Verrica Pharmaceuticals(US:VRCA)2025-08-12 20:20markdown PART I. FINANCIAL INFORMATION [Item 1. Unaudited Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Financial%20Statements) Unaudited interim financial statements for Verrica Pharmaceuticals Inc., detailing financial position, operations, and cash flows [Balance Sheets](index=3&type=section&id=BALANCE%20SHEETS) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Cash and cash equivalents | $15,396 | $46,329 | | Accounts receivable | $9,193 | $48 | | License and collaboration receivable | $8,178 | $29 | | Total current assets | $36,781 | $51,179 | | Total assets | $39,107 | $54,134 | | Total current liabilities | $29,222 | $29,012 | | Total liabilities | $56,591 | $63,994 | | Total stockholders' deficit | $(17,484) | $(9,860) | - Cash and cash equivalents decreased significantly from **$46.3 million** at December 31, 2024, to **$15.4 million** at June 30, 2025[8](index=8&type=chunk) - Accounts receivable and license and collaboration receivable saw substantial increases, indicating higher billed and unbilled amounts[8](index=8&type=chunk) - Total stockholders' deficit worsened from **$(9.9) million** to **$(17.5) million**[8](index=8&type=chunk) [Statements of Operations](index=4&type=section&id=STATEMENTS%20OF%20OPERATIONS) | Metric (in thousands) | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Product revenue, net | $4,534 | $4,892 | $7,956 | $8,124 | | License and collaboration revenue | $8,168 | $285 | $8,185 | $879 | | Total revenue | $12,702 | $5,177 | $16,141 | $9,003 | | Total operating expenses | $11,192 | $20,383 | $22,761 | $42,808 | | Income (loss) from operations | $1,510 | $(15,206) | $(6,620) | $(33,805) | | Net income (loss) | $204 | $(17,186) | $(9,538) | $(37,517) | | Net income (loss) per share, basic | $0.02 | $(3.70) | $(1.01) | $(8.07) | - The company reported a net income of **$0.2 million** for the three months ended June 30, 2025, a significant improvement from a net loss of **$(17.2) million** in the prior-year period[10](index=10&type=chunk) - Total revenue for the three months ended June 30, 2025, increased by **$7.5 million** (**145%**) year-over-year, primarily driven by an **$8.0 million** milestone payment from Torii[10](index=10&type=chunk)[156](index=156&type=chunk) - Total operating expenses decreased by **$9.2 million** (**45%**) for the three months ended June 30, 2025, mainly due to reduced selling, general and administrative, and research and development expenses[10](index=10&type=chunk)[159](index=159&type=chunk)[161](index=161&type=chunk) [Statements of Stockholders' Deficit](index=5&type=section&id=STATEMENTS%20OF%20STOCKHOLDERS'%20DEFICIT) | Metric (in thousands) | January 1, 2025 (in thousands) | June 30, 2025 (in thousands) | January 1, 2024 (in thousands) | June 30, 2024 (in thousands) | | :-------------------------------- | :-------------- | :------------ | :-------------- | :------------ | | Total Stockholders' (Deficit) Equity | $(9,860) | $(17,484) | $19,763 | $(13,300) | | Stock-based compensation | $1,026 (Q1) / $888 (Q2) | $1,914 (6M) | $2,072 (Q1) / $2,228 (Q2) | $4,300 (6M) | | Net income (loss) | $(9,742) (Q1) / $204 (Q2) | $(9,538) (6M) | $(20,331) (Q1) / $(17,186) (Q2) | $(37,517) (6M) | - The accumulated deficit increased from **$(307.0) million** at January 1, 2025, to **$(316.6) million** at June 30, 2025[13](index=13&type=chunk) - Additional paid-in capital increased by **$1.9 million** during the six months ended June 30, 2025, primarily due to stock-based compensation[13](index=13&type=chunk) [Statements of Cash Flows](index=6&type=section&id=STATEMENTS%20OF%20CASH%20FLOWS) | Metric (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(22,721) | $(36,305) | | Net cash used in investing activities | $0 | $(11) | | Net cash used in financing activities | $(8,212) | $(1,301) | | Net decrease in cash and cash equivalents | $(30,933) | $(37,617) | | Cash and cash equivalents at end of period | $15,396 | $31,930 | - Net cash used in operating activities decreased by **$13.6 million**, from **$(36.3) million** in H1 2024 to **$(22.7) million** in H1 2025, primarily due to a reduced net loss and changes in operating assets