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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

OR

 

 

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.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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.

1


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.

 

 

2


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.

 

 

3


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: