[10-Q] Verrica Pharmaceuticals Inc. Quarterly Earnings Report
Verrica Pharmaceuticals reported consolidated results for the quarter ended June 30, 2025 showing total revenue of $12.7 million, driven by $8.2 million of license and collaboration revenue and $4.5 million of net product sales of YCANTH (VP-102). The company recorded a small net income of $0.2 million for the quarter versus a large loss in the prior-year period, but a net loss of $9.5 million for the six months ended June 30, 2025.
Cash and cash equivalents declined to $15.4 million from $46.3 million at year-end, and the balance sheet shows total debt, net of discounts and issuance costs, of $37.3 million and a derivative liability of $1.8 million. Management disclosed substantial doubt about the company’s ability to continue as a going concern within one year unless additional financing is obtained; the Credit Agreement requires maintaining at least $10.0 million of liquidity and contains covenants that were partially waived for certain 2025 periods.
Key corporate actions include a 1-for-10 reverse stock split (effective July 24, 2025) and a June 27, 2025 amendment with Torii that accelerated an $8.0 million milestone (paid in July 2025) and sets cost-sharing and future royalty/transfer-price arrangements for a Phase 3 program for common warts.
Verrica Pharmaceuticals ha pubblicato i risultati consolidati per il trimestre chiuso il 30 giugno 2025, con ricavi totali di $12,7 milioni, trainati da $8,2 milioni di ricavi da licenze e collaborazioni e $4,5 milioni di vendite nette del prodotto YCANTH (VP-102). La società ha registrato un lieve utile netto di $0,2 milioni nel trimestre rispetto a una consistente perdita nello stesso periodo dell'anno precedente, mentre nei sei mesi chiusi il 30 giugno 2025 ha riportato una perdita netta di $9,5 milioni.
La liquidità e gli equivalenti di cassa sono diminuiti a $15,4 milioni dai $46,3 milioni di fine esercizio, e lo stato patrimoniale mostra un debito totale, al netto di sconti e costi di emissione, di $37,3 milioni e una passività derivata di $1,8 milioni. La direzione ha espresso notevoli dubbi sulla capacità della società di continuare come azienda in continuità entro un anno, a meno che non venga reperito finanziamento aggiuntivo; il Credit Agreement richiede di mantenere almeno $10,0 milioni di liquidità e include covenant che sono stati parzialmente derogati per alcuni periodi del 2025.
Le principali iniziative societarie comprendono uno split azionario inverso 1-per-10 (efficace il 24 luglio 2025) e un emendamento del 27 giugno 2025 con Torii che ha accelerato un milestone da $8,0 milioni (pagato a luglio 2025) e definisce la ripartizione dei costi e gli accordi futuri di royalty/prezzo di trasferimento per un programma di fase 3 sulle verruche comuni.
Verrica Pharmaceuticals informó resultados consolidados para el trimestre cerrado el 30 de junio de 2025, con ingresos totales de $12,7 millones, impulsados por $8,2 millones en ingresos por licencias y colaboraciones y $4,5 millones en ventas netas del producto YCANTH (VP-102). La compañía registró una pequeña utilidad neta de $0,2 millones en el trimestre frente a una importante pérdida en el mismo periodo del año anterior, aunque incurrió en una pérdida neta de $9,5 millones en los seis meses terminados el 30 de junio de 2025.
El efectivo y equivalentes de efectivo disminuyeron a $15,4 millones desde $46,3 millones a cierre de ejercicio, y el balance muestra deuda total, neta de descuentos y costos de emisión, por $37,3 millones y un pasivo por derivados de $1,8 millones. La dirección declaró serias dudas sobre la capacidad de la empresa para continuar como empresa en marcha dentro de un año, salvo que se obtenga financiación adicional; el Credit Agreement exige mantener al menos $10,0 millones de liquidez y contiene convenios que fueron parcialmente eximidos para ciertos periodos de 2025.
