Go ahead. Go ahead and get started here. Thank you, everybody, for joining us this afternoon at the Citizens Life Science Conference. Excited to be joined next by Verrica Pharmaceuticals. Verrica is a company focused on dermatology medicines, has an approved product for molluscum, joined here this afternoon by Jayson Rieger, the CEO. Jayson, appreciate you being here and look forward to running through the story.
Thank you so much. Appreciate being here.
Thank you, everyone, for taking the time to learn a little more about Verrica and our exciting pipeline and commercial assets. Because your clicker is not working. Do the presentation without slides. It's a real test, right? Jayson Rieger, CEO of Verrica Pharmaceuticals. We're a dermatological indication-focused company. Our first indication is a product for molluscum contagiosum with an FDA-approved product called YCANTH commercially indicated for molluscum for children or adults aged two and up. The product launched in 2023, and there was a challenge in those some launches, and our company rebranded last year, brought in some new management, and relaunched a commercial strategy. Perfect. There's the disclaimer. Early last year, and myself joined in November of last year as well.
In terms of what is Verrica and what are we trying to accomplish, we're implementing a new commercial strategy for YCANTH for the treatment of molluscum contagiosum. It's FDA-approved, addresses a market of 6 million, predominantly children. There's a U.S. J- code approved. FDA has granted NCE status and Orange Book listings. We have a robust pipeline with the potential for additional data resulting from our phase II program, gearing up for phase III for basal cell carcinoma, and as well as a partnership with a Japanese pharma for expanding our indication in common warts. Importantly, that expands our market penetration opportunity, with common warts being about 20 million additional patients and VP-315 for basal cell carcinoma, adding about 3.6 million patients in an addressable market.
Our commercial strategy is HCP-administered products, where the product is administered in the office by the clinician to treat the variety of diseases, whether it's molluscum, whether it's common warts, whether it is basal cell carcinoma or other indications down the road. We have a robust IP portfolio with patents on our primary indication for YCANTH going from 2034 to 2041, as well as additional patents on the 315 program for basal cell that could go out to 2044. In the restructuring, we brought in an experienced management team that's very entrepreneurial-focused and focused on execution and operations. What we'll talk to you today a little bit about is what we've done to implement the changes in the program, the changes in the commercial agent structure, and how we're planned to execute.
From a financial position, we had cash and cash equivalents of $46 million at the end of last year. We had a debt facility of about $50 million from OrbiMed. You can see the outstanding share count as well on the slides. We did a financing in November of last year, raising $42 million in proceeds. Here is the management team. Most of the folks here are new relative to the team that was here last year: Jayson Rieger, John Kirby as our CFO, Noah Rosenberg, Chief Medical Officer, and Dave Zawitz, our Chief Operating Officer. What does a snapshot of Verrica look like?
Obviously, new management team brings in a new focus, not changing for the sake of change, but changing for the purpose of what we're trying to accomplish and being very, very focused on how do we execute on the business every minute of every day to make that happen. We solidify our balance sheet, so that's really important, especially in this time. We have capital that could get us into next year, provided some covenants are met with our debt provider. We have approved product with YCANTH, first FDA-approved product for the treatment of molluscum in patients two and older. We have a very proven safety and efficacy record and, importantly, starting to build some brand awareness for YCANTH as a product for molluscum and the brand of cantharidin. The operational efficiency is really important to emphasize.
We reduced costs and expenses of the company by more than half last year when we took over, implemented to the refined sales goal. Even in the course of doing the cost reductions and the changes in the sales model and commercial structure, we showed growth quarter over quarter for Q4 and Q1 of this year, 12% last year and 16% growth in Q1 based on a number of dispensed applicators. We announced that earlier this month. What are we trying to accomplish? Number one, laser-focused on driving sales. We need to have a tactical sales team that focuses on calling on customers and meeting the customer needs. We have added a focus on pediatricians in addition to dermatologists and other primary care practitioners to hit the patients where they are first being seen and the first medical professional they encounter after a parent notices the bumps on their children.
Pediatricians, for example, have been seeking an FDA-approved product and opportunity to treat molluscum. Historically, there was nothing available to them, and they often referred the patients to either watch and wait or go see a dermatologist. Even with all the changes we've made, we still believe our peak addressable market is still addressable, even with our reduced budget and leaner team. One of the things we did to focus on expanding the business was change the copay assist program, focus on the insurance coverage and making sure it was a robust experience for the clinician when they wrote the script and the patient when they tried to get access to the product. The drug is delivered either white bagging to the pharma, to the doctor directly via specialty pharmacy or through a buy-and-bill model to the clinician directly.
