurate estimates of our future experience, our results could be materially affected. The potential of our estimates to vary differs by program, product, type of customer and geographic location.
Coupons, however, can have a significant impact on year-over-year individual product revenue growth trends. If any of our ratios, factors, assessments, experiences, or judgments are not indicative or accurate estimates of our future experience, our results could be materially affected.
In evaluating our business, you should carefully consider the information set forth under the heading “Risk Factors” herein and in our Annual Report on Form 10-K for the year ended December 31, 2021. As used below, the words “we,” “us” and “our” refer to Journey Medical Corporation and its consolidated subsidiaries.
In evaluating our business, you should carefully consider the information set forth under the heading “Risk Factors” herein. As used below, the words “we,” “us” and “our” refer to Journey Medical Corporation and its consolidated subsidiaries.
Due to the contingent nature of these obligations, the amounts of these payments cannot be reasonably predicted. ​ Item 7A. Quantitative and Qualitative Disclosures About Market Risks We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item. ​ Item 8.
Quantitative and Qualitative Disclosures About Market Risks We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item. ​ Item 8. Financial Statements and Supplementary Data.
Gross-to-net sales accruals and the balance in the related allowance accounts for the years ended December 31, 2022, 2021 and 2020 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Chargebacks ​ Distrubutor ​ Prompt ​ ​ ​ ​ ​ ​ Managed ​ ​ ​ ​ ​ ​ ​ ​ and other ​ Service Pay ​ ​ ​ ​ Care ​ Gov’t ​ ​ ​ ($’s in thousands) allowances Fees Discounts Returns Coupons Rebates Rebates Total Balance as of December 31, 2020 ​ $ — ​ $ — ​ $ — ​ $ 2,580 ​ $ 12,769 ​ $ 100 ​ $ — ​ $ 15,449 Current provision related to sales in the current period ​ 622 ​ 791 ​ 197 ​ 3,564 ​ 140,871 ​ 9,025 ​ 690 ​ 155,760 Checks/credits issued to third parties ​ — ​ — ​ — ​ (2,589) ​ (148,963) ​ (5,633) ​ — ​ (157,185) Reclassifications between liability accounts ​ — ​ — ​ — ​ (315) ​ 315 ​ — ​ — ​ — Balance as of December 31, 2021 ​ $ 622 ​ $ 791 ​ $ 197 ​ $ 3,240 ​ $ 4,992 ​ $ 3,492 ​ $ 690 ​ $ 14,024 Current provision related to sales in the current period ​ 2,663 ​ 5,868 ​ 1,104 ​ 5,387 ​ 117,883 ​ 22,654 ​ 3,651 ​ 159,210 Checks/credits issued to third parties ​ (3,032) ​ (5,730) ​ (1,094) ​ (4,938) ​ (121,179) ​ (22,552) ​ (3,331) ​ (161,856) Balance as of December 31, 2022 ​ $ 253 ​ $ 929 ​ $ 207 ​ $ 3,689 ​ $ 1,696 ​ $ 3,594 ​ $ 1,010 ​ $ 11,378 ​ The change in our reserve from period-to-period is driven by the decrease in our reserve for coupons.
Gross-to-net sales accruals and the balance in the related allowance accounts for the years ended December 31, 2023, 2022 and 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Chargebacks ​ Distributor ​ Prompt ​ ​ ​ ​ ​ ​ Managed ​ ​ ​ ​ ​ ​ ​ ​ and other ​ Service Pay ​ ​ ​ ​ Care ​ Gov’t ​ ​ ​ ($’s in thousands) allowances Fees Discounts Returns Coupons Rebates Rebates Total Balance as of December 31, 2021 ​ $ 622 ​ $ 791 ​ $ 197 ​ $ 3,240 ​ $ 4,992 ​ $ 3,492 ​ $ 690 ​ $ 14,024 Current provision related to sales in the current period ​ 2,663 ​ 5,868 ​ 1,104 ​ 5,387 ​ 117,883 ​ 22,654 ​ 3,651 ​ 159,210 Checks/credits issued to third parties ​ (3,032) ​ (5,730) ​ (1,094) ​ (4,938) ​ (121,179) ​ (22,552) ​ (3,331) ​ (161,856) Balance as of December 31, 2022 ​ $ 253 ​ $ 929 ​ $ 207 ​ $ 3,689 ​ $ 1,696 ​ $ 3,594 ​ $ 1,010 ​ $ 11,378 Current provision related to sales in the current period ​ 1,856 ​ 5,439 ​ 976 ​ 5,483 ​ 94,822 ​ 22,934 ​ 5,191 ​ 136,701 Checks/credits issued to third parties ​ (2,016) ​ (5,470) ​ (1,041) ​ (5,095) ​ (93,074) ​ (21,318) ​ (5,948) ​ (133,962) Balance as of December 31, 2023 ​ $ 93 ​ $ 898 ​ $ 142 ​ $ 4,077 ​ $ 3,444 ​ $ 5,210 ​ $ 253 ​ $ 14,117 ​ 67 Table of Contents The increase in our reserves for gross-to-net sales accruals from period-to-period is driven by increases in our reserves for coupons and managed care rebates of $1.7 million and $1.6 million, respectively.
