Journey Medical Corporation (DERM) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Good afternoon, and welcome to Journey Medical's Emrosi Launch Plan Conference Call. [Operator instructions] Today's webcast will include a slide presentation. Participants that have dialed into this conference call telephonically should refer to the webcast link in the press release filed by the company on January 23, 2025 or the presentation included in the company's 8-K that was filed in conjunction with this conference call today. Participants of this call are advised that the audio of this conference call is being webcast live over the Internet and is also being recorded for playback purposes. A webcast replay of the call will be available approximately 1 hour after the end of the call for approximately 30 days. I would now like to turn the call over to Jaclyn Jaffe, the company's Senior Director of Corporate Operations. Please go ahead, Jaclyn.

Good afternoon, and thank you for participating in today's conference call. During this call, management will be making forward-looking statements, including statements that address, among other things, Journey Medical's expectations for future performance, commercial business and marketing plans, operational results, financial condition and the receipt of regulatory approvals. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in Journey Medical's most recently filed periodic reports on Form 10-K and Form 10-Q, the Form 8-K filed with the SEC today and the company's presentation that accompanies this call, particularly the cautionary statements in it. The content of this call contains time sensitive information that is accurate only as of today, Wednesday, February 5, 2025. Except as required by law, Journey Medical disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to Claude Maraoui, Co-Founder, President and Chief Executive Officer of Journey Medical.

Welcome, everyone, and thank you for joining today's Emrosi commercial update call. On November 4, we announced the FDA approval of Emrosi 40 milligram, our modified release novel oral minocycline for the treatment of the inflammatory lesions of rosacea. Importantly, our Phase III head-to-head clinical trials against both placebo and the current market leader, Oracea, demonstrated a best-in-class profile for Emrosi with statistically significant superiority against both comparators. Given the robust Phase III efficacy and safety data and the millions of patients suffering from rosacea in the United States, we anticipate that Emrosi will not only become our flagship product, but also the new standard of care. We believe that Emrosi has potential to significantly increase our revenue over the next several years. In addition, the sales growth is expected to drive significant earnings power as we plan to leverage our already established dermatology sales force. And with Emrosi's long dated patents, we believe that the earnings opportunity from U.S. sales will be durable. The company is extremely excited about Emorsi's potential. We are focused on launching Emrosi in early April. Today, we will provide an update as we move toward the launch, and members of our clinical, commercial and market access teams will provide information on the progress that we are making on the critical activities that we believe will make Emrosi's U.S. market launch a success. As you can see on this slide, our speakers, besides myself, will be Dr. Srinivas Sidgiddi, our Vice President of Research and Development and Medical Affairs; Andrew Zwible, VP of Operations; Robert Nevin, our Chief Commercial Officer; Brian Prout, Executive Director of Marketing; and Lou Donati, Director of Market Access. We also have a brief financial update from Joseph Benesch, our Chief Financial Officer. To kick things off, I will turn the call over to Dr. Sidgiddi, who will review key highlights of Emrosi's positive Phase III clinical results and Emrosi's FDA approved label. Srini?

Thank you, Claude, and hello to everyone on the call. I will first review the key characteristics of rosacea to underscore the unmet medical need that Emrosi can fill. On this slide, we see that rosacea is a chronic disease described by inflammation of the skin, acne like lesions, deep redness of the face, that is erythema, and spider veins resulting from vasodilation on the face. The condition is also relapsing, meaning that once under control, flare ups are common and can be triggered by stress, UV light, alcohol and other factors. The disorder occurs primarily in adults, and a majority of those diagnosed report that their rosacea symptoms lower their self-esteem and confidence, and that their personal and professional lives are negatively affected. Emrosi was developed to address the condition of patients like the ones shown in the previous slide and was also designed to improve the standard of care with a unique formulation of the active ingredient minocycline. The mix of immediate release and extended release of minocycline in Emrosi is 25% and 75%, respectively. As you can see in the graph on this slide, doxycycline 40 milligrams modified release, or Oracea, the green line, results in a very high Cmax, that is maximum blood concentration, and a very high area under the curve or overall blood concentration throughout the day. In contrast, our formulation of minocycline 40 milligrams modified release, or Emrosi, the orange line in the graph, results in a much lower Cmax and a lower AUC. We believe that these lower blood levels allow more of the drug to enter and remain in the skin, which is where it needs to be to exert its anti-inflammatory effects. Emrosi's prescribing label is reflective of the product's proprietary formulation. The drug is a 40 milligram capsule dosed once daily for adults with rosacea and can be taken with or without food. Emrosi is the lowest approved oral dose of minocycline, and this dose is administered independent of body weight. Importantly, the label contains the superior efficacy of Emrosi relative to modified released doxycycline, significantly differentiating the product from Oracea, the current oral standard of care. Emrosi's efficacy was also consistent across age groups. This next slide highlights our Phase III clinical results that supported Emrosi's approval and FDA label. These are the pooled results from our 2 randomized, well controlled, double blind Phase III trials demonstrating the superiority of Emrosi relative to both placebo and Oracea. A major takeaway is that Emrosi outperformed Oracea on all key endpoints in both trials with high statistical significance. The drug also demonstrated strong statistically significant efficacy in reducing erythema, the redness associated with rosacea, compared to placebo in both trials. Safety was also favorable, with no major adverse events and a safety profile similar to placebo. I will now provide insight into our publication strategy. First, we are awaiting a comprehensive publication of Emrosi's Phase III trial results in a high impact U.S. dermatology journal. This publication will feature all co-primary and secondary endpoints from the Phase III program as well as the positive Phase I trial results from our sub-antimicrobial and pharmacokinetic studies. We anticipate this manuscript to be published in the near term. A second publication focused primarily on our sub-antimicrobial study results will follow, with the potential to publish in the spring of 2025. As a reminder, our sub-antimicrobial study demonstrated that administration of Emrosi did not lead to significant antibiotic resistance and did not cause destruction of normal resident microbiota or healthy bacteria. We believe the results of this study will provide meaningful information to the HCP community that treat rosacea patients. The third publication will be based on the positive quality of life data from our Phase III program, with this publication anticipated in the second half of this year. In addition to these expected publications, we are planning to present multiple abstracts and posters at upcoming dermatology congresses throughout the year. Lastly, given the exceptional efficacy and safety of Emrosi, we expect the product to be considered to be added into the consensus treatment guidelines for rosacea, with strong positioning in the treatment algorithms for the disorder. And with that, I will now turn the call over to Andrew Zwible, our Vice President of Operations, to discuss the rosacea market and the opportunity for Emrosi. Andrew?

