Verrica (VRCA) Q2 2026 Earnings Call Transcript

DATE

Thursday, Aug. 6, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer - Jayson Rieger
• Chief Medical Officer - Noah Rosenberg
• Interim Chief Financial Officer - John Kirby
• Chief Operating Officer - David Zawitz
• Chief Commercial Officer - Chris Chapman

TAKEAWAYS

• Total Revenue -- $5.9 million, compared to $12.7 million in the prior year, reflecting a one-time $8 million milestone payment received in 2025.
• U.S. YCANTH Net Product Revenue -- $5.1 million, representing an 18.7% increase from the first quarter of 2026 due to increased unit demand.
• Dispensed Applicator Units -- 19,626 units, an increase of 28.3% from the first quarter of 2026 and 46.1% year over year.
• Non-GAAP Net Loss -- $10.2 million or $0.48 per share, compared to non-GAAP net income of $1.2 million or $0.12 per share in the second quarter of 2025.
• Credit Facility -- $27.5 million, provided by an entity controlled by Chairman Paul Manning to support commercialization and clinical development.
• Cash Runway -- Extended into 2028, assuming full availability of the new $27.5 million credit facility and current operating plans.
• Research and Development Expenses -- $6 million, compared to $1.8 million in the prior year, primarily driven by costs for the common warts program.
• Selling, General and Administrative Expenses -- $10.3 million, an increase from $8.9 million due to expanded commercial sales force operations.
• Gross Product Margin -- 91.5%, compared to 92.5% in the prior year period.
• License and Collaboration Revenue -- $0.8 million, largely consisting of commercial supply for the launch of YCANTH in Japan by Torii Pharmaceutical.
• Legal Settlement Expense -- $1.7 million, representing the company's net share of a settlement for a 2022 class action after insurance recovery.
• Common Warts Clinical Timeline -- Mid-2027, the date management currently expects to present top-line data from the global Phase III program.
• Common Warts Market Size -- 22 million people in the U.S., which is more than threefold the size of the molluscum patient population.
• Phase III Funding -- $40 million, the initial amount funded by Torii Pharmaceutical for the common warts program, covering approximately 90% of the budget.
• Medomie Pharma Agreement -- 60% of net selling price plus up to $8.2 million in milestones, according to terms for YCANTH distribution in Israel.
• VP-315 Phase II Data -- 67% reduction in size of untreated nontarget basal cell lesions, demonstrating a potential abscopal effect in nine subjects.
• Credit Facility Interest -- SOFR plus 8% with a 4.5% floor, including a 16% internal rate of return catch-up payment upon full repayment.
• Initial Loan Draw -- $12.5 million, available immediately under the new credit agreement, with $15 million contingent on operational milestones including revenue and growth.
• Inventory Value -- $2.7 million as of June 30, 2026, compared to $2.2 million at the end of 2025.
• Accounts Receivable -- $11.1 million, an increase from $5.4 million at the end of 2025, reflecting higher shipment volumes to distribution partners.
• GAAP Net Loss -- $13.2 million, compared to a net income of $0.2 million in the second quarter of 2025.
• YCANTH Dispensed Unit Growth -- 28.3% sequential growth in the second quarter, accelerating from 12.3% growth in the fourth quarter of 2025.
• COVE-3 Dosing Date -- June 22, 2026, when the first U.S. patient was dosed in the second pivotal clinical trial for common warts.
• Insurance Eligibility -- 250 million lives are eligible to receive YCANTH coverage under various insurance plans.
• Common Warts Program Funding -- 50-50 basis for splitting overall program costs with Torii Pharmaceutical after the initial $40 million funding threshold is met.

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RISKS

• Chief Commercial Officer Chapman warned that the second half of the year includes summer months when "vacations, lifestyle things that impact all therapeutic areas" and could affect prescription momentum.

SUMMARY

Management reported increased demand for YCANTH and progress in its clinical pipeline for common warts and basal cell carcinoma. The company secured a $27.5 million credit facility to extend its cash runway and is pursuing global expansion through partnerships in Israel and Japan. Operational focus remains on optimizing the sales force and improving patient access through co-pay assistance.

