you for joining the H.C. Wainwright. I'm hoping to touch on all of those, so welcome, Ted.
Thank you all.
Full disclosure for everyone in the room, I do cover Verrica with a buy rating. First, just, Ted, could you give us a very brief overview of the business and the pipeline?
Yes, sure. So, Verrica, as a reminder, is a dermatology therapeutics company. We're based in West Chester, Pennsylvania, just outside of Philadelphia, focused on really addressing high unmet needs within medical dermatology. As mentioned, our first drug, YCANTH, approved for the indication of molluscum contagiosum, a viral, highly contagious viral skin disease, form of a pox virus that typically affects children ages 2 to 14. Although adults can get it, typically in a form of an STD. And then we're also building a franchise around YCANTH, so as you mentioned, we've a partnership with Torii Pharmaceuticals in Japan, where they're gonna be filing their NDA for molluscum here by the end of the year. Then we're gonna conduct a global phase III program in common warts.
We'll also look at external genital warts as well as plantar warts. And then we've got an exciting asset, VP-315, which is a first-in-class oncolytic peptide that we're studying in basal cell carcinoma. We just announced phase II data, which was extremely promising. So, again, fits in our niche of clinician-administered assets and the same target audience.
So since VP-315 is the most recent news item, and it's happened, dropped since the last time we had one of these fireside chats, let's lead with that. Can you just talk about the preliminary data that you announced last month and the significance of that?
Sure. I think the data was certainly exceeded our expectations, and we're certainly thrilled by the data. So we showed a 51% histologic clearance of tumors of basal cell tumors. We showed a 71% reduction in tumors of those lesions that were not cleared, and then an overall reduction of 86%, so really, you know, exciting data. We were thinking of this program as more of a neoadjuvant type of play, and now based on the results, you know, our thoughts have changed to being now more primary as well as neoadjuvant therapy.
So help frame that VP-315 opportunity for us relative to the current treatment landscape in BCC, and based on the data you saw and similarity to other indications, where else would it be natural to expand indications?
Naturally, I mean, take the last part of the question, and naturally to go into squamous cell carcinoma. No reason to believe that it would not work in squamous cell. Basal cell, you know, we're talking, you know, 3.5, 3.6 million cases a year that's growing annually. And the, you know, the real advantage is that this is non-invasive. So 95% + of the patients currently today are going to a Mohs surgeon to have these tumors removed. The challenge is, it's an all-day process. All day, you're sitting in the chair, they're taking layer by layer, going under the microscope to ensure that they've got it all, and you're always left with some type of residual effect.
You think about majority of these basal cells are on the face, neck, ears, nose, and people just don't want to get cut. So this would be a real opportunity, multi-billion dollar opportunity if we looked at squamous cell and basal cell in that light.
Obviously, it's quite early with the data, but what feedback have you gotten, either from your scientific advisory board or community physicians who've seen the data so far? You know, how do you think VP-315 might fit into their practices, and, I guess, how would it compare for them versus a Mohs surgery?
Yeah, so listen, they like the opportunity. So one thing to note that before we licensed VP-315 from Lytix Biopharma in Oslo, Norway, we did payer research to make sure that this would be, you know, feasible for a dermatologist, you know, to utilize. The good news is the feedback came back very positive. There's CPT destruction codes, there's CPT codes for the injection of chemotherapy agents, which is not really utilized a lot or scrutinized a lot in dermatology. So, you know, the good news is from a payer perspective, it fits. And then with regards to the second part of your question, I'm sorry.
Well, I guess just... it's a different group of-
Yep
... physicians
Yeah
performing these, right? So does this dramatically expand the universe of doctors who are able to actually address this?
That's right, it does s o the dermatologist today is gonna refer onto the Mohs surgeon.
Right.
Okay, where today, with VP-315, you know, they can give it an injection. They got a 50, you know, greater than 50% chance of the tumor being eliminated, or they could either decide to administer another round of therapy or refer on to the Mohs surgeon for the surgery. The good news is, even if they refer on to the surgery, you're talking about a half of the scar, half the lesion, the incision that would have normally take place if they did not administer VP-315.
Right. So I imagine from a patient preference standpoint, it'd be a no-brainer. What other additional data are we maybe looking forward to? Are you still generating or doing further analysis on that phase II that might give you more clarity on the product profile or on the next steps for development?
