DERM 10-K & 10-Q changes, risk factors and insider trading

Also, thea majoritysubstantial portion of our sales derive from products that are without patent protection and/or are or may become subject to third-party generic competition,competition because their period of exclusivity has ended or they are without patent protection, subjecting them to the potential introduction of new competitor products,products and/or an increased market share of existing competitor products, anyeither of which could have a significant adverse effect on our operating income.

TheA majoritysubstantial portion of our sales derive from products that are without patent protection and/or are or may become subject to third-party generic competition,competition because their period of exclusivity has ended or they are without patent protection, subjecting them to the potential introduction of new competitor products,products and/or an increase in market share of existing competitor products, anyeither of which could have a significant adverse impact on our operating income. Three of our marketed products, Qbrexza, Amzeeq, and Zilxi as well as Emrosi which was approved by the FDA on November 1, 2024, currently have patent protection. Four of our marketed products, Accutane, Targadox, Exelderm and Luxamend, do not have patent protection or otherwise are not eligible for patent protection. Accutane currently competes in the Isotretinoin market with five other therapeutic equivalent (“AB rated”) products. Targadox faces AB rated generic competition. Exelderm may face AB rated generic competition in the future.

The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, added Section 505(b)(2) to the FDCA. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference. Section 505(b)(2), if applicable to us under the FDCA, would allow an NDA we submit to FDA to rely in part on data in the public domain or the FDA’s prior conclusions regarding the safety and effectiveness of approved compounds, which could expedite the development program for ourfuture product candidates by potentially decreasing the amount of clinical data that we would need to generate in order to obtain FDA approval. If the FDA does not allow us to pursue the Section 505(b)(2) regulatory pathway as anticipated, we may need to conduct additional clinical trials, provide additional data and information, and meet additional standards for regulatory approval. If this were to occur, the time and financial resources required to obtain FDA approval for these product candidates, and complications and risks associated with these product candidates, would likely substantially increase. We could need to obtain more additional funding, which could result in significant dilution to the ownership interests of our then existing stockholders to the extent we issue equity securities or convertible debt. We cannot assure you that we would be able to obtain such additional financing on terms acceptable to us, if at all. Moreover, inability to pursue the Section 505(b)(2) regulatory pathway would likely result in new competitive products reaching the market more quickly than our product candidates, which would likely materially adversely impact our competitive position and prospects. Even if we are allowed to pursue the Section 505(b)(2) regulatory pathway, we cannot assure you that our product candidates will receive the requisite approvals for commercialization.

If serious adverse or unacceptable side effectsevents are identified during the development of any future product candidates, we may need to abandon or limit our development of these product candidates.

If any future product candidates are associated with undesirable sideadverse effects,events, toxicities, or other negative characteristics, we may need to abandon such product candidates’ development or limit development to more narrow uses or subpopulations. Such sideadverse effectsevents may affect patient recruitment or the ability of enrolled patients to complete the trial and could result in potential product liability claims. Many compounds that show initial promise in early-stage testing are later found to causebe sideassociated effectswith adverse events that prevent further development. If our clinical trials reveal severe or prevalent sideadverse effects,events, our trials could be suspended or terminated, we may be unable to recruit patients and enrolled patients may be unable to complete the trials, and the FDA or comparable foreign regulatory authorities could order issue a clinical hold, or order us to cease further development or deny approval of the product candidate. The FDA may also request additional data, which it has done with increased prevalence in recent years, which has resulted in substantial delays in new drug approvals. Undesirable sideadverse effectsevents causedassociated bywith any future product candidates could also result in the inclusion of unfavorable information in our product labeling, if approved, denial of regulatory approval by the FDA or other regulatory authorities for any or all targeted indications, and in turn prevent us from commercializing and generating revenues from the sale of such product candidate.

If one or more of our current products or any future product candidate receives marketing approval and we or others later identify undesirable adverse events orassociated side effects caused bywith this product,product or any future product candidate, or we fail to comply with post-market regulatory requirements, a number of potentially significant negative consequences could result, including:

Any of these events could prevent us from achieving or maintaining market acceptance of any current or future product candidate or could substantially increase our development and commercialization costs and expenses, which could delay or prevent us from generating significant revenues.

OurThe ability to successfully commercialize our products, or any future product candidate forthat which we receivereceives marketing authorization,authorization will dependdepends in part on the extent to which coverage and reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. A primary trend in the healthcare industry in the United States and elsewhere is cost containment. It is currently unknown what impact, if any, proposed changes by the federal and state governments in the U.S. and similar changes in foreign countries may have on pricing and reimbursement, particularly with respect to government programs such as Medicare and Medicaid.

