Arcutis Announces Second Quarter 2024 Financial Results and Provides Business Update

Rhea-AI Summary

Arcutis Biotherapeutics reported strong Q2 2024 financial results, with net product revenues of $30.9M for the ZORYVE franchise, representing a 547% increase year-over-year and 43% growth quarter-over-quarter. The company saw improved gross-to-net (GTN) margins, now in the high 50% range. Arcutis entered a co-promotion agreement with Kowa Pharmaceuticals to expand ZORYVE's reach in primary care and pediatric offices. They also submitted an sNDA for ZORYVE foam for scalp and body psoriasis treatment. The company amended its $200M term-loan, improving financial flexibility. Despite strong sales growth, Arcutis reported a net loss of $52.3M for Q2 2024, with cash and equivalents of $363.1M as of June 30, 2024.

Positive

• Net product revenues for ZORYVE franchise increased 547% year-over-year to $30.9M
• Gross-to-net (GTN) margins improved to high 50% range
• Total U.S. franchise unit demand increased 42% quarter-over-quarter
• Entered co-promotion agreement with Kowa Pharmaceuticals to expand market reach
• Submitted sNDA for ZORYVE foam for scalp and body psoriasis treatment
• Amended $200M term-loan with improved terms and extended maturity

Negative

• Net loss of $52.3M in Q2 2024
• Increase in SG&A expenses to $58.2M from $46.0M year-over-year
• Net cash used in operating activities was $45.2M during Q2

Financial Analyst

Arcutis Biotherapeutics' Q2 2024 results show impressive growth, with net product revenues reaching $30.9 million, a 547% increase year-over-year and 43% quarter-over-quarter. The company's ZORYVE franchise is gaining traction, with improved gross-to-net (GTN) margins now in the high 50% range. This financial performance, coupled with the recent FDA approval for ZORYVE cream in atopic dermatitis, positions Arcutis for continued growth.

The co-promotion agreement with Kowa Pharmaceuticals expands their market reach, potentially accelerating revenue growth. However, investors should note that despite strong top-line growth, Arcutis still reported a net loss of $52.3 million. The amended $200 million term-loan provides improved financial flexibility, but careful management of cash burn remains important as the company balances growth investments with path to profitability.

Medical Research Analyst

Arcutis' progress in expanding ZORYVE's indications is noteworthy. The recent FDA approval for ZORYVE cream 0.15% in atopic dermatitis, down to age 6, significantly broadens its potential patient base. The submission of an sNDA for ZORYVE foam in scalp and body psoriasis further demonstrates the company's commitment to maximizing the product's potential.

The development of ARQ-255 for alopecia areata and ARQ-234 for atopic dermatitis showcases a promising pipeline. These novel approaches, particularly the topical JAK1 inhibitor and CD200R checkpoint agonist, could address significant unmet needs in dermatology. However, as these are still in early stages, their impact on the company's value proposition remains speculative. The recent patent acquisitions for ZORYVE strengthen Arcutis' intellectual property position, potentially extending the product's market exclusivity.

Market Research Analyst

Arcutis' market penetration is impressive, with over 252,000 ZORYVE cream prescriptions filled by nearly 13,000 unique prescribers since launch. The rapid adoption suggests strong product differentiation and physician satisfaction. The co-promotion agreement with Kowa Pharmaceuticals is a strategic move, potentially accelerating market penetration in primary care and pediatric offices.

Improved insurance coverage, including by major PBMs and initial Medicaid coverage in key states, should support continued growth. However, the dermatology market is competitive and maintaining this growth trajectory may become challenging as the product matures. The company's ability to execute on its pipeline and expand indications for existing products will be important for long-term success. Investors should monitor prescription trends, GTN improvements and the uptake of newly approved indications as key performance indicators.

• Second quarter net product revenues for ZORYVE^® franchise of $30.9M, with $17.3M for ZORYVE (roflumilast) cream 0.3%, and $13.6M for ZORYVE (roflumilast) topical foam, 0.3%; sales growth of 547% vs. Q2 '23 and 43% vs. Q1 '24
• Continued gross-to-net (GTN) improvement with blended GTN across products now in the high 50 percent range, improving from the low 60 percent range last quarter
• Sustained growth in prescriptions for both cream and foam, with total U.S. franchise unit demand increase of 42% quarter over quarter
• Entered into ZORYVE co-promotion agreement with Kowa Pharmaceuticals America, Inc., expanding promotional efforts to primary care and pediatric offices in the United States
• Submitted Supplemental New Drug Application (sNDA) for ZORYVE (roflumilast) foam to the Food & Drug Administration (FDA) for the treatment of scalp and body psoriasis in adults and adolescents ages 12 and over
• Amended existing $200 million term-loan on attractive terms to increase financial and strategic flexibility

WESTLAKE VILLAGE, Calif., Aug. 14, 2024 (GLOBE NEWSWIRE) -- Arcutis Biotherapeutics, Inc. (Nasdaq: ARQT), a commercial-stage biopharmaceutical company focused on developing meaningful innovations in immuno-dermatology, today reported financial results for the quarter ended June 30, 2024, and provided a business update.