Thank you, Dr. Sidgiddi, and good afternoon, everyone. I am pleased to provide you with an overview of the rosacea market and Journey Medical's commercial strength as we prepare for our upcoming launch. We are excited to get Emrosi 40 milligram modified release into the field because there is a real need for better rosacea treatment options, and Emrosi brings a new and differentiated value proposition to both physicians and their patients. To describe the opportunity, let's examine the market from 3 different perspectives: rosacea patients, rosacea prescriptions and rosacea healthcare providers or prescription writers. The first slide focuses on the number of patients. As you can see, there are approximately 16.5 million people in the United States that suffer from rosacea. That's a significant patient population, as is the 5.1 million prescriptions written for treatments of the disorder in 2024. However, these prescription numbers indicate that there are still many people with rosacea that are not actively receiving treatment, which we believe offers an opportunity for Emrosi to expand the existing prescription market given its clinical advantages. Next, one can see on this slide that the treatment for rosacea can be broadly divided up into oral products and topical products. As with Emrosi, 95% of rosacea treatments, both oral and topical, target the inflammatory symptoms associated with the condition, commonly referred to as papules and pustules. One key product to note in the market basket is ZILXI, Journey's topical minocycline foam for the treatment of rosacea. We believe that our experience with ZILXI and our existing HCP customers that write rosacea prescriptions will provide us with an important commercial advantage as we launch Emrosi into the market. On the right-hand side of the slide, you'll notice that rosacea treatment market continues to grow, but oral treatments have been relatively flat over the past few years. We believe this is indicative of an unmet patient need for an effective and convenient oral treatment as there has been no innovation in this space for nearly 2 decades since Oracea was first launched in 2006. In this next slide, we drill down to look at the prescriptions for oral rosacea treatments only, which totaled a little over 700,000 per year. We believe the slight decline is attributed to Galderma reducing its promotional efforts behind Oracea as the product has reached the end of its patent life. We believe there is a major opportunity to re-energize the growth of the oral rosacea treatment segment, leveraging both Emrosi's superior efficacy compared to rosacea (sic) [ Oracea ] and the promotional support that we will put behind Emrosi. Our wholesale acquisition cost or list price is $1,298 for a 30-day supply, which represents a premium to Oracea given Emrosi's superior benefit. Looking further at prescriptions in the next slide on the left, one can see that 94% oral rosacea prescriptions are written by dermatology offices, which aligns well with our current strategic focus and commercial footprint. On the right of this slide, we can see that our current sales force calls on dermatology offices that write 83% of oral rosacea prescription, corresponding to approximately 547,000 prescriptions dispensed on an annual basis. Given these figures, we believe that Emrosi represents a perfect fit in our product portfolio and will enable us to significantly leverage our commercial dermatology infrastructure for this launch. So given the 547,000 oral rosacea prescriptions that Journey currently covers geographically, the question becomes, how quickly can Journey reach its target market? To answer this, we now need to look at the prescribers or writers of oral rosacea prescription in the context of our dermatologist targeting plan. In our current coverage geography, there are approximately 11,500 dermatology prescription writers, which, if evenly spread out, would take us 9 months to call on each prescriber 6 times. However, when we break down the prescribers into deciles, you can see that the top writers, such as those in decile 10, are highly productive and write a disproportionately higher number of prescriptions per writer. Given that this market is highly concentrated in the top decile, we believe that our 35 sales professionals can cover the highest value target with our promotional messages within the first 3 months. As previously mentioned, Journey is not new to dermatology or the rosacea category. To emphasize our commercial effectiveness in the rosacea disease state, the pie chart on the right of this slide categorizes the 11,500 prescribers by those that currently write one of Journey's existing products. Looking at this group, we see that 92% of the 547,000 oral rosacea prescriptions come from existing Journey medical writers. To summarize, we are already covering the vast majority of this market with our experienced sales team that have long standing relationships with the HCPs in their respective territory. We believe this will lead to rapid prescriber adoption of Emrosi. And with that background, I will now turn the call over to Robert Nevin, our Chief Commercial Officer, to discuss the oral rosacea market opportunity and our go-to-market strategy for Emrosi.

