Good evening, ladies and gentlemen, and welcome to the Verrica Pharmaceuticals Second Quarter 2025 Corporate Update Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I will now turn the call over to your host, Kevin Gardner of LifeSci Advisors. You may begin your conference.

Thank you, operator. Hello, everyone, and welcome to Verrica Pharmaceuticals Second Quarter 2025 Corporate Update Conference Call. With me on the line this evening are Jayson Rieger, President and Chief Executive Officer of Verrica Pharmaceuticals; Noah Rosenberg, Chief Medical Officer; John Kirby, Interim Chief Financial Officer; and David Zawitz, Chief Operating Officer. As a reminder, during today's call, management will make forward-looking statements. These forward-looking statements are based on the company's current expectations and involve inherent risks and uncertainties. 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 compared to their closest GAAP equivalents. The earnings release that the company issued today includes GAAP to non-GAAP reconciliations for these measures and is also available on the Investor Relations section of Verrica's website. I'll now turn the call over to Verrica's President and CEO, Jayson Rieger.

Thank you, Kevin, and good evening, everyone, and thank you for joining us for our second quarter 2025 corporate update call. The second quarter featured a number of notable accomplishments across multiple areas of our business, each of which has made us stronger as a company. First and foremost, I'm very pleased with the continued execution from our commercial team, which continues to grow our YCANTH business and is now helping thousands of patients and their families treat molluscum contagiosum every month. On July 9, we reported a record 13,434 YCANTH dispensed applicator units in the second quarter, which represents sequential quarterly growth of 32.8% over the prior quarter. In a moment, I will describe in more detail our recent business experience and the tailwinds that are helping to drive this growth. We also made major progress in strengthening our relationship with Torii Pharmaceutical, our development partner for YCANTH in Japan. As we announced on July 1, at the end of the quarter, we executed an amendment to our agreement with Torii, whereby we secured Torii's financial commitment to starting our planned global Phase III program to study YCANTH in patients with common warts. And we also received an $8 million milestone payment from Torii shortly thereafter in July. I'll describe in greater detail later in the call the financial and strategic benefits stemming from the Torii amended agreement, which we view as a significant driver of value for our shareholders into the future. I'll also share a brief update on our development plans for VP-315, our other late- stage pipeline asset, which is ready for Phase III trials for the treatment of basal cell carcinoma. We believe this program has strong potential to drive future value for Verrica. Finally, John will take and provide a detailed review of our…

Thanks, Jayson. I'll now take a few minutes to summarize our financial results for the quarter ended June 30, 2025. For the second quarter of 2025, we reported total revenue of $12.7 million compared to total revenue of $5.2 million in the second quarter of 2024. Total revenue for the second quarter of 2025 primarily consists of $8 million of Torii milestone revenue and net YCANTH revenue of $4.5 million compared to no milestone revenue and $4.9 million of net YCANTH revenue in the second quarter of 2024. Net YCANTH revenue in the second quarter of 2025 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 programs. As a reminder, in the second quarter of 2024, approximately 54% of net YCANTH revenue represented a onetime impact of an initial stocking order from a new specialty distributor. This year, as Jayson mentioned earlier, net YCANTH revenue represents orders from our distribution partners to meet demand from their customers. Gross product margins for the second quarter of 2025 were approximately 93% and cost of product revenue was $0.3 million, with no material obsolete inventory costs. Research and development expenses of $1.8 million in the second quarter of 2025 decreased compared to the second quarter of 2024 by $1.5 million, driven by a $0.8 million decrease of clinical trial expenses primarily related to VP-315 as well as decreases in costs related to CMC and medical affairs expenses of $0.6 million. Selling, general and administrative expenses of $8.9 million in the second quarter of 2025 decreased compared to the second quarter of 2024 by $7.7 million, driven primarily by the implementation of our more focused commercial strategy for YCANTH, including a reduction in sales force of $5.7 million,…

Thanks, John. Based on the performance for the first half of 2025, we believe it is increasingly evident that our more focused commercial strategy is helping to drive significant demand for YCANTH. This demand is being driven primarily by the unique attributes of our product, robust commercial and Medicaid insurance coverage and most importantly, the outstanding relationships that our commercial team continues to build in the medical community. Looking at the second half of the year, I believe we remain on track to realize strong and sustainable growth based on the significant momentum in our business. We expect our commercial team will continue to execute. And with our recently amended agreement with Torii, Verrica has also taken important steps to realize the long-term value in our late-stage pipeline. We are excited about the future of our company and significant value-creating opportunities that lie ahead for us as YCANTH utilization continues to expand and our clinical programs into pivotal testing. With that, we would now be happy to take your questions. Operator?

[Operator Instructions] We'll take our first question from Stacy Ku with TD Cowen.

Congrats on the quarter. So we have a few questions. First, now have been 2 quarters kind of discussing high level the expansion of the sales force. So could you provide more details how many additional, let's say, folks are you considering in the near term? And then for those areas of success, are you able to pinpoint what exactly is maybe the few reasons for increased YCANTH adoption? So that's the first question. The second question is compounded cantharidin, something that we haven't asked about recently. So just kind of curious with the sales force that's really now reacquainting themselves with YCANTH and the prescribers, what are they experiencing currently in terms of maybe the feedback you're hearing there? And then last question is on consensus, which has now increased to between $15 million to $20 million, so a touch above the $15 million from before. So curious what are your views? And of course, as a housekeeping -- for housekeeping purposes, maybe provide some additional color around the specialty distributor. Is that going to result in any lumpiness between quarters?

