What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-26 compared with 2025-03-27 · 89 added, 103 removed, 117 unchanged (62% of the section changed)

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As used below, the words “we,” “us” and “our” refer to Journey Medical Corporation and its consolidated subsidiaries.

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.

We are a commercial-stage pharmaceutical company founded in October 2014 that primarily focuses on the selling and marketing of 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”).

We are a controlled subsidiary of Fortress.

Recent Corporate Highlights

FDA Approval of Emrosi

On November 1, 2024, the FDA approved Emrosi TM (Minocycline Hydrochloride Extended Release Capsules, 40 mg), formerly referred to as DFD-29 (“Emrosi”) for the treatment of inflammatory lesions of rosacea in adults.

Emrosi was developed by Journey in collaboration with Dr.

Reddy’s Laboratories, Ltd (“DRL”).

On November 1, 2024, the FDA approved Emrosi, for the treatment of inflammatory lesions of rosacea in adults.

Emrosi was developed by Journey in collaboration with DRL.

Our initial supply became available in March 2025.

In addition, the initial distribution of Emrosi to pharmacies is ongoing and the first Emrosi prescriptions have been filled.

We anticipate sales promotion of Emrosi beginning in April 2025.

We intend to commercialize Emrosi in the U.S.

We began sales promotion of Emrosi beginning in April 2025, and we are commercializing Emrosi in the U.S.

with our existing commercial team.

Effective after the close of U.S.

equity markets on June 27, 2025, we joined the small cap Russell 2000® Index and the broad-market Russell 3000® Index as a result of the 2025 annual Russell Index reconstitution.

Critical Accounting Policies and Uses of Estimates

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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”).

We are an emerging growth company, as defined in the 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.

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.

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Selling, general and administrative

Loss on impairment of intangible assets

Loss recovery

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($ in thousands)

Foam franchise products (Amzeeq® & Zilxi®)

Other / legacy

Total net product revenue

Total net product revenues decreased by $4.5 million, or 8%, to $55.1 million for the year ended December 31, 2024, from $59.7 million for the year ended December 31, 2023.

The decrease is primarily due to overall higher rebate costs across our product portfolio and lower unit volumes, mainly from our legacy products Targadox, Ximino and Exelderm, driven specifically by continued generic competition for Targadox.

In addition, Amzeeq net product revenues decreased by approximately $1.2 million, due to both higher rebates and decreased unit sales volumes from 2023.

Increases in unit sales volumes for Qbrexza, Accutane and Zilxi were offset by higher rebate costs compared to 2023.

Revenues totaled $61.2 million for the year ended December 31, 2025, reflecting an 11% increase from $55.1 million for the year ended December 31, 2024.

The growth was primarily driven by incremental revenue from the launch and commercialization of Emrosi, partially offset by continued competitive pressures on Accutane, for which revenue declined by $6.5 million, as well as lower sales of our legacy products.

Other revenue

For the Years Ended

For the Years Ended December 31,

($ in thousands)

Milestone payment from Cutia

Non-refundable upfront payment from Maruho

Royalties on sales of Rapifort® Wipes 2.5%

Cutia supply agreement

Royalties on sales Amzeeq by Cutia

Total other revenue

Other revenue for the year ended December 31, 2024 reflects a $1.0 million milestone payment from Cutia under the Cutia Agreement that became payable to us upon Cutia receiving marketing approval for topical 4% minocycline foam in the People’s Republic of China.

Other revenue for the year ended December 31, 2023 reflects a $19.0 million non-refundable upfront payment from Maruho under the New License Agreement and $0.5 million in royalties on the sale of Rapifort Wipes 2.5%.

Other revenue for the year ended December 31, 2025, reflects the supply to Cutia of Amzeeq for commercial use and sales-based royalties on Cutia’s net sales of Amzeeq, pursuant to the Cutia Agreement.

The Company began supplying Amzeeq to Cutia in August 2025 under the Cutia Agreement.

Gross-to-Net Sales Accruals

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Balance as of December 31, 2025

Our reserves for gross-to-net sales allowances were $9.3 million at December 31, 2024, compared to $14.1 million at December 31, 2023, a decrease of $4.8 million.

The decrease in the returns reserve reflects lower units on hand in the wholesaler channel.

