Q1 2025 Verrica Pharmaceuticals Inc Earnings Call

Speaker Change: Good evening ladies and gentlemen and welcome to the Verrica Pharmaceuticals 1st quarter 2025 corporate update conference call.

Speaker Change: At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session.

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

Kevin Gardner: Thank you, operator. Hello, everyone, and welcome to Verrica Pharmaceuticals, 1st quarter 2025 corporate update conference call.

Kevin Gardner: With me on the line this evening are Jayson Rieger, President and Chief Executive Officer of Verrica Pharmaceuticals, Noah Rosenberg, Chief Medical Officer, John Kirby, Interim Chief Financial Officer, and David Zawitz, Chief Operating Officer. Thank you very much.

Kevin Gardner: As a reminder during today's call, management will make forward-looking statements. These statements may include expectations related to the commercialization of Y-Camp for the treatment of Malaskan Contegiosum in the United States.

Kevin Gardner: continued revenue growth, regulatory developments, the development of Verrica's product candidates, the company's expected cash runway, and its ability to obtain funding for future operations and Verrica's overall business strategy and planned operations.

Kevin Gardner: These forward-looking statements are based on the company's current expectations and involve inherent risks and uncertainties.

Kevin Gardner: And based on those risks and uncertainties, Verrica's actual results and the timing of events, could differ materially from those anticipated in such forward-looking statements.

Please see Verrica's SEC filings for important risk factors.

Kevin Gardner: Verrica cautions you not to place undue reliance on forward-looking statements and undertakes no duty or obligation to update any forward-looking statements as a result of new information, future events or changes in expectations.

Kevin Gardner: In addition, during today's call, management will discuss certain non-GAAP financial measures.

Kevin Gardner: These non-GAT financial measures are in addition to, and not a substitute for, or superior to, measures of financial performance prepared in accordance with GAT.

Kevin Gardner: There are a number of limitations related to the use of these non-GAAP financial measures versus their closest GAP equivalents.

Speaker Change: The earnings release that the company issued today includes gap to non-GAAP reconciliations for these measures and is also available on the investor relations section of Verrica's website. I'll now turn the call over to Verrica's President and CEO , Jason Rieger. Thank you for your time.

Jayson Rieger: Thank you, Kevin, and good evening, everyone, and thank you for joining us for our first quarter 2025 corporate update call.

Jayson Rieger: I am pleased to report that our focus, commercialization strategy is helping to drive increased

Jayson Rieger: On April 7, we pre-announced strong sequential growth in the first quarter, with wide-cance dispensed applicator units increasing 16.7% over the fourth quarter of 2024 and rising above 10,000 units per quarter for the first time since the launch of the product.

Jayson Rieger: As announced today, this also resulted in $3.4 million in revenue for the quarter.

Jayson Rieger: I'm further excited to say that we have seen Momenta build throughout Q1 and are working to continue to capture that momentum.

Jayson Rieger: As the man for White Hands by pediatricians, dermatologists, and other health care professionals and their patients continues to grow, we believe White Hands distributor inventory levels have normalized that we expect that dispensed applicator units will now more closely track to our revenues.

Jayson Rieger: Importantly, we are executing on our commercial strategy as a much leaner and more capital-efficient company, which I believe will place us on a strong and sustainable growth trajectory.

Jayson Rieger: In parallel with our commercial progress, Verrica's clinical stage pipeline also can be used to advance.

Jayson Rieger: We continue to work with our development and commercialization partner, Tori Pharmaceuticals, to initiate our Phase 3 program of Why Can't The Treatment of Common Woods.

Jayson Rieger: Meanwhile, we continue to advance our novel on-galytic peptide BP-315, which has shown promising safety and efficacy data in Phase 2 trial for the treatment of basal cell carcinoma, having recently held an end-of-phase-2 meeting with the FDA to discuss the design of our Phase 3

Jayson Rieger: Given the significant unmet need for both of these indications, we believe developing these programs has the potential to significantly grow the value of our company.

Jayson Rieger: We will now provide a more detailed update on our commercial activities for White Kemp.

Jayson Rieger: During the first quarter of 2025, the full effects from our revised commercialization strategy, which began to implement in Q4 of last year, helped drive the man for White Kemp.

Jayson Rieger: As we have previously noted, we initially focused on territories with high prevalence of molestome and established strong insurance coverage. The productivity of our sales force also improves substantially during the first quarter.

Jayson Rieger: Our average dispensed applicator unit, Percelling Day, continues to trend favorably, giving us the digital confidence that our new commercial strategy is working.

Jayson Rieger: To that end, we have recruited new sales representatives to work in new territories splitting certain large markets and entering other new markets to capitalize on improving demand.