Thank you, Andrew, and a special thanks to all of you for joining us today on our Emrosi 40 milligram modified release prelaunch call. I'd like to kick off my presentation by discussing the market adoption of the first oral treatment for rosacea, Oracea, which Galderma launched in 2006. This can be instructive on why we believe that Emrosi modified release capsules will enjoy a similar and rapid adoption curve. Oracea represented a paradigm shift in the treatment of rosacea because of a lower dose oral doxycycline formulation whose efficacy in rosacea is widely attributed to its anti-inflammatory properties and not the antimicrobial effects of higher dose doxycycline. While some dermatologists were initially skeptical on the efficacy of Oracea's lower dose doxycycline formulation, the product was quickly adopted in treating rosacea patients because the anti-inflammatory effects of doxycycline were maintained at a sub-antimicrobial dose. And Galderma rapidly capitalized on this paradigm shift, driving the brand to roughly 770,000 prescriptions annually at peak. I'd ask everyone to take note, a lot has changed since Galderma launched Oracea close to 20 years ago. While dermatologists are known to be the most frequent prescribers of oral antibiotics in medicine, they have substantially decreased this prescribing behavior according to a study published in JAMA Dermatology. As a result, we find ourselves in a fortuitous position. Introducing Emrosi, a low dose modified release minocycline product with statistically significant superior efficacy over the current standard Oracea, we believe that Emrosi modified release capsules will be seen as a new and innovative treatment option and will represent another paradigm shift in rosacea treatment. Turning to the next slide. I'd like to discuss Journey's 4 pillars for driving dermatologist adoption of Emrosi modified release capsules with a laser-focused objective of rapidly establishing Emrosi modified release capsules as the oral standard of care among dermatology providers for the treatment of inflammatory lesions of rosacea. Journey's first pillar is direct promotion, driven by our experienced sales force with representatives that average more than 10 years of dermatology sales experience. These 35 professionals work territories that have been optimized to cover 83% of the dermatology TRxs for the oral rosacea market. Journey's second pillar is to build HCP awareness. This will be done by targeting HCPs with digital advertising, facilitating both educational events such as speaker programs, while attending key industry conferences. Our third pillar is to enable patient access. Journey will enable patient access and savings with our best-in-class access program, the Journey Total Access Program, or JTAP. As you will hear later in this presentation, we will also work to establish and expand health plan coverage for Emrosi modified release capsules this year, supported by the efforts of our sales force to drive strong demand for this product. And finally, Journey's fourth pillar is to simplify refill adherence by enhancing refill visibility at the pharmacy level while direct messaging patients to encourage refill adherence and their treatment outcomes. This slide shows some of the market research that we commissioned to help us understand the drivers for HCPs to prescribe Emrosi modified release capsules. This research was conducted by surveying 50 rosacea prescription writers after providing them with a blinded target product profile. The results in this slide reflect the target product profile that describes Emrosi's benefits based on the Phase III clinical results and Emrosi's FDA-approved label. As you can see, the survey participants believe there is a need for new treatments, and a high proportion of prescribers found the target product profile to be very valuable for patients. Importantly, 88% of those surveyed saw the head-to-head Phase III results as the primary reason to prescribe Emrosi modified release capsules and 74% responded that they were very likely to prescribe the product. With more than 7 out of 10 prescribers stating that they will likely prescribe Emrosi modified release capsules, we are confident that our sales force will be successful in converting a high percentage of rosacea prescriptions to Emrosi. Now I would like to turn the call over to Brian Prout, Journey's Executive Director of Marketing, to discuss our marketing strategy. Brian?

