10-Q

28

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38529

Verrica Pharmaceuticals Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	46-3137900
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
44 West Gay Street, Suite 400 West Chester, PA	19380
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (484) 453-3300

N/A

(Former address of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	VRCA	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 2, 2022, the registrant had 27,519,053 shares of common stock, $0.0001 par value per share, outstanding.

Auditor Firm Id: 185 Auditor Name: KPMG LLP Auditor Location: Philadelphia, PA

VERRICA PHARMACEUTICALS INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	21
Item 4.	Controls and Procedures	21
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 6.	Exhibits	23
Signatures		25

PART I. FINANCIAL INFORMATION

Item 1. Unaudited Condensed Financial Statements

VERRICA PHARMACEUTICALS INC.

CONDENSED BALANCE SHEETS

(in thousands, except share and per share amounts)

(Unaudited)

	March 31,			December 31,
	2022			2021
ASSETS
Current assets:
Cash and cash equivalents	$	10,407		$	15,752
Marketable securities		11,497			54,602
Restricted cash		40,000			—
Unbilled receivable		431			—
Prepaid expenses and other assets		3,437			3,974
Total current assets		65,772			74,328
Property and equipment, net		4,155			3,894
Operating lease right-of-use asset		1,548			1,608
Other non-current assets		142			295
Total assets	$	71,617		$	80,125
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	531		$	845
Accrued expenses and other current liabilities		2,014			3,266
Operating lease liability		250			245
Financing lease liability		6			6
Debt, net		41,999			41,693
Total current liabilities		44,800			46,055
Operating lease liability		1,384			1,449
Financing lease liability		15			16
Total liabilities		46,199			47,520
Commitments and Contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares  issued and outstanding as of March 31, 2022 and December 31, 2021		—			—
Common stock, $0.0001 par value; 200,000,000 authorized; 27,624,197 shares issued and 27,519,053 shares outstanding as of March 31, 2022 and December 31, 2021		3			3
Treasury stock, at cost, 105,144 shares as of March 31, 2022 and December 31, 2021		—			—
Additional paid-in capital		172,913			171,597
Accumulated deficit		(147,436	)		(138,966	)
Accumulated other comprehensive loss		(62	)		(29	)
Total stockholders’ equity		25,418			32,605
Total liabilities and stockholders’ equity	$	71,617		$	80,125

The accompanying notes are an integral part of these condensed financial statements.

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VERRICA PHARMACEUTICALS INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share amounts)

(Unaudited)

	For the Three Months Ended March 31,
	2022			2021
License revenue	$	431		$	12,000
Operating expenses:
Research and development		2,723			5,362
General and administrative		5,118			6,578
Total operating expenses		7,841			11,940
(Loss) income from operations		(7,410	)		60
Other income (expense):
Interest income		22			32
Interest expense		(1,082	)		(1,028	)
Total other expense		(1,060	)		(996	)
Net loss	$	(8,470	)	$	(936	)
Net loss per share, basic and diluted	$	(0.31	)	$	(0.04	)
Weighted average common shares outstanding, basic and diluted		27,519,053			25,602,404
Net loss	$	(8,470	)	$	(936	)
Other comprehensive gain:
Unrealized (loss) gain on marketable securities		(33	)		2
Comprehensive loss	$	(8,503	)	$	(934	)

The accompanying notes are an integral part of these condensed financial statements.

2

VERRICA PHARMACEUTICALS INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(Unaudited)

														Accumulated
														Other			Total
	Common Stock				Additional		Accumulated			Treasury Stock				Comprehensive			Stockholders’
	Shares Issued		Amount		Paid-in Capital		Deficit			Shares		Cost		(Loss) Gain			Equity
January 1, 2022		27,624,197	$	3	$	171,597	$	(138,966	)		105,144	$	—	$	(29	)	$	32,605
Stock-based compensation		—		—		1,316		—			—		—		—			1,316
Net loss		—		—		—		(8,470	)		—		—		—			(8,470	)
Unrealized loss on marketable securities		—		—		—		—			—		—		(33	)		(33	)
March 31, 2022		27,624,197	$	3	$	172,913	$	(147,436	)		105,144	$	—	$	(62	)	$	25,418
January 1, 2021		25,546,257	$	3	$	136,868	$	(103,886	)		105,144	$	—	$	1		$	32,986
Stock-based compensation		—		—		1,403		—			—		—		—			1,403
Issuance of common stock, net of issuance costs		2,033,899		—		28,115		—			—		—		—			28,115
Exercise of stock options		15,708		—		240		—			—		—		—			240
Net loss		—		—		—		(936	)		—		—		—			(936	)
Unrealized gain on marketable securities		—		—		—		—			—		—		2			2
March 31, 2021		27,595,864	$	3	$	166,626	$	(104,822	)		105,144	$	—	$	3		$	61,810

The accompanying notes are an integral part of these condensed financial statements.

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VERRICA PHARMACEUTICALS INC.

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	For the Three Months Ended March 31,
	2022			2021
Cash flows from operating activities
Net loss	$	(8,470	)	$	(936	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		1,316			1,403
Amortization of premiums (discounts) on marketable securities		49			(14	)
Depreciation expense		98			11
Non cash interest expense		300			393
Reduction in operating lease right-of-use asset		60			56
Changes in operating assets and liabilities:
License receivable		—			(11,500	)
Prepaid expenses and other assets		537			13
Accounts payable		(314	)		525
Unbilled receivable		(431	)		—
Accrued expenses and other current liabilities		(1,425	)		(209	)
Deferred revenue		—			(500	)
Operating lease liability		(60	)		(27	)
Net cash used in operating activities		(8,340	)		(10,785	)
Cash flows from investing activities
Sales and maturities of marketable securities		47,508			20,500
Purchases of marketable securities		(4,485	)		(9,285	)
Purchases of property and equipment		(5	)		(311	)
Deposits		(5	)		(69	)
Net cash provided by investing activities		43,013			10,835
Cash flows from financing activities
Proceeds from exercise of stock options		—			240
Proceeds from issuance of debt, net of issuance costs		—			4,975
Debt Issuance Costs		(17	)		—
Repayment of financing lease		(1	)		—
Proceeds from issuance of common stock, net of issuance costs		—			28,150
Net cash (used in) provided by financing activities		(18	)		33,365
Net increase in cash, cash equivalents and restricted cash		34,655			33,415
Cash, cash equivalents and restricted cash at the beginning of the period		15,752			10,686
Cash, cash equivalents and restricted cash at the end of the period	$	50,407		$	44,101
Supplemental disclosure of noncash investing and financing activities:
Property and equipment purchases payable or accrued at period end	$	459		$	253
Change in unrealized gain on marketable securities	$	(33	)	$	2
Cash paid for interest	$	725		$	634

The accompanying notes are an integral part of these condensed financial statements.

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VERRICA PHARMACEUTICALS INC.

Notes to Condensed Financial Statements

(Unaudited)

Note 1—Nature of Business

Verrica Pharmaceuticals Inc. (the “Company”) was formed on July 3, 2013 and is incorporated in the State of Delaware. The Company is a dermatology therapeutics company committed to the development and commercialization of novel treatments that provide meaningful benefit for people living with skin diseases.

Liquidity

The Company has incurred substantial operating losses since inception and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of March 31, 2022, the Company had an accumulated deficit of $147.4 million. On March 17, 2021, the Company entered into the Torii Agreement (Note 11), pursuant to which the Company received an upfront payment from Torii of $11.5 million in April 2021. On March 25, 2021, the Company closed a follow-on public offering in which it sold 2,033,899 shares of common stock at a public offering price of $14.75 per share, resulting in net proceeds of $28.1 million after deducting underwriting discounts and commissions and offering expenses.

In March 2020, the Company entered into a Mezzanine Loan Agreement (see Note 7) pursuant to which the Company borrowed (i) $35.0 million in March 2020 and (ii) $5.0 million on March 1, 2021. On March 1, 2022, the Company entered into a second amendment to the Mezzanine Loan Agreement (the “Second Mezzanine Loan Amendment”). Pursuant to the Second Mezzanine Loan Amendment the Company is no longer required to maintain a minimum liquidity ratio or achieve minimum levels of trailing six-month net product revenues but will be required to maintain a minimum balance equal to the outstanding amount of the Term Loans under the Existing Mezzanine Credit Facility (as defined in Note 7) in a separate money market account with Silicon Valley Bank (“SVB”). Additionally, the Company entered into a second amendment (the “Second Senior Loan Amendment”) to the Senior Loan Agreement (as defined in Note 7). Pursuant to the Second Senior Loan Amendment, the Company is no longer required to achieve minimum levels of trailing six-month net product revenues.

As of March 31, 2022 the Company had cash, cash equivalents, marketable securities and restricted cash of $61.9 million. The Company believes its existing cash, cash equivalents and marketable securities as of March 31, 2022 will be sufficient to support Company’s planned operations into the third quarter of 2022. Substantial additional financing will be needed by the Company to fund its operations. The Company's condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. The Company anticipates incurring additional losses until such time, if ever, that it can obtain marketing approval to sell, and then generate significant sales of VP-102. These factors raise substantial doubt about the Company's ability to continue as a going concern within one year after the date the financial statements are issued. The Company plans to secure additional capital in the future through equity or debt financings, partnerships, or other sources to carry out the Company’s planned development activities. If the Company is unable to raise capital when needed or on attractive terms, the Company would be forced to delay, reduce or eliminate its research and development programs or future commercialization efforts.

Note 2—Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. They may not include all of the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on March 2, 2022. The results of operations for any interim periods are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period.

The Company has been actively monitoring the coronavirus (“COVID-19”) pandemic and its impact globally. Management believes the financial results for the year ended December 31, 2021 and the three months ended March 31, 2022, were not significantly impacted by COVID-19. In addition, management believes the remote working arrangements, travel restrictions and any other regulations imposed by various governmental jurisdictions have had limited impact on the Company’s ability to maintain internal operations during the year. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s

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business, results of operations and financial condition will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19. As a direct result of COVID-19, the Company decided to delay the initiation of its previously planned Phase 2 clinical trial to evaluate VP-103 in subjects with plantar warts.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. These estimates and assumptions are based on current facts, historical experience as well as other pertinent industry and regulatory authority information, including the potential future effects of COVID-19, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

Significant Accounting Policies

Restricted Cash

Restricted cash at March 31, 2022 includes a cash deposit with SVB as required under the Existing Mezzanine Credit Facility with a minimum balance equal to the outstanding amount of the Term Loans under the Existing Mezzanine Credit Facility.

Net Loss Per Share

Net loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period. Diluted net loss per share excludes the potential impact of common stock options and unvested shares of restricted stock because their effect would be anti-dilutive due to the Company’s net loss. Since the Company had a net loss in each of the periods presented, basic and diluted net loss per common share are the same.

The table below provides potential shares outstanding that were not included in the computation of diluted net loss per common share, as the inclusion of these securities would have been anti-dilutive:

	As of March 31,
	2022		2021
Shares issuable upon exercise of stock options		3,768,955		3,571,708
Non-vested shares under restricted stock grants		425,000		475,000

Note 3—Investments in Marketable Securities

Investments in marketable securities consisted of the following as of March 31, 2022 and December 31, 2021 (in thousands):

	March 31, 2022
	Amortized		Gross Unrealized		Gross Unrealized			Fair
	Cost		Gains		Losses			Value
U.S. Treasury securities	$	5,025	$	—	$	(40	)	$	4,985
Commercial paper		2,499		—		—		$	2,499
Asset-backed securities		4,035		—		(22	)	$	4,013
Total marketable securities	$	11,559	$	—	$	(62	)	$	11,497
	December 31, 2021
	Amortized		Gross Unrealized		Gross Unrealized			Fair
	Cost		Gains		Losses			Value
U.S. Treasury securities	$	15,272	$	—	$	(15	)	$	15,257
Commercial paper		28,980		—		—			28,980
Asset-backed securities		10,379		—		(14	)		10,365
Total marketable securities	$	54,631	$	—	$	(29	)	$	54,602

Unrealized gains and losses on marketable securities are recorded as a separate component of accumulated other comprehensive gain included in stockholders’ equity. Realized gains (losses) are included in interest income (expense) in the statement of operations and comprehensive loss on a specific identification basis. There were no marketable securities with a maturity of greater than one year

6

for either period presented. To date, the Company has not recorded any impairment charges on marketable securities related to other-than-temporary declines in market value.

Accretion of bond discount and premium on marketable securities and interest income on marketable securities is recorded as interest income on the statement of operations and comprehensive loss.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

Level 1 — Quoted market prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following tables presents fair value of the Company’s marketable securities (in thousands):

	Fair Value Measurement as of March 31, 2022
	Level 1		Level 2		Level 3		Total
Assets
U.S. treasury securities	$	4,985	$	—	$	—	$	4,985
Commercial paper		—		2,499		—		2,499
Asset-backed securities		—		4,013		—		4,013
Total assets	$	4,985	$	6,512	$	—	$	11,497
	Fair Value Measurement as of December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets
U.S. treasury securities	$	15,257	$	—	$	—	$	15,257
Commercial paper		—		28,980		—		28,980
Asset-backed securities		—		10,365		—		10,365
Total assets	$	15,257	$	39,345	$	—	$	54,602

Note 4—Property and Equipment

Property and equipment, net consisted of (in thousands):

	As of			As of
	March 31,			December 31,
	2022			2021
Machinery and equipment	$	737		$	737
Office furniture and fixtures		303			303
Office equipment		301			301
Leasehold improvements		54			49
Automobiles		27			27
Construction in process		3,085			2,731
		4,507			4,148
Accumulated depreciation		(352	)		(254	)
Total property and equipment, net	$	4,155		$	3,894

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The Company has recorded an asset classified as construction in process associated with the construction of a product assembly and packaging line that would be placed into service for commercial manufacturing upon future regulatory product approval.

Note 5—Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

	As of March 31, 2022		As of December 31, 2021
Compensation and related costs	$	699	$	1,667
Professional fees		347		406
Construction in process		335		131
Interest expense		219		250
Clinical trials and drug development		216		613
Machinery and equipment		124		124
Other accrued expenses and other current liabilities		74		75
Total accrued expenses and other current liabilities	$	2,014	$	3,266

Note 6—Leases

Effective January 1, 2019, the Company accounts for its leases under ASC 842, Leases (Topic 842). Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the balance sheet as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease, if available, otherwise at the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right-of-use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right-of-use asset result in straight-line rent expense over the lease term. Variable lease expenses, if any, are recorded when incurred.

In calculating the right-of-use asset and lease liability, the Company elects to combine lease and non-lease components. The Company excludes short-term leases having initial terms of 12 months or less from the guidance as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term. The Company does not act as a lessor.