Las acciones corporativas clave incluyen una consolidación de acciones 1 por 10 (efectiva el 24 de julio de 2025) y una enmienda del 27 de junio de 2025 con Torii que aceleró un milestone de $8,0 millones (pagado en julio de 2025) y establece el reparto de costes y los futuros acuerdos de regalías/precios de transferencia para un programa de fase 3 para verrugas comunes.
Verrica Pharmaceuticals는 2025년 6월 30일로 종료된 분기의 연결 실적을 발표했으며, 총 매출은 $12.7M로 그중 $8.2M은 라이선스 및 협업 수익, $4.5M은 제품 YCANTH(VP-102)의 순매출에서 발생했습니다. 회사는 당분기 소액의 순이익 $0.2M을 기록했으나 전년 동기에는 큰 손실을 냈고, 2025년 6월 30일로 종료된 상반기에는 순손실 $9.5M을 기록했습니다.
현금 및 현금성자산은 기말 기준 $46.3M에서 $15.4M으로 감소했으며, 재무상태표에는 할인 및 발행비용 차감 후 총부채 $37.3M과 파생상품부채 $1.8M이 계상되어 있습니다. 경영진은 추가 자금 조달이 이루어지지 않을 경우 1년 이내에 회사가 계속기업으로 존속할 수 있을지에 대해 중대한 의문을 제기했습니다. 신용계약은 최소 $10.0M의 유동성을 유지할 것을 요구하며, 일부 2025 기간에 대해 일부 약정이 부분적으로 면제되었습니다.
주요 기업 조치로는 1대10 액면병합(2025년 7월 24일 발효)과 Torii와의 2025년 6월 27일자 수정계약이 있으며, 이 수정계약은 $8.0M의 마일스톤을 앞당겼고(2025년 7월 지급), 비용 분담 및 일반 사마귀 대상 3상 프로그램에 대한 향후 로열티/이전가격 관련 합의를 규정합니다.
Verrica Pharmaceuticals a publié ses résultats consolidés pour le trimestre clos le 30 juin 2025, faisant apparaître un chiffre d'affaires total de $12,7 M, porté par $8,2 M de revenus de licences et collaborations et $4,5 M de ventes nettes du produit YCANTH (VP-102). La société a dégagé un petit bénéfice net de $0,2 M pour le trimestre, contre une lourde perte au même trimestre de l'exercice précédent, mais un résultat net négatif de $9,5 M pour les six mois clos le 30 juin 2025.
Les liquidités et équivalents de trésorerie ont diminué à $15,4 M contre $46,3 M à la clôture de l'exercice, et le bilan montre une dette totale, nette des escomptes et frais d'émission, de $37,3 M ainsi qu'un passif lié à des dérivés de $1,8 M. La direction a fait état de doutes importants quant à la capacité de la société à poursuivre son activité dans l'année, sauf obtention d'un financement supplémentaire ; l'accord de crédit exige le maintien d'au moins $10,0 M de liquidités et contient des clauses qui ont été partiellement levées pour certaines périodes de 2025.
Parmi les principales mesures societaires figurent un regroupement d'actions 1 pour 10 (effet au 24 juillet 2025) et un avenant du 27 juin 2025 avec Torii qui a accéléré un jalon de $8,0 M (payé en juillet 2025) et fixe le partage des coûts ainsi que les modalités futures de redevances/prix de transfert pour un programme de phase 3 sur les verrues communes.
Verrica Pharmaceuticals meldete konsolidierte Ergebnisse für das Quartal zum 30. Juni 2025 mit einem Gesamtumsatz von $12,7 Mio., getragen von $8,2 Mio. Lizenz- und Kooperationserlösen sowie $4,5 Mio. Nettoproduktumsätzen von YCANTH (VP-102). Das Unternehmen erzielte im Quartal einen kleinen Nettogewinn von $0,2 Mio. gegenüber einem großen Verlust im Vorjahreszeitraum, verzeichnete jedoch für die sechs Monate zum 30. Juni 2025 einen Nettoverlust von $9,5 Mio.