Thank you, Rob. I'd like to start by walking you through the key marketing messages that we'll be sharing as we launch Emrosi. As a marketer, it's unusual to have so many different patient benefits to work with during a drug launch, especially head-to-head data. So it's been an exciting process preparing for this launch. Our marketing campaign will be focused on the strong data generated in our Phase III trials, such as the significant improvement in IGA success and inflammatory lesion count reduction compared to both Oracea and placebo. Emrosi also showed a rapid onset of efficacy, achieving statistically significant treatment results on both co-primary endpoints in as little as 2 weeks compared to placebo. Importantly, the results from our Phase III trials showed that with Emrosi patients don't have to compromise between superior efficacy and placebo-like safety. We also have additional supporting messages around Emorsi's uniqueness, convenience and patient savings program. All of these product attributes support the positioning of Emrosi as the best-in-class oral therapy for the treatment of inflammatory lesions of rosacea. And as a result, we expect Emrosi to quickly become the standard of care in oral therapy for rosacea patients. The key messaging that you saw on the prior slide will be highlighted throughout our Emrosi sales aids, the product website and patient materials. We're currently in the process of finalizing these materials for the launch, but wanted to share a couple of examples of pages from the sales aid to give you an idea of what it looks like. The pages are blurred because the materials aren't in distribution yet. As you can see, the spread on the right features 4 sets of before and after patient photos from our Phase III clinical trials. Andrew shared one of these sets of photos earlier in the presentation, and now I'd like to focus on the other 3. On this slide, we have a male subject with moderate papulopustular rosacea and 43 lesions at baseline. The inclusion criteria for subjects in the Emrosi Phase III trial was 3 to 4 on an IGA scale, which indicates moderate to severe rosacea. Study participants also had to have between 15 to 60 inflammatory lesions at baseline. As you can see, at week 16, this patient's IGA score dropped to 1, which is almost clear, and the number of lesions dropped from 43 down to 8. On this next slide, we have a female subject with an IGA score of 4, which indicates severe rosacea. She also has 46 lesions at baseline. After 16 weeks of treatment with Emrosi, her IGA score dropped down to 1 or almost clear and her lesion count went from 46 lesions down to 1 lesion. And finally, we have another male subject with an IGA score of 3, which indicates moderate rosacea. This patient had 28 lesions at baseline. And after 16 weeks on Emrosi, his IGA score was reduced to 0 or clear and his lesion count went from 28 down to 0. With these types of materials being prepared for the Emrosi launch, I'd also like to discuss some of the educational and promotional tactics we're planning to quickly grow adoption of Emrosi by dermatologists. Approximately 1 month before launch, we'll be exhibiting at the American Academy of Dermatology Conference in Orlando, Florida, which takes place from March 7 through the 11. With over 20,000 attendees and over 5,000 health care providers under one roof, it's the largest dermatology conference of the year. We believe that the timing of AAD positions us perfectly to maximize awareness of Emrosi within the dermatology community ahead of its launch. Our professional relations team is also working on training a speakers' bureau of key opinion leaders. We feel that peer-to-peer education is a useful way for dermatology providers to learn about Emrosi. So professional relations will be hosting a number of speaker programs throughout the country starting in April. In early April, our reps will begin in-office promotion. We'll also have an e-sampling program to ship samples to providers in areas that aren't covered by a sales rep. Our e-sampling program will add scale to the launch. And because we already have physicians ordering samples of other Journey's products through this platform, Emrosi will be an easy addition for our customers. And finally, we'll be running a targeted digital advertising campaign using an AI-enabled platform that can identify and then selectively advertise to rosacea writers across the country. Based on these prescribers' online activities, the platform will place digital ads in their social media feeds and on websites that they visit. This effort will supplement the activities of our sales reps and offices to grow adoption of Emrosi more quickly. And with that, I'd like to pass the call over to Lou Donati to provide insights on our market access strategy.

Thanks, Brian. I appreciate the opportunity to present an overview of our market access strategy to the investment community. Before we begin, I would like to introduce myself and my background in the pharmaceutical industry. 25 years in the pharma industry at companies such as Allergan, Dermira, Almirall and Journey Medical. 18-plus years in market access, I am now Director, Market Access at Journey. My primary role here at Journey Medical is to support the launch of Emrosi by securing pharmacy benefit coverage for patients with rosacea. Our focus will be the commercial government, which includes federal employees and a health exchange and Medicare Part D lines of business. The importance of market access cannot be understated. A successful Emrosi launch will depend on many factors, including gaining payer coverage and restricting barriers for the patients to fill this drug at point of sale. Given my experience in dermatology at companies such as Dermira and Almirall, I have developed a unique perspective on how to approach the payers strategically from a contracting, negotiation and formulary positioning point of view. As soon as Emrosi received FDA approval, I began payer outreach. The initial Emrosi discussions have been well received. Two of the key differentiators that I see supporting our efforts in maximizing our coverage and limiting restrictions are the Phase III head-to-head superiority data of Emrosi versus Oracea and the expected strong demand from HCPs and patients for this new and highly effective medication. In my 18-plus years in market access, I cannot recall an instance where I had clear superiority data supporting a new drug over an existing standard of care treatment. Market access has changed over the years to a balance of quality of care and cost, which can make it challenging to gain access for patients. However, with our proven contracting strategies, our ability to share the head-to-head Phase III data with payers and the anticipated Emrosi demand in the market, I believe we will obtain the payer coverage necessary to make Emrosi a leading rosacea treatment. Let us take a step back and look at the payers from a macro view. Payers for our brief discussion today will include the vertical integration of GPOs, PBMs and health plans. Payers implement utilization management policies, or called UMs for short, to manage drug categories. Common utilization management policies, or UMs, are prior authorizations and step edits or step therapy. While the potential UMs for newly approved medications entering the market at times can be challenging, a disciplined approach to obtaining broad coverage will help us navigate this landscape and build the Emrosi franchise. As you can see on this slide, our focus will be the commercial government and Medicare lines of business. The commercial government segment includes approximately 188 million lives and the Medicare segment includes approximately 54 million lives. This focused approach to the specific lines of business will set up the sales team for a successful Emrosi launch. Our 2 main objectives for the market access team are to gain overall quantity coverage in terms of total covered lives and to improve the quality of coverage where we can. The ramp-up in coverage is expected to be a stair-step approach typically with quarterly additions for commercial government payers placing Emrosi on their formularies. Medicare coverage will take more time with formulary additions at the beginning of the new year. The time lines give you an idea of how much planning, preparation and execution must be done to introduce Emrosi to the payer community. Journey and our market access team are focused on a top-down vertical integration plan of action beginning with the GPOs, PBMs and then the national and regional health plans. As indicated on the slide, we have conducted initial payer outreach, which includes the payer value proposition, clinical presentations and contracting and business discussions. Our plan is to complete these discussions in conjunction with the commercial launch by the beginning of April. Our relationships with many of the key payers put us in a good position to optimize our interactions. To summarize, Journey Medical's market access team is ready to deliver on gaining payer coverage throughout 2025 and beyond in order to establish this best-in-class drug in the rosacea treatment market. Thank you for your attention. I will now turn the call over to our CFO, Joseph Benesch.

