10q10k10q10k.net

What changed in Journey Medical Corp's 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of Journey Medical Corp's 2023 and 2024 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 2024 report.

+395 added−393 removedSource: 10-K (2025-03-27) vs 10-K (2024-03-29)

Top changes in Journey Medical Corp's 2024 10-K

395 paragraphs added · 393 removed · 287 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

93 edited+37 added−50 removed137 unchanged
Biggest changeClinical testing must meet requirements for institutional review board oversight, informed consent and good clinical practices, and must be conducted pursuant to an Investigational New Drug (“IND”) Application unless exempted. 21 Table of Contents For purposes of NDA approval, clinical trials are typically conducted in the following sequential phases: Phase 1 : ➢ The drug is administered to a small group of humans, either healthy volunteers or patients, to test for safety, dosage tolerance, absorption, metabolism, excretion and clinical pharmacology.
Biggest changeFor purposes of NDA approval, clinical trials are typically conducted in the following sequential phases: Phase 1 : ➢ The drug is administered to a small group of humans, either healthy volunteers or patients, to test for safety, dosage tolerance, absorption, metabolism, excretion and clinical pharmacology. 19 Table of Contents Phase 2 : ➢ Studies are conducted on a larger number of patients to assess the efficacy of the product, to ascertain dose tolerance and the optimal dose range, and to gather additional data relating to safety and potential adverse events.
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.
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 Vyne APA. There are no subsequent milestone payments or royalties beyond the aforementioned payments.
If our competitors prepare and file patent applications in the U.S. that claim technology also claimed by us, we may have to participate in derivation proceedings declared by the USPTO to determine proper inventorship of a claimed of invention, which could result in substantial cost, even if the eventual outcome is favorable to us.
If our competitors prepare and file patent applications in the U.S. that claim technology also claimed by us, we may have to participate in derivation proceedings declared by the USPTO to determine proper inventorship of a claim of invention, which could result in substantial cost, even if the eventual outcome is favorable to us.
The APA also provides for contingent net sales milestone payments: in the first calendar year in which annual sales reach each of $100 million, $200 million, $300 million, $400 million and $500 million, we will be required to make a one-time payment of $10 million, $20 million, $30 million, $40 million and $50 million, respectively, in that year only, per product, totaling up to $450.0 million.
The Vyne APA also provides for contingent net sales milestone payments: in the first calendar year in which annual sales reach each of $100 million, $200 million, $300 million, $400 million and $500 million, we will be required to make a one-time payment of $10 million, $20 million, $30 million, $40 million and $50 million, respectively, in that year only, per product, totaling up to $450.0 million.
Anti-Itch Product for the Treatment of Pruritus Our acquired anti-itch product is indicated to treat pruritis, scabies, and other skin itch conditions (“Anti-itch Product”). Our Anti-itch Product delivers prescription relief and is non-steroidal and antihistamine free. Topical steroids are effective against itch because they reduce inflammation that can cause itch. However, they are not recommended for long-term use.
Anti-Itch Product for the Treatment of Pruritus Our acquired anti-itch product is indicated to treat pruritus, scabies, and other skin itch conditions (“Anti-itch Product”). Our Anti-itch Product delivers prescription relief and is non-steroidal and antihistamine free. Topical steroids are effective against itch because they reduce inflammation that can cause itch. However, they are not recommended for long-term use.
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 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.
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.
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. 13 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.
From time to time, we may also seek to grant licenses or sublicenses of rights to develop, sell and distribute our products to third parties in exchange for the payment of license fees and/or royalty payments.
From time to time, we may also seek to grant licenses or sublicenses of rights to develop, sell and distribute our products to third parties in exchange for the payment of license fees, royalty payments and/or milestone payments.
License & Collaboration Agreements and Acquisitions We continue to seek to enhance our product line and develop a balanced portfolio of differentiated products through product acquisitions and in-licensing or acquiring rights to products and technologies from third parties.
License & Collaboration Agreements and Acquisitions We continue to seek to enhance our product line and develop a portfolio of differentiated products through product acquisitions and in-licensing or acquiring rights to products and technologies from third parties.
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.
Through December 31, 2024, 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 2025 or first half of 2026.
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.
Accordingly, we face pressure to continually seek out technological innovations and to market our products effectively. Our major competitors, including Galderma Laboratories, Almirall, 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.
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.
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 informed of developments in our space and continually monitor new opportunities.
Royalties ranging from ten percent to twenty percent are payable on net sales of the product. Royalties are payable in each country until the last-to-expire patent in such country expires. Royalties are subject to a 50% reduction in the event that a generic competitor launches in an applicable country where we market and sell the product.
Royalties ranging from ten percent to fourteen percent are payable on net sales of the product. Royalties are payable in each country until the last-to-expire patent in such country expires. Royalties are subject to a 50% reduction in the event that a generic competitor launches in an applicable country where we market and sell the product.
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.
Of these patents and patent applications: There are 18 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.
This will consist of both commercial execution on our existing product portfolio, including lifecycle management, out-licensing of our current branded products and/or technologies in global markets, as well as investing in additional growth strategies through product and company acquisitions, licensing, or developing new products.
This will consist of both commercial execution on our existing product portfolio, including lifecycle management, out-licensing of our current branded products, intellectual property and/or technologies in global markets, as well as investing in additional growth strategies through product and company acquisitions, licensing, or developing new products.
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.
As of December 31, 2024, 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.
Of these patents and patent applications: ● There are twenty one issued U.S. patents, fifteen issued foreign patents (Australia, Canada, Europe, Israel, Mexico, United Kingdom, South Africa), six pending U.S. patent applications and one pending foreign application (Canada), all relating to Amzeeq. The issued Amzeeq patents contain claims directed to compositions and use of the compositions (method claims).
Of these patents and patent applications: ● There are 21 issued U.S. patents, fifteen issued foreign patents (Australia, Canada, Europe, Israel, Mexico, United Kingdom, South Africa), six pending U.S. patent applications and one pending foreign application (Canada), all relating to Amzeeq. The issued Amzeeq patents contain claims directed to compositions and use of the compositions (method claims).
Generic products generally face intense competition from other generic equivalents (including authorized generics) and therapeutically similar branded or generic products. 20 Table of Contents Supply and Manufacturing We have limited experience in manufacturing products for clinical or commercial purposes, and we currently do not have any internal manufacturing capabilities.
Generic products generally face intense competition from other generic equivalents (including authorized generics) and therapeutically similar branded or generic products. 18 Table of Contents Supply and Manufacturing We have limited experience in manufacturing products for clinical or commercial purposes, and we currently do not have any internal manufacturing capabilities.
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.
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 2025 or first half of 2026.
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.
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 14 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.
Our policy is to actively seek to obtain, where appropriate, the broadest intellectual property protection possible for any product candidates, proprietary information and proprietary technology through a combination of contractual arrangements and patents, both in the U.S. and elsewhere in the world. Patents and other proprietary rights are crucial to the development of our business.
Our policy is to actively seek to obtain, where appropriate, the broadest intellectual property protection possible for any product candidates, proprietary information and proprietary technology through a combination of contractual arrangements and patents, both in the U.S. and elsewhere in the world. 16 Table of Contents Patents and other proprietary rights are crucial to the development of our business.
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.
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 due over time. 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.
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.
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 Recalcitrant Nodular Acne Accutane® (isotretinoin 10mg, 20mg, 30mg, and 40mg capsules USP) is indicated for the treatment of severe recalcitrant nodular acne.
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.
We regularly engage in discussions with an array of companies, both domestic and international, 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.
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.
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 28 million prescriptions in 2024 according to Symphony Health.
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.
Amzeeq, Zilxi & the Molecular Stabilizing Technology Platform Patents We own 39 issued U.S. patents and twenty issued foreign patents, and nine pending U.S. patent applications, and two pending foreign patent applications.
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 acquired global rights to Emrosi, 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.
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.
This decentralized approach allows us to maximize our brand equity across our product portfolio 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.
Litigation is costly and time-consuming and there can be no assurance that our litigation expenses will not be significant in the future or that we will prevail in any such litigation. Competition Pharmaceutical Industry Our competitors include pharmaceutical companies and biotechnology companies, as well as universities and public and private research institutions.
Litigation is costly and time-consuming and there can be no assurance that our litigation expenses will not be significant in the future or that we will prevail in any such litigation. 17 Table of Contents Competition Pharmaceutical Industry Our competitors include pharmaceutical companies and biotechnology companies, as well as universities and public and private research institutions.
Minocycline, first introduced in 1971, is widely believed to be the most effective tetracycline agent due to its high lipophilicity, which is anticipated to permit greater permeation into, and accumulation in, the sebaceous follicles and layers of the epidermis.
Minocycline is widely believed to be the most effective tetracycline agent due to its high lipophilicity, which is anticipated to permit greater permeation into, and accumulation in, the sebaceous follicles and layers of the epidermis.
Another important part of our business development strategy is to continue to out-license our branded products and/or proprietary technologies in global markets. 12 Table of Contents Major Customers We primarily sell our prescription products to specialty pharmacies, independent wholesalers, and distributors with limited sales through the traditional national wholesaler channels.
Another important part of our business development strategy is to continue to out-license our branded products, intellectual property and/or proprietary technologies in global markets. Major Customers We primarily sell our prescription products to specialty pharmacies, independent wholesalers, and distributors with limited sales through the traditional national wholesaler channels.
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.
Qbrexza has Orange Book-listed patents that extend through February of 2033. The PAH market had approximately 485,000 prescriptions in 2024 according to Symphony Health, excluding over-the-counter (“OTC”) clinical strength anti-perspirants.
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.
Emrosi Patents With regard to Emrosi, we own 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.
For development stage drugs, we may require financial resources significantly in excess of our current cash on hand and amounts that we may borrow under our Credit Facility, and it may take many years for us to receive marketing approval, if ever, for any in-licensed or acquired product candidate. 11 Table of Contents Competitive Strengths To successfully execute our strategy, we must continue to capitalize on our following core strengths: ● Commercial leadership of our management team with a track record of commercial execution .
For development stage drugs, we may require financial resources significantly in excess of our current cash on hand, and it may take many years for us to receive marketing approval, if ever, for any in-licensed or acquired product candidate. 10 Table of Contents Competitive Strengths To successfully execute our strategy, we must continue to capitalize on our following core strengths: ● Commercial leadership of our management team with a track record of commercial execution .
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.
Through this collaboration, the parties were required to work together to complete the development of the product, which included conducting two Phase 3 studies to assess the efficacy, safety and tolerability of oral Emrosi for the treatment of rosacea and the January 4, 2024 regulatory submission of an NDA under Section 505(b)(2) of the FDCA.
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.
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. We commenced sales of this product in August 2018.
We believe that we are an ideal partner for development stage companies with limited or no commercial capabilities, as well as established pharmaceutical companies looking to deprioritize their dermatology portfolio.
We believe that we are an ideal partner for development stage companies with limited or no commercial capabilities, as well as established pharmaceutical companies looking to deprioritize their dermatology products that are no longer a strategic fit for their portfolio.
Our 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.
Our Market, Products and Relevant Disease States Our major marketed products, which have been approved by the FDA for sale in the United States, include: ● Emrosi TM (Minocycline Hydrochloride Extended Release Capsules, 40 mg for the treatment of inflammatory lesions of rosacea in adults), approved by the FDA in November 2024, sales promotion beginning in April 2025. ● Qbrexza® (a medicated cloth towelette for the treatment of primary axillary hyperhidrosis in patients nine years of age and older), 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; 6 Table of Contents ● 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.
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.
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.
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.