The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system, including implementing cost-containment programs to limit the growth of government-paid healthcare costs, including price controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs. In the United States, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (the “Affordable Care Act”), was intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. ThereWe haveexpect beenthat significant ongoing judicial, administrative, executive and legislative effortschanges to modify or eliminate the Affordable Care Act.Act, the Medicare and Medicaid programs, changes allowing the federal government to directly negotiate drug prices and changes stemming from other healthcare reform measures, especially with regard to healthcare access, financing or other legislation in individual states, may result in more rigorous coverage criteria and in additional downward pressure on the price that can be charged for drug products. In addition, on May 12, 2025, President Trump issued an executive order implementing the concept of most-favored nation pricing. Under this order, the Department of Health and Human Services, in coordination with other federal agencies, is directed to take actions to ensure that the price of prescription drugs paid by federal health insurers, including Medicare and Medicaid, is in line with the prices paid in comparably developed nations. Any reduction in reimbursement from Medicare, Medicaid, or other government programs may result in a similar reduction in payments from private payers.

The Inflation Reduction Act of 2022 (the “IRA”) contains substantial drug pricing reforms, including the establishment of a drug price negotiation program within the U.S. Department of Health and Human Services that would require manufacturers to charge a negotiated “maximum fair price” for certain selected drugs or pay an excise tax for noncompliance, the establishment of rebate payment requirements on manufacturers of certain drugs payable under Medicare Parts B and D to penalize price increases that outpace inflation, and requires manufacturers to provide discounts on Part D drugs. Orphan drugs that treat only one rare disease are exempt from the IRA’s drug negotiation program. Substantial penalties can be assessed for noncompliance with the drug pricing provisions in the IRA. The effects of the IRA on the pharmaceutical industry in general are not yet known.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. We expect that additionalAdditional federal, state and foreign healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in limited coverage and reimbursement and reduced demand for our products, once approved, or additional pricing pressures.future.

These and other healthcare reform measures that may be adopted in the future may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any current product or future product candidate. Any reduction in reimbursement from Medicare or other government healthcare programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our products. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for drugs. WeIt cannotis be sureuncertain whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of any future product candidates, if any, may be. In addition, increased Congressional scrutiny of the FDA’s approval processprocess, as well as staffing cuts effected at the FDA in early 2025, may significantly delay or prevent marketing approval, asand wellthe asindustry could become subject us to more stringent product labeling and post-marketing testing and other requirements.requirements, Weany alsoof dowhich notcould knowhave whata material adverse impact any changes made by the new presidential administration will have on our business. Such actions may impact the development and commercialization of drug products and could materially harm our business and financial conditionproducts.

In light of widely publicized events concerning the safety risk of certain drug products, the FDA, members of Congress, the Government Accountability Office, medical professionals and the general public have raised concerns about potential drug safety issues. These events have resulted in the withdrawal of drug products, revisions to drug labeling that further limit use of the drug products, and the establishment of risk management programs. The increased attention to drug safety issues may result in a more cautious approach by the FDA in its review of data from ourany clinical trials.trials we may conduct. Data from clinical trials may receive greater scrutiny, particularly with respect to safety, which may make the FDA or other regulatory authorities more likely to require additional preclinical studies or clinical trials. If the FDA requires us to conduct additional preclinical studies or clinical trials prior to approving any other potential future product candidate, our ability to obtain approval of such product candidate will be delayed. If the FDA requires us to provide additional clinical or preclinical data following the approval of any potential future product candidate, the indications for which such product candidate is approved may be limited or there may be specific warnings or limitations on dosing, and our efforts to commercialize potential future product candidatecandidate, if approved, may be otherwise adversely impacted.

Any of our future product candidates may not be effective, may be only moderately effective or may prove to havebe associated with undesirable or unintended sideadverse effects,events, toxicities or other characteristics that may preclude us from obtaining marketing approval or prevent or limit commercial use. If any future product candidates receive(s) marketing approval, the accompanying label may limit the approved use of our drug in this way, which could limit sales of the product.

