We came across a bullish thesis on Journey Medical Corporation (DERM) on Substack by The 10x Radar. In this article, we will summarize the bulls’ thesis on DERM. Journey Medical Corporation (DERM)’s share was trading at $4.98 as of Feb 19th. DERM’s trailing and forward P/E were 39.77 and 100 respectively according to Yahoo Finance.
A dermatologist in an exam room, observing a positive response to therapy for inflammatory bowel diseases, acne, psoriasis, asthma, allergies, or bacterial infections.
Journey Medical (DERM) is on the verge of a major transformation following the FDA approval of Emrosi, its newly launched rosacea treatment set to hit the U.S. market in early 2025. Despite this milestone, the stock has remained relatively flat, presenting an intriguing opportunity. Rosacea affects approximately 5% of the U.S. population, requiring ongoing treatment, and Oracea, the current market leader, generates $300 million in annual sales. Emrosi, with superior clinical data and higher dermal absorption, is well-positioned to capture market share. Priced similarly to Oracea at around $950 per month, Emrosi’s sales could add $55 million in revenue by 2027, potentially doubling Journey Medical’s business.
The company is already cash flow breakeven at $55 million in revenue, and strong insider ownership, including CEO Claude Maraoui’s 8.5% stake, reinforces confidence in management’s alignment with shareholders. At a modest valuation of 1.5x EV/sales, Journey Medical is significantly undervalued, with a potential run to $15 per share by 2027, assuming a reasonable 3x EV/revenue multiple. This represents a compelling 3-4x upside, making it an attractive investment despite execution risks.
Unlike speculative biotech firms, Journey Medical is a profitable, commercial-stage pharmaceutical company with a focused, efficient model. Instead of investing heavily in unproven science, the company licenses dermatology drugs, leverages its established salesforce, and scales effectively. Covering 80% of dermatologists in top U.S. metro areas, Journey Medical dominates its niche, controlling 75%+ of prescriptions across its core dermatology markets. The company’s product lineup—including Qbrexza (excessive sweating), Accutane (acne), and Amzeeq & Zilxi (acne and rosacea)—generates steady cash flow, ensuring financial stability. With four consecutive quarters of positive adjusted EBITDA, the business is already profitable and growing efficiently.
Emrosi marks a pivotal shift. Licensed from Dr. Reddy’s in 2021, Journey Medical successfully navigated clinical trials and FDA approval, positioning itself as a major player in dermatology. With 79% of surveyed dermatologists planning to prescribe Emrosi and payers covering over 200 million lives signaling support, the launch is set for strong adoption. Moreover, 90% of Oracea prescriptions come from doctors who already prescribe Journey Medical’s products, minimizing sales friction. The company has the infrastructure in place—its 35-person sales team already covers 90% of top prescribers—allowing Emrosi’s revenue to flow directly to the bottom line without additional costs.
Financially, Journey Medical is in a strong position, with $22.5 million in cash and a manageable $15 million debt load, ensuring Emrosi’s launch can proceed without dilution. The company’s 2024 revenue guidance of $55–$60 million and expanding gross margins highlight its financial discipline. By 2027, with Emrosi projected to contribute ~$55 million in sales and the base business growing modestly, total revenue could reach ~$120 million, with ~$23 million in net income and an estimated EPS of ~$1.00. Applying a conservative 15x P/E multiple or 3x EV/revenue, the stock could be worth ~$15, offering substantial upside.
There are risks. Generic Oracea could pressure pricing, and insurance coverage may take time to materialize. Additionally, Emrosi’s approval excludes erythema (redness), a key differentiator. However, with strong execution, established market presence, and a focused business model, Journey Medical presents an exceptional risk-reward opportunity, making it a high-conviction investment in the dermatology space.
Journey Medical Corporation (DERM) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 3 hedge fund portfolios held DERM at the end of the third quarter which was 1 in the previous quarter. While we acknowledge the risk and potential of DERM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DERM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.