The potential approval and launch of Verrica Pharmaceuticals Inc.'s (VRCA:NASDAQ) VP-102, topical cantharidin drug and device for molluscum contagiosum, have been delayed due to the third party manufacturer, Sterling, not meeting quality standards with a different product, reported H.C. Wainwright & Co. analyst Oren Livnat in a May 31 research note.
As such, H.C. Wainwright lowered its target price on Verrica to $12 per share from $20 but remains bullish on the U.S.-based dermatology therapeutics firm and its VP-102.
"We continue to see good overall odds of ultimate approval, and still see greater than $300 million potential peak U.S. sales for molluscum, hence, we maintain our Buy rating at current levels," Livnat added. Molluscum contagiosum is an infection caused by a poxvirus, which results in a bumpy skin rash.
This is the second time problems with Sterling not passing plant inspection by U.S. Food and Drug Administration (FDA) have pushed back Verrica's timeline to commercialization for VP-102. The first happened in Q3/21 and was resolved. Now, the total delay is estimated at 12–18 months.
In light of the setback, Verrica requested a Type A meeting with the FDA to discuss the fastest path to getting VP-102 approved. That discussion should take place by the end of June 2022.
"Based on our reading of the repeated quality issues, we'd prefer Verrica get as far away as possible from Sterling and immediately pursue tech transfer to an alternate facility," Livnat wrote.
Whereas Verrica believes it can switch manufacturers and resubmit a new drug application for VP-102 by the end of this year, H.C. Wainwright is less optimistic. It projects refiling could happen in mid-2023 at the earliest, with subsequent approval late that year, followed by commercial launch in early 2024.
Accordingly, the financial institution revised its model on Verrica, and this resulted in the target price reduction.
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Disclosures for H.C. Wainwright, Verrica Pharmaceuticals Inc., May 31, 2022
H.C. Wainwright & Co, LLC (the “Firm”) is a member of FINRA and SIPC and a registered U.S. Broker-Dealer.
I, Oren Livnat, CFA , certify that 1) all of the views expressed in this report accurately reflect my personal views about any and all subject securities or issuers discussed; and 2) no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report; and 3) neither myself nor any members of my household is an officer, director or advisory board member of these companies.
None of the research analysts or the research analyst’s household has a financial interest in the securities of Verrica Pharmaceuticals, Inc. (including, without limitation, any option, right, warrant, future, long or short position). As of April 30, 2022 neither the Firm nor its affiliates beneficially own 1% or more of any class of common equity securities of Verrica Pharmaceuticals, Inc.
Neither the research analyst nor the Firm knows or has reason to know of any other material conflict of interest at the time of publication of this research report. The research analyst principally responsible for preparation of the report does not receive compensation that is based upon any specific investment banking services or transaction but is compensated based on factors including total revenue and profitability of the Firm, a substantial portion of which is derived from investment banking services.
The firm or its affiliates received compensation from Verrica Pharmaceuticals, Inc. for non-investment banking services in the previous twelve months.
The Firm or its affiliates did not receive compensation from Verrica Pharmaceuticals, Inc. for investment banking services within twelve months before, but will seek compensation from the companies mentioned in this report for investment banking services within three months following publication of the research report. The Firm does not make a market in Verrica Pharmaceuticals, Inc. as of the date of this research report.
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