Jayson Rieger: Throughout the first quarter, we also continued adding local independent regional pharmacies to our strong relationships with our national specialty pharmacy partners. Our approach to distribution of YCANs has the defocus where physicians and other healthcare professionals prefer to write prescriptions, and we've seen strong adoption to this approach since the relaunch.

Jayson Rieger: As previously noted, why can't the inventory levels appear to have normalized? As we are seeing multiple orders each month from our distribution partners rather than larger infrequent stocking orders.

Jayson Rieger: Going forward, we believe shipments of White Kemp applicator units will more closely reflect the underlying demand from physicians and patients, and that this closer relationship will translate into steady or revenue growth as we continue the relaunch.

Jayson Rieger: Finally, our cost-cutting measures have taken hold and our quarterly expenses are reflected within it.

Jayson Rieger: We would expect it going forward. We will selectively add two sales personnel in geographic areas where we have good coverage, but no representative. And add additional sales representatives in markets where there are enough potential customers to work multiple representatives in that market. Thank you.

Jayson Rieger: I'd like to now also provide a brief update on our Clinical Stage Pipeline.

Jayson Rieger: As previously reported, with respect to WICAN, our Japanese Development and Commercialization partner, Torin Pharmaceutical, filed in late 2024 a new drug application in Japan, seeking approval of WICAN, designated in Japan as T-0 or T-0-208, good treatment of Alaska.

Speaker Change: With an estimated over 1.6 million patients in Japan alone, Velasco represents a significant market opportunity for White Kid. I'm going to look forward to Tori's sharing updates on the regulatory approval process later this year.

Speaker Change: We are also working with Tori to relaunch to launch a global phase 3 study evaluating White Kemp in the United States for T-O-208 in Japan for the treatment of common worse.

Speaker Change: Verrica remains eligible to receive a milestone payment of $8 million upon the initiation of the study, which we could begin as early as mid-2025.

Speaker Change: As we've previously stated, the cost of this study will be split 50-50 with Tory, but they're proportionally pained by Tory and reimbursed by Verrica at a future milestones and transfer

Speaker Change: Regarding our Phase III-ready clinical oncology asset, VP315, which we are developing for the treatment of basal cell carcinoma as previously discussed in January , in post-talk analysis of data from our Phase II, or Part II of our Phase II study, demonstrating the treatment with VP315 led to a calculated objective response rate, where OOR of 97%.

Speaker Change: ORO was defined as the percentage of study subjects who did not demonstrate disease progression and who experienced at least 30% reduction in tumor size, along with a partial or complete response following treatment.

Speaker Change: We'll leave positive preliminary top-line results from our phase 2 study to just a B.T. 315 as the potential to change the treatment paradigm for patients with nasal carcinoma, the most common form of skin cancer.

Speaker Change: As noted on our fourth quarter call, we expect to announce additional genomic and immune response data for VP315 in mid-2025. We are also encouraged by our recent end-of-phase-2 meeting with the FDA. After reviewing the file meeting minutes and this additional data, we plan to providing a global development program update later this work.

Speaker Change: Finally, I would like to mention recent appointments to our senior management and board of directors. In March, we announced that Dr. Noah Rosenberg joined Verrica team as our new chief medical officer. Noah is a highly accomplished pharmaceutical executive and physician who brings deep expertise in both drug development and commercialization.

Speaker Change: As CMO, he will play an instrumental role in advancing of our goal for White Kemp to become the standard of care for the treatment of meloscom, contagiosum, and in advancing our clinical

Speaker Change: Following Noah's appointment in early April , we welcome Dr. Gavin Corcoran to our Board of Directors. Over his career, Gavin has built an outstanding track record of developing and launching innovative medicines, as well as creating significant value through strategic transactions.

Speaker Change: As we execute our strategic objectives, his expertise will help guide us our decision-making, and I look forward to working with him as the enter our next phase of growth.

Speaker Change: I will now turn the call over to our Interim Chief Financial Officer, John Kirby, to review our first quarter of 2025 financials.

John Kirby: Thanks, Jason. In the first quarter of 2025, we reported total revenues of $3.4 million, which was substantially all White Cans revenue.

Netwide Kemp Revenue reflects shipments to our distribution partners.

John Kirby: Offset by standard grossed in that adjustments, including actual or anticipated product returns, off invoice discounts, distribution fees, co-pay programs, and other rebates.

John Kirby: Collaboration revenues totaling $17,000 in the first quarter of 2025, which related to our supply of applicators to Tori in connection with their development and commercialization activities.

John Kirby: Gross product margins for the first quarter of 2025 were approximately 88%. Cost of product revenue of $0.4 million included $47,000 of obsolete inventory cost.

John Kirby: Research and Development Expenses of $2.3 million in the first quarter of 2025 decreased versus the first quarter of 2024 by $2.6 million.

John Kirby: Driven primarily by $2.1 million decrease in clinical trial expenses related to VP-315, as well as cost related to a decrease in regulatory and medical affairs expenses of $0.4 million. [inaudible]

John Kirby: Selling General in Administrative Expenses of $8.8 million in the first quarter of 2025, decreased versus the first quarter of 2024 by $7.5 million, driven primarily by the implementation of our more focused commercial strategy for why can't.

John Kirby: GapNet loss was $9.7 million or 10 cents per share for the first quarter of 2025, compared to a GapNet loss of $20.3 million or $44 cents per share for the first quarter of 2024.

John Kirby: On a non-gaft basis, which excludes soft-based compensation, non-cast interest expense, and change in fair value of embedded derivatives, the first quarter of 2025 met loss with $7.8 million for 8 cents per share.

John Kirby: Compared to a net loss of $17.8 million or $38 cents per share for the first quarter of 2024.

John Kirby: And finally, as of March 31st, 2025, Verrica had aggregate cash and cash equivalence of $29.6 million.

John Kirby: Undergaat, the cash and cash equivalence as of March 31st, 2025, would not be sufficient to fund operations for the one-year period following the release of our financial states.

John Kirby: However, should Verrica receive the $8 million milestone payment from Tory triggered by the initiation of the Phase III clinical trial in Japan for common morts.

from the Exercise of Series A Wires.

John Kirby: Issued as part of our November 2024 equity financing, which expired in November of 2025, we could have sufficient cash to fund operations for such periods.

John Kirby: Nonetheless, we will continue to apply discretion in our use of cash and explore opportunities to further bolster the strength of our balance sheet, while still advancing our commercial and clinical development efforts.

Jayson Rieger: I'll now turn the call back over to Jayson for closing remarks.

Thanks, John .

Speaker Change: Based on our focus commercialization strategy and more capital-efficient operating structure, I believe Verrica remains on a pathway for strong and sustainable growth.

Speaker Change: The positive feedback we are receiving from the field also tells us that brand recognition for White Kemp continues to grow amongst both dermatologists and pediatricians.

Speaker Change: In addition, we see patient access continuing to improve along with strong and predictable reimbursement from Medicaid and commercial payers, all of which we believe point towards why can't becoming the new standard of care for the treatment of molestum contagious.

Speaker Change: As White Cancer continues to grow, our late-stage pipeline provides another exciting source of value for our company and shareholders. We believe our program in common words and basal cell carcinoma each holds significant potential value, and we look forward to providing updates on these programs in the near future. With that, we would now be happy to take any questions. Operator?

Speaker Change: At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may withdraw yourself from the queue at any time by pressing star two.

Speaker Change: Once again, that is star and one for your questions. We'll move first to Stacy Ku with TD Cowan. Your line is open.

Stacey Ku: Hey there, thanks so much for taking our questions and congratulations on your Q1 performance.

Stacey Ku: So first, maybe you could do further discuss your success in targeting pediatricians.

Stacey Ku: Maybe talk about the current split of pediatric terms versus pediatrics.

Writing White Kemp, so that's the first question. Let's begin.

Speaker Change: And then the second question, maybe as we think about the summertime, potential increase in most patients, what kind of preparation is ongoing to really capture these patients? And do you expect why I can't show some seasonality as it relates to patient demand as we kind of enter the summer months?

Speaker Change: And then last question is on 2025 for a year. Consensus is around 15 million, so we'd love to hear your thoughts around the Q1 performance and how it relates to the rest of the year. Can we talk about the dynamic? We've seen patient demand and maybe some additional pull-through inventory. Sounds like it's stable, so just want to make sure we have that correct. Thank you so much.

Jayson Rieger: Thanks, thanks, they see. This is Jason. I appreciate the questions and if I don't answer all your questions, you'll please try to be down for anything I left off.

Jayson Rieger: In terms of split between terms and peds, we're seeing an ever-growing number of pediatricians writing the product, but still large percentage of our customers are the terms, and they still remain the strong advocates of our product and users of the product.

Jayson Rieger: So I would say rather than the dynamic splitting we're seeing growth in both, which is very exciting for the penetration of the product but also the availability of it for the patients.

Jayson Rieger: In terms of the summer months, it's kind of interesting that you ask that.

There tends to be...

Jayson Rieger: You know, modest speculation on seasonality for Molescum, although as the weather does get better and, you know, kids are outside more, you know, commonly, you know, going to pools where, you know, Molescum can be transmitted with sharing of towels, et cetera.

Jayson Rieger: There may be some seasonality up tick. We are doing a fair amount of sort of marketing to clinicians and some of the social media activities to sort of continue to build awareness for molestika as a disease but also that their White Kemp is available for treatment.

