Verrica Pharmaceuticals Inc. (VRCA) Earnings Call Transcript & Summary

Good morning, everyone. Thank you for dialing in. My name is Balaji Prasad, I cover specialty pharma for Barclays. Continuing our Virtual Health Care Conference, we have with us today, Ted White from -- President and CEO of Verrica Pharmaceuticals. Also, a reminder that owing to the nature of this format, there will be no Q&A session and it will be a presentation format from Ted on Verrica. So Ted, over to you. Thank you.

Thank you, Balaji. And good morning, everyone. We'll start on Slide 3 of the presentation deck, if you have it in front of you, and to tell you that Verrica Pharmaceuticals is a late-stage therapeutics dermatology company based in West Chester, Pennsylvania, just outside Philadelphia. We are focused on the development and commercialization of novel dermatology products that provide meaningful benefits for people living with skin disease. Turning to Slide 4, just an investment highlight overview. Verrica is addressing the 2 largest unmet needs in medical dermatology. The first being molluscum contagiosum that has a prevalence of 6 million in the U.S. And then our second area of focus is in area of common warts, where the prevalence is 22 million. Important to note, in both of these disease states, there are no FDA-approved drugs to treat either condition. Our lead asset, VP-102 for the treatment of molluscum contagiosum, has a PDUFA date of July 13 of this year. That's based off of positive Phase III clinical trials that we ran CAMP-1 and CAMP-2, which I'll talk to later on in the presentation. In addition, we recently announced positive top line results of our Phase II results in common warts, where we showed 51% complete clearance of all warts at day 84. Our lead asset, VP-102, with a conditional brand name of Ycanth, is a drug device combination with a proprietary formulation of cantharidin in a novel single-use applicator. Now cantharidin has been around since the 1950s, and it was in 1962 that the FDA mandated that all manufacturers produce efficacy studies. At that time, no manufacturer was willing to do the efficacy study. So therefore, cantharidin has never been approved. And I will tell you is that you will not speak to a dermatologist or a pediatric dermatologist who is not familiar with the compound who has not utilized cantharidin. This will be an NCE with 5 years exclusivity, along with 6 months for pediatric, and we have IP pending on our novel formulation or applicator and our method of use. It's important to note that Ycanth will be a clinician-administered product, distributed through a buy-and-bill model and also a specialty distribution model for those physicians that elect not to buy-and-bill. Turning to Slide 5 is our overview of our portfolio. We're building a franchise around cantharidin, starting with our lead asset Ycanth for molluscum contagiosum, as I mentioned, a PDUFA date of July 13. Then right behind it is common warts. We'll initiate our pivotal Phase III clinical trials in the first half of 2020, and then we'll announce our top line results of our Phase II clinical trials in external general warts in the second half of 2020. And then finally, a new formulation of cantharidin in VP-103 for plantar warts, and we'll initiate a Phase II trial for plantar warts midyear this year. It's important to note that we own the rights to our product across all indications globally. Turning to Slide 6. As I mentioned, we're addressing the 2 largest unmet needs in dermatology, but you can see here that 85% go undiagnosed. And the reason being is that there's just no effective treatments. And the treatments that exist have major drawbacks and limitations, such as pain and scarring, which I'll talk to you about in a minute. And again, for common warts, 22 million with 1.5 million being diagnosed annually. So 2 large addressable markets. Turning to Slide 8, which is just a background on molluscum. For those that are not familiar with molluscum contagiosum, this is a highly contagious viral skin disease that primarily affects children ages 2 to 14, although adults can get this disease, and we did see adults in our clinical trials. This is a form of the pox virus. And if untreated, these lesions persist on an average of 13 months and with many cases remaining unresolved for several years, 2-plus years or more, and we did see in our clinical trials where patients had this disease for 3 to 4 years. This is a disease that's spread by skin to skin contact, the sharing of clothing, towels, it's transmitted in swimming pool with the toys, sports equipment. And a typical patient presents anywhere from 10 to 30 lesions, although we did see many patients in our trial that had over 100 lesions. Turning to Slide 9, looking at the current treatments. While there are no FDA-approved therapies, as I mentioned, the therapies that you see here on the slide have many limitations and drawbacks. I would tell you the major 2 that are utilized is cryotherapy, which is the freezing of the lesion, and curettage, which is basically taking a curette and scraping the lesion. Obviously, the challenges here are pain and a potential scarring, which is every parent's worst nightmare. So as a result, this is a significantly undertreated patient population. If we skip to -- over to Slide 11, it shows you -- on the right-hand panel is our -- is a picture of our proprietary drug device administered through our single-use precision applicator. There are 5 components to our applicator, starting with the tube; the glass ampule; the filter, which is there to capture any glass shards; the tip; and the cap. So Ycanth is produced under GMP. It's a single-use applicator to reduce any type of cross-contamination. We've taken cantharidin in the formulation. We added a visualization agent. We basically -- Gentian Violet, that's found in the surgical pen, added it to the solution, so it allows the identification of lesions with a health care provider. As you can imagine, if they're treating 30 to 50 patients, they would -- they now would be able to see which lesions have been treated. In addition, because cantharidin is a vesicant, it's a blistering agent, we've added a bittering agent to our formulation to deter any type of oral ingestion, as young children tend to lick things. And as I pointed out earlier, a key distinguishing factor for us is that we're a clinician-administered product. We are a buy-and-bill product and an in-office procedure. And if you turn to Slide #13, it's an overview of our pivotal Phase III clinical trials, CAMP-1 and CAMP-2. These were 2 identical design, randomized, double-blinded, multicenter, placebo-controlled trials. These were 12-week studies. Our CAMP-1 was conducted under a SPA. The reason why CAMP-2 was not under a SPA was because that we made commitment to our institutional investors, mainly Perceptive and OrbiMed, that we would start our pivotal Phase III clinical trials prior to the AAD last year. The primary endpoint for our studies was the percent of subjects that had complete clearance of all their molluscum lesions at day 84, with the secondary endpoint being those subjects that had complete clearance at 3, 6, 9, along with safety and tolerability and also lesion reduction. And then, finally, the way the drug was administered was administered topically to all lesions every 21 days or every 3 weeks until clearance for a maximum of 4 applications, and that our solution was left on for a 24-hour period of time before being watched off. Turning to Slide 14. It shows you the pooled data from our Phase III trials. You can see that we showed statistical significance at each endpoint, and at day 84, we showed over 50% complete clearance of all lesions, which if you think about is a high endpoint because this is a disease that children tend to pick their lesions and then auto-inoculate themselves and spread to other areas of the body. So this had to be complete clearance of all lesions. Compared to vehicle, at 15.6% at day 84. Turning to Slide 15, shows the percent of lesion reduction over the course of therapy. And as you can see, at day 84, the endpoint, we showed a 76% reduction in lesions compared to no change from baseline for vehicle. It's also important to note that if you look after the first treatment, 31% of patients are seeing a reduction in their lesions, which is meaningful and it will adhere to patient compliance. Turning to Slide 16. If you look at our discontinuation rates based on treatment-related adverse events, they're extremely low, and Ycanth is extremely well tolerated. We showed less than 2%, a total of 6 patients discontinued out of over 500 patients. Moving over to the commercial opportunity on Slide 18. Again, addressing a large addressable market, we feel we have the ability to drive greater foot traffic into offices that now will have an FDA-approved product and create greater awareness. So Slide 19 shows you, from the Journal of American Academy of Dermatology, 400 dermatologists that were surveyed said that 70% of them do not use the compound cantharidin because it's just inaccessible and it's just not hard -- it's just too hard to get. Cantharidin today is available in a compounded version. And then on the right panel, this is a study that Verrica did internally with 40 dermatologists. And the reason they said that 87% of them would utilize Ycanth, if approved, if the cost of the drug was covered by payers. Looking at Slide 20. This was a qualitative study with 30 pediatricians, 13 dermatologists and 5 pediatric derms, and we're given the profile of Ycanth and you could see high scores for derms and pediatric derms. The reasons to use our product, if approved, is based on efficacy, the precision and pain-free application and the convenience of administration. And then when you looked at the pediatricians, they scored high with regards to efficacy, it fits into their current office model, when you think about vaccinations and things along those lines in the buy-and-bill type of a situation, it fits right into their work stream. And there are also pediatricians who are extremely frustrated without having any options to treat this disease, and they tend to refer to the dermatologists because parents are adamant about getting treatment. Turning to Slide 21. We've conducted payer research, I would tell you, with the top 15 payers that represent over 100 million lives. And we did 2 rounds of payer research based on our Phase II findings and also on our Phase III clinical trials, and the feedback has been very consistent. That feedback is stated on Slide 22, and that payers recognize that this is a significant unmet need and there is a lack of effective treatment. They also recognize the secondary risk factors that are associated with this disease, such as bacteria infections, scarring and spreading of this disease. And all the payers, I would tell you, 95% of the payers perceive Ycanth to be highly favorable based on our 12-week clearance data and that they see that this would be covered. And it's important to note that the product would be covered under a medical benefit, not a pharmacy benefit, given the fact that it's a clinician-administered product. Turning to Slide 23. I would tell you, we have a 5-pronged approach to our commercial readiness and that really is already all underway. First, starting with KOL engagement. We've had a strong presence at all the major congresses. Just came back from Winter Clinical and Maui Derm, where we had