The Company leased office space in West Chester, Pennsylvania under an agreement classified as an operating lease that expired in May 2021. On July 1, 2019, the Company entered into a lease for office space located in West Chester which was further amended on March 12, 2020 to include additional office space. The initial term will expire on September 1, 2027. Base rent over the initial term is approximately $2.4 million, and the Company is also responsible for its share of the landlord’s operating expense.

The Company leases a vehicle under a financing lease that expires in 2025. The net basis of the vehicle lease of $21 thousand is recorded as property and equipment on the condensed balance sheet.

The components of lease expense are as follows (in thousands):

	For the Three Months Ended March 31,
	2022		2021
Finance lease cost:
Amortization ROU assets	$	2	$	—
Total finance lease costs	$	2	$	—
Operating lease:
Operating lease costs	$	85	$	89
Short-term lease costs		8		5
Total operating lease expense	$	93	$	94

Maturities of the Company’s operating and finance leases, excluding short-term leases, as of March 31, 2022 are as follows (in thousands):

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	For the Three Months Ended March 31,
	Operating			Financing
2022 (remaining 9 months)	$	259		$	6
2023		349			7
2024		355			7
2025		360			2
Thereafter		613			—
Total lease payments		1,936			22
Less imputed interest		(302	)		(1	)
Lease liability	$	1,634		$	21

The weighted average remaining term and discount rate are as follows:

Other information:	Operating			Finance
Weighted average remaining lease term		5.4			3.1
Weighted-average discount rate		6.25	%		4.35	%

Note 7—Debt

On March 10, 2020 (the “Effective Date”), the Company entered into (i) a mezzanine loan and security agreement (the “Mezzanine Loan Agreement”) with SVB, as administrative agent and collateral agent (the “Agent”), and Silicon Valley Bank and West River Innovation Lending Fund VIII, L.P., as lenders (the “Mezzanine Lenders”), pursuant to which the Mezzanine Lenders have agreed to lend the Company up to $50.0 million in a series of term loans, and (ii) a loan and security agreement (the “Senior Loan Agreement”, and together with the Mezzanine Loan Agreement, the “Loan Agreements”) with Silicon Valley Bank, as lender (the “Senior Lender”, and together with the Mezzanine Lenders, the “Lenders”), pursuant to which the Senior Lender has agreed to provide the Company with a revolving line of credit of up to $5.0 million. Upon entering into the Loan Agreements, the Company borrowed $35.0 million in term loans from the Mezzanine Lenders (the “Term A Loan”).

On October 26, 2020, the Company entered into (i) the first amendment to the Mezzanine Loan Agreement (the “Mezzanine Loan Amendment”) and (ii) the first amendment to the Senior Loan Agreement (the “Senior Loan Amendment” and together with the Mezzanine Loan Amendment the “Loan Agreement Amendments”) with the Lenders, under which the Company borrowed an additional $5.0 million in term loans on March 1, 2021 (the “Term B1 Loan”).

On March 1, 2022, the Company entered into the Second Mezzanine Loan Amendment to its existing mezzanine loan and security agreement (as amended prior to the Amendment, the “Existing Mezzanine Credit Facility”) with SVB, as administrative agent and a lender and SVB Innovation Credit Fund VIII, L.P., as a lender. Pursuant to the Second Mezzanine Loan Amendment, the Company is no longer required to maintain a minimum liquidity ratio or achieve minimum levels of trailing six-month net product revenues. Under the terms of the Second Mezzanine Loan Amendment, the Company will be required to maintain a minimum cash balance equal to the outstanding amount of the term loans under the Existing Mezzanine Credit Facility at all times in a separate money market account with SVB. The Company also entered into the Second Senior Loan Amendment (together with the Second Mezzanine Loan Amendment, the “Second Amendments”) to its existing loan and security agreement with SVB (as amended prior to the Amendment, the “Existing Senior Credit Facility” and together with the Existing Mezzanine Credit Facility, the “Existing Credit Facilities”) pursuant to which, the Company is no longer required to achieve minimum levels of trailing six-month net product revenues. Pursuant to the Second Amendments, The Term Loans will be interest-only through February 28, 2023, followed by 12 equal monthly payments of principal and interest.

The Term Loans will bear interest at a floating per annum rate equal to the greater of (i) 7.25% and (ii) the sum of (a) the prime rate reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue, plus (b) 2.50%.

Under the terms of the Senior Loan Agreement, as amended on March 1, 2022, the Company agreed to forego its right to request or receive any advances on the revolving credit line.

The Company’s obligations under the Senior Loan Agreement and the Mezzanine Loan Agreement, as amended, are secured by, respectively, a first priority perfected security interest and second priority perfected security interest in substantially all of the Company’s current and future assets, other than its intellectual property (except rights to payment from the sale, licensing or disposition of such intellectual property). The Company has also agreed not to encumber its intellectual property assets, except as permitted by the Loan Agreements.

Under the terms of the Mezzanine Loan Agreement, as amended, the Company will be required to make a final payment fee of $3,750,000 payable on the earlier of (i) the Maturity Date, (ii) the acceleration of any Term Loans, or (iii) the prepayment of the Term Loans (the “Final Payment”). The Company is recording the final payment fee to interest expense using the effective interest rate

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method over the term of the Term Loan with an increase in long-term debt. The Company may prepay all, or any portion of the Term Loans upon 5 business days’ advance written notice to the Agent, provided that the Company will be obligated to pay a prepayment fee equal to (i) $1.0 million if prepaid between October 27, 2021 and October 26, 2022, and (ii) $0.5 million if prepaid between October 27, 2022 and October 26, 2023 and (iii) no prepayment fee if prepaid after October 26, 2023 (each, a “Prepayment Fee”).

The Company may terminate the revolving credit line under the Senior Loan Agreement at any time upon three business days’ advance written notice to the Senior Lender. If the Company terminates the revolving credit line prior to the Maturity Date, it must pay to the Senior Lender an early termination fee of $50,000 (the “Termination Fee”).

Under the Loan Agreements, as amended, the Company is subject to a number of affirmative and restrictive covenants, including covenants regarding, delivery of financial statements, maintenance of inventory, payment of taxes, maintenance of insurance, protection of intellectual property rights, dispositions of property, business combinations or acquisitions, incurrence of additional indebtedness or liens, investments and transactions with affiliates among other customary covenants. As of March 31, 2022 the Company is in compliance with all covenants.

Upon the occurrence of certain events, including but not limited to the Company’s failure to satisfy its payment obligations under the Loan Agreements, the breach of certain of its other covenants under the Loan Agreements, or the occurrence of a material adverse change, cross defaults to other indebtedness or material agreements, judgment defaults and defaults related to failure to maintain governmental approvals failure of which to maintain could result in a material adverse effect, the Agent and the Lenders will have the right, among other remedies, to declare all principal and interest immediately due and payable, to exercise secured party remedies, to receive the Final Payment and Termination Fee and, if the payment of principal and interest is due prior to the Maturity Date, to receive the applicable Prepayment Fee. The Loan Agreements also include subjective acceleration clauses that permit the Lenders to accelerate the maturity date under certain circumstances, including a material adverse change in the Company’s business, operations, or financial condition or a material impairment of the prospect of repayment of the Company’s obligations to the Mezzanine Lenders.

The Company believes that without additional financing, it is probable that it will not have sufficient funds to maintain the minimum cash balance within the twelve months after March 31, 2022, at which time the remaining debt will become due. In accordance with FASB ASC 470, the Company has classified all outstanding principal and final payment fees as a current liability in the accompanying balance sheet as of March 31, 2022.

The Company has incurred debt discount and issuance costs of $4.4 million, including the final payment fee of $3.8 million, that are classified as a contra-liability on the condensed balance sheet. The Company incurred additional debt issuance costs related to the revolving credit line of $0.1 million, classified as other non-current assets in the condensed balance sheet. These costs related to the revolving credit line are being amortized to interest expense over the life of the loans using the straight-line method.

For the three months ended March 31, 2022, the Company recognized interest expense of $1.0 million of which $0.7 million was interest on the term loan and $0.3 million was non-cash interest expense related to the amortization of deferred debt issuance costs and accrual of the final payment fee.

The following table summarizes the composition of debt as reflected on the balance sheet as of March 31, 2022 (in thousands):

Gross proceeds	$	40,000
Accrued final payment fee		3,750
Unamortized debt discount and issuance costs		(1,751	)
Total short-term debt, net	$	41,999

The aggregate maturities of debt as of March 31, 2022, are as follows (in thousands):

2023	$	33,333
2024 (1)		6,667
	$	40,000
(1) Excludes the final payment fee due at time of maturity

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Note 8—Stock-Based Compensation

Stock-based compensation expense, which includes expense for both employees and non-employees, has been reported in the Company’s condensed statements of operations for the three months ended March 31, 2022 and 2021 as follows (in thousands):

	For the Three Months Ended March 31,
	2022		2021
Research and development	$	417	$	298
General and administrative		899		1,105
Total stock-based compensation	$	1,316	$	1,403

Stock Options

The following table summarizes the Company’s stock option activity for the three months ended March 31, 2022:

						Weighted average
				Weighted average		remaining contractual		Aggregate intrinsic
	Number of shares			exercise price		life (in years)		value
Outstanding as of December 31, 2021		3,443,817		$	10.05		7.8	$	3,952,803
Granted		365,000			8.09
Exercised		—			—
Forfeitures		(14,238	)		11.76
Expired		(25,624	)		14.13
Outstanding as of March 31, 2022		3,768,955		$	9.83		7.8	$	2,468,987
Options vested and exercisable as of    March 31, 2022		1,968,559		$	8.90		6.8	$	2,076,929

As of March 31, 2022, the total unrecognized compensation related to unvested stock option awards granted was $13.0 million, which the Company expects to recognize over a weighted-average period of 2.84 years.

Restricted Stock

In November 2019 and August 2020 the Company granted 300,000 and 250,000 restricted stock units, respectively to its executive officers. As of March 31, 2022, 425,000 restricted stock units were outstanding. The restricted stock units vest 50% upon receipt of regulatory approval of the Company’s new drug application for VP-102 for the treatment of molluscum (the “Approval Date”) and 50% shall vest on the one year anniversary of the Approval Date subject to the holders’ continuous service through each applicable date.

The following is a summary of changes in the status of non-vested RSUs:

			Weighted Average
			Grant Date Fair
	Number of Shares		Value
Nonvested as of December 31, 2021		425,000	$	11.68
Granted		—		—
Forfeitures		—		—
Nonvested as of March 31, 2022		425,000	$	11.68

No compensation expenses have been recognized for these nonvested restricted stock units as these shares are performance based and the triggering event was not determined to be probable as of March 31, 2022. As of March 31, 2022, the total unrecognized compensation expense related to the restricted stock units was $5.0 million.

Note 9—Related Party Transactions

Prior to the completion of the initial public offering of the Company’s common stock in June 2018, the Company was controlled by PBM VP Holdings, LLC (“PBM VP Holdings”) an affiliate of PBM Capital Group, LLC (“PBM”). Paul B. Manning, who is the Chairman and Chief Executive Officer of PBM and the current chairman of the Company’s Board of Directors, and certain entities affiliated with Mr. Manning, continue to be the Company’s largest shareholder on a collective basis.

On December 2, 2015, the Company entered into a Services Agreement (the “SA”) with PBM. Pursuant to the terms of the SA, which had an initial term of twelve months (and was automatically renewable for successive monthly periods), PBM rendered advisory and consulting services to the Company. Services provided under the SA included certain business development, operations, technical, contract, accounting and back office support services. In consideration for these services, the Company was obligated to pay

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PBM a monthly management fee. On October 1, 2019, the SA was amended to reduce the monthly management fee to $5,000 as a result of a reduction in services provided by PBM.

For each of the three months ended March 31, 2022 and 2021, the Company incurred expenses under the SA of $15,000 of which $9,000 were included in general and administrative expenses, and $6,000 were included in research and development expenses.

As of March 31, 2022, the Company had $5,000 of outstanding payables due to PBM and its affiliates.

Note 10—Commitments and Contingencies

The Company is involved in ordinary, routine legal proceedings that are not considered by management to be material. In the opinion of Company counsel and management, the ultimate liabilities resulting from such legal proceedings will not materially affect the financial position of the Company or its results of operations or cash flows.

Note 11—License and Collaboration Agreements

In August 2020, the Company entered into an option agreement with Torii Pharmaceutical Co., Ltd. (“Torii”) for the development and commercialization of the Company’s product candidates for the treatment of molluscum contagiosum and common warts in Japan, including VP-102 (the “Option Agreement”). Torii paid the Company $0.5 million to secure the exclusive option. The $0.5 million is included in deferred revenue as of December 31, 2020 in the balance sheet.

On March 2, 2021, Torii exercised the exclusive option in the Option Agreement. On March 17, 2021, the Company entered into a collaboration and license agreement (the “Torii Agreement”) with Torii, pursuant to which the Company granted Torii an exclusive license to develop and commercialize the Company’s product candidates that contain a topical formulation of cantharidin for the treatment of molluscum contagiosum and common warts in Japan, including VP-102. Additionally, the Company granted Torii a right of first negotiation with respect to additional indications for the licensed products and certain additional products for use in the licensed field, in each case in Japan.

Pursuant to the Torii Agreement, the Company received payments from Torii of $0.5 million in December 2020 and $11.5 million in April 2021. Additionally, the Company is entitled to receive from Torii an additional $58 million in aggregate payments contingent on achievement of specified development, regulatory, and sales milestones, in addition to tiered transfer price payments for supply of product in the percentage range of the mid-30’s to the mid-40’s of net sales. The transfer payments shall be payable, on a product-by-product basis, beginning on the first commercial sale of such product and ending on the latest of (a) expiration of the last-to-expire valid claim contained in certain licensed patents in Japan that cover such product, (b) expiration of regulatory exclusivity for the first indication for such product in Japan, and, (c) (i) with respect to the first product, ten years after first commercial sale of such product, and, (ii) with respect to any other product, the later of (x) ten years after first commercial sale of the first product and (y) five years after first commercial sale of such product.

The Torii Agreement expires on a product-by-product basis upon expiration of Torii’s obligation under the agreement to make transfer price payments for such product. Torii has the right to terminate the agreement upon specified prior written notice to us. Additionally, either party may terminate the agreement in the event of an uncured material breach of the agreement by, or insolvency of, the other party. The Company may terminate the agreement in the event that Torii commences a legal action challenging the validity, enforceability or scope of any licensed patents.

On March 7, 2022, pursuant to the Torii Agreement, the Company entered into a Clinical Supply Agreement with Torri, whereby the Company is obligated to supply product to Torii for use in clinical trials and other development activities. The Company recognized unbilled license revenue of $0.4 million for the three months ended March 31, 2022 related to supplies and development activity pursuant to this agreement.

