Verrica’s Q2 2026 Call: R&D Expense Structure and Credit Facility Seniority Contradict

Date of Call: Aug 6, 2026

Financials Results

• Revenue: $5.9 million, compared to $12.7 million in Q2 2025 (which included an $8 million one-time milestone)
• EPS: GAAP net loss of $0.62 per share, compared to GAAP net income of $0.02 per share in Q2 2025; Non-GAAP net loss of $0.48 per share, compared to Non-GAAP net income of $0.12 per share in Q2 2025
• Gross Margin: 91.5% compared to 92.5% in Q2 2025

Business Commentary:

Revenue and Unit Growth of Y-CAMP:

• Verica Pharmaceuticals reported total revenue of $5.9 million for Q2 2026, with U.S. Y-CAMP net product revenue at $5.1 million, reflecting an 18.7% increase over Q1 2026. Dispensed applicator units for Y-CAMP rose to 19,626, up 28% from Q1 and over 12% from Q4 2025.
• The growth was driven by strong market demand, increased prescriber adoption, and effective retargeting and segmentation of the molluscum prescriber base.

Non-Dilutive Financing and Cash Runway:

• The company announced a new non-dilutive financing facility providing up to $27.5 million, with an initial draw of $12.5 million and additional amounts contingent on achieving specific milestones.
• This financing is expected to extend Verica's cash runway into 2028, supporting the continued growth of Y-CAMP and its Phase III program for common warts.

Progress in Clinical Trials for Y-CAMP:

• The first patient was dosed in the second pivotal Phase III trial (COVE-3) in June, with recruitment in the first pivotal trial (COVE-2) on schedule for top-line data in mid-2027.
• Verica and its partner, Torrey Pharmaceuticals, are advancing planning for a Phase III-ready oncology asset, VP315, for basal cell carcinoma, with encouraging Phase II data presented.

Strategic Partnerships and Global Expansion:

• Verica signed an exclusive agreement with Madomi Pharma to commercialize Y-CAMP in Israel, with Verica receiving 60% of the net selling price and potential milestone payments up to $8.2 million.
• The partnerships in Japan and Israel are part of a broader strategy to expand Y-CAMP's global presence and establish it as a standard of care in new markets.

Financial Performance and Expenses:

• Research and development expenses increased to $6 million in Q2 2026 from $1.8 million in Q2 2025, primarily due to costs related to the Commonwealth's program.
• Selling, general, and administrative expenses rose to $10.3 million, driven by increased commercial spend on sales force expansion.

Sentiment Analysis:

Overall Tone: Positive

• CEO states 'It's certainly an exciting time at Verica' and 'We've made major progress...'. Highlights include Y-CAMP unit growth more than doubling, non-dilutive financing extending cash runway to 2028, and strong momentum in Phase III programs. Describes Y-CAMP as 'well positioned to become the standard of care' and the company as 'well positioned for growth, having two large programs, each with multibillion-dollar potential'.

Q&A:

• Question from Stacy Koo (T-Cal): Help contextualize how we should think about Y-CAMP prescription trends this summer and what areas the team is focused on to maximize adoption and where net pricing could stabilize.
  Response: Momentum is strong with 28% quarterly unit growth, but summer may see seasonal impacts. Growth drivers are retargeting high-prescribing physicians, improving fulfillment, and patient affordability programs. Management expects yield to continue accreting over time and will not comment on gross-to-net pricing specifics.

• Question from Stacy Koo (T-Cal): [Follow-up on net pricing and use scenarios].
  Response: Management declined to comment on gross-to-net pricing but stated they are reevaluating market access and fulfillment strategies to improve yield over time.

• Question from Georgia Bank (Jefferies): Provide color on recruiting for the COVE studies and remaining on track for 2027 top-line data.
  Response: Enrollment is progressing well in both pivotal trials (COVE-2 and COVE-3) and the long-term follow-up study (COVE-4). Top-line data is still expected in mid-2027.

• Question from Georgia Bank (Jefferies): [Follow-up on the distribution agreement and launch in Israel opportunity size and timeline].
  Response: The Israeli market is smaller than the U.S., but prevalence is consistent across demographics. Verica will receive 60% of net revenue plus potential milestones exceeding $8 million. The launch timeline is pending regulatory submission.

• Question from Ram Savaraju (HC Wainwright): Provide granularity on R&D planning for 2027-2028, particularly for VP315, and R&D expense modulation. Also, refresh on credit facility terms.
  Response: R&D planning is minimal cash impact due to Torrey's funding covering ~90% of the common warts Phase III budget. VP315 Phase III preparation costs are in the budget. Credit facility terms: SOFR + 8% coupon (4.5% floor), senior secured, no scheduled payments until 2030, delayed draw, and 16% IRR catch-up on repayment.