• CEO Rieger stated, "Dispensed applicator units for YCANTH increased to 19,626 in the second quarter, up more than 28% from the first quarter."
• Regarding the new financing, CEO Rieger noted, "This facility provides the potential for no scheduled payments of interest or principal until maturity in December of 2030."
• Management implemented a $0 co-pay for refills for eligible commercially insured patients in July 2026 to reduce financial barriers for caregivers.
• The company has completed site activation for the COVE-3 Phase III trial in both the United States and Japan.
• Verrica retains full global commercial rights to VP-315 for nonmetastatic skin cancers, including basal cell and squamous cell carcinoma.
• Chief Commercial Officer Chapman attributed quarterly performance to "a refocus of the field force on the productive physicians in terms of those who are both prescribing but also seeing this patient population."

INDUSTRY GLOSSARY

• YCANTH (VP-102): A drug-device combination containing a GMP-controlled formulation of cantharidin for the topical treatment of molluscum and common warts.
• VP-315: An oncolytic peptide-based injectable therapy being developed for dermatological oncology indications such as basal cell carcinoma.
• Abscopal Effect: A phenomenon in which localized treatment of a tumor results in the shrinkage of other untreated tumors elsewhere in the body.
• SOFR: Secured Overnight Financing Rate, a benchmark interest rate for dollar-denominated loans.
• BCC: Basal Cell Carcinoma, a common form of skin cancer occurring in basal cells.
• GMP: Good Manufacturing Practice, a system of quality standards that ensure pharmaceutical products are consistently produced and controlled.
• Molluscum Contagiosum: A viral skin infection that results in firm, round, painless bumps on the skin.
• Common Warts: Skin growths caused by the human papillomavirus that typically affect the hands and feet.
• COVE Trials: The series of clinical trials (COVE-2, COVE-3, and COVE-4) evaluating VP-102 for the treatment of common warts.

Full Conference Call Transcript

Operator: Good afternoon, ladies and gentlemen. Welcome to the Verrica Pharmaceuticals Second Quarter 2026 Corporate Update Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to our host, Mr. Kevin Gardner of LifeSci Advisors. Please go ahead, sir.

Kevin Gardner: Thank you, operator. Hello, everyone, and welcome to Verrica Pharmaceuticals Second Quarter 2026 Corporate Update Conference Call. With me on the line this evening are Jayson Rieger, President and Chief Executive Officer; Noah Rosenberg, Chief Medical Officer; John Kirby, Interim Chief Financial Officer; David Zawitz, Chief Operating Officer; and Chris Chapman, Chief Commercial Officer. As a reminder, during today's call, management will make forward-looking statements. These forward-looking statements are based on the company's current expectations and involve inherent risks and uncertainties. Verrica's actual results and the timing of events could differ materially from those anticipated in such forward-looking statements. Please see Verrica's SEC filings for important risk factors.

Verrica cautions you not to place undue reliance on forward-looking statements and undertakes no duty or obligation to update any forward-looking statements as a result of new information, future events or changes in expectations. In addition, during today's call, management will discuss certain non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures compared to their closest GAAP equivalents. The earnings release that the company issued today includes GAAP to non-GAAP reconciliations for these measures and is also available on the Investor Relations section of Verrica's website.

I'll now turn the call over to Verrica's President and CEO, Jayson Rieger.

Jayson Rieger: Thank you, Kevin. Good evening, everyone, and thank you for joining us for our second quarter 2026 corporate update call. We've made major progress at Verrica during the quarter and in the weeks since. It's certainly an exciting time at Verrica. Today, we will cover the quarterly results first, but I also want to spend some time discussing the nondilutive financing we announced today as well as our partnership for YCANTH in Israel. I'll speak more on each of those in a few minutes. During the quarter, we more than doubled the percent unit growth of YCANTH from the previous quarter, demonstrating both strong market demand for YCANTH and continued improvements in execution from our commercial team.

This momentum reinforces our view that a significant unmet need remains in the treatment of molluscum and YCANTH is well positioned to become the standard of care. While we focus on growing the YCANTH business, we are also advancing our product pipeline and are making meaningful progress with each asset. In June, we and our partner, Torii Pharmaceutical, a subsidiary of Shionogi, dosed the first patient in the second pivotal Phase III trial, also known as COVE-3, and the recruitment in the first pivotal trial, COVE-2, remains on schedule with expected top line data in mid-2027 based on our current projections.

