Verrica Pharmaceuticals Inc.

begin. If you need assistance during your conference today, please press star zero. Good evening, ladies and gentlemen, and welcome to the Verica Pharmaceuticals fourth quarter and full year 2024 Corporate Update Conference Call. At this time, all participants are in a 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 would now like to turn the call over to your host, John Francis, of LifeSci Advisors. You may begin your conference.

Thank you, operator. Hello, everyone, and welcome to Verica Pharmaceuticals' fourth quarter and full year 2024 Corporate Update Conference Call. With me on the line this evening are Jason Rieger, President and Chief Executive Officer of Verica Pharmaceuticals, John Kirby, Interim Chief Financial Officer, David Zawetz, Chief Operating Officer, Chris Hayes, Verica's Chief Legal Officer, and Aaron Hullett, Chief of Commercial. As a reminder, during today's call, management will make forward-looking statements. These statements may include expectations related to the commercialization of Y-CAN, the treatment of molluscum contagiosum in the United States, regulatory developments, the development of Verica's product candidates, companies' expected cash runway and its ability to obtain funding for future operations, and Verica's overall business strategy and planned operations. These forward-looking statements are based on the company's current expectations and involve inherent risks and uncertainties. And based on those risks and uncertainties, Verica's actual results and the timing of events could differ materially from those anticipated in such forward-looking statements. Please see Verica's SEC filings for important risk factors. Verica 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, for 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 versus their closest GAAP equivalents. The earnings released at the company issued today includes gap to non-gap reconciliations for these measures and is also available on the investor relations section of Verica's website. I'll now turn the call over to Verica's president and CEO, Jason Rieger.

