Journey Medical Corp

Previous wording

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements

Current wording

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Previous wording

We are a commercial-stage pharmaceutical company founded in October 2014 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 portfolio includes eight FDA-approved prescription drugs for dermatological conditions that are marketed in the U.S. 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. 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”).

Current wording

We are a commercial-stage pharmaceutical company founded in October 2014 that primarily focuses on the selling and marketing of U.S. Food and Drug Administration (“FDA”) approved branded 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. and a majority of our revenues derive from our branded, patent protected products. 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. 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”).

Previous wording

During the six-month period ended June 30, 2025, there were no new accounting pronouncements or updates to recently issued accounting pronouncements disclosed in the 2024 Form 10-K that are expected to materially affect the Company’s present or future financial statements.

Current wording

During the nine-month period ended September 30, 2025, there were no new accounting pronouncements or updates to recently issued accounting pronouncements disclosed in the 2024 Form 10-K that are expected to materially affect the Company’s present or future financial statements.

Previous wording

Total net product revenues of $15.0 million for the second quarter of 2025 were consistent with $14.9 million of net product revenues for the second quarter of 2024. The second quarter of 2025 includes $2.8 million of incremental net product revenue related to the U.S. commercial launch of Emrosi™, offset by a decrease in Accutane, as a result of lower sales volume driven by recent market competition.

Current wording

Total product revenue increased $2.4 million, or 16.0%, to $17.0 million for the three-month period ended September 30, 2025 compared to the three-month period ended September 30, 2014. The third quarter of 2025 includes $4.9 million of incremental net product revenue related to the U.S. commercial launch of Emrosi™, offset by a decrease in Accutane, as a result of lower sales volume driven by recent market competition.

Previous wording

Gross-to-net sales accruals are primarily a function of product sales volume, mix of products sold, and contractual discounts or rebates. Our reserves for gross-to-net sales allowances were $13.9 million at June 30, 2025, compared to $9.8 million at June 30, 2024, an increase of $4.1 million. The increase is due to the coupon rebate allowance related to the launch and commercialization of Emrosi.

Current wording

Gross-to-net sales accruals are primarily a function of product sales volume, mix of products sold, and contractual discounts or rebates. Our reserves for gross-to-net sales allowances were $12.2 million at September 30, 2025, compared to $9.8 million at September 30, 2024, an increase of $2.4 million. The increase is due to the incremental allowances recorded related to the launch and commercialization of Emrosi, due substantially to the Emrosi coupon rebate allowance.

Previous wording

Selling, general and administrative expenses increased by $3.7 million, or 20%, to $22.4 million for the six-month period ended June 30, 2025, from $18.7 million for the six-month period ended June 30, 2024. The increase is primarily due to the incremental operational activities related to the launch and commercialization of Emrosi.

Current wording

Selling, general and administrative expenses increased by $0.7 million, or 6%, to $12.1 million for the three-month period ended September 30, 2025, from $11.4 million for the three-month period ended September 30, 2024. The increase is primarily due to the incremental operational activities related to the launch and commercialization of Emrosi. Selling, general and administrative expenses for the three-month period ended September 30, 2025 also includes non-cash stock compensation of $1.9 million compared to $1.5 million for the three-month period ended September 30, 2024.

Previous wording

Interest expense, net increased by $0.4 million, to $0.8 million for the three-month period ended June 30, 2025, from $0.4 million for the three-month period ended June 30, 2024. The increase is primarily attributable to a higher principal balance outstanding under the Credit Agreement with SWK (each as defined below) during the three months ended June 30, 2025 of $25.0 million as compared to an average of approximately $15.0 million during the three months ended June 30, 2024.

Current wording

Interest expense, net increased by $0.2 million, to $0.8 million for the three-month period ended September 30, 2025, from $0.6 million for the three-month period ended September 30, 2024. The increase is primarily attributable to a higher principal balance outstanding under the Credit Agreement with SWK.

Previous wording

The following table reflects our net product revenue for the six-month periods ended June 30, 2025 and 2024:

Current wording

The following table reflects our net product revenue for the nine-month periods ended September 30, 2025 and 2024:

Previous wording

Total net product revenues increased by $0.3 million, to $28.2 million for the six months ended June 30, 2025 from $27.9 million for the six months ended June 30, 2024. The six months ended June 30, 2025 includes $4.9 million of incremental net product revenue related to the U.S. commercial launch of Emrosi™, offset by a decrease in Accutane, as a result of lower sales volume driven by recent market competition. Our Legacy products decreased by $0.4 million mainly due to continued generic competition for Targadox.

Current wording

Total net product revenues increased by $2.7 million, to $45.2 million for the nine-month period ended September 30, 2025 from $42.5 million for the nine-month period ended September 30, 2024. The nine months ended September 30, 2025 includes $9.7 million of incremental net product revenue related to the U.S. commercial launch of Emrosi™, offset by a decrease in Accutane, as a result of lower sales volume driven by recent market competition.

