Verrica Pharmaceuticals Inc 10-Q for FY2025 Q2
Verrica Pharmaceuticals Inc. (VRCA)
About this 10-Q
Verrica Pharmaceuticals Inc filed this 10-Q on August 12, 2025, covering the quarter ended June 30, 2025 (FY2025 Q2).
Headline figures
Quarter ended June 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $12.7M
- up 145.4% from $5.18M a year earlier
- Net income
- $204K
- compared with a net loss of $17.19M a year earlier
- Diluted EPS
- $0.02
- compared with -$3.70 a year earlier
28
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____ to _____
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
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Registrant’s telephone number, including area code: (
N/A
(Former name, former address and former fiscal year, if changed since last report
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 5, 2025, the registrant had
VERRICA PHARMACEUTICALS INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
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Item 1. |
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1 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 5. |
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Item 6. |
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31 |
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33 |
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PART I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
VERRICA PHARMACEUTICALS INC.
BALANCE SHEETS
(in thousands, except share and per share amounts)
(Unaudited)
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June 30, |
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December 31, |
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2025 |
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2024 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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Accounts receivable |
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License and collaboration receivable, billed and unbilled |
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Inventory |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use asset |
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Finance lease right-of-use asset |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Current liabilities: |
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Accounts payable |
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Accrued expenses and other current liabilities |
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Deferred revenue |
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Current portion of long-term debt |
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Operating lease liability |
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Finance lease liability |
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Total current liabilities |
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Operating lease liability |
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Finance lease liability |
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Derivative liability |
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Long term debt |
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Total liabilities |
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(Note 6) |
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Stockholders’ deficit: |
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Preferred stock, $ |
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Common stock, $ |
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Treasury stock, at cost, |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders’ deficit |
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Total liabilities and stockholders’ deficit |
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$ |
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$ |
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The accompanying notes are an integral part of these financial statements.
1
VERRICA PHARMACEUTICALS INC.
STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(Unaudited)
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For the Three Months Ended |
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For the Six Months Ended |
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June 30, |
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June 30, |
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2025 |
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2024 |
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2025 |
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2024 |
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Revenue: |
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Product revenue, net |
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$ |
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$ |
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License and collaboration revenue |
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Total revenue |
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Operating expenses: |
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Cost of product revenue |
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Cost of collaboration revenue |
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Selling, general and administrative |
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Research and development |
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Total operating expenses |
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Income (loss) from operations |
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Other income (expense): |
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Interest income |
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Interest expense |
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Change in fair value of derivative liability |
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Other expense |
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Total other expense, net |
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Net income (loss) |
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$ |
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$ |
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$ |
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$ |
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Net income (loss) per share, basic |
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$ |
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$ |
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$ |
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$ |
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Weighted-average common shares outstanding, basic |
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Net income (loss) per share, diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted-average common shares outstanding, diluted |
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The accompanying notes are an integral part of these financial statements.
2
VERRICA PHARMACEUTICALS INC.
STATEMENTS OF STOCKHOLDERS’ DEFICIT
(in thousands, except share amounts)
(Unaudited)
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Total |
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Common Stock |
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Additional |
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Subscription |
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Accumulated |
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Treasury Stock |
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Stockholders’ |
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Shares Issued |
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Amount |
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Paid-in Capital |
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Receivable |
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Deficit |
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Shares |
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(Deficit) Equity |
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January 1, 2025 |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Vesting of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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March 31, 2025 |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Exercise of pre-funded warrants |
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— |
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— |
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— |
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— |
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— |
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Vesting of restricted stock units |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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— |
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June 30, 2025 |
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$ |
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$ |
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$ |
— |
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$ |
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$ |
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January 1, 2024 |
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$ |
— |
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$ |
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$ |
— |
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$ |
( |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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— |
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March 31, 2024 |
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$ |
— |
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$ |
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$ |
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$ |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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June 30, 2024 |
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$ |
- |
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$ |
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$ |
— |
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$ |
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The accompanying notes are an integral part of these financial statements.
3
VERRICA PHARMACEUTICALS INC.
STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
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For the Six Months Ended June 30, |
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2025 |
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2024 |
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Cash flows from operating activities |
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Net loss |
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$ |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock-based compensation |
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Depreciation expense |
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Non-cash interest expense |
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Loss on disposal of fixed assets |
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Loss on termination of financing lease |
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Amortization of operating lease right-of-use asset |
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Amortization of finance lease right-of-use asset |
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Change in fair value of derivative liability |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other assets |
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License and collaboration receivable, billed and unbilled |
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( |
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( |
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Inventory |
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Accounts payable |
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Deferred revenue |
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Accounts receivable |
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( |
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( |
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Accrued expenses and other current liabilities |
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( |
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Operating lease liability |
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( |
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( |
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Net cash used in operating activities |
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Cash flows from investing activities |
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Purchases of property and equipment |
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Net cash used in investing activities |
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Cash flows from financing activities |
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Proceeds from exercise of stock options |
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Payment of debt amendment fees |
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Repayment of debt |
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Repayment of finance lease |
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Net cash used in financing activities |
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Net decrease in cash and cash equivalents |
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Cash and cash equivalents at the beginning of the period |
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Cash and cash equivalents at the end of the period |
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$ |
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$ |
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Supplemental disclosures |
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Cash paid for interest |
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$ |
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$ |
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Supplemental disclosure of noncash investing and financing activities: |
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Property and equipment purchases in accounts payable or accrued expenses and other current liabilities at period end |
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$ |
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$ |
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Finance lease liability extinguished as a result of lease termination |
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$ |
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$ |
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Right-of-use asset obtained in exchange for lease obligation |
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$ |
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$ |
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The accompanying notes are an integral part of these financial statements.
4
VERRICA PHARMACEUTICALS INC.
Notes to Financial Statements
(Unaudited)
Note 1—Organization and Description of Business Operations
Verrica Pharmaceuticals Inc. (the "Company") was formed on July 3, 2013 and is incorporated in the State of Delaware. The Company is a dermatology therapeutics company developing and selling medications for skin diseases requiring medical intervention. On July 21, 2023, the U.S. Food and Drug Administration ("FDA") approved YCANTH (VP-102) topical solution for the treatment of molluscum contagiosum in adult and pediatric patients two years of age and older.
Reverse Stock Split
At the close of trading on July 24, 2025, the Company effected a
No fractional shares were issued as a result of the reverse stock split and the split did not impact the par value of the Company's common stock. Any fractional shares that would otherwise have resulted from the reverse stock split were rounded down to the next whole share.
While the reverse stock split occurred subsequent to the quarter ended June 30, 2025, the accompanying financial statements and footnotes have been adjusted to reflect the impact of the reverse stock split as though it had occurred in all periods presented.
Liquidity and Capital Resources
The Company has incurred substantial operating losses since inception and expects to continue to incur significant losses for the foreseeable future and may never become profitable. As of June 30, 2025, the Company has an accumulated deficit of $
There can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all. If the Company is unable to raise capital when needed or on attractive terms, the Company would be forced to delay, reduce or eliminate commercialization efforts and development programs.
On June 27, 2025, the Company entered into the Second Amendment to the Collaboration and License Agreement (the "Second Amendment") with Torii Pharmaceutical Co., Ltd. ("Torii"), amending the Collaboration and License Agreement dated as of March 17, 2021, between the Company and Torii, as amended on May 14, 2024 (as amended, the "Torii Agreement"). The Second Amendment provided for the acceleration of an $
5
continue to receive from Torii a transfer price for applicators manufactured by the Company's manufacturing partners. After the transfer of at least one component of the manufacturing process, the Company will begin receiving royalties related to net sales in Japan of applicators manufactured by Torii and/or its manufacturing partners in lieu of the transfer price for completed applicators.
The Company plans to secure additional capital in the future through equity or debt financings, partnerships, or other sources to carry out the Company’s planned commercial and development activities. If the Company is unable to raise capital when needed or on attractive terms, the Company would be forced to delay, reduce or eliminate continued commercialization efforts or research and development programs. In addition, the amount of proceeds the Company may be able to raise pursuant to its currently effective shelf registration statement on Form S-3 is limited. The Company is subject to the general instructions of Form S-3 known as the "baby shelf rules." Under these rules, the amount of funds the Company can raise through primary public offerings of securities in any 12-month period using its registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of the Company's common stock held by its non-affiliates. Therefore, the Company will be limited in the amount of proceeds it is able to raise by selling its securities using its Form S-3 until such time as the Company's public float exceeds $
On July 26, 2023, the Company entered into a Credit Agreement, pursuant to which the Company borrowed $
The Credit Agreement contains customary events of default, including, but not limited to, nonpayment of principal, interest, fees or other amounts; material inaccuracy of a representation or warranty; failure to perform or observe covenants; cross-defaults with certain other indebtedness; bankruptcy and insolvency events; material monetary judgment defaults; impairment of any material definitive loan documentation; other material adverse effects; key permit and other regulatory events; key person events; and change of control. In addition, the Credit Agreement contains a financial covenant that the Company must maintain a liquidity of at least $
Note 2—Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification ("ASC") and Accounting Standards Update ("ASU") of the Financial Accounting Standards Board ("FASB").
Unaudited Interim Financial Statements
The accompanying unaudited interim financial statements have been prepared by the Company in accordance with US GAAP for interim information and pursuant to the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures normally included in audited financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited consolidated interim financial statements should be read in conjunction with the audited financial statements and related notes for the year ended December 31, 2024, filed as part of the Company's Annual Report.
6
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on current facts, historical experience as well as other pertinent industry and regulatory authority information, results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenues and expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.
Segments
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker "CODM" in making decisions regarding resource allocation and assessing performance.
The Company views its operations and manages its business in
The table below summarizes the significant revenue and expense categories regularly reviewed by the CEO for the three and six months ended June 30, 2025 and 2024:
|
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For the Three Months Ended |
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For the Six Months Ended |
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2025 |
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2024 |
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2025 |
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2024 |
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Revenue |
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$ |
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$ |
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$ |
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$ |
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Less: |
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Selling, general and administrative: |
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Commercial (including payroll) |
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General and administrative (including payroll) |
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Stock-based compensation |
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Total selling, general and administrative |
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Research and development: |
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YCANTH (VP-102) |
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VP-315 |
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Common warts |
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( |
) |
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( |
) |
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Stock-based compensation |
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||||
Other unallocated expenses |
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Research and development |
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Cost of revenue |
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||||
Other segment items (a) |
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||||
Net income (loss) |
|
$ |
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|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
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(a) Other segment items include interest income, interest expense, change in fair value of embedded derivative liability and other expenses. |
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Cash and Cash Equivalents
The Company considers all highly-liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents. Cash and cash equivalents include cash held in banks and money market mutual funds.
Cash and cash equivalents are financial instruments that are potentially subject to concentrations of credit risk. The Company’s deposits are in accounts at large financial institutions, and amounts may exceed federally insured limits. The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the funds are held. The Company has
7
Cash and cash equivalents as of June 30, 2025, includes a cash deposit of $
Fair Value of Financial Instruments and Credit Risk
As of June 30, 2025, the Company’s financial instruments included cash equivalents, accounts payable, and notes payable. The carrying amount of cash equivalents and accounts payable approximated fair value, given their short-term nature. The carrying value of the Company's long term note payable (Note 10) approximates fair value as the interest rate is reflective of current market rates on debt with similar terms and conditions.
Cash equivalents subject the Company to concentrations of credit risk. However, the Company invests its cash in accordance with a policy objective that seeks to ensure both liquidity and safety of principal. The policy limits investments to instruments issued by the U.S. government, certain SEC registered money market funds that invest only in U.S. government obligations and various other low-risk liquid investment options, and places restrictions on portfolio maturity terms.
Accounts receivable trade subjects the Company to concentrations of credit risk as all of the Company's revenue is from sales of a single product, YCANTH (VP-102), sold to several pharmaceutical wholesalers/distributors (the "Customers").
Accounts Receivable
The Company had $
Inventory
The Company values inventory at the lower of cost or net realizable value. Inventory cost is determined using the specific identification method. The Company regularly reviews its inventory quantities and, when appropriate, records a provision for obsolete and excess inventory to derive the new cost basis, which takes into account the Company’s sales forecast and corresponding expiry dates. The Company did
Financial Instruments – Derivatives
The Company evaluates its financial instruments to determine if the financial instrument itself or any embedded components of a financial instrument potentially qualify as derivatives required to be separately accounted for in accordance with ASC Topic 815 - Derivatives and Hedging.