Cash Flows for the Years Ended December 31, 2022 and 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years ended December 31, ​ Increase ($’s in thousands) 2022 2021 (Decrease) Net cash used in operating activities ​ $ (13,534) ​ $ (2,181) ​ $ 11,353 Net cash used in investing activities ​ (20,000) ​ (10,000) ​ 10,000 Net cash provided by financing activities ​ 16,456 ​ 53,016 ​ (36,560) Net change in cash and cash equivalents ​ $ (17,078) ​ $ 40,835 ​ $ 57,913 68 Table of Contents ​ Operating Activities Net cash used in operating activities increased by $11.4 million, to $13.5 million for the year ended December 31, 2022, from $2.2 million for the year ended December 31, 2021.
Cash Flows for the Years Ended December 31, 2023 and 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years ended December 31, ​ Increase ($’s in thousands) 2023 2022 (Decrease) Net cash provided by (used in) operating activities ​ $ 5,240 ​ $ (13,534) ​ $ 18,774 Net cash used in investing activities ​ (5,000) ​ (20,000) ​ 15,000 Net cash provided by (used in) financing activities ​ (4,804) ​ 16,456 ​ (21,260) Net change in cash and cash equivalents ​ ​ (4,564) ​ ​ (17,078) ​ ​ (12,514) ​ 69 Table of Contents Operating Activities Net cash from operating activities changed by $18.8 million from period-to-period, from $13.5 million cash used in operating activities for the year ended December 31, 2022 to $5.2 million net cash provided by operating activities for the year ended December 31, 2023.
Since inception, we have made significant investments to build out our commercial product portfolios, which we believe, coupled with our experienced dermatology sales leadership team and our recently expanded field sales force, will position our business for growth.
Since inception, we have made significant investments to build out our commercial product portfolios, which we believe, coupled with our experienced dermatology sales leadership team and field sales force, will position our business for growth. We are a majority-owned subsidiary of Fortress. Critical Accounting Policies and Uses of Estimates Our consolidated financial statements have been prepared in accordance with U.S.
Investing Activities Net cash used in investing activities increased by $10.0 million, to $20.0 million for the year ended December 31, 2022, from $10.0 million for the year ended December 31, 2021.
Investing Activities Net cash used in investing activities decreased by $15.0 million, to $5.0 million for the year ended December 31, 2023, from $20.0 million for the year ended December 31, 2022. The year ended December 31, 2023 reflects the $5.0 million deferred cash payment paid in January 2023 related to the VYNE Product Acquisition.
The above table includes the authorized generic product within the line items for Targadox, Ximino and Exelderm. Other revenue The year ended December 31, 2022 includes a net $2.5 million milestone payment from Maruho. In January 2022, Maruho received manufacturing and marketing approval in Japan for Rapifort® Wipes 2.5%, triggering the net payment.
Other revenue for the year ended December 31, 2022 includes a net $2.5 million milestone payment from Maruho. In January 2022, Maruho received manufacturing and marketing approval in Japan for Rapifort Wipes 2.5% (Japanese equivalent to U.S. FDA approved QBREXZA®), for the treatment of primary axillary hyperhidrosis, triggering the one-time net payment.
Cost of Goods Sold Cost of goods sold decreased by $1.3 million, or 4%, to $30.8 million for the year ended December 31, 2022, from $32.1 million for the year ended December 31, 2021. The decrease is primarily due to a $5.9 million decrease in inventory step-up costs.
