Company: VRCA
Filing Date: 2025-11-14
Form Type: 10-Q
Source: 0001660334-25-000006
Chunk: 23

Company: Verrica Pharmaceuticals Inc.
Filing Date: 2025-11-14
Form: 10-Q
Item: Part I, Item 1
Chunk 23
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 for YCANTH (VP-102) are generally 60 days from the shipment date.InventoryThe Company values inventory at the lower of cost or net realizable value. Inventory cost is determined using the specific identification method. The Company regularly reviews its inventory quantities and, when appropriate, records a provision for obsolete and excess inventory to derive the new cost basis, which takes into account the Company’s sales forecast and corresponding expiry dates. The Company recognized $0.4 million of obsolete inventory costs as cost of product revenue for the three and nine months ended September 30, 2025, due to the expiration of Product (as defined below). The Company recognized obsolete inventory costs of $0.2 million and $0.6 million as cost of product revenue for the three and nine months ended September 30, 2024, respectively, due to the expiration of Product.Financial Instruments – DerivativesThe Company evaluates its financial instruments to determine if the financial instrument itself or any embedded components of a financial instrument potentially qualify as derivatives required to be separately accounted for in accordance with ASC Topic 815 - Derivatives and Hedging.The derivative liability relates to a bifurcated settlement feature of the Company’s OrbiMed Credit Agreement (Note 10). The derivative liability is subject to re-measurement at each reporting period, at each balance sheet date and any change in fair value is recognized as a component of change in fair value of derivative liability in the statements of operations. The Company will continue to adjust the liability for changes in fair value until the final repayment of the Term Loan.

10

RevenueProduct Revenue, NetThe Company recognizes revenue from sales of a single product, YCANTH (VP-102) (the "Product") in accordance with ASC Topic 606 – Revenue from Contracts with Customers. YCANTH (VP-102) became available for commercial sale and shipment to patients with a prescription in the United States in the third quarter of 2023. The Company sells the Product to Customers who in turn sell the Product directly to clinics, hospitals, and federal healthcare programs. Revenue is recognized as the Product is physically delivered to the Customers.Gross product sales are reduced by corresponding gross-to-net ("GTN") estimates using the expected value method, resulting in the Company’s reported “Product revenue, net” in the accompanying statements of operations. Product revenue, net reflects the amount the Company ultimately expects to realize in net cash proceeds, taking into account the current period gross sales and related cash receipts and the subsequent cash dis