H.C. Wainwright maintains Neutral on Verrica stock after Q1 update

Published 08/04/2025, 12:38
H.C. Wainwright maintains Neutral on Verrica stock after Q1 update

On Monday, Verrica Pharmaceuticals (NASDAQ:VRCA), a $59.23 million market cap pharmaceutical company, received a continued Neutral rating from H.C. Wainwright. The firm's analyst highlighted the company's first-quarter performance, noting that Verrica's YCANTH dispensed volume reached approximately 10,100 applicators, surpassing their estimate by nearly 5%. According to InvestingPro data, the stock has shown significant volatility, surging over 53% in the past week despite being down 90% over the past year. This increase represents a significant 16.7% growth over the fourth quarter of 2024, which itself had seen a solid 12.3% increase from the third quarter of the same year.

The analyst pointed out the impressive nature of this growth, especially considering several factors. Verrica had recently downsized its commercial operations, reducing its sales representatives from 85 to around 30. Additionally, the company cut its operating expense (OPEX) run-rate burn by approximately 50%. These changes occurred while facing typical first-quarter insurance headwinds and a seasonal dip in the prevalence of molluscum contagiosum (MC), the condition YCANTH treats, compounded by particularly disruptive winter weather.

Despite these challenges, YCANTH's growth is seen as a testament to the new management's effective execution, the significant unmet need in treating MC, and YCANTH's superiority over unapproved alternatives, including compounded cantharidin, which is becoming harder to acquire. InvestingPro data reveals the company achieved impressive revenue growth of 47.66% in the last twelve months, though it maintains challenging gross profit margins of -92.7%.

While Verrica did not preannounce first-quarter sales, management indicated that channel inventory levels have normalized, as stated during the fourth-quarter 2024 results. Therefore, dispensed volume is expected to closely reflect reported revenue. The analyst projects nearly $2.8 million in sales for the first quarter, above the consensus estimate of $2.5 million. Adjusted operating expenses are also anticipated to decline further compared to the fourth quarter of 2024, leading to a substantially lower operating loss in the first quarter, with projections more than 10% above consensus at an adjusted EBIT loss of $6.8 million.

Looking ahead, the analyst expects double-digit volume increases each quarter through 2025, forecasting full-year YCANTH sales of $16.3 million. This would indicate a nearly 150% year-over-year revenue growth based on an estimated 75% volume growth, while maintaining the Neutral stock rating. InvestingPro subscribers have access to 12 additional investment tips for VRCA, including detailed analysis of the company's financial health, profitability metrics, and comprehensive valuation models. Get the full picture with InvestingPro's exclusive Research Report, available for over 1,400 US stocks.

In other recent news, Verrica Pharmaceuticals reported mixed financial results for the fourth quarter of 2024. The company exceeded earnings per share (EPS) expectations with a reported EPS of -$0.24, surpassing analysts' projections of -$0.30. However, revenue came in at $340,000, falling short of the anticipated $532,750, raising concerns about sales execution. The full year 2024 revenue was reported at $7.6 million, an increase from $5.1 million in 2023, despite a full year GAAP net loss of $76.8 million. In leadership news, Dr. Gavin Corcoran was appointed to the Board of Directors, bringing extensive experience from his previous roles at Formation Bio and Allergan (NYSE:AGN). Dr. Corcoran's appointment is expected to enhance the company's strategic planning and execution. Additionally, Verrica Pharmaceuticals is advancing its product YCANTH® for treating molluscum contagiosum and exploring its potential for common warts. The company has also entered a licensing agreement for VP-315, aimed at treating non-melanoma skin cancers. These developments reflect Verrica Pharmaceuticals' ongoing efforts to strengthen its leadership and expand its product pipeline.

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