In August 2020, the Company entered into an exclusive license agreement with Lytix Biopharma AS (“Lytix”) for the use of licensed technology to research, develop, manufacture, have manufactured, use, sell, have sold, offer for sale, import, and otherwise commercialize products for use in all malignant and pre-malignant dermatological indications, other than metastatic melanoma and metastatic merkel cell carcinoma (the” Lytix Agreement”). As part of the Lytix Agreement, the Company paid Lytix a one-time up-front fee of $0.3 million in 2020. In addition, in February 2021, the Company paid Lytix a one-time $2.3 million payment upon the achievement by Lytix of a regulatory milestone. The $0.3 million and $2.3 million payments were recognized in research and development expense in the statement of operations for the year ended December 31, 2020 and the three months ended March 31, 2021, respectively. The Company is also obligated to pay up to $111.0 million contingent on achievement of specified development, regulatory, and sales milestones, as well as tiered royalties based on worldwide annual net sales ranging in the low double digits to the mid-teens, subject to certain customary reductions. The Company’s obligation to pay royalties expires on a country-by-country and product-by-product basis on the later of the expiration or abandonment of the last to expire licensed patent covering LTX-315 anywhere in the world and expiration of regulatory exclusivity for LTX-315 in such country. Additionally, all upfront fees and milestone based payments received by the Company from a sublicensee will be treated as net sales and will be subject to the royalty

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payment obligations under the Lytix Agreement, and all royalties received by the Company from a sublicensee shall be shared with Lytix at a rate that is initially 50% but decreases based on the stage of development of LTX-315 at the time such sublicense is granted.

Note 12 – Subsequent Event

None.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with (i) our unaudited interim condensed financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and (ii) our audited financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the years ended December 31, 2020 and 2021 included in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on March 2, 2022. Our financial statements have been prepared in accordance with U.S. GAAP.

We own various U.S. federal trademark applications and unregistered trademarks, including our company name. All other trademarks or trade names referred to in this Quarterly Report on Form 10-Q are the property of their respective owners. Solely for convenience, the trademarks and trade names in this report are referred to without the symbols ® and ™, but such references should not be construed as an indication that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words “expect,” “anticipate,” “intend,” “believe,” “may,” “plan,” “seek” or similar language. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our business and financial performance are subject to substantial risks and uncertainties. Our actual results could differ materially from those discussed in these forward-looking statements. In evaluating our business, you should carefully consider the information set forth in this Quarterly Report under Part II - Item 1A “Risk Factors,” and in our other filings with the SEC.

Overview

We are a dermatology therapeutics company committed to the development and commercialization of novel treatments that provide meaningful benefit for people living with skin diseases. Our lead product candidate, VP-102, is a proprietary drug-device combination of our topical solution of cantharidin, a widely recognized, naturally sourced agent to treat topical dermatological conditions, administered through our single-use precision applicator. We are initially developing VP-102 for the treatment of molluscum contagiosum, or molluscum, a highly contagious and primarily pediatric viral skin disease, external genital warts and common warts. There are currently no products approved by the U.S. Food and Drug Administration, or FDA, nor is there an established standard of care for either of these diseases, resulting in significant undertreated populations in two of the largest unmet needs in dermatology. VP-102 has the potential to be the first FDA-approved product for molluscum and for its active pharmaceutical ingredient, or API, to be characterized as a new chemical entity, or NCE, with the five years of non-patent regulatory exclusivity associated with that designation. We also believe VP-102 has the potential to qualify for pediatric exclusivity in common warts, which would provide for an additional six months of non-patent exclusivity. In addition, our granted patents and pending patent applications include claims drawn to our cantharidin formulations, applicator devices and related accessories, dosing regimens, methods of preparation including methods of synthesis and methods of use.

In January 2019, we reported positive top-line results from our Phase 3 CAMP-1 and CAMP-2 pivotal trials with VP-102 for the treatment of molluscum. Based on the results from these trials, we submitted a new drug application, or NDA, to the FDA for VP-102 for the treatment of molluscum in September 2019. In November 2019, we received notice that the FDA accepted the NDA for filing, with a Prescription Drug User Fee Act, or PDUFA, goal date of July 13, 2020. In July 2020, we received a Complete Response Letter, or CRL, from the FDA for our NDA. We resubmitted our NDA for VP-102 for the treatment of molluscum in December 2020. In February 2021, we received notice that the FDA accepted the resubmitted NDA for filing, with a PDUFA goal date of June 23, 2021. On May 28, 2021, the FDA extended the PDUFA date to September 23, 2021 to allow additional time to review information submitted by Verrica in response to comments from the agency regarding the Company's human factors study.

On September 17, 2021, the FDA issued a CRL regarding our NDA for VP-102. According to the CRL, the FDA identified deficiencies at a facility of a contract manufacturing organization, or CMO, which are not specifically related to the manufacturing of VP-102 but instead raise general quality issues at the facility. The FDA did not identify any clinical, safety or product specific Chemistry, Manufacturing, and Controls, or CMC, deficiencies related to VP-102. Following the CRL, on September 22, 2021 we received a General Advice Letter from the FDA with recommendations to improve VP-102's user interface. On November 5, 2021, we were notified that the inspection of the CMO has been classified as “voluntary action indicated”, or VAI, is now closed and that the VAI classification will not directly negatively impact FDA’s assessment of our NDA regarding this CMO. With the satisfactory resolution of the facility inspection, we resubmitted the NDA for the approval of VP-102 for the treatment of molluscum on

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November 29, 2021. The resubmission was limited to those sections and elements of the NDA that were identified as deficiencies in the CRL issued by the FDA in September 2021. On December 15, 2021 the FDA accepted our NDA resubmission for VP-102 and assigned a new PDUFA goal date of May 24, 2022.

In addition, we are also developing VP-102 for the treatment of external genital warts. We initiated a Phase 2 clinical trial evaluating the optimal dose regimen, efficacy, safety and tolerability of VP-102 in patients with external genital warts in June 2019. In November 2020, we announced positive topline results from our Phase 2 clinical trial of VP-102 for the treatment of external genital warts. Based on the results of the Phase 2 trial, we intend to initiate a Phase 3 trial of VP-102 for the treatment of external genital warts and to dose the first patient in the first half of 2023.

In addition, we are conducting necessary drug development activities for VP-103, our second cantharidin-based product candidate, and are evaluating when to initiate a Phase 2 clinical trial for the treatment of plantar warts. We also intend to develop our third product candidate, LTX-315, for the treatment of dermatological oncology indications. We submitted an Investigational New Drug Application, or IND, for LTX-315 in October 2021. The FDA accepted our IND in November 2021. We dosed the first patient in a Phase 2 trial of LTX-315 in Basal Cell Carcinoma, or BCC, in April 2022.

In June 2019, we announced positive topline results from our COVE-1 Phase 2 open label clinical trial of VP-102 for the treatment of verruca vulgaris, or common warts. Based on feedback from the FDA regarding a potential Phase 3 trial protocol, we are currently evaluating conducting an additional Phase 2 clinical trial of VP-102 for the treatment of common warts that would be designed to further evaluate the treatment indication, application time, or regimen and long term sustainability.

On March 17, 2021, we entered into a collaboration and license agreement, or the Torii Agreement, with Torii Pharmaceutical Co., Ltd., or Torii, pursuant to which we granted Torii an exclusive license to develop and commercialize our product candidates that contain a topical formulation of cantharidin for the treatment of molluscum contagiosum and common warts in Japan, including VP-102. Additionally, we granted Torii a right of first negotiation with respect to additional indications for the licensed products and certain additional products for use in the licensed field, in each case in Japan. Pursuant to the Torii Agreement, we received payments from Torii of $0.5 million in December 2020 and $11.5 million in April 2021. Additionally, we are entitled to receive from Torii an additional $58.0 million in aggregate payments contingent on achievement of specified development, regulatory, and sales milestones, in addition to tiered transfer price payments for supply of product in the percentage range of the mid-30s to the mid-40s of net sales.

In August 2020, we entered into an exclusive license agreement with Lytix Biopharma AS, or Lytix, pursuant to which we obtained a worldwide, license for certain technology of Lytix to develop LTX-315 for use in all malignant and pre-malignant dermatological indications, other than metastatic melanoma and metastatic merkel cell carcinoma.

Our strategy is to advance VP-102 through regulatory approval and self-commercialize in the United States for the treatment of several skin diseases. We intend to build a specialized sales organization in the United States focused on pediatric dermatologists, dermatologists, and select pediatricians. In the future, we also intend to develop VP-102 for commercialization in additional geographic regions, either alone or together with a strategic partner.

We have been actively monitoring the coronavirus, or COVID-19, pandemic and its impact globally. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19. As a direct result of COVID-19, we decided to delay the initiation of our previously planned Phase 2 clinical trial to evaluate VP-103 in subjects with plantar warts.

Since our inception in 2013, our operations have focused on developing VP-102, organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio and conducting clinical trials. We do not have any product candidates approved for sale and have not generated any revenue from product sales. We have funded our operations primarily through the sale of equity and equity-linked securities and through borrowing under our loan agreement with Silicon Valley Bank.

As of March 31, 2022, we had cash, cash equivalents, marketable securities and restricted cash of $61.9 million. We believe that our existing cash, cash equivalents and marketable securities as of March 31, 2022 will be sufficient to support our planned operations into the third quarter of 2022.

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Since inception, we have incurred significant operating losses. For the three months ended March 31, 2022 and 2021, our net loss was $8.5 million and $0.9 million, respectively. As of March 31, 2022, we had an accumulated deficit of $147.4 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:

•initiate clinical trials evaluating VP-102 for the treatment of external genital warts;

•continue our ongoing clinical programs including evaluating VP-102 for the treatment of common warts and LTX-315 for the treatment of BCC, as well as initiate and complete additional clinical trials, as needed;

•initiate clinical trials evaluating VP-103 for the treatment of plantar warts, and LTX-315 for the treatment of dermatological oncology indications;

•pursue regulatory approvals for VP-102 for the treatment of molluscum, and eventually for the treatment of external genital warts, common warts or any other indications we may pursue for VP-102, as well as for VP-103 or LTX-315;

•seek to discover and develop additional product candidates;

•ultimately, establish a commercialization infrastructure and scale up external manufacturing and distribution capabilities to commercialize any product candidates for which we may obtain regulatory approval, including VP-102, VP-103 and LTX-315;

•seek to in-license or acquire additional product candidates for other dermatological conditions;

•adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products;

•maintain, expand and protect our intellectual property portfolio;

•hire additional clinical, manufacturing and scientific personnel;

•add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts; and

•incur additional legal, accounting and other expenses in operating as a public company.

These factors raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued. We plan to secure additional capital in the future through equity or debt financings, partnerships, or other sources to carry out our planned development activities. If we are unable to raise capital when needed or on attractive terms, we will be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the balance sheets and the reported amounts of expenses during the reporting periods. In accordance with GAAP, we evaluate our estimates and judgments on an ongoing basis.

A summary of our significant accounting policies are disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. However, we believe that the additional accounting policies disclosed in Note 2 to our condensed financial statement are important to understanding and evaluating our reported financial results.

Components of Results of Operations

License Revenue

We have not received any revenue from product sales since our inception. License revenue represents revenue from the Torii Agreement pursuant to which we granted Torii an exclusive license to develop and commercialize our product candidates that contain a topical formulation of cantharidin for the treatment of molluscum contagiosum and common warts in Japan including VP-102.

Operating Expenses

Research and Development Expenses

Research and development expenses consist of expenses incurred in connection with the discovery and development of our product candidates. We expense research and development costs as incurred. These expenses include:

•expenses incurred under agreements with contract research organizations, or CROs, as well as investigative sites and consultants that conduct our clinical trials and preclinical studies;

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•manufacturing and supply scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial supply and commercial supply, including manufacturing validation batches;

•outsourced professional scientific development services;

•employee-related expenses, which include salaries, benefits and stock-based compensation;

•expenses relating to regulatory activities; and

•laboratory materials and supplies used to support our research activities.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to increase over the next several years as we increase personnel costs, including stock-based compensation, initiate and conduct clinical trials of VP-102 in patients with external genital warts, VP-102 in patients with common warts, VP-103 in patients with plantar warts, LTX-315 for dermatological oncology indications, including BCC, and conduct other clinical trials and prepare regulatory filings for our product candidates.

The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of, or when, if ever, material net cash inflows may commence from our product candidates. This uncertainty is due to the numerous risks and uncertainties associated with the duration and cost of clinical trials, which vary significantly over the life of a project as a result of many factors, including:

•the number of clinical sites included in the trials;

•the length of time required to enroll suitable patients;

•the number of patients that ultimately participate in the trials;

•the number of doses patients receive;

•the duration of patient follow-up; and

•the results of our clinical trials.

Our expenditures are subject to additional uncertainties, including the manufacturing process for our product candidates, the terms and timing of regulatory approvals, and the expense of filing, prosecuting, defending and enforcing any patent claims or other intellectual property rights. We may never succeed in achieving regulatory approval for our product candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of our product candidates. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.

General and Administrative Expenses

General and administrative expenses consist principally of salaries and related costs for personnel in executive and administrative functions, including stock-based compensation, travel expenses and recruiting expenses. Other general and administrative expenses include market research costs, insurance costs, and professional fees for audit, tax and legal services.

We anticipate that our general and administrative expenses, including payroll and related expenses, will increase in the future as we continue to increase our headcount to support the expected growth in our business, expand our operations and organizational capabilities, and prepare for potential commercialization of VP-102 for the treatment of molluscum, if successfully developed and approved. We also anticipate increased expenses associated with general operations, including costs related to audit, tax and legal services, director and officer insurance premiums, and investor relations costs.

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Results of Operations for the Three Months Ended March 31, 2022 and 2021

The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021 (in thousands):

	For the Three Months Ended March 31,
	2022			2021			Change
License revenue	$	431		$	12,000		$	(11,569	)
Operating expenses:
Research and development		2,723			5,362			(2,639	)
General and administrative		5,118			6,578			(1,460	)
Total operating expenses		7,841			11,940			(4,099	)
(Loss) income from operations		(7,410	)		60			(7,470	)
Other income (expense):
Interest income		22			32			(10	)
Interest expense		(1,082	)		(1,028	)		(54	)
Total other expense		(1,060	)		(996	)		(64	)
Net loss	$	(8,470	)	$	(936	)	$	(7,534	)

License Revenue

License revenue was $0.4 million for the three months ended March 31, 2022, compared to $12.0 million for the three months ended March 31, 2021. For the three months ended March 31, 2022, license revenue consisted of supplies and development activity with Torii. For the three months ended March 31, 2021, pursuant to the exercise of the license option in March 17, 2021 per the Torii Agreement, we recognized revenue of $12.0 million comprised of an up-front payment of $0.5 million received in December 2020 and $11.5 million payment paid in April 2021.

