Good evening, ladies and gentlemen, and welcome to the Verrica 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 Fraunces of LifeSci Advisors. You may begin your conference.

Thank you, operator. Hello, everyone, and welcome to Verrica Pharmaceuticals’ fourth quarter and full year 2024 corporate update conference call. With me on the line this evening are Jayson Rieger, President and Chief Executive Officer of Verrica Pharmaceuticals; John Kirby, Interim Chief Financial Officer; David Zawitz, Chief Operating Officer; Chris Hayes, Verrica’s Chief Legal Officer, and Aaron Hullitt, 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 wide can, the treatment of molluscum contagiosum in the United States, regulatory developments, the development of Verrica’s product candidates, company's expected cash runway and its ability to obtain funding for future operations, and Verrica'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, Verrica's actual results and the timing of events could differ materially from those anticipated in such forward-looking statements. Please see Verrica's SEC filings for important risk factors. Verrica 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 versus 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 Verrica's website. I'll now turn the call over to Verrica's President and CEO, Jayson 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 Verrica, 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 YCANTH 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 as a company with a clear focus on maximizing YCANTH utilization for the treatment of molluscum contagiosum and advancing our late stage pipeline programs. We continue to support our development partner, Torri Pharmaceutical, in their effort to obtain approval from Japanese regulators for TO-208, referred to as YCANTH in the United States. And we were happy to see their filing of a new drug application in Japan for TO-208 during the fourth quarter of 2024. We are also excited to continue to work with Lytix Biopharma in advancing our basal cell carcinoma asset, BP-315. 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…

Thanks, Jayson. I'd like to start by covering our recent financing activities, which have enabled us to strengthen our balance sheet. In November, we raised $42 million in a public offering of common stock, refunded warrants, and accompanying Series A and B warrants. As you will recall, in July, 2023, Verrica entered into a debt financing with OrbiMed, and upon closing of the agreement, we borrowed $50 million from the facility. In February of this year, we negotiated with OrbiMed a waiver of certain covenants under our credit agreement, including the requirement that there be no going concern qualification with respect to the financial statements for the period ended December 31, 2024 and March 31, 2025. Turning to the financial results, for the fourth quarter and full year of 2024, we reported total revenues of $0.3 million, which was substantially all YCANTH revenue. Net YCANTH revenue reflects shipments to our distributor partners, offset by standard gross to net adjustments, including actual or anticipated product returns, all invoice discounts and distribution fees, and expenses. For the full year 2024, we reported total revenue of $7.6 million versus $5.1 million in the prior year. Total revenue for 2024 included net product revenue of $6.6 million versus net product revenue of $4.7 million in the prior year. As a reminder, YCANTH became available for commercial sale and shipment to patients in August of 2023. And so we did not recognize any product revenue prior to that point. Collaboration revenues of $29,000 in the fourth quarter of 2024 related to our supply of applicators to Torri in connection with their development and commercialization activities. For the full year 2024, collaboration revenue was $1 million compared to half a million dollars for the year ended December 31, 2023. Similarly to the fourth quarter, collaboration revenue…

Thanks, John. Although I arrived at Verrica just a few months ago, I can tell you that we have made an extraordinary amount of progress over a very short period of time. We are faithfully executing on our new strategic initiatives across every area of our company, and I believe we are now on a pathway towards strong and sustainable growth for YCANTH and our development programs. We have cut non-essential spending as we execute on our strategy. Core to our commercial strategy is an emphasis on fostering an environment that will lead to more solid, long-term relationships with the physicians and the patients that we serve. As I mentioned earlier, we are also excited about the outstanding progress we are making in our clinical stage pipeline. As these programs continue to advance, we believe investors will see the massive potential of these programs, each of which could become the new standard of care in their respective indications. In summary, the Verrica team has executed with a true sense of purpose and urgency in the few short months since I joined in November. As a commercial stage company with a robust pipeline, we are excited about the future of Verrica. We are seeing the fruits of the efforts over the last few months take hold as reflected by increased ease of access to YCANTH by HGPs, increased dispensed units, reduction in channel inventory, and advancement of our pipeline programs, all at a pace ahead of our initial thoughts late last year. In YCANTH, we not only have a commercial product for the treatment of molluscum that is already back on a positive growth trajectory, but we also are uniquely positioned to address the largest and most underserved population in all of dermatology in common warts, as well as perhaps change the paradigm in which HGPs treat basal cell carcinoma through VP-315. I would like to thank all of my Verrica teammates, both in the field and in our corporate organization. Going through a turnaround is difficult and requires substantial additional efforts to properly execute, and the way that I am seeing our team respond to tough situations has strengthened my resolve that we can be successful and achieve positive outcomes for our physician customers and their patients. We believe we will emerge from this transition as a much stronger and capable team, when working in close alignment to ensure that Verrica achieves its potential and becomes one of the most innovative, high-growth companies in dermatology drug development. With that, we'll be now happy to take your questions. Operator?

