Verrica has licensed Lytix' LTX-315 in dermatology. At the end of Q3, Verrica had a cash position of USD23m, while the net loss for Q3 was USD23m. While the company will lower operating costs, the cash position will only last into Q1 2025. The company has switched CEOs and engaged Jefferies as a financial advisor to strengthen its balance sheet. The company already has an approved product, YCANTH for molluscum contagiosum, that is generating sales, but they are far from the targets. The share price is now below 1USD (it was above USD8 in June) and the market capitalisation just cUSD40m, not much more than Lytix. It also has considerable debt, which it drew to fund the commercialisation ramp-up of YCANTH. This reflects a distressed market valuation. New funding for Verrica would be a major catalyst for Lytix. If Verrica is unable to find capital and ends up in bankruptcy, Lytix regains the rights to LTX-315 in dermatology. Furthermore, Verrica cannot pause the programme. There are clauses requiring a certain development speed.

The first patient (of 27) in the phase IIa study of LTX-315 in combination with pembrolizumab as neodjuvant treatment for melanoma was recruited in November. The main endpoint is complete pathologic response, which means no cancer cells can be found in sample tissues. This endpoint is reached within a few months, so a first readout is planned for summer 2025 from a few patients. The study will conclude late in 2026 when recurrence-free survival numbers will also be available.

We have made some significant changes to our estimates in this update (more details in the valuation section below), including reducing the assumed upfront payment for LTX-315 in a deal after NeoLIPA to USD20m (USD50m) and risk-adjusting the deal with Verrica by 50% due to that company's difficult financial situation. This results in a diluted base case of NOK11.