Journey Medical Corporation
05/13/2026 | Press release | Distributed by Public on 05/13/2026 14:34
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain matters discussed in this report may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended (the "Securities Act"), and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. The words "anticipate," "believe," "estimate," "may," "expect," "will," "could," "project," "should," "intend" and similar expressions are generally intended to identify forward-looking statements. Our actual results may differ materially from the results anticipated in or implied by these forward-looking statements due to a variety of factors, including, without limitation:
| ● | the fact that our products and product candidates are subject to time and cost intensive regulation and clinical testing and as a result, may never be successfully developed or commercialized; |
| ● | a substantial portion of our sales derive from products that may become subject to third-party generic competition because their period of exclusivity has ended or they are without patent protection, subjecting them to the potential introduction of new competitor products and/or an increase in market share of existing competitor products, either of which could have a significant adverse impact on our operating income; |
| ● | we operate in a heavily regulated industry, and we cannot predict the impact that any future legislation or administrative or executive action may have on our operations; |
| ● | our revenue is dependent mainly upon sales of our dermatology products and any setback relating to the sale of such products could impair our operating results; |
| ● | competition could limit our products' commercial opportunity and profitability, including competition from manufacturers of generic versions of our products; |
| ● | the risk that our products do not achieve broad market acceptance, including by government and third-party payors; |
| ● | our reliance on third parties for several aspects of our operations; |
| ● | our dependence on our ability to identify, develop, and acquire or in-license products and integrate them into our operations, at which we may be unsuccessful; |
| ● | the dependence of the success of our business, including our ability to finance our company and generate additional revenue, on the successful commercialization of Emrosi® (Minocycline Hydrochloride Modified Release Capsules, 40 mg), formerly referred to as DFD-29 ("Emrosi") and the successful development, regulatory approval and commercialization any future product candidates that we may develop, in-license or acquire; |
| ● | clinical drug development is very expensive, time consuming, and uncertain and our clinical trials may fail to adequately demonstrate the safety and efficacy of our current or any future product candidates; |
| ● | our competitors could develop and commercialize products similar or identical to ours; |
| ● | risks related to the protection of our intellectual property and our potential inability to maintain sufficient patent protection for our technology and products; |
| ● | our business and operations would suffer in the event of computer system failures, cyber-attacks, or deficiencies in our or our third parties' cybersecurity; |
| ● | the effects of major public health issues, epidemics or pandemics on our product revenues and any future clinical trials; |
| ● | our potential need to raise additional capital; |
| ● | the substantial doubt expressed about our ability to continue as a going concern; |
| ● | Fortress controls a voting majority of our common stock, which could be detrimental to our other shareholders; and |
| ● | the risks described under the section titled "Risk Factors" in Item 1A below and in our Annual Report on Form 10-K for the year ended December 31, 2025 (the "2025 Form 10-K"). |
The forward-looking statements contained in this report reflect our views and assumptions as of the effective date of this report. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. Except as required by law, we assume no responsibility for updating any forward-looking statements.
We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
Overview
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. 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").
Critical Accounting Policies and Uses of Estimates
Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States. Applying these principles requires our judgment in determining the appropriateness of acceptable accounting principles and methods of application in diverse and complex economic activities. The preparation of the accompanying financial statements requires us to make estimates and judgments that affect the reported amounts of revenues, expenses, assets and liabilities, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
For a discussion of our critical accounting estimates, see the section of the 2025 Form 10-K titled "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Use of Estimates." There were no material changes to our critical accounting estimates or accounting policies from December 31, 2025.
Accounting Pronouncements
In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The guidance provides a practical expedient that can be elected to be applied to accounts receivable and contract assets, which would allow entities to assume that current conditions as of the balance sheet date do not change for the remaining life of the assets when estimating expected credit losses for such assets. Entities are required to apply the guidance on a prospective basis. We adopted ASU 2025-05 on January 1, 2026. Upon adoption, we elected to apply the practical expedient to our current trade receivables arising from contracts with customers. The adoption of ASU 2025-05 did not have a material impact on our unaudited condensed consolidated financial statements.
Emerging Growth Company and Smaller Reporting Company Status
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. The Company expects to cease qualifying as an emerging growth company as of the end of its fiscal year ending December 31, 2026.
We are also a "smaller reporting company," meaning that either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) the market value of our shares held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates is less than $700 million. As a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K, we have reduced disclosure obligations regarding executive compensation, and smaller reporting companies are permitted to delay adoption of certain recent accounting pronouncements discussed in Note 2 to our consolidated financial statements in this report on Form 10-Q.
