Journey Medical Corp (NASDAQ:DERM) is one of the best performing micro cap stocks in 2025. On January 4, Lake Street analyst Thomas Flaten reaffirmed a Buy rating on Journey Medical Corp (NASDAQ:DERM) with a $13 price target. Journey Medical (DERM) Publishes Positive Emrosi Phase 1 Microbiome Data Source: Pexels Earlier on December 10, Journey Medical Corp published results from a Phase 1 clinical trial, focusing on Emrosi’s impact on microbial flora in healthy adults, in the Journal of Drugs in Dermato ...

Core Insights - The article discusses the strong performance of micro-cap stocks in 2025, highlighting that they experienced significant growth during a year characterized by an "everything rally" across various asset classes [2][3]. Market Performance - The Dow Jones US Micro-Cap Total Stock Market Index gained 12.59% in 2025, while the S&P 500 achieved nearly 17% [2]. - The Russell Micro-Cap Index saw a remarkable recovery, returning 17.03% in Q3 2025 after a 14.39% decline in Q1 [3]. Investment Outlook - Analysts believe that smaller companies are set for meaningful rebounds in 2026, driven by improved macroeconomic conditions and a shift away from speculative stocks [4]. - Factors contributing to this positive outlook include moderated inflation, easing conflicts, stabilized energy prices, and anticipated interest rate cuts by central banks [4]. Methodology for Stock Selection - Micro-cap stocks were defined as companies with market capitalizations between $50 million and $300 million, focusing on those with the strongest year-to-date performance in 2025 [7]. - Hedge fund sentiment was also considered based on Q3 2025 13F filing data [8]. Notable Micro-Cap Stocks - **Duos Technologies Group Inc (NASDAQ:DUOT)**: Market capitalization of $205.17 million with a YTD performance of 49.20%. The company received a price target increase from $11.50 to $14.00 due to a major contract and its leadership in train check services [9][10]. - **Journey Medical Corp (NASDAQ:DERM)**: Market capitalization of $150.49 million with a YTD performance of 80.99%. The company reaffirmed a Buy rating with a $13 price target following positive results from a Phase 1 clinical trial for its FDA-approved medication Emrosi [13][15].

Fund Performance - The Summers Value Fund LP achieved a net return of 20.4% in Q3 2025, outperforming the Russell 2000 Index ETF (12.4%) and the Russell 2000 Value Index ETF (12.5%) [2] - Year-to-date, the Fund is up 4.9%, lagging behind the IWM (10.3%) and IWN (8.9%) [2] - Since inception, the Fund has delivered a 12.2% annualized net return compared to 6.8% for IWM and 6.1% for IWN [2][3] Healthcare Sector Overview - The healthcare sector has faced challenges leading to underperformance against broader indexes, influenced by regulatory uncertainty from new FDA leadership and budget pressures at federal agencies [4] - Investors withdrew approximately $13 billion from healthcare funds in 2025, indicating a record annual outflow, while large-cap stocks saw $224 billion in inflows [5] - Despite negative sentiment, the healthcare sector is viewed as defensive and growing, with potential for disciplined investors to find opportunities [5][6] Investment Opportunities - The Fund has increased exposure to biopharma stocks, anticipating outperformance due to an innovation cycle and potential acquisitions by large-cap companies [6] - Notable contributors to the Fund's performance in Q3 included Zimvie (124% acquisition premium), Liquidia (strong sales of Yutrepia), and Consensus Cloud Solutions (return to positive revenue growth) [7] - The Fund initiated a position in uniQure following promising Phase 3 results for its gene therapy drug, which showed a 75% reduction in disease progression [9] Position Updates - Journey Medical, with a market cap of $175 million, launched Emrosi for rosacea treatment, with annualized sales approaching $30 million and potential peak sales exceeding $100 million [12] - Ligand Pharmaceuticals, valued at $3.7 billion, operates as a royalty aggregator and is expected to see strong performance from its drugs Ohtuvaryre and Filspari, with blockbuster potential [13][14] - The Fund's top five holdings include Electromed, Consensus Cloud Solutions, Liquidia, Spok Holdings, and Ligand Pharmaceuticals, with a significant allocation to pharmaceutical and biotechnology stocks [10]

Group 1: Fund Performance - Summers Value Fund LP achieved a net return of 20.4% in Q3 2025, outperforming the Russell 2000 Index ETF and the Russell 2000 Value Index ETF, which returned 12.4% and 12.5% respectively [1] - Year-to-date, the fund is up 4.9%, while the Russell 2000 Index ETF and the Russell 2000 Value Index ETF are up 10.3% and 8.9% respectively [1] Group 2: Journey Medical Corporation Overview - Journey Medical Corporation (NASDAQ:DERM) focuses on developing and commercializing pharmaceutical products for dermatological conditions [2] - The stock of Journey Medical Corporation has seen a one-month return of 8.46% and a 52-week gain of 52.01%, closing at $7.95 per share with a market capitalization of $215.73 million on November 18, 2025 [2] Group 3: Product Launch and Financial Outlook - Journey Medical recently launched Emrosi for treating rosacea, with annualized sales nearing $30 million in the first six months post-launch, and potential peak sales exceeding $100 million based on positive feedback [3] - The company is expected to achieve profitability in 2026, supported by a scalable business model, and may be an attractive acquisition target due to ongoing consolidation in the dermatology industry [3] Group 4: Revenue and Hedge Fund Interest - Journey Medical Corporation reported revenue of $17.6 million in Q3 2025, an increase from $14.9 million in Q3 2024 [4] - The company is not among the 30 most popular stocks among hedge funds, with only 4 hedge fund portfolios holding its stock at the end of Q2 2025, down from 6 in the previous quarter [4]