Well, thanks, Stacy. This is Jayson. I appreciate all the questions. Keep me honest if I leave any of them out and don't answer them fully. In terms of the sales reps, we were around 35 late last year and into the beginning of this year, and we expect that number to stay within that range to maybe 5 or 10 more in the short-term predictable future. I think that gives us robust coverage across the country, and we also buttress that with some inside sales and other support sales mechanisms. In terms of what's driving success, I think there's a lot of factors there. One, just the pure tenacity of our sales reps being out there calling on doctors every day and advocating the support for YCANTH, but that's coupled by strong support in the medical community on the clinical and safety benefits and efficacy benefits of YCANTH for patients. We worked very hard to improve access to YCANTH, both through the buy-and-bill mechanism where the company focused initially on the launch, but also through our expanding pharmacy network where patients can access the drug; b, a doctor writing a script to the pharmacy and that pharmacy couriering under a white bag service right back to the doctor. So that goes into the normal pharmacy benefit. Commercial patients only pay up to $25 for 2 applicators and the drug is there for their treatment. So that's been a very big advantage. A lot of these doctors, particularly dermatologists, have preferred local pharmacies that they've worked with historically and provide great customer service, and that provides very rapid access to the drug for treatment of their patients. In terms of compounded cantharidin, as we've said in the past, it is on the book drugs list. It is available and clinicians can access it. We've seen a significant change in that utilization. We still do find it on-site from time to time, but it is allowed to be used for common warts and other indications. But we've seen a larger adoption of the use of compounded cantharidin only for that indication and much more use of YCANTH for molluscum. We continue to simply advocate for the value proposition of YCANTH for the patients and the clinicians that are treating them. In terms of consensus, I appreciate you always asking for forward-looking guidance. I know that $15 million to $20 million is sort of where the analysts seem to be, as you indicated. I think our goal is to continue to execute quarter-over-quarter in growing the number of applicators dispensed on our underlying revenue. So at this point, we continue to grow, continue to push and make that happen, and we'll see where the next rest of the year comes from.

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

This is John on for Serge today. Congrats on the continued progress. So you reported another solid quarter of growth in dispensed applicator units, 17% in Q1 and now 33% in Q2. So since we're still in peak season here for molluscum, I just wanted to gauge if we should expect similar growth for Q3 or more of a less pronounced growth trajectory just based on seasonality trends? And then second, regarding patient access. I believe you've previously mentioned the majority of pediatrics are covered under Medicaid. Just curious how progress is going there? And any updates on the derm side, particularly pertaining to improvements in commercial coverage?

Thank you. So in terms of general guidance, we don't really give that. What we can say is molluscum seems to be a disease that exists year round. It's often diagnosed as a secondary diagnosis when a parent is at a pediatrician and asks for what is the spot of my child, and we're trying to capture and encourage that treatment rather than a watch-and-wait mentality. And we're seeing adoption of that approach, both by pediatricians and by dermatologists. We are seeing an uptick in the number of pediatricians and the number of [ dermatologists ] both who treat molluscum with YCANTH. So we're seeing that trend continue. In terms of just the general accessibility of the drug, I think that's where the growth is going to continue to come. As it's easier for clinicians to gain access to the product and the coverage continues to expand, that will continue to help. Every quarter, we seem to get greater access on either Medicaid or commercial access to YCANTH across the country as we build robust coverage both on the medical and the pharmacy side. So every quarter, we seem to get greater coverage in one of those sort of 4 categories, and we continue to use that as a driving factor for bringing on and expanding our sales force and our commercialization efforts.

[Operator Instructions] We'll go next to Kemp Dolliver with Brookline Capital.

A couple of questions on the receivables and then GTN. The receivables had a pretty sharp increase quarter-to-quarter. Can you comment on the drivers of that because they looked like they were in excess of the growth in revenue sequentially? And then also, what are you seeing with GTN, particularly with the increased use of the $25 co-pay program?

Kemp, this is John. Thanks for your question. So remember that our collection terms are 60 days. So if you think about it, things that were sold in the second and third month of the quarter are being collected in the first and second month of the following quarter. So that gives rise to part of the increase. Also from the -- your second question, which...

Gross to net.

Gross to net, sorry. So you can -- our WACC is out there. You can get a rough estimate from the dispensed applicator units, which we are disclosing or have disclosed for the second quarter and the first quarter. As Jayson noted in his comments during the beginning of the call, right, we do have -- we have been trying to get the product out there and get the patients treated and the co-pay card has been used. So that may lead to slightly different gross to nets in the future, but we haven't given direct guidance on the gross to nets. Also, just to -- sorry, to come back to your first question, just to confirm, my comments were around the commercial receivables. The $8 million Torii receivable was included in a separate line item on the balance sheet, but that was another $8 million in receivable. But obviously, that's a unique item, shall we say.

Right and higher quality. And then just to clarify on the GTN, have you changed WACC since launch?

We have not.

And that does conclude today's question-and-answer session. I would now like to turn the call back over to Jayson Rieger for final and closing remarks.

Thank you, operator. I'd just like to thank everyone for joining the call this evening, and we look forward to providing updates on our progress throughout 2025. Have a great evening.

Thank you. And this does conclude today's program. We thank you for your participation. You may disconnect at any time.