Revenue
The Company recognizes revenue from sales of a single product, YCANTH (VP-102) (the "Product") in accordance with ASC Topic 606 – Revenue from Contracts with Customers. YCANTH (VP-102) became available for commercial sale and shipment to patients with a prescription in the United States in the third quarter of 2023. The Company sells the Product to Customers who in turn sell the Product directly to clinics, hospitals, and federal healthcare programs. Revenue is recognized as the Product is physically delivered to the Customers.
Gross product sales are reduced by corresponding gross-to-net ("GTN") estimates using the expected value method, resulting in the Company’s reported “Product revenue, net” in the accompanying statements of operations. Product revenue, net reflects the amount the Company ultimately expects to realize in net cash proceeds, taking into account the current period gross sales and related cash receipts and the subsequent cash disbursements on these sales that the Company estimates for the various GTN categories discussed below. The GTN estimates are based upon information received from external sources, such as written or oral information obtained from our customers with respect to their period-end inventory levels and sales to end-users during the period, in combination with management’s informed judgments. Due to the inherent uncertainty of these estimates, the actual amount of product returns, government chargebacks, prompt pay discounts, commercial rebates, Medicaid rebates, co-pay assistance and distribution, data, and group purchasing organizations ("GPO") administrative fees may be materially above or below the amount estimated. Variance between actual amounts and estimated amounts may result in prospective adjustments to reported net product revenue.
8
Each of the GTN estimate categories are discussed below:
Product Returns Allowances: The Customers are contractually permitted to return purchased Product in certain circumstances. The Company records discrete reserves if Product held by customers, forecasted sales and expiration of Product warrant a reserve. As historical data for returns of the Product becomes available over time, the Company will utilize historical return rates of the Product in making its estimates. Returned Product is typically destroyed, since substantially all returns are due to expiry and cannot be resold.
Government Chargebacks: The Product is subject to pricing limits under certain federal government programs, including Medicare and the 340B drug pricing program. Qualifying entities (the "End-Users") purchase the Product from the Customers at their applicable qualifying discounted price. The chargeback amount the Company incurs represents the difference between the Company’s contractual sales price to the Customers and the end-user’s applicable discounted purchase price under the government program.
Medicaid Rebates: The Product is subject to state government-managed Medicaid programs, whereby rebates are issued to participating state governments. These rebates arise when a patient treated with the Product is covered under Medicaid, resulting in a discounted price for the Product under the applicable Medicaid program. The Medicaid rebate accrual calculations require the Company to project the magnitude of its sales, by state, that will be subject to these rebates.
Patient Assistance: The Company offers a voluntary co-pay patient assistance program intended to provide financial assistance to eligible patients with a prescription drug co-payment required by payors and coupon programs for cash payors. The calculation of the current liability for this assistance is based on an estimate of claims and the cost per claim that the Company expects to receive associated with YCANTH (VP-102) that has been recognized as revenue but remains in the distribution channel inventories at the end of each reporting period.
Distribution, Data, and GPO Administrative Fees: Distribution, data, and GPO administrative fees are paid to authorized wholesalers/distributors of the Company’s products for various commercial services including contract administration, inventory management, delivery of end-user sales data, and product returns processing. These fees are based on a contractually-determined percentage of the Company’s applicable sales.
Collaboration Revenues
The Company has generated collaboration revenue through its licensing and collaboration arrangements. The terms of the arrangements typically include payments to the Company of one or more of the following: nonrefundable, up-front license fees; regulatory and commercial milestone payments; payments for manufacturing supply services; materials shipped to support development; and royalties on net sales of licensed products.
In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs the following steps:
(i) identification of the promised goods or services in the contract;
(ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract;
(iii) measurement of the transaction price, including the constraint on variable consideration;
(iv) allocation of the transaction price to the performance obligations; and
(v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company’s revenue arrangements may include the following:
Up-front License Fees: If a license is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.
Milestone Payments: At the inception of an agreement that includes regulatory or commercial milestone payments, the Company evaluates whether each milestone is considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At each reporting period, the Company assesses the probability of achievement of each milestone under its current agreements. The Company recognized $
9
that a development milestone would be met and that a significant reversal of revenue would not occur related to the previously constrained portion of the transaction price.
Royalties: If the Company is entitled to receive sales-based royalties from its collaborator, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, provided the reported sales are reliably measurable, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).
Manufacturing Supply and Research Services: Arrangements that include a promise for supply of drug substance or drug product for either clinical development or commercial supply at the licensee’s discretion are generally considered as options. The Company assesses if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations. If not, the supply services are recognized as collaboration revenue as the Company provides the services.
The Company receives payments from its licensees based on schedules established in each contract. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the licensees and the transfer of the promised goods or services to the licensees will be one year or less.
Cost of Product Revenue
Cost of product revenue includes the cost of inventory sold, which includes direct manufacturing, production and packaging materials for YCANTH (VP-102) sales.
Cost of Collaboration Revenue
Cost of collaboration revenue consisted of supplies and development activity with Torii.
Fair Value Measurement
ASC Topic 820, Fair Value Measurement, provides guidance on the development and disclosure of fair value measurements. Under this accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.
The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.
Level 3: Unobservable inputs which are supported by little or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
At June 30, 2025, the Company’s financial instruments included cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, notes payable and a derivative liability. The carrying amount of accounts payable, accounts receivable and accrued expenses approximates fair value due to the short-term maturities of these instruments. Notes payable are carried at amortized cost, which approximates fair value.
The following table presents the Company’s fair value information for liabilities measured at fair value on a recurring basis. The Company had
|
|
As of June 30, 2025 |
|
|||||||||
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|||
Recurring fair value measurements |
|
|
|
|
|
|
|
|
|
|||
Derivative liability |
|
$ |
|
|
$ |
|
|
$ |
|
|||
10
The following is a rollforward of the derivative liability:
Balance at December 31, 2024 |
|
$ |
|
|
Change in fair value |
|
|
( |
) |
Balance at June 30, 2025 |
|
$ |
|
The Company estimated the fair value of the derivative liability using a lattice model with an interest rate lattice consistent with the Hull-White model. The derivative liability was classified within Level 3 of the fair value hierarchy due to the use of unobservable inputs. The key inputs into the lattice model for the derivative liability were as follows:
|
|
June 30, 2025 |
|
|
Expected term (years) |
|
|
|
|
Credit spread |
|
|
% |
|
Net Income (Loss) Per Share
Basic net income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period including pre-funded warrants to purchase shares of common stock that were issued in an underwritten offering in February 2023 and November 2024 (Note 7). The pre-funded warrants to purchase common stock are included in the calculation of basic and diluted net loss per share as the exercise price of $
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
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|
2024 |
|
||||
|
|
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|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) attributable to common stockholders - basic |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Weighted average common shares outstanding - basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) per share - basic |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) attributable to common stockholders - diluted |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Weighted average common shares outstanding - basic |
|
|
|
|
|
|
|
|
|
|
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|
||||
Restricted stock units |
|
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|
||||
Stock options |
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|
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Warrants |
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|
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Weighted average common shares outstanding - diluted |
|
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|
|
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|
|
|
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|
||||
Net income (loss) per share - diluted |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
11
The table below provides potential shares outstanding that were not included in the computation of diluted net loss per common share, as the inclusion of these securities would have been anti-dilutive:
|
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June 30, |
|
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2025 |
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2024 |
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Shares issuable upon exercise of stock options |
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Non-vested shares under restricted stock grants |
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Shares issuable upon exercise of warrants pursuant to debt financing |
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Shares issuable upon exercise of warrants pursuant to Torii amendment |
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Shares issuable upon exercise of Series A and B warrants pursuant to 2024 equity financing |
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Total |
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|
||
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 is intended to improve income tax disclosure requirements by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) the disaggregation of income taxes paid by jurisdiction. The guidance makes several other changes to the income tax disclosure requirements as well. The guidance in ASU 2023-09 will be effective for annual reporting periods in fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact that the adoption of ASU 2023-09 will have on its financial statements and disclosures.
In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses. ASU 2024-03 requires additional disclosure of specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The requirements will be applied prospectively with the option for retrospective application. The Company is currently evaluating the impact that the adoption of ASU 2024-03 will have on its financial statements and disclosures.
Note 3 —Inventory
Upon FDA approval of YCANTH (VP-102) for the treatment of molluscum contagiosum on July 21, 2023, the Company began capitalizing the purchases of saleable inventory of YCANTH (VP-102) from suppliers.
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2025 |
|
|
2024 |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work in process |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Total inventory |
|
$ |
|
|
$ |
|
||
12
Note 4—Property and Equipment
Property and equipment, net consisted of (in thousands):
|
|
|
|
|
|
|
||
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2025 |
|
|
2024 |
|
||
Machinery and equipment |
|
$ |
|
|
$ |
|
||
Office equipment |
|
|
|
|
|
|
||
Office furniture and fixtures |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Total property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense for the three months ended June 30, 2025 and 2024 was $
Note 5—Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
Gross to net reserves |
|
$ |
|
|
$ |
|
||
Compensation and related costs |
|
|
|
|
|
|
||
Commercial-related costs |
|
|
|
|
|
|
||
Professional fees |
|
|
|
|
|
|
||
Clinical trials and drug development |
|
|
|
|
|
|
||
Other current liabilities |
|
|
|
|
|
|
||
Total accrued expenses and other current liabilities |
|
$ |
|
|
$ |
|
||
Note 6—Commitments and Contingencies
Litigation
On June 6, 2022, plaintiff Kranthi Gorlamari ("Plaintiff") filed a putative class action complaint captioned Gorlamari v. Verrica Pharmaceuticals Inc., et al., in the U.S. District Court for the Eastern District of Pennsylvania against us and certain of our current and former officers and directors ("Defendants"). On January 12, 2023, the Plaintiff filed an amended complaint alleging that Defendants violated federal securities laws by, among other things, failing to disclose certain manufacturing deficiencies at the facility where our contract manufacturer produced bulk solution for the YCANTH (VP-102) drug device and that such deficiencies posed a risk to the prospects for regulatory approval of YCANTH (VP-102) for the treatment of molluscum. The amended complaint seeks unspecified compensatory damages and other relief on behalf of Plaintiff and all other persons and entities which purchased or otherwise acquired our securities between May 19, 2021 and May 24, 2022 (the "Putative Class Period").
On January 12, 2024, the Court granted in part and denied in part Defendants’ motion to dismiss the amended complaint. The Court held that Plaintiff’s claims relating to statements made in May and June 2021 were sufficiently pled, but dismissed Plaintiff’s claims relating to all other statements made during the Putative Class Period. On January 26, 2024, Plaintiff filed a second amended complaint in an attempt to cure certain of the deficiencies identified in the January 12, 2024 ruling. Defendants’ motion to dismiss the second amended complaint was fully briefed as of April 22, 2024. On September 3, 2024, the Court granted in part and denied in part Defendants’ motion to dismiss the second amended complaint. The Court dismissed Plaintiff’s claims related to one of the two individual defendants but held that Plaintiff’s claims against the Company and the other individual defendant were sufficiently pled.
In addition, on October 21, 2024, May 12, 2025, and June 26, 2025, plaintiffs Ivan S. Cohen, Paul Cannon, and Joseph Bonaccorso, respectively, each filed a putative stockholder derivative lawsuit in the U.S. District Court for the Eastern District of Pennsylvania. Each derivative complaint names the company as a nominal defendant and purports to bring claims on behalf of the company against certain of our current and former directors and officers for alleged violations of the federal securities laws and breaches of their fiduciary duties in relation to substantially the same factual allegations as the above-described putative class action lawsuit. Each derivative complaint primarily seeks to recover for the company compensatory damages for losses allegedly sustained related to the facts alleged, restitution, and punitive damages. On December 16, 2024, the Court granted the parties' joint stipulation to
13
stay the Cohen derivative lawsuit. On July 21, 2025, the Court granted the parties' joint stipulation in the Cohen and Cannon derivative lawsuits to consolidate the two actions and stay the consolidated action. On July 24, 2025, the plaintiff in the Bonaccorso derivative lawsuit filed a corrected complaint to clarify that the named plaintiff "is not Joseph (Joe) Bonaccorso, the former Chief Commercial Officer" of the Company. On July 29, 2025, the plaintiff in the Bonaccorso derivative lawsuit filed a notice voluntarily dismissing the action without prejudice.
