Verrica Pharmaceuticals Q3 2023 Earnings Call Transcript

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November 9, 2023

There are 12 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to the Verica Pharmaceuticals Third Quarter 2023 Corporate Update and Earnings Conference Call. As a reminder, this conference is being recorded. I will now turn the call over to our host, Kevin Gardner of LifeSci Advisors.

Speaker 1

Thank you, operator. Hello, everyone, and welcome to Verica Pharmaceuticals' Q3 2023 Corporate Update and Earnings Conference Call. With me on the line this morning are Ted White, President and Chief Executive Officer of Verica Pharmaceuticals Joe Bonacourso, Chief Commercial Officer Terry Koehler, Chief Financial Officer Doctor. Gary Goldenberg, Verica's Chief Medical Officer and Chris Hayes, Verica's Chief Legal Officer. As a reminder, during today's call, management will make forward looking statements.

Speaker 1

These statements may include expectations related to the commercialization of Wycanth in the United States, Verica's clinical development programs and product candidates as well as overall business strategy and planned operations. These forward looking statements are based on the company's current expectations and involve inherent risks and uncertainties. And based on those risks and uncertainties, Barricka's actual results and the timing of events could differ materially from those anticipated in such forward looking statements. Please see Verica's SEC filings for important risk factors. Verica cautions you not to place undue reliance on forward looking statements and undertakes no duty or obligation to update any forward looking statements as a result of new information, future events or changes in expectations.

Speaker 1

In addition, during today's call, we will discuss certain non GAAP financial measures. These non GAAP financial measures are in addition to and not a substitute for or superior to Measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non GAAP financial measures versus their closest GAAP equivalents. Our earnings release that we issued today includes GAAP to non GAAP reconciliations for these measures and is also available on the Investor Relations section of our website. I'll now turn the call over to Verica's President and CEO, Ed White.

Speaker 1

Ed?

Speaker 2

Thank you, Kevin, and good morning, everyone, and thank you for joining us for our Q3 2023 corporate update and earnings conference call. I'd like to begin today's call by providing a general update on the progress we've made since the Q2. I'll then turn the call over to our Chief Commercial Officer, Joe Bonacorso, who will provide a more detailed review of our commercial activities and launch of WiKamt in the United States. Following Joe's remarks, our Chief Financial Officer, Terry Koller, We'll review our Q3 financial results. We'll then open up the call to take your questions.

Speaker 2

The Q3 of 2023 proved to be a momentous period for our company. In July, The FDA approved WiCant for the treatment of molluscum contagiosum or molluscum in adult and pediatric patients 2 years of age and older. The first ever FDA approved product aimed at treating the 6,000,000 patients in the U. S. Who suffer from this highly contagious viral skin infection.

Speaker 2

We are very pleased with the high awareness and initial reception of Liscant. Physicians and their patients who suffer from Luscum Have waited a long time to have a safe and effective FDA approved therapy to treat this disease. Based on the feedback we've received to date, We are confident in WiCann's ability to address this disease, including that the design of the applicator itself allows for precise administration In addition to the positive reception and feedback we've been receiving for WiCant, our distribution model is well received by the dermatologists and pediatric communities. As a reminder, physicians can obtain Ycanth in 2 primary ways. The first is a white bag service with our specialty pharmacy partner, NuFactor.

Speaker 2

The second is on buy and bill basis directly through We believe our buy and bill model is resonating well with healthcare providers And we believe it will be a driver of future demand. As a reminder, under our buy and bill model, WiCant is currently reimbursed under a miscellaneous J code, which is expected to be replaced by an assigned permanent J code by January 2024, which should be published by April of 2024. We were just granted a C code, which is used by hospitals and clinics on a temporary basis until our J code is assigned. We expect that physicians who select to use our buy and build distribution model will typically realize a 6% to 10% margin on ASP, which would not be available utilizing a specialty pharmacy in a white bag service. Our launch activities for White Soon after receiving FDA approval for WiCAMF, we announced a non dilutive financing that extended Our estimated cash runway into the Q1 of 2025.

