What changed in this filing

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Item 1. Business

2024-03-29 compared with 2023-03-31 · 169 added, 229 removed, 440 unchanged (47% of the section changed)

We are a commercial-stage pharmaceutical company founded in October 2014 that focuses on the development and commercialization of pharmaceutical products for the treatment of dermatological conditions.

Our current portfolio includes eight branded and three authorized generic prescription drugs for dermatological conditions that are marketed in the U.S.

Our current portfolio includes seven branded and two authorized generic prescription drugs for dermatological conditions that are marketed in the U.S.

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 enabling physicians and other licensed medical professionals to provide better care for their patients.

We aim to acquire rights to future products by licensing or otherwise acquiring an ownership interest in, funding the research and development of, and eventually commercializing, these products through our field sales organization.

Since inception, we have made significant investments to build out our commercial product portfolios, which we believe, coupled with our experienced dermatology sales leadership team and our recently expanded field sales force, will position our business for growth.

Since inception, we have made significant investments to build out our commercial product portfolios, which we believe, coupled with our experienced dermatology sales leadership team and our seasoned field sales force, will position our business for growth.

We are a majority-owned subsidiary of Fortress.

2023 Highlights and Events

On December 30, 2022, we filed a shelf registration statement on Form S-3 (File No.

333-269079), which was declared effective by the Securities and Exchange Commission (“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 (the “2022 Shelf”).

At December 31, 2022, $150.0 million remains available under the 2022 Shelf.

In connection with the 2022 shelf, we have entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with B.

Riley Securities, Inc.

Riley”), relating to shares of our common stock.

In accordance with the terms of the Sales Agreement, we may offer and sell up to 4,900,000 shares of our common stock, par value $0.0001 per share, from time to time through or to B.

Riley acting as our agent or principal.

On March 14, 2022, we dosed the first patient in our Phase 3 clinical trial evaluating DFD-29 (Minocycline Modified Release Capsules 40 mg) for the Treatment of Rosacea.

In January 2023 we achieved 100% enrollment in the trial, with a top-line data readout expected in the second quarter of 2023.

We plan to submit the NDA for DFD-29 in the second half of 2023 and FDA approval is anticipated in the second half of 2024.

In the Phase 2 clinical trials, DFD-29 (40mg) demonstrated nearly double the efficacy when compared against Oraycea® (European equivalent of Oracea®) on both co-primary endpoints.

For the first co-primary endpoint, Investigator’s Global Assessment (“IGA”) treatment success, Oraycea only had a 33.33% IGA treatment success rate, while DFD-29 achieved a 66.04% IGA treatment success rate.

For the second co-primary endpoint, the change in total inflammatory lesion count, Oraycea only had a 10.5 reduction in inflammatory lesions, while DFD-29 achieved a 19.2 reduction in inflammatory lesions.

On February 11, 2022, we announced that our exclusive licensing partner in Japan, Maruho Co., Ltd.

(“Maruho”), received marketing and manufacturing approval for Rapifort® Wipes 2.5% (Qbrexza®), for the treatment of primary axillary hyperhidrosis, triggering a net $2.5 million milestone payment to us.

The net payment reflects a milestone payment of $10 million to us from our exclusive licensing partner Maruho, offset by a $7.5 million payment to Dermira, Inc.

(“Dermira”), the company from which we acquired global rights to Qbrexza® in May 2021, pursuant to the terms of the Asset Purchase Agreement between us and Dermira.

Under the terms of the licensing agreement with Maruho, the milestone payment was due from Maruho within 30 days of the approval.

The period ended December 31, 2022 also reflects total year-to-date royalties of $0.2 million from Maruho on sales of Rapifort® Wipes 2.5% in Japan.

On January 12, 2022, we acquired Amzeeq® (minocycline) topical foam, 4%, and Zilxi® (minocycline) topical foam, 1.5%, two FDA-Approved Topical Minocycline Products and Molecule Stabilizing Technology (MST)™ from VYNE Therapeutics Inc., which expanded our product portfolio to eight actively marketed branded dermatology products.

These proprietary foam-based products optimize the topical delivery of minocycline, an active pharmaceutical ingredient that was previously available only in oral form.

Approved by the FDA nearly 50 years ago, minocycline is a well-established molecule that has been prescribed, in oral formulation, over 30 million times in the past decade.

AMZEEQ (minocycline) topical foam, 4%, is the first and only topical formulation of minocycline to be approved by the FDA for the treatment of inflammatory lesions of non-nodular moderate to severe acne vulgaris in adults and children 9 years and older.

According to the American Academy of Dermatology (“AAD”), acne is the most common skin condition in the United States, affecting up to 50 million Americans annually.

Approved by the FDA in May 2020, ZILXI (minocycline) topical foam, 1.5%, is the first and only topical minocycline treatment for inflammatory lesions due to rosacea in adults.

Rosacea is a common skin disease that affects 16 million Americans, according to AAD.

Market research shows that over 70% of patients with rosacea are seeking better alternatives to current treatments.

On January 12, 2022, we entered into a third amendment of the loan and security agreement with East West Bank (“EWB”) (the “Amendment”), which increased the borrowing capacity of our revolving line of credit to $10.0 million, $2.9 million of which was outstanding at December 31, 2022, and added a term loan not to exceed $20.0 million.

Both the revolving line of credit and the term loan mature on January 12, 2026.

In January 2022 and August 2022, the Company borrowed $15.0 million and $5.0 million, respectively, against the term loan.

The term loans bear interest at a floating rate equal to 1.73% above the prime rate and are payable monthly.

The term loans contain an interest-only payment period through January 12, 2024, with an extension through July 12, 2024 if certain covenants are met, after which the outstanding balance of each term loan is payable in equal monthly installments of principal, plus all accrued interest, through the term loan maturity date.

We may elect to prepay all or any part of the term loan without penalty or premium, but we may not re-borrow any amount, once repaid.

Any outstanding borrowing against the revolving line of credit bears interest at a floating rate equal to 0.70% above the prime rate.

The Amendment includes customary financial covenants such as collateral ratios and minimum liquidity provisions.

We are in compliance with all applicable financial covenants under the Amendment as of December 31, 2022.

The $10.0 million revolving line of credit is fully available to us without any restrictions, other than certain customary and ordinary closing conditions.

In September 2021, we were the victim of a cybersecurity incident that affected our accounts payable function and led to approximately $9.5 million in wire transfers being misdirected to fraudulent accounts.

The matter was reported to the Federal Bureau of Investigation (“FBI”) and remains under their investigation.

The cybersecurity incident does not appear to have compromised any personally identifiable information or protected health information.

Fortress, as our controlling stockholder and supporting partner in our back-office functions, provided us with $9.5 million to ensure our accounts payable operations continued to function smoothly.

The $9.5 million of support was in the form of a related party note, which was approved by the board of directors of both companies, and the balance of which was fully converted into 1,476,044 shares of our common stock upon the consummation of our IPO in November 2021 at the IPO price.

The federal government has been able to trace and seize the fraudulently transferred cryptocurrency assets associated with the breach.

The seized cryptocurrency has been transferred into U.S.

government-controlled custodial wallets.

Subsequently, the forfeiture process will be initiated by the U.S.

Attorney’s Office.

The process includes mandatory waiting periods for filing of claims.

Once the cryptocurrency has been converted back into U.S.

dollars, we expect to receive a notification letter to initiate the return of the cash to the Company.

This process could take several months to a year or possibly longer to complete before funds can be returned.

Given the recent market declines, volatility, and liquidity issues with cryptocurrency, there is no certainty as to the amount we will ultimately recover.

See “ Risk Factors — Risks Related to our Platform and Data — Our business and operations would suffer in the event of computer system failures, cyber-attack s, or deficiencies in our or third parties’ cybersecurity.

On December 27, 2023, we entered into a Credit Agreement (the “Credit Agreement”) with SWK Funding LLC (“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, we drew $15.0 million.

