VRCA US Equity☆

ITEM 7. 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 the financial statements and the related notes to those statements included later in this Annual Report. In addition to historical financial information, the following discussion contains forward‐looking statements that reflect our plans, estimates, beliefs and expectations that involve risks and uncertainties. Our actual results and the timing of events could differ materially from those discussed in these forward‐looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report, particularly in Item 1A. "Risk Factors" and "Special Note Regarding Forward‐Looking Statements."

Overview

We are a therapeutics company developing and commercializing medications for the treatment of dermatologic diseases, including skin cancers. Our commercial product and portfolio of product candidates are clinician administered therapies in areas of high unmet need. Our current product portfolio consists of one approved product with several potential follow-on indications, as well as an additional pipeline product. Our commercial product, YCANTH (VP-102), was approved by the U.S. Food and Drug Administration, or FDA, in July 2023 for the treatment of molluscum in adult and pediatric patients two years of age and older. YCANTH (VP-102) is a proprietary drug-device combination that contains a GMP-controlled formulation of cantharidin. We are currently developing YCANTH (VP-102) for a potential follow-on indication for the treatment of common warts. Our second development candidate, VP-315, is an oncolytic peptide-based injectable therapy for the potential treatment of dermatology oncologic conditions, including basal cell carcinoma or BCC.

We commercially launched YCANTH (VP-102) in August 2023 in the United States for the treatment of molluscum. We have built a specialized sales organization consisting of 40 employee sales representatives in the United States focused on pediatric dermatologists, dermatologists, pediatricians and select other primary care healthcare providers, or HCPs. In 2026, we expect to expand the field sales force to 50 employee sales representatives. In the fourth quarter of 2025, we also launched YCANTH-Rx, a non-dispensing pharmacy, in order to streamline and simplify the provider experience by allowing offices to send YCANTH prescriptions to the same place, regardless of the patient's insurance coverage, for triage to an in-network dispensing pharmacy.

We are also advancing YCANTH (VP-102) for common warts through a separate regulatory approval process and have initiated a global Phase 3 study, or the Program, in common warts with our partner, Torii, with first patient dosed in December 2025. In the future, we also intend to pursue commercialization for YCANTH (VP-102) for the treatment of molluscum, as well as YCANTH (VP-102) for common warts if approved, in additional geographic regions, either alone or together with a strategic partner. In late 2025, we received regulatory feedback that we can pursue a submission for registration in Europe without the need for additional Phase 3 clinical studies and are currently working towards that submission.

We are also developing VP-315 for the treatment of BCC and potentially additional dermatological oncology indications. In November 2025, we presented additional data at the Society for Immunotherapy of Cancer 40th Annual Meeting, which showed that VP-315 induced a robust local immune response with both cell-mediated and humoral components, effectively shifting the tumor microenvironment from an immunosuppressive to an anti-tumor state, and additional data regarding the histologic assessment in non-injected lesions that suggests a potential abscopal-like effect. Since that presentation, there has been a growing interest in this program across a broad audience. We believe this reflects the high response rates observed in the study and the potential for VP-315 to change the paradigm for the treatment of basal cell carcinoma, particularly for patients wishing to avoid or reduce their surgical burden and recovery. Our enthusiasm is further supported by the suggested potential for less scarring and improved compliance versus other therapeutic options such as surgery and topicals, as either a primary or neoadjuvant treatment for superficial and nodular tumors. We have also continued to evaluate the abscopal response in 14 observed but not treated lesions in the Phase 2 study and are excited to report that 3 out of the 14 lesions had complete histologic clearance and that there was a 67% overall reduction in tumor size across all 14 lesions. If this overall product profile could be demonstrated in pivotal Phase 3 testing, we believe VP-315 has the potential to emerge as a non-surgical, immunotherapy treatment option for basal cell carcinoma and other skin cancers.

We have also obtained feedback from the FDA from the end-of-Phase 2 meeting this year that supports an efficient Phase 3 program and path to registration for VP-315. This includes two Phase 3 studies of approximately 100 subjects each in placebo-controlled studies with a primary endpoint of complete clearance at week 14. Additional long-term follow-up clinical studies will all be deferred to post approval commitments. We believe these data, coupled with the

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EOP2 regulatory feedback, further support the clinical efficacy and histologic clearance observed in the Phase 2 BCC trial. These data support the advancement of the Phase 3 Program and we have initiated clinical and chemistry, manufacturing and controls (CMC) activities to prepare commencement of Phase 3 clinical trials. We may also pursue non-dilutive strategic partnerships to help fund the development and commercialization of VP-315.

Since our inception in 2013, our operations have focused on developing YCANTH (VP-102) and expanding our development pipeline (which includes VP-315), organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio, conducting clinical trials and commercializing YCANTH. We have funded our operations primarily through the sale of equity and equity-linked securities and through borrowings under loan agreements.

On July 26, 2023, we entered into a credit agreement with OrbiMed Royalty & Credit Opportunities IV, LP, or OrbiMed pursuant to which we borrowed $50.0 million under the Loan Facility (as defined in Note 10) on July 26, 2023, or the Credit Agreement, resulting in net proceeds of approximately $44.1 million after payment of certain fees and transaction related expenses. Amounts borrowed under the Loan Facility were scheduled to mature on July 26, 2028. On November 26, 2025, following our Private Placement described below, we fully extinguished the Loan Facility by paying a cash settlement amount of $35.0 million.

On November 23, 2025, we entered into Securities Purchase Agreements with certain investors, or the Purchasers, pursuant to which we sold and issued in a private placement, or the Private Placement, an aggregate of (i) 6,499,826 shares of our common stock, (ii) with respect to certain Purchasers, pre-funded warrants to purchase 5,305,164 shares of common stock, or the Pre-Funded Warrants, in lieu of shares and (iii) in either case, accompanying Series C warrants to purchase 2,951,241 shares of common stock, or the Series C Warrants. The purchase price per share of common stock and accompanying Series C Warrant was $4.2413 per share and the purchase price for the Pre-Funded Warrants and accompanying Series C Warrant $4.2412 per share. The Series C Warrants expire on November 23, 2030. We received net proceeds of $49.1 million from the private placement transaction, after deducting placement fees of $0.9 million.

As of December 31, 2025, we had cash and cash equivalents of $30.1 million, which we believe to be sufficient to support our planned operations into the first quarter of 2027. Based on our current business plan and current capital resources, we have concluded that there is substantial doubt regarding our ability to continue as a going concern within one year after the date the accompanying financial statements are issued. Our 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 financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of recorded asset amounts and classification of liabilities that might result should we be unable to continue as a going concern.

We plan to secure additional capital in the future through equity or debt financings, partnerships, or other sources to carry out our planned commercial and development activities. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate continued and future commercialization efforts and/or research and development programs.

Since inception, we have incurred significant losses. For the years ended December 31, 2025 and 2024, our net loss was $17.9 million and $76.6 million, respectively. As of December 31, 2025, we had an accumulated deficit of $324.9 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future. Our expenses may increase in connection with our ongoing activities, as we:

•continue to establish our commercialization infrastructure and scale up external manufacturing and distribution capabilities to commercialize YCANTH (VP-102) for the treatment of molluscum and product candidates for which we may obtain regulatory approval;

•continue our ongoing clinical programs evaluating YCANTH (VP-102) for the treatment of common warts and VP-315 for the treatment of BCC and potentially additional dermatological oncology indications;

•pursue regulatory approvals in the United States and, potentially, other parts of the world for YCANTH (VP-102) for the treatment of common warts and VP-315 for the treatment of BCC;

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

•maintain, expand and protect our intellectual property portfolio;

•hire and retain clinical, manufacturing, commercialization and scientific personnel; and

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

Components of Results of Operations

Product Revenue, Net

We recognize revenue from sales of YCANTH (VP-102), or the Product, in accordance with ASC Topic 606 – Revenue from Contracts with Customers. We sell the Product to several pharmaceutical wholesaler/distributors, or the Customers, who in turn sell the Product directly to pharmacies, 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, or GTN, estimates using the expected value method, resulting in our reported "Product revenue, net" in the accompanying statements of operations. Product revenue, net reflects the amount we ultimately expect to realize in net cash proceeds, taking into account the current period gross sales and related cash receipts and the subsequent cash disbursements on these sales that we estimate for the various GTN categories as well as adjustments for any potential future product returns from distributors. The GTN estimates are based upon information received from external sources, such as written or oral information obtained from our customers with respect to their period-end inventory levels and sales to end-users during the period, in combination with management’s informed judgments. Due to the inherent uncertainty of these estimates, the actual amount of product returns, government chargebacks, prompt pay discounts, commercial rebates, Medicaid rebates, co-pay assistance and distribution, data, and group purchasing organizations, or GPOs, administrative fees may be materially above or below the amount estimated. Variance between actual amounts and estimated amounts may result in prospective adjustments to reported net product revenue.

License and Collaboration Revenue

License and collaboration 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 and common warts in Japan, including YCANTH (VP-102). On June 27, 2025, we entered into the Second Amendment to the Torii Agreement, as previously amended. The Second Amendment provided for the acceleration of an $8.0 million milestone payment which was paid to us in July 2025, following Torii's approval of the study plan and execution of the Clinical Research Organization agreement, or CRO agreement. In September 2025, Torii paid us a $10.0 million milestone payment upon the approval of TO-208, referred to as YCANTH in the U.S., for molluscum in Japan.

Operating Expenses

Cost of Product Revenue

Cost of product revenue includes the cost of inventory sold, which includes direct manufacturing and supply chain costs. Prior to FDA approval, all product purchased from such suppliers was included as a component of research and development expense, as we were unable to assert that the inventory had future economic benefit until YCANTH (VP-102) received FDA approval. Pursuant to the supply agreement, we purchased and included in research and development expenses approximately $4.5 million of raw cantharidin and processed active pharmaceutical ingredient, or API, prior to FDA approval. The raw cantharidin and processed API is sufficient to produce approximately 17 million finished drug product applicators to be used for commercially saleable product and other YCANTH (VP-102) product candidates. In addition, we purchased other components and services related to YCANTH (VP-102) for commercially saleable product and included approximately $1.2 million in research and development expenses prior to FDA approval. As a result, cost of product revenue related to YCANTH (VP-102) initially reflected a lower average per unit cost of materials as previously expensed inventory was utilized for commercial production and sold to customers. On a pro forma basis, were we to have included those costs previously expensed as a component of cost of product revenue, our cost of product revenue for the year ended December 31, 2024 would have been $2.6 million. For the year ended December 31, 2025, including those costs previously expensed as a component of cost of product revenue would have had an immaterial impact on our cost of product revenue.