Thanks, Lou, and hello to everyone on the call. I would like to start by reporting that we intend to release our fourth quarter 2024 financial results in late March, consistent with the timing of when we reported during the last several years. That said, I would like to provide some unaudited financial insight ahead of our year-end results. With respect to 2024, we issued guidance for $55 million to $60 million in net product revenue, SG&A expense in the range of $39 million to $42 million, R&D in the range of $8 million to $10 million for the full year. Today, we are reiterating this guidance for each of the line items that I just mentioned. In addition, we expect to end 2024 with $20.3 million in cash. We believe that this bodes well for Emrosi launch and gives us a solid cash runway through the Emrosi launch and beyond. We will provide more details on our financials when we report our fourth quarter and full year audited results. Claude, back to you.

Thank you, Joe. As you've just heard, the clinical, commercial and market access teams at Journey are in full swing and gearing up to launch Emrosi, which we believe will be recognized as a best-in-class rosacea treatment in an important and sizable dermatology market. We have the know-how and commercial reach already in place to execute on a successful launch, and our activities to prepare for a launch in April are on track. We expect there to be a strong demand for this new and differentiated product right out of the gate given the superior benefits to patients. To meet this demand, we expect to complete activities to build launch quantities in March, and our patient access and savings program will be in place to facilitate early adoption. Our experienced market access team has already begun to execute on a proven strategy to establish payer coverage and expand it throughout the year based on Emrosi's strong value proposition. In addition to the approaching U.S. launch of Emrosi, the recent FDA approval supports our strategy to market a portfolio of proprietary and patent-protected dermatology products. This also positions us to out-license the commercial rights to these products in international markets like we did with Maruho for QBREXZA in certain Asian countries. Our business development team continues to look for such opportunities, which we believe can create additional value for the company and our shareholders. I would like to thank the entire Journey team for their hard work as we prepare for the launch of Emrosi. And thanks to all of the participants on this call today for your interest in the company. Now operator, we are ready to open the lines up for Q&A.

[Operator Instructions] The first question comes from Scott Henry with AGP.

Great presentation, extremely thorough. I've got a few questions, but I'm going to keep it to 2 to allow others as well. So the first question I would have is, Oracea was a really strong fast launch. It seems they reached peak in almost 2 years, which is a very short time for any product to reach a peak penetration. But that was 2006. Obviously, insurers are a lot different now in 2025 than they were in 2007. Would you expect a fast uptick? Or would you expect them to flatten this out and kind of over what magnitude? Maybe you will go from 2 years to 4 years? Or how should we think about comparing this product to Oracea? And I just have one follow-up.

Oracea, like you said, about 20 years ago, 2006 launched, it took them about 5 years to get to their peak sales. But they did have a strong launch right from the get-go and showed some great momentum over that 4-, 5-year time period. We certainly have high expectations of having a strong ramp-up very quickly. Again, we've got 35 sales territories across the United States. We know who our targets are. And we believe that with the strong head-to-head data, we're going to be able to convert over a lot of these physicians and get them to become early adopters of Emrosi. So our expectations are high. We're not going to say we're going to be identical to Oracea, but we believe we're going to have a very successful launch and anticipate that. Again, I think when you look -- are looking for peak sales, I think peak sales will take several years. Our early adoption as well with the payers is going to be important, and we have a strategic plan to do that.

Okay. Great. And then the follow-up question along the same lines, but perhaps a little more specificity. And you may want to use different numbers. But what I would like to know is get your thoughts on patient access. And for your target market, what percent of your target patients would you expect to have unrestricted access, at least as unrestricted as it will be at, say, 3 months, 6 months and then at a year, at a 2-year period? How should we expect that curve of unrestricted access to occur for patients? And by unrestricted, I mean as good as it's going to get. It's never going to be perfect. But just trying to get a sense of do you think you'll have 10% of your patients after 3 months where you want them or maybe lower or maybe higher? And then how should that curve change over time from 6 months, 1 year, 2 year, however, whatever kind of metrics you want to think about it?