and liabilities[16](index=16&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) - Net cash used in financing activities increased significantly to **$(8.2) million** in H1 2025, mainly due to debt repayments under the Credit Agreement, compared to **$(1.3) million** in H1 2024[16](index=16&type=chunk)[187](index=187&type=chunk) [Notes to Financial Statements](index=7&type=section&id=Notes%20to%20Financial%20Statements) [Note 1—Organization and Description of Business Operations](index=7&type=section&id=Note%201%E2%80%94Organization%20and%20Description%20of%20Business%20Operations) - Verrica Pharmaceuticals Inc. is a dermatology therapeutics company, incorporated in Delaware in 2013[18](index=18&type=chunk) - YCANTH (VP-102) topical solution was approved by the FDA on July 21, 2023, for molluscum contagiosum in adult and pediatric patients two years of age and older[18](index=18&type=chunk) - A **1-for-10** reverse stock split was effected on July 24, 2025, reducing outstanding common shares from 92,650,404 to 9,265,034, with financial statements retroactively adjusted[19](index=19&type=chunk)[21](index=21&type=chunk) - The company has an accumulated deficit of **$316.6 million** as of June 30, 2025, and cash outflows from operations of **$22.7 million** for the six months ended June 30, 2025, leading to substantial doubt about its ability to continue as a going concern[22](index=22&type=chunk) - To address liquidity concerns, the company plans to seek additional funding through equity offerings, debt financing, collaborations, and licensing arrangements[22](index=22&type=chunk)[26](index=26&type=chunk) - A Second Amendment to the Torii Collaboration and License Agreement on June 27, 2025, accelerated an **$8.0 million** milestone payment (received in July 2025) and modified terms for a **$10.0 million** milestone payment and manufacturing transfer[24](index=24&type=chunk)[25](index=25&type=chunk) - The company is subject to 'baby shelf rules' limiting primary public offerings to one-third of its public float until it exceeds **$75.0 million**[26](index=26&type=chunk) - Principal payments on the **$50.0 million** Loan Facility (from July 2023) commenced in January 2025 due to not meeting specified YCANTH net revenue targets[27](index=27&type=chunk) - A 'going concern' waiver for financial statements was obtained from lenders for Q2, Q3, and Q4 2025, but future waivers or additional financing are critical to avoid default[28](index=28&type=chunk) [Note 2—Significant Accounting Policies](index=9&type=section&id=Note%202%E2%80%94Significant%20Accounting%20Policies) - The unaudited interim financial statements are prepared in conformity with US GAAP and SEC rules, with certain information condensed or omitted[29](index=29&type=chunk)[30](index=30&type=chunk) - The company operates as a single operating segment focused on developing and selling medications for skin diseases[34](index=34&type=chunk) - Revenue from product sales (YCANTH) is recognized upon physical delivery to customers, with gross sales reduced by gross-to-net (GTN) estimates for returns, chargebacks, rebates, and fees[48](index=48&type=chunk)[49](index=49&type=chunk) - Collaboration revenue includes nonrefundable up-front license fees, regulatory/commercial milestone payments, and manufacturing supply payments. An **$8.0 million** development milestone from Torii was recognized in Q2 2025[55](index=55&type=chunk)[57](index=57&type=chunk) - The derivative liability, related to a bifurcated settlement feature of the OrbiMed Credit Agreement, is re-measured at fair value each reporting period, with changes recognized in the statements of operations[47](index=47&type=chunk) | Metric | June 30, 2025 | | :-------------------------------- | :------------ | | Derivative liability (Level 3) | $1,796 | | Expected term (years) | 3.07 | | Credit spread | 12.3% | - Basic and diluted net income per share for Q2 2025 was **$0.02**, a significant improvement from **$(3.70)** in Q2 2024[74](index=74&type=chunk) - Potential shares outstanding not included in diluted EPS calculation due to anti-dilutive effect totaled **5,968,904** as of June 30, 2025[75](index=75&type=chunk) - New accounting