“In the second quarter, sales grew by a robust 43% sequentially, highlighting the strength of physician demand for ZORYVE across multiple approved indications, and our ability to continue to improve our GTN. Following the recent launch of ZORYVE cream for atopic dermatitis, we are well-positioned to drive further growth,” said Frank Watanabe, president and chief executive officer. “Our ZORYVE franchise co-promotion agreement with Kowa will further expand our total addressable market, allowing us to address millions of patients treated outside of a dermatology office. In addition, we continue to advance ZORYVE's late-stage development, with the filing of the supplemental new drug application for ZORYVE foam in scalp and body psoriasis, which will enable us to drive greater preference share, once approved. Finally, we amended our existing debt agreement favorably, providing us with additional financial flexibility and improved liquidity to enhance our business going forward.”

“We are pleased that we continued to grow sales while prudently managing operating expenses in the second quarter. These solid financial results together with our amended existing debt agreement, which provides an extended maturity, a lower interest rate and the flexibility to repay a portion and re-draw it later, give us additional financial and strategic flexibility to continue investing in our growth, especially supporting our three commercial launches and advancing our pipeline,” said David Topper, chief financial officer.

Program Updates / Key Milestones

ZORYVE cream - a highly potent and selective phosphodiesterase-4 (PDE4) inhibitor in a once-daily cream formulation, approved in the United States for the treatment of plaque psoriasis and atopic dermatitis

• U.S. Demand for ZORYVE cream in plaque psoriasis continues to grow, with over 252,000 prescriptions filled to date since launch by close to 13,000 unique prescribers, reflecting the high levels of patient and physician satisfaction with the ZORYVE cream clinical profile. ZORYVE cream is covered by the three largest Pharmacy Benefit Managers (PBMs) and multiple other commercial insurers, and the Company obtained its first Medicaid coverage in Texas, Florida, and New York and anticipates it will obtain Medicaid coverage in additional states during 2024. The cream 0.3% saw further GTN improvement in the second quarter compared to Q1 '24, and we anticipate modest incremental GTN improvement throughout 2024 as GTN for the cream 0.3% approaches steady state.
• The FDA approved ZORYVE cream 0.15% for the treatment of mild to moderate atopic dermatitis in adults and children down to age 6 in early Q3, and the Company commenced the commercial launch at the end of July. ZORYVE cream 0.15% is already covered as a line extension by two of the largest national PBMs, and the company anticipates continued improvement in coverage through the remainder of 2024.

ZORYVE foam - a once-daily foam formulation of topical roflumilast designed to overcome the challenges of delivering topical drugs in hair-bearing areas of the body, approved in the United States for the treatment of seborrheic dermatitis, and under FDA review for scalp and body psoriasis

• The launch of ZORYVE foam in seborrheic dermatitis continues to progress well, with over 98,000 prescriptions filled since launch, reflecting the high unmet need in this disease. ZORYVE foam is also covered by the three largest PBMs, and coverage for the foam is steadily improving, as evidenced by its favorable GTN, which is expected to improve over the remainder of 2024 and approach steady state in early 2025.
• The Company submitted an sNDA for ZORYVE foam for scalp and body psoriasis to the FDA in July 2024 based on the positive results from the pivotal ARRECTOR Phase 3 trial and a Phase 2b trial.

ARQ-255 - a topical suspension formulation of ivarmacitinib, a potent and highly selective topical Janus kinase type 1 (JAK1) inhibitor, designed to preferentially deliver the drug deep into the hair follicle, in order to potentially treat alopecia areata at the site of inflammation

• In December 2022, Arcutis announced the enrollment of the first healthy volunteer subject in a Phase 1b study in alopecia areata. The first subject in the alopecia areata cohort enrolled in the second quarter of 2023.
  

ARQ-234 - a fusion protein that is a potent and highly selective checkpoint agonist of the CD200 Receptor (CD200R), being developed as a potential biologic treatment in atopic dermatitis

• The Company continues preclinical development efforts and is working towards submitting an Investigational New Drug Application in 2025.
  