Research and Development Expenses

Research and development expenses were $2.7 million for the three months ended March 31, 2022, compared to $5.4 million for the three months ended March 31, 2021. The decrease of $2.6 million was primarily attributable to a one-time $2.3 million milestone payment made to Lytix upon achievement of a regulatory milestone for LTX-315.

General and Administrative Expenses

General and administrative expenses were $5.1 million for the three months ended March 31, 2022, compared to $6.6 million for the three months ended March 31, 2021. The decrease of $1.5 million was primarily due to lower expenses related to pre-commercial activities for VP-102 partially offset by increase in expenses related to increased headcount.

Interest Income

Interest income was relatively consistent for the periods presented and consisted primarily of interest earned on our cash, cash equivalents, marketable securities and restricted cash.

Interest Expense

Interest expense was relatively consistent for the three months ended March 31, 2022 and 2021 and consisted of interest expense on the Mezzanine Loan Agreement as noted in Note 7 to our condensed financial statements.

Liquidity and Capital Resources

Since our inception, we have not generated any revenue from product sales and have incurred net losses and negative cash flows from our operations. We have financed our operations since inception through sales of our convertible preferred stock and the sale of our common stock in our IPO, as well as in a subsequent offering of our common stock noted below, receiving aggregate net proceeds of $114.9 million from our IPO, $40.0 million of gross proceeds from the Mezzanine Loan Agreement noted below and $28.1 million of net proceeds from our public offering of common stock in March 2021.

As of March 31, 2022, we had cash, cash equivalents, marketable securities and restricted cash of $61.9 million. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.

On March 25, 2021, we closed a follow-on public offering in which we sold 2,033,899 shares of common stock at a public offering price of $14.75 per share, resulting in net proceeds of $28.1 million after deducting underwriting discounts and commissions and offering expenses.

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On March 10, 2020, we entered into (i) a mezzanine loan and security agreement, or the Mezzanine Loan Agreement, with Silicon Valley Bank, as administrative agent and collateral agent, or the Agent, and Silicon Valley Bank and West River Innovation Lending Fund VIII, L.P., as lenders, or the Mezzanine Lenders, pursuant to which the Mezzanine Lenders have agreed to lend us up to $50.0 million in a series of term loans, and (ii) a loan and security agreement, or the Senior Loan Agreement, and together with the Mezzanine Loan Agreement, the Loan Agreements, with Silicon Valley Bank, as lender, or the Senior Lender, and together with the Mezzanine Lenders, the Lenders, pursuant to which the Senior Lender has agreed to provide us a revolving line of credit of up to $5.0 million. Upon entering into the Loan Agreements, we borrowed $35.0 million in term loans, or the Term A Loan, from the Mezzanine Lenders. We entered into amendments to the Loan Agreements in October 2020 under which we borrowed an additional $5.0 million in term loans, or the Term B1 Loan and together with the Term A Loan, the Loans, on March 1, 2021.

On October 26, 2020, we entered into (i) the first amendment to the Mezzanine Loan Agreement, or the Mezzanine Loan Amendment and (ii) the first amendment to the Senior Loan Agreement, or the Senior Loan Amendment with the Lenders, under which we borrowed the Term B1 Loan on March 1, 2021.

On March 1, 2022, we entered into a second amendment to the Mezzanine Loan Agreement, or the Second Mezzanine Loan Amendment. Pursuant to the Second Mezzanine Loan Amendment, we are no longer required to maintain a minimum liquidity ratio or achieve minimum levels of trailing six-month net product revenues but will be required to maintain a minimum cash balance equal to the outstanding amount of the Term Loans under the Mezzanine Loan Agreement prior to entry into the Second Mezzanine Loan Amendment in a separate money market account with SVB. Additionally, we entered into a second amendment to the Senior Loan Agreement, or the Second Senior Loan Amendment. Pursuant to the Second Senior Loan Amendment, we are no longer required to achieve minimum levels of trailing six-month net product revenues.

Under the terms of the Senior Loan Agreement, as amended on March 1, 2022, we agreed to forego our right to request or receive any advances on the revolving credit line.

Our obligations under the Senior Loan Agreement and the Mezzanine Loan Agreement, as amended, are secured by, respectively, a first priority perfected security interest and second priority perfected security interest in substantially all of our current and future assets, other than our intellectual property (except rights to payment from the sale, licensing or disposition of such intellectual property). We have also agreed not to encumber our intellectual property assets, except as permitted by the Loan Agreements.

All of the Loans mature on March 1, 2024, or the Maturity Date. Based on the terms of the Term Loans prior to the Second Loan Amendments, the Term Loans were interest-only through March 31,2022, followed by 24 equal monthly payments of principal and interest. Following the entry into the Second Loan Amendments on March 1, 2022, the Term Loans will be interest-only through February 28, 2023, followed by 12 equal monthly payments of principal and interest.

The Term Loans will bear interest at a floating per annum rate equal to the greater of (i) 7.25% and (ii) the sum of (a) the prime rate reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue, plus (b) 2.50%.

Under the terms of the Mezzanine Loan Agreement, as amended, we will be required to make a final payment fee of $3,750,000 payable on the earlier of (i) the Maturity Date, (ii) the acceleration of any Term Loans, or (iii) the prepayment of the Term Loans, or the Final Payment. We are recording the final payment fee using the effective interest rate method over the term of the Term Loan with an increase in debt. We may prepay all, or any portion of the Term Loans upon 5 business days advance written notice to the Agent, provided that we will be obligated to pay a prepayment fee equal to (i) $1.0 million if prepaid between October 27, 2021 and October 26, 2022, and (ii) $0.5 million if prepaid between October 27, 2022 and October 26, 2023 and (iii) no prepayment fee if prepaid after October 26, 2023, each, a Prepayment Fee.

We may terminate the revolving credit line under the Senior Loan Agreement at any time upon three business days advance written notice to the Senior Lender. If we terminate the revolving credit line prior to the Maturity Date, we must pay to the Senior Lender an early termination fee of $50,000, or the Termination Fee.

Under the Loan Agreements, as amended, we are subject to a number of affirmative and restrictive covenants, including covenants regarding, delivery of financial statements, maintenance of inventory, payment of taxes, maintenance of insurance, protection of intellectual property rights, dispositions of property, business combinations or acquisitions, incurrence of additional indebtedness or liens, investments and transactions with affiliates among other customary covenants. As of March 31, 2022 we were in compliance with all covenants.

Upon the occurrence of certain events, including but not limited to our failure to satisfy our payment obligations under the Loan Agreements, the breach of certain of our other covenants under the Loan Agreements, or the occurrence of a material adverse change, cross defaults to other indebtedness or material agreements, judgment defaults and defaults related to failure to maintain governmental approvals failure of which to maintain could result in a material adverse effect, the Agent and the Lenders will have the right, among other remedies, to declare all principal and interest immediately due and payable, to exercise secured party remedies, to receive the Final Payment and Termination Fee and, if the payment of principal and interest is due prior to the Maturity Date, to receive the

19

applicable Prepayment Fee. The Loan Agreements also include subjective acceleration clauses that permit the Lenders to accelerate the maturity date under certain circumstances, including a material adverse change in our business, operations, or financial condition or a material impairment of the prospect of repayment of our obligations to the Mezzanine Lenders.

We believe that without additional financing, it is probable that we will not have sufficient funds to maintain the minimum cash balance within the twelve months after March 31, 2022, at which time the remaining debt will become due. In accordance with FASB ASC 470, we have classified all outstanding principal and final payment fees as a current liability in the accompanying balance sheet as of March 31, 2022.

Cash Flows

The following table summarizes our cash flows for the three months ended March 31, 2022 and 2021 (in thousands):

	For the Three Months Ended March 31,
	2022			2021
Net cash used in operating activities	$	(8,340	)	$	(10,785	)
Net cash provided by investing activities		43,013			10,835
Net cash (used in) provided by financing activities		(18	)		33,365
Net increase in cash and cash equivalents	$	34,655		$	33,415

Operating Activities

During the three months ended March 31, 2022, operating activities used $8.3 million of cash, primarily resulting from a net loss of $8.5 million partially offset by non-cash stock-based compensation of $1.3 million and non-cash interest expense of $0.3 million. Net cash used by changes in operating assets and liabilities consisted primarily of a decrease in accounts payable and accrued expenses of $1.7 million.

During the three months ended March 31, 2021, operating activities used $10.8 million of cash, primarily resulting from a change in operating assets and liabilities of $11.7 million due to an increase in license receivables of $11.5 million related to the Torri Agreement and a net loss of $0.9 million, offset by non-cash stock-based compensation of $1.4 million and non-cash interest of $0.4 million.

Investing Activities

During the three months ended March 31, 2022, net cash provided by investing activities of $43.0 million was primarily due to sales and maturities of marketable securities of $47.5 million, partially offset by purchases of marketable securities of $4.5 million.

During the three months ended March 31, 2021, net cash provided by investing activities of $10.8 million was due to sales and maturities of marketable securities of $20.5 million, partially offset by purchases of marketable securities of $9.3 million and purchase of property and equipment of $0.3 million.

Financing Activities

During the three months ended March 31, 2022, net cash used in financing activities of $18,000 was primarily due to debt amendment costs of $17,000.

During the three months ended March 31, 2021, net cash provided by financing activities of $33.4 million was primarily due to the proceeds of $28.1 million, net of issuance costs from the issuance of common stock and proceeds of $5.0 million from the issuance of debt.

Funding Requirements

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, continue or initiate clinical trials of, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to sales, marketing, manufacturing and distribution. Furthermore, we expect to incur additional costs associated with operating as a public company. We will need substantial additional financing to fund our operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

We believe that our existing cash, cash equivalents, marketable securities and restricted cash as of March 31, 2022 will be sufficient to support our planned operations into the third quarter of 2022. Our future capital requirements will depend on many factors, including:

20

•the costs, timing and outcome of regulatory review of our product candidates;

•the scope, progress, results and costs of our clinical trials;

•the scope, prioritization and number of our research and development programs;

•the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

•our ability to maintain compliance with covenants under our loan agreements;

•the extent to which we acquire or in-license other product candidates and technologies;

•the impact on the timing of our clinical trials and our business due to the COVID-19 pandemic;

•the costs to scale up and secure manufacturing arrangements for commercial production; and

•the costs of establishing or contracting for sales and marketing capabilities if we obtain regulatory approvals to market our product candidates.

Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of a product candidate that we do not expect to be commercially available in the near term, if at all. We may need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interests of existing stockholders may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing stockholders’ rights. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations and Commitments

As of March 31, 2022, there have been no material changes to our contractual obligations and commitments as previously discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Item 3. Quantitative and Qualitative Disclosures About Market Risks

There have been no material changes to our quantitative and qualitative disclosures about market risk as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that the information required to be disclosed by us in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily

21

applies its judgment in evaluating the cost benefit relationship of possible controls and procedures. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2022.

Disclosure Controls and Procedures

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management utilized the criteria established in the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) to assess the effectiveness of our internal control over financial reporting as of March 31, 2022.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(b) and 15d-15(b) of the Exchange Act that occurred during the quarter ended March 31, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item. 1 Legal Proceedings

From time to time, we may be subject to litigation and claims arising in the ordinary course of business. We are not currently a party to any material legal proceedings and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results, cash flows or financial condition.

Item 1A. Risk Factors

Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. In addition to the other information set forth in this quarterly report on Form 10-Q, you should carefully consider the factors described in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission on March 2, 2022. There have been no material changes to the risk factors described in that report.

Risk Factors Summary

Our business is subject to a number of risks and uncertainties, including those risks discussed below. These risks include, among others, the following:

•Risks Related to Our Financial Position and Capital Needs

oWe have incurred significant losses since our inception. We expect to incur losses over the next several years and may never achieve or maintain profitability.

oWe will need substantial additional funding to meet our financial obligations and to pursue our business objectives. If we are unable to raise capital when needed, we could be forced to curtail our planned operations and the pursuit of our growth strategy.

oWe have a limited operating history and no history of commercializing products, which may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

•Risks Related to the Development of Our Product Candidates

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oOur lead product candidate, VP-102, is being developed for the treatment of molluscum, external genital warts, and common warts, for which we are currently conducting clinical trials. If we are unable to successfully develop, receive regulatory approval for and commercialize VP-102 for the treatment of molluscum, external genital warts, common warts or any other indications, or successfully develop any other product candidates, or experience significant delays in doing so, our business will be harmed.

•Risks Related to the Commercialization of Our Product Candidates

oWe face substantial competition, including from compounded cantharidin products that may compete with VP-102 and any other product candidates, which may result in a smaller than expected commercial opportunity and/or others discovering, developing or commercializing products before or more successfully than we do.

oThe success of VP-102 for the treatment of molluscum, external genital warts and common warts will depend significantly on coverage and adequate reimbursement or the willingness of patients to pay for these procedures.

oThe market for VP-102 and any other product candidates may not be as large as we expect.

•Risks Related to Our Dependence on Third Parties

oWe currently rely on a third party to supply our raw material used in VP-102, and if we encounter any extended difficulties in procuring, or creating an alternative for, our raw material in VP-102 or any of our other product candidates we may develop, our business operations would be impaired.

oWe have entered into, and may seek additional, collaborations with third parties for the development or commercialization of our product candidates. If those collaborations are not successful, we may not be able to capitalize on the market potential of these product candidates.

•Risks Related to Our Intellectual Property

oIf we are unable to obtain or protect intellectual property rights related to any of our product candidates, we may not be able to compete effectively in our market.

•Risks Related to Employee Matters and Managing Our Growth

oWe expect to expand our development and regulatory capabilities and potentially implement sales, marketing and distribution capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

•Risks Related to Ownership of Our Common Stock and Our Status as a Public Company

oThe trading price of the shares of our common stock may be volatile, and purchasers of our common stock could incur substantial losses.

Item 6. Exhibits

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EXHIBIT INDEX

Exhibit No.	Description
3.1 (1)	Amended and Restated Certificate of Incorporation.
3.2 (2)	Amended and Restated Bylaws.
10.1 (3)	Waiver and Second Amendment to Mezzanine Loan and Security Agreement, dated as of March 1, 2022.
10.2 (4)	Amended and Restated Non-Employee Director Compensation Policy, adopted by the Board as of February 24, 2022.
10.3 (5)	Waiver and Second Amendment to Loan and Security Agreement, dated as of March 1, 2022.
31.1	Certification of Chief Executive Officer and President (Principal Executive Officer), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2	Certification of Chief Financial Officer (Principal Financial Officer), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1*	Certifications of Chief Executive Officer and President (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

(1) Previously filed as Exhibit 3.3 to the Company’s Registration Statement on Form S-1 (File No. 333-225104), filed with the Securities and Exchange Commission on May 22, 2018.

