Verrica Pharmaceuticals (VRCA) – First FDA-Approved Molluscum Drug in Dermatology Biotech, With Warts & Skin Cancer Expansion Story

Verrica Pharmaceuticals (VRCA) – First FDA-Approved Molluscum Drug in Dermatology Biotech, With Warts & Skin Cancer Expansion Story

※ Verrica Pharmaceuticals (NASDAQ: VRCA) is a dermatology-focused biotech company that developed YCANTH® (VP-102), a cantharidin-based topical drug–device combo and the first and only FDA-approved treatment for molluscum contagiosum in adults and children aged 2 and older. YCANTH is now being commercialized in the U.S., targeting an estimated 6 million patients with molluscum each year, while Verrica is also pursuing label expansion into common warts, external genital warts, plantar warts, and non-melanoma skin cancers, building a broader pipeline strategy around the same platform. 😅

 

1. Company Overview

• Company name: Verrica Pharmaceuticals, Inc.
• Ticker: VRCA (NASDAQ)
• Sector: Dermatology therapeutics / Biotechnology
• Focus areas:
  • Viral skin diseases (molluscum, warts, etc.)
  • Skin cancer (non-melanoma skin cancers such as basal cell carcinoma, squamous cell carcinoma)
• Business model:
  1. Develop cantharidin-based topical drug–device combination products
  2. Self-commercialize in the U.S., and out-license to partners (e.g., Torii Pharmaceutical in Japan) for ex-US markets
  3. Monetize through upfront payments, milestones and royalties, plus direct product sales

With the launch of YCANTH, Verrica is transitioning into a commercial-stage, dermatology-focused biotech, expanding its portfolio around the cantharidin platform and an immuno-oncology candidate (VP-315).

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2. Core Product: YCANTH® (VP-102)

2-1. Mechanism and Formulation

• Active ingredient: Cantharidin 0.7% (w/v)
• Formulation: Drug–device combination using a disposable, single-use applicator
• Mechanism (simple view):
  • Cantharidin is a blistering agent applied topically; it induces a controlled blister in the epidermis and causes the lesion to detach
  • Unlike compounded (pharmacy-made) cantharidin, YCANTH provides standardized concentration and dosing under GMP conditions
• Administration:
  • Applied by healthcare professionals directly to lesions in the clinic
  • Typically re-applied every ~3 weeks until lesions resolve

The key point: YCANTH is the first standardized, commercial-grade cantharidin product to be approved, rather than a non-standardized compounded preparation.

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2-2. Approved Indication & Market

• Indication:
  • Treatment of molluscum contagiosum in adults and children 2 years of age and older
• FDA approval:
  • Approved by the US FDA on July 21, 2023
  • The first and only FDA-approved therapy for molluscum contagiosum
• Disease & market characteristics:
  • Molluscum contagiosum is a highly contagious viral skin disease, most common in children
  • In the U.S., it is estimated to affect about 6 million patients annually
  • Historically, there was no officially approved drug; treatment relied on cryotherapy, curettage, cautery, compounded cantharidin, etc., mostly off-label

Thanks to its status as the first standardized molluscum therapy, YCANTH is gradually ramping up in usage, supported by reimbursement infrastructure (J-code) and increasing adoption in dermatology practices.

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3. Pipeline & Label Expansion Strategy

YCANTH (VP-102) is not intended to stop at molluscum. Verrica is actively pursuing expansion into common warts, external genital warts, and plantar warts, leveraging the same platform.

3-1. VP-102 / YCANTH – Common Warts

• Target indication: Common warts (verruca vulgaris)
• Background:
  • An estimated 22 million people in the U.S. are affected by common warts, with over 2 million physician visits annually
  • There is currently no FDA-approved standard of care for common warts, leaving substantial unmet need
• Development status:
  • Phase 2 (COVE-1) work completed on dose, regimen, and safety
  • Verrica amended its agreement with Torii Pharmaceutical, so that Torii will shoulder a significant portion of the costs for the global pivotal Phase 3 program

The strategy is essentially “molluscum → common warts”, using the same drug and mechanism to target a larger, underserved wart market.

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3-2. VP-102 – External Genital Warts (EGW)

• External genital warts caused by HPV are a significant burden, both cosmetically and from a sexual health perspective.
• Verrica has conducted Phase 2 studies evaluating dose and regimen of VP-102 for EGW and is in discussions with regulators on the optimal path forward.

EGW represents another sizeable therapeutic niche with suboptimal satisfaction for existing options (acid preparations, cryotherapy, etc.), where a procedure-based, premium topical therapy could find a role.