Research and Development As discussed above, on June 29, 2021, we obtained the global rights from DRL for the development and commercialization of Emrosi, then known as DFD-29, a modified release oral minocycline we developed for the treatment of inflammatory lesions of rosacea.
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.
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.
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.
We own 14 of the issued U.S. patents, both of the pending U.S. patent applications, 20 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, 17 issued foreign patents, and one pending foreign patent application.
Repeated scratching can cause raised thick areas of skin that might bleed or become infected. Treatment for itch may include moisturizing daily, using gentle cleansers, and bathing with lukewarm water. Long-term relief requires identifying and treating the underlying cause of itchy skin. Common treatments are prescription medicated creams and lotions, moist dressings, and oral anti-itch medicines.
Treatment for itch may include moisturizing daily, using gentle cleansers, and bathing with lukewarm water. Long-term relief requires identifying and treating the underlying cause of itchy skin. Common treatments are prescription medicated creams and lotions, moist dressings, and oral anti-itch medicines.
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.
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 23 Table of Contents 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.
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.
The three issued U.S. patents will expire in 2039. 15 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 sixteen pending foreign patent applications.
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.
Relationship with 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.
CORPORATE INFORMATION Journey Medical Corporation was incorporated in Delaware in 2014. Our executive offices are located at 9237 E Via de Ventura Blvd. Suite 105, Scottsdale, AZ 85258. Our telephone number is 480-434-6670, and our e-mail address is info@jmcderm.com or ir@jmcderm.com. 6 Table of Contents We maintain a website with the address www.jmcderm.com.
Our executive offices are located at 9237 E Via de Ventura Blvd. Suite 105, Scottsdale, AZ 85258. Our telephone number is 480-434-6670, and our e-mail address is info@jmcderm.com or ir@jmcderm.com. We maintain a website with the address www.jmcderm.com.
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.
Accutane belongs to a class of drugs that affects all four major pathogenic processes in acne: increased sebum 8 Table of Contents 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 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.
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.
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.
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 22 Table of Contents Code and the Health and Human Services Office of Inspector General (“OIG”) Compliance Program requirements for Pharmaceutical Manufacturers.
The SPA agreement may only be changed through a written agreement between the sponsor and the FDA, or if the FDA becomes aware of a substantial scientific issue essential to product safety or efficacy. 22 Table of Contents Before receiving FDA approval to market a product, we must demonstrate that the product is safe and effective for its intended use by submitting to the FDA an NDA, Abbreviated NDA (“ANDA”), 510(K) or Biologics License Application (“BLA”) containing the pre-clinical and clinical data that have been accumulated, together with chemistry and manufacturing and controls specifications and information, and proposed labeling, among other things.
Before receiving FDA approval to market a product, we must demonstrate that the product is safe and effective for its intended use by submitting to the FDA an NDA, Abbreviated NDA (“ANDA”), 510(K) or Biologics License Application (“BLA”) containing the pre-clinical and clinical data that have been accumulated, together with chemistry and manufacturing and controls specifications and information, and proposed labeling, among other things.
We aim to acquire rights to future products by licensing or otherwise acquiring an ownership interest in, funding the research and development of, and eventually commercializing, these products through our field sales organization.
We acquire rights to products and product candidates by licensing or otherwise acquiring an ownership interest in, funding the research and development of, and eventually commercializing the products through our field sales organization. We are a controlled subsidiary of Fortress Biotech, Inc.
Exelderm cream or solution is administered externally only, whereby a small amount of cream or solution is gently massaged into the affected and surrounding areas and only requires a convenient once or twice daily application. However, when used to treat tinea pedis, for which Exelderm cream is also indicated, twice daily application is required.
Exelderm cream or solution is administered externally only, whereby a small amount of cream or solution is gently massaged into the affected and surrounding areas and only requires a convenient once or twice daily application.
The FDA may refuse to accept an NDA, ANDA, 510(K) or BLA for filing if certain content criteria are not met and, even after accepting an NDA, ANDA, 510(K) or BLA, the FDA may often require additional information, including clinical data, before approval of marketing a product.
The FDA may refuse to accept an NDA, ANDA, 510(K) or BLA for filing if certain content criteria are not met and, even after accepting an NDA, ANDA, 510(K) or BLA, the FDA may often require additional information, including clinical data, before approval of marketing a product. 20 Table of Contents Section 505(b)(2) NDAs may provide an alternate path to FDA approval for new or improved formulations or new uses of previously approved products.
Each party may also terminate the Targadox Agreement for material breach by the other party or for certain bankruptcy or insolvency related events. We commenced sales of this product in October 2016.
Each party may also terminate the Targadox Agreement for material breach by the other party or for certain bankruptcy or insolvency related events.
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.
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. Repeated scratching can cause raised thick areas of skin that might bleed or become infected.
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.
Oral doxycycline (40mg) has been approved for the treatment of only inflammatory lesions (papules and pustules) of rosacea and is available under the proprietary name Oracea ® (Galderma L.P.) in the US. Oracea is generally considered to be the current standard of care.
Amzeeq is a once-daily novel topical antibiotic foam formulation of minocycline for the treatment of inflammatory lesions of non-nodular moderate-to-severe acne vulgaris in patients nine years of age and older. Amzeeq utilizes proprietary MST™ technology and is the first topical minocycline to be approved by the FDA for any condition.
Amzeeq® for the Treatment of Moderate-to-Severe Acne Amzeeq® (4% minocycline foam) was approved by the FDA in October 2019 and became available in pharmacies nationwide in January 2020. Amzeeq is a once-daily novel topical antibiotic foam formulation of minocycline for the treatment of inflammatory lesions of non-nodular moderate-to-severe acne vulgaris in patients nine years of age and older.
On August 31, 2023, we entered into a license agreement (the “New License Agreement”) with Maruho Co., Ltd., a Japanese company specializing in dermatology (“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”).
We commenced sales of this product in October 2016. 14 Table of Contents Out - licensing Agreements Qbrexza 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.
Such alliances and arrangements will potentially enable us to share the risk of incurring all research and development expenses that do not lead to revenue-generating products.
These alliances and arrangements can take many forms, including licensing arrangements, co-development and co-marketing agreements, co-promotion arrangements, research collaborations and joint ventures. Such alliances and arrangements will potentially enable us to share the risk of incurring all research and development expenses that do not lead to revenue-generating products.
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.
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.
Targadox® for the Treatment of Severe Acne Targadox® (doxycycline hyclate immediate release 50mg tablets) is indicated as adjunctive therapy for severe acne, which is part of a class of oral antibiotics known as tetracyclines.
The oral isotretinoin market had just under 2.3 million prescriptions in 2024 according to Symphony Health. Targadox® for the Treatment of Severe Acne Targadox® (doxycycline hyclate immediate release 50mg tablets) is indicated as adjunctive therapy for severe acne, which is part of a class of oral antibiotics known as tetracyclines.
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.
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 tetracycline class of antibiotics (minocycline and doxycycline) are considered to be effective options for the treatment of papulopustular rosacea.
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.
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.
These agreements are designed to protect our proprietary information and to grant us ownership of technologies that are developed in connection with their relationship with us.
These agreements are designed to protect our proprietary information and to grant us ownership of technologies that are developed in connection with their relationship with us. These agreements may not, however, provide protection for our trade secrets in the event of unauthorized disclosure of such information.
We intend to enter into strategic alliances and collaborative arrangements with third parties, which will give us rights to develop, manufacture, market and/or commercialize pharmaceutical products, the rights to which are primarily owned by these third parties. These alliances and arrangements can take many forms, including licensing arrangements, co-development and co-marketing agreements, co-promotion arrangements, research collaborations and joint ventures.
We intend to enter into strategic alliances and collaborative 11 Table of Contents arrangements with third parties, which will give us rights to develop, manufacture, market and/or commercialize pharmaceutical products, the rights to which are primarily owned by these third parties.
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.
Pursuant to the Emrosi 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. In addition, we paid two developmental milestones in 2024.
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.
Item 1. Business OVERVIEW We are a commercial-stage pharmaceutical company that primarily focuses on the selling and marketing of U.S. Food and Drug Administration (“FDA”) approved prescription pharmaceutical products for the treatment of dermatological conditions. Our current product portfolio includes eight FDA-approved prescription drugs for dermatological conditions that are marketed in the U.S.
We commenced sales of this product in August 2018. 16 Table of Contents Targadox Agreement On March 10, 2015, we entered into a license and supply agreement (as amended) for Targadox® (the “Targadox Agreement”) with PuraCap International LLC n/k/a Caribe Holdings, Inc. (“Caribe”). We made an upfront payment of $1.3 million.
Targadox Agreement On March 10, 2015, we entered into a license and supply agreement (as amended) for Targadox® (the “Targadox Agreement”) with PuraCap International LLC n/k/a Caribe Holdings, Inc. (“Caribe”). We made an upfront payment of $1.3 million. Further payments will be made based on a revenue sharing arrangement and no additional licensing or milestone payments are required.
(“DRL”) to obtain 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 (the “DFD-29 Agreement”).
Emrosi TM (formerly DFD-29) On June 29, 2021, we entered into a license, collaboration, and assignment agreement with DRL to obtain the global rights for the development and commercialization of Emrosi TM (“Emrosi”), a late-stage development modified release oral minocycline that is being evaluated for the treatment of inflammatory lesions of rosacea (the “Emrosi Agreement”).
Failure to comply with applicable federal, state and foreign laws and regulations would likely have a material adverse effect on our business. In addition, federal, state and foreign laws and regulations regarding the manufacture and sale of new drugs are subject to future changes.
In addition, federal, state and foreign laws and regulations regarding the manufacture and sale of new drugs are subject to future changes.
Phase 4 : ➢ The FDA may require Phase 4 post-marketing studies to find out more about the drug’s long-term risks, benefits, and optimal use, or to test the drug in different populations. The length of time necessary to complete clinical trials varies significantly and may be difficult to predict.
Phase 3 : ➢ Studies establish safety and efficacy in an expanded patient population. Phase 4 : ➢ The FDA may require Phase 4 post-marketing studies to find out more about the drug’s long-term risks, benefits, and optimal use, or to test the drug in different populations.
(“Dermira”), pursuant to which we acquired global ownership to Qbrexza (glycopyrronium), a prescription cloth towelette approved to treat primary axillary hyperhidrosis in people nine years of age and older. The transaction closed on May 14, 2021, and pursuant to the Qbrexza APA, we made an upfront $12.5 million cash payment to Dermira.
Qbrexza Agreement On March 31, 2021, we executed an asset purchase agreement for Qbrexza® (the “Qbrexza APA”) with Dermira Inc. (“Dermira”), pursuant to which we acquired global ownership to Qbrexza (glycopyrronium), a prescription cloth towelette approved to treat primary axillary hyperhidrosis in people nine years of age and older.
We believe the anti-inflammatory properties of minocycline delivered in our innovative foam technology make Zilxi a highly appealing treatment option for rosacea patients. Zilxi has Orange Book-listed patents that extend through October of 2030. DFD-29 for the Treatment of Rosacea DFD-29 is a low-dose minocycline (40 mg) extended release capsule formulation for oral use for the treatment of papulopustular rosacea.
Similar to Amzeeq, Zilxi leverages MST™ technology and is the first minocycline product of any form to be approved by the FDA for use in rosacea. We believe the anti-inflammatory properties of minocycline delivered in our innovative foam technology make Zilxi a highly appealing treatment option for rosacea patients. Zilxi has Orange Book-listed patents that extend through October of 2030.
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.
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. Pruritus may be localized or generalized and can occur as an acute or chronic condition.
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. Four of our FDA approved products, Emrosi, Qbrexza, Amzeeq, and Zilxi, , currently have patent protection with patents listed in the FDA Orange Book.
Clinical results are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals.
The length of time necessary to complete clinical trials varies significantly and may be difficult to predict. Clinical results are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals.
These infections are easily transmissible between people, pets or contaminated objects or surfaces but are usually not serious in nature. 9 Table of Contents Treatment options typically involve topical OTC and prescription antifungal medications.
These infections are easily transmissible between people, pets or contaminated objects or surfaces but are usually not serious in nature. Treatment options typically involve topical OTC and prescription antifungal medications. 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.
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 Acquisition included two FDA-approved products (Amzeeq® and Zilxi®), and a development-stage dermatology program (FCD105), along with the Molecule Stabilizing Technology proprietary platform.
International Regulations In addition to regulations in the United States, there are a variety of foreign regulations governing clinical trials and commercial sales and distribution of any product candidates. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval.
Such actions may impact the development and commercialization of drug products. International Regulations In addition to regulations in the United States, there are a variety of foreign regulations governing clinical trials and commercial sales and distribution of any product candidates.

… 100 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

145 edited+32 added−31 removed303 unchanged
Biggest changeThe 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.
Biggest changeThe 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; ● 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; ● U.S.
Our current and future arrangements with third-party payors for the sales of our products and sales to customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations, including, without limitation, the federal Anti-Kickback Statute (“AKS”) and the federal False Claims Act, which may constrain the business or financial arrangements and relationships through which we sell, market and distribute any current products or current or future product candidates for which we obtain marketing approval.
Our current and future arrangements with third-party payors for the sales of our products and sales to customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations, including, without limitation, the federal Anti-Kickback Statute (“AKS”) and the federal False Claims Act, which may constrain the business or financial arrangements and relationships through which we sell, market and distribute any current products or future product candidates for which we obtain marketing approval.
There can be no assurance that our competitors’ developments, including the development of other drug technologies and methods of preventing the incidence of disease, will not render our current products or current or future product candidates obsolete or noncompetitive.
There can be no assurance that our competitors’ developments, including the development of other drug technologies and methods of preventing the incidence of disease, will not render our current products or future product candidates obsolete or noncompetitive.
The principal methods of competition for our products include quality, efficacy, market acceptance, price, and marketing and promotional efforts. The commercial opportunity for our products and/or product future candidates could be significantly harmed if competitors are able to develop alternative formulations outside the scope of our in-licensed intellectual property.
The principal methods of competition for our products include quality, efficacy, market acceptance, price, and marketing and promotional efforts. The commercial opportunity for our products and/or future product candidates could be significantly harmed if competitors are able to develop alternative formulations outside the scope of our in-licensed intellectual property.
Our competitors may also develop drugs or products that are more effective, safe, useful and less costly than ours and may be more successful than us in manufacturing and marketing their drugs or products. If we are unable to compete effectively, our business, our business, prospects, results of operations, financial condition or cash flows may be materially adversely affected.
Our competitors may also develop drugs or products that are more effective, safe, useful and less costly than ours and may be more successful than us in manufacturing and marketing their drugs or products. If we are unable to compete effectively, our business, prospects, results of operations, financial condition or cash flows may be materially adversely affected.
If we or any of these third parties fail to comply with applicable GCP and GLP requirements, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or other regulatory authorities may not accept or data, or may require us to perform additional clinical trials before approving our or our partners’ marketing applications.
If we or any of these third parties fail to comply with applicable GCP and GLP requirements, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or other regulatory authorities may not accept data, or may require us to perform additional clinical trials before approving our or our partners’ marketing applications.
In connection with these applications, generic drug companies may seek to challenge the validity and enforceability of our patents through litigation and/or with the USPTO. Such challenges may subject us to costly and time-consuming litigation and/or USPTO proceedings). Such challenges may subject us to costly and time-consuming litigation and/or USPTO proceedings.
In connection with these applications, generic drug companies may seek to challenge the validity and enforceability of our patents through litigation and/or with the USPTO. Such challenges may subject us to costly and time-consuming litigation and/or USPTO proceedings).
Further, any uncured, material breach under our license agreement with any current or future licensor could result in our loss of rights to our products or current or future product candidates and may lead to a complete termination of any future product development efforts.
Further, any uncured, material breach under our license agreement with any current or future licensor could result in our loss of rights to our products or any future product candidates and may lead to a complete termination of any future product development efforts.
Our ability to generate and sustain revenue depends on a number of factors, including, but not limited to, our ability to: ● obtain and maintain regulatory approval for our products, or any other current or future product candidates that we may license or acquire; ● manufacture commercial quantities of our current products or current or future product candidates, if approved, at acceptable cost levels; and ● maintain and/or expand our commercial organization and the supporting infrastructure required to successfully market and sell our products or current or future product candidates, if approved.
Our ability to generate and sustain revenue depends on a number of factors, including, but not limited to, our ability to: ● obtain and maintain regulatory approval for our products, or any other future product candidates that we may license or acquire; ● manufacture commercial quantities of our current products or future product candidates, if approved, at acceptable cost levels; and ● maintain and/or expand our commercial organization and the supporting infrastructure required to successfully market and sell our products or future product candidates, if approved.
For example: ● our licensors might not have been the first to make the inventions covered by each of our pending patent applications and issued patents; ● our licensors might not have been the first to file patent applications for these inventions; ● others may independently develop similar or alternative technologies or duplicate our products or our current or future product candidates’ technologies; ● it is possible that none of the pending patent applications licensed to us will result in issued patents; ● the issued patents covering our products or any current or future product candidates may not provide a basis for commercially viable active products, may not provide us with any competitive advantages, or may be challenged and defeated by third parties; ● we may not develop additional proprietary technologies that are patentable; or ● patent rights of others may have an adverse effect on our business.
For example: ● our licensors might not have been the first to make the inventions covered by each of our pending patent applications and issued patents; ● our licensors might not have been the first to file patent applications for these inventions; ● others may independently develop similar or alternative technologies or duplicate our products or any future product candidates’ technologies; ● it is possible that none of the pending patent applications licensed to us will result in issued patents; ● the issued patents covering our products or any future product candidates may not provide a basis for commercially viable active products, may not provide us with any competitive advantages, or may be challenged and defeated by third parties; ● we may not develop additional proprietary technologies that are patentable; or ● patent rights of others may have an adverse effect on our business.
Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection in the United States and other countries with respect to our products or any current or future product candidates that we may license or acquire and our manufacturing methods, as well as successfully defending these patents and trade secrets against third-party challenges, which is expensive and time-consuming.
Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection in the United States and other countries with respect to our products or any future product candidates that we may license or acquire and our manufacturing methods, as well as successfully defending these patents and trade secrets against third-party challenges, which is expensive and time-consuming.
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.
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. 55 Table of Contents Risks Related to our Relationship with Fortress Biotech, Inc.
If we do not achieve one or more of these factors, many of which are beyond our control, in a timely manner or at all, we could experience significant delays or an inability to successfully complete and obtain regulatory approvals of our current or any future product candidates, which could materially adversely affect our business, results of operations, financial condition or cash flows.
If we do not achieve one or more of these factors, many of which are beyond our control, in a timely manner or at all, we could experience significant delays or an inability to successfully complete and obtain regulatory approvals of any future product candidates, which could materially adversely affect our business, results of operations, financial condition or cash flows.
If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our preclinical studies or clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for any current or future product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize such product candidates.
If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our preclinical studies or clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for any future product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize such product candidates.
If we experience delays in obtaining or fail to obtain or maintain any necessary approvals of any current or future product candidates, receive approval for fewer or more limited indications than we request or without including the labeling claims we desire, our future commercial prospects may be harmed and our ability to generate revenue may be materially impaired.
If we experience delays in obtaining or fail to obtain or maintain any necessary approvals of any future product candidates, receive approval for fewer or more limited indications than we request or without including the labeling claims we desire, our future commercial prospects may be harmed and our ability to generate revenue may be materially impaired.
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.
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. 34 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.
If our products do not achieve broad market acceptance, including by government and third-party payors, the revenues that we generate from sales will be limited. The commercial success of our products or any current or future product candidates will depend upon their acceptance by the medical community and coverage and reimbursement for our products by third-party payors, including government payors.
If our products do not achieve broad market acceptance, including by government and third-party payors, the revenues that we generate from sales will be limited. The commercial success of our products or any future product candidates will depend upon their acceptance by the medical community and coverage and reimbursement for our products by third-party payors, including government payors.
We may conduct clinical trials for our current and any future product candidates, in whole or in part, outside of the United States and the FDA and applicable foreign regulatory authorities may not accept data from such trials, which would likely result in additional costs to us and delay our business plan.
We may conduct clinical trials for any future product candidates, in whole or in part, outside of the United States and the FDA and applicable foreign regulatory authorities may not accept data from such trials, which would likely result in additional costs to us and delay our business plan.
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.
In addition, our amended and restated 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. 53 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.
We may not be able to initiate any future clinical trials for any current or future product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the United States.
We may not be able to initiate any future clinical trials for any future product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the United States.
We will also need to demonstrate acceptable evidence of safety and efficacy, as well as relative convenience and ease of administration. Market acceptance could be further limited depending on the prevalence and severity of any expected or unexpected adverse side effects associated with any current or future product candidates.
We will also need to demonstrate acceptable evidence of safety and efficacy, as well as relative convenience and ease of administration. Market acceptance could be further limited depending on the prevalence and severity of any expected or unexpected adverse side effects associated with any future product candidates.
