Journey Medical: A Small-Cap Multibagger Hiding in Plain Sight

The Best Risk-Reward I’ve Seen in a While

Estimated Reading Time: 5 minutes

I don’t invest in pharmaceutical companies.

Too much uncertainty. Stocks surge on hype, speculation, and catalysts. FDA approvals? The stock either explodes or collapses.

Journey Medical (NASDAQ: DERM) didn’t follow that script.

They just won FDA approval for Emrosi (formerly DFD-29, 40 mg extended-release capsule), a rosacea treatment launching in the U.S. market in early 2025

And the stock? Barely moved.

That caught my attention.

Rosacea affects ~5% of the U.S. population, causing facial redness, visible blood vessels, and inflammatory lesions. There’s no cure—patients need on-going treatment

Oracea (acquired by Galderma), the current gold-standard oral treatment, does $300M in annual sales.

Emrosi has better clinical data and is positioned to take market share. While Oracea (doxycycline) is also an extended-release formulation, Emrosi (minocycline) offers a different release profile and higher dermal absorption, potentially delivering superior anti-inflammatory benefits while maintaining a favorable safety profile.

Journey Medical is already cash flow breakeven at $55M revenue on its base business. Even capturing ~25-30% of Oracea’s market by 2027 could add ~$55M in sales—potentially more than doubling the business..

Insider ownership further strengthens the case. CEO and Co-Founder Claude Maraoui owns ~8.5% of the company, and insiders collectively hold ~13% of the stock. Fortress Biotech, the company's parent, maintains a controlling stake at ~49%

At ~$4.50 per share (~1.5x EV/Sales on the core business), that upside isn’t priced in. A run to ~$14 by 2027 (assuming a reasonable 3x EV/revenue multiple) is on the table—or ~15-20x implied EPS of ~$0.8.

That’s a 3-4x upside.

Of course, execution risks exist.

But the risk-reward?

Too damn compelling.

From Small Dermatology Player to Serious Contender

I’m not betting on a biotech moonshot. Journey Medical isn’t that kind of company.

This is a profitable, commercial-stage pharmaceutical company—with real revenue, strong execution, and a proven strategy.

They don’t chase unproven science or sink money into endless R&D. Instead, they find dermatology drugs that need a commercial partner, leverage their existing salesforce, and scale efficiently.

It’s simple. It works.

Journey has one of the most effective dermatology sales teams in the industry:

✅ Covers 80% of dermatologists in the top 50 U.S. metro areas.
✅ Controls 75%+ of total prescriptions in their dermatology markets, particularly in rosacea, hyperhidrosis, and acne.
✅ Uses an entrepreneurial compensation model to drive performance.

What I like? They’re all-in on dermatology.

That kind of focus allows them to deepen industry relationships, refine expertise, and navigate market nuances better than a generalist pharma company ever could.

Their core product lineup—which generates 90%+ of revenue—includes:

• Qbrexza – for excessive sweating.

• Accutane – the well-known acne treatment.

• Amzeeq & Zilxi – acne and rosacea treatments.

These aren’t blockbusters, but they’re steady, cash-generating products.

Journey Medical hasn’t bet everything on a single drug. They’ve built a portfolio, built a salesforce, and built a profitable business.

That approach has worked—Journey Medical just posted its fourth consecutive quarter of positive adjusted EBITDA.

Now?

They’re playing a bigger game.

Emrosi was licensed from Dr. Reddy’s in 2021, but Journey Medical took it across the finish line—navigating late-stage clinical trials, securing FDA approval, and preparing for launch.

That’s execution.

Beyond the U.S. market, Journey Medical is also exploring international licensing opportunities—similar to its 2023 deal with Maruho Co., Ltd. for Qbrexza in Asia. A potential licensing agreement for Emrosi outside the U.S. could unlock further upside without significant investment.

And leadership matters.

CEO Claude Maraoui and much of the management team were part of Medicis Pharmaceutical’s commercial organization, a company that built and marketed dermatology treatments before being acquired for $2.6 billion by Valeant.

They’ve done this before. Now, they’re doing it again—with Emrosi.

Emrosi: Taking a Slice of Oracea’s $300M Market

Rosacea is a huge market—16.5 million U.S. patients, 4 million prescriptions annually, and $300M+ in sales for the leading oral treatment, Oracea.

Journey’s goal? Take a big piece of that market.

Why Emrosi Could Win?

✅ Superior clinical data – Outperformed Oracea in Phase 3 trials.
✅ Better drug absorption – Higher dermal concentration than Oracea’s active ingredient.
✅ Patent protection through 2039 – No generic threats anytime soon.
✅ Doctors are ready – 79% of surveyed dermatologists plan to prescribe it.
✅ Insurance coverage expected – Payers covering 200M+ lives have signaled support.

For years, Oracea has dominated the oral rosacea market—but Emrosi is coming in stronger: better clinical data, a proven sales force, and no added costs.

Here’s the kicker: Over 90% of Oracea prescriptions come from providers who already prescribe a Journey Medical product.

That’s why Journey Medical doesn’t need to expand its sales team for Emrosi’s launch.