Sure. Yes. No, no, understood, Scott. And a number of variables really go into this. I will tell you that early on since November, there's been some momentum that's already been done with the product in getting acceptance for Emrosi. We use Fingertip Formulary to show how things are going accordingly. And as of date, we're already at 12% covered lives, and we haven't even started selling the product. When you look at Oracea itself, currently in 2025, it has about 41% coverage right now with the PBMs and so forth. I think it will be more interesting to hear from our Market Access Director, Louis Donati. So Louis, if you don't mind chiming in here.

Yes. Sure, Claude. Really a good question, by the way. So there's going to be a mix of unrestricted and restricted access for the patient, and that's what our market access team in collaboration with finance and General Counsel -- our job is to mitigate, minimize the restrictions for the patient, so when they go to the pharmacy, they have less hurdles. We'll know more, I would say, in the next few months, because right now, Emrosi is on many of the GPO and PBM, P&T meetings, calendars for January, February, March, obviously, for the first half of '25. So we anticipate feedback from them after their business review meetings in the next few months. I'll get a better feel for it the next few months. But the majority of the mix will be restricted with some unrestricted mixed in. So restricted, we're going to mitigate it as much as we can to single step edit. And that's our benchmark. So hopefully, that answers the question.

The next question comes from Kalpit R. Patel with B. Riley Securities.

So you mentioned on one of the slides that there are a little over 700,000 orals that are being prescribed in this rosacea market today. I guess the question is, do we know what the breakdown is in terms of branded Oracea, generic Oracea and maybe off-label other oral antibiotics generic that might be used today? And then I have a follow-up.

Yes, I think generally I would say that the mix between the brand Oracea and the generics that are available is about 40% to the brand, 60% towards the generics currently. And then we are looking at -- we are not looking at outside of the 40-milligram doxycycline and 20-milligram doxy. We are not looking outside of that in our market basket when we're referring to the 700,000-plus prescriptions that are out there. So it certainly is larger than that. But we're going to be focused on that and that's where our sales force will take their time and start to educate, build awareness and build momentum for the brand.

And then the follow-up would be, how many of those 700,000 prescriptions do you think you can cannibalize over time? And do you expect the overall number of prescriptions to grow from this 700,000 number to what level over time?

Yes. No, I mean that certainly is our game plan. We do believe with the head-to-head superiority data, the placebo-like safety side effect profile, it's really fantastic. And the fact that our sales force and our promotion is going to be able to directly go head-to-head and have those discussions with our health care providers is extremely important. And the current standard of care is Oracea. We believe that, that will quickly become our standard of care with Emrosi. So we certainly believe that we will get the lion share of those prescriptions and that the vast majority of HCPs will want to get the best potential treatment for their patient outcomes. And our Phase III clinical trials have that robust evidence to persuade them and give trial to patients. So it will happen quickly. We're not ready to give a specific time period, but we certainly -- by showing that decile graph focused on those top 3,200 approximate HCPs, we'll be able to convert a lot of them backed up by our research that is showing about 7 out of 10 HCPs will want to utilize Emrosi. So I think we've got a lot on our side. And just give us a little time and look for those prescriptions, those weekly and monthly prescriptions once we launch here in early April, and we'll start to see that shift take place.

And one follow-up, if I may. The first year guidance, do you anticipate giving guidance as you head into the launch?

So we will definitely discuss our thoughts on guidance when we come out with our 2024 earnings call here towards the end of March. And there's just a lot of variability when you're coming up with a launch product. So we're going to continue to do some thinking about that. We obviously gave guidance on our base business with our current portfolio, and we're just thinking through the Emrosi here. So nothing to give at this point in time.

The next question comes from Brandon Folkes with Rodman & Renshaw.

Maybe just first one for me, and I'll keep it to 2 as well. How should we think about refill levels of Emrosi? Any color on refills per year you're thinking about? And just any color on the persistency rates on Oracea? And then maybe just some color. Is -- are patients on Oracea therapy -- do they treat this -- do they -- they sort of take the medication. It works. Sort of it's a bit difficult to keep them compliant. And then sort of as it sporadically flares up, they drive back to get refills or new prescriptions. Just how should we think about persistency and refill rates going forward here?

First of all, when you think about Emrosi, we did our Phase III clinical trials over a 16-week period of time. So we'll certainly be looking for those new prescriptions. And we're looking for a duration and advising physicians, just as the clinical trials were, for 4 months. We do know that there -- the product works highly effectively and they'll control that. Obviously, nothing is a cure for it, and there will be some relapses and some flare-ups. And we do see that happening 2 to 3 times over a calendar year, is what we're anticipating right now. So we do believe there will certainly be refills that take place, but getting those new early prescriptions will really lend itself well. I'd like to ask if -- Andrew, would you like to add anything regarding refill data?

Yes, just real quick. Looking at Oracea in 2024, they have a TRx to NRx ratio of about 3, which indicates to Claude's point, they get the NRx and then 2 refills. We've got a lot of programs already in place with our existing products that indicate we should have a very strong refill ratio with Emrosi. Again, that's going to take time to build up. So it's not as if it's going to be 3 refills month 1. We're going to build to that towards the end of the year.

