In-office Dermatology Access And Global Trials Will Shape Markets

Key Takeaways

• Expanding demand for non-invasive dermatology treatments and broadening pharmacy access are driving revenue growth and improved margins for Verrica.
  
• Advancing clinical pipeline and strategic partnerships support future revenue streams with minimal shareholder dilution and greater operating efficiency.
  
• Heavy dependence on a single product, reimbursement challenges, cash needs, and rising competition create significant risks to sustained growth and financial stability.

Catalysts

A dermatology therapeutics company, engages in the development and sale of medications for the treatment of skin diseases in the United States.

• Sustained growth in YCANTH™ applicator units dispensed (up 32.8% sequentially in Q2) reflects expanding demand for convenient, in-office topical dermatology treatments, positioning Verrica to benefit from increasing market preference for non-invasive solutions; this directly supports higher revenues and improving gross margins.
  
• Ongoing investments in sales force expansion and pharmacy distribution network are lowering access barriers and increasing coverage among both commercial and Medicaid patient populations, enabling access to a broader, aging patient pool affected by skin conditions-likely driving durable revenue and market share growth.
  
• Advancement of pipeline programs, notably the global Phase III trial for YCANTH in common warts and late-stage VP-315 for basal cell carcinoma, is supported by nondilutive capital and development partnerships (Torii), creating multiple new future revenue streams with minimal shareholder dilution and enhancing long-term earnings potential.
  
• Strategic partnership with Torii Pharmaceuticals secures substantial milestone payments and cost-sharing for global trials, while providing a clear pathway to international market entry, which enables topline growth and operational leverage as international sales ramp up.
  
• Reduction in commercial and administrative expenses through a focused commercial strategy has already contributed to a turnaround from net losses to positive net income, suggesting greater operating efficiency and scalability that is likely to improve net margins as product adoption accelerates.

Verrica Pharmaceuticals Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Verrica Pharmaceuticals's revenue will grow by 114.3% annually over the next 3 years.
• Analysts are not forecasting that Verrica Pharmaceuticals will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Verrica Pharmaceuticals's profit margin will increase from -330.5% to the average US Pharmaceuticals industry of 23.2% in 3 years.
• If Verrica Pharmaceuticals's profit margin were to converge on the industry average, you could expect earnings to reach $33.6 million (and earnings per share of $3.05) by about August 2028, up from $-48.6 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.0x on those 2028 earnings, up from -1.2x today. This future PE is lower than the current PE for the US Pharmaceuticals industry at 19.8x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Verrica Pharmaceuticals Future Earnings Per Share Growth

Risks

• Heavy dependence on YCANTH as the primary commercial product exposes Verrica to significant product concentration risk; any underperformance in sales, regulatory delays, or new competition in molluscum contagiosum treatment could sharply reduce revenue and threaten long-term earnings growth.
  
• Substantial reliance on co-pay assistance programs to drive adoption and maintain patient affordability may erode gross-to-net revenue realizations and worsen net margins if payer reimbursement pressures or discounting intensify in the future.
  
• Continued need for external, nondilutive financing (e.g., milestone payments from partners like Torii and potential warrant exercises) highlights ongoing risks around cash burn and capital sufficiency; inability to secure additional funds or meet financing milestones could necessitate dilutive equity raises or restrict operational investments, impacting future earnings per share.
  
• Competitive threats from compounded cantharidin, changing physician preferences, and the potential rise of alternative therapies (such as non-drug or device-based dermatological treatments) could limit the company's addressable market, mute top-line growth, and negatively impact long-term revenue potential.
  
• Seasonality of molluscum contagiosum diagnosis, potential fluctuations in specialty distributor ordering patterns, and increasing gross-to-net adjustments (returns, rebates, co-pay) introduce revenue volatility and could mask underlying sales weakness or delay recognition of financial underperformance, pressuring financial forecasting and reported earnings.

Valuation

• The analysts have a consensus price target of $25.0 for Verrica Pharmaceuticals based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $30.0, and the most bearish reporting a price target of just $20.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $144.7 million, earnings will come to $33.6 million, and it would be trading on a PE ratio of 10.0x, assuming you use a discount rate of 6.8%.
  
• Given the current share price of $6.15, the analyst price target of $25.0 is 75.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.