Huge upside to Journey Medical, says Roth

The stock may be down plenty since its IPO in November, 2021, but investors should be looking to the road ahead when it comes to Journey Medical Corp (Journey Medical Stock Quote, Charts, News, Analysts, Financials NASDAQ:DERM). That’s according to Roth Capital Partners analyst Scott R. Henry, who published on Friday a company note where he reiterated a “Buy” rating on DERM and 12-month target price of $6.00.

Incorporated in 2014, Journey Medical develops and commercializes pharma products for treating dermatological conditions and has products like medicated cloth towelette Qbrexza and Accutane, an oral isotretinoin drug for severe recalcitrant acne. 

The company released its fourth quarter and full 2022 earnings on Wednesday, posting Q4 revenue up almost nine per cent year-over-year to $16.0 million and a net loss of $10.6 million compared to a loss of $21.8 million a year earlier. For the 2022 year, Journey’s revenue was up 17 per cent to $73.7 million, while its net loss went from $44.0 million to $29.6 million. (All figures in US dollars.)

Journey Medical CEO, President and co-founder Claude Maraoui said 2022 came with its challenges, including the impact of generic competition on Journey’s Targadox brand and supply chain issues for Ximino and Exelderm. But with those issues resolved, Journey is looking to a bigger and better year, he said.

“In 2023, we look forward to continued revenue growth from these products and achieving clinical milestones in our Phase 3 clinical trials evaluating DFD-29 for the treatment of rosacea. We expect a top-line data read out from the DFD-29 Phase 3 clinical trials in the second quarter of 2023 and to file a New Drug Application (“NDA”) in the second half of 2023,” Maraoui said in a press release.

Commenting on the quarter, Henry said the results were within expectations based on revenues, where the $16.0 million topline compared to the consensus call from analysts of $16.6 million and the net EPS loss of $0.60 per share was larger than the Street’s call at negative $0.37 per share.

On the positive side, Henry said he’s encouraged by Journey Medical’s pursuit of breakeven commercial operations in 2023, while pivotal data on its rosacea product should be arriving late in 2023 in the form of two Phase 3 trials for its DFD-29 product.

“We are optimistic in positive results based on the Phase 2 clinical data, but rosacea trials do contain risk (particularly on the IGA endpoint). This could be step 2 in reviving the share price,” Henry wrote.

At press time, Henry’s maintained $6.00 target represented a projected one-year return of 326 per cent.

“We remain optimistic – particularly with a target to get commercial operations to breakeven this year. Further, the pipeline readout could move the stock price significantly given the current valuation,” Henry said.