Journey Medical Corp
For the period ended Sep 30, 2024. Filed Nov 12, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 12, 2024
DERM$4.47+4.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-13.
0001410578-24-001326
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0001410578-24-001877
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 74 previous paragraphs and 85 current paragraphs.
33 unchanged; 26 reworded; 25 added; 12 removed; 3 previous and 1 current paragraphs rearranged.
Tables are not compared: 34 previous and 36 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (25)
Current report
Special Cautionary Notice Regarding Forward-Looking Statements
Current report
FDA Approval of Emrosi
Current report
On November 4, 2024, the U.S. Food and Drug Administration (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 DRL. Journey is completing the manufacturing of Emrosi for the U.S. market and anticipates initial supply will be available in late first quarter or early second quarter of 2025. Journey intends to commercialize Emrosi in the U.S. with its commercial team.
Current report
Qbrexza® net product revenue increased by $1.7 million, or 29%, to $7.6 million for the three-month period ended September 30, 2024, from $5.9 million for the three-month period ended September 30, 2023. The increase is primarily volume driven, due to our continued marketing efforts and the recent expansion of our access and coverage platforms related to the Qbrexza product.
Current report
Amzeeq® and Zilxi® net product revenue combined, decreased by $0.9 million, or 30%, to $2.1 million for the three-month period ended September 30, 2024, from $3.0 million for the three-month period ended September 30, 2023. The decrease is primarily due to a slight decrease in unit sales volume and an increase in coupon rebates as a result of the expansion of our patient coverage options under our overall market access program driving average selling prices lower as compared to the prior year quarter.
Current report
Other Revenue
Current report
On August 31, 2023, we entered into a license agreement (the “Maruho 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”). Under the terms of the Maruho Agreement, Maruho paid us $19.0 million as a non - refundable upfront payment. Maruho is also obligated to make royalty payments to us related to sales of the product in the Territory equal to the corresponding rate payable by us to Dermira under the asset purchase agreement between us and Dermira.
Current report
Cost of goods sold decreased by $1.1 million, or 18%, to $5.3 million for the three-month period ended September 30, 2024, from $6.4 million for the three-month period ended September 30, 2023 driving an increase in our gross product margin of 6.0%, from 57.9% for the three-month period ended September 30, 2023, to 63.9% for the three-month period ended September 30, 2024. The decrease in cost of goods sold and related increase in our gross product margin from period-to-period is mainly due to $0.6 million in inventory charges recorded in the prior year period and a decrease of $0.2 million in product royalties from the same period in 2023, resulting from lower sales of Accutane and the contractual expiration of our Exelderm® product royalty in November 2023. Additionally, Prescription User Drug (PDUFA) fees were lower than the same period in 2023 by $0.3 million, due to the discontinuation of Ximino® in September of 2023. Non-cash amortization of acquired intangible assets was $0.8 million for each of the three-month periods ending September 30, 2024 and 2023.
Current report
Selling, general and administrative (“SG&A”) expenses increased by $2.8 million, or 32%, to $11.4 million for the three-month period ended September 30, 2024, from $8.6 million for the three-month period ended September 30, 2023. The increase is mainly due to increases non-cash share-based compensation expense and overall selling and marketing expenses. Non-cash share-based compensation expense increased by $1.0 million as a result of an increase in outstanding equity awards from the same period in 2023. The remaining increase is primarily due to the expansion of our access and coverage platforms and the commencement of our launch efforts for Emrosi related mainly to market research and access and corporate headcount. Additionally, product sample expenses increased from the same period in 2023 due to the timing of delivery of product samples from period-to-period, as the bulk of our product sample expense in 2023 occurred in the first half of the year.
Current report
Interest Income
Current report
Interest income increased by $0.2 million compared to the same period in 2023. Interest income reflects the income earned on our high yield money market account. The increase is due to a higher invested balance compared to the prior year resulting from entering into the SWK Credit Facility in December 2023, and to a lesser extent, a slight increase in investment yield.
Current report
Interest Expense
Current report
Interest expense increased by $0.5 million compared to the same period in 2023. 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.
Current report
Comparison of the Nine-Month Periods Ended September 30, 2024 and 2023
Current report
Qbrexza® net product revenue increased by $1.4 million, or 8%, to $19.4 million for the nine-month period ended September 30, 2024, from $18.0 million for the nine-month period ended September 30, 2023. The increase is due to an increase in unit sales volume driven by our continued marketing efforts and the expansion of our access and coverage platforms related to Qbrexza.