(2) Previously filed as Exhibit 3.4 to the Company’s Registration Statement on Form S-1 (File No. 333-225104), filed with the Securities and Exchange Commission on May 22, 2018.

(3) Previously filed as Exhibit 10.26 to the Company’s Annual Report on Form 10-K (File No. 001-38529), filed with the Securities and Exchange Commission on March 2, 2022.

(4) Previously filed as Exhibit 10.27 to the Company’s Annual Report on Form 10-K (File No. 001-38529), filed with the Securities and Exchange Commission on March 2, 2022.

(5) Previously filed as Exhibit 10.28 to the Company’s Annual Report on Form 10-K (File No. 001-38529), filed with the Securities and Exchange Commission on March 2, 2022.

* These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	VERRICA PHARMACEUTICALS INC.
May 9, 2022	By:	/s/ Ted White
		Ted White
		Chief Executive Officer and President
		(Principal Executive Officer)
	By:	/s/ P. Terence Kohler Jr.
		P. Terence Kohler Jr.
		Chief Financial Officer
		(Principal Financial Officer)

25

EX-31.1

Exhibit 31.1

VERRICA PHARMACEUTICALS INC.

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Ted White, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2022 of Verrica Pharmaceuticals Inc. (the “registrant”);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2022

/s/ Ted White

Ted White

President and Chief Executive Officer

(principal executive officer)

EX-31.2

Exhibit 31.2

VERRICA PHARMACEUTICALS INC.

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, P. Terence Kohler Jr., certify that:

1.I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2022 of Verrica Pharmaceuticals Inc. (the “registrant”);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2022

/s/ P. Terence Kohler Jr.

P. Terence Kohler Jr.

Chief Financial Officer

(principal financial officer)

EX-32.1

Exhibit 32.1

VERRICA PHARMACEUTICALS INC.

PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350),Ted White, President and Chief Executive Officer of Verrica Pharmaceuticals Inc. (the “Company”), and P. Terence Kohler Jr., Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge:

1.The Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2022, to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and

2.The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF , the undersigned have set their hands hereto as of the 9th day of May, 2022.

/s/ Ted White	/s/ P. Terence Kohler Jr.
Ted White	P. Terence Kohler Jr.
President and Chief Executive Officer (principal executive officer)	Chief Financial Officer (principal financial officer)

* This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2022	May 02, 2022
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2022
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q1
Entity Trading Symbol	VRCA
Entity Interactive Data Current	Yes
Entity Registrant Name	Verrica Pharmaceuticals Inc.
Entity Central Index Key	0001660334
Entity Current Reporting Status	Yes
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		27,519,053
Entity Shell Company	false
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transaction Period	true
Entity File Number	001-38529
Entity Tax Identification Number	46-3137900
Title of 12(b) Security	Common Stock, $0.0001 par value
Security Exchange Name	NASDAQ
Document Quarterly Report	true
Document Transition Report	false
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	44 West Gay Street
Entity Address, Address Line Two	Suite 400
Entity Address, City or Town	West Chester
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	19380
City Area Code	484
Local Phone Number	453-3300

XML

CONDENSED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 10,407	$ 15,752
Marketable securities	11,497	54,602
Restricted Cash	40,000	0
Unbilled receivable	431	0
Prepaid expenses and other assets	3,437	3,974
Total current assets	65,772	74,328
Property and equipment, net	4,155	3,894
Operating lease right-of-use asset	1,548	1,608
Other non-current assets	142	295
Total assets	71,617	80,125
Current liabilities:
Accounts payable	531	845
Accrued expenses and other current liabilities	2,014	3,266
Operating lease liability	250	245
Financing lease liability	6	6
Debt, net	41,999	41,693
Total current liabilities	44,800	46,055
Operating lease liability	1,384	1,449
Financing lease liability	15	16
Total liabilities	46,199	47,520
Commitments and Contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding as of March 31, 2022 and December 31, 2021	0	0
Common stock, $0.0001 par value; 200,000,000 authorized; 27,624,197 shares issued and 27,519,053 shares outstanding as of March 31, 2022 and December 31, 2021	3	3
Treasury stock, at cost, 105,144 shares as of March 31, 2022 and December 31, 2021	0	0
Additional paid-in capital	172,913	171,597
Accumulated deficit	(147,436)	(138,966)
Accumulated other comprehensive loss	(62)	(29)
Total stockholders’ equity	25,418	32,605
Total liabilities and stockholders’ equity	$ 71,617	$ 80,125

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CONDENSED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	27,624,197	27,519,053
Common stock, shares outstanding	27,624,197	27,519,053
Treasury stock, shares	105,144	105,144

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CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
License revenue	$ 431	$ 12,000
Revenue from Contract with Customer, Product and Service [Extensible List]	License revenue	License revenue
Operating expenses:
Research and development	$ 2,723	$ 5,362
General and administrative	5,118	6,578
Total operating expenses	7,841	11,940
(Loss) income from operations	(7,410)	60
Other income (expense):
Interest income	22	32
Interest expense	(1,082)	(1,028)
Total other expense	(1,060)	(996)
Net loss	$ (8,470)	$ (936)
Net loss per share, basic and diluted	$ (0.31)	$ (0.04)
Weighted average common shares outstanding, basic and diluted	27,519,053	25,602,404
Other comprehensive gain:
Unrealized (loss) gain on marketable securities	$ (33)	$ 2
Comprehensive loss	$ (8,503)	$ (934)

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CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Deficit [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive (Loss) Gain [Member]
Beginning Balance at Dec. 31, 2020	$ 32,986	$ 3	$ 136,868	$ (103,886)		$ 1
Beginning Balance (shares) at Dec. 31, 2020		25,546,257			105,144
Stock-based compensation	$ 1,403		$ 1,403
Issuance of common stock, net of issuance costs (shares)	28,115	2,033,899	28,115
Exercise of stock options (shares)	240	15,708	240
Net loss	$ (936)			(936)
Unrealized gain (loss) on marketable securities	2					2
Ending Balance at Mar. 31, 2021	61,810	$ 3	$ 166,626	(104,822)		3
Ending Balance (shares) at Mar. 31, 2021		27,595,864			105,144
Beginning Balance at Dec. 31, 2021	32,605	$ 3	171,597	(138,966)		(29)
Beginning Balance (shares) at Dec. 31, 2021		27,624,197			105,144
Stock-based compensation	$ 1,316		1,316
Exercise of stock options (shares)	0
Net loss	$ (8,470)			(8,470)
Unrealized gain (loss) on marketable securities	(33)					(33)
Ending Balance at Mar. 31, 2022	$ 25,418	$ 3	$ 172,913	$ (147,436)		$ (62)
Ending Balance (shares) at Mar. 31, 2022		27,624,197			105,144

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CONDENSED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Cash flows from operating activities
Net loss	$ (8,470)	$ (936)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	1,316	1,403
Amortization of premiums / (discounts) on marketable securities	49	(14)
Depreciation expense	98	11
Non cash interest expense	300	393
Reduction in operating lease right-of-use asset	60	56
Changes in operating assets and liabilities:
License receivable	0	(11,500)
Prepaid expenses and other assets	537	13
Accounts payable	(314)	525
Unbilled receivable	(431)	0
Accrued expenses and other current liabilities	(1,425)	(209)
Deferred revenue	0	(500)
Operating lease liability	(60)	(27)
Net cash used in operating activities	(8,340)	(10,785)
Cash flows from investing activities
Sales and maturities of marketable securities	47,508	20,500
Purchases of marketable securities	(4,485)	(9,285)
Purchases of property and equipment	(5)	(311)
Deposits	(5)	(69)
Net cash provided by investing activities	43,013	10,835
Cash flows from financing activities
Proceeds from exercise of stock options	0	240
Proceeds from issuance of debt, net of issuance costs	0	4,975
Debt issuance Costs	(17)	0
Repayment of financing lease	(1)	0
Proceeds from issuance of common stock, net of issuance costs	0	28,150
Net cash (used in) provided by financing activities	(18)	33,365
Net increase in cash, cash equivalents and restricted cash	34,655	33,415
Cash, cash equivalents and restricted cash at the beginning of the period	15,752	10,686
Cash, cash equivalents and restricted cash at the end of the period	50,407	44,101
Supplemental disclosure of noncash investing and financing activities:
Property and equipment purchases payable or accrued at period end	459	253
Change in unrealized gain on marketable securities	(33)	2
Cash paid for interest	$ 725	$ 634

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Nature of Business

3 Months Ended

Mar. 31, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Business

Note 1—Nature of Business

Verrica Pharmaceuticals Inc. (the “Company”) was formed on July 3, 2013 and is incorporated in the State of Delaware. The Company is a dermatology therapeutics company committed to the development and commercialization of novel treatments that provide meaningful benefit for people living with skin diseases.

Liquidity

The Company has incurred substantial operating losses since inception and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of March 31, 2022, the Company had an accumulated deficit of $147.4 million. On March 17, 2021, the Company entered into the Torii Agreement (Note 11), pursuant to which the Company received an upfront payment from Torii of $11.5 million in April 2021. On March 25, 2021, the Company closed a follow-on public offering in which it sold 2,033,899 shares of common stock at a public offering price of $14.75 per share, resulting in net proceeds of $28.1 million after deducting underwriting discounts and commissions and offering expenses.

In March 2020, the Company entered into a Mezzanine Loan Agreement (see Note 7) pursuant to which the Company borrowed (i) $35.0 million in March 2020 and (ii) $5.0 million on March 1, 2021. On March 1, 2022, the Company entered into a second amendment to the Mezzanine Loan Agreement (the “Second Mezzanine Loan Amendment”). Pursuant to the Second Mezzanine Loan Amendment the Company is no longer required to maintain a minimum liquidity ratio or achieve minimum levels of trailing six-month net product revenues but will be required to maintain a minimum balance equal to the outstanding amount of the Term Loans under the Existing Mezzanine Credit Facility (as defined in Note 7) in a separate money market account with Silicon Valley Bank (“SVB”). Additionally, the Company entered into a second amendment (the “Second Senior Loan Amendment”) to the Senior Loan Agreement (as defined in Note 7). Pursuant to the Second Senior Loan Amendment, the Company is no longer required to achieve minimum levels of trailing six-month net product revenues.

As of March 31, 2022 the Company had cash, cash equivalents, marketable securities and restricted cash of $61.9 million. The Company believes its existing cash, cash equivalents and marketable securities as of March 31, 2022 will be sufficient to support Company’s planned operations into the third quarter of 2022. Substantial additional financing will be needed by the Company to fund its operations. The Company's condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. The Company anticipates incurring additional losses until such time, if ever, that it can obtain marketing approval to sell, and then generate significant sales of VP-102. These factors raise substantial doubt about the Company's ability to continue as a going concern within one year after the date the financial statements are issued. The Company plans to secure additional capital in the future through equity or debt financings, partnerships, or other sources to carry out the Company’s planned development activities. If the Company is unable to raise capital when needed or on attractive terms, the Company would be forced to delay, reduce or eliminate its research and development programs or future commercialization efforts.

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Significant Accounting Policies

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Significant Accounting Policies

Note 2—Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. They may not include all of the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on March 2, 2022. The results of operations for any interim periods are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period.

The Company has been actively monitoring the coronavirus (“COVID-19”) pandemic and its impact globally. Management believes the financial results for the year ended December 31, 2021 and the three months ended March 31, 2022, were not significantly impacted by COVID-19. In addition, management believes the remote working arrangements, travel restrictions and any other regulations imposed by various governmental jurisdictions have had limited impact on the Company’s ability to maintain internal operations during the year. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s

business, results of operations and financial condition will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19. As a direct result of COVID-19, the Company decided to delay the initiation of its previously planned Phase 2 clinical trial to evaluate VP-103 in subjects with plantar warts.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. These estimates and assumptions are based on current facts, historical experience as well as other pertinent industry and regulatory authority information, including the potential future effects of COVID-19, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

Significant Accounting Policies

Restricted Cash

Restricted cash at March 31, 2022 includes a cash deposit with SVB as required under the Existing Mezzanine Credit Facility with a minimum balance equal to the outstanding amount of the Term Loans under the Existing Mezzanine Credit Facility.

Net Loss Per Share

Net loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period. Diluted net loss per share excludes the potential impact of common stock options and unvested shares of restricted stock because their effect would be anti-dilutive due to the Company’s net loss. Since the Company had a net loss in each of the periods presented, basic and diluted net loss per common share are the same.

The table below provides potential shares outstanding that were not included in the computation of diluted net loss per common share, as the inclusion of these securities would have been anti-dilutive:

	As of March 31,
	2022		2021
Shares issuable upon exercise of stock options		3,768,955		3,571,708
Non-vested shares under restricted stock grants		425,000		475,000

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Investments In Marketable Securities

3 Months Ended

Mar. 31, 2022

Investments [Abstract]

Investments in Marketable Securities

Note 3—Investments in Marketable Securities

Investments in marketable securities consisted of the following as of March 31, 2022 and December 31, 2021 (in thousands):

	March 31, 2022
	Amortized		Gross Unrealized		Gross Unrealized			Fair
	Cost		Gains		Losses			Value
U.S. Treasury securities	$	5,025	$	—	$	(40	)	$	4,985
Commercial paper		2,499		—		—		$	2,499
Asset-backed securities		4,035		—		(22	)	$	4,013
Total marketable securities	$	11,559	$	—	$	(62	)	$	11,497
	December 31, 2021
	Amortized		Gross Unrealized		Gross Unrealized			Fair
	Cost		Gains		Losses			Value
U.S. Treasury securities	$	15,272	$	—	$	(15	)	$	15,257
Commercial paper		28,980		—		—			28,980
Asset-backed securities		10,379		—		(14	)		10,365
Total marketable securities	$	54,631	$	—	$	(29	)	$	54,602

Unrealized gains and losses on marketable securities are recorded as a separate component of accumulated other comprehensive gain included in stockholders’ equity. Realized gains (losses) are included in interest income (expense) in the statement of operations and comprehensive loss on a specific identification basis. There were no marketable securities with a maturity of greater than one year

for either period presented. To date, the Company has not recorded any impairment charges on marketable securities related to other-than-temporary declines in market value.