If these third parties do not meet our requirements, conduct the trials as required or otherwise provide services as anticipated, we may not be able to satisfy our contractual obligations or obtain regulatory approval for, or successfully commercialize, our current or any future product candidates when expected or at all.
If these third parties do not meet our requirements, conduct the trials as required or otherwise provide services as anticipated, we may not be able to satisfy our contractual obligations or obtain regulatory approval for, or successfully commercialize, any future product candidates when expected or at all.
There could also be existing patents of which we are not aware that our products or current or future product candidates may inadvertently infringe. There is a substantial amount of litigation involving patent and other intellectual property rights in the biotechnology and biopharmaceutical industries generally.
There could also be existing patents of which we are not aware that our products or future product candidates may inadvertently infringe. There is a substantial amount of litigation involving patent and other intellectual property rights in the biotechnology and biopharmaceutical industries generally.
Clinical drug development is very expensive, time-consuming and uncertain. Our clinical trials may fail to adequately demonstrate the safety and efficacy of our current or any future product candidates, which could prevent or delay regulatory approval and commercialization. Clinical drug development is very expensive, time-consuming and difficult to design and implement, and its outcome is inherently uncertain.
Clinical drug development is very expensive, time-consuming and uncertain. Our clinical trials may fail to adequately demonstrate the safety and efficacy of any future product candidates, which could prevent or delay regulatory approval and commercialization. Clinical drug development is very expensive, time-consuming and difficult to design and implement, and its outcome is inherently uncertain.
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.
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; 41 Table of Contents ● 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 conduct 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 the event that we or our potential partners abandon or are delayed in the clinical development efforts related to our current or any future product candidates, we may not be able to execute on our business plan effectively and our business, financial condition, operating results and prospects would be harmed.
In the event that we or our potential partners abandon or are delayed in the clinical development efforts related to any future product candidates, we may not be able to execute on our business plan effectively and our business, financial condition, operating results and prospects would be harmed.
The FDA and foreign regulatory bodies have substantial discretion in the approval process, including the ability to delay, limit or deny approval of product candidates. The delay, limitation or denial of any regulatory approval would adversely impact our business and our operating results. We may never obtain regulatory approval to commercialize our current or any future product candidates.
The FDA and foreign regulatory bodies have substantial discretion in the approval process, including the ability to delay, limit or deny approval of product candidates. The delay, limitation or denial of any regulatory approval would adversely impact our business and our operating results. We may never obtain regulatory approval to commercialize any future product candidates.
As a result of these factors, our competitors may obtain regulatory approval of their products more rapidly than we are able to or may obtain patent protection or other intellectual property rights that limit our ability to develop or commercialize any current or future product candidates.
As a result of these factors, our competitors may obtain regulatory approval of their products more rapidly than we are able to or may obtain patent protection or other intellectual property rights that limit our ability to develop or commercialize any future product candidates.
In the event that a third party has also filed a U.S. patent application relating to any current or future product candidates or a similar invention, we may have to participate in derivation proceedings declared by the USPTO to determine proper inventorship of a claimed invention.
In the event that a third party has also filed a U.S. patent application relating to any future product candidates or a similar invention, we may have to participate in derivation proceedings declared by the USPTO to determine proper inventorship of a claimed invention.
The United States Patent Office recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first-inventor-to-file provisions, which became effective on March 16, 2013.
The United States Patent Office developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first-inventor-to-file provisions, which became effective on March 16, 2013.
If any current or future product candidates are approved but do not achieve an adequate level of acceptance by physicians, health care payors and patients, we may not generate sufficient revenue from these products, and we may not become or remain profitable.
If any future product candidates are approved but do not achieve an adequate level of acceptance by physicians, health care payors and patients, we may not generate sufficient revenue from these products, and we may not become or remain profitable.
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.
We anticipate that our expenses will increase substantially if: ● 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; 50 Table of Contents ● 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 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 or future product candidates, or the product candidates of our competitors; or ● the level of underlying demand for our products and wholesalers’ buying patterns.
The use of our products and any current or future product candidate we may license, acquire or develop in clinical trials and the sale of any products for which we obtain marketing approval expose us to the risk of product liability claims.
The use of our products and any future product candidate we may license, acquire or develop in clinical trials and the sale of any products for which we obtain marketing approval expose us to the risk of product liability claims.
We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of any current or future product candidates, if any, may be.
We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of any future product candidates, if any, may be.
Any delay in obtaining, or inability to obtain, applicable regulatory approval for any of our product candidates would delay or prevent commercialization of our current and any future product candidates and would harm our business, financial condition, operating results and prospects.
Any delay in obtaining, or inability to obtain, applicable regulatory approval for any of our product candidates would delay or prevent commercialization of any future product candidates and would harm our business, financial condition, operating results and prospects.
Any termination or disruption of any current or future relationships relating to product development may materially harm our business and financial condition and frustrate any commercialization efforts for affected current or future product candidates.
Any termination or disruption of any current or future relationships relating to product development may materially harm our business and financial condition and frustrate any development and commercialization efforts for affected current or future products or future product candidates.
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.
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. 57 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 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 clinical success of 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 any clinical trials we undertake in the future in respect of any future product candidates, which may be significantly slower or cost more than we then 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 products or any future product candidates; 40 Table of Contents ● acceptance of our proposed indications and primary endpoint assessments relating to the proposed indications of 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 any future product candidates; ● the prevalence, duration and severity of potential side effects experienced with our current products 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 any future product candidates; ● our ability to successfully obtain the substances and materials used in 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 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 any future product candidates.
We may also be unable to manufacture or commercialize products without infringing third-party patent rights, under which a license might not be available. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop, or commercialize our current or future product candidates.
We may also be unable to manufacture or commercialize products without infringing third-party patent rights, under which a license might not be available. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop, or commercialize any future product candidates.
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.
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. 56 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.
Any products or current or future product candidates we may license or acquire will be subject to ongoing regulatory and compliance requirements and oversight by the FDA and other regulatory authorities.
Any products or future product candidates we may license or acquire will be subject to ongoing regulatory and compliance requirements and oversight by the FDA and other regulatory authorities.
The research, testing, manufacturing, safety surveillance, efficacy, quality control, recordkeeping, labeling, packaging, storage, approval, sale, marketing, distribution, import, export and reporting of safety and other post-market information related to our current and any future product candidates are subject to extensive regulation by the FDA and other regulatory authorities in the United States and in foreign countries, and such regulations differ from country to country.
The research, testing, manufacturing, safety surveillance, efficacy, quality control, recordkeeping, labeling, packaging, storage, approval, sale, marketing, distribution, import, export and reporting of safety and other post-market information related to any future product candidates are subject to extensive regulation by the FDA and other regulatory authorities in the United States and in foreign countries, and such regulations differ from country to country.
In order to commercialize any current or future product candidates that have not yet received marketing approval or for which we have not yet acquired rights, we may need to build additional marketing, sales, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services tailored to those products, and we may not be successful in doing so.
In order to commercialize any of our current products or any future products or product candidates that have not yet received marketing approval or for which we have not yet acquired rights, we may need to build additional marketing, sales, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services tailored to those products, and we may not be successful in doing so.
Additionally, as a result of recurring losses from operations, we have concluded that there is substantial doubt regarding our ability to continue as a going concern for a period of at least 12 months from the date of the issuance of the financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2023.
Additionally, as a result of recurring losses from operations, we have concluded that there is substantial doubt regarding our ability to continue as a going concern for a period of at least 12 months from the date of the issuance of the financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2024.
A third party may hold intellectual property rights, including patent rights, that are important or necessary to the development of our products or current or future product candidates.
A third party may hold intellectual property rights, including patent rights, that are important or necessary to the development of our products or future product candidates.
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.
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. 54 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.
The applicable federal, state and foreign healthcare laws and regulations that may affect our ability to operate include: ● AKS, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal and state healthcare programs, such as Medicare and Medicaid.
The applicable federal, state and foreign healthcare laws and regulations that may affect our ability to operate include: ● AKS, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal and state 28 Table of Contents healthcare programs, such as Medicare and Medicaid.
In addition, our efforts to educate the medical community and third-party payors on the benefits of any current or future product candidates may require significant resources and may never be successful. Further, in both domestic and foreign markets, any future product sales will depend in part upon the availability of coverage and reimbursement from third-party payors.
