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

Good morning, and welcome to the Verrica Pharmaceuticals KOL Investor Event. [Operator Instructions] As a reminder, this call is being recorded and a replay will be made available on the Verrica website following the conclusion of the event. I'd now like to turn the call over to Ted White, President and Chief Executive Officer of Verrica Pharmaceuticals. Please go ahead, Ted.

Thank you, Tara, and good morning, everyone. I'd like to personally welcome you and thank everyone for participating in today's virtual KOL investor event, discussing our recent FDA approval of Ycanth, the first and only approved treatment for molluscum contagiosum in adult and pediatric patients 2 years of age and older. Molluscum is caused by a pox virus that produces a distinct raised skin-tone, pink-colored lesions that can cause pain, inflammation, itching and bacteria infection. It's easily transmitted through direct skin-to-skin contact or through fomites that can spread to other parts of the body or to other people, including siblings. Without treatment, molluscum can last on average 13 months and, in many cases, can last up to several years. This here is just a forward-looking statement on our disclosure. And as a reminder, Verrica is a dermatology therapeutics company. We're based in West Chester, Pennsylvania, which is approximately 35 minutes outside of Philadelphia. We're focused on addressing high unmet needs within medical dermatology. And as an organization, we are concentrated on clinician-administered assets that have the potential for medical benefit. Ycanth was approved for molluscum contagiosum on July 21 and has a prevalence of 6 million annually in the U.S. We plan to build a franchise around Ycanth with additional indications, including common warts, which there's no FDA-approved therapies, which has a prevalence of 22 million in the U.S. and is Phase III ready, along with external genital warts, which is also Phase III ready. And in addition, VP-315, which is our first-in-class oncolytic peptide, which is currently in a Phase II program for noninvasive treatment for basal cell carcinoma, which has a prevalence of over 5 million cases each year. Ycanth is a proprietary drug device combination product that contains a GMP-controlled formulation of cantharidin delivered via a single-use applicator that allows for precise topical dosing and target administration for the treatment of molluscum. Ycanth is the only product approved by the FDA to treat molluscum. It's a common highly contagious skin disease that affects an estimated 6 million people in the U.S., primarily children, and Ycanth should be administered by a trained health care professional and is not for home use. I'm pleased to report at this time the high interest, awareness and adoption of Ycanth in the marketplace. In just 1 month, we have over 81 million lives covered on commercial and managed Medicaid plans like Anthem, CVS Caremark, UPMC Highmark, and several Blue Cross Blue Shield plans. In addition, we have several state Medicaid fee-for-service coverage in states such as Connecticut, Nevada and Arkansas. To date, we have formulary acceptance at over a dozen key institutions, including Stanford Children's Hospital, Mount Sinai in New York, University of Miami, Advent, Orlando's Children's Hospital, Memphis Children's Hospital. In addition, we have institutions that are utilizing Nufactor, which is our specialty pharmacy and a white bag service to bridge until their formulary statuses are complete, which we anticipate this month. They include Yale, UPMC, Montefiore, Temple, [ Dell's ] Children's Hospital and Northwell. In addition, we're expecting at least 15 more hospital formulary wins at the end of the month in October. And then finally, we have trained over 1,000 health care professionals to date in just 1 month, and we have over 800 offices that are sampled with Ycanth. It's my pleasure to introduce today's panel. First, our moderator today will be Dr. Gary Goldenberg, who is Verrica's Chief Medical Officer. Gary is a medical and cosmetic dermatologist at Goldenberg Dermatology, which he cofounded in April of 2017. Dr. Goldenberg also served as an assistant clinical professor of Dermatology at the Icahn School of Medicine at Mount Sinai in New York City. Dr. Mark Kaufmann is the Chief Medical Officer of Advanced Dermatology and Cosmetic Surgery, which is a premier dermatology group practice with over 160 locations in the United States. He's also an associate clinical professor in the Department of Dermatology at the Icahn School of Medicine at Mount Sinai. And he's also the most recent President of the American Academy of Dermatology, of which he held from March of '22 to March of 2023. Dr. Michael Cameron is the Founder of Cameron Dermatology and assistant clinical professor of Dermatology at Mount Sinai in New York City. He's a Board-certified dermatologist with expertise in drug development and inflammatory skin diseases with previous experience in the pharmaceutical industry, health care consulting and academic medicine. And then finally, Dr. Mercedes Gonzalez is the Founder of Pediatric Dermatology of Miami. She currently serves as a clinical assistant professor of Dermatology at the Florida International University and also serves as a faculty adviser at the University of Miami School of Medicine. In addition, she's also the co-editor of an upcoming fourth edition of the Goodheart's Photoguide to Common Skin Disorders, a picture-based dermatology textbook. I want to thank you all for participating. And I would now like to turn the program over to our moderator, Dr. Gary Goldenberg.

Ted, thank you so much. Mercedes, Michael, Mark, I'm happy to be here with the 3 of you to discuss Ycanth and how you think it fits into your practice and how -- what makes it different. It's the only FDA approved treatment for molluscum. So Mercedes, I'm going to go to you first since you probably see a lot of molluscum. So can you just talk us through the number of cases you usually see, the kind of cases you see and the significance of this disease state that the caregivers and the patients experience in your pediatric dermatology practice?

Sure. Good morning, Gary. Happy to answer that. Yes, I am the Director, as mentioned, of a very busy pediatric dermatology practice. Recently have 2 additional providers, so we see adult patients now as well. So we have 3 providers and 2 physician extenders. So we have a pretty high-volume practice. And I would say, roughly, we see about 20 to 30 cases of molluscum a week amongst all the providers. And in terms of the burden that I see these parents going through when I am in the office with them, number one is the burden of logistically getting the child there, the missing of school, canceling work events. So the logistical burden and the loss of work and school productivity. And then second is they're very distressed about the spread and how this disease might spread to other children within the household and they might need to make another appointment the following month to bring that child -- the sibling in, and also the spread to other children within the classroom, which can cause a lot of phone calls from the school and as well as missing school and missing sporting events.