The remaining $5.0 million may be drawn upon our request within 12 months after the closing date.

Loans under the Credit Facility (the “Term Loans”) mature on December 27, 2027 unless the Credit Facility is otherwise terminated pursuant to the terms of the Credit Agreement 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%.

The interest rate resets quarterly.

Interest payments begin in February 2024 and are paid quarterly.

Beginning in February 2026, we are required to repay the outstanding principal of the Term Loans quarterly in an amount equal to 7.5% of the principal amount of funded Term Loans.

If our total revenue, measured on a trailing twelve-month basis, is greater than $70 million as of December 31, 2025, principal repayment is not required until February 2027, at which point we are required to repay a portion of the outstanding principal of the Term Loans quarterly in an amount equal to 15% of the principal amount of funded Term Loans.

On August 31, 2023, we entered into a license agreement (the “New License Agreement”) with Maruho Co., Ltd., a Japanese company specializing in dermatology (“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, Maruho paid us $19.0 million as a non-refundable upfront payment.

Maruho is also obligated to make royalty payments to us related to sales of the product in the Territory equal to the corresponding rate payable by us to Dermira under the asset purchase agreement between us and Dermira.

In July 2023, we announced positive topline data from our two DFD-29 Phase 3 clinical trials for the treatment of papulopustular rosacea.

The Phase 3 clinical trials achieved the co-primary and all secondary endpoints, the subjects completed the 16-week treatment and the drug was well-tolerated.

DFD-29 demonstrated statistical superiority over both the standard of care, Oracea® capsules, and placebo for Investigator’s Global Assessment treatment success and the reduction in the total inflammatory lesion count in both studies.

We summitted a New Drug Application (“NDA”) under Section 505(b)(2) of the United States Federal Food, Drug and Cosmetic Act (“FDCA”) with the U.S.

Food and Drug Administration (the “FDA”) for DFD-29 on January 4, 2024, paying a $4.0 million filing fee, and expect potential approval from the FDA in the second half of 2024.

On March 18, 2024, we announced the FDA accepted the Company’s NDA with a Prescription Drug User Fee Act goal date of November 4, 2024.

CORPORATE INFORMATION

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We maintain a website with the address www.jmcderm.com.

We make available free of charge through our Internet website our annual reports on Form 10-K, quarterly reports on Form 10-K and current reports on Form 8-K, and any amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC.

We make available free of charge through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC.

We are not including the information on our website as a part of, nor incorporating it by reference into, this report.

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Our Market, Products and Relevant Disease States

As of December 31, 2022, our major actively marketed products, which have been approved by the U.S.

Food and Drug Administration (“FDA”) for sale in the United States, include:

As of December 31, 2023, our major actively marketed products, which have been approved by the FDA for sale in the United States, include:

● Qbrexza® (a medicated cloth towelette for the treatment of primary axillary hyperhidrosis), acquired and launched in May 2021;

● Accutane® (an oral isotretinoin drug for the treatment of severe recalcitrant nodular acne), licensed in July 2020 and launched in March 2021;

● Amzeeq® (minocycline) topical foam, 4% (a topical formulation of minocycline for the treatment of inflammatory lesions of non-nodular moderate to severe acne vulgaris in adults and children 9 years and older), acquired and launched in January 2022;

● Zilxi® (minocycline) topical foam, 1.5% (a topical minocycline treatment for inflammatory lesions due to rosacea in adults), acquired and launched in January 2022.

● Ximino® (an oral minocycline drug for the treatment of moderate to severe acne), acquired and launched in August 2019;

● Amzeeq® (minocycline) topical foam, 4% (a topical formulation of minocycline for the treatment of inflammatory lesions of non-nodular moderate to severe acne vulgaris in adults and children nine years and older), acquired and launched in January 2022;

● Zilxi® (minocycline) topical foam, 1.5% (a topical minocycline treatment for inflammatory lesions of rosacea in adults), acquired and launched in January 2022;

● Exelderm® Cream and Solution (a broad-spectrum antifungal intended for topical use), acquired and launched in October 2018;

● Targadox® (an oral doxycycline drug for adjunctive therapy for severe acne), licensed in March 2015 and launched in October 2016;

Additionally, we sell three authorized generic products:

● minocycline hydrocholoride extended release capsules, launched in April 2020;

● sulconazole nitrate cream and solution, launched in January 2020;

● doxycycline hyclate immediate release tablets, launched in May 2018.

● Luxamend® (a water-based emulsion formulated to provide an optimally moist healing environment for superficial wounds;

minor cuts or scrapes;

dermal ulcers;

first- and second-degree burns, including sunburns;

and radiation dermatitis), acquired in 2021 and launched in 2023.

Additionally, we sell two authorized generic products:

● sulconazole nitrate cream and solution, 1% antifungal agents indicated for the treatment of tinea cruris and tinea corporis caused by Trichophyton rubrum , Trichophyton mentagrophytes , Epidermophyton floccosum , and Microsporum canis ,* and for the treatment of tinea versicolor .

*Efficacy for this organism in the organ system was studied in fewer than 10 infections.

EXELDERM ® Cream is also indicated for the treatment of tinea pedis (athlete’s foot).

Effectiveness of EXELDERM ® Solution has not been proven in tinea pedis .

These products were launched in January 2020;

● doxycycline hyclate immediate release 50mg tablets, indicated as adjunctive therapy for severe acne to reduce the development of drug-resistant bacteria as well as to maintain the effectiveness of doxycycline hyclate and other antibacterial drugs, launched in May 2018.

Our Products and Relevant Disease States

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Our Qbrexza® (glycopyrronium 2.4%) product is a topical, once-daily anticholinergic cloth that was approved by the FDA in June 2018 for the treatment of PAH in adult and pediatric patients nine years of age and older.

Anticholinergics are a class of pharmaceutical products that exert their effect by blocking the action of acetylcholine, a neurotransmitter that transmits signals within the nervous

system that are responsible for the activation of sweat glands.

Anticholinergics are a class of pharmaceutical products that exert their effect by blocking the action of acetylcholine, a neurotransmitter that transmits signals within the nervous system that are responsible for the activation of sweat glands.

Qbrexza is applied directly to the skin and is designed to block underarm sweat production by inhibiting sweat gland activation.

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Acne, also known as acne vulgaris, is a common skin disorder characterized by a blockage of hair follicles, which are clogged with oil and dead skin cells.

According to the AAD, acne is the most common skin condition in the US, affecting up to 50 million individuals annually.

According to the American Academy of Dermatology (“AAD”), acne is the most common skin condition in the US, affecting up to 50 million individuals annually.

Approximately 85% of people between the ages of 12 and 24 experience at least a minor form of acne.

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market size for treatment of acne is considerable and estimated at approximately $3 billion annually, according to the American Medical Association.

Accutane® for the Treatment of Severe Recalitrant Nodular Acne

Accutane® for the Treatment of Severe Recalcitrant Nodular Acne

Accutane® (isotretinoin 10mg, 20mg, 30mg, and 40mg capsules USP) is indicated for the treatment of severe recalcitrant nodular acne.

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Amzeeq utilizes proprietary MST™ technology and is the first topical minocycline to be approved by the FDA for any condition.

that the combination of a well-established antibiotic in a well-tolerated, easy to use foam makes Amzeeq a very attractive treatment option for patients.

We believe that the combination of a well-established antibiotic in a well-tolerated, easy to use foam makes Amzeeq a very attractive treatment option for patients.

The topical acne market had almost 21 million prescriptions in 2023 according to Symphony Health, presenting significant unmet needs of patients and healthcare providers to be addressed.

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Ximino® for the Treatment of Inflammatory Lesions of Non-Nodular Moderate to Severe Acne

Ximino® (minocycline hydrochloride extended-release 45mg, 90mg, and 135mg capsules) is indicated for the treatment of inflammatory non-nodular lesions (pimples and red bumps) associated with moderate to severe acne.