Financial Data and Key Metrics Changes - Total revenues for Q3 2025 were $17.6 million, a 21% increase from $14.9 million in Q3 2024, driven by the successful launch of Emrosi [13][18] - Gross margin decreased to 67.4% in Q3 2025 from 69.4% in Q3 2024, but showed steady improvement from 63.5% in Q1 to 67.1% in Q2 [14][15] - GAAP net loss was $2.3 million, or $0.09 per share, compared to a loss of $2.4 million, or $0.12 per share, in the same period last year [15] - EBITDA improved from a loss of $1 million in Q3 2024 to a loss of $500,000 in Q3 2025, while adjusted EBITDA was positive at $1.7 million [16] Business Line Data and Key Metrics Changes - Emrosi contributed $4.9 million in Q3 2025, a 75% increase compared to Q2 2025, with total prescriptions growing approximately 146% [5][6] - Legacy products, including Qbrexa, Accutane, and Amzeeq, saw a 16% year-over-year decline in revenue due to generic competition impacting Accutane [5] - Amzeeq's total prescription growth indicates strong commercial execution, with a one-to-one ratio of refills to new prescriptions [8][9] Market Data and Key Metrics Changes - Over $100 million of the $187 million commercial lives currently have access to Amzeeq, with successful contracting with two of the three largest GPOs [7] - The number of unique prescribers for Emrosi increased by approximately 50% to over 2,700, demonstrating substantial progress in product adoption [9] Company Strategy and Development Direction - The company aims to position Emrosi as the standard of care for rosacea treatment, targeting peak annual net sales of over $200 million in the U.S. and over $300 million globally [18] - Focus on disciplined expense management and margin expansion to improve profitability and sustain revenue growth [16][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving sustainable EBITDA positivity in Q4 2025, indicating a transformational year for the company [18] - Positive physician feedback on Emrosi suggests strong initial adoption and potential for continued growth [8][50] Other Important Information - The company is actively participating in key dermatology medical conferences to build awareness and momentum for Emrosi [9][10] - The copay assistance program is currently bridging the gap until broader health plan formulary adoption occurs [7] Q&A Session Summary Question: Usage of patient assistance program for Amzeeq - Management noted that the copay assistance program will see reduced reliance as reimbursement improves, with significant gains expected in 2026 [22][23] Question: Focus on breadth vs. depth of prescribers - The strategy involves both expanding the number of prescribers and increasing the volume of prescriptions from existing prescribers, with expectations for a snowball effect as confidence builds [25][26] Question: Revenue per script fluctuations - Management acknowledged variability in gross to net revenue due to early-stage dynamics and expected improvements with the addition of the third GPO in early 2026 [33][34] Question: Launch curve perspective - All indicators suggest a positive and potentially accelerating launch curve, with expectations for increased new prescriptions and refills [40][41] Question: Accutane's performance amidst generic competition - Management indicated that Accutane appears stable, with a recent uptick in performance, although competition remains a factor [42] Question: Retention rate of prescribers - No specific retention data was provided, but management noted ongoing trial and adoption among new prescribers [46][50] Question: Qbrexa's growth management - Qbrexa is expected to maintain single-digit growth year-over-year, with effective management of the overlap with Amzeeq [51]

Core Insights - The Medical sector is showing strong performance as the earnings season concludes, particularly among large biotech companies which have reported positive second-quarter results [1][2][9] Company Performance - Gilead Sciences, Inc. reported better-than-expected second-quarter results and raised its annual guidance [2] - Amgen's second-quarter results exceeded expectations in both earnings and sales, leading to an increased revenue and earnings outlook for 2025 [2] - Regeneron also surpassed earnings and sales estimates, achieving year-over-year revenue growth despite a decline in sales of its leading drug Eylea [2] - Biogen's second-quarter results were strong, with both top and bottom-line figures beating estimates, prompting an increase in its full-year guidance [2] Earnings Expectations - Several biotech companies are expected to report earnings surprises, with a focus on three specific companies: Zevra Therapeutics, Inovio Pharmaceuticals, and Journey Medical Corporation [3][9] - The Earnings ESP methodology indicates that stocks with a positive Earnings ESP and a favorable Zacks Rank have a high chance of delivering earnings surprises [4][5] Company Highlights - **Zevra Therapeutics (ZVRA)**: Focused on therapies for rare diseases, with a strong initial uptake of its FDA-approved treatment for Niemann-Pick disease type C. ZVRA has an Earnings ESP of +58.04% and is scheduled to report on August 12, 2025 [6][7] - **Inovio Pharmaceuticals (INO)**: A clinical-stage company developing DNA medicines, with a lead candidate for treating recurrent respiratory papillomatosis. INO has an Earnings ESP of +10.76% and is also set to report on August 12, 2025 [8][10] - **Journey Medical Corporation (DERM)**: Focuses on dermatological treatments and has seen a strong start for its new oral rosacea treatment. DERM has an Earnings ESP of +14.29% and is scheduled to report on August 12, 2025 [11][12]