Cost of Goods Sold Cost of goods sold decreased by $4.1 million, or 13%, to $26.7 million for the year ended December 31, 2023, from $30.8 million for the year ended December 31, 2022.
Material Cash Requirements In the normal course of business, we enter into contractual obligations that contain cash requirements of which the most significant to date include the following: ● We are required to make regular payments under the EWB Facility, which was recently amended to increase the borrowing capacity of our revolving line of credit to $10.0 million, $2.9 million of which was outstanding at December 31, 2022, and to add a term loan not to exceed $20.0 million.
Material Cash Requirements In the normal course of business, we enter into contractual obligations that contain cash requirements of which the most significant currently include the following: ● We are required to make regular payments under the SWK Credit Facility.
Each required payment must only be paid one time following the first achievement of the applicable annual net sales milestone amount. 69 Table of Contents ● Pursuant to the DFD-29 Agreement with DRL, we paid an upfront payment of $10.0 million. Additional contingent regulatory and commercial milestone payments totaling up to $158.0 million may also be payable.
Each required payment must only be paid one time following the first achievement of the applicable annual net sales milestone amount. ● On June 29, 2021, we entered into the DFD-29 Agreement to obtain the global rights for the development and commercialization of DFD-29 with DRL.
Financing Activities Net cash provided by financing activities decreased by $36.6 million, to $16.5 million for the year ended December 31, 2022, from $53.0 million for the year ended December 31, 2021.
The year ended December 31, 2022 reflects the upfront $20.0 million payment for the VYNE Product Acquisition. Financing Activities Net cash used in financing activities increased by $21.3 million, to $4.8 million for the year ended December 31, 2023, from $16.5 million of cash flows provided by financing activities for the year ended December 31, 2022.
The provision for coupons was $1.7 million at December 31, 2022 compared to $5.0 million at December 31, 2021. The change in the coupon reserve is primarily due to a decrease in sales of Minocycline as well as an increase primarily associated with initial program prefunding payments for Amzeeq and Zilxi.
Our provision for coupons was $3.4 million at December 31, 2023 compared to $1.7 million at December 31, 2022. The increase in the coupon reserve is primarily due to an increase in our channel reserve at December 31, 2023 for rebates not credited at the end of the year as a result of the timing of receipt.
In addition, we may seek to raise capital through additional debt or equity financing, which may include sales of securities under our 2022 Shelf or under a new registration statement. If such funding is not available or not available on terms acceptable to us, our current plans for expansion of our product portfolio may be scaled back, limited or curtailed.
We may seek to raise capital through debt or equity financings, to expand our product portfolio, and for other strategic initiatives, which may include sales of securities under either our 2022 Shelf or a new registration statement or drawing on the SWK Credit Facility.
Selling, General and Administrative Expenses (“SG&A”) Selling, general and administrative expenses increased by $19.6 million, or 49%, to $59.5 million for the year ended December 31, 2022, from $39.8 million for the year ended December 31, 2021.
Selling, General and Administrative Expenses (“SG&A”) Selling, general and administrative expenses decreased by $15.6 million, or 26%, to $43.9 million for the year ended December 31, 2023, from $59.5 million for the year ended December 31, 2022. The decrease is mainly due to our expense reduction efforts primarily in sales and marketing and other SG&A areas.
The net payment reflects a milestone payment of $10.0 million to the Company from Maruho, offset by a $7.5 million payment to Dermira. The year ended December 31, 2022 also reflects total year-to-date royalties of $174,000 from Maruho on sales of Rapifort® Wipes 2.5% in Japan.
Other revenue for the year ended December 31, 2023 includes a $19.0 million non-refundable upfront payment from Maruho under the New License Agreement. Royalties on sales of Rapifort Wipes 2.5% in Japan were $0.5 million for the year ended December 31, 2023 as compared to $0.2 million for the year ended December 31, 2022.
Total net product revenue increased $7.9 million, or 12%, to $71.0 million for the year ended December 31, 2022, from $63.1 million for the year ended December 31, 2021.
Interest Expense Interest expense decreased $0.3 million to $1.7 million for the year ended December 31, 2023, from $2.0 million for the year ended December 31, 2022.