The commercial success of our products or any future product candidates for which we receive marketing authorization will depend upon their acceptance by the medical community and coverage and reimbursement for our products by third-party payors, including government payors. The degree of market acceptance of our products or any other potential product candidate we may develop, license or acquire will depend on a number of factors, including:

Our ability to effectively promote and sell our current products and any future product candidates for which we receive marketing authorization, we may develop, license or acquire in the marketplace will also depend on pricing and cost effectiveness, including our ability to produce a product at a competitive price and achieve acceptance of the product onto formularies, as well as our ability to obtain sufficient third-party coverage or reimbursement. Since many insurance plans are members of group purchasing organizations, which leverage the purchasing power of a group of entities to obtain discounts based on the collective buying power of the group, our ability to attract customers in the marketplace will also depend on our ability to effectively promote any future product candidates to group purchasing organizations. We will also need to demonstrate acceptable evidence of safety and efficacy, as well as relative convenience and ease of administration. Market acceptance could be further limited depending on the prevalence and severity of any expected or unexpected adverse side effectsevents associated with any future product candidates. If any future product candidates are approved but do not achieve an adequate level of acceptance by physicians, health care payors and patients, we may not generate sufficient revenue from these products, and we may not become or remain profitable. In addition, our efforts to educate the medical community and third-party payors on the benefits of any future product candidates may require significant resources and may never be successful.

If we are unable to maintain sales, marketing, and distribution capabilities, or to enter into agreements with third parties to market and sell our current products or any future product candidates for which we receive marketing authorization, we may not be successful in generating revenues from selling and commercializing our current products and any suchfuture product candidates.candidates for which we receive marketing authorization.

We rely, and expect to continue to rely,rely on third parties to conduct any future preclinical studies and clinical trials, and those third parties may not perform satisfactorily, including by failing to meet deadlines for the completion of such trials or to comply with applicable regulatory requirements.

Our reliance on any third parties for research and development activities will reduce our own control over these activities but will not relieve us of our responsibilities. We will remain responsible for ensuring that each of any future preclinical studies and clinical trials are conducted in accordance with the general investigational plan and protocols for the trial and for ensuring that any future preclinical studies are conducted in accordance with good laboratory practice (“GLP”) as appropriate. Moreover, the FDA requires us to comply with standards, commonly referred to as good clinical practices (“GCPs”) for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Regulatory authorities enforce these requirements through periodic inspections of trial sponsors, clinical investigators and trial sites. If we or any ofthird ourparty futureon clinicalwhich researchwe organizationsrely fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that any such regulatory authority, upon inspection of any future clinical trial, will determine that such clinical trial complies with cGMPGCP regulations. In addition, any future clinical trials must be conducted with product produced under cGMP regulations and subject to an IND. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process. We also are required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within specified timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

The third parties with whom we may contract to help perform future preclinical studies or clinical trials may also have relationships with other entities, some of which may be our competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our preclinical studies or clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for any future product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize such product candidates.candidates, if approved.

We will obtain limited product liability insurance coverage for any and all future clinical trials. However, our insurance coverage may not reimburse us or may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. Our current insurance coverage includes the sale of commercial products, but we may be unable to maintain or obtain commercially reasonable product liability insurance for any products approved for marketing. On occasion, large judgments have been awarded in class action lawsuits based on drugs that had unanticipated sideadverse effects.events. A successful product liability claim or series of claims brought against us could cause our stock price to fall and, if judgments exceed our insurance coverage, could decrease our cash and materially adversely affect our business, results of operations, financial condition or cash flows.

We began marketing and promoting Accutane®,Accutane, an isotretinoin product in the second quarter of 2021. Isotretinoin has a black box warning for use in pregnant women. Isotretinoin also has warnings for sideadverse effectsevents related to psychiatric disorders and inflammatory bowel disease, among others. Historically, isotretinoin has been the subject of significant product liability claims, mainly related to irritable bowel disease. Currently, there is no significant isotretinoin product liability litigation. In 2014, the federal multi-district litigation (“MDL”) court ruled that the warning label for isotretinoin was adequate and dismissed all remaining federal isotretinoin cases. The MDL dissolved in 2015, effectively ending federal isotretinoin lawsuits. Isotretinoin cases continued in New Jersey state court until 2017, when the trial court judge dismissed the remaining isotretinoin product liability cases. Accordingly, we have substantial defenses should a product liability claim arise related to isotretinoin. However, we cannot predict the ultimate outcome of any litigation and the Company may be required to pay significant amounts as a result of settlement or judgments should any new product liability claim be brought.