extensive podium exposure. As I mentioned, this is going to be a buy-and-bill or a specialty pharmacy distribution. We're also introducing to the market an innovative distribution model, and that is what we're calling forward-deployed inventory. So one of the challenges that you hear from physicians which relates to buy-and-bill is they don't want to carry the cost of the inventory, especially at launch, not knowing whether or not the product would be approved by payers and reimbursed. This forward-deployed inventory that we utilized with a company called [ 3F ] is the physician would take the product and does not pay for the product until it's actually been given to the patient. So there's no cost out of the pocket for the customer. So in addition, we'll be putting up a field force of around 50 specialists across the country, covering the top 50 MSAs in the country. In addition, we'll be adding anywhere from 5 to 10 institutional sales representatives to call the major teaching institutions because of the 400 pediatric dermatologists that reside in the U.S., they typically reside in the teaching institutions. And then finally, we'll do a lot of disease awareness. We've just revised our aboutmolluscum.com website, a patient education website, and we believe we can drive greater foot traffic into offices through a cost-effective social media advertising. Turning to Page 24 and looking at our exclusivity. First, again, a reminder, this is an NCE. So we'll have 5.5 years of exclusivity with 6 months for the pediatric indication. Note on the compounding pharmacies, that compounding, once Ycanth is approved, they will be unable to compound cantharidin. They really know of 4 that are registered with the FDA, so we know who they are. The only way that they would be able to compound the product post-approval would be if a patient had an allergic reaction to one of the excipients in Ycanth. Also important to note that we've entered into a supply agreement for naturally sourced cantharidin. And as long as we keep up with our purchase agreement and supply orders that we have, we have North American exclusivity, which we've already accomplished for 2020. And then the true generic is unlikely because of the fact that our Phase II pilot study where we had to do a PK, there was no blood levels detected. So a generic would have to sponsor a whole new program in order to get approved. And then turning to Slide 25. If you look at our IP, I will tell you that we have IP on our specific formulation of Ycanth, and that includes the bittering agent and the Gentian Violet coloring agent. We also have IP on the design of our applicator, the method of use, the method of purifying cantharidin and the complete process of cantharidin's synthesis. We have been working on a synthetic version of cantharidin, and we plan to introduce that post-approval of Ycanth. Then moving over quickly to our opportunity in common warts, and jumping to Slide 27. Again, common warts is caused by the human papilloma virus, a lot of the same characteristics for molluscum contagiosum applied to common warts. This is a -- common warts affects patients of all ages. It's a highly refractory disease. Again, spread by skin to skin contact and touching contaminated objects. And the same limitations and drawbacks exist for common warts as they do for molluscum contagiosum with regards to no FDA-approved therapies, and those that exist, cryotherapy, curettage, are painful and potential scarring. So we've completed our Phase II COVE-1 study in common warts. The study design was to look at the efficacy, the safety and tolerability, but also to really understand what the dosage form would be. So we had 2 cohorts to our Phase II study, Cohort 1, which had 1 center, and then Cohort 2, which had 4 centers. The primary endpoint was the percent of subjects that had complete clearance of all treatable warts from baseline and new at day 84, while the secondary endpoint was those that have complete clearance of all warts at visits 2, 3 and 4, and then, of course, the change in baseline and number of warts at 84, day 84. So the key distinguishing factors from Cohort 1 to Cohort 2 was that Cohort 1 patients were treated every 14 days, where at Cohort 2, subjects were treated like they did in molluscum, every 3 weeks. With the addition, we allowed paring of the wart. And then upon complete clearance, we gave the subject one more treatment. And this, again, was -- this was a day 84 study and the product was left on for 24 hours. Moving to Slide 29. You can see the result of our Phase II clinical trial, COVE-1 and COVE-2. Clearly, you can see that Cohort 2 was the most effective at 51.4% complete clearance at day 84. So we'll take Cohort 2, which was, again, every 3 weeks of therapy, with allowing paring and one additional treatment into our pivotal Phase III trials later this year. And moving over to Slide 20 -- actually, Slide 30. This is just showing the discontinuation rates for our clinical trials for Cohort 1 and Cohort 2. And you could see that we had very low discontinuation rates in Cohort 2 at 5.7%, 2 patients. So just to wrap up, if you look at the last slide, Slide 31, we have been able to accomplish a great deal in 2019. And as we look to 2020, as a reminder, we'll initiate our pivotal Phase III trials in common warts, followed by our Phase II trial in plantar warts midyear this year. We have our PDUFA date and commercialization of July 13 and we anticipate to be in the market in late summer, early fourth quarter. And then we'll also, later on in the year, second half, we'll announce the top line results from our Phase II trial in external genital warts, and again, the commercial launch of Ycanth. So with that, I thank you for your time today.