Minocycline is part of a class of oral antibiotics known as tetracyclines.

Ximino encloses a small, uniform amount of the active pharmaceutical ingredient in a patented polymer wrapper through a controlled dosing capsular technology, known as Capsular Minotab Technology®, and provides a steady, controlled release of minocycline.

The polymer technology in Ximino capsules is partially resistant to dissolution, so the minocycline is released over time, in a controlled manner.

Ximino has Orange Book-listed patents that extend through April of 2027.

During fiscal 2022 and part of fiscal 2023, we marketed and sold Ximino® (minocycline hydrochloride extended-release 45mg, 90mg, and 135mg capsules), which is indicated for the treatment of inflammatory non-nodular lesions (pimples and red bumps) associated with moderate to severe acne.

We discontinued selling Ximino in September 2023.

The oral minocycline market had just under 2.7 million prescriptions in 2023 according to Symphony Health.

Fungal Infections of the Skin and the Current Standard of Care

Fungal skin infections, collectively referred to as dermatomycoses, are common infections caused by ringworms (tinea) and include such conditions as athlete’s foot, jock itch and ringworm of the body.

Fungal skin infections, collectively referred to as dermatomycoses, are common infections caused by ringworms (tinea) and include conditions such as athlete’s foot, jock itch and ringworm of the body.

Tinea pedis, commonly known as athlete’s foot, is a form of ringworm that usually develops between the toes.

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Pruritus may be localized or generalized and can occur as an acute or chronic condition.

Itch can be caused by a number of conditions, including skin conditions such as dry skin, eczema, psoriasis, scabies,

parasites, burns, scars, insect bites and hives.

Itch can be caused by a number of conditions, including skin conditions such as dry skin, eczema, psoriasis, scabies, parasites, burns, scars, insect bites and hives.

Depending on the cause of itchiness, skin may appear normal, red, rough or bumpy.

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Antihistamines are also effective in treating some types of itch, but they too have drawbacks with continued use.

We plan on launching our Anti-itch Product through our field sales force during the second half of 2023.

We plan on launching our Anti-itch Product through our field sales force during the second half of 2024 or first half of 2025.

Rosacea and the Current Standard of Care

Rosacea is a chronic, relapsing, inflammatory skin condition that most commonly presents with symptoms such as deep facial redness, acne-like inflammatory lesions (papules and pustules) and spider veins (telangiectasia).

According to The National Rosacea Society, it is estimated that rosacea affects well over 16 million Americans and as many as 415 million people worldwide.

According to The National Rosacea Society, it is estimated that rosacea affects well over 16 million Americans (F1000Research 2018, 7(F1000 Faculty Rev):1885) and as many as 415 million people worldwide.

Rosacea is most frequently seen in adults between 30 and 50 years of age.

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Among rosacea patients with severe symptoms, 88% said the disorder had adversely affected their professional interactions, and 51% said they had missed work because of their condition.

The rosacea market had 3.6 million prescriptions in 2022 and 3.4 million prescriptions in 2021 according to Symphony Health.

The tetracycline class of antibiotics (minocycline and doxycycline) are considered to be effective options for treatment of papulopustular rosacea, likely due to anti-inflammatory activities that are usually manifested at doses much lower than those prescribed for treatment of bacterial infections.

A sub-antimicrobial dose of doxycycline (i.e., 40 mg taken once daily) as oral formulation has been approved for the treatment of only inflammatory lesions (papules and pustules) of rosacea and is available under the proprietary name Oracea® in the US.

The rosacea market had 3.8 million prescriptions in 2023 according to Symphony Health.

The tetracycline class of antibiotics (minocycline and doxycycline) are considered to be effective options for the treatment of papulopustular rosacea, likely due to anti-inflammatory activities that are usually manifested at doses much lower than those prescribed for treatment of bacterial infections.

A low dose of doxycycline (i.e., 40 mg taken once daily) as oral formulation has been approved for the treatment of only inflammatory lesions (papules and pustules) of rosacea and is available under the proprietary name Oracea® in the US.

Oracea is generally considered to be the current standard of care.

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The rationale of selecting DFD-29 doses lower than the approved minocycline dose is based on the lower protein binding and higher lipophilicity of minocycline.

A Phase 1 PK study (DFD-29-CD-001) in 24 healthy subjects demonstrated the systemic exposure of minocycline from DFD-29 (minocycline HCl) ER capsules 40 mg was much lower than that seen with the approved antibiotic dose of minocycline (not a head-to-head study).

In a Phase 1 PK study (DFD-29-CD-001) in 24 healthy subjects, the systemic exposure of minocycline from DFD-29 (minocycline HCl) ER capsules 40 mg was much lower than that seen with the approved antibiotic dose of minocycline, although this was not a head-to-head study.

A Phase 2 study (DFD-29-CD-002) in 205 subjects with papulopustular rosacea, demonstrated that DFD-29 (40 mg) was significantly superior to placebo and Oracea®, on the co-primary endpoints of IGA treatment success and absolute inflammatory lesion count reduction.

The study also showed DFD-29 was well-tolerated and safe.

DFD-29 is currently in advanced stages of Phase 3 clinical studies for papulopustular rosacea.

The study also showed DFD-29 was well-tolerated.

DFD-29 has also shown superiority to Oracea and Placebo on the co-primary endpoints and all secondary endpoints in two phase 3 studies and was well-tolerated.

The NDA was filed under Section 505(b)(2) of the FDCA, in January 2024 and is under review by the FDA.

Luxamend® for Wound Healing

Luxamend® is a water-based wound cream formulated for the dressing and management of superficial wounds;

minor abrasions;

dermal ulcers;

1st and 2nd degree burns, including sunburns;

and radiation dermatitis.

Luxamend contains purified water, white mineral oil, ethylene glycol monostearate, stearic acid, propylene glycol, paraffin wax, squalane, avocado oil, trolamine/sodium alginate, triethanolamine, cetyl palmitate, sodium sulfate (anhydrous), potassium sorbate, methylparaben sodium, propylparaben sodium, sodium hexametaphosphate, sulfamic acid, and allergen-free fragrance.

When applied properly to a wound, Luxamend provides an optimum moist environment for the healing process.

It is approved as a prescription medical device and is supplied in a 114 gram tube.

We are a highly focused, pharmaceutical company dedicated to developing and commercializing therapies for the treatment of dermatologic conditions that seeks to deliver value to patients, physicians and the healthcare system, as well as to our stakeholders.

Our strategic priorities include continuing to augment and grow our product portfolio and organization in order to maximize the probabilities of sustainable long-term value creation.

This will consist of both commercial execution on our existing product portfolio, including lifecycle management, as well as investing in additional growth strategies through product and company acquisitions, licensing, or developing new products.

Our strategic priorities include continuing to augment and grow our product portfolio and organization in order to maximize long-term value creation.

This will consist of both commercial execution on our existing product portfolio, including lifecycle management, out-licensing of our current branded products and/or technologies in global markets, as well as investing in additional growth strategies through product and company acquisitions, licensing, or developing new products.

An important part of our growth strategy is to identify new business development opportunities, including development stage and commercial drugs that we may acquire from other pharmaceutical companies.

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Successful development and commercialization of any future in-licensed development stage or commercial drugs will require us to navigate the many laws and regulations of governmental authorities and regulatory agencies around the world, including the FDA, relating to the manufacture, development, approval and commercialization of investigational drugs.

For development stage drugs, we may require financial resources significantly in excess of those received by us upon completion of our IPO in November 2021 and our current cash on hand, and it may take many years for us to receive marketing approval, if ever, for any in-licensed or acquired product candidate.

For development stage drugs, we may require financial resources significantly in excess of our current cash on hand and amounts that we may borrow under our Credit Facility, and it may take many years for us to receive marketing approval, if ever, for any in-licensed or acquired product candidate.

