Dermatology biopharma Verrica Pharmaceuticals is lining up a cost-cutting plan that is prompting a major shake-up of its commercial teams and a narrowed focus on how it sells its only approved drug.
That drug, Ycanth, is the world’s first therapeutic for molluscum, a viral skin infection, and has been on the market for around one year.
The commercial teams running point for Ycanth are now going to be cut up in order to “reduce expenses and optimize the efficiency of Verrica’s field force,” the company said in a statement.
To do this, Verrica is slashing the number of sales territories by more than half, from 80 to around 35 “with a focus on those territories that have historically shown a high prevalence of molluscum.”
This will also see the company “reduce headcount in certain support functions,” though it did not outline any further details. The company told Fierce Pharma Marketing that its workforce "was reduced by 47 employees," which came primarily from sales reps and field based reimbursement/medical support. "These were straight reductions in staff," a spokesperson said, and were not being moved into other positions within the company.
Verrica did say however that its total operating expenses will be cut by around half as a result of the changes, though it will be hit by a $1 million restructuring charge.
As part of the changes, sales activities in each of the 35 territories “will focus on pediatricians in addition to Verrica’s established sales efforts to dermatology offices," the company said.
Looking back over Verrica's second-quarter financial results released in August, it's easy to spot the problem. Selling, general and administrative expenses were $16.5 million in the second quarter of 2024, a massive jump from $5.9 million for the same period in 2023.
The increase of $10.6 million “was primarily due to higher expenses related to commercial activities for Ycanth, including increased compensation, recruiting fees, benefits and travel due to ramp-up of sales force of $7.2 million, other commercial activity of $1.7 million, increased marketing and sponsorship costs of $0.4 million and increased legal costs of $1.1 million,” the drugmaker noted in its report.
Given that net revenue from Ycanth for the same quarter was just $4.9 million, and that money for any startup launching a new drug is tight, the math was not in the company’s favor.
Verrica’s shares traded down more than 5% on the news Wednesday morning, though on a market cap of just $58 million.
The company has endured a tough few years. The path to Ycanth’s FDA approval last year was a tortured one, coming after two rejections centered on manufacturing woes.
The green light last July was a first for the company but, as so many smaller biotechs have found over the years, a first approval can prove to be a make-or-break moment for a once clinical-only company.
Things went south quickly for Verrica when, immediately after the approval, the company said it was entering a non-binding term sheet for up to $125 million in debt financing to support the launch.
Cue its shares dipping around 30% on the day of that announcement as investors balked at the need for such a loan.
Molluscum is an under-diagnosed contagious condition that strikes roughly 6 million annually in the U.S., most of them children. The approval of the topical treatment covers those ages 2 and older.
It’s spread by skin-to-skin contact or by contact with objects that can carry the virus such as toys, towels or wet surfaces. The ailment causes raised lesions that can produce inflammation, itching and bacterial infection. The lesions can last for years and sometimes produce permanent scarring.
The company estimates that only 15% of molluscum cases are diagnosed and has projected the market to be 1 million patients per year.
The drug is also being trialed for common warts and genital warts.