Verrica Pharmaceuticals Q1 2025 Earnings Call Transcript

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May 13, 2025

There are 8 speakers on the call.

Operator

Evening, ladies and gentlemen, and welcome to the Verica Pharmaceuticals First Quarter twenty twenty five Corporate Update 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.

Operator

As a reminder, this conference is being recorded. I will now turn the call over to our host, Kevin Gardner of LifeSci Advisors. You may begin your conference.

Speaker 1

Thank you, operator. Hello, everyone, and welcome to Verica Pharmaceuticals First Quarter twenty twenty five Corporate Update Conference Call. With me on the line this evening are Jason Rieger, President and Chief Executive Officer of Verica Pharmaceuticals Noah Rosenberg, Chief Medical Officer John Kirby, Interim Chief Financial Officer and David Zawitz, Chief Operating Officer. As a reminder, during today's call, management will make forward looking statements. These statements may include expectations related to the commercialization of Wycanth for the treatment of molluscum contagiosum in The United States, continued revenue growth, regulatory developments, the development of Verica's product candidates, the company's expected cash runway and its ability to obtain funding for future operations and Verica's overall business strategy and planned operations.

Speaker 1

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, Verica'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. In addition, during today's call, management will discuss certain non GAAP financial measures.

Speaker 1

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. The earnings release that the company issued today includes GAAP to non GAAP reconciliations for these measures and is also available on the Investor Relations section of Verica's website. I'll now turn the call over to Verica's President and CEO, Jason Rieger.

Speaker 2

Thank you, Kevin, and good evening, everyone, and thank you for joining us for our first quarter twenty twenty five corporate update call. I'm pleased to report that our focused commercialization strategy is helping to drive increased demand for WICANT. On April 7, we preannounced strong sequential growth in the first quarter with WICANT's dispensed applicator units increasing 16.7% over the fourth quarter of twenty twenty four and rising above 10,000 units per quarter for the first time since the launch of the product. As announced today, this also resulted in $3,400,000 in revenue for the quarter. I'm further excited to say that we have seen momentum build throughout Q1 and are working to continue to capture that momentum.

Speaker 2

As demand for WICANS by pediatricians, dermatologists, and other healthcare professionals and their patients continues to grow, we believe WICANS distributor inventory levels have normalized and we expect that dispensed applicator units will now more closely track to our revenues. Importantly, we are executing on our commercial strategy as a much leaner and more capital efficient company, which I believe will place us on a strong and sustainable growth trajectory. In parallel with our commercial progress, Verica's clinical stage pipeline also continues to advance. We continue to work with our development and commercialization partner Torrey Pharmaceutical to initiate our phase three program of WICANT in the treatment of common warts. Meanwhile, we continue to advance our novel oncolytic peptide BP315 which has shown promising safety and efficacy data in phase two trials for the treatment of basal cell carcinoma having recently held an end of phase two meeting with the FDA to discuss the design of our phase three program.

Speaker 2

Given the significant unmet need for both of these indications we believe developing these programs has the potential to significantly grow the value of our company. I will now provide a more detailed update on our commercial activities for WICANT. During the first quarter of twenty twenty five the full effects from our revised commercialization strategy, which we began to implement in Q4 of last year, helped drive demand for WICANT. As we have previously noted, we initially focused on territories with high prevalence of molluscum and established strong insurance coverage. The productivity of our sales force also improved substantially during the first quarter.

Speaker 2

Our average dispensed applicator unit per selling day continues to trend favorably, giving us additional confidence that our new commercial strategy is working. To that end, we have recruited new sales representatives to work in new territories, splitting certain large markets and entering other new markets to capitalize on improving demand. Throughout the first quarter we also continued adding local independent regional pharmacies to our strong relationships with our national specialty pharmacy partners. Our approach to distribution of YCANS has been to focus where physicians and other healthcare professionals prefer to write prescriptions and we've seen strong adoption to this approach since the relaunch. As previously noted, YCANT inventory levels appear to have normalized as we are seeing multiple orders each month from our distribution partners rather than larger infrequent stocking orders.

Speaker 2

Going forward, we believe shipments of YCANTH applicator units will more closely reflect the underlying demand from physicians and patients and that this closer relationship will translate into steadier revenue growth as we continue the relaunch. Finally, our cost cutting measures have taken hold and our quarterly expenses are reflective of that. We would expect that going forward we will selectively add to sales personnel in geographic areas where we have good coverage but no representative and add additional sales representatives in markets where there are enough potential customers to work multiple representatives in that market. I'd like to now also provide a brief update on our clinical stage pipeline. As previously reported with respect to WICAN, our Japanese development and commercialization partner Torii Pharmaceutical filed in late twenty twenty four a new drug application in Japan seeking approval of WICANT designated in Japan as T0 or T0208 for the treatment of Velasco.