Barmittel und Zahlungsmitteläquivalente sanken auf $15,4 Mio. von $46,3 Mio. zum Jahresende, und die Bilanz weist eine Gesamtverschuldung, bereinigt um Abschläge und Emissionskosten, von $37,3 Mio. sowie eine Derivatverbindlichkeit von $1,8 Mio. aus. Das Management gab erhebliche Zweifel an der Fortführungsfähigkeit des Unternehmens innerhalb eines Jahres an, sofern nicht zusätzliche Finanzierung sichergestellt wird; die Kreditvereinbarung verlangt eine Mindestliquidität von $10,0 Mio. und enthält Covenants, die für bestimmte 2025-Zeiträume teilweise aufgehoben wurden.
Wesentliche unternehmerische Maßnahmen umfassen einen 1-zu-10 Reverse-Split (wirksam ab 24. Juli 2025) und eine Änderung vom 27. Juni 2025 mit Torii, die einen $8,0 Mio. Meilenstein vorverlegte (im Juli 2025 bezahlt) und Kostenaufteilung sowie künftige Royalty-/Verrechnungspreisregelungen für ein Phase-3-Programm gegen gewöhnliche Warzen festlegt.
- $8.0 million license and collaboration milestone recognized in Q2 2025 (Torii amendment accelerated payment)
- Quarterly total revenue increased to $12.7 million, including $8.2 million in collaboration revenue which produced a small quarterly net income of $0.2 million
- Torii amendment provides cost-sharing for the Phase 3 common warts program and accelerated cash payment, improving near-term funding visibility
- Company completed a 1-for-10 reverse stock split (effective July 24, 2025) and previously raised net proceeds of approximately $39.6 million in November 2024 offering
- Management disclosed substantial doubt about the company’s ability to continue as a going concern within one year absent additional financing
- Cash and cash equivalents declined to $15.4 million at June 30, 2025 from $46.3 million at December 31, 2024; operating cash outflows were $22.7 million for six months
- Significant debt obligations with total debt, net of discounts, of approximately $37.3 million and a $1.8 million derivative liability; Credit Agreement requires maintaining at least $10.0 million liquidity
- Ongoing legal exposure: a putative securities class action and multiple derivative lawsuits related to manufacturing/regulatory disclosures
- Concentration risk: commercial revenue dependent on a single product, YCANTH (VP-102), sold to a limited number of wholesale customers
Insights
TL;DR: Revenue spike from milestone masks liquidity strain; debt covenants and cash burn create near-term solvency risk.
The quarter shows a notable revenue shift: $8.2 million of license/collaboration revenue recognized after the Torii milestone constraint was released, producing a positive quarterly net income of $0.2 million. However, cash fell to $15.4 million and operating cash outflows were $22.7 million for the six months, while net debt stands at roughly $37.3 million. The Credit Agreement’s $10.0 million liquidity covenant and the company’s own statement of substantial doubt are material negatives. The Torii amendment provides a near-term $8.0 million cash inflow (received in July 2025) and cost-sharing for Phase 3, which partially mitigates funding needs, but relying on milestone and partnership timing creates execution and financing risk. From a valuation perspective, near-term dilution or additional financings appear likely absent cost reductions or further non-dilutive proceeds.
TL;DR: Governance actions show proactive creditor negotiation, but legal exposure and covenant dependencies remain material.
The company has actively amended its Credit Agreement multiple times and obtained waivers for going-concern qualifications through certain 2025 periods, demonstrating engagement with lenders and short-term covenant relief. The June 27, 2025 Torii amendment accelerated milestone cash and clarifies manufacturing and royalty mechanics, which improves near-term predictability. However, ongoing securities class and derivative lawsuits, coupled with heavy reliance on a single commercial product and a concentrated customer base, pose governance and operational risks. Management’s plans to raise capital via equity, debt, or partnerships are standard remedies, yet contingent on market access and investor appetite. Impact is material but partially mitigated by recent contractual accommodations.
