All right. Good morning. Thanks for joining us at TD Cowen’s Healthcare Conference. My name is Stacy Ku. I'm one of the biotech analysts, and I'm here with my colleague, Vish. So we'd like to welcome Ted White, CEO, Joe Bonaccorso, CCO, and Terry Kohler, CFO of Verrica Pharmaceuticals, to our fireside chat. Thank you so much for joining us today. So we're very excited to discuss the ongoing early launch of YCANTH for molluscum contagiosum, and with that, we're going to dive right into Q&A. So first, Ted, could you just provide a brief overview of YCANTH, just a background on molluscum? Sure. Thank you, Stacy. So YCANTH is the first FDA-approved treatment for molluscum contagiosum, which is a viral skin disease. It's a form of a poxvirus, one of the top 50 diagnoses around the world, and we, again, are the first FDA-approved therapy. It's a disease that typically affects children ages 2 to 14. The challenge is destructive therapies that are available, such as cryotherapy, curettage, have major drawbacks such as pain and potential for scarring. The advantage that YCANTH has is, number one, it's painless upon application, and two, no potential for scarring because the cantharidin doesn't go below the epidermis. So this is a bit of a unique launch. There's a really high clinician awareness of the product. So just, could you comment on the early experience, what the patient feedback has been? Sure. The early experience has been extremely positive. High awareness, and that's through ATU studies, both branded and unbranded awareness, a high level of receptivity from mid-levels, nurse practitioners, and PAs. The other feedback that we're getting is it works. You know, we have not had a situation where the product doesn't work. You know, we're unique because, as I tell everyone, it works 100% of the time. If you put YCANTH on your skin, you will blister, so. Okay, wonderful. So obviously, Joe, you've been focused on building out the infrastructure, really important. There's a lot of different nuances to the commercial infrastructure for YCANTH. So curious, do you want to talk about first, high level, what the clinician reach has been like, your progress so far, and how many targets you expect to reach over time? Yeah. So, we've reached about 85% of our targeted audience. You know, that's always factoring in who may not be in that target universe right when you hit the market. We're continuing to build out our reach and actually looking to expand and to add frequency in reaching some high-value markets that we've learned since launch. Acceptance is growing each day, where we're seeing high adoption rates across the country, and our processes and our infrastructure has been well supported. We feel we got a very strong operational plan behind it. Okay, wonderful. That 85% would be that 4,000 HCPs that you've targeted so far- Yeah, well- - or are you thinking more about, you know, hospitals, academic institutions? Yeah. So it's community-based and, institutional-based, right? So it's a combination of both. We, as, just to remind everybody, we have a dedicated team to community-based practices, and then we have a hospital team that focuses solely on institutional, inside the four walls, and the in-clinic clinics around the hospitals as well. So our reach gets a little greater than 85% when you factor in the hospitals as well. Okay, wonderful. Do you want to just speak, very recently, you're gonna continue to broaden out your commercial infrastructure, so, what should we expect moving forward? Just provide the most recent update in terms of commercial reach and plans. Yeah. So we're going to expand into the pediatric space. We see a very rich opportunity there based on market response, and it also supports what our market research had showed us prior to getting into the market. So we're gonna be adding a pediatric team staffed up to 20 representatives focused on that. We've also added two additional hospital representatives to continue to expand that reach into the academic institutions as well as the IDNs. And those are very rich opportunities with large pools of patients monthly. Okay. And as just, as a comment, obviously, YCANTH is mostly a pediatric indication. So right now, have you really been focused on the pediatric dermatologist? Let's walk through the different steps of kind of going through the different treating population. Absolutely. So our go-to-market strategy was community-based dermatologists and pediatric dermatologists. Pediatric dermatologists are largely institutional-based, right? They're in all your major children's hospitals. All in, we cover about 80, 80 institutions on the health system side. So our go-to-market strategy made total sense, right? Dermatologists, ped derms, see and treat the most. Pediatricians do a high level of diagnosis, but we're slow to treat, right? They usually refer out. So we're following our launch strategy, and as the market is expanding and response is building, we're making additional adjustments to our operational plan to get that extended reach we think we need to continue to maximize what is a 6 million prevalence market. Okay, wonderful. And, I know you both kind of commented on this, but just very briefly before we move into just really the different types of institutions, just talk very broadly about the level of inbound interest. Are you getting inbound interest every day? I mean- Yeah. What's the level of enthusiasm you're hearing? Yeah, I think that's what's most encouraging is the amount of inbound traffic that we've been receiving, both through our branded website, YCANTH.com, or YCANTHpro.com, and then through the Verrica website. There hasn't been a day that's gone by where we've not received