Competitive Strengths

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Our senior management team has over 135 years of collective sales and marketing experience in the pharmaceutical industry and a proven track record of developing businesses and creating value.

Members of our management team have developed, launched, commercialized, and managed brands, generating over $3 billion in peak sales, collectively, at leading dermatology organizations.

Members of our management team have developed, launched, commercialized, and managed brands generating over $3 billion in aggregate peak sales, collectively, at leading dermatology organizations.

This experience includes improving business performance through organic revenue growth, maximizing operational efficiencies and through the identification, consummation and integration of licensing and acquisition opportunities.

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Our strategic approach leverages our management team’s experience with the capabilities of our field sales force to drive performance based on prescribing habits, brand preferences, promotional strategies and profit optimization while focusing on customer service excellence for our providers and their patients.

Our execution to date has led to market-leading positions for three of our established brands, Targadox, Ximino, and Exelderm, in each of their respective markets.

● Performance and experience of our accomplished field sales force .

Our current seasoned field sales force includes approximately 65 professionals with an average tenure of over 11 years of experience in dermatology sales.

Each of these individuals have deep-rooted and longstanding customer relationships in their respective territories.

Our current seasoned field sales force has deep-rooted and longstanding customer relationships in their respective territories.

We have strategically optimized our sales outreach to cover over 80% of dermatologists in the top 50 U.S.

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Business development plays a vital role in our growth strategy as we look to build scale.

We consistently evaluate both strategic add-on deals that leverage our existing infrastructure, as well as more transformative assets that would require building out or restructuring our field sales force.

We consistently evaluate both synergistic acquisitions that leverage our existing infrastructure, as well as more transformative assets that would require building out or restructuring our field sales force.

We have extensive relationships in the industry that help us stay abreast of developments in our space and continually monitor new opportunities.

We believe that we are an ideal partner for development stage companies with limited or no commercial capabilities, as well as established pharmaceutical companies looking to deprioritize their dermatology portfolio.

We have ongoing discussions with an array of companies, including traditional large pharma, mid-size specialty pharma companies and smaller companies that focus on research and development, although we have not entered into any definitive agreements or arrangements.

● Focus on cost management and efficient capital allocation .

We have operated in a cost-conscious and capital efficient manner since inception.

In addition to our internal leadership and management team, we have access to over 30 Fortress employees who possess significant expertise in one or more of the following areas:

business development, legal, accounting, regulatory affairs, clinical operations and manufacturing.

In November 2021, we entered into a shared services agreement with Fortress whereby Fortress would continue to provide consulting services and for the continued use of its personnel.

As part of our emphasis on cost effectiveness with our resources, we endeavor to structure licenses and product acquisitions for future product opportunities in a capital efficient manner that allows us to minimize indebtedness and compensate partner companies through future profits and commercial benchmarks.

We regularly engage in discussions with an array of companies, including traditional large pharma, mid-size specialty pharma companies and smaller companies that focus on research and development, although we have not entered into any definitive agreements or arrangements.

Another important part of our business development strategy is to continue to out-license our branded products and/or proprietary technologies in global markets.

Major Customers

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However, because profits from alliance products are shared with the counterparties to the collaborative arrangement, the gross margins on alliance products are generally lower, sometimes substantially so, than the gross margins that could be achieved had we not opted for a development partner.

From time to time, we may also seek to grant licenses or sublicenses of rights to develop, sell and distribute our products to third parties in exchange for the payment of license fees and/or royalty payments.

Environmental Matters

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Many of our third-party operations require environmental permits and controls to prevent and limit pollution of the environment.

We believe that the facilities of our third-party service providers are in substantial compliance with applicable environmental laws and regulations and we do not believe that future compliance will have a material adverse effect on our business, financial condition, results of operations or cash flows.

We believe that the facilities of our third-party service providers are in substantial compliance with applicable environmental laws and regulations, and we do not believe that future compliance costs will have a material adverse effect on our business, financial condition, results of operations or cash flows.

Employees and Human Capital Management

Our current headcount is 80 employees and contractors.

Of these, we employee a total of 20 employees, of which 20 are full-time employees.

These employees and contractors include 65 in sales as well as 13 in marketing, general and administrative positions, and 2 in research and development positions.

We currently rely, and may continue to rely, on professional employer organizations and staffing organizations for the employment of our field sales force.

Additionally, we have retained a number of expert advisors and consultants that help navigate us through different aspects of our business.

We currently employ 58 individuals, all of whom are full-time employees.

We have 41 employees in sales and marketing, 14 employees in general and administrative positions, and 3 employees in research and development positions.

Additionally, we have retained a number of expert advisors and consultants that help us navigate through different aspects of our business.

We consider our relations with our employees to be good and have not experienced any work stoppages, slowdowns or other serious labor problems that have materially impeded our business operations.

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The principal purpose of our equity incentive plan is to attract, retain, and motivate selected employees, consultants, and directors through the granting of share-based compensation awards and cash-based bonus awards.

Additionally, we have access to Fortress employees and consultants, who possess significant expertise in one or more of the following areas:

business development, legal, accounting, regulatory affairs, clinical operations and manufacturing.

Geographic Areas

All of our product revenues are generated from operations or otherwise earned within the U.S.

We receive royalties for Rapifort® Wipes 2.5% (Qbrexza®), for the treatment of primary axillary hyperhidrosis, from our exclusive licensing partner in Japan, Maruho Co., Ltd.

We do not consider royalty revenue to be a material source of our consolidated revenue.

We are entitled to receive commercial milestones payments from Maruho, our exclusive licensing partner in Japan, based on certain net sales achievements for Rapifort® Wipes 2.5% (Qbrexza®), for the treatment of primary axillary hyperhidrosis.

We also received a one-time upfront license payment totaling $19.0 million from Maruho during 2023 under the New License Agreement in which we granted Maruho exclusive rights to Qbrexza in Korea and other Asian countries.

Seasonality of Business

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Relationship with Fortress

We have an eight-year operating history.

We are a majority owned subsidiary of Fortress.

Fortress is a biopharmaceutical company dedicated to acquiring, developing and commercializing pharmaceutical and biotechnology products and product candidates at its majority-owned and majority-controlled subsidiaries and joint ventures, and at entities founded by Fortress and in which it maintains significant minority ownership positions.

Fortress has a talented and experienced business development team, comprised of scientists, doctors, and finance professionals, who identify, evaluate, and propose for our consideration promising products and product candidates.

Fortress Note

From the Company’s inception in October 2014 until its initial public offering (“IPO”), Fortress funded the Company’s operations through a working capital loan future advance promissory note (the “Fortress Note”).

In connection with the closing of our IPO on November 16, 2021, the balance of the Fortress Note reflecting $14.8 million converted into 1,476,044 shares of Journey common stock.

The Fortress Note is no longer outstanding.

We have a nine-year operating history and we are a majority owned subsidiary of Fortress.

Product Licensing Agreements and Asset Acquisitions

Rapifort® Wipes 2.5% (Qbrexza)

On February 11, 2022, we announced that our exclusive licensing partner in Japan, Maruho Co., Ltd.

The net payment reflects a milestone payment of $10 million to us from our exclusive licensing partner in Maruho, offset by a $7.5 million payment to Dermira, pursuant to the terms of the Asset Purchase Agreement between us and Dermira.

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 the Territory.

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

On February 11, 2022, we announced that Maruho received marketing and manufacturing approval for Rapifort Wipes 2.5% (Qbrexza), for the treatment of primary axillary hyperhidrosis, triggering a net $2.5 million milestone payment to us.

The net payment reflected a milestone payment of $10.0 million to us from our exclusive licensing partner in Maruho, offset by a $7.5 million payment to Dermira, pursuant to the terms of the asset purchase agreement between us and Dermira.

In conjunction with the terms of the licensing agreement with Maruho, the milestone payment was due from Maruho within 30 days of the approval.