And maybe just sort of how do you view Emrosi interacting with the topicals? Are you seeing this as being used complementary, sort of polypharmacy here? Do you need to sort of convince the prescribers to bring patients off topical? I know there's -- obviously, you gave a lot of detail on the oral therapy, 700,000 oral prescriptions that are out there. But just how do we think about sort of the interaction in practice between topicals and oral?

Sure, Brandon. Yes, just, I guess, a few pieces of information here. One of the slides that was shown displayed from 2020 to 2024 the total prescriptions and it kind of split it up between orals and topicals. But in 2020, there was about 3.9 million prescriptions. And now, in 2024, there's about 5.1 million. So what bodes well for us is that this is a growing category. And there -- that helps us with launching Emrosi. The fact that Galderma with Oracea and its patent life ending here in 2025, I think they've taken their foot off the gas pedal in terms of their promotion. That gives us an opportunity to really go after the 700,000-plus prescriptions, which we're calling the low-hanging fruit, and to be able to become the majority of that and become the leader there. That's what our -- one of our goals is. So it's a growing market, about 30% over that time period. And once we've established ourselves as the oral choice as a new innovation, if you will, with the high efficacy that we have, then we believe we'll be able to get additional and grow this oral market by getting more physicians to add Emrosi with their topical choice, for example. So we think that, that certainly is a larger pie, but we are first going to focus on the head-to-head data. And that gives us the target right in front of our eyes, is going after the oral 700,000 plus. Robert Nevin, I'm not sure if you wanted to add anything to that.

Claude, what I'd like to chime in with is that dermatologists typically average between 3 and 4 prescriptions for their rosacea patients. And we're certainly going to do everything on our end to make sure that Emrosi is one of those products. And I can't reiterate enough for the audience the fact that 88% of dermatologist surveyed said that they needed a new therapy in their armamentarium for their rosacea patients. And 74% of dermatologists said that they were very likely to prescribe Emrosi after they reviewed the head-to-head Phase III results between Oracea and Emrosi that we've been referencing on this call. And I'll wrap up by saying I'm approaching 30 years of commercial derm experience and I've never launched a product in dermatology with these survey results. And I'd like to add that I launched Solodyn, which at the time was the largest launch in the history of dermatology brands as it pertains to revenue. So we're very excited.

The next question comes from Thomas Flaten with Lake Street Capital Markets.

In response to an earlier question, Lou, you mentioned that your goal was to have at most a single step edit on those restricted plans. What would that step edit be, failure on a topical, failure on a generic? Can you help me think through that?

So our benchmark, again, is a single-step edit through an oral generic agent. And the negotiation with the GPOs and payers -- primarily GPOs and PBMs and then the downstream client, that is -- my job is to negotiate that so-called drug policy and help them get Emrosi in a position where there's minimal restrictions for the patients. So yes, the benchmark is a single-step edit through an oral generic agent. And that covers a lot of, obviously, trial and error. So it's going to be a trial and failure of one oral agent.

And then maybe, Lou, just sticking with you, if you look at the overall rosacea market, what is the payer mix?

In regards -- well, primarily, it's going to be a commercial government line of business. And earlier in the call, we talked about Journey's focus will be primarily the commercial government, which includes your federal employees and health exchange lives, which is a big chunk of the U.S. population, and then a segment of Medicare, obviously, which is about 54 million lives. So the only line of business that we're not going to participate in is Medicaid, obviously, for obvious reasons. But commercial will be our big focus. And fortunately, the initial response from the GPO and PBMs has been very well received. They do like the head-to-head, and the true demand, they know it's going to be there. So the initial response has been very positive. And I've been with 3 different dermatology companies in the last 8 years and I can say honestly this is probably the drug that has the best profile I've ever dealt with. So we're very positive, we're very bullish and we're very excited for '25.

And then, Claude, just a quick question for you. You mentioned that you'll be building commercial products in March. Is there a chance you could have products in the channel in March, which means you would recognize some -- at least modest revenues in Q1 versus us assuming that in Q2 we will see all the revenues?

Yes, it's a good one, Thomas. There certainly is that possibility of that happening. We're not holding ourselves to it. We're definitely saying that April is our green light. And we will certainly do everything within our power to start at least distribution into the channel earlier than that.

The next question comes from Jason Wittes with ROTH MKM.

Maybe some follow-ups. One, in terms of getting full payer coverage or at least maximum payer coverage -- I'm just looking at that slide you put up. Was that -- we assume by early 2026 it's all in place? Or what kind of timing should we anticipate for that?

Yes, so thanks...

So...

Oh, sorry. Claude, go ahead, please.

No, no. Just real fast. Yes, look, this is -- every quarter, we're going to increase our coverage. Certainly, that's the plan. And as we get further into 2025 and into 2026, you'll see more and more success for the brand. And this is certainly typical and standard in these types of launches. And Lou, please add on to that.