Sounds like it's stressful for a lot of, not only the patients themselves, but also their caregivers and parents. So that's helpful. Michael, I want to go to you on this. Recently opening a new practice in New York City. What is your experience with molluscum, seeing both kids and adults in your office? And can you just talk us through sort of the number of cases you typically see and also the burden that your patients are experiencing?

Sure thing. Well, thank you so much, Gary, for having me and the rest of the Verrica team. Yes, so we're running a busy practice here in New York City. I see around 50 or 55 patients a day, 5 days a week. Sexually transmitted molluscum, I see throughout the year at a pretty kind of even pace. I would say, in New York City, I'm seeing about one of those per day, maybe every other day. Pediatric molluscum contagiosum kind of varies a little bit based on the season. I would say, certainly, the peak is late summer, early fall, after swimming pool season, things like that. And it's not uncommon for me to see 3, 4 cases per day right at the peak. And so I would say at peak, 15 or so cases per week. And then I would say, pretty consistently throughout the year, 3 to 5 cases per week of sexually transmitted molluscum.

That's helpful. And certainly, your patients with sexually transmitted infection are highly motivated for treatment.

They are. They all come in for treatment. And Ycanth has been really exciting for that because really, for those patients, I was doing cryotherapy before, but we had issues with pain as well as pigmentary changes long term with cryotherapy. And so now with Ycanth, we're able to do something where we're not having to worry about pigment loss as well as pain.

That's great. Mercedes, I want to go back to you about something that Michael brought up. Our data suggests that molluscum really doesn't have a valley. It does have a little bit of a peak, but then it kind of stabilizes and we see cases throughout the year. Do you think that's a fair assessment of what you see in your pediatric practice?

No, I don't see that in my pediatric practice. I mean my practice is really fairly consistent. We're seeing molluscum very, very consistently. It could be that we don't really have seasons down here in Miami. It's kind of [ here's lunch ], hot, hotter or very, very hot. And so it's always swimming pool season down here. And so that's a possibility. So maybe in other parts of the country, that may be. But for me it's very, very consistent high large volume of molluscum.

And Mercedes, I just want to hone in on something you said, the first question, about the motivation that patients and their caregivers have to treat molluscum. Because we know that a lot of patients go untreated, and that's probably something that we see more from our pediatric colleagues than from dermatology colleagues. But when you see patients in your office, what is the motivation for them to get their child cleared up?

I think the main motivation for many parents is the prevention of spreading, right? So every day they wake up and they look at the child's molluscum, they see more and more, and then they see it on the sibling. And so they go into panic mode as to why this is continuing. And so that's the main motivation, especially when they've been told by pediatricians that it will go away, right? So 6 months go by, the pediatrician has said, "Oh, it's going to go away." But then now, every day they wake up and they have more, and now the sibling has it. So that's the main complaint oftentimes. And then in addition, we see those patients that also have eczema that are symptomatic from this. So they're uncomfortable, they're itchy and many of these lesions can get infected. And then that's another way molluscum can spread by the child scratching themselves. And a few become many very quickly.

And we certainly saw that in our Phase III clinical program where a large percent of the subjects we studied did have concurrent atopic dermatitis, and we certainly know this from the literature. So Michael, I'm going to go back to you. I think you mentioned some of this already, but prior to Ycanth, can you just talk us through sort of the treatment algorithm that you would have in your mind when you're seeing somebody with molluscum, maybe an adult or a pediatric patient?

Yes, certainly. So for pediatric molluscum, I would always tell caregivers that we don't necessarily have to treat, but I recommend treating. The reason why I recommend treating is I want to prevent auto-inoculation to the face, scarring, potential eczema flares, skin infections. And so I kind of give them that background and I let the caregiver decide, do they want to treat? And I would say the vast majority want to treat because they don't want it to spread to the siblings or anything of that nature. And so we usually treat, for pediatric patients, the vast majority of the time I have been using Cantharone which I import from Canada, which has been frustrating, and I'm sure we'll go into kind of the pain points of Cantharone and things like that, but -- at a later point in the call. But I would use Cantharone for those patients. And then for the sexually transmitted molluscum, they definitely want to treat, and we're not talking about whether or not we should treat, I'm just going ahead and treating just because we want to prevent spreading to partners, we want to prevent spreading with them and things like that, and it is sexually transmitted. And so for those patients, I was normally using cryotherapy, because for them, they want to get -- they wanted to get treated and get out of the office. And I was worried with Cantharone because I don't have control of the concentration amount with the evaporation of the solvent. I worry about in sensitive areas like the penis, for example, causing blistering and things like that, and then them putting on their underwear right away and going about their business and it's spreading. With Ycanth, it is drying very quickly and I have control of concentration. And so I feel more comfortable applying it to sensitive areas like the genitalia. And so that's why I've moved actually away from cryotherapy in the sexually transmitted population and have moved on to Ycanth.

That's great. Mercedes, same question to you. What was your algorithm prior to -- prior to Ycanth, there was nothing FDA-approved. So we used everything that was kind of off-label. But what was your algorithm like with the kids in your practice?

So yes, in pediatric dermatology, we're used to using things off-label because we don't have many options that are FDA-approved, right? A few companies do what Verrica has done, which is put that time and energy into the FDA approval. But really, the treatment algorithm was you have the off-label use of cantharidin that I would obtain either through a compounding pharmacy or from Canada as well. That was really my go-to first line. And then sometimes we'd do curettage, which is an in-office procedure after applying topical anesthesia for about 10 minutes and then using a curette to remove. But usually we'd do that only if there was about 10 or fewer, depending on the age and the motivation of the child and family. And then we also did very, very limited cryotherapy for the reasons that Dr. Cameron discussed here. And also in children, it's uncomfortable, it's painful. I personally do not use intralesional Candida, but I know a lot of my colleagues do use that as part of the treatment for molluscum, especially in institutions where, prior to Ycanth, cantharidin was not available.

