Hey, good afternoon, everybody. Why don't we get started? For our next presentation, we're excited to have Verrica Pharmaceuticals here with us. Representing the company, to my left is Ted White, who's the CEO, and in the audience, Terry Kohler, who's the CFO. So, definitely, feel free to introduce yourself to either of them as we're sort of making our way out in a little bit. But, I'm Glen Santangelo. For those of you who don't know me, I cover the specialty pharmaceutical sector at Jefferies, and I cover Verrica Pharmaceuticals. All right, so let's get started. You know, Ted, I'm not sure the knowledge level of everybody in the room, so maybe let's just take a quick step back. You know, give everyone a brief overview of the company all the way up until the July approval of YCANTH, and, you know, I think that'll frame the conversation, then we can jump right in with the questions. Sure. So, good afternoon, everyone. So, Verrica Pharmaceuticals, we're a dermatology therapeutics company based out of West Chester, Pennsylvania, which is about 20-25 minutes outside of Philadelphia. We're focused really on clinician-administered assets. Our lead asset, VP102, which is now YCANTH, indicated for molluscum contagiosum, is our first product, first indication. We're also looking to build a franchise around YCANTH. We're looking at additional indications such as common warts, external genital warts, as well as plantar warts. In addition, we've licensed a product from Lytix Biopharma, and that's VP315, which is a first-in-class oncolytic peptide for the treatment of basal cell carcinoma. Currently, we're in a phase II study with that program right now. Okay, perfect. All right, so maybe why don't you just sort of walk through molluscum in a little bit more detail, the treatment for, you know, the focus of the product. And maybe if you could, as part of that, maybe just frame for people the current treatment landscape that's currently in place and how YCANTH will sort of replace that current treatment landscape. Sure. So, a little bit of background. Molluscum contagiosum, prevalence of 6 million in the U.S., so it's a significant opportunity, addressable market. Until our YCANTH, there was no FDA-approved therapies. The challenge is what therapies that exist, such as destructive therapies, mainly being cryotherapy and curettage, have major drawbacks and limitations, mainly pain, as well as the potential for scarring. Because the typical molluscum patient will present themselves with anywhere from 10-20... 10-30 lesions at a time, and it primarily affects children, ages 2- 14. Adults can get molluscum and do get molluscum, but typically it's in the form of an STD. So, that's our opportunity there with molluscum. Right, and, and what about the current treatment landscape? What are these dermatologists doing today to treat the- Yeah, as mentioned- - disease ... the current treatment is a lot of wait and watch that this will resolve on its own. Now, the challenge with that is that this is a disease that lasts on average up to 13 months, and we had many patients in our clinical trials that had the disease for several years. So it's not something that goes away. First line of defense is these patients go to the pediatrician, and the pediatrician, because they have no FDA-approved therapies to treat these patients, will refer them on to the dermatologist if the parents are adamant about getting treatment. But again, most of it is wait and watch. And then, as far as going beyond that, for treatments, it's the destructive therapies that I mentioned. It's cryotherapy and curettage. Okay, perfect. All right, why don't we just shift to financials for a second? Because as you prepare for the launch, kind of curious to get your sense of the current balance sheet and the kind of resources that'll be needed. You know, as of last quarter, I think you had $84 million in cash. I know you completed or you took advantage of some financing opportunity earlier in the year. Could you sort of talk about the current state of the balance sheet and that- Sure ... that financing that you were able to take advantage of? Sure. So, as you mentioned, we closed the quarter with $83 million in cash. That runway gives us to first quarter of 2025. So, you know, we believe we're in a good cash position, but we always want to be opportunistic, as you know, as we move forward. I'm sorry, Glen, the other part of the question was? No, I mean, I guess what people are trying to assess is the resources that are gonna be needed to prepare for the launch. You know, and so I think you're making the case with the $84 million, you have adequate resources for the next six quarters, let's call it. Right. Give people a better sense for, you know, what type of resources will be needed in 2024 as you think about, you know, what type of investments you may want to make to prepare for the launch. Yeah, so listen, we built