Verrica Pharmaceuticals Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 14, 2024

There are 13 speakers on the call.

Operator

Good morning, and welcome to the Verica Pharmaceuticals Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' remarks, there will be a question and answer session. Please note today's call will be recorded and I will be standing by if you should need any assistance. It is now my pleasure to turn the call over to today's host, Kevin Gardner, Managing Director with LifeSci Partners.

Operator

Please go ahead.

Speaker 1

Thank you, operator. Hello, everyone, and welcome to Verica Pharmaceuticals' Q2 2024 Corporate Update and Earnings Conference Call. With me on the line this morning are Ted White, President and Chief Executive Officer of Verica Joe Vonicorso, 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, VP-one hundred and two, for the treatment of molluscum contagiosum in the United States regulatory developments the development and potential benefits of Verica's product candidates our expected cash runway 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, Ted White.

Speaker 1

Ted?

Speaker 2

Thank you, Kevin, and good morning, everyone, and thank you for joining us for our Q2 2024 earnings call. I'm pleased to report that we continue to make progress across our business, including with the commercial launch of WiCAMP and the exciting data being generated from our development stage pipeline. Starting with WiCAM, for the Q2, we recorded product revenue net of $4,900,000 which reflects growth in demand for WiCant as well as the expansion of our distribution footprint with the addition of Syncora as a specialty distribution partner and the related impact of a one time stock in order. Syncora allows us to provide additional customer support through their GPO IPN, which is intended to target dermatologists and drive further buy and bill account growth through IPN's membership. We've also added Vizient as a GPO for hospitals and we believe we will see a positive impact on Wycan't pull through demand in the second half of the year.

Speaker 2

We believe that we've addressed many big operational hurdles and in the back half of the year, we must focus on capturing market share and driving adoption. We continue to focus on simplifying the process for physicians to treat patients. On April 1, Wycanth received the permanent J code from CMS and on July 1, CMS published the Part B schedule listing, why can't reimbursement at an average selling price plus 6%. This created visibility for commercial insurers to further establish their own allowables, which represents the maximum amount a plan will pay for covered healthcare service. I'm pleased to report that as of today, insurance companies covering approximately 98% of commercial lives with White Camp coverage have formally published their allowables, which is now visible to physicians electronically at the time of diagnosis.

Speaker 2

We believe that this should drive confidence in paired coverage and additional same day treatment for established buy and bill accounts. In addition to driving growth in buy and bill, we continue to promote WiCann's value proposition for specialty pharmacy customers as we look to maximize adoption across both channels. In a moment, Joe will talk more about our commercial strategy and specific efforts to build additional momentum in the commercialization of WiCAM. We continue to make progress in removing products containing compound and cantheradine in the U. S.

Speaker 2

In July, we announced a litigation settlement with Dormer Laboratories that will discontinue the sale by Dormer of compounded cantharidin products in the United States. As the largest supplier of non FDA approved cantharidin containing products into the U. S. Market, The settlement with Dormer marks a major win for patients who seek access to a safe, effective and FDA approved therapy for the treatment of molluscum. While we expect this sentiment will have a positive impact on demand for YCAMF, removing compounded cantharidin from the marketplace will take time.

Speaker 2

As compounded products typically have a 6 month dating. We therefore remain focused on customer conversion, but we recognize it will take some time for dormers previously sold inventory to work its way through offices. While our main focus remains developing the market opportunity for Wycanth for the treatment of molluscum, we think that's just the beginning for this unique and innovative product. The next major opportunity for YCANT is for the treatment of common warts and with a prevalence of approximately 22,000,000 patients in the U. S.

Speaker 2

Alone and no FDA approved therapies, common warts represents one of the largest unmet needs in all of dermatology. We continue to make important progress in advancing our common morts program. During the quarter, we amended our existing licensing agreement with Torrey Pharmaceutical so that both companies will jointly conduct and split the costs of a global pivotal Phase 3 trial for Wycanth in common warts. Torrey will fund Verica's portion of the cost as an offset to Torrey's future payment obligations to Verica based on regulatory milestones and sales of LYCANT for molluscum contagiosum and common warts in Japan. In addition, Tori will make a milestone payment of $8,000,000 to VERICA upon the first patient dosed in Japan in the Phase 3 trial.