Current report
Other revenue
Current report
On August 31, 2023, we entered into the Maruho Agreement where Maruho paid us $19.0 million as a non-refundable upfront payment.
Current report
Cost of goods sold (“COGS”) decreased by $2.0 million, or 10%, to $18.6 million for the nine-month period ended September 30, 2024, from $20.6 million for the nine-month period ended September 30, 2023. Product royalties were lower by $1.0 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. In addition, the discontinuation of Ximo has resulted in lower PDUFA fees of $0.8 million and lower non-cash license amortization of $0.5 million. These decreases were offset, in part, by an increase in product COGS of $0.5 million, as a result of product mix, mainly driven by the higher Accutane net product revenue from period-to-period.
Current report
SG&A expenses decreased by $3.9 million, or 12%, to $30.1 million for the nine-month period ended September 30, 2024, from $34.1 million for the nine-month period ended September 30, 2023. The decrease is due to our continued expense management efforts, offset by non-cash share-based compensation, the expansion of our access and coverage platforms and the commencement of our launch efforts for Emrosi. SG&A related to our continued expense management efforts, primarily in sales and marketing and other SG&A areas, decreased by $7.6 million compared to the same period in 2023. This decrease is partially offset by a $1.4 million increase in SG&A expenses from period-to-period due to the expansion of our access and coverage platforms, and the commencement of our launch efforts for Emrosi related mainly to market research and access and corporate headcount. In addition, non-cash share-based compensation expense increased by $2.3 million compared to the same period in 2023 as a result of an increase in outstanding equity awards from period-to-period.
Current report
Interest Income
Current report
Interest income increased by $0.4 million compared to the same period in 2023. Interest income reflects the income earned on our high yield money market account. The increase is due to a higher invested balance compared to the prior year resulting from entering into the SWK Credit Facility in December 2023, and to a lesser extent, a slight increase in investment yield.
Current report
Interest Expense
Current report
Interest expense increased by $0.2 million compared to the same period in 2023. In July 2023, we satisfied all of our outstanding debt obligations with 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, and therefore incurred only minimal interest expense until entering into the Credit Facility with SWK in December of 2023.
Current report
On September 19, 2024, the United Stated District Court Southern District of New York through the United States Marshalls notified us that it has recovered and will be returning to the Company a portion of the misappropriated cash in connection with the previously disclosed September 2021 cybersecurity incident.
Current report
installment payments to Sun associated with the license of Ximino. Pursuant to the Settlement Agreement, we agreed to settle the total outstanding obligation owed to Sun for a total of $1.9 million, payable in three installments: i) $625.0 thousand upon execution of the Settlement Agreement, ii) $625.0 thousand on December 1, 2024, and iii) $625.0 thousand on January 15, 2025.
Removed paragraphs (12)
Previous report
In January 2024, we summitted a New Drug Application (“NDA”) under Section 505(b)(2) of the United States Federal Food, Drug and Cosmetic Act (“FDCA”) with the U.S. Food and Drug Administration (the “FDA”) for DFD-29.
Previous report
On March 18, 2024, we announced that the FDA accepted the Company’s NDA with a Prescription Drug User Fee Act (“PDUFA”) goal date of November 4, 2024.
Previous report
Qbrexza net product revenue decreased by $1.2 million, or 15%, to $6.8 million for the three-month period ended June 30, 2024, from $8.1 million for the three-month period ended June 30, 2023. The decrease is substantially due to a decrease in unit sales volume driven by the timing of customer orders. In addition, and to a lesser extent, coupon rebates were higher as a result of the expansion of our coverage programs under our overall market access program and managed care rebates increased from the prior year quarter due to higher managed care utilization and cost increases, driving Qbrexza’s average selling price slightly lower than the prior year quarter.
Previous report
Amzeeq and Zilxi combined net product revenue decreased by $0.4 million, or 19%, to $1.6 million for the three-month period ended June 30, 2024, from $1.9 million for the three-month period ended June 30, 2023. Despite increases in unit sales volume for both products, coupon and managed care rebates increased from period-to-period (See Qbrexza above) offsetting the impact of the volume increase and driving both Amzeeq and Zilxi’s average selling prices lower than the prior year quarter.
Previous report
Cost of goods sold decreased by $1.2 million, or 16%, to $6.5 million for the three-month period ended June 30, 2024, from $7.8 million for the three-month period ended June 30, 2023, due to the decrease in net product revenue from period-to-period.
