Good morning. I'm Jason Wittes, one of the senior healthcare analysts here at Roth MKM, and today we have the Co-Founder, President, and CEO Claude Maraoui of Journey Medical. Claude, welcome.
Thank you.
Claude, why don't we start by giving a little bit of background of Journey Medical, and an update of kind of where the company is today?
Yeah, sure. Well, Journey Medical is a dermatology-focused company. We established ourselves back in 2014.
Mm-hmm.
We're actually going to be celebrating our 10 year anniversary this October. We ended up going public in November of 2021, late in the year, and we've been public for a little over two years. We've got a great portfolio of products focused primarily in dermatology. We are in three major categories. We're in acne, we're in hyperhidrosis, as well as rosacea.
Mm-hmm.
It's a large market. It's approximately over $5 billion. So we like that sweet spot of where we are. We've got a great commercial presence, and, you know, today, as a matter of fact, there was great news that we did a press release. We've got a pipeline asset called DFD-29. We've taken it all the way through the phase III clinical trials. We ended up putting in the application, submitting it early January of this year, 2024, and I'm glad to announce today and to anybody watching that we just got the NDA acceptance.
Oh, congratulations.
So, we are absolutely thrilled about that. Right now that PDUFA date is set for November of this year.
Okay.
So we hit a major, you know, regulatory milestone with this. This is our first product that we've ever taken through clinical trials. We typically acquire, license, and now out-license products, and we grow our brands organically with our sales force and our strong marketing team.
Well, great. Congratulations on DFD-
Thank you.
-DFD-29. That's it. It seems like a very pretty transformative product for Journey.
yeah.
So why don't you kind of give us kind of what the expectation is for that and, you know, what it brings to Journey?
Absolutely. Absolutely. This is the first oral systemic drug that's going to be approved for specifically rosacea since 2006. And what we did was a little bit different. We didn't just look at our clinical trials to get approval going head-to-head against placebo. We actually looked at it compared to the market leader as well. And that product is called Oracea. And the clinical trial outcomes, there was about 640 patients in both studies combined. We looked at inflammatory lesions, as well as erythema, which is very different.
And the scientific evidence is statistically superior in being anti-inflammatory against papules, pustules, as well as the erythema associated with rosacea. Now, the current standard of care tried to get that in their indication, and we're not successful. We believe our information is very robust, and we look forward to November 4th to hear what the FDA says.
That's exciting. So, what are you ready to launch, assuming approval in November, or what's the outlook here?
Yeah, yeah. I mean, we've already been preparing for DFD. We saw the great results from the phase II. We had a lot of confidence. So we've already been out to an early start, in terms of preparation. We've done an extensive market research with payers, with providers, and we're compiling that right now. The results look outstanding. I think we're going to get high patient acceptance. Physicians, providers, we are going to have a strong uptake with this relatively fast. The product itself is a modified minocycline. It's a proprietary formulation.
Nobody else has this combination of immediate release and extended release. It also has placebo-like side effects. So combining that all together, our value proposition is going to look very strong, we believe. And, you know, between now all the way through, probably the first quarter is when we'll launch this, Jason.
Mm-hmm.
We're going to have peer-reviewed journals. We're going to have posters at all the different academic meetings that are out there, and we're going to start to get some hype around this. But we're going to have to wait until that label gets finalized, and we feel confident.
Great. Great.
Yeah.
What, what are you kind of thinking in terms of the TAM or the opportunity here in terms of and also what this might do for your P&L?
Well, I'll tell you, we've done a great job with the P&L over the last year, 2023. I can't speak to the numbers yet because we're going to announce on Thursday, right?
Mm-hmm.
So we're just a few days shy from that. So just going through Q3 of 2023, it's been a rock-solid year for us. We did an incredible deal with a company called Maruho. We out-licensed Qbrexza, which brought in $19 million of capital back in September.
Mm-hmm.