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Cost of License and Collaboration Revenue

The cost of license and collaboration revenue consists of payments for commercial and clinical supply to support the commercial launch of YCANTH (VP-102) in Japan as well as continued development and testing services pursuant to the Torii Clinical Supply Agreement.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist principally of salaries and related costs for personnel in sales, executive and administrative functions, including stock-based compensation, travel expenses and recruiting expenses. Other selling, general and administrative expenses include cost of samples, sponsorships, consumer and health care professional marketing and advertising expense, insurance costs, and professional fees for audit, tax and legal services.

Research and Development Expenses

Research and development expenses consist of expenses incurred in connection with the discovery and development of YCANTH (VP-102) for the treatment of common warts, continued development for the treatment of molluscum and our other product candidate, VP-315 for BCC. 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;

•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 YCANTH (VP-102) in patients with common warts and VP-315 for BCC and potentially additional dermatological oncology indications 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 YCANTH (VP-102) or our other 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

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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.

Results of Operations for the Years Ended December 31, 2025 and 2024

The following table summarizes our results of operations (in thousands):

For the Year Ended December 31,

Revenue:

Operating expenses:

Cost of license and collaboration revenue 1,249 887 362

Other income (expense):

Change in fair value of derivative liability 2,648 (2,648) 5,296

Loss on extinguishment of debt (1,533) — (1,533)

Product Revenue, Net

Product revenue, net was $15.3 million for the year ended December 31, 2025, compared to $6.6 million for the year ended December 31, 2024. The increase in product revenue, net was primarily related to an increase in deliveries of YCANTH to our distribution partners. For the year ended December 31, 2024, product revenue, net was partially offset by an increase in our returns reserve of $3.2 million for estimated returns from our distributors. We determined it was more than probable that product held by certain distributors would be returned based on lower than forecasted sell-through and expiration of product.

License and Collaboration Revenue

License and collaboration revenue was $20.3 million for the year ended December 31, 2025, compared to $1.0 million for the year ended December 31, 2024. License and collaboration revenue for the year ended December 31, 2025 primarily consisted of $18.0 million in milestone payments from Torii and $2.3 million in commercial supply activity. License and collaboration revenue for the year ended December 31, 2024 consisted of supplies and development activity with Torii.

Cost of Product Revenue

Cost of product revenue was $2.2 million for the year ended December 31, 2025, compared to $1.9 million for the year ended December 31, 2024. The increase consisted of higher product costs primarily related to the increase in sales of

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YCANTH (VP-102) of $0.7 million, offset by a lower obsolete inventory reserve of $0.3 million during the year ended December 31, 2025.

Cost of License and Collaboration Revenue

License and collaboration revenue costs were $1.2 million for the year ended December 31, 2025, compared to $0.9 million for the year ended December 31, 2024. The change of $0.3 million was due primarily to costs associated with the initial commercial supply for Torii's product launch in early 2026.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $35.2 million for the year ended December 31, 2025, compared to $58.8 million for the year ended December 31, 2024. Excluding the impact of stock-based compensation, the decrease of $20.6 million was primarily a result of lower expenses related to commercial activities for YCANTH (VP-102) for the treatment of molluscum, including decreased compensation, recruiting fees, benefits and travel of $6.9 million related to a smaller sales force, decreased compensation of $2.7 million due to termination of non-sales employees, decreased commercial-related costs of $6.6 million, decreased travel and fleet-related costs of $2.0 million and decreased legal and administrative costs of $2.3 million.

On October 1, 2024, we terminated 47 employees to reduce costs and optimize the efficiency of our field sales force, or the Restructuring. At that time, we reduced the number of sales territories from 80 to approximately 35, with a focus on those territories that have historically shown a high prevalence of molluscum. In connection with the Restructuring, we incurred a one-time charge totaling approximately $0.7 million related to one-time employee termination costs. In addition, we recognized an impairment charge for right-of-use assets associated with leased vehicles of $0.3 million for the year ended December 31, 2024 in selling, general and administrative expenses. This restructuring charge was substantially paid out by December 31, 2024.

The following table summarizes our selling, general and administrative expense for the years ended December 31, 2025 and 2024 (in thousands).

For the Year Ended December 31,

Research and Development Expenses

Research and development expenses were $8.9 million for the year ended December 31, 2025, compared to $11.8 million for the year ended December 31, 2024. Excluding stock-based compensation, the decrease of $2.1 million was primarily attributable to decreased clinical costs for VP-315 of $3.0 million, partially offset by increased costs related to the Program of $0.2 million and increased compensation related costs of $0.7 million.

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The following table summarizes our research and development expense by product candidate or, for unallocated expenses, by type, in thousands, for the years ended December 31, 2025 and 2024. Unallocated expenses include compensation and other personnel-related costs.

For the Year Ended December 31,

Loss on Disposal of Assets

For the years ended December 31, 2025 and 2024, we recognized a $0.2 million and $0.1 million loss on disposal of assets, respectively.

Interest Income

Interest income was $0.9 million and $1.4 million for the years ended December 31, 2025 and 2024, respectively. The decrease of $0.5 million was primarily due to a lower cash balance.

Interest Expense

Interest expense of $7.7 million and $9.4 million for the years ended December 31, 2025 and 2024, respectively, consisted of interest expense pursuant to the Credit Agreement entered into on July 26, 2023. The decrease of $1.7 million was primarily due to a lower principal balance. We paid $35.0 million to settle all outstanding obligations under the Credit Agreement in November 2025.

Change in Fair Value of Derivative Liability

Our Credit Agreement contained a bifurcated settlement feature classified as a derivative liability which was remeasured each accounting period. The derivative liability was remeasured to fair value immediately prior to the settlement of the Credit Agreement in November 2025, resulting in a reduction to nil. As of December 31, 2024, the fair value of the embedded derivative was valued at $2.6 million, as a result of the acceleration of principal payments, repayment fee and exit fee.

Results of Operations for Years Ended December 31, 2024 and 2023

For a discussion and analysis of changes in financial condition and results of operations for the year ended December 31, 2024 as compared to the year ended December 31, 2023, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 11, 2025.

Liquidity and Capital Resources

Overview

Since our inception, we have incurred net losses and negative cash flows from our operations. We have financed our operations since inception primarily through sales of our convertible preferred stock, the sale of our common stock, borrowings under loan agreements and $38.0 million from the Torii Agreement. In November 2024, we closed an underwritten offering of 4,551,824 shares of our common stock (and, in lieu of common stock to certain investors that so chose, pre-funded warrants to purchase 223,595 shares of our common stock, or the Pre-Funded Warrants), and in either case, accompanying Series A warrants to purchase 2,387,703 shares of our common stock at an exercise price of $10.68 per share of common stock, or the Series A Warrants, and Series B warrants to purchase 2,387,703 shares of our common stock at an exercise price of $13.35 per share of common stock, or the Series B Warrants, at a combined public offering price of $8.90 per share of common stock and accompanying Series A and Series B Warrants (or $8.899 per Pre-Funded

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Warrant and accompanying Series A and Series B Warrants). The offering resulted in net proceeds of $39.6 million, after deducting underwriting discounts and commissions, and offering expenses.

On November 23, 2025, we sold an aggregate of (i) 6,499,826 shares of common stock, (ii) with respect to certain Purchasers, the Pre-funded warrants in lieu of shares of common stock and (iii) in either case, accompanying Series C warrants to purchase 2,951,241 shares of our common stock, referred to herein as the Series C Warrants. The purchase price per share of Common Stock and accompanying Series C Warrant was $4.2413 per share and the purchase price for the Pre-Funded Warrants and accompanying Series C Warrant $4.2412 per share. We received net proceeds of $49.1 million from the Private Placement, after deducting placement fees of $0.9 million.

As of December 31, 2025, we had cash and cash equivalents of $30.1 million. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.

In addition, we have an operating lease for office space in West Chester, Pennsylvania with obligations through September 1, 2027 of $0.6 million including imputed interest.

We entered into a fleet program to provide vehicles for our sales force. The vehicles are leased for a typical term of 52 months and classified as finance leases with obligations of $1.2 million through February 2030 including imputed interest.

On July 26, 2023, we entered into the Credit Agreement which provided for a $125.0 million Loan Facility. We borrowed $50.0 million on July 26, 2023, resulting in net proceeds to us of approximately $44.1 million after payment of certain fees and transaction related expenses. Based on our net revenue attributable to YCANTH on a trailing 12-month basis not meeting a specified amount set forth in the Credit Agreement as of December 31, 2024, we became obligated to start making principal payments starting on January 1, 2025. We were obligated to repay the principal amount of the loan on the last day of each month in equal monthly installments through the maturity date, together with the applicable repayment premium and the exit fee. On June 10, 2025, we entered into the sixth amendment and waiver to the Credit Agreement, or the Sixth Amendment, pursuant to which the Lenders waived specified covenants under the Credit Agreement, including the requirements under Section 7.1(b) and Section 7.1(c) of the Credit Agreement that there be no "going concern" qualification with respect to the financial statements for the quarters ending June 30, 2025, September 30, 2025 and the quarter and year ended December 31, 2025. In connection with the Sixth Amendment, we paid an amendment fee of $0.1 million. On November 26, 2025, we paid $35.0 million to fully settle the debt related to the Credit Agreement.

On January 24, 2025, we received written notice from the Nasdaq Stock Market indicating that we were not in compliance with the minimum bid price requirement for continued listing. Failure to regain compliance could have resulted in delisting of our common stock, which would have adversely affected the liquidity of our common stock and our ability to access the capital markets. To regain compliance and maintain our Nasdaq listing, we effected a one-for-ten reverse stock split on July 25, 2025. Following the reverse stock split, we regained compliance with the minimum bid price requirement. Maintaining our Nasdaq listing is important to our stockholder liquidity and our ability to raise additional capital.

