Technical Analysis - A hammer chart pattern has formed in Arcutis Biotherapeutics' last trading session, indicating a potential trend reversal as bulls counteract bears to find support [1] - The hammer pattern is a technical indication of nearing a bottom with likely subsiding of selling pressure, signaling that bears might have lost control over the price [1][2] - Hammer candles can occur on any timeframe and are utilized by both short-term and long-term investors, but should be used in conjunction with other bullish indicators [2] Fundamental Analysis - Wall Street analysts have shown strong agreement in raising earnings estimates for Arcutis Biotherapeutics, enhancing its prospects of a trend reversal [1] - The consensus EPS estimate for the current year has increased 14.5% over the last 30 days, indicating that analysts expect better earnings than previously predicted [3] - Arcutis Biotherapeutics currently has a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 stocks ranked based on earnings estimate revisions and EPS surprises [3] Market Performance - Arcutis Biotherapeutics' stock has lost 13% over the past week, but the formation of a hammer chart pattern suggests a potential trend reversal [1] - Stocks with a Zacks Rank 1 or 2, such as Arcutis Biotherapeutics, usually outperform the market, further supporting the likelihood of a trend reversal [3]

Technical Analysis - ARQT reached a significant support level and broke through the 20-day moving average, indicating a short-term bullish trend [1] - The 20-day simple moving average is a useful tool for short-term traders as it smooths out price trends and provides trend reversal signals [2] - ARQT's price moved above the 20-day SMA (9.22) to 9.26, suggesting a positive trend [3] - ARQT's stock price increased by 13.5% over the last four weeks, potentially signaling another rally [3] Earnings and Revisions - ARQT has seen 3 upward earnings estimate revisions for the current fiscal year with no downward revisions, strengthening the bullish case [4] - The consensus estimate for ARQT has also moved higher, indicating positive sentiment among analysts [4] Investment Outlook - ARQT is currently a Zacks Rank 2 (Buy) stock, further supporting its potential for near-term gains [3] - Investors may consider ARQT for potential gains due to its technical levels and positive earnings estimate revisions [4]

Brendan, a Pennsylvanian by birth:-Completed a Ph.D. at Stanford University in the field of organic synthesis (2009). -Worked for a major pharmaceutical company (Merck, 2009-2013).-Worked in biotech including start-ups (Theravance/Aspira) prior to securing employment at Caltech.-First employee and co-founder of 1200 Pharma as it spun out of Caltech garnering major investment (into the 8 figures).-Remains an avid investor, focused on market trends and especially biotechnology stocks.Analyst’s Disclosure: I/w ...

Core Viewpoint - Arcutis Biotherapeutics, Inc. (ARQT) shows significant upside potential, with a mean price target of $18.43 indicating a 70.3% increase from the current price of $10.82 [1] Price Target Analysis - The average price target consists of seven estimates ranging from a low of $11 to a high of $26, with a standard deviation of $4.50, suggesting variability in analyst opinions [2] - The lowest estimate indicates a modest increase of 1.7%, while the highest suggests a substantial upside of 140.3% [2] - A low standard deviation indicates a high degree of agreement among analysts regarding the stock's price movement direction [7] Earnings Estimates and Analyst Sentiment - Analysts are optimistic about ARQT's earnings prospects, as indicated by a positive trend in earnings estimate revisions, which historically correlates with stock price movements [9] - Over the last 30 days, the Zacks Consensus Estimate for the current year has increased by 12.4%, with two estimates moving higher and no negative revisions [10] - ARQT holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate factors, suggesting strong potential for near-term upside [11]

