Arcutis Biotherapeutics(ARQT) - 2024 Q1 - Quarterly Results

First Quarter 2024 Overview Arcutis reported strong Q1 2024 results, driven by significant ZORYVE revenue growth and improved gross-to-net Key Financial and Business Highlights Arcutis reported strong Q1 2024 results, driven by significant ZORYVE revenue growth, improved gross-to-net, and a robust cash position, with an upcoming PDUFA date for ZORYVE cream in atopic dermatitis ZORYVE Franchise Net Product Revenues | Metric | Q1 2024 (in millions) | Q1 2023 (in millions) | QoQ vs Q4 2023 | | :-------------------------------- | :-------------------- | :-------------------- | :------------- | | ZORYVE Franchise Net Product Revenues | $21.6 | $2.8 | +59% | | ZORYVE Cream Net Product Revenues | $15.0 | N/A | N/A | | ZORYVE Foam Net Product Revenues | $6.5 | N/A | N/A | - Sales growth of 675% vs. Q1 '23 and 59% vs. Q4 '23 for the ZORYVE franchise[1] - Continued gross-to-net (GTN) improvement, with blended GTN across products now in the low 60 percent range[1] - July 7, 2024, Prescription Drug User Fee Act (PDUFA) action date for roflumilast cream, 0.15%, for treatment of mild to moderate atopic dermatitis in adults and children down to age 6[1] - Strong cash position following a public offering raising gross proceeds of $172.5 million and a strategic licensing agreement in Japan[1] CEO Commentary The CEO attributed strong Q1 performance to successful ZORYVE foam and cream launches, reinforcing demand for steroid-free treatments, anticipating a transformative 2024 - The launch of ZORYVE foam for seborrheic dermatitis was "incredibly well received," and ZORYVE cream continued growth in psoriasis[2] - The demand for new and novel steroid-free treatment options and physician adoption of the ZORYVE portfolio is reinforced by the strong performance[2] - Arcutis is positioned for a "potentially transformative year in 2024" due to product growth, the July 7 PDUFA date for ZORYVE cream in atopic dermatitis, and a robust development pipeline[2] Program Updates and Key Milestones Arcutis advanced ZORYVE cream and foam programs with strong commercial performance and regulatory milestones, alongside pipeline progress ZORYVE (Roflumilast) Cream ZORYVE cream demonstrates strong demand and prescription growth in plaque psoriasis, with improving gross-to-net, and an sNDA accepted for atopic dermatitis with a July 7, 2024 PDUFA date Plaque Psoriasis ZORYVE cream for plaque psoriasis shows strong prescription growth, broad PBM coverage, and continued gross-to-net improvement - Over 208,000 prescriptions filled to date since launch by close to 12,000 unique prescribers[3] - Covered by the three largest Pharmacy Benefit Managers, with Medicare and Medicaid coverage anticipated during 2024[3] - Experienced another significant gross-to-net (GTN) improvement in Q1 compared to Q4 '23, with additional GTN improvement anticipated throughout 2024[3] Atopic Dermatitis FDA accepted sNDA for roflumilast cream 0.15% for atopic dermatitis, with a PDUFA date of July 7, 2024, supported by positive Phase 3 results - FDA accepted the supplemental new drug application (sNDA) for roflumilast cream 0.15% for mild to moderate atopic dermatitis in adults and children down to age 6[4] - PDUFA target action date assigned for July 07, 2024[4] - The sNDA is supported by positive results from three Phase 3 studies, a Phase 2 dose ranging study, and two Phase 1 pharmacokinetic studies[4] ZORYVE (Roflumilast) Topical Foam ZORYVE foam's launch for seborrheic dermatitis achieved strong uptake and favorable gross-to-net, with an sNDA planned for scalp and body psoriasis in Q3 2024 Seborrheic Dermatitis ZORYVE foam for seborrheic dermatitis has been well-received, with over 46,000 prescriptions filled and favorable, improving gross-to-net - Launch in January of ZORYVE foam has been "incredibly well received" by healthcare providers and patients, with over 46,000 prescriptions filled since launch[5] - ZORYVE foam is covered by the three largest Pharmacy Benefit Managers[5] - Gross-to-net (GTN) is favorable and improving rapidly for the partial first quarter of launch[5] Scalp and Body Psoriasis Arcutis plans to submit an sNDA for ZORYVE foam for scalp and body psoriasis in Q3 2024, based on positive Phase 3 trial results - Anticipates submitting an sNDA for scalp and body psoriasis to the FDA in the third quarter of 2024[5] - Submission is based on positive topline results from the ARRECTOR pivotal Phase 3 trial[5] Early-Stage Pipeline Arcutis advances its early-stage pipeline, with ARQ-255 in Phase 1b for alopecia areata and ARQ-234 in preclinical development for atopic dermatitis ARQ-255 (Alopecia Areata) ARQ-255, a topical JAK1 inhibitor, is in a Phase 1b study for alopecia areata, with the first subject enrolled in Q2 2023 - First healthy volunteer subject enrolled in a Phase 1b