Previous report
Selling, general and administrative (“SG&A”) expenses decreased by $1.8 million, or 15%, to $10.3 million for the three-month period ended June 30, 2024, from $12.1 million for the three-month period ended June 30, 2023. The decrease is mainly due to our continued expense management efforts, primarily in sales and marketing and other SG&A areas, designed to improve operational efficiencies, optimize expenses and reduce overall costs.
Previous report
Interest Expense, net
Previous report
Interest expense decreased by $0.3 million to $0.4 million for the three-month period ended June 30, 2024, from $0.7 million for the three-month period ended June 30, 2023. The decrease is primarily attributable to a lower average principal balance outstanding during the three-months ended June 30, 2024 of approximately $15.0 million as compared to $20.0 million during the three-months ended June 30, 2023, and higher interest income resulting from increased yields.
Previous report
Comparison of the Six-Month Periods Ended June 30, 2024 and 2023
Previous report
Selling, general and administrative (“SG&A”) expenses decreased by $6.7 million, or 26%, to $18.7 million for the six-month period ended June 30, 2024, from $25.4 million for the six-month period ended June 30, 2023. The decrease is mainly due to our continued expense management efforts, primarily in sales and marketing and other SG&A areas, designed to improve operational efficiencies, optimize expenses and reduce overall costs.
Previous report
Interest Expense, net
Previous report
Interest expense decreased by $0.5 million to $0.7 million for the six-month period ended June 30, 2024, from $1.2 million for the six-month period ended June 30, 2023. The decrease is primarily attributable to a lower average principal balance outstanding during the six-months ended June 30, 2024 of approximately $15.0 million as compared to $20.0 million during the six-months ended June 30, 2023 and higher interest income resulting from increased yields.
Reworded paragraphs (26)
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
During the six-month period ended June 30, 2024, there were no new accounting pronouncements or updates to recently issued accounting pronouncements disclosed in the 2023 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, 2024, there were no new accounting pronouncements or updates to recently issued accounting pronouncements disclosed in the 2023 Form 10-K that are expected to materially affect the Company’s present or future financial statements.
Previous wording
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay the adoption of new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. Other exemptions and reduced reporting requirements under the JOBS Act for emerging growth companies include presentation of only two years of audited financial statements in our annual reports on Form 10-K, an exemption from the requirement to provide an auditor’s report on internal controls over financial reporting
Current wording
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay the adoption of new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. Other exemptions and reduced reporting requirements under the JOBS Act for emerging growth companies include presentation of only two years of audited financial statements in our annual reports on Form 10-K, an exemption from the requirement to provide an auditor’s report on internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended, an exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation and less extensive disclosure about our executive compensation arrangements. We have elected to use the extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that (i) we are no longer an emerging growth company or (ii) we affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.
Previous wording
Total net product revenues decreased by $1.2 million, or 4%, to $27.9 million for the six-month period ended June 30, 2024, from $29.1 million for the six-month period ended June 30, 2023.
Current wording
Total net product revenues decreased by $0.7 million, or 4%, to $14.6 million for the three-month period ended September 30, 2024, from $15.3 million for the three-month period ended September 30, 2023.
Previous wording
Cost of goods sold decreased by $0.9 million, or 6%, to $13.4 million for the six-month period ended June 30, 2024, from $14.2 million for the six-month period ended June 30, 2023, mainly due to the decrease in net product revenue from period-to-period.
Current wording
Accutane® net product revenue decreased by $0.9 million, or 18%, to $4.0 million for the three-month period ended September 30, 2024, from $4.9 million for the three-month period ended September 30, 2023 due to recent market competition.
Previous wording
Net Revenue from our legacy products, Targadox, Exelderm, and Ximino, decreased by $0.6 million, or 46%, to $0.7 million for the three-month period ended June 30, 2024, from $1.3 million for the three-month period ended June 30, 2023. Targadox continues to experience erosion due to generic competition and we discontinued selling Ximino on September 29, 2023.
Current wording
Net Revenue from our legacy products decreased by $0.6 million, or 37%, to $0.9 million for the three-month period ended September 30, 2024, from $1.5 million for the three-month period ended September 30, 2023. Targadox® continues to experience erosion due to generic competition and we discontinued selling Ximino® on September 29, 2023.
Previous wording
We record gross-to-net sales accruals for other (chargebacks, distributor service fees, prompt pay discounts), sales returns, coupons, managed care rebates, government rebates, and other allowances customary to the pharmaceutical industry.
Current wording
We record gross-to-net sales accruals for sales returns, coupons, managed care rebates, government rebates, and other allowances (chargebacks, distributor service fees, prompt pay discounts), customary to the pharmaceutical industry.
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 $9.8 million at June 30, 2024, compared to $9.9 million at March 31, 2024, consistent from period-to-period.
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 $9.8 million at September 30, 2024, compared to $9.8 million at June 30, 2024, consistent from period-to-period.
Previous wording
Research and Development expenses decreased by $0.9 million, to $0.9 million for the three-month period ended June 30, 2024, from $1.8 million for the three-month period ended June 30, 2023. The decrease is primarily driven by lower clinical trial expenses to develop our DFD-29 product as the clinical phase of the project has concluded.
Current wording
Research and Development (“R&D”) expenses decreased by $1.4 million, to $0.8 million for the three-month period ended September 30, 2024, from $2.2 million for the three-month period ended September 30, 2023. The decrease is primarily driven by lower clinical trial expenses to develop Emrosi, offset slightly by R&D-related launch costs for the product, as the clinical phase of the project has concluded, and our Emrosi launch efforts have commenced.
Previous wording
The following table reflects our net product revenue for the six-month periods ended June 30, 2024 and 2023:
Current wording
The following table reflects our net product revenue for the nine-month periods ended September 30, 2024 and 2023:
Previous wording
Total net product revenues decreased by $2.1 million, or 12%, to $14.9 million for the three-month period ended June 30, 2024, from $17.0 million for the three-month period ended June 30, 2023. The decrease is primarily related to a decrease in net product revenue from Qbrexza.
Current wording
Total net product revenues decreased by $1.9 million, or 4%, to $42.5 million for the nine-month period ended September 30, 2024, from $44.4 million for the nine-month period ended September 30, 2023.
Previous wording
Accutane net product revenue increased by $1.3 million, or 13%, to $11.5 million for the six-month period ended June 30, 2024, from $10.2 million for the six-month period ended June 30, 2023 due to increased unit volume from the expansion of our customer and distribution base as a result of our focused selling and marketing efforts for Accutane.
Current wording
Accutane net product revenue increased by $0.4 million, or 3%, to $15.5 million for the nine-month period ended September 30, 2024, from $15.1 million for the nine-month period ended September 30, 2023 due to increased unit volume from the expansion of our customer and distribution base as a result of our focused selling and marketing efforts for Accutane.
Previous wording
Qbrexza, Amzeeq and Zilxi combined net product revenue decreased by $1.2 million, or 8%, to $14.5 million for the six-month period ended June 30, 2024, from $15.6 million for the six-month period ended June 30, 2023. The decrease is substantially due to a decrease in unit sales volume. In addition, and to a lesser extent, coupon rebates were higher as a result of the expansion of our coverage programs under our overall market access program and managed care rebates increased from the prior year due to higher managed care utilization and cost increases, driving Qbrexza, Amzeeq and Zilxi’s average selling price lower than the prior year.
Current wording
Amzeeq and Zilxi combined net product revenue decreased by $1.8 million, or 27%, to $4.7 million for the nine-month period ended September 30, 2024, from $6.5 million for the nine-month period ended September 30, 2023. The decrease is substantially due to decreased unit sales volume. In addition, coupon rebates were higher as a result of the expansion of coverage options under our overall market access program. Additionally, managed care rebates increased from the same period in 2023 due to higher managed care utilization and cost increases, driving Amzeeq and Zilxi’s average selling price lower than the prior year.
Previous wording
Net revenue from our legacy products decreased by $1.4 million, or 42%, to $1.9 million for the six-month period ended June 30, 2024, from $3.3 million for the six-month period ended June 30, 2023. Targadox continues to experience erosion due to generic competition and we discontinued selling Ximino on September 29, 2023.
Current wording
Net revenue from our legacy products decreased by $1.9 million, or 41%, to $2.8 million for the nine-month period ended September 30, 2024, from $4.8 million for the nine-month period ended September 30, 2023 due to the continued price erosion of Targadox from generic competition, and the discontinuation of Ximino on September 29, 2023.
Previous wording
Gross-to-net sales accruals and the balance in the related allowance accounts for the six-month periods ended June 30, 2024 and 2023, 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, 2024 and 2023, 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 $9.8 million at June 30, 2024, compared to $14.1 million at December 31, 2023, a decrease of $4.3 million. The decrease in the returns reserve reflects lower units on hand in the wholesaler channel. The decrease in the coupon reserve is primarily a result of the timing of receipt. The decrease in the provision for managed care is primarily due to the timing of invoices received at December 31, 2023 leading to a higher reserve at year end.
Current wording
Our reserves for gross-to-net sales allowances were $9.8 million at September 30, 2024, compared to $14.1 million at December 31, 2023, a decrease of $4.4 million. 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, leading to a higher reserves at December 31, 2023.
Previous wording
Research and Development expense increased by $5.0 million, to $8.8 million for the six-month period ended June 30, 2024, from $3.8 million for the six-month period ended June 30, 2023. The increase is driven by the $4.1 million filing fee payment to the FDA in January 2024 for DFD-29 and $3.0 million payment for the contractual milestone payment owed to Dr. Reddy’s Laboratories, Ltd (“DRL”) triggered by the FDA’s acceptance of our DFD-29 product NDA in March 2024. This was partially offset by lower clinical trial expenses to develop our DFD-29 product as the clinical phase of the project has concluded.
Current wording
R&D expense increased by $3.6 million, to $9.6 million for the nine-month period ended September 30, 2024, from $6.0 million for the nine-month period ended September 30, 2023. The increase is 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 Dr. Reddy’s Laboratories, Ltd (“DRL”) triggered by the FDA’s acceptance of the NDA for Emrosi in March 2024. In addition, Emrosi launch related expenses were an incremental $0.8 million from the same period in 2023 as a result of the commencement of our product launch efforts in 2024. These increases were offset, in part, by $4.3 million of lower clinical trial expenses to develop Emrosi compared to the same period in 2023, as the clinical phase of the project has concluded.
Previous wording
At June 30, 2024, we had $23.9 million in cash and cash equivalents as compared to $27.4 million of cash and cash equivalents at December 31, 2023.
Current wording
At September 30, 2024, we had $22.5 million in cash and cash equivalents as compared to $27.4 million of cash and cash equivalents at December 31, 2023.
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 then 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. 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. As of June 30, 2023, and as of the date of this Quarterly Report on Form 10-Q, the Company was in compliance with the financial covenants under the SWK Credit Facility.
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 then 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
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 is contractually required to be drawn upon FDA approval of DFD-29, subject to receiving approval on or before June 30, 2025.
Current 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 is contractually required to be drawn upon FDA approval of Emrosi, subject to receiving approval on or before June 30, 2025. The approval of Emrosi by the FDA triggered the requirement to draw on the remaining $5.0 million under the Credit Facility. As of the date of issuance of these financial statements, we have not drawn on this amount. The FDA approval also triggered a $15.0 million milestone payment obligation to DRL that is due 30 days after the FDA approval. (See Note 19, to the consolidated financial statements, “Subsequent Events”, for further information regarding current contingent regulatory milestone payments to DRL pursuant to the DFD – 29 Agreement).
Previous wording
On December 30, 2022, we filed a shelf registration statement on Form S-3 (File No. 333-269079), which was declared effective by the Securities and Exchange Commission (“SEC”) on January 26, 2023. This shelf registration statement covers the offering, issuance and sale 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 entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) relating to shares of our common stock. 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, 2024, we issued and sold 289,744 shares of common stock under the 2022 Shelf, generating net proceeds of $1.5 million. At June 30, 2024, 3,861,553 shares remain available for issuance under the 2022 Shelf.
Current wording
On December 30, 2022, we filed a shelf registration statement on Form S-3 (File No. 333-269079), which was declared effective by the Securities and Exchange Commission (“SEC”) on January 26, 2023. This shelf registration statement covers the offering, issuance and sale 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 entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) relating to shares of our common stock. 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 nine months ended September 30, 2024, we issued and sold 325,019 shares of common stock under the 2022 Shelf, generating net proceeds of $1.7 million. At September 30, 2024, 3,826,278 shares remain available for issuance under the 2022 Shelf.
Previous wording
We regularly evaluate market conditions, our liquidity profile, and financing alternatives, including out-licensing arrangements for our products to enhance our capital structure. 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 the 2022 Shelf or a new registration statement or drawing on the SWK Credit Facility, if the conditions for the final drawdown are satisfied. We cannot make any assurances that such additional financing will be available and, if available, the terms may negatively impact the Company’s business and operations. Our expectations are based on current assumptions, projected commercial sales of our products, clinical development plans and regulatory submission timelines, which may be 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.