From the Q2 2024 earnings call, CEO Claude Maraoui put it clearly:

"With our current 35 sales reps, we already cover 90% of the top prescribers of rosacea treatments. We’re in a solid position for launch and will assess demand before making any changes."

Translation? Emrosi’s revenue will flow straight to the bottom line.

Journey has already proven its ability to commercialize dermatology products—building strong market positions with Accutane and Qbrexza. Now, they’re set to do the same with Emrosi.

Financials and Balance Sheet

Journey Medical is already profitable and growing efficiently.

✅ Four consecutive quarters of positive adjusted EBITDA
✅ 2024 revenue guidance: $55M–$60M
✅ Expanding gross margins—63.9% in Q3 2024 (up from 57.9%)

Journey operates with tight financial discipline:

• $15M in debt (SWK credit facility), but no excessive leverage.

• $22.5M in cash—enough to fund Emrosi’s launch without dilution.

• No major cash burn—their core business is cash flow breakeven.

Financial Projection and Valuation

Looking back nearly two decades to Oracia’s launch offers useful guidance. Oracea—developed by CollaGenex Pharmaceuticals and launched in July 2006 (with Galderma acquiring the company in 2008)—peaked at 769K prescriptions six years post-launch, with revenue growing at a peak CAGR of about 42%.

Below is Oracea’s prescription growth and revenue ramp from launch (source: CollaGenex 2006/2007 10K and other reports).

• Launch-Related Costs: CollaGenex incurred roughly $7.1M in pre/post-launch activities, $4.7M in sales force training, and $4.6M in promotional expenses during the 2006–2007 launch (totaling ~16.4M)

• Market Dynamics: Oracea was a blockbuster launch—benefiting from an absence of generics and quickly establishing itself as the gold standard for rosacea, achieving a peak revenue CAGR of roughly 40% over first 6 years

DERM 2024E Projections: Revenue of ~$55–60M, SG&A expenses of ~$40M, and R&D of ~$10M.

Key Launch Assumptions for EMROSI

• Projected Launch: April 2025

• Pricing: EMROSI’s WAC is set at $1,298 compared to Oracea’s $914. I have excluded this pricing premium from revenue projections for a conservative approach.

• Market Dynamics: With generics already present, even with its differentiated formulation, I expect EMROSI’s early sales growth to be roughly two-thirds of Oracea’s performance during the first 2–3 years post-launch.

• Sales Force & SG&A Baseline: Since an existing sales force is in place, only an incremental $10M in SG&A (using Oracea launch costs as a proxy) is assumed as a new baseline to cover additional marketing activities and/or the hiring of extra sales personnel.

• Revenue Estimates:

  • 2025: ~$12M (accounting for 9 months of operations)

  • 2026: ~$35M

  • 2027: ~$55M

These conservative assumptions provide a solid margin of safety while laying the groundwork for a robust market entry.

Financial Projections (2027):

• Base Business Revenue: ~$65M (5% CAGR)

• EMROSI Revenue: ~$55M

• Total Revenue: ~$120M

• Gross Margin: ~65% (consistent with the current product portfolio)

• Operating Expenses: ~$60M (SG&A ~$50M; R&D ~$10M)

• Net Income: ~$18M

• EPS: ~ $0.80 (based on 23M shares)

Valuation & Upside:

• Current Price: ~$4.50

• Enterprise Value (EV): ~$100M

• With a 3x EV/revenue multiple or 15-20x P/E on these earnings, the stock could reach approximately $14—a 3-4x return from current levels.

This projection presents a conservative yet robust base forecast for EMROSI's market performance. In the long term, I expect EMROSI to capture at least 50% of Oracea’s market and eventually reach peak sales of $150M or more.

Risks: What Could Go Wrong?

No investment is without risk. Here’s what could trip up the thesis:

⚠️ Generic Oracea is already on the market. Could pricing pressure impact Emrosi’s rollout?
⚠️ Launch execution risk. Can Journey’s sales team convert strong clinical data into strong prescriptions?
⚠️ Slow insurance adoption. Payers have signaled support, but actual approvals could take time.
⚠️ Labeling Risk. The FDA approved Emrosi for inflammation but not for redness (erythema), a key differentiator vs. Oracea. This could impact adoption and positioning.

Journey Medical has a strong commercial strategy, but these factors could influence the pace of Emrosi’s market penetration.

Conclusion

Journey Medical secured FDA approval for Emrosi in November 2024, yet the stock barely reacted. Now, the focus shifts to execution.

On February 5, 2025, Journey Medical will host a conference call on Emrosi’s U.S. launch, providing key updates on manufacturing and rollout—something I’m watching closely.

The best opportunities often come not when the news hits, but when the numbers follow. As prescription data rolls in, insurers finalize coverage, and revenue flows to the bottom line, the market will have to adjust—and by then, the easy money will be gone.

My Skin in the Game

I own shares in Journey Medical because the market hasn’t priced in Emrosi’s upside

Disclaimer

This is not financial advice. I hold positions in the stocks mentioned, which may create a conflict of interest. Please do your own research and consult a financial professional, as all investments carry risk, including potential loss of principal. I have not received any compensation from any company to write this; all opinions are solely my own.

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