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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

______________________________________________________

FORM 10-Q

______________________________________________________

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to _____

Commission File Number: 001-38529

______________________________________________________

Verrica Pharmaceuticals Inc.

(Exact Name of Registrant as Specified in its Charter)

______________________________________________________


Delaware			46-3137900
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
44 West Gay Street, Suite 400 West Chester, PA			19380
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (484) 453-3300

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading
Symbol(s)

Name of Each Exchange on which Registered

Common Stock, $0.0001 par value

VRCA

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer	o

Non-accelerated filer	x	Smaller reporting company	x

Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of November 7, 2025, the registrant had 9,490,035 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents

VERRICA PHARMACEUTICALS INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risks	34

Item 4.	Controls and Procedures	34

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	35

Item 5.	Other Information	36

Item 6.	Exhibits	36

Signatures		37

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

Table of Contents

VERRICA PHARMACEUTICALS INC.

BALANCE SHEETS

(in thousands, except share and per share amounts)

(Unaudited)


	September 30, 2025		December 31, 2024
ASSETS
Current assets:
Cash and cash equivalents	$	21,097	$	46,329
Accounts receivable	7,047		48
Collaboration receivable, billed and unbilled	282		29
Deferred R&D services, current portion (Note 11)	1,959		—
Inventory	2,304		2,463
Prepaid expenses and other current assets	3,586		2,310
Total current assets	36,275		51,179
Property and equipment, net	225		589
Operating lease right-of-use asset	616		836
Finance lease right-of-use asset	1,050		1,154
Deferred R&D services, non-current portion (Note 11)	2,354		—
Other non-current assets	376		376
Total assets	$	40,896	$	54,134
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	1,585	$	1,896
Accrued expenses and other current liabilities	12,600		13,511
Deferred revenue	1,564		—
Current portion of long-term debt	12,458		12,938
Operating lease liability	335		315
Finance lease liability	366		352
Total current liabilities	28,908		29,012
Operating lease liability	330		583
Finance lease liability	629		768
Derivative liability	1,762		2,648
R&D funding liability (Note 11)	4,688		—
Long term debt	21,619		30,983
Total liabilities	57,936		63,994
Commitments and Contingencies (Note 6)
Stockholders’ deficit:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding as of September 30, 2025 and December 31, 2024	—		—
Common stock, $0.0001 par value; 200,000,000 authorized; 9,500,549 shares issued and 9,490,035 shares outstanding as of September 30, 2025 and 9,188,513 shares issued and 9,177,999 shares outstanding as of December 31, 2024	1		1
Treasury stock, at cost, 10,514 shares as of September 30, 2025 and December 31, 2024	—		—
Additional paid-in capital	299,798		297,166
Accumulated deficit	(316,839)		(307,027)
Total stockholders’ deficit	(17,040)		(9,860)
Total liabilities and stockholders’ deficit	$	40,896	$	54,134

The accompanying notes are an integral part of these financial statements.

Table of Contents

VERRICA PHARMACEUTICALS INC.

STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

(Unaudited)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2025		2024		2025		2024

Revenue:
Product revenue, net	$	3,607	$	(1,865)	$	11,563	$	6,259
License and collaboration revenue	10,737		84		18,922		963
Total revenue	14,344		(1,781)		30,485		7,222
Operating expenses:
Cost of product revenue	754		351		1,517		1,257
Cost of collaboration revenue	355		84		523		858
Selling, general and administrative	9,403		16,083		27,103		48,944
Research and development	2,205		2,405		6,335		10,672
Total operating expenses	12,717		18,923		35,478		61,731
Income (loss) from operations	1,627		(20,704)		(4,993)		(54,509)
Other income (expense):
Interest income	159		221		724		1,212
Interest expense	(2,094)		(2,376)		(6,428)		(7,063)
Change in fair value of derivative liability	34		—		886		—
Other expense	—		(1)		(1)		(17)
Total other expense, net	(1,901)		(2,156)		(4,819)		(5,868)
Net loss	$	(274)	$	(22,860)	$	(9,812)	$	(60,377)

Net loss per share, basic and diluted	$	(0.03)	$	(4.88)	$	(1.03)	$	(12.96)
Weighted-average common shares outstanding, basic and diluted	9,490,083		4,680,543		9,489,173		4,659,788

The accompanying notes are an integral part of these financial statements.

Table of Contents

VERRICA PHARMACEUTICALS INC.

STATEMENTS OF STOCKHOLDERS’ DEFICIT

(in thousands, except share amounts)

(Unaudited)


	Common Stock			Additional Paid-in Capital		Subscription Receivable		Accumulated Deficit		Treasury Stock	Total Stockholders’ (Deficit) Equity
	Shares Issued	Amount								Shares

January 1, 2025	9,188,513	$	1	$	297,166	$	—	$	(307,027)	10,514	$	(9,860)
Stock-based compensation	—	—		1,026		—		—		—	1,026
Vesting of restricted stock units	1,000	—		—		—		—		—	—
Net loss	—	—		—		—		(9,742)		—	(9,742)
March 31, 2025	9,189,513	$	1	$	298,192	$	—	$	(316,769)	10,514	$	(18,576)
Stock-based compensation	—	—		888		—		—		—	888
Exercise of pre-funded warrants	70,100	—		—		—		—		—	—
Vesting of restricted stock units	5,426	—		—		—		—		—	—
Net income	—	—		—		—		204		—	204
June 30, 2025	9,265,039	$	1	$	299,080	$	—	$	(316,565)	10,514	$	(17,484)
Stock-based compensation	—	—		718		—		—		—	718
Exercise of pre-funded warrants	235,548	—		—		—		—		—	—
Retired shares	(38)	—		—		—		—		—	—

Net loss	—	—		—		—		(274)		—	(274)
September 30, 2025	9,500,549	$	1	$	299,798	$	—	$	(316,839)	10,514	$	(17,040)


January 1, 2024	4,251,869	$	—	$	250,211	$	—	$	(230,448)	10,514	$	19,763
Stock-based compensation	—	—		2,072		—		—		—	2,072
Exercise of stock options	650	—		8		(4)		—		—	4
Net loss	—	—		—		—		(20,331)		—	(20,331)
March 31, 2024	4,252,519	$	—	$	252,291	$	(4)	$	(250,779)	10,514	$	1,508
Stock-based compensation	—	—		2,228		—		—		—	2,228
Exercise of stock options	3,600	—		146		4		—		—	150
Net loss	—	—		—		—		(17,186)		—	(17,186)
June 30, 2024	4,256,119	$	—	$	254,665	$	—	$	(267,965)	10,514	$	(13,300)
Stock-based compensation	—	—		2,108		—		—		—	2,108
Vesting of restricted stock units	56,150	—		—		—		—		—	—
Exercise of pre-funded warrants	258,324	1		—		—		—		—	1
Net loss	—	—		—		—		(22,860)		—	(22,860)
September 30, 2024	4,570,593	$	1	$	256,773	$	—	$	(290,825)	10,514	$	(34,051)

The accompanying notes are an integral part of these financial statements.

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VERRICA PHARMACEUTICALS INC.

STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	For the Nine Months Ended September 30,
	2025		2024
Cash flows from operating activities
Net loss	$	(9,812)	$	(60,377)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	2,632		6,408
Depreciation expense	119		288
Non-cash interest expense	2,075		1,571
Loss on disposal of fixed assets	246		141
Loss on termination of financing lease	3		260
Amortization of operating lease right-of-use asset	220		246
Amortization of finance lease right-of-use asset	252		482
Non-cash accretion of R&D funding liability	375		—
Change in fair value of derivative liability	(886)		—
Changes in operating assets and liabilities:
Prepaid expenses and other assets	(1,276)		(1,499)
Collaboration receivable, billed and unbilled	(253)		84
Inventory	159		—
Accounts payable	(311)		(1,499)
Deferred revenue	1,564		—
Accounts receivable	(6,999)		4,401
Accrued expenses and other current liabilities	(911)		4,886
Operating lease liability	(233)		(255)
Net cash used in operating activities	(13,036)		(44,863)
Cash flows from investing activities
Purchases of property and equipment	—		(27)
Net cash used in investing activities	—		(27)
Cash flows from financing activities
Proceeds from exercise of stock options	—		154
Payment of debt amendment fees	—		(1,139)
Repayment of debt	(11,919)		—
Repayment of finance lease	(277)		(550)
Payment of equity issuance costs	—		(163)
Net cash used in financing activities	(12,196)		(1,698)
Net decrease in cash and cash equivalents	(25,232)		(46,588)
Cash and cash equivalents at the beginning of the period	46,329		69,547
Cash and cash equivalents at the end of the period	$	21,097	$	22,959

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VERRICA PHARMACEUTICALS INC.

STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	For the Nine Months Ended September 30,
	2025		2024
Supplemental disclosures
Cash paid for interest	$	4,353	$	5,492
Supplemental disclosure of noncash investing and financing activities:
Recognition of R&D funding liability and deferred R&D services	$	4,313	$	—
Finance lease liability extinguished as a result of lease termination	$	50	$	—
Right-of-use asset obtained in exchange for lease obligation	$	141	$	1,976

The accompanying notes are an integral part of these financial statements.

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VERRICA PHARMACEUTICALS INC.

Notes to Financial Statements

(Unaudited)

Note 1—Organization and Description of Business Operations

Verrica Pharmaceuticals Inc. (the "Company") was formed on July 3, 2013 and is incorporated in the State of Delaware. The Company is a dermatology therapeutics company developing and selling medications for skin diseases requiring medical intervention. On July 21, 2023, the U.S. Food and Drug Administration ("FDA") approved YCANTH (VP-102) topical solution for the treatment of molluscum contagiosum in adult and pediatric patients two years of age and older.

Reverse Stock Split

At the close of trading on July 24, 2025, the Company effected a reverse stock split at a ratio of 1-for-10 shares of its common stock. As a result, every ten shares of the Company’s issued and outstanding common stock were automatically combined into one share. The reverse stock split affected all stockholders uniformly and did not alter any stockholder’s percentage ownership interest in the Company.

No fractional shares were issued as a result of the reverse stock split and the split did not impact the par value of the Company's common stock. Any fractional shares that would otherwise have resulted from the reverse stock split were rounded down to the next whole share.

The accompanying financial statements and footnotes have been adjusted to reflect the impact of the reverse stock split as though it had occurred in all periods presented.

Liquidity and Capital Resources

The Company has incurred substantial operating losses since inception and expects to continue to incur significant losses for the foreseeable future and may never become profitable. As of September 30, 2025, the Company has an accumulated deficit of $316.8 million and had cash outflows from operations of $13.0 million for the nine months ended September 30, 2025. Based on the Company’s current business plan and current capital resources, consisting of cash and cash equivalents of $21.1 million as of September 30, 2025, combined with the uncertainty regarding the availability of additional funding and considering its debt obligations, including a requirement to maintain cash, cash equivalents and investments of at least $10.0 million at all times, the Company has concluded that substantial doubt exists regarding its ability to continue as a going concern within one year after the date these financial statements are issued. The Company plans to address the conditions that raise substantial doubt regarding its ability to continue as a going concern by, among other things, obtaining additional funding through equity offerings, debt financing and refinancings, collaborations, strategic alliances and/or licensing arrangements. The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments to the carrying amounts and classification of recorded assets, liabilities and reported expenses that might result should the Company be unable to continue as a going concern.

There can be no assurance the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all. If the Company is unable to raise capital when needed or on attractive terms, the Company would be forced to delay, reduce or eliminate commercialization efforts and development programs.