Cash Flows

The following table summarizes our cash flows (in thousands):

For the Year Ended December 31,

Net cash used in operating activities (17,627) (60,927)

Net cash used in investing activities — (19)

Net cash provided by financing activities 1,445 37,728

Net decrease in cash and cash equivalents (16,182) (23,218)

Operating Activities

During the year ended December 31, 2025, operating activities used $17.6 million of cash, primarily resulting from a net loss of $17.9 million as well as the non-cash change in fair value of embedded derivative of $2.6 million, partially offset by the loss of $1.5 million on the extinguishment of debt, noncash stock-based compensation of $3.3

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million, non-cash interest expense of $2.5 million, the non-cash change in obligation for the R&D funding liability of $0.8 million and non-cash amortization of operating and finance lease right-of-use assets of $0.6 million. Net cash used by changes in operating assets and liabilities consisted primarily of an increase in accounts receivable of $5.2 million, a decrease in accrued expenses and other current liabilities of $1.3 million and an increase in prepaid expenses and other assets of $0.3 million, partially offset by an increase in deferred revenue of $0.8 million.

During the year ended December 31, 2024, operating activities used $60.9 million of cash, primarily resulting from a net loss of $76.6 million, partially offset by noncash stock-based compensation of $7.1 million, non-cash interest expense of $2.2 million, non-cash change in fair value of embedded derivative of $2.6 million and non-cash amortization of operating and finance lease right-of-use assets of $0.9 million. Net cash provided by changes in operating assets and liabilities consisted primarily of a decrease in accounts receivable of $4.2 million partially offset by a decrease in accounts payable and accrued expenses of $0.9 million, and an increase in prepaid and other assets of $1.1 million.

Investing Activities

During the year ended December 31, 2025, no cash was used in investing activities. Net cash used in investing activities during the year ended December 31, 2024 was primarily related to the purchase of property and equipment of $27,000.

Financing Activities

During the year ended December 31, 2025, net cash provided by financing activities of $1.4 million was primarily related to cash proceeds of $49.8 million, net of issuance costs from the issuance of common stock, Prefunded warrants, and Series C Warrants in November 2025, partially offset by repayment of debt and debt settlement totaling $47.8 million.

During the year ended December 31, 2024, net cash provided by financing activities of $37.7 million, was primarily related to net cash proceeds of $39.6 million net of issuance costs from the issuance of common stock, Prefunded Warrants, Series A Warrants and Series B Warrants in November 2024, partially offset by payment of debt amendment costs of $1.1 million and repayment of finance leases of $0.9 million.

Funding Requirements

Our first commercial sale of YCANTH (VP-102) occurred in August 2023 to a pharmaceutical distributor. While we expect to continue to generate revenue from the sale of YCANTH (VP-102), our expenses may 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. 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 reduce operating expenses, delay, reduce or eliminate our research and development programs and/or continued and future commercialization efforts. In addition, the amount of proceeds we may be able to raise pursuant to our currently effective shelf registration statement on Form S-3 is limited. As of the filing of this Annual Report on Form 10-K, we are subject to the general instructions of Form S-3 known as the "baby shelf rules." Under these rules, the amount of funds we can raise through primary public offerings of securities in any 12-month period using our registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of our common stock held by non-affiliates. Therefore, we will be limited in the amount of proceeds we are able to raise by selling securities using our Form S-3 until such time as our public float exceeds $75.0 million.

We have incurred substantial operating losses since inception and expect to continue to incur significant losses for the foreseeable future and may never become profitable. As of December 31, 2025, we had an accumulated deficit of $324.9 million. We believe our cash and cash equivalents of $30.1 million as of December 31, 2025 will be sufficient to support our planned operations into the first quarter of 2027. Based on our current business plan and current capital resources, combined with the uncertainty regarding the availability of additional funding, we have concluded that there is substantial doubt regarding our ability to continue as a going concern within one year after the date these financial statements are issued. We plan to address the conditions that raise substantial doubt regarding our ability to continue as a going concern by, among other things, obtaining additional funding through equity offerings, debt financing and refinancings, collaborations, strategic alliances and/or licensing arrangements. Our financial statements have been prepared

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on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Our future capital requirements, and timing, will depend on many factors, including:

•the level of sales achieved, and costs related to the commercialization of YCANTH (VP-102) for the treatment of molluscum;

•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;

•the costs to scale up and secure manufacturing arrangements for commercial production of YCANTH (VP-102) for the treatment of molluscumand any product candidate we successfully commercialize; and

•the costs of establishing and maintaining sales and marketing capabilities for YCANTH (VP-102) for the treatment of molluscum and any product candidate that obtains regulatory approval.

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, YCANTH (VP-102), and our other product candidates, if approved, may not achieve commercial success. Our commercial revenues will be derived solely from sales of YCANTH (VP-102) in the near term. 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 disruptions to, and volatility in, the credit and financial markets in the United States and worldwide. 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.

Other Contractual Obligations and Commitments

On August 7, 2020, we entered into an exclusive license agreement, or the Lytix Agreement, with Lytix, pursuant to which we obtained a worldwide, exclusive, royalty-bearing license, with the right to sublicense, for certain technology of Lytix to research, develop, manufacture, have manufactured, use, sell, have sold, offer for sale, import and otherwise commercialize VP-315 for use in all malignant and pre-malignant dermatological indications, other than metastatic melanoma and metastatic Merkel cell carcinoma. Our right to manufacture the active pharmaceutical ingredient is limited to certain instances, and Lytix is obligated to manufacture and supply our clinical and commercial needs for such active pharmaceutical ingredient. We are obligated to use commercially reasonable efforts to develop and to commercialize the product, which development and commercialization will be overseen by a joint steering committee. Lytix has agreed not to pursue any products in the field of dermatology other than VP-315 for use in metastatic melanoma and metastatic Merkel

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cell carcinoma. Lytix has granted us an exclusive option to negotiate for an exclusive license for use of VP-315 in additional dermatological indications.

In connection with entering the Lytix Agreement, we made an initial payment of $250,000 and additional payments of $2.3 million during the year ended December 31, 2021 and $1.0 million during the year ended December 31, 2022 upon the achievement by Lytix of certain regulatory milestones. Additionally, we are obligated to pay up to $111.0 million contingent on achievement of specified development, regulatory, and sales milestones, and tiered royalties based on worldwide annual net sales ranging in the low double digits to the mid-teens, subject to certain customary reductions. Our 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 VP-315 anywhere in the world and expiration of regulatory exclusivity for VP-315 in such country. Additionally, all upfront fees and milestone-based payments received by us 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 us from a sublicensee shall be shared with Lytix at a rate that was initially 50% but decreases based on the stage of development of VP-315 at the time such sublicense is granted.

Critical Accounting Estimates

The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements, as well as the reported revenues and expenses during the reported periods. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

While we describe our significant accounting policies in the notes to our financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies are the most critical to the judgments and estimates we use in the preparation of our financial statements.

Revenue Recognition

We recognize YCANTH (VP-102) revenue in accordance with Accounting Standards Codification, or ASC 606 – Revenue from Contracts with Customers. Our revenue recognition analysis consists of the following steps: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are capable of being distinct; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue as we satisfy each performance obligation.

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. We sell our products to pharmaceutical wholesalers/distributors (i.e., our customers) who in turn sell our products directly to pharmacies, clinics, hospitals, and federal healthcare programs. Revenue from our product sales is recognized as physical delivery of product occurs (when our customer obtains control of the product), in return for agreed-upon consideration.

The transaction price that we recognize for YCANTH (VP-102) revenue is our gross product sales reduced by our corresponding gross-to-net, or GTN, estimates using the expected value method, resulting in our reported "net sales" in the accompanying Statements of Operations. Net sales reflects the amount we ultimately expect to realize in net cash proceeds, taking into account our current period gross sales and related cash receipts, and the subsequent cash disbursements on these sales that we estimate for the various GTN categories discussed below. These estimates are based upon information received from external sources (such as written or oral information obtained from our customers with respect to their period-end inventory levels and sales to end-users during the period), in combination with management’s informed judgments. Due to the inherent uncertainty of these estimates, the actual amount incurred (of some, or all) of product returns, government chargebacks, prompt pay discounts, commercial rebates, Medicaid rebates, and distribution, data, and GPO administrative fees may be above or below the amount estimated, then requiring prospective adjustments to our reported net sales.

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These GTN estimate categories (that comprise our GTN liabilities) are each discussed below:

Product Returns Allowances: The Customer is contractually permitted to return purchased product in certain circumstances. We record discrete reserves if product held by distributors, forecasted sales and expiration of product warrant a reserve. As historical data for returns of the product becomes available over time, we will utilize historical return rates of the product in making our estimates. Returned product is typically destroyed, since substantially all returns are due to expire and cannot be resold.

Government Chargebacks: The product is subject to pricing limits under certain federal government programs, including Medicare and the 340B drug pricing program. Qualifying entities, or the End-Users, purchase the product from the Customer at their applicable qualifying discounted price. The chargeback amount we incur represents the difference between our contractual sales price to the Customer and the end-user’s applicable discounted purchase price under the government program.

Medicaid Rebates: The product is subject to state government-managed Medicaid programs, whereby rebates are issued to participating state governments. These rebates arise when a patient treated with the Product is covered under Medicaid, resulting in a discounted price for the Product under the applicable Medicaid program. The Medicaid rebate accrual calculations require us to project the magnitude of our sales, by state, that will be subject to these rebates.

Patient Assistance: We offer voluntary co-pay patient assistance programs intended to provide financial assistance to eligible patients with a prescription drug co-payment required by payors and coupon programs for cash payors. The calculation of the current liability for this assistance is based on an estimate of claims and the cost per claim that we expect to receive associated with YCANTH (VP-102) that has been recognized as revenue but remains in the distribution channel inventories at the end of each reporting period.

Distribution, Data, and GPO Administrative Fees: Distribution, data and GPO administrative fees are paid to authorized wholesalers/distributors of our products for various commercial services including contract administration, inventory management, delivery of end-user sales data, and product returns processing. These fees are based on a contractually-determined percentage of our applicable sales.

Research and Development Costs

We rely on third parties to conduct our preclinical studies and clinical trials, and to provide services, including manufacturing of product in connection with the clinical trials. At the end of each reporting period, we compare payments made to third-party service providers to the estimated progress toward completion of the applicable research or development objectives. Such estimates are subject to change as additional information becomes available. Depending on the timing of payments to the service providers and the progress that we estimate has been made as a result of the service provided, we may record net prepaid or accrued expense relating to these costs. As of December 31, 2025, we did not make any material adjustments to our prior estimates of accrued research and development expenses.

Financial Instruments – Derivatives

We evaluate our 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 related to a bifurcated settlement feature of the Credit Agreement (see Note 10). The derivative liability was subject to re-measurement at each reporting period, at each balance sheet date and any change in fair value was recognized as a component of change in fair value of derivative liability in the statements of operations. We adjusted the liability for changes in fair value until the settlement of the Loan Facility in November 2025. The derivative liability was classified as a Level 3 liability.

Smaller Reporting Company Status

We are a "smaller reporting company," meaning that the market value of our shares held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We will continue to be a smaller reporting company if either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the

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market value of our shares held by non-affiliates is less than $700 million. As a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and we have reduced disclosure obligations regarding executive compensation.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements

Report of Independent Registered Public Accounting Firm 86

Statements of Operations for the years ended December 31, 2025 and 2024 89

Statements of Cash Flows for the years ended December 31, 2025 and 2024 91

Notes to Financial Statements 92

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors

Verrica Pharmaceuticals Inc.:

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Verrica Pharmaceuticals Inc. (the Company) as of December 31, 2025 and 2024, the related statements of operations, stockholders' (deficit) equity, and cash flows for the years then ended, and the related notes (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred substantial operating losses since inception and has negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accounting for Series C Warrants Issued in 2025

As described in Notes 1 and 7 to the financial statements, in November 2025 the Company sold shares of its common stock and pre-funded warrants to purchase its common stock. Accompanying each common share and pre-funded warrant were Series C warrants to purchase common stock. The Company determined that the Series C warrants were classified as equity.

We identified the assessment of the accounting for the Series C warrants to purchase common stock issued in November 2025 as a critical audit matter. Challenging auditor judgment was required in assessing whether the Series C warrants issued should be accounted for as either liabilities or equity instruments due

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to the interpretation of contract provisions within the warrant agreements and application of complex technical accounting guidance.

The following are the primary procedures we performed to address this critical audit matter. We inspected the agreements related to the Series C warrants to identify terms and conditions that were relevant to whether the Series C warrants should be accounted for as either liabilities or equity instruments. We assessed the appropriateness of management's interpretation and application of the relevant accounting literature to support the equity classification of the warrants on the balance sheet.

/s/ KPMG LLP

We have served as the Company's auditor since 2017.

Philadelphia, Pennsylvania

March 11, 2026

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VERRICA PHARMACEUTICALS INC.

BALANCE SHEETS

(in thousands, except share and per share amounts)

December 31,

ASSETS

Current assets:

Collaboration revenue, billed and unbilled 137 29

Deferred R&D services, current portion (Note 12) 1,958 —

Prepaid expenses and other current assets 2,801 2,310

Property and equipment, net 209 589

Operating lease right-of-use asset 540 836

Finance lease right-of-use asset 1,113 1,154

Deferred R&D services, non-current portion (Note 12) 2,354 —

Other non-current assets 376 376

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

Current liabilities:

Accrued expenses and other current liabilities 12,837 13,511

Deferred revenue 782 —

Current portion of long-term debt — 12,938

Operating lease liability 341 315

Finance lease liability 405 352

Operating lease liability 242 583

Finance lease liability 643 768

Derivative liability — 2,648

R&D Funding Liability (Note 12) 5,066 —

Commitments and Contingencies (Note 6)

Stockholders’ (deficit) equity:

Total stockholders’ (deficit) equity 24,743 (9,860)

Total liabilities and stockholders’ (deficit) equity $ 47,131 $ 54,134

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

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VERRICA PHARMACEUTICALS INC.

STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

For the Year Ended December 31,

Revenue:

License and collaboration revenue 20,292 992

Operating expenses:

Cost of license and collaboration revenue 1,249 887

Loss on disposal of assets 246 83

Other (expense) income:

Change in fair value of derivative liability 2,648 (2,648)

Loss on extinguishment of debt (1,533) —

Other expense (3) (17)

Net loss per share, basic and diluted $ (1.68) $ (14.78)

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

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VERRICA PHARMACEUTICALS INC.

STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY

(in thousands, except share amounts)

Shares Issued Amount Shares Cost

Stock-based compensation — — 7,164 — — — 7,164

Restricted stock vested 56,150 — — — — — —

Exercise of pre-funded warrants 324,420 — — — — — —

Stock-based compensation — — 3,318 — — — 3,318

Vesting of Torii warrants — — 51 — — — 51

Restricted stock vested 16,426 — — — — — —

Exercise of pre-funded warrants 1,484,573 — — — — — —

Retired shares (38) — — — — — —

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

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VERRICA PHARMACEUTICALS INC.

STATEMENTS OF CASH FLOWS

(in thousands)

For the Year Ended December 31,

Cash flows from operating activities

Adjustments to reconcile net loss to net cash used in operating activities:

Loss on disposal of fixed assets 246 83

Amortization of operating lease right-of-use asset 296 308

Amortization of finance lease right-of-use asset 352 619

Change in obligation for R&D Funding liability 754 —

Non-cash R&D expense related to warrant vesting 51 —

Impairment of right-of-use asset — 255

Loss on termination of financing lease 1 19

Loss on extinguishment of debt 1,533 —

Change in fair value of derivative liability (2,648) 2,648

Changes in operating assets and liabilities:

Prepaid expenses and other assets (264) (1,128)

Deferred revenue 782 —

Collaboration receivable, billed and unbilled (108) 139

Accrued expenses and other current liabilities (1,311) (294)

Operating lease liability (315) (322)

Net cash used in operating activities (17,627) (60,927)

Cash flows from investing activities

Purchases of property and equipment — (27)

Sale of fixed assets — 8

Net cash used in investing activities — (19)

Cash flows from financing activities

Proceeds from exercise of stock options — 155

Proceeds from issuance of debt, net of issuance costs — —

Issuance costs for common stock, pre-funded warrants and warrants (310) (2,864)

Cash paid to settle debt (35,030) —

Repayment of debt (12,789) —

Repayment of finance lease (383) (924)

Net cash provided by financing activities 1,445 37,728

Net decrease in cash and cash equivalents (16,182) (23,218)

Cash and cash equivalents at the beginning of the year 46,329 69,547

Cash and cash equivalents at the end of the year $ 30,147 $ 46,329

Supplemental disclosures

Supplemental disclosure of noncash investing and financing activities:

Recognition of R&D funding liability and deferred R&D services $ 5,066 $ —

Non-cash accruals for equity issuance costs $ 637 $ —

Right-of-use asset obtained in exchange for lease obligation $ 302 $ 1,976

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

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VERRICA PHARMACEUTICALS INC.

Notes to Financial Statements

Note 1—Organization and Description of Business Operations

Verrica Pharmaceuticals Inc. (the "Company") was formed on July 3, 2013 and is incorporated in the State of Delaware. The Company is a therapeutics company developing and commercializing medications for the treatment of dermatologic diseases, including skin cancers. On July 21, 2023, the U.S. Food and Drug Administration ("FDA") approved YCANTH (VP-102) topical solution for the treatment of molluscum in adult and pediatric patients two years of age and older. The Company launched commercial operations in August 2023.

Reverse Stock Split

At the close of trading on July 24, 2025, the Company effected a reverse stock split at a ratio of 1-for-10 shares of its common stock. As a result, every ten shares of the Company's issued and outstanding common stock were automatically combined into one share. The reverse stock split affected all stockholders uniformly and did not alter any stockholder's percentage ownership interest in the Company.

No fractional shares were issued as a result of the reverse stock split and the split did not impact the par value of the Company's common stock. Any fractional shares that would otherwise have resulted from the reverse stock split were rounded down to the next whole share.

The accompanying financial statements and notes have been adjusted to reflect the impact of the reverse stock split as though it had occurred in all periods presented.

Liquidity and Capital Resources

On November 23, 2025, the Company entered into Securities Purchase Agreements (the "Purchase Agreements") with certain investors (the "Purchasers"). The Company agreed to sell and issue to the Purchasers in a private placement transaction (the "Private Placement") an aggregate of (i) 6,499,826 shares of the Company's common stock, (ii) with respect to certain Purchasers, pre-funded warrants to purchase 5,305,164 shares of Common Stock (the "Pre-Funded Warrants") in lieu of Shares and (iii) in either case, accompanying Series C warrants to purchase 2,951,241 shares of Common Stock (the "Series C Warrants"). The purchase price per share of Common Stock and accompanying Series C Warrant is $4.24125 per share (the "Purchase Price") and the purchase price for the Pre-Funded Warrants and accompanying Series C Warrant is the Purchase Price minus $0.0001 per Pre-Funded Warrant. The Company received gross proceeds of approximately $50.0 million from the Private Placement, before deducting fees payable to the placement agent for the Private Placement and offering expenses payable by the Company, and without giving effect to any exercises of the Series C Warrants.

