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

Good morning and welcome to the Verrica Pharmaceuticals conference call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to hand the call over to Brian Davis, Chief Financial Officer of Verrica. Please go ahead.

Thank you, operator. As a reminder, certain statements made during this call will be forward-looking statements. These forward-looking statements include our current expectations with regard to our interactions and communications with the FDA, our future resubmission of the NDA for VP-102 for the treatment of molluscum, the potential approval of the NDA for VP-102 following resubmission, the potential benefits and potential approval and commercialization of VP-102 for the treatment of molluscum, our plans with respect to planned clinical of VP-102 for common warts and VP-103 for plantar warts and our expectations with respect to our cash runway. These statements involve risks and uncertainties that could cause actual results to differ materially from those reflected in such statements. Risks and uncertainties that may cause actual results to differ materially include risks and uncertainties that are described in our annual report on Form 10-K for the year ended December 31, 2019. Our quarterly report on Form 10-Q for the quarter ended March 31, 2020, and other filings we made with the United States Securities and Exchange Commission. Any forward-looking statements speak only as of today and are based on information available to us as of today, and we assume no obligation to, and do not intend to, update any forward-looking statements, whether as a result of new information, future events or otherwise. I will now turn the call over to Ted White, President and Chief Executive Officer of Verrica.

Thank you, Brian, and welcome, everyone, to our conference call. Earlier today, we issued a press release announcing that we received a Complete Response Letter, also known as a CRL from the FDA regarding the new drug application for VP-102, our lead product candidate, for the treatment of molluscum contagiosum, also known as molluscum. A copy of this press release is available in the Investors section of our website at www.verrica.com, and a replay of today's call will be available on the Events and Presentations section of the Investors section of our website for 60 days. Joining me for the Q&A portion of today's call is Dr. Patrick Burnett, our Chief Medical Officer; Gene Scavola, our Executive Vice President of Technical Operations; Brian Davis, our Chief Financial Officer; and Joe Bonaccorso, our Chief Commercial Officer. We feel it's important to share what we know regarding the issues outlined in the letter and to discuss a path forward for the potential approval of VP-102. At the outset, it is important to note that the agency has not requested any new clinical data. In the CRL, the agency informed us that they were seeking additional information regarding certain aspects of chemistry, manufacturing and controls, also known as CMC, process for the drug-device combination as well as human factors validation. As you may recall, we announced on June 29 that we received a letter from the FDA in which the agency noted deficiencies that precluded discussion of labeling and post-marketing requirements and commitments. In that press release, we also disclosed that the FDA's prior information requested during the NDA review focused on CMC. One of the requests was related to a potential safety issue with the applicator that could arise if the instructions-for-use were not properly followed. And the applicated cap was removed before breaking the glass ampule. In response, the company incorporated a warning label shrink ban around the cap and updated the instructions for use to address that issue. The CRL provided new information that the safety of the applicator could also be improved with the addition of an external tool to help break the glass ampule. We had originally anticipated to incorporate such a tool in our life cycle management program as a potential convenience for health care providers. Given the FDA communication in the CRL, Verrica is accelerating the development of the tool and will review the suitability of it with the agency at its earliest possible time. The addition of these changes necessitates further human factors testing and additional support of stability data on the fully assembled device. However, the company believes that its existing long-term stability data with the ampule and as submitted applicators supports significant shelf life and stability for VP-102. The company plans to request a Type A meeting to discuss the issues that were described in the CRL and determine the path forward for resubmission of the NDA for VP-102. We continue to believe that the positive results from our 2 double-blind Phase III trials, CAMP-1 and CAMP-2, which evaluated VP-102 compared to placebo in patients 2 years of age and older diagnosed with molluscum indicate that VP-102 remains viable for FDA approval, having demonstrated favorable safety, efficacy and tolerability in these trials. While we are disappointed that we're not able to share an approval with you today, we are confident that we can work closely with the FDA to fully address these issues and ultimately gain FDA approval of VP-102. We remain steadfast in our commitment to help the millions of patients and families dealing with the burden of molluscum, a disease for which there are no FDA approved treatment. We look forward to sharing additional updates on our progress towards resubmitting our NDA for VP-102. Before we take any questions, I also want to confirm that the company intends to continue deferral of its originally planned clinical trials for VP-102 for common warts, and VP-103 for plantar warts. As a result, the company believes its existing cash, cash equivalents and marketable securities which totaled approximately $80 million as of June 30, will be sufficient to support planned operations at least through the fourth quarter of 2021. With that, I would now like to open up the call for questions. Operator?

[Operator Instructions] And your first question comes from the line of Jason Gerberry with Bank of America.