Speaker 2

With an estimated over one point six million patients in Japan alone, Velasco represents a significant market opportunity for WICANT. We look forward to Tori sharing updates on the regulatory approval process later this year. We are also working with Tori to launch a global phase three study evaluating WICANT in The United States for TO-two zero eight in Japan for the treatment of common warts. Veric remains eligible to receive a milestone payment of $8,000,000 upon the initiation of this study, which could begin as early as mid-twenty twenty five. As we previously stated, the cost of this study will be split fiftyfifty with Torii, but Veric's portion will be paid by Torii and reimbursed by Verica out of future milestones and transfer price payments.

Speaker 2

Regarding our phase three ready clinical oncology asset VP315, which we are developing for the treatment of basal cell carcinoma, as previously disclosed in January, a post hoc analysis of data from our phase two, or part two of our phase two study demonstrated treatment with BP315 led to a calculated objective response rate or OOR of ninety seven percent. OOR was defined as the percentage of study subjects who did not demonstrate disease progression and who experienced at least thirty percent reduction in tumor size along with a partial or complete response following treatment. We believe positive preliminary top line results from our phase two study suggest that BP315 has the potential to change the treatment paradigm for patients with basal cell carcinoma, the most common form of skin cancer. As noted on our fourth quarter call, we expect to announce additional genomic and immune response data for BP315 in mid-twenty twenty five. We are also encouraged by our recent end of phase two meeting with the FDA.

Speaker 2

After reviewing the final meeting minutes and this additional data we plan on providing a global development program update later this quarter. Finally, I would like to mention recent appointments to our senior management and board of directors. In March we announced that Doctor. Noah Rosenberg joined the Verica team as our new Chief Medical Officer. Noah is a highly accomplished pharmaceutical executive and physician who brings deep expertise in both drug development and commercialization.

Speaker 2

As CMO, he will play an instrumental role in advancing of our goal for YCAM to become the standard of care for the treatment of molluscum contagiosum and in advancing our clinical stage programs. Following Noah's appointment in early April, we welcomed Doctor. Gavin Corcoran to our Board of Directors. Over his career Gavin has built an outstanding track record of developing and launching innovative medicines as well as creating significant value through strategic transactions. As we execute our strategic objectives, his expertise will help guide us on our decision making and look forward to working with him as we enter our next phase of growth.

Speaker 2

I will now turn the call over to our Interim Chief Financial Officer, John Kirby, to review our first quarter twenty twenty five financials.

Speaker 3

Thanks Jason. In the first quarter of twenty twenty five we reported total revenues of $3,400,000 which was substantially all YCANT revenue. Net YCANT revenue reflects shipments to our distribution partners, offset by standard gross to net adjustments, including actual or anticipated product returns, off invoice discounts, distribution fees, copay programs and other rebates. Collaboration revenues totaling $17,000 in the first quarter of twenty twenty five, which related to our supply of applicators to Tori in connection with their development and commercialization activities. Gross product margins for the first quarter of twenty twenty five were approximately 88%.

Speaker 3

Cost of product revenue of $400,000 included $47,000 of obsolete inventory cost. Research and development expenses of $2,300,000 in the first quarter of twenty twenty five decreased versus the first quarter of twenty twenty four by $2,600,000 driven primarily by $2,100,000 decrease in clinical trial expenses related to VP-three 15, as well as costs related to a decrease in regulatory and medical affairs expenses of $400,000 Selling, general and administrative expenses of $8,800,000 in the first quarter of twenty twenty five decreased versus the first quarter of twenty twenty four by $7,500,000 driven primarily by the implementation of our more focused commercial strategy for YCANF. GAAP net loss was $9,700,000 or $0.10 per share for the first quarter of twenty twenty five, compared to a GAAP net loss of $20,300,000 or $0.44 per share for the first quarter of twenty twenty four. On a non GAAP basis, which excludes stock based compensation, non cash interest expense, and change in fair value of embedded derivatives, the first quarter of twenty twenty five net loss was $7,800,000 or $08 per share, compared to a net loss of $17,800,000 or $0.38 per share for the first quarter of twenty twenty four. And finally, as of 03/31/2025, Verica had aggregate cash and cash equivalents of $29,600,000 Under GAAP, the cash and cash equivalents as of 03/31/2025 would not be sufficient to fund operations for the one year period following the release of our financial statements.

Speaker 3

However, should Verica receive the $8,000,000 milestone payment from Tori triggered by the initiation of the Phase III clinical trial in Japan for common warts, or should we receive a portion of the $25,000,000 in proceeds from the exercise of Series A warrants issued as part of our November 2024 equity financing, which expire in November of twenty twenty five, we could have sufficient cash to fund operations for such period. Nonetheless, we will continue to apply discretion in our use of cash and explore opportunities to further bolster the strength of our balance sheet while still advancing our commercial and clinical development efforts. I'll now turn the call back over to Jason for closing remarks.

