Ladies and gentlemen, thank you for being here today. Welcome to Journey Medical's Second Quarter 2024 Financial Results and Corporate Update Conference Call. I would now like to hand over the call to Ms. Jaclyn Jaffe, the Company's Senior Director of Corporate Operations. Please proceed, ma'am.

Good afternoon, and thank you for participating in today's conference call. Joining me from Journey Medical's leadership team are Claude Maraoui, Co-Founder, President and Chief Executive Officer; Joseph Benesch, Chief Financial Officer; Dr. Srini Sidgiddi, Vice President of Research and Development; and Ramsey Alloush, General Counsel and Corporate Secretary, who will be joining for the Q&A portion of the call. During this call, management will be making forward-looking statements, including statements that address among other things, Journey Medical's expectations for future performance, operational results, financial condition and the receipt of regulatory approvals. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in Journey Medical's most recently filed periodic reports on Form 10-K and Form 10-Q and the Form 8-K filed with the SEC today, and the company's press release that accompanies this call, particularly the cautionary statements in it. Today's conference call includes non-GAAP financial measures that Journey Medical believes can be useful in evaluating its performance. You should not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP. For a reconciliation of this non-GAAP financial measure to net loss, its most directly comparable GAAP financial measure, please see the reconciliation table located in the company's earnings press release. The content of this call contains time-sensitive information that is accurate only as of today, Monday, August 12, 2024. Except as required by law, Journey Medical disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to Claude Maraoui, Co-Founder, President and Chief Executive Officer of Journey Medical.

