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Item 1. Business

2022-03-17 compared with 2021-03-04 · 264 added, 304 removed, 303 unchanged (65% of the section changed)

ITEM 1 - BUSINESS

We are a specialty pharmaceutical company focused on developing proprietary, innovative and differentiated therapies in dermatology and beyond.

Our products, AMZEEQ® (minocycline) topical foam, 4% (“AMZEEQ”) for the treatment of inflammatory lesions of moderate-to-severe acne vulgaris in adults and patients 9 years of age and older, and ZILXI® (minocycline) topical foam, 1.5% (“ZILXI”) for the treatment of inflammatory lesions of rosacea in adults, are the first topical minocycline products to be approved by the FDA.

AMZEEQ and ZILXI were commercially launched in January and October of 2020, respectively, and serve as a springboard for commercializing additional innovative products.

Our product pipeline includes FCD105 (minocycline 3% and adapalene 0.3%) ("FCD105"), our proprietary novel topical combination foam formulation of minocycline and adapalene for the treatment of moderate-to-severe acne vulgaris.

FCD105 is a Phase 3-ready asset that we believe has the potential to be a best-in-class treatment for patients with acne.

In addition, we recently announced a development program for FMX114, which is a combination topical gel for the potential treatment of mild-to-moderate atopic dermatitis.

We plan to conduct a Phase 2a proof-of-concept study for FMX114 in the third quarter of 2021.

AMZEEQ and ZILXI utilize our proprietary Molecule Stabilizing Technology (MST)™ delivery system that is also being used to develop FCD105.

Our MST™ proprietary foam platform is designed to optimize the topical delivery of minocycline, an active pharmaceutical ingredient ("API") that was previously available only in oral form despite its prevalent use in dermatology.

In addition to the MST platform, we have a number of proprietary delivery platforms in development that enable topical delivery of other APIs, each having unique pharmacological features and characteristics designed to keep the API stable when delivered and directed to the target site.

We believe our MST vehicles and other topical delivery platforms may offer significant advantages over alternative delivery options and are suitable for multiple application sites across a range of conditions.

In March 2020, we combined with Foamix Pharmaceuticals Ltd.

Prior to the merger transaction, the Company’s strategy was focused on the development and commercialization of serlopitant for pruritic conditions.

Following the receipt of the results of the Phase III PN Trials, we discontinued the development of serlopitant.

Currently, our strategy is to develop and commercialize proprietary, innovative and differentiated therapies that we believe can advance the standard of care for patients with high unmet needs in dermatology.

The key components of our strategy are to:

Commercialize AMZEEQ and ZILXI, and any of our other products which are approved for marketing.

We are commercializing our AMZEEQ and ZILXI products in the United States by deploying a specialized, focused and scalable sales force targeting dermatologists and other healthcare practitioners.

We believe that having this synergistic cross-brand commercial footprint allows us to effectively target key prescribers and leads to efficient sales activity.

We are also actively pursuing opportunities to out-license our products and product candidates to third parties for development and commercialization outside the United States.

For example, in April 2020, we entered into a license agreement with Cutia Therapeutics (HK) Limited, a company organized and existing under the laws of Hong Kong (“Cutia”), pursuant to which we granted Cutia a license to obtain regulatory approval of and commercialize our minocycline products in Greater China in exchange for an upfront payment of $10 million and quarterly royalties on net sales.

Develop our combination product candidate, FCD105 .

In June 2020, we announced positive results from a Phase 2 clinical trial evaluating the preliminary safety and efficacy of FCD105, the first ever topical minocycline-based combination product, for the treatment of moderate-to-severe acne vulgaris.

We anticipate commencing a Phase 3 trial in 2021.

If approved by the FDA, FCD105 will expand our product offering, which we believe will enhance our position as a scaled leader in dermatology.

Identify, in‑license and acquire new products and product candidates .

In addition to developing product candidates organically within our organization, we intend to identify, evaluate, in‑license and acquire products and product candidates from third parties by leveraging our business development capabilities.

We are a biopharmaceutical company focused on developing proprietary, innovative and differentiated therapies for the treatment of immuno-inflammatory conditions.

Our most advanced product candidate, FMX114, which is in Phase 2a, is being evaluated for the potential treatment of mild-to-moderate atopic dermatitis (“AD”).

We are also in the preclinical stages of developing products containing Bromodomain and Extra-Terminal Domain (or “BET”) inhibitor compounds.

Our initial BET inhibitor candidate in development is VYN201, a locally administered pan-BET inhibitor, which we are exploring in various immuno-inflammatory diseases, including skin diseases .

In addition, we continue to explore opportunistic transactions that may enhance our pipeline portfolio, as well as support our current operations and fund our future growth.

In 2020, we commercially launched two dermatology products, AMZEEQ (minocycline) topical foam, 4%, and ZILXI (minocycline) topical foam, 1.5%, that we developed in-house using our proprietary molecule stabilizing technology (MST) platform and clinical development capabilities.

Following a review of our business in the first half of 2021, including the revenues we had received from these commercial products, the market environment for specialty pharmaceutical companies and the potential for biopharmaceutical companies with novel immuno-inflammatory pipelines, we determined to divest our commercial dermatology business and refocus our strategic efforts and resources toward advancing our pipeline and development platform for products to treat immuno-inflammatory conditions.

See "—Divestiture of Minocycline Business" and“Part II.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Company Overview” for further discussion regarding the sale of our MST franchise, including AMZEEQ, ZILXI, and FCD105, to Journey Medical Corporation.

Immuno-Inflammatory Disease

Our therapies are being evaluated for their potential to target inflammatory/autoimmune disease (which we refer to “immuno-inflammatory diseases”).

These immune system disorders are caused by the immune system having too much activation or too little inhibition.

There are dozens of known types of immuno-inflammatory diseases, many of which are severely debilitating and/or life threatening.

Our therapeutic goal in immuno-inflammatory disease is to deliver a potent anti-inflammatory response while minimizing systemic side effects.

Our most advanced product candidate, FMX114, is being evaluated for the potential treatment of mild-to-moderate AD.

AD is a chronic immune-mediated disease that is characterized by the appearance of dry, red, and itchy skin.

FMX114 is being developed to address both the source and cause of inflammation in AD by developing a distinct combination gel formulation of tofacitinib, a Janus kinase inhibitor (“JAK”), aimed at reducing inflammation by inhibiting cytokine release from inflammatory cells, and fingolimod, a Sphingosine 1-phosphate receptor modulator, which approaches the reduction of inflammation by inhibiting migration of inflammatory cells, and in addition may also directly support skin barrier recovery.

See “—Our Portfolio of Product Candidates—FMX114 for Mild-to-Moderate Atopic Dermatitis” for additional information regarding our FMX114 program.

In addition, in August 2021, we entered into a transaction with In4Derm Limited ("In4Derm") providing us with exclusive worldwide rights to research, develop and commercialize products containing BET inhibitors for the treatment of any disease, disorder or condition in humans.

Through our access to this library of new chemical BET inhibitor compounds (our “InhiBET™ platform”), we plan to develop BET inhibitor product candidates in various modes of administration and for a diverse set of indications.

Based on preclinical data generated to date, we believe therapeutics generated by our InhiBET™

platform have the potential to provide patient benefit in a broad range of immune system disorders.

Accordingly, we have chosen to focus our initial efforts for this platform on select therapeutic areas with unmet medical needs in immuno-inflammatory disease.

BET proteins play a key role in regulating gene transcription via epigenetic interactions (“reading”), and recent research has determined a key role for these BET proteins in regulating B cell and T cell activation and subsequent inflammatory processes.

As epigenetic readers, BET proteins regulate the recruitment of transcriptional factors that are key to the production of several pro-inflammatory cytokines.

Inhibiting BET proteins blocks cytokine transcription and therefore may have significant therapeutic potential across a wide variety of immuno-inflammatory/fibrotic and myeloproliferative neoplastic disorders.

Our initial BET inhibitor candidate in development is VYN201, which was developed using the InhiBET™ platform and is a locally administered pan-bromodomain, or pan-BD, BET inhibitor.

It is a first-in-class “soft” pan-BD BET inhibitor that is designed to address diseases involving multiple, diverse inflammatory cell signaling pathways.

Through our license with In4Derm, we are developing VYN201 for local administration for various immuno-inflammatory diseases, including skin diseases.

Based on preclinical data to date, we believe VYN201 has the potential to deliver a potent, localized anti-inflammatory effect to the affected area and be rapidly cleared through the body’s metabolic process.

As part of our partnership with In4Derm, we also have an exclusive option to license In4Derm’s highly selective bromodomain 2 BET inhibitors for oral administration.

We believe bromodomain 2 selective oral BET inhibitors may present as more conveniently-administered non-biologic treatment options for both acute control and chronic management of immuno-inflammatory indications, where the damaging effects of unrestricted inflammatory signaling activity is common.

We intend to execute on our strategy, including the following:

Develop our combination product candidate, FMX114 .

FMX114 is our proprietary investigational combination gel formulation of tofacitinib and fingolimod and is being developed to address both the source and cause of inflammation in AD.

We believe FMX114 has the potential to be the first topical combination product for the treatment of AD and is the first topical product in clinical development that utilizes the sphingosine 1-phosphate receptor modulation mode of action.

We expect to receive topline results from our Phase 2a study evaluating the safety and efficacy of FMX114 for mild-to-moderate AD in the second quarter of 2022.

Establish our InhiBET™ BET inhibitor platform as a proprietary product development vehicle .

By leveraging our proven drug development and clinical development capabilities and strong network of discovery and preclinical science partners, we intend to discover and develop BET inhibitor product candidates in various modes of administration and for a diverse set of indications.

Our goal is to capitalize on these strengths and establish InhiBET™ as a proprietary product development vehicle.

Maximize the value of our pipeline and platform via potential partnering activities .

We believe our pipeline is unique and has broad utility.

For example, based on our preclinical efforts to date, we believe VYN201 has the potential to be developed for a variety of immuno-inflammatory indications and multiple modes of administration.

We intend to continue to leverage our existing pipeline and platform to actively explore and evaluate potential value-creating partnering opportunities.

Expand our product candidate portfolio and pipeline through in‑licensing or acquisitions of additional product candidates or technologies.

In addition to developing product candidates organically within our organization, we may in‑license or acquire product candidates from third parties by leveraging our business development capabilities.

With a goal of building a well‑balanced and diversified portfolio, we assess a variety of factors for potential product candidates and technologies.

