Verrica Pharmaceuticals Inc.
11/13/2026 | Press release | Distributed by Public on 11/13/2026 06:53
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
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 consolidated 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, 2025 and 2024 included in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission or the SEC, on March 11, 2026. Our consolidated 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, or 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, 2025, filed with the SEC on March 11, 2026, in this Quarterly Report under Part II - Item 1A "Risk Factors," and in our other filings with the SEC.
Overview
We are a therapeutics company developing and commercializing medications for the treatment of dermatologic diseases, including skin cancers. Our commercial product and portfolio of product candidates are 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 an additional pipeline product. Our commercial product, YCANTH (VP-102), was approved by the U.S. Food and Drug Administration, or FDA, in July 2023 for the treatment of molluscum 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 currently developing YCANTH (VP-102) for a potential follow-on indication for the treatment of common warts. Our second development candidate, VP-315, is an oncolytic peptide-based injectable therapy for the potential treatment of dermatology oncologic conditions, initially targeting basal cell carcinoma or BCC.
Commercial Product
We commercially launched YCANTH (VP-102) in August 2023 in the United States for the treatment of molluscum. We have built a specialized sales organization which as of October 31, 2026, consisted of approximately 50 employee sales representatives in the United States focused on pediatric dermatologists, dermatologists, pediatricians and select other primary care healthcare providers.
In the fourth quarter of 2025, we also launched YCANTHRx, a non-dispensing pharmacy, in order to streamline and simplify the provider experience by allowing offices to send YCANTH prescriptions to the same place, regardless of the patient's insurance coverage, for triage to an in-network dispensing pharmacy.
Additional Pipeline Products
YCANTH (VP-102) - Treatment of Common Warts
We are also advancing YCANTH (VP-102) for common warts through a separate regulatory approval process and have initiated a global Phase 3 program, or the Program, of YCANTH for the treatment of common warts with our partner, Torii. The first patient in the first Phase 3 clinical study (COVE-2) in the Program was dosed in the United States in December 2025, and the first patients were dosed in the second Phase 3 study (COVE-3) in the Program in the United States and Japan in June 2026. We announced in August 2026 that COVE-2 enrollment has been completed and we had
achieved greater than 50% of COVE-3 enrollment and patients continue to be enrolled in COVE-3 and through the long-term follow up study (COVE-4). Top-line data is anticipated in the first quarter of 2027 for COVE-2, with the remaining top-line data from our Program expected to be available in mid-2027.
On October 20, 2025, we announced that the Committee for Medicinal Products for Human Use of the European Medicines Agency provided positive feedback which supports the filing of a Marketing Authorization Application for YCANTH (VP-102) as a treatment for molluscum contagiosum in the EU with no requirement to complete additional clinical studies.
In July 2026, we entered into an exclusive distribution, marketing and supply agreement with Medomie Pharma Ltd., or Medomie, pursuant to which Medomie received the exclusive rights to seek regulatory approval for and commercialize YCANTH for the treatment of molluscum contagiosum in Israel. We currently retain all global rights to YCANTH outside of Japan and Israel and we are exploring non-dilutive partnerships to fund development and commercialization for YCANTH (VP-102) for the treatment of molluscum contagiosum, as well as for common warts if approved, in additional geographic regions outside of the United States and Japan.
VP-315 - Treatment of Basal Cell Carcinoma
We are also developing VP-315 for the treatment of BCC and potentially additional dermatological oncology indications. In November 2025, we presented additional data at the Society for Immunotherapy of Cancer 40th Annual Meeting, which showed that VP-315 induced a robust local immune response with both cell-mediated and humoral components, effectively shifting the tumor microenvironment from an immunosuppressive to an anti-tumor state, and additional data regarding the histologic assessment in non-injected lesions that suggests a potential abscopal-like effect. We have also presented at multiple dermatology conferences in 2026. There has been a growing interest in this program across a broad audience. We believe this reflects the high response rates observed in the study and the potential for VP-315 to change the paradigm for the treatment of BCC, particularly for patients wishing to avoid or reduce their surgical burden and recovery. Our enthusiasm is further supported by the suggested potential for less scarring and improved compliance versus other therapeutic options such as surgery and topicals, as either a primary or neoadjuvant treatment for superficial and nodular tumors. We have also continued to evaluate the abscopal response in 14 observed but not treated lesions in the Phase 2 study and have reported that 3 out of the 14 lesions had complete histologic clearance and that there was a 67% overall reduction in tumor size across all 14 lesions. If this overall product profile could be demonstrated in pivotal Phase 3 testing, we believe VP-315 has the potential to emerge as a non-surgical, immunotherapy treatment option for BCC and other skin cancers.
We have obtained feedback from the FDA from the end-of-Phase 2 meeting in 2025, which supports an efficient Phase 3 program and path to registration for VP-315. This includes two Phase 3 studies of approximately 100 subjects each in placebo-controlled studies with a primary endpoint of complete clearance at week 14. Additional long-term follow-up clinical studies will be needed post-approval. We believe these data, coupled with the EOP2 regulatory feedback, further support the clinical efficacy and histologic clearance observed in the Phase 2 BCC trial. These data support the advancement of the Phase 3 Program and we have initiated clinical and chemistry, manufacturing and controls, or CMC, activities to prepare for commencement of Phase 3 clinical trials. We may also pursue non-dilutive strategic partnerships to help fund the development and commercialization of VP-315.
We are also exploring the potential of VP-315 to treat patients with Gorlin syndrome, a rare disease that leads to dozens or hundreds of BCCs over the patient's lifetime, often presenting them with substantial surgical fatigue. We believe our foundational data in sporadic BCC provides promise for the potential benefit of VP-315 to Gorlin patients, and we will provide more details as the clinical protocol and anticipated timelines are finalized.
Liquidity Overview
Since our inception in 2013, our operations have focused on developing YCANTH (VP-102) and expanding our development pipeline (which includes VP-315), organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio, conducting clinical trials and commercializing YCANTH. We have funded our operations primarily through the sale of equity and equity-linked securities and through borrowings under loan agreements.
On July 26, 2023, we entered into the OrbiMed Credit Agreement, pursuant to which we borrowed $50.0 million under the OrbiMed Loan Facility (as defined in Note 9), resulting in net proceeds of approximately $44.1 million after payment of certain fees and transaction-related expenses. Amounts borrowed under the OrbiMed Loan Facility were scheduled to mature on July 26, 2028. On November 25, 2025, following the Private Placement described below, we fully extinguished the OrbiMed Loan Facility by paying a cash settlement amount of $35.0 million.
On November 23, 2025, we entered into Securities Purchase Agreements with certain investors, or the Purchasers, pursuant to which we sold and issued in a private placement, or the Private Placement, an aggregate of (i) 6,499,826 shares of our common stock, (ii) with respect to certain Purchasers, pre-funded warrants to purchase 5,305,164 shares of common stock, or the Pre-Funded Warrants, in lieu of shares and (iii) in either case, accompanying Series C warrants to purchase 2,951,241 shares of common stock, or the Series C Warrants. The purchase price per share of common stock and accompanying Series C Warrant was $4.24125 per share and the purchase price for the Pre-Funded Warrants and accompanying Series C Warrant was $4.24115 per share. The Series C Warrants expire on November 25, 2030. We received net proceeds of $49.1 million from the private placement transaction, after deducting placement fees of $0.9 million.
On August 3, 2026, we entered into a credit agreement, or the PD Credit Agreement, with PD Joint Holdings, LLC Series 2016-B, or the Lender, which provides for delayed-draw term loans of up to $12.5 million, increasing to $27.5 million upon our achievement of specified milestone conditions, or the Term Loans. On September 17, 2026, we borrowed $12.5 million under the facility. On October 22, 2026, we achieved the specified milestone conditions, increasing total availability under the PD Credit Agreement to $27.5 million, of which $12.5 million has been funded and $15 million remains available to borrow. The Lender is an entity controlled by Paul B. Manning, a significant investor of our company and Chairman of the Board.
As of September 30, 2026, we had cash of $14.4 million. Based on our current business plan and current capital resources, combined with the uncertainty regarding the availability of additional funding, we have concluded that there is substantial doubt regarding our ability to continue as a going concern within one year after the date these consolidated financial statements are issued. Our consolidated 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 consolidated 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 we be unable to continue as a going concern.
We plan to secure additional capital in the future through equity or debt financings, partnerships, or other sources to carry out our planned commercial and development activities. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate continued and future commercialization efforts and/or research and development programs.