Speaker 2

At this time, we believe we have sufficient capital to support the WiKanth launch and the continued advancement through Phase 2 of VP-three fifteen, our novel oncolytic peptide I'll provide a brief on this program in just a minute. On August 21, we held our WiGant National Launch Meeting to prepare for the launch of WiGant. By the end of September, all 60 sales representatives were deployed into the field and were actively calling on their targets among over 8,500 healthcare providers identified in our launch strategy. In August, We received our first sale of WiCant to our exclusive distributor FFF Enterprises, which resulted in net WiGant product revenues of $2,800,000 in the 3rd quarter. In a few minutes, Joe Bonacorso will share some details with respect to our marketing and reimbursement strategies to support the launch of YCAMP.

Speaker 2

While we're obviously excited by the reception for YCAMP, We're also mindful that healthcare professionals continue to use unapproved cantharidin based products in some markets remain a challenge. Our efforts to clear the market of those unapproved drugs continue to proceed through the FDA and other available venues. To be clear, we believe that both federal and state law and regulations require, among other things, healthcare providers to have a valid prescription and a medical reason for prescribing a compounded product instead of prescribing our FDA approved product. Moreover, we believe that it is a violation of federal and state law and regulations for pharmacies and healthcare providers to order compounded cantheradine has office stock for use on more than the single patient for whom they write a valid prescription as well as procure product from unauthorized trading partners in violation of the DSCSA. In August, we also issued a statement in support of the FDA's recent action against certain retailers, including Amazon and Walmart And manufacturers that warn consumers not to use unapproved products for the treatment of molluscum.

Speaker 2

We applaud the FDA's decisive actions to safeguard the public against these unapproved products, which supports the view that molluscum is a serious and prevalent health problem that requires medical intervention with therapies that have been rigorously tested and reviewed by regulatory authorities. As a reminder, YCANT's approval was based upon positive data from 2 well controlled Phase 3 trials Demonstrating the clinical safety and efficacy of WiCant, so that millions of people, primarily children who suffer from this viral infection can finally receive a safe, effective FDA approved treatment for their condition. To further underscore our commitment to patient health, in September, we filed an import alert to halt the illegal importation of Compounding cantharidin from Canada into the United States. In October, we filed a citizen's petition to, among other things, remove comparatin from both the 503A and the 503 bulk substance list. We are also requesting that the FDA utilize its enforcement discretion to clear the market of all unapproved cantharidin drugs and issue warning letters to those entities who are in violation of the applicable laws and regulations.

Speaker 2

And finally, we are investigating private right of action claims against individuals and entities who are violating the law. We also remain quite active on the educational front. On October 11, we held a virtual KOL event for investors To discuss the approval of WiCAMP, which featured Doctor. Mark Kaufman from Advanced Dermatology in Miami, Doctor. Michael Cameron of Cameron Dermatology in New York City and also the Department of Dermatology at Mount Sinai and Doctor.

Speaker 2

Mercedes Gonzalez, Pediatric Dermatologists in the Dermatology of Miami. This event was well attended and attracted a broad array of institutional investors. Finally, I'd like to provide a brief update on BP315, our novel oncolytic peptide, which is being developed For the treatment of basal cell carcinoma or BCC, in August, we announced the presentation of lesion clearance data from Part 1 of our ongoing Phase 2 trial. These data highlighted the antitumor response of BP-three fifteen As determined by clinical and histological clearance of treatment basal cell carcinoma lesions Doctor. Neil Bhatia, Director of Clinical Dermatology, Therapeutics and Clinical Research in San Diego and Principal Investigator for the study presented the data at the 2023 American Academy of Dermatology Innovation Academy.

Speaker 2

Based on the early But encouraging results from Part 1, we recently expanded Part 2 of the ongoing trial. VP-three fifteen Continues to show potential to be a non surgical, non invasive therapeutic approach for the treatment of basal cell carcinoma And we look forward to providing another update on this program in the first half of twenty twenty four. I'd now like to turn the call over to Joe Bonacorso, who will review our commercial activities and the WhiteHamp launch. Joe?