Recent Corporate Highlights 

• In July, the Company Received FDA approval for ZORYVE cream 0.15%, for the treatment of atopic dermatitis in adults and children down to age 6, and launched ZORYVE cream for atopic dermatitis in United States in late July.
• In July, the Company also announced a co-promotion agreement with Kowa Pharmaceuticals America, Inc., whereby Kowa will leverage its 200-person primary care sales force in the United States to market and promote ZORYVE cream and ZORYVE foam to primary care practitioners and pediatricians for all FDA approved indications.
• Amended the $200 million term-loan with SLR Investment Corp., lowering the interest rate by 150 basis points, extending the maturity to June 2029, and obtaining an option to prepay up to $100 million of the principal and re-draw it within 21-24 months at company’s discretion.
• Arcutis obtained five new U.S. patents in June and July related to ZORYVE. These patents cover, in part, formulations and methods of treatment resulting in unexpected and beneficial properties of ZORYVE, including the reduced side effects of ZORYVE compared to orally administered roflumilast and the beneficial pharmacokinetic profile of ZORYVE.

Second Quarter 2024 Summary Financial Results

Product revenues for the quarter ended June 30, 2024 were $30.9 million compared to $4.8 million for the corresponding period in 2023. Revenues for the quarter were $17.3 million for ZORYVE cream 0.3% and $13.6 million for ZORYVE topical foam, 0.3%. Year-over-year and quarter-over-quarter increases were due to strong unit demand as well as GTN improvements. Across ZORYVE cream and ZORYVE foam, blended GTN is now in the high 50s, driven by the high percentage of prescriptions being reimbursed.

Cost of sales for the quarter ended June 30, 2024 were $3.5 million compared to $0.8 million for the corresponding period in 2023.

Research and development (R&D) expenses for the quarter ended June 30, 2024 were $19.3 million compared to $25.2 million for the corresponding period in 2023. The year-over-year decrease was due to decreased clinical development costs related to our topical roflumilast program.

Selling, general, and administrative (SG&A) expenses for the quarter ended June 30, 2024 were $58.2 million compared to $46.0 million for the corresponding period in 2023. The year-over-year increase was primarily due to sales and marketing expenses related to the launches of ZORYVE cream and foam.

Net loss was $52.3 million, or $0.42 per basic and diluted share, for the quarter ended June 30, 2024 compared to $71.0 million, or $1.16 per basic and diluted share, for the corresponding period in 2023.

Cash, cash equivalents, restricted cash, and marketable securities were $363.1 million as of June 30, 2024, compared to $272.8 million as of December 31, 2023. Net cash used in operating activities was $45.2 million during the second quarter.

Conference Call and Webcast

Arcutis management will host a conference call and webcast today at 4:30 pm ET to discuss the financial results for the quarter and provide a business update. The webcast for this conference call may be accessed at the “Events” section of the Company’s website. The replay of the webcast will be available on the Arcutis website following the call.

About Arcutis

Arcutis Biotherapeutics, Inc. (Nasdaq: ARQT) is a commercial-stage medical dermatology company that champions meaningful innovation to address the urgent needs of individuals living with immune-mediated dermatological diseases and conditions. With a commitment to solving the most persistent patient challenges in dermatology, Arcutis has a growing portfolio including three FDA approved products that harnesses our unique dermatology development platform coupled with our dermatology expertise to build differentiated therapies against biologically validated targets. Arcutis’ dermatology development platform includes a robust pipeline with multiple clinical programs for a range of inflammatory dermatological conditions including scalp and body psoriasis, atopic dermatitis, and alopecia areata. For more information, visit https://www.arcutis.com or follow Arcutis on LinkedIn, Facebook, Instagram and X.

Forward Looking Statements

Arcutis cautions you that statements contained in this press release regarding matters that are not historical facts are forward-looking statements. These statements are based on the Company's current beliefs and expectations. Such forward-looking statements include, but are not limited to, statements regarding the potential for its topical drugs in development to address large markets with significant unmet need; the development, approval and potential commercialization of Arcutis' product candidates; the potential continued commercial success and growth of ZORYVE cream 0.3% in plaque psoriasis, ZORYVE cream 0.15% in atopic dermatitis and ZORYVE foam in seborrheic dermatitis, including market access and reimbursement, product demand growth and continued improvement in GTN; and the timing of regulatory filings and potential approvals for a number of dermatology indications for roflumilast in the United States and Canada. These statements involve substantial known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from the information expressed or implied by these forward-looking statements and you should not place undue reliance on our forward-looking statements. Risks and uncertainties that may cause our actual results to differ include risks inherent in the clinical development process and regulatory approval process, the timing of regulatory filings, the timing, expenses, and success of our commercialization efforts, including uncertainty of future commercial sales and related items that can impact net sales, and our ability to defend our intellectual property. For a further description of the risks and uncertainties applicable to our business, see the “Risk Factors” section of our Form 10-K filed with U.S. Securities and Exchange Commission (SEC) on February 27, 2024, as well as any subsequent filings with the SEC. We undertake no obligation to revise or update information herein to reflect events or circumstances in the future, even if new information becomes available.

