Verrica Pharmaceuticals announces workforce reduction

WEST CHESTER, PA – Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) disclosed today that it is reducing its workforce by 47 employees as part of a plan to streamline operations and conserve capital. The decision, made by the company's Board of Directors on September 23, 2024, is expected to be substantially completed by today.

The Delaware-based pharmaceutical company anticipates incurring about $1.0 million in total expenses related to this restructuring. This includes a one-time charge of approximately $0.7 million for employee termination costs, which covers severance and other benefits. Additionally, a deemed loss on vehicle sales is estimated at $0.3 million. The company anticipates these costs to be the sole direct expense from the restructuring initiative.

Verrica Pharmaceuticals expects to record the charge in the quarter ending December 31, 2024, with the majority of related cash payments projected to be disbursed by November 30, 2024. The company cautions that these cost estimates and their timing are based on current assumptions and could vary with actual results.

This announcement comes as part of a current report filed with the Securities and Exchange Commission on October 1, 2024, based on a press release statement. The report indicates that Verrica Pharmaceuticals is taking these measures to reduce costs and preserve capital, reflecting a strategic shift in its operations. The company's stock is listed on The Nasdaq Stock Market under the ticker symbol VRCA.

In other recent news, Verrica Pharmaceuticals reported significant developments. The company's Chief Financial Officer, Terence Kohler, announced his resignation effective October 4, 2024, to pursue a new business opportunity. Additionally, Verrica formalized two agreements with its former Chief Commercial Officer, Joe Bonaccorso, following his departure.

The company's second quarter of 2024 showed strong growth, with net product revenue reaching $4.9 million, primarily driven by increased demand for YCANTH and an expanded distribution network. Total revenues for the quarter stood at $5.2 million, despite a GAAP net loss of $17.2 million.

RBC Capital revised its outlook on Verrica, reducing the stock's price target to $13 from $14, while maintaining an Outperform rating. This adjustment followed challenges in the launch of YCANTH, Verrica's treatment for molluscum contagiosum.

Verrica also reported positive preliminary open-label phase II data from VP-315 for the treatment of basal cell carcinoma. The study reported complete clearance in 51% of treated lesions, surpassing management's expectations. Further insights into VP-315's clinical profile are anticipated to be revealed in the first quarter of 2025.

InvestingPro Insights

The recent workforce reduction at Verrica Pharmaceuticals aligns with several InvestingPro insights that shed light on the company's financial situation. According to InvestingPro data, Verrica's market cap stands at a modest $58.46 million, reflecting its current challenges. The company's revenue for the last twelve months as of Q2 2024 was $13.91 million, with a significant revenue growth of 61.61% over the same period. However, this growth comes with substantial losses, as evidenced by the negative gross profit of $8.41 million and an alarming operating income margin of -563.14%.

InvestingPro Tips indicate that Verrica is "quickly burning through cash" and "suffers from weak gross profit margins," which explains the need for the restructuring announced. The company's stock performance has been poor, with a 38.3% decline in the past month and an 81.76% drop over the last three months. These figures underscore the urgency of the cost-cutting measures.

Despite these challenges, analysts anticipate sales growth in the current year, suggesting potential for recovery. However, it's worth noting that the stock is trading near its 52-week low, and analysts do not expect profitability this year. For investors seeking a more comprehensive analysis, InvestingPro offers 14 additional tips for Verrica Pharmaceuticals, providing a deeper understanding of the company's financial health and market position.

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