Accretion of bond discount and premium on marketable securities and interest income on marketable securities is recorded as interest income on the statement of operations and comprehensive loss.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

Level 1 — Quoted market prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following tables presents fair value of the Company’s marketable securities (in thousands):

	Fair Value Measurement as of March 31, 2022
	Level 1		Level 2		Level 3		Total
Assets
U.S. treasury securities	$	4,985	$	—	$	—	$	4,985
Commercial paper		—		2,499		—		2,499
Asset-backed securities		—		4,013		—		4,013
Total assets	$	4,985	$	6,512	$	—	$	11,497
	Fair Value Measurement as of December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets
U.S. treasury securities	$	15,257	$	—	$	—	$	15,257
Commercial paper		—		28,980		—		28,980
Asset-backed securities		—		10,365		—		10,365
Total assets	$	15,257	$	39,345	$	—	$	54,602

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Property and Equipment

3 Months Ended

Mar. 31, 2022

Property, Plant and Equipment [Abstract]

Property and Equipment

Note 4—Property and Equipment

Property and equipment, net consisted of (in thousands):

	As of			As of
	March 31,			December 31,
	2022			2021
Machinery and equipment	$	737		$	737
Office furniture and fixtures		303			303
Office equipment		301			301
Leasehold improvements		54			49
Automobiles		27			27
Construction in process		3,085			2,731
		4,507			4,148
Accumulated depreciation		(352	)		(254	)
Total property and equipment, net	$	4,155		$	3,894

The Company has recorded an asset classified as construction in process associated with the construction of a product assembly and packaging line that would be placed into service for commercial manufacturing upon future regulatory product approval.

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Accrued Expenses and Other Current Liabilities

3 Months Ended

Mar. 31, 2022

Payables and Accruals [Abstract]

Accrued Expenses and Other Current Liabilities

Note 5—Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

	As of March 31, 2022		As of December 31, 2021
Compensation and related costs	$	699	$	1,667
Professional fees		347		406
Construction in process		335		131
Interest expense		219		250
Clinical trials and drug development		216		613
Machinery and equipment		124		124
Other accrued expenses and other current liabilities		74		75
Total accrued expenses and other current liabilities	$	2,014	$	3,266

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Leases

3 Months Ended

Mar. 31, 2022

Leases [Abstract]

Leases

Note 6—Leases

Effective January 1, 2019, the Company accounts for its leases under ASC 842, Leases (Topic 842). Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the balance sheet as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease, if available, otherwise at the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right-of-use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right-of-use asset result in straight-line rent expense over the lease term. Variable lease expenses, if any, are recorded when incurred.

In calculating the right-of-use asset and lease liability, the Company elects to combine lease and non-lease components. The Company excludes short-term leases having initial terms of 12 months or less from the guidance as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term. The Company does not act as a lessor.

The Company leased office space in West Chester, Pennsylvania under an agreement classified as an operating lease that expired in May 2021. On July 1, 2019, the Company entered into a lease for office space located in West Chester which was further amended on March 12, 2020 to include additional office space. The initial term will expire on September 1, 2027. Base rent over the initial term is approximately $2.4 million, and the Company is also responsible for its share of the landlord’s operating expense.

The Company leases a vehicle under a financing lease that expires in 2025. The net basis of the vehicle lease of $21 thousand is recorded as property and equipment on the condensed balance sheet.

The components of lease expense are as follows (in thousands):

	For the Three Months Ended March 31,
	2022		2021
Finance lease cost:
Amortization ROU assets	$	2	$	—
Total finance lease costs	$	2	$	—
Operating lease:
Operating lease costs	$	85	$	89
Short-term lease costs		8		5
Total operating lease expense	$	93	$	94

Maturities of the Company’s operating and finance leases, excluding short-term leases, as of March 31, 2022 are as follows (in thousands):

	For the Three Months Ended March 31,
	Operating			Financing
2022 (remaining 9 months)	$	259		$	6
2023		349			7
2024		355			7
2025		360			2
Thereafter		613			—
Total lease payments		1,936			22
Less imputed interest		(302	)		(1	)
Lease liability	$	1,634		$	21

The weighted average remaining term and discount rate are as follows:

Other information:	Operating			Finance
Weighted average remaining lease term		5.4			3.1
Weighted-average discount rate		6.25	%		4.35	%

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Debt

3 Months Ended

Mar. 31, 2022

Debt Disclosure [Abstract]

Debt

Note 7—Debt

On March 10, 2020 (the “Effective Date”), the Company entered into (i) a mezzanine loan and security agreement (the “Mezzanine Loan Agreement”) with SVB, as administrative agent and collateral agent (the “Agent”), and Silicon Valley Bank and West River Innovation Lending Fund VIII, L.P., as lenders (the “Mezzanine Lenders”), pursuant to which the Mezzanine Lenders have agreed to lend the Company up to $50.0 million in a series of term loans, and (ii) a loan and security agreement (the “Senior Loan Agreement”, and together with the Mezzanine Loan Agreement, the “Loan Agreements”) with Silicon Valley Bank, as lender (the “Senior Lender”, and together with the Mezzanine Lenders, the “Lenders”), pursuant to which the Senior Lender has agreed to provide the Company with a revolving line of credit of up to $5.0 million. Upon entering into the Loan Agreements, the Company borrowed $35.0 million in term loans from the Mezzanine Lenders (the “Term A Loan”).

On October 26, 2020, the Company entered into (i) the first amendment to the Mezzanine Loan Agreement (the “Mezzanine Loan Amendment”) and (ii) the first amendment to the Senior Loan Agreement (the “Senior Loan Amendment” and together with the Mezzanine Loan Amendment the “Loan Agreement Amendments”) with the Lenders, under which the Company borrowed an additional $5.0 million in term loans on March 1, 2021 (the “Term B1 Loan”).

On March 1, 2022, the Company entered into the Second Mezzanine Loan Amendment to its existing mezzanine loan and security agreement (as amended prior to the Amendment, the “Existing Mezzanine Credit Facility”) with SVB, as administrative agent and a lender and SVB Innovation Credit Fund VIII, L.P., as a lender. Pursuant to the Second Mezzanine Loan Amendment, the Company is no longer required to maintain a minimum liquidity ratio or achieve minimum levels of trailing six-month net product revenues. Under the terms of the Second Mezzanine Loan Amendment, the Company will be required to maintain a minimum cash balance equal to the outstanding amount of the term loans under the Existing Mezzanine Credit Facility at all times in a separate money market account with SVB. The Company also entered into the Second Senior Loan Amendment (together with the Second Mezzanine Loan Amendment, the “Second Amendments”) to its existing loan and security agreement with SVB (as amended prior to the Amendment, the “Existing Senior Credit Facility” and together with the Existing Mezzanine Credit Facility, the “Existing Credit Facilities”) pursuant to which, the Company is no longer required to achieve minimum levels of trailing six-month net product revenues. Pursuant to the Second Amendments, The Term Loans will be interest-only through February 28, 2023, followed by 12 equal monthly payments of principal and interest.

The Term Loans will bear interest at a floating per annum rate equal to the greater of (i) 7.25% and (ii) the sum of (a) the prime rate reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue, plus (b) 2.50%.

Under the terms of the Senior Loan Agreement, as amended on March 1, 2022, the Company agreed to forego its right to request or receive any advances on the revolving credit line.

The Company’s obligations under the Senior Loan Agreement and the Mezzanine Loan Agreement, as amended, are secured by, respectively, a first priority perfected security interest and second priority perfected security interest in substantially all of the Company’s current and future assets, other than its intellectual property (except rights to payment from the sale, licensing or disposition of such intellectual property). The Company has also agreed not to encumber its intellectual property assets, except as permitted by the Loan Agreements.

Under the terms of the Mezzanine Loan Agreement, as amended, the Company will be required to make a final payment fee of $3,750,000 payable on the earlier of (i) the Maturity Date, (ii) the acceleration of any Term Loans, or (iii) the prepayment of the Term Loans (the “Final Payment”). The Company is recording the final payment fee to interest expense using the effective interest rate

method over the term of the Term Loan with an increase in long-term debt. The Company may prepay all, or any portion of the Term Loans upon 5 business days’ advance written notice to the Agent, provided that the Company will be obligated to pay a prepayment fee equal to (i) $1.0 million if prepaid between October 27, 2021 and October 26, 2022, and (ii) $0.5 million if prepaid between October 27, 2022 and October 26, 2023 and (iii) no prepayment fee if prepaid after October 26, 2023 (each, a “Prepayment Fee”).

The Company may terminate the revolving credit line under the Senior Loan Agreement at any time upon three business days’ advance written notice to the Senior Lender. If the Company terminates the revolving credit line prior to the Maturity Date, it must pay to the Senior Lender an early termination fee of $50,000 (the “Termination Fee”).

Under the Loan Agreements, as amended, the Company is subject to a number of affirmative and restrictive covenants, including covenants regarding, delivery of financial statements, maintenance of inventory, payment of taxes, maintenance of insurance, protection of intellectual property rights, dispositions of property, business combinations or acquisitions, incurrence of additional indebtedness or liens, investments and transactions with affiliates among other customary covenants. As of March 31, 2022 the Company is in compliance with all covenants.

Upon the occurrence of certain events, including but not limited to the Company’s failure to satisfy its payment obligations under the Loan Agreements, the breach of certain of its other covenants under the Loan Agreements, or the occurrence of a material adverse change, cross defaults to other indebtedness or material agreements, judgment defaults and defaults related to failure to maintain governmental approvals failure of which to maintain could result in a material adverse effect, the Agent and the Lenders will have the right, among other remedies, to declare all principal and interest immediately due and payable, to exercise secured party remedies, to receive the Final Payment and Termination Fee and, if the payment of principal and interest is due prior to the Maturity Date, to receive the applicable Prepayment Fee. The Loan Agreements also include subjective acceleration clauses that permit the Lenders to accelerate the maturity date under certain circumstances, including a material adverse change in the Company’s business, operations, or financial condition or a material impairment of the prospect of repayment of the Company’s obligations to the Mezzanine Lenders.

The Company believes that without additional financing, it is probable that it will not have sufficient funds to maintain the minimum cash balance within the twelve months after March 31, 2022, at which time the remaining debt will become due. In accordance with FASB ASC 470, the Company has classified all outstanding principal and final payment fees as a current liability in the accompanying balance sheet as of March 31, 2022.

The Company has incurred debt discount and issuance costs of $4.4 million, including the final payment fee of $3.8 million, that are classified as a contra-liability on the condensed balance sheet. The Company incurred additional debt issuance costs related to the revolving credit line of $0.1 million, classified as other non-current assets in the condensed balance sheet. These costs related to the revolving credit line are being amortized to interest expense over the life of the loans using the straight-line method.

For the three months ended March 31, 2022, the Company recognized interest expense of $1.0 million of which $0.7 million was interest on the term loan and $0.3 million was non-cash interest expense related to the amortization of deferred debt issuance costs and accrual of the final payment fee.

The following table summarizes the composition of debt as reflected on the balance sheet as of March 31, 2022 (in thousands):

Gross proceeds	$	40,000
Accrued final payment fee		3,750
Unamortized debt discount and issuance costs		(1,751	)
Total short-term debt, net	$	41,999

The aggregate maturities of debt as of March 31, 2022, are as follows (in thousands):

2023	$	33,333
2024 (1)		6,667
	$	40,000
(1) Excludes the final payment fee due at time of maturity

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

Note 8—Stock-Based Compensation

Stock-based compensation expense, which includes expense for both employees and non-employees, has been reported in the Company’s condensed statements of operations for the three months ended March 31, 2022 and 2021 as follows (in thousands):

	For the Three Months Ended March 31,
	2022		2021
Research and development	$	417	$	298
General and administrative		899		1,105
Total stock-based compensation	$	1,316	$	1,403

Stock Options

The following table summarizes the Company’s stock option activity for the three months ended March 31, 2022:

						Weighted average
				Weighted average		remaining contractual		Aggregate intrinsic
	Number of shares			exercise price		life (in years)		value
Outstanding as of December 31, 2021		3,443,817		$	10.05		7.8	$	3,952,803
Granted		365,000			8.09
Exercised		—			—
Forfeitures		(14,238	)		11.76
Expired		(25,624	)		14.13
Outstanding as of March 31, 2022		3,768,955		$	9.83		7.8	$	2,468,987
Options vested and exercisable as of    March 31, 2022		1,968,559		$	8.90		6.8	$	2,076,929

As of March 31, 2022, the total unrecognized compensation related to unvested stock option awards granted was $13.0 million, which the Company expects to recognize over a weighted-average period of 2.84 years.

Restricted Stock

In November 2019 and August 2020 the Company granted 300,000 and 250,000 restricted stock units, respectively to its executive officers. As of March 31, 2022, 425,000 restricted stock units were outstanding. The restricted stock units vest 50% upon receipt of regulatory approval of the Company’s new drug application for VP-102 for the treatment of molluscum (the “Approval Date”) and 50% shall vest on the one year anniversary of the Approval Date subject to the holders’ continuous service through each applicable date.

The following is a summary of changes in the status of non-vested RSUs:

			Weighted Average
			Grant Date Fair
	Number of Shares		Value
Nonvested as of December 31, 2021		425,000	$	11.68
Granted		—		—
Forfeitures		—		—
Nonvested as of March 31, 2022		425,000	$	11.68

No compensation expenses have been recognized for these nonvested restricted stock units as these shares are performance based and the triggering event was not determined to be probable as of March 31, 2022. As of March 31, 2022, the total unrecognized compensation expense related to the restricted stock units was $5.0 million.

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Related Party Transactions

3 Months Ended

Mar. 31, 2022

Related Party Transactions [Abstract]

Related Party Transactions

Note 9—Related Party Transactions

Prior to the completion of the initial public offering of the Company’s common stock in June 2018, the Company was controlled by PBM VP Holdings, LLC (“PBM VP Holdings”) an affiliate of PBM Capital Group, LLC (“PBM”). Paul B. Manning, who is the Chairman and Chief Executive Officer of PBM and the current chairman of the Company’s Board of Directors, and certain entities affiliated with Mr. Manning, continue to be the Company’s largest shareholder on a collective basis.

On December 2, 2015, the Company entered into a Services Agreement (the “SA”) with PBM. Pursuant to the terms of the SA, which had an initial term of twelve months (and was automatically renewable for successive monthly periods), PBM rendered advisory and consulting services to the Company. Services provided under the SA included certain business development, operations, technical, contract, accounting and back office support services. In consideration for these services, the Company was obligated to pay

PBM a monthly management fee. On October 1, 2019, the SA was amended to reduce the monthly management fee to $5,000 as a result of a reduction in services provided by PBM.

For each of the three months ended March 31, 2022 and 2021, the Company incurred expenses under the SA of $15,000 of which $9,000 were included in general and administrative expenses, and $6,000 were included in research and development expenses.

As of March 31, 2022, the Company had $5,000 of outstanding payables due to PBM and its affiliates.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 10—Commitments and Contingencies

The Company is involved in ordinary, routine legal proceedings that are not considered by management to be material. In the opinion of Company counsel and management, the ultimate liabilities resulting from such legal proceedings will not materially affect the financial position of the Company or its results of operations or cash flows.