We have limited resources to identify and execute the acquisition or in-licensing of third-party products, current or future product candidates, businesses, and technologies and to integrate them into our current infrastructure. As a result, we focus on research programs and product candidates that we identify for specific indications, which may cause us to forego or delay pursuit of opportunities with other product candidates or for other indications that may have greater commercial potential. Further, we may devote resources to potential acquisitions or in-licensing opportunities that are ultimately not completed or of which we do not realize the anticipated benefits. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

Our business is affected by global and local economic and political conditions as well as the state of the financial markets, inflation, recession, financial liquidity, currency volatility, growth, and policy initiatives. There can be no assurance that global economic conditions and financial markets will not worsen and that we will not experience any adverse effects that may be material to our consolidated cash flows, results of operations, financial position or our ability to access capital, such as the adverse effects resulting from a prolonged shutdown in government operations both in the United States and internationally. Political changes, including war or other conflicts, some of which may be disruptive, could interfere with our supply chain, our customers and all of our activities in a particular location. These risks could be magnified in connection with the recent and ongoing military conflicts between the United States and Iran, Israel and Hamas and Hezbollah and Russia and Ukraine. However, as of the date of this report, we have not experienced any direct material adverse consequences as a result of these events.

Additionally, trade policies and geopolitical disputes and other international conflicts can result in tariffs, sanctions and other measures that restrict international trade, and can materially adversely affect our business, particularly if these measures occur in regions where drug products are manufactured or raw materials are sourced. With the new presidential administration in the U.S., additionalAdditional and higher tariffs and sanctions may be imposed on goods imported from India (from which we import products), China and other countries which could increase the cost of goods needed to commercialize our products and development of any future product candidates. Further, such actions by the U.S. could result in retaliatory action by those countries which could impact our ability to profitably commercialize our products in those jurisdictions. As a result, our business, operations, and financial condition could be materially harmed.

Our current assumptions, projected commercial sales of our products, clinical development plans and regulatory submission timelines are uncertain and may not emerge as expected. Additionally, as a result of recurring losses from operations, we have concluded that there is substantial doubt regarding our ability to continue as a going concern for a period of at least 12 months from the date of the issuance of the financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2024.2025. In addition to reductions in sales force and marketing expenses, we may also seek to raise capital through additional debt or equity financing, which may include sales of securities under our existing shelf registration statement on Form S-3, including under theour Salesat-the-market Agreementoffering with B. Riley,program, or under a new registration statement.

Our business is dependent on the successful development and regulatory approval of our current and any future product candidates.

As of December 31, 2024,2025, our major marketed products that have been approved by the FDA for sale in the United States include EmrosiTM, Qbrexza®, Accutane®, Amzeeq®, Zilxi®, Exelderm®, Targadox® and Luxamend®. In addition, Emrosi was approved by the FDA on November 1, 2024. However, our business remains dependent on the successful development and regulatory approval of additional product candidates.

The success of our business, including our ability to finance our company and generate additional revenue in the future, may depend on the successful development and marketing of Emrosi and any future product candidates that we may develop, in-license or acquire.acquire and for which we receive marketing authorization.

We expect to rely on third-party CROs and other third parties to conduct and oversee our clinical trials, other aspects of our product development and our regulatory submission process. We will also rely upon various medical institutions, clinical investigators and contract laboratories to conduct our trials in accordance with our clinical protocols and all applicable regulatory requirements, including the FDA’s regulations and GCPs, which are meant to protect the rights, integrity, and confidentiality of study subjects and to define the roles of clinical trial sponsors, administrators and monitors, and state regulations governing the handling, storage, security and recordkeeping for drug and biologic products. These CROs and other third parties play a significant role in the conduct of our clinical trials, the subsequent collection and analysis of data from the clinical trials, the preparation for and submission of our filings with the FDA and comparable foreign regulatory authorities and the successful commercialization of our product.product candidate, if approved.

Pursuant to the terms of our agreement with DRL for the exclusive, worldwide rights to develop and commercialize Emrosi for the evaluation of treatment, among other potential indications, inflammatory lesions of rosacea (the “Emrosi Agreement”), DRL is responsible for the manufacture and supply to us of Emrosi drug productproduct. andAlthough we are currently in the process of setting up a secondary manufacturer for Emrosi, we are completely reliant upon DRL to provide us with adequate supply for our use. We may experience an interruption in supply if, among other reasons, we incorrectly forecast our supply requirements, DRL allocates supply to its own development programs, DRL incorrectly plans its manufacturing production orproduction, DRL is unable to manufacture Emrosi drug product in a timely manner to match our commercial needs.needs or if we are unable to set up a second manufacturer of Emrosi on a timely or commercially reasonable basis, or at all. Transferring technology to athis new manufacturer, or any other manufacturer in the future, will require additional processes, technologies and validation studies, which are costly, may take considerable amounts of time, may not be successful and require review and approval by the FDA and applicable foreign regulatory bodies. Such manufacturer must comply with cGMP requirements enforced by the FDA and applicable foreign regulatory bodies through facilities inspection programs and review of submitted technical information.