In terms of our expansion program, I mentioned earlier we have a common warts program. The key nuance to that is our Japanese partner has agreed to co-fund that program with us 50/50 for a global program. It also results in an $8 million milestone to the company upon initiation of the trial. Importantly, they have agreed to fund Verrica's portion of the trial at future milestones and royalties as we start the program. It is a phase III expansion opportunity that should have minimal cash impact on Verrica's balance sheet. Lastly, in terms of our pipeline, we have a phase III basal cell carcinoma program. BCC is the most common cancer in the United States, 3.6 million cases a year. VP-315 is an innovative immunotherapy addressing a large market and patients who want to seek non-surgical options to BCC.
We'll complete an end of phase II meeting with the FDA on VP-315 to understand what the phase III program would look like. We'll also be reporting additional genomic and immune response data on that program by the middle of this year. What is molluscum? Molluscum is caused by a pox virus. It primarily infects children. It's very, very contagious. If left untreated, it can persist for 13 months on average and up to five years and often leads to a variety of anxieties, social challenges that patients and caregivers want to address versus just to watch and wait for that type of period of time. It's transmitted via skin-to-skin contact, sharing of clothing or contaminated objects like towels or toys. As we gear up for the summertime, sometimes there's an increase in the prevalence of molluscum in that period of time.
Diagnosed, typically 10 lesions- 30 lesions. You can see what they look like here on the slide, but you can have up to 100 lesions. They can inoculate. They incubate for about two to three weeks. If you scratch, they can transfer to other parts of the skin and show up two or three weeks later. That is why it can persist for so long due to the inoculation period. Importantly, they can be asymptomatic, but also can be painful at times and can be itchy. It sort of depends on the patient and how much problems they would end up dealing with it. Importantly, you get inflammation, you get skin irritation, you get reinfection. There are some comorbidities with other dermatologic indications. In a more severe case, you can end up with things like cellulitis, et cetera.
What has been done over the last decades of time, while there was not an FDA-approved product, there was the opportunity for cryotherapy. This is freezing off the lesions. You can imagine small children not wanting to have that many lesions frozen off. They can occur anywhere on the body, so it can be painful. It can result in scarring or skin discoloration. There is curettage, which is literally cutting the lesions out, laser surgery, other topical products, off-label drugs, natural remedies. Importantly, many of these have limitations. They do not have the pharmacovigilance or quality oversight of an FDA-approved product. In fact, the FDA in 2023 published a consumer update warning patients not to accept non-FDA-approved products for the treatment of molluscum for safety reasons. Ultimately, it is a significantly underserved patient population. What is the solution?
Our solution is YCANTH, the only commercially available FDA-approved treatment for molluscum designed to be consistent and targeted for administration. It's a topical use drug-device combination product in an applicator, as you can see here. The active ingredient is cantharidin at a formulation concentration of 0.7% with proprietary ingredients as part of that formulation. Single-use applicator, so it avoids cross-contamination. Historically, this product had been treated by compounders and compounded formulations and multi-use products that could lead to cross-contamination and also changes in the concentration of a product due to the volatile solvents typically in the formulation. The small tip of the applicator makes it very easy to apply and target the lesions very carefully and quickly for any HCP in the office. The product is shelf-stable under manufactured by GMP for two years, allows it for reliable dosing for the patient, for the clinician when they're treating the patient.
We actually added an oral deterrent to deter the children from licking or biting on the lesions to facilitate transfer, et cetera. From a clinical data perspective, we ran two phase III global trials. Our Japanese partner also ran two phase III trials, which saw very similar results. The FDA held us to a very high standard of complete clearance of all lesions, both that were present at the baseline and that may have reoccurred from self-inoculation over the course of the study. As you can see, over a four-week cycle of treatments, we almost 50% clearance of complete clearance for these patients when you look at versus about 15% for the placebo. When you look on the graph on the right, you can see the reduction in total lesions. That is the lesions that were there at baseline and also came up during the study.
You can see placebo patients, even though some did achieve complete clearance, almost no change in the total lesion count for the placebo patients due to the self-inoculation problem. With the YCANTH product, we were down almost 76% of total lesions, including both baseline and new. Also, the one thing I should add to this also is from a safety perspective, the adverse event reactions were local skin reactions. The product is a vesicant, so you get small blisters, which is what you expect. The majority of them were mild to moderate, and there were no serious adverse events for the phase III program. What are we doing for an expanded launch? A couple of things that we did to change things differently: expanded the target population to pediatricians in addition to dermatologists. That allows us to more adequately address a 6 million target patient population.
