Good evening, ladies and gentlemen, and welcome to Verrica Pharmaceuticals' third-quarter 2026 corporate update conference call. At this time, all participants are in listen-only mode. After the speaker's remarks, there will be a question-and-answer session. As a reminder, this conference is being recorded. I will now turn the call over to our host, Kevin Gardner of LifeSci Advisors. You may begin your conference.
Thank you, operator. Hello, everyone, and welcome to Verrica Pharmaceuticals' third-quarter 2026 corporate update conference call . With me on the line this evening are Jayson Rieger, President and Chief Executive Officer, Noah Rosenberg, Chief Medical Officer, John Kirby, Interim Chief Financial Officer, and Chris Chapman, Chief Commercial Officer. As a reminder, during today's call, management will make forward-looking statements. These forward-looking statements are based on the company's current expectations and involve inherent risks and uncertainties.
Verrica's actual results and the timing of events could differ materially from those anticipated in such forward-looking statements. Please see Verrica's SEC filings for important risk factors. Verrica cautions you not to place undue reliance on forward-looking statements and undertakes no duty or obligation to update any forward-looking statements as a result of new information, future events, or changes in expectations. In addition, during today's call, management will discuss certain non-GAAP financial measures.
These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. There are some limitations related to the use of these non-GAAP financial measures compared to their closest GAAP equivalents. The earnings release that the company issued today includes GAAP to non-GAAP reconciliations for these measures and is also available on the Investor Relations section of Verrica's website. I'll now turn the call over to Verrica's President and CEO, Jayson Rieger.
Thank you, Kevin. Good evening, everyone, and thank you for joining us for our third-quarter 2026 corporate update conference call . We're so proud of our team's performance in the third quarter, as our commercial organization generated record YCANTH revenue for the second quarter in a row, while our research and development teams made major progress in our global phase III program to expand YCANTH's label to common warts, the largest unmet need in dermatology by prevalence. During the quarter, we announced the completion of enrollment in the first pivotal trial in the phase III program and greater than 50% enrollment in the second pivotal trial. Progress in each trial brings us closer to a possible expansion of YCANTH's label into what we believe could be a multi-billion-dollar market for common warts.
Following the end of the quarter, we announced that we have unlocked the remaining $15 million of borrowing commitment from the credit facility we entered into in August, as we met the predefined operational and performance milestones established in the facility. The non-dilutive capital now available to draw, as needed, is expected to allow us to complete both pivotal studies in the Common Warts Program, with readouts from the studies expected in the first quarter and in mid-2027, respectively. Finally, I am excited to share that we are now exploring the development of VP-315 to treat patients with Gorlin syndrome, a rare genetic disease causing dozens or hundreds of basal cell carcinomas, or BCCs, over the patient's lifetime, often presenting them with substantial surgical fatigue and extensive scarring, and for which there are currently no approved therapies.
Our foundational data in sporadic BCC provides promise for the potential benefit of VP-315 for Gorlin patients, and we will provide more details about our plans as the clinical protocol, budget, and timelines are finalized. I will now discuss in more detail our commercial and clinical progress before turning the call over to Noah to provide some additional detail on the potential of treating Gorlin patients with VP-315, and finally to John to review our third-quarter financial results. From a commercial perspective, in the third quarter of 2026, total revenue was $6.9 million, including a record U.S. YCANTH net product revenue of $5.7 million. This represents an increase of approximately 11.9% over the second quarter and a 57.9% increase over the third quarter of last year.
In the third quarter, dispensed applicator units for YCANTH totaled 19,135, down 491 units from the previous quarter and up 35.8%, or 5,042 units, from the third quarter of last year. We believe this decrease reflects summer travel seasonality impacting both patients and providers. The strong year-over-year revenue and unit growth reflects the continued successful execution of our commercial strategy based on expanding YCANTH distribution through both the specialty and retail pharmacy channels, which allows continued penetration into high-volume prescribers across dermatology, pediatric, and primary care offices. Consistent with the second quarter, we continue to generate strong growth demand from commercially insured patients, where our copay assistance programs play a critical role in enabling patient access to YCANTH.
As always, our goal is to maximize patient access to what we believe is the most effective therapy in the treatment of molluscum, YCANTH, and we continue to work to anticipate and remove as many barriers to access as possible. With our prescriber retargeting and segmentation work that we discussed on our second quarter call now in place, we have turned our focus to driving both volume and yield, and have undertaken efforts to reduce prescription leakage and ensure optimal insurance coverage. The efforts that began with our YCanthRx non-dispensing pharmacy option, as well as other initiatives, have matured. During the third quarter, we began to realize the benefits of these efforts with an improvement in yield per prescription. With regard to YCANTH for molluscum, we continue to believe the largest competitive challenge is the historically entrenched watch-and-wait mindset that exists before any FDA-approved therapies were available.