Of the large number of drugs and biologics in development, only a small percentage successfully complete the FDA or other regulatory approval processes and are commercialized. Any future product candidates may not be approved by the FDA or applicable foreign regulatory agencies even though they meet specified endpoints in our clinical trials. The FDA or applicable foreign regulatory agencies may ask us to conduct additional costly and time-consuming clinical trials in order to obtain marketing approval or approval to enter into an advanced phase of development, or may change the requirements for approval even after such agency has reviewed and commented on the design for the clinical trials. Any delay in obtaining, or inability to obtain, applicable regulatory approval for any of ourfuture product candidates would delay or prevent commercialization of any future product candidates and would harm our business, financial condition, operating results and prospects.

Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. On September 16, 2011, the Leahy-Smith America Invents Act (the “Leahy-Smith Act”), was signed into law. The Leahy-Smith Act includes a number of significant changes to United States patent law. These include provisions that affect the way patent applications are prosecuted and may also affect patent litigation. The United States Patent OfficeUSPTO developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first-inventor-to-file provisions, which became effective on March 16, 2013. Courts continue to consider the constitutionality of certain provisions of the Leahy-Smith Act, including the Supreme Court in a recent decision affecting inter partes review procedures. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.

Additionally, some of our products, including Accutane, TargadoxTargadox, Exelderm and Exelderm,Luxamend, do not have patent protection because they are not eligible or qualify for such protection. This creates greater risk of competition with generic drug manufacturers and may otherwise adversely affect our business or result of operations.

If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations, and could result in financial, legal, business, and reputational harm to us. For example, in 2021, we were the victim of a cybersecurity incident that affected our accounts payable function and led to approximately $9.5 million in wire transfers being misdirected to fraudulent accounts. The cybersecurity incident does not appear to have compromised any personally identifiable information or protected health information. The federal government was able to trace and seize the fraudulently transferred cryptocurrency associated with the breach. On September 19, 2024, the United StatesU.S. District Court Southern District of New York through the United StatesU.S. Marshalls notified the Company that it has recovered and will be returning to the Company a portion of the misappropriated cash in connection with the previously disclosed September 2021 cybersecurity incident.

Our independent registered public accounting firm is not required to audit the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company” (“EGC”), as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act.Act”). At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating.

Our ThirdFourth Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws contain provisions that could delay or prevent a change in control of our Company. These provisions could also make it difficult for stockholders to elect directors that are not nominated by the current members of our board of directors or take other corporate actions, including effecting changes in our management. These provisions include certain provisions that:

Our ThirdFourth Amended and Restated Certificate of Incorporation provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware is the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a chosen judicial forum for disputes with us or our directors, officers, employees or stockholders.

Our ThirdFourth Amended and Restated Certificate of Incorporation requires to the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions must be brought in the Court of Chancery in the State of Delaware or, if that court lacks subject matter jurisdiction, another federal or state court situated in the State of Delaware. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our certificate of incorporation. In addition, our ThirdFourth Amended and Restated Certificate of Incorporation provides that the federal district courts of the United States are the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act and the Exchange Act.

This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision contained in our ThirdFourth Amended and Restated Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.

Pursuant to the terms of the Class A Common Stock held by Fortress, Fortress is entitled to cast, for each share of Class A Common Stock held by Fortress, the number of votes that is equal to 1.1 times a fraction, the numerator of which is the number of shares of our outstanding common stock and the denominator of which is the number of shares of outstanding Class A Common Stock (the “Class A Common Stock Ratio”).Stock. Thus, Fortress will at all times have voting control of Journey so long as it continues to be the sole holder of our Class A Common Stock. Further, for a period of ten (10) years from the date of the first issuance of shares of Class A Common Stock, the holders of record of the shares of Class A Common Stock (or other capital stock or securities issued upon conversion of or in exchange for the Class A Common Stock), exclusively and as a separate class, shall be entitled to appoint or elect the majority of the directors of Journey; however, the Company and Fortress waived application of this provision of the certificate of incorporation, and the holders of the Common Stock voted together with the holders of the Class A Common Stock for all directors, at our most recent annual meeting of stockholders, with the holders of the Class A Common Stock utilizing the super-voting rights described above. In any case, the 10-year period is expiring during the year ending December 31, 2025. This concentration of voting power may delay, prevent or deter a change in control of us even when such a change may be in the best interests of all stockholders, could deprive our stockholders of an opportunity to receive a premium for their shares of common stock as part of a sale of Journey or our assets, and might affect the prevailing market price of our common stock.