We have incurred substantial operating losses since inception and expect to continue to incur significant losses for the foreseeable future and may never become profitable. As of September 30, 2026, we had an accumulated deficit of $360.2 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future. Our expenses may increase in connection with our ongoing activities, as we:
•continue to establish our commercialization infrastructure, obtain secondary suppliers for key components of the YCANTH manufacturing process and scale up external manufacturing and distribution capabilities to commercialize YCANTH (VP-102) for the treatment of molluscum contagiosum and product candidates for which we may obtain regulatory approval;
•continue our ongoing clinical programs evaluating VP-102 for the treatment of common warts and VP-315 for the treatment of BCC and potentially additional dermatological oncology indications;
•pursue regulatory approvals for YCANTH (VP-102) for the treatment of common warts and VP-315 for the treatment of BCC;
•adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products;
•maintain, expand and protect our intellectual property portfolio;
•hire and retain clinical, manufacturing, commercialization and scientific personnel; and
•incur additional legal, accounting and other expenses while operating as a public company.
Critical Accounting Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to 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 U.S. GAAP, we evaluate our estimates and judgments on an ongoing basis.
A summary of our significant accounting policies is disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. However, we believe that the additional accounting policies disclosed in Note 2 to our consolidated 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) is available for commercial sale and shipment for the treatment of patients by a healthcare provider in the United States. We sell the Product to several pharmaceutical wholesalers and distributors, or the Customers, who in turn sell the Product directly to pharmacies, 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 consolidated 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 Customers. 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.
License and Collaboration Revenue
License and 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. In September 2025, YCANTH (VP-102) received regulatory approval from Japan's Ministry of Health for treatment of molluscum contagiosum and in February 2026, Torii launched YCANTH as a new treatment option for molluscum in children over 2 years of age in Japan.
Operating Expenses
Cost of Product Revenue
Cost of product revenue includes the cost of inventory sold, which includes direct manufacturing and supply chain costs. Cost of product revenue also includes period costs related to excess and obsolete inventory write-downs.
Cost of License and Collaboration Revenue
The cost of license and collaboration revenue consists of payments for commercial product and manufacturing supply to support development and testing services pursuant to the Torii Clinical Supply Agreement.
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.
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 our other product candidates in addition to VP-315 for BCC. We expense research and development costs as incurred. These expenses include:
•expenses incurred under agreements with contract research organizations, or CROs, as well as investigative sites and consultants that conduct our clinical trials and preclinical studies;
•manufacturing and supply scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial supply and commercial supply, including manufacturing validation batches;
•outsourced professional scientific development services;
•employee-related expenses, which include salaries, benefits and stock-based compensation;
•expenses relating to regulatory activities; and
•laboratory materials and supplies used to support our research activities.
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 and VP-315 for BCC and potentially additional dermatological oncology indications 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:
•the number of clinical sites included in the trials;
•the length of time required to enroll suitable patients;
•the number of patients that ultimately participate in the trials;
•the number of doses patients receive;
•the duration of patient follow-up; and
•the results of our clinical trials.
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.
Results of Operations for the Three Months Ended September 30, 2026 and 2025
The following table summarizes our results of operations (in thousands):
| For the Three Months Ended September 30, | |||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||
| Total revenue | |||||||||||||||||
| Product revenue, net | $ | 5,697 | $ | 3,607 | $ | 2,090 | |||||||||||
| License and collaboration revenue | 1,217 | 10,737 | (9,520) | ||||||||||||||
| Total revenue | 6,914 | 14,344 | (7,430) | ||||||||||||||
| Operating expenses: | |||||||||||||||||
| Cost of product revenue | 583 | 754 | (171) | ||||||||||||||
| Cost of license and collaboration revenue | 565 | 355 | 210 | ||||||||||||||
| Selling, general and administrative | 10,356 | 9,403 | 953 | ||||||||||||||
| Research and development | 7,577 | 2,205 | 5,372 | ||||||||||||||
| Total operating expenses | 19,081 | 12,717 | 6,364 | ||||||||||||||
| (Loss) income from operations | (12,167) | 1,627 | (13,794) | ||||||||||||||
| Other expense: | |||||||||||||||||
| Interest income | 45 | 159 | (114) | ||||||||||||||
| Interest expense | (285) | (2,094) | 1,809 | ||||||||||||||
| Change in fair value of derivative liability | - | 34 | (34) | ||||||||||||||
| Total other expense, net | (240) | (1,901) | 1,661 | ||||||||||||||
| Net loss | $ | (12,407) | $ | (274) | $ | (12,133) | |||||||||||
Product Revenue, Net
Product revenue, net was $5.7 million for the three months ended September 30, 2026, compared to $3.6 million for the three months ended September 30, 2025. The increase in product revenue, net was primarily due to higher deliveries of YCANTH to our distribution partners, consistent with growth in dispensed applicator unit volume, as well as improved yield resulting from reduced spending on our co-pay assistance program.