our field force, so we've got 60 representatives, you know, 50 calling on office-based dermatologists. We've got a small institutional team focused on the larger children's hospitals across the country. In addition, we've got a team of five pediatric account specialists that are calling on large PE-backed pediatric groups, and I think that represents an opportunity for us going into 2024 is the reception that we've been receiving from pediatricians. You know, we always knew pediatricians were gonna be part of our launch plan and our launch strategy, but more so into 2024 and beyond. What we're seeing now is we're getting a lot of inbound, a lot of interest from pediatricians a lot sooner than we anticipated. One of the areas that we'll look to, to build out in 2024 is expanding our footprint within pediatrics. Right. And so when you think about the expense footprint you have today with the existing reps you have, that's the six quarters of runway that you're talking about? That's correct, and that's all built into the runway. Okay. Now, with the approval in hand, I was kind of curious if you could give us some early thoughts on, you know, how the initial launch is sort of going and how receptive the dermatology community has been thus far? Sure. I would tell you the launch is going well. High receptivity, high awareness, which is great to see. Everyone is aware of the product, which is great. And I would say right now, the mode of distribution, we offer two modes of distribution, being specialty pharmacy as well as traditional buy and bill. Right now, we're seeing about 80% of that being specialty pharmacy, and that's what we expected, and 20% buy and bill. We think that those numbers on the buy and bill side will continue to increase as we get closer to our J-code being issued, which we anticipate in January. You talked about sort of pediatrics, right? I mean, if it's a disease that largely affects children, right? The first line of defense is the pediatrician. Correct. Have you had much, you know, exposure at this level to the pediatricians and any sort of incremental feedback you can give us on that, on that community? Sure. We've not— To be honest, we've not had a lot of interaction with the pediatricians. We're doing more of that as we speak. We were just present at the American Academy of Pediatrics a couple of weeks ago. That also coincided with the biggest dermatology meeting in the fall, Clinical, in Vegas, and I could tell you that we were swamped at our booth at the American Academy of Pediatrics. So we're running pediatric focus groups right now, advisory boards, and trying to really understand how to best penetrate that market. Okay. And feedback on how patients are responding to the therapy? Yeah, so the feedback has been very positive, Glen, on both fronts. On the clinician side, physicians really appreciate the applicator, the ease of use, the precision of applying the cantharidin. And from the patient's perspective, it's a better end user experience on the patient side. Could you maybe talk about the IP around the applicator and why that's so unique and what's differentiated about it? Sure. So, you know, cantharidin being naturally sourced, the IP is not on the cantharidin itself. The IP that we have is on the excipients that we have in our solution, so we're ether-free based formulation, so we're based in acetone, and that was by design, because when you apply the medication, it'll dry very quickly, and so the applicator cannot be used for multiple patients. Also, the glass ampoule inside of our applicator is key from IP perspective, because if another sponsor tried to take, for example, compounded cantharidin that's based in ether into a glass ampoule, the only way that you can seal that glass ampoule is with heat, and if you put heat on ether, it'll blow, right? So, that's another formulation that we have and reason why we put it in a glass ampoule for the IP. So our IP takes us out to 2034, 2035, and we've also been working behind the scenes on a synthetic version of cantharidin, and we've been able to do it on a small scale, and then in the fall of 2022, we're able to do it on a large scale. So, we'll be looking to bring synthetic cantharidin to the market, you know, in the not too distant future. All right, let's shift gears and talk about the commercial strategy, and I know you touched on sort of the sales force in place, a few minutes ago. But, you know, when you think about into 2024, I think you sort of suggested you wanna have greater exposure to pediatricians. Can you talk about that commercial strategy and that build in 2024, and what sort of incremental adjustments you may make to the existing infrastructure? Yeah. So I mean, again, the current structure, you know, 50 reps calling on the office-based dermatologist and select pediatricians that are treating, but the market is in pediatrics, and of course, there's, you know, 