Note 7—Stockholders’ Deficit
Common Stock
The Company had authorized
November 2024 Offering
In November 2024, the Company sold
Warrants
The following table summarizes the Company’s outstanding warrants, all of which are exercisable for shares of common stock:
|
|
June 30, 2025 |
||||||||
|
|
Number of warrants |
|
|
Exercise Price |
|
|
Expiration Date |
||
Equity classified warrants |
|
|
|
|
|
|
|
|
||
Pre-funded warrants issued pursuant to 2023 underwritten public offering |
|
|
|
|
$ |
|
|
No expiration |
||
Warrants issued in connection with OrbiMed debt facility |
|
|
|
|
$ |
|
|
|||
Warrants issued in connection with Torii amendment |
|
|
|
|
$ |
|
|
|||
Pre-funded warrants issued pursuant to 2024 underwritten public offering |
|
|
|
|
$ |
|
|
No expiration |
||
Series A warrants issued pursuant to 2024 underwritten public offering |
|
|
|
|
$ |
|
|
|||
Series B warrants issued pursuant to 2024 underwritten public offering |
|
|
|
|
$ |
|
|
|||
|
|
|
|
|
|
|
|
|
||
The OrbiMed warrants are eligible for a price adjustment if the Company consummates any share distribution at a price per common shares less than the exercise price. As a result of the November 2024 Offering, the OrbiMed warrant exercise price was adjusted down to $
14
Note 8—Stock-Based Compensation
Stock-based compensation expense, which includes expense for both options and restricted stock units, has been reported in the Company’s statements of operations as follows (in thousands):
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Selling, general and administrative |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total stock-based compensation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Stock Options
The following table summarizes the Company’s stock option activity for the six months ended June 30, 2025:
|
|
|
|
|
|
|
|
Weighted average |
|
|
|
|
||||
|
|
|
|
|
Weighted average |
|
|
remaining contractual |
|
|
Aggregate intrinsic |
|
||||
|
|
Number of shares |
|
|
exercise price |
|
|
term (in years) |
|
|
value |
|
||||
Outstanding as of December 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Expired |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding as of June 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options vested and exercisable as of |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The aggregate intrinsic value in the above table is calculated as the difference between fair market value of the Company’s common stock price and, as of June 30, 2025, the exercise price of the stock options. The weighted average grant date fair value per share for the employee and non-employee stock options granted during the six months ended June 30, 2025 was $
Restricted Stock Units
Compensation expense related to RSUs is recognized in the Company’s statements of operations based on the fair market value at the date of grant over the period expected to vest. As of June 30, 2025, the remaining unrecognized compensation expense related to the RSUs was $
The following table summarizes the Company's restricted stock unit activity for the six months ended June 30, 2025:
|
|
|
|
|
Weighted Average |
|
||
|
|
|
|
|
Grant Date Fair |
|
||
|
|
Number of Shares |
|
|
Value |
|
||
Nonvested as of December 31, 2024 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
Vested |
|
|
( |
) |
|
|
|
|
Nonvested as of June 30, 2025 |
|
|
|
|
$ |
|
||
Note 9—Leases
The Company leases office space located in West Chester, Pennsylvania that serves as the Company’s headquarters. The initial term expires on
The Company leased office space in Scotch Plains, New Jersey under an agreement classified as an operating lease, which commenced on
The Company entered into a fleet program to provide vehicles for its sales force. The vehicles are leased for a term of
15
liabilities by $
The components of lease expense are as follows (in thousands):
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Finance lease cost: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization right-of-use assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest on lease liabilities |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
||||
Total finance lease costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating lease: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating lease costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Operating |
|
|
Finance |
|
||
2025 (remaining 6 months) |
|
$ |
|
|
$ |
|
||
2026 |
|
|
|
|
|
|
||
2027 |
|
|
|
|
|
|
||
2028 |
|
|
|
|
|
|
||
Thereafter |
|
|
|
|
|
|
||
Total lease payments |
|
|
|
|
|
|
||
Less imputed interest |
|
|
( |
) |
|
|
( |
) |
Lease liability |
|
$ |
|
|
$ |
|
||
The weighted average remaining lease term and discount rates for the Company's leases as of June 30, 2025 are as follows:
|
|
|
|
|||||
|
|
Operating |
|
|
Finance |
|
||
Weighted average remaining lease term (years) |
|
|
|
|
|
|
||
Weighted average discount rate |
|
|
% |
|
|
% |
||
Note 10—Debt
On July 26, 2023 (the "Closing Date"), the Company entered into a Credit Agreement (the "Credit Agreement"), by and between the Company, as borrower, and OrbiMed Royalty & Credit Opportunities IV, LP, a Delaware limited partnership (the "Initial Lender"), as a lender, and each other lender that may from time to time become a party thereto (each, including the Initial Lender, and together with their affiliates, successors, transferees and assignees, the "Lenders"), and OrbiMed Royalty & Credit Opportunities IV, LP, as administrative agent for the Lenders (in such capacity, the "Administrative Agent"). The Credit Agreement provides for a five-year senior secured credit facility in an aggregate principal amount of up to $
Amounts borrowed under the Loan Facility will mature on
During the term of the Loan Facility, interest payable in cash by the Company shall accrue on any outstanding balance due at a rate per annum equal to the higher of (x) the Secured Overnight Financing Rate (") rate (which is the forward-looking term rate for a one-month tenor based on the secured overnight financing rate administered by the CME Group Benchmark Administration Limited) and (y)
16
The Credit Agreement contains customary events of default, including, but not limited to, nonpayment of principal, interest, fees or other amounts; material inaccuracy of a representation or warranty; failure to perform or observe covenants; cross-defaults with certain other indebtedness; bankruptcy and insolvency events; material monetary judgment defaults; impairment of any material definitive loan documentation; other material adverse effects; key permit and other regulatory events; key person events; and change of control. In addition, the Credit Agreement contains a financial covenant that the Company must maintain a liquidity of at least $
On the Closing Date, the Company also issued the Initial Lender warrants to purchase up to
On each of December 20, 2023 and January 31, 2024, the Company entered into an amendment to the Credit Agreement in order to extend a deadline for a specified regulatory milestone. For the second amendment on January 31, 2024, the Company paid an up front amendment fee of $
On May 6, 2024, the Company entered into an amendment to the Credit Agreement (the "Third Amendment") pursuant to which the Lenders waived the going concern requirement under Section 7.1(b) of the Credit Agreement with respect to the financial statements for the quarter ended March 31, 2024. In connection with the Third Amendment, the Company paid an amendment fee of $
On June 26, 2024, the Company entered into an amendment to the Credit Agreement (the "Fourth Amendment") changing the commencement date of the Revenue Test to September 30, 2024. In connection with the Fourth Amendment, the Company paid an amendment fee of $
On August 2, 2024, the Company entered into the fifth amendment and waiver to the Credit Agreement (the "Fifth Amendment") pursuant to which the Lenders waived the going concern requirement under Section 7.1(b) of the Credit Agreement with respect to the financial statements for the quarters ended June 30, 2024 and September 30, 2024, the commencement date for the Revenue Test was changed to December 31, 2024 and the exit fee for the Initial Loans (as defined in the Credit Agreement) was increased from
On February 18, 2025, the Company entered into a waiver to the Credit Agreement pursuant to which the Lenders waived specified covenants under the Credit Agreement, including the requirements under Section 7.1(b) and Section 7.1(c) of the Credit Agreement that there be no "going concern" qualification with respect to the financial statements for the year ended December 31, 2024 and the quarter ended March 31, 2025.
On June 10, 2025, the Company entered into the sixth amendment and waiver to the Credit Agreement (the "Sixth Amendment") pursuant to which the Lenders waived specified covenants under the Credit Agreement, including the requirements under Section 7.1(b) and Section 7.1(c) of the Credit Agreement that there be no "going concern" qualification with respect to the financial statements for the quarters ending June 30, 2025, September 30, 2025 and the quarter and year ending December 31, 2025. In connection with the Sixth Amendment, the Company paid an amendment fee of $
For the three and six months ended June 30, 2025, the Company recognized interest expense related to the Credit Agreement of $
17
|
|
As of June 30, 2025 |
|
|||||||||
|
|
Short-term |
|
|
Long-term |
|
|
Total |
|
|||
Gross proceeds |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Accrued final payment fee |
|
|
|
|
|
|
|
|
|
|||
Accrued repayment fee |
|
|
|
|
|
|
|
|
|
|||
Unamortized debt discount and issuance costs |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total debt, net |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The aggregate maturities of debt are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|||||||||||||
|
|
Debt |
|
|
Final payment fee |
|
|
Repayment fee |
|
|
Total |
|
||||
2025 (6 months remaining) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
2026 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
2027 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
2028 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Note 11—License and Collaboration Agreements
Torii Agreements
On March 17, 2021, the Company entered into a collaboration and license agreement (the "Torii Agreement") with Torii, pursuant to which the Company granted Torii an exclusive license to develop and commercialize the Company’s product candidates that contain a topical formulation of cantharidin for the treatment of molluscum contagiosum and common warts in Japan, including YCANTH (VP-102). Additionally, the Company granted Torii a right of first negotiation with respect to additional indications for the licensed products and certain additional products for use in the licensed field, in each case in Japan.
The Company previously received milestone payments from Torii in prior periods totaling $
The Torii Agreement expires on a product-by-product basis upon expiration of Torii’s obligation under the agreement to make transfer price payments for such product. Torii has the right to terminate the agreement upon specified prior written notice to us. Additionally, either party may terminate the agreement in the event of an uncured material breach of the agreement by, or insolvency of, the other party. The Company may terminate the agreement in the event that Torii commences a legal action challenging the validity, enforceability or scope of any licensed patents.
On March 7, 2022, the Company executed a Clinical Supply Agreement with Torii, whereby the Company will supply product to Torii for use in clinical trials and other development activities. The Company recognized collaboration revenue of $
On May 14, 2024, the Company entered into the First Amendment to the Torii Agreement (the "First Amendment"). Pursuant to the First Amendment, the Company and Torii will equally split the cost of a global Phase 3 program of YCANTH (VP-102) for the treatment of common warts (the "Program"), with Torii paying all the costs when due and the Company repaying Torii half of the costs (the "Company Portion"). The results of the Program will be utilized by the Company in the filing of its new drug application with the FDA for YCANTH (VP-102) for the treatment of common warts. The Company Portion accrues interest annually at the
18
greater of (i) the one-month SOFR plus
In conjunction with the First Amendment, the Company issued Torii a warrant to purchase up to
On June 27, 2025, the Company entered into the Second Amendment to the Torii Agreement with Torii. The Second Amendment provided for the acceleration of an $
Lytix Agreement
In August 2020, the Company entered into an exclusive license agreement with Lytix Biopharma AS ("Lytix") for the use of licensed technology, referred to as VP-315, to research, develop, manufacture, have manufactured, use, sell, have sold, offer for sale, import, and otherwise commercialize products for use in all malignant and pre-malignant dermatological indications, other than metastatic melanoma and metastatic Merkel cell carcinoma (the "Lytix Agreement"). As part of the Lytix Agreement, the Company has paid Lytix milestone fees of $
Note 12 – Related Parties
Note 13 – Subsequent Event
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. This legislation includes changes to U.S. federal tax law, which may be subject to further clarification and the issuance of interpretive guidance. The Company is assessing the legislation and its effect on its financial statements. However, due to the existence of a full valuation allowance against the Company's U.S. federal deferred tax assets, the Company does not currently expect the enactment of the OBBBA to have a material impact on its financial statements. The Company will continue to analyze the OBBBA and will reflect any impact in the period of enactment.