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We intend to continue to be opportunistic in our business development activities to achieve our long-term strategic goals.

Advance early‑stage product candidates into late‑stage development, including FMX114 .

In developing early‑stage product candidates, such as FMX114, we focus on converting our understanding of disease states into proprietary, innovative, and differentiated therapies to address the unmet needs of patients.

We seek to establish proof‑of‑concept and create intellectual property protection for these product candidates.

Using this approach, our experienced management team is able to determine whether and how to advance product candidates into the next stages of development in a cost-effective manner, which we believe increases our ability to direct resources to promising programs and enhances our likelihood of successfully developing and commercializing our product candidates.

In addition, we may also seek collaborations, licenses and other strategic relationships to assist in advancing and expanding our current and any future product candidates in order to drive value.

Our Portfolio of Products and Product Candidates

The following provides a developmental summary of our products and key product candidates.

The light blue represents the anticipated stage by year end 2021.

AMZEEQ for moderate-to-severe acne

AMZEEQ (4% minocycline foam), formerly known as FMX101, was approved by the FDA in October 2019 and became available in pharmacies nationwide in January 2020.

AMZEEQ is a once-daily novel topical antibiotic foam formulation of minocycline for the treatment of inflammatory lesions of non-nodular moderate-to-severe acne vulgaris in patients 9 years of age and older.

AMZEEQ utlizes our proprietary MST™ technology and is the first topical minocycline to be approved by the FDA for any condition.

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.

Market opportunity

Acne is characterized by areas of scaly red skin, non-inflammatory blackheads and whiteheads, inflammatory lesions, papules and pustules and occasionally boils and scarring.

It affects approximately 40 to 50 million people in the United States alone, of whom approximately 10 million suffer from moderate-to-severe acne.

For most people, acne diminishes over time and tends to disappear or decrease by age 25.

However, some individuals continue to suffer from acne well into their 30s, 40s and later.

The current U.S.

market size for treatment of acne is considerable and estimated at approximately $5 billion and 22 million prescriptions in 2019, presenting significant unmet needs of patients and healthcare providers to be addressed.

As the first topical minocycline to be approved by the FDA for any condition, we believe that AMZEEQ may provide a new treatment alternative for patients and healthcare providers who are unsatisfied with their current therapies.

Limitations of oral minocycline for acne

Oral minocycline, such as Solodyn, has been widely prescribed for the treatment of moderate-to-severe acne.

According to the product label of Solodyn, inflammatory lesions were reduced by 44% at week 12 following use, and a positive effect on the

reduction of non-inflammatory acne lesions versus vehicle was not demonstrated.

According to its product label, the most common adverse systemic side effects of Solodyn include diarrhea, dizziness, drowsiness, indigestion, lightheadedness, loss of appetite, nausea, sore mouth, throat or tongue and vomiting.

In 2009, the FDA added oral minocycline to its Adverse Event Reporting System, a list of medications under investigation by the FDA, due to its severe side effects.

In 2011, we conducted a blind survey of 40 U.S.

dermatologists.

The results of the survey revealed that 90% of the dermatologists surveyed who prescribed oral minocycline were concerned about its side effects, and 76% of these dermatologists stated they would prefer prescribing a topical minocycline product over an existing oral medication, assuming the topical treatment was safe, effective and approved by the FDA.

ZILXI for papulopustular rosacea

ZILXI (1.5% minocycline foam), formerly known as FMX103, was approved by the FDA in May 2020 and became available in pharmacies nationwide in October 2020.

ZILXI is a once-daily novel antibiotic foam formulation of minocycline for the treatment of inflammatory lesions of rosacea in adults.

Similar to AMZEEQ, ZILXI leverages our MST™ technology and is the first minocycline product of any form to be approved by the FDA for use in rosacea.

We believe the anti-inflammatory properties of minocycline delivered in our innovative foam technology make ZILXI a highly appealing treatment option for rosacea patients.

Market Opportunity

Papulopustular rosacea is a chronic skin disease causing inflammatory lesions (papules and pustules) on the face.

It can create psychosocial burdens, such as embarrassment, anxiety and low self-esteem that adversely affect quality of life.

Rosacea is most frequently seen in adults between 30 and 60 years of age and affects more than 16 million people in the United States alone.

There is no known cure for rosacea and the exact root cause of the disease remains unknown, though both genetic and environmental factors are thought to have an impact on its outbreak.

Mild papulopustular rosacea is currently treated by topical antimicrobials (such as metronidazole, clindamycin and ivermectin) or azelaic acid, while the mainstays for the treatment of moderate-to-severe rosacea are systemic antibiotics such as minocycline and doxycycline.

The current U.S.

market size for treatment of rosacea in adults is estimated to be approximately $1 billion and 4.4 million prescriptions, and we believe that ZILXI provides a new treatment alternative for patients and healthcare providers who are unsatisfied with their current therapies.

FCD105 for moderate-to-severe acne vulgaris

Our combination product candidate FCD105 (minocycline 3% and adapalene 0.3%) is our proprietary novel topical combination foam formulation of minocycline and adapalene minocycline for the treatment of moderate-to-severe acne vulgaris.

Based on the Phase 2 data, as further discussed below, we believe FCD105 has the potential to be a best-in-class treatment for patients with acne.

FCD105 foam combines the bacteriostatic and anti-inflammatory properties of minocycline with the third-generation retinoid, adapalene, which acts in regulating the differentiation of follicular epithelial cells.

Oral minocycline and topical adapalene products are approved for use in the treatment of acne vulgaris in the United States, with the latter available in combination and as monotherapy.

Pending a successful development program, we intend to file an NDA for FCD105 under the FDA 505(b)(2) regulatory pathway, which is the same regulatory pathway we have pursued for AMZEEQ and ZILXI.

Market opportunity

For information about the market opportunity for alternative treatments for acne vulgaris, please see “—AMZEEQ for moderate-to-severe acne—Market opportunity.” We believe that our FCD105 product candidate for this indication, if approved, may provide a new treatment alternative for patients and healthcare providers who are unsatisfied with their current therapies, alongside AMZEEQ and as a complementary product.

Limitations of oral minocycline for acne

For information about the limitations of oral minocycline for acne, please see “—AMZEEQ for moderate-to-severe acne—Limitations of oral minocycline for acne.”

FCD105 clinical trials

FCD105 Phase II clinical trial

On September 19, 2019, we announced that the first patient had been enrolled in our Phase II clinical trial (Study FX2016-40) to evaluate the efficacy and safety of FCD105.

Study FX2016-40 is a prospective, randomized, double-blind, vehicle-controlled Phase 2 trial that enrolled 447 patients aged 12 years and older with a clinical diagnosis of moderate-to-severe acne vulgaris.

Patients were randomized to one of four treatment arms:

FCD105 foam, 3% minocycline foam, 0.3% adapalene foam, or vehicle foam and self-applied their assigned treatment once daily for 12 weeks.

The primary efficacy endpoints were:

(1) the proportion of patients achieving treatment success at week 12 based on an Investigator's Global Assessment (“IGA”) (success is defined as a score of 0 "clear" or 1 "minimal" and at least a two-grade improvement from baseline), (2) the mean change from baseline in inflammatory lesion counts in each treatment group at week 12, and (3) the mean change from baseline in non-inflammatory lesion counts in each treatment group at Week 12.

Safety evaluations include reported adverse events, local skin tolerability assessments, physical examinations and vital signs.

On June 2, 2020, we announced positive results from this Phase II clinical trial evaluating the efficacy and safety of FCD105.

FCD105 showed a highly statistically significant improvement compared to vehicle for the endpoints of (1) IGA treatment success (IGA score “0” or “1” and at least a two-grade improvement from baseline) and (2) absolute change from baseline in mean inflammatory counts at week 12.

The proportion of patients achieving IGA treatment success in the FCD105 treatment group was 35.9% compared to 15.7% of patients in the vehicle treatment group (p=0.0003).

Absolute reduction in inflammatory lesion counts at Week 12 was -19.4 (-64.1%) for the FCD105 treatment group compared to -15.58 (-50.9%) for the vehicle treatment group (p=0.0020).

The trial was not powered to demonstrate a statistical difference between FCD105 and either 3% minocycline foam or 0.3% adapalene foam treatments;

however, the majority of these comparisons did show a statistically significant improvement of FCD105 at week 12.

Numerical improvement was observed for FCD105 on all efficacy endpoints for these comparisons at week 12.

Absolute reduction in non-inflammatory lesion counts at week 12 was also assessed with a mean lesion count reduction of -24.94 (-51.0%) for the FCD105 treatment group compared to -22.87 (-45.9%) for the vehicle treatment group.

Although numerical improvement was shown, this was not statistically significant, which has been attributed to outlier results affecting both FCD105 and vehicle treatment groups.

Conversely, absolute reduction in non-inflammatory lesion counts at week 12 for FCD105 did show a statistically significant improvement compared to each of 3% minocycline foam and 0.3% adapalene foam.

The most commonly reported treatment-emergent adverse event in the trial was upper respiratory tract infection (4.9% in the vehicle treatment group), with dry skin being the most commonly reported cutaneous adverse event (3.6% in the 0.3% adapalene treatment group).

The majority of adverse events were assessed as mild in severity.

There were no serious adverse events.

FCD105 was comparably tolerated to vehicle in all local skin tolerability assessments with 93% or greater of severity scores being assessed as “none” or “mild” for burning/stinging, itching, dryness, scaling, erythema and hyperpigmentation.

In November 2020, we conducted an End-of-Phase 2 meeting with the FDA to confirm the key elements of the Phase III program to support a New Drug Application for FCD105.

We anticipate initiating our Phase III program in 2021.

Our Portfolio of Product Candidates

FMX114 for Mild-to-Moderate Atopic Dermatitis

In March 2021, we announced development plans for FMX114 for the potential treatment of mild-to-moderate atopic dermatitis.

FMX114 is a fixed combination of tofacitinib, which is a pan-Janus kinase (JAK) inhibitor, and fingolimod, a sphingosine 1-phosphate receptor modulator.

FMX114 attempts to address both the source and cause of inflammation in atopic dermatitis and support skin barrier recovery.

FMX114, our first product candidate designed to target atopic dermatitis, will be evaluated in a Phase 2a proof-of-concept study expected to begin in the third quarter of 2021.

Serlopitant for Pruritus

Prior to the Merger, the Company was focused on the development and commercialization of serlopitant for the treatment of pruritus, or itch, associated with various conditions, such as prurigo nodularis and psoriasis.