We also continue to advance planning activities for our Phase III-ready oncology asset, VP-315, for the treatment of basal cell carcinoma, and we presented encouraging new Phase II data at the Society for Investigative Dermatology Annual Meeting in May. In the weeks since the quarter ended, we also announced a distribution agreement that will allow our new partner, Medomie Pharma, to bring YCANTH to molluscum patients in Israel. And perhaps most importantly, today, we announced new nondilutive financing from our largest investor, Paul Manning, which we believe will extend our cash runway into 2028 based on our current operating plan. I'll now provide a detailed update on our YCANTH business.

In the second quarter, total revenue was $5.9 million, including U.S. YCANTH net product revenue of $5.1 million, an increase of 18.7% over the first quarter and an additional $0.8 million of license collaboration revenue associated with our partnership with Torii. Dispensed applicator units for YCANTH increased to 19,626 in the second quarter, up more than 28% from the first quarter, which grew over 12% from the fourth quarter of 2025. This accelerating unit growth reflects momentum in prescriber adoption of YCANTH and the impact of our retargeting and segmentation of the molluscum prescriber base. Even with this quarterly growth, we believe we are just scratching the surface of the patient universe afflicted by molluscum in the United States.

In this quarter, we observed particularly strong growth in demand from commercially insured patients who depend on our co-pay assistance program for their access to YCANTH, while we also began emerging from deductible season. Our priority continues to be for all eligible patients to have access to YCANTH as we believe that prescribers value consistency in being able to treat their patients with as few access hurdles as possible. Just as we initiated our prescriber retargeting strategy during the quarter, we have been hard at work evaluating and enhancing our patient access programs. A good example is a recent change we implemented in July, providing refills at a $0 co-pay for eligible commercially insured patients.

This further reduces the financial burden for caregivers and also allows the prescriber to focus on the best treatment course for their patients if additional applicators are required. Alongside our momentum of YCANTH in the U.S., we would also like to acknowledge our partner, Torii, for its continued growth of YCANTH in Japan following its launch earlier this year. As a reminder, we currently supply YCANTH applicators to Torii for the Japanese market, and we receive a transfer price, a portion of which offsets Verrica's share of the clinical costs for the global common warts program. We also continue to pursue opportunities to launch YCANTH outside the United States and Japan.

Just a few weeks ago, we announced an exclusive distribution, marketing and supply agreement with Medomie Pharma to commercialize YCANTH for the treatment of molluscum in Israel. Medomie has a strong track record of bringing innovative new therapies to patient populations with limited available treatments, and we look forward to working with them to establish YCANTH as their new standard of care for molluscum. Medomie will now prepare a regulatory submission for approval in Israel. For commercial sales, we will receive 60% of net selling price of YCANTH sold by Medomie. That is in addition to up to $8.2 million in regulatory and commercial milestone payments.

Turning to our pipeline, we made meaningful progress in our global Phase III program studying YCANTH as a potential treatment for common warts during the second quarter. As a critical part of our YCANTH strategy, we remain focused on the opportunity to expand the label to include common warts, which impact approximately 22 million people in the U.S. alone, more than 3x the size of the molluscum patient population. There are no FDA-approved therapies for common warts today.

And since about half of the patients who seek treatment are children, we believe our field force that is already selling YCANTH for molluscum to pediatricians, dermatologists and pediatric dermatologists will be well positioned to detail the product to these prescribers diagnosing common warts. As a reminder, Torii is funding the first $40 million of the cost of the global Phase III program, representing approximately 90% of the current trial budget, with the 2 companies splitting overall program costs on a 50-50 basis. Verrica's portion is expected to be paid out of future net transfer payments for commercial supply, payments relating to sales and regulatory milestones and royalties arising from sales of YCANTH in Japan.

In June, we announced that the first U.S. patient was dosed in COVE-3, our second pivotal trial in the common warts program, and our development partner, Torii, also announced dosing of the first Japanese patient in this trial as well. We continue to enroll patients in the first pivotal study, COVE-2, and the long-term follow-up study, COVE-4. All studies are recruiting well, and we will provide further updates as each trial achieves full enrollment. As a reminder, Verrica maintains ownership of the global rights to YCANTH for all indications in all territories outside of Japan and Israel, including common warts. Based upon our current projections, we now expect to present top line data from the program in mid-2027.

Turning to VP-315 in basal cell carcinoma, we presented new Phase II data at the Society for Investigative Dermatology Annual Meeting in May, which shared details about a potential abscopal effect of VP-315 that we are studying. Among 9 subjects, there were 14 untreated nontarget basal cell lesions that showed an overall 67% reduction in size with 3 of those untreated lesions achieving complete histological clearance. This effect on untreated lesions is in addition to the meaningful reductions we've seen in the treated primary lesions themselves.

We continue to believe in the potential for VP-315 to change the paradigm for treatment of basal cell carcinoma, and we continue to prepare for a Phase III program, including CRO selection and manufacturing of Phase III clinical supplies based upon our favorable FDA feedback on the design of the registration program. As a reminder, Verrica retains full global commercial rights to VP-315 for non-metastatic skin cancers, including basal cell and squamous cell carcinoma. We believe these 2 indications each represent a significant commercial opportunity, and we continue to prepare to actively prepare for the Phase III program.

Before turning the call over to John to review our financial performance, I would like to briefly touch on our announcement from earlier today of a new nondilutive financing provided by an entity controlled by Paul Manning, Verrica's largest shareholder and our Chairman. This facility provides Verrica with up to $27.5 million of capital that supports the continued growth of YCANTH as well as our ongoing Phase III program studying YCANTH for the treatment of common warts.

Under the terms of the facility, Verrica may borrow up to $12.5 million immediately with an additional $15 million becoming available upon Verrica's achievement of certain revenue, growth and other operational milestones, and our goal is to achieve those before the end of 2026. Importantly, this facility provides the potential for no scheduled payments of interest or principal until maturity in December of 2030. This flexibility will allow Verrica to maximize deployment of its cash resources on advancing its business and pipeline. I would like to thank Paul Manning for his continued support of Verrica and for his confidence in our team to execute on our commercial and development initiatives.

With this strategic and financial support from our largest shareholder, we will work to grow our existing YCANTH business for molluscum to achieve the extraordinary potential of YCANTH to become the first FDA-approved therapy for the treatment of common warts and continue to prepare for the Phase III VP-315 program, which could change the paradigm for basal cell carcinoma. I'll now turn the call over to our Interim Chief Financial Officer, John Kirby, to review our second quarter financials.

John Kirby: Thanks, Jayson. I'll now take a few minutes to summarize our financial results for the second quarter ended June 30, 2026. Total revenue for the second quarter of 2026 was $5.9 million, consisting of $5.1 million of U.S. net YCANTH revenue and $0.8 million of license and collaboration revenue associated with our Torii partnership compared to $12.7 million of total revenue for the second quarter of 2025, which consisted of $4.5 million of U.S. net YCANTH revenue and $8.2 million of license and collaboration revenue. As you will recall, in the second quarter of 2025, the company earned a onetime milestone of $8 million.

Net YCANTH revenue in the second quarter of 2026 reflects shipments to our distribution partners, offset by standard gross to net adjustments, including actual or anticipated product returns, off-invoice discounts, distribution fees, rebates and co-pay assistance program expenses. Gross product margins for the second quarter of 2026 were approximately 91.5% compared to gross product margins of approximately 92.5% in the second quarter of 2025. Cost of product revenue for the second quarter of 2026 was $0.4 million versus $0.3 million in the second quarter of 2025. Research and development expenses of $6 million in the second quarter of 2026 compared to $1.8 million in the second quarter of 2025.

Excluding the impact of stock-based compensation, the increase was due to the increased costs related to the common warts program. Selling, general and administrative expenses of $10.3 million in the second quarter of 2026 compared to $8.9 million in the second quarter of 2025. Excluding the impact of stock-based compensation, the increase was primarily due to increased commercial spend related to the expansion of our sales force. An agreement in principle was reached to settle legal proceedings related to a class action brought against the company in 2022. And as a result, expense of $1.7 million was recognized in the second quarter of 2026. This expense represents the net impact of the settlement after insurance recovery.

GAAP net loss was $13.2 million or $0.62 per share for the second quarter of 2026 compared to GAAP net income of $0.2 million or $0.02 per share for the second quarter of 2025. On a non-GAAP basis, which excludes stock-based compensation, noncash interest expense, legal settlement, net of insurance recovery and change in fair value of embedded derivatives, the second quarter of 2026 net loss was $10.2 million or $0.48 per share compared to non-GAAP net income of $1.2 million or $0.12 per share for the second quarter of 2025. And finally, as of June 30, 2026, Verrica had cash of $11.2 million.

