Verrica Pharmaceuticals Inc.

Good evening, ladies and gentlemen, and welcome to the Verica Pharmaceuticals Second Quarter 2025 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 will now turn the call over to your host, Kevin Gardner of LifeSci Advisors. You may begin your conference.

Thank you, Operator. Hello, everyone, and welcome to Verica Pharmaceuticals Second Quarter 2025 Conference Corporate Update Conference Call. With me on the line this evening are Jason Rieger, President and Chief Executive Officer of Verica Pharmaceuticals, Noah Rosenberg, Chief Medical Officer, John Kirby, Interim Chief Financial Officer, and David Zawitz, Chief Operating 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. 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, 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 Verica's website. I'll now turn the call over to Verica's President and CEO, Jason Rieger.

Thank you, Kevin, and good evening, everyone, and thank you for joining us for our second quarter 2025 corporate update call. The second quarter featured a number of notable accomplishments across multiple areas of our business, each of which has made us stronger as a company. First and foremost, I'm very pleased with the continued execution from our commercial team, which continues to grow our Wycant business and is now helping thousands of patients and their families treat molluscum contagiosum every month. On July 9th, we reported a record 13,434 YCAM dispensed applicator units in the second quarter, which represents sequential quarterly growth of 32.8% over the prior quarter. In a moment, I will describe in more detail our recent business experience and the tailwinds that are helping to drive this growth. We also made major progress in strengthening our relationship with Tori Pharmaceutical, our development partner for Y-CAMP in Japan. As we announced on July 1st, at the end of the quarter, we executed an amendment to our agreement with Tori, whereby we secured Tori's financial commitment to starting our planned Global Phase III program to study Y-CAMP in patients with common warts. And we also received an $8 million milestone payment from Tori shortly thereafter in July. I'll describe in greater detail later in the call the financial and strategic benefits stemming from the Tory-amended agreement, which we view as a significant driver of value for our shareholders into the future. I'll also share a brief update on our development plans for VP315, our other late-stage pipeline asset, which is ready for Phase III trials for the treatment of basal cell carcinoma. We believe this program has strong potential to drive future value for Verica, Finally, John will take and provide a detailed review of our second quarter financials. I will now provide a more detailed update on our commercial activities for YCAMP. Our strong second quarter results once again reflected our focused commercialization strategy. Starting in the fourth quarter of 2024, we began to focus on those territories with high prevalence of molluscum and robust medical and pharmacy benefit coverage. As our strong sequential growth in the second quarter demonstrates, this more focused commercial strategy is resonating with healthcare professionals. We believe that these providers are experiencing positive outcomes for their patients, and we expect to continue to build these relationships across both pediatric and dermatology practices, driving continued expansion in Y-CAMP utilization. In addition, we continue to make substantial investments in our commercial co-pay assistance programs. which allows patients with commercial insurance to pay just $25 per Y-CAMP treatment for up to two applicators, which provides physicians with comfort knowing that their patients will find affordable access for Y-CAMP. Our priority has been making Y-CAMP broadly available so that many healthcare professionals as possible can treat their patients. To this end, and because of that investment, we have seen an increase in utilization of the co-pay program during the second quarter. and we believe utilization of the co-pay program may continue to increase in future quarters as more prescribers use this important option to support their patients' treatment with Y-CAMP. Given our success in growing our core business over the last two quarters, we are now applying the same disciplined approach to expand into additional territories where demand and reimbursement for Y-CAMP is likely to be strong and sustainable. As noted on our first quarter call, we started recruiting sales representatives for these new territories, splitting territories covering certain large markets, and entering into these new markets as well. Consistent with the first quarter, we have continued to add local independent regional pharmacies to our pharmacy distribution network, along with our national specialty pharmacy partners. Our approach to distribution of Y-CAMP continues to focus on making Y-CAMP available where healthcare professionals prefer to write their prescriptions, and we continue to see strong adoption with this approach. For the second consecutive quarter, Y-CAMP inventory remained at normalized levels, with Y-CAMP applicator units shipped to distributors continuing to closely track underlying market demand of dispensed applicators. In terms of commercial operating costs, as I mentioned earlier, we expect to selectively add sales personnel based on identifying additional high-value territories with our disciplined criteria. Looking ahead to the second half of 2025, we remain confident in generating strong and sustainable growth, primarily driven by YCAM's unique set of product attributes. As an in-office treatment, healthcare professionals who choose YCAMP can directly observe the dose and compliance for their patients. We believe ensuring that patients complete the treatment cycle established