Verrica Pharmaceuticals ha pubblicato i risultati consolidati per il trimestre chiuso il 30 giugno 2025, con ricavi totali di $12,7 milioni, trainati da $8,2 milioni di ricavi da licenze e collaborazioni e $4,5 milioni di vendite nette del prodotto YCANTH (VP-102). La società ha registrato un lieve utile netto di $0,2 milioni nel trimestre rispetto a una consistente perdita nello stesso periodo dell'anno precedente, mentre nei sei mesi chiusi il 30 giugno 2025 ha riportato una perdita netta di $9,5 milioni.
La liquidità e gli equivalenti di cassa sono diminuiti a $15,4 milioni dai $46,3 milioni di fine esercizio, e lo stato patrimoniale mostra un debito totale, al netto di sconti e costi di emissione, di $37,3 milioni e una passività derivata di $1,8 milioni. La direzione ha espresso notevoli dubbi sulla capacità della società di continuare come azienda in continuità entro un anno, a meno che non venga reperito finanziamento aggiuntivo; il Credit Agreement richiede di mantenere almeno $10,0 milioni di liquidità e include covenant che sono stati parzialmente derogati per alcuni periodi del 2025.
Le principali iniziative societarie comprendono uno split azionario inverso 1-per-10 (efficace il 24 luglio 2025) e un emendamento del 27 giugno 2025 con Torii che ha accelerato un milestone da $8,0 milioni (pagato a luglio 2025) e definisce la ripartizione dei costi e gli accordi futuri di royalty/prezzo di trasferimento per un programma di fase 3 sulle verruche comuni.
Verrica Pharmaceuticals informó resultados consolidados para el trimestre cerrado el 30 de junio de 2025, con ingresos totales de $12,7 millones, impulsados por $8,2 millones en ingresos por licencias y colaboraciones y $4,5 millones en ventas netas del producto YCANTH (VP-102). La compañía registró una pequeña utilidad neta de $0,2 millones en el trimestre frente a una importante pérdida en el mismo periodo del año anterior, aunque incurrió en una pérdida neta de $9,5 millones en los seis meses terminados el 30 de junio de 2025.
El efectivo y equivalentes de efectivo disminuyeron a $15,4 millones desde $46,3 millones a cierre de ejercicio, y el balance muestra deuda total, neta de descuentos y costos de emisión, por $37,3 millones y un pasivo por derivados de $1,8 millones. La dirección declaró serias dudas sobre la capacidad de la empresa para continuar como empresa en marcha dentro de un año, salvo que se obtenga financiación adicional; el Credit Agreement exige mantener al menos $10,0 millones de liquidez y contiene convenios que fueron parcialmente eximidos para ciertos periodos de 2025.
Las acciones corporativas clave incluyen una consolidación de acciones 1 por 10 (efectiva el 24 de julio de 2025) y una enmienda del 27 de junio de 2025 con Torii que aceleró un milestone de $8,0 millones (pagado en julio de 2025) y establece el reparto de costes y los futuros acuerdos de regalías/precios de transferencia para un programa de fase 3 para verrugas comunes.
Verrica Pharmaceuticals는 2025년 6월 30일로 종료된 분기의 연결 실적을 발표했으며, 총 매출은 $12.7M로 그중 $8.2M은 라이선스 및 협업 수익, $4.5M은 제품 YCANTH(VP-102)의 순매출에서 발생했습니다. 회사는 당분기 소액의 순이익 $0.2M을 기록했으나 전년 동기에는 큰 손실을 냈고, 2025년 6월 30일로 종료된 상반기에는 순손실 $9.5M을 기록했습니다.
