28
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
N/A
(Former address of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of October 28, 2024, the registrant had
VERRICA PHARMACEUTICALS INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
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Item 1. |
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1 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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16 |
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Item 3. |
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27 |
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Item 4. |
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27 |
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Item 1. |
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27 |
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Item 1A. |
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28 |
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Item 5. |
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29 |
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Item 6. |
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29 |
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31 |
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PART I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
VERRICA PHARMACEUTICALS INC.
BALANCE SHEETS
(in thousands, except share and per share amounts)
(unaudited)
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September 30, |
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December 31, |
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2024 |
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2023 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable |
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Unbilled collaboration revenue |
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Inventory |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use asset |
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Finance lease right-of-use asset |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Operating lease liability |
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Finance lease liability |
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Total current liabilities |
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Operating lease liability |
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Finance lease liability |
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Long-term debt |
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Total liabilities |
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(Note 6) |
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Stockholders’ (deficit) equity: |
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Preferred stock, $ |
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Common stock, $ |
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Treasury stock, at cost, |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders’ (deficit) equity |
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Total liabilities and stockholders’ (deficit) equity |
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$ |
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$ |
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The accompanying notes are an integral part of these financial statements.
1
VERRICA PHARMACEUTICALS INC.
STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(Unaudited)
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For the Three Months Ended |
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For the Nine Months Ended |
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September 30, |
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September 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Revenue: |
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Product revenue, net |
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$ |
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$ |
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$ |
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$ |
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Collaboration revenue |
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Total revenue |
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Operating expenses: |
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Selling, general and administrative |
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Research and development |
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Cost of product revenue |
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Cost of collaboration revenue |
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Total operating expenses |
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Loss from operations |
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Other (expense) income: |
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Interest income |
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Interest expense |
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Other expense |
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Total other (expense) income, net |
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Net loss |
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$ |
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$ |
( |
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$ |
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$ |
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Net loss per share, basic and diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted-average common shares outstanding, basic and diluted |
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The accompanying notes are an integral part of these financial statements.
2
VERRICA PHARMACEUTICALS INC.
STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(in thousands, except share amounts)
(Unaudited)
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Total |
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Common Stock |
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Additional |
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Subscription |
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Accumulated |
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Treasury Stock |
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Stockholders’ |
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Shares Issued |
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Amount |
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Paid-in Capital |
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Receivable |
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Deficit |
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Shares |
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(Deficit) Equity |
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January 1, 2024 |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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( |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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— |
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March 31, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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— |
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June 30, 2024 |
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$ |
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$ |
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$ |
— |
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$ |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Vesting of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of pre-funded warrants |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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September 30, 2024 |
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$ |
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$ |
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$ |
— |
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$ |
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$ |
( |
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January 1, 2023 |
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$ |
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$ |
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$ |
— |
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$ |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock and pre-funded warrants, for the purchase of common stock, net of issuance costs |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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March 31, 2023 |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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June 30, 2023 |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Common stock warrants issued with debt |
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— |
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— |
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— |
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— |
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— |
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Vesting of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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September 30, 2023 |
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$ |
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$ |
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$ |
— |
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$ |
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$ |
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The accompanying notes are an integral part of these financial statements.
3
VERRICA PHARMACEUTICALS INC.
STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
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For the Nine Months Ended September 30, |
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2024 |
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2023 |
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Cash flows from operating activities |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock-based compensation |
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Depreciation expense |
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Non-cash interest expense |
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Loss on disposal of fixed assets |
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Amortization of operating lease right-of-use asset |
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Amortization of finance lease right-of-use asset |
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Impairment of right-of-use asset |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other assets |
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( |
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Collaboration revenue receivable, billed and unbilled |
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Accounts receivable |
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( |
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Accounts payable |
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( |
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Accrued expenses and other current liabilities |
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Operating lease liability |
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( |
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( |
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Net cash used in operating activities |
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( |
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( |
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Cash flows from investing activities |
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Purchases of property and equipment |
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( |
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( |
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Net cash used in investing activities |
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( |
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( |
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Cash flows from financing activities |
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Proceeds from exercise of stock options |
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Repayment of financing lease |
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( |
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Payment of debt amendment fees |
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( |
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Proceeds from issuance of debt, net of issuance costs |
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Proceeds from issuance of common stock and pre-funded warrants, net of issuance costs |
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Payment of equity issuance costs |
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( |
) |
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( |
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Net cash (used in) provided by financing activities |
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( |
) |
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Net (decrease) increase in cash and cash equivalents |
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( |
) |
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Cash and cash equivalents at the beginning of the period |
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Cash and cash equivalents at the end of the period |
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$ |
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$ |
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Supplemental disclosure of noncash investing and financing activities: |
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Property and equipment purchases in accounts payable or accrued expenses and other current liabilities at period end |
|
$ |
|
|
$ |
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Right-of-use asset obtained in exchange for lease obligation |
|
$ |
|
|
$ |
|
||
Common stock warrants issued with debt |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these financial statements.
4
VERRICA PHARMACEUTICALS INC.
Notes to Financial Statements
(Unaudited)
Note 1—Organization and Description of Business Operations
Verrica Pharmaceuticals Inc. (the “Company”) was formed on July 3, 2013 and is incorporated in the State of Delaware. The Company is a dermatology therapeutics company developing and selling medications for skin diseases requiring medical intervention. On July 21, 2023, the U.S. Food and Drug Administration (“FDA”) approved YCANTH (VP-102) topical solution for the treatment of molluscum contagiosum in adult and pediatric patients two years of age and older. The Company launched commercial operations in August 2023.
Liquidity
The Company has incurred substantial operating losses since inception and expects to continue to incur significant losses for the foreseeable future and may never become profitable. As of September 30, 2024, the Company had an accumulated deficit of $
The Company plans to secure additional capital in the future through equity or debt financings, partnerships, or other sources to carry out the Company’s planned commercial and development activities. If the Company is unable to raise capital when needed or on attractive terms, the Company would be forced to delay, reduce or eliminate continued commercialization efforts or research and development programs.
On July 26, 2023, the Company entered into a Credit Agreement, pursuant to which the Company borrowed $
The Credit Agreement contains customary events of default, including, but not limited to, nonpayment of principal, interest, fees or other amounts; material inaccuracy of a representation or warranty; failure to perform or observe covenants; cross-defaults with certain other indebtedness; bankruptcy and insolvency events; material monetary judgment defaults; impairment of any material definitive loan documentation; other material adverse effects; key permit and other regulatory events; key person events; and change of control. In addition, the Credit Agreement contains a financial covenant that the Company must maintain a liquidity of at least $
Note 2—Significant Accounting Policies
The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim financial
5
statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. They may not include all of the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2023 included in its Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on February 29, 2024. The results of operations for any interim periods are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on current facts, historical experience as well as other pertinent industry and regulatory authority information, results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenues and expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.
Collateral Cash
Fair Value of Financial Instruments
As of September 30, 2024, the Company’s financial instruments included cash equivalents, accounts payable, and notes payable. The carrying amount of cash equivalents and accounts payable approximated fair value, given their short-term nature. The carrying value of the notes payable approximates fair value as the interest rate is reflective of current market rates on debt with similar terms and conditions.
Cash equivalents subject the Company to concentrations of credit risk. However, the Company invests its cash in accordance with a policy objective that seeks to ensure both liquidity and safety of principal. The policy limits investments to instruments issued by the U.S. government, certain SEC registered money market funds that invest only in U.S. government obligations and various other low-risk liquid investment options, and places restrictions on portfolio maturity terms.
Accounts Receivable
Inventory
The Company values inventory at the lower of cost or net realizable value. Inventory cost is determined using the specific identification method. The Company regularly reviews its inventory quantities and, when appropriate, records a provision for obsolete and excess inventory to derive the new cost basis, which takes into account the Company’s sales forecast and corresponding expiry dates. The Company has recognized obsolete inventory costs as cost of goods sold in the amount of $
On July 21, 2023, the Company received FDA approval for YCANTH (VP-102) for the treatment of molluscum contagiosum and began capitalizing inventory purchases of saleable product from certain suppliers. Prior to FDA approval, all product purchased from such suppliers was included as a component of research and development expense, as the Company was unable to assert that the inventory had future economic benefit until YCANTH received FDA approval. Pursuant to the supply agreement (Note 6), the Company purchased and included in research and development expenses approximately $
Product Revenue, Net
The Company recognizes revenue from sales of a single product, YCANTH (VP-102) (the “Product”) in accordance with ASC Topic 606 – Revenue from Contracts with Customers. YCANTH (VP-102) became available for commercial sale and shipment to patients with a prescription in the United States in the third quarter of 2023. The Company sells the Product to several customers who
6
are pharmaceutical wholesalers/distributors (the “Customers”) who in turn sell the Product directly to clinics, hospitals, and federal healthcare programs. Revenue is recognized as the Product is physically delivered to the Customers.
Gross product sales are reduced by corresponding gross-to-net (“GTN”) estimates using the expected value method, resulting in the Company’s reported “Product revenue, net” in the accompanying statements of operations. Product revenue, net reflects the amount the Company ultimately expects to realize in net cash proceeds, taking into account the current period gross sales and related cash receipts and the subsequent cash disbursements on these sales that the Company estimates for the various GTN categories discussed below. The GTN estimates are based upon information received from external sources, such as written or oral information obtained from our customers with respect to their period-end inventory levels and sales to end-users during the period, in combination with management’s informed judgments. Due to the inherent uncertainty of these estimates, the actual amount of product returns, government chargebacks, prompt pay discounts, commercial rebates, Medicaid rebates, co-pay assistance and distribution, data, and group purchasing organizations ("GPO") administrative fees may be materially above or below the amount estimated. Variance between actual amounts and estimated amounts may result in prospective adjustments to reported net product revenue.
Each of the GTN estimate categories are discussed below:
Product Returns Allowances: The Customers are contractually permitted to return purchased Product in certain circumstances. The Company estimates expected returns based on the Company’s review of similar products in the industry. The Company has additionally recorded discrete reserves if Product held by distributors, forecasted sales and expiration of Product warrant a reserve. As historical data for returns of the Product becomes available over time, the Company will utilize historical return rates of the Product in making its estimates. Returned Product is typically destroyed, since substantially all returns are due to expiry and cannot be resold. During the three months ended September 30, 2024, the Company increased its returns reserve by $
Government Chargebacks: The Product is subject to pricing limits under certain federal government programs, including Medicare and the 340B drug pricing program. Qualifying entities (the “End-Users”) purchase the Product from the Customers at their applicable qualifying discounted price. The chargeback amount the Company incurs represents the difference between the Company’s contractual sales price to the Customers and the end-user’s applicable discounted purchase price under the government program.
Medicaid Rebates: The Product is subject to state government-managed Medicaid programs, whereby rebates are issued to participating state governments. These rebates arise when a patient treated with the Product is covered under Medicaid, resulting in a discounted price for the Product under the applicable Medicaid program. The Medicaid rebate accrual calculations require the Company to project the magnitude of its sales, by state, that will be subject to these rebates.
Patient Assistance: The Company offers a voluntary co-pay patient assistance program intended to provide financial assistance to eligible patients with a prescription drug co-payment required by payors and coupon programs for cash payors. The calculation of the current liability for this assistance is based on an estimate of claims and the cost per claim that the Company expects to receive associated with YCANTH (VP-102) that has been recognized as revenue but remains in the distribution channel inventories at the end of each reporting period.
Distribution, Data, and GPO Administrative Fees: Distribution, data, and GPO administrative fees are paid to authorized wholesalers/distributors of the Company’s products for various commercial services including contract administration, inventory management, delivery of end-user sales data, and product returns processing. These fees are based on a contractually-determined percentage of the Company’s applicable sales.
Cost of Product Revenue
Cost of product revenue includes the cost of inventory sold, which includes direct manufacturing, production and packaging materials for YCANTH (VP-102) sales. Prior to FDA approval of YCANTH (VP-102) in July 2023, the Company expensed costs associated with manufacturing of YCANTH (VP-102) as a component of research and development expense that would have been included in cost of goods sold for the nine months ended September 30, 2024 in the amount of $
Advertising Expense
Advertising expenses, comprised primarily of print and digital assets, social media and internet advertising as well as search engine marketing, are expensed as incurred and are included in selling, general, and administrative expenses. For the three and nine months ended September 30, 2024, advertising expense was approximately $
Net Loss Per Share
Net loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period including pre-funded warrants to purchase shares of common stock that were issued in an underwritten offering in February 2023 (Note 7). The pre-funded warrants to purchase common stock are included in the calculation
7
of basic and diluted net loss per share as the exercise price of $
The table below provides potential shares outstanding that were not included in the computation of diluted net loss per common share, as the inclusion of these securities would have been anti-dilutive:
|
|
September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Shares issuable upon exercise of stock options |
|
|
|
|
|
|
||
Non-vested shares under restricted stock grants |
|
|
|
|
|
|
||
Shares issuable upon exercise of warrants pursuant to debt financing |
|
|
|
|
|
|
||
Shares issuable upon exercise of warrants pursuant to Torii amendment |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
Note 3 —Inventory
Upon FDA approval of YCANTH (VP-102) for the treatment of molluscum contagiosum on July 21, 2023, the Company began capitalizing the purchases of saleable inventory of YCANTH (VP-102) from suppliers.