I want to thank both of you. It sounds to me like Ycanth is going to replace all these other modalities because of the fact that it's FDA approved and has a consistent formulation. Mark, I want to bring you into this conversation about sort of the treatment algorithm. And I want you to think about this question as the Chief Medical Officer of the largest dermatology practice in the United States, and sort of this top-down approach. What is the top-down approach an organization like Advanced Derm has? And will that change now that molluscum -- now that Ycanth is approved for the treatment of molluscum contagiosum?

Thank you, Gary. It's a pleasure to be with you all this morning. I'll answer that question, Gary. I just wanted to speak for a second on the seasonality, because prior to taking on my job as Chief Medical Officer, I did run a solo practice in New York City for 25 years. And I think it might be that seasonality is regional because I definitely have seasons. It was right before the summer and right after the summer. Because kids and their parents couldn't stand thinking that their kid wouldn't be accepted into summer camp because they had molluscum. And the same thing after the summer, they couldn't bear not being able to send them to school because they had molluscum. So there definitely were peaks in New York. Now that I live in South Florida, I'd agree with Mercedes, we definitely don't have seasons, and I think there is less seasonality. So I think it might be regional. But getting back to the question that you asked me, it depends on the group. Advanced Dermatology, I am the Chief Medical Officer, but we -- I do not dictate treatment algorithms to our 400 -- over 400 clinicians in our group. I actually rely on their own professional decision-making processes on what they're going to do. The problem we do run into is with being a large group, we have a very strong and robust compliance department, which makes it extremely important for us to be able to follow FDA guidelines. And so if there are FDA guidelines that come out that there is a current FDA-approved product and that their recommendation is to no longer use anything that is not FDA approved, well, then I have a lot of clinicians who are using compounded and Canadian cantharidin that will become an issue moving forward.

So I'm glad you brought compliance out because I know, in my almost decade that I spent on faculty at Mount Sinai, we were under the same kind of microscope, if you wish, about using non-FDA-approved treatments. And I think that compliance definitely is an important part of any organization, but especially a larger organization. And as you guys are aware, there has been some FDA guidance recently regarding using non-approved products for treatment of molluscum. So Mark, since you brought it up, I'm going to ask you if that's kind of permeated into your practices and if your clinicians are aware of it, and what you're doing from a best practices perspective to make sure that all of your clinicians are practicing per the FDA guidelines.

So things move slowly typically in large practices. So the word hasn't trickled down yet. I think Verrica has done a good job of spreading the word and a lot of our clinicians and physicians are using Ycanth already even without some processes that we're going to talk about later in place. It has not yet been brought up to compliance, but I'm sure it will be on an agenda for a meeting coming up. Because if the FDA is putting out guidance, and I know they've put out guidance letters to remove all medications or solutions that were being sold online to patients from being used, I'm sure that a notification probably to clinicians on the use of nonapproved cantharidin is probably fast approaching.

Great. Thank you for that. Okay. Let's move on to our next question, and it has to do with the -- with our Phase III clinical data. And I know that all of you had a chance to look at the data and are aware of it, and I think some of you may have actually presented the data at several conferences, national conferences. So Mercedes, I'm going to ask you first. What are the few points that you focus on when evaluating this kind of Phase III -- robust Phase III program, and really the only program that's a drug device that's had this kind of data? What's important to you? What are some of the things that you kind of took out of the data set?

Right. So having this large data set, for me in pediatric dermatology, is huge. I mean it really does change the conversation in the exam room with the patients that I'm able to say over 500 children were treated with this exact product. Because we don't have that with a lot of products in pediatric dermatology. Many times you're using things off-label. But the fact that, that is the exact product I'm using as what was studied in a rigorous manner and was peer-reviewed and FDA-approved is huge. And so when I look at the data, I mean, the data, specifically with Ycanth, confirm the expected efficacy, right? The efficacy that we see in terms of clearance of molluscum, but here, we do not have the actual numbers, and I was surprised there's a large number of complete clearance in that short amount of time and even a good amount patients with just 1 application of the Ycanth clearing. In addition for me, and another very, very important point is the safety, the large number of patients that went through the trial and had very few adverse events. And the more important part of that to look at is the number of subjects that discontinued treatment due to the adverse effect, it was extremely low. And it was really skin local reactions that caused that discontinuation. So really a lot of good data to be able to share with my families and talk about the predictable response and the predictable safety.

So do you think, when you counsel parents about their kids, molluscum and treatment, do you feel that because of the data set and the safety, and you mentioned the dropout rate of just north of 2%, which I think is quite low for a pediatric -- mostly pediatric study, do you feel like those patients are, a, more comfortable with going through the treatment for their child? And b, do you think that more parents or caregivers are going to start bringing their kids in for treatment instead of waiting for a year or 2 for this condition to resolve on its own?

Sure. I mean the top concern of all parents is the safety, right? Is there any side effects to this treatment? And really, now we're able to exactly say this isn't -- these are the numbers. This is what was seen. And it's going to blister, but it's usually mild, the pain is mild. And in terms of is it going to bring more patients in, absolutely, especially now with that stern FDA letter that was sent to the major retailer, Amazon, citing several violations of products that they have on the market that are advertised as being treatments for molluscum incorrectly. And so they've cited these violations and given them a limited amount of time to respond. And so for me, that seems to say to me that those products are probably going to be pulled off the market and harder and harder to obtain. And so -- also because of that reason, I think more and more people are going to be coming in to the physician's office to seek the FDA-approved treatment.

So fewer DIY and more physician controlled and FDA approved treatment. I think that's probably fair to say.

Yes.

Michael, I'm going to go to you on this. And I know you've also had a chance to look at the data. Can you just tease out some pearls for us that you think are important in your patient population?