inbound traffic. And interestingly enough, I would tell you 50% of that inbound traffic has come from pediatricians, which is hence why Joe is building out, you know, adding pediatric representatives in the top MSAs to address those pediatricians. And we're also getting a lot of inbound traffic from infectious disease centers across the country that are treating HIV patients that have molluscum as well. So it's a series of inbound traffic that we're getting from multiple specialists. Joe, if we just dive deeper into kind of establishing the infrastructure, obviously, we're gonna spend a lot of time here today. Yeah. Just talk about the early experiences, what have been your learnings, where are you, where are you most encouraged? And obviously, help us understand the different kind of modules of where YCANTH is gonna be distributed? So, you know, the distribution model is a white bag specialty pharmacy, and we also have an in-office buy and bill model, right? We just got our J-code approved, so that should now accelerate the buy and bill piece of our launch. We had anticipated our J-code to be approved in January. We were successful in achieving that, and it'll be fully published April 1. So that's gonna be another inflection point for the organization, and we see that as a catalyst now to start shifting our pool of business from specialty pharmacy to more of an in-office treatment buy and bill, and doctors will see that as advantageous, 'cause they do wanna treat children the same day as much as possible, right? So we expect to see that proliferation taking place now over the next couple of weeks. What we've learned in the market is that it's exactly what we thought it was. This is endemic. There's molluscum everywhere. I mean, you talk to insurance companies when you're going through clinical review, invariably someone will say, "Yeah, my niece had it, my son had it, my daughter had it," right? So we know it's out there, and it's in different pools of opportunity, right, as we talked about, the pediatrician, the ped derm, and the dermatologist. So when we think about our expansion in the market, we also think about our operational expansion, right? So we did add Walgreens as a second specialty pharmacy. The Walgreens opportunity is unique because it brings along their community health system stores, which they have about 300. So we fully expect to expand into those 300 stores over the next quarter, quarter and a half of business starting in March. So that'll be an exciting opportunity. We still have a unique buy-and-bill model with forward-deployed inventory, and we also work on an off-invoice discount program with physicians, actually our Phase 2. That was something that our clinicians brought to us and said, "Hey, we like the forward deployed, but in lieu of forward deployed, we'd also like to think about some type of off-invoice discounting," you know, or based on levels of volume that they achieve. So that's been an interesting opportunity. That's kinda one of those things we've learned when we got into the marketplace, because early on they were signaling, "Hey, we like to be de-risked." So that's why the forward deployed inventory, and it still makes a lot of sense for some doctors, but others say: "Hey, you know what? We're very capable and confident in how we operate with buy and bill. We'd rather see if we can work with some type of discount up front," right? So, you know, we're continuing to react to the customer base. That's one of the nice things of being a small, nimble organization, right? You can be more adapted, more fluid. We have real-time decision making going on every day. It's... That's what makes it an exciting launch and exciting opportunity for America. Okay, wonderful. Just to remind us, what's the current split right now of kind of the buy-and-bill model versus- Yeah ... potential for reimbursement? So as expected, we thought specialty pharmacy would outweigh buy and bill at launch. It's about an 80/20 mix, only because there was a miscellaneous J-code, and doctors will typically wanna wait for a J-code to streamline claims processes and, you know, get a clearer handle on what they're gonna get reimbursed. And it also allows us to build out our insurance coverage, right? So as we were building our insurance coverage these past six months, we expected more to weigh on the specialty pharmacy side. Over time, we expect that to convert to buy and bill over the next, you know, call it 12-18 months, right? So as we build buy and bill accounts, we're gonna see more go with the same-day treatment. We would expect that eventually to be 70/30 at some point the other way. Okay, wonderful. Specialty pharmacy does allow for sampling as well. Is that for early in the launch, something that's important? Yeah, early in the launch, we had starter dosage samples, if you will, out there, just to... You know, doctors who were using the specialty pharmacy wanted to treat same day, so they would start the patient with a sample and then bring them back, write a prescription, and have that ready to go for the second visit. Okay, wonderful. Just one more piece. You've made wonderful progress on payer progress, on the payer fronts. So just remind us how many lives currently under coverage and the different major PBMs have, that have been added? Yeah. And then, one more question, expectations for 2024. Expectations in the payer community or just in general? For payer, I guess- Yeah ... payer coverage. Okay. The different, So we thought we would have strong payer coverage, and I'm happy to say it even outpaced our expectations. We have roughly 205 million lives covered, predominantly on the medical benefit side. We do have some plans offering