On June 27, 2025, the Company entered into the Second Amendment to the Collaboration and License Agreement (the "Second Amendment") with Torii Pharmaceutical Co., Ltd. ("Torii"), amending the Collaboration and License Agreement dated as of March 17, 2021, between the Company and Torii, as amended on May 14, 2024 (as amended, the "Torii Agreement"). The Second Amendment provided for the acceleration of an $8.0 million milestone payment which was paid to the Company in July 2025, following Torii's approval of the study plan and execution of the CRO agreement. The milestone payment was initially conditioned upon the dosing of the first patient as part of the Company's global Phase 3 program of VP-102 (TO-208 in Japan) in common warts (the "Program"), which it is sponsoring with Torii. See Note 11 for further discussion of the Research and Development ("R&D") funding arrangement related to the Program. In September 2025, Torii paid the Company a $10.0 million milestone payment upon the approval of TO-208, referred to as YCANTH in the U.S., for molluscum contagiosum in Japan. In addition, the Company will initiate a manufacturing transfer to Torii, expected to take several years, for Torii to be able to produce YCANTH (TO-208) applicators to be sold in Japan. In the interim, the Company will continue to receive from Torii a transfer price for applicators manufactured by the Company's manufacturing partners. After the transfer of at least one component of the manufacturing process, the Company will begin receiving royalties related to net sales in Japan of applicators manufactured by Torii and/or its manufacturing partners in lieu of the transfer price for completed applicators.

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The Company plans to secure additional capital in the future through equity or debt financings, partnerships, or other sources to carry out the Company’s planned commercial and development activities. The amount of proceeds the Company may be able to raise pursuant to its currently effective shelf registration statement on Form S-3 is limited. The Company is subject to the general instructions of Form S-3 known as the "baby shelf rules." Under these rules, the amount of funds the Company can raise through primary public offerings of securities in any 12-month period using its registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of the Company's common stock held by its non-affiliates. Therefore, the Company will be limited in the amount of proceeds it is able to raise by selling its securities using its Form S-3 until such time as the Company's public float exceeds $75.0 million.

On July 26, 2023, the Company entered into a Credit Agreement, pursuant to which the Company borrowed $50.0 million under the Loan Facility (as defined in Note 10) resulting in net proceeds of approximately $44.1 million after payment of certain fees and transaction related expenses. Amounts borrowed under the Loan Facility will mature on July 26, 2028, and payments of principal were originally not required under the Credit Agreement. Based on the Company's net revenue attributable to YCANTH on a trailing 12-month basis not meeting a specified amount set forth in the Credit Agreement (as amended) as of December 31, 2024, the Company became obligated to start making principal payments starting in January 2025. The Company is obligated to repay the principal amount of the loan on the last day of each month in equal monthly installments through the maturity date, together with the applicable repayment premium, the exit fee and interest.

The Credit Agreement contains customary events of default, including, but not limited to, nonpayment of principal, interest, fees or other amounts; material inaccuracy of a representation or warranty; failure to perform or observe covenants; cross-defaults with certain other indebtedness; bankruptcy and insolvency events; material monetary judgment defaults; impairment of any material definitive loan documentation; other material adverse effects; key permit and other regulatory events; key person events; and change of control. In addition, the Credit Agreement contains a financial covenant that the Company must maintain a liquidity of at least $10.0 million and that the Company’s quarterly and annual financial statements not be subject to any qualification or statement which is of a "going concern" or similar nature. On June 10, 2025, the requirement to deliver financial statements that are not subject to a qualification of a "going concern" was waived for the financial statements for the quarters ending June 30, 2025, September 30, 2025 and the quarter and the year ending December 31, 2025. If the requirement to deliver financial statements that are not subject to a qualification of a "going concern" is not waived for additional future periods or if additional financing is not raised to meet the liquidity test, the Company may be in default of the Credit Agreement in the near-term. Upon the occurrence of an event of default (subject to notice and grace periods), additional interest of 4% per annum applies and obligations under the Credit Agreement could be accelerated. As of September 30, 2025, the Company is in compliance with all applicable covenants under the Credit Agreement.

Note 2—Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification ("ASC") and Accounting Standards Update ("ASU") of the Financial Accounting Standards Board ("FASB").

Unaudited Interim Financial Statements

The accompanying unaudited interim financial statements have been prepared by the Company in accordance with US GAAP for interim information and pursuant to the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures normally included in audited financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited interim financial statements should be read in conjunction with the audited financial statements and related notes for the year ended December 31, 2024, filed as part of the Company's Annual Report.

These unaudited interim financial statements have been prepared on the same basis as the audited financial statements and, in management’s opinion, include all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the financial information for the interim periods. However, the results of operations for any interim period are not necessarily indicative of the results to be expected for the full fiscal year.

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Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on current facts, historical experience as well as other pertinent industry and regulatory authority information, results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenues and expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

Segments

Operating segments are identified as components of an enterprise about which separate and discrete financial information is available for evaluation by the chief operating decision-maker ("CODM") in making decisions regarding resource allocation and assessing performance.

The Company views its operations and manages its business in one operating segment engaged in developing and selling medications for skin diseases requiring medical intervention. The Company’s Chief Executive Officer ("CEO"), as the CODM, regularly reviews the entity-wide financial and operational performance as a single unit. No financial information is disaggregated into separate lines of businesses and the Company does not differentiate the activities of its headquarters from the overall performance of the Company. The CEO makes resource allocation and business process decisions regarding the overall level of resources available and how to best deploy these resources.

The single segment’s principal measure of segment profit and loss is consolidated net loss. The CEO considers actual and forecasted consolidated revenues, significant expenses, and consolidated net loss when evaluating performance. Significant expenses are amounts regularly provided to the CEO and included in consolidated net loss and include selling, general and administrative expenses and research and development expenses.

The table below summarizes the significant revenue and expense categories regularly reviewed by the CEO for the three and nine months ended September 30, 2025 and 2024:


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2025		2024		2025		2024
Revenue:
Product revenue, net	$	3,607	$	(1,865)	$	11,563	$	6,259
License and collaboration revenue	10,737		84		18,922		963
Total revenue	14,344		(1,781)		30,485		7,222
Less:
Selling, general and administrative:
Commercial (including payroll)	4,976		10,169		13,604		28,561
General and administrative (including payroll)	3,996		4,411		11,695		15,543
Stock-based compensation	431		1,503		1,804		4,840
Total selling, general and administrative	9,403		16,083		27,103		48,944
Research and development:
YCANTH (VP-102)	304		417		1,015		1,635
VP-315	197		310		391		3,162
Common warts	16		211		(50)		371
Stock-based compensation	287		605		828		1,568
Other unallocated expenses	1,401		862		4,151		3,936
Research and development	2,205		2,405		6,335		10,672
Cost of revenue	1,109		435		2,040		2,115
Other segment items (a)	1,901		2,156		4,819		5,868
Net loss	$	(274)	$	(22,860)	$	(9,812)	$	(60,377)

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(a)Other segment items include interest income, interest expense, change in fair value of embedded derivative liability and other expenses.

Cash and Cash Equivalents

The Company considers all highly-liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents. Cash and cash equivalents include cash held in banks and money market mutual funds.

Cash and cash equivalents are financial instruments that are potentially subject to concentrations of credit risk. The Company’s deposits are in accounts at large financial institutions, and amounts may exceed federally insured limits. The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the funds are held. The Company has no financial instruments with off-balance sheet risk of loss.

Cash and cash equivalents as of September 30, 2025, includes a cash deposit of $0.2 million with Bank of America as required under the Commercial Credit Card Program with a balance equal to the outstanding credit limit on commercial credit cards.

Fair Value of Financial Instruments and Credit Risk

As of September 30, 2025, the Company’s financial instruments included cash equivalents, accounts payable notes payable, and a derivative liability. The carrying amount of cash equivalents and accounts payable approximated fair value, given their short-term nature. The carrying value of the Company's long term note payable (Note 10) approximates fair value as the interest rate is reflective of current market rates on debt with similar terms and conditions.

Cash equivalents subject the Company to concentrations of credit risk. However, the Company invests its cash in accordance with a policy objective that seeks to ensure both liquidity and safety of principal. The policy limits investments to instruments issued by the U.S. government, certain SEC registered money market funds that invest only in U.S. government obligations and various other low-risk liquid investment options, and places restrictions on portfolio maturity terms.

The Company is subject to credit risk from accounts receivable. As of September 30, 2025, one customer represented approximately 90% of the Company's accounts receivable. Based on the Company's periodic credit evaluations, there have been no historical concerns with this customer.

Accounts Receivable

The Company had $7.0 million in accounts receivable as of September 30, 2025. As of September 30, 2025, the Company had no allowance for credit losses. An allowance for credit losses is determined based on the Company's assessment of the creditworthiness and financial condition of its customers, aging of receivables, as well as the general economic environment. Any allowance would reduce the net receivables to the amount that is expected to be collected. Current payment terms for YCANTH (VP-102) are generally 60 days from the shipment date.

Inventory

The Company values inventory at the lower of cost or net realizable value. Inventory cost is determined using the specific identification method. The Company regularly reviews its inventory quantities and, when appropriate, records a provision for obsolete and excess inventory to derive the new cost basis, which takes into account the Company’s sales forecast and corresponding expiry dates. The Company recognized $0.4 million of obsolete inventory costs as cost of product revenue for the three and nine months ended September 30, 2025, due to the expiration of Product (as defined below). The Company recognized obsolete inventory costs of $0.2 million and $0.6 million as cost of product revenue for the three and nine months ended September 30, 2024, respectively, due to the expiration of Product.

Financial Instruments – Derivatives

The Company evaluates its financial instruments to determine if the financial instrument itself or any embedded components of a financial instrument potentially qualify as derivatives required to be separately accounted for in accordance with ASC Topic 815 - Derivatives and Hedging.

The derivative liability relates to a bifurcated settlement feature of the Company’s OrbiMed Credit Agreement (Note 10). The derivative liability is subject to re-measurement at each reporting period, at each balance sheet date and any change in fair value is recognized as a component of change in fair value of derivative liability in the statements of operations. The Company will continue to adjust the liability for changes in fair value until the final repayment of the Term Loan.

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Revenue

Product Revenue, Net

The Company recognizes revenue from sales of a single product, YCANTH (VP-102) (the "Product") in accordance with ASC Topic 606 – Revenue from Contracts with Customers. YCANTH (VP-102) became available for commercial sale and shipment to patients with a prescription in the United States in the third quarter of 2023. The Company sells the Product to Customers who in turn sell the Product directly to clinics, hospitals, and federal healthcare programs. Revenue is recognized as the Product is physically delivered to the Customers.

Gross product sales are reduced by corresponding gross-to-net ("GTN") estimates using the expected value method, resulting in the Company’s reported “Product revenue, net” in the accompanying statements of operations. Product revenue, net reflects the amount the Company ultimately expects to realize in net cash proceeds, taking into account the current period gross sales and related cash receipts and the subsequent cash disbursements on these sales that the Company estimates for the various GTN categories discussed below. The GTN estimates are based upon information received from external sources, such as written or oral information obtained from our customers with respect to their period-end inventory levels and sales to end-users during the period, in combination with management’s informed judgments. Due to the inherent uncertainty of these estimates, the actual amount of product returns, government chargebacks, prompt pay discounts, commercial rebates, Medicaid rebates, co-pay assistance and distribution, data, and group purchasing organizations ("GPO") administrative fees may be materially above or below the amount estimated. Variance between actual amounts and estimated amounts may result in prospective adjustments to reported net product revenue.

Each of the GTN estimate categories are discussed below:

Product Returns Allowances: The Customers are contractually permitted to return purchased Product in certain circumstances. The Company records discrete reserves if Product held by customers, forecasted sales and expiration of Product warrant a reserve. As historical data for returns of the Product becomes available over time, the Company will utilize historical return rates of the Product in making its estimates. Returned Product is typically destroyed, since substantially all returns are due to expiry and cannot be resold.

