What happened
Shares of Verrica Pharmaceuticals (VRCA 3.31%) were down more than 30% as of 2:45 p.m. on Monday. The company, which specializes in dermatology therapeutics, said it was entering into an agreement for as much as $125 million in financing to fund operations.
The healthcare company learned last week that it had received Food and Drug Administration (FDA) approval for a topical therapy to treat a skin infection.
So what
Verrica gave the classic good news/bad news combination, but investors were more concerned with the bad news. On Friday, after the markets closed, the company said it had received approval from the FDA for Ycanth (cantharidin) to treat the skin infection molluscum contagiosum in adults and in children 2 or older.
According to Verrica, the drug, previously known as VP-102, is the first FDA-approved treatment for a cantharidin-based product to treat the disease, which it said affects roughly 6 million people in the U.S. each year.
The FDA approval was based on positive data from two identical phase III clinical trials.
The down news, though, was that the company said it had entered into a nonbinding term loan for up to $125 million to help fund operations.
Now what
The stark move downward seemed a bit much considering the company finally has a marketed product that it expects to launch by September. The loan amount isn't binding and has a term of five years.
In the announcement, Verrica said that it plans to borrow $50 million immediately following the close of the transaction, with additional capital available in tranches based on reaching certain revenue milestones. Don't be surprised if the stock bounces back soon.
In the first quarter, the company said it had $60 million in cash, enough to fund operations into only the first quarter of 2024. It also reported collaboration revenue of $37,000, down from $400,000 in the first quarter of 2022. It lost $0.15 in earnings per share, compared to a loss of $0.31 in the same period last year.