In addition, our efforts to educate the medical community and third-party payors on the benefits of any future product candidates may require significant resources and may never be successful. Further, in both domestic and foreign markets, any future product sales will depend in part upon the availability of coverage and reimbursement from third-party payors.
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.
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. 52 Table of Contents Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business.
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.
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 any future product candidates for which we receive marketing authorization; ● 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; 51 Table of Contents ● the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights associated with any 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 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 future product candidates for which we receive marketing authorization.
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.
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 any of our future product candidates under applicable regulatory requirements.
Since many insurance plans are members of group purchasing organizations, which leverage the purchasing power of a group of entities to obtain discounts based on the collective buying power of the group, our ability to attract customers in the marketplace will also depend on our ability to effectively promote any current or future product candidates to group purchasing organizations.
Since many insurance plans are members of group purchasing organizations, which leverage the purchasing power of a group of entities to obtain discounts based on the collective buying power of the group, our ability to attract customers in the marketplace will also depend on our ability to effectively promote any future product candidates to group purchasing organizations.
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.
If we need to enter into alternative arrangements, that could delay any future product development activities. 35 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.
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.
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 future product candidates.
Section 505(b)(2), if applicable to us under the FDCA, would allow an NDA we submit to FDA to rely in part on data in the public domain or the FDA’s prior conclusions regarding the safety and effectiveness of approved compounds, which could expedite the development program for our product candidates by potentially decreasing the amount of clinical data that we would need to generate in order to obtain FDA approval.
Section 505(b)(2), if applicable to us under the FDCA, would allow an NDA we submit to FDA to rely in part on data in the public domain or the FDA’s prior conclusions 25 Table of Contents regarding the safety and effectiveness of approved compounds, which could expedite the development program for our product candidates by potentially decreasing the amount of clinical data that we would need to generate in order to obtain FDA approval.
Our current and potential future product candidates may not receive regulatory approval, or such approval may be delayed, which would have a material adverse effect on our business and financial condition. Further, even if a product receives regulatory approval, such product will remain subject to substantial regulatory scrutiny.
Our potential future product candidates may not receive regulatory approval, or such approval may be delayed, which would have a material adverse effect on our business and financial condition. Further, even if a product candidate receives regulatory approval, such product will remain subject to substantial regulatory scrutiny.
Pursuant to the terms of the Class A Common Stock held by Fortress, Fortress will be entitled to cast, for each share of Class A Common Stock held by Fortress, the number of votes that is equal to 1.1 times a fraction, the numerator of which is the number of shares of our outstanding common stock and the denominator of which is the number of shares of outstanding Class A Common Stock (the “Class A Common Stock Ratio”).
Pursuant to the terms of the Class A Common Stock held by Fortress, Fortress is entitled to cast, for each share of Class A Common Stock held by Fortress, the number of votes that is equal to 1.1 times a fraction, the numerator of which is the number of shares of our outstanding common stock and the denominator of which is the number of shares of outstanding Class A Common Stock (the “Class A Common Stock Ratio”).
If the third-party data and results we rely upon prove to be inaccurate, unreliable or not applicable to future product candidates or acquired products, we could make inaccurate assumptions and conclusions about current or future product candidates and our research and development efforts could be compromised.
If the third-party data and results we rely upon prove to be inaccurate, unreliable or not applicable to future product candidates or acquired products, we could make inaccurate assumptions and conclusions about any future product candidates and our research and development efforts could be compromised.
Our failure to obtain marketing approval for any current or future product candidates will prevent us from commercializing the product candidates. Further, any products or future products candidates we license or acquire will be subject to ongoing requirements and review by such regulatory authorities.
Our failure to obtain marketing approval for any future product candidates will prevent us from commercializing the product candidates. Further, any future product candidates we license or acquire will be subject to ongoing requirements and review by such regulatory authorities.
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.
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.
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.
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.
Healthcare providers, physicians and third-party payors in the United States and elsewhere play a primary role in the recommendation and prescription of our current products or current or future product candidates for which we obtain marketing approval.
Healthcare providers, physicians and third-party payors in the United States and elsewhere play a primary role in the recommendation and prescription of our current products and any future product candidates for which we obtain marketing 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 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.
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.
If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed. If we are sued for infringing intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in any litigation would harm our business.
If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed. 47 Table of Contents If we are sued for infringing intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in any litigation would harm our business.
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.
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 are not permitted to market any of our current or any future product candidates in the United States until we receive approval of an NDA, BLA or other applicable regulatory filing from the FDA.
We are not permitted to market any future product candidates in the United States until we receive approval of an NDA, BLA or other applicable regulatory filing from the FDA.
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.
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.
In addition to reductions in sales force and marketing expenses, we may also seek to raise capital through additional debt or equity financing, which may include sales of securities under our existing shelf registration statement on Form S-3, including under the Sales Agreement with B.
In addition to reductions in sales force and marketing expenses, we may also seek to raise capital through additional debt or equity financing, which may include sales of securities under our existing shelf registration statement on Form S-3, including under the Sales Agreement with B. Riley, or under a new registration statement.
Changes in corporate tax rates, the realization of net deferred tax assets relating to our operations, the taxation of foreign earnings, and the deductibility of expenses could have a material impact on the value of our deferred tax assets, could result in significant one-time charges, and could increase our future U.S. tax expense. ​ 60 Table of Contents Item 1B.
Changes in corporate tax rates, the realization of net deferred tax assets relating to our operations, the taxation of foreign earnings, and the deductibility of expenses could have a material impact on the value of our deferred tax assets, could result in significant one-time charges, and could increase our future U.S. tax expense. ​ Item 1B.
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.
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.
We expect to rely on third-party CROs and other third parties to conduct and oversee our clinical trials, other aspects of our product development and our regulatory submission process for our product candidates.
We expect to rely on third-party CROs and other third parties to conduct and oversee our clinical trials, other aspects of our product development and our regulatory submission process for any future product candidates.
We may experience an interruption in supply if, among other reasons, we incorrectly forecast our supply requirements, DRL allocates supply to its own development programs, DRL incorrectly plans its manufacturing production or DRL is unable to manufacture DFD-29 drug product in a timely manner to match our development or commercial needs.
We may experience an interruption in supply if, among other reasons, we incorrectly forecast our supply requirements, DRL allocates supply to its own development programs, DRL incorrectly plans its manufacturing production or DRL is unable to manufacture Emrosi drug product in a timely manner to match our commercial needs.
It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our products or current or future product candidates, in which case we would be required to obtain a license from these third parties, if available, on commercially reasonable terms, or our business could be harmed, possibly materially.
It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our products or future product candidates for which we receive marketing authorization, in which case we would be required to obtain a license from these third parties, if available, on commercially reasonable terms, or our business could be harmed, possibly materially.
If any of our contract manufacturers fails to produce our products in the volumes that we require on a timely basis, or to comply with stringent regulations applicable to pharmaceutical drug manufacturers, we may face delays in the commercialization of this product candidate or be unable to meet market demand, and may lose potential revenues.
If any of our contract manufacturers fails to produce our products in the volumes that we require on a timely basis, or to comply with stringent regulations applicable to pharmaceutical drug manufacturers, we may face delays in the commercialization of our products or development and commercialization of any future product candidate, if approved, or be unable to meet market demand, and may lose potential revenues.
We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials. In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations.
We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials. In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations, including climate-related initiatives.
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.
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.
As a result, any such sale could have a material adverse effect on our business, financial condition, results of operations and cash flows. There is substantial doubt regarding our ability to continue as a going concern.
As a result, any such sale could have a material adverse effect on our business, financial condition, results of operations and cash flows. 39 Table of Contents There is substantial doubt regarding our ability to continue as a going concern.
Some of our competitors may have ongoing clinical trials for product candidates that treat the same indications as our current or potential future product candidates, and patients who would otherwise be eligible for any future clinical trials may instead enroll in clinical trials of our competitors’ product candidates.
Some of our competitors may have ongoing clinical trials for product candidates that treat the same indications as our future product candidates, and patients who would otherwise be eligible for any future clinical trials may instead enroll in clinical trials of our competitors’ product candidates.
We are currently dependent on DRL for the manufacture and clinical supply of DFD-29 drug product. Any interruption in our supply may cause serious delays in the timing of our clinical trials, increase our costs and adversely impact our financial results.
We are currently dependent on DRL for the manufacture and clinical supply of Emrosi drug product. Any interruption in our supply may cause serious delays in the timing of our clinical trials, increase our costs and adversely impact our financial results.
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.
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.