Serlopitant is a highly selective small molecule inhibitor of the neurokinin 1 receptor, or NK1-R, given as a once-daily, oral tablet.

On April 6, 2020, we announced that our Phase III PN Trials evaluating the safety and efficacy of once daily oral serlopitant for the treatment of pruritus associated with prurigo nodularis (study MTI-105 and study MTI-106) did not meet their respective primary endpoint of demonstrating statistically significant reduction in pruritus in patients treated with serlopitant compared to placebo based upon a 4-point improvement responder analysis.

Following the receipt of such results, the Company has decided to discontinue the internal development of serlopitant.

In March 2021, we announced development plans for FMX114 for the potential treatment of mild-to-moderate AD.

FMX114 is a fixed combination of tofacitinib and fingolimod.

Tofacitnib reduces inflammation intracellularly by inhibiting cytokine release from inflammatory cells.

Fingolimod reduces inflammation by inhibiting migration of inflammatory cells and may directly support upregulation of filaggrin.

By combining tofacitinib and fingolimod in a topical gel formulation, FMX114 attempts to address both the source and cause of inflammation in AD and support skin barrier recovery.

Preclinical Data

FMX114 was evaluated in a well-known preclinical model in which dorsal depilated BALB-C mice were dosed with 100µl topical dinitrochlorobenzene ("DNCB") solution to induce a type 2 inflammatory response in the skin with AD-like pathology.

There was a 32-day induction phase followed by seven days of both DNCB and investigational drug concomitant treatment.

Two doses of FMX114 (0.6% tofacitinib + 0.01% fingolimod and 0.3% tofacitinib + 0.02% fingolimod) were compared with tofacitinib monotherapy, fingolimod monotherapy, triamcinolone (steroid) 0.1%, and DNCB control.

Key findings from the study include the following:

• Treatment with FMX114 0.6% tofacitinib + 0.01% fingolimod combination gel resulted in an 89% reduction in the modified atopic dermatitis index score (mADI) relative to the DNCB control group at day 7.

• Both FMX114 doses had comparable efficacy to triamcinolone 0.1% cream, a product widely used in the treatment of AD.

• Animal body weight was also evaluated to help determine tolerance to treatment.

◦ In both FMX114 treatment groups, the animals experienced body weight gains comparable to DNCB negative control and vehicle-treated healthy control animal groups.

◦ Animals treated with triamcinolone 0.1% cream lost approximately 21% of their body weight compared to the animals treated with FMX114.

Phase 1b /2a Study

In October 2021, we enrolled the first patient in our Phase 1b/2a clinical trial evaluating FMX114 for the treatment of mild-to-moderate AD.

After considering the Food and Drug Administration's (the "FDA") recent review of the oral JAK inhibitor class for the treatment of several systemic autoimmune diseases, we believe it was important to characterize the preliminary safety and pharmacokinetic profile of FMX114 before advancing to the Phase 2a portion of the study.

On January 19, 2022, we announced the Phase 1b data showing that systemic bioavailability of tofacitinib and fingolimod in topical formulation was substantially lower when compared to their oral equivalents.

Specifically, the mean plasma C max of tofacitinib calculated on treatment day 1 and day 14 were approximately 50-fold and 1500-fold lower, respectively, when compared to the equivalent data for the lowest commercially available adult oral dose of tofacitinib (XELJANZ 5mg BD) and the pharmacokinetics of fingolimod and active metabolite, fingolimod 1-phosphate, could not be determined as all whole blood concentrations were below the assay LLOQ (0.08ng/ml for both analytes).

We expect to receive topline results from our Phase 2a study evaluating the safety and efficacy of FMX114 for mild-to-moderate AD in the second quarter of 2022.

Market Opportunity

AD is a skin disorder that causes long-term inflammation of the skin, resulting in itchy, red, swollen and cracked skin.

Onset can occur at any age, but is more common in infants and children.

Of the approximately 30 million people diagnosed with AD in the United States, approximately 19 million are characterized as mild-to-moderate disease severity.

In 2019, 7.1 million patients used prescription medication to treat AD, with topical glucocorticosteroids accounting for 8 of the 10 highest prescribed topical products for AD.

We believe FMX114, if approved, can provide an attractive treatment option for physicians and patients by demonstrating efficacy that is comparable to that of a glucocorticosteroid with an improved safety profile.

InhiBET™ BET Inhibitor Platform

As a result of our partnership with In4Derm, we have exclusive worldwide rights to research, develop and commercialize products containing certain BET inhibitor compounds for the treatment of any disease, disorder or condition in humans.

See "—Development and License Agreements—In4Derm License Agreements." Utilizing our InhiBET TM platform and through our preclinical activities, we are evaluating the impact that BET inhibitor compounds have on regulating pro-inflammatory cytokines.

Based on this evaluation, we are targeting indications whose pathogenesis is linked to the proliferation of these specific cytokines, and we are developing formulations designed to maximize the anti-inflammatory effect of the drug while minimizing any potential safety concerns.

Through our InhiBET™ product development platform, we believe we can demonstrate the potential utility of these BET inhibitor compounds and develop therapies for a variety of immuno-inflammatory conditions .

VYN201 - Locally Administered Pan-BD BET Inhibitor

Our initial BET inhibitor candidate in development is VYN201.

VYN201 was developed using the InhiBET™ platform and is a locally administered pan-BD BET inhibitor.

It is a first-in-class “soft” pan-BD BET inhibitor that is being developed to address diseases involving multiple, diverse inflammatory cell signaling pathways.

Our goal with the VYN201 program is to develop a therapy that delivers a potent, localized anti-inflammatory effect and is rapidly cleared through the body’s metabolic process so as to avoid systemic absorption.

To date, we have conducted several preclinical models which have demonstrated VYN201's anti-fibrotic activity and the ability to significantly reduce the expression of certain cytokines relevant to certain autoimmune diseases.

Based on such data, we believe VYN201 has the potential to be highly versatile by serving as a locally acting therapy with low systemic exposure.

We are continuing to evaluate VYN201 in a variety of preclinical models and will announce an initial indication for VYN201 following such evaluation.

The following summarizes preclinical data received to date for the VYN201 program:

Th17 Inflammation Model

In October 2021, we announced preclinical data showing that VYN201 significantly reduced the expression of several key pro-inflammatory cytokines relevant to Th17-mediated autoimmune diseases in an animal model and an ex vivo human tissue study.

The pathogenesis of many autoimmune diseases is linked to the proliferation and activity of Th17 cells.

VYN201 was evaluated in a well-established preclinical model in which dorsal depilated mice were topically dosed with imiquimod cream to induce a Th17 inflammation pathology over a 7-day induction phase.

A further 7-day treatment phase evaluated three doses of VYN201 (0.001%, 0.01% and 0.1% concentrations) compared to a class 1 super-potent glucocorticosteroid product positive control (clobetasol propionate 0.05% cream) and vehicle control.

Further, an imiquimod-naive control group (healthy control group) was included for VYN201 vehicle treatment.

Key findings from the study include:

• A dose-dependent improvement in the signs and symptoms of inflammation was observed for VYN201 treatment groups.

◦ Treatment with VYN201 0.1% resulted in a 94% reduction in the composite inflammation severity score of erythema and scaling, relative to the vehicle control group at treatment day 7.

◦ Animals treated with VYN201 0.1% experienced a reduction in inflammation comparable to those treated with the class 1 super-potent glucocorticosteroid clobetasol propionate 0.05% cream.

◦ Corresponding dose-dependent reductions were observed across all treatment groups in Th17-relevant cytokine biomarkers of inflammation, including IL-1β, IL-17, IL-6, IL-36 and TNFα for VYN201-treated animals.

• Treatment with VYN201 at all concentrations appeared well-tolerated based on the following observations:

◦ Animals treated with VYN201 continued to gain body weight in a similar manner to the healthy control group, whereas animals treated with clobetasol propionate cream 0.05% had a mean body weight loss of approximately 17% compared to the animals treated with VYN201 0.1%.

◦ Animals treated with VYN201 had no evidence of dermal tolerance issues, consistent with the healthy control group, whereas animals treated with clobetasol propionate 0.05% cream had significant skin atrophy as evidenced by deep wrinkling and rhytides (fine wrinkles), marked dermal translucency and loss of elasticity.

Fibrotic Tissue Model

In November 2021, we announced preclinical data showing that VYN201 demonstrated improvements in reducing fibrotic tissue mass and overall skin repair outcomes with no negative impact on healing time.

In the preclinical study, duplicate identical skin incisions were induced on the flanks of hairless mice under anesthesia.

The animals were topically dosed once daily with either 100mg VYN201 vehicle, VYN201 1%, or a hydroalcoholic gel (a negative control known to delay healing) until each lesion had completely healed.

Key findings from the study include:

• As early as treatment day 5, and consistent with the vehicle control, animals treated with VYN201 1% had a statistically significant decrease (improvement) in global external lesion severity score, a comprehensive evaluation of length, width, swelling and visibility of lesions, compared to those treated with hydroalcoholic gel.

• Consistent with the vehicle control, lesions treated with VYN201 1% completely healed (mean time to heal:

15.5 days) approximately 5 days earlier compared to those treated with hydroalcoholic gel (mean time to heal:

• Animals treated with VYN201 1% had a significantly lower global internal lesion severity score than those treated with VYN201 vehicle or hydroalcoholic gel, indicative of an improved internal lesion outcome and a positive effect on reducing the formation of fibrotic tissue mass in the lesion bed.

• By the end of treatment, healed lesions treated with VYN201 1% appeared less visually distinct and more macular in nature with an improved overall aesthetic outcome compared to the other treatments.

• VYN201 vehicle and VYN201 1% appeared to be well-tolerated both within the lesion sites, based on the absence of irritation, and in general throughout the treatment period.

Vitiligo Model

In March 2022, we announced positive preclinical data in an ex vivo skin model of vitiligo.

In the preclinical model, VYN201 reduced the expression of key pro-inflammatory biomarkers relevant to the pathogenesis of vitiligo, and demonstrated marked reduction in melanocyte loss.

The objectives of this study were to evaluate the potential of VYN201 to (i) reduce Matrix Metalloproteinase-9 (“MMP-9”) secretion (reducing the secretion of MMP-9 allows for melanocyte stabilization and limits loss of melanocytes/depigmentation in vitiligo);

(ii) reduce soluble adhesion molecule, E-cadherin (soluble E-cadherin is a biomarker of melanocyte loss due to degradation of matrix-bound E-cadherin by MMP-92);

(iii) minimize the loss of melanocytes by assessing melanin pigment content and (iv) affect the expression of genes commonly associated with melanogenesis (melanin synthesis, melanosome maturation and transport).