Jayson Rieger: for the patient. So I think that's, you know, going to continue to contribute to the growth of Lycan penetration, you know, and the units that we're dispensing.

Jayson Rieger: And in terms of 2025, for a full year consensus and guidance, I appreciate you asking that. The company at this point is not going to give guidance for the year. We will continue, though, however, to...

Jayson Rieger: Share the number of dispensed applicator units, you know, we'll try to update that on a quarterly basis, but that information becomes available and share the revenue, you know, during our quarterly violins. As you can see, you know, this this quarter, we did see meaningful revenue and dispensed applicator units.

Jayson Rieger: And as our distributors are altering more frequently and in smaller quantities, those numbers should mirror each other much closer going forward. And we hope to continue to see the momentum that we see. We saw the end of last quarter continue to rise in this quarter as well.

Okay, wonderful. Thanks so much. Thanks, Stacy.

Speaker Change: We'll take our next question from Gregory Renza with RBC Capital Markets. Your mine is open.

Speaker Change: Hey guys, it's Anishan for Greg. Congrats on the progress this quarter and thanks for taking our questions.

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

Speaker Change: In terms of the accounts receivable, it's interesting you notice that so we do offer 68 payment terms to our distributors. So as the product is pulling through and then they're passing it through as we normalize the inventory levels, we expect that to semi-stabilize.

Speaker Change: and sort of be, you'll continue to generate cash to import. And because we're getting smaller orders and more frequent orders, that should stabilize in terms of conversion to cash from a receivable.

Speaker Change: In terms of the pharmacy benefit, we'd say the mix of our business continues to grow both on the pharmacy side, pharmacy distribution side, as well as the medical benefit, which is the biennial approach. We see growth in both sides of that business.

Speaker Change: Particularly on the pharmacy side, we've added a number of independent pharmacies which proven to be a convenient mechanism for some clinicians to order the product at a white bag right to their office.

Speaker Change: and Treat to Patients, in addition to those who prefer to do the bio-build model and have it on hand that same day. So we've seen it both and are...

Speaker Change: Commercial team has done an excellent job of expanding our benefit coverage, so I would say that we have robust, you know, coverage growing in both Medicaid and commercial across both of the pharmacy and the medical benefit.

Great. Thanks so much. Appreciate the color.

Get the prompt.

Speaker Change: We'll move next to Serge Belanger, with Needham & Company. Your line is open.

Good afternoon.

Serge Belanger: A couple questions. First on patient access, just a follow-up on the prior question. When you're looking at the overall cam from the left hand, how should we look at the split between commercial and Medicaid coverage for the indication?

Speaker Change: So we would say that in the pediatrician world, there's a large percentage of pediatric patients that are covered under the Medicaid. There's going to be a lot of dependency on state as well. And then on the Durham side, there's a higher percentage of commercial pay. But there are obviously commercial and Medicaid on both sides. [inaudible]

Speaker Change: We're seeing growth on both sides of that across states where we have good, robust coverage.

Thank you for watching.

Speaker Change: Yeah, and then maybe a quick one for John , just we're currently at growth to Nets and where do you think they they'll get to once we get to kind of a more steady state level.

Speaker Change: Aligning with the sales demand that we've reported, you can do the back of the envelope math to get to the rough percentage.

Got it. Thanks.

Thank you.

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

Thank you.

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

Speaker Change: Laws of Old Business, Laws of Accounts, they were not reordering, and so brought bringing up new customers.

In this last quarter, we started to see...

Speaker Change: Solid Growth and Retention of customers that have been here and ordered previously and continuing to reorder.

Speaker Change: And that's a fundamental part of our business model, which means, likely that the conditions are having a positive experience, both in acquisition of the product and treatment of their patients and using it as a going forward part of their practice for the treatment of patients with melaska. [inaudible]

And any comments on the applicators for patient?

Speaker Change: So, we're not given you a specific guidance on that, you know, in our clinical study we allowed for up to 4 treatment cycles to be used. I would say clinically as we saw originally, we're probably closer to the 2-3 treatment cycles.

Speaker Change: Where clinicians are feeling their patients are achieving the medical benefit that they are desiring.

Great. Thank you. And.

Speaker Change: What are trends you're seeing in Salesforce turnover? I mean, you are starting to rebuild the Salesforce, but have you seen turnover?

You should level off.

Are you seeing less involuntary turnover, et cetera?

Speaker Change: I would say we're seeing, you know, in this industry there tends to be some turnover, we're seeing some very solid retention of our core performers.

Speaker Change: And quite a bit of interest as we put post some openings for both expanding and existing territories where we have demands or territories where new demand is growing.

Speaker Change: The sales, the areas we're trying to target grow, and or there's additional demand so that it's been a very very positive impact on that front.

Great. Thank you.

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

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

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