Assuming the full $27.5 million will be available to the company under the credit facility announced today, we believe our cash runway could extend into 2028. I'll now turn the call back over to Jayson for closing remarks.

Jayson Rieger: Thanks, John. Again, I would like to recognize the strong growth of YCANTH driven by our commercial team this quarter, which provides the strongest evidence thus far that YCANTH is fast becoming the new standard of care for the treatment of molluscum. Many have begun to appreciate the significant commercial opportunity for YCANTH expanding into common warts, a large and underserved indication, and we are excited to finish the global Phase III program and present top line data next year. Equally exciting is our VP-315 program for basal cell carcinoma, a disease that also impacts millions of patients in the U.S. alone with few treatment alternatives besides surgery.

The Phase II data generated to date demonstrates the potential impact for patients by this oncolytic peptide-based approach, which is further supported by the recently presented abscopal effects observed. We are well positioned for growth, having 2 large programs, each with multibillion-dollar potential in our pipeline. We also remain committed to execute on our opportunities for global expansion for YCANTH, and we are pursuing additional partnerships around the world to complement our relationship with Torii in Japan and Medomie in Israel. With the recent credit facilities providing the runway to grow YCANTH and complete our common warts development program, we are positioned to create value for our shareholders and help our patients receive the treatments they need.

With that, we will be happy to answer your questions. Operator?

Operator: [Operator Instructions] We'll go first this afternoon to Stacy Ku of TD Cowen.

Stacy Ku: Nice to see the credit facility giving you some runway to YCANTH and potentially add common warts. So we have a couple of questions. First, just help us think about or give some contextualize -- maybe contextualize how we should be thinking about the YCANTH prescription trends this summer. Would you be expecting the same steady inflection or growth trajectory that you've been seeing in the next few months in the last few months as we look forward? That's the first question. The second is really what areas the team is focused as we think about maximizing adoption? Is it the clinician base, seeking access, broadening sales force? Just help us understand what will drive that continued growth.

And then third, if you're willing to comment, where do you think net pricing could stabilize in the long term? What are you learning about the different use scenarios for YCANTH use, the pricing that we're seeing in the pharmacy?

Jayson Rieger: Thanks, Stacy. I appreciate the questions, and I'll respond a little bit, and then I'll ask Chris to as well. We're seeing momentum in the prescriptions. I think you've seen that with the quarter-over-quarter growth of over 28%, and we're seeing increased adoption penetration. But I'll let Chris comment on sort of the specifics of what he's seeing day-to-day and how we'll continue to support that growth now and into the future.

Chris Chapman: Yes, Stacy, thanks for the question, and good to talk to you again. In the last quarter quarterly call, I had mentioned a real deep dive. It's always nice to be new to an organization and take a fresh look at the targeted segmentation, our deployment. I think what you're seeing reflected in this quarterly performance is a refocus of the field force on the productive physicians in terms of those who are both prescribing but also seeing this patient population. In terms of your question about what do we expect for this quarter, of course, when you get into the summer months, you are impacted by vacations, lifestyle things that impact all therapeutic areas.

So I certainly would expect continued growth, but I do want to be realistic, we will be impacted by the seasonal aspects that impact everybody. But I'm very pleased, very pleased with the performance that we've had with the redirection of the field force, the redeployment of the field force. And I think some of the key growth drivers, as I mentioned, number one, the retargeting segmentation, which I believe is now spot on and right where we need to be. The second are some of the things that we've done to enable the fulfillment process, both for physician but also affordability for the patients.

As Jayson mentioned, the ability to help patients who are commercially insured with refills should the physician choose and the patient need additional treatments, and that's had a very nice impact as well in getting patients to their goals. So I think all of that combined together, I would expect another strong quarter for us, taking into account the seasonal effects that everybody is going to be affected by.

Stacy Ku: And net pricing?

Chris Chapman: Well, we're not going to comment on gross to net. But as I mentioned with the fresh set of eyes, it's nice to come in and reevaluate the market access strategy as well as the patient and physician fulfillment strategy. So we are spending some time taking a close look at that. And I would expect that our yield will continue to accrete over time.

Operator: We'll go next now to Dennis Ding with Jefferies.

Georgia Bank: Congratulations on the quarter. This is Georgia Bank on the line for Dennis Ding. Maybe you can just provide some color around recruiting for the COVE studies and remaining on track for that 2027 top line data? And any additional detail on the enrollment progress and time lines there?