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3-3. VP-103 – Plantar Warts

• Active ingredient: A next-generation, cantharidin-based product candidate
• Indication: Plantar warts (on the soles of the feet)
• Rationale:
  • Plantar lesions can be particularly difficult to treat due to pressure and thick stratum corneum
  • A single-use applicator topical has the potential to be used in dermatology, podiatry and orthopedic clinics, offering a standardized procedure option

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3-4. VP-315 (ruxotemitide, formerly LTX-315) – Non-Melanoma Skin Cancer

• Mechanism: Intratumoral injection of an immuno-oncology peptide with oncolytic-like effects
• Target: Non-melanoma skin cancers (e.g., basal cell carcinoma, squamous cell carcinoma)
• Partner: Licensed globally from Lytix Biopharma (Norway)
• Strategic significance:
  • While YCANTH and VP-103 focus on benign viral lesions (molluscum, warts), VP-315 addresses higher-value oncology indications
  • If successful, Verrica could evolve from a “wart-focused company” into a broader dermatology specialty company covering both benign and malignant conditions

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4. Commercialization & Partnerships

4-1. US Commercialization

• YCANTH launched in the U.S. in the second half of 2023
• With a dedicated J-code in place from 2024, clinics and hospitals can bill for YCANTH procedures using a clear reimbursement code
  • As of Q2 2025, Verrica reports that the number of dispensed applicators (actual usage) has increased by roughly 120% year-over-year, indicating strong early momentum in utilization

4-2. Japan Partner – Torii Pharmaceutical

• Verrica has out-licensed YCANTH to Torii Pharmaceutical for commercialization in Japan
• In September 2025, Torii obtained regulatory approval in Japan for YCANTH (product code TO-208) for molluscum contagiosum
  • This triggered a milestone payment of around $10 million, recorded as license revenue in Verrica’s Q3 2025 results
• Under the amended agreement, Torii also bears a substantial portion of the global Phase 3 costs for common warts, reducing Verrica’s cash burden

Overall, Verrica is using a hybrid strategy of US direct sales + ex-US licensing + shared global development, which helps spread commercialization and development risk across partners.

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5. Financial & Valuation Snapshot (as of Q3 2025)

(USD, GAAP basis; summary of company disclosures)

• Q3 2025 total revenue: approx. $14.3 million
  • Of which:
    • YCANTH product revenue: approx. $3.6 million
    • License & collaboration revenue: approx. $10.7 million
      • Includes ~$10 million milestone related to Torii’s approval in Japan
• Net income (loss):
  • Q3 2024 net loss of about $22.9 million →
  • Q3 2025 net loss narrowed sharply to around $0.27 million (roughly breakeven)
• Structural takeaway:
  • Product revenue is still in early ramp mode; the Q3 2025 improvement is largely driven by one-time-like milestone revenue
  • Over the medium to long term, revenue and profit structure will depend heavily on:
    • The growth trajectory of YCANTH in the U.S.
    • Successful label expansions (common warts, EGW, plantar warts)
    • Progress of VP-103 and VP-315 through clinical development

As a small-cap biotech, market cap and valuation multiples are highly volatile, so up-to-date share price and market cap should be checked via your broker or financial data platforms.

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6. Bullish Points (Upside Drivers)

1. “First and only” status in molluscum
   • Being the first and only FDA-approved therapy for molluscum is a powerful selling point for:
     • Reimbursement and guideline inclusion
     • Physician education and adoption
     • Awareness among parents and patients
   • Compared with compounded cantharidin, YCANTH offers standardized quality, dosing and regimen, which is attractive in terms of both clinical consistency and medico-legal risk.
2. Market size – molluscum + warts
   • Around 6 million molluscum patients annually in the U.S., many of them children
   • Adding common warts, plantar warts and EGW, the total addressable market (TAM) for YCANTH/VP-103 can conceivably reach the multi-billion-dollar range, depending on pricing and penetration.
3. Early signs of commercial traction
   • After J-code launch, YCANTH usage (dispensed applicators) has shown triple-digit growth (~120% YoY)
   • This suggests that, as reimbursement infrastructure solidifies, physicians are increasingly willing to adopt YCANTH.
4. Risk-sharing through partnerships
   • Partnerships with Torii (Japan) and Lytix Biopharma (immuno-oncology) allow Verrica to:
     • Offload part of the clinical and commercial costs
     • Earn ex-US royalties and milestones
   • For a small biotech, using partners’ capital and infrastructure to execute global Phase 3 and ex-US launches is a meaningful de-risking strategy.
5. Potential expansion into skin cancer
   • If VP-315 generates meaningful efficacy and safety data in non-melanoma skin cancers,
     • Verrica could be re-rated from a “wart/molluscum company” to a broader dermatology specialty pharma with oncology exposure.