study in alopecia areata in December 2022, with the first subject in the alopecia areata cohort enrolled in Q2 2023[6] - ARQ-255 is a topical suspension formulation of ivarmacitinib, a potent and highly selective topical Janus kinase type 1 (JAK1) inhibitor[6] ARQ-234 (Atopic Dermatitis) ARQ-234, a CD200R checkpoint agonist, continues in preclinical development for atopic dermatitis - The Company continues preclinical development efforts for ARQ-234[6] - ARQ-234 is a fusion protein that is a potent and highly selective checkpoint agonist of the CD200 Receptor (CD200R)[6] Recent Corporate Highlights Arcutis strengthened its financial position through a public offering and a strategic licensing agreement in Japan, appointing a new CFO Recent Corporate Highlights Arcutis strengthened its financial position via a public offering and a strategic licensing agreement in Japan, also appointing a new Chief Financial Officer - Completed a public offering in February, raising gross proceeds of $172.5 million, including the underwriters' fully exercised 30-day option[7] - Announced a strategic collaboration and licensing agreement in February with Sato Pharmaceutical Co., Ltd. for the development, manufacture, and commercialization of topical roflumilast in Japan[7] - David Topper was appointed Chief Financial Officer (CFO) effective April 10, 2024, replacing John Smither[7] First Quarter 2024 Summary Financial Results Arcutis reported significant Q1 2024 revenue growth, reduced net loss, and a strong cash position, driven by product sales and licensing Revenue Analysis Total revenues for Q1 2024 surged to $49.6 million, driven by robust ZORYVE product sales and significant licensing agreement contributions Total Revenues | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | YoY Change | | :--------------------- | :--------------------- | :--------------------- | :--------- | | Product revenue, net | $21,569 | $2,781 | +675% | | Other revenue | $28,000 | $— | N/A |\ | Total revenues | $49,569 | $2,781 | +1682% | - Year-over-year increases in product revenue were due to strong unit demand and improvements in gross-to-net sales deductions[8] - Other revenues of $28.0 million were related to upfront and milestone payments from the Sato Pharmaceutical and Huadong Pharmaceutical collaboration and licensing agreements[8] Operating Expenses R&D expenses decreased due to reduced clinical development costs, while SG&A expenses increased primarily from ZORYVE product launch sales and marketing efforts Operating Expenses by Category | Expense Category | Q1 2024 (in thousands) | Q1 2023 (in thousands) | YoY Change | | :--------------------------------- | :--------------------- | :--------------------- | :--------- | | Cost of sales | $3,256 | $783 | +316% | | Research and development | $23,141 | $35,345 | -34.5% | | Selling, general, and administrative | $54,794 | $42,918 | +27.7% | | Total operating expenses | $81,191 | $79,046 | +2.7% | - The decrease in R&D expenses was due to decreased clinical development costs related to the topical roflumilast program[9] - The increase in SG&A expenses was primarily due to sales and marketing expenses related to the launches of ZORYVE cream and foam[9] Net Loss and Cash Position Arcutis significantly reduced its Q1 2024 net loss to $35.4 million and maintained a strong cash position of $404.5 million in cash, equivalents, restricted cash, and marketable securities Net Loss | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | YoY Change | | :-------------------------------------- | :--------------------- | :--------------------- | :--------- | | Net loss | $(35,382) | $(80,100) | -55.8% | | Net loss per share, basic and diluted | $(0.32) | $(1.31) | -75.5% | Cash and Marketable Securities | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change | | :------------------------------------------------------------------ | :---------------------------- | :------------------------------- | :------- | | Cash, cash equivalents, restricted cash, and marketable securities | $404,500 | $272,800 | +48.3% | - Net cash used in operating activities was $31.6 million during the first quarter[10] Condensed Consolidated Financial Statements Arcutis's Q1 2024 financial statements reflect increased assets and equity, driven by cash and marketable securities, and a reduced net loss Condensed Consolidated Balance Sheets As of March 31, 2024, total assets increased to $478.5 million, primarily from cash and marketable securities, leading to a considerable increase in stockholders' equity Condensed Consolidated Balance Sheets | ASSETS | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------------------------------------- | :---------------------------- | :------------------------------- | | Current assets: | | | | Cash and cash equivalents | $190,097 | $88,398 | | Restricted cash | $617 | $925 | | Marketable securities | $213,769 | $183,463 | | Trade receivable, net | $37,154 | $25,807 | | Inventories | $13,247 | $13,134 | | Prepaid expenses and other current assets | $13,178 | $18,704 | | Total current assets | $468,062 | $330,431 | | Property and equipment, net | $1,369 | $1,539 | | Intangible assets, net | $6,250 | $6,438 | | Operating lease right-of-use asset | $2,264 | $2,361 | | Other assets | $596 | $596 | | Total assets | $478,541 | $341,365 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Current liabilities: | | | | Accounts payable | $12,969 | $11,992 | | Accrued liabilities | $33,584 | $33,941 | | Operating lease liability | $756 | $735 | | Total current liabilities | $47,309 | $46,668 | | Operating lease liability, noncurrent | $3,181 | $3,382 | | Long-term debt, net | $202,803 | $201,799 | | Other long-term liabilities | $306 | $849 | | Total liabilities | $253,599 | $252,698 | | Stockholders' equity: | | | | Common stock | $12 | $9 | | Additional paid-in capital | $1,242,349 | $1,070,558 | | Accumulated other comprehensive loss | $(133) | $4 | | Accumulated deficit | $(1,017,286) | $(981,904) | | Total stockholders' equity | $224,942 | $88,667 | | Total liabilities and stockholders' equity | $478,541 | $341,365 | Condensed Consolidated Statements of Operations Q1 2024 total revenues substantially increased to $49.6 million, driven by product and other revenues, significantly reducing net loss from $80.1 million to $35.4 million and improving net loss per share Condensed Consolidated Statements of Operations | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :------------------------------------------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Revenues: | | | | Product revenue, net | $21,569 | $2,781 | | Other revenue | $28,000 | $— | | Total revenues | $49,569 | $2,781 | | Operating expenses: | | | | Cost of sales | $3,256 | $783 | | Research and development | $23,141 | $35,345 | | Selling, general, and administrative | $54,794 | $42,918 | | Total operating expenses | $81,191 | $79,046 | | Loss from operations | $(31,622) | $(76,265) | | Other income (expense): | | | | Other income, net | $4,044 | $3,207 | | Interest expense | $(7,480) | $(7,042) | | Loss before income taxes | $(35,058) | $(80,100) | | Provision for income taxes | $324 | $— | | Net loss | $(35,382) | $(80,100) | | Per share information: | | | | Net loss per share, basic and diluted | $(0.32) | $(1.31) | | Weighted-average shares used in computing net loss per share, basic and diluted | 111,048,525 | 61,169,089 | Additional Information This section provides details on the Q1 2024 conference call, company overview, forward-looking statements, and contact information Conference Call and Webcast Arcutis management hosted a conference call and webcast on May 14, 2024, to discuss financial results and business updates, with a replay available online - Arcutis management hosted a conference call and webcast on May 14, 2024, at 4:30 pm ET[11] - The webcast for this conference call may be accessed at the "Events" section of the Company's website, with a replay available following the call[11] About Arcutis Biotherapeutics, Inc. Arcutis Biotherapeutics, Inc. is a commercial-stage medical dermatology company focused on immune-mediated dermatological diseases, with two FDA-approved products and a robust pipeline - Arcutis Biotherapeutics, Inc. is a commercial-stage medical dermatology company[12] - Focuses on developing innovations to address urgent needs in immune-mediated dermatological diseases and conditions[12] - Has a growing portfolio including two FDA approved products and a robust pipeline with multiple clinical programs for conditions like scalp and body psoriasis, atopic dermatitis, and alopecia areata[12] Forward-Looking Statements This press release contains forward-looking statements regarding future business performance, product development, and financial outcomes, subject to known and unknown risks and uncertainties - Statements contained in this press release regarding matters that are not historical facts are forward-looking statements, based on the Company's current beliefs and expectations[14] - Such statements involve substantial known and unknown risks, uncertainties, and other factors that may cause actual results, levels of activity, performance, or achievements to be materially different[14] - Readers should not place undue reliance on forward-looking statements, and the Company undertakes no obligation to revise or update information[14] Contacts Provides contact information for media and investor relations inquiries - Media Contact: Amanda Sheldon, Head of Corporate Communications (asheldon@arcutis.com)[15] - Investor Contacts: Latha Vairavan, VP Finance and Head of Investor Relations (lvairavan@arcutis.com), and Derek Cole (derek.cole@iradvisory.com)[15]