So I guess my question here, my first one is just the human factor studies, just trying to get a sense of the range of timeline considerations here. So you mean factor studies, which may take maybe a couple of months. So it seems like the bigger variable and all this is the stability data, and you mentioned the potential to leverage existing stability data. And so that could be expedient. I guess the alternative is if the FDA doesn't agree with that then you have to generate new stability data? And so what, in the latter scenario, could you be looking at in terms of a time line consideration if you have to generate new stability data?

Sure. I'm going to let -- Patrick.

Ted. Thanks for the question, Jason. This is Patrick. Yes. So we've been working to put product up on stability in order to address this. So what we're going to need to do is in that Type A meeting, really kind of reach an agreement with the agency with regard to exactly what that will require. So we'll be able to come back to you after the Type A meeting with kind of further guidance and what the time line will be for the stability as well as for the final submission.

Okay. And then just help us think through how you'll manage your capital runway here with respect to initiating the clinical on warts, is that going to be delayed until I assume you get greater clarity out of your Type A meeting? Just wondering if you can talk a little bit about how you plan to kind of manage your cash burn until you get greater clarity on these issues.

Yes. Jason, this is Brian Davis. And yes, you're right. As Ted mentioned, we're going to continue to defer initiation of the planned studies for study VP-102 in common warts as well as VP-103 and plantar works that's logical, sensible way to proceed at this point. As you know, we'd already put those studies on hold because of the pandemic anyone because of the COVID-19 pandemic. So we'll continue to manage that very carefully. That's why we thought it was important to come out with a message today to update our public cash runway that we do have sufficient existing cash to take us at least through the end of next year. And that certainly will allow us a lot of time here to get further visibility on timing of -- on the regulatory front and eventually launching.

Got it. And then last question, and I apologize if I missed this. Your Type A meeting has been scheduled or not been scheduled yet. Just curious where you guys stand with the agency?

This is Ted, Jason. We have not requested a Type A meeting. We will be doing so here in the near future.

Our next question comes from Ken Cacciatore from Cowen.

Just wondering if you could clarify. You were saying that the new change to the device you were contemplating already the second enhancement to make it a bit easier. Can you just give a little bit more details on are you complete -- again, you're contemplating doing it, but is there a -- is this going to take a long time for you to ensure that, that is now ready to go? And does it change the manufacturing process and in any meaningful way you were talking about having to perform human factor studies. So I think Jason's assumption stability would take a little bit of time. Can -- is this going to be a gating item? Or maybe you could just give us which one of these 2 issues are going to be the gating item and how fast it can be completed?

Ken, this is Gene Scavola. Answer to that question is relatively simple. The new issue that was raised by the FDA, the braking tool will have no impact on stability. It's fairly far along in development. We expect to have materials to test within the next month or so. The gating issue there will be going back through a human factor study for that. But it should have no effect on [ human factor ] study.

And how long will -- and the human factors just fairly rapid to complete?

Given the current environment with COVID, that will be something we have to work out in the Type A meeting with the FDA. Those are typically performed face-to-face. So in this environment, we'll need to come up with a pathway with them to actually execute the study.

Okay. And then as we have a slight delay, maybe you all could just review for us the competitive landscape. So we understand if this delay has real meaningful impact on capturing this entire market? Or are we at risk of losing it to anyone else? So maybe just lay out anyone that you're worried about? Or are we still kind of greenfield here for us?

Yes, Ken, this is Ted. I would say that the only competitor, Novan Therapeutics, they have recently announced that they have sufficient funding to restart the Phase III program sometime in the fall. They have not given specifics of one in the fall, but when they plan to initiate those trials.

And our next question comes from Oren Livnat with H. C. Wainwright.

So yes, I have a few questions. This is Oren, by the way, in case that was not announced. So first, can you just confirm, does the CRL specify only these issues you've outlined above? Or are there potentially still other ambiguous or otherwise issues remaining? Secondly, you mentioned you'd already submitted -- 2 weeks ago, you had already submitted some information related to a change on the device, which I assume is the instructions and the warnings on the cap. Do you believe the FDA reviewed some or all of that information already? Or they are all indications that the CRL just covered the initial or the original application. And so you don't really have any sense on, I guess, the suitability of those changes so far? And just lastly, if I may. Can you just help us understand how stability could be affected by these changes to the device? If things are sealed on the glass and tool, how it does removing the cap before or after use affect that stability? And can you imagine there'd be any data you could generate that would look different than your initial stability data?

Sure. We'll start with Patrick, and then I'll turn it over to Gene.