Royalties ranging from ten percent to twenty percent are payable on net sales of the product.
Based on the development and commercialization of DFD-29, additional contingent regulatory and commercial milestone payments totaling up to $158.0 million may also become payable. Royalties ranging from ten percent to twenty percent are payable on net sales of the product.
Based on the amount currently outstanding under the EWB facility and current interest rates, and assuming we do not make further draws under the EWB Facility, we expect to make the following payments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments by Period ​ Total 2023 2024 2025 2026 ​ ​ ($’s in thousands) Interest ​ $ 4,448 ​ $ 1,877 ​ $ 1,790 ​ $ 777 ​ $ 4 Principal ​ 22,948 ​ 2,948 ​ 5,556 ​ 13,333 ​ 1,111 Total ​ $ 27,396 ​ $ 4,825 ​ $ 7,346 ​ $ 14,110 ​ $ 1,115 ​ Should we elect to make further borrowings under the EWB facility, we would expect to repay additional amounts each year until maturity. ● Pursuant to the Vyne Product Acquisition Agreement, we agreed to pay to Vyne an additional $5.0 million upon the one-year anniversary of the closing, January 12, 2023, completing our obligation to pay the full purchase price.
Based on the amount currently outstanding under the SWK facility and current interest rates, and assuming we do not make further draws under the SWK facility, we expect to make the following payments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments by Period ​ Total 2024 2025 2026 2027 ​ ​ ($’s in thousands) Interest ​ $ 6,770 ​ $ 1,998 ​ $ 1,993 ​ $ 1,693 ​ $ 1,086 Principal ​ ​ 15,000 ​ ​ — ​ ​ — ​ ​ 4,500 ​ ​ 10,500 Exit fee ​ 750 ​ — ​ — ​ — ​ 750 Total ​ $ 22,520 ​ $ 1,998 ​ $ 1,993 ​ $ 6,193 ​ $ 12,336 ​ Should we elect to borrow the remaining $5.0 undrawn balance under the SWB facility, we would expect to repay additional amounts each year until maturity. ● Pursuant to the Vyne Product Acquisition Agreement, upon the achievement of net sales milestones with respect to the products purchased in the Vyne Product Acquisition, we are also required to pay contingent consideration consisting of a one-time payment, per product, of $10.0 million and $20.0 million upon each product reaching annual net sales of $100 million and $200 million, respectively.
The decreases are also offset by increased costs of approximately $2.1 million related to freight, destruction, product validation, stability testing costs, and the establishment of expired product and other inventory reserves for the year ended December 31, 2022. 66 Table of Contents Research and Development Research and Development expense increased to $10.9 million for the year ended December 31, 2022 from $2.7 million for the year ended December 31, 2021 due to clinical trial expenses to develop our DFD-29 product, for which our Phase 3 clinical trial is 100% enrolled as of January 10 th , 2023.
Research and Development Research and development expense decreased by $3.4 million, or 31%, to $7.5 million for the year ended December 31, 2023 from $10.9 million for the year ended December 31, 2022. The decrease is related to lower clinical trial expenses to develop our DFD-29 product as the project winds down and eventually concludes.
Additionally, we are required to fund and oversee the Phase 3 clinical trials, which we anticipate will cost approximately $24.0 million, based upon the current development plan and budget. ● We are contractually obligated to make installment milestone payments on our acquired licenses as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments by Period Product Total 2023 2024 ​ ​ ($’s in thousands) Ximino ​ $ 3,000 ​ $ 1,500 ​ $ 1,500 Accutane ​ 1,000 ​ 1,000 ​ — Total ​ $ 4,000 ​ $ 2,500 ​ $ 1,500 ​ ● We are contractually obligated to make sales-based royalty payments to Dermira (for Qbrexza), Sun Pharmaceutical Industries (for Exelderm and Ximino) and PuraCap Caribe (for Targadox).
The Company is obligated to make a $3.0 million milestone payment to DRL in April 2024 based on the FDA’s acceptance of the NDA filed in January 2024. ● We are contractually obligated to make installment milestone payments of $3.0 million on Ximino, all of which is classified as current as it is due within a year of December 31, 2023. ● We are contractually obligated to make sales-based royalty payments to Dermira (for Qbrexza), Sun Pharmaceutical Industries (for Exelderm) and PuraCap Caribe (for Targadox).