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7. Bearish Points (Risks & Downsides)

1. Product/platform concentration risk
   • Currently, YCANTH is essentially the only commercial product
   • The pipeline is also concentrated around the cantharidin platform and VP-315
   • If YCANTH underperforms commercially, or if class-wide safety issues emerge for cantharidin, or if VP-315 fails in trials, company value could be hit hard.
2. Heavy reliance on license & milestone revenue
   • As Q3 2025 showed, a large portion of revenue came from Torii milestones and other license income, which are not recurring by nature
   • In the long run, Verrica must prove its core operating strength through sustained growth in YCANTH product revenue; that ramp is still in the early phase.
3. Strong existing treatment habits and competition
   • In molluscum and warts, dermatologists already use cryotherapy, curettage, electrocautery, acid preparations, compounded cantharidin, etc.
   • For physicians to switch to YCANTH, they need to be comfortable with:
     • Reimbursement and coverage
     • Profitability and margin structure
     • Workflow efficiency in the clinic
   • As a result, adoption may ramp more slowly than investors expect.
4. Small-cap biotech volatility & funding risk
   • With a relatively small market cap and lower liquidity,
     • Clinical trial updates, regulatory decisions and milestone wins/misses can drive very high share price volatility
   • Until YCANTH and the pipeline generate more stable operating cash flow,
     • Investors should assume there is ongoing risk of additional equity offerings, convertibles, or other financing.
5. Regulatory & reimbursement uncertainty
   • Molluscum and warts are not life-threatening, so:
     • Payers and regulators may be more conservative on pricing and reimbursement scope
   • For common warts, EGW and plantar warts,
     • Future approvals and coverage will depend on Phase 3 data quality and clear superiority vs existing options.

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8. Key Checkpoints & Investment Takeaways

If you plan to follow or invest in VRCA, these are the main items to monitor:

1. US YCANTH revenue growth
   • Quarterly YCANTH revenue (USD) and dispensed applicator numbers
   • Changes in reimbursement (coverage rates) and average selling price (ASP)
2. Global Phase 3 for common warts
   • Study design: sample size, primary endpoints, control arm (placebo vs active standard of care)
   • Interim data on efficacy and safety signals
3. Development timelines for EGW, VP-103, VP-315
   • Start dates and top-line timelines for Phase 1/2/3 in each program
   • Expansion of partnerships (additional regional licenses, co-promotion deals, etc.)
4. New license/milestone deals & evolving financial structure
   • Potential new partnerships beyond Japan (e.g., Europe, China)
   • Any new capital raises (follow-on offerings, PIPEs, convertibles) and the associated dilution
5. Share price vs risk–reward
   • Around key events (clinical data, regulatory decisions, milestones), consider:
     • Expected upside vs downside
     • Position sizing and risk control appropriate for a small, high-volatility biotech

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9. Quick Q&A (FAQ)

Q1. Does VRCA already generate stable product revenue?

→ Partially, but it’s still early.
YCANTH product sales are growing quarter over quarter, but as of Q3 2025, license and milestone revenue still represent the larger share. It’s too early to call Verrica a fully “product-driven, cash-flow-stable” company.

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Q2. What is YCANTH’s key differentiator?

→ In one sentence:

“The first and only FDA-approved, standardized cantharidin product for molluscum contagiosum.”

It offers standardized concentration, dosing and regimen with a single-use applicator, differentiating it from compounded cantharidin and other off-label procedures.

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Q3. What are the biggest near-term share price catalysts?

→ Three main ones stand out:

1. Growth in US YCANTH sales (YoY and QoQ)
2. Progress in global Phase 3 for common warts – trial initiation, interim updates, and top-line data
3. Early clinical data and partnership updates for VP-315 and other higher-value indications (e.g., skin cancer)

Given the company’s size, each event could trigger large upside or downside moves.

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Q4. What type of investor might VRCA be suitable for?

→ VRCA may be more suited for:

• Aggressive growth and event-driven investors who can tolerate clinical, regulatory and financing risk, plus high volatility
• Those interested in dermatology (molluscum, warts, skin cancer) who want a small “high-risk/high-reward” position in a focused small-cap name

On the other hand, VRCA is not ideal for defensive or income-oriented investors who prioritize dividends, stable cash flow and low volatility.