Journey Medical (US:DERM)2024-05-14 20:46PART I. FINANCIAL INFORMATION Condensed Consolidated Financial Statements (unaudited) The company reported increased Q1 2024 revenue but a wider net loss due to higher R&D expenses, raising going concern doubts Unaudited Condensed Consolidated Balance Sheets Total assets and stockholders' equity decreased as of March 31, 2024, primarily due to reduced cash and the net loss incurred Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $24,057 | $27,439 | | Total current assets | $47,013 | $56,455 | | Total assets | $66,571 | $76,849 | | Liabilities & Equity | | | | Total current liabilities | $38,936 | $41,868 | | Total liabilities | $53,620 | $56,499 | | Total stockholders' equity | $12,951 | $20,350 | Unaudited Condensed Consolidated Statements of Operations Q1 2024 revenue increased 7% to $13.0 million, but a 288% surge in R&D expenses resulted in a net loss of $10.4 million Q1 2024 vs. Q1 2023 Statement of Operations (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total revenue | $13,030 | $12,213 | | Cost of goods sold | $6,816 | $6,449 | | Research and development | $7,884 | $2,033 | | Selling, general and administrative | $8,420 | $13,292 | | Loss from operations | $(10,090) | $(9,561) | | Net loss | $(10,442) | $(10,136) | | Net loss per share (Basic & Diluted) | $(0.53) | $(0.57) | Unaudited Condensed Consolidated Statements of Cash Flows Net cash used in operating activities significantly increased to $5.0 million in Q1 2024, leading to an overall $3.4 million decrease in cash Q1 2024 vs. Q1 2023 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,019) | $(956) | | Net cash provided by (used in) investing activities | $— | $(5,000) | | Net cash provided by financing activities | $1,637 | $52 | | Net change in cash | $(3,382) | $(5,904) | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail the company's dermatology focus, liquidity challenges, and accounting policies, including a going concern warning due to recurring losses - The company is a commercial-stage pharmaceutical firm focused on dermatological treatments, with a portfolio of seven branded and two authorized generic drugs19 - As a result of recurring losses, substantial doubt exists about the Company's ability to continue as a going concern for at least twelve months from the financial statement issuance date24 - The company is a majority-owned subsidiary of Fortress Biotech, Inc. as of March 31, 202420 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 financial results, noting a 7% revenue increase, a significant rise in R&D expenses, and ongoing liquidity challenges with a going concern warning - The company submitted a New Drug Application (NDA) for DFD-29 to the FDA on January 4, 2024, with a PDUFA goal date of November 4, 202485 - The company's ability to continue as a going concern is subject to substantial doubt due to recurring losses87103 Results of Operations Total revenue increased 7% in Q1 2024, but a significant rise in R&D expenses led to a wider loss from operations and increased net loss Comparison of Three-Month Periods Ended March 31, 2024 and 2023 (in thousands) | Metric | 2024 | 2023 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $13,030 | $12,213 | $817 | 7% | | Research and development | $7,884 | $2,033 | $5,851 | 288% | | Selling, general and administrative | $8,420 | $13,292 | $(4,872) | -37% | | Loss from operations | $(10,090) | $(9,561) | $(529) | 6% | | Net loss | $(10,442) | $(10,136) | $(306) | 3% | - Net product revenues increased by $0.9 million (7%), primarily due to increased sales of Qbrexza (up 23%) and Accutane (up 25%) from focused marketing efforts93 - R&D expenses increased by $5.9 million, driven by a $4.0 million FDA filing fee for DFD-29 and a $3.0 million contractual milestone payment to DRL97 - SG&A expenses decreased by $4.9 million (37%) due to continued expense management efforts98 Liquidity and Capital Resources As of March 31, 2024, the company held $24.1 million in cash, supported by a $20.0 million SWK term loan and ATM proceeds, despite ongoing going concern doubts - The company had $24.1 million in cash and cash equivalents at March 31, 2024100 - The company has a term loan facility with SWK for up to $20.0 million, with $15.0 million drawn and an additional $5.0 million available101 - During Q1 2024, the company sold 289,744 shares under its ATM program, generating net proceeds of $1.5 million102 Material Cash Requirements The company faces significant future cash requirements, including SWK term loan payments, potential DFD-29 milestones up to $155.0 million, and ongoing royalty obligations Future Payments for SWK Credit Facility (in thousands) | Period | Total | Interest | Principal | Exit Fee | | :--- | :--- | :--- | :--- | :--- | | Remainder of 2024 | $1,501 | $1,501 | $— | $— | | 2025 | $1,993 | $1,993 | $— | $— | | 2026 | $6,193 | $1,693 | $4,500 | $— | | 2027 | $12,336 | $1,086 | $10,500 | $750 | | Total | $22,023 | $6,273 | $15,000 | $750 | - The company faces up to $155.0 million in additional contingent regulatory and commercial milestone payments for DFD-29110 Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Journey Medical Corporation is not required to provide quantitative and qualitative disclosures about market risk110 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal controls - The company's principal executive and financial officers concluded that disclosure controls and procedures were effective as of March 31, 2024111 - No material changes in internal control over financial reporting occurred during the quarter112 PART II. OTHER INFORMATION Legal Proceedings The company reports no pending legal proceedings expected to have a material adverse effect on its financial condition or operations - To the company's knowledge, there are no material legal proceedings pending against it114 Risk Factors This section refers investors to the detailed risk factors in the 2023 Form 10-K, with no new or materially changed risks presented - The company directs readers to the "Risk Factors" section in its 2023 Form 10-K for a discussion of risks115 Unregistered Sales of Equity Securities and Use of Proceeds The company confirms no unregistered sales of equity securities occurred during the reporting period - The company did not sell any equity securities in unregistered transactions during the reporting period116 Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, officer certifications, and Inline XBRL financial statements