Verrica Pharmaceuticals Inc. Common Stock 2026 Q2 Earnings Call

Hello, everyone, and welcome to Verrica Pharmaceuticals' second 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, David Zawitz, Chief Operating 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 a number of 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 second quarter 2026 corporate update call. We've made major progress at Verrica during the quarter and in the weeks since. It's certainly an exciting time at Verrica. Today, we will cover the quarterly results first, but I also want to spend some time discussing the non-dilutive financing we announced today, as well as our partnership for YCANTH in Israel. I'll speak more on each of those in a few minutes. During the quarter, we more than doubled the percent unit growth of YCANTH from the previous quarter, demonstrating both strong market demand for YCANTH and continued improvements in execution from our commercial team. This momentum reinforces our view that a significant unmet need remains in the treatment of molluscum, and YCANTH is well-positioned to become the standard of care.

While we focus on growing the YCANTH business, we are also advancing our product pipeline and are making meaningful progress with each asset. In June, we and our partner, Torii Pharmaceutical, a subsidiary of Shionogi, dosed the first patients in the second pivotal phase III trial, also known as COVE3, and the recruitment in the first pivotal trial, COVE2, remains on schedule with expected top-line data in mid 2027 based on our current projections. We also continue to advance planning activities for our phase III-ready oncology asset, VP-315, for the treatment of basal cell carcinoma, and we presented encouraging new phase II data at the Society for Investigative Dermatology annual meeting in May. In the weeks since the quarter ended, we also announced a distribution agreement that will allow our new partner, Medomie Pharma, to bring YCANTH to molluscum patients in Israel.

Perhaps most importantly, today we announced new non-dilutive financing from our largest investor, Paul Manning, which we believe will extend our cash runway into 2028 based on our current operating plan. I'll now provide a detailed update on our YCANTH business. In the second quarter, total revenue was $5.9 million, including U.S. YCANTH net product revenue of $5.1 million, an increase of 18.7% over the first quarter, and an additional $0.8 million of license collaboration revenue associated with our partnership with Torii. Dispensed applicator units for YCANTH increased to 19,626 in the second quarter, up more than 28% from the first quarter, which grew over 12% from the fourth quarter of 2025. This accelerating unit growth reflects momentum in prescriber adoption of YCANTH and the impact of our retargeting and segmentation of the molluscum prescriber base.

Even with this quarterly growth, we believe we are just scratching the surface of the patient universe afflicted by molluscum in the United States. In this quarter, we observed particularly strong growth and demand from commercially insured patients who depend on our copay assistance program for their access to YCANTH, while we also began emerging from deductible season. Our priority continues to be for all eligible patients to have access to YCANTH, as we believe that prescribers value consistency in being able to treat their patients with as few access hurdles as possible. Just as we initiated our prescriber retargeting strategy during the quarter, we have been hard at work evaluating and enhancing our patient access programs.

A good example is a recent change we implemented in July providing refills at $0 copay for eligible commercially insured patients. This further reduces the financial burden for caregivers and also allows the prescriber to focus on the best treatment course for their patient if additional applicators are required. Alongside our momentum of YCANTH in the U.S., we would also like to acknowledge our partner, Torii, for its continued growth of YCANTH in Japan following its launch earlier this year. As a reminder, we currently supply YCANTH applicators to Torii for the Japanese market, and we receive a transfer price, a portion of which offsets Verrica's share of the clinical costs for the global common warts program. We also continue to pursue opportunities to launch YCANTH outside the U.S. and Japan.

Just a few weeks ago, we announced an exclusive distribution, marketing, and supply agreement with Medomie Pharma to commercialize YCANTH for the treatment of molluscum in Israel. Medomie has a strong track record of bringing innovative new therapies to patient populations with limited available treatments, and we look forward to working with them to establish YCANTH as their new standard of care for molluscum. Medomie will now prepare a regulatory submission for approval in Israel. For commercial sales, we will receive 60% of net selling price of YCANTH sold by Medomie. That is in addition to up to $8.2 million in regulatory and commercial milestone payments. Turning to our pipeline, we made meaningful progress in our global phase III program studying YCANTH as a potential treatment for common warts during the second quarter.

As a critical part of our YCANTH strategy, we remain focused on the opportunity to expand the label to include common warts, which impacts approximately 22 million people in the U.S. alone, more than three times the size of the molluscum patient population. There are no FDA-approved therapies for common warts today, since about half of the patients who seek treatment are children, we believe our field force that is already selling YCANTH for molluscum to pediatricians, dermatologists, and pediatric dermatologists will be well-positioned to detail the product to these prescribers diagnosing common warts. As a reminder, Torii is funding the first $40 million of the cost of the global phase III program, representing approximately 90% of the current trial budget, with the two companies splitting overall program costs on a 50/50 basis.

Verrica's portion is expected to be paid out of future net transfer payments for commercial supply, payments relating to sales and regulatory milestones, and royalties arising from sales of YCANTH in Japan. In June, we announced that the first U.S. patient was dosed in COVE 3, our second pivotal trial in the common warts program, our development partner, Torii, also announced dosing of the first Japanese patient in this trial as well. We continue to enroll patients in the first pivotal study, COVE 2, and the long-term follow-up study, COVE 4. All studies are recruiting well, we will provide further updates as each trial achieves full enrollment. As a reminder, Verrica maintains ownership of the global rights to YCANTH for all indications in all territories outside of Japan and Israel, including common warts.

Based upon our current projections, we now expect to present top-line data from the program in mid-2027. Turning to VP-315 in basal cell carcinoma, we presented new phase II data at the Society for Investigative Dermatology annual meeting in May, which shared details about a potential abscopal effect of VP-315 that we are studying. Among nine subjects, there were 14 untreated non-target basal cell lesions that showed an overall 67% reduction in size, with three of those untreated lesions achieving complete histological clearance. This effect on untreated lesions is in addition to the meaningful reductions we've seen in the treated primary lesions themselves.

We continue to believe in the potential for VP-315 to change the paradigm for treatment of basal cell carcinoma, we continue to prepare for a phase III program, including CRO selection and manufacturing of phase III clinical supplies based upon our favorable FDA feedback on the design of the registration program. As a reminder, Verrica retains full global commercial rights to VP-315 for non-metastatic skin cancers, including basal cell and squamous cell carcinoma. We believe these two indications each represent a significant commercial opportunity, we continue to actively prepare for the phase III program. Before turning the call over to John to review our financial performance, I would like to briefly touch on our announcement from earlier today of a new non-dilutive financing provided by an entity controlled by Paul Manning, Verrica's largest shareholder and our chairman.

This facility provides Verrica with up to $27.5 million of capital and supports the continued growth of YCANTH, as well as our ongoing phase III program studying YCANTH for the treatment of common warts. Under the terms of the facility, Verrica may borrow up to $12.5 million immediately, with an additional $15 million becoming available upon Verrica's achievement of certain revenue, growth, and other operational milestones, our goal is to achieve those before the end of 2026. Importantly, this facility provides the potential for no scheduled payments of interest or principal until maturity in December of 2030. This flexibility will allow Verrica to maximize deployment of its cash resources on advancing its business and pipeline.