Previous wording

Gross-to-net sales accruals and the balance in the related allowance accounts for the six-month periods ended June 30, 2025 and 2024, were as follows:

Current wording

Gross-to-net sales accruals and the balance in the related allowance accounts for the nine-month periods ended September 30, 2025 and 2024, were as follows:

Previous wording

Gross-to-net sales accruals are primarily a function of product sales volume, mix of products sold, and contractual discounts or rebates. Our reserves for gross-to-net sales allowances were $13.9 million at June 30, 2025, compared to $9.3 million at December 31, 2024, an increase of $4.6 million. The increase is due to the coupon rebate allowance related to the launch and commercialization of Emrosi. This is offset, in part, by a decrease in the returns reserve primarily due to lower units on hand in the wholesaler channel.

Current wording

Gross-to-net sales accruals are primarily a function of product sales volume, mix of products sold, and contractual discounts or rebates. Our reserves for gross-to-net sales allowances were $12.2 million at September 30, 2025, compared to $9.3 million at December 31, 2024, an increase of $2.9 million. The increase is due to the incremental allowances recorded related to the launch and commercialization of Emrosi, due substantially to the Emrosi coupon rebate allowance.

Previous wording

Cost of goods sold - (excluding amortization of acquired intangible assets) decreased by $2.0 million, or 17%, to $9.7 million for the six-month period ended June 30, 2025, from $11.7 million for the six-month period ended June 30, 2024, due to lower overall product cost of goods related to product sales mix, driven mainly by the decrease in Accutane revenue, as well as lower inventory obsolescence costs in the six-month period ended June 30, 2025 of $0.8 million.

Current wording

Cost of goods sold - (excluding amortization of acquired intangible assets) decreased by $0.7 million, or 4.0%, to $15.5 million for the nine-month period ended September 30, 2025, from $16.2 million for the nine-month period ended September 30, 2024, due to lower overall product cost of goods related to product sales mix, driven mainly by the decrease in Accutane revenue, as well as lower inventory obsolescence costs for the nine-month period ended September 30, 2025.

Previous wording

Amortization of acquired intangible assets increased by $0.5 million, or 31%, to $2.1 million for the six-month period ended June 30, 2025, from $1.6 million for the six-month period ended June 30, 2024, driven by the addition of the Emrosi acquired intangible asset upon our payment to DRL of the milestone payment triggered by the FDA’s approval of Emrosi in November 2024.

Current wording

Amortization of acquired intangible assets increased by $0.8 million, or 31%, to $3.2 million for the nine-month period ended September 30, 2025, from $2.4 million for the nine-month period ended September 30, 2024, driven by the addition of the Emrosi acquired intangible asset upon our payment to DRL of the milestone payment triggered by the FDA’s approval of Emrosi in November 2024.

Previous wording

Selling, general and administrative expenses increased by $1.6 million, or 15%, to $11.9 million for the three-month period ended June 30, 2025, from $10.3 million for the three-month period ended June 30, 2024. The increase is primarily due to the incremental operational activities related to the launch and commercialization of Emrosi.

Current wording

Selling, general and administrative expenses increased by $4.4 million, or 14%, to $34.5 million for the nine-month period ended September 30, 2025, from $30.1 million for the nine-month period ended September 30, 2024. The increase is primarily due to the incremental operational activities related to the launch and commercialization of Emrosi.

Previous wording

Interest expense, net increased by $0.8 million, to $1.5 million for the six-month period ended June 30, 2025, from $0.7 million for the six-month period ended June 30, 2024. The increase is primarily attributable to a higher principal balance outstanding under the Credit Agreement with SWK (each as defined below) during the six-months ended June 30, 2025 of $25.0 million as compared to an average balance of approximately $15.0 million during the six-months ended June 30, 2024.

Current wording

Interest expense, net increased by $1.0 million, to $2.3 million for the nine-month period ended September 30, 2025, from $1.3 million for the nine-month period ended September 30, 2024. The increase is primarily attributable to a higher principal balance outstanding under the Credit Agreement with SWK.

Previous wording

At June 30, 2025, we had $20.3 million in cash and cash equivalents as compared to $20.3 million of cash and cash equivalents at December 31, 2024, and working capital of $10.8 million at June 30, 2025, compared to $13.0 million at December 31, 2024.

Current wording

At September 30, 2025, we had $24.9 million in cash and cash equivalents as compared to $20.3 million of cash and cash equivalents at December 31, 2024. At September 30, 2025 we had working capital of $16.7 million as compared to $13.0 million at December 31, 2024.

Previous wording

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 (as defined below) and our at-the-market sales program with B. Riley to meet additional capital and liquidity needs, specifically to fund the research and development and commercialization of Emrosi.