This is compared to borrowings under the EWB term loan of $20 million and net borrowings under the EWB revolving line of credit of $2.1 million during the year ended December 31, 2022.
Net cash provided by financing activities for the year ended December 31, 2022 reflects net proceeds of $19.8 million from the EWB term loan and net proceeds of $2.1 million from the EWB revolving line of credit, offset by $5.0 million in payments of the installment notes related to our previously acquired products.
The period ended December 31, 2022 also reflects total year-to-date royalties of $174,000 from Maruho on sales of Rapifort® Wipes 2.5% in Japan.
Other revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ ​ December 31, ​ Change ($in thousands) ​ 2023 2022 ​ $ ​ % Non-refundable upfront payment from Maruho ​ $ 19,000 ​ $ — ​ $ 19,000 ​ 100 % Net milestone payment from Maruho ​ — ​ 2,500 ​ (2,500) ​ (100) % Royalties on sales of Rapifort® Wipes 2.5% ​ 519 ​ 174 ​ 345 ​ 198 % Total other revenue ​ $ 19,519 ​ $ 2,674 ​ $ 16,845 ​ 630 % ​ Other revenues increased approximately $16.8 million, to $19.5 million for the year ended December 31, 2023, from $2.7 million for the year ended December 31, 2022.
Removed
We are a majority-owned subsidiary of Fortress. 2022 Highlights and Events On December 30, 2022, we filed a shelf registration statement on Form S-3 (File No. 333-269079), which was declared effective by the SEC on January 26, 2023.
Added
The decrease is primarily due to lower unit volumes from our legacy products, Targadox, Ximino and Exelderm driven specifically by continued generic competition for Targadox and the winding down, and ultimate discontinuation of Ximino, during the third quarter of 2023.
Removed
On March 14, 2022, we dosed the first patient in our Phase 3 clinical trial evaluating DFD-29 (Minocycline Modified Release Capsules 40 mg) for the Treatment of Rosacea. As of January 10, 2023, we achieved 100% enrollment in the trial, with a top-line data readout expected in the second quarter of 2023.
Added
Despite unit volume increases from period-to-period for Qbrexza, Amzeeq and Zilxi, net revenues for these products were negatively impacted by higher managed care rebates due to higher managed care program costs.
Removed
We plan to submit the NDA for DFD-29 in the second half of 2023 and FDA approval is anticipated in the second half of 2024. The Phase 2 clinical trials, DFD-29 (40mg) concluded with results indicating improved treatment by the investigational drug when compared to Oraycea® (European equivalent of Oracea®) on both co-primary endpoints.
Added
In addition, Qbrexza net revenue was negatively impacted by coupon deductible rate resets in the beginning of 2023, and isolated charges in the first quarter of 2023 for higher-than-anticipated returns from the Dermira product lots purchased in 2021, as well as higher government rebates from increases in certain state rebate programs.
Removed
For the first co-primary endpoint, IGA treatment success, Oraycea only had a 33.33% IGA treatment success rate, while DFD-29 achieved a 66.04% IGA treatment success rate. For the second co-primary endpoint, the change in total inflammatory lesion count, Oraycea only had a 10.5 reduction in inflammatory lesions, while DFD-29 achieved a 19.2 reduction in inflammatory lesions.
Added
As of July 1, 2023, we no longer participate in these programs. Accutane net product revenue increased $1.8 million from 2022 due to increased unit volume resulting from our focused sales and marketing efforts.
Removed
On February 11, 2022, we announced that our exclusive licensing partner in Japan, Maruho Co., Ltd. (“Maruho”), received marketing and manufacturing approval for Rapifort® Wipes 2.5% (Qbrexza®), for the treatment of primary axillary hyperhidrosis, triggering a net $2.5 million milestone payment to us.
Added
Sales of Rapifort in Japan will no longer be subject to a royalty after October 1, 2023 in accordance with the Second A&R License Agreement.
Removed
The net payment reflects a milestone payment of $10 million to us from our exclusive licensing partner Maruho, offset by a $7.5 million payment to Dermira, pursuant to the terms of the Asset Purchase Agreement between us and Dermira. We acquired global rights to Qbrexza from Dermira in 2021.