Thank you, Jaclyn, and good afternoon to everyone on the call today. I am pleased to report on the ongoing progress that we are making at Journey Medical. Our second quarter results were solid with $14.9 million in net product revenue. We believe that our second quarter performance demonstrates that we remain on track to meet our 2024 annual revenue guidance range of $55 million to $60 million. We also believe that our second quarter results highlight the strength of our base business as we await the November 4 PDUFA date for DFD-29, our product candidate for rosacea. With our core portfolio of prescription dermatology brands generating operating cash, and direct commercial organization already calling on physicians that generate greater than 90% of prescriptions written in our dermatology network, we believe we are well positioned to leverage the DFD-29 opportunity. Looking at the TRxs for our top brands, QBREXZA grew by approximately 4,000 prescriptions when compared to Q2 of 2023. And Accutane grew by 17,000 prescriptions during the same period. QBREXZA and Accutane together contributed $12.6 million in net product revenue for Q2 this year. Additionally, we are pleased to report that both QBREXZA and Accutane gained market share in their respective categories. This was achieved through a combination of efforts by our sales and marketing team and our trade and access group. In particular, our reach has expanded with both prescriber adoption of our brands and the expansion of our pharmacy network. Looking at the quarterly performance of our four core commercial brands, QBREXZA, Accutane, AMZEEQ, and ZILXI during this quarter, these products accounted for more than 90% of our revenue. Importantly, we generated a positive contribution from our core product portfolio with the support of our optimized commercial infrastructure. Simply put, the revenues generated from these products have surpassed our operating expenses, excluding one-time pre-launch expenses for DFD-29 such as the NDA filing fee of $4.1 million and the recent milestone payment that we made to Dr. Reddy's of $3 million for NDA acceptance. In addition to our solid top line results, we delivered non-GAAP adjusted EBITDA of $300,000 in the second quarter. I am very pleased to report that this is the fourth consecutive quarter that we achieved positive adjusted EBITDA results. Our strategic initiative to significantly reduce SG&A expenses including the rationalization of our sales and marketing headcount has been a key factor in improving our profitability while maintaining our product revenue base from 2023. Since the beginning of 2023, when this initiative began, we've reduced our total expenses by approximately $22 million, enabling us to contain our costs and retain more cash generated from sales. Importantly, our financial discipline puts us in a strong position to leverage the anticipated launch of DFD-29 with the goal to become sustainably cash flow positive in the coming quarters and EBITDA positive in 2025. Given that we remain focused on our two main objectives for the year: First, achieving our financial guidance and continuing to improve our profitability; and second, preparing for the anticipated approval and launch of DFD-29. With approximately 16.5 million people suffering from rosacea and more than 4 million prescriptions filled in the United States alone each year to treat this condition, we believe that DFD-29 provides a significant growth opportunity for the company. As many of you recall, the clinical trial results for both our Phase III DFD-29 studies were very positive and clinically compelling. On both co-primary endpoints, IGA success and the reduction of inflammatory lesions associated with rosacea, DFD-29 demonstrated statistical superiority to both placebo and Oracea, the current standard of care and market-leading oral treatment for rosacea. We believe that head-to-head superiority already demonstrated in our Phase III clinical trials will carry significant weight with prescribers and health plans as we initially position DFD-29 against Oracea which had over $300 million in annual TRx sales in 2023. Additionally, in our Phase III trials, DFD-29 demonstrated the ability to significantly reduce erythema or the skin redness associated with rosacea. We believe this is a meaningful clinical result from our Phase III program that can differentiate DFD-29's product profile, if approved, and can help accelerate both prescriber and patient adoption. The market for rosacea treatments in the United States for both oral and topical products is approximately $1.2 billion annually. With the anticipated indication of erythema and DFD-29's label, we believe DFD-29 will be positioned to take share of the broader rosacea treatment market. Our Phase III results also demonstrated a favorable safety and tolerability profile for DFD-29, with results that were similar to placebo. This gives us high confidence in the DFD-29’s clinical and regulatory package as well as the potential for market approval later this year. As you may recall, earlier this year, we conducted market research in which we surveyed prescribers of rosacea treatments and leading commercial insurance plans to assess the adoption potential of DFD-29. The feedback was very positive for both sets of participants. Given the statistically significant Phase III results against placebo and Oracea, as well as the positive erythema results. Health care prescribers expressed a strong willingness to prescribe DFD-29 for their rosacea patients with an adoption rate of 79%. This was a compelling result, which exceeded our own internal expectations. For our survey of payers, which collectively represented over 200 million covered lives, the interview showed that most, if not all, PBMs, GPOs and other managed care organizations are likely to contract with us to provide coverage for DFD-29. We believe that this market research demonstrates that DFD-29 will have high acceptance among prescribers and the negotiations with payers for formulary inclusion and reimbursement will be favorable, assuming DFD-29 is approved. A key component of our value creation strategy has been to focus on building a portfolio of specialty dermatology products with strong intellectual property. As a result of our patent litigation settlements in 2022 and 2023, we have a strong runway of patent exclusivity for QBREXZA with current patent exclusivity to 2030. AMZEEQ with current patent exclusivity to 2031 and ZILXI with current patent exclusivity to 2027. Importantly, DFD-29 will also add to our portfolio providing exclusivity until 2039. As a result, we anticipate having market exclusivity without generic intrusion for the foreseeable future. With our focus on the prescription dermatology segment, we have a strong presence and track record in the business development community for dermatology products. As a result, we have a robust effort for evaluating opportunities to enhance shareholder value. A primary focus for the company is to continue to out-license our intellectual property and related technologies to interested and capable companies outside of the United States. Similar to the Maruho transaction for the rights to QBREXZA in certain Asian countries. This out-licensing transaction resulted in $19 million of non-dilutive capital to the company last year. We will continue to explore ways to monetize our IP and technologies globally for QBREXZA, AMZEEQ and ZILXI as well as DFD-29 in the future. Additionally, we will continue to survey the dermatology landscape for revenue-generating product opportunities that we can acquire or in-license to leverage our focused commercial infrastructure. And we will also continue to evaluate late-stage product candidates that have demonstrated strong clinical trial results in dermatology indications and where we can satisfy unmet market needs for our physician customers and their patients. We believe that executing on one or more of these product opportunities would allow us to bring in additional revenue with minimal investment, adding to both our top and bottom lines. And with that, I will now turn the call over to our CFO, Joe Benesch, to review our financial results for the second quarter.