License and Collaboration Revenue
License and collaboration revenue was $1.2 million for the three months ended September 30, 2026, compared to $10.7 million for the three months ended September 30, 2025. License and collaboration revenue for the three months ended September 30, 2026 consisted primarily of commercial supply. License and collaboration revenue for the three months ended September 30, 2025 consisted of a one-time $10.0 million milestone payment from Torii as well as supplies and development activity.
Cost of Product Revenue
Cost of product revenue for the three months ended September 30, 2026 and 2025 was $0.6 million and $0.8 million, respectively, consisting primarily of product costs related to the sale of YCANTH (VP-102).
Cost of License and Collaboration Revenue
Cost of license and collaboration revenue was $0.6 million and $0.4 million for the three months ended September 30, 2026 and 2025, respectively. Cost of license and collaboration revenue consisted of commercial product and supplies and development activity with Torii.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $10.4 million for the three months ended September 30, 2026, compared to $9.4 million for the three months ended September 30, 2025. Excluding the impact of stock-based compensation, expenses were comparable to the prior-year period. The following table summarizes our selling, general and administrative expense for the three months ended September 30, 2026 and 2025 (in thousands).
| For the Three Months Ended September 30, | |||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||
| Commercial (including payroll) | $ | 5,610 | $ | 4,976 | $ | 634 | |||||||||||
| General and administrative (including payroll) | 3,326 | 3,996 | (670) | ||||||||||||||
| Stock-based compensation | 1,420 | 431 | 989 | ||||||||||||||
| Selling, general and administrative expense | $ | 10,356 | $ | 9,403 | $ | 953 | |||||||||||
Research and Development Expenses
Research and development expenses were $7.6 million for the three months ended September 30, 2026, compared to $2.2 million for the three months ended September 30, 2025. Excluding the impact of stock-based compensation, the increase of $5.2 million was primarily due to an increase of $3.7 million in non-cash expense related to the Program, in addition to an increase of $1.3 million of expense related to chemistry, manufacturing and controls costs across YCANTH and VP-315.
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, 2026 and 2025. Unallocated expenses include compensation and other personnel-related costs (in thousands):
| For the Three Months Ended September 30, | |||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||
| YCANTH (VP-102) | $ | 1,389 | $ | 304 | $ | 1,085 | |||||||||||
| VP-315 | 387 | 197 | 190 | ||||||||||||||
| Common warts | 3,990 | 16 | 3,974 | ||||||||||||||
| Stock-based compensation | 465 | 287 | 178 | ||||||||||||||
| Other unallocated expenses | 1,346 | 1,401 | (55) | ||||||||||||||
| Research and development expense | $ | 7,577 | $ | 2,205 | $ | 5,372 | |||||||||||
Interest Income
Interest income was $45,000 and $0.2 million for the three months ended September 30, 2026, and September 30, 2025, respectively. The decrease of $0.1 million was primarily due to lower cash balances.
Interest Expense
Interest expense was $0.3 million for the three months ended September 30, 2026, compared to $2.1 million for the three months ended September 30, 2025. The decrease of $1.8 million was primarily related to the settlement of the OrbiMed Loan Facility and termination of the OrbiMed Credit Agreement in November 2025, as discussed in Note 9 to our consolidated financial statements, partially offset by imputed interest on the R&D funding liability under the Torii Agreement and $0.1 million of interest expense, consisting of paid-in-kind interest and amortization of discount and issuance costs, on the Term Loans borrowed under the PD Credit Agreement on September 17, 2026.
Results of Operations for the Nine Months Ended September 30, 2026 and 2025
The following table summarizes our results of operations (in thousands):
| For the Nine Months Ended September 30, | |||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||
| Total revenue | |||||||||||||||||
| Product revenue, net | $ | 15,080 | $ | 11,563 | $ | 3,517 | |||||||||||
| License and collaboration revenue | 2,719 | 18,922 | (16,203) | ||||||||||||||
| Total revenue | 17,799 | 30,485 | (12,686) | ||||||||||||||
| Operating expenses: | |||||||||||||||||
| Cost of product revenue | 1,562 | 1,517 | 45 | ||||||||||||||
| Cost of license and collaboration revenue | 1,353 | 523 | 830 | ||||||||||||||
| Selling, general and administrative | 30,694 | 27,103 | 3,591 | ||||||||||||||
| Research and development | 17,471 | 6,335 | 11,136 | ||||||||||||||
| Legal settlement, net of insurance recovery | 1,698 | - | 1,698 | ||||||||||||||
| Total operating expenses | 52,778 | 35,478 | 17,300 | ||||||||||||||
|
Loss from operations
|
(34,979) | (4,993) | (29,986) | ||||||||||||||
| Other expense: | |||||||||||||||||
| Interest income | 357 | 724 | (367) | ||||||||||||||
| Interest expense | (609) | (6,428) | 5,819 | ||||||||||||||
| Change in fair value of derivative liability | - | 886 | (886) | ||||||||||||||
|
Other expense
|
(11) | (1) | (10) | ||||||||||||||
| Total other expense, net | (263) | (4,819) | 4,556 | ||||||||||||||
| Net loss | $ | (35,242) | $ | (9,812) | $ | (25,430) | |||||||||||
Product Revenue, Net
Product revenue, net was $15.1 million for the nine months ended September 30, 2026, compared to $11.6 million for the nine months ended September 30, 2025. The increase in product revenue, net was primarily related to an increase in deliveries of YCANTH to our distribution partners commensurate with an increase in dispensed applicator unit volume.
License and Collaboration Revenue
License and collaboration revenue was $2.7 million for the nine months ended September 30, 2026, compared to $18.9 million for the nine months ended September 30, 2025. License and collaboration revenue for the nine months ended September 30, 2026, consisted primarily of commercial supply. License and collaboration revenue for the nine months ended September 30, 2025, consisted of $18.0 million in milestone payments as well as supplies and development activity.
Cost of Product Revenue
Cost of product revenue for the nine months ended September 30, 2026 and 2025 was $1.6 million and $1.5 million, respectively, consisting primarily of product costs related to the sale of YCANTH (VP-102).
Cost of License and Collaboration Revenue
Cost of license and collaboration revenue was $1.4 million and $0.5 million for the nine months ended September 30, 2026 and 2025, respectively. Cost of license and collaboration revenue consisted of commercial product and supplies and development activity with Torii.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $30.7 million for the nine months ended September 30, 2026, compared to $27.1 million for the nine months ended September 30, 2025. Excluding the impact of stock-based
compensation, the increase of $2.6 million was primarily a result of increased commercial spend related to the expansion of the sales force.
The following table summarizes our selling, general and administrative expense for the nine months ended September 30, 2026 and 2025 (in thousands).
| For the Nine Months Ended September 30, | |||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||
| Commercial (including payroll) | 16,983 | 13,604 | $ | 3,379 | |||||||||||||
| General and administrative (including payroll) | 10,899 | 11,695 | $ | (796) | |||||||||||||
| Stock-based compensation | 2,812 | 1,804 | 1,008 | ||||||||||||||
| Selling, general and administrative expense | $ | 30,694 | $ | 27,103 | $ | 3,591 | |||||||||||
Research and Development Expenses
Research and development expenses were $17.5 million for the nine months ended September 30, 2026, compared to $6.3 million for the nine months ended September 30, 2025. Excluding the impact of stock-based compensation, the increase of $10.8 million was primarily due to an increase of $9.0 million in costs related to the Program as well as an increase of $1.5 million in chemistry, manufacturing and controls costs.
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, 2026 and 2025. Unallocated expenses include compensation and other personnel-related costs (in thousands):
| For the Nine Months Ended September 30, | |||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||
| YCANTH (VP-102) | $ | 2,475 | $ | 1,015 | $ | 1,460 | |||||||||||
| VP-315 | 588 | 391 | 197 | ||||||||||||||
| Common warts | 8,998 | (50) | 9,048 | ||||||||||||||
| Stock-based compensation | 1,137 | 828 | 309 | ||||||||||||||
| Other unallocated expenses | 4,273 | 4,151 | 122 | ||||||||||||||
| Research and development expense | $ | 17,471 | $ | 6,335 | $ | 11,136 | |||||||||||
Legal Settlement, net of Insurance Recovery
An agreement in principle was reached to settle certain legal proceedings, and for the nine months ended September 30, 2026, $1.7 million was recorded representing the net expected impact after the insurance recovery. There was no expense related to legal settlements in the nine months ended September 30, 2025.
Interest Income
Interest income was $0.4 million and $0.7 million for the nine months ended September 30, 2026 and September 30, 2025, respectively. The decrease of $0.4 million was primarily due to lower cash balances.
Interest Expense
Interest expense was $0.6 million for the nine months ended September 30, 2026 compared to $6.4 million for the nine months ended September 30, 2025. The decrease of $5.8 million was primarily related to the settlement of the OrbiMed Loan Facility and termination of the OrbiMed Credit Agreement in November 2025, as discussed in Note 9 to our consolidated financial statements. Interest expense for the nine months ended September 30, 2026 includes $0.3 million of imputed interest on the R&D funding liability under the Torii Agreement and $0.1 million of interest expense on the Term Loans borrowed under the PD Credit Agreement on September 17, 2026.
Liquidity and Capital Resources
As of September 30, 2026, we had cash of $14.4 million. Since our inception, we have incurred negative cash flows from our operations. We have financed our operations since inception primarily through sales of our convertible preferred stock, sales of our common stock, and $38.0 million from the Torii Agreement, which includes $8.0 million received in July 2025 and $10.0 million received in September 2025.
On November 23, 2025, we sold an aggregate of (i) 6,499,826 shares of common stock, (ii) with respect to certain Purchasers, the pre-funded warrants in lieu of shares of common stock and (iii) in either case, accompanying warrants to purchase 2,951,241 shares of our common stock, referred to herein as the Series C Warrants. The purchase price per share of Common Stock and accompanying Series C Warrant was $4.24125 per share and the purchase price for the Pre-Funded Warrants and accompanying Series C Warrant was $4.24115 per share. We received net proceeds of $49.1 million from the Private Placement, after deducting placement fees of $0.9 million.
On July 26, 2023, we entered into the OrbiMed Credit Agreement under which we borrowed $50.0 million, 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 were set to mature on July 26, 2028. Based on our net revenue attributable to YCANTH on a trailing 12-month basis not meeting a specified amount set forth in the OrbiMed Credit Agreement as of December 31, 2024, we became obligated to start making principal payments starting in January 2025. We were obligated to repay the principal amount of the loan 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. On November 25, 2025, we paid $35.0 million to fully settle the debt related to the OrbiMed Credit Agreement.
On August 3, 2026, we entered into the PD Credit Agreement with PD Joint Holdings, LLC Series 2016-B, referred to herein as the Lender, an entity controlled by Paul B. Manning, our Chairman of the Board and a significant investor, which provides for delayed-draw Term Loans of up to $12.5 million, increasing to $27.5 million upon the Company's achievement of specified milestone conditions, referred to herein as the Term Loans. On September 17, 2026, the Company borrowed $12.5 million under the facility. On October 22, 2026, we achieved the specified milestone conditions, increasing total availability under the PD Credit Agreement to $27.5 million, of which $12.5 million has been funded and $15 million remains available to borrow. The Term Loans mature on December 31, 2030, bear interest at a variable rate with a 12.5% per annum minimum, and interest is paid in kind by capitalization into principal rather than in cash, absent an event of default. The PD Credit Agreement requires mandatory prepayments from specified cash flows and proceeds, requires repayment in full upon specified triggering events, at which time we also owe the Lender the Final Payment, and contains an annual YCANTH revenue covenant and a $5 million monthly minimum liquidity covenant. We were in compliance with these covenants as of September 30, 2026. See Note 9 to our consolidated financial statements for additional information.
Cash Flows
The following table summarizes our cash flows (in thousands):
| For the Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net cash used in operating activities | $ | (27,480) | $ | (13,036) | |||||||
| Net cash used in investing activities | - | - | |||||||||
| Net cash provided by (used in) financing activities | 11,989 | (12,196) | |||||||||
|
Net decrease in cash and restricted cash
|
$ | (15,491) | $ | (25,232) | |||||||
Operating Activities
During the nine months ended September 30, 2026, operating activities used $27.5 million of cash, primarily resulting from a net loss of $35.2 million partially offset by the non-cash change in obligation for the R&D funding arrangement of $7.8 million, non-cash stock-based compensation of $4.0 million, and the amortization of right-of-use assets related to operating and financing leases of $0.6 million. Net cash used by changes in operating assets and liabilities consisted primarily of an increase in accounts receivable of $6.0 million, an increase in insurance recovery asset of $2.3 million, an increase in inventory of $0.6 million and a decrease in accounts payable of $1.0 million, partially offset by the change in legal settlement accrual of $4.0 million, increase in accrued expenses and other current liabilities of $1.8 million and an increase in deferred revenue of $0.3 million.
During the nine months ended September 30, 2025, operating activities used $13.0 million of cash, primarily resulting from a net loss of $9.8 million partially offset by non-cash stock-based compensation of $2.6 million and non-cash interest expense of $2.1 million. Net cash used by changes in operating assets and liabilities consisted primarily of an increase in accounts receivable of $7.0 million and an increase in prepaid expenses and other assets of $1.3 million partially offset by an increase in deferred revenue of $1.6 million.
Investing Activities
We did not use any cash in investing activities during the nine months ended September 30, 2026 and 2025.
Financing Activities
During the nine months ended September 30, 2026, net cash provided by financing activities of $12.0 million was primarily due to $12.5 million of proceeds from the issuance of the Term Loans under the PD Credit Agreement, partially offset by the payment of $0.2 million of related debt issuance costs and $0.3 million of finance lease repayments.
During the nine months ended September 30, 2025, net cash used in financing activities of $12.2 million was primarily due to the repayment of debt related to the OrbiMed Credit Agreement.
Funding Requirements
While we expect to continue to generate revenue from the sale of YCANTH (VP-102), our expenses may increase in connection with our ongoing activities, particularly as we continue the research and development of, continue or initiate clinical trials of, and seek marketing approval for, our product candidates. 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. In addition, the amount of proceeds we may be able to raise pursuant to our currently effective shelf registration statement on Form S-3 is limited. We are subject to the general instructions of Form S-3 known as the "baby shelf rules." Under these rules, the amount of funds we can raise through primary public offerings of securities in any 12-month period using our registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of our common stock held by non-affiliates. Therefore, we will be limited in the amount of proceeds we are able to raise by selling securities using our Form S-3 until such time as our public float exceeds $75.0 million.
We have incurred substantial operating losses since inception and expect to continue to incur significant losses for the foreseeable future and may never become profitable. As of September 30, 2026, we had an accumulated deficit of $360.2 million. We believe our cash of $14.4 million as of September 30, 2026, together with the $15.0 million of additional borrowing capacity that became available on October 22, 2026, upon the Company's achievement of the specified milestone conditions under the PD Credit Agreement entered into on August 3, 2026, would be sufficient to extend our cash runway into the fourth quarter of 2027, without giving effect to any potential clinical trial costs related to any study of VP-315 for the treatment of Gorlin syndrome. Based on our current business plan and current capital resources, combined with the uncertainty regarding the availability of additional funding, we have concluded that there is substantial doubt regarding our ability to continue as a going concern within one year after the date these consolidated financial statements are issued. We plan to address the conditions that raise substantial doubt regarding our ability to continue as a going concern by, among other things, utilizing borrowings available under the PD Credit Agreement, subject to the terms and conditions thereof, and obtaining additional funding through equity offerings, debt financing, collaborations, strategic alliances and/or licensing arrangements. Our consolidated 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 consolidated 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 we 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, and timing, will depend on many factors, including:
•the level of sales achieved, and costs related to the commercialization of YCANTH (VP-102) for the treatment of molluscum contagiosum;
•the costs, timing and outcome of regulatory review of our product candidates;
•the scope, progress, results and costs of our clinical trials;
•the scope, prioritization and number of our research and development programs;
•the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
•our ability to maintain compliance with covenants under our loan agreements;
•the extent to which we acquire or in-license other product candidates and technologies;
•the impact on the timing of our clinical trials and our business;
•the costs to scale up commercial production of YCANTH (VP-102) and any product candidate we successfully commercialize; and
•the costs of establishing and maintaining sales and marketing capabilities for YCANTH (VP-102) and any product candidate that obtains regulatory approval.
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, 2026, 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, 2025.
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