Yeah, so right now we're in a database lock. We do expect additional data coming in, especially we're doing some genomic work, and then we'll look at, you know, we'll look at things such as abscopal effects that may have been seen in the study. Important to note, in the study, every single patient had a lesion reduction. There wasn't one patient that did not have a lesion reduction, which I think is, you know, speaks volumes.
... So if and when you get more feedback from the FDA, given oncology is pretty distinct therapeutic area from where you are now, which we'll talk about after this, how do you think about going forward, whether this is an asset you'd want to potentially partner for further development, or do you think you can advance this yourself? And, you know, and I guess, how does it fit into your current business?
Yeah, as I mentioned earlier, I think it fits nicely into our current business 'cause it's the same target audience, you know, with the dermatologist. But I think if you look at our scope right now, indicating that we're gonna get ready to enter a pivotal phase III trial for common warts, I think it makes a lot of sense to find a business partner to help us develop VP-315 moving forward in a phase III program. So that would be ideally, if we could find the right business partner, that would be welcomed.
Okay, let's talk about your current business with YCANTH. So you're about a year in or just over a year in, you know, what have you learned? What's gone better or maybe less smoothly than you'd expected in this launch?
Well, listen, I think, you know, as a CEO, launches are tough, and things are never at your expectations. You can always be doing better. I think what's gone well is, you know, the high awareness of YCANTH in the marketplace, the strong coverage that we have. You know, we've got over 223 million lives that are covered on majority under a medical benefit. We're able to get the J-code in the timeframe that we indicated that we were going to get, and I also think that we've been very successful in removing the compounders, the compounding cantharidin from the market.
It's still a little bit of a game of Whac-A-Mole with the 503As, but I can tell you that from the 503B perspective, no one has manufactured cantharidin in 2024, and the two largest distributors, Leiters and Dormer out of Canada, have ceased and no longer sell or market the product here in the United States. So I think those were two significant accomplishments.
Okay.
I think, you know, what could be what needs to be done better is that we still have some bottlenecks. We've made the process a little complex for our customers, and a little bit it is just by the nature of how the FDA has mandated that this has to be clinician administered, so patients can't touch the product. So just the fact that we have a white bag, specialty pharmacy model, and a buy and bill model has its layers of complexity. But the challenge that we face today, or I should say, the greatest challenge that we face today, is the prior authorizations under the medical benefit because it's different than a pharmacy benefit. Pharmacy benefit, you can use CoverMyMeds. You can do the PA electronically.
On the medical benefit side, under a PA, you've got to submit the claim and get the authorization code before you treat. If you treat the patient before you get the authorization code, the claim is gonna get denied. Now, you can resubmit the claim, that's not a problem, but offices just don't wanna do it. They don't have the staff. It's disruptive to the office flow, et cetera. So we've got to, we've gotta do two things. We've gotta, A, remove the prior authorizations. We'll do that with supplemental rebates. And then, B, is look to have a dual benefit of a pharmacy benefit as well as a medical benefit with the top plans moving forward.
Okay, so you talked about clearly there's different distribution models for this product. You know, I was really excited when you launched this because I thought the buy and bill model offering a profit incentive to practitioners made obvious sense and would aid in uptake, but it sounds like it's maybe there's been a little more friction than you expected, right? So can you just talk a little bit more about... You had coverage, and you had very high-level coverage, over two hundred million lives, relatively quickly, but these prior auths are still an issue. So what feedback are you getting from offices on that front? How willing are they to work with you, or how patient do you think they'll be? And you mentioned maybe some rebates.
You know, how quickly can this even be resolved so that going forward, they don't have these bottlenecks?
Yeah. So we're clear, is the prior authorization really is not the issue? 'Cause I would tell you that they're confirmatory prior authorizations, meaning that the the prior auth is confirming that, A, the patient is two years of age or older, or, B, they have at least one molluscum lesion. Okay? So that's the extent of the prior authorization. It's under the medical benefit, where you can't treat the same day until you get the authorization code. So what's happening is these patients now have to be rescheduled, which is disruptive, especially in the dermatologist, where it takes long to get these appointments with the dermatologist. So that becomes a challenge. Also, in your Medicaid clinics, like at, for example, here in New York City at Mount Sinai, you know, there's a strong...
lot of the managed Medicaid as well as fee-for-service Medicaid have a prior authorization. They cover us, but with a prior authorization. It's all about productivity. They wanna be able to treat the patient the same day, so we've got to be able to get these prior auths removed so that the physicians can treat the same day. That's, that's our biggest challenge.