We are a commercial-stage pharmaceutical company founded in October 2014 that primarily focuses on the selling and marketing of U.S. Food and Drug Administration (“FDA”) approved prescription pharmaceutical products for the treatment of dermatological conditions. Our current portfolio includes eight FDA-approved prescription drugs for dermatological conditions that are marketed in the U.S. and a majority of our revenues derive from our branded, patent protected products. We are managed by experienced life science executives with a track record of creating value for their stakeholders and bringing novel medicines to the market, enabling patients to experience increased quality of life and physicians and other licensed medical professionals to provide better care for their patients. We acquire rights to products and product candidates by licensing or otherwise acquiring an ownership interest in, funding the research and development of, and eventually commercializing the products through our field sales organization. We are a controlled subsidiary of Fortress Biotech, Inc. (“Fortress” or “Parent”).Fortress.

On November 1, 2024, the FDA approved EmrosiTM (Minocycline Hydrochloride Extended Release Capsules, 40 mg), formerly referred to as DFD-29 (“Emrosi”)Emrosi, for the treatment of inflammatory lesions of rosacea in adults. Emrosi was developed by Journey in collaboration with Dr. Reddy’s Laboratories, Ltd (“DRL”).DRL. Our initial supply became available in March 2025. In addition, the initial distribution of Emrosi to pharmacies is ongoing and the first Emrosi prescriptions have been filled. We anticipatebegan sales promotion of Emrosi beginning in April 2025.2025, Weand intendwe toare commercializecommercializing Emrosi in the U.S. with our existing commercial team.

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”).Act. Under the JOBS Act, emerging growth companies can delay the adoption of new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. Other exemptions and reduced reporting requirements under the JOBS Act for emerging growth companies include presentation of only two years of audited financial statements in our annual reports on Form 10-K, an exemption from the requirement to provide an auditor’s report on internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended, an exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation and less extensive disclosure about our executive compensation arrangements. We have elected to use the extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that (i) we are no longer an emerging growth company or (ii) we affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. The Company expects to cease qualifying as an emerging growth company as of the end of its fiscal year ending December 31, 2026.

Gross - to - NetGross-to-Net Sales Accruals

Amortization of acquired intangible assets decreasedincreased by $0.4$0.8 million, or 9%,24%, to $4.3 million for the year ended December 31, 2025, from $3.4 million for the year ended December 31, 2024, fromdriven $3.8 million forby the yearaddition ended December 31, 2023 asof the discontinuationEmrosi acquired intangible asset upon our payment to DRL of Ximinothe milestone payment triggered by the FDA’s approval of Emrosi in 2023November has resulted in lower amortization.2024.

We recorded a $4.6 million loss recovery benefit to income of $4.6 million in connection with the recovery of funds related to the previously disclosed September 2021 cybersecurity incident. We received the $4.6 million in cash in December of 2024. See Note 17 to our consolidated financial statements for further details.

Interest ExpenseExpense, net

We recorded a gain of $1.1 million in August 2024 upon the execution of a settlement agreement (the “Settlement Agreement”) to settle amounts owed by the Company to Sun Pharmaceutical Industries, Inc. (“Sun”) pursuant to the Ximino Asset Purchase Agreement. See Note 9 to our consolidated financial statements for further details.

We rely primarily on cash on hand generated from the sales of our pharmaceutical products to our customers to fund our core operations. In addition, we have relied on the proceeds from our term loan Credit Facility (as defined below) with SWKSWK, and our at-the-market sales program with B. Riley to meet additional capital and liquidity needs, specifically to fund the research and development and commercialization of Emrosi, formerly referred to as DFD-29, which received marketing approval by the FDA on November 1, 2024.needs.

We regularly evaluate market conditions, our liquidity profile, and financing alternatives, including out-licensing arrangements for our products, to enhance our capital structure. We may seek to raise capital through debt or equity financings, to expand our product portfolio, and for other strategic initiatives, which may include sales of securities under either our 20222026 Shelf (as defined below) or a new registration statement.statement, to expand our product portfolio and/or for other strategic initiatives. Additionally, as a result of recurring losses, primarily a result of the research and development of Emrosi, substantial doubt exists about our ability to continue as a going concern for a period of at least twelve months from the date of issuance of these financial statements.statements included in this Annual Report on Form 10-K.

On December 27, 2023, the Companywe entered into athe Credit Agreement (the “Credit Agreement”) with SWK. The Credit Agreement providesoriginally provided for a term loan facility (the “Credit Facility”) in the original principal amount of up to $20.0 million. On the closing date, the Companywe drew $15.0 million. On June 26, 2024, the Companywe drew the remaining $5.0 million under the Credit Facility. Loans under the Credit Facility (the “Term Loans”) mature on December 27, 2027, and bear interest at a rate per annum equal to the three-month term Secured Overnight Financing Rate (“SOFR”) (subject to a SOFR floor of 5%) plus 7.75%. The interest rate resets quarterly. Interest payments began in February 2024 and are paid quarterly. Beginning in February 2026, the Company is required to repay a portion of the outstanding principal of the Term Loans quarterly in an amount equal to 7.5% of the principal amount of funded Term Loans.