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work in process |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Total inventory |
|
$ |
|
|
$ |
|
||
Note 4—Property and Equipment
Property and equipment, net consisted of (in thousands):
|
|
|
|
|
|
|
||
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Machinery and equipment |
|
$ |
|
|
$ |
|
||
Office equipment |
|
|
|
|
|
|
||
Office furniture and fixtures |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Total property and equipment, net |
|
$ |
|
|
$ |
|
||
8
Depreciation expense for both the three months ended September 30, 2024 and 2023 was $
Note 5—Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
Gross to net reserves |
|
$ |
|
|
$ |
|
||
Compensation and related costs |
|
|
|
|
|
|
||
Professional fees |
|
|
|
|
|
|
||
Clinical trials and drug development |
|
|
|
|
|
|
||
Other current liabilities |
|
|
|
|
|
|
||
Commercial-related costs |
|
|
|
|
|
|
||
Machinery and equipment |
|
|
|
|
|
|
||
Total accrued expenses and other current liabilities |
|
$ |
|
|
$ |
|
||
Note 6—Commitments and Contingencies
Litigation
On June 6, 2022, plaintiff Kranthi Gorlamari (“Plaintiff”) filed a putative class action complaint captioned Gorlamari v. Verrica Pharmaceuticals Inc., et al., in the U.S. District Court for the Eastern District of Pennsylvania against us and certain of our current and former officers and directors (“Defendants”). On January 12, 2023, the Plaintiff filed an amended complaint alleging that Defendants violated federal securities laws by, among other things, failing to disclose certain manufacturing deficiencies at the facility where our contract manufacturer produced bulk solution for the YCANTH (VP-102) drug device and that such deficiencies posed a risk to the prospects for regulatory approval of YCANTH (VP-102) for the treatment of molluscum. The amended complaint seeks unspecified compensatory damages and other relief on behalf of Plaintiff and all other persons and entities which purchased or otherwise acquired our securities between May 19, 2021 and May 24, 2022 (the “Putative Class Period”).
On January 12, 2024, the Court granted in part and denied in part Defendants’ motion to dismiss the amended complaint. The Court held that Plaintiff’s claims relating to statements made in May and June 2021 were sufficiently pled, but dismissed Plaintiff’s claims relating to all other statements made during the Putative Class Period. On January 26, 2024, Plaintiff filed a second amended complaint in an attempt to cure certain of the deficiencies identified in the January 12, 2024 ruling. Defendants’ motion to dismiss the second amended complaint was fully briefed as of April 22, 2024, and is pending before the Court. On September 3, 2024, the Court granted in part and denied in part Defendants’ motion to dismiss the second amended complaint. The Court dismissed Plaintiff’s claims related to one of the two individual defendants but held that Plaintiff’s claims against the Company and the other individual defendant were sufficiently pled.
In addition, on October 21, 2024, plaintiff Ivan S. Cohen filed a putative stockholder derivative lawsuit in the U.S. District Court for the Eastern District of Pennsylvania. The complaint names the company as a nominal defendant and purports to bring claims on behalf of the company against certain of our current and former directors and officers for alleged violations of the federal securities laws and breaches of their fiduciary duties in relation to substantially the same factual allegations as the above-described putative class action lawsuit. The complaint primarily seeks to recover for the company compensatory damages for losses allegedly sustained related to the facts alleged, restitution, and punitive damages.
In February 2024, the Company filed a lawsuit in the Eastern District of Pennsylvania against Dormer Laboratories Inc. ("Dormer Labs"), a Canadian Drug Manufacturer, requesting, among other relief, that the court enjoin Dormer Labs from marketing, selling, and distributing drugs containing cantharidin in the United States, as well as compensatory, statutory and punitive damages for Dormer Labs’ violations of the federal Lanham Act and Pennsylvania law.
In June 2024, the Company and Dormer Labs announced the settlement of litigation. As part of the settlement, Dormer Labs discontinued the sale of all cantharidin-containing products in the United States and also, provided the Company with Dormer’s customer list in exchange for $
9
The Company is also involved in ordinary, routine legal proceedings that are not considered by management to be material. In the opinion of Company counsel and management, the ultimate liabilities resulting from such legal proceedings will not materially affect the financial position of the Company or its results of operations or cash flows.
Supply Agreement and Purchase Order
On July 16, 2018, the Company entered into a supply agreement with a supplier of crude cantharidin material. All executed purchase orders for crude cantharidin in the ordinary course of business are expected to be covered under the terms of the supply agreement. Pursuant to the supply agreement, the supplier has agreed that it will not supply cantharidin, any beetles or other raw material from which cantharidin is derived to any other customer in North America, subject to specified minimum annual purchase orders and forecasts by the Company. The supply agreement had an initial
Note 7—Stockholders’ Equity
Common Stock
The Company had authorized
Underwritten Public Offering
In February 2023, the Company closed an underwritten offering of
Warrants
The following table summarizes the Company’s outstanding warrants, all of which are exercisable for common stock:
|
|
September 30, 2024 |
||||||||
|
|
Number of warrants |
|
|
Exercise Price |
|
|
Expiration Date |
||
Pre-funded warrants issued pursuant to 2023 underwritten public offering |
|
|
|
|
$ |
|
|
No expiration |
||
Warrants issued in connection with OrbiMed debt facility |
|
|
|
|
$ |
|
|
|||
Warrants issued in connection with Torii amendment |
|
|
|
|
$ |
|
|
|||
Note 8—Stock-Based Compensation
Stock-based compensation expense, which includes expense for both options and restricted stock units, has been reported in the Company’s statements of operations as follows (in thousands):
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Selling, general and administrative |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total stock-based compensation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Stock Options
The following table summarizes the Company’s stock option activity for the nine months ended September 30, 2024:
10
|
|
|
|
|
|
|
|
Weighted average |
|
|
|
|
||||
|
|
|
|
|
Weighted average |
|
|
remaining contractual |
|
|
Aggregate intrinsic |
|
||||
|
|
Number of shares |
|
|
exercise price |
|
|
term (in years) |
|
|
value |
|
||||
Outstanding as of December 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
$ |
|
|
|
|
|
$ |
|
|||
Forfeited |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Expired |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Outstanding as of September 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options vested and exercisable as of |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
As of September 30, 2024, the total unrecognized compensation related to unvested stock option awards granted was $
Restricted Stock Units
In November 2019 and August 2020, the Company granted
In March 2023, the Company granted
In March 2024, the Company granted
Compensation expense was recognized in the Company’s statements of operations related to the vested RSUs based on the fair market value at the date of grant. As of September 30, 2024, the remaining unrecognized compensation expense related to the RSUs was $
The following is a summary of changes in the status of non-vested RSUs for the nine months ended September 30, 2024:
|
|
|
|
|
Weighted Average |
|
||
|
|
|
|
|
Grant Date Fair |
|
||
|
|
Number of Shares |
|
|
Value |
|
||
Nonvested as of December 31, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Nonvested as of September 30, 2024 |
|
|
|
|
$ |
|
||
Note 9—Leases
The Company leases office space located in West Chester, Pennsylvania that serves as the Company’s headquarters. The initial term expires on
The Company leases office space in Scotch Plains, New Jersey under an agreement classified as an operating lease, which commenced on
The Company entered into a fleet program to provide vehicles for its sales force. The vehicles are leased for a term of
The components of lease expense are as follows (in thousands):
11
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Finance lease cost: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization ROU assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest on lease liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total finance lease costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating lease: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating lease costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total operating lease expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Operating |
|
|
Finance |
|
||
2024 (remaining 3 months) |
|
$ |
|
|
$ |
|
||
2025 |
|
|
|
|
|
|
||
2026 |
|
|
|
|
|
|
||
2027 |
|
|
|
|
|
|
||
Thereafter |
|
|
|
|
|
|
||
Total lease payments |
|
|
|
|
|
|
||
Less imputed interest |
|
|
( |
) |
|
|
( |
) |
Lease liability |
|
$ |
|
|
$ |
|
||
The weighted average remaining lease term and discount rates for the Company's leases as of September 30, 2024 are as follows:
|
|
|
|
|||||
|
|
Operating |
|
|
Finance |
|
||
Weighted average remaining lease term (years) |
|
|
|
|
|
|
||
Weighted average discount rate |
|
|
% |
|
|
% |
||
Note 10—Debt
On July 26, 2023 (the “Closing Date”), the Company entered into a Credit Agreement (the “Credit Agreement”), by and between the Company, as borrower, and OrbiMed Royalty & Credit Opportunities IV, LP, a Delaware limited partnership (the “Initial Lender”), as a lender, and each other lender that may from time to time become a party thereto (each, including the Initial Lender, and together with their affiliates, successors, transferees and assignees, the “Lenders”), and OrbiMed Royalty & Credit Opportunities IV, LP, as administrative agent for the Lenders (in such capacity, the “Administrative Agent”). The Credit Agreement provides for a five-year senior secured credit facility in an aggregate principal amount of up to $
Amounts borrowed under the Loan Facility will mature on
During the term of the Loan Facility, interest payable in cash by the Company shall accrue on any outstanding balance due under the Loan Facility at a rate per annum equal to the higher of (x) the Secured Overnight Financing Rate (“SOFR”) rate (which is the forward-looking term rate for a one-month tenor based on the secured overnight financing rate administered by the CME Group Benchmark Administration Limited) and (y)
12
Facility, an administration fee, a prepayment premium and an exit fee, as well as certain other fees and expenses of the Administrative Agent and the Lenders.
The Credit Agreement contains customary events of default, including, but not limited to, nonpayment of principal, interest, fees or other amounts; material inaccuracy of a representation or warranty; failure to perform or observe covenants; cross-defaults with certain other indebtedness; bankruptcy and insolvency events; material monetary judgment defaults; impairment of any material definitive loan documentation; other material adverse effects; key permit and other regulatory events; key person events; and change of control. In addition, the Credit Agreement contains a financial covenant that the Company must maintain a liquidity of at least $
On the Closing Date, the Company also issued the Initial Lender warrants to purchase up to
On each of December 20, 2023 and January 31, 2024, the Company entered into amendments (the "First and Second Amendments") to the Credit Agreement in order to extend a deadline for a specified regulatory milestone. For each amendment, the Company paid an amendment fee of $
On May 6, 2024, the Company entered into an amendment to the Credit Agreement (the "Third Amendment") pursuant to which the Lenders waived the going concern requirement under Section 7.1(b) of the Credit Agreement with respect to the financial statements for the quarter ended March 31, 2024. In connection with the Third Amendment, the Company paid an amendment fee of $
On June 26, 2024, the Company entered into an amendment to the Credit Agreement (the "Fourth Amendment") changing the commencement date of the Revenue Test to September 30, 2024. In connection with the Fourth Amendment, the Company paid an amendment fee of $
On August 2, 2024, the Company entered into the fifth amendment and waiver to the Credit Agreement (the "Fifth Amendment") pursuant to which the Lenders waived the going concern requirement under Section 7.1(b) of the Credit Agreement with respect to the financial statements for the quarters ended June 30, 2024 and September 30, 2024, the commencement date for the Revenue Test was changed to December 31, 2024 and the exit fee for the Initial Loans (as defined in the Credit Agreement) was increased from
The Loan Facility is classified as non-current debt as no event of default has occurred that would result in an acceleration of the repayment of the Loan Facility at September 30, 2024 and the Company does not currently intend to repay amounts borrowed under the Loan Facility, unless it is required to do so, prior to the maturity date of July 26, 2028. The Company has incurred debt discount and issuance costs of $
For the three and nine months ended September 30, 2024, the Company recognized interest expense of $
The following table summarizes the composition of debt as of September 30, 2024 (in thousands):
Gross proceeds from Loan Facility |
|
$ |
|
|
Accrued final payment fee |
|
|
|
|
Unamortized debt discount and issuance costs |
|
|
( |
) |
Total long-term debt, net |
|
$ |
|
13
Note 11—License and Collaboration Agreements
Torii Agreements
On March 17, 2021, the Company entered into a collaboration and license agreement (the “Torii Agreement”) with Torii, pursuant to which the Company granted Torii an exclusive license to develop and commercialize the Company’s product candidates that contain a topical formulation of cantharidin for the treatment of molluscum contagiosum and common warts in Japan, including YCANTH (VP-102). Additionally, the Company granted Torii a right of first negotiation with respect to additional indications for the licensed products and certain additional products for use in the licensed field, in each case in Japan.
Pursuant to the Torii Agreement, the Company received milestone payments from Torii in prior periods totaling $
The Torii Agreement expires on a product-by-product basis upon expiration of Torii’s obligation under the agreement to make transfer price payments for such product. Torii has the right to terminate the agreement upon specified prior written notice to us. Additionally, either party may terminate the agreement in the event of an uncured material breach of the agreement by, or insolvency of, the other party. The Company may terminate the agreement in the event that Torii commences a legal action challenging the validity, enforceability or scope of any licensed patents.