Results of Operations
The following table summarizes our results of operations for the three-month periods ended March 31, 2026 and 2025:
Comparison of the Three-Month Periods Ended March 31, 2026 and 2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Month Periods Ended March 31, |
|
Change |
|
|||||||
|
|
|
2026 |
|
2025 |
|
$ |
|
% |
|
|||
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenue, net |
$ |
15,921 |
$ |
13,139 |
|
$ |
2,782 |
|
21 |
% |
||
|
Other revenue |
|
|
40 |
|
|
- |
|
|
40 |
|
100 |
% |
|
Total revenue |
|
|
15,961 |
|
|
13,139 |
|
|
2,822 |
|
21 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
||
|
Cost of goods sold - (excluding amortization of acquired intangible assets) |
|
6,218 |
|
4,790 |
|
|
1,428 |
|
30 |
% |
||
|
Amortization of acquired intangible assets |
|
|
1,126 |
|
|
1,065 |
|
|
61 |
|
6 |
% |
|
Research and development |
|
- |
|
39 |
|
|
(39) |
|
(100) |
% |
||
|
Selling, general and administrative |
|
10,109 |
|
10,569 |
|
|
(460) |
|
(4) |
% |
||
|
Total operating expenses |
|
17,453 |
|
16,463 |
|
|
990 |
|
6 |
% |
||
|
Loss from operations |
|
(1,492) |
|
(3,324) |
|
|
1,832 |
|
(55) |
% |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense (income) |
|
|
|
|
|
|
|
|
|
|
||
|
Interest income |
|
(157) |
|
(149) |
|
|
(8) |
|
5 |
% |
||
|
Interest expense |
|
|
892 |
|
|
891 |
|
|
1 |
|
0 |
% |
|
Foreign exchange transaction losses |
|
|
3 |
|
|
7 |
|
|
(4) |
|
(57) |
% |
|
Total other expense |
|
738 |
|
749 |
|
|
(11) |
|
(1) |
% |
||
|
Loss before income taxes |
|
|
(2,230) |
|
|
(4,073) |
|
|
1,843 |
|
(45) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
- |
|
- |
|
|
- |
|
0 |
% |
||
|
Net loss |
|
$ |
(2,230) |
|
$ |
(4,073) |
|
$ |
1,843 |
|
(45) |
% |
Revenues
The following table reflects our net product revenue for the three-month periods ended March 31, 2026 and 2025:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Month Periods Ended |
|
|
|
|
|
|||||
|
|
|
March 31, |
|
Change |
|
|||||||
|
($ in thousands) |
|
2026 |
|
2025 |
|
$ |
|
% |
|
|||
|
Emrosi® |
|
$ |
6,252 |
|
$ |
2,070 |
|
$ |
4,182 |
|
202 |
% |
|
Qbrexza® |
|
|
5,028 |
|
|
5,161 |
|
|
(133) |
|
(3) |
% |
|
Accutane® |
|
|
3,314 |
|
|
3,655 |
|
|
(341) |
|
(9) |
% |
|
Foam franchise products (Amzeeq® & Zilxi®) |
|
|
1,050 |
|
|
1,526 |
|
|
(476) |
|
(31) |
% |
|
Other / legacy |
|
|
277 |
|
|
727 |
|
|
(450) |
|
(62) |
% |
|
Total net product revenue |
|
$ |
15,921 |
|
$ |
13,139 |
|
$ |
2,782 |
|
21 |
% |
Net product revenue increased $2.8 million, or 21.0%, to $15.9 million for the three-month period ended March 31, 2026 compared to the three-month period ended March 31, 2025. The increase is primarily driven by sales of Emrosi in the first quarter of 2026 of $6.3 million compared to $2.1 million in the first quarter of 2025. The Company launched Emrosi in the first quarter of 2025. This is partially offset by a decrease in Accutane of $0.3 million, the foam franchise products of $0.5 million, and our legacy products of $0.5 million due to continued competitive pressures.
Other Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Month Periods Ended |
|
|
|
|||||||
|
|
|
March 31, |
|
Change |
|
|||||||
|
($ in thousands) |
|
2026 |
|
2025 |
|
$ |
|
% |
|
|||
|
Royalties on sales of Amzeeq by Cutia |
|
$ |
40 |
$ |
- |
|
$ |
40 |
100 |
% |
||
|
Total other revenue |
|
$ |
40 |
|
$ |
- |
|
$ |
40 |
|
100 |
% |
Other revenue for the three-month period ended March 31, 2026 reflects sales-based royalties on Cutia's net sales of Amzeeq, pursuant to the Cutia Agreement. In August 2025, we began supplying Cutia with finished licensed products for Cutia's commercial use.
