Arcutis Biotherapeutics, Inc. Q3 FY2024 earnings call

• ZORYVE portfolio sales grew 452% year-over-year and 45% quarter-over-quarter to $44.8 million.
• The ZORYVE portfolio now covers psoriasis, seborrheic dermatitis, and atopic dermatitis, with plans to expand indications like scalp and body psoriasis in mid-2025 and pediatric patients in atopic dermatitis and psoriasis.
• Made progress in government payer coverage, securing Medicaid coverage in multiple states and making progress in Medicare Part B negotiations.
• Partner Kowa is promoting ZORYVE to primary care doctors and pediatricians, with expected meaningful contribution from co-promotion starting in 2025.
• Overwhelming majority of prescriptions are topical steroids, presenting a large growth opportunity as clinicians transition to ZORYVE portfolio.

The ZORYVE portfolio achieved net product revenue of $44.8 million in the third quarter of 2024, representing a 452% year-over-year growth and a 45% quarter-over-quarter growth. The ZORYVE portfolio contributes significantly to the company's revenue, with its sales growth driving the overall financial performance.

• Expect to maintain strong revenue growth in the remainder of 2024 and into 2025.
• Anticipate reaching breakeven point in 2026.
• Expect seasonal regression in gross-to-net during the first quarter of 2025 but gross-to-net to remain in the 50s overall.

• Impact of Medicare Part D implementation changes on coverage negotiations.
• Potential changes in the competitive environment, such as transitions with direct competitors.
• Nominal impact from hurricanes Helene and Milton on volume, though quickly recovered.

Q: Please elaborate on the cadence of contribution from the Kowa co-promotion starting in 2025 and how it might trend throughout next year?

A: Kowa has been promoting since September in primary care and pediatrics, but it's a longer selling cycle for a new branded topical. A meaningful contribution is expected in 2025 but no specific guidance on the exact contribution amount.

Q: What would be looked for in the Phase 1b readout of ARQ-255 in alopecia areata?

A: Looking for evidence of safety and tolerability in topical application to the scalp, and some evidence of efficacy to support a longer duration clinical trial.

Q: Was there any stocking in the quarter contributing to the impressive result?

A: No stocking relative to actual gross-to-net. Gross-to-net improvement was driven by converting more prescriptions to paid ones, efficient prior authorization and fulfillment process, and decline in patient deductibles and co-pay.

Q: How will coverage dynamics in 2025, especially Medicare and seborrheic dermatitis, progress?

A: Positive discussions with Medicare Part D payers, but Inflation Reduction Act changes delayed coverage in 2024, expecting coverage in 2025 which will benefit atopic dermatitis, psoriasis, and seb derm.

Q: How does Kowa's promotion impact gross-to-net?

A: Kowa's promotion in primary care and peds doesn't anticipate impact on gross-to-net as it's consistent with payer coverage and prescription fulfillment process in dermatology.

Q: What to expect from Lilly's CD200R agonist data and its impact on ARQ-234?

A: Would like to see validation of efficacy in atopic dermatitis with CD200R agonist mechanism. Any validation helps, and plan to move ARQ-234 forward as quickly as possible.

Q: What proportion of 3Q sales are attributable to the Kowa deal?

A: Results from Kowa in the third quarter were essentially immaterial as they started mid-September.

Q: What's the blend of commercial versus government payer contribution to 3Q revenue?

A: Q3 net revenue was primarily driven by commercial, with some Medicaid uptake in earlier states but Q3 was mainly commercial.

Q: How was the pricing strategy informed and its impact on payer negotiation?

A: Strategy was to optimize access to Medicare and Medicaid populations, avoiding specialty tier with Medicare. Confident in securing good Medicare coverage in 2025, and pricing strategy helped in rapid progress on commercial front and Medicaid uptake.