… 128 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

6 edited+7 added−1 removed3 unchanged
Biggest changeItem 1C. Cybersecurity Cybersecurity Risk Management and Strategy We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats, as such term is defined in Item 106(a) of Regulation S-K. These risks include, among other things: operational risks, intellectual property theft, fraud, extortion, harm to employees or customers and violation of data privacy or security laws.
Biggest changeItem 1C. Cybersecurity Cybersecurity Risk Management and Strategy We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats, as such term is defined in Item 106(a) of Regulation S-K.
We describe whether and how risks from identified cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition, under the heading “ Our business and operations would suffer in the event of computer system failures, cyber-attacks, or deficiencies in our or third parties’ cybersecurity ” in our risk factor disclosures in Item IA of this Annual Report on Form 10-K.
We describe whether and how risks from identified cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition, under the heading “ Our business and operations would suffer in the event of computer system failures, cyber-attacks, or deficiencies in our or third parties’ cybersecurity ” in our risk factor disclosures in Item 1A of this Annual Report on Form 10-K.
These individuals are informed about, and monitor the prevention, mitigation, detection and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan, and report to our board of directors on any appropriate items.
Our CFO, as well as our management team, are informed about, and monitor the prevention, mitigation, detection and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan, and report to our audit committee and overall board of directors on any appropriate items.
To defend, detect and respond to cybersecurity incidents, we, among other things: conduct proactive privacy and cybersecurity reviews of systems and applications, conduct employee training, monitor emerging laws and regulations related to data protection and information security and implement appropriate changes.
Cybersecurity risks related to our business, operations, privacy and compliance issues are identified and addressed through a multi-faceted approach. To defend, detect and respond to cybersecurity incidents, we, among other things: conduct proactive privacy and cybersecurity reviews of systems and applications, conduct employee training, monitor emerging laws and regulations related to data protection and information security and implement appropriate changes.
Cybersecurity Governance Cybersecurity is an important part of our risk management processes and an area of focus for our management. Our executive management is responsible for the oversight of risks from cybersecurity threats. Members of our board of directors receive updates from our executive management team regarding matters of cybersecurity.
Our executive management is responsible for the oversight of risks from cybersecurity threats. Members of our board of directors receive periodic updates from our executive management team regarding matters of cybersecurity.
This includes existing and new cybersecurity risks, status on how management is addressing and/or mitigating those risks, cybersecurity and data privacy incidents (if any) and status on key information security initiatives. Our cybersecurity risk management and strategy processes are overseen by leaders from our information security, compliance and legal teams.
This includes existing and new cybersecurity risks, status on how management is addressing and/or mitigating those risks, cybersecurity and data privacy incidents (if any) and status on key information security initiatives. Any urgent cybersecurity threats are immediately flagged and reported to the board of directors. ​ 59 Table of Contents
Removed
Identifying and assessing cybersecurity risk is integrated into our overall risk management systems and processes. Cybersecurity risks related to our business, operations, privacy and compliance issues are identified and addressed through a multi-faceted approach.
Added
These risks include, among other things: operational risks, intellectual property theft, fraud, extortion, harm to employees or customers and violation of data privacy or security laws as well as overall business continuation risk. Identifying and assessing cybersecurity risk is integrated into our overall risk management systems and processes.
Added
We also engage third-party cybersecurity consultants to help us oversee cybersecurity threats both internally and in relation to our third-party service providers, including in connection with the foregoing activities.
Added
Our third-party cybersecurity consultants work to mitigate cybersecurity risks by executing all-inclusive security procedures, including but not limited to continuous employee education and training, assessing risks, monitoring systems, implementing security controls, and responding to incidents.
Added
This is done in a variety of manners including assessing the strength of outside vendors, suppliers and business partners that may have access to the Company’s data and systems, setting up strong access controls in the form of firewalls and encryption, continuous monitoring of data for suspicious activity and other threats, security audits and extensive training.
Added
Cybersecurity Governance Cybersecurity is an important part of our risk management processes and an area of focus for our management. Our Chief Financial Officer (“CFO”) oversees the leaders from our information security, compliance and legal teams who are responsible for our cybersecurity risk management and strategy processes.
Added
Our CFO, together with these individuals, also oversee the work of our third-party consultants. These individuals have significant prior business experience in compliance and risk management.
Added
Specifically, our CFO has more than 25 years of experience in all aspects of corporate controllership including managing operating and organizational risk developing, executing and maintaining robust internal control environments, including cybersecurity risk and cash controls as part of several pharmaceutical company operations.

Item 2. Properties

Properties — owned and leased real estate

1 edited+1 added−0 removed1 unchanged
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
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 expired on January 31, 2025.
Added
In July 2024, 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 will commence on February 1, 2025 and will expire on February 28, 2027.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed3 unchanged
Biggest changeMine Safety Disclosures Not applicable. ​ 62 Table of Contents PART II ​
Biggest changeMine Safety Disclosures Not applicable. ​ 60 Table of Contents PART II ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+3 added−1 removed2 unchanged
Biggest changeWe 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.
Biggest changeWe used and will continue 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.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ Market information ​ Our common stock is listed on the Nasdaq Capital Market and trades under the symbol “DERM.” We commenced trading on the Nasdaq Capital Market on November 12, 2021.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market information Our common stock is listed on the Nasdaq Capital Market and trades under the symbol “DERM.” We commenced trading on the Nasdaq Capital Market on November 12, 2021. Prior to November 12, 2021 there was no public market for our common stock.
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.
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. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
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.
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.
This 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
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.] ​ 61 Table of Contents
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.
From our entry into the Sales Agreement through December 31, 2024 , we issued and sold 2,313,013 shares of common stock under the 2022 Shelf, generating net proceeds of $12.8 million. At December 31, 2024, 2,586,987 shares remain available for issuance under the Sales Agreement.
Removed
Prior to November 12, 2021 there was no public market for our common stock. ​ Equity Compensation Plans ​ We do not maintain any deferred compensation, retirement, pension or profit-sharing plans.
Added
Equity Compensation Plans Our board of directors has adopted an incentive plan, allowing for the grant of equity and cash-based awards to our employees and directors as well as a deferred compensation plan for non-employee members of the board of directors and select executive-level employees. We do not maintain any retirement, pension or profit-sharing plans.
Added
The additional information required by this item will be incorporated by reference from our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A. Sales of Unregistered Securities None.
Added
Holders As of March 26, 2025, there were approximately 43 holders of record for our common stock and 1 holder of record for our Class A common stock.