Yes. I'll just add on commercial -- so Jason, commercial government coverage will come quicker than Medicare. So we expect commercial government coverage to be quarterly adds. We have some coverage already, 1125, with 4125, et cetera. We'll see that ramp-up period throughout the year. Obviously, it takes a year, year-and-a-half to get peak coverage for any type of new drug or new launch. Medicare Part D will take a little longer. It's a longer life cycle to get coverage. So we anticipate 1126 for some Medicare coverage with maybe some pull forward. They call it pulling forward the coverage and earlier in '25. So the earliest Medicare coverage we would see would be a July 1 start. But primarily, we're really focused on commercial and government right now.

And also I think you mentioned -- oh, sorry. Go ahead, Claude.

Oh, no. Go ahead, please.

Yes, I think you mentioned in your survey there was sensitivity to $50 out of pocket. I assume that's a monthly out of pocket. And in terms of your current pricing, what's the assumption that it might turn -- and I know it will vary, but what percentage of patients might be above that threshold assuming, obviously, once everything gets in place?

Our research indicated that there's a sensitivity for patients in terms of their out-of-pocket cost, and that threshold is between $50 to $70. We have in that slide $50. And we think that, that is the point that we would assume, $50 and lower, that patients will fill that prescription and get that for their treatment of their rosacea. So that is our goal. Again, working with the payers, trying to make sure that the co-pay programs and our co-pay program, the Journey Total Access Program, help assist patients in getting this. We want as many patients as possible to obtain this, get the clinicians very comfortable with it, make it a very natural choice when they see patients to prescribe Emrosi. So that's our goal, trying to keep it at $50 and less.

And maybe just one last one. If I look at current Oracea users, is it primarily, I guess, the latest -- or more severe 3 or 4 category patients that are on Oracea right now? And is that the way to look at it? And I assume at some point given the superiority there's potential that you would obviously expand that market beyond that for Emrosi. But just to get a sense of what the current market looks like and what it could be would be helpful.

Yes. Dr. Sidgiddi, could you comment a little bit on Oracea and Emrosi? And then we'll have maybe Andrew follow up with the market goal.

Sure, sure. So the market right now is like Oracea and other doxycyclines or minocyclines. Generally, the orals are prescribed along with topical, one of the topicals, for treatment of more severe patients. Once they have control on the disease, they have control on the flare-up, then they tend to discontinue the orals and then continue with the topical that they had along with the oral. The big difference that Emrosi brings into this field is that we have specifically tested this on moderate to severe rosacea patients and we have shown that significant efficacy. So we believe that there is a possibility for the same thing to be continued with Emrosi, wherein it might be combined with the topicals or it might be prescribed alone for moderate to severe patients. Andrew?

Yes, that was great. The only thing I would add is when we look at our market size of 700,000 -- technically, the dermatologists can write the product for whatever disease state they want. We're focusing on rosacea, which obviously is the indication for Oracea, but not necessarily exactly where it's written. To your point, we do believe there's a lot of unmet need. This is kind of backed up by 2 data points. One, 16.5 million patients, but only 2 million to 3 million are currently being treated. So again, that gives us a lot of confidence that there's a lot of unmet need. Additionally, the discrepancy between orals and topicals, orals are at 700,000, topicals are at 4.4 million. As Rob mentioned, the derms really like the concomitant use. So we believe there's a lot of unmet need for us to grow the market by combining with the topicals as well.

I understand that there is time for a follow-up, and that will come from Scott Henry with AGP.

I'll try to be quick. Just a couple of very short questions. First, I know the launch took a little more time to build up supply. How should we think about manufacturing capacity? Is that an issue at all? Or could that factor in if demand is high? Just wanted to get your take on capacity.

Yes. No, the capacity -- first of all, in terms of launch quantities, everything is on track and we feel very comfortable launching our efforts in April. So we feel highly confident. In terms of the ramp-up, right after our initial allotments of supply, we're getting backup supply and then continuation that's set for the entire year. I would like to tell you that to start out, we start out with approximately a 2-year shelf life. And then very quickly in the next batches coming out, we have a 3-year shelf life. So I think we are certainly going to be adequately supplied. I'd like to see us in a little bit of a situation where the demand is just going blockbuster and we have to increase our forecasts. And I think that would be a good situation for us to have. But in terms of forecasting and supply, we always like to have about a 6-month supply on hand as we continue to get additional supplies. And that's worked out well for us.

And then a lot of dermatology products have some seasonality. They tend to go down in the summer when people are out in the sun. Is there any seasonality to rosacea? How should we think about that? Or do you really want to get it out there ahead of the summer? Or is it less of a factor to you?

There's many factors for people that have rosacea that get flare-ups throughout the entire year. So that actually works well for us. So Dr. Sidgiddi, if you want to just go over that a little bit and explain further?

Sure, Claude. That's a great question. There is definitely a seasonality associated with rosacea that with exposure to sun, there are flare-ups. But then there are additional factors which also cause flare-ups like stress, anxiety, smoking, alcohol, et cetera. So it tends to have flare-ups throughout the year. And so we believe that it's not just the seasonal part. There are multiple aspects that lead to flare-ups happening throughout the year.

This concludes our question-and-answer session and Journey Medical's Emrosi launch plan conference call. Thank you for attending today's presentation. You may now disconnect.