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in the first calendar year in which annual sales reach each of $100 million, $200 million, $300 million, $400 million and $500 million, we will be required to make a one-time payment of $10 million, $20 million, $30 million, $40 million and $50 million, respectively, in that year only, per product, totaling up to $450.0 million.

In addition, Journey will pay VYNE 10% of any upfront

payment received by Journey from a licensee or sublicensee of the products in any territory outside of the United States, subject to exceptions for certain jurisdictions as detailed in the APA.

In addition, Journey will pay Vyne 10% of any upfront payment received by Journey from a licensee or sublicensee of the products in any territory outside of the United States, subject to exceptions for certain jurisdictions as detailed in the APA.

There are no subsequent milestone payments or royalties beyond the aforementioned payments.

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We acquired global rights to DFD-29, including in the U.S.

and Europe, except that DRL has retained certain rights to the program in select markets including Brazil, Russia, India and China.

and Europe, except that DRL has retained certain rights to the program in select markets including Brazil, Russia, India, China and the Commonwealth of Independent States (“CIS”) countries.

Pursuant to the DFD-29 Agreement, we agreed to make an upfront payment of $10.0 million, comprised of a $2.0 million payment upon execution and $8.0 million which was paid on September 29, 2021, 90 days following execution, with additional contingent regulatory, commercial, and corporate-based milestone payments, totaling up to $158.0 million.

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Each party may also terminate the DFD-29 Agreement for material breach by the other party or for certain bankruptcy or insolvency related events.

Additionally, we agreed to fund and oversee the Phase III clinical trials, approximating $24.0 million, based upon the most recent development plan and budget, which is subject to change.

Additionally, we agreed to fund and oversee the Phase III clinical trials.

From inception to date we have incurred approximately $23.8 million in costs associated with the development of DFD-29.

The DFD-29 Agreement will remain in effect on a country-by-county basis until the expiration of the revenue percentage term in the relevant country, which period begins on the first commercial sale of a product in that country and ends upon the expiration or invalidation date of the last revenue generating patent in such country.

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Qbrexza Agreement

On March 31, 2021, we executed an asset purchase agreement for Qbrexza® (the “Qbrexza APA”) with Dermira, pursuant to which we acquired global ownership to Qbrexza® (glycopyrronium), a prescription cloth towelette approved to treat primary axillary hyperhidrosis in people nine years of age and older.

On March 31, 2021, we executed an asset purchase agreement for Qbrexza® (the “Qbrexza APA”) with Dermira Inc.

(“Dermira”), pursuant to which we acquired global ownership to Qbrexza (glycopyrronium), a prescription cloth towelette approved to treat primary axillary hyperhidrosis in people nine years of age and older.

The transaction closed on May 14, 2021, and pursuant to the Qbrexza APA, we made an upfront $12.5 million cash payment to Dermira.

We are obligated to make payments to Dermira of up to $144.0 million in the aggregate upon the achievement of certain milestones.

For the first two years, we are required to pay royalties on sales ranging from the mid-thirty to the mid-twenty percent and, thereafter royalties ranging from the lower teen digits to the upper teen digits are payable on net sales of Qbrexza products.

Subject to certain reductions, royalties are payable for a period of eight years.

The agreement contains customary representations, warranties, and indemnities.

Each party may also terminate the Qbrexza APA for material breach by the other party or for certain bankruptcy or insolvency related events.

For the first two years, we were required to pay royalties on sales ranging from the mid-thirty to the mid-twenty percent.

Thereafter, we are required to pay royalties on Qbrexza net sales ranging from the lower teen digits to the upper teen digits, which are payable for a period of eight years ending in 2029, subject to certain reductions.

The Qbrexza APA contains customary representations, warranties, and indemnities.

Each party may also terminate the Qbrexza APA for material breach by the other party.

As part of the Qbrexza APA, we were assigned an exclusive license agreement with Rose University (“Rose U”) pursuant to which we obtained a worldwide exclusive license within a field of use including hyperhidrosis to practice, enforce and otherwise exploit certain patent rights, know-how and data related to Qbrexza.

The license agreement with Rose U included a sublicense of certain data and an assignment of certain regulatory filings which Rose U had obtained from Stiefel Laboratories (“Stiefel”).

The license agreement with Rose U includes a sublicense of certain data and an assignment of certain regulatory filings which Rose U had obtained from Stiefel Laboratories (“Stiefel”).

In connection with the license agreement, we assumed Rose U’s obligations to Stiefel to use commercially reasonable efforts to develop and commercialize products using the licensed patent rights, know-how and data.

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We may terminate the license agreement if Rose U experiences certain insolvency events or if Rose U commits a material breach of the license agreement, subject to applicable cure provisions.

Rose U may terminate the license in certain

circumstances if we experience certain insolvency events or if we commit a material breach of the license agreement or if we cause Rose U to be in material breach of its license agreement with Stiefel, subject in each case to applicable cure provisions.

Rose U may terminate the license in certain circumstances if we experience certain insolvency events or if we commit a material breach of the license agreement or if we cause Rose U to be in material breach of its license agreement with Stiefel, subject in each case to applicable cure provisions.

Subject to earlier termination, the license agreement remains in effect until 15 years following the first commercial sale of a licensed product have elapsed or, if later, the date that the last patent or patent application in the licensed patent rights has expired or been revoked, invalidated or abandoned.

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Accutane Agreement

On July 29, 2020, we entered into a license and supply agreement for Accutane® (“Accutane Agreement”) with DRL.

On July 29, 2020, we entered into a license and supply agreement for Accutane® (the “Accutane Agreement”) with DRL.

Pursuant to the Accutane Agreement, we agreed to pay $5.0 million, comprised of an upfront payment of $1.0 million paid upon execution, with additional milestone payments totaling $4.0 million.

To date, we have paid $3.0 million of the additional milestone payments.

To date, we have paid all of the additional milestone payments.

Three additional milestone payments totaling $17.0 million are contingent upon the achievement of certain net sales milestones.

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The term of the Accutane Agreement is ten years and renewable upon mutual agreement.

We are required to pay royalties during the term of the Accutane Agreement.

The agreement contains customary representations, warranties, and indemnities.

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Anti-Itch Product Agreement

On December 18, 2020, we entered an asset purchase agreement for our Anti-itch Product (the “Anti-itch APA”) with Sun Pharmaceutical Industries, Inc.

On December 18, 2020, we entered into an asset purchase agreement for our Anti-itch Product (the “Anti-itch APA”) with Sun Pharmaceutical Industries, Inc.

Pursuant to the Anti-itch APA, total consideration is $4.0 million, comprised of an upfront payment of $2.0 million, payable upon execution.

Through December 31, 2022, we have paid $4.0 million and have no additional payments.

Through December 31, 2023, we have paid $4.0 million and have no additional payment obligations.

The Anti-itch APA contains customary representations, warranties, and indemnities.

There are no subsequent milestone payments or royalties beyond the aforementioned payments.

We intend to launch this product during the second half of 2023.

We intend to launch this product during the second half of 2024 or first half of 2025.

Ximino Agreement

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Pursuant to the Ximino APA, total consideration is $9.4 million, with an upfront payment of $2.4 million, which was payable within 60 days after execution on September 22, 2019.

The remaining $7.0 million will be made starting on the second anniversary and for the next four anniversaries of the Ximino APA thereafter.

Pursuant to the terms of the Ximino APA, the remaining $7.0 million is due on the second anniversary and for the next four anniversaries of the Ximino APA thereafter.

In addition, we are obligated to pay royalties in the mid-single digits based on net sales of Ximino, subject to specified reductions until the end of 2022.

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We commenced sales of this product in August 2019.

We discontinued selling Ximino in September 2023.

Exelderm Agreement

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This threshold was achieved in 2020 and paid in early 2021.

We are obligated to pay royalties in the low-double digits based on net sales of Exelderm until the end of 2023, and no additional licensing or milestone payments are required.