Key findings from the study include:

• VYN201 produced a dose dependent reduction in MMP-9 and soluble E-cadherin:

◦ Applications with VYN201 at each of the 0.1% and 1% concentrations resulted in statistically significant reductions in MMP-9 when compared to vehicle, with a 94.7% reduction in secreted MMP-9 for the VYN201 1% treatment (p<0.0001).

◦ Applications with VYN201 at each of the 0.1% and 1% concentrations resulted in statistically significant reductions in the release of soluble E-cadherin relative to vehicle, with a 32.6% reduction in soluble E-cadherin for the VYN201 1% concentration (p<0.01).

◦ VYN201 0.1% and 1% were both numerically superior to topical ruxolitinib cream, 1.5% in reducing the secretion of MMP-9 and soluble E-cadherin.

• VYN201 at each of the 0.1% and 1% concentrations substantially reduced the loss of melanin pigment in the basal layers of skin:

◦ Quantified melanin levels for VYN201 1% treated skin cultures were approximately 10-fold higher as compared to VYN201 vehicle treated skin cultures (p=0.03).

• VYN201 positively impacted the expression of several genes implicated in the pathogenesis of vitiligo:

◦ VYN201 0.1% and 1% resulted in a statistically significant reduction in the expression of inflammatory cytokines IL1-α and IL1-β relative to vehicle (VYN201 1%, p<0.0005).

These cytokines are well recognized as significant contributors to inflammation in vitiligo and their over-expression correlates with disease progression.

◦ VYN201 significantly upregulated the WNT signaling pathway at the 0.1% and 1% concentrations relative to vehicle, with a 10-fold increase observed at the 1% concentration (p<0.01).

The WNT family of proteins and its signaling pathway is recognized as an important indicator of melanocyte regeneration .

VYN202 - Selective BET Inhibitor

VYN202 is exploring multiple BET inhibitor compounds that are highly selective for bromodomain 2 ("BD2").

By selectively inhibiting BD2, we believe VYN202 could have a more targeted anti-inflammatory effect with an improved benefit/risk profile.

We are diligently working with In4Derm to develop a lead molecule for the VYN202 program.

Once a lead candidate has been selected, we intend to exercise our option with respect to these BET inhibitor compounds and commence an IND-enabling preclinical safety program.

See "—Development and License Agreements—In4Derm License Agreements."

Divestiture of Minocycline Business

On January 12, 2022, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Journey Medical Corporation (“Journey”) pursuant to which we divested our Molecule Stabilizing Technology ("MST") franchise, including AMZEEQ, ZILXI, and FCD105, to Journey (the “Sale”).

Journey acquired, among other things, the intellectual property related to the MST assets, inventory as of closing, and our rights and obligations under the license agreement with respect to the greater China territory.

In addition, Journey agreed to assume certain liabilities, including, among others, those arising from ourpatent infringement suit initiated against Padagis Israel Pharmaceuticals Ltd.

The Sale was consummated concurrently with the execution of the Purchase Agreement.

Pursuant to the Purchase Agreement, we received an upfront payment of $20.0 million and we are entitled to an additional $5.0 million on the one-year anniversary of the closing of the transaction.

We are also eligible to receive sales milestone payments of up to $450.0 million in the aggregate upon the achievement of specified levels of net sales on a product-by-product basis, beginning with annual net sales exceeding $100,000,000 (with products covered in three categories (1) AMZEEQ (and certain modifications), (2) ZILXI (and certain modifications), and (3) FCD105 and other products covered by the patents being transferred, including certain modifications).

In addition, we are entitled to receive certain payments from any licensing or sublicensing of the assets by Journey outside of the United States.

The Purchase Agreement includes customary representations and warranties, as well as indemnification rights for breaches of representations, warranties, and covenants, as well as certain other matters, subject to customary deductibles, caps, and other limitations.

Manufacturing

We do not own or operate manufacturing facilities for the production of AMZEEQ, ZILXI or any of our product candidates.

We currently contract with third party manufacturers for all of our required raw materials, active ingredients and finished products for our preclinical research and clinical trials for our product candidates and for the supply of finished product for commercial use.

We currently have no plans to establish our own manufacturing capabilities and plan to continue to rely on third-party manufacturers for any future trials of our product candidates and commercialization of our products.

We, together with our contract manufacturing organizations, or CMOs, have developed the validation processes, methods, tests and/or controls suitable for commercial scale manufacturing of our products and various product candidates and for defining their properties.

Changes in manufacturing scale or the manufacturer may require changes to processes, methods, tests and/or controls, which may take time to develop, validate and implement.

On October 21, 2019, we entered into a Contract Manufacturing and Supply Agreement with ASM Aerosol-Service AG, or ASM, pursuant to which ASM agreed to exclusively manufacture and supply AMZEEQ and ZILXI for a specified price per can of product.

Pursuant to the agreement, ASM has agreed to manufacture and supply all of our commercial needs for AMZEEQ and ZILXI on an exclusive basis for a period of four years, subject to certain exceptions.

We are not required to purchase a minimum amount of the products under the ASM agreement.

In addition, ASM will not be permitted to manufacture or supply to a third party any topical product containing minocycline or minocycline hydrochloride during the term of the ASM agreement and for two years after the termination or expiration of the ASM agreement.

We also have supply agreements in place for the commercial supply of the drug substance minocycline hydrochloride, which is contained in our products and product candidates.

We currently have a development contract and quality agreement in place with one CMO for the manufacturing of FCD105 for our clinical trials.

Development stage and commercial quantities of any products that we develop need to be manufactured in facilities, and by processes, that comply with the requirements of the FDA and the regulatory agencies of other jurisdictions in which we seek approval.

We currently have no plans to establish our own manufacturing capabilities and plan to continue to rely on third-party manufacturers for any future trials of our product candidates.

We, together with our contract manufacturing organizations, or CMOs, have developed the validation processes, methods, tests and/or controls suitable for the manufacturing of our product candidates and for defining their properties.

Development stage

quantities of any products that we develop need to be manufactured in facilities, and by processes, that comply with the requirements of the FDA and the regulatory agencies of other jurisdictions in which we may seek approval.

We require all of our CMOs to comply with these requirements and currently employ internal and external resources to manage our manufacturing contractors.

The relevant manufacturers of our drug products for commercial production, and product candidates for our current preclinical and clinical trials, have advised us that they are compliant with both the FDA’s Good Laboratory Practices, or GLP, and cGMP.

Our products, AMZEEQ and ZILXI, and our product candidates, if approved, may not be able to be produced in sufficient commercial quantities, in compliance with regulatory requirements or at an acceptable cost.

We and our contract manufacturers are, and will be, subject to extensive governmental regulation in connection with the manufacture of any pharmaceutical products or medical device constituent components.

We and our contract manufacturers must ensure that all of the processes, methods and equipment are compliant with cGMP and the FDA’s GLP for drugs on an ongoing basis, as mandated by the FDA and foreign regulatory authorities, and conduct extensive audits of vendors, contract laboratories and suppliers.

Commercialization

We have a scalable commercial infrastructure to support the sales of AMZEEQ, ZILXI and our product candidates, including FCD105, if approved, in the United States, and intend to partner with third parties outside the United States to launch our products in other geographic territories or therapeutic classes.

See “—Development and License Agreements—Cutia License for Minocycline Products.” Our market strategy for AMZEEQ and ZILXI, physician targeting models, and portfolio strategies are designed to capitalize on infrastructure synergies.

Our commercial sales force of approximately 50 representatives is responsible for selling both AMZEEQ and ZILXI and specifically targets dermatologists and other healthcare practitioners who diagnose and manage dermatologic conditions.

We also have a centralized marketing, market access, supply chain and distribution infrastructure.

For the year ended December 31, 2020, a significant percentage of our sales were to three national wholesale drug distributors.

In the fourth quarter of 2020, we expanded our distribution capabilities with respect to AMZEEQ and ZILXI.

In addition to distributing our products through national wholesalers, we have established direct relationships with certain independent and specialty pharmacies which account for a significant portion of volume in dermatology.

We believe that dermatologists frequently rely on prescribing acne and rosacea products through independent and specialty pharmacies to ensure seamless access to the products they and their patients desire.

As a result, we believe that these relationships will help further reduce the barriers for patients to initiate and maintain therapy with our products.

Additionally, continuous efforts are deployed to identify unmet needs in the dermatology market, assess their commercial potential and advise on the prioritization of the development of our future product candidates accordingly.

The relevant manufacturers of our product candidates for our current preclinical and clinical trials have advised us that they are compliant with both the FDA’s Good Laboratory Practices, or GLP, and cGMP.

Development and License Agreements

Parallel to the development of our product candidates, we have entered into development and license agreements with various pharmaceutical companies.

Certain licenses combine our emulsion-based foam technology with drugs selected by the licensee to create new product offerings for patients.

Each license agreement entitles us to service payments, contingent payments and royalties from sales of any new products that are commercialized.

Each agreement is exclusive only to the specific drug that is licensed, leaving us the rights to commercialize and develop products with other drugs for the same indications using our

proprietary foam technology while also allowing the licensee to apply the new products to any indication with its specific drug.

A summary of our material license agreements is set forth below.

Cutia License for Minocycline Products

On April 21, 2020, we entered into a License Agreement with Cutia (the “Cutia License Agreement”).

Pursuant to the Cutia License Agreement, we granted Cutia an exclusive license to obtain regulatory approval of and commercialize AMZEEQ and ZILXI in mainland China, Taiwan, Hong Kong and Macau (each a “Region” and collectively, the “Territory”).

In addition, Cutia has been granted an exclusive license to obtain regulatory approval of and commercialize FCD105 (together with AMZEEQ and ZILXI, the “Licensed Products”) in the Territory if and as approved by the FDA in the United States.

We have agreed to supply the finished Licensed Products to Cutia for clinical and commercial use at an agreed price.

We received an upfront cash payment of $10.0 million pursuant to the Cutia License Agreement.

We will be entitled to receive an additional $1.0 million following the first regulatory approval of any of the Licensed Products by the National Medical Product Administration of the People’s Republic of China.

In addition, we will be entitled to receive a royalty on net sales of the Licensed Products in the Territory each quarter.