Financial Data and Key Metrics Changes - The company reported net product revenues of approximately $45 million for Q3 2024, reflecting a 452% increase year-over-year and a 45% increase quarter-over-quarter [57][66] - R&D expenses decreased by 26% from $26.2 million in Q3 2023 to $19.5 million in Q3 2024, primarily due to reduced development costs [58] - SG&A expenses increased to $58.8 million in Q3 2024 from $47.6 million in the same period last year, reflecting investments in current and future launches [59] Business Line Data and Key Metrics Changes - The ZORYVE portfolio sales grew 452% year-over-year and 45% quarter-over-quarter, reaching $44.8 million [7][27] - Total prescriptions for the ZORYVE portfolio increased by 25% quarter-over-quarter, with new prescription growth also up by 23% [8][30] - The gross-to-net percentage improved to the low 50s, a significant enhancement from the high 50s in the previous quarter [8][33] Market Data and Key Metrics Changes - The ZORYVE family of products is now the leading branded topical anti-inflammatory agent for new prescriptions, with expectations to soon lead in total prescriptions as well [19][37] - The company is expanding its market share in the branded topical space, with a focus on transitioning patients away from topical steroids [20][38] Company Strategy and Development Direction - The company aims to build out the ZORYVE product label with expected approvals for scalp and body psoriasis and expanded indications for pediatric patients [12][14] - The strategy includes securing access to government pay patients, potentially opening access to 3.3 million additional patients [13][21] - The company is focused on driving a shift away from topical steroids, emphasizing the safety and efficacy of ZORYVE [15][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining strong revenue growth, citing the unique position of ZORYVE in the market [10][66] - The company anticipates a strong finish to 2024 and a solid start to 2025, despite typical seasonal softness in Q1 [29][66] - Management highlighted the importance of securing Medicare and Medicaid coverage as a key growth driver [35][99] Other Important Information - The company appointed Keith Leonard as the Chair of the Board, effective immediately, to support ongoing growth [24] - The company has made significant progress in securing Medicaid coverage in several states, representing a substantial portion of the U.S. population [35][100] Q&A Session Summary Question: Contribution from Kowa partnership and pipeline guidance - Management indicated that Kowa's contribution to Q3 sales was immaterial as they began promoting in mid-September, with expectations for a meaningful contribution starting in 2025 [67][95] Question: Stocking impact on Q3 results - Management confirmed there was no significant stocking impact on gross-to-net, attributing improvements to better conversion of prescriptions to paid prescriptions [73][76] Question: Medicare coverage dynamics for 2025 - Management expects to secure Medicare Part D coverage in 2025, with initial coverage likely to be a proportion of the total market [87][90] Question: Impact of Hurricanes on sales - Management noted nominal impact from hurricanes but reported strong demand performance across all indications [85] Question: Pricing strategy and government payer contribution - Management explained that the pricing strategy was designed to optimize access to Medicare and Medicaid populations, with commercial business driving Q3 revenue [99][100]

Company Performance - Arcutis Biotherapeutics reported a quarterly loss of $0.33 per share, better than the Zacks Consensus Estimate of a loss of $0.42, and an improvement from a loss of $0.73 per share a year ago, representing an earnings surprise of 21.43% [1] - The company posted revenues of $44.76 million for the quarter ended September 2024, exceeding the Zacks Consensus Estimate by 17.62%, compared to revenues of $38.11 million in the same quarter last year [2] - Over the last four quarters, Arcutis has surpassed consensus EPS estimates three times and topped consensus revenue estimates two times [2] Stock Performance - Arcutis Biotherapeutics shares have increased approximately 187.9% since the beginning of the year, significantly outperforming the S&P 500's gain of 21.2% [3] - The current consensus EPS estimate for the upcoming quarter is -$0.38 on revenues of $49.14 million, and for the current fiscal year, it is -$1.60 on revenues of $153.8 million [7] Industry Outlook - The Medical - Biomedical and Genetics industry, to which Arcutis belongs, is currently ranked in the top 38% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact stock performance [5]

PART I FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents Arcutis Biotherapeutics, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, with accompanying notes detailing accounting policies, revenue, debt, and stock-based compensation [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Balance Sheet Highlights (in thousands) | September 30, 2024 (unaudited) | December 31, 2023 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $134,851 | $88,398 | | Marketable securities | $195,710 | $183,463 | | Total current assets | $423,720 | $330,431 | | Total assets | $437,354 | $341,365 | | **Liabilities & Equity** | | | | Total current liabilities | $172,426 | $46,668 | | Long-term debt, net | $105,095 | $201,799 | | Total liabilities | $280,713 | $252,698 | | Total stockholders' equity | $156,641 | $88,667 | - Total assets increased to **$437.4 million** as of September 30, 2024, from $341.4 million at year-end 2023, primarily driven by an increase in cash, marketable securities, and trade receivables[7](index=7&type=chunk) - A significant portion of long-term debt (**$99.5 million**) was reclassified to current liabilities as of September 30, 2024, in anticipation of a partial prepayment made in October 2024[7](index=7&type=chunk)[71](index=71&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) | Operating Results (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | **Total revenues** | **$44,755** | **$38,109** | **$125,182** | **$46,080** | | Product revenue, net | $44,755 | $8,109 | $97,182 | $15,660 | | Total operating expenses | $83,821 | $75,013 | $245,947 | $226,012 | | Loss from operations | ($39,066) | ($36,904) | ($120,765) | ($179,932) | | **Net loss** | **($41,537)** | **($44,765)** | **($129,251)** | **($195,856)** | | Net loss per share | ($0.33) | ($0.73) | ($1.08) | ($3.19) | - Product revenue for Q3 2024 surged to **$44.8 million**, a **452% increase** from $8.1 million in Q3 2023, driven by the launch of new ZORYVE products and increased demand[10](index=10&type=chunk)[127](index=127&type=chunk) - Net loss for the nine months ended September 30, 2024, narrowed to **$129.3 million** from $195.9 million in the prior-year period, primarily due to significantly higher product revenue and a decrease in R&D expenses[10](index=10&type=chunk)[140](index=140&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Summary (in thousands) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($111,410) | ($190,813) | | Net cash (used in) provided by investing activities | ($6,057) | $242,418 | | Net cash provided by financing activities | $163,613 | $2,034 | | **Net increase in cash, cash equivalents, and restricted cash** | **$46,145** | **$53,521** | - Cash used in operating activities decreased to **$111.4 million** in the first nine months of 2024 from $190.8 million in the same period of 2023, reflecting improved operational performance and revenue growth[17](index=17&type=chunk)[169](index=169&type=chunk) - Financing activities provided **$163.6 million** in cash, primarily from a common stock issuance in February 2024 which raised net proceeds of **$161.7 million**[17](index=17&type=chunk)[23](index=23&type=chunk)[173](index=173&type=chunk) [Notes to Financial Statements](index=9&type=section&id=Notes%20to%20Financial%20Statements) - The company is a commercial-stage biopharmaceutical firm focused on dermatological diseases, receiving FDA approval for ZORYVE cream 0.15% for atopic dermatitis in July 2024 and commencing commercialization shortly thereafter[19](index=19&type=chunk)[20](index=20&type=chunk) - In February 2024, the company completed a common stock offering, raising aggregate net proceeds of **$161.7 million**[23](index=23&type=chunk) - As of September 30, 2024, the company had cash, cash equivalents, restricted cash, and marketable securities totaling **$331.2 million**, believing its capital resources are sufficient for at least the next 12 months[26](index=26&type=chunk)[27](index=27&type=chunk) - Subsequent to the quarter end, on October 8, 2024, the company made a partial prepayment of **$100.0 million** on its outstanding loan[96](index=96&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's commercial performance, highlighting the successful launches and revenue growth of its ZORYVE franchise, detailing the significant increase in product revenue and narrowing net loss, and covering strategic shifts in operating expenses and sufficient liquidity for the next 12 months [Overview](index=25&type=section&id=Overview) - The company is focused on commercializing its ZORYVE franchise, which now includes treatments for plaque psoriasis (cream 0.3%), seborrheic dermatitis (foam 0.3%), and atopic dermatitis (cream 0.15%)[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) - A co-promotion agreement was signed with Kowa Pharmaceuticals in July 2024 to market ZORYVE to primary care practitioners and pediatricians, expanding commercial reach beyond dermatology[105](index=105&type=chunk) - Pipeline development continues with ARQ-255 for alopecia areata (Phase 1b data expected H1 2025) and ARQ-234 for