On March 7, 2022, the Company executed a Clinical Supply Agreement with Torii, whereby the Company will supply product to Torii for use in clinical trials and other development activities. The Company recognized collaboration revenue of $
On May 14, 2024, the Company entered into the First Amendment to the Torii Agreement (the “First Amendment”). Pursuant to the First Amendment, the Company and Torii will equally split the cost of a global Phase 3 clinical trial of YCANTH (VP-102) for the treatment of common warts (the “Trial”), with Torii paying all of the costs when due and the Company repaying Torii half of the costs (the “Company Portion”). The results of the global Phase 3 clinical trials will be utilized by the Company in the filing of its new drug application with the FDA for YCANTH (VP-102) for the treatment of common warts. The Company Portion accrues interest annually at the greater of (i) the one-month SOFR plus
In conjunction with the First Amendment, the Company issued Torii a warrant to purchase up to
Lytix Agreement
In August 2020, the Company entered into an exclusive license agreement with Lytix Biopharma AS (“Lytix”) for the use of licensed technology, referred to as VP-315, to research, develop, manufacture, have manufactured, use, sell, have sold, offer for sale, import, and otherwise commercialize products for use in all malignant and pre-malignant dermatological indications, other than metastatic melanoma and metastatic Merkel cell carcinoma (the” Lytix Agreement”). As part of the Lytix Agreement, the Company has paid Lytix milestone fees of $
14
and will be subject to the royalty payment obligations under the Lytix Agreement, and all royalties received by the Company from a sublicensee shall be shared with Lytix at a rate that is initially
Note 12 – Subsequent Event
15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with (i) our unaudited interim financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and (ii) our audited financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the years ended December 31, 2022 and 2023 included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on February 29, 2024. Our financial statements have been prepared in accordance with U.S. GAAP.
We own various U.S. federal trademark applications and unregistered trademarks, including our company name and YCANTH. All other trademarks or trade names referred to in this Quarterly Report on Form 10-Q are the property of their respective owners. Solely for convenience, the trademarks and trade names in this report are referred to without the symbols ® and ™, but such references should not be construed as an indication that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words “expect,” “anticipate,” “intend,” “believe,” “may,” “plan,” “seek” or similar language. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our business and financial performance are subject to substantial risks and uncertainties. Our actual results could differ materially from those discussed in these forward-looking statements. In evaluating our business, you should carefully consider the information set forth in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 29, 2024, in this Quarterly Report under Part II - Item 1A “Risk Factors,” and in our other filings with the SEC.
Overview
We are a dermatology therapeutics company developing and selling medications for skin diseases requiring medical intervention. We are primarily focused on developing clinician administered therapies in areas of high unmet need. Our current product portfolio consists of one approved product with several potential follow-on indications, as well as two additional pipeline products. Our commercial product, YCANTH (VP-102) (formerly referred to as VP-102), was approved by the U.S. Food and Drug Administration, or FDA, in July 2023 for the treatment of molluscum contagiosum in adult and pediatric patients two years of age and older. YCANTH (VP-102) is a proprietary drug-device combination that contains a GMP-controlled formulation of cantharidin. We are also developing YCANTH (VP-102) for potential follow-on indications for the treatment of common warts and external genital warts. Our two additional product candidates are: (i) VP-315 an oncolytic peptide-based injectable therapy for the potential treatment of dermatology oncologic conditions, including basal cell carcinoma, and (ii) VP-103, a second cantharidin based drug device combination for the potential treatment of plantar warts.
On July 21, 2023, YCANTH (cantharidin) 0.7% topical solution was the first product approved by the FDA for the treatment of molluscum contagiosum in adult and pediatric patients two years of age and older. We commercially launched YCANTH (VP-102) in August 2023 in the United States for the treatment of molluscum contagiosum. We have built a specialized sales organization consisting of 35 sales representatives in the United States focused on pediatric dermatologists, dermatologists, and select pediatricians. We also plan to advance YCANTH (VP-102) for common warts and external genital warts through a separate regulatory approval process. We are currently commercializing YCANTH (VP-102) for the treatment of molluscum contagiosum in the United States and in the future we intend to pursue YCANTH (VP-102) for common warts and genital warts if approved. We also will evaluate the expansion of our commercialization efforts in additional geographic regions, either alone or together with a strategic partner. Verrica is continuously reviewing and making changes to its commercialization organization designed to balance sales growth and cost controls based upon distribution and reimbursement coverage for YCANTH (VP-102).
We are also developing YCANTH (VP-102) for the treatment of common warts. In June 2019, we announced positive topline results from our COVE-1 Phase 2 open label clinical trial of YCANTH (VP-102) for the treatment of common warts. COVE-1 included two cohorts that evaluated the safety and efficacy of YCANTH (VP-102) in subjects with up to six warts. We held a Type C meeting with FDA on clinical development plan for YCANTH (VP-102) common warts indication on November 6, 2023. The meeting and additional extensive regulatory correspondence with the FDA has resulted in gaining in-depth alignment on the design of a pivotal Phase 3 clinical development plan to evaluate YCANTH (VP-102) for the treatment of common warts.
On May 14, 2024, we entered into the First Amendment to the Collaboration and License Agreement, or the First Amendment, with Torii Pharmaceutical Co., Ltd., or Torii. Pursuant to the First Amendment, we and Torii will equally split the cost of a global Phase 3 clinical trial of YCANTH (VP-102) for the treatment of common warts, or the Trial, with Torii paying all of the costs when
16
due and we will repay Torii half of the costs, or the Company Portion. The Company Portion accrues interest annually at the greater of (i) the one-month SOFR plus 2% and (ii) 6%. Torii has the right to offset the Company Portion plus applicable interest against certain of the milestone-based payments that would otherwise be due to us under the terms of the Collaboration and License Agreement. In addition, if Torii has not received payment or other recoupment in full of the Company Portion plus applicable interest within 60 months after the date on which Torii made its first payment for the Trial costs, Torii may invoice us for the remained Company Portion plus applicable interest. Torii may recoup our share of the costs plus applicable interest against any development milestone payments in the Torii Agreement. We anticipate the Company and Torii will agree to a Global Study Plan during the fourth quarter of 2024 and the Trial will begin in the first half of 2025. The Company has incurred costs of $0.1 million related to the study during the three month period ended September 30, 2024.
In conjunction with the First Amendment, we issued Torii a warrant to purchase up to 500,000 shares of our common stock at an exercise price per share of $9.56. The warrant has a term of ten years and is exercisable only with respect to the shares that have vested as of the date of exercise. The shares underlying the warrant will vest as follows: one-third on the date the first patient is dosed in the Trial, one-third on the date that the database lock with respect to the Trial occurs, and one-third on the date the Company submits a new drug application to the FDA for YCANTH (VP-102) for the treatment of common warts.
In addition, we are also developing YCANTH (VP-102) for the treatment of external genital warts. We initiated a Phase 2 clinical trial evaluating the optimal dose regimen, efficacy, safety and tolerability of YCANTH (VP-102) in patients with external genital warts in June 2019. In November 2020, we announced positive topline results from our Phase 2 clinical trial of YCANTH (VP-102) for the treatment of external genital warts. An end of Phase 2 meeting was held with the FDA in May 2021. Based on results of the Phase 2 trial, we are evaluating the timing and design of a Phase 3 trial of YCANTH (VP-102) for the treatment of external genital warts.
We also intend to develop our product candidate, VP-315, for basal cell carcinoma and potentially additional dermatological oncology indications. The FDA accepted our investigational new drug application in November 2021. In April 2022, we dosed the first patient in Part 1 of a three-part Phase 2, multicenter, open-label, dose-escalation proof-of-concept trial with a safety run-in designed to assess the safety, pharmacokinetics, and efficacy in subjects with biopsy proven basal cell carcinoma, or BCC. BCC is the most common form of cancer in the United States, and incidence is rising worldwide. There are approximately 3.6 million diagnoses of BCCs in the United States each year, with a high unmet need for new treatment options. More than one out of every three new cancers are skin cancers, and the vast majority are BCCs. In 2021, the estimated global BCC market was $6.7 billion, which is expected to grow to $11.5 billion in 2028. Mohs micrographic surgery is considered the most effective technique for treating BCCs with over 700,000 procedures in the United States annually. We believe VP-315 has the potential to be a non-surgical alternative for the treatment of BCC.
In Part 1 of the trial, VP-315 demonstrated a favorable safety and tolerability profile with no reported serious adverse events. We initiated Part 2 of the trial in April 2023. In June 2023, the protocol was amended to remove Part 3 of the trial and to expand Part 2. The trial enrolled 92 adult subjects with a histological diagnosis of basal cell carcinoma in at least one eligible target lesion. The last patient in Part 2 of the trial was dosed in December 2023. We announced preliminary positive results in August 2024 based on 93 confirmed basal cell carcinoma lesions that were treated during Part 2 of the trial; however, for histologic reduction in tumor size and overall reduction in tumor size, data from three of the 93 lesions are pending. Based on the preliminary results, VP-315 was well tolerated with no reported treatment-related serious adverse events or dose-limiting toxicities (n=93). Most treatment-related adverse events were mild to moderate cutaneous reactions. The overall reduction in tumor size of 90 of the lesions treated in Part 2 of the trial was approximately 86%. Approximately 51% of all lesions treated in Part 2 of the trial achieved complete histological clearance, with no residual tumor cells (n=93), and patients with residual tumor on average achieved an approximate 71% reduction in tumor size (n=90).We expect genomic and T-cell (immune response) data from the trial in the first quarter of 2025 and plan to request an End-of-Phase 2 meeting with the FDA to determine next steps for the development of VP-315 for the treatment of BCC in the first half of 2025.
In addition, we have conducted necessary drug development activities for VP-103, our second cantharidin-based product candidate, and are evaluating when to initiate a Phase 2 clinical trial for the treatment of plantar warts.
On October 1, 2024, we reduced our workforce by terminating 47 employees, or the Restructuring, to reduce costs and optimize the efficiency of our field sales force. We will reduce the number of sales territories from 80 to approximately 33, with a focus on those territories that have historically shown a high prevalence of molluscum. The Restructuring was completed on October 1, 2024. In connection with the Restructuring, we expect to incur a one-time charge totaling approximately $0.6 million related to one-time employee termination costs In addition, we recognized an impairment charge for right-of-use assets associated with leased vehicles of $0.3 million during the three months ending September 30, 2024 in selling, general and administrative expenses for the three months ended September 30, 2024. This restructuring charge will substantially be paid out by December 31, 2024.
Since our inception in 2013, our operations have focused on developing YCANTH (VP-102), organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio and conducting clinical trials. We have funded our operations primarily through the sale of equity and equity-linked securities and through borrowings under loan agreements.
17
On July 26, 2023, we entered into a Credit Agreement with OrbiMed, or the Initial Lender, and each other lender that may from time to time become a party thereto, or the Lenders, pursuant to which we borrowed $50.0 million on July 26, 2023, resulting in net proceeds to us of approximately $44.1 million after payment of certain fees and transaction related expenses. Amounts borrowed under the Loan Facility will mature on July 26, 2028. The Credit Agreement contains customary events of default, including, but not limited to, nonpayment of principal, interest, fees or other amounts; material inaccuracy of a representation or warranty; failure to perform or observe covenants; cross-defaults with certain other indebtedness; bankruptcy and insolvency events; material monetary judgment defaults; impairment of any material definitive loan documentation; other material adverse effects; key permit and other regulatory events; key person events; and change of control. In addition, the Credit Agreement contains a financial covenant that we must maintain a liquidity of at least $10.0 million and that our quarterly and annual financial statements not be subject to any qualification or statement which is of a “going concern” or similar nature. The qualification of a "going concern" was waived for the quarterly financial statements ended September 30, 2024. Upon the occurrence of an event of default (subject to notice and grace periods), additional interest of 4% per annum applies and obligations under the Credit Agreement could be accelerated. As of September 30, 2024, we were in compliance with all covenants under the Credit Agreement as amended. As part of the Loan Facility, we issued the Initial Lender a warrant to purchase up to 518,551 shares of our common stock, at an exercise price of $6.0264 per share, which have a term of 10 years from the issuance date.
In February 2023, we closed an underwritten offering of 750,000 shares of our common stock and pre-funded warrants to purchase 4,064,814 shares of common stock, of which 2.583,333 were exercised were exercised resulting in net shares issued of 2,583,242 during the three-month period ended September 30, 2024. The shares of common stock were sold in the underwritten offering at a price of $6.75 per share and the pre-funded warrants were sold at a price of $6.7499 per pre-funded warrant, resulting in total net proceeds of $30.3 million, after deducting underwriting discounts and commissions, and offering expenses.
Since inception, we have incurred significant operating losses. For the nine months ended September 30, 2024 and 2023, our net loss was $60.4 million and $42.4 million, respectively. The increase in loss is primarily due to significant commercial expenditures to support the launch and future growth of YCANTH (VP-102) compounded by slower than expected revenue growth. As of September 30, 2024, we had an accumulated deficit of $290.8 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses may increase significantly in connection with our ongoing activities, as we:
Critical Accounting Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to
18
make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the balance sheets and the reported amounts of expenses during the reporting periods. In accordance with GAAP, we evaluate our estimates and judgments on an ongoing basis.
A summary of our significant accounting policies are disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. However, we believe that the additional accounting policies disclosed in Note 2 to our financial statements are important to understanding and evaluating our reported financial results.
Components of Results of Operations
Product Revenue, Net
We recognize revenue from sales of YCANTH (VP-102), or the Product, in accordance with ASC Topic 606 – Revenue from Contracts with Customers. YCANTH (VP-102) became available for commercial sale and shipment for the treatment of patients by a healthcare provider in the United States in the year ended December 31, 2023. We sell the Product to several pharmaceutical wholesaler/distributors, or the Customers, who in turn sell the Product directly to clinics, hospitals, and federal healthcare programs. Revenue is recognized as the Product is physically delivered to the Customers.