The royalties will be payable on a Licensed Product-by-Licensed Product and Region-by-Region basis and will be paid until the later of (i) ten years from the date of first commercial sale of such Licensed Product in such Region and (ii) the expiration of the last claim of our patent covering such Licensed Product in such Region.

We may terminate the Cutia License Agreement if, among other things, Cutia challenges the validity, enforceability or scope of any of our licensed patents in respect of the Licensed Products in a litigation or other court proceeding, subject to certain exceptions.

Cutia may terminate the Cutia License Agreement at any time upon 90 days’ prior written notice.

In addition, Cutia may terminate the Cutia License Agreement if a regulatory authority in the Territory has ordered Cutia to stop all sales of Licensed Products in the Territory due to a safety concern, subject to certain exceptions.

The Cutia License Agreement also contains representations and warranties customary for this type of agreement, including with respect to intellectual property rights.

In4Derm License Agreements

On April 30, 2021, we entered into an Evaluation and Option Agreement (the “Option Agreement”) with In4Derm.

In4Derm is a spin-out of the University of Dundee’s School of Life Sciences and has discovered and is developing proprietary BET inhibitors for the treatment of immunology and oncology conditions.

Pursuant to the Option Agreement, In4Derm granted us an exclusive option to obtain certain exclusive worldwide rights to research, develop and commercialize products containing In4Derm’s BET inhibitor compounds for the treatment of any disease, disorder or condition in humans.

Pursuant to the Option Agreement, we agreed to use commercially reasonable efforts to stabilize, develop and manufacture a product with a pan-BD BET inhibitor as its active ingredient and In4Derm agreed to provide a mutually agreed data package and select an NCE development candidate from its highly selective BET inhibitor compounds (the "Oral BETi Compounds").

The Company paid a $1.0 million non-refundable cash payment to In4Derm upon execution of the Option Agreement, 50% of which was to be used by In4Derm in the development of the Oral BETi Compounds.

Locally Administered Pan-BD BET Inhibitor Program (VYN201)

On August 6, 2021, we exercised our option with respect to the VYN201 program and, on August 9, 2021, the parties entered into a License Agreement (the “License Agreement”) granting VYNE a worldwide, exclusive license that is sublicensable through multiple tiers to exploit certain of In4Derm’s pan-BD BET inhibitor compounds.

We have the sole responsibility for development, regulatory, marketing and commercialization activities to be conducted for the licensed products at our sole cost and discretion.

We are required to use commercially reasonable efforts to develop and, if approved, commercialize such products.

Pursuant to the License Agreement, a joint development committee consisting of one representative from each party reviews the progress of the development plan for the licensed products.

Pursuant to the License Agreement, we may develop a product that contains or incorporates a specific BET inhibitor, whether alone or in combination with other active ingredients, in any form, formulation, presentation, or dosage, and for any mode of administration.

We made a $0.5 million cash payment to In4Derm in connection with entering into the License Agreement.

Pursuant to the License Agreement, we have agreed to make cash payments of up to an aggregate of $15.75 million upon the achievement of specified clinical development and regulatory approval milestones with respect to each licensed product in the U.S.

In4Derm is entitled to additional milestones upon the achievement of regulatory approvals in certain jurisdictions outside the U.S.

In addition, with respect to any products we commercialize under the License Agreement, we will pay tiered royalties to In4Derm on net sales of such licensed products by us, our affiliates, or sublicensees, of 5%, 7.5% and 10% based on tiered annual net sales bands subject to specified reductions.

We are obligated to pay royalties until the later of (1) the tenth anniversary of the first commercial sale of the relevant licensed product, (2) the expiration of the last valid claim of the licensed patent rights covering such licensed product in such country and (3) the expiration of regulatory exclusivity for the relevant licensed product in the relevant country, on a licensed product-by-licensed product and country-by-country basis.

Selective BET Inhibitor Program (VYN202)

Under the terms of the Option Agreement, we can exercise our option with respect to the Oral BETi Compounds at any time until it expires upon the earlier of (i) 14 days following the delivery of an agreed data package and selection of a lead NCE candidate by In4Derm and (ii) June 30, 2022.

We expect to exercise our option following the selection of a lead candidate for the program.

Upon exercise of the option, the parties will sign a license agreement (the “Oral License Agreement”) and we will pay In4Derm a $4.0 million cash payment.

The Oral License Agreement will include cash payments payable to In4Derm of up to an aggregate of $43.75 million upon the achievement of specified clinical development and regulatory approval milestones with respect to each licensed oral product in the U.S.

In4Derm is entitled to additional milestones upon the achievement of regulatory approvals in certain jurisdictions outside the U.S.

In addition, with respect to any products we commercialize under the Oral License Agreement, we will pay tiered royalties to In4Derm on net sales of such licensed products by us, our affiliates, or sublicensees, of 5%, 7.5% and 10% based on tiered annual net sales bands subject to specified reductions.

LEO Pharma A/S for Finacea® Foam

In September 2015, Bayer HealthCare AG, or Bayer, began selling in the United States a product branded Finacea, based on our foam technology.

Finacea is a prescription topical drug which was developed through a collaboration between Bayer and Foamix.

It is the first prescription product developed using our proprietary technology that has been approved by the FDA for sale in the United States.

Bayer listed in the Orange Book several patents that were licensed from us in connection with the development of Finacea.

According to our initial license agreement with Bayer, we are entitled to receive royalties and certain contingent payments upon the commercialization of Finacea.

On September 4, 2018, LEO Pharma A/S ("Leo") acquired Finacea from Bayer.

As part of the acquisition, our license agreement with Bayer with respect to Finacea was assigned to LEO.

LEO has assumed all of the rights and responsibilities of Bayer under the license agreement as it relates to Finacea, including the payment of royalties to us and rights and obligations related to patent litigation matters.

In April 2019, LEO informed us that the batches of API intended for use in Finacea and produced by a contract manufacturer had failed to meet the required specifications for the finished product.

As a result, LEO was unable to manufacture the Finacea product for sale, which, in turn, stopped the royalty payments from LEO to us during the time of the supply interruption.

In April 2020, LEO remedied the supply issues and resumed commercial sales in the United States.

This supply chain issue for Finacea was unrelated to our manufacturing, production or supply of AMZEEQ, ZILXI, FCD105 or any of our other product candidates.

In September 2015, Bayer HealthCare AG, or Bayer, began selling in the United States a product branded Finacea® Foam, based on our legacy foam technology.

Finacea is a prescription topical drug which was developed through a collaboration between Foamix and Bayer.

Bayer sold the product to LEO Pharma A/S ("LEO") in 2018.

Pursuant to our license agreement with LEO for Finacea, we are entitled to receive royalties on net sales of Finacea.

In 2021, we received (or became entitled to receive) a total of $0.9 million in royalties from sales of Finacea from LEO.

Together with LEO, we resolved litigation against Taro, Teva and Perrigo for their alleged infringement of certain of our patents following their submission of an ANDA to the FDA seeking approval to manufacture and sell a generic version of Finacea.

This settlement concludes the litigation relating to Finacea.

See also “Risk Factors—Risks Related to Our Intellectual Property—We have received notice letters of ANDAs submitted for drug products that are generic versions of Finacea foam and we have been involved in lawsuits to protect and enforce our patents, and while we have now settled all these lawsuits we may in the future be involved in other lawsuits to protect and enforce our patents, for example, if we receive new notice letters of submission of an ANDA to the FDA seeking approval to manufacture and sell a generic version of a product with Orange Book listed patents.”

Merck License for Serlopitant

In December 2012, Menlo entered into a license agreement with Merck for exclusive worldwide royalty free rights for the development and commercialization of serlopitant and two other NK1 R antagonists in all human diseases, disorders or conditions, except for in the field of treatment or prevention of nausea or vomiting, which was retained by Merck.

We paid Merck an upfront licensing fee of $1.0 million and issued to Merck an aggregate of 1,243,168 shares of our common stock.

In addition, we have agreed to make aggregate payments of up to $25.0 million upon the achievement of specified development and regulatory milestones for serlopitant.

Furthermore, if we choose to pursue the development of any other non-serlopitant product pursuant to this agreement, we may owe up to an aggregate of $50.0 million of additional payments upon the achievement of specified development and regulatory milestones.

In 2018, upon dosing our first patient in our Phase 3 clinical trial for serlopitant for the treatment of pruritus associated with PN, we paid a milestone payment of $3.0 million to Merck.

We are responsible for the prosecution and enforcement of patents licensed under the agreement.

The agreement contains customary representations, warranties, and indemnities, and terminates on the date of achievement of all of milestones set forth in the agreement, after which our licenses become fully paid and perpetual.

Each party may also terminate the agreement for material breach by the other party or for certain bankruptcy or insolvency related events, and we may terminate the agreement without cause at any time upon advance written notice to Merck.

The Company has decided to discontinue the internal development of serlopitant following the receipt of the results of the Phase III PN Trials in April 2020.

Additional Research and Development

In addition to AMZEEQ for the treatment of inflammatory lesions of non-nodular moderate-to-severe acne vulgaris in patients 9 years of age and older, ZILXI for the treatment of rosacea in adults, FCD105 for the treatment of moderate-to-severe acne vulgaris and licensed products resulting from our development and license agreements with various pharmaceutical companies, we are developing product candidates for various indications to which we own worldwide rights, and which are based on formulations and adaptations of our patented, versatile foam platforms or other dosage forms and/or new technology.

We intend to selectively proceed into clinical trials with these formulations under the FDA’s 505(b)(2) regulatory pathway wherever necessary to expedite FDA approval, and according to our identification of unmet needs and potential market opportunities.

For the fiscal year ended December 31, 2020, our research and development expenses totaled $43.5 million.

Prior to the Merger, our research and development expenses totaled $51.2 million and $64.5 million in 2019 and 2018, respectively.

For the fiscal years ended December 31, 2021 and 2020, our research and development expenses totaled $25.0 million and $43.5 million, respectively.

In the ordinary course of business, we enter into agreements with third parties such as contract research organizations, or CROs, medical institutions, clinical investigators and contract laboratories, to conduct our clinical trials and aspects of our research and preclinical testing.

These CROs and other third parties provide us with project management, monitoring, regulatory consulting and investigative services, and their fees are part of our research and development expenses.

Intellectual Property – our Products and Pipeline Clinical Trial Product Candidates

Our intellectual property and proprietary technology are essential to the development, manufacture and sale of our topical AMZEEQ and ZILXI foam products, our phase III ready FCD105 combination product and our clinical stage future pipeline product candidates.

