Hi, good afternoon. I'm Serge Belanger, one of the healthcare analysts at Needham and Company. I want to welcome everybody to our 25th Annual Healthcare Conference. For our next fireside chat session, we have Verrica Pharmaceuticals, a company in the dermatology space. From the company, we have Jayson Rieger, President and CEO, and the company's CFO, John Kirby. Thanks for joining us this afternoon, gentlemen, and if you wouldn't mind, maybe I'll kick it off to you, and if you can start with a quick overview of the company for those who may not be familiar with Verrica.
Well, thank you, Serge. We appreciate it. Verrica Pharmaceuticals, we're a development-stage and commercial-stage company with an approved product, YCANTH, for molluscum contagiosum, a predominant childhood disease that affects about 6 million children a year. We launched that drug and are actively commercializing it in the United States. We also have a partner in Japan, Torii Pharmaceutical, who has launched the product in Japan as well. Together, we are also working on expanding that label for a secondary indication in common warts. It's a fully funded trial, with about $40 million contributed by our Japanese partner towards it, estimated to be about 90% of the cost for that program. That program has already started phase III in alignment with PMDA and the FDA. That first phase III began last year. A second one should begin later this year. We're excited about that program.
They're funding the upfront cash, and we will repay them out of future milestones of royalties in Japan. Lastly, we have a Phase III-ready development stage program for basal cell carcinoma, a novel approach as a non-surgical alternative to the treatment of basal cell carcinoma. I'm sure we'll have a chance to talk more about that pipeline program as well.
Yeah, absolutely. Maybe we'll start off with YCANTH since it's the commercial product. It would be worthwhile to just remind us of what molluscum is and kind of where the product fits in the treatment paradigm.
Sure, yeah. Molluscum is a poxvirus predominantly affecting children. For those less familiar, think chickenpox, but chickenpox that would last 1-5 years. It would last a long time. Historically, the major treatment option for it was to do nothing or a variety of unapproved, sort of topical things that could stimulate the immune system to recognize the virus. It tends to hide in the skin, and that's why it persists so long. It also incubates for about 2-3 weeks. The child scratches a lesion that looks a little bit like a zit, but a raised bump. It can infect other skin and pop up with bumps 2-3 weeks later. That's why it tends to persist for more than half the patients, almost 1 year or longer. That's what molluscum is. YCANTH is a topical treatment applied by the clinician.
It could be your dermatologist, pediatrician, primary care doctor, or a nurse or other healthcare professional in the office. A patient comes in and is diagnosed with molluscum. The doctor writes a prescription, and it's delivered directly to that doctor's office. The patient comes in, and it typically takes about 5 to 15 minutes for an average patient to get treated. A small amount of the drug is applied to each of the lesions, and the patient returns about three weeks later for a second treatment. Typically, most patients see the disease fully resolved after that second treatment. The drug forms a small blister that stimulates your immune system, helps destroy the lesions, heals very rapidly, and yields very significant clinical outcomes with robust safety data from our Phase III program and our post-approval commercial execution.
Okay. Who treats molluscum? Obviously, it's a dermatological condition, but it primarily impacts pediatric patients, so who's the main user of YCANTH?
We are seeing robust adoption by the dermatology community, dermatologists, pediatricians, and primary care offices, as well as through hospital systems that treat those patients through either the pediatric or dermatology departments in those hospitals. More importantly, we see a lot of PAs and nurses in these offices also applying the drug and treating. It's very simple. It's very easy to get trained on how to use this and put a small amount of drug on the lesion to treat them. We have a robust user base of those who are able to, and we simply put the power in the hands of the clinician to identify what is a molluscum lesion versus some other spot or blemish that a child may have. You only treat the lesions that need to be treated, and you start the healing process.
Okay. Product's been on the market for a couple of years now.
Yes.
It's worth, I think, reviewing performance for 2025 and how that sets you up for 2026. What will be the growth drivers for this year?
Sure. John and I both started in late 2024. We came into the company raising capital, and we tried to adopt a more streamlined commercial strategy for the program, which we executed on last year. We view the year as having turned out pretty successfully, all the while maintaining a lean and efficient business model. We typically grew revenue by almost double and dispensed applicator units by the same sort of quotient. This made a pretty big difference as well and bodes well for our performance this year. We saw adoption and a shift from an initial launch in dermatology to expansion into pediatrics, with still a dermatology focus, as well as expansion from a buy-and-bill model to distribution through pharmacies, where doctors could write a script to a local specialty pharmacy, have it delivered to their office, and simply treat the patient.
