• Zarife Portfolio Sales: Grew 452% year over year and 45% quarter over quarter, reaching $44.8 million.
• TRX Growth: Zarife portfolio grew 25% quarter over quarter.
• New Prescription Growth: Increased 23% quarter over quarter.
• Gross to Net Improvements: Improved to the low 50% range from the high 50s last quarter.
• Net Product Revenue: Achieved $44.8 million for the third quarter of 2024, reflecting 45% growth from the second quarter.
• R&D Expenses: $19.5 million, down 26% from the third quarter of 2023.
• SG&A Expenses: $58.8 million for the third quarter of 2024, up from $47.6 million in the same period last year.
• Cash and Marketable Securities: $331 million as of September 30.
• Cash Burn: $35 million for the quarter, a decrease of more than 23% quarter over quarter.
• Debt Repayment: Repaid $100 million of the debt facility, with the option to redraw through mid-2026.

• Warning! GuruFocus has detected 4 Warning Signs with ARQT.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Arcutis Biotherapeutics Inc (NASDAQ:ARQT) reported a robust growth trajectory with Zarife portfolio sales growing 452% year over year and 45% quarter over quarter, reaching $44.8 million.
• The company has successfully expanded its Zarife portfolio to include psoriasis, seborrheic dermatitis, and atopic dermatitis, making it the first topical anti-inflammatory agent with indications for all three conditions.
• Arcutis Biotherapeutics Inc (NASDAQ:ARQT) has made significant progress in improving gross-to-net percentages, now in the low 50% range, a meaningful improvement from the high 50s last quarter.
• The company has secured Medicaid coverage in several states, representing roughly four in ten Americans, and is making progress with Medicare Part D programs.
• Arcutis Biotherapeutics Inc (NASDAQ:ARQT) anticipates no need to return to the equity market to support its existing businesses, expecting to reach breakeven by 2026 with current capital and growing product revenues.

Negative Points

• The company faces challenges in transitioning patients away from topical steroids, which remain the primary competition in the market.
• There is a delay in securing Medicare Part D coverage due to operational impacts from the Inflation Reduction Act, affecting the timing of coverage dynamics.
• The contribution from the co-promotion partnership with Coa in primary care and pediatrics is expected to take time to ramp up, with no specific guidance provided for 2025.
• The company experienced nominal impact from hurricanes Helane and Milton, although it quickly recovered.
• Arcutis Biotherapeutics Inc (NASDAQ:ARQT) faces competition from other branded topical agents, and the impact of the transition of Topinaroff to a new company remains uncertain.

Q & A Highlights

Q: Can you provide insights on the expected contribution from the primary care partnership with Coa and the Alopecia areata readout? A: Frank Watanabe, President and CEO, mentioned that the contribution from Coa is expected to start in 2025, but specific guidance on the contribution is not yet provided. Patrick Burnett, Chief Medical Officer, explained that the Alopecia areata readout is primarily a safety and biomarker study, with some clinical endpoints, aiming to establish evidence for success in later trials.

Q: Was there any stocking in the quarter that contributed to the results, and what are the coverage dynamics expected in 2025? A: Todd Edwards, Chief Commercial Officer, stated there was no significant stocking impact. The improvement in gross to net was driven by converting more prescriptions to paid ones and efficient fulfillment processes. For 2025, positive discussions with Medicare Part D payers are ongoing, but operational delays due to the Inflation Reduction Act have affected the timeline.

Q: How will the Coa promotion in primary care affect gross to net, and what is the expected impact on prescription fulfillment? A: Todd Edwards explained that the Coa promotion is not expected to impact gross to net adversely, as the same payer coverage and fulfillment processes apply as in dermatology. Prescriptions will be fulfilled through the established specialty pharmacy network.

Q: What is the expected proportion of Medicare Part D coverage for Zarif in 2025? A: Todd Edwards indicated that initial coverage will be a proportion of the Medicare Part D business, with expectations to secure a majority of the impact and expand coverage over time.

Q: How does the change in ownership of a direct competitor affect the competitive environment? A: Frank Watanabe noted that the impact of the competitor's change in ownership is still uncertain, but the delay in their product's PDUFA action date is advantageous for Arcutis, allowing more time to build their brand.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.