Speaker 3

Thanks very much, Ted. As Ted mentioned earlier, our commercial team is fully in place and we're starting to see the effects of our initial outreach in the market With growing interest in prescribing WiKant amongst physicians and broad acceptance on the payer side. In just 2 months since commercial launch, We have amassed over 112,000,000 lives covered on both commercial and managed Medicaid plans, including Anthem, CVS Caremark and several Blues plans like Horizon, Empire, New Jersey, Georgia and Louisiana. In addition, we have already received state Medicaid Fee for service coverage in New Jersey, Connecticut, Nevada and Arkansas. Looking out 6 months from now, we estimate the number of lives under coverage will grow to approximately $140,000,000 As we mentioned in our July approval call, product sampling is a very important tool for our commercial activities at this early phase of our launch as we continue to grow reimbursement coverage.

Speaker 3

We continue to believe this strategy will drive adoption of WiCAMP among healthcare providers. Our co pay program is also working effectively. And through September, more than 85% of our patients paid $25 or less out of pocket based on our co pay support program. To date, we have also gained formulary acceptance at over a dozen key institutions, including Akron Children's Hospital, Mount Sinai, MUCS, University of Miami, Stanford Lucille Packard Children's Hospital, Avent Orlando Children's Hospital, Memphis Children's Hospital and Northwell Hospital. In addition, we have several other institutions utilizing NuFactor as a bridge as they contemplate their formulary process, such as Yale, UPMC, Montefiore, Temple, Dell's Children's.

Speaker 3

During the 4th quarter, we anticipate several wins at key institutions, including Lori's Children's Hospital, Texas Children's Hospital and UCSF. We currently have over 3,000 trained healthcare professionals and 1300 offices sampled. We were also very active at major conferences this quarter, including the Fall Clinical Dermatology Conference and the American Academy of Pediatrics National Conference, where we conducted product trainings and education programs. Finally, as Ted noted earlier, we expect to receive a final J code for WiCAM in January of 2024, which is expected to benefit the establishment of buy and bill accounts. I'll now pass it to Terry to review our Q3 financial results.

Speaker 4

Thanks, Joe. Wycanth revenues were $2,800,000 in the Q3 of 2023, driven by the initial order from our sole distributor, at FF Enterprises. We also recognized collaboration revenues of $125,000 in the Q3 of 2023 related to the clinical supply agreement with Tory Pharmaceuticals. Those collaboration revenues related to clinical supplies and development support for Tori's Phase 3 clinical trial for molluscum contagionosum in Japan. Consistent with new product launches towards the end of the quarter, Revenue at Wyckhamt in the Q3 of 2023 primarily reflects inventory stocking at FFF.

Speaker 4

While the company expects additional orders from FFF in the Q4 of 2023, these orders may be less than those received in the Q3 of 2023 as we continue to build awareness and pull through demand among healthcare providers and patients in our 1st full quarter of commercialization. We expect inventory levels at FFF to normalize in the first half of twenty twenty four as demand continues to grow. Gross margins for Wycalf were 95% for the Q3 of 2023, which benefited from certain components of standard cost of goods sold, including bulk production and the applicator assembly of our registration batches having been expensed as R and D prior to approval. Research and development expenses were $6,500,000 in the Q3 of 2023 compared to $2,800,000 in the same period of 2022. The increase of $3,700,000 was primarily attributable to increased clinical costs driven by an increase in enrollment of patients in our Part 2 of our Phase 2 program studying BP-three fifteen for the treatment of basal cell carcinoma.

Speaker 4

Selling, general and administrative expenses were $20,000,000 in the Q3 of 2023 compared to $3,900,000 in the same period of 2022. The increase of $16,100,000 was primarily driven by the launch of WiCap in the quarter and the onboarding of the sales force and commercial support functions. For the Q3 of 2023, net loss on a GAAP basis was $24,800,000 or $0.54 per share compared to net income of $83,000 or $0.00 per share in the same period in 2022. As a reminder, the earnings per share in 2022 included the impact of the $8,000,000 Tory milestone payment related to the start of their Phase 3 clinical program for molluscum in Japan. For the Q3 of 2023, Non GAAP net loss, which is calculated by adding back stock based compensation and non cash interest expense, was $14,800,000 or $0.32 per share compared to a non GAAP net gain of $2,900,000,000 or $0.07 per share for the same period in 2022.