Change the addressable market from insurance coverage by expanding both dual benefit medical and pharmacy, as well as robust Medicaid coverage. It also presents an incremental revenue opportunity for pediatricians because there is a CPT code accompanying the product for destruction of benign lesions. It is both a drug-device combination, but also offers the procedure reimbursement for the clinician that treats the patient. Our covered lives is up to about 225 million now as of first quarter. We are expanding access to the product by both pharmacies regionally and national, as well as a buy-and-bill approach. We have adjusted the copay of the program where it is $25 max out of pocket for the patient. This is for up to two applicators for every visit as required for the treatment and eradication of the disease. Importantly, we have also received expanded opportunities with pediatricians and acknowledgment by the Red Book.
The Red Book is sort of a guideline to the pediatric community of products and approaches to treating childhood diseases. In 2024, the Red Book reported that the most support for treating molluscum was from cryotherapy, curettage, or cantharidin. Obviously, cantharidin is the active ingredient in YCANTH, which is the only FDA-approved approach for providing cantharidin to these patients. Our current approach for the pediatric market is education and providing access and treatment to the patients. In terms of our pipeline, as indicated earlier, we had two key pipeline programs, common warts and basal cell carcinoma. I'll talk about those two now. We have additional opportunities for the same molecules for external genital warts and for plantar warts. For basal cell carcinoma, VP-315 is our active molecule. We've shown promising preliminary safety and efficacy data, including a 97% calculated objective response rate.
That indicates that nearly every patient in the trial either saw a benefit from the trial of at least 30% and did not get worse in terms of the size of their basal cell lesions. The 51% of the patients treated show complete histological clearance of their basal cell. And of those that did not completely clear those lesions, we saw an average of almost 67% reduction in those lesions as well. Two-thirds smaller if you did not get completely clear or you are completely clear. It presents an opportunity both for the patients who want to avoid surgery, but also if they need surgery, it would make their job much easier for the clinician and the Mohs surgeon.
We expect to have additional data for this program to report out middle of this year, as well as results from our end of phase II meeting with minimal additional spend on behalf of the company. In terms of here's some of the data, as you can see, complete clearance reduction in all our different cohorts. We evaluated both the dosing concentration as well as the frequency and cadence of the dosing and ultimately settled on a likely clinical phase III design that would have up to about two doses of the patient early in the treatment cycle. In terms of adverse events for treating basal cell carcinoma, there were no treatment-related serious adverse events that were reported in the course of our study.
Most of the TRAEs were mild to moderate, and they were expected cutaneous reactions, both destruction of the lesion and ultimately the healing of the skin after the lesion was destroyed. From a common warts perspective, we've run a phase II study called COVE-1. This is the pilot study that's going to support our phase III program in the U.S. and with our partner, Torii. As you can see in the graph on the right, we achieved over 50% of the patients complete clearance of their baseline and new common warts in the course of the study. A lot of that sustained for a significant period of time after the end of treatment. It was only up to four treatments in the program. As many are aware, there are no FDA-approved treatments in the U.S. or Japan currently for common warts.
The prevalence is nearly 22 million, so it's a very large addressable market. We are working with the FDA and our Japanese partner to have complete final alignment on the design of that program. As I indicated earlier, there could be an $8 million milestone that would come to Verrica on the initiation of that program. In terms of the adverse events in that program and safety profile, as I indicated earlier, most of the adverse events were application site related and expected. In summary, what can I tell you about Verrica as the sort of parting thoughts to remember about the company? We have an FDA-approved product with proven safety and efficacy for the treatment of molluscum in adults and pediatric patients two years and older. We are achieving greater brand awareness and seeing real traction in our relaunch of the program.
We're implementing changes from the initial launch. We've expanded distribution models. We are targeting both pediatricians as well as primary care in addition to our primary call point of dermatologists. We've pursued and now have a significant amount of dual benefit coverage via medical as well as pharmacy benefit. Our focus sales team is now calling on all call points in a territory. They're being much more efficient in terms of their call points and traction with clinicians. We've shown great sequential quarterly growth of 12.3% in Q4 and 16.7% in Q1 for the number of dispensed applicator units that we're seeing. We secured $42 million in capital to provide us a cash runway to get into this year. From an opportunity perspective, as you look through companies, they're small mid-cap like we are.
We feel very unique because we have a commercial stage asset that's actually launched and growing in sales and penetration with a robust target pipeline that can address large unmet needs in dermatology and minimal needed cash to support both those programs as they advance throughout this year. With that, I'll pause and take any questions.
Thanks, Jayson. Maybe I can start off here. The focus on pediatricians, what's the feedback you're getting in terms of a pediatrician's willingness to treat versus just to refer to a dermatologist?
It's been actually a mixture of both. I think it's community-based based on the relationships between the pediatricians, whether it's a community hospital or a larger hospital in the area. We've seen a large uptick in the number of pediatricians that are actually treating, particularly as we expanded to distribution via the specialty pharmacy. They don't typically do buy-and-bill, so it wasn't what worked for them. Now that we've set up the specialty pharmacy route, both local, regional, and national pharmacies that can write the script, get delivered to the office, and they can treat, it's often working very well. We've seen examples where the patient goes to see the pediatrician. They want to get treated. They refer to the derm. The derm says, "I'll see you in three or four months." They come back, and the pediatrician orders the drug.
They treat them, and they might have a follow-up with the derm just to make sure everything is going all right. They often are cleared before they can get into the dermatologist.
Can you also get a benefit, though, even if the pediatrician's less willing to treat, they're aware of the product, and when they send the parent over to the dermatologist, they're already pre-educating them?
We've actually seen a number of that. In some cases, they send it over to the dermatologist with a diagnosis. The dermatologist either has the drug in hand or writes the script, and it's waiting for the patient when they come in for the visit. We're seeing, and that's one of the things that's evolved with the ecosystem of our sales team, is because the sales team own regional and local, the whole community, they have relations with the derms, the peds, the primary care, and they work through what's the best ecosystem for that practice and referrals.
Okay. What would the derm be doing before you came into the picture?
The derm wrote no script. They would either order a compounded product and have it as office stock, which is not really what you're supposed to do with compounded products, and treat that way. They would use liquid nitrogen. They would do other things or also tell folks to watch and wait. A lot of times, it was using this active molecule in a compounded form. We're seeing now that there's an FDA-approved product and it's shifting to the use of YCANTH. Importantly, they still get to charge their destruction code for the procedure and for administering the product. For the pediatrician, that's an opportunity that didn't exist for them before. Rather than referral, they can help the patient, treat them sooner, and generate additional revenue for the pediatric office.
On those two components of, I guess, distribution and reimbursement, how far along are you in terms of getting into specialty pharmacy and getting coverage both from the pharmacy and the medical perspective?
I would say more than half our business is now through the specialty pharmacy. It is a very robust part. It is state and/or community and plan dependent. One of the things our sales team has done a really good job with is go into an office, understand what type of insurance plans they are seeing, what kind of patient flow they see, whether it is Medicaid, whether it is commercial, etc., and then provide the right solution that meets their need. I think that has really started to resonate in terms of our uptick in volume.
I guess just looking forward, when you think about the common warts indication specifically, is that more of an adult indication? I guess ultimately, where is the commercial overlap or the awareness and education overlap?
It's going to be the same. The same call points. It's going to be primary care. It's going to be pediatrician. It's going to be dermatologists who treat a lot of these. As we build these relationships, and ultimately, if we get the additional indication expanded on the label, it should be plug and play for all of our existing relationships for how they order the product, how they acquire the product, and how they would ultimately address their patient needs.
Fantastic.
The competition on the common warts side, I guess I wasn't exactly.
No. Common warts is liquid nitrogen or curettage, so same problems. As you think about the opportunity here, it's a robust opportunity. You don't need a very large penetration to a market of this size to achieve some real traction. We're providing a real benefit for these patients. The compounded product really gave support that the molecule works. Because the formulation changes over time and the extent of the vesicant activity of the blister and robustness of it, both speed and size is proportional to the concentration. If you're in a multi-use bottle that changes concentration over time, it becomes more of an art to treatment, which makes it very difficult to, how do you tell a patient, wash it off after this amount of time, treat this number of lesions, how robust the response can be? Our product is very consistent in formulation.
It's in a glass ampule and contained within that applicator. You break the ampule, and the concentration is the same every time from day one to 24 months later.
I got to imagine there are still physicians out there, though, that are comfortable with the compounded product. What proportion of the prescribing population would you say fits into that bucket versus understand the need to move away from a compounded product?
I would say when we started, there was very poor insurance coverage. They were more resistant to change. We're seeing that shift as it progresses. It also changes their liability and other activities for a clinician. When there's an FDA-approved product and you do not have a real reason not to, it becomes more of a problem. I think also we're seeing more adoption with younger clinicians as well, as they're more open sometimes to trying new things. We have great endorsement by leading KOLs both in pediatrics, dermatology, and elsewhere that have endorsed the product and supported it.
Fantastic. All right, Jayson, thank you very much. Appreciate you being with us.
Thank you.