Yes. So when I look at this data, I'm really impressed by it. And I actually think, in my real world experience -- and I've already used Ycanth now between samples and I've done buy-and-bill and specialty pharmacy, I've used it in over 20 patients. And I'm actually seeing clearance much better than this. And so all of my patients have cleared with 2 application sessions. And so when I look at this data of 50% complete clearance at day 84, when I see -- when I present this data to providers, I always try to make sure they understand that this is a dichotomous endpoint that's really for the FDA that shows statistical significance. I don't think I need to remind you guys, but the Dupixent response rates in their landmark studies were around 40%. And I think we all know how Dupixent has done in the real world, and this real world satisfaction is like 98%. And obviously, it's been a commercial success as well. And so I'm just not seeing 50% with 4 applications. I mean I'm seeing close to 100% with 2 applications. And so I don't know kind of what leads to that, but my real world experience has been phenomenal with this and even more so than the data suggests. From the safety perspective, it's an interesting thing because the safety events are the mechanism of action. I don't think we're really used to this, but the application site vesicles and pain and pruritus, that is what we expect with the active ingredient cantharidin. And so that's really all we see from the safety is what we'd expect. And the discontinuation rate in the trials of around 2% of patients is extremely low. And so I haven't had any tolerability issues with my patients and my caregivers, instructing them to wash it off in 24 hours. And we've had no severe blistering or anything like that.

That's very helpful. Thank you. And I just want to go back to the FDA warning because there were actually 2 that FDA put out. One in June was for consumers basically to say don't use any treatments that aren't approved, because at that time, there was nothing FDA approved for the treatment of molluscum. And since then, the agency has updated it to say that Ycanth is the only approved treatment. And then there was that warning letter to online retailers about selling products online to treat molluscum since none of those products are approved by the agency. So Mercedes, I think for you, especially seeing exclusively kids, I think that's the kind of conversation that really kind of hits it home with the parents. Can you just kind of talk about that?

Yes. I mean as I mentioned, I think that this is going to ultimately lead to the lack of availability of these products and maybe seeking them in alternative ways. But that's just pretty stern warning there, and that is going to -- that has gotten media coverage in numerous outlets that our parents are reading. And so they are going to be now seeking the FDA-approved treatments.

And Gary, from my perspective, this letter on August 22 is welcome because I've had multiple patients come in that have burned themselves from do-it-yourself formulations off Amazon. And so I don't think -- to me, this is like needed from a consumer safety perspective because I have had patients with sexually transmitted molluscum that have permanently burned themselves by applying these Amazon OTC do-it-yourself things. And so I'm just very happy strictly from just like a patient safety perspective that this was communicated.

Great. Thank you -- yes, please.

And Gary, to follow-up there. My pediatric patients having kind of eczema reaction, types of the itchy eczema rashes due to the treatment that they buy online for -- those advertised to treat molluscum that actually induces an eczema-type reaction, which makes them more itchy and then ultimately makes the molluscum spread.

Mercedes, thank you for that. And I think there's good data to suggest that not only does molluscum make atopic eczema worse, which we know from a health care economics perspective, is an extremely expensive and chronic disease to treat, as opposed to an acute therapy like Ycanth. I think there's also good data to suggest that having molluscum in a predisposed child can actually induce onset of eczema. And we all know that once that switch is turned on, it does not get turned back off. So once you have it, you're kind of stuck with it. So I think that's a very good point that you brought up. So thank you for that. I'm going to stay with you, Mercedes. Can you just talk a little bit about sort of the awareness or the level of awareness of Ycanth and molluscum within the pediatric dermatology community? I know you have your finger on the pulse with your colleagues. Can you just kind of talk us through that?

I think we all as dermatologists are very familiar with cantharidin. Cantharidin has been standard of care within dermatology for over 50 years. And specifically, Ycanth has been a very anticipated product for a while given the very -- the numerous issues that we have surrounding obtaining the currently. And prior to Ycanth, what was available was cantharidin, right? We would obtain it in bulk, compounded from compounding pharmacies and there were issues surrounding that where sometimes the compounding pharmacies did not have the bulk ingredients. And so we had periods of time where we could not get it. In addition, compounded cantharidin, after you open the bottle several times, becomes much more concentrated at the bottom, and so it becomes unknown in terms of how they're going to react to that more concentrated version. The same thing with the Canadian one, it was inconsistent. Sometimes they didn't have it in stock and you had to wait. So having something that is cantharidin at the same concentration that was standard of care, right, but are now manufactured with good manufacturing process and having undergone the rigorous trials to obtain the FDA approval has been much anticipated by our pediatric dermatology community. And I really expect kind of wide update. Specifically, I think one of the biggest gaps that I think has been mentioned by some of the panelists, is in institutions, right? There are some institutions that really do not allow any compounded medication for multiple use, like in a multiple use file. Like in institutions where I trained actually, we were not allowed to have these multiple-use compounded medications, and much less importing from Canada. So for those institutions specifically, this is going to be very, very welcome.

Great. We're going to come back to the differences with compounded, but I think you kind of set the stage for us to really talk through some of the main differences between Ycanth and all the compounders -- and all the compounded product. Michael, I'm going to go to you on this since you're in New York City, new practice. You're one of the first -- I think you're one of the first people to really jump on board with the buy-and-bill program. Can you just talk us through sort of what you talk to when you talk to your colleagues that see both adults and pediatrics, what has their reaction been? And what are you hearing from the folks that you're in touch with?

In terms of buy-and-bill?

Well, in general, about awareness of Ycanth and sort of what kind of feedback you're hearing from colleagues.

I think it's been welcomed. I mean let's think what we've been doing until this point. I mean we've been importing from Canada a bottle that I have to take a Q-tip and flip and dunk it in and then apply it to lesions, and I can't even see the liquid. I mean in 2023 in the United States, to have to do something like that is -- I mean it's kind of ridiculous, honestly. And so -- and then over time, the solvent evaporates and you have a hyper-concentrated mix, and you're also using it in multiple patients. And so a lot of times there's a lot of red tape in hospitals, which is unnecessary. But for this one, I think it's warranted. I mean why would you want to use the same bottle on multiple patients using the back of a Q-tip? So when I speak to providers about the pain points that Ycanth is addressing between consistent concentration, single-use application, very precise pinpoint application to the lesion, a violaceous vehicle so you can see the application, it drying quickly, the fact that there's a bittering agent so kids aren't licking it. I mean there's just so many different pain points that Ycanth is addressing from a strictly practice of medicine perspective. And then what I also think kind of resonates with providers is, look, we're in an environment where we're getting squeezed on both ends. We're seeing decreasing reimbursement on the top line revenue, and we're seeing increasing cost. And so, say I bill a destruction code with cryotherapy or Cantharone, for cryotherapy, I have to supply the liquid nitrogen, which I'm not going to get reimbursed for. And for Cantharone, I have to ship it in. Each bottle is around $150 and they bill you for shipping, too. And I'm not going to get reimbursed for that either. And so I'm getting squeezed with increasing cost -- input costs as well as decreasing revenue. And so I think providers, when I'm bringing it up to them it's music to their ears that we can actually bill for the product itself as well and be reimbursed for that. And so I think we're helping the providers out as well as the patients.

Michael, I want to stay with you here about the economics. So I think it's important that everyone on the call understands, whereas all the other treatments we've used in the past have a cost to the practice, whereas Ycanth, either through the new factor specialty pharmacy model or the buy-and-bill model, is either cost-neutral or actually adds to the revenue. Can you just talk us through that one more time so that people have a clear understanding of the exact billing and the difference between Ycanth and everything else that's out there.

Sure thing. Yes. So normally, if I saw somebody for warts or molluscum contagiosum, I would bill the insurance for up to 14 lesions the CPT code 17110. In New York City, I'm getting an average reimbursement of that of about $135. If there's more than 14 lesions, we bill 17111, and that's around $158. Reimbursement is very region specific, and so someone in Florida, for example, could be getting a lot less for that than I am in Manhattan, and it obviously depends on the insurance. But that's sort of the average top line reimbursement. If I was treating them with cryotherapy, I have to purchase the actual cryotherapy gun, the dispenser that sprays it, which can be somewhere around $700, $800. And then I also have to refill this nitrogen canister about once a month, which can be around $100 or something like that. And then I have to also buy the Dewar canister, the big keg that holds the liquid nitrogen, which is quite expensive as well. And so there's a variety of kind of input costs from liquid nitrogen. And none of that gets reimbursed specifically for me. It's just, again, the professional revenue of the CPT code, no matter how much liquid nitrogen I use. And so that's for cryotherapy destruction. For chemical destruction, I would bill the similar CPT codes, get similar reimbursement, but I'm using Cantharone now. And again, for me, if I'm importing that from Canada, with shipping, you're looking at around $150 to $200 to get that shipped to me. And again, I'm not getting reimbursed for that at all. And so now here I have Ycanth which is -- has a much better product profile, which we've already highlighted in terms of all the different things it's addressing, in terms of helping patients out in that regard. But in addition to that, I have two different options for how I can get reimbursed for this. And I've actually tried both. And so I've done buy-and-bill three times now. I'm still waiting on reimbursement, but all 3 PAs were accepted without issue. And for that, I'm going to get about a 5% to 8% over the ASP. And so potentially, we'll see how it goes. But I would imagine around $50 of additional revenue to the practice over what I bought it for. And so this is accretive to my practice, instead of $135 for the CPT code, it now it might be $135 plus $50 for buy-and-bill. And so particularly as we get the J code and as we get more and more comfortable with these prior authorizations, I'm probably going to move my entire practice over to buy-and-bill, just because, again, I'm moving in a client with decreased revenue and increased expenses. And so I want to find kind of margins wherever I can. Now the other option is the specialty pharmacy, which I've also tried a few times where basically the patient comes in, I can either use a sample or I can just bring them back. But no matter what, I always submit to the pharmacy to get the specialty pharmacy. And for that one, at least I'm not losing money, right? If I don't want to mess with buy-and-bill, at least it's not like Cantharone where I'm importing from Canada and I'm just literally just setting the $150 on fire, I'm never going to get it reimbursed. At least now I'm getting that input cost money back. I might not be getting the 5% to 8% fees around on the ASP like I would buy-and-bill, but at least now all of that CPT, $135, I get to keep all that. I don't have to pay for the Cantharone. And so I think both options are great. And I really applaud Verrica for giving providers that flexibility to do what they want, because not every provider wants to do buy-and-bill. I happen to love buy-and-bill and I do it with other products as well. And so it's great that you have both options.

Thank you for that. That was like a mini MBA of dermatologists. So that's great. I appreciate that. Mark, I want to go to you on this, again, as Chief Medical Officer of the largest practice, what kind of opportunities do -- or do you think there are any unique opportunities for a group our size with over 400 providers that Ycanth from -- really from a business perspective, gives a practice of your size?

So great question, Gary. The practices of every size are under the same pressures that Michael just described of decreasing reimbursements, increasing costs. You don't have to be an economist to understand it's a recipe for disaster. And I've been going around the country actually lecturing to dermatologists to get their heads out of the sand and to understand that we can't just put blinders on and keep using the same codes we're using and expect to magically be able to make more money in an environment with increasing costs and decreasing reimbursement. And a lot of other specialties have figured this out, right? The ophthalmologists make more money on their J codes than they do on their professional fees. Gastroenterologists make more on facility fees than they do on their professional fees. Dermatologists have been very late to this game. They don't understand the rules. They don't think it's necessarily the way that they should be practicing. And it's kind of crazy that it's -- that the fee schedule is set up this way, but it is set up this way. And so it's important to understand the advantages of buy-and-bill. And that's where the major opportunity is for a practice like ours, where we can put a process in place that will be able to leverage the 5% to 8% that Michael was describing, and to do that on the number of patients that we see with molluscum that could be treated with Ycanth is a compelling argument to make.

I'm going to stay with you, Mark, because I want to just go a little bit deeper on what you said. I think it's important that everyone understands that our buy-and-bill model is different than a traditional buy-and-bill model, where we're using something called forward-deployed inventory, which essentially the drug is shipped to doctor's office on consignment. So a practice of your size of over 400 prescribers that already does buy-and-bill, I assume that it's much better for your cash flow, and we're both medical people but we also understand what the cash flow issues are. For cash flow, it's much better to have a consignment model as opposed to where you have to lay out capital and wait for reimbursement and wait for those patients to show up in your office. So on the scale of your practice, your business, what does that mean for adoption for a practice like Advanced Derm, where it's not really traditional buy-and-bill, it's more of a consignment model where you don't have to lay out capital.