Current wording

We rely primarily on cash on hand generated from sales of our pharmaceutical products to customers to fund our core operations. In addition, we have relied on the proceeds from our term loan Credit Facility with SWK Funding LLC (“SWK”), and our at-the-market sales program to meet additional capital and liquidity needs, specifically to fund the research and development and commercialization of Emrosi.

Previous wording

On December 27, 2023, we entered into a Credit Agreement (the “Credit Agreement”) with SWK Funding LLC (“SWK”). The Credit Agreement originally provided for a term loan facility (the “Credit Facility”) in the original principal amount of up to $20.0 million. On the closing date, we drew $15.0 million. On June 26, 2024, we 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. Interest payments began in February 2024 and are paid quarterly. Beginning in February 2026, we are 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.

Current wording

On December 27, 2023, we entered into a Credit Agreement (the “Credit Agreement”) with SWK Funding LLC (“SWK”). The Credit Agreement originally provided for a term loan facility (the “Credit Facility”) in the original principal amount of up to $20.0 million. On the closing date, we drew $15.0 million. On June 26, 2024, we drew the remaining $5.0 million under the Credit Facility. Loans under the Credit Facility (the “Term Loans”) 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. Interest payments began in February 2024 and are paid quarterly.

Previous wording

On July 9, 2024, we 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. The $5.0 million of additional principal added in the Amendment was contractually required to be drawn upon FDA approval of Emrosi, subject to us 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. The Credit Facility also includes both revenue and liquidity covenants, restrictions as to payment of dividends, and is secured by substantially all of our assets. As of June 30, 2025, we were in compliance with the financial covenants under the Credit Facility.

Current wording

On July 9, 2024, we entered into an amendment (the “First Amendment”) to the Credit Agreement. The First Amendment increased the original principal amount of the Credit Facility from $20.0 million to $25.0 million. The $5.0 million of additional principal added in the First Amendment was contractually required to be drawn upon FDA approval of Emrosi, subject to us 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.

Previous wording

On December 30, 2022, we filed a shelf registration statement on Form S-3 (File No. 333-269079) (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 us of up to an aggregate of $150.0 million of our common stock, preferred stock, debt securities, warrants, and units. In connection with the 2022 Shelf, we entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) relating to shares of the Company’s common stock with B. Riley Securities, Inc. We may offer and sell up to 4,900,000 shares of our common stock, from time to time, under the Sales Agreement. During the six-months ended June 30, 2025, we issued and sold 834,722 shares of common stock under the 2022 Shelf, generating net proceeds of $4.1 million. At June 30, 2025, 1,752,265 shares remain available for issuance under the Sales Agreement.

Current wording

On December 30, 2022, we filed a shelf registration statement on Form S-3 (File No. 333-269079) (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 us of up to an aggregate of $150.0 million of our common stock, preferred stock, debt securities, warrants, and units. During the nine-months ended September 30, 2025, we issued and sold 1,832,107 shares of common stock under the 2022 Shelf, generating net proceeds of $10.9 million under the Sales Agreement with B. Riley.

Previous wording

Cash Flows for the Six-Month Periods Ended June 30, 2025 and 2024

Current wording

Cash Flows for the Nine-Month Periods Ended September 30, 2025 and 2024

Previous wording

Net cash flows used in operating activities for the six-month period ended June 30, 2025 decreased by $6.4 million, to $3.8 million, from net cash flows used in operating activities of $10.2 million for the six-month period ended June 30, 2024. The decrease was driven primarily by the decrease in our net loss period-to-period, offset by changes in net working capital.

Current wording

Net cash flows used in operating activities for the nine-month period ended September 30, 2025 decreased by $5.2 million, to $6.2 million, from net cash flows used in operating activities of $11.4 million for the nine-month period ended September 30, 2024. The decrease was driven primarily by the decrease in our net loss period-to-period driven by lower Emrosi R&D expenses related to pre-approval project expenses, milestones and fees for the nine-month period ended September 30, 2024, offset by changes in net working capital.

Previous wording

Net cash flows provided by financing activities for the six-month period ended June 30, 2025 decreased by $2.9 million, to $3.8 million, from $6.7 million of cash flows provided by financing activities for the six-month period ended June 30, 2024. The Company received proceeds from the issuance of common stock under the ATM program of $4.0 million, offset by $0.6 million in payments on installment notes to Sun Pharmaceuticals Industries, Inc. during the six months ended June 30, 2025. The Company received $5.0 million from the SWK Credit Facility and $1.5 million from the issuance of common stock under the ATM program during the six months ended June 30, 2024.

Current wording

Net cash flows provided by financing activities for the nine-month period ended September 30, 2025 increased by $4.4 million, to $10.8 million, from $6.4 million of cash flows provided by financing activities for the nine-month period ended September 30, 2024. The Company received proceeds from the issuance of common stock under the ATM program of $10.9 million for the nine-month period ended September 30, 2025, compared to receiving proceeds of $1.7 million and $5.0 million under the ATM program and the SWK credit facility, respectively, for the nine-month period ended September 30, 2024.