Added
Our provision for managed care rebates was $5.2 million at December 31, 2023 compared to $3.6 million at December 31, 2022. The increase in the managed care rebate reserve is primarily due to the timing of invoices received.
Removed
On January 12, 2022, we acquired Amzeeq® (minocycline) topical foam, 4%, and Zilxi® (minocycline) topical foam, 1.5%, two FDA-approved topical minocycline products and Molecule Stabilizing Technology (MST)™ from VYNE Therapeutics Inc., which expanded our product portfolio to eight actively marketed branded dermatology products. 62 Table of Contents These proprietary foam-based products optimize the topical delivery of minocycline, an active pharmaceutical ingredient that was previously available only in oral form.
Added
The decrease is mainly due to lower-than-prior-year product royalties driven by lower sales of products from period-to-period, and a permanent contractual decrease in the Qbrexza royalty percentage from the prior-year period.
Removed
Approved by the FDA nearly 50 years ago, minocycline is a well-established molecule that has been prescribed, in oral formulation, over 30 million times in the past decade.
Added
During the last quarter of 2022, we began implementing a cost reduction initiative designed to improve operational efficiencies, optimize expenses, and reduce overall costs. The initiative is intended to reduce selling, general, and administrative expenses to better align costs with their revenue-generating capabilities.
Removed
Amzeeq (minocycline) topical foam, 4%, is the first and only topical formulation of minocycline to be approved by the FDA for the treatment of inflammatory lesions of non-nodular moderate to severe acne vulgaris in adults and children 9 years and older.
Added
In connection with the cost reduction initiative, during the last quarter of 2022 and the first two quarters of 2023, we executed a headcount reduction to our sales force and implemented marketing and other cost cuts.
Removed
According to the American Academy of Dermatology (“AAD”), acne is the most common skin condition in the United States, affecting up to 50 million Americans annually. Approved by the FDA in May 2020, Zilxi (minocycline) topical foam, 1.5%, is the first and only topical minocycline treatment for inflammatory lesions due to rosacea in adults.
Added
Loss on impairment of intangible assets We recorded a loss on the impairment of intangible assets of $3.1 million during 2023 related to the impairment of the Ximino intangible asset as a result of lower net product revenues and gross profit levels for the Ximino products. We discontinued selling Ximino on September 29, 2023.
Removed
Rosacea is a common skin disease that affects 16 million Americans, according to AAD. Market research shows that over 70% of patients with rosacea are seeking better alternatives to current treatments.
Added
This decrease was driven in part by the total repayment of our prior credit facility with East West Bank during the third quarter of 2023 and no additional borrowing of funds until entering into the Credit Facility with SWK in December 2023.
Removed
On January 12, 2022, we entered into a third amendment of the loan and security agreement with EWB (the “Amendment”), which increased the borrowing capacity of our revolving line of credit to $10.0 million, $2.9 million of which was outstanding at December 31, 2022, and added a term loan not to exceed $20.0 million.
Added
As we utilize this Credit Facility during 2024 to help us fund our operations, we expect interest expenses may increase year-over-year from the fiscal year ended December 31, 2023.
Removed
Both the revolving line of credit and the term loan mature on January 12, 2026. In January 2022 and August 2022, the Company borrowed $15.0 million and $5.0 million, respectively, against the term loan. The term loans bear interest at a floating rate equal to 1.73% above the prime rate and are payable monthly.
Added
Income tax expense Income tax expense increased by $0.2 million during 2023 due to an increase in certain state taxes driven by the Maruho New License Agreement. 68 Table of Contents Liquidity and Capital Resources On December 27, 2023, we entered into the Credit Agreement with SWK.
Removed
The term loans contain an interest-only payment period through January 12, 2024, with an extension through July 12, 2024 if certain covenants are met, after which the outstanding balance of each term loan is payable in equal monthly installments of principal, plus all accrued interest, through the term loan maturity date.
Added
The Credit Agreement provides for a term loan Credit Facility in the original principal amount of up to $20.0 million. On the closing date, we drew $15.0 million. The remaining $5.0 million may be drawn upon our request within 12 months after the closing date.
Removed
We may elect to prepay all or any part of the term loan without penalty or premium, but we may not re-borrow any amount, once repaid. Any outstanding borrowing against the revolving line of credit bears interest at a floating rate equal to 0.70% above the prime rate.