Speaker 4

And finally, as of September 30, 2023, Barrick had aggregate cash and cash equivalents of $84,300,000 and the company continues to believe its cash and cash equivalents will be sufficient to fund operations into the Q1 of 2025. I'll now turn the call back over to Ted for closing remarks.

Speaker 2

Thanks, Terry. As you can see, we believe that we're off to a positive start. The awareness of Wycanth is high and Wycanth is being well received. As the only FDA approved therapy for the treatment of molluscum, We expect to see continued growing demand throughout the Q4 and in 2024. Our commercial team is in place, fully operational and has made significant inroads to bring this important new therapy to dermatologists and pediatricians.

Speaker 2

As always, we are in very close alignment with the FDA to help to remove any unapproved products from the market. In parallel with our commercial activities, we also continue to make significant progress with our lead pipeline asset, BP-three fifteen, and expect to read out top line data on the ongoing Phase 2 trial in the first half of twenty twenty four. With that, we'll now be happy to take your questions.

Operator

The first question we have is from Stacy Ku of TD Cowen. Please go ahead.

Speaker 5

Hi, good morning. Thanks so much for taking our questions. So we had a few. First, Really nice early onboarding of multiple hospitals. So can you just discuss your anecdotal early experience with establishing infrastructure with these institutions, Early learnings and maybe what's been going really well that has surprised you all.

Speaker 5

So that's the first question. And then second, Appreciate the detailed update on compounded cantharidin. Just remind us how many FDA registered compounding pharmacies produce cantharidin? And do you have any early thinking around the potential timing of this process? And if we could sneak a third, just very early, Where is the average number of treatments trending right now?

Speaker 5

Thank you so much.

Speaker 6

Yes. So thank you, Stacy for your question. This is Joe Bonacourso. I'll take the question on the hospitals. So the early learnings are a lot of the institutions want to move away from compounding.

Speaker 6

So those are the ones that are adopting quickly to our opportunity with Wi Can't. Obviously, we're working through the formulary process and we're either working through the central pharmacy department or we're working through the ambulatory pharmacy Depending on the needs of the institution, it also requires some infrastructure on their end to get the EMR set up and their workflows and processes. So that's been a great learning for us as a young organization. Every time we have an institution established, we're able to take those learnings forward to the next opportunity. And as you can see,

Speaker 5

And an update on Cardiscan Derogen timing?

Speaker 7

Yes. Stacy, hi. It's Chris Hayes. So as to the number, I think your question was how many 503 pharmacies do we know? If that's the question, our internal and external investigations indicate that there are about 3 or 4 503B pharmacies on the market who may be compounding cantharidin.

Speaker 7

However, for the January through June period, There was a report that's filed with the FDA that they did not compound any during that time period. However, if you look at their websites and anecdotal evidence From prescribers indicate there are about 3 or 4 503b pharmacies on the market right now. Given our efforts with the FDA and other intended efforts that we intend to pursue outside the FDA, We hope to have some traction and gain momentum in clearing the market within 8 to 10 months.

Speaker 5

Very helpful. And then my last question about the early average number of treatments trending.

Speaker 6

Hey Stacy, it's Joe again. So it's a little too early to tell because For all intents and purposes, we got boots on the ground at the Labor Day a week and then we are using a starter dose in most cases to get doctors to trial And we're just starting to see now the flow in October November of 2nd and third refills coming in. So it's too early to establish a Definitive number to give you right now, unlike an oral medication, there's no day con data you can pull daily on this. And as you know, we're every 3 weeks So we're continuing to monitor that as well.

Speaker 2

And Stacy, this is Ted. I would also point you to our KALM-one and KALM-two Phase 3 clinical trials where

Operator

The next question we have is from Gregory Renza of RBC Capital Markets. Please go ahead.

Speaker 8

Hey, good morning, Ted and team. Congrats on the progress and the start with WiCAT. Just two questions for me. As you really dig into building that awareness with respect to the launch and we talk about or at least get anecdotal Feedback on the clearance and the performance of Wyckham really maybe overextending beyond the label, certainly anecdotally. Just curious how you plan to maybe deliver those anecdotes collectively to enhance the buy in across the clinician Community as folks get greater experience with WiCAMP and build that awareness.

