On November 7, 2022 Verrica Pharmaceuticals Inc. (Verrica) (Nasdaq: VRCA), a dermatology therapeutics company developing medications for skin diseases requiring medical interventions, reported financial results for the third quarter ended September 30, 2022 (Press release, Verrica Pharmaceuticals, NOV 7, 2022, View Source [SID1234623280]).
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"This quarter, we achieved significant progress in the transfer of our bulk material production to Piramal Pharma Solutions, and we are on track to resubmit our NDA for VP-102 for the treatment of molluscum contagiosum in the first quarter of 2023," said Ted White, Verrica’s President and Chief Executive Officer. "We greatly appreciate the collaborative effort from the entire Piramal team, as well as their commitment to completing this technology transfer on an expedited basis. We continue to look forward to providing physicians and caregivers the potential first FDA-approved treatment option for molluscum, a disease impacting an estimated six million patients annually in the United States."
Business Highlights and Recent Developments
VP-102
In July 2022, Torii Pharmaceutical Co., Ltd. ("Torii") dosed the first patient in its Phase 3 trial of VP-102 (referred to as TO-208 in Japan) for molluscum contagiosum in Japan, triggering an $8 million milestone payment from Torii to Verrica.
VP-LTX-315
Verrica continued to progress its Phase 2 clinical trial of VP-LTX-315, a potentially first-in-class oncolytic peptide immunotherapy, for the treatment of basal cell carcinoma. The Phase 2 trial is a three-part, open-label, multicenter, dose-escalation, proof-of-concept study with a safety run-in designed to assess the safety, pharmacokinetics, and efficacy of VP-LTX-315 when administered intratumorally to adults with biopsy-proven basal cell carcinoma. Part 1 (safety and dose escalation) is expected to conclude in Q1 2023.
Financial Results
Third Quarter 2022 Financial Results
Verrica recognized license revenues of $8.3 million for the three months ended September 30, 2022 and no license revenue for the same period in 2021 related to the Collaboration and License Agreement (the "Torii Agreement") with Torii for supplies and development activity with Torii.
Research and development expenses were $2.9 million in the third quarter of 2022, compared to $3.8 million for the same period in 2021. The decrease was primarily attributable to a reduction of Chemistry, Manufacturing and Controls (CMC) and clinical costs related to our development of VP-102 for molluscum contagiosum, external genital warts and common warts and reduction in compensation due to reduction in headcount.
General and administrative expenses were $3.9 million in the third quarter of 2022, compared to $8.0 million for the same period in 2021. The decrease was primarily a result of higher expenses in the prior year related to pre-commercial activities for VP-102 and reduction in compensation costs due to reduction in headcount.
For the third quarter of 2022, net income on a GAAP basis was $83 thousand, or $0.00 per share (basic and diluted), compared to a net loss of $12.8 million, or $0.47 per share, for the same period in 2021.
For the third quarter of 2022, non-GAAP net income was $2.9 million, or $0.07 per share (basic and diluted), compared to a non-GAAP net loss of $11.0 million, or $0.40 per share, for the same period in 2021.
Year-to-Date September 2022 Financial Results
Verrica recognized license revenues related to the Torii Agreement of $9.0 million for the nine months ended September 30, 2022 compared to $12.0 million for the same period in 2021. The current period license revenue was related to an $8.0 million milestone payment and $1.0 million related to Torii’s purchase of supplies and reimbursement for development activities. License revenue for the nine months ended September 30, 2021 comprised of $0.5 million received in December 2020, and an $11.5 million up-front payment paid in April 2021, pursuant to the exercise of the license option on March 17, 2021 per the Torii Agreement.
Research and development expenses were $9.8 million for the nine months ended September 30, 2022, compared to $12.6 million for the same period in 2021. The decrease was primarily attributable to one-time payments of $2.3 million and $1.0 million to Lytix upon the achievement of regulatory milestones for LTX-315, during the nine months ended September 30, 2021 and 2022, respectively, as well as decreased CMC and clinical costs related to Verrica’s development of VP-102 for molluscum contagiosum, external genital warts, and common warts in 2021.
General and administrative expenses were $14.2 million for the nine months ended September 30, 2022, compared to $21.9 million for the same period in 2021. The decrease was primarily a result of a decrease in expenses related to pre-commercial activities for VP-102 and reduction in compensation costs due to reduction in headcount.
For nine months ended September 30, 2022, net loss on a GAAP basis was $18.6 million, or $0.58 per share, compared to a net loss of $25.5 million, or $0.95 per share, for the same period in 2021.
For nine months ended September 30, 2022, non-GAAP net loss was $12.7 million, or $0.40 per share, compared to a non-GAAP net loss of $19.8 million, or $0.73 per share, for the same period in 2021.
As of September 30, 2022, Verrica had aggregate cash, cash equivalents, marketable securities and restricted cash of $39.5 million. The Company believes that its existing cash, cash equivalents and marketable securities as of September 30, 2022, will be sufficient to support planned operations into the third quarter of 2023.
Non-GAAP Financial Measures
In evaluating the operating performance of its business, Verrica’s management considers non-GAAP income (loss) from operations, non-GAAP net income (loss) and non-GAAP net income (loss) per share. These non-GAAP financial measures exclude stock-based compensation charges, non-cash interest expense and loss on debt extinguishment that are required by GAAP. Verrica believes that non-GAAP income (loss) from operations, non-GAAP net income (loss) and non-GAAP net income (loss) per share provides useful information to both management and investors by excluding the effect of certain non-cash expenses and items that Verrica believes may not be indicative of its operating performance, because either they are unusual and Verrica does not expect them to recur in the ordinary course of its business, or they are unrelated to the ongoing operation of the business in the ordinary course. Non-GAAP income (loss) from operations, non-GAAP net income (loss) and non-GAAP net income (loss) per share should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. Non-GAAP income (loss) from operations, non-GAAP net income (loss) and non-GAAP net income (loss) per share have been reconciled to the nearest GAAP measure in the tables following the financial statements in this press release.
About VP-102
Verrica’s lead product candidate, VP-102, is a proprietary drug-device combination product that contains a GMP-controlled formulation of cantharidin (0.7% w/v) delivered via a single-use applicator that allows for precise topical dosing and targeted administration. VP-102 could potentially be the first product approved by the FDA to treat molluscum contagiosum — a common, highly contagious skin disease that affects an estimated six million people in the United States, primarily children. Upon submission of the NDA for VP-102, Verrica intends to seek approval to market VP-102 in the United States under the brand name YCANTH. In addition, Verrica has successfully completed a Phase 2 study of VP-102 for the treatment of common warts and a Phase 2 study of VP-102 for the treatment of external genital warts.
About Molluscum Contagiosum (Molluscum)
There are currently no FDA-approved treatments for molluscum, a highly contagious viral skin disease that affects approximately six million people — primarily children — in the United States. Molluscum is caused by a pox virus that produces distinctive raised, skin-toned-to-pink-colored lesions that can cause pain, inflammation, itching and bacterial infection. It is easily transmitted through direct skin-to-skin contact or through fomites (objects that carry the disease like toys, towels or wet surfaces) and can spread to other parts of the body or to other people, including siblings. The lesions can be found on most areas of the body and may carry substantial social stigma. Without treatment, molluscum can last for an average of 13 months, and in some cases, up to several years.