Item 7. Management's Discussion & Analysis

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

35 edited+28 added−23 removed17 unchanged
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.
Biggest changeSee 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. ​ 63 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2024 and 2023 The following table summarizes our results of operations for the years ended December 31, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change ​ 2024 2023 ​ $ % ​ Revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product revenue, net ​ $ 55,134 ​ $ 59,662 ​ $ (4,528) ​ (8) % Other revenue ​ ​ 1,000 ​ ​ 19,519 ​ ​ (18,519) ​ (95) % Total Revenue ​ ​ 56,134 ​ ​ 79,181 ​ ​ (23,047) ​ (29) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of goods sold – (excluding amortization of acquired intangible assets) ​ ​ 20,879 ​ ​ 22,893 ​ ​ (2,014) ​ (9) % Amortization of acquired intangible assets ​ ​ 3,424 ​ ​ 3,767 ​ ​ (343) ​ (9) % Research and development ​ ​ 9,857 ​ ​ 7,541 ​ ​ 2,316 ​ 31 % Selling, general and administrative ​ ​ 40,204 ​ ​ 43,910 ​ ​ (3,706) ​ (8) % Loss on impairment of intangible assets ​ ​ — ​ ​ 3,143 ​ ​ (3,143) ​ (100) % Loss recovery ​ ​ (4,553) ​ ​ — ​ ​ (4,553) ​ 100 % Total operating expenses ​ ​ 69,811 ​ ​ 81,254 ​ ​ (11,443) ​ (14) % Loss from operations ​ ​ (13,677) ​ ​ (2,073) ​ ​ (11,604) ​ 560 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other expense (income) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest income ​ ​ (757) ​ ​ (322) ​ ​ (435) ​ 135 % Interest expense ​ ​ 2,700 ​ ​ 1,698 ​ ​ 1,002 ​ 59 % Gain on extinguishment of debt ​ ​ (1,125) ​ ​ — ​ ​ (1,125) ​ 100 % Foreign exchange transaction losses ​ ​ 116 ​ ​ 183 ​ ​ (67) ​ (37) % Total other expense ​ ​ 934 ​ ​ 1,559 ​ ​ (625) ​ (40) % Loss before income taxes ​ ​ (14,611) ​ ​ (3,632) ​ ​ (10,979) ​ 302 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income tax expense ​ ​ 61 ​ ​ 221 ​ ​ (160) ​ (72) % Net Loss ​ $ (14,672) ​ $ (3,853) ​ $ (10,819) ​ 281 % ​ Revenues The following table reflects our revenue by product for the years ended December 31, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ Change ($in thousands) 2024 2023 $ % ​ Qbrexza® ​ $ 25,114 ​ $ 25,410 ​ $ (296) ​ (1) % Accutane® ​ $ 19,407 ​ $ 20,168 ​ $ (761) ​ (4) % Amzeeq® ​ $ 5,009 ​ $ 6,201 ​ $ (1,192) ​ (19) % Zilxi® ​ $ 1,643 ​ $ 1,962 ​ $ (319) ​ (16) % Other / legacy ​ $ 3,961 ​ $ 5,921 ​ $ (1,960) ​ (33) % Total net product revenue ​ $ 55,134 ​ $ 59,662 ​ $ (4,528) ​ (8) % ​ Total net product revenues decreased by $4.5 million, or 8%, to $55.1 million for the year ended December 31, 2024, from $59.7 million for the year ended December 31, 2023.
We are managed by experienced life science executives with a track record of creating value for their stakeholders and bringing novel medicines to the market, enabling patients to experience increased quality of life, and enabling physicians and other licensed medical professionals to provide better care for their patients.
We are managed by experienced life science executives with a track record of creating value for their stakeholders and bringing novel medicines to the market, enabling patients to experience increased quality of life and physicians and other licensed medical professionals to provide better care for their patients.
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.
Gross - to - Net Sales Accruals We record gross-to-net sales accruals for sales returns, coupons, managed care rebates, government rebates, and other allowances (chargebacks, distributor service fees and prompt pay discounts) customary to the pharmaceutical industry.
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.
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 Emrosi Agreement to obtain the global rights for the development and commercialization of Emrosi with DRL.
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.
These policies relate to the more significant areas involving management’s judgments and estimates. 62 Table of Contents 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.
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
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. ​
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.
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.
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.
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.
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.
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.
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.
Other revenue for the year ended December 31, 2023 reflects a $19.0 million non-refundable upfront payment from Maruho under the New License Agreement and $0.5 million in royalties on the sale of Rapifort Wipes 2.5%.
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”).
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”).
We aim to acquire rights to future products by licensing or otherwise acquiring an ownership interest in, funding the research and development of, and eventually commercializing, the products through our field sales organization.
We acquire rights to products and product candidates by licensing or otherwise acquiring an ownership interest in, funding the research and development of, and eventually commercializing the products through our field sales organization. We are a controlled subsidiary of Fortress Biotech, Inc. (“Fortress” or “Parent”).
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.
Interest payments began in February 2024 and are paid quarterly. Beginning in February 2026, the Company is required to repay a portion of the outstanding principal of the Term Loans quarterly in an amount equal to 7.5% of the principal amount of funded Term Loans.
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.
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. Overview We are a commercial-stage pharmaceutical company founded in October 2014 that primarily focuses on the selling and marketing of U.S.
Our current assumptions, projected commercial sales of our products, clinical development plans and regulatory submission timelines are uncertain and may not emerge as expected. Additionally, as a result of recurring losses, substantial doubt exists about our ability to continue as a going concern for a period of at least twelve months from the date of issuance of these financial statements.
Additionally, as a result of recurring losses, primarily a result of the research and development of Emrosi, substantial doubt exists about our ability to continue as a going concern for a period of at least twelve months from the date of issuance of these financial statements.
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 $200 million, respectively.
Based on the amount currently outstanding under the SWK facility and current interest rates, and assuming we do not make further draws under the SWK facility, we expect to make the following payments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments by Period ​ Total 2025 2026 2027 ​ ​ ($’s in thousands) Interest ​ $ 7,884 ​ $ 3,293 ​ $ 2,797 ​ $ 1,794 Principal ​ ​ 25,000 ​ ​ — ​ ​ 7,500 ​ ​ 17,500 Exit fee ​ 1,250 ​ — ​ — ​ 1,250 Total ​ $ 34,134 ​ $ 3,293 ​ $ 10,297 ​ $ 20,544 ​ 68 Table of Contents ● 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 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 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.
On June 26, 2024, the Company drew the remaining $5.0 million under the Credit Facility. Loans under the Credit Facility (the “Term Loans”) mature on December 27, 2027, and bear interest at a rate per annum equal to the three-month term Secured Overnight Financing Rate (“SOFR”) (subject to a SOFR floor of 5%) plus 7.75%. The interest rate resets quarterly.
In July 2023, we satisfied all of the outstanding debt obligations we had with East West Bank (“EWB”) by voluntarily repaying the outstanding balance on the term loan under the Loan and Security Agreement, dated March 31, 2021 (as Amended, the “EWB facility”).
In July 2023, we satisfied all of our outstanding debt obligations with East West Bank (“EWB”) by voluntarily repaying the outstanding balance on our term loan under the Loan and Security Agreement with EWB. As such, we had no additional debt or borrowing of funds until entering into the Credit Facility with SWK in December of 2023.
Gross-to-net sales accruals and the balance in the related allowance accounts for the years ended December 31, 2023, 2022 and 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Chargebacks ​ Distributor ​ Prompt ​ ​ ​ ​ ​ ​ Managed ​ ​ ​ ​ ​ ​ ​ ​ and other ​ Service Pay ​ ​ ​ ​ Care ​ Gov’t ​ ​ ​ ($’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 $1.6 million, respectively.
Gross-to-net sales accruals and the balance in the related allowance accounts for the years ended December 31, 2024, 2023 and 2022 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Chargebacks ​ Distributor ​ Prompt ​ ​ ​ ​ ​ ​ Managed ​ ​ ​ ​ ​ ​ ​ ​ and other ​ Service Pay ​ ​ ​ ​ Care ​ Gov’t ​ ​ ​ ($’s in thousands) allowances Fees Discounts Returns Coupons Rebates Rebates Total Balance as of December 31, 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 Current provision related to sales in the current period ​ 996 ​ 4,009 ​ 664 ​ 1,787 ​ 79,451 ​ 23,627 ​ 643 ​ 111,177 Checks/credits issued to third parties ​ (1,004) ​ (4,504) ​ (714) ​ (2,740) ​ (81,145) ​ (25,120) ​ (743) ​ (115,970) Balance as of December 31, 2024 ​ $ 85 ​ $ 403 ​ $ 92 ​ $ 3,124 ​ $ 1,750 ​ $ 3,717 ​ $ 153 ​ $ 9,324 ​ Our reserves for gross-to-net sales allowances were $9.3 million at December 31, 2024, compared to $14.1 million at December 31, 2023, a decrease of $4.8 million.
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.
Financing Activities Net cash flows provided by financing activities for the year ended December 31, 2024 were $17.0 million compared to $4.8 million of net cash flows used in financing activities for the year ended December 31, 2024, reflecting a change of $21.8 million from period-to-period.
Cash Flows for the Years Ended December 31, 2023 and 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years ended December 31, ​ Increase ($’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 $5.2 million net cash provided by operating activities for the year ended December 31, 2023.
At December 31, 2024, 2,586,987 shares remain available for issuance under the Sales Agreement. 67 Table of Contents Cash Flows for the Years Ended December 31, 2024 and 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years ended December 31, ​ Increase ($’s in thousands) 2024 2023 (Decrease) Net cash provided by (used in) operating activities ​ $ (9,127) ​ $ 5,240 ​ $ (14,367) Net cash used in investing activities ​ (15,000) ​ (5,000) ​ (10,000) Net cash provided by (used in) financing activities ​ 16,993 ​ (4,804) ​ 21,797 Net change in cash and cash equivalents ​ ​ (7,134) ​ ​ (4,564) ​ ​ 2,570 ​ Operating Activities Net cash flows used in operating activities for the year ended December 31, 2024 were $9.1 million compared to $5.2 million of net cash flows provided by operating activities for the year ended December 31, 2023, reflecting a change of $14.4 million from period-to-period.
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.
Interest Expense Interest expense increased $1.0 million to $2.7 million for the year ended December 31, 2024, from $1.7 million for the year ended December 31, 2023 as a result of interest payments we made under the SWK Credit Facility.
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.
In connection with the 2022 Shelf, the Company entered into the Sales Agreement relating to shares of the Company’s common stock with B. Riley. The Company may offer and sell up to 4,900,000 shares of its common stock, from time to time, under the Sales Agreement.
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.
Selling, General and Administrative Expenses (“SG&A”) SG&A expenses decreased by $3.7 million, or 8%, to $40.2 million for the year ended December 31, 2024, from $43.9 million for the year ended December 31, 2023.
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.
Sources of Liquidity SWK Credit Facility On December 27, 2023, the Company entered into a Credit Agreement (the “Credit Agreement”) with SWK. The Credit Agreement provides for a term loan facility (the “Credit Facility”) in the original principal amount of up to $20.0 million. On the closing date, the Company drew $15.0 million.
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 year ended December 31, 2024 reflects a $15.0 million milestone payment made to DRL, which was triggered upon our receipt of FDA approval for Emrosi in November 2024. The year ended December 31, 2023 reflects the $5.0 million deferred cash payment paid in January 2023 related to the VYNE Product Acquisition.