Thank you, Claude, and good afternoon to everyone on the call. Our net product revenue for the second quarter of 2024 was $14.9 million compared to $17 million for the second quarter of 2023. The decrease from the prior year period was primarily due to the timing of custom orders for QBREXZA, continued generic competition for Accutane and our decision to discontinue Amino at the end of the third quarter of 2023. Keep in mind, we started 2023 with 70 sales territories. After our adjustments, we began 2024 with 35 sales territories. Sequentially, net product revenue for the second quarter increased by $1.8 million compared to the first quarter of 2024, driven by higher volume for QBREXZA and continued growth of Accutane; these results suggest that we remain on track to meet or exceed our revenue guidance for the year. Our gross profit margin increased slightly from the prior year quarter, driven primarily by product mix and the contractual royalty decrease in QBREXZA that occurred in May of 2023. R&D expense decreased by $900,000 from the prior year quarter due to lower DFD-29 clinical trial expenses, as the clinical phase of the project has concluded. Looking now to our SG&A expenses. SG&A decreased by $1.8 million or 15% from the prior year quarter as a result of our continued expense management efforts; the decrease is in addition to the $4.7 million reduction in SG&A expenses that were reported in Q1 of this year, and the $15.6 million reduction that we realized in 2023. Continuing now to our GAAP net loss for the period, net loss to common shareholders was $3.4 million or $0.17 per share basic and diluted for the second quarter of 2024. This compares to a GAAP net loss to common shareholders of $8.4 million or $0.46 per share basic and diluted for the second quarter of 2023. Turning now to our non-GAAP results. Our non-GAAP adjusted EBITDA for the second quarter of 2024 resulted in income of $300,000, reflecting our fourth consecutive quarter of positive non-GAAP adjusted EBITDA. This compares to a non-GAAP adjusted EBITDA loss of $6 million for the second quarter of 2023. We ended the second quarter of 2024 with $23.9 million in cash compared to $24.1 million at March 31, 2024. Our cash balance includes the $3 million milestone payment that we made to Dr. Reddy's upon the FDA's acceptance of our DFD-29 NDA application as well as the $5 million drawdown on our SWK credit facility, both of which took place in the second quarter. Lastly, we are on track to meet and potentially exceed the financial guidance that we communicated at year-end, which is to achieve net product revenues in the range of $55 million to $60 million; SG&A expense in the range of $39 million to $42 million; and R&D expense in the range of $9 million to $10 million. Thank you very much. I will now turn the call back to Claude.

The second quarter results demonstrate the strength of our base business as we delivered revenue results on track with our annual guidance range and generated our fourth consecutive quarter of positive non-GAAP adjusted EBITDA. We've strengthened the IP position around our core dermatology portfolio established a productive business development platform and right-sized our operations, positioning us well strategically and financially in advance of an anticipated DFD-29 launch, which has transformative potential for our business. Thank you. Operator, we are now ready to open the lines for Q&A.

And the first question will come from Kalpit Patel with B. Riley Securities.

Maybe one related to DFD-29. And it looks like for Oracea, there was a generic entry a little sooner than we had anticipated, and it looks like there was a launch in April-May timeframe. So a question for you is, does that in any sense impact your internal forward estimates for DFD-29 launch?

Kalpit, this is Claude. So yes, Lupin came out in April of this year. They have a very similar, if not identical price to the Oracea AG that's out there. In terms of our moving forward and negotiations with the payers, we do not see this as a critical factor in any headway.

And then assuming you guys get FDA approval here in November, what early metrics would you recommend investors to focus on in the first few quarters of launch that might be useful?

Well, sure. Just to sort of take one step back. We're anticipating an approval on November 4, our PDUFA date. At that time, we're anticipating having product delivered and hopefully, into our 3PL for product distribution. We are targeting sometime in late Q1 for that to take place. If anything falls up from label printing, it could push us into April, but we are counting towards March right now. So we'll get distribution moving in March. And then the sales and marketing team will execute on the pull-through with the product beginning in Q2. Some of the metrics I would certainly look for if I was an investor, is after the first full month is just where our prescriptions landed and what sort of volume that we've created there. So one would be prescriptions. I think another metric that one should follow is to see the uptick in physician adoption. So how many unique prescribers begin to prescribe DFD-29 and the market share that we start to share in the field with Oracea and the other generic that you just mentioned. I think those are three basic areas that I would look to early on in a launch.

And how should we think about the SG&A ramp for fiscal year 2025? And as a follow-up, do you expect to give forward guidance maybe starting next year when you're in your launch phase?

Sure. Yes. We have been preparing for DFD and the marketing and everything that comes along with executing a flawless launch early next year in the first half of next year. So in terms of marketing spend, SG&A spend, I think for pre-approval, you're seeing a few million dollars already put into play here. In 2025, we'll certainly meet that and exceed that to execute our launch for DFD. In terms of the forecast that we will give as we get closer to the launch next year, we'll plan on giving some sort of guidance as we had done this year in 2024. I just think it's a bit early right now for us to comment on that, Kalpit.