We are committed to protecting our intellectual property rights, core technologies and other know-how, through a combination of patents, trademarks, trade dress, trade secrets, copyrights, non-disclosure and confidentiality agreements, common interest agreements to protect privileged confidential information, licenses, assignments of invention and other contractual arrangements with our employees, scientific advisors, consultants, partners, suppliers, customers and others.

Intellectual Property

Our intellectual property and proprietary technology are essential to the development of our pipeline product candidates.

We are committed to protecting our intellectual property rights, core technologies and other know-how, through a combination of patents, trademarks, domain names, trade dress, trade secrets, copyrights, non-disclosure and confidentiality agreements, common interest agreements to protect privileged confidential information, licenses, assignments of invention and other contractual arrangements with our employees, scientific advisors, consultants, partners, suppliers, customers and others.

Such agreements and rights may however be breached, and we may not have adequate remedies for any breach.

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To the extent that our employees, scientific advisors, consultants, partners or other contractors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

Additionally, we rely on our research and development program, clinical trials, know-how and marketing and distribution programs to advance our products.

Our commercial success may depend on our ability to defend and assert our intellectual property and other rights, which is uncertain.

Our commercial success will also depend at least in part on not infringing the proprietary rights of third parties.

It is uncertain whether the issuance of any third party patent would require us to alter our development or commercial strategies, alter our drugs or processes, obtain licenses or cease certain activities.

Our breach of any license agreements or failure to obtain a license to proprietary rights that we may require to develop or commercialize our current and future drugs may have a material adverse impact on us.

If third parties prepare and file patent applications in the United States that also claim technology to which we have rights, we may have to participate in interference or other proceedings in the United States Patent and Trademark Office,

or USPTO, to determine priority of invention.

Our success will also depend at least in part on not infringing the proprietary rights of third parties.

While we are diligent in our efforts to investigate proprietary rights of third parties, no search is completely exhaustive.

For example, a relevant patent or published application could escape detection because of unusual terminology or use of terminology that is still evolving in developing technological fields.

Also, databases used in the searches may not be entirely complete.

It is uncertain whether the issuance of any third party patent would require us to alter our development strategies, alter our processes, obtain licenses or cease certain activities.

Our breach of any license agreements or failure to obtain a license to proprietary rights that we may require to develop our current and future drugs may have a material adverse impact on us.

We may also have to participate in court proceedings or arbitration to defend and assert our rights.

As of December 31, 2020, the combined portfolio of the merged company had a patent portfolio of over 215 granted patents in certain countries worldwide, including over 90 granted patents in the United States.

Additionally, as of December 31, 2020, we had a number of pending patent applications worldwide, of which over 25 are pending in the United States.

Our portfolio also includes a significant number of issued patents from licenses.

The portfolio describes and claims topical delivery platforms, including various foam-based platforms, and other technology such as patents and applications in relation to serlopitant, its uses and compositions for oral delivery.

Our main foam-based platform, which is the subject of various patents and pending patent applications, relates to our minocycline foam products, and utilizes our proprietary Molecule Stabilizing Technology (MST)™ platform.

We also have granted patents in the United States for our various other foam platforms, such as emulsion foam, hydrophobic foam, hydro-alcoholic foam, and aqueous foam and we have additional patents directed to other technology.

AMZEEQ and ZILXI

Our most important issued patents are various U.S.

patents relating to our AMZEEQ and ZILXI foam products, and to our Phase III-ready topical combination foam candidate FCD105.

We have a number of issued U.S.

patents listed in the FDA’s Orange Book in relation to ZILXI and AMZEEQ.

Subject to payments of the appropriate maintenance fees, the patents related to ZILXI expire in 2030 and the patents related to AMZEEQ expire in 2030 and 2037.

These patents generally relate to a composition of matter comprising a claim to a minocycline formulation or to a formulation of a tetracycline antibiotic, which can include minocycline or doxycycline, or to methods of treatment using the compositions and therefore, may be less protective than patents that claim a new drug.

We also have granted patents and pending patent applications in a number of foreign jurisdictions with specifications relating to AMZEEQ, ZILXI, or FCD105.

AMZEEQ, ZILXI and FCD105 are based on a different foam technology platform and are supported by different patents and applications than those patents listed in the Orange Book for the foam technology used in Finacea foam.

We have discontinued the internal development of serlopitant.

We currently own and have licensed various granted patents related to serlopitant in the United States.

We have a granted patent licensed from Merck with claims in relation to the compound serlopitant and to a composition of matter comprising serlopitant that is expected to expire in 2025 in the United States, if the appropriate maintenance fees are paid.

Patent applications in the same family were also filed internationally and patents have been granted in multiple foreign jurisdictions.

We additionally have granted patents in the United States claiming methods-of-use for serlopitant that are expected to expire in 2033 in the United States, if the appropriate maintenance fees are paid.

From this family we also have patents granted in several foreign jurisdictions and patent applications pending in the United States and in various foreign jurisdictions.

An additional patent term of up to five years may potentially be awarded in the United States for one of the serlopitant U.S.

patents as a result of the patent term extension provision of the Hatch Waxman Act, if regulatory approval of serlopitant is obtained.

Further, depending on national laws in certain foreign jurisdictions, an extension of patent term may also potentially be available if regulatory approval of serlopitant is obtained in those countries.

For example, a supplementary protection certificate, if obtained in Europe, can provide up to a maximum five years of market exclusivity.

Likewise, in Japan, the term of a patent may be extended by a maximum of five years in certain circumstances.

The medical and pharmaceutical industries in which we operate are intensely competitive and subject to significant technological change and changes in practice.

While we believe that our innovative technology, knowledge, experience and resources provide us with competitive advantages, we may face competition from many different sources with respect to AMZEEQ and ZILXI and our other pipeline products or any product candidates that we may seek to develop or commercialize in the future.

Possible competitors may include pharmaceutical companies, academic and medical institutions, governmental agencies and public and private research institutions.

These prospective competitors have the ability to effectively discover, develop, test and obtain regulatory approvals for products that compete with ours, as well as the ability to effectively commercialize, market and promote approved products, including communicating the effectiveness, safety and value of products to actual and prospective customers and medical staff.

Currently marketed products that could compete with AMZEEQ include:

(i) oral products such as Solodyn (minocycline, Bausch Health), Minocin (minocycline, Bausch Health), Ximino (minocycline extended release, Journey Medical Corporation), Doryx (doxycycline, Mayne Pharmaceuticals), Targadox (doxycycline, Journey), Acticlate (docycycline, Almirall), Claravis (isotretinoin, Teva Pharmaceuticals), Myorisan (isotretinoin, Douglas Pharmaceuticals) and Seysara (sarecycline, Almirall) and (ii) topical products such as Epiduo (adapalene + BPO, Galderma), Aczone (dapsone, Almirall), Retin-A (tretinoin, Bausch Health), Onexton-Acanya (clindamycin + BPO, Bausch Health), Benzaclin (benzoyl peroxide + clindamycin, Bausch Health), Arazlo (tazarotene, Bausch Health), Tazorac (tazarotene, Almirall), Altreno (tretinoin, Ortho Derm), Aklief (trifarotene, Galderma), Fabior (tazarotene, Mayne Pharmaceuticals), Ziana (clindamycin + tretinoin, Medicis Pharmaceutical), Differin (adapalene, Galderma) and Winlevi (clascoterone, Cassiopea SpA).

Currently marketed products that may compete with ZILXI include:

(i) branded and generic oral products containing minocycline and Oracea (doxycycline, Galderma) and (ii) topical products such as all forms of metrogel/metronidazole available as a branded or generic product, Soolantra (ivermectin, Galderma) and Finacea (azaleic acid, LEO).

Other topical products that may also compete include Mirvaso (brimonidine, Galderma Laboratories ) and Rhofade (oxymetazoline, Epi Health), which are used to reduce redness.

In addition, new products are currently being developed that may compete with AMZEEQ and ZILXI, including, generic versions of any of the above on-marketed products.

In September 2019, Hovione Farmaciencia SA, a private company, announced details of its planned Minocycline Against Rosacea Study, Phase 3 development program for the treatment of moderate-to-severe inflammatory rosacea with HY01, a 3% topical gel suspension containing minocycline non-hydrochloride.

In January 2020, BioPharmX Corporation entered into a Merger Agreement with Timber Pharmaceuticals LLC and intends to “evaluate BioPharmX's Phase 3 ready proprietary topical minocycline gel programs.” This product has previously been studied by BioPharmX in the treatment of inflammatory lesions of acne vulgaris and papulopustular rosacea.

Glenmark is developing a minocycline gel and is working on a minocycline combination product.

In addition, PDUFA dates for Sol-Gel’s EPSOLAY (microencapsulated benzoyl peroxide cream, 5%) for inflammatory lesions of rosacea, and for TWYNEO (microencapsulated benzoyl peroxide, 3% and microencapsulated tretinoin, 0.1%) for acne vulgaris have been set for 2021.

Sol-Gel is also working on a minocycline composition.

If ultimately approved and launched in the United States, these product candidates, and others that may be in development, could be direct competitors to AMZEEQ and ZILXI.

Licenses have been granted for certain topical products with various licensees combining our proprietary technology with a drug selected by the licensee.

The development of these products is uncertain.

They may have been delayed or adversely affected following the advent of the COVID crisis and some or all may not continue.

While the licenses we grant are exclusive with respect to the specific drug which is licensed, our agreements with these licensees allow them to commercialize the licensed developed products for any topical dermatological application, not just for the specific indication for which each product was originally intended.

If any such licensed product proves to be effective for moderate-to severe acne, rosacea or any other indication that we are pursuing with AMZEEQ, ZILXI, FCD105 or our other product candidates, we may face competition from these licensees.

Although these products would be based on a different foam technology than the technology platforms used in our in-house minocycline-based products, such licensed products may nevertheless pose a competitive challenge, as they will have the benefit of our foam technology coupled with the licensees’ potentially greater resources, experience and brand recognition, extensive marketing channels and other capabilities, and possibly the advantage of entering the market before us.

See "Item 1A.

Risk Factors—Risks Related to Our Intellectual Property."

We have various pending patent applications related to our FMX114 and VYN201 product candidates.

We have PCT applications in relation to FMX114.

Our patent portfolio in relation to our BETi programs includes pending compound and composition patent applications in various jurisdictions worldwide, owned or licensed by us.