Thank you. [Operator Instructions] We will move first to Stacy Ku with TD Cowen.

Hey, thanks so much for taking our questions and congratulations on the progress. So maybe a first question around maybe that patient demand. You talked about the applicators that are dispensed, but are you getting a sense around the number of patients, roughly, that are being treated with YCANTH, maybe from average dosing? Maybe talk about the feedback that you're getting from clinicians about whether or not it's now getting a little bit easier to access YCANTH, whether they're able to kind of get that infrastructure that you're trying to improve. So that's the first question. And then obviously, the second question is looking to ‘25. Can you comment what you're seeing early in the year in terms of YCANTH adoption? Now that we're in March, understand that you're trying to stay high level, but how's the new single applicator doing? How's broadening to pediatricians? Any type of maybe high level commentary about early ‘25 would be appreciated as you're trying to kind of change the strategy. And then maybe the last comment is going to be around your expectations on sales for ‘25. Consensus is around $15 million. So maybe discuss your thoughts on where sell side is versus some of the sales force investment and potential R&D investment as it relates to your guidance to be cash positive monthly operating results by year end. Thank you so much.

Thank you, Stacey. This is Jayson. I appreciate all those questions. I'll try and tackle them in order. If I leave something out, please feel free to follow up. In general, we're seeing very good adoption and interest in the use of YCANTH for the treatment of molluscum, both across the pediatrician market, but also our core dermatology market as well. The patients who are seeking the dermatologist and the pediatricians and are getting treated. Obviously, we published our clinical results and the efficacy and safety of YCANTH has been disclosed and has been well accepted by the medical professionals. And we're seeing the continued use of the product. Depending on the pediatrician or the dermatologist, we'll see them using obviously several applicators or sometimes one depending on the need of that patient. We still encourage treatment to clearance as we did in our clinical study and as the FDA helped us in designing that program. The mixture of those treating with YCANTH continues to be a blend of all healthcare providers as we continue to roll out the program. In terms of 2025, I think we're continuing to see good momentum that we saw going into the end of last year. As we discussed in the past, we expected this to be a turnaround and would take into the first quarter to realize. And we're starting to see that traction even ahead of our original schedule. We're still being cautiously optimistic, but remain optimistic and confident. We'll continue to see growth in the business. And we're wrapping up the quarter and we'll be disclosing updates on that, obviously, in the next few months as the quarter comes to a close. In terms of guidance and consensus. At this point, we're going to just leave guidance where the analysts have left it so far. And as we gain momentum in the year and have better clarity on that, we may have further conversations. But at this point, our policy is not to provide revenue guidance.

Okay, incredibly helpful. Thank you.

Thank you, Stacey.

We'll go next to Gregory Renza with RBC Capital Markets.

Great, great. Hey, good afternoon, Jayson and team. Congrats on the progress ahead of schedule. Thanks for taking my question. Jayson, maybe just building on your commentary as you're focusing the field force and your efforts and as you've really geared towards that demand generation. I'm just curious if you could comment on maybe some of those seasonal tailwinds or even sort of the periodic headwinds that can occur throughout a year as certainly we enter the warmer months, the spring and the summer. Do you have any views on what you're hearing as far as potential lifts or momentum that you get as it converges with the demand generation you're working on? Thanks so much.