19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with (i) our unaudited interim financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and (ii) our audited financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the years ended December 31, 2024 and 2023 included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (the "SEC") on March 11, 2025. Our financial statements have been prepared in accordance with U.S. GAAP. Unless otherwise indicated, all information in this Quarterly Report on Form 10-Q gives effect to a 1-for-10 reverse stock split of our common stock that became effective on July 24, 2025, and all references to shares of common stock outstanding and per share amounts give effect to the reverse stock split.
We own various U.S. federal trademark applications and unregistered trademarks, including our company name and YCANTH. All other trademarks or trade names referred to in this Quarterly Report on Form 10-Q are the property of their respective owners. Solely for convenience, the trademarks and trade names in this report are referred to without the symbols ® and ™, but such references should not be construed as an indication that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words "expect," "anticipate," "intend," "believe," "may," "plan," "seek" or similar language. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our business and financial performance are subject to substantial risks and uncertainties. Our actual results could differ materially from those discussed in these forward-looking statements. In evaluating our business, you should carefully consider the information set forth in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 11, 2025, in this Quarterly Report under Part II - Item 1A "Risk Factors," and in our other filings with the SEC.
Overview
We are a dermatology therapeutics company developing and selling medications for skin diseases requiring medical intervention. Our commercial product and portfolio of product candidates are clinician administered therapies in areas of high unmet need. Our current product portfolio consists of one approved product with several potential follow-on indications, as well as an additional pipeline product. Our commercial product, YCANTH (VP-102), was approved by the U.S. Food and Drug Administration, or FDA, in July 2023 for the treatment of molluscum contagiosum in adult and pediatric patients two years of age and older. YCANTH (VP-102) is a proprietary drug-device combination that contains a GMP-controlled formulation of cantharidin. We are currently developing YCANTH (VP-102) for a potential follow-on indication for the treatment of common warts. Our second development candidate, VP-315, is an oncolytic peptide-based injectable therapy for the potential treatment of dermatology oncologic conditions, including basal cell carcinoma, or BCC.
Commercial Product
We commercially launched YCANTH (VP-102) in August 2023 in the United States for the treatment of molluscum contagiosum. We have built a specialized sales organization consisting of 37 employee sales representatives in the United States focused on pediatric dermatologists, dermatologists, and select pediatricians.
Additional Pipeline Products
YCANTH (VP-102) - Treatment of Common Warts
We also plan to advance YCANTH (VP-102) for common warts through a separate regulatory approval process and have begun the Phase 3 Program with our partner, Torii. We expect to dose the first patient in the Phase 3 Program in the United States in the fourth quarter of 2025.
In the future, we also intend to pursue commercialization for YCANTH (VP-102) for the treatment of molluscum contagiosum, as well as YCANTH (VP-102) for common warts if approved, in additional geographic regions, either alone or together with a strategic partner.
20
VP-315 - Treatment of Basal Cell Carcinoma
We are also developing VP-315 for the treatment of BCC and potentially additional dermatological oncology indications. We held an end-of-Phase 2 meeting with the FDA in the first quarter and expect to report additional data by the end of 2025, which we believe will help inform next steps for the advancement of the program into Phase 3 clinical trials.
Liquidity Overview
Since our inception in 2013, our operations have focused on developing YCANTH (VP-102), organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio and conducting clinical trials. We have funded our operations primarily through the sale of equity and equity-linked securities and through borrowings under loan agreements.
On July 26, 2023, we entered into a Credit Agreement, pursuant to which we borrowed $50.0 million under the Loan Facility (as defined in Note 10), resulting in net proceeds of approximately $44.1 million after payment of certain fees and transaction related expenses. Amounts borrowed under the Loan Facility will mature on July 26, 2028. Based on our net revenue attributable to YCANTH on a trailing 12-month basis not meeting a specified amount set forth in the Credit Agreement as of December 31, 2024, we became obligated to start making principal payments starting on January 1, 2025. We are obligated to repay the principal amount of the loan on the last day of each month in equal monthly installments through the maturity date, together with the applicable repayment premium and the exit fee.
The Credit Agreement contains customary events of default, including, but not limited to, nonpayment of principal, interest, fees or other amounts; material inaccuracy of a representation or warranty; failure to perform or observe covenants; cross-defaults with certain other indebtedness; bankruptcy and insolvency events; material monetary judgment defaults; impairment of any material definitive loan documentation; other material adverse effects; key permit and other regulatory events; key person events; and change of control. In addition, the Credit Agreement contains a financial covenant that we must maintain a liquidity of at least $10.0 million and that our quarterly and annual financial statements not be subject to any qualification or statement which is of a "going concern" or similar nature. The requirement to deliver financial statements that do not include a qualification of a "going concern" was waived for the financial statements for the quarters ending June 30, 2025, September 30, 2025 and the quarter and year ending December 31, 2025. If the requirement to deliver financial statements that do not include a qualification of a "going concern" is not waived for additional future periods or if additional financing is not raised to meet the liquidity test, we may be in default of the debt agreement in the near-term. Upon the occurrence of an event of default (subject to notice and grace periods), additional interest of 4% per annum applies and obligations under the Credit Agreement could be accelerated. As of June 30, 2025, we were in compliance with all covenants under the Credit Agreement as amended.
In November 2024, we closed an underwritten offering of 4,551,824 shares of our common stock (and, in lieu of common stock to certain investors that so chose, pre-funded warrants to purchase 223,595 shares of our common stock, or the pre-funded warrants), and in either case, accompanying Series A warrants to purchase 2,387,703 shares of our common stock at an exercise price of $10.68 per share of common stock, or the Series A Warrants, and Series B warrants to purchase 2,387,703 shares of our common stock at an exercise price of $13.35 per share of common stock, or the Series B Warrants, at a combined public offering price of $8.90 per share of common stock and accompanying Series A and Series B Warrants (or $8.899 per Pre-Funded Warrant and accompanying Series A and Series B Warrants). The offering resulted in net proceeds of $39.6 million, after deducting underwriting discounts and commissions, and offering expenses.
As of June 30, 2025, we had cash and cash equivalents of $15.4 million. Based on our current business plan and current capital resources, combined with the uncertainty regarding the availability of additional funding and considering our debt obligations, including a requirement to maintain cash, cash equivalents and investments of at least $10.0 million at all times, we have concluded that there is substantial doubt regarding our ability to continue as a going concern within one year after the date these financial statements are issued. We have incurred substantial operating losses since inception and expect to continue to incur significant losses for the foreseeable future and may never become profitable. As of June 30, 2025, we had an accumulated deficit of $316.6 million. Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result should we be unable to continue as a going concern.
We plan to secure additional capital in the future through equity or debt financings, partnerships, or other sources to carry out our planned commercial and development activities. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate continued and future commercialization efforts and/or research and development programs.
We expect to continue to incur significant expenses and operating losses for the foreseeable future. Our expenses may increase in connection with our ongoing activities, as we:
21
Reverse Stock Split
On July 25, 2025, we effected a one-for-ten (1-for-10) reverse stock split (the "Reverse Stock Split"). Pursuant to their terms, a proportionate adjustment was made to the per share exercise price and number of shares issuable under all of the Company’s outstanding options and warrants, and the number of shares authorized for issuance pursuant to the Company’s equity incentive plans have been reduced proportionately. The Reverse Stock Split did not reduce the number of authorized shares of common stock and did not alter the par value.
All share and per share amounts of common stock presented in this Quarterly Report on Form 10-Q have been retroactively adjusted to reflect the Reverse Stock Split.
Critical Accounting Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the balance sheets and the reported amounts of expenses during the reporting periods. In accordance with GAAP, we evaluate our estimates and judgments on an ongoing basis.
A summary of our significant accounting policies are disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. However, we believe that the additional accounting policies disclosed in Note 2 to our financial statements are important to understanding and evaluating our reported financial results.
Components of Results of Operations
Product Revenue, Net
We recognize revenue from sales of YCANTH (VP-102), or the Product, in accordance with ASC Topic 606 – Revenue from Contracts with Customers. YCANTH (VP-102) is available for commercial sale and shipment for the treatment of patients by a healthcare provider in the United States. We sell the Product to several pharmaceutical wholesalers and distributors, or the Customers, who in turn sell the Product directly to clinics, hospitals, and federal healthcare programs. Revenue is recognized as the Product is physically delivered to the Customers.
Gross product sales are reduced by corresponding gross-to-net, or GTN, estimates using the expected value method, resulting in our reported “Product revenue, net” in the accompanying statements of operations. Product revenue, net reflects the amount we ultimately expect to realize in net cash proceeds, taking into account the current period gross sales and related cash receipts and the subsequent cash disbursements on these sales that we estimate for the various GTN categories as well as adjustments for any potential future product returns from customers. The GTN estimates are based upon information received from external sources, such as written or oral information obtained from our customers with respect to their period-end inventory levels and sales to end-users during the period, in combination with management’s informed judgments. Due to the inherent uncertainty of these estimates, the actual amount of product returns, government chargebacks, prompt pay discounts, commercial rebates, Medicaid rebates, co-pay assistance and distribution, data, and group purchasing organizations, or GPOs, administrative fees may be materially above or below the amount estimated. Variance between actual amounts and estimated amounts may result in prospective adjustments to reported net product revenue.
License and Collaboration Revenue
License and collaboration revenue represents revenue from the Torii Agreement pursuant to which we granted Torii an exclusive license to develop and commercialize our product candidates that contain a topical formulation of cantharidin for the treatment of molluscum contagiosum and common warts in Japan, including YCANTH (VP-102).
22
Operating Expenses
Cost of Product Revenue
Cost of product revenue includes the cost of inventory sold, which includes direct manufacturing and supply chain costs. Cost of product revenue also includes period costs related to excess and obsolete inventory write-downs.
Cost of Collaboration Revenue
The costs of collaboration revenue consists of payments for manufacturing supply to support development and testing services pursuant to the Torii Clinical Supply Agreement.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist principally of salaries and related costs for personnel in sales, executive and administrative functions, including stock-based compensation, travel expenses and recruiting expenses. Other selling, general and administrative expenses include cost of samples, sponsorships, consumer and health care professional marketing and advertising expense, insurance costs, and professional fees for audit, tax and legal services.
Research and Development Expenses
Research and development expenses consist of expenses incurred in connection with the discovery and development of YCANTH (VP-102) for the treatment of molluscum contagiosum, potential follow-on indications for YCANTH (VP-102), including common warts, and our other product candidates in addition to VP-315 for BCC. We expense research and development costs as incurred. These expenses include:
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to increase over the next several years as we increase personnel costs, including stock-based compensation, initiate and conduct clinical trials of YCANTH (VP-102) in patients with common warts and VP-315 for BCC and potentially additional dermatological oncology indications and prepare regulatory filings for our product candidates.
The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of, or when, if ever, material net cash inflows may commence from YCANTH (VP-102) or our other product candidates. This uncertainty is due to the numerous risks and uncertainties associated with the duration and cost of clinical trials, which vary significantly over the life of a project as a result of many factors, including:
Our expenditures are subject to additional uncertainties, including the manufacturing process for our product candidates, the terms and timing of regulatory approvals, and the expense of filing, prosecuting, defending and enforcing any patent claims or other intellectual property rights. We may never succeed in achieving regulatory approval for our product candidates. We may obtain
23
unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of our product candidates. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.