Jayson Rieger: Sure. Thanks, Georgia. This is Jayson. I'll ask that Noah comments if I leave anything out. As we reported previously, we really were getting good momentum in the COVE-3 trial, and that momentum has continued into this quarter. We've seen a solid start to COVE-3. We indicated that we wanted to see how that progressed as we activate both sites in Japan with Torii as well as the United States. We're seeing enrollment in both those trials progressing. And importantly, patients rolling into our long-term follow-up study COVE-4 to gather long-term safety data as well. As we've indicated, both those trials started, the primary endpoint have all been disclosed, et cetera.

And we're currently targeting as enrollment stays on track to have data to report on that program by mid next year.

Georgia Bank: Got it. Okay. That's very helpful. And I just had one follow-up, if that's okay. Around the distribution agreement and launch in Israel, can you just remind us of the size of the opportunity there and when you'd expect the launch to begin?

Jayson Rieger: So two things. One, obviously, the population is a little smaller than the United States. But what we've begun to learn as we have conversations with potential partners around the world is that molluscum is prevalent across all socioeconomic, gender and other demographics at a relatively consistent percentage according to the demographic data that's available. And the way we've structured our relationship there is we'll provide drug but we will receive 60% of the net revenue that's earned there. So we're positioned to really participate in the upside success as penetration for YCANTH grows traction there, but also they have the potential to add in common warts as should those trials read out positively.

So again, just like we're trying to position here in the United States, have access to YCANTH potentially multiple indications as we go forward. Additionally, we structured the relationship with milestones in excess of $8 million based on clinical -- commercial and regulatory achievements. So we're hoping I can't comment specifically on -- to the partnership discussions. What I can say is we continue to invest in our VP-315 program, our readiness for Phase III and for the expansion of YCANTH into markets around the world, and we're hopeful this is the first of others in the future.

Operator: We'll go next now to Ram Selvaraju with H.C. Wainwright.

Raghuram Selvaraju: Firstly, I was wondering in the context of the additional nondilutive capital availability, if you could just provide us with some additional granularity on how you expect broader R&D planning to shape up over the course of 2027 and into 2028, particularly as this pertains to whatever you ultimately elect to do in basal cell carcinoma with ruxotemitide over the course of that period? And also, if you could give us a sense of how you expect R&D quarterly expenses to modulate over the course of the coming quarters as COVE-2 and COVE-3 advance and ultimately yield top line data.

And then secondly, I was just wondering if you could refresh our recollection regarding the specific terms of the credit facility in terms of both the coupon and the seniority in the capital stack.

Jayson Rieger: Sure. I'll make the initial comments on the R&D and the budget activity. John will add some color and if Zawitz can add some additional color to your credit facility. In terms of the R&D planning, it's actually pretty interesting the way we've structured the business. As you may recall, the common wart trial with our relationship with Torii, they're providing the first $40 million of funding, which we expect to cover about 90% of the budget for that trial. So as you would think about as we progress towards top line data next year, there'll be a minimal impact on our cash burn from that program relative to the cost of the entire study.

And John can sort of comment how we're accruing accounting for that in our financials to reflect sort of the expenses that are being incurred. Similarly, for the VP-315 program, as we've indicated previously, we continue to invest in that program. The initial cost to get to through the rest of this year into next year to prepare for that study related to CRO costs and manufacturing supply are in the budget that we prepared and are actively pursuing that to be ready for next year. I'll let John add some color for you on the way we're accounting for.

John Kirby: Yes. So I think Jayson brought up the most important point, Ram, and thanks for your question, which is the initial out-of-pocket is by Torii. So if you look at our financial statements, you will see on the balance sheet the associated prepayment asset side and the liability side, but most importantly, on the cash flow, you see, for instance, year-to-date, we had $4.2 million of noncash expense. So I think broadly, the way I would think about it would be that we've given you the time lines for the study and the 90% of the budget being $40 million, and that will occur over the course of the next year.

So you will see our R&D expense ramp up, but you also see that noncash number on the cash flow ramp up. Hopefully, that's helpful to you.