On June 27, 2025, the Company entered into the Second Amendment to the Collaboration and License Agreement (the "Second Amendment") with Torii Pharmaceutical Co., Ltd. ("Torii"), amending the Collaboration and License Agreement dated as of March 17, 2021, between the Company and Torii, as amended on May 14, 2024 (as amended, the "Torii Agreement"). The Second Amendment accelerated an $8.0 million milestone payment, which was paid to the Company in July 2025, following Torii's approval of the study plan and execution of the agreement with the clinical research organization ("CRO"). The Company recognized revenue related to this milestone in the second quarter of 2025, when it became probable that the associated performance obligations were met. The milestone payment was initially conditioned upon the dosing of the first patient as part of the Company's global Phase 3 program of VP-102 (TO-208 in Japan) in common warts (the "Program"), which the Company is sponsoring with Torii. See Note 12 for further discussion of the Research and Development ("R&D") funding arrangement related to the Program. In September 2025, Torii paid the Company a $10.0 million milestone payment upon the approval of TO-208, referred to as YCANTH in the U.S., for molluscum in Japan. In addition, the Company will initiate a manufacturing transfer to Torii, expected to take several years, for Torii to be able to produce YCANTH (TO-208) applicators to be sold in Japan. In the interim, the Company will continue to receive from Torii a transfer price for applicators manufactured by the Company's manufacturing partners. After the transfer of at least one component of the manufacturing process, the Company will begin receiving 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.

On July 26, 2023, the Company entered into the Credit Agreement (as defined in Note 10), pursuant to which the Company borrowed $50.0 million under the Loan Facility (as defined in Note 10) on July 26, 2023, resulting in net proceeds of approximately $44.1 million after payment of certain fees and transaction related expenses. Originally,

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amounts borrowed under the Loan Facility were scheduled to mature on July 26, 2028. Based on the Company's net revenue attributable to YCANTH on a trailing 12-month basis not meeting a specified amount set forth in the Credit Agreement as of December 31, 2024, the Company became obligated to start making principal payments starting on January 1, 2025. The Company was obligated to repay the principal amount of the loan on the last day of each month in equal monthly installments through the maturity date, together with the applicable repayment premium, the exit fee and interest. On November 25, 2025, the Company extinguished all outstanding obligations under the Credit Agreement through the payment of a total settlement amount of $35.0 million.

The Company has incurred substantial operating losses since inception and expects to continue to incur significant losses for the foreseeable future. As of December 31, 2025, the Company has an accumulated deficit of $324.9 million and had cash outflows from operations of $17.6 million for the year ended December 31, 2025. Based on the Company's current business plan and current capital resources, consisting of cash and cash equivalents of $30.1 million as of December 31, 2025, combined with the uncertainty regarding the availability of additional funding, the Company has concluded that substantial doubt exists regarding its ability to continue as a going concern within one year after the date these financial statements are issued. These 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 financial statements do not include any adjustments to the carrying amounts and classification of recorded assets, liabilities and reported expenses that might result should the Company be unable to continue as a going concern.

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 commercial and development activities. There can be no assurance that such capital will be available on acceptable terms, or at all. If the Company is unable to raise capital when needed or on attractive terms, the Company would be forced to delay, reduce or eliminate continued commercialization efforts or research and development programs. In addition, the amount of proceeds the Company may be able to raise pursuant to its currently effective shelf registration statement on Form S-3 is limited. As of the filing of this Annual Report on Form 10-K, the Company is subject to the general instructions of Form S-3 known as the "baby shelf rules." Under these rules, the amount of funds the Company can raise through primary public offerings of securities in any 12-month period using its registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of the Company's common stock held by its non-affiliates. Therefore, the Company will be limited in the amount of proceeds it is able to raise by selling its securities using its Form S-3 until such time as the Company's public float exceeds $75.0 million.

Note 2—Significant Accounting Policies

Basis of Presentation

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification ("ASC") and Accounting Standards Update ("ASU") of the Financial Accounting Standards Board ("FASB").

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, 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.

Segments

Operating segments are identified as components of an enterprise about which separate and discrete financial information is available for evaluation by the chief operating decision-maker "CODM" in making decisions regarding resource allocation and assessing performance.

The Company views its operations and manages its business in one operating segment engaged in developing and commercializing medications for the treatment of dermatologic diseases, including skin cancers. The Company's Chief Executive Officer ("CEO"), as the CODM, regularly reviews the entity-wide financial and operational performance as a single unit. No financial information is disaggregated into separate lines of businesses and the Company does not differentiate the activities of its headquarters from the overall performance of the Company. The CEO makes resource

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allocation and business process decisions regarding the overall level of resources available and how to best deploy these resources.

The single segment’s principal measure of segment profit and loss is net loss. The CEO considers actual and forecasted revenues, significant expenses, and net loss when evaluating performance. Significant expenses are amounts that are regularly provided to the CEO and included in net loss and include selling, general and administrative expenses and research and development expenses.

The table below summarizes the significant expense categories regularly reviewed by the CEO for the years ended December 31, 2025 and 2024 (in thousands):

Year ended December 31,

Revenue:

License and collaboration revenue 20,292 992

Less:

Selling, general and administrative:

General and administrative (including payroll) 14,356 19,118

Total selling, general and administrative 35,220 58,822

Research and development:

Loss on disposal of assets 246 83

Cost of license and collaboration revenue 1,249 887

(a)Other segment items include interest income, interest expense, change in fair value of derivative liability and other expenses.

Cash and Cash Equivalents

The Company considers all highly-liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents. Cash and cash equivalents include cash held in banks and money market mutual funds.

Cash and cash equivalents are financial instruments that are potentially subject to concentrations of credit risk. The Company's deposits are in accounts at large financial institutions, and amounts may exceed federally insured limits. The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the funds are held. The Company has no financial instruments with off-balance sheet risk of loss.

Cash and cash equivalents at December 31, 2025 includes a cash deposit of $0.3 million with JPMorgan Chase Bank, N.A. as required under the Commercial Credit Card Program with a balance equal to the outstanding credit limit on commercial credit cards.

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Fair Value of Financial Instruments and Credit Risk

At December 31, 2025, the Company's financial instruments included cash equivalents, accounts receivable, accrued expenses and accounts payable. The carrying amount of each instrument approximated fair value, given its short-term nature.

Cash equivalents subject the Company to concentrations of credit risk. However, the Company invests its cash in accordance with a policy objective that seeks to ensure both liquidity and safety of principal. The policy limits investments to instruments issued by the U.S. government, certain SEC registered money market funds that invest only in U.S. government obligations and various other low-risk liquid investment options, and places restrictions on portfolio maturity terms.

The Company is subject to credit risk from accounts receivable. As of December 31, 2025, one customer represented approximately 87% of the Company's accounts receivable. Based on the Company's periodic credit evaluations, there have been no historical concerns with this customer.

Accounts Receivable

The Company had $5.3 million in accounts receivable as of December 31, 2025. As of December 31, 2025, the Company had no allowance for credit losses. An allowance for credit losses is determined based on the Company's assessment of the creditworthiness and financial condition of its customers, aging of receivables, as well as the general economic environment. Any allowance would reduce the net receivables to the amount that is expected to be collected. Current payment terms for YCANTH (VP-102) are generally 60 days from the shipment date.

Inventory

The 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 has recognized obsolete inventory costs as cost of product revenue in the amount of $0.5 million for the year ended December 31, 2025 due to expiration of product.

On July 21, 2023, the Company received FDA approval for YCANTH (VP-102) for the treatment of molluscum and began capitalizing inventory purchases of saleable product from certain suppliers. Prior to FDA approval, all product purchased from such suppliers was included as a component of research and development expense, as the Company was unable to assert that the inventory had future economic benefit until YCANTH (VP-102) received FDA approval. Pursuant to the supply agreement (Note 6), the Company purchased and included in research and development expenses approximately $4.5 million of raw cantharidin and processed active pharmaceutical ingredient ("API"). The raw cantharidin and processed API is sufficient to produce approximately 17 million finished drug product applicators to be used for commercially saleable product and other product candidates. In addition, the Company purchased other components and services related to YCANTH (VP-102) for commercially saleable product and included approximately $1.2 million in research and development expenses prior to FDA approval. As a result, cost of product revenue related to YCANTH (VP-102) initially reflected a lower average per unit cost of materials as previously expensed inventory was utilized for commercial production and sold to customers. On a pro forma basis, if the Company were to have included those costs previously expensed as a component of cost of product revenue, the Company's cost of product revenue for the year ended December 31, 2024 would have been $2.6 million. For the year ended December 31, 2025, including those costs previously expensed as a component of cost of product revenue would have had an immaterial impact on the Company's cost of product revenue.

Property and Equipment

Property and equipment is recorded at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the expected useful lives of the assets, after the assets are placed in service.

Expenditures associated with upgrades and enhancements that improve, add functionality, or otherwise extend the life of property and equipment are capitalized, while expenditures that do not, such as repairs and maintenance, are expensed as incurred.

The Company reviews long-lived assets, including property and equipment, for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset may not be fully recoverable. If the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount, an impairment loss would be recognized if the carrying value of the asset exceeds its fair value. Fair value is generally determined using discounted cash flows. The Company recognized an impairment loss on disposal

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of equipment of $0.2 million and $0.1 million, respectively, during the years ended December 31, 2025 and 2024. The Company generally uses the following depreciable lives for its major classifications of property and equipment:

Description Useful lives

Machinery and equipment 3 - 5 years

Office furniture and fixtures and equipment 3 years

Leasehold improvements Lease Term

Automobiles 3 years

Deferred Financing Costs

The Company capitalizes costs that are directly associated with in-process equity financing until such financings are consummated, at which time such costs are either recorded against the gross proceeds from the applicable financing or expensed if certain freestanding instruments are determined to be liability classified. If a financing is abandoned, deferred financing costs are expensed.

Debt Issuance Costs

Debt issuance costs incurred in connection with the Loan Facility (Note 10) were amortized to interest expense over the term of the financing arrangement using the effective-interest method. Debt issuance costs, net of related amortization were deducted from the carrying value of the related debt. Upon extinguishment of the Loan Facility, the remaining unamortized debt issuance costs were written off and included in the loss on extinguishment of debt.

Financial Instruments – Derivatives

The 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 related to a bifurcated settlement feature of the Company's Credit Agreement (Note 10). The derivative liability was subject to re-measurement at each reporting period, at each balance sheet date and any change in fair value was recognized as a component of change in fair value of derivative liability in the statements of operations. The Company adjusted the liability for changes in fair value until the settlement of the Loan Facility which occurred in November 2025.