Government Chargebacks: The Product is subject to pricing limits under certain federal government programs, including Medicare and the 340B drug pricing program. Qualifying entities (the "End-Users") purchase the Product from the Customers at their applicable qualifying discounted price. The chargeback amount the Company incurs represents the difference between the Company’s contractual sales price to the Customers and the end-user’s applicable discounted purchase price under the government program.

Medicaid Rebates: The Product is subject to state government-managed Medicaid programs, whereby rebates are issued to participating state governments. These rebates arise when a patient treated with the Product is covered under Medicaid, resulting in a discounted price for the Product under the applicable Medicaid program. The Medicaid rebate accrual calculations require the Company to project the magnitude of its sales, by state, that will be subject to these rebates.

Patient Assistance: The Company offers a voluntary co-pay patient assistance program intended to provide financial assistance to eligible patients with a prescription drug co-payment required by payors and coupon programs for cash payors. The calculation of the current liability for this assistance is based on an estimate of claims and the cost per claim that the Company expects to receive associated with YCANTH (VP-102) that has been recognized as revenue but remains in the distribution channel inventories at the end of each reporting period.

Distribution, Data, and GPO Administrative Fees: Distribution, data, and GPO administrative fees are paid to authorized wholesalers/distributors of the Company’s products for various commercial services including contract administration, inventory management, delivery of end-user sales data, and product returns processing. These fees are based on a contractually-determined percentage of the Company’s applicable sales.

Collaboration Revenues

The Company has generated collaboration revenue through its licensing and collaboration arrangements. The terms of the arrangements typically include payments to the Company of one or more of the following: nonrefundable, up-front license fees; regulatory and commercial milestone payments; payments for manufacturing supply of product and services; materials shipped to support development; and royalties on net sales of licensed products.

In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs the following steps:

(i)identification of the promised goods or services in the contract;

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(ii)determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract;

(iii)measurement of the transaction price, including the constraint on variable consideration;

(iv)allocation of the transaction price to the performance obligations; and

(v)recognition of revenue when (or as) the Company satisfies each performance obligation. The Company’s revenue arrangements may include the following:

Up-front License Fees: If a license is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone Payments: At the inception of an agreement that includes regulatory or commercial milestone payments, the Company evaluates whether each milestone is considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At each reporting period, the Company assesses the probability of achievement of each milestone under its current agreements. The Company recognized $10.0 million in milestone revenue during the three months ended September 30, 2025, following regulatory approval of YCANTH (TO-208) by Japan's Ministry of Health. Total milestone revenue of $18.0 million was recognized during the nine months ended September 30, 2025.

Royalties: If the Company is entitled to receive sales-based royalties from its collaborator, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, provided the reported sales are reliably measurable, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Manufacturing Supply and Research Services: Arrangements that include a promise for supply of drug substance or drug product for either clinical development or commercial supply at the licensee’s discretion are generally considered as options. The Company assesses if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations. If not, the supply services are recognized as collaboration revenue as the Company provides the services.

The Company receives payments from its licensees based on schedules established in each contract. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the licensees and the transfer of the promised goods or services to the licensees will be one year or less.

Deferred Revenue: The Company records deferred revenue when a customer prepays for goods or services, or when the Company has an unconditional right to bill but has not yet delivered the performance obligation. Deferred revenue is primarily comprised of deposits on customer product orders yet to be delivered. The Company expects to recognize all of the deferred revenue within the next 6 months.

Cost of Product Revenue

Cost of product revenue includes the cost of inventory sold, which includes direct manufacturing, production and packaging materials for YCANTH (VP-102) sales.

Cost of Collaboration Revenue

Cost of collaboration revenue consisted of supplies and development activity with Torii.

Fair Value Measurement

ASC Topic 820, Fair Value Measurement, provides guidance on the development and disclosure of fair value measurements. Under this accounting guidance, fair value is defined as an exit price, representing the amount that would be

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received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.

Level 3: Unobservable inputs which are supported by little or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

At September 30, 2025, the Company’s financial instruments included cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, notes payable and a derivative liability. The carrying amount of accounts payable, accounts receivable and accrued expenses approximates fair value due to the short-term maturities of these instruments. Notes payable are carried at amortized cost, which approximates fair value.

The following table presents the Company’s fair value information for liabilities measured at fair value on a recurring basis. The Company had no liabilities measured at fair value on a recurring basis at September 30, 2024.


	As of September 30, 2025
	(Level 1)		(Level 2)		(Level 3)
Recurring fair value measurements
Derivative liability	$	—	$	—	$	1,762

The following is a rollforward of the derivative liability:


Balance at December 31, 2024	$	2,648
Change in fair value	(886)
Balance at September 30, 2025	$	1,762

The Company estimated the fair value of the derivative liability using a lattice model with an interest rate lattice consistent with the Hull-White model. The derivative liability was classified within Level 3 of the fair value hierarchy due to the use of unobservable inputs. The key inputs into the lattice model for the derivative liability were as follows:


	September 30, 2025
Expected term (years)	2.82
Credit spread	13.0	%

Net Loss Per Share

Net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period including pre-funded warrants to purchase shares of common stock that were issued in an underwritten offering in February 2023 and November 2024 (Note 7). The pre-funded warrants to purchase common stock are included in the calculation of basic and diluted net loss per share as the exercise price of $0.0001 per share is non-substantive and is virtually assured. Diluted net loss per share excludes the potential impact of common stock options, unvested shares of restricted stock and warrants because their effect would be anti-dilutive due to the Company's net loss. Since the Company had a net loss in each of the periods presented, basic and diluted net loss per common share are the same.

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The table below provides potential shares outstanding that were not included in the computation of diluted net loss per common share, as the inclusion of these securities would have been anti-dilutive:


	September 30,
	2025	2024
Shares issuable upon exercise of stock options	1,006,478	638,961
Non-vested shares under restricted stock grants	25,000	27,250
Shares issuable upon exercise of warrants pursuant to debt financing	51,855	51,855
Shares issuable upon exercise of warrants pursuant to Torii amendment	50,000	50,000
Shares issuable upon exercise of Series A and B warrants pursuant to 2024 equity financing	4,775,406	—
Total	5,908,739	768,066

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 is intended to improve income tax disclosure requirements by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) the disaggregation of income taxes paid by jurisdiction. The guidance makes several other changes to the income tax disclosure requirements as well. The guidance in ASU 2023-09 will be effective for annual reporting periods in fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact that the adoption of ASU 2023-09 will have on its financial statements and disclosures.

In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses. ASU 2024-03 requires additional disclosure of specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The requirements will be applied prospectively with the option for retrospective application. The Company is currently evaluating the impact that the adoption of ASU 2024-03 will have on its financial statements and disclosures.

Legislative Changes

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. This legislation includes changes to U.S. federal tax law, which may be subject to further clarification and the issuance of interpretive guidance. The Company is assessing the legislation and its effect on its financial statements. The Company expects to finalize its assessment in the fourth quarter of 2025, however, due to the existence of a full valuation allowance against the Company's U.S. federal deferred tax assets, the Company does not expect the OBBBA to have a material impact on its financial statements.

Note 3 —Inventory

Upon FDA approval of YCANTH (VP-102) for the treatment of molluscum contagiosum on July 21, 2023, the Company began capitalizing the purchases of saleable inventory of YCANTH (VP-102) from suppliers. Inventory consisted of the following (in thousands):


	September 30, 2025		December 31, 2024
Raw materials	$	973	$	1,082
Work in process	405		664
Finished goods	926		717
Total inventory	$	2,304	$	2,463

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Note 4—Property and Equipment

Property and equipment, net consisted of (in thousands):


	September 30, 2025		December 31, 2024
Machinery and equipment	$	576	$	1,164
Office equipment	326		326
Office furniture and fixtures	303		303
Leasehold improvements	54		54
	1,259		1,847
Accumulated depreciation	(1,034)		(1,258)
Total property and equipment, net	$	225	$	589

Depreciation expense for the three months ended September 30, 2025 and 2024 was $21,807 and $0.1 million, respectively. Depreciation expense for the nine months ended September 30, 2025 and 2024 was $0.1 million and $0.3 million, respectively.

Note 5—Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):


	September 30, 2025		December 31, 2024
Gross to net reserves	$	8,661	$	10,316
Compensation and related costs	1,794		1,173
Commercial-related costs	690		407
Professional fees	731		618
Clinical trials and drug development	665		892
Other current liabilities	59		105
Total accrued expenses and other current liabilities	$	12,600	$	13,511

Note 6—Commitments and Contingencies

Litigation

On June 6, 2022, plaintiff Kranthi Gorlamari ("Plaintiff") filed a putative class action complaint captioned Gorlamari v. Verrica Pharmaceuticals Inc., et al., in the U.S. District Court for the Eastern District of Pennsylvania against us and certain of our current and former officers and directors ("Defendants"). On January 12, 2023, the Plaintiff filed an amended complaint alleging that Defendants violated federal securities laws by, among other things, failing to disclose certain manufacturing deficiencies at the facility where our contract manufacturer produced bulk solution for the YCANTH (VP-102) drug device and that such deficiencies posed a risk to the prospects for regulatory approval of YCANTH (VP-102) for the treatment of molluscum. The amended complaint seeks unspecified compensatory damages and other relief on behalf of Plaintiff and all other persons and entities which purchased or otherwise acquired our securities between May 19, 2021 and May 24, 2022 (the "Putative Class Period").

On January 12, 2024, the Court granted in part and denied in part Defendants’ motion to dismiss the amended complaint. The Court held that Plaintiff’s claims relating to statements made in May and June 2021 were sufficiently pled, but dismissed Plaintiff’s claims relating to all other statements made during the Putative Class Period. On January 26, 2024, Plaintiff filed a second amended complaint in an attempt to cure certain of the deficiencies identified in the January 12, 2024 ruling. Defendants’ motion to dismiss the second amended complaint was fully briefed as of April 22, 2024. On September 3, 2024, the Court granted in part and denied in part Defendants’ motion to dismiss the second amended complaint. The Court dismissed Plaintiff’s claims related to one of the two individual defendants but held that Plaintiff’s claims against the Company and the other individual defendant were sufficiently pled.

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In addition, on October 21, 2024, May 12, 2025, and June 26, 2025, plaintiffs Ivan S. Cohen, Paul Cannon, and Joseph Bonaccorso, respectively, each filed a putative stockholder derivative lawsuit in the U.S. District Court for the Eastern District of Pennsylvania. Each derivative complaint names the company as a nominal defendant and purports to bring claims on behalf of the company against certain of our current and former directors and officers for alleged violations of the federal securities laws and breaches of their fiduciary duties in relation to substantially the same factual allegations as the above-described putative class action lawsuit. Each derivative complaint primarily seeks to recover for the company compensatory damages for losses allegedly sustained related to the facts alleged, restitution, and punitive damages. On December 16, 2024, the Court granted the parties' joint stipulation to stay the Cohen derivative lawsuit. On July 21, 2025, the Court granted the parties' joint stipulation in the Cohen and Cannon derivative lawsuits to consolidate the two actions and stay the consolidated action. On July 24, 2025, the plaintiff in the Bonaccorso derivative lawsuit filed a corrected complaint to clarify that the named plaintiff "is not Joseph (Joe) Bonaccorso, the former Chief Commercial Officer" of the Company. On July 29, 2025, the plaintiff in the Bonaccorso derivative lawsuit filed a notice voluntarily dismissing the action without prejudice.

The Company is also involved in ordinary, routine legal proceedings that are not considered by management to be material. In the opinion of Company counsel and management, the ultimate liabilities resulting from such legal proceedings will not materially affect the financial position of the Company or its results of operations or cash flows.