Gross product sales are reduced by corresponding gross-to-net, or GTN, estimates using the expected value method, resulting in our reported “Product revenue, net” in the accompanying statements of operations. Product revenue, net reflects the amount we ultimately expect to realize in net cash proceeds, taking into account the current period gross sales and related cash receipts and the subsequent cash disbursements on these sales that we estimate for the various GTN categories as well as adjustments for any potential future product returns from distributors. The GTN estimates are based upon information received from external sources, such as written or oral information obtained from our customers with respect to their period-end inventory levels and sales to end-users during the period, in combination with management’s informed judgments. Due to the inherent uncertainty of these estimates, the actual amount of product returns, government chargebacks, prompt pay discounts, commercial rebates, Medicaid rebates, co-pay assistance and distribution, data, and group purchasing organizations, or GPOs, administrative fees may be materially above or below the amount estimated. Variance between actual amounts and estimated amounts may result in prospective adjustments to reported net product revenue.
YCANTH (VP-102) may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.
Collaboration Revenue
Collaboration revenue represents revenue from the Torii Agreement pursuant to which we granted Torii an exclusive license to develop and commercialize our product candidates that contain a topical formulation of cantharidin for the treatment of molluscum contagiosum and common warts in Japan, including YCANTH (VP-102).
Operating Expenses
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist principally of salaries and related costs for personnel in sales, executive and administrative functions, including stock-based compensation, travel expenses and recruiting expenses. Other selling, general and administrative expenses include cost of samples, sponsorships, consumer and health care professional marketing and advertising expense, insurance costs, and professional fees for audit, tax and legal services.
We anticipate that our selling, general and administrative expenses, including payroll and related expenses, will change in the future due to the Restructuring and as we continue to evaluate our headcount to support the expected growth in our business, modify our operations and organizational capabilities, and continue to commercialize YCANTH (VP-102). We also anticipate increased expenses associated with general operations, including costs related to audit, tax and legal services, director and officer insurance premiums, and investor relations costs.
Research and Development Expenses
Research and development expenses consist of expenses incurred in connection with the discovery and development of YCANTH (VP-102) for the treatment of molluscum contagiosum, potential follow-on indications for YCANTH (VP-102), including common warts and external genital warts, VP-315, and our other product candidates. We expense research and development costs as incurred. These expenses include:
19
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to increase over the next several years as we increase personnel costs, including stock-based compensation, initiate and conduct clinical trials of YCANTH (VP-102) in patients with common warts, YCANTH (VP-102) in patients with external genital warts, VP-315 for basal cell carcinoma and potentially additional dermatological oncology indications,VP-103 in patients with plantar warts, and conduct other clinical trials and prepare regulatory filings for our product candidates.
The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of, or when, if ever, material net cash inflows may commence from YCANTH (VP-102) or our other product candidates. This uncertainty is due to the numerous risks and uncertainties associated with the duration and cost of clinical trials, which vary significantly over the life of a project as a result of many factors, including:
Our expenditures are subject to additional uncertainties, including the manufacturing process for our product candidates, the terms and timing of regulatory approvals, and the expense of filing, prosecuting, defending and enforcing any patent claims or other intellectual property rights. We may never succeed in achieving regulatory approval for our product candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of our product candidates. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.
Cost of Product Revenue
Cost of product revenue includes the cost of inventory sold, which includes direct manufacturing and supply chain costs. Prior to FDA approval, all product purchased from such suppliers was included as a component of research and development expense, as we were unable to assert that the inventory had future economic benefit until YCANTH (VP-102) received FDA approval. We purchased and included in research and development expenses approximately $4.5 million of raw cantharidin and processed active pharmaceutical ingredient, or API. The raw cantharidin and processed API is sufficient to produce approximately 14 million finished drug product applicators to be used for commercially saleable product and other product candidates. In addition, we purchased other components and services related to YCANTH (VP-102) for commercially saleable product and included approximately $1.2 million in research and development expenses prior to FDA approval. As a result, cost of product revenue related to YCANTH (VP-102) will initially reflect a lower average per unit cost of materials over approximately the next six months as previously expensed inventory is utilized for commercial production and sold to customers. If we included those costs previously expensed as a component of cost of product revenue, our cost of product revenue for three and nine months ended September 30, 2024 would have been $0.4 million and $1.8 million, respectively.
Cost of Collaboration Revenue
The costs of collaboration revenue consists of payments for manufacturing supply to support development and testing services pursuant to the Torii Clinical Supply Agreement.
20
Results of Operations for the Three Months Ended September 30, 2024 and 2023
The following table summarizes our results of operations for the three months ended September 30, 2024 and 2023 (in thousands):
|
|
For the Three Months Ended September 30, |
|
|
|
|
||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
Revenue |
|
|
|
|
|
|
|
|
|
|||
Product revenue, net |
|
$ |
(1,865 |
) |
|
$ |
2,792 |
|
|
$ |
(4,657 |
) |
Collaboration revenue |
|
|
84 |
|
|
|
125 |
|
|
|
(41 |
) |
Total revenue |
|
|
(1,781 |
) |
|
|
2,917 |
|
|
|
(4,698 |
) |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Selling, general and administrative |
|
|
16,083 |
|
|
|
20,054 |
|
|
|
(3,971 |
) |
Research and development |
|
|
2,405 |
|
|
|
6,510 |
|
|
|
(4,105 |
) |
Cost of product revenue |
|
|
351 |
|
|
|
145 |
|
|
|
206 |
|
Cost of collaboration revenue |
|
|
84 |
|
|
|
125 |
|
|
|
(41 |
) |
Total operating expenses |
|
|
18,923 |
|
|
|
26,834 |
|
|
|
(7,911 |
) |
Loss from operations |
|
|
(20,704 |
) |
|
|
(23,917 |
) |
|
|
3,213 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|||
Interest income |
|
|
221 |
|
|
|
822 |
|
|
|
(601 |
) |
Interest expense |
|
|
(2,376 |
) |
|
|
(1,657 |
) |
|
|
(719 |
) |
Other expense |
|
|
(1 |
) |
|
|
(50 |
) |
|
|
49 |
|
Total other (expense) income, net |
|
|
(2,156 |
) |
|
|
(885 |
) |
|
|
(1,271 |
) |
Net loss |
|
$ |
(22,860 |
) |
|
$ |
(24,802 |
) |
|
$ |
1,942 |
|
Product Revenue, Net
Product revenue, net was negative $1.9 million for the three months ended September 30, 2024 compared to $2.8 million for the three months ended September 30, 2023. Negative revenue during the three months ended September 30, 2024 was due to an increase in our returns reserve of $1.7 million for estimated returns from certain distributors. We determined it was more than probable that product held by certain distributors will be returned based on lower than forecasted sell-through and expiration of product. This increase in reserve was in addition to an adjustment of other gross to net reserves of $0.2 million mostly related to increase in co-pay reserve. We will continue to work with all of our distributors to sell through existing inventory and expand target channels of sales and distribution. Reserves will continue to be reviewed on a quarterly basis and may be adjusted based on assessment of the overall business and sales forecast by each distributor. There were no ex-factory sales for the three months ended September 30, 2024 due to lower demand pull through.
YCANTH (VP-102), our first FDA approved product, became available for commercial sale in August 2023. Revenue generated during the three months ending September 30, 2023 relates to the delivery of YCANTH (VP-102) to FFF, our sole distributor during this period.
Collaboration Revenue
Collaboration revenue was $0.1 million for each of the three months ended September 30, 2024 and 2023. During each of the three months ended September 30, 2024 and 2023, collaboration revenue consisted of supplies and development activity with Torii.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $16.1 million for the three months ended September 30, 2024, compared to $20.1 million for the three months ended September 30, 2023. The decrease of $4.1 million was primarily due to a decrease in stock compensation of $7.0 million due to restricted stock units vested on FDA approval in July 2023 and a decrease in advertising costs of $1.0 million partially offset by increased compensation, and benefits and travel due to ramp-up of sales force of $1.6 million, an increase in medical affairs costs in selling, general and administrative expenses of $0.7 million, severance of $0.4 million, increased legal costs of $0.4 million and loss on disposal of assets of $0.3 million.
Research and Development Expenses
Research and development expenses were $2.4 million for the three months ended September 30, 2024, compared to $6.5 million for the three months ended September 30, 2023. The decrease of $4.1 million was primarily related to decrease in VP-315 clinical trial costs of $2.5 million, a decrease of medical affairs costs in research and development expenses of $0.7 million, decrease of stock compensation of $0.6 million related to restricted stock units vested on FDA approval in July 2023 and a reduction of costs related to YCANTH (VP-102) pre-launch activity of $0.5 million partially offset by increased headcount related costs of $0.3 million.
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The following table summarizes our research and development expense by product candidate or, for unallocated expenses, by type, for the three months ended September 30, 2024 and 2023. We did not incur any research and development expense for VP-103 during the three months ended September 30, 2024 or 2023. Unallocated expenses include compensation and other personnel related costs.
|
|
For the Three Months Ended |
|
|
|
|
||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
YCANTH (VP-102) |
|
$ |
417 |
|
|
$ |
898 |
|
|
$ |
(481 |
) |
VP-315 |
|
|
310 |
|
|
|
2,847 |
|
|
|
(2,537 |
) |
Common Warts (VP-102) |
|
|
211 |
|
|
|
— |
|
|
|
211 |
|
Stock based compensation |
|
|
605 |
|
|
|
1,225 |
|
|
|
(620 |
) |
Other unallocated expenses |
|
|
862 |
|
|
|
1,540 |
|
|
|
(678 |
) |
Research and development expense |
|
$ |
2,405 |
|
|
$ |
6,510 |
|
|
$ |
(4,105 |
) |
|
|
|
|
|
|
|
|
|
|
|||
Cost of Product Revenue
Cost of product revenue of $0.4 million for the three months ended September 30, 2024 consisted of obsolete inventory write-off of $0.3 million and $0.1 million of indirect overhead labor and product testing costs. YCANTH (VP-102), our first FDA approved product, became available for commercial sale in August 2023. Cost of product revenue for the three months ended September 30, 2023 was $0.1 million related to indirect overhead labor costs. All product costs had previously been expensed prior to FDA approval of YCANTH (VP-102) for the treatment of molluscum.
Cost of Collaboration Revenue
Cost of collaboration revenue was $0.1 million for each of the three months ended September 30, 2024 and 2023. The costs were related to manufacturing supply required to support development and testing services pursuant to the Torii Clinical Supply Agreement.
Interest Income
Interest income was $0.2 million for the three months ended September 30, 2024 compared to $0.8 million for the three months ended September 30, 2023. The decrease of $0.6 million was primarily due to lower cash balance for the period ended September 30, 2024.
Interest Expense
Interest expense was $2.4 million for the three months ended September 30, 2024 compared to $1.7 million for the three months ended September 30, 2023. The higher interest expense of $0.7 million was due to the OrbiMed Credit Agreement commencement on July 26, 2023.
22
Results of Operations for the Nine Months Ended September 30, 2024 and 2023
The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023 (in thousands):
|
|
For the Nine Months Ended September 30, |
|
|
|
|
||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
Revenue: |
|
|
|
|
|
|
|
|
|
|||
Product revenue, net |
|
$ |
6,259 |
|
|
$ |
2,792 |
|
|
$ |
3,467 |
|
Collaboration revenue |
|
|
963 |
|
|
|
344 |
|
|
|
619 |
|
Total revenue |
|
|
7,222 |
|
|
|
3,136 |
|
|
|
4,086 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Selling, general and administrative |
|
|
48,943 |
|
|
|
30,310 |
|
|
|
18,633 |
|
Research and development |
|
|
10,673 |
|
|
|
14,975 |
|
|
|
(4,302 |
) |
Cost of product revenue |
|
|
1,257 |
|
|
|
145 |
|
|
|
1,112 |
|
Cost of collaboration revenue |
|
|
858 |
|
|
|
329 |
|
|
|
529 |
|
Total operating expenses |
|
|
61,731 |
|
|
|
45,759 |
|
|
|
15,972 |
|
Loss from operations |
|
|
(54,509 |
) |
|
|
(42,623 |
) |
|
|
(11,886 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|||
Interest income |
|
|
1,212 |
|
|
|
1,948 |
|
|
|
(736 |
) |
Interest expense |
|
|
(7,063 |
) |
|
|
(1,657 |
) |
|
|
(5,406 |
) |
Other expense |
|
|
(17 |
) |
|
|
(49 |
) |
|
|
32 |
|
Total other (expense) income, net |
|
|
(5,868 |
) |
|
|
242 |
|
|
|
(6,110 |
) |
Net loss |
|
$ |
(60,377 |
) |
|
$ |
(42,381 |
) |
|
$ |
(17,996 |
) |
Product Revenue, Net
Product revenue, net was $6.3 million for the nine months ended September 30, 2024 compared to $2.8 million for the nine months ended September 30, 2023. YCANTH (VP-102), our first FDA approved product, became available for commercial sale in August 2023. The increase of $3.5 million relates to additional sales of YCANTH (VP-102) to FFF, our primary distributor, related to forecasted demand pull through, as well as the expansion of our specialty distribution network during the three-month period ended June 30, 2024 to bring-on an additional specialty distributor and the related impact of an initial one-time stock-in order from that distributor. Revenue during the nine months ended September 30, 2024 was partially offset by an increase in our returns reserve of $1.7 million for estimated returns from our distributors. We determined it was more than probable that product held by certain distributors will be returned based on our lower than forecasted sell-through and expiration of product. We will continue to work with all of our distributors to sell through existing inventory and expand target channels of sales and distribution. Reserves will continue to be reviewed on a quarterly basis and may be adjusted based on assessment of the overall business and sales forecast by each distributor.