pronouncements (ASU 2023-09 on Income Taxes and ASU 2024-03 on Disaggregation of Income Statement Expenses) are being evaluated for their impact on future financial statements[76](index=76&type=chunk)[77](index=77&type=chunk) [Note 3—Inventory](index=18&type=section&id=Note%203%E2%80%94Inventory) | Inventory Category (in thousands) | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :------------ | :---------------- | | Raw materials | $1,008 | $1,082 | | Work in process | $523 | $664 | | Finished goods | $991 | $717 | | Total inventory | $2,522 | $2,463 | - Total inventory increased slightly from **$2.46 million** at December 31, 2024, to **$2.52 million** at June 30, 2025[78](index=78&type=chunk) [Note 4—Property and Equipment](index=19&type=section&id=Note%204%E2%80%94Property%20and%20Equipment) | Category (in thousands) | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :------------ | :---------------- | | Machinery and equipment | $737 | $1,164 | | Office equipment | $326 | $326 | | Office furniture and fixtures | $303 | $303 | | Leasehold improvements | $54 | $54 | | Total property and equipment, gross | $1,420 | $1,847 | | Accumulated depreciation | $(1,105) | $(1,258) | | Total property and equipment, net | $315 | $589 | - Net property and equipment decreased from **$0.59 million** at December 31, 2024, to **$0.32 million** at June 30, 2025, primarily due to depreciation[79](index=79&type=chunk) [Note 5—Accrued Expenses and Other Current Liabilities](index=19&type=section&id=Note%205%E2%80%94Accrued%20Expenses%20and%20Other%20Current%20Liabilities) | Category (in thousands) | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :------------ | :---------------- | | Gross to net reserves | $9,609 | $10,316 | | Compensation and related costs | $1,850 | $1,173 | | Clinical trials and drug development | $546 | $892 | | Total accrued expenses and other current liabilities | $13,101 | $13,511 | - Total accrued expenses and other current liabilities decreased slightly from **$13.5 million** at December 31, 2024, to **$13.1 million** at June 30, 2025[80](index=80&type=chunk) [Note 6—Commitments and Contingencies](index=19&type=section&id=Note%206%E2%80%94Commitments%20and%20Contingencies) - The company is a defendant in a putative class action lawsuit (Gorlamari v. Verrica Pharmaceuticals Inc., et al.) alleging federal securities law violations related to manufacturing deficiencies of YCANTH (VP-102)[81](index=81&type=chunk) - Multiple stockholder derivative lawsuits (Cohen, Cannon, Bonaccorso) were filed with similar factual allegations; the Cohen and Cannon actions have been consolidated and stayed, while the Bonaccorso action was voluntarily dismissed[83](index=83&type=chunk)[84](index=84&type=chunk) - Management believes that the ultimate liabilities from these legal proceedings will not materially affect the company's financial position, results of operations, or cash flows[85](index=85&type=chunk) [Note 7—Stockholders' Deficit](index=21&type=section&id=Note%207%E2%80%94Stockholders'%20Deficit) - The company has **200,000,000** authorized shares of common stock, **$0.0001** par value[86](index=86&type=chunk) - A November 2024 offering generated net proceeds of approximately **$39.6 million** from the sale of common stock and pre-funded warrants, along with Series A and B warrants[87](index=87&type=chunk) | Warrant Type | Number of Warrants (June 30, 2025) | Exercise Price | Expiration Date | | :-------------------------------- | :--------------------------------- | :------------- | :-------------- | | Pre-funded warrants (2023 offering) | 148,148 | $0.0001 | No expiration | | OrbiMed debt facility warrants | 51,855 | $34.5040 | 7/26/2033 | | Torii amendment warrants | 50,000 | $95.6000 | 5/14/2034 | | Pre-funded warrants (2024 offering) | 87,400 | $0.0001 | No expiration | | Series A warrants (2024 offering) | 2,387,703 | $10.6800 | 11/21/2025 | | Series B warrants (2024 offering) | 2,387,703 | $13.3500 | 11/20/2029 | - The OrbiMed warrant exercise price was adjusted down to **$34.50** per share due to the November 2024 Offering[88](index=88&type=chunk) - Torii warrants vest based on clinical milestones related to the global Phase 3 Program for common warts[88](index=88&type=chunk) [Note 8—Stock-Based Compensation](index=22&type=section&id=Note%208%E2%80%94Stock-Based%20Compensation) | Expense Category (in thousands) | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Selling, general and administrative | $588 | $1,715 | $1,373 | $3,337 | | Research and development | $300 | $513 | $541 | $963 | | Total stock-based compensation | $888 | $2,228 | $1,914 | $4,300 | - Total stock-based compensation decreased by **$1.3 million** for the three months ended June 30, 2025, and by **$2.4 million** for the six months ended June 30, 2025, compared to the prior year periods[89](index=89&type=chunk) - As of June 30, 2025, unrecognized compensation for unvested stock options was **$5.4 million** (weighted-average period of 2.43 years) and for RSUs was **$30,586** (weighted-average period of 0.27 years)[90](index=90&type=chunk)[91](index=91&type=chunk) [Note 9—Leases](index=22&type=section&id=Note%209%E2%80%94Leases) - The company leases office space in West Chester, PA, as its headquarters, with the initial term expiring September 1, 2027[93](index=93&type=chunk) - A previous operating lease for office space in Scotch Plains, NJ, was terminated effective November 30, 2024[94](index=94&type=chunk) - The company has finance leases for a vehicle fleet program for its sales force, with a term of 52 months[95](index=95&type=chunk) | Lease Type (in thousands) | Three Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | | :-------------------------------- | :------------------------------- | :----------------------------- | | Total finance lease costs | $99 | $203 | | Operating lease costs | $85 | $171 | | Maturity (in thousands) | Operating Lease (in thousands) | Finance Lease (in thousands) | | :-------------------------------- | :-------------- | :------------ | | 2025 (remaining 6 months) | $181 | $198 | | 2026 | $366 | $344 | | 2027 | $246 | $320 | | 2028 | $0 | $133 | | Total lease payments | $793 | $995 | | Weighted average remaining lease term (years) | 2.17 | 2.96 | | Weighted average discount rate | 6.25% | 7.76% | [Note 10—Debt](index=24&type=section&id=Note%2010%E2%80%94Debt) - On July 26, 2023, the company entered into a Credit Agreement for a **$125.0 million** senior secured credit facility, borrowing **$50.0 million** with net proceeds of **$44.1 million**[98](index=98&type=chunk) - The loan matures on July 26, 2028, and principal payments began in January 2025 due to YCANTH net revenue not meeting specified targets[99](index=99&type=chunk) - Interest accrues at SOFR (or **4.00%**) plus **8.00%**, with an additional **4.00%** during an event of default[100](index=100&type=chunk) - The Credit Agreement includes a financial covenant to maintain at least **$10.0 million** in liquidity and requires financial statements not to be subject to a 'going concern' qualification[101](index=101&type=chunk) - Waivers for the 'going concern' requirement were obtained for financial statements through December 31, 2025[101](index=101&type=chunk)[108](index=108&type=chunk) - Interest expense related to the Credit Agreement was **$2.1 million** for Q2 2025 and **$4.3 million** for H1 2025, including non-cash interest[109](index=109&type=chunk) | Debt Component (in thousands) | Short-term (in thousands) | Long-term (in thousands) | Total (in thousands) | | :-------------------------------- | :--------- | :-------- | :---- | | Gross proceeds | $13,953 | $29,070 | $43,023 | | Accrued final payment fee | $1,047 | $2,180 | $3,227 | | Accrued repayment fee | $581 | $47 | $628 | | Unamortized debt discount and issuance costs | $(2,908) | $(6,719) | $(9,627) | | Total debt, net | $12,673 | $24,578 | $37,251 | | Aggregate Maturities (in thousands) | Debt (in thousands) | Final payment fee (in thousands) | Repayment fee (in thousands) | Total (in thousands) | | :-------------------------------- | :--- | :---------------- | :------------ | :---- | | 2025 (6 months remaining) | $6,976 | $524 | $302 | $7,802 | | 2026 | $13,953 | $1,047 | $326 | $15,326 | | 2027 | $13,953 | $1,047 | $0 | $15,000 | | 2028 | $8,141 | $609 | $0 | $8,750 | | Total | $43,023 | $3,227 | $628 | $46,878 | [Note 11—License and