Gross-to-Net Sales Accruals
We record gross-to-net sales accruals for chargebacks, distributor service fees, prompt pay discounts, sales returns, coupons, managed care rebates, government rebates, and other allowances customary to the pharmaceutical industry.
Gross-to-net sales accruals and the balance in the related allowance accounts for the three-month periods ended March 31, 2026 and 2025, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Managed |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Care |
|
|
|
|
|
||
|
($'s in thousands) |
|
Returns |
|
Coupons |
|
Rebates |
|
Other |
|
Total |
|||||
|
Balance as of December 31, 2025 |
|
$ |
2,177 |
|
$ |
11,416 |
|
$ |
4,234 |
|
$ |
897 |
|
$ |
18,724 |
|
Current provision related to sales in the current period |
|
|
773 |
|
|
46,568 |
|
|
6,908 |
|
|
1,746 |
|
|
55,995 |
|
Checks/credits issued to third parties |
|
|
(442) |
|
|
(48,683) |
|
|
(6,878) |
|
|
(1,438) |
|
|
(57,441) |
|
Balance as of March 31, 2026 |
|
$ |
2,508 |
|
$ |
9,301 |
|
$ |
4,264 |
|
$ |
1,205 |
|
$ |
17,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Managed |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Care |
|
|
|
|
|
||
|
($'s in thousands) |
|
Returns |
|
Coupons |
|
Rebates |
|
Other |
|
Total |
|||||
|
Balance as of December 31, 2024 |
|
$ |
3,124 |
|
$ |
1,750 |
|
$ |
3,717 |
|
$ |
733 |
|
$ |
9,324 |
|
Current provision related to sales in the current period |
|
|
(249) |
|
|
27,415 |
|
|
5,431 |
|
|
1,410 |
|
|
34,007 |
|
Checks/credits issued to third parties |
|
|
(274) |
|
|
(20,497) |
|
|
(5,708) |
|
|
(1,382) |
|
|
(27,861) |
|
Balance as of March 31, 2025 |
|
$ |
2,601 |
|
$ |
8,668 |
|
$ |
3,440 |
|
$ |
761 |
|
$ |
15,470 |
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 $17.3 million at March 31, 2026, compared to $18.7 million at December 31, 2025, a decrease of $1.4 million. The decrease is due primarily to the timing of sales throughout the first quarter of 2026 as well as coverage mix.
Cost of Goods Sold - (excluding amortization of acquired intangible assets)
Cost of goods sold - (excluding amortization of acquired intangible assets) increased by $1.4 million, or 30%, to $6.2 million for the three-month period ended March 31, 2026, from $4.8 million for the three-month period ended March 31, 2025, driven primarily by a $1.3 million non-cash charge related to inventory acquired in the 2021 Qbrexza asset acquisition as well an increase in royalties driven by the incremental net revenue recognized for Emrosi during the first quarter of 2026 as compared to the first quarter of 2025.
Amortization of acquired intangible assets
Amortization of acquired intangible assets increased less than $0.1 million, or 6%, to $1.1 million for the three-month period ended March 31, 2026, from $1.1 million for the three-month period ended March 31, 2025, driven by the start of amortization on the anti-itch acquired intangible asset during the first quarter of 2026, offset by the completion of amortization on the Accutane intangible asset during the first quarter of 2026.
Selling, General and Administrative
Selling, general and administrative expenses decreased by $0.5 million, or 4%, to $10.1 million for the three-month period ended March 31, 2026, from $10.6 million for the three-month period ended March 31, 2025. The decrease is primarily due to a reduction in Emrosi launch costs from the prior year quarter.
Liquidity and Capital Resources
At March 31, 2026, we had cash and cash equivalents on hand of approximately $27.2 million as compared to $24.1 million of cash and cash equivalents at December 31, 2025, and working capital of $27.1 million at March 31, 2026, compared to $29.4 million at December 31, 2025.
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, and our at-the-market sales program to meet additional capital and liquidity needs.
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, which may include sales of securities under either our 2026 Shelf (as defined below) or a new registration statement, to expand our product portfolio and/or for other strategic initiatives. 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.
Sources of Liquidity
SWK Credit Facility
On December 27, 2023, we entered into the Credit Agreement with 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.
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.
On September 25, 2025, we entered into a Third Amendment to the Credit Agreement (the "Third Amendment"). The Third Amendment, among other things, extends the maturity date of the facility from December 27, 2027 to June 27, 2028. The Third Amendment also modifies the Revenue-Based Payment provision, as defined in the Credit Agreement, by lowering the applicable revenue threshold, measured on a trailing twelve-month basis, from $70.0 million to $60.0 million. Upon satisfaction of the revised revenue threshold, the interest-only period under the Credit Facility will be extended by one year, with scheduled principal repayments commencing in February 2027 rather than February 2026. We satisfied the $60.0 million revenue threshold as of December 31, 2025. Accordingly, principal payments under the Credit Facility will begin in February 2027.