I would say you had us at consignment. It is everything, right? I mean it means that we don't have to put out any money in order to use it. But with many device companies and buy-and-bill opportunities, the best way to get people to be interested in it is to do consignment because that way, there's revenue share rather than inventory costs that the company has to basically take in. And it means the world to be able to have this on consignment.

That's great. Thank you for that. And Michael, I'm going to go to you on this because I know you've tried both the specialty pharmacy and then also the buy and bill. And I think you may have mentioned some of this already, but can you just sort of talk us through using both of these models and where you think some of the advantages are for a practice your size, that's a busy practice, but also, I'm sure buy-and-bill hits the bottom line, versus the consignment, the traditional buy-and-bill versus the consignment model.

Sure thing, yes. I think that was one of the first practices to have a forward-deployed system. And essentially, we keep it in our lab room. It's very easy to use, and we just pull the auto applicator and it communicates to the -- a company that's managing it, I think it's called FFF Enterprises, they're managing the forward-deployed model and it informs them. They essentially send me an e-mail later saying that I used an auto applicator and then I have my 60- or 90-day net to pay that back. And it gives me the flexibility where I don't really have to worry about having to bring patient back. Patients want to be treated right away. And so the buy-and-bill program has worked really well. Again, it was very seamless submitting the 3 PAs, the commercial insurance plans. We had no issues getting those approved. And so it's just sort of pending in terms of the miscellaneous J code. But I'm not really worried about that because, again, from a cash flow perspective, it's forward-deployed, it's consignment. And so that has not been stressful at all. And I think it's going to be great. I did want to try the specialty pharmacy as well just to see how it went, and I've tried that with a couple of patients. And that was great also. And so I used the sample to get them started, it was right when Ycanth was approved. And then I want them to come back in 3 weeks for a second application if needed, and they're going to come back soon. And I had no issues getting the specialty pharmacy to send me the medication. But my expectation is as I -- as the Ycanth matures and we have the J code, I'm really just going to do entirely buy-and-bill just because for me, it's like why leave that money on the table. So it just makes sense to do it.

Great. Mercedes, I know you've used Nufactor specialty pharmacy a bunch for your patients. Can you just give your experience being in a different geography with coverage, et cetera, for Nufactor?

Sure. We chose to go with the specialty pharmacy model first because we're very used to using specialty pharmacies for many other medications that we use in our practice. And so that was very easy for our patients to understand. And so we've used Nufactor on several -- many patients now. And it's been pretty seamless. I mean we haven't had any complaints. They are pretty available to answer questions from our office. The parents get a phone call and they're told what their co-pay is. They pay the co-pay, and then the medication arrives in our office.

Well, as always, it's great working with you guys. You're not off the hook quite yet. We're going to open it up for Q&A now. So Tara, I'm going to turn it over to you so we can open it up for Q&A.

[Operator Instructions] So our first question comes from Stacy Ku from Cowen.

We had a few questions. So first, to Dr. Cameron, can you comment on the patient feedback in terms of the efficacy and tolerability in the real world? I know you commented on two different visits. But how has it been in terms of safety? Are you using Ycanth in combination with OTC topical analgesics like they did in the clinical trial? So that's the first question. And then to Dr. Gonzalez and Dr. Kaufmann, can you comment on your Ycanth prescribing in your practice? Have you used it in the real world? In addition, are you using Ycanth to treat the complete clearance of molluscum lesions. Is this the patient preference? And then finally, a question to any of the clinicians. Right now, can you comment on the split of the different treatment modalities on average, understanding there is kind of a variability between different patients. What percentage of your patients eventually treat -- choose cantharidin or you're recommending cantharidin? And where do you expect Ycanth to grow? Is it going to grow from your current compounded cantharidin use? And what do you think it might look like at peak?

Michael, before you start, I just want to mention that we did not use a topical analgesic in our Phase III program. There was no analgesic used. So there's no topical needed for Ycanth. It's not in our label. Go ahead, Michael.

Sure. Yes. No, I -- and that's been my experience, Gary. I mean there really has been no issues with pain. From an efficacy perspective, again, my experience has been almost complete clearance with one application. I'm seeing them back on that second visit to sort of finish it off. But when I'm seeing patients back 3 weeks later, a majority of the lesions are cleared, and then the lesions that are left over, they tend to be more pink and inflamed. And that's telling me that Ycanth is helping to turn on that immune reaction and allow people to kind of develop immunity. And so in my experience, the efficacy has been really, really impressive. From a safety perspective, I've had no issues. I mean there's -- I am counseling caregivers and patients on the potential for some mild blistering and scabbing and irritation, and patients are doing really well. I've had no issues with infections or any other real safety or tolerability issues. In terms of what I'm doing in terms of what the landscape looks like for me in terms of prescribing, I'm not a paternalistic provider by any means. I mean when it comes to psoriasis, I certainly give my patients meaningful differences and options between pills and injections and things like that. But for molluscum, this is all we have. This is the FDA-approved therapy. And so I'm just using Ycanth for all the patients because it's by far the best product profile, it's not off-label and it addresses all the issues we've had in the past with therapies in terms of pain, pigment changes, things like that. And so 100% of my molluscum patients that come through the door now are getting Ycanth. I mean the only other option is to not treat. And so I certainly discuss with my patients not treating because in theory, it can be a self-resolving disease, although that can take several years sometimes. But I am seeing that the vast, vast majority of my patients and caregivers want to treat. And if they do want to treat, we're using the Ycanth for 100% of them.

Mercedes or Mark, do you want to comment?