Collaboration Revenue
Collaboration revenue was $1.0 million for the nine months ended September 30, 2024, compared to $0.3 million for the nine months ended September 30, 2023 which consisted of supplies and development activity with Torii for each period.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $48.9 million for the nine months ended September 30, 2024, compared to $30.3 million for the nine months ended September 30, 2023. The increase of $18.6 million was primarily due to higher expenses related to commercial activities for YCANTH (VP-102), including increased compensation, recruiting fees, benefits and travel due to ramp-up of sales force of $13.8 million, increased marketing and sponsorship costs of $2.5 million, increase in other commercial activity of $3.3 million, increased legal costs of $1.3 million, severance costs of $0.5 million, Dormer legal settlement of $0.8 million, an increase in medical affairs costs of $0.7 million in selling, general and administrative expenses and increased finance costs of $0.6 million partially offset by decrease in stock compensation costs of $5.0 million due to restricted stock units vested on FDA approval in July 2023.
Research and Development Expenses
Research and development expenses were $10.7 million for the nine months ended September 30, 2024 compared to $15.0 million for the nine months ended September 30, 2023. The decrease of $4.3 million was primarily due to a reduction of costs related to YCANTH (VP-102) pre-launch activity of $3.2 million, a decrease in clinical trial costs for VP-315 of $0.9 million, a decrease in medical affairs costs in research and development of $0.7 million, and decrease of stock compensation of $0.6 million related to restricted stock units vested on FDA approval in July 2023 partially offset by increased headcount related costs of $1.1 million.
The following table summarizes our research and development expense by product candidate or, for unallocated expenses, by type for the nine months ended September 30, 2024 and 2023. We did not incur any research and development expense for VP-103
23
during the three months ended September 30, 2024 or 2023. Unallocated expenses include compensation and other personnel related costs.
|
|
For the Nine Months Ended September 30, |
|
|
|
|
||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
VP-315 |
|
$ |
3,162 |
|
|
$ |
4,095 |
|
|
$ |
(933 |
) |
YCANTH (VP-102) |
|
|
1,634 |
|
|
|
4,817 |
|
|
|
(3,183 |
) |
Common Warts (VP-102) |
|
|
371 |
|
|
|
— |
|
|
|
371 |
|
Stock based compensation |
|
|
1,568 |
|
|
|
2,078 |
|
|
|
(510 |
) |
Other unallocated expenses |
|
|
3,938 |
|
|
|
3,985 |
|
|
|
(47 |
) |
Research and development expense |
|
$ |
10,673 |
|
|
$ |
14,975 |
|
|
$ |
(4,302 |
) |
Cost of Product Revenue
Cost of product revenue was $1.3 million for the nine months ended September 30, 2024 compared to $0.1 million for the nine months ended September 30, 2023. The increase of $1.2 million was related to additional product sales and obsolete inventory write-off of $0.6 million during the nine months ended September 30, 2024.
Cost of Collaboration Revenue
Cost of collaboration revenue was $0.9 million for the nine months ended September 30, 2024, compared to $0.3 million for the nine months ended September 30, 2023. The increase of $0.5 million was primarily due to increased manufacturing supply required to support development and testing services pursuant to the Torii Clinical Supply Agreement.
Interest Income
Interest income was $1.2 million for the nine months ended September 30, 2024 compared to $1.9 million for the nine months ended September 30, 2023. The decrease of $0.7 million was primarily due to lower cash as of September 30, 2024.
Interest Expense
Interest expense was $7.1 million for the nine months ended September 30, 2024 compared to $1.7 million for the nine months ended September 30, 2023. The higher interest expense of $5.4 million was due to the OrbiMed Credit Agreement commencement on July 26, 2023.
Liquidity and Capital Resources
Since our inception, we have incurred net losses and negative cash flows from our operations. We have financed our operations since inception primarily through sales of our convertible preferred stock, the sale of our common stock, the issuance of debt and $20.0 million from the Torii Agreement.
As of September 30, 2024, we had cash and cash equivalents of $23.0 million. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.
On July 21, 2023, the FDA approved YCANTH (VP-102) topical solution for the treatment of molluscum contagiosum in adult and pediatric patients two years of age and older. Our first commercial sale of YCANTH (VP-102) occurred in August 2023 to FFF, our primary specialty pharmacy distributor.
On July 26, 2023, we entered into the Credit Agreement, pursuant to which we borrowed $50.0 million on July 26, 2023, resulting in net proceeds to us of approximately $44.1 million after payment of certain fees and transaction related expenses. Amounts borrowed under the Loan Facility will mature on July 26, 2028.
Payments of the principal amount of borrowings under the Credit Agreement, together with a repayment premium and other fees, are not required under the Credit Agreement unless our net revenue attributable to YCANTH on a trailing 12-month basis does not equal or exceed specified amounts for specified test periods as set forth in the Credit Agreement beginning on December 31, 2024. If, on a test date, we do not achieve the specified amount of revenue on a trailing 12-month basis, then, beginning on the last day of the next full month immediately following the such test date, we would be required to repay the outstanding principal amount of the loans on the last day of each month in equal monthly installments through the maturity date, together with the applicable repayment premium and the exit fee. If we do not achieve the specified amount of revenue on a trailing 12-month basis to meet the revenue test requirements as of December 31, 2024, we would begin making principal payments on the outstanding debt balance starting in January 2025. We do not anticipate meeting the revenue test as of December 31, 2024. In addition, the Credit Agreement contains a financial covenant that we must maintain a liquidity of at least $10.0 million and if we are unable to maintain compliance by either amending the debt or raising additional funds, we could be in default in the near-term. The Credit Agreement also requires that our quarterly and annual financial statements not be subject to any qualification or statement which is of a “going concern” or
24
similar nature. The qualification of a "going concern" was waived for the quarterly financial statements ended September 30, 2024. If the qualification of a "going concern" is not waived for additional future periods or if we don’t raise additional financing, we may be in default of our debt in the near-term. Upon the occurrence of an event of default (subject to notice and grace periods), additional interest of 4% per annum applies and obligations under the Credit Agreement could be accelerated. As of September 30, 2024, the Company was in compliance with all covenants under the Credit Agreement as amended.
During the term of the Loan Facility, interest payable in cash by us will accrue on any outstanding balance due under the Loan Facility at a rate per annum equal to the higher of (x) the SOFR rate (which is the forward-looking term rate for a one-month tenor based on the secured overnight financing rate administered by the CME Group Benchmark Administration Limited) and (y) 4.00% plus, in either case, 8.00%. During an event of default, any outstanding amount under the Loan Facility will bear interest at a rate of 4.00% in excess of the otherwise applicable rate of interest. We will pay certain fees with respect to the Loan Facility, including an upfront fee, an unused fee on the undrawn portion of the Loan Facility, an administration fee, a prepayment premium and an exit fee, as well as certain other fees and expenses of the Administrative Agent and the Lenders.
Cash Flows
The following table summarizes our cash flows for the nine months ended September 30, 2024 and 2023 (in thousands):
|
|
For the Nine Months Ended September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Net cash used in operating activities |
|
$ |
(44,863 |
) |
|
$ |
(24,070 |
) |
Net cash used in investing activities |
|
|
(27 |
) |
|
|
(135 |
) |
Net cash (used in) provided by financing activities |
|
|
(1,698 |
) |
|
|
74,240 |
|
Net (decrease) increase in cash and cash equivalents |
|
$ |
(46,588 |
) |
|
$ |
50,035 |
|
Operating Activities
During the nine months ended September 30, 2024, operating activities used $44.9 million of cash, primarily resulting from a net loss of $60.4 million partially offset by non-cash stock-based compensation of $6.4 million, non-cash amortization and impairment of right-of-use assets of $0.9 and non-cash interest expense of $1.6 million. Net cash used by changes in operating assets and liabilities consisted primarily of an increase in prepaid expenses and other assets of $1.5 and a decrease in accounts payable of $1.5 million partially offset by decreases in accounts receivable of $4.4 million and a net increase in accrued expenses of $4.9 million.
During the nine months ended September 30, 2023, operating activities used $24.1 million of cash, primarily resulting from a net loss of $42.4 million partially offset by non-cash stock-based compensation of $12.3 million. Net cash provided by changes in operating assets and liabilities consisted primarily of a decrease in prepaid and other assets of $1.0 million and an increase in accounts payable and accrued expenses of $7.8 million partially offset by an increase in accounts receivable of $3.9 million.
Investing Activities
During the nine months ended September 30, 2024 and 2023, net cash used in investing activities of $27,000 and $135,000, respectively, was for the purchase of property and equipment.
Financing Activities
During the nine months ended September 30, 2024, net cash used by financing activities of $1.7 million was primarily due to $1.1 million of debt amendment costs related to the OrbiMed Credit Agreement and finance lease payments of $0.6 million.
During the nine months ended September 30, 2023, net cash provided by financing activities of $74.2 million was primarily related to net cash proceeds of $44.1 million from the OrbiMed Credit Agreement and proceeds of $30.3 million, net of issuance costs from the issuance of common stock and pre-funded warrants.
Funding Requirements
Our first commercial sale of YCANTH (VP-102) occurred in August 2023 to FFF, our primary specialty pharmacy distributor. While we expect to continue to generate revenue from the sale of YCANTH (VP-102), we expect our expenses to increase in connection with our ongoing activities, particularly as we continue commercialization of YCANTH (VP-102) and continue the research and development of, continue or initiate clinical trials of, and seek marketing approval for, our product candidates. We expect to incur significant commercialization expenses related to sales, marketing, manufacturing and distribution. Furthermore, we expect to incur additional costs associated with operating as a public company. We will need substantial additional financing to fund our operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to reduce operating expenses, delay, reduce or eliminate our research and development programs and/or continued and future commercialization efforts. We believe that our existing cash and cash equivalents as of September 30, 2024 will be sufficient to support our planned operations only into the
25
first quarter of 2025. These factors cause substantial doubt to exist about the Company's ability to continue as a going concern within one year after the date these financial statements are issued. The Company’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result should the Company be unable to continue as a going concern.
We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our capital resources sooner than we expect. Our future capital requirements will depend on many factors, including:
Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, YCANTH (VP-102), and our other product candidates, if approved, may not achieve commercial success. Our commercial revenues will be derived solely from sales of YCANTH (VP-102) in the near term. We may need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the disruptions to, and volatility in, the credit and financial markets in the United States and worldwide. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interests of existing stockholders may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing stockholders’ rights. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Obligations and Commitments
As of September 30, 2024, there have been no material changes to our contractual obligations and commitments as previously discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
26
Item 3. Quantitative and Qualitative Disclosures About Market Risks
There have been no material changes to our quantitative and qualitative disclosures about market risk as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Interim Principal Financial Officer has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that the information required to be disclosed by us in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Interim Principal Financial Officer, to allow timely decisions regarding required disclosures. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures. Based on such evaluation, our Chief Executive Officer and Interim Principal Financial Officer has concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2024.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(b) and 15d-15(b) of the Exchange Act that occurred during the quarter ended September 30, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item. 1 Legal Proceedings
On June 6, 2022, plaintiff Kranthi Gorlamari (“Plaintiff”) filed a putative class action complaint captioned Gorlamari v. Verrica Pharmaceuticals Inc., et al., in the U.S. District Court for the Eastern District of Pennsylvania against us and certain of our current and former officers and directors (“Defendants”). On January 12, 2023, the Plaintiff filed an amended complaint alleging that Defendants violated federal securities laws by, among other things, failing to disclose certain manufacturing deficiencies at the facility where our contract manufacturer produced bulk solution for the YCANTH (VP-102) drug device and that such deficiencies posed a risk to the prospects for regulatory approval of YCANTH (VP-102) for the treatment of molluscum. The amended complaint seeks unspecified compensatory damages and other relief on behalf of Plaintiff and all other persons and entities which purchased or otherwise acquired our securities between May 19, 2021 and May 24, 2022 (the “Putative Class Period”).
On January 12, 2024, the Court granted in part and denied in part Defendants’ motion to dismiss the amended complaint. The Court held that Plaintiff’s claims relating to statements made in May and June 2021 were sufficiently pled, but dismissed Plaintiff’s claims relating to all other statements made during the Putative Class Period. On January 26, 2024, Plaintiff filed a second amended complaint in an attempt to cure certain of the deficiencies identified in the January 12, 2024 ruling. Defendants’ motion to dismiss the second amended complaint was fully briefed as of April 22, 2024, and is pending before the Court. On September 3, 2024, the Court granted in part and denied in part Defendants’ motion to dismiss the second amended complaint. The Court dismissed Plaintiff’s claims related to one of the two individual defendants but held that Plaintiff’s claims against us and the other individual defendant were sufficiently pled.
In addition, on October 21, 2024, plaintiff Ivan S. Cohen filed a putative stockholder derivative lawsuit in the U.S. District Court for the Eastern District of Pennsylvania. The complaint names us as a nominal defendant and purports to bring claims on or against certain of our current and former directors and officers for alleged violations of the federal securities laws and breaches of their fiduciary duties in relation to substantially the same factual allegations as the above-described putative class action lawsuit. The complaint primarily seeks to recover for us compensatory damages for losses allegedly sustained related to the facts alleged, restitution, and punitive damages.
We are involved in ordinary, routine legal proceedings that are not considered by management to be material. We believe the ultimate liabilities resulting from such legal proceedings will not materially affect our financial position or our results of operations or cash flows.
27
Item 1A. Risk Factors
Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. In addition to the other information set forth in this quarterly report on Form 10-Q, you should carefully consider the factors described in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission on February 29, 2024. Except as set forth below, there have been no material changes to the risk factors described in that report.
Our financial statements have been prepared assuming that we will continue as a going concern.