Results of Operations for the Three Months Ended June 30, 2025 and 2024
The following table summarizes our results of operations (in thousands):
|
|
For the Three Months Ended June 30, |
|
|
|
|
||||||
|
|
2025 |
|
|
2024 |
|
|
Change |
|
|||
Total revenue |
|
|
|
|
|
|
|
|
|
|||
Product revenue, net |
|
$ |
4,534 |
|
|
$ |
4,892 |
|
|
$ |
(358 |
) |
License and collaboration revenue |
|
|
8,168 |
|
|
|
285 |
|
|
|
7,883 |
|
Total revenue |
|
|
12,702 |
|
|
|
5,177 |
|
|
|
7,525 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Cost of product revenue |
|
|
340 |
|
|
|
360 |
|
|
|
(20 |
) |
Cost of collaboration revenue |
|
|
154 |
|
|
|
182 |
|
|
|
(28 |
) |
Selling, general and administrative |
|
|
8,852 |
|
|
|
16,522 |
|
|
|
(7,670 |
) |
Research and development |
|
|
1,846 |
|
|
|
3,319 |
|
|
|
(1,473 |
) |
Total operating expenses |
|
|
11,192 |
|
|
|
20,383 |
|
|
|
(9,191 |
) |
Income (loss) from operations |
|
|
1,510 |
|
|
|
(15,206 |
) |
|
|
16,716 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|||
Interest income |
|
|
228 |
|
|
|
393 |
|
|
|
(165 |
) |
Interest expense |
|
|
(2,131 |
) |
|
|
(2,368 |
) |
|
|
237 |
|
Change in fair value of derivative liability |
|
|
598 |
|
|
|
— |
|
|
|
598 |
|
Other expense |
|
|
(1 |
) |
|
|
(5 |
) |
|
|
4 |
|
Total other expense, net |
|
|
(1,306 |
) |
|
|
(1,980 |
) |
|
|
674 |
|
Net income (loss) |
|
$ |
204 |
|
|
$ |
(17,186 |
) |
|
$ |
17,390 |
|
Product Revenue, Net
Product revenue, net was $4.5 million for the three months ended June 30, 2025, compared to $4.9 million for the three months ended June 30, 2024. Product revenue, net, related to the delivery of YCANTH (VP-102) to our distribution partners. For the three months ended June 30, 2024, product revenue, net included an initial one-time stock-in related to the expansion of our specialty distribution network to bring on an additional specialty distributor, which represented approximately 54% of product revenue, net in the period.
License and Collaboration Revenue
License and collaboration revenue was $8.2 million for the three months ended June 30, 2025, compared to $0.3 million for the three months ended June 30, 2024. Collaboration revenue for the three months ended June 30, 2025 consisted of an $8.0 million milestone payment from Torii as well as supplies and development activity. Collaboration revenue for the three months ended June 30, 2024 consisted of supplies and development activity with Torii.
Cost of Product Revenue
Cost of product revenue for the three months ended June 30, 2025 and 2024 was $0.3 million and $0.4 million, respectively, consisting primarily of product costs related to the sale of YCANTH (VP-102).
Cost of Collaboration Revenue
Cost of collaboration revenue was $0.2 million for the three months ended June 30, 2025 and 2024. Cost of collaboration revenue consisted of supplies and development activity with Torii.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $8.9 million for the three months ended June 30, 2025, compared to $16.5 million for the three months ended June 30, 2024. The decrease of $7.7 million was primarily due to lower expenses related to
24
commercial activities for YCANTH (VP-102), including decreases in compensation, stock compensation, benefits and travel due to reduced sales force of $5.7 million, decreased marketing and sponsorship costs of $1.1 million, and decreased legal costs of $0.9 million.
Research and Development Expenses
Research and development expenses were $1.8 million for the three months ended June 30, 2025, compared to $3.3 million for the three months ended June 30, 2024. The decrease of $1.5 million was primarily related to decreased chemistry, manufacturing and controls (CMC) and medical affairs costs of $0.6 million, as well as decreased clinical operations costs of $0.8 million, mostly related to the clinical trial for VP-315.
The following table summarizes our research and development expense by product candidate or, for unallocated expenses, by type, for the three months ended June 30, 2025 and 2024. Unallocated expenses include compensation and other personnel-related costs (in thousands):
|
|
For the Three Months Ended |
|
|
|
|
||||||
|
|
2025 |
|
|
2024 |
|
|
Change |
|
|||
YCANTH (VP-102) |
|
$ |
340 |
|
|
$ |
639 |
|
|
$ |
(299 |
) |
VP-315 |
|
|
33 |
|
|
|
462 |
|
|
|
(429 |
) |
Common warts |
|
|
(93 |
) |
|
|
160 |
|
|
|
(253 |
) |
Stock based compensation |
|
|
300 |
|
|
|
513 |
|
|
|
(213 |
) |
Other unallocated expenses |
|
|
1,266 |
|
|
|
1,545 |
|
|
|
(279 |
) |
Research and development expense |
|
$ |
1,846 |
|
|
$ |
3,319 |
|
|
$ |
(1,473 |
) |
|
|
|
|
|
|
|
|
|
|
|||
Interest Income
Interest income was $0.2 million for the three months ended June 30, 2025 compared to $0.4 million for the three months ended June 30, 2024. The decrease of $0.2 million was primarily due to a lower cash balance.
Interest Expense
Interest expense was $2.1 million for the three months ended June 30, 2025 compared to $2.4 million for the three months ended June 30, 2024 and consisted of interest expense on the OrbiMed Credit Agreement as described in Note 10 to our financial statements for each period. The decrease of $0.2 million was related to a lower outstanding principal balance under our Credit Agreement with OrbiMed.
Change in Fair Value of Derivative Liability
The change in the fair value of the derivative liability for the three months ended June 30, 2025 and 2024 was $0.6 million and $0 million, respectively, due to principal payments starting in January 2025, relating to the Credit Agreement.
25
Results of Operations for the Six Months Ended June 30, 2025 and 2024
The following table summarizes our results of operations (in thousands):
|
|
For the Six Months Ended June 30, |
|
|
|
|
||||||
|
|
2025 |
|
|
2024 |
|
|
Change |
|
|||
Revenue: |
|
|
|
|
|
|
|
|
|
|||
Product revenue, net |
|
$ |
7,956 |
|
|
$ |
8,124 |
|
|
$ |
(168 |
) |
License and collaboration revenue |
|
|
8,185 |
|
|
|
879 |
|
|
|
7,306 |
|
Total revenue |
|
|
16,141 |
|
|
|
9,003 |
|
|
|
7,138 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Cost of product revenue |
|
|
763 |
|
|
|
906 |
|
|
|
(143 |
) |
Cost of collaboration revenue |
|
|
168 |
|
|
|
774 |
|
|
|
(606 |
) |
Selling, general and administrative |
|
|
17,700 |
|
|
|
32,861 |
|
|
|
(15,161 |
) |
Research and development |
|
|
4,130 |
|
|
|
8,267 |
|
|
|
(4,137 |
) |
Total operating expenses |
|
|
22,761 |
|
|
|
42,808 |
|
|
|
(20,047 |
) |
Loss from operations |
|
|
(6,620 |
) |
|
|
(33,805 |
) |
|
|
27,185 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|||
Interest income |
|
|
565 |
|
|
|
991 |
|
|
|
(426 |
) |
Interest expense |
|
|
(4,334 |
) |
|
|
(4,687 |
) |
|
|
353 |
|
Change in fair value of derivative liability |
|
|
852 |
|
|
|
- |
|
|
|
852 |
|
Other expense |
|
|
(1 |
) |
|
|
(16 |
) |
|
|
15 |
|
Total other expense, net |
|
|
(2,918 |
) |
|
|
(3,712 |
) |
|
|
794 |
|
Net loss |
|
$ |
(9,538 |
) |
|
$ |
(37,517 |
) |
|
$ |
27,979 |
|
Product Revenue, Net
Product revenue, net was $8.0 million for the six months ended June 30, 2025, compared to $8.1 million for the six months ended June 30, 2024. For the six months ended June 30, 2024, product revenue, net included an initial one-time stock-in related to the expansion of our specialty distribution network to bring on an additional specialty distributor, which represented approximately 32% of product revenue, net in the period.
License and Collaboration Revenue
License and collaboration revenue was $8.2 million for the six months ended June 30, 2025, compared to $0.9 million for the six months ended June 30, 2024. License and collaboration revenue for the six months ended June 30, 2025 consisted of an $8.0 million milestone payment from Torii as well as supplies and development activity. License and collaboration revenue for the six months ended June 30, 2024 consisted of supplies and development activity with Torii.
Cost of Product Revenue
Cost of product revenue for the six months ended June 30, 2025 and 2024 was $0.8 million and $0.9 million, respectively, consisting primarily of product costs related to the sale of YCANTH (VP-102).
Cost of Collaboration Revenue
Cost of collaboration revenue was $0.2 million for the six months ended June 30, 2025, compared to $0.8 million for the six months ended June 30, 2024. The decrease of $0.6 million was primarily due to decreased manufacturing supply required to support development and testing services pursuant to the Torii Clinical Supply Agreement.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $17.7 million for the six months ended June 30, 2025, compared to $32.9 million for the six months ended June 30, 2024. The decrease of $15.2 million was primarily due to lower expenses related to commercial activities for YCANTH (VP-102), including decreases in compensation, stock compensation, recruiting fees, benefits and travel due to reduced sales force of $10.6 million, decreased marketing and sponsorship costs of $3.2 million and decreased legal, general and administrative costs of $1.4 million.
Research and Development Expenses
Research and development expenses were $4.1 million for the six months ended June 30, 2025, compared to $8.3 million for the six months ended June 30, 2024. The decrease of $4.1 million was primarily related to decreased clinical trial costs for VP-315 of $2.6 million and decreased regulatory and medical affairs costs of $0.7 million.
26
The following table summarizes our research and development expense by product candidate or, for unallocated expenses, by type, for the six months ended June 30, 2025 and 2024. Unallocated expenses include compensation and other personnel-related costs (in thousands):
|
|
For the Six Months Ended June 30, |
|
|
|
|
||||||
|
|
2025 |
|
|
2024 |
|
|
Change |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
VP-315 |
|
$ |
194 |
|
|
$ |
2,850 |
|
|
$ |
(2,656 |
) |
YCANTH (VP-102) |
|
|
711 |
|
|
|
1,219 |
|
|
|
(508 |
) |
Common warts |
|
|
(66 |
) |
|
|
160 |
|
|
|
(226 |
) |
Stock based compensation |
|
|
541 |
|
|
|
963 |
|
|
|
(422 |
) |
Other unallocated expenses |
|
|
2,750 |
|
|
|
3,075 |
|
|
|
(325 |
) |
Research and development expense |
|
$ |
4,130 |
|
|
$ |
8,267 |
|
|
$ |
(4,137 |
) |
Interest Income
Interest income was $0.6 million for the six months ended June 30, 2025 compared to $1.0 million for the six months ended June 30, 2024. The decrease of $0.4 million was primarily due to a lower cash balance.
Interest Expense
Interest expense was $4.3 million for the six months ended June 30, 2025 compared to $4.7 million for the six months ended June 30, 2024 and consisted of interest expense on the OrbiMed Credit Agreement as described in Note 10 to our financial statements for each period. The decrease of $0.4 million was related to a lower outstanding principal balance under our Credit Agreement with OrbiMed.
Change in Fair Value of Derivative Liability
The change in the fair value of the derivative liability for the six months ended June 30, 2025 and 2024 was $0.9 million and $0 million, respectively, due to the principal payments starting in January 2025 relating to the Credit Agreement.
Liquidity and Capital Resources
As of June 30, 2025, we had cash and cash equivalents of $15.4 million. Since our inception, we have incurred negative cash flows from our operations. We have financed our operations since inception primarily through sales of our convertible preferred stock, the sale of our common stock, and $28.0 million from the Torii Agreement, which includes $8.0 million received in July 2025. In November 2024, we closed an underwritten offering of 4,551,824 shares of our common stock and, in lieu of common stock to certain investors that so chose, pre-funded warrants to purchase 223,595 shares of our common stock, and in either case, accompanying Series A Warrants to purchase 2,387,703 shares of our common stock at an exercise price of $10.68 per share of common stock and Series B Warrants to purchase 2,387,703 shares of our common stock at an exercise price of $13.35 per share of common stock, at a combined public offering price of $8.90 per share of common stock and accompanying Series A and Series B Warrants (or $8.899 per Pre-Funded Warrant and accompanying Series A and Series B Warrants). The offering resulted in net proceeds of $39.6 million, after deducting underwriting discounts and commissions, and offering expenses.
On July 21, 2023, the FDA approved YCANTH (VP-102) topical solution for the treatment of molluscum contagiosum in adult and pediatric patients two years of age and older. Our first commercial sale of YCANTH (VP-102) occurred in August 2023.
On July 26, 2023, we entered into the Credit Agreement under which we borrowed $50.0 million, resulting in net proceeds to us of approximately $44.1 million after payment of certain fees and transaction related expenses. Amounts borrowed under the Loan Facility will mature on July 26, 2028. Based on our net revenue attributable to YCANTH on a trailing 12-month basis not meeting a specified amount set forth in the Credit Agreement as of December 31, 2024, we became obligated to start making principal payments starting in January 2025. We are obligated to repay the principal amount of the loan on the last day of each month in equal monthly installments through the maturity date, together with the applicable repayment premium and the exit fee.
