SEC Filing | Verrica Pharmaceuticals

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vrca-10q_20200630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38529

Verrica Pharmaceuticals Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	46-3137900
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
10 North High Street, Suite 200 West Chester, PA	19380
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (484) 453-3300

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value

VRCA

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 30, 2020, the registrant had 25,814,493 shares of common stock, $0.0001 par value per share, outstanding.

VERRICA PHARMACEUTICALS INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

Item 1.	Financial Statements (Unaudited)	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures About Market Risks	21

Item 4.	Controls and Procedures	22

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	23

Item 1A.	Risk Factors	23

Item 2.	Recent Sales of Unregistered Securities and Use of Proceeds	25

Item 3.	Defaults Upon Senior Securities	25

Item 4.	Mine Safety Disclosures	25

Item 5.	Other Information	25

Item 6.	Exhibits	25

Signatures		27

PART I. FINANCIAL INFORMATION

Item 1.

Unaudited Condensed Financial Statements

VERRICA PHARMACEUTICALS INC.

CONDENSED BALANCE SHEETS

(in thousands, except share and per share amounts)

(Unaudited)

	June 30,			December 31,
	2020			2019
ASSETS
Current assets:
Cash and cash equivalents	$	48,932		$	9,241
Marketable securities		30,690			52,776
Prepaid expenses and other assets		3,716			2,966
Total current assets		83,338			64,983
Property and equipment, net		2,517			2,090
Operating lease right-of-use asset		—			111
Other non-current assets		1,381			1,240
Total assets	$	87,236		$	68,424
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,297		$	1,185
Accrued expenses and other current liabilities		2,557			2,036
Operating lease liability		124			130
Current debt, net		34,720			—
Total current liabilities		38,698			3,351
Operating lease liability		—			58
Other liabilities		75			—
Total liabilities		38,773			3,409
Commitments and Contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding as of June 30, 2020 and December 31, 2019		—			—
Common stock, $0.0001 par value; 200,000,000 authorized; 25,919,637 shares issued and 25,814,493 shares outstanding as of June 30, 2020 and 25,912,137 shares issued and 25,786,330 shares outstanding as of December 31, 2019		3			3
Treasury stock, at cost, 105,144 shares as of June 30, 2020 and December 31, 2019		—			—
Additional paid-in capital		128,851			126,594
Subscription receivable		—			(410	)
Accumulated deficit		(80,423	)		(61,192	)
Accumulated other comprehensive gain		32			20
Total stockholders’ equity		48,463			65,015
Total liabilities and stockholders’ equity	$	87,236		$	68,424

The accompanying notes are an integral part of these condensed financial statements.

VERRICA PHARMACEUTICALS INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share amounts)

(Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2020			2019			2020			2019
Operating expenses:
Research and development	$	3,521		$	3,928		$	8,413		$	8,415
General and administrative		5,110			3,593			10,098			7,132
Total operating expenses		8,631			7,521			18,511			15,547
Loss from operations		(8,631	)		(7,521	)		(18,511	)		(15,547	)
Other income (expense):
Interest income		126			523			404			1,070
Interest expense		(904	)		—			(1,124	)		—
Other expense		—			(3	)		—			(3	)
Total other (expense) income		(778	)		520			(720	)		1,067
Net loss	$	(9,409	)	$	(7,001	)	$	(19,231	)	$	(14,480	)

Net loss per share, basic and diluted	$	(0.38	)	$	(0.28	)	$	(0.77	)	$	(0.58	)
Weighted average common shares outstanding, basic and diluted		24,965,634			24,875,573			24,964,900			24,866,721

Net loss	$	(9,409	)	$	(7,001	)	$	(19,231	)	$	(14,480	)
Other comprehensive gain:
Unrealized gain on marketable securities		12			27			12			55
Comprehensive loss	$	(9,397	)	$	(6,974	)	$	(19,219	)	$	(14,425	)

The accompanying notes are an integral part of these condensed financial statements.