Sure. I can. So I haven't seen patients back for a third time. I think I'd seen only a couple back for a second round. And so -- actually, in a couple of patients, I did see exactly what Dr. Cameron mentioned, which was this immune reaction that's induced. And sometimes by treating molluscum, you induce the body's own immune reaction to fight molluscum often, so a lot of them get red and inflamed. And sometimes they get a little rash around it, and that's a sign that the immune reaction has kicked in and that heralds molluscum clearance. In terms of the side effects, I would say, very tolerable, as expected, blisters and we have kind of made a list just to internally call back the patients that we have treated with Ycanth just to get that clinical real-world experience. And I would say I've had several patients that have blisters on every single spot. And then I've had some patients that have had blisters in about 20% to 30%. So it's not 100% blistering. And so it's pretty much what's expected with the cantharidin, kind of what was also seen in the trial. In terms of pain, mild, tolerable. And I think your other question was whether this is going to change my approach, and then more people would be treated with cantharidin. And for me, in my practice, kind of more than 97% of the time, I'm recommending cantharidin as a first-line treatment option, just because it's painless, in the office, the application. So with pediatric patients, that's what we really are going for. And I think, though, that more and more people are going to be asking for this. And as the word gets out to the pediatricians, we're going to get more and more referrals specifically asking for the Ycanth.

Yes. And I would agree with what's been said, I think the growth opportunity is to capture everyone that's using compounded cantharidin. And then probably more patients that never chose to do it will be more prone to accept the treatment course with Ycanth than they would with some chemical. I think that my adult patients would certainly consider that now instead of getting frozen with liquid nitrogen.

Tara, let's see if there's another question.

Yes. So our next question comes from Gregory Renza from RBC.

It's Anish on for Greg. Thanks to the Verrica team for hosting this important KOL event and to the physicians on for their time. Just a few for me for the doctors on. How well have you been able to integrate Ycanth into your clinical practice and use in patients, including any anecdotal hurdles on reimbursement? And how would you describe the ordering process experience and storage up until it's used in patients?

Mercedes, I'm going to go to you first on that.

Sure. So the second part was the storage and use. So they're stored at room temperature and it doesn't take up very much space, we have it in a box in our kind of sample closets in the locked area, so limited to the patient and public access. In terms of adopting it into the flow and into the practice, there was a little bit of a learning curve. Just like any new medication that has to go through a specialty pharmacy, we did have to train the staff now that this is going to be our preferred cantharidin and that no longer kind of just taking out the compounded little bottle and setting that up. I mean we're going to work on prescribing the Ycanth and talking about how to obtain it and the fact that they were going to get a phone call from the specialty pharmacy. But really, once the staff learned what specialty pharmacy it was going to, we put that into our EMR just like we have other pharmacies built into the EMR that we can send the prescription electronically. They learned how to complete the form. And then they learned the small little bit about counseling the patient to be aware that they were going to get a phone call or text from that pharmacy, which is really the process that we do for a lot of other medications in the office. So it took a few weeks, I think, as part of that learning curve, but now it's pretty seamless.

Michael, any feedback from your practice? Thank you, Mercedes.

No. I think Mercedes covered it well. I mean I would just add that the forward-deployed buy-and-bill has been very easy to use again. And it's really -- it doesn't change how we -- it's not like a new biologic where you have to think about what labs to check or how -- what enrollment form to use. I mean, look, we're you using -- we've been using cantharidin for years. And so now we're just using one that's much, much better, and it happens to be legal to use.

Always helpful.

Always helpful.

Tara, let's see if there's anyone else who has a question?

Yes. So our next question comes from Oren Livnat from H.C. Wainwright.

Can you hear me?

Yes, we can hear you, Oren.

Great. I'm just curious, you mentioned, I think, Mercedes, that -- or someone else, pediatricians, as they become more aware of this, will maybe refer patients to use Ycanth in your practice. I'm actually curious what you expect as Ycanth becomes more -- as awareness grows that pediatricians will actually feel comfortable using it themselves rather than referring patients to you? And I have a follow-up.

Yes. I'm a proponent of that approach. I think that this is something that pediatricians can very easily learn to use and use in their own practice. And it's just going to be about educating the staff in terms of fielding phone calls and counseling, anticipatory guidance as to what to expect after the treatment, because there will be blistering and there will be some wound care involved after the treatment. But I do expect that pediatricians are willing and are able to build it into their practice or in possession of it. There's going to be some pediatricians that are going to be very open to it and others who it may not fit in to their practice style. But I just also think that, I've seen this in pediatric dermatology with other disease states, for example, infantile hemangiomas. Recently, we had an FDA approved medication to treat infantile hemangiomas, and this causes a treatment paradigm shift. Many pediatricians were telling the babies that, "Oh, those go away, we just watch and wait." And now because of this FDA, a very effective, very safe medication, there's been a paradigm shift in the treatment approach where many of these pediatricians now are aware that there's a highly effective safe medication and are referring for early treatment. And I think that's what I envision happening with Ycanth, where there's going to be this kind of shift in pediatricians' minds now that we do have something available, we shouldn't say watch and wait, right? We have an effective, very available, very accessible medication. And I am a proponent of training pediatricians. That means I get to see less molluscum and so I'd be happy about that. But I think it's going to be dependent on the pediatric practice. But it's something that's simple enough for pediatricians to do.

And can any of you speak to the training process that Verrica has provided for your practice, whether that be both on the actual application, the use of the product, and also with regard to the various supply chain and reimbursement options?

Michael, do you want to take that one?

Yes. So I would say, using it is certainly not rocket science. I mean it's pretty straightforward to use the applicator. But per the label, the company has trained providers and that was a very, very short seamless training that I received and I've had no issues with using it. The company also did, when they delivered the forward-deployed inventory kind of device, they did -- someone from the company came and showed my medical assistants how to use it so that we're correctly kind of falling inventory use over time. And so it's been, again, very, very seamless with the company in terms of deploying the inventory.

Okay. And I think, Michael, you mentioned having no problems with PAs for the first several you tried to put through. Is that consistent with your prior experience with other new drugs? We're all used to insurance companies sort of putting NDC blocks on new products. And how does this compare to your other experience? Is it actually better than one would hope for a new product with no explicit insurance coverage out of the gates? Or limited coverage?

