Verrica Pharmaceuticals Inc.VRCA
Verrica Pharmaceuticals Inc. Debt Disclosure
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
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.
On November 25, 2025, the Company remitted $35.0 million in cash to fully settle and extinguish all amounts outstanding under its Credit Agreement. Immediately prior to settlement, the carrying amount of the debt was $33.5 million, which reflected a face amount of $38.4 million, net of $8.4 million of unamortized debt discount and issuance costs, $3.3 million of prepayment and exit fee liabilities, and $0.3 million of accrued interest payable. As a result of the settlement, the Company recognized a loss on extinguishment of debt of $1.5 million during the year ended December 31, 2025. The Company had a derivative liability related to a bifurcated settlement feature of the Credit Agreement. The derivative liability was remeasured to fair value immediately prior to settlement, resulting in a reduction to nil, with the corresponding Change in Fair Value of Derivative Liability recognized in the Statement of Operations.
During the year ended December 31, 2025, the Company paid $0.1 million in cash related to an amendment fee and made aggregate cash payments of $1.5 million toward the previously accrued prepayment and exit fees in conjunction with its monthly debt service. The remaining prepayment and exit fee liabilities were settled upon extinguishment of the Credit Agreement. As of December 31, 2024, the Company had recorded debt discount and issuance costs of $13.9 million, which were classified as a contra-liability on the balance sheet. These costs included $1.2 million of cash paid during the year ended December 31, 2024, non-cash amounts including the fair value of warrants issued of $2.0 million classified as equity, and contractual prepayment and final payment fees of $1.0 million and $3.8 million, respectively, which were accrued and classified as short-term and long-term liabilities at December 31, 2024.
For the year ended December 31, 2025, the Company recognized interest expense related to the Credit Agreement of $7.5 million, of which $5.0 million was interest on the term loan and $2.5 million was non-cash interest expense related to the amortization of deferred debt issuance costs and accrual of the final payment fee. For the year ended December 31, 2024, the Company recognized interest expense related to the Credit Agreement of $9.2 million, of which $7.1 million was interest on the term loan and $2.2 million was non-cash interest expense related to the amortization of deferred debt issuance costs and accrual of the final payment fee.
The following table summarizes the composition of debt as reflected on the balance sheet as of December 31, 2024 (in thousands):
| As of December 31, 2024 | |||||||||||||||||
| Short-term | Long-term | Total | |||||||||||||||
| Gross proceeds | $ | 13,953 | $ | 36,047 | $ | 50,000 | |||||||||||
| Accrued final payment fee | 1,047 | 2,703 | 3,750 | ||||||||||||||
| Accrued repayment fee | 721 | 326 | 1,047 | ||||||||||||||
| Unamortized debt discount and issuance costs | (2,783) | (8,093) | (10,876) | ||||||||||||||
| Total debt, net | $ | 12,938 | $ | 30,983 | $ | 43,921 | |||||||||||
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 11, 2026 | Showing above |
| 2024 | Mar 11, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 6, 2023 | |
| 2021 | Mar 2, 2022 | |
| 2020 | Mar 17, 2021 | |
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.