Note 7—Stockholders’ Deficit

Common Stock

The Company had authorized 200,000,000 shares of common stock, $0.0001 par value per share, as of September 30, 2025 and December 31, 2024. Each share of common stock is entitled to one vote. Common stock owners are entitled to dividends when funds are legally available and declared by the Board.

November 2024 Offering

In November 2024, the Company sold 4,551,824 shares of its common stock, and in lieu of common stock to certain investors, pre-funded warrants to purchase 223,595 shares of its common stock, with accompanying Series A warrants to purchase 2,387,703 shares of its common stock at an exercise price of $10.68 per share of common stock and Series B warrants to purchase 2,387,703 shares of its common stock at an exercise price of $13.35 per share of common stock (the "November 2024 Offering"). The offering price was $8.90 per share of common stock and accompanying Series A and Series B warrants, or $8.899 per pre-funded warrant and accompanying Series A and Series B warrants. The Series A warrants expire in November 2025 and the Series B warrants expire in November 2029. The November 2024 Offering resulted in net proceeds of approximately $39.6 million after deducting underwriting discounts and commissions, and offering expenses of $2.9 million.

Pre-funded Warrant Exercises

Pre-funded warrants for 66,095, 70,100, 191,248, and 44,300 shares of common stock were exercised in December 2024, April 2025, July 2025 and August 2025, respectively.

Warrants

The following table summarizes the Company’s outstanding warrants, all of which are exercisable for shares of common stock:


	September 30, 2025
	Number of warrants	Exercise Price		Expiration Date
Equity classified warrants
Warrants issued in connection with OrbiMed debt facility	51,855	$	34.5040	7/26/2033
Warrants issued in connection with Torii amendment	50,000	$	95.6000	5/14/2034
Series A warrants issued pursuant to 2024 underwritten public offering	2,387,703	$	10.6800	11/21/2025
Series B warrants issued pursuant to 2024 underwritten public offering	2,387,703	$	13.3500	11/20/2029

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The OrbiMed warrants are eligible for a price adjustment if the Company consummates any share distribution at a price per common shares less than the exercise price. As a result of the November 2024 Offering, the OrbiMed warrant exercise price was adjusted down to $34.50 per share. The Torii warrants become exercisable at different clinical milestones related to the global Phase 3 Program for common warts (See Note 11 for more details).

Note 8—Stock-Based Compensation

Stock-based compensation expense, which includes expense for both options and restricted stock units, has been reported in the Company’s statements of operations as follows (in thousands):


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2025		2024		2025		2024
Selling, general and administrative	$	431	$	1,503	$	1,804	$	4,840
Research and development	287		605		828		1,568
Total stock-based compensation	$	718	$	2,108	$	2,632	$	6,408

Stock Options

The following table summarizes the Company’s stock option activity for the nine months ended September 30, 2025:


	Number of shares	Weighted average exercise price		Weighted average remaining contractual term (in years)	Aggregate intrinsic value
Outstanding as of December 31, 2024	800,544	$	49.49	7.3
Granted	551,230	6.29
Exercised	—	—			—
Forfeited	(124,932)	22.18
Expired	(220,364)	96.95
Outstanding as of September 30, 2025	1,006,478	$	18.83	8.9	$	—
Options vested and exercisable as of September 30, 2025	236,408	$	47.50	7.5	$	—

The aggregate intrinsic value in the above table is calculated as the difference between fair market value of the Company’s common stock price and, as of September 30, 2025, the exercise price of the stock options. The weighted average grant date fair value per share for the employee and non-employee stock options granted during the nine months ended September 30, 2025 was $4.30. As of September 30, 2025, the total unrecognized compensation related to unvested stock option awards granted was $4.5 million, which the Company expects to recognize over a weighted-average period of 2.32 years.

Restricted Stock Units

Compensation expense related to RSUs is recognized in the Company’s statements of operations based on the fair market value at the date of grant over the period expected to vest. As of September 30, 2025, the remaining unrecognized compensation expense related to the RSUs was $1,961, which the Company expects to recognize over a weighted average service period of 0.25 years.

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The following table summarizes the Company's restricted stock unit activity for the nine months ended September 30, 2025:


	Number of Shares	Weighted Average Grant Date Fair Value
Nonvested as of December 31, 2024	38,426	$	22.40
Granted	—	—
Forfeited	(7,000)	48.00
Vested	(6,426)	48.00
Nonvested as of September 30, 2025	25,000	$	17.50

Note 9—Leases

The Company leases office space located in West Chester, Pennsylvania that serves as the Company’s headquarters. The initial term expires on September 1, 2027. Base rent over the initial term is approximately $2.4 million, and the Company is also responsible for its share of the landlord’s operating expenses.

The Company leased office space in Scotch Plains, New Jersey under an agreement classified as an operating lease, which commenced on May 1, 2022 and was due to expire on April 30, 2025. In September 2024, the Company terminated the agreement effective November 30, 2024. No termination fees were incurred.

The Company entered into a fleet program to provide vehicles for its sales force. The vehicles are leased for a term of 52 months and classified as finance leases. On December 31, 2024, the Company reduced the right-of-use assets by $1.6 million and right-of use liabilities by $1.5 million related to these finance leases. The Company recorded $0.1 million of additional right-of-use assets and $0.1 million of additional right-of-use liabilities during the three and nine months ended September 30, 2025.

The components of lease expense are as follows (in thousands):


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2025		2024		2025		2024
Finance lease cost:
Amortization right-of-use assets	$	88	$	187	$	252	$	482
Interest on lease liabilities	$	19	$	52	57		143
Total finance lease costs	$	107	$	239	$	309	$	625
Operating lease:
Operating lease costs	$	85	$	98	$	256	$	292

Maturities of the Company’s operating leases, excluding short-term leases, as of September 30, 2025 are as follows (in thousands):


	Operating		Finance
2025 (remaining 3 months)	$	91	$	116
2026	366		409
2027	246		371
2028	—		173
Thereafter	—		33
Total lease payments	703		1,102
Less imputed interest	(38)		(107)
Lease liability	$	665	$	995

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The weighted average remaining lease term and discount rates for the Company's leases as of September 30, 2025 are as follows:


	Operating		Finance
Weighted average remaining lease term (years)	1.92		2.97
Weighted average discount rate	6.25	%	7.74	%

Note 10—Debt

On July 26, 2023 (the "Closing Date"), the Company entered into a Credit Agreement (the "Credit Agreement"), by and between the Company, as borrower, and OrbiMed Royalty & Credit Opportunities IV, LP, a Delaware limited partnership (the "Initial Lender"), as a lender, and each other lender that may from time to time become a party thereto (each, including the Initial Lender, and together with their affiliates, successors, transferees and assignees, the "Lenders"), and OrbiMed Royalty & Credit Opportunities IV, LP, as administrative agent for the Lenders (in such capacity, the "Administrative Agent"). The Credit Agreement provides for a five-year senior secured credit facility in an aggregate principal amount of up to $125.0 million (the "Loan Facility"). The Company borrowed $50.0 million under the Credit Agreement on July 26, 2023, resulting in net proceeds of approximately $44.1 million after payment of certain fees and transaction related expenses. The Company will not be able to borrow any additional funds under the Credit Agreement.

Amounts borrowed under the Loan Facility will mature on July 26, 2028 (the "Maturity Date"). Based on the Company's net revenue attributable to YCANTH on a trailing 12-month basis not meeting a specified amount set forth in the Credit Agreement as of December 31, 2024, the Company became obligated to start making principal payments starting on January 1, 2025. The Company is obligated to repay the principal amount of the loan on the last day of each month in equal monthly installments through the Maturity Date, together with the applicable repayment premium and the exit fee. Beginning December 31, 2024, the Company recorded a derivative liability related to the accelerated settlement of the Credit Agreement.

During the term of the Loan Facility, interest payable in cash by the Company shall accrue on any outstanding balance due at a rate per annum equal to the higher of (x) the Secured Overnight Financing Rate ("SOFR") rate (which is the forward-looking term rate for a one-month tenor based on the secured overnight financing rate administered by the CME Group Benchmark Administration Limited) and (y) 4.0% plus, in either case, 8.0%. During an event of default, any outstanding amount under the Loan Facility will bear interest at a rate of 4.0% in excess of the otherwise applicable rate of interest. The Company paid or will pay certain fees with respect to the Loan Facility, including an upfront fee, an unused fee on the undrawn portion of the Loan Facility, an administration fee, a prepayment premium and an exit fee, as well as certain other fees and expenses of the Administrative Agent and the Lenders.

The Credit Agreement contains customary events of default, including, but not limited to, nonpayment of principal, interest, fees or other amounts; material inaccuracy of a representation or warranty; failure to perform or observe covenants; cross-defaults with certain other indebtedness; bankruptcy and insolvency events; material monetary judgment defaults; impairment of any material definitive loan documentation; other material adverse effects; key permit and other regulatory events; key person events; and change of control. In addition, the Credit Agreement contains a financial covenant that the Company must maintain a liquidity of at least $10.0 million and that the Company’s quarterly and annual financial statements not be subject to any qualification or statement which is of a "going concern" or similar nature. The qualification of a "going concern" was waived for the financial statements for the quarters ending September 30, 2025, September 30, 2025 and the quarter and year ending December 31, 2025. Upon the occurrence of an event of default (subject to notice and grace periods), additional interest of 4.0% per annum applies and obligations under the Credit Agreement could be accelerated. As of September 30, 2025, the Company was in compliance with all covenants under the Credit Agreement, as amended.

On the Closing Date, the Company also issued the Initial Lender warrants to purchase up to 51,855 shares of the Company’s common stock, at an exercise price of $60.26 per share, which have a term of 10 years from the issuance date.

On each of December 20, 2023 and January 31, 2024, the Company entered into an amendment to the Credit Agreement in order to extend a deadline for a specified regulatory milestone. For the second amendment on January 31, 2024, the Company paid an upfront amendment fee of $250,000 and agreed to make an additional payment of $250,000 if a specified regulatory milestone is not achieved by a specified date.

On May 6, 2024, the Company entered into an amendment to the Credit Agreement (the "Third Amendment") pursuant to which the Lenders waived the going concern requirement under Section 7.1(b) of the Credit Agreement with respect to the financial statements for the quarter ended March 31, 2024. In connection with the Third Amendment, the Company paid an amendment fee of $100,000.

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On June 26, 2024, the Company entered into an amendment to the Credit Agreement (the "Fourth Amendment") changing the commencement date of the Revenue Test to September 30, 2024. In connection with the Fourth Amendment, the Company paid an amendment fee of $500,000.

On August 2, 2024, the Company entered into the fifth amendment and waiver to the Credit Agreement (the "Fifth Amendment") pursuant to which the Lenders waived the going concern requirement under Section 7.1(b) of the Credit Agreement with respect to the financial statements for the quarters ended September 30, 2024 and September 30, 2024, the commencement date for the Revenue Test was changed to December 31, 2024 and the exit fee for the Initial Loans (as defined in the Credit Agreement) was increased from 5.0% to 7.5%.

On February 18, 2025, the Company entered into a waiver to the Credit Agreement pursuant to which the Lenders waived specified covenants under the Credit Agreement, including the requirements under Section 7.1(b) and Section 7.1(c) of the Credit Agreement that there be no "going concern" qualification with respect to the financial statements for the year ended December 31, 2024 and the quarter ended March 31, 2025.

On June 10, 2025, the Company entered into the sixth amendment and waiver to the Credit Agreement (the "Sixth Amendment") pursuant to which the Lenders waived specified covenants under the Credit Agreement, including the requirements under Section 7.1(b) and Section 7.1(c) of the Credit Agreement that there be no "going concern" qualification with respect to the financial statements for the quarters ending June 30, 2025, September 30, 2025 and the quarter and year ending December 31, 2025. In connection with the Sixth Amendment, the Company paid an amendment fee of $110,465.