현금 및 현금성자산은 기말 기준 $46.3M에서 $15.4M으로 감소했으며, 재무상태표에는 할인 및 발행비용 차감 후 총부채 $37.3M과 파생상품부채 $1.8M이 계상되어 있습니다. 경영진은 추가 자금 조달이 이루어지지 않을 경우 1년 이내에 회사가 계속기업으로 존속할 수 있을지에 대해 중대한 의문을 제기했습니다. 신용계약은 최소 $10.0M의 유동성을 유지할 것을 요구하며, 일부 2025 기간에 대해 일부 약정이 부분적으로 면제되었습니다.
주요 기업 조치로는 1대10 액면병합(2025년 7월 24일 발효)과 Torii와의 2025년 6월 27일자 수정계약이 있으며, 이 수정계약은 $8.0M의 마일스톤을 앞당겼고(2025년 7월 지급), 비용 분담 및 일반 사마귀 대상 3상 프로그램에 대한 향후 로열티/이전가격 관련 합의를 규정합니다.
Verrica Pharmaceuticals a publié ses résultats consolidés pour le trimestre clos le 30 juin 2025, faisant apparaître un chiffre d'affaires total de $12,7 M, porté par $8,2 M de revenus de licences et collaborations et $4,5 M de ventes nettes du produit YCANTH (VP-102). La société a dégagé un petit bénéfice net de $0,2 M pour le trimestre, contre une lourde perte au même trimestre de l'exercice précédent, mais un résultat net négatif de $9,5 M pour les six mois clos le 30 juin 2025.
Les liquidités et équivalents de trésorerie ont diminué à $15,4 M contre $46,3 M à la clôture de l'exercice, et le bilan montre une dette totale, nette des escomptes et frais d'émission, de $37,3 M ainsi qu'un passif lié à des dérivés de $1,8 M. La direction a fait état de doutes importants quant à la capacité de la société à poursuivre son activité dans l'année, sauf obtention d'un financement supplémentaire ; l'accord de crédit exige le maintien d'au moins $10,0 M de liquidités et contient des clauses qui ont été partiellement levées pour certaines périodes de 2025.
Parmi les principales mesures societaires figurent un regroupement d'actions 1 pour 10 (effet au 24 juillet 2025) et un avenant du 27 juin 2025 avec Torii qui a accéléré un jalon de $8,0 M (payé en juillet 2025) et fixe le partage des coûts ainsi que les modalités futures de redevances/prix de transfert pour un programme de phase 3 sur les verrues communes.
Verrica Pharmaceuticals meldete konsolidierte Ergebnisse für das Quartal zum 30. Juni 2025 mit einem Gesamtumsatz von $12,7 Mio., getragen von $8,2 Mio. Lizenz- und Kooperationserlösen sowie $4,5 Mio. Nettoproduktumsätzen von YCANTH (VP-102). Das Unternehmen erzielte im Quartal einen kleinen Nettogewinn von $0,2 Mio. gegenüber einem großen Verlust im Vorjahreszeitraum, verzeichnete jedoch für die sechs Monate zum 30. Juni 2025 einen Nettoverlust von $9,5 Mio.
Barmittel und Zahlungsmitteläquivalente sanken auf $15,4 Mio. von $46,3 Mio. zum Jahresende, und die Bilanz weist eine Gesamtverschuldung, bereinigt um Abschläge und Emissionskosten, von $37,3 Mio. sowie eine Derivatverbindlichkeit von $1,8 Mio. aus. Das Management gab erhebliche Zweifel an der Fortführungsfähigkeit des Unternehmens innerhalb eines Jahres an, sofern nicht zusätzliche Finanzierung sichergestellt wird; die Kreditvereinbarung verlangt eine Mindestliquidität von $10,0 Mio. und enthält Covenants, die für bestimmte 2025-Zeiträume teilweise aufgehoben wurden.