Speaker 2

Importantly, this amendment should benefit both parties from a cost and time to market standpoint and the new funding structure is expected to have minimal impact on our near term cash position. Initiation of a global Phase 3 study remains subject to feedback from the U. S. FDA and Japan's Pharmaceuticals and Medical Device Agency on the proposed design of the Phase 3 trial. We expect to receive feedback from the FDA and the PMDA in Q4 of this year.

Speaker 2

And based on our current timeline estimates, we anticipate initiating the Phase 3 trial in the first half of twenty twenty five. If Wycanth is successfully developed, approved and commercialized for the treatment of common warts, we anticipate a high degree of cold point overlap and marketing synergies with our current molluscum promotion of WiCan. Now I'd like to briefly review the exciting data we announced this morning for our lead pipeline candidate VP315, which is being developed for the treatment of basal cell carcinoma. By the way of background, VP315 is a potential 1st in class oncolytic peptide that has been engineered to provide more targeted delivery to stimulate the patient's immune system and destroy cancer cells. We are developing BP-three fifteen as a therapy that can serve as a potential non surgical alternative to surgery, including Mohs surgery or as a neoadjuvant chemotherapeutic for basal cell carcinomas, including advanced basal cell.

Speaker 2

As the most common type of cancer globally, we expect that the commercial opportunity for basal cell carcinoma is sizable with approximately 3,600,000 diagnoses each year in the United States alone. The Phase 2 study is an open label proof of concept trial designed to assess the safety and tolerability, dose regimen and efficacy of VP-three fifteen in biopsy confirmed basal cell carcinoma. Preliminary efficacy data based on 90 out of 93 lesions treated show that the treatment with VP-three fifteen resulted in approximately 51 percent complete histologic clearance rate of basal cell carcinoma. In addition, of the patients who had residual carcinoma, those residual tumors showed approximately 71% reduction in tumor size. Taken together, this represents approximately 86 percent overall reduction in tumor size across all lesions treated.

Speaker 2

These results, if confirmed in the pivotal study, make a strong argument for the use of BP-three fifteen as first line therapy in the treatment of local and advanced basal cell carcinoma, which will either eliminate the need for additional treatment entirely or significantly reduce the size of the excision and the surgical burden associated with other treatment regimens including Mohs surgery. No treatment related serious adverse events were reported in Phase 2 study and most treatment related adverse events were classified as mild to moderate as expected with injection site pain being the most common adverse event. Based on these positive efficacy and safety data from the Phase 2 trial, we believe VP-three fifteen has significant potential to become an important first line treatment option for basal cell carcinoma for use prior to surgery or instead of oral therapies, which have significant systemic side effects. We are obviously very pleased with these clinical data and we intend to hold a KOL event in the near future to discuss in more detail the results from the BP-three fifteen Phase 2 study and provide additional insight into physician use case. I'll now turn the call over to Joe to review our commercial progress.

Speaker 2

Joe?

Speaker 3

Thanks very much, Ted. As Ted mentioned earlier, in the Q2, we saw pull through demand for Wyckhamf grow sequentially quarter over quarter. The increase in demand reflects an increase in units dispensed through a specialty pharmacy and a higher number of units sold to hospitals and buy and bill offices, including Walgreens community stores. Although White Camp showed growth versus the prior quarter, we remain focused on accelerating growth in the second half of the year. We believe that many of our accomplishments from the second quarter, including our settlement with Dormer Labs and the receipt of a permanent J code from CMS and the establishment of allowables across the commercial coverage will translate into increased demand for WiCAM in the second half of twenty twenty four and beyond.

Speaker 3

In the Q3, we are working aggressively to grow applicator demand by focusing on the extension of our buy and bill accounts, which includes the addition of GPO's Vizient for hospitals and IPN for dermatology practices. The targeted conversion of physician practices that were former uses of compounded cantharidin and placing an emphasis on driving adherence through treat to clear messaging and medical education. Our coverage footprint also continues to expand. And in the Q2, we added a number of new Medicaid states, including Michigan, Louisiana, Alabama and West Virginia. With respect to total lives under coverage as of July 31, we have reached 234,000,000 lives under coverage, which encompasses 139 healthcare plans spanning commercial, Medicaid, TRICARE and federal employee plans.