87,000+ pediatricians. Yeah. So we've got to be smart in how we go attack the market because, you know, we only have so many resources. So we, we've partnered with one of the largest pediatric buying groups, Main Street Vaccines, and so we're working with them and their, and their groups more on a C-suite level, top-down approach, and, where they can go in and talk economics of the, of the product, and, that seems to be resonating very well with some of the pediatric groups. You know, and, and products like this, pricing is always an issue, reimbursement is always an issue. Could you maybe update the investors here on, on the price of the product, how you decided to price it, and why you did it that way? And then, and then we'll sort of segue into sort of reimbursement- Sure ... negotiations- Sure - and how those may be going. Yeah. So, pleased to report that we did multiple rounds, three plus rounds of payer research, and I would tell you that the research has been very consistent, and that is, that the product would be viewed as a medical benefit because this is a clinician-administered asset. The FDA mandated that patients cannot touch the product, so it can't be in a retail setting. The payers also gave us feedback, telling us to stay under the specialty tier pricing, and today, that specialty tier pricing is somewhere around $875, and if you do that, then, you know, you will not be managed. And then also, the other piece of consistency was the messaging that we would be a medical benefit, not a pharmacy benefit, because, again, it's clinician-administered. So we came up... The price is $685 per applicator, and I'm pleased to tell you that 95% of patients today are paying $25 or less for the product right now. What about on the payer side? I mean, you know, have you gotten any pushback, you know, from any of the payers, and what about the physicians or, I mean, not that it's coming out of their pocket? We'll talk about the inventory method in a second, but, you know, in terms of any sort of pushback, I mean, it's great, right, that the copay for the individual, you know, mom and dad patients is $25 or less, but what about from the payer side? Yeah, the payer side, the reception has been very positive. I'm pleased to report that we have 113 million lives that are covered, well above our forecast. At this time, we were expecting to be around 80 million. So we've, you know, we've got 113 million lives. I will tell you that we've got some big accounts that are on the one-yard line, such as UnitedHealthcare, Express Scripts, that we're waiting to hear from any day, and I think if we can get those two over the finish line, we're gonna be in a really good position as far as access. With price, look, you know, physicians and dermatologists are consumers, so when you tell them the price, but when you remind them, if they're prescribing, you know, Dupixent and other products that are costing, you know, $2,000, you know, it negates the conversation. You know, the challenge is when, when it comes to pricing, you know, we always like to use the analogy, it's like a three-legged stool, right? So you've got the payers, so you got to make sure it's priced correctly.... The other leg of the stool is the physicians themselves. You have to price it adequately where there's a financial incentive to motivate them to, you know, to use the product. And then the third leg of the stool is the patients, right? What they can pay out of pocket. So that went into the development of our pricing. Maybe we'll segue, and we'll talk about the financial incentives that have been created for the, for the dermatologists in a second. But, you know, essentially, you know, given the derms, you know, may be, you know, may be currently or, or familiar with a, a cheaper alternative that they may be using today off-label. You know, is that impacting their decision at all in terms of making a transition or how they think about things or look at the price? Well, I would say that, look, you know, you're changing behaviors, those that have, you know, compounded cantharidin. But when you sit down and have the conversation and talk about the, the user experience and the fact that you- you're not using a bottle that's, has a cross-contamination that you're treating multiple patients for and, and better consistency. Because the challenge with compounded cantharidin is once you open up that jar, every, or I should say, every time you open up that jar, that ether blows off, and it changes the concentration, which makes it stronger. So you often hear cases where, Mm. There's over blistering. And so that's one of the advantages of YCANTH is that you have a consistent formulation of cantharidin at all times. All right, so let's talk about... You know, we'll talk about the financial incentives right after this. But, you know, you know, YCANTH, you said, is classified as a medical benefit. Correct. Right? So