Current wording
We regularly evaluate market conditions, our liquidity profile, and financing alternatives, including out-licensing arrangements for our products to enhance our capital structure. 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 the 2022 Shelf or a new registration statement. Additionally, since we received FDA approval for Emrosi on November 4, 2024, we are required to draw on the remaining $5.0 million under the SWK Credit Facility on or before June 30, 2025. We cannot make any assurances that such additional financing will be available and, if available, the terms may negatively impact the Company’s business and operations. Our expectations are based on current assumptions, projected commercial sales of our products, clinical development plans and regulatory submission timelines, which may be 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.
Previous wording
Cash Flows for the Six-Month Periods Ended June 30, 2024 and 2023
Current wording
Cash Flows for the Nine-Month Periods Ended June 30, 2024 and 2023
Previous wording
Net cash flows used in operating activities for the six-month period ended June 30, 2024 were $10.2 million compared to $3.0 million of net cash flows provided by operating activities for the six-month period ended June 30, 2023, reflecting a change of $13.2 million from period-to-period. The change substantially reflects cash payments for the $4.1 million filing fee payment to the FDA in January 2024 for DFD-29 and $3.0 million for the contractual milestone payment owed to Dr. Reddy’s Laboratories, Ltd (“DRL”) triggered by the FDA’s acceptance of our DFD-29 product NDA in March 2024. The remainder was driven primarily by the changes in net working capital.
Current wording
Net cash flows used in operating activities for the nine-month period ended September 30, 2024 were $11.4 million compared to $21.8 million of net cash flows provided by operating activities for the nine-month period ended September 30, 2023, reflecting a change of $33.1 million from period-to-period. Cash provided by operating activities for the nine-month period ended September 30, 2023 includes cash received pursuant to the Maruho Agreement, where Maruho paid us $19.0 million as a non-refundable upfront payment. Additionally, 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 DRL triggered by the FDA’s acceptance of the NDA for Emrosi in March 2024. The remainder was driven primarily by the changes in net working capital.
Previous wording
Net cash used in investing activities decreased by $5.0 million from period to period. The six-month period ended June 30, 2023 reflects the $5.0 million deferred cash payment paid in January 2023 related to the Vyne Product Acquisition.
Current wording
The nine-month period ended September 30, 2023 reflects the $5.0 million deferred cash payment paid in January 2023 related to the Vyne Product Acquisition.
Previous wording
Net cash flows provided by financing activities for the six-month period ended June 30, 2024 were $6.7 million compared to $13.0 million of net cash flows used in financing activities for the six-month period ended June 30, 2023, reflecting a change of $19.7 million from period-to-period. The change is driven primarily by the draw of an additional $5.0 million under the Credit Facility with SWK as well as the net proceeds from issuances of common stock under the Sales Agreement of $1.5 million as compared to the paydown of our prior letter of credit and debt facility in the prior year period.
Current wording
Net cash flows provided by financing activities for the nine-month period ended September 30, 2024 were $6.4 million compared to $24.0 million of net cash flows used in financing activities for the nine-month period ended September 30, 2023, reflecting a change of $30.4 million from period-to-period. Cash provided by financing activities for the nine-month period ended September 30, 2024 reflects the draw of an additional $5.0 million under the SWK Credit Facility in June of 2024, as well as the net proceeds from issuances of common stock under the Sales Agreement of $1.7 million as compared to the paydown of our prior letter of credit and debt facility in the prior year period. Net cash used in financing activities for the nine-month period ended September 30, 2023 reflects the voluntarily repayment the outstanding balance on our term loan under the Loan and Security Agreement with EWB.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
outstanding principal of the Term Loans quarterly in an amount equal to 7.5% of the principal amount of funded Term Loans. 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. As of June 30, 2023, and as of the date of this Quarterly Report on Form 10-Q, the Company was in compliance with the financial covenants under the SWK Credit Facility.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended, an exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation and less extensive disclosure about our executive compensation arrangements. We have elected to use the extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that (i) we are no longer an emerging growth company or (ii) we affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.
Previous report — wording carried elsewhere
Accutane net product revenue increased by $0.1 million, or approximately 3%, to $5.7 million from the prior year quarter due to increased unit volume from the expansion of our customer and distribution base as a result of our focused selling and marketing efforts for Accutane.
Previous report — wording carried elsewhere
We record gross-to-net sales accruals for other (chargebacks, distributor service fees, prompt pay discounts), sales returns, coupons, managed care rebates, government rebates, and other allowances customary to the pharmaceutical industry.