Collaboration Agreements](index=27&type=section&id=Note%2011%E2%80%94License%20and%20Collaboration%20Agreements) - The company has a collaboration and license agreement with Torii Pharmaceutical Co., Ltd. for the development and commercialization of cantharidin-based product candidates in Japan[111](index=111&type=chunk) - As of June 30, 2025, the company is entitled to receive an additional **$50.0 million** in aggregate payments from Torii, contingent on development, regulatory, and sales milestones[112](index=112&type=chunk) - The Second Amendment to the Torii Agreement (June 27, 2025) accelerated an **$8.0 million** milestone payment (received July 2025) and changed a **$10.0 million** milestone payment for Japanese approval of YCANTH (TO-208) to cash, rather than an offset[118](index=118&type=chunk) - The company and Torii will equally split the cost of a global Phase 3 program for YCANTH (VP-102) in common warts, with Torii initially paying costs and the company repaying its share through offsets against future royalties and milestones[115](index=115&type=chunk) - A warrant to purchase **50,000** shares of common stock was issued to Torii, vesting upon specific clinical milestones for the common warts program[117](index=117&type=chunk) - The Lytix Agreement grants the company an exclusive license for VP-315 for dermatological indications, with potential milestone payments up to **$111.0 million** and tiered royalties[119](index=119&type=chunk) [Note 12 – Related Parties](index=29&type=section&id=Note%2012%20%E2%80%93%20Related%20Parties) - The CEO, Jayson Rieger, and COO, David Zawitz, are former employees and current consultants to PBM Capital Group, LLC, a significant investor controlled by Paul B. Manning[120](index=120&type=chunk) [Note 13 – Subsequent Event](index=29&type=section&id=Note%2013%20%E2%80%93%20Subsequent%20Event) - The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, introducing changes to U.S. federal tax law[121](index=121&type=chunk) - Due to a full valuation allowance against U.S. federal deferred tax assets, the company does not currently expect the OBBBA to have a material impact on its financial statements[121](index=121&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis of financial condition and results, covering dermatology focus, YCANTH, pipeline, and liquidity [Overview](index=30&type=section&id=Overview) - Verrica Pharmaceuticals Inc. is a dermatology therapeutics company focused on clinician-administered therapies for skin diseases[125](index=125&type=chunk) - YCANTH (VP-102) was approved by the FDA in July 2023 for molluscum contagiosum and commercially launched in August 2023[125](index=125&type=chunk)[126](index=126&type=chunk) - The company is developing YCANTH (VP-102) for common warts, with a Phase 3 program initiated with Torii, expecting the first patient to be dosed in Q4 2025[127](index=127&type=chunk) - VP-315, an oncolytic peptide-based injectable therapy, is being developed for basal cell carcinoma (BCC) and other dermatological oncology indications, with additional data expected by end of 2025[129](index=129&type=chunk) [Liquidity Overview](index=31&type=section&id=Liquidity%20Overview) - The company has funded operations primarily through equity sales and borrowings, including a **$50.0 million** Loan Facility in July 2023[130](index=130&type=chunk)[131](index=131&type=chunk) - Principal payments on the Loan Facility began in January 2025 due to YCANTH net revenue not meeting specified targets[131](index=131&type=chunk) - A 'going concern' waiver was obtained for financial statements through December 31, 2025, but future waivers or additional financing are crucial to avoid default[132](index=132&type=chunk) - A November 2024 offering generated **$39.6 million** in net proceeds from common stock and warrant sales[133](index=133&type=chunk) - As of June 30, 2025, cash and cash equivalents were **$15.4 million**, and the company has an accumulated deficit of **$316.6 million**, raising substantial doubt about its ability to continue as a going concern[134](index=134&type=chunk) - Future expenses are expected to increase due to commercialization infrastructure, manufacturing scale-up, ongoing clinical programs (YCANTH for common warts, VP-315 for BCC), regulatory compliance, intellectual property, and public company operating costs[136](index=136&type=chunk)[144](index=144&type=chunk) [Reverse Stock Split](index=33&type=section&id=Reverse%20Stock%20Split) - A **one-for-ten (1-for-10)** reverse stock split was effective on July 25, 2025, retroactively adjusting all share and per share amounts in the report[137](index=137&type=chunk)[138](index=138&type=chunk) - The reverse stock split proportionately adjusted exercise prices and shares issuable under outstanding options and warrants, and reduced shares authorized for equity incentive plans[137](index=137&type=chunk) [Critical Accounting Estimates](index=33&type=section&id=Critical%20Accounting%20Estimates) - The preparation of financial statements requires management to make estimates, judgments, and assumptions that affect reported amounts[139](index=139&type=chunk) - Key accounting policies are detailed in Note 2 to the financial statements, which are important for understanding financial results[140](index=140&type=chunk) [Components of Results of Operations](index=33&type=section&id=Components%20of%20Results%20of%20Operations) - Product revenue, net, is recognized from YCANTH (VP-102) sales upon physical delivery to pharmaceutical wholesalers/distributors, reduced by gross-to-net (GTN) estimates[141](index=141&type=chunk)[142](index=142&type=chunk) - License and collaboration revenue stems from the Torii Agreement, granting an exclusive license for cantharidin-based product candidates in Japan[143](index=143&type=chunk) - Cost of product revenue includes direct manufacturing and supply chain costs for YCANTH (VP-102) and inventory write-downs[146](index=146&type=chunk) - Cost of collaboration revenue covers payments for manufacturing supply and development/testing services under the Torii Clinical Supply Agreement[147](index=147&type=chunk) - Selling, general and administrative expenses include personnel costs (salaries, stock-based compensation), travel, recruiting, marketing, insurance, and professional fees[148](index=148&type=chunk) - Research and development expenses are expensed as incurred and include costs for clinical trials, manufacturing, scientific services, personnel, regulatory activities, and laboratory supplies[149](index=149&type=chunk)[151](index=151&type=chunk) - R&D expenses are expected to increase with advancing clinical development stages, but the successful development of product candidates remains highly uncertain[149](index=149&type=chunk)[150](index=150&type=chunk) [Results of Operations for the Three Months Ended June 30, 2025 and 2024](index=37&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20June%2030,%202025%20and%202024) | Metric (in thousands) | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change (Q2 2025 vs Q2 2024) (in thousands) | | :-------------------------------- | :------ | :------ | :-------------------------- | | Product revenue, net | $4,534 | $4,892 | $(358) | | License and collaboration revenue | $8,168 | $285 | $7,883 | | Total revenue | $12,702 | $5,177 | $7,525 | | Total operating expenses | $11,192 | $20,383 | $(9,191) | | Income (loss) from operations | $1,510 | $(15,206) | $16,716 | | Net income (loss) | $204 | $(17,186) | $17,390 | - Product revenue, net, decreased by **$0.4 million**, with Q2 2024 including a one-time stock-in related to distribution network expansion (**54%** of Q2 2024 product revenue)[155](index=155&type=chunk) - License and collaboration revenue increased significantly by **$7.9 million**, primarily due to an **$8.0 million** milestone payment from Torii[156](index=156&type=chunk) - Selling, general and administrative expenses decreased by **$7.7 million**, driven by reduced commercial activities, sales force, marketing, and legal costs[159](index=159&type=chunk)[160](index=160&type=chunk) - Research and development expenses decreased by **$1.5 million**, mainly due to lower CMC, medical affairs, and clinical operations costs, particularly for VP-315[161](index=161&type=chunk)[162](index=162&type=chunk) - Interest income decreased by **$0.2 million** due to a lower cash balance[163](index=163&type=chunk) - Interest expense decreased by **$0.2 million** due to a lower outstanding principal balance on the OrbiMed Credit Agreement[164](index=164&type=chunk) - A **$0.6 million** change in fair value of derivative liability was recognized in Q2 2025, compared to $0 in Q2 2024, due to principal payments starting in January 2025[165](index=165&type=chunk) [Results of Operations for the Six Months Ended June 30, 2025 and 2024](index=40&type=section&id=Results%20of%20Operations%20for%20the%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) | Metric (in thousands) | H1 2025 (in thousands) | H1 2024 (in thousands) | Change (H1 2025 vs H1 2024) (in thousands) | | :-------------------------------- | :------ | :------ | :-------------------------- | | Product revenue, net | $7,956 | $8,124 | $(168) | | License and collaboration revenue | $8,185 | $879 | $7,306 | | Total revenue | $16,141 | $9,003 | $7,138 | | Total operating expenses | $22,761 | $42,808 | $(20,047) | | Loss from operations | $(6,620) | $(33,805) | $27,185 | | Net loss | $(9,538) | $(37,517) | $27,979 | - Product revenue, net, remained relatively stable, decreasing slightly by **$0.2 million**, with H1 2024 including a one-time stock-in (**32%** of H1 2024 product revenue)[168](index=168&type=chunk) - License and collaboration revenue increased by **$7.3 million**, primarily due to an **$8.0 million** milestone payment from Torii[169](index=169&type=chunk) - Cost of collaboration revenue decreased by **$0.6 million** due to reduced manufacturing supply for Torii development and testing services[171](index=171&type=chunk) - Selling, general and administrative expenses decreased by **$15.2 million**, mainly from lower commercial activities, sales force, marketing, and legal/G&A costs[172](index=172&type=chunk) - Research and development expenses decreased by **$4.1 million**, primarily due to reduced clinical trial costs for VP-315 and lower regulatory/medical affairs costs[173](index=173&type=chunk)[174](index=174&type=chunk) - Interest income decreased by **$0.4 million** due to a lower cash balance[175](index=175&type=chunk) - Interest expense decreased by **$0.4 million** due to a lower outstanding principal balance on the OrbiMed Credit Agreement[176](index=176&type=chunk) - A **$0.9 million** change in fair value of derivative liability was recognized in H1 2025, compared to $0 in H1 2024, due to principal payments starting in January 2025[177](index=177&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2025, cash and cash equivalents were **$15.4 million**, with an additional **$8.0 million** milestone payment received from Torii in July 2025[178](index=178&type=chunk)[189](index=189&type=chunk) - The company has incurred substantial operating losses since inception, with an accumulated deficit of **$316.6 million** as of June 30, 2025[189](index=189&type=chunk) - Substantial doubt exists regarding the company's ability to continue as a going concern within one year, given current capital resources and debt obligations[189](index=189&type=chunk)[190](index=190&type=chunk) - The company plans to secure additional funding through equity/debt financings, collaborations, and licensing arrangements to address liquidity and fund operations[190](index=190&type=chunk)[193](index=193&type=chunk) - Potential additional liquidity in 2025 includes a **$10.0 million** milestone payment for YCANTH (TO-208) approval in Japan and up to **$25.0 million** from Series A Warrants exercise[190](index=190&type=chunk) - The company is subject to 'baby shelf rules,' limiting primary public offerings to one-third of its public float until it exceeds **$75.0 million**[188](index=188&type=chunk) - Future capital requirements depend on factors such as YCANTH sales, regulatory review, clinical trial costs, R&D programs, intellectual property, and manufacturing scale-up[192](index=192&type=chunk) | Cash Flow Category (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(22,721) | $(36,305) | | Net cash used in investing activities | $0 | $(11) | | Net cash used in financing activities | $(8,212) | $(1,301) | | Net decrease in cash and cash equivalents | $(30,933) | $(37,617) | - Operating