Speaker 3

With the permanent J code in place and allowables established on most commercial plans, we believe broader acceptance by prescribers will continue as the reimbursement process becomes more efficient. We're also very focused on optimizing coverage under the commercial and state Medicaid plans by working with the payer universe to eliminate prior authorizations and other administrative burdens that may potentially be a barrier to patients being able to receive an approved treatment. Finally, on our last call, I discussed the addition of 20 new pediatric reps in the major MSAs across the country. I am very pleased with the productivities of these new professionals to our sales force, which we believe is driving increased awareness and utilization of WiCAMP and major pediatric medical practices. Pediatricians are also showing interest in buying bill as they prefer to control the patient journey and have the ability to treat same day.

Speaker 3

I'll now pass it to Terry to review our Q4 and year end financial results. Terry?

Speaker 4

Thanks, Joe. For the Q2 of 2024, we reported total revenues of $5,200,000 which included Wycanth net revenues of 4,900,000 dollars Wycanth revenue reflects a combination of ex factory shipments to Triple F related to demand pull through as well as a onetime impact of an initial stock in order from our new specialty distributor, Syncora, which represented approximately 54% of WiCAMP revenue in the quarter. Gross product margins for the Q2 of 2024 were 93%, which continued to benefit from certain components of standard cost of goods sold, including bulk production and the assembly of applicators from our registration batches having been expensed as R and D prior to approval. Research and development expenses of $3,300,000 in the Q2 of 2024 decreased versus the Q2 of 2023 by $2,400,000 driven primarily by a reduction in clinical trial costs related to VP-three fifteen and CMC costs related to preapproval Vicant spend in the prior year period. Selling, general and administrative expenses of $16,500,000 in the Q2 of 2024 increased versus the Q2 of 2023 by $10,600,000 driven primarily by commercial activity for WiCann.

Speaker 4

GAAP net loss was $17,200,000 or $0.37 per share for fiscal Q2 2024 compared to a GAAP net loss of $11,000,000 or $0.24 per share for the prior year period. On a non GAAP basis, which excludes stock based compensation and non cash interest expense, the Q2 of 2024 net loss was $14,400,000 or $0.31 per share compared to a net loss of $9,400,000 or $0.21 per share for the Q2 of 2023. And finally, as of June 30, 2024, Verica had aggregate cash and cash equivalents of $31,900,000 The company expects that its cash and cash equivalents as of June 30, 2024 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 we progress through the Q3, we are laser focused on the launch of Wycanth and accelerating Wycanth demand in the second half of the year. We achieved important wins across multiple areas of our business. Significant amounts of compounded contraridin have been removed from the U. S.

Speaker 2

Market and we will continue to be vigilant on this front. CMS published favorable Wycanth allowables on July 1st and we continue to focus on expanding our buy and bill accounts and demand with the addition of Syncora, IBN and Vizient as GPOs, targeting physician groups and hospitals. We also made considerable progress in our pipeline. We expect to continue advancing YCANT for the treatment of common warts through our amended agreement with Torrey and the exciting top line data we released today on our Phase 2 data for VP315 for the treatment of basal cell carcinoma. Our company remains very excited about VP-three fifteen's unique and differentiated product profile, which has the potential to be a primary and neoadjuvant non invasive therapy that addresses a significant unmet medical need in dermatology.

Speaker 2

That concludes our formal remarks and I'll now turn the call over to the operator for Q and A.

Operator

Thank you. The floor is now open for your questions. Our first question will come from Stacy Ku with TD Cowen. Please go ahead.

Speaker 5

We had a few questions. Just first on WiCant. Can you put some metrics around the progress you've made in removing cantharidin? And just a better understanding around the timeline of when things might resolve, just help set some expectations there. And a quick follow-up on kind of the stocking, you've discussed in a lot of detail.

Speaker 5

Where do you expect it to normalize versus where it is now? So those are why can't questions. And then for BPH315, obviously the treatment paradigm for BCC is has a lot of surgery. So kind of curious what's the pathway forward that could help build enthusiasm beyond the typical cutting out the lesion? What are your early thoughts on study design?

Speaker 5

And what kind of follow-up do you think will be necessary to confirm long term complete histological clearance? What do you think clinicians will want to see? And then one more question, if possible, and I can come back and follow-up. Do you see any greater success in certain lesions? Kind of curious about the success you've seen maybe on the face.

Speaker 5

Thanks so much.

Speaker 2

Thank you, Stacy. This is Ted. I'll handle the first part on the compounded cantharidin and then turn it over to Terry and then over to Gary Goldenberg for the BP315. So on the compounded cantheradine, as you know, we've announced that we've been successful with both Leiters and Dormer Laboratories. Typical compounded cantharidin has a shelf life of around 6 months.