could you maybe, for the people in this room, just sort of talk quickly about what that means and, you know, particularly over here in Europe, they may not be as familiar with the coding for the product, and why that's so important. Yeah. So I mean, advantages of being a medical benefit, you know, obviously, pharmacy benefit, the patients can touch it. They take the, they take the product home. So medical benefit, obviously, it's administered in the office. Also, from a reimbursement perspective, your reimbursement on medical benefits are typically quicker than on the pharmacy side, and you don't have all the hurdles such as prior authorizations and step edits that typically occur on a pharmacy benefit side. So that's one of the advantages. Now, on a medical benefit, you typically get issued a J-code, and you get a C-code for your hospitals. And so we've just been issued a C-code, which is a precursor to the J-code. So again, we fully anticipate getting that J-code come January. Right now, we utilize a miscellaneous J-code, and some of the challenges with miscellaneous J-codes is that physicians have been burned in the past on the miscellaneous J-code. As we anticipate, once we get the J-code, we expect the buy-and-bill distribution model to pick up significantly. So maybe it's worth spending a minute to talk about the financial incentives for the dermatologists. Now, as we were just speaking a minute ago, right? They may be using an off-label product today that maybe has less efficacy for the reasons you just talked about, but now there's a way, through using the applicator, they can charge and, you know, basically bill for different codes, right? And essentially get a reimbursement on top of the typical office visit and destruction code. So maybe could you talk to the investors about how things were and how they can be now using the applicator and the incremental financial benefit for the dermatologist- Sure ... in addition to providing, you know, a better standard of care that's on-label? Sure, absolutely. So the way you should think about it is that traditionally, if a patient comes in with molluscum, they get diagnosed, the physician would get an E&M code for the office visit, and then for treating the lesions, and it's a generic CPT code, which is a destruction of a lesion. And it doesn't matter if you're using a laser, if you're using cryotherapy, or if you're using curettage. There's two CPT codes that are utilized. One code is for 14 lesions or less, and that's 17110, or if you have more than 14 lesions, then it's a CPT code 17111. The difference on average, you know, it's, it pays about anywhere from $125-$150 on that CPT code. Okay? And that's how things are being done, you know, traditionally. Now, with the introduction of YCANTH, you'll continue to get those same codes, so which is great. So it's not like you're. I always say in dermatology, the key is if you take the cryo gun out of their hand, you have to have something to replace it. So our product replaces the cryo. Now, if a customer decides to buy and bill, then they get an added benefit of ASP, the average sales price, plus 6%-10%, depending upon the prescriber's individual contract that they have with the payers. So, you know, you should think about it as, you know, three revenue opportunities for treating molluscum with YCANTH in that buy-and-bill model. It's at 6%-10%, right? That's incremental above- That's incremental ... and beyond what they were getting, right? That's correct. That's actually putting more money in their pocket for using the applicator. That's correct. Right. So if you can overcome the inertia of getting them to do things differently than maybe what they've done before, they're not only gonna improve treatment, they're actually gonna put some extra money in their pocket. That's correct. And then the other point, too, Glen, to point out, is that if a physician is utilizing compounded cantharidin, that's being paid out of their own pocket, right? That's not reimbursable. Right. So- It's a negative carry for them. That, that's correct. Okay, perfect. All right, well, let's talk about that, right? Because the product is not inexpensive, right? And so to the point where, you know, you were just talking about the carry on, on the dermatologist. You know, there are two different, you know, types of deployment models you have, right? And so maybe we should talk about that forward deployment strategy and how that works and how that's to the dermatologist's advantage to utilize that versus, you know, traditional buy and bill. Sure. So we did a lot of market research prior to the approval of YCANTH, and we heard loud and clear from customers, is that they've gotten burnt so many times on buy-and-bill models where, you know, manufacturers have raised price, put them under water, and that there was just this negative sentiment about a buy and bill. The other piece of information that came back in our research was that, especially coming out of COVID, clinicians did not want to outlay working capital in order to buy a product when they weren't sure what the reimbursement landscape was like... so, you know, we've partnered with a company called FFF Enterprises. They're the largest distributor of vaccines in the country, in the United States, and they have this novel platform. They bought MinibarRx. So when you go to a hotel and you take a candy bar, they know that you took the candy bar. They're using this type of RFID technology. So we have what we call forward deployed inventory. Better term is it's consignment model. So we'll put product in the physician's office at no cost, and once the physician utilizes our applicator, okay, they use a weighted scale. It's about the size of a mouse pad, very thin, and once the physician goes through our hub, diagnoses the patient, and verifies the patient's benefits, once they pull the product and utilize, then that starts the billing cycle, okay? And we offer 60 days of billing. So it's in real time, real time data, and the advantage is, it's that, you know, the physicians don't have to use working capital, and they're not going to use the product unless they go through the hub and verify the patient's benefits. So Ted, in that, in that 60-day cycle, can that physician, that dermatologist, he can get reimbursed, he or she can get reimbursed? That's correct. Before they have to pay for the product? That's right. Right. So they actually have a positive carry in that, in that example. We're seeing typically 30-45 days, right now, on that reimbursement, so yes, no working capital- Hmm. in order to pay for that product. All right, so now you have the only FDA-approved, you know, product for molluscum. You know, how has the FDA sort of responded, or are you seeing them, you know, start to crack down on illicit products? And I, you know, I know, you filed a citizen petition, you know, earlier this year. Could you sort of talk about, you know, that end of the market and maybe what the FDA is doing and maybe what you're doing with the citizen petition? Sure. So I would tell you, listen, we've had our challenges with the FDA, but we've been very pleased with their recent activity. They put out two consumer warning messages back in July, you know, the month that we got approved, which I always say was no coincidence that they're putting out this communication. But it's basically a consumer warning letter not to utilize any products that are not approved for molluscum. Who are they sending that to? They sent that to Amazon, they sent that to Walmart, they sent it to a company called MolluscumRx. You know, there's a lot of, like, tea, tea oils. A lot of people are using, you know, holistic type of- Over-the-counter type stuff. over-the-counter type of medications. So, you know, that same division that's put out this communication is working with us on the two things: on the citizens petition as well as the drug import alert. We know. The good news is we know where the cantharidin is coming from, and we know who has the compounded cantharidin, so that makes the job a lot easier. So the drug import alert is for Canada. We know there's a company called Dormer Labs that has been importing cantharidin into the country. Now we filed that back in September, and we should be hearing back on that any day now, but you know, definitely before the end of the year. And the citizens petition is more for the you know, the 503As, the mom-and-pop compounding pharmacies that are you know, compounding cantharidin. Now, the challenge is, now that we're approved, legally, the only way you can compound is that if a patient has, for example, an allergic reaction to one of the excipients in our product. That would be the only way that they could compound. In addition, they can only compound for one single patient, so it's got to be in a small vial. And we have documentation to show that the 503As are still continuing to provide bottles, you know, for multiple, multiple patients with some violations. Will the FDA provide any type of warning to the dermatologists themselves? We're working with them on that issue. You're pushing them on that. That, that's correct. And so how do you think things evolve over the next three to six months? I mean, you, you hopefully will make progress on all these different fronts. Is that- A- absolutely. Anything specific you can give us or we should be looking out for? Well, listen, I would tell you, I've always said it's not going to be a light switch, right? Yep. So it's going to take time. I can tell you that, you know, those that know dermatologists, they are very risk-averse, and it's going to be a case where, you know, we make a good example out of one, and then the others will tend to fall in line. That's typically the way it works. Same thing with the pharmacies. Right. So what's the ideal