UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Item 1.01 Entry into a Material Definitive Agreement.
On July 26, 2023 (the “Closing Date”), Verrica Pharmaceuticals Inc., a Delaware corporation (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 million (the “Loan Facility”), of which $50 million was made available on the Closing Date (the “Initial Commitment Amount”), up to $25 million will be made available on or prior to June 30, 2024, up to $15 million will be made available on or prior to December 31, 2024, up to an additional $15 million will be made available on or prior to December 31, 2024, up to $10 million will be made available on or prior to March 31, 2025, and up to $10 million will be made available on or prior to June 30, 2025, in each case, subject to the satisfaction of certain revenue requirements (such additional commitment amounts, the “Delayed Draw Commitment Amount”). The term loan will mature on July 26, 2028. On July 26, 2023, the Company borrowed the Initial Commitment Amount, resulting in net proceeds to the Company of approximately $47.2 million after payment of certain fees and transaction related expenses.
Subject to certain exceptions, to the extent the Company has subsidiaries, obligations under the Credit Agreement are to be guaranteed by such subsidiaries. The obligations under the Credit Agreement are secured by all or substantially all of the assets of the Company and the subsidiary guarantors. If, until the maturity date of the Loan Facility, the Company’s net revenue attributable to YCANTHTM does not equal or exceed the applicable amount for such period as set forth in the Credit Agreement, then the Company shall repay in equal monthly installments the outstanding principal amount of the Loan Facility, together with a repayment premium and other fees. The Company shall repay amounts outstanding under the Loan Facility in full immediately upon an acceleration as a result of an event of default as set forth in the Credit Agreement, together with a repayment premium and other fees.
During the term of the Loan Facility, interest payable in cash by the Company shall accrue on any outstanding balance due under the Loan Facility at a rate per annum equal to the higher of (x) the 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%. During an event of default, any outstanding amount under the Loan Facility will bear interest at a rate of 4.00% in excess of the otherwise applicable rate of interest. The Company will pay 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 and an exit fee, as well as certain other fees and expenses of the Administrative Agent and the Lenders.
The Credit Agreement contains 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. Upon the occurrence of an event of default (subject to notice and grace periods), obligations under the Credit Agreement could be accelerated.
Each of the Credit Agreement and a Pledge and Security Agreement entered into by the Company, any guarantors party thereto and the Administrative Agent on July 26, 2023 (the “Pledge and Security Agreement”) also contain a number of customary representations, warranties and covenants that, among other things, will limit or restrict the ability of the Company and its subsidiaries to (subject to certain qualifications and exceptions): create liens and encumbrances; incur additional indebtedness; merge, dissolve, liquidate or consolidate; make acquisitions, investments, advances or loans; dispose of or transfer assets; pay dividends or make other payments in respect of their capital stock; amend certain material documents; redeem or repurchase certain debt; engage in certain transactions with affiliates; and enter into certain restrictive agreements. In addition, the Company will be required to maintain at least $10 million of unrestricted cash and cash equivalents at all times.
On the Closing Date, the Company agreed to issue the Initial Lender a warrant (the “Warrant”) to purchase up to 518,551 shares of the Company’s common stock, at an exercise price of $6.0264 per share, which shall have a term of 10 years from the issuance date. The Warrant contains customary share adjustment provisions.
The foregoing description of the terms of the Credit Agreement, the Pledge and Security Agreement and the Warrant are not intended to be complete and are qualified in their entirety by reference to the Credit Agreement, the Pledge and Security Agreement and the Warrant, which the Company expects to file as exhibits to the Company’s Quarterly Report on Form 10-Q for the quarter ending September 30, 2023.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 is incorporated by reference into this Item 2.03.
Item 3.02 Unregistered Sales of Equity Securities.
The information set forth in Item 1.01 above regarding the Warrant is incorporated by reference into this Item 3.02. The issuance of shares of the Company’s common stock underlying the Warrant will be made in reliance upon the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D thereunder.
Item 7.01 Regulation FD Disclosure.
On July 26, 2023, the Company issued a press release announcing the borrowing under the Credit Agreement. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit Number |
Exhibit Description | |
| 99.1 | Press Release of Verrica Pharmaceuticals Inc., dated July 26, 2023 | |
| 104 | Cover Page Interactive Data File (formatted as inline XBRL). | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Verrica Pharmaceuticals Inc. | ||||||
| Date: July 26, 2023 | /s/ P. Terence Kohler Jr. | |||||
| P. Terence Kohler Jr. | ||||||
| Chief Financial Officer | ||||||