atopic dermatitis (IND submission planned for 2025)[106](index=106&type=chunk)[107](index=107&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) | Product Revenue, Net (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | ZORYVE cream 0.3% | $22,041 | $8,109 | $13,932 | 172% | | ZORYVE foam | $20,262 | $— | $20,262 | N/A | | ZORYVE cream 0.15% | $2,452 | $— | $2,452 | N/A | | **Total** | **$44,755** | **$8,109** | **$36,646** | **452%** | - Q3 2024 R&D expenses decreased by **26% YoY** to **$19.5 million**, primarily due to the completion of Phase 3 studies for roflumilast cream in atopic dermatitis[127](index=127&type=chunk)[134](index=134&type=chunk) - Q3 2024 Selling, General, and Administrative (SG&A) expenses increased by **24% YoY** to **$58.8 million**, driven by higher personnel costs and marketing expenses to support the commercialization of ZORYVE[127](index=127&type=chunk)[136](index=136&type=chunk) - For the nine months ended Sep 30, 2024, total revenue grew **172%** to **$125.2 million**, while net loss improved by **34%** to **$129.3 million** compared to the same period in 2023[140](index=140&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) - As of September 30, 2024, the company had **$331.2 million** in cash, cash equivalents, restricted cash, and marketable securities[155](index=155&type=chunk) - The company had **$200.0 million** in debt outstanding as of September 30, 2024, and on October 8, 2024, made a **$100.0 million** partial prepayment, reducing the principal to $100.0 million but retaining the right to re-draw the funds for a defined period[155](index=155&type=chunk)[160](index=160&type=chunk) - Following the debt prepayment, the loan's maturity date was extended to August 1, 2029, and the interest rate was revised, with options to draw down two additional tranches (C-1 and C-2) of up to **$50.0 million** each, subject to meeting revenue targets[160](index=160&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks are interest rate sensitivity on its variable-rate debt and foreign currency exchange risk from its Canadian subsidiary, with no current use of hedging instruments for these exposures - The company is exposed to interest rate risk on its floating-rate debt; a **100 basis point (1%) increase** in interest rates would result in approximately **$1.0 million** of additional annual interest expense on the remaining $100.0 million of debt[178](index=178&type=chunk) - Foreign currency exchange risk is present due to the Canadian subsidiary, with the company holding cash balances of **$4.5 million** denominated in Canadian dollars as of September 30, 2024[179](index=179&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2024, with no material changes to internal control over financial reporting identified during the quarter - The CEO and CFO have concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[180](index=180&type=chunk) - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[181](index=181&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) Arcutis has filed a patent infringement lawsuit against Padagis concerning its attempt to market a generic version of ZORYVE® 0.3% cream, asserting infringement of eleven patents and triggering an automatic 30-month stay preventing FDA approval until August 2026 - The company filed a lawsuit against Padagis on March 27, 2024, for patent infringement related to a generic version of ZORYVE® 0.3% cream[186](index=186&type=chunk) - The lawsuit triggers an automatic **30-month stay** of FDA approval for Padagis's generic product, which is set to expire on August 14, 2026[187](index=187&type=chunk) [Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, focusing on the implications of transitioning to a 'large accelerated filer,' which will increase compliance costs and reporting requirements, and highlights risks associated with strategic collaborations and restrictive covenants of its loan agreement - The company will become a 'large accelerated filer' and will no longer qualify as a 'smaller reporting company' starting Q1 2025, leading to heightened disclosure requirements and compliance costs[190](index=190&type=chunk)[191](index=191&type=chunk) - The success of collaboration agreements (e.g., with Huadong, Sato, Kowa) is not guaranteed and depends heavily on the efforts of partners, posing risks to development and commercialization[192](index=192&type=chunk)[193](index=193&type=chunk) - The loan agreement contains restrictive covenants, including a minimum net product revenue requirement, which could limit operational flexibility, and an event of default could lead to debt acceleration[195](index=195&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) [Other Information](index=44&type=section&id=Item%205.%20Other%20Information) This section reports that no directors or officers adopted or terminated Rule 10b5-1 trading plans during the quarter and announces Keith Leonard's election as Chair of the Board, effective November 4, 2024 - Keith Leonard was elected to serve as Chair of the Board, effective November 4, 2024[202](index=202&type=chunk)