We were obligated to pay royalties in the low-double digits based on net sales of Exelderm until the end of 2023, and no additional licensing or milestone payments are required.

We commenced sales of this product in August 2018.

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Further payments will be made based on a revenue sharing arrangement and no additional licensing or milestone payments are required.

The term of the Targadox Agreement is ten years and automatically renews for three-year periods unless either party provides notice of its intent not to

renew at least 180 days prior to the expiration of the applicable term.

The term of the Targadox Agreement is ten years and automatically renews for three-year periods unless either party provides notice of its intent not to renew at least 180 days prior to the expiration of the applicable term.

Under our revenue sharing arrangement, we are entitled to retain a majority of the net profits and pay Caribe a portion of the net profits after deducting certain commercial, marketing and sales expenses during the term of the Targadox Agreement.

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Research and Development

As discussed above, on June 29, 2021, we obtained the global rights for the development and commercialization of DFD-29, a late-stage development modified release oral minocycline that is being evaluated for the treatment of inflammatory lesions of rosacea.

Through this collaboration, the parties will work together to complete the development of DFD-29, which includes conducting two Phase III studies to assess the efficacy, safety and tolerability of oral DFD-29 for the treatment of rosacea and the regulatory submission of a new drug application (“NDA”) under Section 505(b)(2) of the United States Federal Food, Drug and Cosmetic Act (“FDCA”).

DRL will provide development support, including the monitoring of two Phase III clinical trials.

On March 17, 2022, we dosed the first patient in our Phase 3 clinical trials evaluating DFD-29 (Minocycline Modified Release Capsules 40 mg) for the Treatment of Rosacea.

As of January 10, 2023, we achieved 100 % enrollment in the trials, with a top-line data readout expected in the second quarter of 2023.

We plan to submit the NDA for DFD-29 in the second half of 2023 and FDA approval is anticipated in the second half of 2024.

In the Phase 2 clinical trials, DFD-29 (40mg) demonstrated nearly double the efficacy when compared against Oraycea® (European equivalent of Oracea®) on both co-primary endpoints.

For the first co-primary endpoint, IGA treatment success, Oraycea only had a 33.33% IGA treatment success rate, while DFD-29 achieved a 66.04% IGA treatment success rate.

The Phase II study, conducted in Germany, was a multi-center, randomized, double-blinded, parallel group, controlled study that assessed the efficacy, safety and tolerability of oral DFD-29 (20mg and 40mg) extended release minocycline hydrochloride capsules for the treatment of inflammatory lesions of rosacea over 16 weeks.

Initial patient enrollment in the Phase II study included 205 male and female subjects with papulopustular rosacea.

160 subjects completed the study.

Each subject was allocated to one of the following treatment groups, and received one capsule once daily, in the morning, for 16 weeks:

i) DFD-29 40 mg extended release capsules (with 47 subjects at completion);

ii) DFD-29 20mg extended release capsules (with 38 subjects at completion);

iii) Oraycea® (doxycycline) capsules (with 40 subjects at completion);

and iv) placebo capsules (with 35 subjects at completion).

The study showed that DFD-29 40mg had statistical significance to both placebo and the active control, Oraycea® (German equivalent of U.S.

marketed Oracea®), on both co-primary endpoints - proportion of subjects with IGA treatment success (grade 0 or 1 with at least a two grade reduction from baseline at week 16 and total inflammatory lesion count reduction from baseline to week 16.

More information on the DFD-29 Phase II study can be found at clinicaltrials.gov.

Highly statistically significant difference in IGA success could be shown for DFD-29 40mg compared to placebo (p < 0.0001) as well as compared to Oraycea (p= 0.0010).

Highly statistically significant treatment difference was also observed in the co-primary endpoint mean change in total inflammatory lesion count as well in both DFD-29 40mg compared to placebo (p < 0.0001) and DFD-29 40mg compared to Oraycea (p = 0.0004).

All statistical tests used were two-sided, with α=0.05 as level of significance.

There were no related serious adverse events reported during the study for those subjects who were studied with DFD-29 40mg.

As discussed above, on June 29, 2021, we obtained the global rights from DRL for the development and commercialization of DFD-29, a late-stage development modified release oral minocycline that is being developed for the treatment of inflammatory lesions of rosacea.

Through this collaboration, the parties were required to work together to complete the development of DFD-29, which included conducting two Phase III studies to assess the efficacy, safety and tolerability of oral DFD-29 for the treatment of rosacea and the January 4, 2024 regulatory submission of an NDA under Section 505(b)(2) of the FDCA.

DRL provided development support, including responding to any requests for information or clarification from FDA regarding the NDA.

On March 17, 2022, we dosed the first patient in our Phase III clinical trials evaluating DFD-29 (Minocycline Modified Release Capsules 40 mg) for the Treatment of Rosacea.

We filed the NDA with the FDA on January 4, 2024.

The two Phase III studies conducted in the US and Germany demonstrated that DFD-29 was statistically superior to Oracea ® and Placebo on multiple efficacy endpoints relevant to the treatment of rosacea.

DFD-29 also demonstrated statistical superiority to Placebo in reducing erythema of rosacea.

The safety profile of DFD-29 in the two Phase III studies was similar to Placebo.

Based on the Phase III data, we are seeking an indication to treat inflammatory lesions and erythema of rosacea in patients 18 years of age and older for DFD-29.

Intellectual Property

We rely on a combination of contractual provisions, confidentiality policies and procedures and patent, trademark, copyright and trade secrecy laws to protect the proprietary aspects of our technology and business.

Three of our marketed products, Accutane, Targadox, and Exelderm, do not have patent protection and/or otherwise not eligible for patent protection.

Three of our marketed products, Accutane, Targadox, and Exelderm, do not have patent protection and/or are not otherwise eligible for patent protection.

As part of our development and acquisition strategy, we place a strong emphasis on the patent protection for potential products.

Four of our marketed products, Qbrexza, Amzeeq, Zilxi, and Ximino, as well as DFD-29, currently have patent protection.

Three of our marketed products, Qbrexza, Amzeeq, and Zilxi, as well as DFD-29, currently have patent protection.

Qbrexza Patents

We own or have an exclusive license to 22 issued U.S.

patents and 41 issued foreign patents, which include granted European patent rights that have been validated in selected European Patent Organization (“EPO”) member states (Switzerland, Germany, Spain, France, Great Britain, Ireland, and Italy), Australia, Canada, Mexico, Israel, Japan, Hong Kong, Korea, and New Zealand, Singapore, and South Africa, and six pending U.S.

patent applications, one pending Patent Cooperation Treaty application, and 16 pending foreign patent applications.

We own or have an exclusive license to twenty two issued U.S.

patents and forty one issued foreign patents, which include granted European patent rights that have been validated in selected European Patent Organization (“EPO”) member states (Switzerland, Germany, Spain, France, Great Britain, Ireland, and Italy), Australia, Canada, Mexico, Israel, Japan, Hong Kong, Korea, and New Zealand, Singapore, and South Africa, and six pending U.S.

patent applications, one pending Patent Cooperation Treaty application, and sixteen pending foreign patent applications.

Of these patents and patent applications:

There are 15 issued U.S.

patents, 28 issued foreign patents (AU, CA, selected EP member states, Mexico, Japan, Hong Kong, Korea, New Zealand, Singapore, and South Africa), four pending U.S.

patent applications and eight pending foreign applications (in Canada, the European Patent Office, Mexico, Japan, Hong Kong, and Korea) as well as one pending PCT application, all relating to Qbrexza.

We own 11 of the issued U.S.

patents, three of the pending U.S.

patent applications, 18 of the issued foreign patents, and six of the pending foreign applications, and have exclusively licensed from Rose U worldwide rights to four of the issued U.S.

patents, one pending U.S.

patent application, ten issued foreign patents, and two pending foreign patent applications.