We have incurred recurring losses from operations since inception and we believe our existing cash and cash equivalents will be sufficient to support our planned operations only into the first quarter of 2025. These factors cause substantial doubt to exist about our ability to continue as a going concern. If we are unable to obtain sufficient funding, our business, prospects, financial condition and results of operations will be materially and adversely affected, and we may be unable to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our financial statements, and it is likely that investors will lose all or a part of their investment. In addition, if there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms, or at all.
We may not be able to generate sufficient cash to service our indebtedness, we may be required to begin paying principal prior to the maturity date, and we believe we will be unable to borrow additional funds pursuant to our Loan Facility.
We have entered into a Credit Agreement with OrbiMed, pursuant to which we borrowed $50.0 million in July 2023. Our obligations under the Credit Agreement are secured by all or substantially all of our assets.
The Credit Agreement provided for up to $25.0 million could have been made available on or prior to June 30, 2024, up to $30.0 million would be made available on or prior to December 31, 2024, up to $10.0 million would be made available on or prior to March 31, 2025, and up to $10.0 million would be made available on or prior to June 30, 2025, in each case, subject to certain revenue requirements. We did not achieve the revenue target as of June 30, 2024 and were not able to borrow the first additional tranche of $25.0 million. In addition, we do not believe we will be able to borrow, and do not intend to borrow, additional tranches under the Credit Agreement.
We are subject to a number of affirmative and restrictive covenants pursuant to the Credit Agreement, which limit or restrict our ability to (subject to certain qualifications and exceptions): create liens and encumbrances; incur additional indebtedness; merge, dissolve, liquidate or consolidate; make acquisitions, investments, advances or loans; dispose of or transfer assets; pay dividends or make other payments in respect of their capital stock; amend certain material documents; redeem or repurchase certain debt; engage in certain transactions with affiliates; and enter into certain restrictive agreements. In addition, the Credit Agreement contains a financial covenant that the Company must maintain a liquidity of at least $10.0 million and that the Company’s quarterly and annual financial statements not be subject to any qualification or statement which is of a “going concern” or similar nature beginning with our Annual Report on Form 10-K for the year ending December 31, 2024. Our obligations under the Credit Agreement are subject to acceleration upon the occurrence of an event of default (subject to notice and grace periods). We are currently in compliance with the Credit Agreement covenants.
Payments of the principal amount of borrowings under the Credit Agreement, together with a repayment premium and other fees, are not required under the Credit Agreement unless our net revenue attributable to YCANTH on a trailing 12-month basis does not equal or exceed specified amounts for specified test periods as set forth in the Credit Agreement beginning on December 31, 2024. If, on a test date, we do not achieve the specified amount of revenue on a trailing 12-month basis, then, beginning on the last day of the next full month immediately following the such test date, we would be required to repay the outstanding principal amount of the loans on the last day of each month in equal monthly installments through the maturity date, together with the applicable repayment premium and the exit fee.
If we are unable to achieve certain milestones, generate sufficient revenue and raise additional capital through a combination of equity offerings, debt financings and license and collaboration agreements, we will no longer be in compliance with these covenants. We may also enter into other debt agreements in the future which may contain similar or more restrictive terms.
Our ability to make scheduled monthly payments or to refinance our debt obligations depends on numerous factors, including the amount of our cash reserves and our actual and projected financial and operating performance. These amounts and our performance are subject to certain financial and business factors, as well as prevailing economic and competitive conditions, some of which may be beyond our control. We cannot assure you that we will maintain a level of cash balances or cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our existing or future indebtedness. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness. We cannot assure you that we would be able to take any of these actions, or that these actions would permit us to meet our scheduled debt service obligations. Failure to comply with the conditions of the Credit Agreement could result in an event of default, which could result in an acceleration
28
of amounts due under the Credit Agreement. We may not have sufficient funds or may be unable to arrange for additional financing to repay our indebtedness or to make any accelerated payments, and OrbiMed could seek to enforce security interests in the collateral securing such indebtedness, which would harm our business.
Greater than expected returns of YCANTH (VP-102) may exceed our reserve for returns, which would adversely affect our revenue and operating results.
The pharmaceutical wholesalers and distributors to which we sell YCANTH (VP-102) are permitted to return purchased product under certain circumstances. We estimate expected returns based on our review of similar products in the industry and record discrete reserves if product held by distributors, forecasted sales and expiration of product warrant a reserve. Substantially all returns are due to expiry of the product. During the three months ended September 30, 2024, we increased our returns reserve by $1.7 million on previously sold product as a result of lower than forecasted sell-through and expiration of product. Any significant increase in returns that exceeds our reserve could adversely affect our revenue and operating results.
Item 5. Other Information
Appointment of Interim Principal Financial Officer and Interim Principal Accounting Officer
On November 1, 2024, our Board of Directors designated Ted White, our President and Chief Executive Officer and a director of the Company, as the Company’s interim principal financial officer and interim principal accounting officer, effective immediately, to serve until November 5, 2024.
Information regarding Mr. White’s background and business experience is set forth under the caption “Class III Director Nominees for Election for a Three-Year Term Expiring at the 2027 Annual Meeting” in our definitive proxy statement filed with the Securities and Exchange Commission on April 19, 2024 and is incorporated herein by reference. There are no arrangements or understandings between Mr. White and any other persons pursuant to which he was selected as an officer or director of ours. There are also no family relationships between Mr. White and any of our director or executive officers, and Mr. White has no direct or indirect material interest in any related party transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
We did not enter into, or materially amend, any material plan, contract or arrangement to which Mr. White is a party or in which he participates in connection with Mr. White’s designation as interim principal financial officer and interim principal accounting officer, or make or modify any grant or award to Mr. White under any such plan, contract or arrangement.
Rule 10b5-1 Trading Arrangements and Non-Rule 10b5-1 Trading Arrangements
During the three months ended September 30, 2024, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act)
Item 6. Exhibits
29
EXHIBIT INDEX
Exhibit |
|
Description |
|
|
|
3.1 (1) |
|
|
|
|
|
3.2 (2) |
|
|
|
|
|
10.1 # |
|
|
|
|
|
10.2 |
|
|
|
|
|
31.1 |
|
|
|
|
|
32.1* |
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
(1) Previously filed as Exhibit 3.3 to the Company’s Registration Statement on Form S-1 (File No. 333-225104), filed with the Securities and Exchange Commission on May 22, 2018.
(2) Previously filed as Exhibit 3.4 to the Company’s Registration Statement on Form S-1 (File No. 333-225104), filed with the Securities and Exchange Commission on May 22, 2018.
# Certain portions of this exhibit, indicated by asterisks, have been omitted pursuant to Item 601(b)(10) of Regulation S-K because they are not material and would likely cause competitive harm to the registrant if publicly disclosed.
* These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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VERRICA PHARMACEUTICALS INC. |
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November 4, 2024 |
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By: |
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/s/ Ted White |
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Ted White |
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Chief Executive Officer and President |
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(Principal Executive Officer and Interim Principal Financial Officer) |
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EXHIBIT 10.1
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL. OMISSIONS ARE DESIGNATED [***].
Execution Version
Fifth AMENDMENT and Waiver TO CREDIT AGREEMENT
This FIFTH AMENDMENT AND WAIVER TO CREDIT AGREEMENT (this “Amendment”) is made and entered into as of August 2, 2024 by and among VERRICA PHARMACEUTICALS INC., a Delaware corporation (the “Borrower”), the Lenders party hereto (the “Lenders”), and ORBIMED ROYALTY & CREDIT OPPORTUNITIES IV, LP, as administrative agent for the Lenders (together with its Affiliates, successors, transferees and assignees, the “Administrative Agent”).
WHEREAS, the Borrower, the Lenders and the Administrative Agent entered into a Credit Agreement, dated as of July 26, 2023 (as amended by that First Amendment to Credit Agreement, dated as of December 20, 2023, as further amended by that certain Second Amendment to Credit Agreement, dated as of January 31, 2024, as further amended by that certain Third Amendment and Waiver to Credit Agreement, dated as of May 6, 2024, and as further amended by that certain Fourth Amendment to Credit Agreement, dated as of June 26, 2024 the “Existing Credit Agreement”; the Existing Credit Agreement as amended by this Amendment and as may be further amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), pursuant to which the Lenders have extended credit to the Borrower on the terms set forth therein;
WHEREAS, pursuant to Section 7.1(b) of the Credit Agreement, the Borrower is required, among other things, to deliver to the Administrative Agent consolidated financial statements of the Borrower and its Subsidiaries for each Fiscal Quarter, which financial statements shall be without any “going concern” or like qualification (the “Going Concern Requirement”);
WHEREAS, the Borrower has requested that the Lenders waive, solely in respect of the Borrower’s quarterly unaudited financial statements for the Fiscal Quarters ended June 30, 2024 and September 30, 2024 (the “Specified Quarterly Financials”), the Going Concern Requirement, and the Lenders agree to provide such waiver on the terms and subject to the conditions set forth herein;
WHEREAS, pursuant to Section 10.1 of the Credit Agreement, the Credit Agreement may be amended or waived by an instrument in writing signed by the Borrower and the Lenders and acknowledged by the Administrative Agent; and
WHEREAS, the Borrower and the Lenders desire to amend certain provisions of the Existing Credit Agreement as provided in this Amendment.
NOW, THEREFORE, in consideration of the mutual agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
Test Dates |
Ycanth Revenue Base for the 12-month period ending on such Test Date |
December 31, 2024 |
$[***] |
March 31, 2025 |
$[***] |
June 30, 2025 |
$[***] |
September 30, 2025 |
$[***] |
December 31, 2025 |
$[***] |
March 31, 2026 and each Fiscal Quarter ending thereafter |
$[***] |
SECTION 3.8 Exit Fee. Upon the prepayment or repayment of principal of all or any portion of any Loans (or upon the date any such prepayment or repayment is required to be paid), whether on the Maturity Date, or pursuant to Section 3.2, Section 9.2, Section 9.3, or otherwise, the Borrower shall pay to the Administrative Agent for the account of each Lender, in cash, on the date on which such prepayment or repayment is paid or required to be paid, as the case may be, in addition to the other Obligations (including the Repayment Premium, if any) so prepaid, repaid or required to be prepaid or repaid, a fee (the “Exit Fee”) in an amount equal to (a) with respect to any prepayment or repayment of any Initial Loans, seven and a half percent (7.50%), or (b) with respect to any prepayment or repayment of any Loans other than Initial Loans, five percent (5.00%), in each case, of the principal amount of the Loans prepaid, repaid or required to be prepaid or repaid, as the case may be, on such date.
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A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release, and that if known by him or her, would have materially affected his or her settlement with the debtor or released party.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the day and year first above written.
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VERRICA PHARMACEUTICALS INC. as the Borrower |
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By: /s/ Terry Kohler |
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Name: Terry Kohler |
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Title: Chief Financial Officer |
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[Signature Page to Fifth Amendment and Waiver to Credit Agreement]
ORBIMED ROYALTY & CREDIT OPPORTUNITIES IV, LP,
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By: OrbiMed ROF IV LLC, |
its General Partner
By: OrbiMed Advisors LLC, its Managing Member |
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By: /s/ Matthew Rizzo |
Name: Matthew Rizzo |
Title: Member
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ORBIMED ROYALTY & CREDIT OPPORTUNITIES IV OFFSHORE, LP,
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By: OrbiMed ROF IV LLC, |
its General Partner
By: OrbiMed Advisors LLC, its Managing Member |
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By: /s/ Matthew Rizzo |
Name: Matthew Rizzo |
Title: Member
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[Signature Page to Fifth Amendment and Waiver to Credit Agreement]
ACKNOWLEDGED BY: ORBIMED ROYALTY & CREDIT OPPORTUNITIES IV, LP |
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By: OrbiMed ROF IV LLC, |
its General Partner
By: OrbiMed Advisors LLC, its Managing Member |
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By: /s/ Matthew Rizzo |
Name: Matthew Rizzo |
Title: Member |
[Signature Page to Fifth Amendment and Waiver to Credit Agreement]
EXHIBIT 10.2
Execution Version
Release Agreement
This Release Agreement (“Release” or “Agreement”) is made by and between Joseph Bonaccorso (“you”) and Verrica Pharmaceuticals Inc. (the “Company”).
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Payment”), such Special Severance Payment to be made without regard to your payment of COBRA premiums and without regard to the expiration of the COBRA period prior to the end of the COBRA Payment Period. You may, but are not obligated, to use the Special Severance Payment to pay for medical expenses. Nothing in this Agreement shall deprive you of your
rights under COBRA or ERISA for benefits under plans and policies arising under your employment by the Company.
term deferral exemption in Treasury Regulation Section 1.409A-1(b)(4). For purposes of Code Section 409A, your right to receive any installment payments (whether pay in lieu of notice, Severance Benefits, reimbursements or otherwise) shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment shall at all times be considered a separate and distinct payment. All payments and benefits are subject to applicable withholdings and deductions.
Plan or the Company’s 2018 Equity Incentive Plan (the “2018 Plan” and together with the 2013 Equity Incentive Plan, the “Plans”). You were also granted restricted stock units to be issued shares of the Company’s common stock pursuant to the 2018 Plan (the “RSUs” and together with the Options, the “Equity Awards”). Under the terms of the Plans and your applicable Option and/or RSU agreements (together with the Plans, the “Equity Award Documents”), vesting of the Options and RSUs will cease as of the date your “Continuous Service” (as defined in the Plans, as applicable) ends. Provided that you shall have timely executed the Consulting Agreement and satisfied the conditions for receipt of the Severance Benefits (as described in Section 2 above), your Continuous Service will be deemed to have continued following the Separation Date, and your unvested Equity Awards will remain eligible to vest through the duration of the Consulting Agreement.