The decrease in the coupon and managed care reserves is primarily a result of the timing of credits and invoices received at the end of 2023.

Cost of Goods Sold

Cost of goods sold decreased by $2.0 million, or 9%, to $20.9 million for the year ended December 31, 2024, from $22.9 million for the year ended December 31, 2023, mostly due to lower product royalty payments.

Product royalties were lower by $1.7 million compared to the same period in 2023 due to the contractual expiration of our Exelderm product royalty in November 2023, the contractual decrease in our Qbrexza royalty in the second quarter of 2023, and the discontinuation of Ximino in September of 2023.

In addition, the discontinuation of Ximino has resulted in lower drug-user fees of $0.8 million.

These decreases were offset, in part, by an increase in product-related cost of goods sold of $0.5 million, as a result of product mix, mainly driven by the higher Accutane and Qbrexza unit volumes.

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 $18.7 million as of December 31, 2025, compared to $9.3 million as of December 31, 2024, an increase of $9.4 million.

The increase is due to the incremental allowances recorded related to the launch and commercialization of Emrosi, due substantially to the coupon rebate allowance.

Cost of Goods Sold – (excluding amortization of acquired intangible assets)

Cost of goods sold – (excluding amortization of acquired intangible assets) was consistent year over year at $20.9 million for the years ended December 31, 2025 and 2024.

Higher royalty expenses associated with incremental revenue from Emrosi in 2025 were offset by lower product costs resulting from a favorable product mix, primarily reflecting the increased sales of Emrosi in 2025.

Emrosi carries a higher gross margin than our other products, contributing to the stable overall cost of goods sold despite the increased revenues.

Amortization of acquired intangible assets

Amortization of acquired intangible assets decreased by $0.4 million, or 9%, to $3.4 million for the year ended December 31, 2024, from $3.8 million for the year ended December 31, 2023 as the discontinuation of Ximino in 2023 has resulted in lower amortization.

Amortization of acquired intangible assets increased by $0.8 million, or 24%, to $4.3 million for the year ended December 31, 2025, from $3.4 million for the year ended December 31, 2024, driven by the addition of the Emrosi acquired intangible asset upon our payment to DRL of the milestone payment triggered by the FDA’s approval of Emrosi in November 2024.

Research and Development

Research and development expense increased by $2.3 million, or 31%, to $9.9 million for the year ended December 31, 2024 from $7.5 million for the year ended December 31, 2023.

The increase was driven by the $4.1 million filing fee payment to the FDA for Emrosi in January 2024 and a $3.0 million payment for the contractual milestone payment owed to DRL triggered by the FDA’s acceptance of the NDA application for Emrosi in March 2024, partially offset by lower clinical trial expenses to develop Emrosi compared to 2023, as the clinical phase of the project has concluded.

Research and development expense decreased by $9.4 million, or 95%, to $0.5 million for the year ended December 31, 2025 from $9.9 million for the year ended December 31, 2024.

Research and development expenses in 2024 included pre-approval project costs related to Emrosi, which concluded following the FDA’s approval of Emrosi in November 2024.

Selling, General and Administrative Expenses (“SG&A”)

SG&A expenses decreased by $3.7 million, or 8%, to $40.2 million for the year ended December 31, 2024, from $43.9 million for the year ended December 31, 2023.

The decrease is due to our continued expense management efforts, partially offset by non-cash share-based compensation, the commencement of our launch efforts for Emrosi, and the expansion of our access and coverage platforms.

SG&A in the areas subject to our continued expense management efforts, primarily in sales and marketing and other SG&A areas, decreased by $8.7 million compared to 2023.

This decrease is partially offset by a $1.7 million increase in SG&A expenses from 2023 due to the commencement of our launch efforts for Emrosi related mainly to market research and access and to a lesser extent, the expansion of our access and coverage platforms for our current product portfolio.

In addition, non-cash share-based compensation expense increased by $3.1 million compared to 2023 as a result of an increase in outstanding equity awards from 2023.

Loss on impairment of intangible assets

We recorded a loss on the impairment of intangible assets of $3.1 million during 2023, related to the impairment of the Ximino intangible asset, as a result of lower net product revenues and gross profit levels for the Ximino products.

