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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, 2021

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.)

44 West Gay Street, Suite 400

West Chester, PA

19380

(Address of principal executive offices)

(Zip Code)

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

         

N/A     

(Former address of principal executive offices)

 

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 August 2, 2021, the registrant had 27,514,720 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

 

VERRICA PHARMACEUTICALS INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

 

 

Item 1.

 

Financial Statements (Unaudited)

 

1

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

15

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risks

 

23

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

23

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

24

 

 

 

 

 

Item 1A.

 

Risk Factors

 

24

 

 

 

 

 

Item 2.

 

Recent Sales of Unregistered Securities and Use of Proceeds

 

26

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

26

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

26

 

 

 

 

 

Item 5.

 

Other Information

 

26

 

 

 

 

 

Item 6.

 

Exhibits

 

26

 

 

 

 

 

Signatures

 

28

 

 

 


 

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,

 

 

 

2021

 

 

2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

24,706

 

 

$

10,686

 

Marketable securities

 

 

65,423

 

 

 

54,784

 

Prepaid expenses and other assets

 

 

3,245

 

 

 

2,180

 

Total current assets

 

 

93,374

 

 

 

67,650

 

Property and equipment, net

 

 

3,648

 

 

 

3,102

 

Operating lease right-of-use asset

 

 

1,723

 

 

 

1,836

 

Other non-current assets

 

 

285

 

 

 

1,566

 

Total assets

 

$

99,030

 

 

$

74,154

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

783

 

 

$

348

 

Accrued expenses and other current liabilities

 

 

3,252

 

 

 

3,114

 

Operating lease liability

 

 

235

 

 

 

198

 

Financing lease liability

 

 

7

 

 

 

 

Deferred revenue

 

 

 

 

 

500

 

Short term debt

 

 

41,005

 

 

 

35,315

 

Total current liabilities

 

 

45,282

 

 

 

39,475

 

Operating lease liability

 

 

1,573

 

 

 

1,693

 

Financing lease liability

 

 

19

 

 

 

 

Total liabilities

 

 

46,874

 

 

 

41,168

 

Commitments and Contingencies (Note 10)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value; 200,000,000 authorized;

      27,619,864 shares issued and 27,514,720 shares outstanding as of June 30, 2021;

      25,546,257 shares issued and 25,441,113 shares outstanding as of December 31, 2020

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

168,751

 

 

 

136,868

 

Accumulated deficit

 

 

(116,597

)

 

 

(103,886

)

Accumulated other comprehensive (loss) gain

 

 

(1

)

 

 

1

 

Total stockholders’ equity

 

 

52,156

 

 

 

32,986

 

Total liabilities and stockholders’ equity

 

$

99,030

 

 

$

74,154

 

 

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,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

License revenue

 

$

 

 

$

 

 

$

12,000

 

 

$

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

3,447

 

 

 

3,521

 

 

 

8,809

 

 

 

8,413

 

General and administrative

 

 

7,284

 

 

 

5,110

 

 

 

13,861

 

 

 

10,098

 

Total operating expenses

 

 

10,731

 

 

 

8,631

 

 

 

22,670

 

 

 

18,511

 

Loss from operations

 

 

(10,731

)

 

 

(8,631

)

 

 

(10,670

)

 

 

(18,511

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

33

 

 

 

126

 

 

 

65

 

 

 

404

 

Interest expense

 

 

(1,077

)

 

 

(904

)

 

 

(2,106

)

 

 

(1,124

)

Total other expense

 

 

(1,044

)

 

 

(778

)

 

 

(2,041

)

 

 

(720

)

Net loss

 

$

(11,775

)

 

$

(9,409

)

 

$

(12,711

)

 

$

(19,231

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$

(0.43

)

 

$

(0.38

)

 

$

(0.46

)

 

$

(0.77

)

Weighted average common shares outstanding, basic and diluted

 

 

27,513,665

 

 

 

24,965,634

 

 

 

27,697,985

 

 

 

24,964,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(11,775

)

 

$

(9,409

)

 

$

(12,711

)

 

$

(19,231

)

Other comprehensive gain:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (loss) gain on marketable securities

 

 

(4

)

 

 

12

 

 

 

(2

)

 

 

12

 

Comprehensive loss

 

$

(11,779

)

 

$

(9,397

)

 

$

(12,713

)

 

$

(19,219

)

 

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, 2021

 

 

25,546,257

 

 

$

3

 

 

$

136,868

 

 

$

 

 

$

(103,886

)

 

 

105,144

 

 

$

 

 

$

1

 

 

$

32,986

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,403

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,403

 

Issuance of common stock, net of issuance costs

 

 

2,033,899

 

 

 

 

 

 

28,115

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28,115

 

Exercise of stock options

 

 

15,708

 

 

 

 

 

 

240

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

240

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(936

)

 

 

 

 

 

 

 

 

 

 

 

(936

)

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

2

 

March 31, 2021

 

 

27,595,864

 

 

 

3

 

 

 

166,626

 

 

 

 

 

 

(104,822

)

 

 

105,144

 

 

 

 

 

 

3

 

 

 

61,810

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,848

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,848

 

Exercise of stock options

 

 

24,000

 

 

 

 

 

 

277

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

277

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,775

)

 

 

 

 

 

 

 

 

 

 

 

(11,775

)

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4

)

 

 

(4

)

June 30, 2021

 

 

27,619,864

 

 

$

3

 

 

$

168,751

 

 

$

 

 

$

(116,597

)

 

 

105,144

 

 

$

 

 

$

(1

)

 

$

52,156

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(12,711

)

 

$

(19,231

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

3,251

 

 

 

2,250

 

Accretion of discounts on marketable securities

 

 

(25

)

 

 

(121

)

Depreciation expense

 

 

48

 

 

 

26

 

Non cash interest expense

 

 

729

 

 

 

328

 

Reduction in operating lease right-of-use asset

 

 

113

 

 

111

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

218

 

 

 

(709

)

Accounts payable

 

 

435

 

 

 

112

 

Accrued expenses and other current liabilities

 

 

239

 

 

 

798

 

Deferred revenue

 

 

(500

)

 

 

 

Operating lease liability

 

 

(83

)

 

 

(64

)

Net cash used in operating activities

 

 

(8,286

)

 

 

(16,500

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Sales and maturities of marketable securities

 

 

35,600