dual benefits. We have agreements in place with Optum, United, ESI, and we're on the CVS new to market formulary as well. We have tremendous coverage with plans like Cigna, Anthem, and these are some major insurance companies that obviously take on the majority of the lives in the US. So that's a definite strength. It puts us in outstanding position now with the J-code being assigned and published, 'cause the doctors will have even that much more confidence when they're looking to prescribe and treat same day, right? So we expect in 2024 to continue to grow. And one of the things I failed to mention, we've had a lot of state Medicaid come on board, big ones like Texas, New York, et cetera. In fact, Texas accelerated our approval. Typically, that was supposed to be in March. We got that approved back in February. So we're ahead of pace in Texas as well, which is exciting. This year, it's gonna be about continuing to bring on the remaining Medicaid states, as well as looking to expand our commercial coverage with the remaining plans that are out there, and also looking to see if we can get some dual benefit coverage as well. Just simpler, it's easier when doctors are not interested in buy and bill. It's easier to put it through a dual benefit side. It's a quicker dispense model, as far as, you know, us, achieving our sales. So, we're doing some fine-tuning, right? A lot of the heavy lifting in the payer space has been done, which is a great place to be in after six months of the launch. Wonderful, and just so we understand, in terms of commercial coverage, where are you in terms of percentage-wise? Commercial coverage, as far as a percent of our business right now- Yeah ... well, we got 205 million lives, so that's roughly about, you know, I would say close to 80%. 70%-80% of what's out there on the commercial side. ... Wonderful. Okay, and then just for the patient responsibility, talk about the average copay. Sure. It's physician administered, so just also talk about that nuance as well. Yeah. So, if it goes through the buy-and-bill, it's a coinsurance that the patient's obligated for, and that's typically 20% of the cost of drug, the list price of drug, and we would apply our copay program to that. On the specialty pharmacy side, it's adjudicated, and it, you know, as our copay program. Majority of the patients right now are paying $25 out of pocket for a copay. So it's been very strong coverage and affordable for the patients, and that's one of our missions as an organization, right? We wanna make sure there's access to medicine for people, so. Okay, and one last piece, which I think we, we should cover on the J-code for physician side. What's the incentive there, and obviously, why you think it'll shift over time? So the J-code is typically an average sales price, plus anywhere from 6%-10%, really depending on the individual payer, physician contract with that payer. So just to kind of walk everybody through this systematically, they get an E&M code to bill for. They also get their CPT codes, call it roughly $125. It's really lesion dependent, but let's say an average $125, and then they can get anywhere from 6%-10% on the average sales price of the drug. So it's, it is incentivizing, and when you think about buy and bill for YCANTH, it's not about the individual applicator, it's about the number of patients you're treating on a monthly basis, right? You got your high decile, doctors are seeing, you know, 40, 50, 60 cases a month. This becomes a very worthwhile business proposition for them, plus the value of giving the patient a great product that works every time, right? So- Of course. It's a win for everybody. Wonderful. Obviously, still very early days, but Gross to net, just walk through your expectations, right now, and, and where you think you'll go over time. And, of course, talk about the applicators, number of applicators you're assuming per patient, per treatment, and- Sure ... maybe your, the physician treat to clear type of strategy. Yeah, so gross to nets, happy to report, have been strong at 50%, and they've been maintaining that level. You know, think about going into the new year, you know, with patients that are in high-deductible plans, plans getting reset. We haven't seen a lot of of volatility, which is great, and again, we would expect to see that, given that it's a medical benefit. Now, we only expect to see the gross to nets to improve over time, and I say that because of the J-code being published on April first. That's going to obviously streamline reimbursement. We know we're gonna get more people signed up for buy and bill, and obviously, when folks go to buy and bill, it's advantageous for us on a gross to net per basis. The way to think about the applicators, you know, look, it's still, you know, 2-3 applicators per patient. The good news is, in our label, we did not get a maximum requirement on the number of treatments. There are unlimited treatments, so that's a good thing. But I would also tell you, you know, the feedback we're getting is the product works very well. So, you know, the challenge is we've got to get physicians to treat to complete clearance from all lesions. Some physicians are happy if they can go from 30 lesions down to 5 lesions, right? So it's educating them to let them know that those five lesions remaining are still contagious and can spread. Okay, that makes a lot of sense. So let's, let's go near term, 2024, obviously, focused right now on building out the infrastructure for YCANTH, but as we get into the second half of the year, maybe, Terry, you might have to join in, but I'll, I'll direct this to Ted for now. What are your thoughts around consensus? I think it's around $20-$23 million. Talk about your expectations for consensus first. We've talked about IDN and that potential contribution as well, lots of different potential growth drivers. So just walk us through what- how you see 2024 playing out. Yeah, well, listen, I would tell you that I fully expect us to grow week-over-week, month-over-month, quarter-over-quarter, and fully expect us to, you know, to meet and exceed the consensus. We have a lot of irons in the fire. You know, we announced recently an agreement with DLA. We had the U.S. military approach us and about acquiring YCANTH, and you know, that was business that was not factored in, and that opens up other channels for us as well. So but the expectation is that, you know, we will grow quarter-over-quarter. Okay. Joe, can you talk about IDN, potential contribution, in terms of percentage of revenues for the year? And then obviously, I asked this earlier, on the earnings call, but just remind us what it's gonna look like once the IDN orders start to hit. Is it gonna be a bulky order, or is it gonna be kind of a- Yeah ... month-over-month addition? So we're working with all the major IDNs, and as we talked about and spoke to in the earnings call, Kaiser Permanente and Mayo Clinic are ordering product on a weekly basis. You gotta remember, those facilities have multiple sites, right? So it's not just one central area it goes to. Kaiser's across the U.S., from East Coast to West Coast, and they recently acquired Geisinger. We're seeing some orders from Geisinger now as well, coming onto the board. So that's more of a steady flow. Mayo Clinic's been ordering routinely. We're continuing to talk to UPMC, Cleveland Clinic, Henry Ford. We're making progress in all those areas as well. And then, outside of the IDNs, these major health systems, like Ochsner down in the New Orleans area, and Novant, and those folks as well, right? So they're all areas of high priority for us. I did wanna touch just quickly on what Ted mentioned. Department of Defense is where we got the agreement with the DLA, and that gives us access to a worldwide opportunity for the military treatment facilities, okay, and also some humanitarian work and other endeavors they get involved in. So that was a nice win for the organization, and it's an excellent opportunity for us as well. But as a percent of business, you know, getting back to your question on IDNs, you know, we're gonna- ... think about probably 40%-50% of our business coming from IDN and health systems this year. And again, it's because they have large pools of patients, and they have multiple sites, not just the main facility. They have offshoot satellite sites throughout various states, et cetera. So that all becomes part of that. Okay, that's wonderful. We're not gonna hold you to this, but we did wanna ask additional metrics moving forward. What are you considering? What do you think you're gonna share? Yeah, well, I think, you know, you should expect to see the KPIs that you would expect to see in a buy and bill model, and that would be, you know, number of buy and bill accounts. I would say number of new accounts, accounts that have been reordering, specialty pharmacy metrics as well, so metrics along those lines. Okay, wonderful. You know we love metrics. Okay. Yeah. So obviously we talked in detail on the launch, but we do want to also focus on something that's equally as important to you all, which is the non-FDA-approved agents that are currently being used in molluscum. So just walk through kind of the plan that was always in place, the progress you've made, and what next updates we might expect. Sure. Well, listen, I'm happy to report that I would tell you that we're on the back end of our efforts to remove compounded cantharidin from the market. Now, I would be the first to tell you that I think we underestimated how much compounded cantharidin was in the market at launch, so it's been heroic efforts to date. 503 Bs, which are your major compounding pharmacies, five of them, four of the five have not compounded cantharidin in 2024. We did have one major compounder who supplies the majority of the institutions, IDNs, has agreed to stop promoting. They sent a letter to 400+ institutions announcing that they're no longer distributing and provided them with YCANTH information, and we've been receiving orders on a daily basis there. We've also had I would tell you, we've had about 80, 80%+ success with the 503A pharmacies. These are your mom-and-pop pharmacies. But listen, I'm the first to tell you that they have to be closely monitored, right? Because they may stop for a couple of months and could resume again, so we keep our eye on them, but they have cease and desist. The major outlier, which we've recently announced, and the last piece of the puzzle is Dormer Labs based in Canada, and Dormer supplies compounded cantharidin to your individual dermatology practices in the United States. And so, I could tell you that they've already, you know, come to the table, and you know, wanna talk, which is obviously a good sign, and we're, you know, we expect to get a successful resolution to that here, and we'll announce something very shortly. Okay, wonderful. Last piece, there is a little bit of a competitive landscape, although lots of different nuances there, with Novan and Ligand ZELSUVMI. I think that's the pronunciation. The introduction is in the second half of this year, so just talk through your thoughts there. Yeah, well, listen, we've always said that we think that it's great that another product's coming to the market, which speaks to the opportunity. We like it 'cause it's gonna be higher increased share of voice, which we like our chances of coming over to the YCANTH side. You know, it's almost comparing apples to oranges. You know, we have a product that's considered to be the gold standard in-office procedure, revenue opportunity for the you know for the physician. Their product is a take-home product, which is gonna have some. We believe it's gonna have some challenges with regards to being applied every day, you know, for 12 weeks, which is a big ask. Has to be mixed together in order to activate, and of course, you know, there's not a revenue opportunity for the physician. There's no CPT or ASP plus, you know, 6%-10%. So we know in dermatology, topicals have very poor compliance. Okay? And so again, that's why we like our product because again, it's clinician administered. Okay, wonderful. So, again, understanding that you are focused on YCANTH, and the launch within molluscum, but you also have shown some really intriguing data, in other indications like common warts and genital warts. So you've provided some updates, met with the FDA recently on common warts, so what are the next steps and expected timing there? Sure. Great question. So we're very excited about common warts. You know, I've always said common warts is the holy grail of dermatology, no FDA-approved therapies, et cetera. You know, we're fortunate we have a very good partner in Japan, Torii Pharmaceuticals, who's very enthusiastic about getting common warts approved in Japan. I would say they're more excited about common warts than they are molluscum. So I think there's an opportunity for us to do a global common warts program that could be, you know, that could be financially positive for the organization. Let's just leave it as that. We're working on a deal, and... But we did meet with the agency. To your point, we had a type C meeting. We got alignment on the phase III program. It would, it would definitely be two phase III programs with a long-term follow-up, but we did get clarity on other warts that they've asked us to study, such as periungual warts and cluster warts. And so now that we, we have all the information that we need in order to to go into that pivotal phase III program. Okay, wonderful. One more pipeline question. Yeah. I do believe we're expecting a catalyst on data this year. Just very briefly, some background on VP-315 for basal cell carcinoma, and walk through the data that's been disclosed so far. Sure. Yeah, so we're another product we're excited about, VP-315, first-in-class oncolytic peptide, obviously for basal cell carcinoma. We just announced last patient dosed in our phase II program. As a reminder, our phase II program is a 2-part study. The first part enrolled, you know, 8 patients, of which 6 patients got to the highest dose of 8 mg. And 4 out of the 6 achieved complete clearance. The remaining 2 had some residual. As we go into part two, which is really cohort 4 and 5, we're looking at 80 patients. The difference between the two cohorts, cohort 4 is dosed twice a week, and cohort 5 is three times a week. We'll have the top-line data readout on this in June of this year. Okay. Wonderful. So what do you think needs to be shown to move forward, or do you think you've already kind of shown that efficacy hurdle? Well, I think, you know, look, we're doing some market research to see what success looks like, what the market is looking for. I would tell you, we're gonna look at a lot of endpoints, you know, complete clearance, as you know, as a potential replacement to Mohs, you know, in addition to something. So we'll be looking at a lot of data points. Okay. And then for basal cell carcinoma, just broadly, what's the size of the opportunity there? Yeah. Well, it's a big market opportunity. It's the number one form of non-melanoma skin cancer in the country. You know, 3.5 million, when you add squamous cell, over 5 million. You know, the nice thing about this for us is we did the payer research first before we actually did the license agreement, and we know it fits our model. It fits our model in that it's a clinician-administered asset, so this is an intratumoral injection. There are CPT codes, and so we know physicians... Obviously, there's a revenue opportunity for the product. Okay, wonderful. And then the last few moments, you recently disclosed positive phase III results for your partnership with Torii. So just remind us of the milestone royalty structure there. Right. So, they just announced a positive phase III program. The data is, it's almost mirrored YCANTH's. Maybe the placebo was up just a little bit. So, they'll be submitting their application. We're probably, you know, call it a year away. On approval, you know, the milestone payment to Verrica is $10 million, and so, you know, we're excited about that. We're also excited about when we start the common warts trial. There's a royalty payment of $8 million to Verrica for the first patient dosed in our common warts program. Okay, wonderful. Any last comments, Ted, before we leave it to Q&A? Well, listen, I would just say that the launch is off to a good start. You know, I always say pleased but not satisfied, but I have high expectations. You know, when I see over 200 million commercial lives covered, you don't, you don't see that, especially in dermatology. You don't, you don't see that. So I think that speaks to the advantage of having a medical benefit product. I think you look at the adoption of the institutions, the IDNs, the military, you know, we've got a lot of things that are happening that is gonna really create a lot of opportunities for the organization, so. Okay, wonderful. Thank you so much for your time today. Yeah, thank you. We'll leave it for Q&A or for a brief moment of Q&A. Q&A? Okay, wonderful. Thank you. Thank you so much.