No problem. So I would say that we've been establishing this business to be poised for both changes in seasonality if they are to occur. Often there is commentary that as the weather warms up and kids are more active outside that could continue to support the growth. And we're building our sales force and our team to be prepared for both the seasonality should it occur going into the second quarter and third quarter or beyond this year as the weather warms up. Fortunately, beautiful weather out today. I think spring is rapidly approaching and we'll see that obviously there was some rough winter weather this year. And we've been very, very optimistic by what we've seen so far. Given the weather, the time of year, the deductible season, et cetera. And so we remain cautiously optimistic about what this quarter and the upcoming quarters will look like.

That's helpful. And maybe just a longer term question. Maybe just remind us of how you're framing up the barriers to generic entry, the ultimate IP protection that you see with respect to YCANTH.

We actually have a very robust IP portfolio that takes us well into the future. And in terms of generics, obviously that's a long way off. Historically, the compounders have been the predominant concern and we're working through both any challenges from them, but also just going to where the market is and we're finding good adoption to our product. They have historically removed the 503B compounders from the market, predominantly from Canada. That settlement was announced last year and we're moving forward with our program and finding good adoption.

Thanks again. I'll hop back in the queue.

Thanks, Greg.

We'll go next to Serge Belanger with Needham & Company.

Hi, this is John on for Serge today. Thanks for taking our questions. So first on YCANTH, you've previously spoken on looking to expand usage beyond dermatologists and into the pediatric setting. Just wanted to gauge what sort of impact you've had on this front thus far and what you aim to achieve in terms of distribution between pediatrics and dermatologists in the future.

So to that front, I would say that we are focusing on where the patients are going and we've seen a growth in the pediatric market. The product did start in the derms and I would say the derms have been a customer base that's both loyal to us and we continue to both focus on and support. And we have found in some cases, our pediatric derms, other derms have worked with us to expand access to their pediatric colleagues in the same community. At this moment, I would say the majority of our customers are still dermatologists who see the patients, but we're seeing a very large growing percentage of the pediatrician treating with YCANTH. So I would expect over time, that mix is probably going to waffle back and forth between 60-40, 40-60, depending on how this product rolls out but we're rapidly approaching sort of that equilibrium now.

Okay, that's great. Thank you. And real quick on the VP-315, obviously we'll see some additional data and FDA minutes in the first half here. But considering your new cost structure, I was just curious what your plans are in terms of timing to move this program into Phase 3s.

Yeah, so as we've indicated before, we're very fortunate that all the, the majority of the expense for that program was spent in the prior year. And the remaining data that's being collected in the regulatory interactions are de minimis in cost. Once we have that data in hand and that full package, we'll evaluate the program. It'll also help us determine what the cost of that development program might look like. And we can then explore the best way to advance the program with all options available to us. The company does currently own the full rights to the program. So we have lots of opportunity for developing and advancing it and we'll make a disclosure on what we may or may, what we may do to advance it once we have definitive FDA feedback and can confirm on what a development plan looks like.

Great, thank you.

Yeah.

We'll go next to Kemp Dolliver with Brookline Capital Markets.

Great, thanks. You're seeing a sequential uptick in demand for applicators and continuing to make some progress. What do you think you need to do to achieve what I think you've described as a hockey stick improvement in demand at some point?

Sure, so I think, you know, growth in any business requires two things. Acquisition of new customers as well as continued use utilization and growth of existing customers. Fortunately we're seeing both in this business as we've done the turnaround and are moving forward. Our sales reps are very, very active in the field in dealing with customer needs. Our reimbursement teams are there to help. We have an expanded access through telesales to cover white space and additional support. And ultimately it's going to require advancing into larger markets. And so we have historically worked with and are engaging with some of the larger practices, both that exist in the pediatric and the dermatology community as well as expanding with the independent pharmacies and our pharma distribution partner, Nufactor. I think those are ways that we can provide product in a scalable way to customers and start seeing extra reach. So I think that's one of -- those are some of the key areas we'll see expansion and growth in the market.

Thank you.

It appears we have no further questions at this time. I will turn the conference back to Mr. Rieger for any additional or closing comments.

Thank you, operator. I'd like to thank you all for joining this evening. And we look forward to providing updates on our progress throughout 2025. Thank you very much.

Thank you. Ladies and gentlemen, that will conclude today's call. We thank you for your participation. You may disconnect at this time.