The Credit Agreement also includes both revenue and liquidity covenants, restrictions as to payment of dividends, and is secured by substantially all of our assets. As of March 31, 2026, we were in compliance with the financial covenants under the Credit Agreement.
At-the-Market Offering
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 SEC on January 26, 2023. This shelf registration statement covered 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 August 2025, we executed a new At Market Issuance Sales Agreement (the "2025 Sales Agreement") relating to shares of the Company's common stock with B. Riley Securities, Inc ("B. Riley") and Lake Street Capital Markets, LLC ("Lake Street") (each, an "Agent" and together, the "Agents"), replacing the previous December 30, 2022 At Market Issuance Sales Agreement with B. Riley. In accordance with the terms of the 2025 Sales Agreement, we may offer and sell up to 3,750,000 shares of common stock, from time to time through or to the Agents, each acting as sales agent or principal.
On January 15, 2026, we filed a shelf registration statement on Form S-3 (File No. 333-292758) (the "2026 Shelf"), which was declared effective by the SEC on January 21, 2026. This shelf registration statement covers the offering, issuance and sale by us of up to an aggregate of $150.0 million of our common stock, preferred stock, debt securities, warrants, and units. The 2026 Shelf replaces the 2022 Shelf. Sales under the 2025 Sales Agreement since the effective date are under the 2026 Shelf.
Cash Flows for the Three -Month Periods Ended March 31, 2026 and 2025
|
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|
|
|
|
|
|
|
|
|
|
|
Three-Month Periods Ended March 31, |
|
Increase |
|||||
|
($'s in thousands) |
|
2026 |
|
2025 |
|
(Decrease) |
|||
|
Net cash provided by (used in) operating activities |
|
$ |
2,909 |
|
$ |
(2,832) |
|
$ |
5,741 |
|
Net cash provided by investing activities |
|
- |
|
- |
|
- |
|||
|
Net cash provided by financing activities |
|
220 |
|
3,597 |
|
(3,377) |
|||
|
Net change in cash and cash equivalents |
|
$ |
3,129 |
|
$ |
765 |
|
$ |
2,364 |
Operating Activities
Net cash flows provided by operating activities for the three-month period ended March 31, 2026 increased by $5.7 million, to $2.9 million, from net cash flows used in operating activities of $2.8 million for the three-month period ended March 31, 2025. The increase was driven primarily by the decrease in our net loss period-to-period as well as changes in net working capital, primarily related to net collections of accounts receivable.
Financing Activities
Net cash flows provided by financing activities for the three-month period ended March 31, 2026 decreased by $3.4 million, to $0.2 million, from $3.6 million of cash flows provided by financing activities for the three-month period ended March 31, 2025. The Company received proceeds from the exercise of stock options and the issuance of common stock under the employee stock purchase of $0.2 million during the three-month period ended March 31, 2026. The Company received proceeds from the issuance of common stock under the ATM program of $4.0 million, offset by a payment of $0.6 million for a license installment note payable during the three-month period ended March 31, 2025.
Material Cash Requirements
In the normal course of business, we enter into contractual obligations that contain cash requirements of which the most significant currently include the following:
| ● | We are required to make regular payments under the SWK Credit Facility. Based on the amount currently outstanding under the SWK facility and current interest rates, and assuming we do not make further draws under the SWK facility, we expect to make the following payments: |
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Payments by Period |
||||||||||
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|
|
Remainder of |
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|
|
|
|
|
|
|
|
Total |
|
2026 |
|
2027 |
|
2028 |
||||
|
|
|
($'s in thousands) |
||||||||||
|
Interest |
|
$ |
6,202 |
|
$ |
2,417 |
|
$ |
2,746 |
|
$ |
1,039 |
|
Principal |
|
25,000 |
|
- |
|
10,000 |
|
15,000 |
||||
|
Exit fee |
|
1,250 |
|
- |
|
- |
|
1,250 |
||||
|
Total |
|
$ |
32,452 |
|
$ |
2,417 |
|
$ |
12,746 |
|
$ |
17,289 |
| ● | We are contractually obligated to pay certain milestone and sales-based royalty payments to the counterparties of our license and product acquisition agreements. Due to the contingent nature of these obligations, the amounts of these payments cannot be reasonably predicted. |
Journey Medical Corporation published this content on May 13, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 13, 2026 at 20:34 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]