VERRICA PHARMACEUTICALS INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(Unaudited)

																		Accumulated
																		Other			Total
	Common Stock				Additional			Subscription			Accumulated			Treasury Stock				Comprehensive			Stockholders’
	Shares Issued		Amount		Paid-in Capital			Receivable			Deficit			Shares		Cost		Gain (Loss)			Equity
January 1, 2020		25,912,137	$	3	$	126,594		$	(410	)	$	(61,192	)		105,144	$	—	$	20		$	65,015
Repayment of subscription receivable		—		—		—			410			—			—		—		—			410
Stock-based compensation		—		—		998			—			—			—		—		—			998
Exercise of stock options		7,500		—		7			—			—			—		—		—			7
Net loss		—		—		—			—			(9,822	)		—		—		—			(9,822	)
March 31, 2020		25,919,637		3		127,599			—			(71,014	)		105,144		—		20			56,608
Stock-based compensation		—		—		1,252			—			—			—		—		—			1,252
Net loss		—		—		—			—			(9,409	)		—		—		—			(9,409	)
Unrealized gain on marketable securities		—		—		—			—			—			—		—		12			12
June 30, 2020		25,919,637	$	3	$	128,851		$	—		$	(80,423	)		105,144	$	—	$	32		$	48,463




January 1, 2019		25,809,900	$	3	$	122,526		$	—		$	(33,083	)		105,144	$	—	$	(17	)	$	89,429
Stock-based compensation		—		—		780			—			—			—		—		—			780
Exercise of stock options		3,729		—		3			—			—			—		—		—			3
Net loss		—		—		—			—			(7,479	)		—		—		—			(7,479	)
Unrealized gain on marketable securities		—		—		—			—			—			—		—		28			28
Adoption of ASU 2018-07 (See Note 2)		—		—		(98	)		—			98			—		—		—			—
March 31, 2019		25,813,629		3		123,211			—			(40,464	)		105,144		-		11			82,761
Stock-based compensation		—		—		846			—			—			—		—		—			846
Exercise of stock options		31,812		—		212			—			—			—		—		—			212
Unrealized gain on marketable securities		—		—		—			—			—			—		—		27			27
Net loss		—		—		—			—			(7,001	)		—		—		—			(7,001	)
June 30, 2019		25,845,441	$	3	$	124,269		$	—		$	(47,465	)		105,144	$	—	$	38		$	76,845

The accompanying notes are an integral part of these condensed financial statements.

VERRICA PHARMACEUTICALS INC.

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	For the Six Months Ended June 30,
	2020			2019
Cash flows from operating activities
Net loss	$	(19,231	)	$	(14,480	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		2,250			1,626
Accretion of discounts on marketable securities		(121	)		(642	)
Depreciation expense		26			22
Non cash interest expense		328			—
Reduction in operating lease right-of-use asset		111		59
Changes in operating assets and liabilities:
Prepaid expenses and other assets		(709	)		358
Accounts payable		112			33
Accrued expenses and other current liabilities		798			1,147
Accounts payable and accrued expenses - related party		—			(32	)
Operating lease liability		(64	)		(58	)
Net cash used in operating activities		(16,500	)		(11,967	)
Cash flows from investing activities
Sales and maturities of marketable securities		44,355			70,565
Purchases of marketable securities		(22,136	)		(49,232	)
Purchases of property and equipment		(815	)		—
Net cash provided by investing activities		21,404			21,333
Cash flows from financing activities
Proceeds from exercise of stock options		7			215
Proceeds from issuance of debt, net		34,460			—
Debt issuance costs		(90	)
Repayment of subscription receivable		410			—
Net cash provided by financing activities		34,787			215
Net increase in cash and cash equivalents		39,691			9,581
Cash and cash equivalents at the beginning of the period		9,241			10,271
Cash and cash equivalents at the end of the period	$	48,932		$	19,852

Supplemental disclosure of noncash investing and financing activities: