Company: VRCA
Filing Date: 2025-11-14
Form Type: 10-Q
Source: 0001660334-25-000006
Chunk: 41

Company: Verrica Pharmaceuticals Inc.
Filing Date: 2025-11-14
Form: 10-Q
Item: Part I, Item 1
Chunk 41
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. Pursuant to the Second Amendment, in September 2025, Torii also paid to the Company a $10.0 million milestone payment upon the approval of TO-208, referred to as YCANTH in the U.S., for molluscum contagiosum in Japan, in cash, rather than as an offset to costs of the Program as originally contemplated under the First Amendment. Torii will be paying the first $40.0 million of out-of-pocket costs when due, with the Company repaying to Torii half of such costs over time. Consistent with the First Amendment, to repay its portion of the costs of the Program, the Company will offset amounts otherwise due from Torii for future royalties, certain transfer 

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price payments and remaining development milestones.  To the extent the cost of the Program exceeds $40.0 million, the Company will pay such excess costs, up to a specified maximum amount, and Torii will repay to the Company half of such costs.  The Second Amendment also sets forth that the Company will initiate a manufacturing transfer to Torii, which is expected to take several years, that will allow Torii to produce YCANTH (TO-208) applicators to be sold in Japan. In the interim, Torii will continue to purchase applicators from the Company. After the transfer of at least one component of the manufacturing process, the Company will begin earning royalties related to net sales in Japan of applicators manufactured by Torii and/or its manufacturing partners in lieu of the transfer price for completed applicators.The Company is accounting for the Second Amendment as a R&D funding arrangement since the Company is obligated to repay Torii regardless of the outcome of the research such that a substantive and genuine transfer of risk has not occurred. During the nine months ended September 30, 2025, Torii paid $8.6 million to a contract research organization ("CRO"), half of which comprises the Company Portion.Upon Torii’s $8.6 million payment to the CRO, representing an initial deposit for clinical trial services and fees, the Company recorded a $4.3 million funding liability ("R&D Funding Liability") for the Company Portion it will pay to Torii, as described above, and a corresponding R&D asset ("Deferred R&D Services") of $4.3 million representing its right to the prepaid research and development services.The Company will expense the Deferred R&D Services within R&D expense as the services are performed by the CRO. Because the R