David Zawitz: This is David. I'll just give you a brief answer on your question on the credit facility. So the coupon of SOFR plus 8 with a 4.5% floor on the SOFR rate. There are 2 step-down milestones that are described in the attachment to the 10-Q -- there is a 1% prepayment fee for certain prepayments. But otherwise, there's no warrants issued or any other fees in the facility. There is a 16% IRR catch-up payment upon repayment of the full facility. So the way we sort of price was a bit just jumping forward to the end of getting to a 16% IRR for the lender.

The facility has a delayed draw option, so it gives us flexibility as to when we need the capital and when we start incurring that return for the lender. It's contemplated to have no scheduled P&I payments during the life of the loans, which again allows us to use the proceeds from that facility to -- for our business to grow our YCANTH business and to cover the cost that we have to get to. As far as your question on seniority, the facility is secured, is a senior position against substantially all of our assets, as you would expect for a credit facility.

Raghuram Selvaraju: And just to clarify, on the delayed draw feature, is there an obligation to draw a minimum amount? Is there a deadline by which you would need to have drawn the full amount if that is your intent? And at this juncture, is it your intent to ultimately, given the cost of capital here, draw down on the entirety of the facility during the drawdown period?

David Zawitz: There's no minimum or there's no bite size of each individual loan, but there's no requirement to draw any amount of the facility. It's going to be drawn as necessary. I'll let John comment as to the expected use.

John Kirby: Yes. I think we will -- obviously, given that it costs us money, so to speak, in terms of interest and the overall IRR, Ram, we will be selective and strategic and only draw as much as we need when we need it.

David Zawitz: We're going to be able to use effectively all of the cash that we draw from the facility when we choose to draw it because the financial -- or the liquidity covenant that's present in the facility is very manageable to us, allows us to use our receivables from our distributor creditors as the -- our partners and distributors as the base for the liquidity covenant. So it is a very flexible facility, very helpful from the lender.

Operator: [Operator Instructions] We'll go next now to Dev Prasad with Lucid Capital Markets.

Dev Prasad: Congrats on the progress and the credit facility. A couple of questions. One is, so we see unit growth continues to outpace net product revenue growth. How should we think about revenue conversion from a dispensed applicator over the next few quarters? And second on common wart program, what level of efficacy would you consider clinically meaningful to change the treatment behavior in common?

Jayson Rieger: Sure. I'll let Chris sort of generally comment on the unit growth versus revenue growth number. And then Noah, I'll let you add some color, please, on sort of the clinically meaningful nature of common warts and what would be impactful given that there really isn't anything approved for the treatment disease.

Chris Chapman: Yes. Thanks for the question. And as I just mentioned, we fully expect to see yield to continue to accrete over time. While our efforts were focused last quarter on making some modifications to our targeting segmentation and deployment of our field force and evidenced by the growth that we've seen, we've now turned our focus to optimizing and both driving volume and accreting yield over time. So that would be a fair expectation as we continue to invest in the company, grow the company and expand this market.

Noah Rosenberg: You mind just quickly just repeating that question? I'm sorry, the connection wasn't so great.

Jayson Rieger: The question was on expectations of what would be clinically meaningful for outcome for the trial?

Noah Rosenberg: Yes. So I think that if you look at the Phase II data and you look at the Cohort 1 and Cohort 2, you can get a pretty good idea of how the drug will perform. We haven't disclosed our powering assumptions, but I'll say that we believe if we land somewhere around those results, we should be in pretty good shape. Keep in mind, in this particular study in 2 pivotals, we also have a placebo arm or vehicle arm as well, and we've accounted for that in the powering of the study. But I think the most important piece is that there is no approved current treatment for common warts.

And so I think that getting an effective treatment similar to what we saw in Phase II at that magnitude would clearly be an important advance. I'll just say this that the recruitment efforts are going really well. There's a lot of excitement on the PI front as observed by the numbers of patients that they're bringing in. So there's quite an appetite for an approved treatment.

Operator: [Operator Instructions] Dr. Rieger, it appears we have no further questions today. So I'd like to turn things back to you for any closing comments.

Jayson Rieger: Thank you. First, I'd like to thank everyone for joining the call this evening. We look forward to continue to provide updates on our progress in the second half of 2026. Have a nice evening.

Operator: Thank you, Dr. Rieger. Again, ladies and gentlemen, this will conclude the Verrica Pharmaceuticals Second Quarter 2026 Corporate Update Call. Again, thanks so much for joining us, everyone. We wish you all a great day. Goodbye.