We must work to ensure that patients with molluscum now realize that they have access to a highly effective treatment option that has the potential to induce higher and faster rates of clearance and reduce the spread of infection to others with earlier intervention. To that end, we generated and presented new analyses from our two registrational phase III trials of YCANTH for molluscum at two dermatology conferences in October. In these analyses, patients treated with YCANTH achieved complete clearance at a rate approximately four times faster than patients who were treated with placebo, and three times as many YCANTH-treated patients achieved complete clearance at each treatment visit. We believe these data analyses strongly support the practice of treating molluscum earlier in the course of infection, rather than simply taking a watch-and-wait approach that was common before YCANTH was approved.
Since announcing in July our exclusive distribution, marketing, and supply agreement with Medomie Pharma to commercialize YCANTH in Israel, we have been working with Medomie on their preparation activities to seek approval for YCANTH. We are pursuing many global expansion opportunities for YCANTH, as molluscum appears to affect children globally, irrespective of race, gender, or socioeconomic situation, and we see continued interest from potential partners around the world. Turning to our pipeline, we made major progress in our global phase III program studying YCANTH for the treatment of common warts during the third quarter. In August, we announced the completion of enrollment in COVE-2, the first pivotal phase III trial, after an interim analysis confirmed that no additional patients were recommended for enrollment. We expect top-line data from COVE-2 to be available in the first quarter of 2027.
Our clinical team has also enrolled patients in COVE-3, our second pivotal phase III trial, ahead of schedule. In late August, we announced that enrollment has exceeded 50% of its current target. We expect top-line data from this trial to be available by mid-2027. As a reminder, we are conducting the global phase III program with our development partner, Torii Pharmaceutical, which is funding the first $40 million of trial costs, representing approximately 90% of the current program budget. Research and development expenses for the program have been non-cash to date and will continue to be non-cash until Torii's funding commitment is exhausted toward the end of the program. Common warts affect approximately 22 million people in the U.S. alone, and there are no FDA-approved prescription therapies today. We believe label expansion of YCANTH into common warts could represent a multi-billion dollar commercial opportunity.
Given the substantial overlap of clinicians who see molluscum patients and also treat common warts, we believe that we could realize substantial commercial synergies from our existing commercial infrastructure upon launching into common warts, if approved. With respect to our VP-315 program for basal cell carcinoma, we continue to believe this asset has the potential to change the paradigm for treatment of BCC. In September and October, we present an encore poster at scientific conferences describing an exploratory analysis of potential abscopal-like effects of VP-315. I will now ask Noah to add further commentary on our VP-315 program and its potential to help patients with Gorlin syndrome.
Thank you, Jayson. I am pleased to share a program update regarding VP-315, namely that we are exploring a proof-of-concept study of VP-315 in patients with Gorlin syndrome. As I will discuss more shortly, Gorlin patients live with a relentless burden of frequent basal cell carcinomas, and we believe VP-315 could change their treatment paradigm. Gorlin syndrome, also called basal cell nevus syndrome, is a rare genetic disorder usually caused by a mutation in the PTCH1 gene that overactivates the hedgehog signaling pathway. Patients can develop dozens to hundreds of BCC lesions over their lifetime, often starting in their teens or younger. Because new BCCs continue to appear and patients are highly sensitive to radiation, they often face a lifetime of repeated destructive surgical procedures, which leave cumulative scarring and disfigurement, along with a heavy psychological and quality of life burden.
Oral hedgehog inhibitors can help somewhat, but are not approved for this indication. Side effects of these drugs, such as muscle cramps, hair loss, and loss of taste, make their long-term use hard to tolerate. As I have said today, no therapy is FDA-approved specifically for use in patients with Gorlin syndrome. Gorlin syndrome is a rare disease with a prevalence of an estimated 11,000 patients in the U.S. The Gorlin patient community has desperately sought an effective, safe, and tolerable non-surgical treatment option since the standard of care is so taxing. In this population, Gorlin experts have told us that even a modest reduction in the size and/or number of lesions could have a profound impact on patient quality of life and surgical burden.
In our previously disclosed phase II study of VP-315 for the treatment of sporadic BCC, injections of VP-315 produced a 97% objective response rate and an average 86% reduction in tumor size in treated lesions, with histological confirmation of complete clearance in over half of the subjects. In addition to these results in primary treated lesions, untreated lesions, which in some cases were distant from the primary injection site, also shrank by an average of 67%. Three of the 14 lesions in patients with additional untreated lesions cleared completely, further suggesting a potential abscopal response. The positive results observed in both primary and abscopal lesions are supportive for optimism that the sporadic BCC results may translate to patients with Gorlin syndrome.
As we also previously disclosed, we reached agreement with the FDA on the design of a phase III program to study VP-315 for sporadic BCC, consisting of two 100-patient placebo-controlled studies with long-term follow-up to be conducted post-approval. Our discussions with the FDA led to alignment on the sporadic BCC phase III study design, and the agency specifically asked that we include Gorlin patients in our phase III protocol, given the significant unmet need of these patients. As Gorlin patients were excluded from our phase II study, a first evaluation of VP-315 in this patient population would be an important step in optimizing our overall development, as well as to confirm the benefit in this more severe population. Since our FDA meeting, the feedback we have received from key opinion leaders and treating clinicians has been very supportive.
Experts have urged us to study VP-315 in patients with more severe disease, especially those worn down by repeated destructive therapies and surgeries. By studying patients with a hard disease burden, we can learn more about the potential abscopal effect and explore whether repeat dosing can provide even better efficacy than a single-cycle dosing regimen. Gorlin syndrome patients are the clearest population to demonstrate the impact that VP-315 can have on patients with large quantities of BCC lesions. In our outreach to Gorlin syndrome experts, both clinicians and patient advocacy groups said that there was real excitement about VP-315. Based on our phase II findings, they believe VP-315 has the potential to deliver meaningful lesion reduction and positively impact quality of life in these patients.
We are now finalizing the study design, crafting the protocol, and estimating the cost of a potential Gorlin study, which would use clinical supply we have now manufactured. We expect this study could complement our understanding of VP-315, including its potential abscopal effect, and we believe VP-315 could become a differentiated treatment option for this patient population with significant unmet need. Having experienced successfully developing drugs in rare disease, I have learned about the challenging journey these patients and families endure and have a passion for developing effective therapies for these underserved patients with high unmet need. I am looking forward to sharing more as we finalize the protocol and the next steps necessary to start the study. I'll now turn the call back over to Jayson.
Thanks, Noah. Before turning the call over to John, I'd like to spend a few moments on the additional commitment now available to us under our credit facility. As you will recall, in August, we closed a credit facility of up to $27.5 million with an entity controlled by Paul Manning, our chairman and largest shareholder. Of which $12.5 million was immediately available, and the remaining $15 million would become available upon achievement of certain predefined revenue, growth, and operational milestones. In late October, we announced that Verrica achieved these milestones and has increased the maximum commitment amount under the facility. We reached these milestones based on the momentum that our commercial team has built with YCANTH.
Importantly, the flexibility afforded to us under this credit facility provides Verrica with the ability to draw funds when needed and not carry the entire debt burden from the initial closing. The additional capital from the credit facility will allow us to complete our two pivotal studies in the Common Warts Program and evaluate the data from these studies, which, as I mentioned earlier, are expected to be released in the first quarter and in mid-2027, respectively. In summary, we are now well-positioned to continue investing across all of our strategic initiatives to grow value for our shareholders. I'll now turn the call over to our Interim Chief Financial Officer, John Kirby, to review the third quarter 2026 financials.
Thanks, Jayson. I'll now take a few minutes to summarize our financial results for the third quarter ended September 30, 2026. Total revenue for the third quarter of 2026 was $6.9 million, compared to $14.3 million of total revenue for the third quarter of 2025. As you will recall, revenue for the third quarter of 2025 included a one-time milestone payment from Torii of $10 million earned in connection with the approval of YCANTH for molluscum in Japan. U.S. net YCANTH product revenue was $5.7 million in the third quarter of 2026, compared to $3.6 million in the third quarter of 2025. The increase was primarily related to increased deliveries of YCANTH to our distribution partners and increased yield resulting from improved commercial execution.
Licensing collaboration revenue was $1.2 million, consisting primarily of commercial supply for Torii's YCANTH launch in Japan, compared to $10.7 million in the third quarter of 2025, which again included the one-time payment of $10 million. Net YCANTH revenue in the third quarter of 2026 reflects shipments to our distribution partners, offset by standard gross-to-net adjustments, including actual or anticipated product returns, off-invoice discounts, distribution fees, rebates, and copay assistance program expenses. Gross product margins for the third quarter of 2026 were 89.8%, compared to gross product margins of 79.1% in the third quarter of 2025. Cost of product revenue for the third quarter of 2026 was $0.6 million versus $0.8 million in the third quarter of 2025. Research and development expenses were $7.6 million in the third quarter of 2026, compared to $2.2 million in the third quarter of 2025.
Excluding the impact of stock-based compensation, the increase of $5.2 million was primarily attributable to an increase of $3.7 million in costs associated with the phase III program for common warts. As a reminder, the expense for the phase III common warts program did not impact our cash balance, as the first $40 million of payments for this program will be made by Torii. There was also an increase of $1.3 million in expenses related to chemistry, manufacturing, and controls across YCANTH and VP-315. Selling, general, and administrative expenses were $10.4 million in the third quarter of 2026, compared to $9.4 million in the third quarter of 2025. Excluding the impact of stock-based compensation, these expenses were comparable to the prior year period.
Interest income was $45,000 in the third quarter of 2026, compared to $0.2 million in the third quarter of 2025. Interest expense was $0.3 million, compared to $2.1 million in the same period last year, with a decrease of $1.8 million related to the settlement and termination of our OrbiMed debt facility in November of 2025. GAAP net loss was $12.4 million, or $0.58 per share, for the third quarter of 2026, compared to GAAP net loss of $0.3 million, or $0.03 per share, for the third quarter of 2025.
On a non-GAAP basis, which excludes stock-based compensation, change in fair value of derivative liability, and non-cash interest expense, the third quarter of 2026 net loss was $10.5 million, or $0.49 per share, compared to non-GAAP income of $1.1 million, or $0.12 per share, for the third quarter of 2025. Finally, as of September 30, 2026, Verrica had cash of $14.4 million, which includes the $12.5 million borrowing from the credit facility in the third quarter. Assuming utilization of the remaining $15 million available under the credit facility, we believe our cash runway could extend beyond our key data readouts for common warts and into the fourth quarter of 2027.
As we noted, we are in the process of designing a proof-of-concept study in Gorlin syndrome, and as we finalize our plans, we will include any trial costs in our operating plan in future periods. I will now turn the call back over to Jayson for closing remarks.
Thanks, John. To recap, in the third quarter, we experienced record quarterly YCANTH revenue amid strong year-over-year growth in units, and we are encouraged by these demand trends. We believe that YCANTH is the best treatment option for patients with molluscum, and our new post-hoc pooled analysis from YCANTH's registrational studies reinforces the benefit of early and aggressive treatment interventions with YCANTH. We made progress towards a potential YCANTH label expansion in common warts with the completion of enrollment in COVE-2 and greater than 50% enrollment in COVE-3, with expected top-line data in Q1 2027 and mid-2027, respectively. We believe common warts could represent a multi-billion-dollar opportunity for YCANTH if approved. Collectively, our commercial foundation, potential label expansion, and our pipeline provide a compelling future for Verrica and the patients our therapies can benefit.
Finally, with full access to our credit facility, we have the cash runway that enables us to see through our phase III common warts program to data readouts for both of our pivotal studies. We are excited about our progress across the YCANTH franchise and the potential for VP-315 to help patients with Gorlin syndrome and sporadic BCC, and look forward to sharing further updates. With that, we are happy to answer your questions. Operator?
Thank you. If you'd like to ask a question, press star one on your keypad. To leave the queue at any time, press star two. Once again, that is star one to ask a question. We'll take our first question from Stacy Ku with TD Cowen. Your line is open.
Thanks so much. Congratulations on the progress. We do have a few questions. First, for Jayson and Chris. Maybe, big picture, as we think about 2027, what do you think will be the growth drivers for YCANTH and molluscum? That's the first. To kind of drill down a little bit more, just maybe give us an update on how access is progressing. Could we expect any improvements in pharmacy versus medical coverage for YCANTH just to stay competitive? That's the second question.
Then, of course, as we think about the broader seasonality, you're observing from molluscum, as we looked at just Q4, maybe just help us guide what your expectations are, especially with what seems to be improvement in that pricing. Those are questions for YCANTH. Then, Noah, I appreciate the update on VP-315 and the announcement to pursue development in Gorlin syndrome. Maybe discuss next steps in a little bit more detail. To clarify, would you be trying to pursue a phase II POC? Thanks so much.
Thank you, Stacy. Appreciate the call, and we're certainly excited about the progress we've been making over the last several quarters on these programs. Certainly saw growth in the demand for YCANTH, but also working towards optimization and the coverage access and reimbursement for the YCANTH program. Some of the initiatives that we've spoken about in the past are certainly starting to work pretty well. I'll hand over to Chris and let him comment a little more on what we're using for the growth drivers and how we see that growing going forward, and how we're working on access and some of the impacts we see on seasonality.
Thanks, Jayson. Stacy, thanks for the question. The growth drivers is really straightforward. When you think about Q2, we had the discussion about taking a real close look and a complete revamp of our targeting and segmentation. We are starting to see the benefits of that now, and we are starting to move prescribers from the dabbler phase into stronger adoption and, of course, loyalists. One of the key parts, and this is where it is really good to have competition in the market with a second manufacturer, is that you have to prospect in a market like this where your largest hurdle is watch-and-wait, decades of watch-and-wait. We are seeing that change right now, and we are seeing it specifically in high-volume pediatricians. Certainly, one of the big growth drivers is to continue to move our dabblers up the continuum to the loyalist.
We have a very robust conversion rate now that we saw in Q3. We are hoping to drive that into Q4, then, of course, mature that in 2027. The other, from a net revenue perspective, you saw the early indications this quarter in our efficiency, is putting in place a fulfillment platform that can handle both medical coverage as well as pharmacy coverage. That really ties into your, I think it was your second or third question.
In terms of coverage. Right now, we have, according to MMIT, 95 million lives covered under pharmacy and 137 million under medical. One of the things that is very, very obvious to me is that, whether it is pharmacy or medical coverage, there are draconian restrictions that we are getting through. We do need to get the prescriptions, specifically if it is a medical benefit, into a channel, into a network pharmacy that that particular payer will reimburse for. So, that is one of the key strategies that we have been focused on. Again, you see the benefits in this past quarter in terms of accruing yield. So, we hope to mature that. That will be another key growth driver, combined with our efficiency in moving the physicians up the adoption curve. So, I will pause there. I believe that got to your two questions.
Seasonality?
Yeah.
Seasonality for Q4?
Yeah. Seasonality, I think you do see, like we saw in Q3, and it is really more consumer seasonality. You do see fewer office hours, and we will see that in Q4. You do see changes in consumer patterns and people seeking treatment. So, I would expect in Q4 we would see normal seasonality patterns. But again, we are looking to continue to drive the value of each possible prescription and continue to grow the brand.
Thank you for all the detail.
Thank you.
Noah?
Thank you, Chris. One second, Stacy. The only thing I would add to what Chris commented on, what is going to drive the growth, I think, is also continued awareness about the clinical and safety benefits of YCANTH, especially over the watch-and-wait mindset, and the fact that we can drive a much higher rate of clearance and benefit for these patients versus asking them to suffer with this disease for up to 12 or 18 months or longer. I think part of the driver is going to be that continued education about the clinical and safety benefits.
Now, Noah, I will ask you to sort of comment on the sort of broader strategy for VP-315. But it is important as we think through this and understand the primary data we have already observed, the abscopal data we think we have seen in the pilot study, and how this population, this data, will advance our knowledge of 315 and support the broader program. But Noah, please add some color commentary for Stacy.
Sure. Great question, Stacy. Happy to provide some color here. As you recall, during our discussions with the FDA, which led to alignment on the sporadic BCC phase III study design, the agency specifically asked that we include Gorlin patients in our phase III protocol, and that is because of the significant unmet need of these patients. These patients can see, on average, over 200 lesions in a lifetime, so there is a very, very high unmet need. As Gorlin patients were excluded in our phase II, although we think that data is extremely important as a foundation, if we can translate those results into a proof of concept as a first evaluation of 315 in this patient population, we believe that would be a really important step in optimizing development and confirming benefit in this population.
To that end, we are finalizing study design, we are drafting protocol, estimating costs, et cetera, and we have clinical supply on hand. Just to close, we really expect this study could deepen our understanding of VP-315, as Jayson alluded to, the potential abscopal effect translating into Gorlin, which would be extremely clinically meaningful, as we have talked to KOLs and advocacy folks. We believe that 315 has the potential to become a very differentiated treatment or a very important treatment for this population with a high unmet need. I look forward to sharing more as we finalize the protocol and the next steps necessary to start the study. Thank you.
Thank you.
We'll take our next question from Dennis Ding with Jefferies. Your line is open.
Hey, guys. I have two questions, both on the common warts program . Number one, can you go into more detail about the interim analysis that occurred over the summer, if that included a futility analysis as well? Meaning, the fact that the DSMB didn't stop the trial for futility implies that there's a signal, and if they didn't recommend more patients, that may imply that the signal should look in line with what you guys expected in your protocol, and that there's enough power to detect it. Do you think that we're thinking about that the right way? Then question number two, remind us what standard of care right now is for common warts, and if there's documented data on complete clearance, and if that's the hurdle that you'll need to get over to get favorable reimbursement and be used commercially. Thanks so much.
Thank you, Dennis. Appreciate the questions. I'll let Noah take the question on the interim analysis, as he will provide clarity for you.
Great question, Dennis. So, in terms of the interim analysis, we did not include a specific futility analysis there. It is a blinded review. It is called a promising zone analysis. What we saw there in COVE-2, for instance, when we do that analysis, is that there is no need for additional patients. The agency has reviewed this analysis and agreed, and it is conducted by an independent statistician, and the company and study team remain blinded to it. So, it is a very specific analysis looking at conditional power and ensuring that you have enough power to complete the study. And basically, either if you do not increase the number of patients, there is either the potential that you have got enough patients and you are going forward.
There is also the opportunity and potential that you could not have the ability, despite increasing the total number of patients, to get over that hurdle from a power standpoint. So those are two scenarios. But we are very encouraged by the fact that we did not need any additional patients. And based on the phase II results, we are encouraged, and we have seen the drug work in the past. So that is as much as I can say right now on the interim analysis, Jayson.
Thank you. You will just add some commentary on the standard of care and sort of what we are thinking about for an efficacy hurdle.
I will just add, in terms of the standard of care, keep in mind that right now we have no approved therapies for common warts. There is nothing. Even though it is a 22 million-patient-a-year population, it really gives pause, and you realize how challenging this disease is to treat. It is very stubborn. And I would say, what we are looking to assess with the pivotal data, instead of anchoring to sort of a single numerical threshold, I think we are looking for a clear, consistent improvement in complete clearance and percent reduction over vehicle that is clinically meaningful and statistically significant over vehicle, with acceptable safety and tolerability. I think that is the goal.
Again, with no approved therapies and current surgical treatments are inadequate, they are often painful, and they can cause scarring, discoloration, et cetera. We think that the data here could offer great potential for patients and physicians.
While Noah and the clinical team have done a tremendous job of recruiting in this study and advancing this program, the fact that we were able to recruit these studies as effectively as we did into a placebo-controlled trial sort of speaks to that unmet need and patients really looking for some type of treatment option, given that the standard of care really is not adequately addressing their disease.
Okay, thank you.
Thank you, guys.
We will take our next question from Ram Selvaraju with H.C. Wainwright. Your line is open.
Thanks so much for taking our questions. Firstly, with respect to YCANTH, can you just give us a sense of how we should be thinking about ex-U.S. revenue that you report on the P&L, and if you anticipate, on a go-forward basis, sequential quarter-over-quarter growth on that line, primarily based on, of course, what you are seeing from Torii in Japan, or if we should be thinking about the third quarter number as being reflective of any stocking impact that might not necessarily be seen in the fourth quarter?
Then wanted to see if, within the context of Gorlin syndrome, if you could comment on the competitive landscape there, particularly how you anticipate your candidate might potentially play alongside hedgehog inhibitors, if you anticipate that these could be deployed synergistically, or to what extent, from a competitive standpoint, the Gorlin syndrome indication might be affected in terms of attractiveness by the potential entry of new hedgehog inhibitor drugs. Thank you.
Sure. I will start with the YCANTH. Appreciate it, Ram. The YCANTH ex-U.S. revenue, and then John can add some commentary on how the accounting works for that. Most, as you will recall, we have our collaboration and financing agreement with Torii to support our common warts program. So, most of the revenues there reflect the commercial supply to them, and then offset by reimbursing us for the cost of goods to provide them with their commercial material. We will supply them as needed. They provide us forecasts for orders, and we fulfill those as they launch their commercial product, which began back in February of this year. I will let John sort of add some more color or commentary to that, and we can move into the Gorlin program.
Sure. Thanks, Jayson. Thanks for your question, Ram. Yeah, I think Jayson hit it on the head. This is their first year they are launching. Going forward, I think the revenue will be similar, but probably a little less. As you may recall from our amended agreement, we will start, as they take over their own production in Japan, we will supply them with ampoules, and they will manufacture from that point on, and it will shift to a royalty basis. Hopefully that answers your question.
Yeah, that's very helpful.
Okay. With regard to your Gorlin question, I think it's really interesting as we think about that landscape and the unmet need for those patients currently with nothing approved. You do speak to there are both oral hedgehogs and topical hedgehogs in development with potential data readouts later this year. As we think about the modality of this product, VP-315, for this patient population, it's independent of the hedgehog pathway based on what we saw in our sporadic BCC data. Our drug does a primary lytic approach towards eliminating the existing lesions that are treated with the potential for abscopal effect.
Some of those other therapies are targeted towards reduction in the occurrence of new lesions, but you still have the remaining underlying lesions. There certainly is the potential for complementary benefit for these patients to mitigate the need for surgery, given the surgical burden they already endure. But Noah, if you want to add some more commentary to that, please do so.
Yeah, I think it's a great question, and I think we're at a great opportunity now. To Jayson Rieger's point, we have no currently approved therapies for Gorlin syndrome. The patients, as we mentioned earlier, have a high burden of disease and a great degree of Mohs fatigue, essentially, or surgical fatigue. I think the oral hedgehogs, while they can be effective, are limited by tolerability issues, GI, taste, et cetera. It's difficult to get patients to take those long-term. I think the Sol-Gel approach is a novel one. It's interesting, topical, and I think the avenue that they're approaching is prevention of new lesions. Certainly, they're not curative. They're going to slow progression, hopefully. The word therapies in the field, it often in these diseases requires multiple therapeutic options to address the unique challenges of each patient. I see this as synergistic.
As Jayson Rieger alluded to, for VP-315, I think we've got a lytic and an immunologic effect. The lytic effect: you reduce primary lesions. The immunologic effect: you actually may be leading to a abscopal effect , and there's even some animal data in our program where we may have even seen a vaccine effect in the prevention of new lesions. Again, I think they all can work together synergistically, and it's a great moment for patients with Gorlin, hopefully with some positive data coming up.
Just very quickly, can you give us a sense of how prescribers are reacting to the pooled analysis data from the registrational program in molluscum, and to what extent, if at all, this is coloring their willingness to prescribe YCANTH?
That's a great question. Just as a reminder, we did a pooled analysis of the two pivotal trials. We saw that patients achieved complete clearance faster, four times faster in the YCANTH group than the placebo group, and three times as many YCANTH-treated patients achieved complete clearance as well. As I think it's been alluded to earlier, one of the biggest hurdles that we have is, in some sense, the biggest competition is watch-and-wait, where doctors sort of say, "Well, it's molluscum. I can watch, I can see how it goes, and take my time with it." But I think these analyses really show an urgency to treat.
They show the benefit of treating. I think there's an increasing awareness of patients' desire and families' desire to treat these lesions and to ensure that they can get back to class, they can get back to the gym, they can get back to swimming in the pool. There are certain avenues where they may have limitations. Certainly, the cosmesis and stigma of having this disease can also be really challenging with kids. So we've had very positive feedback on that data from our KOL network and our physicians, and we think it's really important data. I think they would agree with that.
Chris, maybe you want to add any commentary on what you're hearing from the field and how you're using that message to help doctors begin to adopt YCANTH.
We'll take our next question from Serge Belanger with Needham & Company. The line is open.
Hi. Sorry. Good afternoon. A couple of questions for us. First one on YCANTH, just trying to reconcile the growth in sales during the quarter with the downtick in volume units. I assume there were some gross-to-net improvements. Were there also some changes to the copay assistance? Are these one-time benefits, or could they continue into other quarters? For VP-315, just trying to see if I understood correctly. Are you not planning to potentially include the Gorlin syndrome patients in a registrational phase III program? Did I hear that correctly? What would that mean for the potential timing to start this phase III program? Thanks.
Sure. Well, in general, Serge, on the YCANTH side, the gross-to-net improvement based on the efforts we're working on for yield and how the prescriptions are filled is one of the things we've been working on for quite some time after building the foundation of adoption and demand for the product. I'll let Chris comment on the initiatives he's been working on and has been rolling out throughout the year that I think have led to this improvement in yield and hopefully continued growth in that category.
Yes, and thanks, Serge, for the question. I mentioned it a little bit with Stacy's question. One of the unique things with YCANTH that we can't forget, we have the unique benefit of meeting doctors where they are and also payers where they are. We have about a 50/50 split between medical benefit and pharmacy benefit. Doctors can initiate buy-and-bill. What you're seeing a reflection of is that accretion of yield is directing medical benefit claims into in-network pharmacies that are capable of submitting that claim and getting reimbursement. We ran a number of proof of concepts, and clearly, you see the results.
I think it's safe to assume that as we turn this on at scale, we'll continue to see accretion, and we'll continue to refine our pull-through strategies on those medical claims. I mentioned also, we have tremendous access, and many of these medical claims are also going through with no PA and very few restrictions. Part of the challenge is less clearing the PA and more getting into the right channel with a pharmacy that is in-network within the payer.
Sir, with regards to your VP-315 question, the FDA had originally asked that we include those Gorlin patients, as they would certainly have a high interest in the potential of this therapy. As we've talked to our KOLs, advisors, the advocacy groups, and others, and even the patients, we hear that there's real demand, and that because of the number of lesions those patients present with, there's the ability to gather significant data that enhances our basic understanding of the drug and how much of an impact we can have on the broader clearance of BCC lesions.
Our current plan that we are exploring right now is to do a proof of concept to confirm the efficacy in these patients and how the data we saw in our sporadic population would inform the treatment modality. Then use that data to continue to advance our pivotal phase III program, whether it stays a Gorlin-specific population, the sporadic population, as we have alignment with the FDA on that activity, or perhaps both. I think there is real opportunity for this program, but this will help us with understanding and optimizing our treatment approach for treatment of BCCs with Gorlin. Noah, I do not know if you have any more to add to that, but I think that was the question Serge was asking. I think the key is that it is not either/or, Jayson, to your point, right?
We have learned in talking with Gorlin advocates and KOLs, as recommended by the agency, we have learned that it is a huge unmet need, and we really understand it a lot better now. I think the goal is really to ensure that we understand that population and how the drug works in that population, and we believe the two can work together. I think when we have the proof-of-concept data, we will be able to assess and evaluate dosing strategies and different approaches to the scope of effect, et cetera. So, I think it will be very encouraging and positive if we can get some good data in that population to help propel the program forward, both in Gorlin as well as in BCC.
We will take our next question from Thomas Flaten with Lake Street Capital. Your line is open.
Hey, everyone. Thanks for taking the question. It is just a follow-on to that last response. So, you will not initiate a phase III until you have completed the POC in Gorlin patients. Is that a fair read on the discussion so far?
I would say the- Go ahead, Noah, please. No, you please. Oh, okay. I was going to say, in terms of that, the amount of data we can generate and how quickly we generate it could inform that. You don't necessarily need to complete the entire study to initiate phase III. I think we are a data-driven organization. We're going to focus on that data and let it inform the best way to optimize a final phase III protocol for sporadic BCC or move into the engagement with the agency on a pivotal phase III program for Gorlin, or both.
I think we're going to let that data drive our further understanding. It's driven by a lot of KOL feedback encouraging us to really emphasize these patients with large numbers of lesions and high surgical fatigue as a place to really differentiate the benefit of the drug, which would then roll down to those who have one or two lesions but are still averse to getting surgery.
Got it. Just from a strategic perspective then, just to continue that thought, if you did a phase III study as planned with Gorlin patients included, per the FDA's request, would that not give you a label that would include Gorlin? Maybe even if you over-indexed a little bit on Gorlin patients, wouldn't that provide you sufficient data to still penetrate that market without doing a separate POC study, or am I overthinking that?
I think you're partially correct on that front. The key thing is, we wouldn't want to do that without having had some data in that population, on the off chance that we're not correct and that patient population behaves differently. So, by doing this open-label , sort of a proof-of-concept data to confirm the efficacy, which we're highly confident in, but wouldn't want to do a blinded phase III study, especially with patients that really need medical intervention, and when you want to have confidence the drug will work for them.
I think this will allow us to do that, and also to follow those patients over a longer period of time to provide data updates as to the longer-term benefit for those patients, all the while exploring the sporadic BCC, which will certainly help advance the disease and understanding, and also our conversations with KOLs, potentially payers down the road.
That is super helpful. Thank you for that. Then just one final one. Assuming success in the common warts program and a readout in mid-2027, can you give us a sense of what we should anticipate for regulatory submission on that? Do you think you can get that done by year-end 2027?
I would certainly ask. I am going to push very hard on our clinical team , our regulatory team, and our CMC teams to be ready for the filing as quickly as possible. What I will say is, you will want to see the data; you will get it turned around, and the team will focus and make every effort they can to achieve that as fast as possible. I will not put Noah on the spot on the call to answer your question directly, but I will say that we have been pushing them very hard.
As you can see from the data, we have dramatically exceeded our expectations on the enrollment and the enrollment rates of that study, and our goal is to continue to push on that very quickly. Stay tuned for when that data comes out, and we report it. We will certainly provide an update as we have a greater vision towards that timing.
Appreciate it. Thank you.
Yeah, thank you.
We have reached our allotted time for questions. I would now like to turn the call back to Jayson for any additional or closing remarks.
Thank you, operator. Before I close the call, I'd like to express my appreciation for all the Verrica team members who make the results we announced today possible. I'd like to thank all of you for joining us for the meeting. We look forward to seeing some of you at the upcoming Jefferies Healthcare Conference next week, and really appreciate the robust dialogue and questions from everyone today. Have a great night.
Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.