We discontinued selling Ximino on September 29, 2023.

We recorded no losses related to the impairment of assets in the year ended December 31, 2024.

SG&A expenses increased by $4.2 million, or 10%, to $44.4 million for the year ended December 31, 2025, from $40.2 million for the year ended December 31, 2024.

The increase is primarily due to the incremental operational activities related to the launch and commercialization of Emrosi.

Loss Recovery

We recorded a loss recovery benefit to income of $4.6 million in connection with the recovery of funds related to the previously disclosed September 2021 cybersecurity incident.

We received the $4.6 million cash in December of 2024.

See Note 17 to our consolidated financial statements for further details.

Interest Income

Interest income increased $0.5 million to $0.8 million for the year ended December 31, 2024, from $0.3 million for the year ended December 31, 2023.

Interest income reflects the income earned on our high yield money market account.

The increase is due to a higher invested balance compared to the prior year resulting from cash received upon entering into the SWK Credit Facility in December 2023, and to a lesser extent, a slight increase in investment yield.

Interest Expense

Interest expense increased $1.0 million to $2.7 million for the year ended December 31, 2024, from $1.7 million for the year ended December 31, 2023 as a result of interest payments we made under the SWK Credit Facility.

In July 2023, we satisfied all of our outstanding debt obligations with East West Bank (“EWB”) by voluntarily repaying the outstanding balance on our term loan under the Loan and Security Agreement with EWB.

As such, we had no additional debt or borrowing of funds until entering into the Credit Facility with SWK in December of 2023.

We recorded a $4.6 million loss recovery benefit in connection with the recovery of funds related to the previously disclosed September 2021 cybersecurity incident.

We received the $4.6 million in cash in December of 2024.

Interest Expense, net

Interest expense, net increased by $1.2 million to $3.1 million for the year ended December 31, 2025, from $1.9 million for the year ended December 31, 2024.

The increase was primarily due to a higher principal balance outstanding under the Credit Agreement, dated as of December 27, 2023 (the “Credit Agreement”) with SWK throughout 2025.

We drew an additional $10.0 million under the Credit Agreement during 2024, increasing the principal balance from $15.0 million to $25.0 million.

Gain on Extinguishment of Debt

We recorded a gain of $1.1 million in August 2024 upon the execution of a settlement agreement (the “Settlement Agreement”) to settle amounts owed by the Company to Sun Pharmaceutical Industries, Inc.

(“Sun”) pursuant to the Ximino Asset Purchase Agreement.

We recorded a gain of $1.1 million in August 2024 upon the execution of a settlement agreement (the “Settlement Agreement”) to settle amounts owed by the Company to Sun pursuant to the Ximino Asset Purchase Agreement.

See Note 9 to our consolidated financial statements for further details.

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At December 31, 2025, we had cash and cash equivalents on hand of approximately $24.1 million as compared to $20.3 million of cash and cash equivalents at December 31, 2024, and working capital of $29.4 million at December 31, 2025, compared to $13.0 million at December 31, 2024.

We rely primarily on cash on hand generated from the sales of our pharmaceutical products to our customers to fund our core operations.

In addition, we have relied on the proceeds from our term loan Credit Facility (as defined below) with SWK and our at-the-market sales program with B.

Riley to meet additional capital and liquidity needs, specifically to fund the research and development and commercialization of Emrosi, formerly referred to as DFD-29, which received marketing approval by the FDA on November 1, 2024.

We also actively pursue licensing opportunities to raise non-dilutive capital.

On August 31, 2023, we entered into the New License Agreement with Maruho, whereby we granted an exclusive license to Maruho to develop and commercialize Qbrexza® for the treatment of primary axillary hyperhidrosis in South Korea, Taiwan, Hong Kong, Macau, Thailand, Indonesia, Malaysia, Philippines, Singapore, Vietnam, Brunei, Cambodia, Myanmar and Laos (the “Territory”).

Under the terms of the New License Agreement, in exchange for the exclusive rights to Qbrexza® in the Territory, Maruho paid us $19.0 million as a non-refundable upfront payment.

In December 2024 we received additional cash of $4.6 million as a result of the recovery of funds from the previously disclosed cybersecurity incident that impacted us in September of 2021 prior to our IPO.