In addition, the Credit Agreement contains a financial covenant that we must maintain a liquidity of at least $10.0 million and also requires that our quarterly and annual financial statements not be subject to any qualification or statement which is of a "going concern" or similar nature. The requirement to deliver financial statements that are not subject to a qualification of a "going concern" was waived for the financial statements for the quarters ending June 30, 2025, September 30, 2025 and the year ending December 31, 2025. If the requirement to deliver financial statements that are not subject to a qualification of a "going concern" is not waived for additional future periods or if we don’t raise additional financing, we may be in default of our debt in the near-term.
27
During the term of the Credit Agreement, interest payable in cash by us will accrue on any outstanding balance due under the Credit Agreement at a rate per annum equal to the higher of (x) the SOFR rate (which is the forward-looking term rate for a one-month tenor based on the secured overnight financing rate administered by the CME Group Benchmark Administration Limited) and (y) 4.00% plus, in either case, 8.00%. During an event of default, any outstanding amount under the Credit Agreement will bear interest at a rate of 4.00% in excess of the otherwise applicable rate of interest. We will pay certain fees with respect to the Credit Agreement, including an upfront fee, an unused fee on the undrawn portion of the Credit Agreement, an administration fee, a prepayment premium and an exit fee, as well as certain other fees and expenses of the Administrative Agent and the Lenders.
Cash Flows
The following table summarizes our cash flows (in thousands):
|
|
For the Six Months Ended June 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Net cash used in operating activities |
|
$ |
(22,721 |
) |
|
$ |
(36,305 |
) |
Net cash used in investing activities |
|
|
— |
|
|
|
(11 |
) |
Net cash used in financing activities |
|
|
(8,212 |
) |
|
|
(1,301 |
) |
Net decrease in cash and cash equivalents |
|
$ |
(30,933 |
) |
|
$ |
(37,617 |
) |
Operating Activities
During the six months ended June 30, 2025, operating activities used $22.7 million of cash, primarily resulting from a net loss of $9.5 million partially offset by non-cash stock-based compensation of $1.9 million and noncash interest of $1.4 million. Net cash used by changes in operating assets and liabilities consisted primarily of an increase in accounts receivable of $9.1 million and billed and unbilled license and collaboration revenue of $8.1 million partially offset by an increase in accounts payable and deferred revenue of $0.9 million and a decrease in prepaid expenses and other assets of $0.8 million.
During the six months ended June 30, 2024, operating activities used $36.3 million of cash, primarily resulting from a net loss of $37.5 million partially offset by non-cash stock-based compensation of $4.3 million and non-cash interest expense of $1.0 million. Net cash used by changes in operating assets and liabilities consisted primarily of increases in accounts receivable of $5.8 million and prepaid expenses and other assets of $1.6 million partially offset by a net increase in accounts payable and accrued expenses of $2.7 million.
Investing Activities
We did not use any cash in investing activities during the six months ended June 30, 2025. During the six months ended June 30, 2024 net cash used in investing activities of $11,000 was for the purchase of property and equipment.
Financing Activities
During the six months ended June 30, 2025, net cash used by financing activities of $8.2 million was primarily due to the repayment of debt related to the Credit Agreement.
During the six months ended June 30, 2024, net cash used by financing activities of $1.3 million was primarily due to $1.1 million of debt amendment costs paid related to the Credit Agreement.
Funding Requirements
Our first commercial sale of YCANTH (VP-102) occurred in August 2023 to a specialty pharmacy distributor. While we expect to continue to generate revenue from the sale of YCANTH (VP-102), our expenses may increase in connection with our ongoing activities, particularly as we continue the research and development of, continue or initiate clinical trials of, and seek marketing approval for, our product candidates. We will need substantial additional financing to fund our operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to reduce operating expenses, delay, reduce or eliminate our research and development programs and/or continued and future commercialization efforts. In addition, the amount of proceeds we may be able to raise pursuant to our currently effective shelf registration statement on Form S-3 is limited. We are subject to the general instructions of Form S-3 known as the "baby shelf rules." Under these rules, the amount of funds we can raise through primary public offerings of securities in any 12-month period using our registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of our common stock held by non-affiliates. Therefore, we will be limited in the amount of proceeds we are able to raise by selling securities using our Form S-3 until such time as our public float exceeds $75.0 million.
We have incurred substantial operating losses since inception and expect to continue to incur significant losses for the foreseeable future and may never become profitable. As of June 30, 2025, we had an accumulated deficit of $316.6 million. We believe our cash, and cash equivalents of $15.4 million as of June 30, 2025 and the $8.0 million milestone payment received from Torii in July 2025 will be sufficient to support our planned operations into the fourth quarter of 2025. Based on our current business
28
plan and current capital resources, combined with the uncertainty regarding the availability of additional funding and considering our debt obligations, including a requirement to maintain cash, cash equivalents and investments of at least $10.0 million at all times, we have concluded there is substantial doubt regarding our ability to continue as a going concern within one year after the date these financial statements are issued. We plan to address the conditions that raise substantial doubt regarding our ability to continue as a going concern by, among other things, obtaining additional funding through equity offerings, debt financing and refinancings, collaborations, strategic alliances and/or licensing arrangements. While beyond our control, we could receive (A) a $10.0 million milestone payment for regulatory approval of YCANTH (TO-208) in Japan for the treatment of molluscum, which may occur before the end of 2025, and (B) up to $25.0 million upon the exercise of the Series A Warrants issued in conjunction with the November 2024 Equity Financing, which have an exercise price of $10.68 per share and expire in November 2025. Either of these may result in additional liquidity during 2025 and alleviate the substantial doubt regarding our ability to continue as a going concern. We cannot predict with certainty that these funds will be received and alleviate the substantial doubt. Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result should we be unable to continue as a going concern. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our capital resources sooner than we expect. Our future capital requirements, and timing, will depend on many factors, including:
Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, YCANTH (VP-102), and our other product candidates, if approved, may not achieve commercial success. Our commercial revenues will be derived solely from sales of YCANTH (VP-102) in the near term. We may need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.
29
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the disruptions to, and volatility in, the credit and financial markets in the United States and worldwide. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interests of existing stockholders may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing stockholders’ rights. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Obligations and Commitments
As of June 30, 2025, there have been no material changes to our contractual obligations and commitments as previously discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
There have been no material changes to our quantitative and qualitative disclosures about market risk as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Interim Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that the information required to be disclosed by us in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Interim Chief Financial Officer, to allow timely decisions regarding required disclosures. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures. Based on such evaluation, our Chief Executive Officer and Interim Chief Financial Officer has concluded that our disclosure controls and procedures were effective as of June 30, 2025.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(b) and 15d-15(b) of the Exchange Act that occurred during the quarter ended June 30, 2025, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item. 1 Legal Proceedings
On June 6, 2022, plaintiff Kranthi Gorlamari ("Plaintiff") filed a putative class action complaint captioned Gorlamari v. Verrica Pharmaceuticals Inc., et al., in the U.S. District Court for the Eastern District of Pennsylvania against us and certain of our current and former officers and directors ("Defendants"). On January 12, 2023, the Plaintiff filed an amended complaint alleging that Defendants violated federal securities laws by, among other things, failing to disclose certain manufacturing deficiencies at the facility where our contract manufacturer produced bulk solution for the YCANTH (VP-102) drug device and that such deficiencies posed a risk to the prospects for regulatory approval of YCANTH (VP-102) for the treatment of molluscum. The amended complaint seeks unspecified compensatory damages and other relief on behalf of Plaintiff and all other persons and entities which purchased or otherwise acquired our securities between May 19, 2021 and May 24, 2022 (the "Putative Class Period").
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On January 12, 2024, the Court granted in part and denied in part Defendants’ motion to dismiss the amended complaint. The Court held that Plaintiff’s claims relating to statements made in May and June 2021 were sufficiently pled, but dismissed Plaintiff’s claims relating to all other statements made during the Putative Class Period. On January 26, 2024, Plaintiff filed a second amended complaint in an attempt to cure certain of the deficiencies identified in the January 12, 2024 ruling. Defendants’ motion to dismiss the second amended complaint was fully briefed as of April 22, 2024. On September 3, 2024, the Court granted in part and denied in part Defendants’ motion to dismiss the second amended complaint. The Court dismissed Plaintiff’s claims related to one of the two individual defendants but held that Plaintiff’s claims against us and the other individual defendant were sufficiently pled.
In addition, on October 21, 2024, May 12, 2025, and June 26, 2025, plaintiffs Ivan S. Cohen, Paul Cannon, and Joseph Bonaccorso, respectively, each filed a putative stockholder derivative lawsuit in the U.S. District Court for the Eastern District of Pennsylvania. Each derivative complaint names us as a nominal defendant and purports to bring claims on our behalf against certain of our current and former directors and officers for alleged violations of the federal securities laws and breaches of their fiduciary duties in relation to substantially the same factual allegations as the above-described putative class action lawsuit. Each derivative complaint primarily seeks to recover for us compensatory damages for losses allegedly sustained related to the facts alleged, restitution, and punitive damages. On December 16, 2024, the Court granted the parties' joint stipulation to stay the Cohen derivative lawsuit. On July 21, 2025, the Court granted the parties’ joint stipulation in the Cohen and Cannon derivative lawsuits to consolidate the two actions and stay the consolidated action. On July 24, 2025, the plaintiff in the Bonaccorso derivative lawsuit filed a corrected complaint to clarify that the named plaintiff "is not Joseph (Joe) Bonaccorso, the former Chief Commercial Officer" of the Company. On July 29, 2025, the plaintiff in the Bonaccorso derivative lawsuit filed a notice voluntarily dismissing the action without prejudice.
We are involved in ordinary, routine legal proceedings that are not considered by management to be material. We believe the ultimate liabilities resulting from such legal proceedings will not materially affect our financial position or our results of operations or cash flows.
Item 1A. Risk Factors
Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. In addition to the other information set forth in this quarterly report on Form 10-Q, you should carefully consider the factors described in Part I, Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the Securities and Exchange Commission on March 11, 2025.
We completed a reverse stock split of our shares of common stock, which may reduce and may limit the market trading liquidity of the shares due to the reduced number of shares outstanding and may potentially have an anti-takeover effect.
We completed the reverse stock split of our common stock by a ratio of 1-for-10, effective July 24, 2025. The liquidity of our common stock may be adversely affected by the reverse stock split as a result of the reduced number of shares outstanding following the reverse stock split. In addition, the reverse stock split may increase the number of stockholders who own odd lots of our common stock, creating the potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty affecting such sales. Reducing the number of outstanding shares of our common stock through the reverse stock split is intended, absent other factors, to increase the per share market price of our common stock. However, other factors, such as our financial results, market conditions and the market perception of our business may adversely affect the market price of our common stock. As a result, there can be no assurance that the reverse stock split will result in the intended benefits, that the market price of our common stock will remain higher following the reverse stock split or that the market price of our common stock will not decrease in the future.
Item 5. Other Information
Rule 10b5-1 Trading Arrangements and Non-Rule 10b5-1 Trading Arrangements
During the three months ended June 30, 2025, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act)
Item 6. Exhibits
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EXHIBIT INDEX
Exhibit |
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Description |
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3.1 (1) |
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3.2 (2) |
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Certificate of Amendment of the Amended and Restated Certificate of Incorporation |
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3.2 (3) |
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10.1
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10.2+^
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31.1 |
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31.2 |
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32.1* |
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101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
(1) Previously filed as Exhibit 3.3 to the Company’s Registration Statement on Form S-1 (File No. 333-225104), filed with the Securities and Exchange Commission on May 22, 2018.
(2) Previously filed as Exhibit 3.1 to the Company's Current Report on Form 8-K (File No. 001-38529), filed with the Securities and Exchange Commission on July 23, 2025.
(3) Previously filed as Exhibit 3.4 to the Company's Registration Statement on Form S-1 (File No. 333-225104), filed with the Securities and Exchange Commission on May 22, 2018.
+ Certain portions of this exhibit, indicated by asterisks, have been omitted pursuant to Item 601(b)(10) of Regulation S-K because they are not material and would likely cause competitive harm to the registrant if publicly disclosed.