Okay, so it's not about having to fight for these patients to get through a PA. It's purely, like, a logistical and convenience issue right now.
It's a process.
Okay.
That's right.
So, you know, I'd be remiss if I didn't acknowledge that, you know, Q2 sales were disappointing, at least relative to my expectations, and certainly the stocks reacted accordingly. But, can you just talk about what maybe are investors missing, or what are they overreacting to, big picture, with regards to where you think your launch is going and, you know, whether anything's really changed or if it's just a timing issue?
Yeah. Well, listen, the first thing I'll tell you is that we're growing. We're growing, you know, month over month, quarter- over- quarter. So that's I think that's one thing that got missed. I think, you know, the news got also mixed in with the fact that our cash runway takes us to Q1, so I think there's a little bit of that financial overhang. Now, clearly, we need to do better in our execution with YCANTH. That's for sure. But I do believe that, you know, making it more simpler for the customers, and that starts with getting the prior auths removed. We changed our savings card program, where it used to be anywhere from $25-$75 copay.
We've made that now simpler, that it's $25 across the board between specialty pharmacy and buy and bill. So it's a consistent, simple message for customers and for patients.
... So do you think as you frame this opportunity going forward in the near term, can they, are they, you know, are these things that can be fixed quickly, or do we think we need to get through the back half of this year before maybe reset expectations and then getting a reacceleration of uptake next year?
Yeah. Well, listen, I would tell you the preliminary feedback from the payers is there's a warm receptivity to removing the prior authorizations. Now, typically, PAs come off after your first year on the market. These are PAs that they put new to market. They want to make sure the product's not being used off-label. Payers are smart. They know cantharidin's used for many things off-label, such as warts, et cetera. So, we're seeing the prior auths being removed as we speak. For example, Independence Blue Cross of Philadelphia removed the prior authorization last week without us giving any type of a rebate. So they're happening, but we're just trying to expedite that. So, you know, we'll do that with that supplemental rebate.
Big picture, I guess, you know, logistics aside, which will take a little bit of time to work through, how would you characterize awareness in general and excitement in general about the product itself, the product profile? You know, they've been using for a generation or two, cantharidin compounded. Now you've got this innovative product that's different and FDA-approved. PAs aside, what's been the feedback, and how excited are docs to have it?
Well, listen, I think it's a little bit of a mixed message. So you've got some physicians that are upset with us that we took the compounded cantharidin out of their hands. I use the analogy, you take a toy out of a child's hand, they're not happy, right? So you've got... Thank goodness, that's a small subset of the customers. But other customers are really excited and receptive to the product. I can tell you that there's not been one single product complaint. I can tell you that the product works 100% of the time.
I always tell people that, you know, "If you put this product on your skin for at least an hour, you are going to get a blister, no ifs, ands, or buts." And so nobody's asked for their money back. Nobody's said the product doesn't work. In fact, they say it works too good.
Right.
That's probably some of the challenges that we face, 'cause, you know, we were thinking 3-4 applicators per patient, and we're seeing right now about two applicators per patient.
Right. Luckily, that's what I already modeled. But, and to be clear, anyone listening, a blister in this case is what you're trying to get.
That's right. This is a vesicant, and it's not like a friction blister that's painful.
Right.
The beauty of this product is it's absolutely painless upon application, and you're thinking about your target audience with children. You know, that's why pediatricians didn't treat this disease, because they don't want to be associated with pain. This is a big advantage that we have in the market.
You mentioned compounded cantharidin, you know, being a long-standing presence in the market, and you've been very successful in having that pulled, or at least ongoing manufacturing, distribution, or importation. Maybe some unanticipated reaction to some of that, but big picture, how much of that needs to be worked through? If, you know, if I went to a dermatologist today, what are the odds they're gonna have a jar sitting on their counter, still to work through before they might even consider trying your product?
Yeah, it's a great question, a question I get all the time. So look, I'm not naive to think that there's not product still around. I mean, the product that was shipped from Dormer had, like, a 6 month shelf life. I've seen it on the shelves of doctors that have had it for several years, so I don't think they care too much about the expiry date on it. I'm also not naive to think that... Listen, when we settled the agreement with Dormer and with Leiters, you know, I'm sure they had a fire sale, you know, trying to push product out. So I'm not naive about that. So it, it's gonna take time to bleed out, but I, I would think that as we get into Q4, that the bulk of the material that's out there is gonna be- will be dried up.