activities used **$22.7 million** in H1 2025, an improvement from **$36.3 million** in H1 2024, primarily due to reduced net loss and changes in receivables[184](index=184&type=chunk)[185](index=185&type=chunk) - Financing activities used **$8.2 million** in H1 2025, mainly for debt repayment, compared to **$1.3 million** used in H1 2024 for debt amendment costs[187](index=187&type=chunk) [Contractual Obligations and Commitments](index=47&type=section&id=Contractual%20Obligations%20and%20Commitments) - There have been no material changes to contractual obligations and commitments as of June 30, 2025, compared to those disclosed in the Annual Report on Form 10-K for December 31, 2024[195](index=195&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risks](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risks) Reports no material changes to market risk disclosures since the December 31, 2024, Annual Report on Form 10-K - No material changes to quantitative and qualitative disclosures about market risk have occurred since the December 31, 2024, Annual Report on Form 10-K[196](index=196&type=chunk) [Item 4. Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) Details evaluation of disclosure controls, concluding effectiveness with no material changes to internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=47&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management, including the CEO and Interim CFO, concluded that disclosure controls and procedures were effective as of June 30, 2025[197](index=197&type=chunk) [Changes in Internal Control over Financial Reporting](index=47&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the quarter ended June 30, 2025[198](index=198&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=47&type=section&id=Item.%201%20Legal%20Proceedings) Updates on ongoing legal proceedings, including class action and derivative lawsuits, with no material financial impact expected - The company is involved in a putative class action lawsuit (Gorlamari v. Verrica Pharmaceuticals Inc., et al.) alleging federal securities law violations related to manufacturing deficiencies of YCANTH (VP-102)[199](index=199&type=chunk) - Multiple stockholder derivative lawsuits (Cohen, Cannon, Bonaccorso) were filed with similar factual allegations; the Cohen and Cannon actions have been consolidated and stayed, while the Bonaccorso action was voluntarily dismissed[201](index=201&type=chunk) - Management believes that the ultimate liabilities from these legal proceedings will not materially affect the company's financial position, results of operations, or cash flows[202](index=202&type=chunk) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) Refers to risk factors from the Annual Report on Form 10-K and highlights a new risk from the reverse stock split - Readers should consider risk factors from the Annual Report on Form 10-K for December 31, 2024[203](index=203&type=chunk) - A new risk factor is the potential for reduced market trading liquidity and an anti-takeover effect due to the **1-for-10** reverse stock split, which may not achieve the intended increase in per-share market price[204](index=204&type=chunk) [Item 5. Other Information](index=49&type=section&id=Item%205.%20Other%20Information) Reports on Rule 10b5-1 and non-Rule 10b5-1 trading arrangements by directors and officers - No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[205](index=205&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Quarterly Report on Form 10-Q, including corporate documents, amendments, and certifications - The exhibit index includes corporate documents (Amended and Restated Certificate of Incorporation, Bylaws), amendments to the Credit Agreement and Collaboration and License Agreement, and certifications from the CEO and Interim CFO[208](index=208&type=chunk) [Signatures](index=51&type=section&id=Signatures) Contains required signatures for the Quarterly Report on Form 10-Q, confirming submission on behalf of Verrica Pharmaceuticals Inc. - The report is signed by Jayson Rieger, Chief Executive Officer and President, and John J. Kirby, Interim Chief Financial Officer, on August 12, 2025[214](index=214&type=chunk)