On July 9, 2024, the Companywe entered into an amendment (the “First Amendment”) to the Credit Agreement. The First Amendment increased the original principal amount of the Credit Facility from $20.0 million to $25.0 million. The $5.0 million of additional principal added in the First Amendment iswas contractually required to be drawn upon FDA approval of Emrosi, subject to the Companyus receiving approval on or before June 30, 2025. The FDA approved Emrosi on November 1, 2024, and we subsequently drew the remaining $5.0 million.

On DecemberJanuary 30,15, 2022,2026, the Companywe filed a shelf registration statement on Form S-3 (File No. 333-292758) (the 2022“2026 Shelf,Shelf”), which was declared effective by the Securities and Exchange CommissionSEC on January 26,21, 2023.2026. This shelf registration statement covers the offering, issuance and sale by the Companyus of up to an aggregate of $150.0 million of the Company’sour common stock, preferred stock, debt securities, warrants, and units. InThe connection2026 withShelf replaces the 2022 Shelf,Shelf. Sales under the Company entered into the2025 Sales Agreement relating to shares ofafter the Company’seffective commondate stockwill with B. Riley. The Company may offer and sell up to 4,900,000 shares of its common stock, from time to time,occur under the Sales2026 Agreement. During the fiscal year ended December 31, 2024, the Company issued and sold 1,564,310 shares of common stock under the 2022 Shelf, generating net proceeds of $7.9 million. At December 31, 2024, 2,586,987 shares remain available for issuance under the Sales Agreement.Shelf.

Net cash flows used in investing activities for the year ended December 31, 20242025 were $15.0 million$0 compared to $5.0$15.0 million for the year ended December 31, 2023,2024, reflecting a change of $10.0$15.0 million from period-to-period. The year ended December 31, 2024 reflects a $15.0 million milestone payment made to DRL, which was triggered upon our receipt of FDA approval for Emrosi in November 2024. The year ended December 31, 2023 reflects the $5.0 million deferred cash payment paid in January 2023 related to the VYNE Product Acquisition.

Net cash flows provided by financing activities for the year ended December 31, 20242025 were $17.0$16.2 million compared to $4.8$17.0 million of net cash flows usedprovided inby financing activities for the year ended December 31, 2024, reflecting a change of $21.8$0.8 million from period-to-period. Cash provided by financing activities for the year ended December 31, 2025 reflects net proceeds from the issuance of common stock under the Sales Agreement of $16.4 million. Cash provided by financing activities for the year ended December 31, 2024 reflects the draw of an additional $10.0 million under the SWK Credit Facility, as well as the net proceeds from issuances of common stock under the 2022 Sales Agreement of $7.9 million. Net cash used in financing activities for the year ended December 31, 2023 reflects the voluntary repayment of the outstanding balance on our term loan under the Loan and Security Agreement with EWB.

We are a commercial-stage pharmaceutical company founded in October 2014 that primarily focuses on the selling and marketing of U.S. Food and Drug Administration (“FDA”) approved prescription pharmaceutical products for the treatment of dermatological conditions. Our current portfolio includes eightnine FDA-approved prescription drugs for dermatological conditions that are marketed in the U.S. and a majority of our revenues derive from our branded, patent protected products. We are managed by experienced life science executives with a track record of creating value for their stakeholders and bringing novel medicines to the market, enabling patients to experience increased quality of life and physicians and other licensed medical professionals to provide better care for their patients. We acquire rights to products and product candidates by licensing or otherwise acquiring an ownership interest in, funding the research and development of, and eventually commercializing the products through our field sales organization. We are a controlled subsidiary of Fortress Biotech, Inc. (“Fortress” or “Parent”).

The following table summarizes our results of operations for the three-month periods ended MarchJune 31,30, 2026 and 2025:

Comparison of the Three-Month Periods Ended MarchJune 31,30, 2026 and 2025

The following table reflects our net product revenue for the three-month periods ended MarchJune 31,30, 2026 and 2025:

Net product revenue increased $2.8 million, or 21.0%,19.0%, to $15.9$17.8 million for the three-month period ended MarchJune 31,30, 2026 compared to the three-month period ended MarchJune 31,30, 2025. The increase is primarily driven by sales of Emrosi in the firstsecond quarter of 2026 of $6.3$8.1 million compared to $2.1$2.8 million in the firstsecond quarter of 2025. The CompanyWe launched Emrosi in the first quarter of 2025. This is partially offset by a decrease in AccutaneQbrexza of $0.3$1.8 million,million theprimarily foamdue franchiseto productscoverage of $0.5 million,mix and a decrease in our legacy products of $0.5 million due to continued competitivegeneric pressures.competition.