I think it's a bit different because it's a medical benefit, right? And so the only similar experience I would have would be Ilumya, which we do buy-and-bill for psoriasis patients, particularly in the Medicare population. And so my medical assistants were used to doing that. And we really had no issues. And I don't know if it's because it's going to the medical benefit or what, but for our 3 PAs, they've all been received and processed very quickly.

And I guess it's still early, but have any of you had experience? I guess, Mercedes, you've used exclusively, it sounds like, the specialty pharmacy. Once you use the first treatment, that might be a sample, are you having any problems getting -- are they having problems getting approval and coming back in for a second or third treatment as far as you're aware?

No. We've got -- we get the medicine delivered to the office to the patient's name and then they get scheduled. We schedule it before they leave the previous time, then the next Ycanth is available when they arrive.

All right. And I guess lastly, and I appreciate the -- for accommodating me. Again, I know it's really early, but given how active parents are in these communities online, which we can all see, very active social media presence. Are they already aware of this product? Are people coming in to your office aware of and/or asking for Ycanth?

I have had -- I did post about the approval on my Instagram, and I've had several parents come in via that, and then it made it onto one of these Upper West Side Facebook groups and they're communicating. And so given the unmet need here, it's just going to -- the word of mouth is just going to continue to spread. That's certainly what I'm already seeing.

Mercedes, in your mostly pediatric population, what are you seeing?

Sure. I did have somebody mention the FDA warning that must have been put on some type of mommy blog. I don't know exactly where they heard about it. But mostly from the kind of my colleague pediatrician friends that have been kind of discussing the Ycanth.

Our next question comes from Serge Belanger from Needham.

I guess my first question is to the clinicians. If you can talk about the breakdown of pediatric molluscum patients that have commercial coverage and those with Medicaid coverage. And then whether they expect Ycanth's access will be different for those different segments.

Mercedes, I think you're probably the best person to answer that question.

I don't expect -- I think that -- I know Verrica is working very hard to make sure that they get on the majority of formularies. And I do think it's region dependent, right, like the state Medicaids are different. They're going to have different formularies. But once they're on the formulary, again, this is a medical benefit in most insurance companies. So I don't foresee a difference necessarily there.

And it sounds like you all have all had some experience using compounded cantharidin product. Just curious if you would be opposed to Verrica working with the FDA to block the supply of compounded cantharidin product going forward?

Would I be opposed? Definitely not. I mean as we kind of discussed on this call, Serge, there's a lot of issues with the imported Cantharone, notwithstanding the legal issues. I have had patients that have been delivered hyper-concentrated Cantharone and had really bad blistering eruptions. And I was actually starting to not use the kind of last 10% or 20% of the Cantharone bottles because I was becoming paranoid about delivering too much active ingredient. And so I'm by no means an expert in sort of this domain of enforcement of these laws, but I would not be upset if Verrica tried to kind of implement this as best they could because I think it's for the safety of patients, no different than the do-it-yourself kind of stuff that's being sold over Amazon, which is causing a lot of patient harm.

Thank you, Michael.

And just lastly, have any of you had any experience maybe with the clinical trials with the potential competitor product, the topical antiviral gel, berdazimer. I'm not sure if it's -- definitely not widely available, I think there were small trials, but just curious if you've had any experience and feedback with that product.

Yes. I don't know if you were involved in the trials, Mercedes, but I was not. I have to say, just looking at the data, I'm not impressed, right, in terms of their ability to achieve a delta from placebo. It seems to be not that impressive in terms of statistical significance versus placebo. Certainly, more and more therapies for molluscum would be welcome. And so an at-home application will be something that I think, if anything, could be accretive for Ycanth because it brings more disease awareness and it would be great to be able to treat patients in-office and then send them home with a therapy potentially. But we'll have to see if the agency finds their data to be compelling from an efficacy perspective. Certainly, it's not a really, really resound kind of delta from placebo like we see with Ycanth.

I agree with that...

Mercedes, any comments? Please, thank you. Sorry.

Yes. From the data available, the efficacy does not seem as robust here. In addition, this is a very different treatment approach, right? You're going to be applying something daily and it's very dependent on the activity of that nitric oxide. So that's very tricky. And it has requiring repeated application, which we all know the compliance and adherence issues, especially with pediatric patients, right? If you can do something once in the office and it's all done, that's going to be the highly preferred method for parents and patients, is that one visit or two visits, rather than having to go home and do somethings multiple days in a row and actually wait to see a response. It's a completely different approach. I know in the -- we're all the same type of thing, parents are tired of using that daily kind of application at home and rather just kind of get that one treatment and then have it away.

Great. Thank you both.

All right. And our final question comes from Kemp Dolliver from Brookline.

Great. There's been a reference to watchful waiting several times during the course of the call. What percentage of your patients have opted for watchful waiting in the past that would then become candidates for Ycanth?

Mercedes, let's go to you first.

I mean I think that now having the FDA approval on the data, I think I'm going to be better able to convince parents that this is a safe treatment and it's highly effective. And the many reasons to treat, so it prevents spread, prevents having to miss school, prevents potential infection, prevents symptoms. Patients -- there are going to be some patients that have heard and read and done all their research and just want to leave it out, and that's going to be fine. But I think with more time, more and more patients are going to be willing and asking for treatment.

I would also add though that the watchful waiting counseling is usually coming from pediatricians. You're not going to get that from dermatologists. So it's a matter of talking patients out of what they've heard.

This concludes our Q&A session for today. I'll now turn it over to Ted for closing remarks.

Thank you, Tara. And special thank you to Dr. Gonzalez, Dr. Cameron and Dr. Kaufmann for your participation, and Gary for moderating today's session. At Verrica, we're extremely proud to bring Ycanth, the first and only FDA-approved treatment for molluscum. And as you've heard today from our panelists, again, I'm very pleased to report the high interest, the awareness and the adoption of Ycanth to date. While it's only been 30 days really for launch, we've been able to secure over 81 million covered lives, which enhances access to Ycanth, and we're well on our way to our target of 140 million lives to be covered within 6 months. We're very optimistic about our future and establishing Ycanth as the gold standard of care for molluscum. With that, I want to thank everyone for their participation in today's program. Thank you.