For the three and nine months ended September 30, 2025, the Company recognized interest expense related to the Credit Agreement of $2.0 million and $6.3 million, of which $1.3 million and $4.3 million, respectively, was interest on the term loan and $0.7 million and $2.1 million, respectively, was non-cash interest expense related to the amortization of deferred debt issuance costs and accrual of the final payment fee. For the three and nine months ended September 30, 2024, the Company recognized interest expense related to the Credit Agreement of $2.4 million and $7.0 million, of which $1.8 million and $5.4 million was interest on the term loan and $0.6 million and $1.6 million was non-cash interest expense related to the amortization of deferred debt issuance costs and accrual of the final payment fee.

The following table summarizes the composition of debt reflected on the balance sheet as of September 30, 2025 (in thousands):


	As of September 30, 2025

	Short-term		Long-term		Total
Gross proceeds	$	13,953	$	25,580	$	39,533
Accrued final payment fee	1,047		1,919		2,966
Accrued repayment fee	419		—		419
Unamortized debt discount and issuance costs	(2,961)		(5,880)		(8,841)
Total debt, net	$	12,458	$	21,619	$	34,077

The aggregate maturities of debt are as follows:


	Debt		Final payment fee		Repayment fee		Total
2025 (3 months remaining)	$	3,488	$	262	$	140	$	3,890
2026	13,953		1,047		279		15,279
2027	13,953		1,047		—		15,000
2028	8,139		610		—		8,749
Total	$	39,533	$	2,966	$	419	$	42,918

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Note 11—License and Collaboration Agreements

Torii Agreements

On March 17, 2021, the Company entered into a collaboration and license agreement (the "Torii Agreement") with Torii, pursuant to which the Company granted Torii an exclusive license to develop and commercialize the Company’s product candidates that contain a topical formulation of cantharidin for the treatment of molluscum contagiosum and common warts in Japan, including YCANTH (VP-102). Additionally, the Company granted Torii a right of first negotiation with respect to additional indications for the licensed products and certain additional products for use in the licensed field, in each case in Japan.

As of September 30, 2025, the Company had received milestone payments from Torii in prior periods totaling $38.0 million, including an $8.0 million milestone payment in July 2025 and a $10.0 million milestone payment in September 2025, as described below. As of September 30, 2025, the Company is entitled to receive from Torii an additional $32.0 million in aggregate payments, contingent on achievement of specified regulatory and sales milestones, in addition to transfer price payments for supply of product, which will begin to be replaced by royalty payments as part of the manufacturing transfer. The transfer price and royalty payments shall be payable, on a product-by-product basis, beginning on the first commercial sale of such product and ending on the latest of (a) expiration of the last-to-expire valid claim contained in certain licensed patents in Japan that cover such product, (b) expiration of regulatory exclusivity for the first indication for such product in Japan, and, (c) (i) with respect to the first product, ten years after first commercial sale of such product, and, (ii) with respect to any other product, the later of (x) ten years after first commercial sale of the first product and (y) five years after first commercial sale of such product.

The Torii Agreement expires on a product-by-product basis upon expiration of Torii’s obligation under the agreement to make transfer price payments for such product. Torii has the right to terminate the agreement upon specified prior written notice to us. Additionally, either party may terminate the agreement in the event of an uncured material breach of the agreement by, or insolvency of, the other party. The Company may terminate the agreement in the event that Torii commences a legal action challenging the validity, enforceability or scope of any licensed patents.

The Company recognized collaboration revenue of $0.7 million and $0.1 million for the three months ended September 30, 2025 and 2024, respectively, and $0.9 million and $1.0 million for the nine months ended September 30, 2025 and 2024, related to commercial supply and development activity. The cost of collaboration revenue consists of expenses incurred by the Company for commercial supply and to support development and testing services.

On May 14, 2024, the Company entered into the First Amendment to the Torii Agreement (the "First Amendment"). Pursuant to the First Amendment, the Company and Torii agreed on the framework of a cost sharing arrangement for the global Phase 3 program of YCANTH (VP-102) for the treatment of common warts, with Torii paying all the costs of the Program when due and the Company repaying Torii half of the cost (the "Company Portion"). The results of the Program will be utilized by the Company in the filing of its new drug application with the FDA for YCANTH (VP-102) for the treatment of common warts. The Company Portion accrues interest annually at the greater of (i) the one-month SOFR plus 2% and (ii) 6%. Torii may recoup the Company's share of the costs plus applicable interest against certain development milestone payments in the Torii Agreement that would otherwise be due to the Company under terms of the Torii Agreement. In addition, if Torii has not received payment or other recoupment in full of the Company Portion plus applicable interest within 60 months after August 20, 2025, the date on which Torii made its first payment for the Program costs, Torii may invoice the Company for the remaining Company Portion plus applicable interest.

In conjunction with the First Amendment, the Company issued Torii a warrant to purchase up to 50,000 shares of the Company’s common stock at an exercise price per share of $95.60. The warrant has a term of ten years and is exercisable only with respect to the shares that have vested as of the date of exercise. The shares underlying the warrant will vest as follows: one-third on the date the first patient is dosed in the Program, one-third on the date that the database lock with respect to the Trial occurs, and one-third on the date the Company submits a new drug application to the FDA for YCANTH (VP-102) for the treatment of common warts.

On June 27, 2025, the Company entered into the Second Amendment to the Torii Agreement (the "Second Amendment"), which further revised the details of the cost sharing arrangement initially negotiated as part of the First Amendment. The Second Amendment among other things provided for the acceleration of an $8.0 million milestone fee payment that was received by the Company in July 2025. Pursuant to the Second Amendment, in September 2025, Torii also paid to the Company a $10.0 million milestone payment upon the approval of TO-208, referred to as YCANTH in the U.S., for molluscum contagiosum in Japan, in cash, rather than as an offset to costs of the Program as originally contemplated under the First Amendment. Torii will be paying the first $40.0 million of out-of-pocket costs when due, with the Company repaying to Torii half of such costs over time. Consistent with the First Amendment, to repay its portion of the costs of the Program, the Company will offset amounts otherwise due from Torii for future royalties, certain transfer

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price payments and remaining development milestones. To the extent the cost of the Program exceeds $40.0 million, the Company will pay such excess costs, up to a specified maximum amount, and Torii will repay to the Company half of such costs. The Second Amendment also sets forth that the Company will initiate a manufacturing transfer to Torii, which is expected to take several years, that will allow Torii to produce YCANTH (TO-208) applicators to be sold in Japan. In the interim, Torii will continue to purchase applicators from the Company. After the transfer of at least one component of the manufacturing process, the Company will begin earning royalties related to net sales in Japan of applicators manufactured by Torii and/or its manufacturing partners in lieu of the transfer price for completed applicators.

The Company is accounting for the Second Amendment as a R&D funding arrangement since the Company is obligated to repay Torii regardless of the outcome of the research such that a substantive and genuine transfer of risk has not occurred. During the nine months ended September 30, 2025, Torii paid $8.6 million to a contract research organization ("CRO"), half of which comprises the Company Portion.

Upon Torii’s $8.6 million payment to the CRO, representing an initial deposit for clinical trial services and fees, the Company recorded a $4.3 million funding liability ("R&D Funding Liability") for the Company Portion it will pay to Torii, as described above, and a corresponding R&D asset ("Deferred R&D Services") of $4.3 million representing its right to the prepaid research and development services.

The Company will expense the Deferred R&D Services within R&D expense as the services are performed by the CRO. Because the R&D Funding Liability is with a collaborator and the interest rate is below market, the Company is imputing interest expense using a 12% market rate of interest, and the difference between the market rate of interest and the rate being charged by Torii will reduce research and development expense. Interest expense of $74,000 was recognized during the nine months ended September 30, 2025.

As part of the Program, the Company will also directly contract with third parties for certain clinical supply and distribution services that will be reimbursed by Torii and those reimbursements will be recognized as contra-research and development expense once incurred. As of September 30, 2025, the Company has recorded $0.5 million as contra-research and development expense.

Lytix Agreement

In August 2020, the Company entered into an exclusive license agreement with Lytix Biopharma AS ("Lytix") for the use of licensed technology, referred to as VP-315, to research, develop, manufacture, have manufactured, use, sell, have sold, offer for sale, import, and otherwise commercialize products for use in all malignant and pre-malignant dermatological indications, other than metastatic melanoma and metastatic Merkel cell carcinoma (the "Lytix Agreement"). As part of the Lytix Agreement, the Company has paid Lytix milestone fees of $3.6 million in previous periods. The Company is also obligated to pay up to $111.0 million contingent on achievement of specified development, regulatory, and sales milestones, as well as tiered royalties based on worldwide annual net sales ranging in the low double digits to the mid-teens, subject to certain customary reductions. The Company’s obligation to pay royalties expires on a country-by-country and product-by-product basis on the later of the expiration or abandonment of the last to expire licensed patent covering VP-315 anywhere in the world and expiration of regulatory exclusivity for VP-315 in such country. Additionally, all upfront fees and milestone-based payments received by the Company from a sublicensee will be treated as net sales and will be subject to the royalty payment obligations under the Lytix Agreement, and all royalties received by the Company from a sublicensee shall be shared with Lytix at a rate that is initially 50% but decreases based on the stage of development of VP-315 at the time such sublicense is granted.

Note 12 – Related Parties

Our Chief Executive Officer, Jayson Rieger, and our Chief Operating Officer, David Zawitz, are former employees of, and current consultants to, PBM Capital Group, LLC, an entity controlled by Paul B. Manning, a significant investor of the Company.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with (i) our unaudited interim financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and (ii) our audited financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the years ended December 31, 2024 and 2023 included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (the "SEC") on March 11, 2025. Our financial statements have been prepared in accordance with U.S. GAAP. Unless otherwise indicated, all information in this Quarterly Report on Form 10-Q gives effect to a 1-for-10 reverse stock split of our common stock that became effective on July 24, 2025, and all references to shares of common stock outstanding and per share amounts give effect to the reverse stock split.

We own various U.S. federal trademark applications and unregistered trademarks, including our company name and YCANTH. All other trademarks or trade names referred to in this Quarterly Report on Form 10-Q are the property of their respective owners. Solely for convenience, the trademarks and trade names in this report are referred to without the symbols ® and ™, but such references should not be construed as an indication that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words "expect," "anticipate," "intend," "believe," "may," "plan," "seek" or similar language. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our business and financial performance are subject to substantial risks and uncertainties. Our actual results could differ materially from those discussed in these forward-looking statements. In evaluating our business, you should carefully consider the information set forth in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 11, 2025, in this Quarterly Report under Part II - Item 1A "Risk Factors," and in our other filings with the SEC.

Overview

We are a dermatology therapeutics company developing and selling medications for skin diseases requiring medical intervention. Our commercial product and portfolio of product candidates are clinician administered therapies in areas of high unmet need. Our current product portfolio consists of one approved product with several potential follow-on indications, as well as an additional pipeline product. Our commercial product, YCANTH (VP-102), was approved by the U.S. Food and Drug Administration, or FDA, in July 2023 for the treatment of molluscum contagiosum in adult and pediatric patients two years of age and older. YCANTH (VP-102) is a proprietary drug-device combination that contains a GMP-controlled formulation of cantharidin. We are currently developing YCANTH (VP-102) for a potential follow-on indication for the treatment of common warts. Our second development candidate, VP-315, is an oncolytic peptide-based injectable therapy for the potential treatment of dermatology oncologic conditions, including basal cell carcinoma, or BCC.

Commercial Product

We commercially launched YCANTH (VP-102) in August 2023 in the United States for the treatment of molluscum contagiosum. We have built a specialized sales organization consisting of 36 employee sales representatives in the United States focused on pediatric dermatologists, dermatologists, primary care physicians and pediatricians.

In the fourth quarter of 2025, we expect to launch YCANTH Rx, a non-dispensing pharmacy, in order to streamline and simplify the provider experience by allowing offices to send all YCANTH prescriptions to the same place for prior authorization support to expedite speed-to-therapy.

In 2026, we expect to expand the field sales force to 50 employee sales representatives.

Additional Pipeline Products

YCANTH (VP-102) - Treatment of Common Warts

We also plan to advance YCANTH (VP-102) for common warts through a separate regulatory approval process and have begun the Phase 3 Program, or the Program, with our partner, Torii. We expect to dose the first patient in the Program in the United States in the fourth quarter of 2025.

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On October 20, 2025, we announced the Committee for Medicinal Products for Human Use of the European Medicines Agency provided positive feedback that supports the filing of a Marketing Authorization Application for YCANTH (VP-102), as a treatment for molluscum contagiosum in the EU. We currently retain all global rights to YCANTH outside of Japan and we are currently exploring non-dilutive partnerships to fund development and commercialization for YCANTH (VP-102) for the treatment of molluscum contagiosum, as well as YCANTH (VP-102) for common warts if approved, in additional geographic regions outside of the United States and Japan.

VP-315 - Treatment of Basal Cell Carcinoma

We are also developing VP-315 for the treatment of BCC and potentially additional dermatological oncology indications. We recently presented additional data at the Society for Immunotherapy of Cancer 40th Annual Meeting in November 2025, which showed that VP-315 induced a robust local immune response with both cell-mediated and humoral components, effectively shifting the tumor microenvironment from an immunosuppressive to an anti-tumor state, and additional data regarding the histologic assessment in non-injected lesions that suggests a potential abscopal-like effect. We have also obtained feedback from the FDA from the end-of-Phase 2 meeting earlier this year that supports an efficient Phase 3 program and path to registration for VP-315. This includes two Phase 3 studies of approximately 100 subjects each in placebo-controlled studies with a primary endpoint of complete clearance at week 14. Additional long-term follow up studies will all be deferred to post approval commitments. We believe these data, coupled with the EOP2 regulatory feedback, further support the clinical efficacy and histologic clearance observed in the Phase 2 BCC trial. These data also help inform next steps for the advancement of the program into Phase 3 clinical trials, with the company currently evaluting cost and logistics for the initiation of the Phase 3 program. This clarity also provides an opportunity for us to explore non-dilutive strategic partnerships to help fund the development and commercialization of VP-315.

Liquidity Overview

Since our inception in 2013, our operations have focused on developing YCANTH (VP-102), organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio and conducting clinical trials. We have funded our operations primarily through the sale of equity and equity-linked securities and through borrowings under loan agreements.

On July 26, 2023, we entered into a Credit Agreement, pursuant to which we borrowed $50.0 million under the Loan Facility (as defined in Note 10), resulting in net proceeds of approximately $44.1 million after payment of certain fees and transaction related expenses. Amounts borrowed under the Loan Facility will mature on July 26, 2028. Based on our net revenue attributable to YCANTH on a trailing 12-month basis not meeting a specified amount set forth in the Credit Agreement as of December 31, 2024, we became obligated to start making principal payments starting on January 1, 2025. We are obligated to repay the principal amount of the loan on the last day of each month in equal monthly installments through the maturity date, together with the applicable repayment premium and the exit fee.

The Credit Agreement contains customary events of default, including, but not limited to, nonpayment of principal, interest, fees or other amounts; material inaccuracy of a representation or warranty; failure to perform or observe covenants; cross-defaults with certain other indebtedness; bankruptcy and insolvency events; material monetary judgment defaults; impairment of any material definitive loan documentation; other material adverse effects; key permit and other regulatory events; key person events; and change of control. In addition, the Credit Agreement contains a financial covenant that we must maintain a liquidity of at least $10.0 million and that our quarterly and annual financial statements not be subject to any qualification or statement which is of a "going concern" or similar nature. The requirement to deliver financial statements that do not include a qualification of a "going concern" was waived for the financial statements for the quarters ending June 30, 2025, September 30, 2025 and the quarter and year ending December 31, 2025. If the requirement to deliver financial statements that do not include a qualification of a "going concern" is not waived for additional future periods or if additional financing is not raised to meet the liquidity test, we may be in default of the debt agreement in the near-term. Upon the occurrence of an event of default (subject to notice and grace periods), additional interest of 4% per annum applies and obligations under the Credit Agreement could be accelerated. As of September 30, 2025, we were in compliance with all covenants under the Credit Agreement as amended.

In November 2024, we closed an underwritten offering of 4,551,824 shares of our common stock (and, in lieu of common stock to certain investors that so chose, pre-funded warrants to purchase 223,595 shares of our common stock, or the pre-funded warrants), and in either case, accompanying Series A warrants to purchase 2,387,703 shares of our common stock at an exercise price of $10.68 per share of common stock, or the Series A Warrants, and Series B warrants to purchase 2,387,703 shares of our common stock at an exercise price of $13.35 per share of common stock, or the Series B Warrants, at a combined public offering price of $8.90 per share of common stock and accompanying Series A and Series B Warrants (or $8.899 per Pre-Funded Warrant and accompanying Series A and Series B Warrants). The offering resulted in net proceeds of $39.6 million, after deducting underwriting discounts and commissions, and offering expenses.

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As of September 30, 2025, we had cash and cash equivalents of $21.1 million. Based on our current business plan and current capital resources, combined with the uncertainty regarding the availability of additional funding and considering our debt obligations, including a requirement to maintain cash, cash equivalents and investments of at least $10.0 million at all times, we have concluded that there is substantial doubt regarding our ability to continue as a going concern within one year after the date these financial statements are issued. We have incurred substantial operating losses since inception and expect to continue to incur significant losses for the foreseeable future and may never become profitable. As of September 30, 2025, we had an accumulated deficit of $316.8 million. Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result should we be unable to continue as a going concern.

We plan to secure additional capital in the future through equity or debt financings, partnerships, or other sources to carry out our planned commercial and development activities. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate continued and future commercialization efforts and/or research and development programs.

We expect to continue to incur significant expenses and operating losses for the foreseeable future. Our expenses may increase in connection with our ongoing activities, as we:

•continue to establish our commercialization infrastructure and scale up external manufacturing and distribution capabilities to commercialize YCANTH (VP-102) for the treatment of molluscum contagiosum and product candidates for which we may obtain regulatory approval;

•continue our ongoing clinical programs evaluating VP-102 for the treatment of common warts and VP-315 for the treatment of BCC and potentially additional dermatological oncology indications;

•pursue regulatory approvals for YCANTH (VP-102) for the treatment of common warts and VP-315 for the treatment of BCC;

•adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products;

•maintain, expand and protect our intellectual property portfolio;

•hire and retain clinical, manufacturing, commercialization and scientific personnel; and

•incur additional legal, accounting and other expenses while operating as a public company.

Reverse Stock Split

On July 25, 2025, we effected a one-for-ten (1-for-10) reverse stock split (the "Reverse Stock Split"). Pursuant to their terms, a proportionate adjustment was made to the per share exercise price and number of shares issuable under all of the Company’s outstanding options and warrants, and the number of shares authorized for issuance pursuant to the Company’s equity incentive plans have been reduced proportionately. The Reverse Stock Split did not reduce the number of authorized shares of common stock and did not alter the par value.

All share and per share amounts of common stock presented in this Quarterly Report on Form 10-Q have been retroactively adjusted to reflect the Reverse Stock Split.

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the balance sheets and the reported amounts of expenses during the reporting periods. In accordance with GAAP, we evaluate our estimates and judgments on an ongoing basis.

A summary of our significant accounting policies are disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. However, we believe that the additional accounting policies disclosed in Note 2 to our financial statements are important to understanding and evaluating our reported financial results.

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Components of Results of Operations

Product Revenue, Net

We recognize revenue from sales of YCANTH (VP-102), or the Product, in accordance with ASC Topic 606 – Revenue from Contracts with Customers. YCANTH (VP-102) is available for commercial sale and shipment for the treatment of patients by a healthcare provider in the United States. We sell the Product to several pharmaceutical wholesalers and distributors, or the Customers, who in turn sell the Product directly to clinics, hospitals, and federal healthcare programs. Revenue is recognized as the Product is physically delivered to the Customers.

Gross product sales are reduced by corresponding gross-to-net, or GTN, estimates using the expected value method, resulting in our reported “Product revenue, net” in the accompanying statements of operations. Product revenue, net reflects the amount we ultimately expect to realize in net cash proceeds, taking into account the current period gross sales and related cash receipts and the subsequent cash disbursements on these sales that we estimate for the various GTN categories as well as adjustments for any potential future product returns from customers. The GTN estimates are based upon information received from external sources, such as written or oral information obtained from our customers with respect to their period-end inventory levels and sales to end-users during the period, in combination with management’s informed judgments. Due to the inherent uncertainty of these estimates, the actual amount of product returns, government chargebacks, prompt pay discounts, commercial rebates, Medicaid rebates, co-pay assistance and distribution, data, and group purchasing organizations, or GPOs, administrative fees may be materially above or below the amount estimated. Variance between actual amounts and estimated amounts may result in prospective adjustments to reported net product revenue.

License and Collaboration Revenue

License and collaboration revenue represents revenue from the Torii Agreement pursuant to which we granted Torii an exclusive license to develop and commercialize our product candidates that contain a topical formulation of cantharidin for the treatment of molluscum contagiosum and common warts in Japan. In September 2025, YCANTH (VP-102) received regulatory approval from Japan's Ministry of Health for treatment of molluscum contagiosum and will be available in Japan through our development partner Torii as TO-208.

Operating Expenses

Cost of Product Revenue

Cost of product revenue includes the cost of inventory sold, which includes direct manufacturing and supply chain costs. Cost of product revenue also includes period costs related to excess and obsolete inventory write-downs.

Cost of Collaboration Revenue

The costs of collaboration revenue consists of payments for commercial product and manufacturing supply to support development and testing services pursuant to the Torii Clinical Supply Agreement.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist principally of salaries and related costs for personnel in sales, executive and administrative functions, including stock-based compensation, travel expenses and recruiting expenses. Other selling, general and administrative expenses include cost of samples, sponsorships, consumer and health care professional marketing and advertising expense, insurance costs, and professional fees for audit, tax and legal services.

Research and Development Expenses

Research and development expenses consist of expenses incurred in connection with the discovery and development of YCANTH (VP-102) for the treatment of molluscum contagiosum, potential follow-on indications for YCANTH (VP-102), including common warts, and our other product candidates in addition to VP-315 for BCC. We expense research and development costs as incurred. These expenses include:

•expenses incurred under agreements with contract research organizations, or CROs, as well as investigative sites and consultants that conduct our clinical trials and preclinical studies;

•manufacturing and supply scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial supply and commercial supply, including manufacturing validation batches;

•outsourced professional scientific development services;

•employee-related expenses, which include salaries, benefits and stock-based compensation;

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•expenses relating to regulatory activities; and

•laboratory materials and supplies used to support our research activities.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to increase over the next several years as we increase personnel costs, including stock-based compensation, initiate and conduct clinical trials of YCANTH (VP-102) in patients with common warts and VP-315 for BCC and potentially additional dermatological oncology indications and prepare regulatory filings for our product candidates.

The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of, or when, if ever, material net cash inflows may commence from YCANTH (VP-102) or our other product candidates. This uncertainty is due to the numerous risks and uncertainties associated with the duration and cost of clinical trials, which vary significantly over the life of a project as a result of many factors, including:

•the number of clinical sites included in the trials;

•the length of time required to enroll suitable patients;

•the number of patients that ultimately participate in the trials;

•the number of doses patients receive;

•the duration of patient follow-up; and

•the results of our clinical trials.

Our expenditures are subject to additional uncertainties, including the manufacturing process for our product candidates, the terms and timing of regulatory approvals, and the expense of filing, prosecuting, defending and enforcing any patent claims or other intellectual property rights. We may never succeed in achieving regulatory approval for our product candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of our product candidates. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.

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Results of Operations for the Three Months Ended September 30, 2025 and 2024

The following table summarizes our results of operations (in thousands):


	For the Three Months Ended September 30,
	2025		2024		Change
Total revenue
Product revenue, net	$	3,607	$	(1,865)	$	5,472
License and collaboration revenue	10,737		84		10,653
Total revenue	14,344		(1,781)		16,125
Operating expenses:
Cost of product revenue	754		351		403
Cost of collaboration revenue	355		84		271
Selling, general and administrative	9,403		16,083		(6,680)
Research and development	2,205		2,405		(200)
Total operating expenses	12,717		18,923		(6,206)
Income (loss) from operations	1,627		(20,704)		22,331
Other income (expense):
Interest income	159		221		(62)
Interest expense	(2,094)		(2,376)		282
Change in fair value of derivative liability	34		—		34
Other expense	—		(1)		1
Total other expense, net	(1,901)		(2,156)		255
Net loss	$	(274)	$	(22,860)	$	22,586

Product Revenue, Net

Product revenue, net was $3.6 million for the three months ended September 30, 2025, compared to $(1.9) million for the three months ended September 30, 2024. The increase in product revenue, net was primarily related to an increase in deliveries of YCANTH to our distribution partners. Negative revenue for the three months ended September 30, 2024 was primarily due to an increase in our returns reserve of $1.7 million for estimated returns from certain distributors.

License and Collaboration Revenue

License and collaboration revenue was $10.7 million for the three months ended September 30, 2025, compared to $0.1 million for the three months ended September 30, 2024. License and collaboration revenue for the three months ended September 30, 2025 consisted of a $10.0 million development milestone payment from Torii as well as commercial supply and development activity. Collaboration revenue for the three months ended September 30, 2024 consisted of supplies and development activity with Torii.

Cost of Product Revenue

Cost of product revenue for the three months ended September 30, 2025 and 2024 was $0.8 million and $0.4 million, respectively, consisting primarily of product costs related to the sale of YCANTH (VP-102).

Cost of Collaboration Revenue

Cost of collaboration revenue was $0.4 million and $0.1 million for the three months ended September 30, 2025 and 2024. Cost of collaboration revenue consisted of commercial product and supplies and development activity with Torii.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $9.4 million for the three months ended September 30, 2025, compared to $16.1 million for the three months ended September 30, 2024. Excluding the impact of stock-based compensation, the decrease of $5.6 million was primarily due to lower expenses related to commercial activities for YCANTH (VP-102), including decreases in compensation, benefits and travel due to reduced sales force of $3.5 million, decreased commercial costs of $1.2 million and decreased marketing and sponsorship costs of $0.8 million.

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Research and Development Expenses

Research and development expenses were $2.2 million for the three months ended September 30, 2025, compared to $2.4 million for the three months ended September 30, 2024. Excluding the impact of stock-based compensation, the increase of $0.1 million is in line with prior year.

The following table summarizes our research and development expense by product candidate or, for unallocated expenses, by type, for the three months ended September 30, 2025 and 2024. Unallocated expenses include compensation and other personnel-related costs (in thousands):


	For the Three Months Ended September 30,
	2025		2024		Change
YCANTH (VP-102)	$	304	$	417	$	(113)
VP-315	$	197	$	310	(113)
Common warts	16		211		(195)
Stock based compensation	287		605		(318)
Other unallocated expenses	1,401		862		539
Research and development expense	$	2,205	$	2,405	$	(200)

Interest Income

Interest income was $0.2 million for the three months ended September 30, 2025 and September 30, 2024.

Interest Expense

Interest expense was $2.1 million for the three months ended September 30, 2025 compared to $2.4 million for the three months ended September 30, 2024 and consisted of interest expense on the OrbiMed Credit Agreement as described in Note 10 to our financial statements for each period. The decrease of $0.3 million was related to a lower outstanding principal balance under our Credit Agreement with OrbiMed.

Change in Fair Value of Derivative Liability

The change in the fair value of the derivative liability for the three months ended September 30, 2025 was $34,000, due to principal payments starting in January 2025, relating to the Credit Agreement. There was no derivative liability at September 30, 2024.

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Results of Operations for the Nine Months Ended September 30, 2025 and 2024

The following table summarizes our results of operations (in thousands):


	For the Nine Months Ended September 30,
	2025		2024		Change
Revenue:
Product revenue, net	$	11,563	$	6,259	$	5,304
License and collaboration revenue	18,922		963		17,959
Total revenue	30,485		7,222		23,263
Operating expenses:
Cost of product revenue	1,517		1,257		260
Cost of collaboration revenue	523		858		(335)
Selling, general and administrative	27,103		48,944		(21,841)
Research and development	6,335		10,672		(4,337)
Total operating expenses	35,478		61,731		(26,253)
Loss from operations	(4,993)		(54,509)		49,516
Other income (expense):
Interest income	724		1,212		(488)
Interest expense	(6,428)		(7,063)		635
Change in fair value of derivative liability	886		—		886
Other expense	(1)		(17)		16
Total other expense, net	(4,819)		(5,868)		1,049
Net loss	$	(9,812)	$	(60,377)	$	50,565

Product Revenue, Net

Product revenue, net was $11.6 million for the nine months ended September 30, 2025, compared to $6.3 million for the nine months ended September 30, 2024. The increase in product revenue, net, was primarily related to an increase in deliveries of YCANTH to our distribution partners. For the nine months ended September 30, 2024, product revenue, net was partially offset by an increase in our returns reserve of $1.7 million for estimated returns from our distributors.

License and Collaboration Revenue

License and collaboration revenue was $18.9 million for the nine months ended September 30, 2025, compared to $1.0 million for the nine months ended September 30, 2024. License and collaboration revenue for the nine months ended September 30, 2025 consisted of $18.0 million in milestone payments from Torii as well as supplies and development activity. License and collaboration revenue for the nine months ended September 30, 2024 consisted of supplies and development activity with Torii.

Cost of Product Revenue

Cost of product revenue for the nine months ended September 30, 2025 and 2024 was $1.5 million and $1.3 million, respectively, consisting primarily of product costs related to the sale of YCANTH (VP-102).

Cost of Collaboration Revenue

Cost of collaboration revenue was $0.5 million for the nine months ended September 30, 2025, compared to $0.9 million for the nine months ended September 30, 2024. The decrease of $0.3 million was primarily due to decreased manufacturing supply required to support development and testing services pursuant to the Torii Clinical Supply Agreement.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $27.1 million for the nine months ended September 30, 2025, compared to $48.9 million for the nine months ended September 30, 2024. Excluding the impact of stock-based compensation, the decrease of $18.8 million was primarily due to lower expenses related to commercial activities for YCANTH (VP-102), including decreases in compensation, recruiting fees, benefits and travel due to reduced sales force of

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$11.6 million, decreased marketing and sponsorship costs of $4.6 million, decreased commercial spend of $1.3 million and decreased legal costs of $1.3 million.

Research and Development Expenses

Research and development expenses were $6.3 million for the nine months ended September 30, 2025, compared to $10.7 million for the nine months ended September 30, 2024. Excluding the impact of stock-based compensation, the decrease of $3.6 million was primarily related to decreased clinical trial costs for VP-315 of $2.7 million and decreased chemistry, manufacturing and controls costs of $0.8 million.

The following table summarizes our research and development expense by product candidate or, for unallocated expenses, by type, for the nine months ended September 30, 2025 and 2024. Unallocated expenses include compensation and other personnel-related costs (in thousands):


	For the Nine Months Ended September 30,
	2025		2024		Change

VP-315	$	391	$	3,162	$	(2,771)
YCANTH (VP-102)	1,015		1,635		(620)
Common warts	(50)		371		(421)
Stock based compensation	828		1,568		(740)
Other unallocated expenses	4,151		3,936		215
Research and development expense	$	6,335	$	10,672	$	(4,337)

Interest Income

Interest income was $0.7 million for the nine months ended September 30, 2025 compared to $1.2 million for the nine months ended September 30, 2024. The decrease of $0.5 million was primarily due to a lower cash balance.

Interest Expense

Interest expense was $6.4 million for the nine months ended September 30, 2025 compared to $7.1 million for the nine months ended September 30, 2024 and consisted of interest expense on the OrbiMed Credit Agreement as described in Note 10 to our financial statements for each period. The decrease of $0.6 million was related to a lower outstanding principal balance under our Credit Agreement with OrbiMed.

Change in Fair Value of Derivative Liability

The change in the fair value of the derivative liability for the nine months ended September 30, 2025 was $0.9 million due to the principal payments starting in January 2025 relating to the Credit Agreement. There was no derivative liability at September 30, 2024.

Liquidity and Capital Resources

As of September 30, 2025, we had cash and cash equivalents of $21.1 million. Since our inception, we have incurred negative cash flows from our operations. We have financed our operations since inception primarily through sales of our convertible preferred stock, the sale of our common stock, and $38.0 million from the Torii Agreement, which includes $8.0 million received in July 2025 and $10.0 million received in September 2025. In November 2024, we closed an underwritten offering of 4,551,824 shares of our common stock and, in lieu of common stock to certain investors that so chose, pre-funded warrants to purchase 223,595 shares of our common stock, and in either case, accompanying Series A Warrants to purchase 2,387,703 shares of our common stock at an exercise price of $10.68 per share of common stock and Series B Warrants to purchase 2,387,703 shares of our common stock at an exercise price of $13.35 per share of common stock, at a combined public offering price of $8.90 per share of common stock and accompanying Series A and Series B Warrants (or $8.899 per Pre-Funded Warrant and accompanying Series A and Series B Warrants). The offering resulted in net proceeds of $39.6 million, after deducting underwriting discounts and commissions, and offering expenses.

On July 21, 2023, the FDA approved YCANTH (VP-102) topical solution for the treatment of molluscum contagiosum in adult and pediatric patients two years of age and older. Our first commercial sale of YCANTH (VP-102) occurred in August 2023.

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On July 26, 2023, we entered into the Credit Agreement under which we borrowed $50.0 million, resulting in net proceeds to us of approximately $44.1 million after payment of certain fees and transaction related expenses. Amounts borrowed under the Loan Facility will mature on July 26, 2028. Based on our net revenue attributable to YCANTH on a trailing 12-month basis not meeting a specified amount set forth in the Credit Agreement as of December 31, 2024, we became obligated to start making principal payments starting in January 2025. We are obligated to repay the principal amount of the loan on the last day of each month in equal monthly installments through the maturity date, together with the applicable repayment premium and the exit fee.

In addition, the Credit Agreement contains a financial covenant that we must maintain a liquidity of at least $10.0 million and also requires that our quarterly and annual financial statements not be subject to any qualification or statement which is of a "going concern" or similar nature. The requirement to deliver financial statements that are not subject to a qualification of a "going concern" was waived for the financial statements for the quarters ending June 30, 2025, September 30, 2025 and the year ending December 31, 2025. If the requirement to deliver financial statements that are not subject to a qualification of a "going concern" is not waived for additional future periods or if we don’t raise additional financing, we may be in default of our debt in the near-term.