Arcutis Announces Third Quarter 2024 Financial Results and Provides Business Update • Third quarter net product revenues for ZORYVE® (roflumilast) franchise of $44.8M, with $22.0M for ZORYVE cream 0.3%, $20.3M for ZORYVE topical foam 0.3%, and $2.5M for ZORYVE cream 0.15%; sales growth of 452% vs. Q3 '23 and 45% vs. Q2 '24 • Continued gross-to-net (GTN) improvement with blended GTN across products now in the low 50 percent range, improving from the high 50 percent range last quarter • Sustained growth in pr ...

Core Insights - Arcutis Biotherapeutics reported a significant increase in net product revenues for the third quarter of 2024, totaling $44.8 million, representing a 452% increase compared to Q3 2023 and a 45% increase from Q2 2024 [1][12] - The company continues to see strong demand for its ZORYVE products, with a 25% increase in total U.S. franchise unit demand quarter over quarter [1][2] - The FDA accepted a supplemental New Drug Application (sNDA) for ZORYVE foam for treating scalp and body psoriasis, with a PDUFA action date set for May 22, 2025 [1][5] Financial Performance - Product revenues for Q3 2024 were $44.8 million, up from $8.1 million in Q3 2023, driven by strong unit demand and gross-to-net (GTN) improvements [12][21] - Cost of sales for the quarter was $5.5 million, compared to $1.2 million in the same period last year [13] - Research and development (R&D) expenses decreased to $19.5 million from $26.2 million year-over-year, attributed to reduced clinical development costs [14] - Selling, general, and administrative (SG&A) expenses increased to $58.8 million from $47.6 million year-over-year, primarily due to sales and marketing expenses related to ZORYVE launches [15] - The net loss for the quarter was $41.5 million, or $0.33 per share, compared to a net loss of $44.8 million, or $0.73 per share, in Q3 2023 [16][21] Product Updates - ZORYVE cream and foam continue to gain traction, with over 304,000 prescriptions filled for ZORYVE cream and over 168,000 for ZORYVE foam since their respective launches [3][4] - ZORYVE cream 0.15% was approved for treating mild to moderate atopic dermatitis in early Q3 2024, with commercial launch commencing at the end of July [3] - ZORYVE foam has been approved for seborrheic dermatitis in Canada, with plans for commercial launch by the end of 2024 [5] Pipeline Developments - The company is progressing with its pipeline, including the completion of enrollment in a Phase 1b study for ARQ-255, targeting alopecia areata, with data expected in the first half of 2025 [6] - ARQ-234, a potential biologic treatment for atopic dermatitis, is in preclinical development, with an Investigational New Drug Application (IND) submission planned for 2025 [7] Corporate Highlights - A co-promotion agreement was established with Kowa Pharmaceuticals America to market ZORYVE products to primary care practitioners and pediatricians [8] - The company amended a $200 million term loan, lowering the interest rate and extending the maturity to August 2029 [8] - Arcutis received two new U.S. patents related to ZORYVE in Q3 2024, enhancing its intellectual property portfolio [8]

The market expects Arcutis Biotherapeutics, Inc. (ARQT) to deliver a year-over-year increase in earnings on lower revenues when it reports results for the quarter ended September 2024. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates. The stock might move higher if these key numbers top expectations in the upcoming earnings report. On the othe ...