Speaker 2

We know that in Dormer Laboratories specifically there were over 24,000 vials shipped to the United States. So we expect that that inventory has bleed out from offices. And so when you think about it, the last shipment was made in April of 2024. So with a 6 month shelf life, we expect that to bleed out in the second half of the year. And I'll turn the next part over to Terry.

Speaker 4

Sure. Good morning, Stacy. So your question on inventory and normalization, I think our expectations that we're going to continue to grow demand aggressively over the back half of the year here. So I think we expect inventory to normalize in the channel in the back half of the year and be normalized by early 2025.

Speaker 5

Okay. Do you expect it to have some kind of expectations or guidance around the percentage of realized revenue kind of the inventory just to help set expectations?

Speaker 4

Yes. Well, certainly, we know distributors are going to take into account inventory demand and future demand expectations as they think about what the appropriate level of ex factory orders will be in the back half of the year. But we can't give any guidance on revenues at this stage or comment really on the cadence of any future ex factory orders.

Speaker 5

Okay, understood.

Operator

Thank you. Our next question will come from Gregory Brinta with RBC Capital Markets.

Speaker 6

Todd, hold on a second.

Speaker 4

Just as Paul We have to make sure we answer the 315 question as well.

Speaker 6

Yes. Can you hear me? Stacy, hi. Yes. Okay.

Speaker 6

So regarding the paradigm, we believe that based on our Phase 2 data and it's Phase 2 not Phase 3, but based on the Phase 2 data, we believe that this product, the VB-three fifteen has the ability to shift the treatment paradigm. I think if you look at our favorable safety profile in the Phase 2 study, we're very pleased with that. And as you know, Phase 2 really is a safety study. It's a dose escalation safety study. We did not see any severe adverse events related to the treatment.

Speaker 6

So that's a very positive development. You look at efficacy data, for complete histologic clearance and also for tumor size reduction, essentially shrinking the tumor, we believe that VB-three fifteen has the potential to be the treatment of choice between biopsy and diagnosis and potential need for surgery. Right now in vast majority of patients you get a diagnosis with a biopsy, your next step is surgery. We believe that BP-three fifteen has the potential to be that step in between. In 51% of subjects in our study, there was complete histologic clearance, meaning that there would be no need for a surgical intervention.

Speaker 6

In those patients who did not have histologic clearance, there was a 71% reduction in lesion size. What does that mean for a patient? It means that if they do have to have surgery later on, the surgery now is much smaller. It's decreased by more than 50%. So their surgical scar, the operation itself is now much smaller than it would have been prior to using BP-three fifteen.

Speaker 6

So we really believe that this has potential to shift the treatment paradigm. As far as the follow-up time needed and what dermatologists would like to see, I think it's too early to comment. I think these are the things that we will discuss with the agency in our end of Phase 2 meeting, which we anticipate to have it in the first half of next year. But I think at this point, we are all very excited about the potential of this molecule to shift to the treatment paradigm for the 3.6 1,000,000 plus patients with basal cell carcinoma in the United States alone.

Operator

We'll now go to our next question comes from Gregory Renza with RBC Capital Markets.

Speaker 7

Thanks. Good morning, Ted. Congrats on the progress. Thanks for taking my question. Ted, as you and Joe and the team talk about really accelerating and doubling down on execution for Wycantin in the market, just wanted to ask if you could just add additional color on some of those levers that you're pulling.

Speaker 7

How you're prioritizing the detailing there? I know you provided some comments in your prepared remarks. Just curious, how important is that same day treatment and lowering those barriers for prior authorizations? I know you've seen that come down. And as we're about a year or so into launch, just wanted to provide some of your commentary on the trajectory from here in light of all the execution detailing that you're doing?

Speaker 7

Thanks.

Speaker 2

Sure. Thank you, Greg for the question. So listen, I would tell you a couple of things. Prior authorizations, we typically see that in our Medicaid and our managed Medicaid area of business and we are actively working with those accounts as we speak to negotiate to get those PAs removed. Difference between a medical benefit and a pharmacy benefit.

Speaker 2

In a medical benefit policy, you cannot treat the same day until you get the authorization code. So it's not like a pharmacy benefit where you can do an electronic prior authorization, cover my meds, etcetera. Medical benefit is different. So this is a key area that we're focusing on in order to get these PAs removed. Again, we typically see it in managed Medicaid and state Medicaids and then also the Blue Cross Blue Shields of the world.

Speaker 2

So that's number 1. Number 2 is we're looking to pull a lever with our co pay program. Right now our co pay program is there's a variance between $25 to $75 You'll be peering shortly that we'll be streamlining that process and making it more simplistic for customers and for the patients. So that's another lever. I also think that the other lever we have with IPN, which in Cora, they have a strong footprint in dermatology and now we'll be able to do contracting with them and be able to talk spread that as you know our field force cannot talk about with customers.

Speaker 2

And then of course we have Visiant for the institutions. And then finally, looking at payers, while we have strong coverage, we like to get even stronger coverage and look to go to a dual benefit where we have a pharmacy benefit as well as a medical benefit. And those are the levers that we're actively working on as we speak.

Speaker 7

That's great. Thank you. And just one more maybe for Terry. Just on the sampling, can you just give us a state of the contribution there and the expectations? And then maybe I'll just lob in as you see the demand and maybe some of that predictability.

Speaker 7

I know you didn't provide refraining from guidance on, of course, some inventory, but just largely, do you have a timeline as to when you would feel comfortable just internally on projections to provide larger longer term guidance when it comes to Wycanth revenues? Congrats guys on

Speaker 8

the quarter and the data.

Speaker 4

Thanks, Craig. Good morning. So on the guidance front, that's something that we'll consider as we get closer to 20 25. It's not something that we'll do in the back half of this year. And then on the sample program, so we continue to sample, but I would tell you the sampling has gone significantly down and will continue to go down, we believe, over the back half of the year.

Speaker 4

Joe, is that?

Speaker 9

Yes. I mean, we look at the sample program as trade doses because they are a starter dose, right, to help a patient. So we're that continues to go down as we're continuing to build our coverage in same day treatment for physicians. So to Terry's point, that's going to continue to taper down dramatically on the back half of the year here.

Speaker 7

Great. Thanks, guys.

Operator

Thank you. Our next question will come from Glenn Santangelo with Jefferies. Please go ahead.

Speaker 10

Yes. Thanks for taking my questions. Hey, Ted, I mean, you commented multiple times obviously about the settlement against Dormer Labs and that's obviously a major step forward. But can you say sort of confidently at this point you're not really seeing any incremental compounded cathartan sort of come into the market at this point? Do you feel like that window has closed?

Speaker 2

Hi, Glenn. Yes. So listen, I could tell you incrementally, no, we're not seeing any incremental compounded can there be in the market. Are there isolated cases where there's been compounded can there be seen? Yes, absolutely.

Speaker 2

And what I mean by that is, that's the dormer inventory that's bleeding out.

Speaker 10

Right. So I think what we're all trying to do is we're all trying to sort of reconcile maybe the $2,300,000 in revenues you had this quarter with FFF with the sort of the comments that you made in the back in the press release that you expect prescription growth quarter over quarter in the back half sort of taking into consideration that it may take some time to bleed out the compounded cathartan sort of in the market. So you think we start we're starting to see that now. I mean, we're midway through 3Q. I don't know if there's any sort of commentary you can give us sort of at this point, but maybe you feel like we're at the point where we're going to start to see that inflection in scripts because the compounded cathartan is sort of almost worked its way fully through the system.

Speaker 10

Is that kind of the message you're trying to send?

Speaker 2

Absolutely. I mean, we expect to see the inflection with the Dormer now bleeding out. We're already seeing, Glenn, accounts that were on the Dormer target list. As you know, Dormer, we know those accounts and we're already seeing orders from those accounts starting to come in as those accounts bleed out their inventory.

Speaker 10

Perfect. And maybe my last question is sort of on Ligand's product, you're obviously aware that there was another company that got approval. I don't know if you could sort of comment on the competitive landscape, if there's anything else sort of you're paying attention to and how that approval might ultimately be impacting the market positively or negatively for you?

Speaker 2

Yes. Great question. We're fully aware of Zelzumi. And listen, I would tell you, we think it's great that somebody else recognizes the opportunity within molluscum. And look for us, I think it only helps Spirica because it's going to increase the share of voice around molluscum.

Speaker 2

Our customers know that cantharidin is the gold standard for the treatment of molluscum contagiosum. So that again, we only see that as a benefit to us.

Speaker 10

Okay. Thanks, Ed.

Speaker 2

Thank you, Glenn.

