Investors who bought into Verrica Pharmaceuticals Inc VRCA at its June 15 IPO are celebrating 13.1-percent returns.
The gains should continue, in the view of two new sell-side bulls.
The Ratings
Bank of America Merrill Lynch analyst Jason Gerberry initiated coverage of Verrica with a Buy rating and $26 price target.
Cowen analyst Ken Cacciatore initiated coverage with an Outperform rating and $35 target.
The Theses
The analysts are bullish on Verrica for its lead candidate, VP-102, which is in Phase 3 trials for the treatment of molluscum.
The therapy — a non-invasive alternative to cryotherapy and surgery — is poised to become the first approved molluscum drug for a potentially underdiagnosed population growing by an estimated 1 million U.S. patents per year.
Bank of America expects dermatologists to be receptive to VP-102 considering the drug’s familiar active ingredient.
“Supportive Phase 2 data suggests VP-102 can achieve high clearance rates, which have made the API popular with dermatologists,” Gerberry said in a Tuesday note. (See the analyst's track record here.)
BofA forecast a 60-percent possibility of success and anticipates favorable Phase 3 data will boost the likelihood to 85 percent. Cowen's Cacciatore expressed similar optimism.
"With what we believe will be a very reasonable pricing strategy that should secure broad coverage, combined with FDA guidelines that mandate the discontinuation of compounded versions of approved products — as well as what appears to be limited raw material supplies — we believe that Verrica’s formulation will quickly capture, penetrate, and expand the current treatment market," the analyst said in a Tuesday note. (See Cacciatore's track record here.)
Indication expansion into common warts could drive additional upside for Verrica.
Price Action
Verrica shares were down 6.22 percent at $18.54 at the close Tuesday.
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