Contacts:

Media
Amanda Sheldon, Head of Corporate Communications
media@arcutis.com

Investors
Latha Vairavan, VP Finance and Head of Investor Relations
ir@arcutis.com

ARCUTIS BIOTHERAPEUTICS, INC. Condensed Consolidated Balance Sheets (In thousands)
	June 30,				December 31,
	2024				2023
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	84,270			$	88,398
Restricted cash		617				925
Marketable securities		278,167				183,463
Trade receivable, net		43,411				25,807
Inventories		13,880				13,134
Prepaid expenses and other current assets		14,246				18,704
Total current assets		434,591				330,431
Property and equipment, net		1,347				1,539
Intangible assets, net		6,063				6,438
Operating lease right-of-use asset		2,163				2,361
Other assets		595				596
Total assets	$	444,759			$	341,365
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	7,943			$	11,992
Accrued liabilities		42,632				33,941
Operating lease liability		777				735
Total current liabilities		51,352				46,668
Operating lease liability, noncurrent		2,978				3,382
Long-term debt, net		203,808				201,799
Other long-term liabilities		194				849
Total liabilities		258,332				252,698
Stockholders’ equity:
Common stock		12				9
Additional paid-in capital		1,256,327				1,070,558
Accumulated other comprehensive loss		(294	)			4
Accumulated deficit		(1,069,618	)			(981,904	)
Total stockholders’ equity		186,427				88,667
Total liabilities and stockholders’ equity	$	444,759			$	341,365

ARCUTIS BIOTHERAPEUTICS, INC. Condensed Consolidated Statements of Operations (In thousands, except share and per share data) (unaudited)
	Three Months Ended June 30,								Six Months Ended June 30,
	2024				2023				2024				2023
Revenues:
Product revenue, net	$	30,858			$	4,770			$	52,427			$	7,551
Other revenue		—				420				28,000				420
Total revenues		30,858				5,190				80,427				7,971
Operating expenses:
Cost of sales		3,464				776				6,720				1,559
Research and development		19,298				25,219				42,439				60,564
Selling, general, and administrative		58,173				45,958				112,967				88,876
Total operating expenses		80,935				71,953				162,126				150,999
Loss from operations		(50,077	)			(66,763	)			(81,699	)			(143,028	)
Other income (expense):
Other income, net		5,229				3,121				9,273				6,328
Interest expense		(7,484	)			(7,349	)			(14,964	)			(14,391	)
Loss before income taxes		(52,332	)			(70,991	)			(87,390	)			(151,091	)
Provision for income taxes	$	—			$	—			$	324			$	—
Net loss	$	(52,332	)		$	(70,991	)		$	(87,714	)		$	(151,091	)
Per share information:
Net loss per share, basic and diluted	$	(0.42	)		$	(1.16	)		$	(0.75	)		$	(2.46	)
Weighted-average shares used in computing net loss per share, basic and diluted		123,480,849				61,430,620				117,264,687				61,300,577

FAQ

What were Arcutis Biotherapeutics' (ARQT) Q2 2024 net product revenues?

Arcutis Biotherapeutics (ARQT) reported Q2 2024 net product revenues of $30.9M for the ZORYVE franchise, with $17.3M from ZORYVE cream 0.3% and $13.6M from ZORYVE topical foam 0.3%.

How much did Arcutis' (ARQT) ZORYVE franchise sales grow in Q2 2024?

Arcutis' (ARQT) ZORYVE franchise sales grew 547% year-over-year and 43% quarter-over-quarter in Q2 2024.

What was Arcutis Biotherapeutics' (ARQT) net loss in Q2 2024?

Arcutis Biotherapeutics (ARQT) reported a net loss of $52.3M, or $0.42 per basic and diluted share, for Q2 2024.

What new agreement did Arcutis (ARQT) enter into for ZORYVE promotion?

Arcutis (ARQT) entered into a co-promotion agreement with Kowa Pharmaceuticals America, Inc. to expand ZORYVE's promotional efforts to primary care and pediatric offices in the United States.