Thank you, John. Good evening, everyone, and thank you for joining us for our fourth quarter and full year 2024 corporate update call. As most of you are aware, in the fourth quarter of 2024, we began a transition period at Verica, including a significant change to our commercial organization, a leadership transition, and a significant capital raise in November. We are executing on our turnaround plan with a more focused commercialization strategy for YCAMP, while substantially reducing costs across the organization. In a few moments, I'll describe in more detail the progress we have made and continue to make on this plan and why I believe we are now on a trajectory toward sustainability in the company with a clear focus on maximizing YCAMP utilization for the treatment of muscle contagiosum and advancing our late-stage pipeline programs. We continue to support our development partner, Tori Pharmaceutical, in their effort to obtain approval from Japanese regulators for TO208, referred to as WICAMP in the United States, and we were happy to see their filing of a new drug application in Japan for TO208 during the fourth quarter of 2024. We are also excited to continue to work with Lytics Biopharma in advancing our basal cell carcinoma asset, BP315. At our update at the end of Q3 last fall, we indicated a belief that it could be into the first quarter of this year before we saw business stabilization and the signs of working through channel inventory. I am pleased to report that we have already seen new purchases from our distributors in the fourth quarter to replace depleted inventory levels ahead of what we had previously anticipated. We look forward to updating you with more details regarding Q1 2025 dispense units in the near future. We are making significant progress in advancing our clinical stage pipeline, which includes pursuing Y-cans for common warts as an additional indication, as well as our novel oncolytic peptide, BP315, for the treatment of basal cell carcinoma. Each of these programs represent potential key value drivers for our company and, in my view, remain underappreciated assets given each program's potential to become first-in-class treatments in two large dermatological conditions with significant unmet medical need. We are in a unique development position where we believe we will be able to advance our common work program through phase three in collaboration with Tori and also achieve key data and regulatory feedback for our basal cell program with minimal additional cash outlay for Verica. We also made significant progress with respect to our financial position, raising approximately $42 million in an equity follow-on offering in November, and subsequent to the end of the quarter, obtaining a waiver of going concern covenant for the quarter and year ended December 31, 2024, and the first quarter of 2025 from our lending partner, OrbitMed. I will now provide an update on our commercial activities for YCAMP and related results from the quarter. In November, we announced a new commercialization strategy focused on driving demand for YCAMP in territories with high prevalence of molluscum and established strong insurance coverage for YCAMP. This focus was also intended to make Verica become a leaner and more efficient company in the process. I am pleased to say that over the last several months, that is exactly what has happened. As announced in our business update in December, we've reduced our operating expense burn rate by approximately 50% while not only maintaining our prior sales levels, but also achieving positive growth in dispense applicator units in the fourth quarter compared to the prior quarter. Our sales representatives have substantially increased their productivity, measured as an average of sales per selling day, and we are now seeing the results of their efforts. Our fourth quarter operating results do reflect the beginning of this success, and we expect to see further reflection of this strategy in the results for the first quarter of 2025 and beyond. In the fourth quarter, we reported YCAMP dispensed applicator units of 8,654 versus the prior quarter units of 7,706, which represents sequential quarterly growth of 12.3%. And when compared to the second quarter of 2024 of 5,975 units, the Y-CAMP applicator unit growth increased by 44.8%. Another important dimension of our commercial realignment was to make it easier for physicians to order and acquire Y-CAMPs on a buy-and-build basis. We therefore introduced a new single applicator configuration for Y-CAMP, or the one-count, which became commercially available this quarter. We believe the one count will reduce acquisition costs for physician practices in certain channels and potentially expand distribution and patient access to Y camp. Furthermore, we have made great strides in increasing access to the pharmacy benefit route by adding local specialty pharmacies to our strong relationship with New Factor, our nationwide specialty pharmacy. With respect to Why Can't Inventory, we believe we have now fully reserved for distributor inventory reasonably expected to be returned to a lower than anticipated pull-through and observed a significant reduction in distributor inventory levels from our active distributors exiting the fourth quarter. Based on our latest data, we believe that inventory has now reached a stable, normalized level where demand for YCAMS applicator units will translate into new, demand-driven revenue regularly going forward into 2025. I'd now like to discuss our plans to develop YCAMS for the treatment of common warts. Recall that earlier last year, we amended our licensing agreement with our development and commercialization partner, Torrey Pharmaceuticals. which enabled us to equally split the cost of a new planned global phase three clinical program in common warts. Tori previously agreed to fund Verica's portion of the cost as an offset to Tori's future payment obligations to Verica for meeting regulatory milestones and royalties, the sales of Y-CAMP for molluscum contagiosum and common warts in Japan. As we noted in December, Tori filed a new drug application in Japan seeking approval of YCAMP called TO208 in Japan for the treatment of molluscum, and we look forward to helping Tori reach an estimated 1.6 million molluscum patients in Japan after they obtain regulatory approval. Furthermore, Tori will make a milestone payment of $8 million to Verica upon initiation of a Phase III clinical trial with initiation of the global program potentially starting as early as mid-2025. Considering the fact that there are approximately 22 million patients in the U.S. alone with common warts and no FDA-approved therapies, this makes common warts the single largest unmet need in all of dermatology. Under our amended funding structuratory, the capital required for Veracut to fund this large Phase III program is expected to have almost no impact on our cash position, which in my view is fairly remarkable considering that this is a global registrational trial where we will still retain 100% of commercial rights to WICAN in the U.S. and elsewhere around the world other than Japan. I'd now like to focus the recent progress we have made in advancing our late-stage clinical oncology asset, VP315. In October 2024, we presented two posters at the 2024 Fall Clinical Dermatology Conference, featuring positive preliminary top-line results of VP315 for the treatment of basal cell carcinoma. The posters include safety and histologic clearance data from 82 patients with up to two target basal cell carcinoma tumors in Part 2 of the Phase 2 study. As a reminder, Part 2 of the Phase 2 study was designed to explore dosing regimens to help us identify the recommended regimen for a Phase 3 study program, as we identified 8 milligrams as the optimal dose in Part 1 of the study. Preliminary top line results showed that approximately 51% of tumors treated with BP315 achieved complete histological clearance, while those patients with a residual tumor achieved, on average, approximately 71% reduction in tumor size. BP315 was well tolerated. No treatment-related serious events were reported in the study, and most treatment-related adverse events were mild to moderate. Most recently, We presented the results from a post-hoc analysis of the data from part two of the study at a 2025 Winter Clinical Dermatology Conference, which demonstrate that treatment with VP315 led to a calculated objective response rate, or ORR, of 97%, which is defined as the percentage of study subjects who do not demonstrate disease progression and who experience at least 30% reduction in tumor size along with partial or complete response following treatment. This is quite a compelling observation, as it suggests that nearly every subject of the study obtained benefit from BP315 treatment. We still expect to report genomic and immune response data for this trial in the coming months and to receive minutes from an end-of-Phase II meeting in the first half of 2025, which will be critical for gaining alignment for the advancement of the program into Phase III trials. We are highly encouraged by these positive preliminary top-line results, which we believe demonstrate the potential for VP315 to change treatment paradigm for patients with basal cell carcinoma, the most common form of skin cancer. Over the last several months, I've had the opportunity to speak with many investors about Verica, and without a question, I believe our common wards program and basal cell carcinoma programs are two significantly underappreciated assets. To that end, we will continue to provide updates on the progress of these pipeline programs while the majority of the organization remains laser-focused on the YCAM for Molluscum commercial efforts. I'll now turn the call over to our Interim Chief Financial Officer, John Kirby, to discuss our recent financing activities and to review our fourth quarter and full year of 2024 financials.