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except as otherwise set forth in this Agreement, you, on behalf of yourself and, to the extent permitted by law, on behalf of your spouse, heirs, executors, administrators, assigns, insurers, attorneys and other persons or entities, acting or purporting to act on your behalf (collectively, the “Employee Parties”), hereby generally and completely release, acquit and forever discharge the Company, its parents and subsidiaries, and its and their officers, directors, managers, partners, agents, representatives, employees, attorneys, shareholders, predecessors, successors, assigns, insurers and affiliates (the “Company Parties”) of and from any and all claims, liabilities, demands, contentions, actions, causes of action, suits, costs, expenses, attorneys’ fees, damages, indemnities, debts, judgments, levies, executions and obligations of every kind and nature, in law, equity, or otherwise, both known and unknown, suspected and unsuspected, disclosed and undisclosed, arising out of or in any way related to your employment with the Company and separation therefrom, arising at any time prior to and including the execution date of this Agreement, including but not limited to: all such claims and demands directly or indirectly arising out of or in any way connected with your employment with the Company or the termination of that employment; claims or demands related to salary, bonuses, commissions, vacation pay, the right to receive additional grants of stock, stock options or other ownership interests in the Company, fringe benefits, expense reimbursements, severance pay, or any other form of compensation; claims or demands related to or arising from the Employment Agreement; claims pursuant to any federal, state or local law, statute, or cause of action; tort law; or contract law (individually a “Claim” and collectively “Claims”). The Claims you are releasing and waiving in this Agreement include, but are not limited to, any and all Claims that any of the Company Parties:
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Notwithstanding the foregoing, other than events expressly contemplated by this Agreement you do not waive or release rights or Claims that may arise: (i) from events that occur after the date this Release is executed; (ii) that relate to a breach of this Agreement; (iii) that relate to any existing ownership interest in the Company or vested equity awards as of the date this Release is executed; (iv) that relate to your vested benefits or existing rights under any Company benefit plan or any plan or agreement related to equity ownership in the Company that arise after this Release is executed; (v) in connection with any right of indemnification you may have for any liabilities arising from your actions within the course and scope of your employment with the Company or within the course and scope of your role as an officer of the Company; and (vi) any Claims which cannot be waived by law, including, without limitation, any rights you may have under applicable workers’ compensation laws. Nothing in this Agreement has prevented, currently prevents, or shall prevent you from filing, cooperating with, or participating in any proceeding or investigation before the Equal Employment Opportunity Commission, United States Department of Labor, the National Labor Relations Board, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federal government agency, or similar state or local agency (“Government Agencies”), or exercising any rights pursuant to Section 7 of the National Labor Relations Act. You further understand this Agreement is not intended to and does not limit your ability to voluntarily communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company. While this Agreement does not limit your right to receive an award for information provided to the Securities and Exchange Commission, you understand and agree that, you are otherwise waiving, to the fullest extent permitted by law, any and all rights you may have to individual relief based on any Claims that you have released and any rights you have waived by signing this Agreement. If any Claim is not subject to release, to the extent permitted by law, you waive any right or ability to be a class or collective action representative or to otherwise participate in any putative or certified class, collective or multi-party action or proceeding based on such a Claim in which any of the Company Parties is a party.
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against any of the Company Parties. You further affirm that you have no known workplace injuries or occupational diseases. You acknowledge and affirm that you have not been retaliated against for reporting any allegation of corporate fraud or other wrongdoing by any of the Company Parties, or for exercising any rights protected by law, including any rights protected by the Fair Labor Standards Act, the Family Medical Leave Act or any related statute or state or local leave or disability accommodation laws, or any applicable state workers’ compensation law. In addition, you acknowledge that you are knowingly and voluntarily waiving and releasing any rights you may have under the ADEA (“ADEA Waiver”). You also acknowledge that the consideration given for the ADEA Waiver is in addition to anything of value to which you were already entitled. You further acknowledge that you have been advised by this writing, as required by the ADEA, that: (a) your release and waiver herein does not apply to any rights or claims that arise after the date you sign this Agreement; (b) you should consult with an attorney prior to signing this Agreement; (c) you have twenty-one (21) days to consider this Agreement (although you may choose to voluntarily sign it sooner); (d) you have seven (7) days following the date you sign this Agreement to revoke it (by sending written revocation directly by email to Christopher G. Hayes, Chief Legal Officer for the Company at chayes@verrica.com; and (e) the Agreement will not be effective until the date upon which the revocation period has expired unexercised, which will be the eighth (8th) day after you sign this Agreement.
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seal. In addition, in the event that you file a lawsuit for retaliation by the Company for reporting a suspected violation of law, you may disclose the trade secret to your attorney and use the trade secret information in the court proceeding, if you: (A) file any document containing the trade secret under seal; and (B) do not disclose the trade secret, except pursuant to court order.
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amended except in a writing signed by both you and a duly authorized officer of the Company. This Agreement will bind the heirs, personal representatives, successors and assigns of both you and the Company, and inure to the benefit of both you and the Company, their heirs, successors and assigns. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination will not affect any other provision of this Agreement and the provision in question will be modified by the court so as to be rendered enforceable.
This Agreement will be deemed to have been entered into and will be construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania as applied to contracts made and to be performed entirely within the Commonwealth of Pennsylvania.
[signatures to follow on next page]
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VERRICA PHARMACEUTICALS INC. /s/ Ted White Name: Ted White Title: President & Chief Executive Officer |
I UNDERSTAND THAT THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS, EVEN THOSE UNKNOWN CLAIMS THAT IF KNOWN BY ME, WOULD AFFECT MY DECISION TO ACCEPT THIS AGREEMENT.
/s/ Joseph Bonaccorso Joseph Bonaccorso |
August 30th 2024 Date |
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EXHIBIT A
Consulting Agreement
This Consulting Agreement (this “Agreement”), effective as of August 30, 2024 (the “Effective Date”), is made between Verrica Pharmaceuticals Inc. (the “Company”) and Joseph Bonaccorso (“Consultant”). Company and Consultant, collectively, are the “Parties”, and each a “Party”.
RECITALS
WHEREAS, Consultant was employed by Company as a full time employee with the title of Chief Commercial Officer until he resigned from employment with the Company effective August 30, 2024; and
WHEREAS, the Company now desires to retain Consultant, without interruption in his service to the Company, to engage as an independent contractor to perform consulting services for the Company as of the Effective Date, at the Company’s sole request and direction, and Consultant is willing to perform such services, on the terms described below.
AGREEMENT
NOW THEREFORE, in consideration of the mutual promises contained herein, the Parties agree as follows:
1. Incorporation of Recitals by Reference
The above Recitals are hereby incorporated into this Agreement.
2. Engagement
A. Services. Consultant agrees to provide services to the Company on the
terms and conditions hereinafter provided. Consultant shall perform such services as are reasonably requested of him from time to time and in the Company’s sole discretion
and direction. The services shall consist of consulting services related to Consultant’s previous responsibilities with the Company’s and performed only upon request of the Company’s
President & Chief Executive Officer or the Company’s Chief Legal Officer (the “Services”). Consultant shall perform the Services in a professional, diligent and competent manner and will devote the necessary time, attention and skill to carry out the Services timely and in full
compliance with the Company’s policies and practices as well as with all applicable laws, rules, standards and regulations. Consultant will not subcontract or otherwise assign any or all of his duties, obligations, or Services under this Agreement to any individual or entity.
B. Reimbursements. During the Term of this Agreement, upon presentation
of acceptable expense statements and receipts in accordance with Company policy and
procedure, Company shall reimburse Consultant for all reasonable and necessary expenses paid
or incurred by Consultant in the performance of the Services; provided, all such expenses
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were
necessary and reasonable and pre-approved in writing by Company.
3. Equity Awards. As set forth in the Release Agreement between Consultant and the Company dated August 30, 2024 (the “Separation Agreement”), and in consideration for and subject to Consultant’s timely, satisfactory, and compliant performance of the Services hereunder, as shall be determined in Company’s sole discretion, Consultant’s Equity Awards (as defined in the Separation Agreement) will remain eligible to vest for so long as Consultant remains in Continuous Service (as defined in the Company’s 2013 Equity Incentive Plan or 2018 Equity Incentive Plan, as applicable, governing each Equity Award) under this Consulting Agreement as of each such vesting date.
4. Confidentiality
A. Definition of Confidential Information. “Confidential Information” means any information (including any and all combinations of individual items of information) that relates to the actual or anticipated business and/or products, research or development of the Company, its affiliates or subsidiaries or to the Company’s, its affiliates’ or subsidiaries’
technical data, trade secrets, or know-how, including, but not limited to, research, product plans, or other information regarding the Company’s, its affiliates’ or subsidiaries’ products or services and markets therefor, customer lists and customers (including, but not limited to, customers of
the Company on whom Consultant called or with whom Consultant became acquainted during
the term of this Agreement), software, developments, inventions, discoveries, ideas, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, finances, and other business information that is either (A) disclosed by the Company, either directly or indirectly, in writing, orally or by drawings or inspection of premises, parts, equipment, or other property of Company, or (B) otherwise obtained by Consultant in connection with the performance of the Services. Notwithstanding the foregoing, Confidential Information shall not include any such information which Consultant can establish (i) was rightfully in the public domain prior to the time of disclosure to Consultant; (ii) becomes rightfully in the public domain after disclosure to Consultant through no wrongful action or inaction of Consultant; or
(iii) was not obtained or learned in connection with the performance of the Services and is in the rightful possession of Consultant, without confidentiality obligations, at the time of disclosure
as shown by Consultant’s then-contemporaneous written records; provided that any combination of individual items of information shall not be deemed to be within any of the foregoing
exceptions merely because one or more of the individual items are within such exception. Consultant’s duty of confidentiality under this Agreement does not amend or abrogate in any manner Consultant’s continuing duties under any prior agreement between Consultant and the Company, including but not limited to Consultant’s Employee Confidential Information, Inventions, Non-Solicitation and Non-Competition Agreement with the Company.
B. Nonuse and Nondisclosure. During and after the term of this Agreement, Consultant will hold in the strictest confidence, and take all steps to prevent any unauthorized
use or disclosure of Confidential Information. Consultant will not (i) use the Confidential Information for any purpose whatsoever other than as necessary for the performance of the Services on behalf of the Company or (ii) disclose the Confidential Information to any third
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party. Consultant may disclose Confidential Information to the extent compelled by applicable law; provided however, prior to such disclosure, Consultant shall provide prior written notice to Company and seek a protective order or such similar confidential protection as may be available under applicable law. Consultant agrees that no ownership of Confidential Information is
conveyed to the Consultant. Without limiting the foregoing, Consultant shall not use or disclose any Company property, intellectual property rights, trade secrets or other proprietary know-how of the Company to invent, author, make, develop, design, or otherwise enable others to invent, author, make, develop, or design identical or substantially similar designs or products for any
third party. Consultant agrees that his obligations hereunder shall continue after the termination
of this Agreement.
C. Other Client Confidential Information. Consultant agrees that Consultant will not improperly use, disclose, or induce the Company to use any proprietary information or trade secrets of any other person or entity with which Consultant has an obligation to keep any information in confidence. Consultant also agrees that Consultant will not bring onto the Company’s premises or transfer onto the Company’s technology systems any unpublished document, proprietary information, or trade secrets belonging to any third party unless disclosure to, and use by, the Company has been consented to in writing by such third party.
D. Third Party Confidential Information. Consultant recognizes that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the Company’s part to maintain the confidentiality
of such information and to use it only for certain limited purposes. Consultant agrees that at all times during the term of this Agreement and thereafter, Consultant owes the Company and such third parties a duty to hold all such confidential or proprietary information in the strictest confidence and not to use it or to disclose it to any person, firm, corporation, or other third party except as necessary in carrying out the Services for the Company consistent with the Company’s agreement with such third party.
5. Ownership
A. Assignment of Inventions. Consultant agrees that all right, title, and interest in and to any copyrightable material, notes, records, drawings, designs, inventions,
improvements, developments, discoveries, ideas and trade secrets conceived, discovered, authored, invented, developed or reduced to practice by Consultant, solely or in collaboration
with others, during the term of this Agreement and arising out of, or in connection with,
performing the Services under this Agreement and any copyrights, patents, trade secrets, mask work rights or other intellectual property rights relating to the foregoing (collectively, “Inventions”), are the sole property of the Company. Consultant also agrees to promptly make
full written disclosure to the Company of any Inventions and to deliver and assign (or cause to
be assigned) and hereby irrevocably assigns fully to the Company all right, title and interest in
and to the Inventions.
B. Pre-Existing Materials. Consultant agrees that he does not have
any invention, discovery, idea, original works of authorship, development, improvements, trade secret, concept, or other proprietary information or intellectual property rights. Consultant will
not incorporate any invention, discovery, idea, original works of authorship, development,
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improvements, trade secret, concept, or other proprietary information or intellectual property
right owned by any third party into any Invention without Company’s prior written permission.
C. Moral Rights. Any assignment to the Company of Inventions includes all rights of attribution, paternity, integrity, modification, disclosure and withdrawal, and any other rights throughout the world that may be known as or referred to as “moral rights,” “artist’s
rights,” “droit moral,” or the like (collectively, “Moral Rights”). To the extent that Moral Rights cannot be assigned, Consultant hereby waives and agrees not to enforce any and all Moral Rights, including, without limitation, any limitation on subsequent modification, to the extent permitted under applicable law.