Yes, Oren, this is Patrick. The issues that we discussed in the press release and that Ted reviewed, we think, are really kind of the key ones that need to be addressed. I'm not going to say that, that's every single thing that is on the CRL. But we do believe that, especially for the point that you mentioned with regard to late submissions that some of the things that are on the complete response letter as listed, are actually issues that we consider to already be resolved. And so we just need to get confirmation of that with the agency. So we feel pretty confident that we have an understanding of what those issues are. We wanted to disclose those. Those are the ones that we've spoken about. And then that's the role of this meeting with the agency is just to make sure that we're in agreement on the path forward for VP-102. And then just on your second point with regard to some of the late submissions. As I mentioned, in the FDA's review, things that may have been submitted kind of toward the end of the review, the agency may just need to be represented in that type a meeting. So we don't think that there's anything really critical in that, just a matter of, again, gaming agreements so that we're aligned perfectly with the agency what that path forward is.

Oren, it's Gene Scavola. I'll handle the stability question. With respect to the ampule, we have sufficient stability, we believe, for that at this time. The agency is really questioning stability of the final finished drug product. While we do have stability on that product, the initial adjustment that we made to address the first safety issue that the FDA raised, adding the -- basically each ring and as a cap. Would be what we would need to reduce stability for. We've already got that underway.

Okay. So safe to assume that the sort of full stability package that'll give you multiple years, I believe, of shelf life on the ampule, that's on a much more comprehensive program than you need to run on just if we add a shrink rep to keep the cap on, presumably, that doesn't change the -- that doesn't require a full workup on stability from scratch?

Well, I mean, the program that will run will be similar, but it appears that the agency at this juncture only is looking for accelerated data on that to basically be able to draw the correlation.

Okay. And just can you remind us -- I know you're not giving any firm guidance on time lines, but just -- just typical, can you remind us what a accelerated versus full stability programs bookends tend to be?

At this time, since we don't have that fully resolved with the FDA, I'd imagine we would get resolution with that during the Type A meeting. I would imagine it would be somewhere between 3 and 6 months though.

Okay. And actually, the funny thing occurred to me, and I apologize for going on. This tool that is used to presumably squeeze around the device to help crush the ampule. Is that something that would require custom tooling and manufacturing? Or is there some off-the-shelf nutcrackers, so to speak, type of tool that you can use?

It is -- thank you for that description. It is very much like a nutcracker. It is a custom part. The tooling is already underway, being manufactured.

And our next question comes from Tim Chiang with Northland Securities.

Ted, could you just talk a little bit about what size study you'd have to run with the human factor study? I mean is it still uncertain how many patients you might have to enroll in that study?

Sure. I'm going to turn that over to Eugene.

Yes. Tim, typically, those studies are somewhere in the 15 to 20 participant range, at least that's what we dip to the initial human factor study. So I would expect something similar, but we'll get that final answer as part of the Type A meeting, I'm sure.

And can I just interrupt for just one in, I just want to be really clear. You just had mentioned the patients. So just because the human factor study is with health care providers. So this is a health care provider administered product. So we won't be requiring any clinical trials or any patient study. So it's just a matter of recruiting a handful of health care providers in order to kind of go through the instructions for use. And then show that they can safely use the applicator because it's administered in an office setting.

Yes. I mean, forgive me, just to clarify, the human factor studies are performed by the health care professionals, and it's a simulated clinical environment. There are no patients involved.

Got it. And I mean, how long do you think that would take 15 to 20 health care providers? I mean, are we talking a couple of months potential?

At this time, Tim, it's really hard to say. I mean there's also a review period of the protocol by the FDA. I don't think we'll have that answer definitively until the Type A meeting is finished.

And the next question is a follow-up from Serge Belanger, Needham & Company.

This is Tian on for Serge. I just got a few questions. I guess in terms of post-approval requirements, do you have any expectations? Or is it kind of too early to tell what the FDA might require in terms of continually assessing the safety requirements for the device?

Patrick?

Yes. We don't really have any indication at this time with regard to post-approval commitments so that's something that we would anticipate later in the review upon resubmission where we would get an indication of what those might look like. At this point, we haven't identified anything that might need to be addressed.

Okay. And then in terms of, I guess, for the health care professionals, is there any type of training that you think you could or may propose to the FDA to kind of control or mitigate the safety risk for the device?

This is Ted. I would tell you that we have a full training program planned. We'll also create an app for the phone. We'll also put a training video on our website and obviously, sales representatives will be using placebo applicators to help with the training on how to use the applicators.

I'm not showing any further questions at this time. I will now turn the call back over to Verrica's CEO, Ted White. Ted?

Okay. Thank you, operator. I'd like to thank the investigators, patients, families and physicians for their ongoing participation in and support of Verrica, its clinical trials and VP-102. I'd also like to express my gratitude to the entire American team for their tireless efforts and continued dedication as we seek FDA approval for VP-102. It's important to me that I reinforce our belief in the potential of VP-102. The CAMP trials have shown us that VP-102 may be a safe, effective treatment option for molluscum. And we're strongly committed to working with the FDA so that we can resubmit our NDA and take another step forward in our mission to help alleviate the burden of this disease. We look forward to providing further updates on our progress. Again, thank you for joining us today, and this concludes the call.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.