Speaker 2

Thanks, John. Based on our focused commercialization strategy and more capital efficient operating structure, I believe Verica remains on a pathway for strong and sustainable growth. The positive feedback we are receiving from the field also tells us that brand recognition for WICANT continues to grow amongst both dermatologists and pediatricians. In addition, we see patient access continuing to improve along with strong and predictable reimbursement from Medicaid and commercial payers, all of which we believe point towards YCANF becoming the new standard of care for the treatment of molluscum contagiosum. As YCANT continues to grow our late stage pipeline provides another exciting source of value for our company and shareholders.

Speaker 2

We believe our program in common warts and basal cell carcinoma each holds significant potential value and we look forward to providing updates on these programs in the near future. With that we would now be happy to take any questions. Operator?

Operator

We'll move first to Stacy Ku with TD Cowen. Your line is open.

Speaker 4

Hey there. Thanks so much for taking our questions and congratulations on your Q1 performance. So first, maybe could you further discuss your success in targeting pediatricians, maybe talk about the current split of pediatric derms versus pediatrics writing why can't? So that's the first question. And then the second question, maybe as we think about the summertime potential increase in loss from patients, what kind of preparation is ongoing to really capture these patients?

Speaker 4

Do you expect why can't show some seasonality as it relates to patient demand as we enter the summer months? And then last question is on 2025 full year. Consensus is around $15,000,000 So would love to hear your thoughts around the Q1 performance and how it relates to the rest of the year. We talk about the dynamic between patient demand and maybe some additional pull through of inventory? It sounds like it's stable.

Speaker 4

So just want to make sure we have that correct. Thank you so much.

Speaker 2

Thanks, Stacy. This is Jason. I appreciate the questions. And if I don't answer all your questions, please track me down for anything I left off. In terms of split between derms and peds, we're seeing an ever growing number of pediatricians writing the product.

Speaker 2

But still a large percentage of our customers are the derms and they still remain strong advocates of our product and users of the product. So, I would say rather than the dynamic splitting, we're seeing growth in both, which is very exciting for the penetration of the product but also the availability of it for the patients. In terms of the summer months, it's kind of interesting that you asked that. There tends to be modest speculation on seasonality for molluscum, although as the weather does get better and kids are outside more, commonly going to pools where molluscum can be transmitted with sharing of towels, etcetera. There may be some seasonality uptick.

Speaker 2

We are doing a fair amount of marketing to clinicians and some social media activities to sort of continue to build awareness for molescan as a disease, but also that the YCANT is available for treatment for the patient. So, think that's going to continue to contribute to the growth of YCANT penetration and the units that we're dispensing. And in terms of 2025, for full year consensus and guidance, I appreciate you asking that. The company at this point is not going to give guidance for the year. We will continue though, however, to share the number of dispensed applicator units.

Speaker 2

We'll try to update that on a quarterly basis when that information becomes available and share the revenue during our quarterly filings. As you can see, this quarter we did see meaningful revenue and dispensed applicator units, and as our distributors are ordering more frequently and in smaller quantities, those numbers should mirror each other much closer going forward, And we hope to continue to see the momentum that we saw the end of last quarter continue to rise in this quarter as well.

Speaker 4

Wonderful. Thanks so much.

Speaker 2

Thanks, Stacey.

Operator

We'll take our next question from Gregory Renza with RBC Capital Markets. Your line is open.

Speaker 5

Hey, guys. It's Anish on for Greg. Congrats on the progress this quarter and thanks for taking our questions. Just a couple from us. First, how are you thinking about the conversion time between accounts receivable and top line revenue for WYCAMTH?

Speaker 5

How has that been trending and likely to trend through the rest of the year? And second, as we think of accessibility, you previously mentioned expansion into pharmacy benefit. Can you just help us think about how this will improve access for WICANF versus previous periods? Thanks so much.

Speaker 2

So, So, in terms of the accounts receivable, it's interesting you noticed that. We do offer sixty day payment terms to our distributors. So as the product is pulling through and then they're passing it through, as we've normalized the inventory levels, we'd expect that to semi stabilize and sort of continue to generate cash going forward. And because we're getting smaller orders and more frequent orders, that should stabilize in terms of conversion to cash from a receivable. In terms of the pharmacy benefit, I would say the mix of our business continues to grow both on the pharmacy distribution side as well as the medical benefit which is the buy and bill approach.

Speaker 2

We see growth in both sides of that business. Particularly on the pharmacy side, we've added a number of independent pharmacies, which has proven to be a convenient mechanism for some clinicians to order the product, have it white bag right to their office, and treat their patients in addition to those who prefer to do the buy and bill model and have it on hand that same day. So, we've seen both and our commercial team has done an excellent job of expanding our benefit coverage. So, I would say that we have robust coverage growing in both Medicaid and commercial across both of the pharmacy and the medical benefit.