D. Further Assurances. Consultant agrees to assist Company, or its designee, at the Company’s expense, in every proper way to secure the Company’s rights in Inventions in any and all countries, including the disclosure to the Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments and all other instruments that the Company may deem necessary in order to apply for, register, obtain, maintain, defend, and enforce such rights, and in order to deliver, assign and convey to the Company, its successors, assigns and nominees the sole and exclusive right, title, and interest in and to all Inventions and testifying in a suit or other proceeding relating to such Inventions. Consultant further agrees that Consultant’s obligations under this Section 5.D shall continue
after the termination of this Agreement.
E. Attorney-in-Fact. Consultant agrees that, if the Company is unable because of Consultant’s unavailability, dissolution, mental or physical incapacity, or for any other reason, to secure Consultant’s signature with respect to any Inventions, including, without limitation, for the purpose of applying for or pursuing any application for any United States or foreign patents
or mask work or copyright registrations covering the Inventions, then Consultant hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Consultant’s agent and attorney-in-fact, to act for and on Consultant’s behalf to execute and file any papers and oaths and to do all other lawfully permitted acts with respect to such Inventions
to further the prosecution and issuance of patents, copyright and mask work registrations with
the same legal force and effect as if executed by Consultant. This power of attorney shall be deemed coupled with an interest, and shall be irrevocable.
6. Representations and Warranties
A. Consultant represents and warrants that Consultant has no agreements, relationships, or commitments to any other person or entity that conflict with the provisions of this Agreement, Consultant’s obligations to the Company under this Agreement, and/or Consultant’s ability to perform the Services. Consultant will not disclose to the Company, or induce the Company to use, any proprietary information, knowledge or data belonging to any third party.
B. Consultant shall perform all Services in a professional manner, consistent with industry standards and in accordance with all applicable laws, rules, or regulations.
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Consultant shall provide to the Company, upon the Company’s request, any and all information to enable the Company to verify that Consultant is performing in accordance with this Agreement.
C. Consultant is experienced in the Services to be undertaken on behalf of Company and possesses the skills to complete the Services consistent with industry standards and has not been sanctioned or suspended by any governing authority from providing the Services.
D. Consultant certifies that Consultant is not aware of any information relating to Consultant that would damage the business or reputation of the Company, its products or services, or its officers, directors, employees, or shareholders. Consultant shall notify the Company immediately upon discovery of any such information.
E. During the term of this Agreement, Consultant shall not accept work, enter into a contract, or provide services to any third party that provides products or services which compete with the products or services, currently or in development, provided by the Company nor may Consultant enter into any agreement or perform any services which would conflict or interfere with the Services provided pursuant to or the obligations under this Agreement.
F. Consultant represents and warrants that he is not relying on any statement or representation not contained in this Agreement.
G. Consultant represents and warrants that during the Term and for a period of two (2) years after the termination or expiration of this Agreement, he shall not, and shall cause anyone acting on its behalf, not to, directly or indirectly, (i) solicit or encourage any person to leave the employment of the Company, or (ii) contact, solicit, or divert any customer, vendor, consultant, or past or potential customer, vendor or consultant, of the Company to discontinue, reduce, or adversely alter the amount of such customer’s, vendor’s, or consultant’s business or relationship with the Company or to otherwise interfere with the Company’s relationship with such customer, vendor or consultant.
H. Consultant acknowledges and agrees that neither he nor anyone acting on his behalf shall receive any employee benefits of any kind from the Company. Consultant (and Consultant’s agents, employees, and subcontractors) is excluded from participating in any fringe benefit plans or programs as a result of the performance of the Services under this Agreement, without regard to Consultant’s independent contractor status. In addition, Consultant (on behalf
of himself and on behalf of Consultant’s agents, employees, and contractors) waives any and all rights, if any, to participation in any of the Company’s fringe benefit plans or programs including, but not limited to, health, sickness, accident or dental coverage, life insurance, disability benefits, severance, accidental death and dismemberment coverage, unemployment insurance coverage, workers’ compensation coverage, and pension or 401(k) benefit(s) provided by the Company to its employees. Notwithstanding the above, this Agreement does not amend or abrogate in any manner any benefit continuation or conversion rights provided by the provision of a benefit plan or by law arising out of Consultant’s previous employment relationship with the Company.
7. Record-Keeping; Return of Company Materials
A. Consultant shall keep records of all Services performed for the Company. Such records shall include, but not be limited to, all documentation pertaining to the Services,
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records relevant to any costs, expenses, or payments incurred or made by Consultant on behalf of or reimbursable by the Company, financial records, notes, written communications, and all other documentation or materials pertaining to Consultant’s performance of Services. The Company shall have the right to inspect, copy and audit those records identified herein during regular business hours, including, but not be limited to, any records that may pertain to Consultant’s representations and warranties in Section 6.
B. Upon the termination of this Agreement, or upon Company’s earlier request, Consultant will immediately deliver to the Company, and will not keep in Consultant’s possession, custody, or control, recreate, or deliver to anyone else, any Company property, including, but not limited to, Company Confidential Information, tangible embodiments of the Inventions, all devices and equipment belonging to the Company, all electronically-stored information and passwords to access such property and any copies or reproductions of any of the foregoing items.
8. Term and Termination
A. Term. The term of this Agreement will begin on the Effective Date and continue for a period of one (1) year, unless earlier terminated as provided in Section 8.B. below.
B. Termination.
(1) Automatic Termination. If Consultant fails to timely execute the Separation Agreement according to its terms, then this Agreement will automatically terminate effective at the end of the date by which Consultant is required to execute the Separation Agreement. If Consultant revokes his acceptance of the Separation Agreement within seven (7) days after executing the Separation Agreement, then this Agreement will automatically terminate on the day of such revocation.
(2) For Cause. The Company may terminate this Agreement immediately if Consultant refuses to or is unable to satisfactorily perform, as determined in the Company’s sole discretion, the Services or is in actual or threatened breach of any provision of this Agreement.
(3) For Convenience. Either party may terminate this Agreement upon thirty (30) days written notice to the other Party.
The date on which Consultant’s engagement is terminated in accordance with this Section 8.B. is herein referred to as the “Termination Date”.
9. Independent Contractor Relationship
It is the express intention of the Company and Consultant that Consultant perform the Services as an independent contractor to the Company. Nothing in this Agreement shall in any way be construed to constitute, designate, and/or appoint Consultant as an agent, employee or representative of the Company or entitle Consultant to any Company-sponsored benefits from the Company. Further, Consultant is not authorized to bind the Company to any liability or obligation or to represent to anyone that Consultant has any such authority to do so on behalf of the Company. Consultant acknowledges and agrees that Consultant is obligated to report as income all
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compensation received by Consultant pursuant to this Agreement and that Company has no tax, financial, or other obligations to Consultant except those expressly set forth in Section 3 of this Agreement.
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10. Indemnification
Consultant agrees to indemnify and hold harmless the Company and its directors, officers and employees from and against all taxes, losses, damages, liabilities, costs and expenses, including attorneys’ fees and other legal expenses, arising directly or indirectly from or in connection with (i) any negligent, reckless or wrongful act of Consultant, (ii) any actual or threatened breach of this Agreement by the Consultant, or (iii) any failure of Consultant to perform the Services in accordance with the Agreement or any applicable laws, standards, rules or regulations, as determined in Company’s sole discretion.
11. Publicity
The Consultant shall not disclose to any third-party the Services performed hereunder without the Company’s prior written consent. Consultant shall not use the name of the Company in any publicity, advertising or announcement without the Company’s prior written approval.
12. Miscellaneous
A. Governing Law; Consent to Personal Jurisdiction. This Agreement shall be governed by the laws of the Commonwealth of Pennsylvania. To the extent that any lawsuit
is permitted under this Agreement, the Parties hereby expressly consent to the personal and exclusive jurisdiction and venue of the state courts located in Chester County, Pennsylvania and the federal court for the Eastern District of Pennsylvania.
B. Assignability. This Agreement will be binding upon Consultant’s assigns, administrators, and other legal representatives, and will be for the benefit of the Company, its successors, and its assigns. There are no intended third-party beneficiaries to this Agreement. Consultant may not sell, assign, subcontract or delegate any rights or obligations under this Agreement, by operation of law or otherwise (including by merger, consolidation,
reorganization, reincorporation, sale of assets or stock or change of control), and any such attempted assignment, delegation, subcontract or transfer shall be null and void. Notwithstanding anything to the contrary herein, Company may assign this Agreement and its rights and
obligations under this Agreement to any successor to all or substantially all of Company’s
relevant assets, whether by merger, consolidation, reorganization, reincorporation, sale of assets or stock, change of control or otherwise.
C. Entire Agreement. This Agreement constitutes the entire agreement and understanding between the Parties with respect to the subject matter herein and supersedes all
prior written and oral agreements, discussions, or representations between the Parties. Consultant represents and warrants that he is not relying on any statement or representation not contained
in this Agreement. The Parties have entered into separate agreements related to Consultant’s previous employment relationship with the Company, and these separate agreements govern the previous employment relationship between Consultant and Company. Consultant agrees that
that these separate agreements have or may have provisions that survive termination of Consultant’s relationship with the Company under this Agreement, may be amended or
superseded without regard to this Agreement, and are enforceable according to their terms
without regard to the enforcement provision of this Agreement. The Parties also agree that the
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rights and obligations contained in Sections 4, 5, 6, 7 and 10 of this Agreement will survive any termination or expiration of this Agreement.
D. Headings. Headings are used in this Agreement for reference only and shall not be considered when interpreting this Agreement.
E. Severability. If a court or other body of competent jurisdiction finds, or the Parties mutually believe, any provision of this Agreement, or portion thereof, to be invalid or unenforceable, such provision will be enforced to the maximum extent permissible so as to carry out the intent of the Parties, and the remainder of this Agreement will continue in full force and effect.
F. Modification, Waiver. No modification of or amendment to this Agreement, nor any rights under this Agreement, will be effective unless in a writing signed by the Parties. Waiver by the Company of a breach of any provision of this Agreement will not
operate as a waiver of any other or subsequent breach. No payments made by the Company shall constitute an acceptance of satisfactory performance of Consultant’s obligations under this Agreement.
G. Notices. Any notice or other communication required or permitted by this Agreement to be given to a Party shall be in writing and shall be deemed given (i) if delivered personally or by commercial messenger or courier service, (ii) when sent by confirmed e-mail,
or (iii) if mailed by U.S. registered or certified mail (return receipt requested), to the Party at the Party’s address written below or at such other address as the Party may have previously specified by like notice. If by mail, delivery shall be deemed effective three business days after mailing in accordance with this Section 12.G.
(1) If to the Company, to:
Christopher G. Hayes, Esquire
Verrica Pharmaceuticals Inc.
44 W Gay St, Suite 400
West Chester, PA 19380
(2) If to the Consultant, to:
Joseph Bonaccorso
[***]
H. Attorneys’ Fees. In any court action at law or equity that is brought by one of the Parties to this Agreement to enforce or interpret the provisions of this Agreement, the prevailing Party will be entitled to reasonable attorneys’ fees, in addition to any other relief to which that Party may be entitled.
I. Signatures. This Agreement may be signed in two counterparts, each of
which shall be deemed an original, with the same force and effectiveness as though executed in a single document.
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J. Injunctive Relief. Consultant understands and agrees that the Company
will suffer irreparable harm in the event that Consultant breaches any of Consultant’s obligations hereunder and that monetary damages will be inadequate to compensate Company for such
breach. Accordingly, Consultant agrees that, in the event of a breach or threatened breach by Consultant of any of the provisions hereof, as determined by the Company in its sole discretion, the Company, in addition to and not in limitation of any other rights, remedies or damages
available to the Company at law or in equity, shall be entitled to a temporary restraining order, preliminary injunction and/or permanent injunction in order to prevent or to restrain any such breach by Consultant, or by any or all of Consultant’s partners, co-venturers, employers, employees, servants, agents, representatives and any and all persons directly or indirectly acting for, on behalf of or with Consultant.
K. Errors. In the event that Company discovers at any time that this
Agreement contains an error that was caused by a mistake, calculation error, or similar error that misconstrues the spirit and intent of the Company in entering this Agreement, Consultant agrees, upon notice from Company, to re-execute any documents that are necessary to correct any such error(s). Consultant further agrees that Company will not be liable to Consultant for any
damages incurred by Consultant that are directly or indirectly caused by any such error(s).
IN WITNESS WHEREOF, the Parties hereto have executed this Consulting Agreement
as of the Effective Date first written above.
CONSULTANT: /s/ Joseph Bonaccorso Joseph Bonaccorso |
COMPANY: Verrica Pharmaceuticals Inc. /s/ Ted White Ted White President and Chief Executive Officer |
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Exhibit 31.1
VERRICA PHARMACEUTICALS INC.
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND INTERIM PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Ted White, certify that:
Date: November 4, 2024
/s/ Ted White |
Ted White |
President and Chief Executive Officer |
(principal executive officer and interim principal financial officer) |
|
Exhibit 32.1
VERRICA PHARMACEUTICALS INC.
PRINCIPAL EXECUTIVE OFFICER AND INTERIM PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350),Ted White, President and Chief Executive Officer of Verrica Pharmaceuticals Inc. (the “Company”), hereby certifies that, to the best of his knowledge:
IN WITNESS WHEREOF , the undersigned have set their hands hereto as of the 4th day of November, 2024.
/s/ Ted White |
|
|
Ted White |
|
|
President and Chief Executive Officer (principal executive officer and interim principal financial officer) |
|
|
|
|
|
* This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.