outcome here? I mean, it's hard to think that you can, you know, block all sort of compounded cantharidin from coming into the country or stop everyone from using it, but I guess you can just, you know, sort of curb those efforts on a number of different front and sort of bend the curve, right? A little bit more in your direction. Absolutely. I mean, that's the thing that, you know, it'll ramp and build as, as the year goes on. Listen, the good news is all your major hospitals, your large private equity-backed dermatology group practices, which is very significant in the United States, they all have compliance departments, so, you know, they, they know the, the issues around compounding. So, you know, we expect that, you know, those, those situations to go away. All right, we got a couple of minutes left, but I do want to touch on the financials a little bit. In the third quarter, you reported, you know, $2.8 million of revenue, right? Now, that was obviously driven to some extent by your forward deployment sort of stocking model with FFF, right? And so I'm kind of curious how you think about, you know, the cadence over the next sort of couple few quarters. I mean, now that you've sort of pushed some inventory into the channel, maybe you got that initial revenue bump, should we expect the cadence kind of come down and then go up, or how should we think about that over the next sort of handful of quarters? Listen, we expect it, the ramp to continue as we move into 2024. We've got a lot of catalysts that are upcoming, you know, one being the J-code. As I mentioned, we've got UnitedHealthcare, Express Scripts on the one-yard line. We've got two dozen major teaching institutions, you know, pediatric hospitals that are on the one-yard line that we expect to get here in the next, you know, call it the 30, 60 days. So, you know, again, we continue to anticipate to see that ramp continue in 2024. Listen, and if we can get some luck on our side with the compounded cantharidin, you know, that's only going to make things accelerate even quicker. Hmm. Now, one point I want to make, too, on the stocking. You know, keep in mind that, you know, you look at the, you know, the weight loss drugs, these GLP inhibitors, you know, the challenges that they're having with compounding, you know, the difference is there is they ran out of stock, okay? So that allowed these compounding pharmacies to come out. One of, you know, one of the things that we did is we had to make sure that we had sufficient supply in the market available, because once you are trying to get Cantharidin removed from the bulk substance list, you have to have supply in order to meet the market demand. So that's one of the, one of the reasons for our stocking as well. Right. I mean, when I look to the fourth quarter, I mean, for the year at least, when I left on Friday, left my office, you know, looking at the consensus expectations for this year, not really anything that significant expected in the fourth quarter. But when you look out to 2024, and I know you don't wanna give guidance, and you're not going to give guidance for obvious reasons, nor would I expect you to in the launch, but that number is sort of sitting at about $23 million for next year. Anything you can give us directionally that would help us think about, are we within a couple zip codes? Like, are we modeling this thing generally in the right direction? Anything- Well, yeah. I mean, listen, I like to think that, you know, as for all the reasons I- I'll throw as many disclaimers on that question as I can. Yeah, yeah, yeah, yeah, yeah. Savvy, you know, they... No, listen. I would tell you, for all the reasons I've given you, that, that, you know, J-code, you know, institutions, we get some payer wins, you know, I think, you know, we'll be in real, real good shape. Okay, awesome. I'll give you the last 20 seconds. I don't know if there's anything you want to leave the crowd with, anything we didn't cover that you think is important or any sort of final word? Oh, well, thank you for the opportunity, and again, I would tell everyone that they're very pleased with the reception awareness of YCANTH in the marketplace. You know, it momentum continues to build. Again, I would tell you the one surprise is the amount of interest from pediatricians this early on in the launch. I will also tell you, we're getting a lot of interest from infectious disease centers, which I didn't think about, because apparently, infectious disease centers treat a lot of HIV patients, and HIV patients all have molluscum. So, Huh! ... Didn't think about that. Wow. So that represents, you know, another opportunity that, you know, that we'll have to explore. We didn't dig into the pipeline on the wart side, right? Correct. That's yet another opportunity. Yeah. Yeah. Yeah. All right, Ted White, Terry Kohler, thank you guys very much. Thank you. We appreciate you coming out.