Operator

Thank you. Our next question will come from Oren Livnat with H. C. Wainwright. Please go ahead.

Speaker 8

Let me unmute first. Thank you. It's an exciting time over there. I have a couple of questions on 315 and Wycan't if I may. Just firstly, I'm really curious if you saw shrinkage in any tumors that weren't directly treated with 315?

Speaker 8

Essentially, I'm wondering if you saw a systemic immunological response and was there any control against matched tumors intra patient? And bigger picture, if you think about this product strategically, obviously this is also medical dermatology, which overlaps with where you're at, but it's clearly a different market than the pediatric focus you have now. Presumably, it could be maximized by a larger company as well when you talk about multi blockbuster potential. So going forward, do you think about trying to maybe partner this and focus on Wycast? Or are you keeping all your options open, which I assume will be your answer?

Speaker 8

And then I have why can't follow ups after that? Thanks.

Speaker 2

Sure, Hard. This is Ted. So absolutely, we want to keep all of our options open as it relates to 315 including partnerships. So and I'll turn that the next part over to Gary to answer the other questions that you have.

Speaker 6

Thanks Ted. Oren, hi, thanks for the question. So regarding that scopal effect, it was one of the secondary endpoints in our protocol. At this point, we're not ready to comment regarding EBSCOPal effect. The only thing I can say is that we did have a few tumors where we did look for F scopal effect and just stay tuned for those data.

Speaker 6

The only things that we're able to discuss now are the safety and the preliminary top line results.

Speaker 8

And just lastly on 315, you mentioned in the press release you're excited to continue to explore these properties in tissue and blood samples, I think. Does that indicate potentially trying to quickly broaden the potential indications you might target, learning more on that front? Or is this about needing to better characterize the product maybe in the mechanism of action in the current BPC program? And then on WiCan't, can you just talk about the forward deployed inventory model a little more, which I don't think you addressed recently. How's that playing out in the field when you look at orders?

Speaker 8

Are physicians stocking essentially in the office to have some on the table if and when they want to actually pull the trigger and use it? How much of that versus just in time essentially ordering even in office such that they're just we can see what they're using? Do you have visibility with FFF on that front as how much is actually being used?

Speaker 6

Okay, Arnaud. I'll take that first question. Yes, sorry, Ted, please.

Speaker 2

No, no, go ahead.

Speaker 6

So I just want to address the tissue in the blood samples. So I think we're just looking at the basal cell subjects that we studied in our Phase 2 study at this point. And if you look at VB-three fifteen as an immune modulator, as an oncolytic peptide, it works by at least the proposed mechanism of action or the one that's been elucidated to this point, is that it works by activating a local immune response to tumor specific antigens. So you lice tumor cells, you reveal those antigens, which are normally protected by the tumor and then you get an immune stimulation. We want to study this further.

Speaker 6

We want to see exactly what kind of immune response we're getting in the tissue and whether or not we are getting one in the blood samples, which would give us a window to understanding of whether or not we're going to see a systemic response to basal cell antigens, which I think would be exciting. But at this point, it's just simply to characterize further the MOA and the immune response we're getting by injecting BP-three fifteen into the tumors.

Speaker 8

Perfect. Thank

Speaker 6

you.

Speaker 8

And Arren, would you like to follow-up?

Speaker 9

Yes. It's Joe, Arun. How are you?

Speaker 8

Great. Thanks.

Speaker 9

Good. So regarding your question, the forward deployed inventory is still a part of our core model. That is an opportunity for physicians who would rather consign in the inventory, if you will, forward deployed in and then get billed as they're treating patients. We also like to keep our buy and build model agile. We have some physicians that are more interested in volume tier discounts and off invoice discounting as well.

Speaker 9

So we're seeing a blended approach on the buy and build side. And again, we try to keep our program agile enough to reflect the needs of the customer and what that particular customer is interested in.

Speaker 8

All right. Thanks. I'll follow-up after. Appreciate it.

Speaker 2

You're welcome.

Operator

Thank you. Our next question will come from Serge Belanger with Needham. Please go ahead.

Speaker 11

Hi, good morning. Thanks for taking the questions. A couple on Wi Can't to start off with. I guess going forward, should we expect any additional distributor or GPO partnerships? And maybe what the impact is on the overall net pricing as you continue expanding the GPO field here?