Revenue

Product Revenue, Net

The 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 several customers who are pharmaceutical wholesalers/distributors (the "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 disbursements on these sales that the Company estimates for the various GTN categories discussed below. The GTN estimates are based upon information received from external sources, such as written or oral information obtained from our customers with respect to their period-end inventory levels and sales to end-users during the period, in combination with management's informed judgments. Due to the inherent uncertainty of these estimates, the actual amount of product returns, government chargebacks, prompt pay discounts, commercial rebates, Medicaid rebates, co-pay assistance and distribution, data, and group purchasing organizations ("GPO") administrative fees may be materially above or below the amount estimated. Variance between actual amounts and estimated amounts may result in prospective adjustments to reported net product revenue.

Each of the GTN estimate categories are discussed below:

Product Returns Allowances: The Customers are contractually permitted to return purchased Product in certain circumstances. The Company records discrete reserves if Product held by distributors, forecasted sales and expiration of Product warrant a reserve. As historical data for returns of the Product becomes available over time, the Company will

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utilize historical return rates of the Product in making its estimates. Returned Product is typically destroyed, since substantially all returns are due to expiry and cannot be resold.

Government Chargebacks: The Product is subject to pricing limits under certain federal government programs, including Medicare and the 340B drug pricing program. Qualifying entities (the "End-Users") purchase the Product from the Customers at their applicable qualifying discounted price. The chargeback amount the Company incurs represents the difference between the Company's contractual sales price to the Customers and the end-user's applicable discounted purchase price under the government program.

Medicaid Rebates: The Product is subject to state government-managed Medicaid programs, whereby rebates are issued to participating state governments. These rebates arise when a patient treated with the Product is covered under Medicaid, resulting in a discounted price for the Product under the applicable Medicaid program. The Medicaid rebate accrual calculations require the Company to project the magnitude of its sales, by state, that will be subject to these rebates.

Patient Assistance: The Company offers a voluntary co-pay patient assistance program intended to provide financial assistance to eligible patients with a prescription drug co-payment required by payors and coupon programs for cash payors. The calculation of the current liability for this assistance is based on an estimate of claims and the cost per claim that the Company expects to receive associated with YCANTH (VP-102) that has been recognized as revenue but remains in the distribution channel inventories at the end of each reporting period.

Distribution, Data, and GPO Administrative Fees: Distribution, data, and GPO administrative fees are paid to authorized wholesalers/distributors of the Company's products for various commercial services including contract administration, inventory management, delivery of end-user sales data, and product returns processing. These fees are based on a contractually-determined percentage of the Company's applicable sales.

License and Collaboration Revenue

The Company has generated collaboration revenue through its licensing and collaboration arrangements. The terms of the arrangements typically include payments to the Company of one or more of the following: nonrefundable, up-front license fees: regulatory and commercial milestone payments; payments for commercial and clinical supply and services; materials shipped to support development; and royalties on net sales of licensed products.

In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs the following steps:

(i)identification of the promised goods or services in the contract;

(ii)determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract;

(iii)measurement of the transaction price, including the constraint on variable consideration;

(iv)allocation of the transaction price to the performance obligations; and

(v)recognition of revenue when (or as) the Company satisfies each performance obligation.

The Company's revenue arrangements may include the following:

Up-front License Fees: If a license is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from nonrefundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone Payments: At the inception of an agreement that includes regulatory or commercial milestone payments, the Company evaluates whether each milestone is considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At each reporting period, the Company assesses the probability of achievement of each milestone under its current agreements.

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Royalties: If the Company is entitled to receive sales-based royalties from its collaborator, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, provided the reported sales are reliably measurable, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Manufacturing Supply and Research Services: Arrangements that include a promise for supply of drug substance or drug product for either clinical development or commercial supply at the licensee's discretion are generally considered as options. The Company assesses if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations. If not, the supply services are recognized as license and collaboration revenue as the Company provides the services.

The Company receives payments from its licensee based on schedules established in each contract. Amounts are recorded as accounts receivable when the Company's right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the licensee and the transfer of the promised goods or services to the licensee will be one year or less.

Deferred Revenue: The Company records deferred revenue when a customer prepays for goods or services, or when the Company has an unconditional right to bill but has not yet delivered the performance obligation. Deferred revenue is primarily comprised of deposits on customer product orders yet to be delivered, specifically related to the Company's collaboration obligation with Torii. The Company expects to recognize all of the deferred revenue within the next 6 months.

Cost of Product Revenue

Cost of product revenue includes the cost of inventory sold, which includes direct manufacturing, production and packaging materials for YCANTH (VP-102) sales. Prior to FDA approval of YCANTH (VP-102) in July 2023, the Company expensed costs associated with manufacturing of YCANTH (VP-102) as a component of research and development expense that would have been included in cost of goods sold for the years ended December 31, 2025 and 2024. Therefore, these costs are not included in cost of product revenue.

Cost of License and Collaboration Revenue

Cost of license and collaboration revenue consisted of commercial supplies and development activity with Torii.

Advertising Expense

Advertising expenses, comprised primarily of print and digital assets, social media and internet advertising as well as search engine marketing, are expensed as incurred and are included in selling, general, and administrative expenses. For the years ended December 31, 2025 and 2024, advertising expenses were approximately $1.6 million and $4.3 million, respectively.

Research and Development Costs

The Company's research and development expenses consist primarily of costs associated with the Company's clinical trials, salaries, payroll taxes, employee benefits, and equity-based compensation charges for those individuals involved in ongoing research and development efforts. Research and development costs are expensed as incurred. Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made.

Fair Value Measurement

ASC Topic 820, Fair Value Measurements, provides guidance on the development and disclosure of fair value measurements. Under this accounting guidance, fair value is defined as an exit price, representing the amount 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. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes:

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

Level 2: Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.

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Level 3: Unobservable inputs which are supported by little or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

At December 31, 2025, the Company's financial instruments included cash and cash equivalents, accounts receivable, accrued expenses and accounts payable. The carrying amount of accounts receivable, accrued expenses and accounts payable approximates fair value due to the short-term maturities of these instruments.

The following table presents the Company's fair value information for liabilities measured at fair value on a recurring basis (in thousands). The Company had a derivative liability related to a bifurcated settlement feature of the Credit Agreement. The derivative liability was remeasured at fair value immediately prior to settlement of the related debt in November 2025, resulting in a reduction to nil due to the known termination of the Credit Agreement. The Company had no liabilities measured at fair value on a recurring basis at December 31, 2025.

(Level 1) (Level 2) (Level 3)

Recurring fair value measurements

Derivative liability $ — $ — $ 2,648

The Company estimated the fair value of the derivative liability using a lattice model with an interest rate lattice consistent with the Hull-White model. The derivative liability was classified within Level 3 of the fair value hierarchy due to the use of unobservable inputs. The key inputs into the lattice model for the derivative liability were as follows:

Expected term (years) 3.57

Credit spread 12.3 %

The following is a rollforward of the derivative liability measured at fair value (in thousands):

Change in fair value of derivative liability (2,648)

Balance at December 31, 2025 $ —

Stock-Based Compensation

The Company accounts for stock-based compensation awards in accordance with ASC Topic 718, Compensation –Stock Compensation. The Company uses the Black-Scholes option-pricing model to value its stock option awards. For stock-based awards granted to employees, non-employees and members of the board of directors for their services, the Company estimates the grant date fair value of each option award and recognizes compensation expense on a straight-line basis over the vesting period of the award.

The use of the Black‐Scholes option-pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected term of the option, risk‐free interest rates. The expected term of stock options was estimated using the "simplified method," as the Company has limited historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock options grants. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. The Company historically has been a private-company and lacked company-specific historical and implied volatility information. Therefore, prior to the year ended December 31, 2023, it estimated its expected stock volatility based on the historical volatility of a publicly traded set of peer companies in addition to the volatility of the Company's stock. For the years ended December 31, 2025 and 2024 volatility is based solely on the Company's stock. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected term of the option. Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The fair value of restricted stock awards are based on the closing price of the Company's common stock on the grant date.

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Warrants

The Company accounts for warrants in accordance with ASC Subtopic 815-40, Contracts in Entity's Own Equity.

Income Taxes

Income taxes are recorded in accordance with ASC Topic 740, Income Taxes, which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company accounts for uncertain tax positions in accordance with the provisions of ASC Topic 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances.

Net Loss Per Share

Net loss per share of common stock is computed using the two-class method required for participating securities. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period including pre-funded warrants to purchase shares of common stock that were issued in an underwritten offering in February 2023 and November 2024 and the Private Placement in November 2025 (Note 7). The pre-funded warrants to purchase common stock are included in the calculation of basic and diluted net loss per share as the exercise price of $0.0001 per share is non-substantive and is virtually assured. Diluted net loss per share includes the effect from the potential exercise or conversion of securities such as stock options, unvested restricted stock units and common stock warrants, which would result in the issuance of incremental shares of common stock, using the treasury stock method. Potential common shares are excluded from the diluted per share calculation when their effect is anti-dilutive, including in periods of net loss or when inclusion does not result in a decrease in earnings per share. 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 December 31,

Non-vested shares under restricted stock grants — 38,426

Recently Adopted Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. This standard improves the transparency and decision usefulness of income tax disclosures. This standard requires the inclusion of a tabular reconciliation detailing specific categories that contribute to a company's effective tax rate. This update is effective beginning with the Form 10-K for the year ended December 31, 2025 and has been included in Note 11.

Accounting Pronouncements Issued but Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses. ASU 2024-03 requires additional disclosure of specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The

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requirements will be applied prospectively with the option for retrospective application. The Company is currently evaluating the impact that the adoption of ASU 2024-03 will have on its financial statements and disclosures.

In January 2025, the FASB issued ASU 2025-01, Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. This update clarifies that all public business entities must adopt the guidance in ASU 2024-03 for annual reporting periods beginning after December 15, 2026, and for interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. This guidance is not expected to have a material impact on the Company's financial statements.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow Scope-Improvements. This update clarifies a shift in focus for interim reporting towards current-period facts and circumstances, over prior-period precedent. This update is effective for interim periods within annual periods that begin after December 15, 2027. This guidance is not expected to have a material impact on the Company's financial statements.