Speaker 5

Great. Thanks so much. Appreciate the color.

Speaker 2

Yep, no problem.

Operator

We'll move next to Serge Belanger with Needham and Company. Your line is open.

Speaker 6

Hi, good afternoon. A couple of questions. First on patient access, just a follow-up on the prior question. When we're looking at the overall TAM for molluscum, how should we look at the split between commercial and Medicaid coverage for the indication?

Speaker 2

So we would say that in the pediatrician world, there's a large percentage of pediatric patients that are covered under the Medicaid. There's going to be a lot of dependency on state as well. And then on the derm side, there's a higher percentage of commercial pay, but there are obviously commercial and Medicaid on both sides. But we're seeing growth on both sides of that across states where we have good robust coverage.

Speaker 6

Got it. And then maybe a quick one for John. Just where currently are gross to nets and where do you think they'll get to once we get to kind of a more steady state level?

Speaker 3

Serge, I don't think we've spoken directly to the gross to net split. But if you look at the number of applicator units and that as it's tracking to aligning with the sales demand that we've reported, you could do the back of the envelope math to get to the rough percentage.

Speaker 6

Got it. Thanks.

Speaker 3

Thank you.

Operator

We'll move next to Kemp Dolliver with Brookline Capital Markets. Your line is open.

Speaker 7

Great, thank you. A couple of questions. What are you seeing in terms of reordering and then also number of applicators per patient?

Speaker 2

The reordering actually is a very interesting aspect of the business that we're tracking very closely. Historically, I would say a larger percentage of the reorder there was the growth in the business or stabilization of the business was a mix of loss of old loss of accounts they worth not reordering and so bringing up new customers. In this last quarter, we're starting to see solid growth and retention of customers that have been here and ordered previously and continuing to reorder. And that's a fundamental part of our business model, which means likely that the clinicians are having a positive experience, both in acquisition of the product and treatment of their patients and using it as a going forward part of their practice for the treatment of patients with molluscum.

Speaker 7

And any comments on the applicators per patient?

Speaker 2

So we're not giving you specific guidance on that. In our clinical study, we allowed for up to four applicators for treatment cycles to be used. I would say clinically, as we saw originally, we're probably closer to the two to three treatment cycles where clinicians are feeling their patients are achieving the medical benefit that they are desiring.

Speaker 7

Great. Thank you. What are trends you're seeing in Salesforce turnover? I mean, you are starting to rebuild the Salesforce, but have you seen turnover level off? Are you seeing less involuntary turnover, etcetera?

Speaker 2

I would say we're seeing in this industry, there tends to be some turnover. We're seeing some very solid retention of our core performers and quite a bit of interest as we put post some openings for both expanding in existing territories where we have demand or territories where new demand is growing. So, we're excited about our team and you're trying to maintain a relatively stable number to where we were after our reduction in force last year and may incrementally grow the areas we're trying to target grow and or there's additional demand. So that it's been a very, very positive impact on that front.

Speaker 7

Great, thank you.

Operator

And this does conclude the question and answer portion of the call. I would now like to turn it back to Jason Reger for any additional or closing remarks.

Speaker 2

Thank you, operator. I'd just like to thank everyone for joining the call this evening. We look forward to providing updates on our progress throughout 2025. Have a nice evening.

Operator

This does conclude today's program. Thank you for your participation. You may disconnect at any time and have a wonderful afternoon.

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Key Takeaways

  • Verica’s focused commercialization strategy drove a 16.7% sequential increase in WICANT dispensations, exceeding 10,000 applicator units in Q1 2025 and generating $3.4 million in revenue as distributor inventories normalized.
  • The company and partner Torii Pharmaceuticals plan a global Phase 3 study of WICANT for common warts, with Verica eligible for an $8 million milestone upon trial initiation and costs split equally between the parties.
  • Oncolytic peptide BP315 showed a 97% objective response rate in Phase 2 trials for basal cell carcinoma, and following a positive End-of-Phase 2 FDA meeting, Verica is finalizing Phase 3 program design.
  • Q1 financials reported $3.4 million total revenue, an $9.7 million GAAP net loss (down from $20.3 million year-over-year), and $29.6 million cash on hand—funding runway hinges on an $8 million milestone or $25 million in warrant exercises.
  • Management strengthened with Dr. Noah Rosenberg as Chief Medical Officer and Dr. Gavin Corcoran joining the board, enhancing expertise in drug development, commercialization, and strategic growth initiatives.
AI Generated. May Contain Errors.
Earnings Conference Call
Verrica Pharmaceuticals Q1 2025
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