Subject to filing a non-provisional, the PCT's being filed nationally, and the pending patent applications being granted and payments of the appropriate maintenance fees, the patent applications related to FMX114 will expire in 2040 and 2041 and the patent applications in relation to VYN201 will expire in 2040 and 2042.

In addition, in connection with our legacy business, we have various granted patents worldwide owned or licensed by us related to pharmaceutical compositions and their uses, including various foam-based platforms, various gel-based platforms, and other technology.

Patents extend for varying periods according to the date of patent filing or grant and the legal term of patents in various countries where patent protection is obtained.

The actual protection afforded by a patent, which can vary from country to country, depends on the type of patent, the scope of its coverage and the availability of legal remedies in the country.

In most countries in which we file, the patent term is 20 years from the earliest date of filing a non-provisional patent application.

In the United States, a patent term may be shortened if a patent is terminally disclaimed over another patent or as a result of delays in patent prosecution by the patentee, and a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the USPTO in granting a patent or by patent term extension, which compensates a patentee for delays at the FDA.

The patent term of a European patent is 20 years from its filing date;

however, unlike in the United States, the European patent does not grant patent term adjustments.

The European Union does have a compensation

program similar to patent term extension called supplementary patent certificate that would effectively extend patent protection for up to five years.

Our drug development activities face, and will continue to face, intense competition from organizations such as pharmaceutical and biotechnology companies, as well as academic and research institutions and government agencies.

Our drug development activities also face, and may continue to face, governmental actions designed to promote generic drug competition and lower prices.

Any product candidate that we successfully develop and commercialize will compete with existing treatments, including those that may have achieved broad market acceptance, and any new treatment that may become available in the future.

Many of the companies against which we are competing, or against which we may compete in the future, have significantly greater financial resources and expertise in research and development, manufacturing, and preclinical and clinical development than we do.

Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and subject registration for clinical trials, as well as in acquiring technologies complementary to, or that may be necessary for, our development programs.

With respect to FMX114 as a potential treatment of mild-to-moderate AD, there are several different therapies in the AD market, including prescription products and OTC products.

Our primary competitors for this program include topical therapies such as Eucrisa, marketed by Pfizer Inc.;

Opzelura, marketed by Incyte Corporation;

and generic and branded versions of low to mid-potency steroids such as hydrocortisone and betamethasone.

In addition, there are several prescription product candidates under development that could potentially be used to treat AD, including but not limited to:

topical tapinarof and topical cerdulatinib, both under development by Dermavant Sciences, Inc., topical delgocitinib, under development by LEO Pharma A/S and Japan Tobacco, Inc.

(approved as Corectim in Japan), topical difamilast ointment, under development by Medimetriks/Otsuka Pharma, oral PF-04965842, under development by Pfizer Inc., and injectable lebrikizumab, under development by Eli Lilly and Company.

While we have not yet identified an initial indication for VYN201, there is intense competition for the treatment of immuno-inflammatory conditions, including indications we are currently evaluating.

VYN201, if approved, will compete with existing treatments and new treatments that may become available in the future.

The commercial opportunity for our drug candidates, if approved, could be reduced or eliminated if our competitors develop and commercialize drugs that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any drug we may develop.

Our competitors also may obtain FDA or other regulatory approval for their drug candidates more rapidly than us, which could result in our competitors establishing a strong market position before our drug candidates are able to enter the market.

Government Regulation

Our business is subject to extensive government regulation.

Regulation by governmental authorities in the United States and other jurisdictions is a significant factor in the development, manufacture and marketing of our foam delivered treatments and in our ongoing research and development activities.

Regulation by governmental authorities in the United States and other jurisdictions is a significant factor in our research and development activities.

Product approval process in the United States

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requirements at any time during the product development process, approval process or after approval may subject an applicant to a variety of administrative or judicial sanctions and enforcement actions brought by the FDA, the Department of Justice or other governmental entities.

Possible sanctions may include the FDA’s refusal to

approve pending NDAs, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement and civil or criminal penalties.

Possible sanctions may include the FDA’s refusal to approve pending NDAs, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement and civil or criminal penalties.

The process required by the FDA prior to marketing and distributing a new drug product in the United States generally involves the following:

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An IRB must operate in compliance with FDA regulations.

Information about certain clinical trials

must be submitted within specific timeframes to the National Institutes of Health for public dissemination on their ClinicalTrials.gov website.

Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health for public dissemination on their ClinicalTrials.gov website.

Clinical trials are typically conducted in three sequential phases, which, in some cases, may overlap or be combined:

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An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.

be conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution and use restrictions or other risk management mechanisms under a REMS, which can materially affect the potential market and profitability of the product.

Even if the FDA approves a product, it may limit the approved indications for use of the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution and use restrictions or other risk management mechanisms under a REMS, which can materially affect the potential market and profitability of the product.

Once a product is approved, marketing the product for other indicated uses or making certain manufacturing or other changes requires FDA review and approval of a supplemental NDA or a new NDA, which may require additional clinical data and review fees.

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Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.

addition, the manufacturer of an investigational drug for a serious or life-threatening disease is required to make available, such as by posting on its website, its policy on responding to requests for expanded access.

In addition, the manufacturer of an investigational drug for a serious or life-threatening disease is required to make available, such as by posting on its website, its policy on responding to requests for expanded access.

Furthermore, fast track designation, breakthrough therapy designation, accelerated approval and priority review do not change the standards for approval and may not ultimately expedite the development or approval process.

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An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug and has been shown through bioequivalence testing to be bioequivalent to the listed drug.

Other than the requirement for bioequivalence testing, ANDA applicants are not required to conduct, or submit results of, pre-clinical or clinical tests to prove the safety or effectiveness of their drug product.

Other than the requirement for bioequivalence testing, ANDA applicants may not be required to conduct, or submit results of, pre-clinical or clinical tests to prove the safety or effectiveness of their drug product.

In some cases however, the FDA may issue product specific guidance that recommends the conduct of a clinical trial.

Drugs approved in this way are considered to be therapeutically equivalent to the listed drug, are commonly referred to as “generic equivalents” to the listed drug, and can often be substituted by pharmacists under prescriptions written for the original listed drug in accordance with state law.

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If the applicant does not challenge one or more listed patents through a Paragraph IV certification, the FDA will not approve the Section 505(b)(2) NDA application until all the listed patents claiming the referenced product have expired.

Further, the FDA will also not approve, as applicable, a Section 505(b)(2) NDA application until any non-patent exclusivity, such as, for example, five-year exclusivity for obtaining approval of a new chemical entity, three-year exclusivity for an approval based on new clinical trials, and additional 6 months pediatric exclusivity

if applicable, listed in the Orange Book for the referenced product, has expired.

If a generic drug product is ready for approval before the expiration of any patents or exclusivities accorded to the reference listed drug product, the FDA issues a tentative approval letter to the applicant.

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During this three-year exclusivity, the FDA cannot approve an ANDA or 505(b)(2) application that includes the change(s).

Drugs based on an “old antibiotic,” such as AMZEEQ and ZILXI, and our FCD105 product candidate which contain minocycline, must also demonstrate “a significant new use” such as a new indication for a previously approved antibiotic, and not just refinements in labeling related to previously approved uses, in order to qualify for the three-year exclusivity.

A claim of market exclusivity of three years was requested in the original NDA for AMZEEQ, but we do not know if or when it may be granted.

In addition, while we have not yet received an exclusivity determination for ZILXI, we do expect to be granted three years of marketing exclusivity as it is the first minocycline approved for rosacea.

Such applicants must also demonstrate “a significant new use” such as a new indication for a previously approved drug, and not just refinements in labeling related to previously approved uses, in order to qualify for the three-year exclusivity.

Post-approval requirements

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These promotion and advertising requirements include, among others, standards for direct-to-consumer advertising, prohibitions against promoting drugs for uses or patient populations that are not described in the drug’s approved labeling, known as “off-label use,” and other promotional activities, such as those considered to be false or misleading.

Failure to comply with FDA requirements can have negative consequences, including the immediate discontinuation of noncomplying materials, adverse publicity, enforcement letters from the FDA, mandated corrective

advertising or communications with doctors, and civil or criminal penalties.

Such enforcement may also lead to scrutiny and enforcement by other government and regulatory bodies.

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As a result, “off-label promotion” has formed the basis for litigation under the Federal False Claims Act, or FCA, violations of which are subject to significant civil fines and penalties.

In addition, under the federal Physician Payments Sunshine Act, manufacturers of certain prescription products are required to disclose annually to the Centers for Medicaid and Medicare Services, or CMS payments or transfers of value made to “covered recipients” and teaching hospitals, and ownership or investment interests held by covered recipients and their immediate family members.

hospitals, and ownership or investment interests held by covered recipients and their immediate family members.

Reportable payments and transfers of value may be direct or indirect, in cash or kind, for any reason, and are required to be disclosed even if the transfers are not related to an approved product.

Failure to comply with the Physician Payments Sunshine Act could result in penalties up to $1.15 million per year.

The manufacturing of any of our products will be required to comply with applicable FDA manufacturing requirements contained in the FDA’s cGMP regulations.

The manufacturing of any of our product candidates, if approved, will be required to comply with applicable FDA manufacturing requirements contained in the FDA’s cGMP regulations.

The FDA’s cGMP regulations require, among other things, quality control and quality assurance, as well as the corresponding maintenance of comprehensive records and documentation.

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Other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.

The FDA also may require post-marketing testing, or Phase IV testing, as well as REMS to monitor the effects of an approved product or place conditions on an approval that could otherwise restrict the distribution or use of our products.

Pediatric trials and exclusivity

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Patent term restoration and extension

of a patent for up to five years to compensate patent holders for marketing time lost while developing the product and awaiting government approval during the FDA regulatory review.

A patent claiming a new drug product may be eligible for a limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, generally referred to as the “Hatch-Waxman Act,” which permits an extension of the term of a patent for up to five years to compensate patent holders for marketing time lost while developing the product and awaiting government approval during the FDA regulatory review.

The basis for the patent extension is the regulatory review period, which is basically composed of two parts, a testing phase and an approval phase, less a reduction, if any, in either part for a period time where there was a finding of lack of due diligence.

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Patent term extension cannot be used to extend the remaining term of a patent past a total of 14 years from the product’s approval date.

In other words, the total maximum patent life for the product with the patent extension cannot exceed 14 years from the products approval date, which amounts to 14 years of potential marketing time.

In other words, the total maximum patent life for the product with the patent extension cannot exceed 14 years from the products approval date, which amounts to 14 years of

potential marketing time.