• Question from Ram Savaraju (HC Wainwright): [Clarification on credit facility delayed draw and intent to draw the full amount].
  Response: There is no minimum or deadline to draw the facility; Verica will draw strategically as needed, given the flexible liquidity covenant and cost of capital.

• Question from Dev Prasad (Lucid Capital Markets): How should we think about revenue conversion from dispensed applicators, and what level of efficacy would be clinically meaningful for the common warts program?
  Response: Revenue yield is expected to accrete over time as commercial strategies optimize. For common warts, clinically meaningful efficacy would likely be around the results seen in the Phase II study (e.g., 67% reduction in untreated lesions), especially since there are no approved treatments.

Contradiction Point 1

R&D Expense Structure for the Common Warts Program

Contradiction on whether R&D expense will reflect minimal cash burn or a non-cash expense ramp.

Ram Savaraju (HC Wainwright) - Ram Savaraju (HC Wainwright)

2026Q2: - **Common warts program:** Torrey Pharma is funding the first $40M (~90% of budget), minimizing Verica's cash burn. R&D expense will reflect incurred costs. - [Jason Rieger](CEO)

How will R&D planning and expenses for VP315 (basal cell carcinoma) in 2027-2028 evolve, and could you refresh us on the terms of the credit facility (coupon, seniority)? - Ram Selvaraju (H.C. Wainwright)

2026Q2: John Kirby: On the cash flow, a non-cash expense will ramp up to reflect the accrued costs covered by Torii. - [John Kirby](CFO)

Contradiction Point 2

Seniority of the Credit Facility

Contradiction on whether the facility is senior secured or a delayed draw term loan.

What are Ram Savaraju's (HC Wainwright) key insights? - Ram Savaraju (HC Wainwright)

2026Q2: - **Structural Features:** It is a senior secured facility. - [Jason Rieger](CEO)

How will R&D planning and expenses for VP315 (basal cell carcinoma) in 2027-2028 evolve, and can you refresh us on the terms of the credit facility (coupon, seniority)? - Ram Selvaraju (H.C. Wainwright)

2026Q2: - **Drawdown:** No minimum or deadline; the company will draw funds strategically as needed. - **Seniority:** The facility is a senior secured debt position against substantially all assets. - [John Kirby](CFO)

Contradiction Point 3

Israel Market Opportunity and Launch Timeline

Inconsistent characterization of Israel as a market opportunity and the certainty of a launch timeline.

Georgia Bank (Jefferies) for Dennis Ding - Georgia Bank (Jefferies) for Dennis Ding

2026Q2: The molluscum population is prevalent across demographics. The partnership with Madomi Pharma gives Verica 60% of net revenue from sales... The launch timeline depends on regulatory submission and approval. - [Jason Rieger](CEO)

Can you provide color on recruiting for the common warts studies and remaining on track for 2027 top-line data, as well as the size of the opportunity in Israel and expected launch timing? - David Zawitz (Chief Operating Officer)

2026Q1: Europe planning is in early stages... Rollout timing and strategy will be based on country-specific feedback, addressable population, and pricing. - [Jason Rieger](CEO)

Contradiction Point 4

VP-315 Phase III Program Target and Timeline

Contradictory statements about the target patient population and readiness for the Phase III program.

Ram Savaraju (HC Wainwright) - Ram Savaraju (HC Wainwright)

2026Q2: Budget is in place for CRO selection and Phase III supply manufacturing, targeting readiness for a Phase III program in 2027. - [Jason Rieger](CEO)

How will R&D planning and expenses for VP315 (basal cell carcinoma) in 2027-2028 be structured, and what are the current terms of the credit facility (coupon, seniority)? - Georgia Bank / Stacy Ku (TD Cowen / Jefferies)

2026Q1: The VP-315 phase III program will initially target patients with low-risk basal cell carcinoma (BCC)... The treatment shows promise as a potential long-term neoadjuvant approach for complex tumors... - [Noah Rosenberg](CMO)

Contradiction Point 5

Sales Force Expansion and 2026 Sales Outlook

Contradiction on providing sales guidance and the readiness of the sales force.

Stacy Koo (T-Cal) - Stacy Koo (T-Cal)

2026Q2: Momentum in prescriptions is strong, with over 28% quarterly unit growth. The team is focused on retargeting and segmentation of prescribers... - [Jason Rieger](CEO), [Chris Chapman](CCO)

How should we be thinking about Y-CAMP prescription trends this summer, and what areas is the team focused on to maximize adoption? - Stacy Ku (TD Cowen)

2025Q4: The company is not providing guidance yet for 2026. However, the momentum seen over the last 5-6 weeks is optimistic, but it's still early in the quarter. - [Jason Rieger](CEO)