^ Pursuant to Item 601(a)(5) of Regulation S-K promulgated by the SEC, certain exhibits and schedules to this agreement have been omitted. The Company hereby agrees to furnish supplementally to the SEC, upon its request, any or all of such omitted exhibits or schedules.
* These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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VERRICA PHARMACEUTICALS INC. |
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August 12, 2025 |
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By: |
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/s/ Jayson Rieger |
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Jayson Rieger |
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Chief Executive Officer and President |
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(Principal Executive Officer) |
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By: |
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/s/ John J. Kirby |
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John J. Kirby |
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Interim Chief Financial Officer |
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(Interim Principal Financial Officer) |
33
Exhibit 10.1
Sixth Amendment and Waiver to Credit Agreement
This SIXTH AMENDMENT AND WAIVER TO CREDIT AGREEMENT (this “Amendment”) is made and entered into as of June 10, 2025 by and among VERRICA PHARMACEUTICALS INC., a Delaware corporation (the “Borrower”), the Lenders party hereto (the “Lenders”), and ORBIMED ROYALTY & CREDIT OPPORTUNITIES IV, LP, as administrative agent for the Lenders (together with its Affiliates, successors, transferees and assignees, the “Administrative Agent”).
WHEREAS, the Borrower, the Lenders and the Administrative Agent entered into a Credit Agreement, dated as of July 26, 2023 (as amended by that First Amendment to Credit Agreement, dated as of December 20, 2023, as further amended by that certain Second Amendment to Credit Agreement, dated as of January 31, 2024, as further amended by that certain Third Amendment and Waiver to Credit Agreement, dated as of May 6, 2024, as further amended by that certain Fourth Amendment to Credit Agreement, dated as of June 26, 2024, and as further amended by that certain Fifth Amendment and Waiver to Credit Agreement, dated as of August 2, 2024, and as further modified by that certain Waiver, dated as of February 18, 2025, the “Existing Credit Agreement”; the Existing Credit Agreement as may be further amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), pursuant to which the Lenders have extended credit to the Borrower on the terms set forth therein;
WHEREAS, pursuant to Section 7.1(b) of the Credit Agreement, the Borrower is required, among other things, to deliver to the Administrative Agent consolidated financial statements of the Borrower and its Subsidiaries for each Fiscal Quarter, which financial statements shall be without any “going concern” or like qualification (the “Quarterly Going Concern Requirement”);
WHEREAS, the Borrower has requested that the Lenders waive, solely in respect of the Borrower’s quarterly unaudited financial statements for the Fiscal Quarters ending June 30, 2025, September 30, 2025 and December 31, 2025 (the “Specified Quarterly Financials”), the Quarterly Going Concern Requirement, and the Lenders agree to provide such waiver on the terms and subject to the conditions set forth herein;
WHEREAS, pursuant to Section 7.1(c) of the Credit Agreement, the Borrower is required, among other things, to deliver to the Administrative Agent audited financial statements of the Borrower and its Subsidiaries for each Fiscal Year, which financial statements shall be without any “going concern” or like qualification (the “Annual Going Concern Requirement”);
WHEREAS, the Borrower has requested that the Lenders waive, solely in respect of the Borrower’s annual audited financial statements for the Fiscal Year ending December 31, 2025 (the “Specified Annual Financials”), the Annual Going Concern Requirement, and the Lenders agree to provide such waiver on the terms and subject to the conditions set forth herein;
WHEREAS, pursuant to Section 10.1 of the Credit Agreement, the Credit Agreement may be amended or waived by an instrument in writing signed by the Borrower and the Lenders and acknowledged by the Administrative Agent; and
WHEREAS, the Borrower and the Lenders desire to amend or waive certain provisions of the Existing Credit Agreement as provided in this Amendment.
NOW, THEREFORE, in consideration of the mutual agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
“Sixth Amendment” is that certain Sixth Amendment and Waiver to Credit Agreement, dated as of June 10, 2025, by and among the Borrower, the Lenders party thereto and the Administrative Agent.
“Sixth Amendment Fee” is defined in the Sixth Amendment.
A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release, and that if known by him or her, would have materially affected his or her settlement with the debtor or released party.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the day and year first above written.
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VERRICA PHARMACEUTICALS INC. as the Borrower |
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By: /s/ David Zawitz |
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Name: David Zawitz |
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Title: Chief Operating Officer |
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ORBIMED ROYALTY & CREDIT OPPORTUNITIES IV, LP,
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By: OrbiMed ROF IV LLC, |
its General Partner
By: OrbiMed Advisors LLC, its Managing Member |
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By: /s/ Matthew Rizzo |
Name: Matthew Rizzo |
Title: Member
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ORBIMED ROYALTY & CREDIT OPPORTUNITIES IV OFFSHORE, LP,
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By: OrbiMed ROF IV LLC, |
its General Partner
By: OrbiMed Advisors LLC, its Managing Member |
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By: /s/ Mathew Rizzo |
Name: Matthew Rizzo |
Title: Member
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ACKNOWLEDGED BY: |
ORBIMED ROYALTY & CREDIT OPPORTUNITIES IV, LP |
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By: OrbiMed ROF IV LLC, |
its General Partner
By: OrbiMed Advisors LLC, its Managing Member |
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By: /s/ Matthew Rizzo |
Name: Matthew Rizzo |
Title: Member |
Exhibit 10.2
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL. OMISSIONS ARE DESIGNATED [***].
Execution Copy
SECOND AMENDMENT TO THE COLLABORATION AND LICENSE AGREEMENT
This Second Amendment to the Collaboration and License Agreement (the
“Second Amendment”) is entered into as of June 27, 2025 (the “Second Amendment Effective Date”), by and between Verrica Pharmaceuticals Inc., a company incorporated under the laws of Delaware and having an address at 44 West Gay Street, Suite 400, West Chester, Pennsylvania, USA 19380 (“Verrica”) and Torii Pharmaceutical Co., Ltd., a company incorporated under the laws of Japan and having its principal place of business at 4-1 Nihonbashi-Honcho 3-chome, Chuo- ku, Tokyo 103-8439, Japan (“Licensee”). Verrica and Licensee are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”
RECITALS
Whereas, Verrica and Licensee are each a party to that certain Collaboration and License Agreement, dated as of March 17, 2021, as previously amended by that certain First Amendment to Collaboration and License Agreement dated as of May 14, 2024 (collectively, the “Original Agreement”);
Whereas, the Parties have agreed to make certain changes to the Original Agreement to adjust the cost sharing mechanism for the CW Study, to provide Licensee with the right to manufacture the Product for commercialization in the Territory, and to adjust certain milestone payments, transfer price mechanics and royalty payments as set forth in greater detail herein; and
Whereas, the Parties now wish to amend the Original Agreement in accordance with Section 15.3 thereof to reflect these changes.
AGREEMENT
Now, Therefore, in consideration of the foregoing and of the mutual covenants herein contained, the Parties hereby agree to amend the terms of the Original Agreement as provided below.
2.1 The definition of “Second Amendment Effective Date” as set forth in this Second Amendment is hereby incorporated by reference into the Original Agreement.
2.2 Article 1 of the Original Agreement is hereby amended by adding the following definitions in appropriate alphabetical order:
“Cosmetic Variance Product” has the meaning provided in Section 7.2.
“Creditable Cosmetic Variance Product” has the meaning provided in Section 7.2.
“First CW Milestone” has the meaning provided in Section 8.2.
“Licensee Responsible Portion” has the meaning provided in Section 4.10(c)(y).
“Manufacturing Technology Transfer” has the meaning provided in Section 7.9.
“Royalty Product” has the meaning provided in Section 8.5(a).
“Royalty Report” has the meaning provided in Section 8.5(b).
“Transfer Price” has the meaning provided in Section 8.4.”
“2.2 Effectiveness of Manufacturing License. The Manufacturing License shall become effective on the Second Amendment Effective Date.”
“(a) Promptly after the Effective Date, Verrica shall make available to Licensee all copies of Verrica Know-How existing as of the Effective Date, including non-clinical study data, Clinical Trial data and any other study data, related to or reasonably useful in the development of Product in the Field in the Territory that Verrica has filed with the FDA on or before the Effective Date in a form and format in Verrica’s possession (i.e., compliant with the CDISC or SaaS data set or SaaS export file, at Verrica’s discretion). On an ongoing basis during the Term pursuant to a transfer plan agreed to by the Parties, Verrica shall make available to Licensee any and all copies of Verrica Know-How, to the extent not previously provided to Licensee under this Section 2.4(a), that is necessary or reasonably useful for Licensee (i) to practice the License and (ii) to exercise Licensee’s rights and perform Licensee’s obligations under this Agreement. Without limiting the generality of the foregoing, Verrica shall provide to Licensee true and complete copies of all written, graphic or electronic embodiments of Data generated by or on behalf of, or otherwise Controlled by, Verrica or any of its Affiliates, including all draft and final reports of any material preclinical study or Clinical Trial of Compound or Product, and all pharmacology, toxicology, pharmacokinetic and other data with respect to Compound or Product, and Licensee may use the Data contained in such reports solely within the scope of the License.”
“(b) “CW Study Costs” means all external fees, costs, and expenses incurred by either Party in the performance of and in accordance with the CW Study Plan including the tests that may be required by an applicable Regulatory Authority, provided that the CW Study Costs shall not exceed [***] percent [***] of [***] Dollars [***] (i.e., [***] Dollars [***]. For clarity, CW Study Costs shall not include (i) either Party’s internal costs (including but not limited to, costs related to consultation with and application for approval of a Regulatory Authority, and outside advisor’s consultation fees), and or (ii) any consultation fees to be paid to any Regulatory Authority.
(c) Subject to the Parties receiving the applicable approvals from Regulatory Authorities
necessary to initiate the CW Study, Verrica and Licensee shall be equally responsible for the CW Study Costs, provided that
(x) Licensee shall pay one hundred percent (100%) of the budgeted CW Study Costs up to forty million Dollars ($40,000,000) when due and then Verrica shall repay Licensee fifty percent (50%) of the CW Study Costs paid by Licensee (such amount, the “Verrica Responsible Portion”) in accordance with clauses (d), (e), and (f) below; and
(y) to the extent the CW Study Costs exceed forty million Dollars ($40,000,000), Verrica shall pay one hundred percent (100%) of the CW Study Costs up to [***] Dollars [***] when due and then Licensee shall repay Verrica fifty percent (50%) of the CW Study Costs paid by Verrica (such amount, the “Licensee Responsible Portion”) in accordance with clauses (d), (e), and (f) below, provided that Licensee may offset any Verrica Responsible Portion that has not been repaid against Licensee Responsible Portion in accordance with Section 4.10(e)(iv) below; provided further that, if there is insufficient Verrica Responsible Portion that has not been repaid to fully offset Licensee Responsible Portion within sixty (60) months after the date on which Licensee made its first payment of CW Study Costs, then Licensee shall repay the remaining Licensee Responsible Portion within [***] days after receipt of invoice for such payment from Verrica.
Each Party shall pay all invoiced CW Study Costs that such Party is responsible for paying under clause (x) or (y) above (as applicable) directly to the applicable Third Party in accordance with the payment methods and conditions that are separately provided in an agreement to be entered by and among Verrica, Licensee and a Third Party CRO, provided that Verrica (a) will use reasonable best efforts to minimize the number of Third Party invoices and (b) within [***] days after the end of each Calendar Quarter, will provide to Licensee a summary report of the Verrica Responsible Portion of the CW Study Costs incurred by Licensee in the preceding Calendar Quarter until the Verrica Responsible Portion as well as the accrued interest has been fully repaid by Verrica to Licensee. Such summary report shall include (i) the amount of the Verrica Responsible Portion paid by Licensee and the payment date, (ii) accrued interest, (iii) the amount of the Verrica Responsible Portion that has already been offset pursuant to Section 4.10(e), if any, and (iv) the total amount of the outstanding Verrica Responsible Portion, including the accrued interest Verrica owes to Licensee as of the end of such Calendar Quarter. With respect to the Third Party CRO agreement referenced in this Section 4.10(c), notwithstanding the above, the Parties will strive to act by consensus regarding the terms, conditions and/or provisions of such Third Party CRO agreement. However, in the event that the Parties cannot unanimously agree to any such term, condition and/or provision other than those related to payment, Verrica’s Chief Executive Officer will have all final decision-making authority with respect to any such term, condition and/or provision; provided that, in the exercise of his or her final decision-making authority, Verrica’s Chief Executive Officer will give good faith consideration to, and take into account, Licensee’s position on any such term, condition and/or provision.
(d) The Verrica Responsible Portion shall accrue interest at a per annum rate that is the higher of (i) the one-month SOFR plus two (2) percentage points or (ii) six percent (6%). Such interest shall accrue during the period from the date that Licensee pays the first invoice related to the applicable CW Study Costs until the date that Licensee has received, in full, the Verrica Responsible Portion of the CW Study Costs.
(e) Licensee shall have the right to recoup its payment for the Verrica Responsible Portion plus applicable interest or any other amounts payable by Verrica to Torii under this Agreement or otherwise by offsetting such amount against the following payments owed by Licensee to
Verrica:
Until all of the Verrica Responsible Portion plus applicable interest have been recouped or paid, within [***] days after the end of each calendar month, Verrica shall provide Licensee with a report of monthly profit and loss statement, the status of cash and cash equivalents, and the simple number of Applicators dispensed.”
“7.1 General. Subject to the terms and conditions of this Agreement (including Section 2.2) and the applicable Supply Agreement, until the completion of the Manufacturing Technology Transfer, Verrica shall sell and supply, or cause to be supplied, to Licensee, and Licensee shall purchase from Verrica all of Licensee’s, its Affiliates’ and its and their Sublicensees reasonably requested amounts of Product or components thereof (including the Proprietary Applicator/Breaking Tool Components) for (i) Clinical Trials and other non-clinical development and registration activities in the Field in the Territory, as described in additional detail in Section 7.2, and (ii) commercial distribution in the Field in the Territory, as described in additional detail in Sections 7.2 and 7.3. Verrica shall supply Licensee with Product or components thereof in (1) the form/dosage/formulation(s) that have been developed as of the Effective Date and that are available from Verrica's CMO as of the Effective Date; or (2) any form/dosage/formulation that, at the time of supply, is being used outside of the Territory by or on behalf of Verrica and that is available for supply by Verrica to Licensee (whether directly or through a CMO) for use in the Field in the Territory, or (3) any form/dosage/formulation agreed by Verrica and Licensee in accordance with Sections 4.6 and 7.5, in each case, as is set forth in the Clinical Supply Agreement or Commercial Supply Agreement, as applicable. Licensee is responsible, at Licensee’s sole cost and expense, for (x) any cartoning, packaging and labeling of the Products in accordance with the Applicable Laws in the Territory and (y) the distribution of Products in the Field in the Territory.
The Parties shall also agree on written quality agreements to be negotiated in good faith simultaneously with the Clinical Supply Agreement and Commercial Supply Agreement. The Supply Agreements will contain other normal and customary terms and conditions for such supply agreement and will be consistent with, and will be designed to permit Verrica to comply with its obligations under, Verrica’s corresponding supply agreements with its CMOs of Compound and Product, and shall not impose on Verrica obligations with respect to Product manufactured by any such CMO that are in excess of such CMO’s obligations to Verrica with respect to Product as of the Effective Date unless otherwise agreed between the Parties; provided, however, that to the extent that the terms of any agreement between Verrica and any CMO engaged by Verrica to manufacture the Compound or Product for clinical or commercial use in the Field in the Territory (a “CMO Agreement”) are insufficient to (1) permit the supply of the Product in the Field in the Territory in accordance with Applicable Law or (2) comply with any requirements by the applicable Regulatory Authority for the Product in the Territory that are set forth in the Supply Agreement and/or the corresponding quality agreement applicable to clinical or commercial use, then Verrica shall use Commercially Reasonable Efforts to amend such CMO Agreement as necessary to reasonably address such insufficiencies. As may be further set forth in the Commercial Supply Agreement, if Verrica supplies Licensee with drug product that meets all specifications but does not meet the mutually agreed cosmetic preferences set forth in the quality agreement (excluding cap defects) (a “Cosmetic Variance Product”), then to the extent that more than [***] percent [***] for each lot of such drug product is Cosmetic Variance Product (“Creditable Cosmetic Variance Product”), Verrica shall credit half the price paid by Licensee for such Creditable Cosmetic Variance Product against any amounts payable by Licensee to Verrica for subsequent supply of drug product.
“7.9 Manufacturing Technology Transfer. Promptly after the Second Amendment Effective Date, the Parties shall coordinate the logistics of initiation and completion of a
technology transfer of the process and technology that is then-used to manufacture the Product (including, for clarity, Breaking Tools) to Licensee or its CMO (the “Manufacturing Technology Transfer”), which shall be performed in accordance with a mutually agreed technology transfer plan. As part of the Manufacturing Technology Transfer, Verrica shall (a) make available to Licensee (or its designee) any and all copies of Verrica Know-How, to the extent not previously provided to Licensee, that is necessary or reasonably useful for Licensee to practice the Manufacturing License; and (b) provide Licensee (or its designee) with reasonable technical assistance (which may include reasonable access to Verrica’s technical personnel involved in the manufacture of the Product) to enable Licensee (or its designee) to manufacture the Product and components thereof. In addition, upon Licensee’s request, Verrica shall introduce Licensee to the relevant Verrica CMOs and use Commercially Reasonable Efforts to facilitate the direct discussions between Licensee and the relevant Verrica CMOs so that Licensee may be able to directly engage such CMOs to manufacture and supply the Product or components thereof. Licensee shall reimburse Verrica for both out- of-pocket cost and internal cost incurred by Verrica to provide the Manufacturing Technology Transfer. The Manufacturing Technology Transfer shall be deemed completed when Licensee (or its designee, including CMOs engaged by Licensee) is able to perform, and has in fact commenced performing, the full range of manufacturing operations required to produce the Product, including the preparation of the bulk drug product solution, the packaging of bulk solution into ampules and the assembly of the Applicators, but excluding the manufacture of the active pharmaceutical ingredient. In connection with the Manufacturing Technology Transfer, Verrica shall also cooperate and shall cause its CMOs to cooperate, with Licensee in filing necessary regulatory filings in connection with the change of manufacturing facility at Licensee’s costs and expenses. Both Parties shall use best efforts to complete the Manufacturing Technology Transfer as quickly as possible.”
[***] |
$8,000,000 |
“Notwithstanding anything to the contrary in this Agreement, Licensee shall pay Verrica for the First CW Milestone no later than [***] days after receipt of an invoice from Verrica, which Verrica may send on or after the Second Amendment Effective Date.”
“8.4. Transfer Price Payment. Subject to any applicable reduction set forth in Section 8.6, Licensee shall pay to Verrica a purchase price in accordance with Schedule 8.4 (the “Transfer Price”) in accordance with the payment and reporting schedule set forth therein, for Licensee’s purchase of each unit of Product or other items supplied by or on behalf of Verrica to Licensee under the Commercial Supply Agreement.”
“8.5 Royalty Payment.
“8.6 Transfer Price and Royalty Reductions.
“Neither expiration nor termination of this Agreement relieves either Party of any obligation or liability accruing prior to such expiration or termination, nor does expiration or termination of this Agreement preclude either Party from pursuing all rights and remedies it may have under this Agreement, at law or in equity, with respect to breach of this Agreement. Without limiting the foregoing, the following provisions of this Agreement will survive the expiration or termination of this Agreement: Article 1 (Definitions), Section 2.2 (Effectiveness of Manufacturing License), Section 2.7 (Non- Compete), Section 2.8 (Grant-Back Licenses to Verrica), Section 4.9 (Records), Section 4.10(f) (Phase 3 Global Common Warts Study), Section 7.9 (Manufacturing Technology Transfer), Sections 8.4 (Transfer Price Payment), 8.5 (Royalty Payment), 8.7 (Exchange Rate; Manner and Place of Payment), 8.8 (Late Payments), 8.9 (Audits), and 8.10 (Taxes; Cooperation) (each solely to the extent pertaining to amounts becoming due or to sales made during the Term), Article 9 (Confidentiality), Section 10.1(a) (Inventions), Sections 10.2(b) (Joint Patents), 10.2(d) (Cooperation of the Parties), 10.3(a) (Notice; Procedures), 10.3(b)(ii) (Joint Patents), 10.3(c) (Cooperation), 10.3(d) (Recovery) (each solely with respect to Joint Patents), Section 11.6 (Disclaimer), Article 12 (Indemnification; Insurance; Liability Limitations), Section 13.1 (Term), Section 13.6
(Effect of Expiration or Termination), this Section 13.7 (Accrued Obligations; Survival), Article 14 (Dispute Resolution) and Article 15 (Miscellaneous).”
If to Verrica: |
Verrica Pharmaceuticals Inc. 44 West Gay Street, Suite 400 West Chester, Pennsylvania 19380 United States of America Attention: Chief Legal Officer Email: [***] |
With a copy to: |
Verrica Pharmaceuticals Inc. 44 West Gay Street, Suite 400 West Chester, Pennsylvania 19380 United States of America Attention: ChiefExecutive Officer |
With a further copy to: |
Cooley LLP 500 Boylston Street Boston, Massachusetts 02116-3736 United States of America Attention: [***] Email: [***] |
3.1 Full Force and Effect. Except as herein expressly amended, the Original Agreement shall remain in full force and effect and enforceable against each Party in accordance with its terms. Unless the context otherwise requires, the term “Agreement” as used in the Original Agreement shall be deemed to refer to the Original Agreement as amended hereby.
3.2 Counterparts. This Second Amendment may be executed in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. The Parties agree that execution of this Second Amendment by exchanging executed signature pages in .pdf format shall have the same legal force and effect as the
exchange of original signatures.
3.3 Precedence of Schedule 8.4 Over Other Agreements. Notwithstanding anything to the contrary in the Original Agreement or any other agreement entered into solely between Verrica and the Licensee, the Parties hereby agree that, as of the Second Amendment Effective Date, in the event of any conflict or inconsistency between the terms of Schedule 8.4 attached to this Second Amendment and the terms of the Original Agreement or any such other agreement, the terms of Schedule 8.4 shall govern and control. For the avoidance of doubt, the terms of Schedule 8.4 shall supersede and replace any conflicting or inconsistent provisions in the Original Agreement or any such other agreement, with respect to the subject matter addressed in Schedule 8.4.
[Remainder of page intentionally blank.]
IN WITNESS WHEREOF, the Parties have caused their duly authorized officers to execute and deliver this Second Amendment to the Collaboration and License Agreement as of the date first written above.
VERRICA PHARMACEUTICALS INC.
By: /s/ Jayson Rieger
Name: Jayson Rieger, Ph.D., MBA
Title: President and Chief Executive Officer
TORII PHARMACEUTICAL CO., LTD.
By: /s/ Nobumasa Kondo
Name: Nobumasa Kondo
Title: Representative Director, President and Chief Executive Officer
Signature Page to Second Amendment to the Collaboration and License Agreement
Exhibit 31.1
VERRICA PHARMACEUTICALS INC.
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jayson Rieger, certify that:
Date: August 12, 2025
/s/ Jayson Rieger |
Jayson Rieger |
President and Chief Executive Officer |
(Principal Executive Officer) |
Exhibit 31.2
VERRICA PHARMACEUTICALS INC.
CERTIFICATION OF INTERIM PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John J. Kirby, certify that:
Date: August 12, 2025
/s/ John J. Kirby |
John J. Kirby |
Interim Chief Financial Officer |
(Interim Principal Financial Officer) |
Exhibit 32.1
VERRICA PHARMACEUTICALS INC.
PRINCIPAL EXECUTIVE OFFICER AND INTERIM PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Jayson Rieger, President and Chief Executive Officer of Verrica Pharmaceuticals Inc. (the “Company”), and John J. Kirby, Interim Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge:
IN WITNESS WHEREOF , the undersigned have set their hands hereto as of the 12th day of August, 2025.
/s/ Jayson Rieger |
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/s/ John J. Kirby |
Jayson Rieger |
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John J. Kirby |
President and Chief Executive Officer (Principal Executive Officer) |
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Interim Chief Financial Officer (Interim Principal Financial Officer) |
* This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.