Only one patent applicable to an approved drug product may be extended, and the application for the extension must be submitted prior to the expiration of the patent in question and within 60 days of FDA approval.

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The term of a patent which claims a human drug product, a method of using the product, or a method of manufacturing the product may potentially be extended if it satisfies the various conditions including that it is the first permitted commercial marketing or use of the drug.

The patents for serlopitant and its use are potentially eligible for patent term extension under the Hatch-Waxman Act, if serlopitant is approved by the FDA, because serlopitant has never been approved by the FDA.

The patents supporting AMZEEQ and ZILXI were not eligible for the said patent term extension, since minocycline the active pharmaceutical ingredient of AMZEEQ and ZILXI was already approved for marketing by the FDA.

The same reasoning will also apply to our FCD105 product candidate and to other pipeline product candidates where the active pharmaceutical ingredients were previously approved for marketing by the FDA.

Review and approval of drug products outside the United States

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If the product has not received a National MA in any Member State at the time of application, it can be approved simultaneously in various Member States through the Decentralized Procedure.

Prior to obtaining an MA in the EEA, applicants have to demonstrate compliance with all measures included in a Paediatric Investigation Plan, or PIP, approved by the EEA regulatory agency, covering all subsets of the pediatric population, unless the EEA regulatory agency has granted (1) a product-specific waiver, (2) a class waiver or (3) a deferral for one or more of the measures included in the PIP.

Prior to obtaining an MA in the EEA, applicants have to demonstrate compliance with all measures included in a Pediatric Investigation Plan, or PIP, approved by the EEA regulatory agency, covering all subsets of the pediatric population, unless the EEA regulatory agency has granted (1) a product-specific waiver, (2) a class waiver or (3) a deferral for one or more of the measures included in the PIP.

In the EEA, upon receiving a MA, new chemical entities generally receive eight years of data exclusivity and an additional two years of market exclusivity.

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Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.

We have evaluated the optimal price range for AMZEEQ and ZILXI that will reflect their benefits relative to alternative treatments while remaining affordable to potential customers and reimbursable by governments and third-party payors.

Our pricing and overall access strategy prioritizes patients and their healthcare providers by providing novel medicines at pricing designed to help provide the broadest possible access to products for patients.

We believe that the agreements we have entered into with pharmacy benefit managers provide broad commercial coverage for AMZEEQ and ZILXI, however we cannot be certain that these levels of coverage will continue to increase, or that we will be able to maintain these levels of coverage.

CMS administers the Medicaid drug rebate program, in which pharmaceutical manufacturers pay quarterly rebates to each state Medicaid agency.

Generally, for branded prescription drugs marketed under NDAs, as AMZEEQ, ZILXI and our other product candidates are expected to be, manufacturers are required to rebate the greater of 23.1% of the average manufacturer price or the difference between such price and the best price during a specified period.

Generally, for branded prescription drugs marketed under NDAs, manufacturers are required to rebate the greater of 23.1% of the average manufacturer price or the difference between such price and the best price during a specified period.

An additional rebate for products marketed under NDAs is payable if the average manufacturer price increases at a rate higher than inflation, and other methodologies apply to new formulations of existing drugs.

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This comprehensive legislative overhaul was expected to extend coverage to approximately 36 million previously uninsured Americans.

However, the individual mandate was recently repealed by Congress in The Tax Cuts and Jobs Act of 2017, or the Tax Act, tax reform bill that was signed into law in December 2017 and became effective January 1, 2019.

The Joint Committee on Taxation estimates that the repeal will result in over 13 million Americans losing their health insurance coverage by 2027 and is likely to lead to increases in insurance premiums.

The ACA's individual mandate was repealed by Congress in The Tax Cuts and Jobs Act of 2017, or the Tax Act, tax reform bill that was signed into law in December 2017 and became effective January 1, 2019.

On December 14, 2018, a U.S.

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Supreme Court.

Supreme Court declined to hear the appeal on an expedited basis and the Court heard oral arguments on the matter on November 10, 2020.

A decision is expected to be forthcoming during the current U.S.

Supreme Court term in 2021.

On February 10, 2021, the U.S.

Department of Justice Filed a letter with the U.S.

Supreme Court stating that, following the change in the U.S.

presidential administration, the United States no longer adheres to the conclusions in its previous briefs in support of invalidating the ACA.

It is unclear how this decision, subsequent appeals, if any, and other efforts to repeal and replace the ACA will impact the ACA.

On June 17, 2021, the U.S.

Supreme Court held that state and individual plaintiffs did not have standing to challenge the individual mandate provision of the ACA;

in so holding, the Supreme Court did not consider larger constitutional questions about the validity of this provision or the validity of the ACA in its entirety.

It is unclear how this decision, subsequent appeals, if any, and other efforts to modify, repeal and replace the ACA will impact the ACA.

The ACA requires the pharmaceutical industry to share in the costs of reform by increasing Medicaid rebates and expanding Medicaid rebates to cover Medicaid managed care programs, among other things.

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The Bipartisan Budget Act of 2018, or the BBA, among other things, amends the ACA, effective January 1, 2019, to close this gap, also known as the “donut hole”.

Additionally, an excise tax was levied against certain branded pharmaceutical products.

Additionally, an excise tax was levied against certain branded

pharmaceutical products.

The Administration is expected to evaluate drug pricing and the Medicare parts B and D programs in terms of legislative or policy changes in the current session of Congress.

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presidential administration issued final rules in late 2020 that, among other things, made changes to certain Anti-Kickback safe harbors;

however, these rule may be affected by a regulatory freeze announced by the current administration in January 2021;

however, implementation of these rules has been and may continue to be affected by a regulatory freeze announced by the current administration in January 2021 and litigation challenging these rules;

• the federal civil and criminal false claims laws and civil monetary penalties laws, including the federal FCA, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, false, fictitious or fraudulent claims for payment from Medicare, Medicaid or other federal healthcare programs, and knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to avoid, decrease or conceal an obligation to pay money to the federal government.

Even where pharmaceutical companies do not submit claims directly to payors, they can be held liable under these laws if they are deemed to “cause” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers, promoting a product off-label, marketing products of sub-standard quality, or paying a kickback that results in a claim for items or services.

In addition, activities relating to the reporting of wholesaler or estimated retail prices for pharmaceutical products, the reporting of prices used to calculate Medicaid rebate information and other information affecting federal, state and third-party reimbursement for such products, and the sale

and marketing of such products, are subject to scrutiny under this law.

Private individuals or whistleblowers can bring FCA “qui tam” actions on behalf of the government and may share in amounts recovered.

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and (ii) chemical, air, water and ground contamination, air emissions and the cleanup of contaminated sites, including any contamination that results from spills due to our failure to properly dispose of chemicals, waste materials and sewage.

Our operations at our Rehovot research and development facility use chemicals and produce waste materials and

Our operations at our research and development facility in Israel use chemicals and produce waste materials and sewage.

Our activities require permits from various governmental authorities including, local municipal authorities, the Ministry of Environmental Protection and the Ministry of Health.

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These regulations establish new and potentially significant fees for discharging forbidden or irregular sewage into the sewage system.

The operations of our subcontractors and suppliers are also subject to various Israeli and foreign laws and regulations relating to environmental, health and safety matters, and their failure to comply with such laws and regulations could have a material adverse effect on our business and reputation, result in an interruption or delay in the manufacture of AMZEEQ, ZILXI or the development or manufacture of our product candidates, or increase the costs for the manufacture of AMZEEQ, ZILXI or for the development or manufacture of our product candidates.

The operations of our subcontractors and suppliers are also subject to various Israeli and foreign laws and regulations relating to environmental, health and safety matters, and their failure to comply with such laws and regulations could have a material adverse effect on our business and reputation, result in an interruption or delay in the development or manufacture of our product candidates, or increase the costs for the development or manufacture of our product candidates.

Human Capital

As of December 31, 2020, we had a total of 106 employees comprised of 55 females and 51 males, all of whom are full-time employees.

As of such date, 48 employees were sales representatives and 15 employees were primarily engaged in research and development activities.

We believe our sales force is sufficient to effectively target dermatologists and other healthcare providers nationwide in order to successfully commercialize our products.

In addition, we believe our internal R&D capabilities coupled with our third-party R&D consultants are well positioned to execute our pipeline strategy in a cost effective manner.

As of December 31, 2021, we had a total of 28 employees comprising 14 females and 14 males, all of whom are full-time employees.

As of such date, 14 employees were primarily engaged in research and development activities.

We believe our internal R&D capabilities coupled with our third-party R&D consultants are well positioned to execute our pipeline strategy in a cost effective manner.

None of our employees are represented by a labor union, and we consider our employee relations to be good.

We value the importance of retention, growth and development of our employees and we believe we offer competitive compensation (including salary, incentive bonus, and equity) and benefits packages in the U.S.

We value the importance of retention, growth and development of our employees and we believe we offer competitive compensation (including salary, incentive bonus, and equity) and benefits packages.

We strive to foster a corporate culture built on communication and transparency.

We hold annual company-wide trainings and host regularly scheduled town halls where management communicates notable corporate developments to Company employees.

We hold annual company-wide trainings and hold regular company-wide meetings where management communicates notable corporate developments to Company employees.

We are also focused on understanding our diversity and inclusion strengths and opportunities and executing on a strategy to support further progress.

We will continue to promote a work environment that is based on the fundamental principles of human dignity, equality and mutual respect.

In addition, we are committed to providing a safe and healthy work environment for all of our employees.

In response to the COVID-19 pandemic, we invested in personal protective equipment for our sales representatives so as to enhance their safety and protect individuals they interact with in the field.

We will continue to support our sales force during these unprecedented circumstances to ensure their safety and well being.

Financial and Segment Information

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Corporate Information

On September 4, 2020, we filed a Certificate of Amendment to our Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to change our corporate name from "Menlo Therapeutics Inc." to “VYNE Therapeutics Inc.”

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act and as modified by the JOBS Act and a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act.

We were incorporated in October 2011 as a Delaware corporation under the name Tigercat Pharma, Inc.

We changed our name to VYNE Therapeutics Inc.

in September 2020, following the merger (the "Merger") between Foamix Pharmaceuticals Ltd.

("Foamix") and Menlo Therapeutics Inc.

("Menlo") in March 2020.

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the "Securities Act") and as modified by the JOBS Act and a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act.

As such, we are eligible to take advantage of certain exemptions from various reporting requirements, such as the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, and certain reduced or scaled disclosure requirements available to smaller reporting companies.

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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 1. Business