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.

In August 2025, we executed a new At Market Issuance Sales Agreement (the “2025 Sales Agreement”) 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, as described in further detail below.

On September 25, 2025, we entered into a Third Amendment to our Credit Agreement with SWK (the “Third Amendment”).

The Third Amendment, among other things, modifies our existing Credit Facility as described in further detail below.

We regularly evaluate market conditions, our liquidity profile, and financing alternatives, including out-licensing arrangements for our products, to enhance our capital structure.

We may seek to raise capital through debt or equity financings, to expand our product portfolio, and for other strategic initiatives, which may include sales of securities under either our 2022 Shelf or a new registration statement.

Additionally, as a result of recurring losses, primarily a result of the research and development of Emrosi, 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.

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 included in this Annual Report on Form 10-K.

Sources of Liquidity

SWK Credit Facility

On December 27, 2023, the Company entered into a Credit Agreement (the “Credit Agreement”) with SWK.

The Credit Agreement provides for a term loan facility (the “Credit Facility”) in the original principal amount of up to $20.0 million.

On the closing date, the Company drew $15.0 million.

On June 26, 2024, the Company drew the remaining $5.0 million under the Credit Facility.

Loans under the Credit Facility (the “Term Loans”) mature on December 27, 2027, and bear interest at a rate per annum equal to the three-month term Secured Overnight Financing Rate (“SOFR”) (subject to a SOFR floor of 5%) plus 7.75%.

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.

Beginning in February 2026, the Company is required to repay a portion of the outstanding principal of the Term Loans quarterly in an amount equal to 7.5% of the principal amount of funded Term Loans.

On July 9, 2024, the Company entered into an amendment (the “Amendment”) to the Credit Agreement.

The Amendment increased the original principal amount of the Credit Facility from $20.0 million to $25.0 million.

The $5.0 million of additional principal added in the Amendment is contractually required to be drawn upon FDA approval of Emrosi, subject to the Company receiving approval on or before June 30, 2025.

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 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 December 31, 2025, we were in compliance with the financial covenants under the Credit Agreement.

At-the-Market Offering

On December 30, 2022, the Company filed the 2022 Shelf, which was declared effective by the Securities and Exchange Commission on January 26, 2023.

This shelf registration statement covers the offering, issuance and sale by the Company of up to an aggregate of $150.0 million of the Company’s common stock, preferred stock, debt securities, warrants, and units.

In connection with the 2022 Shelf, the Company entered into the Sales Agreement relating to shares of the Company’s common stock with B.

The Company may offer and sell up to 4,900,000 shares of its common stock, from time to time, under the Sales Agreement.

During the fiscal year ended December 31, 2024, the Company issued and sold 1,564,310 shares of common stock under the 2022 Shelf, generating net proceeds of $7.9 million.

At December 31, 2024, 2,586,987 shares remain available for issuance under the Sales Agreement.

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 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.

In August 2025, we entered into the 2025 Sales Agreement relating to shares of the Company’s common stock with B.

Riley and Lake Street.

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.

As of December 31, 2025, we have issued 750,000 shares under the 2025 Sales Agreement.

During the year ended December 31, 2025, we issued and sold 2,582,107 shares of common stock under the 2022 Shelf, generating net proceeds of $16.4 million under the At Market Issuance Agreement with B.

Riley entered into 2022 (the “2022 Sales Agreement”) and the 2025 Sales Agreement.

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 after the effective date will occur under the 2026 Shelf.

Cash Flows for the Years Ended December 31, 2025 and 2024

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($’s in thousands)

Net cash provided by (used in) operating activities

Net cash (used in) operating activities

Net cash (used in) investing activities

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Net change in cash and cash equivalents

Operating Activities

Net cash flows used in operating activities for the year ended December 31, 2024 were $9.1 million compared to $5.2 million of net cash flows provided by operating activities for the year ended December 31, 2023, reflecting a change of $14.4 million from period-to-period.

Cash provided by operating activities for the year ended December 31, 2023 includes cash received pursuant to the New License Agreement, where Maruho paid us $19.0 million as a non-refundable upfront payment.