by their physicians contributes to the clinical safety and efficacy profile of YCAMP. We believe in-office treatment gives providers a role in making sure patients are actively treated properly rather than just being seen in the office and prescribed a product to take home. as at-home treatments have historically shown only modest patient compliance in dermatology. In addition, our product provides an incremental revenue opportunity for pediatricians while maintaining historic billing models for dermatologists. In summary, we are very excited about the progress we have made so far this year. We believe Y-CAMP is a product with exceptional growth potential and will be the new standard of care available for the millions of patients impacted by molluscum contagiosum. Before providing an update on our pipeline, I would first like to touch upon our recently amended agreement with Torrey Pharmaceutical, which, as I mentioned, has significant benefits for our company. On July 1st, we announced a second amendment to our existing collaboration and license agreement with Torrey, securing Torrey's commitment to launch with Verica a global, pivotal Phase III program for Y-CAMP for the treatment of common warts. As part of this amended agreement, we're able to finalize a path to receive up to $18 million in non-dilutive capital in 2025, which includes an $8 million milestone payment already received from Tory earlier in July. If Tory obtains approval for molluscum contagiosum in Japan, which may occur by the end of 2025, this amended agreement provides that we would receive an additional milestone payment of $10 million in cash rather than as an offset to trial costs as previously contemplated. For our investors, it is important to put into proper context the tremendous benefits of this revised agreement. This deal enables us to strengthen our balance sheet without the need to issue a single share of new common stock. Of course, the arrangement with Torrey also provides Verica with critically important drivers of long-term value. Tori committed funding of $40 million for this global program. The $40 million is expected to cover around 90% of the program costs, and Verica is committed to funding the remainder of the program. As you may recall, Verica and Tori will split the cost 50-50, with Verica having the ability to offset its 50% against future milestones, royalties, and transfer payments. We plan to initiate a manufacturing transfer to Tori for YCAMP applicators to be sold in Japan, which is expected to take place in stages over the next few years. In the interim, we will continue to receive from Tori a transfer price for applicators manufactured by Verica's manufacturing partners. After the transfer of at least one component of the manufacturing process, Verica will begin receiving royalties related to net sales in Japan of applicators manufactured by Tori and or its manufacturing partners. This commitment further allows Verica to advance this critical development program in a non-dilutive way. Tori's partnership provides us the funding needed to see the global phase three program to completion and provides us with a clear pathway to potentially seek the label expansion. Furthermore, we retain 100% ownership of the global rights to WICAMP for all indications in all territories outside of Japan. We believe that the preservation of these exclusive rights may have profoundly transformative implications for the future long-term value of our company. We are also working with Torrey to launch the Global Phase III program evaluating Y-CAMP for the treatment of common warts, and Beric expects to dose the first patient in this Global Phase III program in the United States in the fourth quarter of 2025. I'd also like to address our lending partner, Orbamed. In mid-June, we disclosed an amendment to our credit agreement with OrbaMed, where they agreed to waive the going concern qualification to our financial statement for the remainder of 2025. OrbaMed continues to be a great partner to us throughout the implementation of our new commercial strategy for YCAMP, and we very much appreciate their continued support. I'll now provide a brief update on our clinical stage programs. Based on Tori's NDA filing for molluscum in late 2024, we expect a regulatory decision on Wycanth designated TO-208 in Japan by the end of the year. Over 1.6 million patients in Japan alone contract molluscum annually, which represents a significant market opportunity, and we look forward to Tori sharing updates on their regulatory approval process later this year. I would like now to turn to our program in basal cell carcinoma using our novel oncolytic peptide, BP315. As you may recall, we have previously disclosed top-line safety and efficacy data regarding histological clearance and objective response rates. In the second quarter, we also received final minutes from the FDA following a successful end of Phase II meeting. Following our end of phase two meeting with the FDA, we now have additional clarity on advancing this unique and promising therapy into a pivotal phase three program. We plan to explore opportunities to fund the basal cell program, which may include strategic, non-dilutive partnerships for financing both the development of the program as well as post-approval commercialization for this potential multi-billion dollar opportunity in the most common form of skin cancer. Plenty of activities are already underway, including engaging with potential clinical research organizations to manage the study, establishing a study budget and a timeline, and identifying potential study investigators. We plan to provide a comprehensive overview of the basal cell program, including an announcement of additional genomic and immune response data later this year at a scientific conference. I'll now turn the call over to our Interim Chief Financial Officer, John Kirby.