Next question will come from Scott Henry with Alliance Global Partners.

Thank you, and good afternoon. Couple of questions. For starters, gross margins, as expected, ticked up in 2Q relative to first quarter. Would you expect a continued increase in gross margins in the third quarter and fourth quarter of the year?

Joe, would you like to take that please?

Sure. Scott, our margins definitely will continue to grow. Right now, we're at the lowest level of royalty for QBREXZA. A lot of the one-time expenses are behind us, so you'll definitely see more growth in the margins going forward.

And then on SG&A, it looked like about $8.4 million in the first quarter, $10.3 million in the second quarter, which one of those numbers do you think is more reflective of what we should expect going forward?

Scott, I think you're going to see it right in between and probably in the $9 million mark, and we're in line with our guidance and expectations for the total SG&A line for the year.

And then with regards to DFD-29, the erythema, the data there is strong and you want to get it in the label. When we think about that, in the label? Should we think about the data being in the label? Or could this potentially be a client within the indications?

Yes. Dr. Sidgiddi, would you like to take that one, please?

So with the erythema, we have two things over there. One is the claim, the indication itself, which would be erythema in addition to inflammatory lesions. We also have data that we have in the proposed PI, and we expect data for erythema to be there in the label as well.

Final question. How did AMZEEQ and ZILXI perform compared to the first quarter? Was there any growth?

Yes, Scott. There was some growth there with both of the brands combined. Absolutely.

Okay. And I guess, even though that was supposed to be the last question. I guess, Accutane, we'll see the numbers when we look at the filing, but it sounds like that was a new record quarter for revenues there. Is that an accurate statement?

Yes. I think that probably Joe can give more specifics, but you'll see revenue for Q2 with Accutane match up relatively equal to what you saw in Q1 of this year, so maybe a little bit higher.

Next question will come from Jason Wittes with Roth.

On DFD-29, regarding the external poll you conducted with purchasers and reimbursers, what level of confidence does that provide you initially about reimbursement from the purchasers? Also, how many years do you anticipate it will take to achieve full penetration of the DFD-29 opportunity?

Yes. Sure, Jason. First of all, the survey that we took was from a third party independent from us, which looked at about 220 million lives in total. We feel like a benchmark for us to really go out there and shoot for could be close to that 200 million lives in coverage. So that's really what we're going to strive for once we get approval and once negotiations begin. In terms of the uptake and when we would expect to have that full lives in terms of our coverage, that could take anywhere from 6 months to 12 months, perhaps a little bit longer. But that's pretty much the guidance we're giving here.

Okay. That's very helpful. Regarding SG&A and specifically the sales force build, it seems that approximately $9 million is the expected SG&A number for this year. My understanding is that there might be some growth next year with the launch of DFD-29, which could involve adding more salespeople. Should we think of it that way, or should we expect this rate to remain constant even into next year?

Yes. In terms of looking at the sales force, I think we're in a really solid place with our platform as is. If I give you a few points here, 92% of all ratio's prescriptions come from dermatology and that's over 300,000 prescriptions in a year. When we look at those physicians and profile them, we have 90% of those prescribers have been writing Journey Medical products already. So we're calling on the right people and then of the coverage has written specifically Oracea prescriptions as well. So with our current 35 sales configuration, I think you're going to see us stay at the same amount moving into launch, depending on our hockey stick ramp up and what our needs are, we will continue to analyze and see if we want to fill other territories that make sense, but we're going to wait and launch with this current configuration. So from a headcount, I think you'll see very minimal, if anything, you'll see perhaps maybe five sales additions towards the end of 2025. If that. And then in 2026, we'll reassess. In terms of our marketing spend for its part in SG&A, I think we're well set with what we have already configured. So Joe, I'll give you the mic over here on SG&A for anything else you wanted to add on it.

Sure. Thanks, Claude. So to answer your question, no, you're not going to see a huge ramp-up in SG&A from year-over-year going to be pretty consistent. You will see some marketing expenses come through, you are seeing some inflationary cost increase, but you're not going to see anything enormous come through any kind of big swings.

This concludes our question-and-answer session as well as our conference call for today. Thank you for attending today's presentation. You may now disconnect.