Legislative Changes

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law. This legislation includes changes to U.S. federal tax law, which may be subject to further clarification and the issuance of interpretive guidance. The Company has completed its assessment of the impacts of the OBBBA, and the effects of the legislation have been reflected in the Company's income tax provision for the year ended December 31, 2025. Due to the existence of a full valuation allowance against the Company's U.S. federal deferred tax assets, the enactment of the OBBBA did not have a material impact on the Company's financial statements.

Note 3 —Inventory

Upon FDA approval of YCANTH (VP-102) for the treatment of molluscum on July 21, 2023, the Company began capitalizing the purchases of saleable inventory of YCANTH (VP-102) from suppliers. Inventory consisted of the following (in thousands):

As of December 31,

Note 4—Property and Equipment

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

As of December 31,

Machinery and equipment $ 576 $ 1,164

Office furniture and fixtures 303 303

Leasehold improvements 54 54

Total property and equipment, net $ 209 $ 589

Depreciation expense for both the years ended December 31, 2025 and 2024 was $0.1 million and $0.3 million, respectively. The Company recognized a $0.2 million and $0.1 million loss on disposal of equipment during the years ended December 31, 2025 and 2024, respectively.

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Note 5—Accrued Expenses and Other Current Liabilities

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

As of December 31,

Compensation and related costs 1,763 1,173

Clinical trials and drug development 454 892

Commercial-related costs 550 407

Other current liabilities 119 105

Total accrued expenses and other current liabilities $ 12,837 $ 13,511

Note 6—Commitments and Contingencies

Litigation

On June 6, 2022, plaintiff Kranthi Gorlamari ("Plaintiff") filed a putative class action complaint captioned Gorlamari v. Verrica Pharmaceuticals Inc., et al., in the U.S. District Court for the Eastern District of Pennsylvania against us and certain of our current and former officers and directors ("Defendants"). On January 12, 2023, the Plaintiff filed an amended complaint alleging that Defendants violated federal securities laws by, among other things, failing to disclose certain manufacturing deficiencies at the facility where our contract manufacturer produced bulk solution for the YCANTH (VP-102) drug device and that such deficiencies posed a risk to the prospects for regulatory approval of YCANTH (VP-102) for the treatment of molluscum. The amended complaint seeks unspecified compensatory damages and other relief on behalf of Plaintiff and all other persons and entities which purchased or otherwise acquired our securities between May 19, 2021 and May 24, 2022 (the "Putative Class Period").

On January 12, 2024, the Court granted in part and denied in part Defendants' motion to dismiss the amended complaint. The Court held that Plaintiff's claims relating to statements made in May and June 2021 were sufficiently pled, but dismissed Plaintiff's claims relating to all other statements made during the Putative Class Period. On January 26, 2024, Plaintiff filed a second amended complaint in an attempt to cure certain of the deficiencies identified in the January 12, 2024 ruling. Defendants' motion to dismiss the second amended complaint was fully briefed as of April 22, 2024. On September 3, 2024, the Court granted in part and denied in part Defendants' motion to dismiss the second amended complaint. The Court dismissed Plaintiff's claims related to one of the two individual defendants but held that Plaintiff's claims against the Company and the other individual defendant were sufficiently pled. On March 4, 2026, the Court granted Plaintiff's motion for class certification.

In addition, on October 21, 2024, May 12, 2025, and June 26, 2025, plaintiffs Ivan S. Cohen, Paul Cannon, and Joseph Bonaccorso, respectively, each filed a putative stockholder derivative lawsuit in the U.S. District Court for the Eastern District of Pennsylvania. Each derivative complaint names the Company as a nominal defendant and purports to bring claims on behalf of the Company against certain of our current and former directors and officers for alleged violations of the federal securities laws and breaches of their fiduciary duties in relation to substantially the same factual allegations as the above-described putative class action lawsuit. Each derivative complaint primarily seeks to recover for the Company compensatory damages for losses allegedly sustained related to the facts alleged, restitution, and punitive damages. On December 16, 2024, the Court granted the parties' joint stipulation to stay the Cohen derivative lawsuit. On July 28, 2025, the Court granted the parties' joint stipulation in the Cohen and Cannon derivative lawsuits to consolidate the two actions and stay the consolidated action. On July 24, 2025, the plaintiff in the Bonaccorso derivative lawsuit filed a corrected complaint to clarify that the named plaintiff "is not Joseph (Joe) Bonaccorso, the former Chief Commercial Officer" of the Company. On July 29, 2025, the plaintiff in the Bonaccorso derivative lawsuit filed a notice voluntarily dismissing the action without prejudice.

The Company is also 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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Supply Agreement and Purchase Order

On July 16, 2018, the Company entered into a supply agreement with a supplier of crude cantharidin material. All executed purchase orders for crude cantharidin in the ordinary course of business are expected to be covered under the terms of the supply agreement. The supply agreement had an initial five-year term, and now renews for successive annual periods absent termination by either party in accordance with the terms of the supply agreement. The Company did not commit to any purchases for the year ended December 31, 2025 as the Company has sufficient supply.

Note 7—Stockholders' (Deficit) Equity

Common Stock

The Company had authorized 200,000,000 shares of common stock, $0.0001 par value per share, as of December 31, 2025 and 2024. Each share of common stock is entitled to one vote. Common stock owners are entitled to dividends when funds are legally available and declared by the Board.

November 2024 Offering

In November 2024, the Company sold 4,551,824 shares of its common stock, and in lieu of common stock to certain investors, pre-funded warrants to purchase 223,595 shares of its common stock, with accompanying Series A warrants to purchase to purchase 2,387,703 shares of its common stock at an exercise price of $10.68 per share of common stock and Series B warrants to purchase 2,387,703 shares of its common stock at an exercise price of $13.35 per share of common stock (the "November 2024 Offering"). The offering price was $8.90 per share of common stock and accompanying Series A and Series B warrants, or $8.899 per Pre-funded Warrant and accompanying Series A and Series B warrants. The Series A warrants expired unexercised in November 2025 and the Series B warrants expire in November 2029. The November 2024 Offering resulted in net proceeds of approximately $39.6 million after deducting underwriting discounts and commissions, and offering expenses of $2.9 million.

November 2025 Offering

In November 2025, the Company sold an aggregate of (i) 6,499,826 shares of its common stock, (ii) with respect to certain purchasers pre-funded warrants to purchase 5,305,164 shares of common stock in lieu of shares and (iii) in either case, the accompanying Series C warrants to purchase 2,951,241 shares of common stock. The purchase price per share of common stock and accompanying Series C warrant was $4.24125 per share and the purchase price for the Pre-funded Warrants and accompanying Series C warrant $4.24115 per share. The Company received net proceeds of $49.1 million from the Private Placement, after deducting placement fees of $0.9 million.

Pre-funded Warrant Exercises

During the years ended December 31, 2025 and 2024, pre-funded Warrants were exercised for 1,484,573 and 324,420 shares of common stock, respectively. At December 31, 2025, 4,126,239 pre-funded warrants were outstanding, all related to the Private Placement.

Warrants

The following table summarizes the Company's outstanding warrants:

Number of Warrants Exercise Price Expiration Date

Equity classified warrants

The OrbiMed warrants are eligible for a price adjustment if the Company consummates any share distribution at a price per common shares less than the exercise price. As a result of the November 2024 Offering, the OrbiMed warrant exercise price was adjusted down to $34.50 per share. As a result of the Private Placement, the OrbiMed warrant exercise

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price was adjusted down to $23.55 per share. The Torii warrants become exercisable at different clinical milestones related to the global Phase 3 Program for common warts. The related expense is recognized as research and development expense as costs are incurred for the Program under the R&D funding arrangement (See Note 12).

Note 8—Stock-Based Compensation

In June 2018, the Board adopted and approved the 2018 Equity Incentive Plan (the "2018 Plan"), which amended and restated the Company's prior 2013 Equity Incentive Plan (the "2013 Plan") and became effective in connection with the Company's initial public offering. Prior to the effectiveness of the 2018 Plan, the 2013 Plan provided for the grant of share-based awards to employees, directors and consultants of the Company. As a result of the effectiveness of the 2018 Plan, no further grants may be made under the 2013 Plan.

The 2018 Plan provides for the grant of incentive stock options to employees, and for the grant of nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards and other forms of stock awards to employees, including officers, consultants and directors. The 2018 Plan also provides for the grant of performance-based cash awards to employees, including officers, consultants and directors. The Company initially reserved 373,820 shares of common stock for issuance under the 2018 Plan, which is the sum of (1) 219,820 new shares, plus (2) the number of shares reserved for issuance under the 2013 Plan at the time the 2018 Plan became effective, plus (3) any shares subject to outstanding stock options or other stock awards that would have otherwise returned to the 2013 Plan (such as upon the expiration or termination of a stock award prior to exercise). The number of shares of common stock reserved for issuance under the 2018 Plan will automatically increase on January 1 each year, for a period of ten years, from January 1, 2019 through January 1, 2028, by 4% of the total number of shares of the Company's common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Board. As of December 31, 2025, 287,574 shares were available for grant under the 2018 Plan.

In November 2024, the Board adopted and approved the 2024 Inducement Plan which initially reserved 200,000 shares for issuance. The Plan allows for the granting of Awards, for certain individuals to enter into employment with the Company within the meaning of Rule 5635(c)(4) of the Nasdaq Marketplace Rules, (ii) incentives for Eligible Employees to exert maximum efforts for the success of the Company and any Affiliate and (iii) a means by which Eligible Employees may benefit from increases in value of the Common Stock. On December 4, 2024, the Board approved an amendment to the 2024 Inducement Plan to increase the number of shares of Common Stock reserved for issuance pursuant to Awards from 200,000 shares of common stock to 450,000 shares of Common Stock. As of December 31, 2025, 122,500 shares were available for grant under the Inducement Plan.

In December 2025, the Board approved certain equity award arrangements for members of the executive leadership team. The awards are subject to multiple substantive contingencies, including (i) approval by the Company's stockholders of an amendment to the 2018 Plan, (ii) achievement of specified stock price-based vesting conditions, and (iii) continued service. As of December 31, 2025, the required stockholder approval had not been obtained. Because this approval represents a substantive contingency and is not perfunctory, none of the arrangements meet the definition of a grant. Accordingly, no stock-based compensation expense has been recognized and no equity instruments related to these arrangements have been reflected in the accompanying financial statements.