Added
The Term Loans mature on December 27, 2027, and bear interest at a rate per annum equal to the three-month term SOFR (subject to a SOFR floor of 5%) plus 7.75%. The interest rate resets quarterly. Interest payments begin in February 2024 and are paid quarterly.
Removed
The Amendment includes customary financial covenants such as collateral ratios and minimum liquidity provisions. We are in compliance with all applicable financial covenants under the Amendment. The remaining $7.1 million revolving line of credit is fully available to us without any restrictions, other than certain customary and ordinary closing conditions.
Added
Beginning in February 2026, we are required to repay the outstanding principal of the Term Loans quarterly in an amount equal to 7.5% of the principal amount of funded Term Loans.
Removed
In September 2021, we were the victim of a cybersecurity incident that affected our accounts payable function and led to approximately $9.5 million in wire transfers being misdirected to fraudulent accounts. The matter was reported to the FBI and remains under their investigation. The cybersecurity incidenct does not appear to have compromised any personally identifiable information or protected health information.
Added
If our total revenue, measured on a trailing twelve-month basis, is greater than $70.0 million as of December 31, 2025, principal repayment is not required until February 2027, at which point we are required to repay a portion of the outstanding principal of the Term Loans quarterly in an amount equal to 15% of the principal amount of funded Term Loans.
Removed
Fortress, as our controlling stockholder and supporting partner in our back-office functions, provided us with $9.5 million to ensure our accounts payable operations continued to function smoothly.
Added
The SWK Credit Facility also includes both revenue and liquidity covenants, restrictions as to payment of dividends, and is secured by substantially all assets of the Company.
Removed
The $9.5 million of support was in the form of a related party note which the boards of both companies have agreed and converted into 1,476,044 shares of our common stock upon the consummation of our IPO in November 2021 at the IPO price.
Added
As of December 31, 2023, and as of the date of this Annual Report on Form 10-K, the Company was in compliance with the financial covenants under the SWK Credit Facility On August 31, 2023, we entered into the New License Agreement with Maruho, whereby we granted an exclusive license to Maruho to develop and commercialize Qbrexza® for the treatment of primary axillary hyperhidrosis in South Korea, Taiwan, Hong Kong, Macau, Thailand, Indonesia, Malaysia, Philippines, Singapore, Vietnam, Brunei, Cambodia, Myanmar and Laos (the “Territory”).
Removed
The federal government has been able to trace and seize the fraudulently transferred cryptocurrency assets associated with the breach. The seized cryptocurrency has been transferred into U.S. government-controlled custodial wallets. Subsequently, the forfeiture process will be initiated by the U.S. Attorney’s Office. The process includes mandatory waiting periods for filing of claims.
Added
Under the terms of the New License Agreement, in exchange for the exclusive rights to Qbrexza® in the Territory, Maruho paid us $19.0 million as a non-refundable upfront payment.
Removed
Once the cryptocurrency has been converted back into U.S. dollars, we expect to receive a notification letter to initiate the return of the cash to the Company. This process could take several months to a year or possibly longer to complete before funds can be returned.
Added
In July 2023, we satisfied all of the outstanding debt obligations we had with East West Bank (“EWB”) by voluntarily repaying the outstanding balance on the term loan under the Loan and Security Agreement, dated March 31, 2021 (as Amended, the “EWB facility”).
Removed
Given the recent market declines, volatility, and liquidity issues with cryptocurrency, there is no certainty as to the amount we will ultimately recover.
Added
During 2023, we issued 748,703 shares of common stock under the 2022 Shelf, generating net proceeds of $4.5 million. At December 31, 2023, 4,151,297 shares remain available for issuance under the 2022 Shelf. We regularly evaluate market conditions, our liquidity profile, and financing alternatives, including out-licensing arrangements for our products, to enhance our capital structure.
Removed
See “Risk Factors — Risks Related to our Platform and Data — Our business and operations would suffer in the event of computer system failures, cyber-attacks, or deficiencies in our or third parties’ cybersecurity.” Critical Accounting Policies and Uses of Estimates Our consolidated financial statements have been prepared in accordance with U.S. GAAP.
Added
We cannot make any assurances that such additional financing will be available to us and, if available, the terms may negatively impact our business and operations. At December 31, 2023, we had cash and cash equivalents of approximately $27.4 million.

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