Arcutis Biotherapeutics, Inc. Q2 FY2025 earnings call

• Strong revenue growth: Q2 2025 net product revenues were $81.5 million, up 28% QoQ and 164% YoY, driven by increasing demand for ZORYVE.
• FDA approval: ZORYVE foam 0.3% was approved in May 2025 for plaque psoriasis of the scalp and body.
• Conversion progress: Continued progress in converting topical steroid prescriptions to ZORYVE, as clinicians recognize risks of extended steroid use.
• Operating leverage: Improving operating leverage with disciplined expense management, moving towards cash flow breakeven in 2026.
• Life cycle management: Plans for ZORYVE label expansions, including pediatric atopic dermatitis, and life cycle management strategies leveraging various formulations.
• Program halt: Halted development of ARQ-255 after Phase Ib trial results showed insufficient efficacy for alopecia areata.
• Partnerships: Progress with Kowa partnership for primary care and pediatric expansion, including a dedicated national pharmacy to support prescribing and fulfillment.

In the second quarter of 2025, Arcutis reported net product revenues of $81.5 million for the ZORYVE franchise. This represents a 28% quarter-on-quarter growth and 164% growth compared to the same quarter in 2024. ZORYVE's revenue contribution is derived from its strong adoption by health care providers and patients across various inflammatory dermatosis indications.

• Sales growth: Anticipates steady sales growth in 2025 driven by new indication launches, PCP and pediatric channel, and steroid conversion.
• Seasonality: Moderation in sequential growth in Q3 due to topical product seasonality, then robust growth in Q4.
• Cash flow: On track to achieve cash flow breakeven in 2026, with future clinical development funded by ZORYVE cash flows, though potential acquisitions might require incremental capital.

• Seasonality: Topical prescription products face seasonality, affecting growth rates.
• Medicare Part D: Complexities due to Inflation Reduction Act changes causing delays in coverage decisions.
• European market: Challenging reimbursement landscape in Europe, making ex-U.S. expansion less compelling currently.

Q: About Q3 growth and business development, A: Todd mentioned Q3 will have continued growth but moderated due to seasonality, while Frank discussed being rigorous in choosing new indications and focusing on development expertise for value creation.

Q: On Kowa partnership and dedicated pharmacy, A: Todd stated slower adoption in primary care but Kowa is taking actions, and the dedicated pharmacy is seeing positive signals.

Q: On gross to net and Phase II studies, A: Latha said gross to net was stable, and Patrick explained Phase II studies in HS and vitiligo for early efficacy understanding.

Q: On peak sales opportunity, A: Frank mentioned initial view of $700M to $1.2B per indication remains, and growth to 10% market share is achievable.

Q: On sales force and Medicare, A: Frank said no immediate need to expand dermatology sales force, and Todd discussed Medicare classification and Medicaid progress.

Q: On doc adoption of multiple indications, A: Frank stated most derms have adopted multiple indications, with exceptions being unique to practice.

Q: On Medicare classification and Medicaid progress, A: Todd said ZORYVE is in dermatology topical basket, and Medicaid access has expanded to over half of recipients.

Q: On ex-U.S. opportunity, A: Frank said European reimbursement landscape is challenging, making ex-U.S. expansion less compelling currently.