Wesentliche unternehmerische Maßnahmen umfassen einen 1-zu-10 Reverse-Split (wirksam ab 24. Juli 2025) und eine Änderung vom 27. Juni 2025 mit Torii, die einen $8,0 Mio. Meilenstein vorverlegte (im Juli 2025 bezahlt) und Kostenaufteilung sowie künftige Royalty-/Verrechnungspreisregelungen für ein Phase-3-Programm gegen gewöhnliche Warzen festlegt.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
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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
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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:
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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.
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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
PART I. FINANCIAL INFORMATION |
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Financial Statements (Unaudited) |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Quantitative and Qualitative Disclosures About Market Risks |
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Controls and Procedures |
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PART II. OTHER INFORMATION |
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Legal Proceedings |
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Risk Factors |
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Other Information |
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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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Current assets: |
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Cash and cash equivalents |
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License and collaboration receivable, billed and unbilled |
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Inventory |
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Property and equipment, net |
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Total assets |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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|
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|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
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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|
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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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|
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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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|
||
Commitments and Contingencies (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 |
|
|
( |
) |
|
|
( |
) |
Total stockholders’ deficit |
|
|
( |
) |
|
|
( |
) |
Total liabilities and stockholders’ deficit |
|
$ |
|
|
$ |
|
||
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)
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
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||||||||||
|
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2025 |
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2024 |
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2025 |
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2024 |
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||||
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|
||||
Revenue: |
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|
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|
||||
Product revenue, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
License and collaboration revenue |
|
|
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|
|
|
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|
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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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|
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|
||||
Income (loss) from operations |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Other income (expense): |
|
|
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|
|
|
|
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|
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|
||||
Interest income |
|
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|
||||
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Change in fair value of derivative liability |
|
|
|
|
|
|
|
|
|
|
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|
||||
Other expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total other expense, net |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) per share, basic |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Weighted-average common shares outstanding, basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) per share, diluted |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Weighted-average common shares outstanding, diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
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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|
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|||||||
|
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|
|
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|
|
|
|
|
|
|
Total |
|
|||||||
|
|
Common Stock |
|
|
Additional |
|
|
Subscription |
|
|
Accumulated |
|
|
Treasury Stock |
|
|
Stockholders’ |
|
||||||||||
|
|
Shares Issued |
|
|
Amount |
|
|
Paid-in Capital |
|
|
Receivable |
|
|
Deficit |
|
|
Shares |
|
|
(Deficit) Equity |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
January 1, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
|
|
|
$ |
( |
) |
||||
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Vesting of restricted stock units |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
March 31, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
|
|
|
$ |
( |
) |
||||
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Exercise of pre-funded warrants |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Vesting of restricted stock units |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
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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|
|||||||
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
January 1, 2024 |
|
|
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
|
|
|
$ |
|
||||
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Exercise of stock options |
|
|
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
March 31, 2024 |
|
|
|
|
$ |
— |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
$ |
|
||||
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Exercise of stock options |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
June 30, 2024 |
|
|
|
|
$ |
- |
|
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
|
|
|
$ |
( |
) |
|||
The accompanying notes are an integral part of these financial statements.
3
VERRICA PHARMACEUTICALS INC.
STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
|
|
For the Six Months Ended June 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Cash flows from operating activities |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
Stock-based compensation |
|
|
|
|
|
|
||
Depreciation expense |
|
|
|
|
|
|
||
Non-cash interest expense |
|
|
|
|
|
|
||
Loss on disposal of fixed assets |
|
|
|
|
|
|
||
Loss on termination of financing lease |
|
|
|
|
|
|
||
Amortization of operating lease right-of-use asset |
|
|
|
|
|
|
||
Amortization of finance lease right-of-use asset |
|
|
|
|
|
|
||
Change in fair value of derivative liability |
|
|
( |
) |
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Prepaid expenses and other assets |
|
|
|
|
|
( |
) |
|
License and collaboration receivable, billed and unbilled |
|
|
( |
) |
|
|
( |
) |
Inventory |
|
|
( |
) |
|
|
|
|
Accounts payable |
|
|
|
|
|
( |
) |
|
Deferred revenue |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
Accrued expenses and other current liabilities |
|
|
( |
) |
|
|
|
|
Operating lease liability |
|
|
( |
) |
|
|
( |
) |
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from investing activities |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
|
|
|
( |
) |
|
Net cash used in investing activities |
|
|
|
|
|
( |
) |
|
Cash flows from financing activities |
|
|
|
|
|
|
||
Proceeds from exercise of stock options |
|
|
|
|
|
|
||
Payment of debt amendment fees |
|
|
|
|
|
( |
) |
|
Repayment of debt |
|
|
( |
) |
|
|
|
|
Repayment of finance lease |
|
|
( |
) |
|
|
( |
) |
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Net decrease in cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
Cash and cash equivalents at the beginning of the period |
|
|
|
|
|
|
||
Cash and cash equivalents at the end of the period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental disclosures |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of noncash investing and financing activities: |
|
|
|
|
|
|
||
Property and equipment purchases in accounts payable or accrued expenses and other current liabilities at period end |
|
$ |
|
|
$ |
|
||
Finance lease liability extinguished as a result of lease termination |
|
$ |
|
|
$ |
|
||
Right-of-use asset obtained in exchange for lease obligation |
|
$ |
|
|
$ |
|
||
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:
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
|
||||
Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial (including payroll) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative (including payroll) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
YCANTH (VP-102) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
VP-315 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
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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|
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|
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|
|
|
|
|
||||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
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||||
(a) Other segment items include interest income, interest expense, change in fair value of embedded derivative liability and other expenses. |
|||||||||||||||||
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) |
|
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(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 |
|
|
2024 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
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 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock options |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding - diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
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:
|
|
June 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Shares issuable upon exercise of stock options |
|
|
|
|
|
|
||
Non-vested shares under restricted stock grants |
|
|
|
|
|
|
||
Shares issuable upon exercise of warrants pursuant to debt financing |
|
|
|
|
|
|
||
Shares issuable upon exercise of warrants pursuant to Torii amendment |
|
|
|
|
|
|
||
Shares issuable upon exercise of Series A and B warrants pursuant to 2024 equity financing |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
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 ("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)
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").
30
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
31
EXHIBIT INDEX
Exhibit |
|
Description |
|
|
|
3.1 (1) |
|
Amended and Restated Certificate of Incorporation. |
|
|
|
3.2 (2) |
|
Certificate of Amendment of the Amended and Restated Certificate of Incorporation |
|
|
|
3.2 (3) |
|
Amended and Restated Bylaws. |
|
|
|
10.1
|
|
Sixth Amendment and Waiver to Credit Agreement dated as of June 10, 2025, by and between the Company and OrbiMed Royalty & Credit Opportunities IV, LP. |
|
|
|
10.2+^
|
|
Second Amendment to Collaboration and License Agreement, dated as of June 27, 2025, by and between the Company and Torii Pharmaceuticals Co., Ltd. |
|
|
|
31.1 |
|
Certification of Chief Executive Officer and President (Principal Executive Officer), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). |
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31.2 |
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Certification of Interim Chief Financial Officer (Interim Principal Financial Officer), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). |
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32.1* |
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Certifications of Chief Executive Officer and President (Principal Executive Officer) and Interim Chief Financial Officer (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 (furnished herewith). |
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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
32
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
FAQ
What were Verrica (VRCA) total revenues for Q2 2025?
How much cash did Verrica have at June 30, 2025 and is there a going-concern warning?
What is the company’s debt position and credit covenant requirements?
Did Verrica receive any milestone payments from Torii?
What legal proceedings is Verrica facing?
