Verrica Pharmaceuticals Inc.

Please stand by. Your meeting is about to begin. Good afternoon, ladies and gentlemen. Welcome to the Verica Pharmaceuticals second quarter 2026 corporate update conference call. At this time, all participants are in a listen-only mode. After the speaker's prepared remarks, there will be a question-and-answer session. To register to ask a question at any time, please press star 1 on your telephone. If you would like to remove yourself from the queue, please press star 2. As a reminder, this conference is being recorded. I would now like to turn the call over to our host, Mr. Kevin Gardner of LifeSci Advisors. Please go ahead, sir.

Thank you, operator. Hello, everyone, and welcome to Verica Pharmaceuticals' second quarter 2026 corporate update conference call. With me on the line this evening are Jason 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. 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 released at 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, 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 Verica during the quarter and in the week since. It's certainly an exciting time at Verica. 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 YCAMP 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 YCAMP from the previous quarter, demonstrating both strong market demand for YCAMP 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 YCAMP is well positioned to become the standard of care. While we focus on growing the YCAMP business, we are also advancing our product pipeline and are making meaningful progress with each asset. In June, we and our partner, Torrey Pharmaceutical, a subsidiary of Shinogi, dosed the first patients in the second pivotal phase three trial, also known as COVE-3, and the recruitment in the first pivotal trial, COVE-2, 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 three ready oncology asset, BP315, for the treatment of basal cell carcinoma. And we presented encouraging new phase two data at the Society for Investigative Dermatology annual meeting in May. In the week since the quarter ended, We also announced a distribution agreement that will allow our new partner, Madomi Pharma, to bring YCAMS to Moleskine patients in Israel. And 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 YCAMS business. In the second quarter, Total revenue was $5.9 million, including USY Camp's net product revenue of $5.1 million, an increase of 18.7% over the first quarter, and an additional $0.8 million of licensed collaboration revenue associated with our partnership with Tori. dispensed applicator units for WICAMP 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 WICAMP 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 in demand from commercially insured patients who depend on our co-pay assistance program for their access to Y-Camp, while we also began emerging from deductible season. Our priority continues to be for all eligible patients to have access to Y-Camp, 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 YCAMP in the U.S., we would also like to acknowledge our partner, Tori, for its continued growth of YCAMP in Japan following its launch earlier this year. As a reminder, we currently supply YCAMP applicators to Tori for the Japanese market, and we receive a transfer price a portion of which offsets Verica's share of the clinical costs for the Global Common Warts program. We also continue to pursue opportunities to launch Y-CAMP outside the United States and Japan. Just a few weeks ago, we announced an exclusive distribution, marketing, and supply agreement with Midomi Pharma to commercialize Y-CAMP for the treatment of molluscum in Israel. Midomi 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 YCAMP as their new standard of care for Maleska. Madomi will now prepare a regulatory submission for approval in Israel. For commercial sales, we will receive 60% of net selling price of YCAMP sold by Madomi. 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 three program studying Y-CAMP as a potential treatment for common warts during the second quarter. As a critical part of our Y-CAMP strategy, we remain focused on the opportunity to expand the label to include common warts, which impacts approximately 22 million people in the US alone, more than three times the size of the molluscum patient population. There are no FDA approved therapies for common warts today, and since about half of the patients who seek treatment are children, we believe our field force that is already selling Y-cancer molluscum to pediatricians, dermatologists and pediatric dermatologists will be well positioned to detail the product to these prescribers diagnosing common warts. As a reminder, Torrey 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. Verica's portion is expected to be paid at a future net transfer payments for commercial supply, payments relating to sales and regulatory milestones, and royalties arising from sales of Y Camp in Japan. In June, we announced that the first US patient was dosed in Cov3, our second pivotal trial in the CommonWorks program, and our development partner, Tori, 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, and we will provide further updates as each trial achieves full enrollment. As a reminder, Verica maintains ownership of the global rights to Y-CAMP 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 VP315 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 VP315 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 VP315 to change the paradigm for treatment of basal cell carcinoma and 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, Verica retains full global commercial rights to VP315 for non-metastatic skin cancers, including basal cell and squamous cell carcinoma. We believe these two indications each represent a significant commercial opportunity, and we continue to actively prepare for the Phase 3 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, Verica's largest shareholder and our chairman. This facility provides Verica with up to $27.5 million of capital and supports the continued growth of Y-CAMP, as well as our ongoing Phase III program studying Y-CAMP and the treatment of common warts. Under the terms of the facility, Verica may borrow up to $12.5 million immediately, with an additional $15 million becoming available upon Verica's achievement of certain revenue, growth, and other operational milestones, and 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 Verica to maximize deployment of its cash resources on advancing its business and pipeline. I would like to thank Paul Manning for his continued support of Verica and for his confidence in our team to execute on our commercial and development initiatives. With this strategic and financial support from our largest shareholder, we will work to grow our existing YCAMS business for Moleskine to achieve the extraordinary potential of YCAMS to become the first FDA-approved therapy for the treatment of common warts and continue to prepare for the Phase III VP315 program, which could change the paradigm for basal cell carcinoma. I'll now turn the call over to our Interim Chief Financial Officer, John Kirby, to review our second quarter financials.