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License And Collaboration Agreements

3 Months Ended

Mar. 31, 2022

License And Collaboration Agreements [Abstract]

License and Collaboration Agreements

Note 11—License and Collaboration Agreements

In August 2020, the Company entered into an option agreement with Torii Pharmaceutical Co., Ltd. (“Torii”) for the development and commercialization of the Company’s product candidates for the treatment of molluscum contagiosum and common warts in Japan, including VP-102 (the “Option Agreement”). Torii paid the Company $0.5 million to secure the exclusive option. The $0.5 million is included in deferred revenue as of December 31, 2020 in the balance sheet.

On March 2, 2021, Torii exercised the exclusive option in the Option Agreement. On March 17, 2021, the Company entered into a collaboration and license agreement (the “Torii Agreement”) with Torii, pursuant to which the Company granted Torii an exclusive license to develop and commercialize the Company’s product candidates that contain a topical formulation of cantharidin for the treatment of molluscum contagiosum and common warts in Japan, including VP-102. Additionally, the Company granted Torii a right of first negotiation with respect to additional indications for the licensed products and certain additional products for use in the licensed field, in each case in Japan.

Pursuant to the Torii Agreement, the Company received payments from Torii of $0.5 million in December 2020 and $11.5 million in April 2021. Additionally, the Company is entitled to receive from Torii an additional $58 million in aggregate payments contingent on achievement of specified development, regulatory, and sales milestones, in addition to tiered transfer price payments for supply of product in the percentage range of the mid-30’s to the mid-40’s of net sales. The transfer payments shall be payable, on a product-by-product basis, beginning on the first commercial sale of such product and ending on the latest of (a) expiration of the last-to-expire valid claim contained in certain licensed patents in Japan that cover such product, (b) expiration of regulatory exclusivity for the first indication for such product in Japan, and, (c) (i) with respect to the first product, ten years after first commercial sale of such product, and, (ii) with respect to any other product, the later of (x) ten years after first commercial sale of the first product and (y) five years after first commercial sale of such product.

The Torii Agreement expires on a product-by-product basis upon expiration of Torii’s obligation under the agreement to make transfer price payments for such product. Torii has the right to terminate the agreement upon specified prior written notice to us. Additionally, either party may terminate the agreement in the event of an uncured material breach of the agreement by, or insolvency of, the other party. The Company may terminate the agreement in the event that Torii commences a legal action challenging the validity, enforceability or scope of any licensed patents.

On March 7, 2022, pursuant to the Torii Agreement, the Company entered into a Clinical Supply Agreement with Torri, whereby the Company is obligated to supply product to Torii for use in clinical trials and other development activities. The Company recognized unbilled license revenue of $0.4 million for the three months ended March 31, 2022 related to supplies and development activity pursuant to this agreement.

In August 2020, the Company entered into an exclusive license agreement with Lytix Biopharma AS (“Lytix”) for the use of licensed technology to research, develop, manufacture, have manufactured, use, sell, have sold, offer for sale, import, and otherwise commercialize products for use in all malignant and pre-malignant dermatological indications, other than metastatic melanoma and metastatic merkel cell carcinoma (the” Lytix Agreement”). As part of the Lytix Agreement, the Company paid Lytix a one-time up-front fee of $0.3 million in 2020. In addition, in February 2021, the Company paid Lytix a one-time $2.3 million payment upon the achievement by Lytix of a regulatory milestone. The $0.3 million and $2.3 million payments were recognized in research and development expense in the statement of operations for the year ended December 31, 2020 and the three months ended March 31, 2021, respectively. The Company is also obligated to pay up to $111.0 million contingent on achievement of specified development, regulatory, and sales milestones, as well as tiered royalties based on worldwide annual net sales ranging in the low double digits to the mid-teens, subject to certain customary reductions. The Company’s obligation to pay royalties expires on a country-by-country and product-by-product basis on the later of the expiration or abandonment of the last to expire licensed patent covering LTX-315 anywhere in the world and expiration of regulatory exclusivity for LTX-315 in such country. Additionally, all upfront fees and milestone based payments received by the Company from a sublicensee will be treated as net sales and will be subject to the royalty

payment obligations under the Lytix Agreement, and all royalties received by the Company from a sublicensee shall be shared with Lytix at a rate that is initially 50% but decreases based on the stage of development of LTX-315 at the time such sublicense is granted.

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Subsequent Event

3 Months Ended

Mar. 31, 2022

Subsequent Events [Abstract]

Subsequent Event

Note 12 – Subsequent Event

None.

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Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited interim condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. They may not include all of the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on March 2, 2022. The results of operations for any interim periods are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period.

The Company has been actively monitoring the coronavirus (“COVID-19”) pandemic and its impact globally. Management believes the financial results for the year ended December 31, 2021 and the three months ended March 31, 2022, were not significantly impacted by COVID-19. In addition, management believes the remote working arrangements, travel restrictions and any other regulations imposed by various governmental jurisdictions have had limited impact on the Company’s ability to maintain internal operations during the year. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s

business, results of operations and financial condition will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19. As a direct result of COVID-19, the Company decided to delay the initiation of its previously planned Phase 2 clinical trial to evaluate VP-103 in subjects with plantar warts.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. These estimates and assumptions are based on current facts, historical experience as well as other pertinent industry and regulatory authority information, including the potential future effects of COVID-19, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

Significant Accounting Policies

Significant Accounting Policies

Restricted Cash

Restricted cash at March 31, 2022 includes a cash deposit with SVB as required under the Existing Mezzanine Credit Facility with a minimum balance equal to the outstanding amount of the Term Loans under the Existing Mezzanine Credit Facility.

Net Loss Per Share

Net Loss Per Share

Net loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period. Diluted net loss per share excludes the potential impact of common stock options and unvested shares of restricted stock because their effect would be anti-dilutive due to the Company’s net loss. Since the Company had a net loss in each of the periods presented, basic and diluted net loss per common share are the same.

The table below provides potential shares outstanding that were not included in the computation of diluted net loss per common share, as the inclusion of these securities would have been anti-dilutive:

	As of March 31,
	2022		2021
Shares issuable upon exercise of stock options		3,768,955		3,571,708
Non-vested shares under restricted stock grants		425,000		475,000

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Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Schedule of Potential Shares Outstanding not Included in Computation of Diluted Net Loss Per Common Share

The table below provides potential shares outstanding that were not included in the computation of diluted net loss per common share, as the inclusion of these securities would have been anti-dilutive:

	As of March 31,
	2022		2021
Shares issuable upon exercise of stock options		3,768,955		3,571,708
Non-vested shares under restricted stock grants		425,000		475,000

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Investments In Marketable Securities (Tables)

3 Months Ended

Mar. 31, 2022

Investments [Abstract]

Schedule of Marketable Securities

Investments in marketable securities consisted of the following as of March 31, 2022 and December 31, 2021 (in thousands):

	March 31, 2022
	Amortized		Gross Unrealized		Gross Unrealized			Fair
	Cost		Gains		Losses			Value
U.S. Treasury securities	$	5,025	$	—	$	(40	)	$	4,985
Commercial paper		2,499		—		—		$	2,499
Asset-backed securities		4,035		—		(22	)	$	4,013
Total marketable securities	$	11,559	$	—	$	(62	)	$	11,497
	December 31, 2021
	Amortized		Gross Unrealized		Gross Unrealized			Fair
	Cost		Gains		Losses			Value
U.S. Treasury securities	$	15,272	$	—	$	(15	)	$	15,257
Commercial paper		28,980		—		—			28,980
Asset-backed securities		10,379		—		(14	)		10,365
Total marketable securities	$	54,631	$	—	$	(29	)	$	54,602

Schedule of Fair Value of Marketable Securities

The following tables presents fair value of the Company’s marketable securities (in thousands):

	Fair Value Measurement as of March 31, 2022
	Level 1		Level 2		Level 3		Total
Assets
U.S. treasury securities	$	4,985	$	—	$	—	$	4,985
Commercial paper		—		2,499		—		2,499
Asset-backed securities		—		4,013		—		4,013
Total assets	$	4,985	$	6,512	$	—	$	11,497
	Fair Value Measurement as of December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets
U.S. treasury securities	$	15,257	$	—	$	—	$	15,257
Commercial paper		—		28,980		—		28,980
Asset-backed securities		—		10,365		—		10,365
Total assets	$	15,257	$	39,345	$	—	$	54,602

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Property and Equipment (Tables)

3 Months Ended

Mar. 31, 2022

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment, Net

Property and equipment, net consisted of (in thousands):

	As of			As of
	March 31,			December 31,
	2022			2021
Machinery and equipment	$	737		$	737
Office furniture and fixtures		303			303
Office equipment		301			301
Leasehold improvements		54			49
Automobiles		27			27
Construction in process		3,085			2,731
		4,507			4,148
Accumulated depreciation		(352	)		(254	)
Total property and equipment, net	$	4,155		$	3,894

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Accrued Expenses and Other Current Liabilities (Tables)

3 Months Ended

Mar. 31, 2022

Payables and Accruals [Abstract]

Schedule of Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

	As of March 31, 2022		As of December 31, 2021
Compensation and related costs	$	699	$	1,667
Professional fees		347		406
Construction in process		335		131
Interest expense		219		250
Clinical trials and drug development		216		613
Machinery and equipment		124		124
Other accrued expenses and other current liabilities		74		75
Total accrued expenses and other current liabilities	$	2,014	$	3,266

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Leases (Tables)

3 Months Ended

Mar. 31, 2022

Leases [Abstract]

Summary of Components of Lease Expense

The components of lease expense are as follows (in thousands):

	For the Three Months Ended March 31,
	2022		2021
Finance lease cost:
Amortization ROU assets	$	2	$	—
Total finance lease costs	$	2	$	—
Operating lease:
Operating lease costs	$	85	$	89
Short-term lease costs		8		5
Total operating lease expense	$	93	$	94

Schedule of Maturities of Operating and Finance Leases

Maturities of the Company’s operating and finance leases, excluding short-term leases, as of March 31, 2022 are as follows (in thousands):

	For the Three Months Ended March 31,
	Operating			Financing
2022 (remaining 9 months)	$	259		$	6
2023		349			7
2024		355			7
2025		360			2
Thereafter		613			—
Total lease payments		1,936			22
Less imputed interest		(302	)		(1	)
Lease liability	$	1,634		$	21

Schedule of Weighted Average Remaining Term and Discount Rate

The weighted average remaining term and discount rate are as follows:

Other information:	Operating			Finance
Weighted average remaining lease term		5.4			3.1
Weighted-average discount rate		6.25	%		4.35	%

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Debt (Tables)

3 Months Ended

Mar. 31, 2022

Debt Disclosure [Abstract]

Summary of Composition of Debt

The following table summarizes the composition of debt as reflected on the balance sheet as of March 31, 2022 (in thousands):

Gross proceeds	$	40,000
Accrued final payment fee		3,750
Unamortized debt discount and issuance costs		(1,751	)
Total short-term debt, net	$	41,999

Schedule of Aggregate Maturities of Debt

as of March 31, 2022, are as follows (in thousands):

2023	$	33,333
2024 (1)		6,667
	$	40,000
(1) Excludes the final payment fee due at time of maturity

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

Schedule of Stock Based Compensation Expense

Stock-based compensation expense, which includes expense for both employees and non-employees, has been reported in the Company’s condensed statements of operations for the three months ended March 31, 2022 and 2021 as follows (in thousands):

	For the Three Months Ended March 31,
	2022		2021
Research and development	$	417	$	298
General and administrative		899		1,105
Total stock-based compensation	$	1,316	$	1,403

Summary of Stock Option Activity

The following table summarizes the Company’s stock option activity for the three months ended March 31, 2022:

						Weighted average
				Weighted average		remaining contractual		Aggregate intrinsic
	Number of shares			exercise price		life (in years)		value
Outstanding as of December 31, 2021		3,443,817		$	10.05		7.8	$	3,952,803
Granted		365,000			8.09
Exercised		—			—
Forfeitures		(14,238	)		11.76
Expired		(25,624	)		14.13
Outstanding as of March 31, 2022		3,768,955		$	9.83		7.8	$	2,468,987
Options vested and exercisable as of    March 31, 2022		1,968,559		$	8.90		6.8	$	2,076,929

Summary of Non-vested RSUs Activities

The following is a summary of changes in the status of non-vested RSUs:

			Weighted Average
			Grant Date Fair
	Number of Shares		Value
Nonvested as of December 31, 2021		425,000	$	11.68
Granted		—		—
Forfeitures		—		—
Nonvested as of March 31, 2022		425,000	$	11.68

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Nature of Business - Additional Information (Detail) - USD ($)					3 Months Ended
	Mar. 25, 2021	Mar. 17, 2021	Mar. 01, 2021	Mar. 10, 2020	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Mar. 31, 2020
Description Of Business [Line Items]
Number of common shares sold						28,115
Proceeds from issuance of common stock, net of issuance costs					$ 0	$ 28,150,000
Accumulated deficit					(147,436,000)		$ (138,966,000)
Cash, cash equivalents and marketable securities and restricted cash					$ 61,900,000
Follow-on Public Offering [Member]
Description Of Business [Line Items]
Number of common shares sold	2,033,899
Share price	$ 14.75
Proceeds from issuance of common stock, net of issuance costs	$ 28,100,000
Torii Agreement [Member] | Torii [Member]
Description Of Business [Line Items]
Obligated to make upfront payment		$ 11,500,000
Mezzanine Loan Agreement [Member] | Mezzanine Lenders [Member] | Term A Loan [Member]
Description Of Business [Line Items]
Line of credit								$ 35,000,000.0
Borrowed amount				$ 35,000,000.0
Mezzanine Loan Agreement [Member] | Mezzanine Lenders [Member] | Term B1 Loan [Member]
Description Of Business [Line Items]
Borrowed amount			$ 5,000,000.0

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Significant Accounting Policies - Schedule of Potential Shares Outstanding not Included in Computation of Diluted Net Loss Per Common Share (Detail) - shares	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Shares issuable upon exercise of stock options [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Securities that could potentially dilute basic earnings per share	3,768,955	3,571,708
Non-vested shares under restricted stock grants [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Securities that could potentially dilute basic earnings per share	425,000	475,000