There are eighteen issued U.S.

patents, thirty seven issued foreign patents (AU, CA, selected EP member states, Mexico, Japan, Hong Kong, Korea, New Zealand, Singapore, and South Africa), two pending U.S.

patent applications and three pending foreign applications (in Israel and Hong Kong), all relating to Qbrexza.

We own fourteen of the issued U.S.

patents, both of the pending U.S.

patent applications, twenty of the issued foreign patents, and two of the pending foreign applications, and have exclusively licensed from Rose U worldwide rights to four of the issued U.S.

patents, seventeen issued foreign patents, and one pending foreign patent applications.

The issued Qbrexza patents contain claims directed to individually packaged wipes for the treatment of hyperhidrosis where the wipes contain a composition comprising Qbrexza or other related compounds, and methods of alleviating hyperhidrosis using such compositions and contain claims directed to compositions comprising Qbrexza or other related compounds, individually packaged wipes comprising such compositions, absorbent pads comprising Qbrexza pharmaceutical compositions and methods of treating hyperhidrosis with topical administration of Qbrexza or other related compounds.

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and foreign patent applications relating to Qbrexza, if issued, will expire between 2028 and 2034.

Amzeeq, Zilxi & the Molecular Stabilizing Technology Platform

We own 25 issued U.S.

patents and 10 issued foreign patents, and 7 pending U.S.

patent applications, 1 pending Patent Cooperation Treaty application, and 6 pending foreign patent applications.

Amzeeq, Zilxi & the Molecular Stabilizing Technology Platform Patents

We own thirty nine issued U.S.

patents and twenty issued foreign patents, and nine pending U.S.

patent applications, and two pending foreign patent applications.

Of these patents and patent applications:

● There are 12 issued U.S.

patents, 10 issued foreign patents (Australia, Canada, Israel, Mexico, South Africa), 3 pending U.S.

patent applications and 5 pending foreign applications (India, Canada, EPO, Israel, Mexico) as well as 0 pending PCT applications, all relating to Amzeeq.

● There are twenty one issued U.S.

patents, fifteen issued foreign patents (Australia, Canada, Europe, Israel, Mexico, United Kingdom, South Africa), six pending U.S.

patent applications and one pending foreign application (Canada), all relating to Amzeeq.

The issued Amzeeq patents contain claims directed to compositions and use of the compositions (method claims).

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and foreign patent applications relating to Amzeeq will expire between 2030 and 2037.

● There are 8 issued U.S.

patents, 9 issued foreign patents (Australia, Canada, Israel, Mexico, South Africa), 2 pending U.S.

patent applications and 4 pending foreign applications (India, EPO, Canada), all relating to Zilxi.

● There are fourteen issued U.S.

patents, fifteen issued foreign patents (Australia, Canada, Europe, Israel, Mexico, United Kingdom, South Africa), four pending U.S.

patent applications and one pending foreign application (Canada), all relating to Zilxi.

The issued Zilxi patents contain claims directed to compositions and use of the compositions (method claims).

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and foreign patent applications relating to Zilxi will expire between 2030 and 2037.

● Other Patents related to molecular stabilizing platform but not products directly are 11 issued U.S.

patents, 3 pending U.S.

patent applications, and 2 pending foreign applications (Canada and Taiwan) as well as 1 pending PCT application.

The issued U.S.

patents will expire between 2028 and 2030 and the pending U.S.

and foreign patent applications will expire between 2020 and 2040.

● The other patents related to molecular stabilizing platform but not products directly are sixteen issued U.S.

patents, three pending U.S.

patent applications, and five issued foreign patents (Canada, Israel, and Mexico).

DFD-29 Patents

With regard to DFD-29, we have an exclusive license to one U.S.

patent family including 2 issued U.S.

patents, 1 allowed U.S.

patent application, and one U.S.

continuation application, as well as 8 foreign pending patent applications (one in each of Australia, Canada, Europe, Japan, Korea, Mexico, New Zealand, and South Africa) covering methods of treating an inflammatory skin condition by selecting and administering an oral composition comprising reduced dose of minocycline and the relevant pharmacokinetic parameters, and we intend to pursue composition-of-matter patents, where possible, and dosage and formulation patents, as well as method-of-use patents on novel indications for known compounds.

The two issued U.S.

patent family including three issued U.S.

patents and one U.S.

continuation application, as well as one issued foreign patent (Mexico) and eight foreign pending patent applications (one in each of Australia, Canada, Europe, Japan, Korea, and South Africa;

and two in New Zealand) covering methods of treating an inflammatory skin condition by selecting and administering an oral composition comprising reduced dose of minocycline and the relevant pharmacokinetic parameters, and we intend to pursue composition-of-matter patents, where possible, and dosage and formulation patents, as well as method-of-use patents on novel indications for known compounds.

The three issued U.S.

patents will expire in 2039.

Ximino Patents

We have an exclusive license to patents related to Ximino, including 6 issued U.S.

These patents cover the Ximino, methods of treatment, and related dosage forms and strengths, and will expire between 2025 and 2027.

Additional Intellectual Property and Proprietary Right Protection

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We also may need to commence litigation to enforce any patents issued to us or to determine the scope and validity of third-party proprietary rights.

Litigation would involve substantial costs.

Litigation could involve substantial costs.

Other Intellectual Property Rights

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To this end, we require all employees, scientific advisors, consultants, collaborators and other contractors, upon commencement of a relationship with us, to enter into confidentiality agreements, which prohibit the disclosure of confidential information and, in the case of parties other than our research and development collaborators, require disclosure and assignment to us of the ideas, developments, discoveries and inventions important to our business.

These agreements are designed to protect our proprietary information and to grant us ownership of technologies that are developed in connection with their relationship

These agreements are designed to protect our proprietary information and to grant us ownership of technologies that are developed in connection with their relationship with us.

These agreements may not, however, provide protection for our trade secrets in the event of unauthorized disclosure of such information.

There can be no assurance that any of our patents, licenses or other intellectual property rights will afford us any protection from competition or that our confidentiality agreements will not be breached, that we will have adequate remedies for any breach, that others will not independently develop equivalent proprietary information or that other third parties will not otherwise gain access to our trade secrets and other intellectual property.

There can be no assurance that any of our patents, licenses or other intellectual property rights will afford us any protection from competition, that our confidentiality agreements will not be breached, that we will have adequate remedies for any breach, that others will not independently develop equivalent proprietary information or that other third parties will not otherwise gain access to our trade secrets and other intellectual property.

We may find it necessary to initiate litigation to enforce our patent rights, to protect our intellectual property or trade secrets or to determine the scope and validity of the proprietary rights of others.

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Accordingly, we face pressure to continually seek out technological innovations and to market our products effectively.

Our major competitors, including Galderma Laboratories, Almirall, Verrica Pharmaceuticals, MC2 Therapeutics, Novan Therapeutics, Sun Pharma, Leo Pharma, Arcutis Biotherapeutics, Mayne Pharma, Dermavant Sciences, Botanix Pharmaceuticals, and Ortho Dermatologics, among others, vary depending on therapeutic and product category, dosage strength and drug-delivery systems, among other factors.

Our major competitors, including Galderma Laboratories, Almirall, Novan Therapeutics, Leo Pharma, Mayne Pharma, Botanix Pharmaceuticals, and Ortho Dermatologics, among others, vary depending on therapeutic and product category, dosage strength and drug-delivery systems, among other factors.

Generic Competition

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Accordingly, when a branded product loses its market exclusivity, it normally faces intense price competition from generic forms of the product.

To successfully compete for business with managed care and pharmacy benefits management organizations, we

must often demonstrate that our products offer not only medical benefits, but also cost advantages as compared with other forms of care.

To successfully compete for business with managed care and pharmacy benefits management organizations, we must often demonstrate that our products offer not only medical benefits, but also cost advantages as compared with other forms of care.

Generic products generally face intense competition from other generic equivalents (including authorized generics) and therapeutically similar branded or generic products.