Thanks, Jayson. I'll now take a few minutes to summarize our financial results for the second quarter ended June 30, 2026. Total revenue for the second quarter of 2026 was $5.9 million, consisting of $5.1 million of U.S. net YCAMP revenue, and $0.8 million of license and collaboration revenue associated with our Tory partnership, compared to $12.7 million of total revenue for the second quarter of 2025, which consisted of $4.5 million of U.S. met YCAMP revenue and $8.2 million of license and collaboration revenue. As you will recall, in the second quarter of 2025, The company earned a one-time milestone of $8 million. Net YCAMP revenue in the second 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 co-pay assistance program expenses. Gross product margins for the second quarter of 2026 were approximately 91.5% compared to gross product margins of approximately 92.5% in the second quarter of 2025. Cost of product revenue for the second quarter of 2026 was $0.4 million versus $0.3 million in the second quarter of 2025. Research and development expenses of $6 million in the second quarter of 2026 compared to $1.8 million in the second quarter of 2025. Excluding the impact of stock-based compensation, the increase was due to the increased costs related to the common works program. Selling general and administrative expenses of $10.3 million in the second quarter of 2026 Thank you for joining us today. brought against the company in 2022, and as a result, expense of $1.7 million was recognized in the second quarter of 2026. This expense represents the net impact of the settlement after insurance recovery. Gap net loss was $13.2 million, or 62 cents per share, for the second quarter of 2026, compared to gap net income of $0.2 million or two cents per share for the second quarter of 2025. On a non-GAAP basis, which excludes stock-based compensation, non-cash interest expense, legal settlement, net of insurance recovery, and change in fair value of embedded derivatives, the second quarter of 2026 net loss was $10.2 million or 48 cents per share and David Zawitz. And finally, as of June 30, 2026, Verica had cash of $11.2 million. Assuming the full $27.5 million will be available to the company under the credit facility announced today, we believe our cash runway could extend into 2028. I'll now turn the call back over to Jayson for closing remarks.

Thanks, John. Again, I would like to recognize the strong growth of Y-CAMP driven by our commercial team this quarter, which provides the strongest evidence thus far that Y-CAMP is fast becoming the new standard of care for the treatment of molluscum. Many have begun to appreciate the significant commercial opportunity for Y-CAMP expanding into common warts, a large and underserved indication, and we are excited to finish the Global Phase III program and present top-line data next year. Equally exciting is our VP315 program for basal cell carcinoma, a disease that also impacts millions of patients in the U.S. alone with few treatment alternatives besides surgery. The Phase II data generated to date demonstrates the potential impact for patients by this oncolytic peptide-based approach, which is further supported by the recently presented abscopal effects observed. We are well positioned for growth, having two large programs, each with multibillion-dollar potential in our pipeline. We also remain committed to execute on our opportunities for global expansion for Y-CAMP and we are pursuing additional partnerships around the world to complement our relationship with Tori in Japan and Madomi in Israel. With the recent credit facility providing the runway to grow YCAMP and complete our common warts development program, we are positioned to create value for our shareholders and help our patients receive the treatments they need. With that, we would be happy to answer your questions. Operator?