Okay. I think you provided a bit of color on how things were trending in the first couple of months of 2026.
Yes
during your last quarterly call. Maybe just highlight that and.
Yeah. I was going to say, we're trying to be cautious as we've pivoted the business model and the structure in terms of forward-looking guidance. We did, in our Q4 report, indicate that we saw a very solid performance in February this year, after a little bit of a slow start because of the weather we all experienced, especially on the East Coast.
Yeah.
It was a slow start to the year, but even in a typically slower first quarter, we saw some pretty robust uptake, and we're starting to see some adoption of the product.
Okay. You also hired a new chief commercial officer pretty recently. How should we think about what new things they'll be bringing to the commercial efforts or commercial approach?
Our Chief Commercial Officer has extensive experience in dermatology. We've essentially given him some of the reins to execute on this foundational program we put in place last year. We've simplified many things. As I consider our robust development program, our robust commercial program, as well as our partnering activities and development programs worldwide, it was important to have someone focus 100% on that effort. Chris Degnan is bringing a wealth of ideas about what can work in dermatology, and also helping us introduce that into the pediatric community. He's very excited. We recruited him shortly after he left his last company, and he's already hit the ground running quite aggressively.
Okay. In terms of how you think about YCANTH's growth in molluscum, is it a question of just increasing awareness of the product and molluscum in general, or do you have more work to do on the access and reimbursement front?
I would say part of it is changing the mindset of clinicians from a watch-and-wait approach to an actual treatment modality, and doing so by educating them on the benefits and attributes of YCANTH as a preferred choice for the treatment of molluscum. We're seeing that slowly start to take hold. We spent most of last year working on the access side, getting much better pharmacy benefits and coverage there. But our goal was to make sure that when clinicians wrote a script for a patient to treat them, that drug showed up. We really worked hard to take that last mile and make it more efficient and usable for the clinician.
I think that's one of the primary reasons why we're starting to see growth, as well as awareness of the product being available through this pharmacy channel versus the buy-and-bill, which tends to be unattractive to a number of clinicians. There are some who like it, but there are many who just don't have the capital to outlay for a buy and bill process. We've made that easier by making this pharmacy approach very accessible for them.
What's the more typical reimbursement path for the product at this point? Is it a "buy and bill" or something else?
No, we are definitely, John, sorry. Here you go.
We are probably much more pharmacy than buy and bill at the moment. The business shifted, probably from the vast majority buy and bill to certainly a majority on the pharmacy side. We have a number of pharmacies, both local and regional, as well as national, and we'll provide that through either a preferred vendor for HCP, if they have a local pharmacy that they really like, or through one of our national distributors.
I recall when the product first launched, there were some efforts to curb the supply of compounded cantharidin product that was in the U.S. market. How fruitful were those efforts, and are you still having to deal with some compounded cantharidin competition?
Sure. Yeah. There were some very fruitful efforts early on in reducing a large number of the major distributors, particularly from outside the United States. There certainly will always be compounding. We've seen that even with the recent GLP-1s and others. They're a robust group, and they have a lot of power to provide drugs. But importantly, we're trying to provide the best product available for patient treatment, and we are not indicated for every use of the active ingredient. So while there is compounded product, while we are running our current study for common warts, it's not on-label. The payers have restricted access to only on-label reimbursement.
In order to allow for patient care and patients to get a treatment that's best suited for solving their diseases, like common warts or genital warts or other things, that drug has a purpose, even in a compounded form. But we're finding that more and more clinicians are adopting the use of YCANTH, even if they have access to compounded medications, because for their patients, it's reimbursed, it's GMP, it's FDA approved, it has the applicator that provides convenience and precise dosing, and it really helps in that medical care. We're trying to be supportive of the holistic treatment and work that way. I think that's been more receptive and engaging now that there are a lot of people who can't get access to it, and a lot of offices that have self-imposed restrictions because there is an FDA-approved product.
Got it. When you do get common warts on the label, then those efforts will be reinvigorated to curb the supply of compounded product.
I think it'll be reinvigorated, but I also think it will be self-selected when there's an available product that can really make a difference.
Yeah
... it's FDA approved. I think there are a lot of clinicians who would prefer that when it's available, especially because we are allowing for a robust co-pay program, and it's covered by insurance. If it weren't covered by insurance programs, I think it would pose a different challenge.
Yeah.
It actually makes it less expensive for the patient to have access to their product this way. For most of our commercially insured patients, it's a $25 copay for up to two applicators. For Medicaid-covered patients, it is a de minimis payment. I think the access makes it available and should curb that as well.
Yeah. There's been a molluscum competitor in the market since last summer.
Yes.
Has it led to any impact on YCANTH usage?
No. We actually think it's probably been net positive, because the biggest competitor to the treatment of molluscum is doing nothing.
Yeah.
With their having a sales force and us having a sales force, and being out there promoting the advocacy of treating, we believe our product differentiates on efficacy and safety profile, as well as convenience. As you know, a parent can bring their child in for two short visits. Typically, the disease is resolved, rather than putting the burden on the parent to become a healthcare provider at home for extended periods of time, up to 12 weeks. I think it's a difference of what is convenient. Many caregivers that we've spoken to have said, "I don't want to be an HCP. I don't want to play doctor. I don't want to have to do this every day as part of my bedtime routine. I'd much rather bring them in, 10-minute visit, two treatments, a second treatment three weeks later." For most patients, that's enough.
There are a few that only need one treatment. There are some that need a third or fourth treatment, but the vast majority are seeing that benefit. For a disease that would last 13 months or longer, seeing that efficacy that quickly, and under the control of the clinician, is remarkable. Clinicians are designed to be healthcare providers.
Sure.
Parents, we've tried, but when it comes to doing these things, it certainly seems to be a better route.
Got it. Let's talk about the common warts program. Maybe first, if you can just highlight the opportunity here. I know it's much larger than molluscum, but just to put some numbers around it.
Sure. Yeah. There are about, we say, about 6 million patients with molluscum. Sometimes, people estimate higher. For common warts, that number is probably three times as large, 20 million perhaps, in terms of addressable market. Huge unmet medical need. Probably one of the number one questions we hear about on the medical side is, "When can we have this available?" Right now, obviously, it's not labeled, so we can't really promote it that way. We're running this common wart program because of that demand. Importantly, our Japanese partner is providing $40 million of funding for that program, and we received $18 million in milestones just for Japanese rights.
Yeah.
They are highly confident that in Japan alone, it warrants that investment. We've retained global rights outside of Japan for common warts, as well as YCANTH for molluscum. In our Phase II results that we conducted previously, we saw about 51% of patients who were treated with between 1 and 4 treatments over a 12-week period of time show complete clearance of all of their warts. In those studies, they had between 1 and 17, on average close to 6 warts per patient, and they were seeing complete clearance. That's pretty robust for a disease that's typically very hard to treat. The alternatives are freezing, which can be painful, has minimal efficacy in terms of how many times it might take to treat, can lead to discoloration, and a high level of recurrence, or some take-home products that have limited efficacy.
Overall, we think there's a pretty large addressable market opportunity, and what we're building for YCANTH, for molluscum, in terms of those clinicians, will be the same clinicians that will be able to treat common warts. We'll have that embedded base of people who are familiar with writing for YCANTH, treating with YCANTH, training using YCANTH, the pharmacies, understanding how to apply the drug, how to educate patients on what to expect about the treatment modality, et cetera. Building those relationships is one of the things we're focusing on very hard, because that will be the foundation for the common wart as well. Everything we do today to build that best customer experience for the clinician and for the patient will sort of set that foundation for the common wart indication should that trial read out successfully.
How are the Phase III trials or program structured? Is it a single study? Are you looking at the same endpoints that you looked at in the Phase II trial?
It's predominantly the same endpoints as the phase II program. It's two trials, 300 patients each. The first trial is in the U.S. only. The second trial will be split between sites in the United States and Japan, and we will leverage both of those studies for approval in both countries. We will enroll a subset of those patients into a long-term follow-up study to sort of show how long the clearance rates persist, as warts are known to be very, very highly persistent and recurrent. We want to see if we see improvement in recurrence rates.
Yeah
With this treatment, some subset of the patients will start to roll into that. In fact, because our study started in December, we're actually seeing our first patients rolling into long-term follow-up now, because we're about a quarter into the study.
Got it. Any timelines at this point, or it's still too early, given where enrollment is?
It's pretty early to say. Obviously, because we're running a compliant submission regulatory program, we've put some target dates in clinicaltrials.gov of ending enrollment in mid-2027 for the first study. Obviously, we're going to try and do everything we can to bring those timelines in as much as possible. It's not an unreasonable expectation for something like that. The trial's primary endpoint is 12 weeks, and you started last year. If you're going to enroll 300 patients and it takes you about a year, that would be pretty much where you'd end up. Obviously, we're going to try and enroll faster. We do have to sort of marry that with the second trial starting later this year and long-term follow-up, which could be a year. All those things should coalesce sometime in 2027.
Okay. It would enable a broad label for common warts?
That is our goal. The goal is to get a broad label for common warts. Likely, the agency will carve out genital warts or plantar warts as they are. The agency views those as distinct diseases.
Okay.
We have preliminary phase II data already in genital warts from a prior study we've already conducted, where we showed great efficacy. We may explore additional programs to expand that label as well.
Before moving on to the VP-315 program, I think you've had discussions with the European regulators about filing YCANTH in Europe. I assume it's—
Yes
Initially for molluscum, but potentially down the road, it would be for common warts too.
Yes. The dialogue we've had with the European regulators was for YCANTH for molluscum, based on the existing dataset across the United States and Japan. Our expectation would be that after that submission, we'd also have data for common warts, and we'd approach the regulators for that as well. In Europe, there is no other treatment for molluscum, so it made it much simpler to get to a place with no additional phase III trials. For common warts, that is very similar, but I don't like to speak for regulators as to what they're going to opine on. We'll have that conversation with them and confirm what the requirements would be for submission. We will have the two global phase III trials to support registration.
Got it. Okay. VP-315, the basal cell carcinoma program. We saw data last year. Maybe just highlight why you're excited about this program and its potential.
We're really excited about that program. We acquired that program to find a non-surgical, effective way to treat basal cell carcinoma. It's one of the most prevalent forms of skin cancer, affecting upwards of 4 million patients a year. The predominant treatment option is surgery, or a variety of topicals that have both side effect profiles and convenience and hassle factors, and compliance concerns. This drug is a simple, small injection right into the lesion, so you have a very localized effect. Think insulin-like syringe, so a very small needle, minimal pain. What you find is you get a direct killing of the tumor. It targets the tumor cells of your basal cell directly, causing necrosis. That leads to both local killing, but also stimulation of your immune system to seek out and kill the additional remaining tumor cells.
We've reported quite a bit of data on this program over the last year. Most recently, in our last filing, we reported an abscopal-like response where lesions that were distal and not treated were also shrinking in these patients. If you're a patient with multiple basal cells, and you can treat one and others start to shrink as well, that's a pretty compelling opportunity. We recently announced we'll be presenting additional data on that abscopal at an upcoming conference next month. We also couple that with a robust regulatory pathway and engagement with the agency because they recognize the value opportunity with BCC and VP-315. That is, we have designed and agreed with them on two Phase III trials, 100 patients each, to support registration. All the long-term follow-up studies will be post-approval agreement.
After we have a drug approved, we will explore with them what long-term follow-up data might be required to augment the label. The active comparator will be placebo. You're going to compare, for a disease that typically requires cutting to get rid of it, placebo injection of either buffer or saline or something like that with the active drug. We saw about 51% clearance of the lesion completely histologically in our Phase II study. We saw about 86% reduction across all lesions in their size across the Phase II study, approaching 90+ lesions. Even for those lesions that were not 100% gone, they were shrunk in size by about two-thirds or more. You're seeing that robust response. Importantly, we've also reported a 97% objective response rate. That means nearly every lesion shrunk at least 30%, and in most cases, substantially more.
Very rarely do you find oncology programs where the treatment has that type of robust response across a diverse number of patients, and BCCs, whether they're superficial or nodular, which is really important because many of the topicals that exist work better perhaps for superficial, but that is a much smaller demographic of the total BCC market.
Okay. Phase III program is ready to kick off, the protocols have been submitted and
The protocol synopsis and the comprehensive development program have been aligned with the agency. We are now working on CRO bids, finalization of a definitive protocol, and what study startup activities might look like.
Yep.
In doing so, and right now we're also exploring some non-dilutive opportunities for funding that program, whether it's partnership, et cetera, given the size and scope of the potential of that program. Partners with global reach could be very helpful because we have access to YCANTH globally, BCC, all global rights, including Japan. It presents a number of opportunities to find the right type of co-development or other partners to advance that program or to use any proceeds from a YCANTH partnership to help fund that program. We feel very fortunate with where we are financially.
Yeah
...with the BCC program, the common warts program, with the funding provided by Torii, and the growing revenue base in YCANTH for molluscum, and the cash runway into next year. We're exploring all those options. What we need to do over the balance of this year for VP-315 is de minimis in cost relative to conducting the study, but it does take time to be Phase III ready. We're continuing to do those efforts on the CMC side and the regulatory and development side to be ready to start a trial, perhaps as early as the end of this year.
Okay. Since this is a peptide, how complex is a commercial manufacturing for it?
Pretty simple solid-phase manufacturing of the peptide, very stable molecule. COGS are on the order of a simple small molecule. You're not competing with an expensive biologic in terms of COGS. You can price this in a way that's reflective of the value proposition it provides, but not in the realm of an expensive biologic, because it's not going to be in that category.
Got it.
The goal is how to treat the 4 million patients with basal cell, not the subset with smaller, more advanced disease, because that's where most biologics are targeted.
John, I'll ask you to just provide an overview of the financials and the cash runway for the company.
Sure. No problem. Thanks. Yeah, so at year-end, our most recently filed financial statements, we had approximately $30 million on the balance sheet. We indicated that that cash will last us into the first quarter of 2027. As Jayson mentioned, we're going to evaluate multiple alternatives and be opportunistic as to how we may bridge that gap and get us beyond 2027. As you and everyone knows, GAAP doesn't allow us to take into consideration those potential sources of future financing. We're very optimistic about what our opportunities will be between, as Jayson mentioned, the potential partnering opportunities, expansion into Europe with a partner for YCANTH, et cetera. Last year when we raised $50 million in an equity offering in November, that allowed us to pay off our debt. Our balance sheet is unlevered, and that certainly presents us with additional opportunities.
Okay. Maybe just to wrap up, Jayson, I'll ask you to highlight some of the upcoming catalysts for the remainder of 2026 and talk about what you think is the most misunderstood or underappreciated part of the story.
Absolutely. For a small company, we have a lot of catalysts, a lot of action going on, being both commercial and development stage, as a small-cap company. We're seeing growth in YCANTH. We hope to continue to report continued growth and adoption in both revenue and volume, and adoption of YCANTH as we continue to really invest in that commercial story. That is the investment foundation for the common warts program as well, while that trial is ongoing. We would expect, obviously, we'll report commercial updates on revenue and volume. We will announce the start of our second trial in common warts. As that trial, hopefully, at least the first one, gets closer to full enrollment, we can provide updates on where that is. Importantly, updates on where we are in Europe in terms of our submission and our filing readiness for approval there.
If there are opportunistic business development opportunities in co-development, et cetera, around the world, we will certainly announce those as well. Quite a few catalysts are upcoming. We're very excited about what we're trying to build here at Verrica. I would say that what people underappreciate is what a focused, operational, entrepreneurial-minded team can do. I'm an operator at heart, having run clinical development and operations for most of my career, and we're focusing every day, with our own capital in the business. It's not as common as it used to be, in biotech for sure. I'm taking my compensation as incentivized by growth in the company. The equity that I've received doesn't vest until the stock is at many multiples of where we are now, $15 and $25. When you think through that compensation structure, it's very aligned with shareholder growth and value creation.
I think that's what we're trying to do here: focus on execution, not be out self-promoting, not be out hyping the story. It's "look at what we've done." We told you what we were going to do, and we've done it. I think that's what we're going to continue to do as we try to impact patients, help them with their diseases, and do so as a good corporate citizen.
Okay. Well, great wrap-up. I want to thank you both for spending time with us this afternoon, telling us more about Verrica.
We really appreciate it. Thanks so much.
Thank you.
Really appreciate it.
Thank you.
All right. Bye.