Additionally, our core brands, Qbrexza, Accutane, Amzeeq, and Zilxi, have been doing well for us. That's where we really focus in on commercially. We also have some legacy brands as well, but together, with a cost reduction that we took and we were very methodical at it, we actually told the street that we were going to reduce SG&A by about $11-$12 million, and we're certainly going to be exceeding well over $15 million. So that's a major cut in approach of, you know, right-sizing the company to the revenues that we have. We think that's going to bring a lot of shareholder value.
Yeah, it has, and it sounds like you've done a good job of maintaining the revenue line as well despite some of those cuts.
Yeah. Yeah. I think we've been holding it steady. We have less salespeople out there, and we've now believe we're at the right level here. So it's all about just making sure that we're diligent in how we attack things and making sure we have the right cost. We are going to invest in making sure DFD's launch prep is 100% in place.
So there could be some investment there on our end for that. And, Jason, as you know, we've been really averaging approximately one new product per year. So as our BD team continues to evaluate, we're more than ready to continue to add on another product as a bolt-on with very limited expenditure. So we want to bring more to the bottom line.
Well, that's a good segue into sort of your BD process. Can you kind of explain the strategy there and how it's organized?
Yeah, absolutely. As I've been noting, our commercial team is very strong, so we continue to believe and have seen the results that our four major brands will continue to grow organically. So grow what we have organically. We have great patent lives on them. I'll give you a few examples. We were able to settle Paragraph IV that we had on some of these brands. So now we've got Qbrexza that'll be going all the way out well into 2030, so that gives us a good pathway and runway.
Mm-hmm.
Amzeeq goes all the way out to 2031, and Zilxi goes all the way out to 2027, about mid-year. And then Accutane, which is isotretinoin, it's a huge market, over 2 million prescriptions. We have grown that from 0 prescriptions to about 280,000 prescriptions for 2023. So that's dramatic growth in a very little period of time. And even though that's technically an ANDA, because of the REMS program, with it really behaves and acts as a brand has protection on it. Once a patient starts the Accutane therapy, they're typically on it for four to six months.
Mm-hmm.
So we keep gaining new additional prescribers as well as patients. So we've gotten that up to about 17% market share. We haven't hit the roof on that either. So with Qbrexza growth and Accutane growth, I think we're looking really good. So that's organically. A second way that we are planning to grow is, you're talking about now that late-stage assets. We are looking for a late-stage asset. Like we did with DFD-29, we picked it up right at the end of phase II clinical trials. We're looking for another asset where we can take that through.
Something that fits into your current buckets or something that potentially is adjacent to those buckets?
It could be adjacent.
Yeah.
Yeah, yeah. We're very opportunistic. It all depends on what's out there, what's available, and what kind of deal that we could do. And finally, the third part of our-
Mm-hmm.
Of our growth, what that business development focuses on, is the out-licensing. So I mentioned earlier the Maruho deal. Again, because of the great patent lives that I mentioned, we've got 3 to 4 products that we can out-license to other parts of the world, including Asia, Europe, and so forth. So we're working vigorously on that, and there's some good prospects there.
Great. Well, so you mentioned the big one, but I'm curious about sort of catalysts over the next 12 months. I mean, obviously, DFD-29 is, is a very big one, but maybe other things that investors should be focused on. If it's just that, I think that makes a lot of sense too.
Yeah.
So curious, like, how we should be as investors looking at just the next 12 months. Is it really just DFD-focused, watching that ramp? You know, obviously, November's a big. You've got the PDUFA date now. That's great.
Yeah.
Congratulations again on that.
Thank you. Very exciting.
I think now people will be kind of excited about the launch. And I don't know, are you giving numbers for kind of what expectations should be for how big the TAM should be for you guys or how big the market size should be for you guys and how quickly you might be able to sort of approach that market opportunity?
Yeah. I think the focus is on DFD-29. You'll see us.
Yes.