In 2024, we made cash payments of $4.1 million related to the filing fee paid to the FDA for Emrosi in January 2024, and $3.0 million for the contractual milestone payment owed to DRL triggered by the FDA’s acceptance of the NDA for Emrosi in March 2024.

The remainder was driven primarily by the changes in net working capital, which includes a one-time loss recovery payment of $4.6 million from the previously disclosed September 2021 cybersecurity incident.

Net cash flows used in operating activities for the year ended December 31, 2025 were $12.4 million compared to $9.1 million of net cash flows used in operating activities for the year ended December 31, 2024, reflecting a change of $3.3 million from period-to-period.

Net cash used in operating activities during 2025 was primarily driven by our net loss and changes in net working capital.

Investing Activities

Net cash flows used in investing activities for the year ended December 31, 2024 were $15.0 million compared to $5.0 million for the year ended December 31, 2023, reflecting a change of $10.0 million from period-to-period.

Net cash flows used in investing activities for the year ended December 31, 2025 were $0 compared to $15.0 million for the year ended December 31, 2024, reflecting a change of $15.0 million from period-to-period.

The year ended December 31, 2024 reflects a $15.0 million milestone payment made to DRL, which was triggered upon our receipt of FDA approval for Emrosi in November 2024.

The year ended December 31, 2023 reflects the $5.0 million deferred cash payment paid in January 2023 related to the VYNE Product Acquisition.

Financing Activities

Net cash flows provided by financing activities for the year ended December 31, 2024 were $17.0 million compared to $4.8 million of net cash flows used in financing activities for the year ended December 31, 2024, reflecting a change of $21.8 million from period-to-period.

Net cash flows provided by financing activities for the year ended December 31, 2025 were $16.2 million compared to $17.0 million of net cash flows provided by financing activities for the year ended December 31, 2024, reflecting a change of $0.8 million from period-to-period.

Cash provided by financing activities for the year ended December 31, 2025 reflects net proceeds from the issuance of common stock under the Sales Agreement of $16.4 million.

Cash provided by financing activities for the year ended December 31, 2024 reflects the draw of an additional $10.0 million under the SWK Credit Facility, as well as the net proceeds from issuances of common stock under the 2022 Sales Agreement of $7.9 million.

Net cash used in financing activities for the year ended December 31, 2023 reflects the voluntary repayment of the outstanding balance on our term loan under the Loan and Security Agreement with EWB.

Material Cash Requirements

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($’s in thousands)

● Pursuant to the Vyne Product Acquisition Agreement, upon the achievement of net sales milestones with respect to the products purchased in the Vyne Product Acquisition, we are required to pay contingent consideration consisting of a one-time payment, per product, of $10.0 million and $20.0 million upon each product reaching annual net sales of $100 million and $200 million, respectively.

Each required payment must only be paid one time following the first achievement of the applicable annual net sales milestone amount.

● On June 29, 2021, we entered into the Emrosi Agreement to obtain the global rights for the development and commercialization of Emrosi with DRL.

On November 1, 2024, we received FDA approval for Emrosi, which triggered a $15.0 million milestone payment to DRL in 2024.

Based on the development and commercialization of Emrosi, additional contingent regulatory and commercial milestone payments totaling up to $150.0 million may become due.

The Company is required to pay royalties ranging from approximately ten percent to fourteen percent on net sales of Emrosi, subject to certain reductions.

● In August 2024, we executed a settlement agreement (the “Settlement Agreement”) to settle amounts owed by us to Sun Pharmaceutical Industries, Inc.

(“Sun”) pursuant to the Ximino Asset Purchase Agreement.

We owed $3.0 million of license installment payments to Sun associated with the license of Ximino.

Pursuant to the Settlement Agreement, we agreed to settle the total outstanding obligation owed to Sun for a total of $1.9 million, payable in three installments:

(i) $625.0 thousand upon execution of the Settlement Agreement, (ii) $625.0 thousand on December 1, 2024, and (iii) $625.0 thousand on January 15, 2025.

● We are contractually obligated to make sales-based royalty payments to Dermira (for Qbrexza) and DRL (for Accutane and Emrosi).

Due to the contingent nature of these obligations, the amounts of these payments cannot be reasonably predicted as of the date of this Annual Report on Form 10-K.

● 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.

Quantitative and Qualitative Disclosures About Market Risks

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis