Verrica Pharmaceuticals Inc

Previous wording

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 (VP102) (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.

Current wording

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.

Previous wording

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 77 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. In the future, we also intend to pursue commercialization for YCANTH (VP-102) for the treatment of molluscum contagiosum, as well as YCANTH (VP-102) for common warts and genital warts if approved, in additional geographic regions, either alone or together with a strategic partner.

Current wording

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).

Previous wording

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 resulted in gaining alignment on the design of a pivotal Phase 3 clinical development plan to evaluate YCANTH (VP-102) for the treatment of common warts.

Current wording

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.

Previous wording

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 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. Payment of our share of the costs may be offset by any development milestone payments in the Torii Agreement. No costs were incurred during the six month period ended June 30, 2024. We anticipate the Trial will begin in the first half of 2025.

Current wording

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 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.

Previous wording

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, 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.

Current wording

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.

Previous wording

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. The Credit Agreement provides for a five-year senior secured credit facility in an aggregate principal amount of up to $125.0 million, or the Loan Facility, of 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. The additional borrowings would potentially be available to the us subject to achievement of certain revenue targets, up to $25.0 million could have been 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. We did not achieve the revenue target as of June 30, 2024 and were not be able to borrow the first additional tranche of $25.0 million. In addition, we do not believe we will be able to borrow, and we do not intend to borrow, additional tranches under the Credit Agreement. Amounts borrowed under the Loan Facility will mature on July 26, 2028. 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.

Current wording

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.

Previous wording

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. The shares of common stock were sold 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.

Current wording

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.

Previous wording

Since inception, we have incurred significant operating losses. For the six months ended June 30, 2024 and 2023, our net loss was $37.5 million and $17.6 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 June 30, 2024, we had an accumulated deficit of $268.0 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:

Current wording

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:

Previous wording

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. 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.

Current wording

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.

Previous wording

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. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to achieve our revenue forecasts in the near future, if ever.

Current wording

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.

Previous wording

We anticipate that our selling, general and administrative expenses, including payroll and related expenses, will increase in the future as we continue to increase our headcount to support the expected growth in our business, expand 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.

Current wording

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.

Previous wording

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 ten 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 six months ended June 30, 2024 would have been $0.7 million and $1.4 million, respectively, including $0.2 million of obsolete inventory costs for each period.

Current wording

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.

Previous wording

Collaboration revenue was $0.3 million for the three months ended June 30, 2024, compared to $0.2 million for the three months ended June 30, 2023. During both of the three months ended June 30, 2024 and 2023, collaboration revenue consisted of supplies and development activity with Torii.

Current wording

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.

Previous wording

Selling, general and administrative expenses were $16.5 million for the three months ended June 30, 2024, compared to $5.9 million for the three months ended June 30, 2023. The increase of $10.6 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 $7.2 million, other commercial activity of $1.7 million, increased legal costs of $1.1 million and increased marketing and sponsorship costs of $0.4 million.

Current wording

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.

Previous wording

Research and development expenses were $3.3 million for the three months ended June 30, 2024, compared to $5.7 million for the three months ended June 30, 2023. The decrease of $2.4 million was primarily related to reduction of costs related to YCANTH (VP-102) pre-launch activity of $2.3 million and decrease in VP-315 clinical trial costs of $0.5 million partially offset by increased headcount related costs of $0.5 million.

Current wording

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.

Previous wording

Cost of collaboration revenue was $0.8 million for the six months ended June 30, 2024, compared to $0.2 million for the six months ended June 30, 2023. The increase of $0.6 million was primarily due to increased manufacturing supply required to support development and testing services pursuant to the Torii Clinical Supply Agreement.

Current wording

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.

Previous wording

Interest income was $0.4 million for the three months ended June 30, 2024 compared to $0.6 million for the three months ended June 30, 2023. The decrease was primarily due to lower cash balance for the period ended June 30, 2024.

Current wording

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.

Previous wording

The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023 (in thousands):

Current wording

The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023 (in thousands):

Previous wording

Product revenue, net was $4.9 million for the three months ended June 30, 2024 and relates to the delivery of YCANTH (VP-102) to FFF, our primary distributor, related to demand pull through, as well as the expansion of our specialty distribution network to bring-on an additional specialty distributor and the related impact of a one-time stock-in order from that distributor, which represented approximately 54% of net revenue in the period. YCANTH (VP-102), our first FDA approved product, became available for commercial sale in August 2023.

Current wording

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.

Previous wording

Collaboration revenue was $0.9 million for the six months ended June 30, 2024, compared to $0.2 million for the six months ended June 30, 2023 which consisted of supplies and development activity with Torii for each period.

Current wording

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.

Previous wording

Selling, general and administrative expenses were $32.9 million for the six months ended June 30, 2024, compared to $10.3 million for the six months ended June 30, 2023. The increase of $22.6 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 $12.5 million, increased marketing and sponsorship costs of $3.4 million, other commercial activity of $3.9 million, increased legal costs of $1.6 million and finance costs of $0.6 million.

Current wording

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.

Previous wording

Research and development expenses were $8.3 million for the six months ended June 30, 2024 compared to $8.5 million for the six months ended June 30, 2023. The decrease of $0.2 million was primarily due to a reduction of costs related to YCANTH (VP-102) pre-launch activity of $2.5 million partially offset by an increase in clinical trial costs for VP-315 of $1.6 million and increased headcount related costs of $0.7 million.

Current wording

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.

Previous wording

The following table summarizes our research and development expense by product candidate or, for unallocated expenses, by type for the six months ended June 30, 2024 and 2023. We did not incur any research and development expense for VP-103 during the three months ended June 30, 2024 or 2023. Unallocated expenses include compensation and other personnel related costs.

Current wording

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 during the three months ended September 30, 2024 or 2023. Unallocated expenses include compensation and other personnel related costs.

Previous wording

Cost of collaboration revenue was $0.2 million for the three months ended June 30, 2024, compared to $0.1 million for the three months ended June 30, 2023. The increase of $0.1 million was primarily due to increased manufacturing supply required to support development and testing services pursuant to the Torii Clinical Supply Agreement.

Current wording

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.

Previous wording

Interest income was $1.0 million for the six months ended June 30, 2024 compared to $1.1 million for the six months ended June 30, 2023 primarily due to lower cash as of June 30, 2024.

Current wording

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.

Previous wording

As of June 30, 2024, we had cash and cash equivalents of $31.9 million. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.

Current wording

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.

Previous wording

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, the Company 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.

Current wording

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 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.

Previous wording

The following table summarizes our cash flows for the six months ended June 30, 2024 and 2023 (in thousands):

Current wording

The following table summarizes our cash flows for the nine months ended September 30, 2024 and 2023 (in thousands):

Previous wording

During the six months ended June 30, 2024, operating activities used $36.3 million of cash, primarily resulting from a net loss of $37.5 million partially offset by non-cash stock-based compensation of $4.3 million and non-cash interest expense of $1.0 million. Net cash used by changes in operating assets and liabilities consisted primarily of increases in accounts receivable of $5.8 million and prepaid expenses and other assets of $1.6 million partially offset by a net increase in accounts payable and accrued expenses of $2.7 million.

Current wording

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.

Previous wording

During the six months ended June 30, 2023, operating activities used $9.3 million of cash, primarily resulting from a net loss of $17.6 million partially offset by non-cash stock-based compensation of $2.6 million. Net cash used in changes in operating assets and liabilities consisted primarily of an decrease in prepaid and other assets of $2.9 million and an increase in accounts payable and accrued expenses of $2.2 million.

Current wording

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.

Previous wording

During the six months ended June 30, 2024 and 2023, net cash used in investing activities of $11,000 and $70,000, respectively, was for the purchase of property and equipment.

Current wording

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.

Previous wording

During the six months ended June 30, 2024, net cash used by financing activities of $1.3 million was primarily due to $1.1 million of debt amendment costs related to the OrbiMed Credit Agreement.

Current wording

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.

Previous wording

During the six months ended June 30, 2023, net cash provided by financing activities of $30.2 million was primarily related to the proceeds of $30.3 million, net of issuance costs from the issuance of common stock and pre-funded warrants.

Current wording

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.

Previous wording

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 delay, reduce or eliminate our research and development programs or continued and future commercialization efforts.

Current wording

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 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.