Thank you very much, Dr. Rieger. Ladies and gentlemen, at this time, if you do have any questions or comments, please press star 1 at this time. If you would like to remove yourself from the queue, you can do so by pressing star 2. We'll go first this afternoon to Stacy Koo of TD Cowen.

Hey, good afternoon, everyone. Thanks so much for taking your questions. Nice to see the credit facility giving you some runway to in fact at Y Camp and potentially at Common Warrants. So we have a couple questions. First, just help us think about or give some contextualize, maybe contextualize how we should be thinking about the Y Camp prescription trends this summer. Would you be expecting the same study inflection or growth trajectory that you've been seeing in the next few months but in the last few months as we look forward? That's the first question. The second is really what areas the team is focused as they think about maximizing adoption. Is it the clinician base, tweaking access, broadening sales force? Just help us understand what will drive that continued growth. And then third, if you're willing to comment, where do you think net pricing could stabilize in the long term? What are you learning about the different use scenarios for Y-CAN, frequency of use, the pricing that we're seeing in the pharmacy? Thank you so much.

Thanks, Stacey. I appreciate the questions, and I'll respond a little bit, and then I'll ask Chris to add as well. We're seeing momentum in the prescriptions. I think you've seen that with the quarter-over-quarter growth of over 28%, and we're seeing increased adoption penetration. But I'd like Chris to comment on sort of the specifics of what he's seeing day-to-day and how we'll continue to support that growth now and into the future.

Yes, Stacy, thanks for the question and good to talk to you again. In the last quarterly call, I had mentioned a real deep dive. It's always nice to be new to an organization and take a fresh look at the targeted segmentation, our deployment. I think what you're seeing reflected in this quarterly performance is a refocus of the field force on the most productive physicians in terms of those who are both prescribing but also seeing the patient population. In terms of your question about what do we expect for this quarter, of course, you know, when you get into the summer months, you are impacted by vacations, lifestyle things that impact all therapeutic areas. So I certainly would expect continued growth. But I do want to be realistic. We will be impacted by the seasonal aspects that impact everybody. But I'm very pleased, very pleased with the performance that we've had with the redirection of the field force, the redeployment of the field force. And I think some of the key growth drivers, as I mentioned, number one, the retargeting and segmentation, which I believe is now spot on and right where we need to be. The second are some of the things that we've done to enable the fulfillment process, both for physicians and also affordability for the patients. Jayson mentioned the ability to help patients who are commercially insured with refills should the physician choose and the patient needs additional treatments. And that's had a very nice impact as well in getting patients to their goals. So I think all of that combined together, I would expect another Thank you for joining us today. and Physician Fulfillment Strategy. So we are spending some time taking a close look at that and I would expect that our U will continue to accrete over time.

Super helpful. Thank you so much.

Thank you. We go next now to Dennis Ding with Jefferies.

Hi. Thank you so much for taking our questions and congratulations on the quarter. This is Georgia Bank on the line for Dennis Ding. Maybe you can just provide some color around recruiting for the code studies and remaining on track for that 2027 top line data and any additional detail on the enrollment progress and timelines there.

Sure. Thanks, Georgia. This is Jayson and I'll let Noah comment if I leave anything out. You know, as we reported, you know, previously, we really were getting good momentum in the Cov-2 trial, and that momentum has continued into this quarter. We've seen a solid start to Cov-3. We indicated that we wanted to see how that progressed as we activate both sites in Japan with Tori, as well as the United States. We're seeing, you know, enrollment in both those trials progressing. And, you know, importantly, you know, patients rolling into our long-term follow-up study, Cov-4, to gather your long-term safety data as well. As we indicated, your BOCUS trial started, the primary endpoint to all the disclosed, et cetera, and we're currently targeting enrollment stays on track to have data to report on that program by mid-next year.

Got it. Okay, that's very helpful. And I just had one follow-up, if that's okay. around the distribution agreement and launch in Israel. Can you just remind us of the size of the opportunity there and when you'd expect the launch to begin?

So two things. One, obviously the population is a little smaller than the United States, but what we've begun to learn as we have conversations with potential partners around the world is that Moleskine is prevalent across all socioeconomic, gender, and other demographics at a relatively consistent percentage according to the demographic data that's available. And the way we structure our relationship there is we'll provide drugs, but we will receive 60% of the net revenue that's earned there. So we're positioned to really participate in the upside success as penetration for YCAMP grows traction there. but also they have the potential to add in common warts should those trials read out positively. So again, just like we're trying to position here in the United States, have access to Y-CAMP, potentially multiple indications as we go forward. Additionally, they've restructured the relationship with milestones in excess of $8 million based on clinical, commercial and predatory achievements. So we're hoping I can't comment specifically on the partnership discussion. What I can say is we continue to invest in our BP350 program, our readiness for phase three, and for the expansion of YCAM into new markets around the world. And we're hopeful this is the first of others in the future.

Got it. Thank you.

Thank you. We'll go next now to Ram Savaraju with HC Wainwright.

Thanks so much for taking our questions. Firstly, I was wondering in the context of the additional non-dilutive capital availability, if you could just provide us with some additional granularity on how you expect broader R&D planning to shape up over the course of 2027 and into 2028, particularly as this pertains to whatever you ultimately elect to do in basal cell carcinoma. with Ruxotematide over the course of that period. And also if you could give us a sense of how you expect R&D quarterly expenses to modulate over the course of the coming quarters as Cove 2 and Cove 3 advance and ultimately yield top line data. And then secondly, I was just wondering if you could refresh our recollection regarding the specific terms of the credit facility in terms of both the coupon and the seniority in the capital stack. Thank you.

Sure. I'll make the initial comments on the R&D and the budget activities. John will add some color and, you know, David Zawitz can add some, you know, additional color to your credit facility. In terms of the R&D planning, it's actually pretty interesting the way we've structured the business. As you may recall, the common work trial, you know, with our relationship with Tory, they're providing the first $40 million of funding. which we expect to cover about 90% of the budget for that trial. So as you would think about as we progress towards top line data next year, there'll be a minimal impact on our cash burn from that program relative to the cost of the entire study. And John can sort of comment how we're accruing accounting for that in our financials to reflect sort of the expenses that are being incurred. Similarly for the VP315 program, as we've indicated previously, we continue to invest in that program The initial cost to get to and through the rest of this year and into next year to prepare for that study related to CRO costs and manufacturing are in the budget that we've prepared and are actually pursuing that to be ready for next year. I'll let John add some color for you on the way we're accounting for common ones.

Yes, I think Jason brought up the most important point, Ron, and thanks for your question, which is The initial out-of-pocket is by Tori. So if you look at our financial statements, you'll see on the balance sheet the associated prepayment asset side and the liability side. But most importantly on the cash flow, you see, for instance, here today we had $4.2 million of non-cash expense. So I think broadly the way I would think about it would be that we've given you the timelines for the study and the 90% of the budget being Thank you for joining us.

There is a 1% prepayment fee for certain prepayments, but otherwise there's no warrants issued or any other fees in the facility. There is a 16% IRR catch-up payment upon repayment of the full facility. So the way we sort of price this is a bit, just jumping forward to the end of getting to a 16% IRR for the lender. The facility has a delayed draw option, so it gives us flexibility as to when we need the capital and when we start incurring that return for the lender. It's contemplated to have no scheduled P&I payments during the life of the loans, which again allows us to use the proceeds from the facility for our business, to grow our Wacom business and to cover the cost that we have to get to the coverage. As far as your question on seniority, the facility is secure. the senior position against substantially all the brands, as you would expect for a credit facility.

And just to clarify on the delayed draw feature, is there an obligation to draw a minimum amount? Is there a deadline by which you would need to have drawn the full amount if that is your intent? And at this juncture, you know, is it your intent to ultimately, given the cost of capital here,

There's no minimum bite size of each individual loan, but there's no requirement to draw any amount of a facility. It's going to be drawn as necessary. I'll let John comment as to the expected use of the facility.

Yeah, I think we will obviously, given that it costs us money, so to speak, in terms of interest and the overall IRR, we will be selective in

We're going to be able to use effectively all of the cash that we draw from the facility when we choose to draw it because the liquidity covenant that's present in the facility is very manageable to us. It allows us to use our receivables from our distributor creditors, our partners and distributors, as the base for the liquidity. So it is a very flexible facility, very helpful from the lender.

Thank you very much. Thank you. Just a quick reminder, ladies and gentlemen, any further questions today, star one, please. We'll go next now to Dev Prasad with Lucid Capital Markets.

Hi. Thank you for taking our question, and congrats on the progress and the credit facility. A couple of questions. One is, so we see unit growth continues to outpace net product revenue growth. How should we think about revenue conversion from a dispensed applicator over the next few quarter? And second, on common ward program, what level of efficacy would you consider clinically meaningful to change the treatment behavior in common ward? Thank you.

Sure. I'll let Chris sort of generally comment on the unit growth versus revenue growth number. and then Noah, I'll let you add some color please on sort of the clinically meaningful nature of common warts and what would be impactful given that there really isn't anything approved to treat that disease.

Yeah, thanks for the question. And as I just mentioned, you know, we fully expect to see yield to continue to accrete over time. While our efforts were focused last quarter on making some modifications to our targeting and segmentation and deployment of our field force. And evidenced by the growth that we've seen, we've now turned our focus to optimizing and both driving volume and creating yield over time. So that would be a fair expectation as we continue to invest in the company, grow the company, and expand this market.

Hey, guys. Just quickly, just repeating that question. I'm sorry. The connection wasn't so great.

The question was on the expectations of what would be critically meaningful for outcome for the common war trial.

Yeah, so I think that if you look at the phase two data and you look at the cohort one and cohort two, you can get a pretty good idea of how the drug will perform. We haven't disclosed our powering assumptions, but I'll say that, you know, We believe if we land somewhere around those results, we should be in pretty good shape. Keep in mind, in this particular study, in the two pivotals, we also have a placebo arm or a vehicle arm as well, and we've accounted for that in the powering of the study. But I think the most important piece is that there is no approved current treatment for common warts. and so I think that getting an effective treatment similar to what we saw in phase two at that magnitude would clearly be an important advent. I'll just say this, that the recruitment efforts are going really well. There's a lot of excitement on the PI front as observed by the numbers of patients that they're bringing in. So there's quite an appetite for an approved treatment.

Great, thank you.

Thank you. And just one final reminder, ladies and gentlemen, any further questions today, please press star one. We will pause for just one moment. And Dr. Rieger, it appears we have no further questions today, sir. I'd like to turn things back to you for any closing comments.

Thank you. First, I'd like to thank everyone for joining the call this evening. We look forward to continuing to provide updates on our progress in the second half of 2026. Have a nice evening.

Thank you, Dr. Rieger. Again, ladies and gentlemen, this will conclude the Verica Pharmaceuticals second quarter 2026 corporate update call. Again, thanks so much for joining us, everyone. We wish you all a great day. Goodbye.