Stock Options

The Company's employee and non-employee stock options generally vest as follows: 25% after 12 months of continuous services and the remaining 75% on a ratable basis over a 36-month period from 12 months after the grant date and have a maximum contractual term of 10 years. The stock options are subject to time vesting requirements through 2029, are nontransferable, and have term expiration dates set to expire through 2035. Retention stock option grants were granted in October 2024 and December 2025 with a vesting period of 50% on the first anniversary of the grant date and 50% on the second anniversary of the grant date.

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The grant date fair value of employee and non-employee stock option awards is determined using the Black-Scholes option-pricing model. The following assumptions were used during the years ended December 31, 2025 and 2024 to estimate the fair value of employee and non-employee stock option awards:

For the Year Ended December 31,

Dividend yield — —

The following table summarizes the Company's employee and non-employee stock option activity under the 2013 Plan, 2018 Plan and the 2024 Inducement Plan for the years ended December 31, 2025 and 2024:

The aggregate intrinsic value in the above table is calculated as the difference between fair market value of the Company's common stock price and, as of December 31, 2025, the exercise price of the stock options. The weighted average grant date fair value per share for the employee and non-employee stock options granted during the years ended December 31, 2025 and 2024 was $5.32 and $28.35, respectively. As of December 31, 2025, the total unrecognized compensation related to unvested employee and non-employee stock option awards granted was $6.3 million, which the Company expects to recognize over a weighted-average period of 2.1 years.

Restricted Stock Units

In November 2019 and August 2020, the Company granted 30,000 and 25,000 restricted stock units ("RSU"), respectively, to its executive officers of which 12,500 were forfeited. Half of the remaining RSUs vested upon receipt of regulatory approval of YCANTH (VP-102) for the treatment of molluscum on July 21, 2023 (the "Approval Date") and the other half vested on July 21, 2024 subject to the holders' continuous service through such date.

In March 2023, the Company granted 69,800 RSUs, half of which vested upon the first commercial sale of YCANTH (VP-102) on August 24, 2023 and half of which vested on August 24, 2024.

In December 2025, the Company granted 10,000 RSUs, which vested immediately.

Compensation expense related to RSUs of $0.2 million was recognized in the Company's statements of operations for the year ended December 31, 2025 related to the fair market value at the date of grant recognized over the period expected to vest. As of December 31, 2025, there was no remaining unrecognized compensation expense related to the RSUs.

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The following table summarizes the activity related to the RSUs:

Number of Shares Weighted AverageGrant Date FairValue

Nonvested as of December 31, 2025 — $ —

Stock-based compensation expense, which includes expense for both employees and non-employees, has been reported in the Company's statements of operations as follows (in thousands):

For the Year Ended December 31,

Selling, general and administrative $ 2,252 $ 5,219

Total stock-based compensation $ 3,318 $ 7,164

Note 9—Leases

The Company leases office space located in West Chester, Pennsylvania that serves as the Company's headquarters. The initial term expires 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 expenses.

The Company leased office space in Scotch Plains, New Jersey under an agreement classified as an operating lease, which commenced on May 1, 2022 and was due to expire on April 30, 2025. In September 2024, the Company terminated the agreement effective November 30, 2024. No termination fees were incurred.

The Company entered into a fleet program to provide vehicles for its sales force. The vehicles are leased for a term of 52 months and classified as finance leases. During the year ended December 31, 2025, the Company recognized a right-of-use asset of $0.3 million and a lease liability of $0.3 million related to these finance leases. During the year ended December 31, 2024, a total of 57 vehicle leases were terminated and the lessor sold those vehicles at auction. The Company recognized an impairment of the right-of-use asset based on estimated fair value of the vehicles of $0.3 million and a loss on termination of leases of $19,000 for the year ended December 31, 2024. The Company reduced lease liability by $1.5 million and right-of-use assets by $1.6 million related to the terminated leases for the year ended December 31, 2024.

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

For the Year Ended December 31,

Finance lease cost:

Amortization right-of-use assets $ 352 $ 619

Interest on lease liabilities 77 179

Operating lease:

Operating lease costs $ 341 $ 387

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Maturities of the Company's operating leases, excluding short-term leases, as of December 31, 2025 are as follows (in thousands):

Operating Finance

Thereafter — 2

Less imputed interest (29) (107)

The weighted average remaining lease term and discount rates for the Company's leases as of December 31, 2025 are as follows:

Operating Finance

Weighted average remaining lease term (years) 1.67 2.74

Weighted average discount rate 6.25 % 7.73 %

Note 10–Debt

On July 26, 2023 (the "Closing Date"), the Company entered into a Credit Agreement (the "Credit Agreement"), by and between the Company, as borrower, and OrbiMed Royalty & Credit Opportunities IV, LP, a Delaware limited partnership (the "Initial Lender"), as a lender, and each other lender that may from time to time become a party thereto (each, including the Initial Lender, and together with their affiliates, successors, transferees and assignees, the "Lenders"), and OrbiMed Royalty & Credit Opportunities IV, LP, as administrative agent for the Lenders (in such capacity, the "Administrative Agent"). The Credit Agreement provides for a five-year senior secured credit facility in an aggregate principal amount of up to $125.0 million (the "Loan Facility"). The Company borrowed $50.0 million under the Credit Agreement on July 26, 2023, resulting in net proceeds of approximately $44.1 million after payment of certain fees and transaction related expenses.

Amounts borrowed under the Loan Facility were set to mature on July 26, 2028 (the "Maturity Date"). Based on the Company's net revenue attributable to YCANTH on a trailing 12-month basis not meeting a specified amount set forth in the Credit Agreement as of December 31, 2024, the Company became obligated to start making principal payments starting on January 1, 2025. The Company was obligated to repay the principal amount of the loan on the last day of each month in equal monthly installments through the Maturity Date, together with the applicable repayment premium and the exit fee. The Company recorded a derivative liability related to the accelerated settlement of the Credit Agreement (See Note 2 - Financial Instruments - Derivatives and Fair Value Measurement).

During the term of the Loan Facility, interest payable in cash by the Company accrued on any outstanding balance due under the Loan Facility at a rate per annum equal to the higher of (x) the Secured Overnight Financing Rate ("SOFR") rate (which is the forward-looking term rate for a one-month tenor based on the secured overnight financing rate administered by the CME Group Benchmark Administration Limited) and (y) 4.00% plus, in either case, 8.00%. The Company paid certain fees with respect to the Loan Facility, including an upfront fee, an unused fee on the undrawn portion of the Loan Facility, an administration fee, a prepayment premium, as well as certain other fees and expenses of the Administrative Agent and the Lenders.

The Credit Agreement contained customary events of default, including, but not limited to, nonpayment of principal, interest, fees or other amounts; material inaccuracy of a representation or warranty; failure to perform or observe covenants; cross-defaults with certain other indebtedness; bankruptcy and insolvency events; material monetary judgment defaults; impairment of any material definitive loan documentation; other material adverse effects; key permit and other regulatory events; key person events; and change of control. In addition, the Credit Agreement contained a financial covenant that the Company must maintain a liquidity of at least $10.0 million and that the Company's quarterly and annual financial statements not be subject to any qualification or statement which is of a "going concern" or similar nature.

On the Closing Date, the Company also issued the Initial Lender warrants to purchase up to 51,855 shares of the Company's common stock, at an exercise price of $60.26 per share, which have a term of 10 years from the issuance date. The exercise price of the warrants will be adjusted if the Company consummates any share distribution at a price per

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common share less than the exercise price. As a result of the November 2024 Offering, the warrant exercise price was adjusted down to $34.50 per share. Following the Private Placement, the warrant exercise price was adjusted down to $23.55 per share.

On each of December 20, 2023 and January 31, 2024, the Company entered into an amendment to the Credit Agreement in order to extend a deadline for a specified regulatory milestone. For the second amendment on January 31, 2024, the Company paid an upfront amendment fee of $0.3 million and agreed to make an additional payment of $0.3 million if a specified regulatory milestone is not achieved by a specified date.

On May 6, 2024, the Company entered into an amendment to the Credit Agreement (the "Third Amendment") pursuant to which the Lenders waived the going concern requirement under Section 7.1(b) of the Credit Agreement with respect to the financial statements for the quarter ended March 31, 2024. In connection with the Third Amendment, the Company paid an amendment fee of $0.1 million.

On June 26, 2024, the Company entered into an amendment to the Credit Agreement (the "Fourth Amendment") changing the commencement date of the Revenue Test to September 30, 2024. In connection with the Fourth Amendment, the Company paid an amendment fee of $0.5 million.

On August 2, 2024, the Company entered into the fifth amendment and waiver to the Credit Agreement (the "Fifth Amendment") pursuant to which the Lenders waived the going concern requirement under Section 7.1(b) of the Credit Agreement with respect to the financial statements for the quarters ended June 30, 2024 and September 30, 2024, the commencement date for the Revenue Test was changed to December 31, 2024 and the exit fee for the Initial Loans (as defined in the Credit Agreement) was increased from 5.00% to 7.50%.

On February 18, 2025, the Company entered into a waiver to the Credit Agreement pursuant to which the Lenders waived specified covenants under the Credit Agreement, including the requirements under Section 7.1(b) and Section 7.1(c) of the Credit Agreement that there be no "going concern" qualification with respect to the financial statements for the year ended December 31, 2024 and the quarter ending March 31, 2025.

On June 10, 2025, the Company entered into the sixth amendment and waiver to the Credit Agreement (the "Sixth Amendment") pursuant to which the Lenders waived specified covenants under the Credit Agreement, including the requirements under Section 7.1(b) and Section 7.1(c) of the Credit Agreement that there be no "going concern" qualification with respect to the financial statements for the quarters ending June 30, 2025, September 30, 2025 and the quarter and year ending December 31, 2025. In connection with the Sixth Amendment, the Company paid an amendment fee of $0.1 million.