During the term of the Credit Agreement, interest payable in cash by us will accrue on any outstanding balance due under the Credit Agreement at a rate per annum equal to the higher of (x) the SOFR rate (which is the forward-looking term rate for a one-month tenor based on the secured overnight financing rate administered by the CME Group Benchmark Administration Limited) and (y) 4.00% plus, in either case, 8.00%. During an event of default, any outstanding amount under the Credit Agreement will bear interest at a rate of 4.00% in excess of the otherwise applicable rate of interest. We will pay certain fees with respect to the Credit Agreement, including an upfront fee, an unused fee on the undrawn portion of the Credit Agreement, an administration fee, a prepayment premium and an exit fee, as well as certain other fees and expenses of the Administrative Agent and the Lenders.

Cash Flows

The following table summarizes our cash flows (in thousands):


	For the Nine Months Ended September 30,
	2025		2024
Net cash used in operating activities	$	(13,036)	$	(44,863)
Net cash used in investing activities	—		(27)
Net cash used in financing activities	(12,196)		(1,698)
Net decrease in cash and cash equivalents	$	(25,232)	$	(46,588)

Operating Activities

During the nine months ended September 30, 2025, operating activities used $13.0 million of cash, primarily resulting from a net loss of $9.8 million partially offset by non-cash stock-based compensation of $2.6 million and noncash interest of $2.1 million. Net cash used by changes in operating assets and liabilities consisted primarily of an increase in accounts receivable of $7.0 million and an increase in prepaid expenses and other assets of $1.3 million partially offset by an increase in deferred revenue of $1.6 million.

During the nine months ended September 30, 2024, operating activities used $44.9 million of cash, primarily resulting from a net loss of $60.4 million partially offset by non-cash stock-based compensation of $6.4 million, non-cash amortization and impairment of right-of-use assets of $0.9 million and non-cash interest expense of $1.6 million. Net cash used by changes in operating assets and liabilities consisted primarily of an increase in prepaid expenses and other assets of $1.5 million and a decrease in accounts payable of $1.5 million partially offset by decreases in accounts receivable of $4.4 million and a net increase in accrued expenses of $4.9 million.

Investing Activities

We did not use any cash in investing activities during the nine months ended September 30, 2025. During the nine months ended September 30, 2024 net cash used in investing activities of $27,000 was for the purchase of property and equipment.

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Financing Activities

During the nine months ended September 30, 2025, net cash used by financing activities of $12.2 million was primarily due to the repayment of debt related to the Credit Agreement.

During the nine months ended September 30, 2024, net cash used by financing activities of $1.7 million was primarily due to $1.1 million of debt amendment costs paid related to the Credit Agreement and finance lease payments of $0.6 million.

Funding Requirements

While we expect to continue to generate revenue from the sale of YCANTH (VP-102), our expenses may increase in connection with our ongoing activities, particularly as we continue the research and development of, continue or initiate clinical trials of, and seek marketing approval for, our product candidates. We will need substantial additional financing to fund our operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to reduce operating expenses, delay, reduce or eliminate our research and development programs and/or continued and future commercialization efforts. In addition, the amount of proceeds we may be able to raise pursuant to our currently effective shelf registration statement on Form S-3 is limited. We are subject to the general instructions of Form S-3 known as the "baby shelf rules." Under these rules, the amount of funds we can raise through primary public offerings of securities in any 12-month period using our registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of our common stock held by non-affiliates. Therefore, we will be limited in the amount of proceeds we are able to raise by selling securities using our Form S-3 until such time as our public float exceeds $75.0 million.

We have incurred substantial operating losses since inception and expect to continue to incur significant losses for the foreseeable future and may never become profitable. As of September 30, 2025, we had an accumulated deficit of $316.8 million. We believe our cash, and cash equivalents of $21.1 million as of September 30, 2025 will be sufficient to support our planned operations into late fourth quarter of 2025. Based on our current business plan and current capital resources, combined with the uncertainty regarding the availability of additional funding and considering our debt obligations, including a requirement to maintain cash, cash equivalents and investments of at least $10.0 million at all times, we have concluded there is substantial doubt regarding our ability to continue as a going concern within one year after the date these financial statements are issued. We plan to address the conditions that raise substantial doubt regarding our ability to continue as a going concern by, among other things, obtaining additional funding through equity offerings, debt financing and refinancings, collaborations, strategic alliances and/or licensing arrangements. While beyond our control, we could receive up to $25.0 million upon the exercise of the Series A Warrants issued in conjunction with the November 2024 Equity Financing, which have an exercise price of $10.68 per share and expire in November 2025. This may result in additional liquidity during 2025 and alleviate the substantial doubt regarding our ability to continue as a going concern. We cannot predict with certainty that these funds will be received and alleviate the substantial doubt. Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result should we be unable to continue as a going concern. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our capital resources sooner than we expect. Our future capital requirements, and timing, will depend on many factors, including:

•our ability to maintain compliance with our covenants under our Credit Agreement;

•the level of sales achieved, and costs related to the commercialization of YCANTH (VP-102) for the treatment of molluscum contagiosum;

•the costs, timing and outcome of regulatory review of our product candidates;

•the scope, progress, results and costs of our clinical trials;

•the scope, prioritization and number of our research and development programs;

•the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

•our ability to maintain compliance with covenants under our loan agreements;

•the extent to which we acquire or in-license other product candidates and technologies;

•the impact on the timing of our clinical trials and our business;

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•the costs to scale up and secure manufacturing arrangements for commercial production of YCANTH (VP-102) for the treatment of molluscum contagiosum and any product candidate we successfully commercialize; and

•the costs of establishing and maintaining sales and marketing capabilities for YCANTH (VP-102) for the treatment of molluscum contagiosum and any product candidate that obtains regulatory approval.

Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, YCANTH (VP-102), and our other product candidates, if approved, may not achieve commercial success. Our commercial revenues will be derived solely from sales of YCANTH (VP-102) in the near term. We may need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the disruptions to, and volatility in, the credit and financial markets in the United States and worldwide. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interests of existing stockholders may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing stockholders’ rights. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations and Commitments

As of September 30, 2025, there have been no material changes to our contractual obligations and commitments as previously discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Item 3. Quantitative and Qualitative Disclosures About Market Risks

There have been no material changes to our quantitative and qualitative disclosures about market risk as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Interim Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that the information required to be disclosed by us in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Interim Chief Financial Officer, to allow timely decisions regarding required disclosures. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures. Based on such evaluation, our Chief Executive Officer and Interim Chief Financial Officer has concluded that our disclosure controls and procedures were effective as of September 30, 2025.

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Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(b) and 15d-15(b) of the Exchange Act that occurred during the quarter ended September 30, 2025, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item. 1 Legal Proceedings

On January 12, 2024, the Court granted in part and denied in part Defendants’ motion to dismiss the amended complaint. The Court held that Plaintiff’s claims relating to statements made in May and June 2021 were sufficiently pled, but dismissed Plaintiff’s claims relating to all other statements made during the Putative Class Period. On January 26, 2024, Plaintiff filed a second amended complaint in an attempt to cure certain of the deficiencies identified in the January 12, 2024 ruling. Defendants’ motion to dismiss the second amended complaint was fully briefed as of April 22, 2024. On September 3, 2024, the Court granted in part and denied in part Defendants’ motion to dismiss the second amended complaint. The Court dismissed Plaintiff’s claims related to one of the two individual defendants but held that Plaintiff’s claims against us and the other individual defendant were sufficiently pled.

In addition, on October 21, 2024, May 12, 2025, and June 26, 2025, plaintiffs Ivan S. Cohen, Paul Cannon, and Joseph Bonaccorso, respectively, each filed a putative stockholder derivative lawsuit in the U.S. District Court for the Eastern District of Pennsylvania. Each derivative complaint names us as a nominal defendant and purports to bring claims on our behalf against certain of our current and former directors and officers for alleged violations of the federal securities laws and breaches of their fiduciary duties in relation to substantially the same factual allegations as the above-described putative class action lawsuit. Each derivative complaint primarily seeks to recover for us compensatory damages for losses allegedly sustained related to the facts alleged, restitution, and punitive damages. On December 16, 2024, the Court granted the parties' joint stipulation to stay the Cohen derivative lawsuit. On July 21, 2025, the Court granted the parties’ joint stipulation in the Cohen and Cannon derivative lawsuits to consolidate the two actions and stay the consolidated action. On July 24, 2025, the plaintiff in the Bonaccorso derivative lawsuit filed a corrected complaint to clarify that the named plaintiff "is not Joseph (Joe) Bonaccorso, the former Chief Commercial Officer" of the Company. On July 29, 2025, the plaintiff in the Bonaccorso derivative lawsuit filed a notice voluntarily dismissing the action without prejudice.

We are involved in ordinary, routine legal proceedings that are not considered by management to be material. We believe the ultimate liabilities resulting from such legal proceedings will not materially affect our financial position or our results of operations or cash flows.

Item 1A. Risk Factors

Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. In addition to the other information set forth in this quarterly report on Form 10-Q, you should carefully consider the factors described in Part I, Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the Securities and Exchange Commission on March 11, 2025.

We completed a reverse stock split of our shares of common stock, which may reduce and may limit the market trading liquidity of the shares due to the reduced number of shares outstanding and may potentially have an anti-takeover effect.

We completed the reverse stock split of our common stock by a ratio of 1-for-10, effective July 24, 2025. The liquidity of our common stock may be adversely affected by the reverse stock split as a result of the reduced number of

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shares outstanding following the reverse stock split. In addition, the reverse stock split may increase the number of stockholders who own odd lots of our common stock, creating the potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty affecting such sales. Reducing the number of outstanding shares of our common stock through the reverse stock split is intended, absent other factors, to increase the per share market price of our common stock. However, other factors, such as our financial results, market conditions and the market perception of our business may adversely affect the market price of our common stock. As a result, there can be no assurance that the reverse stock split will result in the intended benefits, that the market price of our common stock will remain higher following the reverse stock split or that the market price of our common stock will not decrease in the future.

Item 5. Other Information

Rule 10b5-1 Trading Arrangements and Non-Rule 10b5-1 Trading Arrangements

During the three months ended September 30, 2025, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted, modified or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" (as each term is defined in Item 408 of Regulation S-K).

Item 6. Exhibits

EXHIBIT INDEX


Exhibit No.						Description

3.1 (1)						Amended and Restated Certificate of Incorporation.

3.2 (2)						Certificate of Amendment of the Amended and Restated Certificate of Incorporation

3.2 (3)						Amended and Restated Bylaws.

31.1						Certification of Chief Executive Officer and President (Principal Executive Officer), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2						Certification of Interim Chief Financial Officer (Interim Principal Financial Officer), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1*						Certifications of Chief Executive Officer and President (Principal Executive Officer) and Interim Chief Financial Officer (Interim Principal Financial Officer), pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

101.INS						Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

101.SCH						Inline XBRL Taxonomy Extension Schema Document

104						Cover Page Interactive Data File (embedded within the Inline XBRL document)

____________________________________________________

(1)Previously filed as Exhibit 3.3 to the Company’s Registration Statement on Form S-1 (File No. 333-225104), filed with the Securities and Exchange Commission on May 22, 2018.

(2)Previously filed as Exhibit 3.1 to the Company's Current Report on Form 8-K (File No. 001-38529), filed with the Securities and Exchange Commission on July 23, 2025.

(3)Previously filed as Exhibit 3.4 to the Company's Registration Statement on Form S-1 (File No. 333-225104), filed with the Securities and Exchange Commission on May 22, 2018.

*These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	VERRICA PHARMACEUTICALS INC.

November 14, 2025	By:	/s/ Jayson Rieger
		Jayson Rieger
		Chief Executive Officer and President
		(Principal Executive Officer)

	By:	/s/ John J. Kirby
		John J. Kirby
		Interim Chief Financial Officer
		(Interim Principal Financial Officer)

Verrica Pharmaceuticals Inc. 10-Q