Other revenue for the three-month period ended MarchJune 31,30, 2026 reflects payments to us for supplying Amzeeq to Cutia as well as sales-based royalties payable to us on Cutia’s net sales of Amzeeq, pursuant to the Cutia Agreement. In August 2025, we began supplying Cutia with finished licensed productsAmzeeq for Cutia’s commercial use.

Gross-to-net sales accruals and the balance in the related allowance accounts for the three-month periods ended MarchJune 31,30, 2026 and 2025, were as follows:

Gross-to-net sales accruals are primarily a function of product sales volume, mix of products sold, and contractual discounts or rebates. Our reserves for gross-to-net sales allowances were $22.6 million at June 30, 2026, compared to $17.3 million at March 31, 2026, comparedan to $18.7 million at December 31, 2025, a decreaseincrease of $1.4$5.3 million. The decreaseincrease is due primarily to Emrosi coupon rebates related to the continued growth of the product and the timing of sales throughout the first quarter of 2026 as well as coverage mix.quarter.

Cost of Goods Sold - (excluding amortization of acquired intangible assets) Cost of goods sold - (excluding amortization of acquired intangible assets) increased by $1.4$1.2 million, or 30%,24%, to $6.2$6.1 million for the three-month period ended MarchJune 31,30, 2026, from $4.8$4.9 million for the three-month period ended MarchJune 31,30, 2025, driven primarily by athe $1.3supply millionof non-cash charge relatedAmzeeq to inventory acquired in the 2021 Qbrexza asset acquisitionCutia as well an increase in product royalties payable driven by the incremental net revenue recognized for Emrosi during the firstsecond quarter of 2026 as compared to the firstsecond quarter of 2025.

Amortization of acquired intangible assets increaseddecreased less than $0.1 million, or 6%,9%, to $1.1$1.0 million for the three-month period ended MarchJune 31,30, 2026, from $1.1 million for the three-month period ended MarchJune 31,30, 2025, driven by the start of amortization on the anti-itchEurax acquired intangible asset during the first quarter of 2026, offset by the completion of amortization on the Accutane intangible asset during the first quarter of 2026.

Selling, general and administrative expenses decreased by $0.5$1.0 million, or 4%,8%, to $10.1$10.9 million for the three-month period ended MarchJune 31,30, 2026, from $10.6$11.9 million for the three-month period ended MarchJune 31,30, 2025. The decrease is primarily due to a reduction in Emrosi launch costs from the prior year quarter.

At MarchJune 31,30, 2026, we had cash and cash equivalents on hand of approximately $27.2$25.6 million as compared to $24.1 million of cash and cash equivalents at December 31, 2025, and working capital of $27.1$27.0 million at MarchJune 31,30, 2026, compared to $29.4 million of working capital at December 31, 2025.

The Credit Agreement also includes both revenue and liquidity covenants, restrictions as to payment of dividends, and is secured by substantially all of our assets. As of MarchJune 31,30, 2026, we were in compliance with the financial covenants under the Credit Agreement.

Cash Flows for the ThreeSix -Month Periods Ended MarchJune 31,30, 2026 and 2025

Net cash flows provided by operating activities for the three-monthsix-month period ended MarchJune 31,30, 2026 increased by $5.7$4.9 million, to $2.9$1.2 million, from net cash flows used in operating activities of $2.8$3.8 million for the three-monthsix-month period ended MarchJune 31,30, 2025. The increase was driven primarily by the decrease in our net loss period-to-period as well as changes in net working capital, primarily related to net collections of accounts receivable.capital.

Net cash flows provided by financing activities for the three-monthsix-month period ended MarchJune 31,30, 2026 decreased by $3.4 million, to $0.2$0.4 million, from $3.6$3.8 million of cash flows provided by financing activities for the three-monthsix-month period ended MarchJune 31,30, 2025. The Company received proceeds from the exercise of stock options and the issuance of common stock under the employee stock purchase plan of $0.2$0.4 million during the three-monthsix-month period ended MarchJune 31,30, 2026. The Company received proceeds from the issuancesale of common stock under the ATM program of $4.0 million, offset by a payment of $0.6 million for a license installment note payablepayable, during the three-monthsix-month period ended MarchJune 31,30, 2025.