FDA approves Verrica’s skin infection treatment, enters into non-binding term sheet for $125M loan

Verrica Pharmaceuticals’ drug-device combination product is now the first FDA-approved treatment for molluscum contagiosum, a common skin infection.

On Friday the FDA approved Ycanth, a topical treatment administered by a healthcare provider, for both adults and children aged 2 years and older. The company also announced on Monday that it entered into a non-binding term sheet for up to $125 million in debt financing to support the launch of Ycanth, or cantharidin.

Verrica’s stock $VRCA dipped by more than 30% in trading on Monday afternoon.

The company said it’s planning to make the drug commercially available by September. An estimated six million patients in the US, usually children and teens, are likely infected with molluscum contagiosum, which can cause lesions on the skin.

“We expect Ycanth to fulfill a large unmet need,” TD Cowen analyst Stacy Ku told investors on Monday.

The FDA twice before declined to approve the product — once in September 2021 and again in May 2022, citing deficiencies at Sterling Pharmaceuticals Services, which manufactures Verrica’s bulk solution drug product.

The company hasn’t approved a final list price but is looking to do so in the “short term,” Verrica CFO Terry Kohler said during an investor call on Monday morning. Ahead of the approval, Needham analyst Serge Belanger estimated that the list price could be about $500, with peak sales coming in at about $2 million, Reuters reported Friday.

Ted White

Verrica CEO Ted White said on the call that the company expects about 80% of the treatment’s claims to be covered as a medical benefit as opposed to a pharmacy benefit, which will make it more likely to be eligible for reimbursement.

The approval follows positive results from two Phase III studies evaluating the treatment’s safety and efficacy in comparison to placebo.

Verrica said that a clinically and statistically significant number of patients saw complete clearance of lesions, which was the primary endpoint — with 46% reaching complete clearance in one study and 54% receiving complete clearance in the other.

“Since molluscum spreads through skin-to-skin contact and the sharing of contaminated objects with its viral lesions, a topical treatment with precise administration is essential towards preventing further transmission,” White said in a press release.

As part of the loan agreement, Verrica gets $50 million once the transaction is closed, which is expected to occur by the end of the week. The company said it is expecting the $50 million, in addition to $60 million on hand as of March 31, to carry the company into the first quarter of 2025. Further capital will be available in tranches based on certain revenue targets, according to the release.

Verrica is also testing cantharidin as a treatment for warts.

“Common warts, I’ve always said, is the holy grail of dermatology,” White said on the call. “There’s no FDA-approved therapies.”

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