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Investments in Marketable Securities - Schedule of Marketable Securities (Detail) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Marketable Securities [Line Items]
Amortized Cost	$ 11,559	$ 54,631
Gross Unrealized Losses	(62)	(29)
Fair Value	11,497	54,602
U.S. Treasury Securities [Member]
Marketable Securities [Line Items]
Amortized Cost	5,025	15,272
Gross Unrealized Losses	(40)	(15)
Fair Value	4,985	15,257
Commercial Paper [Member]
Marketable Securities [Line Items]
Amortized Cost	2,499	28,980
Fair Value	2,499	28,980
Asset Backed Securities [Member]
Marketable Securities [Line Items]
Amortized Cost	4,035	10,379
Gross Unrealized Losses	(22)	(14)
Fair Value	$ 4,013	$ 10,365

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Investments in Marketable Securities - Schedule of Fair Value of Marketable Securities (Detail) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Marketable Securities [Line Items]
Marketable securities	$ 11,497	$ 54,602
Level 1 [Member]
Marketable Securities [Line Items]
Marketable securities	4,985	15,257
Level 2 [Member]
Marketable Securities [Line Items]
Marketable securities	6,512	39,345
U.S. Treasury Securities [Member]
Marketable Securities [Line Items]
Marketable securities	4,985	15,257
U.S. Treasury Securities [Member] | Level 1 [Member]
Marketable Securities [Line Items]
Marketable securities	4,985	15,257
Commercial Paper [Member]
Marketable Securities [Line Items]
Marketable securities	2,499	28,980
Commercial Paper [Member] | Level 2 [Member]
Marketable Securities [Line Items]
Marketable securities	2,499	28,980
Asset Backed Securities [Member]
Marketable Securities [Line Items]
Marketable securities	4,013	10,365
Asset Backed Securities [Member] | Level 2 [Member]
Marketable Securities [Line Items]
Marketable securities	$ 4,013	$ 10,365

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Property and Equipment - Schedule of Property and Equipment, Net (Detail) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 4,507	$ 4,148
Accumulated depreciation	(352)	(254)
Total property and equipment, net	4,155	3,894
Machinery and Equipment [Member]
Property Plant And Equipment [Line Items]
Property and equipment, gross	737	737
Office Furniture and Fixtures [Member]
Property Plant And Equipment [Line Items]
Property and equipment, gross	303	303
Office Equipment [Member]
Property Plant And Equipment [Line Items]
Property and equipment, gross	301	301
Leasehold Improvements [Member]
Property Plant And Equipment [Line Items]
Property and equipment, gross	54	49
Automobiles [Member]
Property Plant And Equipment [Line Items]
Property and equipment, gross	27	27
Construction in Progress [Member]
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 3,085	$ 2,731

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Accrued Expenses and Other Current Liabilities - Schedule of Accrued Expenses and Other Current Liabilities (Detail) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Accrued Liabilities, Current [Abstract]
Compensation and related costs	$ 699	$ 1,667
Professional fees	347	406
Construction in process	335	131
Interest expense	219	250
Clinical trials and drug development	216	613
Machinery and equipment	124	124
Other accrued expenses and other current liabilities	74	75
Total accrued expenses and other current liabilities	$ 2,014	$ 3,266

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Leases - Additional Information (Detail) - USD ($) $ in Thousands			3 Months Ended
	Mar. 12, 2020	Jul. 01, 2019	Mar. 31, 2022	Dec. 31, 2021
Lessee Lease Description [Line Items]
Operating lease expired			2021-05
First amendments date	Mar. 12, 2020
Lease expiration date			Sep. 01, 2027
Operating lease right of use asset			$ 1,548	$ 1,608
Lease liability			$ 1,634
Financing leases expiration year			2025
Financing vehicle lease, net			$ 21
Pennsylvania [Member]
Lessee Lease Description [Line Items]
Lease agreement commencement date		Jul. 01, 2019
Landlord's Operating Expense [Member]
Lessee Lease Description [Line Items]
Operating lease, base rent			$ 2,400

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Leases - Summary of Components of Lease Expense (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Leases [Abstract]
Amortization ROU assets	$ 2
Total finance lease costs	2
Operating lease costs	85	$ 89
Short-term lease costs	8	5
Total operating lease expense	$ 93	$ 94

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Leases - Schedule of Maturities of Operating and Finance Leases (Detail) $ in Thousands	Mar. 31, 2022 USD ($)
Leases [Abstract]
Finance Lease, Remainder of Fiscal Year	$ 6
Finance Lease, Year one	7
Finance Lease, Year Two	7
Finance Lease, Year Four	2
Finance Lease, Total lease payments	22
Less Finance Lease imputed interest	(1)
Finance Lease, Lease liability	21
Operating Lease, Remainder of Fiscal Year	259
Operating Lease, Year one	349
Operating Lease, Year Two	355
Operating Lease, Year Four	360
Operating Lease, After Year Four	613
Operating Lease, Total lease payments	1,936
Less Operating Lease, imputed interest	(302)
Operating Lease, Lease liability	$ 1,634

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Leases - Schedule of Weighted Average Remaining Term and Discount Rate (Detail)	Mar. 31, 2022
Leases [Abstract]
Operating Lease, Weighted average remaining lease term	5 years 4 months 24 days
Operating Lease, Weighted-average discount rate	6.25%
Finance Lease, Weighted average remaining lease term	3 years 1 month 6 days
Finance Lease, Weighted-average discount rate	4.35%

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Debt - Additional Information (Detail) - USD ($)				3 Months Ended
	Mar. 01, 2021	Oct. 26, 2020	Mar. 10, 2020	Mar. 31, 2022	Mar. 31, 2020
Debt Instrument [Line Items]
Term loans, frequency of periodic payments		12 equal monthly
Debt instrument, covenant description				Under the Loan Agreements, as amended, the Company is subject to a number of affirmative and restrictive covenants, including covenants regarding, delivery of financial statements, maintenance of inventory, payment of taxes, maintenance of insurance, protection of intellectual property rights, dispositions of property, business combinations or acquisitions, incurrence of additional indebtedness or liens, investments and transactions with affiliates among other customary covenants.
Debt instrument, covenant compliance				As of March 31, 2022 the Company is in compliance with all covenants.
Final payment fee				$ 40,000,000
Mezzanine Loan Agreement [Member]
Debt Instrument [Line Items]
Debt instrument, final payment fee payable		$ 3,750,000
Debt instrument, prepayment written notice period		5 days
Mezzanine Loan Agreement [Member] | Term Loan Prepaid Between October 27, 2021 and October 26, 2022 [Member]
Debt Instrument [Line Items]
Debt instrument, prepayment fee		$ 1,000,000.0
Mezzanine Loan Agreement [Member] | Term Loan Prepaid Between October 27, 2022 and October 26, 2023 [Member]
Debt Instrument [Line Items]
Debt instrument, prepayment fee		500,000
Mezzanine Loan Agreement [Member] | Term Loan Prepaid After October 26, 2023 [Member]
Debt Instrument [Line Items]
Debt instrument, prepayment fee		$ 0
Mezzanine Loan Agreement [Member] | Mezzanine Lenders [Member] | Term Loans [Member]
Debt Instrument [Line Items]
Maximum borrowing capacity			$ 50,000,000.0
Mezzanine Loan Agreement [Member] | Mezzanine Lenders [Member] | Term A Loan [Member]
Debt Instrument [Line Items]
Borrowed amount			35,000,000.0
Line of credit					$ 35,000,000.0
Mezzanine Loan Agreement [Member] | Mezzanine Lenders [Member] | Term B1 Loan [Member]
Debt Instrument [Line Items]
Borrowed amount	$ 5,000,000.0
Mezzanine Loan Agreement [Member] | Silicon Valley Bank (Senior Lender) [Member] | Revolving Loans [Member]
Debt Instrument [Line Items]
Maximum borrowing capacity			$ 5,000,000.0
Senior Loan Agreement [Member]
Debt Instrument [Line Items]
Term loans, payment terms				Term Loans will be interest-only through February 28, 2023, followed by 12 equal monthly payments of principal and interest.
Loans, interest rate terms				The Term Loans will bear interest at a floating per annum rate equal to the greater of (i) 7.25% and (ii) the sum of (a) the prime rate reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue, plus (b) 2.50%.
Loans, interest rate		7.25%
Credit line, early termination notice period		3 days
Debt discount and issuance costs				$ 4,400,000
Interest expense				1,000,000.0
Interest on term loan				700,000
Non-cash interest expense				300,000
Senior Loan Agreement [Member] | Prime Rate [Member]
Debt Instrument [Line Items]
Loans, variable rate		2.50%
Senior Loan Agreement [Member] | Term Loans [Member] | Contra-Liability [Member]
Debt Instrument [Line Items]
Final payment fee				3,800,000
Senior Loan Agreement [Member] | Revolving Loans [Member]
Debt Instrument [Line Items]
Credit line, early termination fee amount		$ 50,000
Senior Loan Agreement [Member] | Revolving Loans [Member] | Other Non-Current Assets [Member]
Debt Instrument [Line Items]
Debt discount and issuance costs				$ 100,000

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Debt - Summary of Composition of Debt (Detail) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Gross proceeds	$ 41,999	$ 41,693
Senior Loan Agreement [Member]
Debt Instrument [Line Items]
Gross proceeds	40,000
Accrued final payment fee	3,750
Unamortized debt discount and issuance costs	(1,751)
Total short-term debt, net	$ 41,999

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Debt - Schedule of Aggregate Maturities of Debt (Detail) $ in Thousands	Mar. 31, 2022 USD ($)
Debt Disclosure [Abstract]
2023	$ 33,333
2024	6,667
Long-term debt	$ 40,000

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Stock-Based Compensation - Schedule of Stock Based Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 1,316	$ 1,403
Research and Development [Member]
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	417	298
General and Administrative [Member]
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 899	$ 1,105

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Stock-Based Compensation - Summary of Stock Option Activity (Detail) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Share-based Payment Arrangement, Additional Disclosure [Abstract]
Number of shares, Outstanding Beginning Balance	3,443,817
Number of shares, Granted	365,000
Number of shares, Exercised	0	(240)
Number of shares, Forfeitures	(14,238)
Number of shares, Expired	(25,624)
Number of shares, Outstanding Ending Balance	3,768,955		3,443,817
Number of shares, Options vested and exercisable Ending Balance	1,968,559
Weighted average exercise price, Outstanding Beginning Balance	$ 10.05
Weighted average exercise price, Granted	8.09
Weighted average exercise price, Exercised	0
Weighted average exercise price, Forfeitures	11.76
Weighted average exercise price, Expired	14.13
Weighted average exercise price, Outstanding Ending Balance	9.83		$ 10.05
Weighted average exercise price, Options vested and exercisable Ending Balance	$ 8.90
Weighted average remaining contractual life (in years), Outstanding	7 years 9 months 18 days		7 years 9 months 18 days
Weighted average remaining contractual life (in years), Options vested and exercisable	6 years 9 months 18 days
Aggregate intrinsic value, Outstanding	$ 2,468,987		$ 3,952,803
Aggregate intrinsic value, Options vested and exercisable Ending Balance	$ 2,076,929

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Stock-Based Compensation - Additional Information (Detail) - USD ($) $ in Millions	1 Months Ended		3 Months Ended
	Aug. 31, 2020	Nov. 30, 2019	Mar. 31, 2022	Dec. 31, 2021
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total unrecognized compensation related to unvested stock options			$ 13.0
Weighted-average stock option recognize period			2 years 10 months 2 days
Restricted Stock Units (RSUs) [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of Shares, Granted			0
Stock vesting period		1 year
Restricted stock units outstanding			425,000	425,000
Total unrecognized compensation related to nonvested restricted stock units			$ 5.0
Restricted Stock Units (RSUs) [Member] | Executive Officers [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of Shares, Granted	250,000	300,000
Restricted Stock Units (RSUs) [Member] | One Year Anniversary [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Percentage of stock subject to vesting (as a percent)	50.00%	50.00%
Restricted Stock Units (RSUs) [Member] | New Drug Application [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Percentage of stock subject to vesting (as a percent)	50.00%	50.00%

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Stock-Based Compensation - Summary of Non-vested RSUs Activities (Detail) - Restricted Stock Units (RSUs) [Member]	3 Months Ended
	Mar. 31, 2022 $ / shares shares
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Nonvested, Number of Shares, Beginning Balance | shares	425,000
Nonvested, Number of Shares, Granted | shares	0
Nonvested, Number of Shares, Forfeitures | shares	0
Nonvested, Number of Shares, Ending Balance | shares	425,000
Nonvested, Weighted Average Grant Date Fair Value, Beginning Balance | $ / shares	$ 11.68
Nonvested, Weighted Average Grant Date Fair Value, Granted | $ / shares	0
Nonvested, Weighted Average Grant Date Fair Value, Forfeitures | $ / shares	0
Nonvested, Weighted Average Grant Date Fair Value, Ending Balance | $ / shares	$ 11.68

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Related Party Transactions - Additional Information (Detail) - PBM Capital Group, LLC [Member] - USD ($)			3 Months Ended
	Oct. 01, 2019	Dec. 02, 2015	Mar. 31, 2022	Mar. 31, 2021
Related Party Transaction [Line Items]
Services agreement initial term		12 months
Expenses incurred under services agreement			$ 15,000	$ 15,000
Due to related party			5,000
Amended Service Agreement [Member]
Related Party Transaction [Line Items]
Monthly management fee payable	$ 5,000
General and Administrative [Member]
Related Party Transaction [Line Items]
Expenses incurred under services agreement			9,000	9,000
Research and Development [Member]
Related Party Transaction [Line Items]
Expenses incurred under services agreement			$ 6,000	$ 6,000

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License and Collaboration Agreements - Additional Information (Detail) - USD ($) $ in Thousands		1 Months Ended				3 Months Ended		12 Months Ended
	Mar. 17, 2021	Apr. 30, 2021	Feb. 28, 2021	Dec. 31, 2020	Aug. 31, 2020	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2020
License And Collaboration Agreements [Line Items]
Research and development expense						$ 2,723	$ 5,362
Ltyix [Member]
License And Collaboration Agreements [Line Items]
Payments upon achievements of milestone					$ 111,000
One time up front license fee			$ 2,300					$ 300
Research and development expense							$ 2,300	300
Percentage of royalty income shared					50.00%
Option Agreement [Member] | Torii [Member]
License And Collaboration Agreements [Line Items]
Consideration receivable to secure exclusive option					$ 500
Deferred revenue				$ 500				$ 500
Torii Agreement [Member] | Torii [Member]
License And Collaboration Agreements [Line Items]
Received payment		$ 11,500		$ 500
Payments upon achievements of milestone	$ 58,000
Unbilled contracts receivable						$ 400
Torii Agreement [Member] | Torii [Member] | Minimum [Member]
License And Collaboration Agreements [Line Items]
Mid Percentage of transfer price payments for supply of product net sales	30.00%
Torii Agreement [Member] | Torii [Member] | Maximum [Member]
License And Collaboration Agreements [Line Items]
Mid Percentage of transfer price payments for supply of product net sales	40.00%