Do you know, double down on that, if you will, now, especially with the good news. When you look at the rosacea market, you're looking at about 16.5 million people that suffer from this in the United States alone. The marketplace is well over $1 billion. We're going up against one product initially. That's the low-hanging fruit, if you will, Oracea. They've done about $300 million in prescription sales last year.
Mm-hmm.
We think and that's, we think we'll be able to get a significant part of that. But then when you look at the fact that with the erythema claim that we believe will get onto the label, we think that we're going to be able to grab some of that topical market.
And that topical market, it's altogether when you put it altogether, there's over 4 million prescriptions in this market that we're looking at. When you take a look at Journey right now, our sales team, our marketing team does an incredible job. We cover 80% of the top MSAs across the country, and then we cover 70% of all prescriptions. We happen to have a rosacea asset right now, Zilxi.
Mm-hmm.
So we're calling on those right targets right now. Our sales force knows rosacea. Obviously, we're going to have a launch meeting and retrain them for this big launch of DFD-29. And ironically, we really peeled back some of the prescription data, and 93% of the physicians that prescribe Oracea have also prescribed Journey products as well.
So that gives us real confidence that, one, we know these customers; two, our salespeople will be able to get in front of them and give them this new evidence that should be better for their patients. And I think that will really give us good value. Our portfolio, again, I have to go with 2022 numbers, so it was about $73 million in net product revenues. That's in 2022. We believe this product DFD-29 is going to be 2 to 3 times that here in the United States over time.
Mm-hmm.
So we've got a lot of work ahead of us. Obviously, we have to contract with the payers. That doesn't occur until once we get approval, and that, to maximize that, will take about 6 to 18 months to get the most covered lives that we can get.
But your P&L is almost at break-even last I checked.
Yeah.
So this should probably kick you over the edge.
Absolutely.
so that.
Yeah. We've been working really hard, especially with those cost-cutting measures, and we were able to hold the line in terms of sales. We are at break even at this point right now. We're just about there. The spend that we do on DFD, you know, that'll teeter it a little bit, but we feel very good about this.
It sounds like also I mean, I keep jumping back to DFD-29, but I guess it's obviously such a focus, but.
Yeah.
You're pretty confident in the label. Well, you'll see on the label, the data's pretty supportive of having the label of a dual indication for rosacea.
Absolutely.
We have a few minutes left. What's out there in terms of, obviously, in terms of for your erythema, in terms of what's out there to treat those patients, I guess there's nothing oral. There may be some topical treatments, but I think a lot of them are steroidal, if I recall. So you could kind of give an outlook of the lay of the land.
Yeah. Yeah. You know, we obviously look to see what kind of competition's out there, how soon it's going to come, and what that looks like. Ironically, a lot of the topicals have generic products as well to them now. So they're not getting as much focus and as attention.
So this is a very open area for us to step in and really be able to grab it. We're obviously in terms of getting prepared for DFD, we're going to have the science behind it, so a really good solid message going in. Two, we're going to have pretty good coverage over time, and the safety, like I said, is placebo-like side effects.
Mm-hmm.
And finally, we're going to have an access program to really make it simple and be affordable to patients. We have a network of distribution across the country with about 700 pharmacies, what we call them specialty pharmacies. That's what dermatologists like to use.
Mm-hmm.
We have a great relationship with them, and they give white glove service. So I think we can get it to a point. I never say seamless. There will be some challenges, but you're talking about a product that will be prescribed, hopefully adjudicated and covered, and delivered right to the doorstep of the patient.
We're trying to really make this as easy as possible for all parties involved. We think, you know, we've been doing pricing sensitivity on where to price this asset, and we believe that the ASPs should be pretty strong. We'll get into that over the next couple months as we dive deeper into it.
Okay. Wonderful. Well, we're out of time, Claude. Thank you so much, and certainly look forward to November.
Okay. Thank you very much. Appreciate it.