Verrica Pharmaceuticals’ Earnings Call: Growth Amid Challenges

Verrica Pharmaceuticals ((VRCA)) has held its Q4 earnings call. Read on for the main highlights of the call.

Verrica Pharmaceuticals’ recent earnings call revealed a mixed sentiment, with notable achievements in financial strengthening, sales growth, and clinical advancements. Despite these positive strides, the company faces challenges related to obsolete inventory costs, suboptimal revenue figures, and financial covenant concerns. The overall tone was optimistic, focusing on the progress made in fundraising, sales, and clinical developments.

Successful Fundraising and Improved Financial Position

Verrica Pharmaceuticals successfully raised approximately $42 million through an equity follow-on offering in November 2024. This significant fundraising effort has bolstered the company’s balance sheet and secured a waiver of the going concern covenant from OrbiMed for the quarter and year ended December 31, 2024, and the first quarter of 2025. This financial maneuvering has provided Verrica with the necessary capital to continue its operations and strategic initiatives.

Positive Growth in YCANTH Sales

The company reported a 12.3% increase in YCANTH dispense applicator units in Q4 2024 compared to the previous quarter, and a 44.8% increase compared to Q2 2024. This growth is attributed to a new commercialization strategy that has enhanced the productivity of sales representatives and reduced operating expenses by approximately 50%. This positive trend in sales is a testament to the effectiveness of Verrica’s strategic adjustments.

Progress in Clinical Pipeline

Verrica has made significant advancements in its clinical pipeline, particularly with YCANTH for common warts and the novel oncolytic peptide BP-315 for basal cell carcinoma. The company presented positive preliminary results for BP-315, showing a calculated objective response rate of 97%. These developments are promising for the company’s future in clinical treatments.

Market Expansion and Product Accessibility

To enhance product accessibility, Verrica introduced a new single applicator configuration for YCANTH, aimed at reducing acquisition costs for physicians and expanding patient access. The company has also improved distribution through specialty pharmacies, further broadening its market reach.

Obsolete Inventory Costs

The financial performance of Verrica was impacted by $0.9 million in obsolete inventory costs. This challenge highlights the need for better inventory management to avoid future financial setbacks.

Suboptimal Revenue Figures

Verrica reported total revenues of $0.3 million for the fourth quarter and $7.6 million for the full year of 2024. These figures reflect the company’s struggle to achieve higher revenue growth, indicating areas for potential improvement.

Debt and Financial Covenant Concerns

The company did not meet the thresholds specified in the OrbiMed debt agreement as of December 31, 2024, which has triggered the initiation of principal payments beginning in 2025. This situation underscores the importance of financial management and strategic planning to meet debt obligations.

Forward-Looking Guidance

Looking ahead, Verrica Pharmaceuticals provided guidance for fiscal year 2024 and beyond, emphasizing several key metrics and strategic developments. The company anticipates further growth in YCANTH sales, with a sequential quarterly growth of 12.3% in dispense applicator units. Verrica aims to advance its clinical pipeline, including a global Phase 3 trial for YCANTH in common warts, and continues to support partners in regulatory efforts in Japan. With cash and cash equivalents of $46.3 million as of December 31, 2024, the company expects to achieve positive cash flow by the end of 2025.

In conclusion, Verrica Pharmaceuticals’ earnings call highlighted a blend of positive developments and challenges. The company’s successful fundraising, sales growth, and clinical advancements are promising, yet they must address inventory costs, revenue growth, and financial covenants to ensure sustained success. Investors and stakeholders will be keenly watching how Verrica navigates these challenges while capitalizing on its strategic initiatives.