Speaker 8

And then secondly, Ted, I know you had an update on VP-one hundred and two For common words, and I know the focus is on the launch here. But I'm just curious how the FDA proceedings are potentially Changing or at least reinforcing your expectations on timing for a Phase 3 trial with common warts. Thanks again and congrats.

Speaker 2

Thanks, Greg for the question. So Greg, regarding the indications and KOLs, listen we've trained 42 KOLs Nationally and we plan to utilize them to help communicate the White Cat message, also white papers And also point you to our recent virtual KOL event that was held recently with the positions I mentioned earlier. And then on common warts question, again, I think that We're not going to look at any trials until the second half of twenty twenty four at the earliest.

Speaker 8

Got it. Sounds great, Ted. Thanks again.

Speaker 2

Thank you.

Operator

The next question we have is from Serge Belanger of Needham and Co. Please go ahead.

Speaker 9

Hi, good morning. Thanks for taking my questions. I guess the first one on coverage. Obviously, you've done A lot of progress on the commercial and Medicaid front. Maybe just talk about when you expect to be at steady state Coverage on both commercial and Medicaid.

Speaker 9

And then You're also establishing a white bag service. Just curious how widely you'll be establishing that service and if we should expect Most of the demand will come through that service until there is a J code established in early 2024? Thanks.

Speaker 6

Yes. So Serge, thanks for your questions. First thing on coverage. So the coverage is growing every day. Prior to our launch of this product, I've said in prior conversations that this has been very consistent feedback from the payer community We've been out there talking to them over the last few years.

Speaker 6

It's exceeding in the 1st 3 months here, it's exceeding even where we thought it would be At over roughly 112,000,000 lives covered and that's going to continue to grow daily as we have more plans that are nearing the finish line on their final decisions. So we should get a steady state here by beginning of Q1 into Q1 of next year. The Medicaid states, they work on their own secular Schedule, so there's a group of states that have us on their review now and there'll be more after the New Year in quarter 1 all the way through April of next year in Medicaid. But it's a very robust coverage landscape as we speak right now. Regarding White Bag, we have an exclusive specialty And the mix is about 80% specialty to 20% buy and bill, Which is predictive of our modeling in the early going and we are fully expecting to get J code established in the Q1 of next year,

Operator

The last question we have is from Kent Oliver of Brookline Capital Markets. Please go ahead.

Speaker 10

Great. Thank you for taking my question. With regard to SG and A, you're now at $20,000,000 in the quarter, sounds like the sales force is fully staffed, launch activities are underway. Should this be a pretty steady state number looking out over the course of the next 4 to 6 quarters?

Speaker 11

Yes. Thanks for the question, Kevin. So SG and A costs were $20,000,000 on a GAAP basis for the quarter. On an adjusted basis, excluding SoftBank, we had about $12,000,000 Obviously, this is a significant step up year over year that we onboarded the sales force and launched the product in the quarter, but we that was only we only have about 6 weeks of commercial activity, if you will, in this quarter. So there will be a step up Going into Q4, as we'll have the commercial team on boarded for that entire quarter and out in the field for that entire quarter.

Speaker 11

So you should expect to see a step up

Operator

There are no further questions at this time. I would like to turn the floor back over to Ted White for closing comments.

Speaker 2

Thank you, operator. So again, I'd like to leave everyone with the fact that we've got overall strong overall interest including earlier than expected interest from pediatricians. As you heard from Joe, we have strong coverage with over 112,000,000 lives and our effective coupon program where 9 out of 10 patients Are paying no more than $25 We have a C code that's been issued and it's important to note that it was posted in the new quarterly CPCS file for January, which includes a full descriptor of Wyckham's code C9164. This is a prelude to a J code being issued and which we fully anticipate in January. We're progressing at hospitals and also private equity group practices within dermatology.

Speaker 2

And As you heard today, we're taking an aggressive stance on compounded cantharidin. With that, I'd like to thank everyone for joining our call today.

Operator

This concludes today's conference. Thank you for joining us. You may now disconnect your lines.

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Verrica Pharmaceuticals Q3 2023
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