Speaker 11

And then on VP-three fifteen, I guess for Gary, obviously pretty exciting data in basal cell carcinoma. Do you feel this derisks the program for squamous cell carcinoma? And is that one of the other non melanomas you expect to target going forward? Thanks.

Speaker 4

Serge, good morning. It's Terry. I'll answer the first part around the pricing. So with the addition of Syncora, we still believe that our overall net sales as a percentage of gross sales is going to continue to be in that 45% to 50% range over time. We'll continue to evaluate that and monitor as we move forward, but that's still our expectation.

Speaker 9

Yes. Serge, for the second part about the possibility of activating our market further with distributors or opportunities. Look, I mean, we have to remain opportunistic as an organization. This is a big market and we certainly are exploring ways to make sure we can reach the customers that need the product. It could be through an expansion perhaps of some degree to some regional pharmacies or we can look into further opportunities that might help in areas such as the Department of Defense and other customer segments that we're spending time in.

Speaker 9

So really the message here is we'll look to be opportunistic and be mindful as we're building it out.

Speaker 6

Serge, regarding your question on SCC, just a reminder that we do have the global rights to develop DP-three fifteen for basal cell carcinoma, squamous cell carcinoma and non metastatic melanoma and non metastatic Merkel cell carcinoma. I think at this point, we're focused on basal cell since it is the most common malignancy in humans with over 3,600,000 cases in United States. But it doesn't mean that we wouldn't think about another opportunity like squamous cell, which is the 2nd most common skin cancer in humans, doesn't mean that we wouldn't think about that at some point. But right now, I think our focus remains basal cell moving forward with the end of Phase 2 meeting sometime in the first half of next year, discussing a Phase 3 program with the agency and then hopefully moving forward into the Phase 3 program.

Speaker 11

Great. Just a follow-up on Wi Can't. Can you just talk about the mix of prescribers between derms and peds since you deployed your pediatric sales force? Maybe just comment on if you've seen any off label use of the product too for some of the wart indication?

Speaker 9

Yes. So Serge, yes, we can't support off label use as you know and our co pay program doesn't cover for that. So we have no visibility into what's happening in the practice because we can't support it. The second piece of it is the dermatologists pediatric dermatologists hospital base continue to be the major treaters of molluscum. But our pediatric team is making quick inroads here having just deployed in April.

Speaker 9

What's been fascinating to us is not only the outreach and the interest from the pediatrician, but the willingness to take the product into their office on direct purchase because they'd like to treat patients same day and do it under the supervision of a healthcare

Speaker 6

professional.

Operator

Thank you. Our last question will come from Kempe Dovar with Brookline Capital Markets. Please go ahead.

Speaker 12

Great. Thank you. Two brief questions on WiCAM. First, you had previously expected gross margin to start to normalize at a lower level around this time, which hasn't yet occurred. What are you thinking about that now?

Speaker 12

Has this been pushed out into, say, 2025? Or we start to see it in the second half of the year?

Speaker 4

Good morning, Cath. This is Terry. Yes, we would expect to see that to start to happen in the second half the year. But just as a reminder, over the long term, we still expect gross margins to be in that low 90s percentage. Obviously, we have we're focused on continuing to drive costs down as we move forward.

Speaker 4

So there's a potential that we could see some of that benefit pull through in 2025, but too early to talk about that at this stage. So I think that low 90s is still a good place for us to be from a gross margin standpoint.

Speaker 12

Great. Thank you. And the second question is going back to the compounded shipments by dormer and lighters. Ted, I think you quoted a number. What was that number again?

Speaker 2

Well, what we know is about 24,000 vials have been shipped to the U. S. From dormer Laboratories.

Speaker 12

Okay, great. And no visibility on what Leiters had been doing prior to your agreement with them?

Speaker 2

No.

Speaker 12

Great. Thank you.

Speaker 2

Thank you.

Operator

Thank you. That concludes our question and answer session. I will now turn the call back to Ted White for closing remarks.

Speaker 2

Thank you, operator. I'd like to thank all of you for joining us this morning. We're obviously very pleased with the significant accomplishments in the Q2 of 2024, including today's announcement on the positive top line results of 315 for basal cell carcinoma. We look forward to providing another update on our Q3 earnings call in November. Thank you.

Operator

Thank you. This does conclude the Verica Pharmaceuticals Q2 2024 earnings conference call. You may disconnect your line at this time and have a wonderful day.

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Earnings Conference Call
Verrica Pharmaceuticals Q2 2024
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