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.
At-the-Market Offering On December 30, 2022, the Company filed the 2022 Shelf, which was declared effective by the Securities and Exchange Commission on January 26, 2023. This shelf registration statement covers the offering, issuance and sale by the Company of up to an aggregate of $150.0 million of the Company’s common stock, preferred stock, debt securities, warrants, and units.
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.
The decrease is primarily due to overall higher rebate costs across our product portfolio and lower unit volumes, mainly from our legacy products Targadox, Ximino and Exelderm, driven specifically by continued generic competition for Targadox. In addition, Amzeeq net product revenues decreased by approximately $1.2 million, due to both higher rebates and decreased unit sales volumes from 2023.
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.
Cost of Goods Sold Cost of goods sold decreased by $2.0 million, or 9%, to $20.9 million for the year ended December 31, 2024, from $22.9 million for the year ended December 31, 2023, mostly due to lower product royalty payments.
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.
Food and Drug Administration (“FDA”) approved prescription pharmaceutical products for the treatment of dermatological conditions. Our current portfolio includes eight FDA-approved prescription drugs for dermatological conditions that are marketed in the U.S.
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.
Amortization of acquired intangible assets Amortization of acquired intangible assets decreased by $0.4 million, or 9%, to $3.4 million for the year ended December 31, 2024, from $3.8 million for the year ended December 31, 2023 as the discontinuation of Ximino in 2023 has resulted in lower amortization. 65 Table of Contents Research and Development Research and development expense increased by $2.3 million, or 31%, to $9.9 million for the year ended December 31, 2024 from $7.5 million for the year ended December 31, 2023.
Other revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ ​ December 31, ​ Change ($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 $2.7 million for the year ended December 31, 2022.
Increases in unit sales volumes for Qbrexza, Accutane and Zilxi were offset by higher rebate costs compared to 2023. 64 Table of Contents Other revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ ​ ​ December 31, ​ Change ($in thousands) ​ 2024 2023 ​ $ % Milestone payment from Cutia ​ $ 1,000 ​ $ — ​ $ 1,000 ​ 100 % Non-refundable upfront payment from Maruho ​ $ — ​ $ 19,000 ​ $ (19,000) ​ (100) % Royalties on sales of Rapifort® Wipes 2.5% ​ $ — ​ $ 519 ​ $ (519) ​ (100) % Total other revenue ​ $ 1,000 ​ $ 19,519 ​ $ (18,519) ​ (95) % ​ Other revenue for the year ended December 31, 2024 reflects a $1.0 million milestone payment from Cutia under the Cutia Agreement that became payable to us upon Cutia receiving marketing approval for topical 4% minocycline foam in the People’s Republic of China.
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.
On November 1, 2024, we received FDA approval for Emrosi, which triggered a $15.0 million milestone payment to DRL in 2024. Based on the development and commercialization of Emrosi, additional contingent regulatory and commercial milestone payments totaling up to $150.0 million may become due.
In January 2024, the Company paid a $4.0 million filing fee to the FDA upon filing of an NDA for DFD-29.
In 2024, we made cash payments of $4.1 million related to the filing fee paid to the FDA for Emrosi in January 2024, and $3.0 million for the contractual milestone payment owed to DRL triggered by the FDA’s acceptance of the NDA for Emrosi in March 2024.
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.
In December 2024 we received additional cash of $4.6 million as a result of the recovery of funds from the previously disclosed cybersecurity incident that impacted us in September of 2021 prior to our IPO. We regularly evaluate market conditions, our liquidity profile, and financing alternatives, including out-licensing arrangements for our products, to enhance our capital structure.
Removed
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.
Added
Recent Corporate Highlights FDA Approval of Emrosi On November 1, 2024, the FDA approved Emrosi TM (Minocycline Hydrochloride Extended Release Capsules, 40 mg), formerly referred to as DFD-29 (“Emrosi”) for the treatment of inflammatory lesions of rosacea in adults. Emrosi was developed by Journey in collaboration with Dr. Reddy’s Laboratories, Ltd (“DRL”). Our initial supply became available in March 2025.
Removed
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.
Added
In addition, the initial distribution of Emrosi to pharmacies is ongoing and the first Emrosi prescriptions have been filled. We anticipate sales promotion of Emrosi beginning in April 2025. We intend to commercialize Emrosi in the U.S. with our existing commercial team. Critical Accounting Policies and Uses of Estimates Our consolidated financial statements have been prepared in accordance with U.S.
Removed
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.
Added
As 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.
Removed
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.
Added
The decrease in the returns reserve reflects lower units on hand in the wholesaler channel. The decrease in the coupon and managed care reserves is primarily a result of the timing of credits and invoices received at the end of 2023.
Removed
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.
Added
Product royalties were lower by $1.7 million compared to the same period in 2023 due to the contractual expiration of our Exelderm product royalty in November 2023, the contractual decrease in our Qbrexza royalty in the second quarter of 2023, and the discontinuation of Ximino in September of 2023.
Removed
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.
Added
In addition, the discontinuation of Ximino has resulted in lower drug-user fees of $0.8 million. These decreases were offset, in part, by an increase in product-related cost of goods sold of $0.5 million, as a result of product mix, mainly driven by the higher Accutane and Qbrexza unit volumes.
Removed
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.
Added
The increase was driven by the $4.1 million filing fee payment to the FDA for Emrosi in January 2024 and a $3.0 million payment for the contractual milestone payment owed to DRL triggered by the FDA’s acceptance of the NDA application for Emrosi in March 2024, partially offset by lower clinical trial expenses to develop Emrosi compared to 2023, as the clinical phase of the project has concluded.
Removed
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.
Added
The decrease is due to our continued expense management efforts, partially offset by non-cash share-based compensation, the commencement of our launch efforts for Emrosi, and the expansion of our access and coverage platforms. SG&A in the areas subject to our continued expense management efforts, primarily in sales and marketing and other SG&A areas, decreased by $8.7 million compared to 2023.
Removed
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.
Added
This decrease is partially offset by a $1.7 million increase in SG&A expenses from 2023 due to the commencement of our launch efforts for Emrosi related mainly to market research and access and to a lesser extent, the expansion of our access and coverage platforms for our current product portfolio.
Removed
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.
Added
In addition, non-cash share-based compensation expense increased by $3.1 million compared to 2023 as a result of an increase in outstanding equity awards from 2023.
Removed
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.
Added
We recorded no losses related to the impairment of assets in the year ended December 31, 2024. Loss Recovery We recorded a loss recovery benefit to income of $4.6 million in connection with the recovery of funds related to the previously disclosed September 2021 cybersecurity incident. We received the $4.6 million cash in December of 2024.
Removed
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.
Added
See Note 17 to our consolidated financial statements for further details. Interest Income Interest income increased $0.5 million to $0.8 million for the year ended December 31, 2024, from $0.3 million for the year ended December 31, 2023. Interest income reflects the income earned on our high yield money market account.
Removed
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.
Added
The increase is due to a higher invested balance compared to the prior year resulting from cash received upon entering into the SWK Credit Facility in December 2023, and to a lesser extent, a slight increase in investment yield.
Removed
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.
Added
Gain on Extinguishment of Debt We recorded a gain of $1.1 million in August 2024 upon the execution of a settlement agreement (the “Settlement Agreement”) to settle amounts owed by the Company to Sun Pharmaceutical Industries, Inc. (“Sun”) pursuant to the Ximino Asset Purchase Agreement.
Removed
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.
Added
See Note 9 to our consolidated financial statements for further details. 66 Table of Contents Liquidity and Capital Resources At December 31, 2024, we had cash and cash equivalents on hand of approximately $20.3 million as compared to $27.4 million of cash and cash equivalents at December 31, 2023, and working capital of $13.0 million at December 31, 2024, compared to $14.6 million at December 31, 2023.
Removed
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.
Added
We rely primarily on cash on hand generated from the sales of our pharmaceutical products to our customers to fund our core operations. In addition, we have relied on the proceeds from our term loan Credit Facility (as defined below) with SWK and our at-the-market sales program with B.
Removed
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 23, 2023.
Added
Riley to meet additional capital and liquidity needs, specifically to fund the research and development and commercialization of Emrosi, formerly referred to as DFD-29, which received marketing approval by the FDA on November 1, 2024. We also actively pursue licensing opportunities to raise non-dilutive capital.
Removed
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.
Added
On July 9, 2024, the Company entered into an amendment (the “Amendment”) to the Credit Agreement. The Amendment increased the original principal amount of the Credit Facility from $20.0 million to $25.0 million.
Removed
The change was driven primarily by the lower net loss from period-to-period, driven by our lower expense base and the $19.0 million payment from Maruho. This was offset by vendor payments as we utilized operating cash and the proceeds of the SWK facility to aggressively pay down our current liabilities.
Added
The $5.0 million of additional principal added in the Amendment is contractually required to be drawn upon FDA approval of Emrosi, subject to the Company receiving approval on or before June 30, 2025. The FDA approved Emrosi on November 1, 2024, and we subsequently drew the remaining $5.0 million.
Removed
The increase reflects a cash outflow of $20.0 million for the repayment of principal on the EWB term loan and net cash outflows of $2.9 million from the repayment of the EWB revolving line of credit, offset by net proceeds of $14.6 million from the SWK Term Loan and $4.5 million from the issuance of common stock under the 2022 Shelf.
Added
During the fiscal year ended December 31, 2024, the Company issued and sold 1,564,310 shares of common stock under the 2022 Shelf, generating net proceeds of $7.9 million.
Removed
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.
Added
Cash provided by operating activities for the year ended December 31, 2023 includes cash received pursuant to the New License Agreement, where Maruho paid us $19.0 million as a non-refundable upfront payment.
Removed
Additionally, the Company was required to fund and 70 Table of Contents oversee the Phase 3 clinical trials beginning upon the license of DFD-29 in 2021. The two Phase 3 clinical trials substantially concluded in July 2023 upon the receipt of positive topline results from the trials.
Added
The remainder was driven primarily by the changes in net working capital, which includes a one-time loss recovery payment of $4.6 million from the previously disclosed September 2021 cybersecurity incident.
Removed
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).

… 6 more changes not shown on this page.

Other DERM 10-K year-over-year comparisons