aibioVerrica Pharmaceuticals prices $42,007,776 stock and warrant offering at $0.89
Tickers VRCA
Verrica priced 44,964,045 shares at $0.89 with Series A and B warrants, for a total public offering price of $42,007,776. Entities tied to director Paul B. Manning agreed to buy 22.9 million shares, and the filing carries a going-concern warning.
Key facts
- Company
- Verrica Pharmaceuticals Inc. (NASDAQ: VRCA)
- News type
- Financings
- Primary source
- Verrica Pharmaceuticals Inc. 424B5 (2024-11-21)
Verrica Pharmaceuticals, Inc., a dermatology company in West Chester, Pennsylvania, listed on the Nasdaq Global Market as VRCA, sold 44,964,045 shares of common stock at $0.89 per share under a prospectus supplement dated November 20, 2024. The price equals the last reported sale price on November 19, 2024. The company also sold pre-funded warrants for 2,235,955 shares at $0.8899 each, in lieu of common stock for some investors. The total public offering price is $42,007,776.
Each share or pre-funded warrant comes with a Series A warrant and a Series B warrant, each for one half of a share. The offering includes Series A warrants for 23,600,000 shares and Series B warrants for 23,600,000 shares. The Series A warrants have an exercise price of $1.0680 and expire one year after issue. The Series B warrants have an exercise price of $1.3350 and expire five years after issue.
Insider purchase
Entities affiliated with Paul B. Manning, a member of Verrica's board of directors, agreed to buy an aggregate of 22.9 million shares, with Series A warrants and Series B warrants for 11.5 million shares each. An earlier preliminary supplement put Manning's indicated interest at approximately $20 million.
Underwriter and advisers
Jefferies LLC is the underwriter of the offering. The underwriting agreement commits it to buy the full 44,964,045 shares, the pre-funded warrants and the warrants, subject to customary conditions. The underwriter has a 30-day option to buy up to 7,080,000 additional shares and/or Series A and Series B warrants for 3,540,000 additional shares each. Jefferies LLC is also the sales agent under Verrica's at-the-market program, a sales agreement dated November 7, 2022 that allows sales of up to $50.0 million of common stock. Cooley LLP of Reston, Virginia, passes on the securities for Verrica, and Latham & Watkins LLP of New York passes on certain matters for the underwriter.
Proceeds and the lender
After underwriting discounts and commissions of $2,100,400, Verrica expects $39,907,376 before expenses. The company intends to use the net proceeds, together with existing cash and cash equivalents, primarily for working capital and general corporate purposes, including the continued commercialization of YCANTH.
The company's credit agreement with OrbiMed Royalty & Credit Opportunities IV, LP restricts its ability to pay dividends.
Going concern and dilution
The risk factors say Verrica's financial statements have been prepared assuming it will continue as a going concern. They also say the company may not generate enough cash to service its debt, may have to begin paying principal before maturity, and believes it cannot borrow more under its loan facility, and that even with this offering it will need substantial additional funding. The company says it is targeting monthly operating cash flow break-even in the second half of 2025.
The dilution figures are large. Shares outstanding were 45,600,795 as of September 30, 2024, and the offering would bring the total to 90.6 million shares, not counting any exercise of the underwriter's option. The company's historical net tangible book value was a deficit of $(34.6) million, or $(0.76) per share, at September 30, 2024. About 16.5 million shares are subject to a 60-day lock-up with the underwriter.
The commercial business
YCANTH, formerly VP-102, was approved by the FDA in July 2023 for molluscum contagiosum in adult and pediatric patients two years of age and older. Verrica launched it in August 2023. On October 1, 2024, the company cut its workforce to reduce costs and reduced its sales territories from 80 to approximately 33. The prospectus supplement describes that as a change to its commercialization strategy, with the aim of balancing sales growth and cost controls.
The company also develops YCANTH for common warts and external genital warts, and it has two other pipeline products.
On pipeline, the company is pursuing a global Phase 3 trial of YCANTH for common warts with Torii Pharmaceuticals, expected to begin in the first half of 2025. It also reported preliminary Phase 2 results for VP-315 in basal cell carcinoma in August 2024, based on 93 lesions, with data from three lesions pending and no reported treatment-related serious adverse events.