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We currently rely upon multiple contract manufacturers to produce our products and clinical supply of product candidates and will continue to rely upon contract manufacturers for any current or future product candidates under current Good Manufacturing Practice (“cGMP”) regulations for use in pre-clinical and clinical activities.

Due to the risks associated with reliance on third-party manufacturing risk, as part of our current and future strategy of licensing, acquiring, or the future development of assets, we currently, and will continue to, secure manufacturing agreements with either a counterparty to a transaction, with one or more of our contract manufacturers or additional contract manufacturers.

Due to the risks associated with reliance on third-party manufacturing, as part of our current and future strategy of licensing, acquiring, or the future development of assets, we currently, and will continue to, secure manufacturing agreements with either a counterparty to a transaction, with one or more of our contract manufacturers or additional contract manufacturers.

As with any supply program, obtaining raw materials of the correct quality cannot be guaranteed, and we cannot ensure that we will be successful.

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The FDA may refuse to accept an NDA, ANDA, 510(K) or BLA for filing if certain content criteria are not met and, even after accepting an NDA, ANDA, 510(K) or BLA, the FDA may often require additional information, including clinical data, before approval of marketing a product.

It is also becoming more common for the FDA to request a Risk Evaluation and Mitigation Strategy (“REMS”), as part of an NDA, ANDA, 510(K) or BLA.

The REMS plan contains post-market obligations of the sponsor to train prescribing physicians, monitor off-label drug use, and conduct sufficient Phase 4 follow-up studies and registries to ensure the continued safe use of the drug.

Section 505(b)(2) NDAs may provide an alternate path to FDA approval for new or improved formulations or new uses of previously approved products.

Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from clinical trials not conducted by, or for, the applicant and for which the applicant has not obtained a right of reference.

The FDA may then approve the new product candidate for all, or some, of the label indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant.

To the extent that the Section 505(b)(2) applicant is relying on the FDA’s findings of safety and effectiveness for an already approved product, the applicant is required to certify to the FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an ANDA applicant would.

Thus approval of a Section 505(b)(2) NDA can be stalled until all the listed patents claiming the referenced product have expired;

until any non-patent exclusivity, such as exclusivity for obtaining approval of a New Chemical Entity (“NCE”), listed in its publication “Approved Drug Products with Therapeutic Equivalence Evaluations,” also referred to as the “Orange Book,” for the referenced product has expired;

and, in the case of a Paragraph IV certification and subsequent patent infringement suit, until the earlier of 30 months, settlement of the lawsuit or a decision in the infringement case that is favorable to the Section 505(b)(2) applicant.

In the interim period, the FDA may grant tentative approval.

Tentative approval indicates that the FDA has determined that the applicant meets the standards for approval as of the date that the tentative approval is granted.

Final regulatory approval can only be granted if the FDA is assured that there is no new information that would affect final regulatory/ approval.

The FDA may request a Risk Evaluation and Mitigation Strategy (“REMS”), as part of an NDA, ANDA, 510(K) or BLA.

The REMS typically contains some combination of post-marketing obligations of the sponsor to train prescribing physicians, monitor drug use, including off-label use, and conduct sufficient Phase 4 follow-up studies and registries to ensure the continued safe use of the drug.

As part of the approval process, the FDA must inspect and approve each manufacturing facility.

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Claims exceeding those contained in approved labeling will constitute a violation of the FDCA.

Violations of the FDCA or regulatory requirements at any time during the product development process, approval process, or marketing and sale following approval may result in agency enforcement actions, including withdrawal of approval, recall, seizure of products, warning letters, injunctions, fines and/or civil or criminal penalties.

Violations of the FDCA or regulatory requirements at any time during the product development process, approval process, or marketing and sale following approval may result in agency enforcement actions, including withdrawal of approval, recall, seizure of products, warning letters, untitled letters, Form 483s, injunctions, fines and/or civil or criminal penalties.

Any agency enforcement action could have a material adverse effect on our business.

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At the state level, there are also new laws and ongoing ballot initiatives that create additional pressure on drug pricing and may affect how pharmaceutical products are covered and reimbursed.

A number of states have adopted or are considering various pricing actions,

such as those requiring pharmaceutical manufacturers to publicly report proprietary pricing information, limit price increases or to place a maximum price ceiling or cap on certain products.

A number of states have adopted or are considering various pricing actions, such as those requiring pharmaceutical manufacturers to publicly report proprietary pricing information, limit price increases or to place a maximum price ceiling or cap on certain products.

Existing and proposed state pricing laws have added complexity to the pricing of pharmaceutical drug products.

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We are subject to various federal, state and local laws targeting fraud and abuse in the healthcare industry, violations of which can lead to civil and criminal penalties, including fines, imprisonment and exclusion from participation in federal healthcare programs.

These laws are potentially applicable to us as both a manufacturer and a supplier of products reimbursed by federal healthcare programs, and they also apply to physicians and other potential purchasers of our products.

These laws are applicable to us as both a manufacturer and a supplier of products reimbursed by federal healthcare programs, and they also apply to physicians and other potential purchasers of our products.

The federal Anti-Kickback Statute (42 U.S.C.

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The federal Anti-Kickback Statute and implementing regulations provide for certain exceptions for “safe harbors” for certain discounting, rebating or personal services arrangements, among other things.

However, the lack of uniform court interpretation of the Anti-Kickback Statute, coupled with novel

enforcement theories by government authorities, make compliance with the law difficult.

However, the lack of uniform court interpretation of the Anti-Kickback Statute, coupled with novel enforcement theories by government authorities, make compliance with the law difficult.

Violations of the federal Anti-Kickback Statute can result in significant criminal fines, exclusion from participation in Medicare and Medicaid and follow-on civil litigation, among other things, for both entities and individuals.

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Failure to comply with reporting requirements under these laws could subject manufacturers and others to substantial civil money penalties.

The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) imposes criminal liability and amends provisions on the reporting, investigation, enforcement, and penalizing of civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of, or payment for healthcare benefits, items or services by a healthcare benefit program, which includes both government and privately funded benefits programs;

similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

Other Healthcare Laws and Compliance Requirements

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Additionally, the DSCSA directs FDA to establish national licensure standards for wholesale distributors and third-party logistics providers, and requires these entities report licensure and other information to FDA annually.

The implementation and enforcement of complete unit level traceability of verifiable return serialization, including aggregation throughout the whole supply chain, is not required until November 27, 2023.

Although the rule regarding wholesale distributor verification of saleable returned products does not directly apply to our Company, we are required to assist our wholesale distributor customers by setting in place mechanics that would allow for traceability of returns in the supply chain.

If we are not able to come into compliance of this rule, our wholesale distributor customers may not accept our returns on our behalf.

We are subject to, and required to be in compliance with, the DQSA.

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Currently, we are in compliance with the DSCSA as it relates to our business and operations.

Recent FDA Announcement Regarding Certain Wholesale Distributor and Dispenser Verification Requirements Under DSCSA .

On October 22, 2020, the FDA announced a final guidance regarding enforcement of the DSCSA requirements for wholesale distributor verification of saleable returned products and dispenser verification of the product identifier for suspect and illegitimate product.

● FDA does not intend to take action against wholesale distributors who do not, prior to November 27, 2023, verify a product identifier prior to further distributing returned product as required under the DSCSA.

This provides wholesale distributors three additional years to comply with this requirement.

● FDA also does not intend to take action against dispensers who do not, prior to November 27, 2023, verify the product identifier for suspect or illegitimate product in the dispenser’s possession or control.

This provides dispensers three additional years to comply with this requirement.

Although the rule regarding wholesale distributor verification of saleable returned products does not directly apply to our Company, we will be required to assist our wholesale distributor customers by setting in place mechanics that would allow for traceability of returns in the supply chain.

If we are not able to come into compliance of this rule, our wholesale distributor customers may not accept our returns on our behalf.

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 1. Business