Let me ask a dumb question here. For the people who have been using it and liking the product, we're just in the first year of launch and with coverage and reimbursement, are physicians who are doing buy and bill now, are they successfully being reimbursed, and getting their ASP plus six and making a profit on this product?
Y es.
Yeah.
To answer your question, yes, they are. But what's happening is that for every, you know, 6- 10 patients they get, one or maybe two might go sideways because of the prior auth situation, and then, you know, things stop. You gotta get your field reimbursement manager in there to, you know, to fix the situation.
All right. I guess big picture, beyond molluscum, how do you think about this warts opportunity? I mean, obviously, it's a huge population. I'm curious how you think about the timelines and the risk around this program. Do you consider it essentially de-risked, given the data you have to date in molluscum and earlier wart data?
Yeah, so based on our phase II program, based on the fact that, you know, listen, cantharidin's been- is being used for the treatment of common warts, we see this as very, a very low risk. It's, it's a de-risk program. So that, that's number one. Number two, the market opportunity is huge, right? You know, 22 million prevalence of common warts. I've always said it's the holy grail of dermatology. And like molluscum, there's no FDA-approved therapies. Therapies that do exist, destructive therapies, in particular, cryotherapy, curettage, you know, a lot of pain. Most even adults can't tolerate the pain because human papillomavirus is deeper in the skin versus molluscum that's sitting on top of the skin.
Mm-hmm.
So you really got to get deep, and most patients can't tolerate that.
In your phase II data, remind me, given, like you said, it is deeper, it's not exactly the same, I guess, mechanism of action in terms of the surface activity, what kind of efficacy did you see in phase II?
We showed 51% complete clearance after 12 weeks of therapy.
Okay.
Yeah.
I don't have common warts in my model yet, but I am curious: Are you comfortable, a year in, providing any, I guess, peak opportunity estimates around molluscum itself? I mean, has it changed in the year, or do you think it's just gonna take a little bit longer to get smooth sailing?
Yeah, I don't think it's changed. I just think it, you know, it's gonna take you know, a little bit longer-
Yeah
.O nce we get the hurdles removed from the, you know, the process.
How many millions of procedures are there a year, in your mind?
In for molluscum?
Yeah.
Oh, well, there's a six million prevalence. There's a million being diagnosed, and about half, a little bit less than a half, about four hundred thousand or so that are getting some type of treatment. Okay?
Yeah. I'd encourage people here to go on Facebook and find yourselves a molluscum support group, and you'll see how many patients there are.
Yeah.
I guess lastly, in general, you did touch on it, the financing overhang, and I'm just really curious: how do you look at your options here, given your runway and your interest in investing, obviously, further in the launch? And where does the OrbiMed debt stand on that front?
Yeah, so with the OrbiMed first, you know, we publicly announced that you know, we do not have access to any additional funding from them, nor do we plan on taking any additional funding from OrbiMed. Ended the quarter with roughly around $30 million in sales, which we've said it'll take us out to Q1. So obviously, you know, we're gonna need to do something, and you know, obviously open to all forms of financing.
One thing I did forget to ask about is, I think just last week, while I was prepping for this, I saw coincidentally, you got some patent term restoration or patent term extension news on the FDA front, or determination. Can you just remind us, what's your runway on this, both from an IP perspective, and also, do you think you have exclusivity even beyond that, given the pretty unique handling, manufacturing, and importation of raw materials circumstances around this product?
Yeah, no, great question. So as a reminder, that cantharidin's naturally sourced, so no IP on that, but our IP is really on the formulation and on the applicator itself. Our IP, we're an NCE, we're Orange Book listed, so that's important. And then, our IP today takes us out to, like, around twenty thirty-four, but I remind everyone that we've been working and have a synthetic version of our formulation that will take us out to, you know, 2039 , possibly 2041 , 2042, so a long runway with a patent. I also like to remind everyone that, you know, if you look at just being a drug device, I mean, we've had our challenges coming to the market from a CMC perspective. You know, you look at EpiPen, how long it took generics to come to the market.
You know, I feel good about the fact that, you know, being a drug device helps as well.
All right. Well, thank you. I think we're actually up against time already.
Great.
It flew. So thanks so much, and we wish you luck in your ongoing launch.
Great. Thank you. Appreciate it.
Thanks, Ted.