Hi, good afternoon, and welcome to Needham's 23rd Annual Healthcare Conference. I'm Serge Belanger, one of the senior analysts of the healthcare team at Needham, and we're happy to have for this afternoon's session, Arcutis Biotherapeutics. We have the company's CEO, Frank Watanabe, company's very new CFO, David Topper, as well as their head of investor relations, Lottie Rivett.
So I think I'll hand it over to Frank. He can give us a quick overview of the company for those who aren't familiar with Arcutis, and then we'll jump to some Q&A. I guess before I hand it over to Frank, just wanna remind everybody listening in that they do have the option to submit questions on the portal they're watching the presentation on. You can also email me questions. I'll take them as they come in. So I'll hand it over to Frank.
Great. Thanks, Serge. Great to be here. Yeah, so for folks who aren't familiar with Arcutis, we are a pure medical dermatology company. Been in existence about eight years, a little over eight years now.
You know, the company was really founded out of recognition that there were not many companies that were focusing on innovation in medical dermatology, especially innovation in the non-biologics space, and I think there's been a lot of innovation in the last couple of decades in biologics, and some very large diseases that were really undertreated.
S o we've developed a portfolio of products over the years to treat various mostly inflammatory skin diseases. We had our first product approved in July 2022. That's a cream, topical nonsteroidal cream for plaque psoriasis.
Trade name is ZORYVE, and that product's been on the market for about 18 months now. T hen in December of last year, we got the second product approved. It's a foam version, same active ingredient, also called ZORYVE, and that was approved by the FDA for plaque... Sorry, excuse me, for seborrheic dermatitis.
Excuse me. We have a supplemental NDA in front of the FDA right now for ZORYVE cream for the treatment of atopic dermatitis or eczema, and we have a PDUFA date in early July for that indication. T hen we plan to file a supplemental NDA of the roflumilast foam, ZORYVE foam, for the treatment of scalp psoriasis in the second half of this year and, you know, be launching sometime next year.
You know, the uptake of the cream, I think, has been gone very well. We see nice, steady progression growth in that product. Did about $13 million in the fourth quarter, which was about a 70% growth rate over Q3, and Q3 was about a 70% growth rate over Q2, so very nice growth.
T hat's really being driven both by an increase in prescription demand as well as the steady improvements in our gross-to-net. The foam we launched in late January, and the uptake of the foam has really been, I think, quite exceptional. There has not been a new treatment for seborrheic dermatitis in over 20 years, and the existing therapy has really left a lot to be desired.
S o doctors have really readily latched on to this new treatment option for seborrheic dermatitis with very good efficacy as well as good tolerability, very good tolerability, and all in a formulation that's very convenient for patients to use. I think that that combination of features is unique and is what's really been driving the uptake of the foam.
Y ou know, we, we feel very good about the seborrheic dermatitis and scalp indications as well, and, and look forward to, to reading those out. We do have some earlier-stage programs, but I, I, I think most investors are probably focused mostly on, ZORYVE, and, and the, the various presentations there.
The other programs we have in our pipeline, we have a topical JAK inhibitor in the clinic for alopecia areata, and then we do have a biologic in development for atopic dermatitis. That's at a late-stage preclinical. We're just completing our IND-enabling work on what we call ARQ-234.
Great. So almost as exciting as the sebderm launch is, in the last couple of days, you announced a new CFO. So I'll ask David if he wants to introduce himself and maybe tell us why he was attracted to Arcutis.
Thanks, Serge. As Serge said, I am brand new. I'm literally in my second day, so I'm not gonna answer too many questions today. But I have actually been around this company for a while. I was at Frazier Life Sciences, which was one of the, you know, first investors in the company. So I've known it well.
I've worked with the company on various projects over the years, so I've gotten to know the team a nd, you know, I find it very, very exciting. So when I got the call asking me if I'd throw my hat in the ring, I was... It took me about two seconds to say yes, and I couldn't be more excited to be here.
Great! Well, looking forward to working with you. So Frank, let's... Obviously, sebderm has been, I think, kind of the key highlight of the company since January. I know you were expecting this to be successful, but are you surprised at this uptake? I guess what has been the most surprising? Is it the trend, how quickly we've seen the uptake or anything else that's been driving this?
Yeah. Yeah, I think we really knew this was going to be big. It you know, it's a very innovative molecule, fits very well with what customers and doctors want, and as I mentioned before, there had been a real lack of innovation in this space.
I think it, you know, the speed of the uptake probably did catch us a little bit by surprise. You know, we knew it was gonna be big, but we didn't know it was gonna be sort of meteoric. Although I will say, I do think we believe that there's likely to be some moderation in the growth, right? You know, because there hasn't been a new treatment in two decades, there was a lot of pent-up demand right at approval, and I think that the very rapid uptake that we saw in the first few weeks is probably a reflection of, you know, this backlog of patients that's been waiting for this new foam.
I don't think that, you know, this kind of growth rate is sustainable. I think we'll continue to see good growth, but we would expect to see some moderation as that backlog of patients really clears. Now, the flip side, I would say of that is the long-term growth potential in sebderm is very strong. You know, there are about as many sebderm patients treated topically for their disease as there are psoriasis patients treated for psoriasis, right?
So it's quite a large market, and about 4.5 million patients in the U.S. alone being treated topically for seborrheic dermatitis, topically for seborrheic dermatitis. The average dermatologist sees about 20 sebderm patients a week. So there's a lot of volume out there, and, you know, the beauty of this indication is we don't have any competition, right?
There are no other branded products promoted in the class. As I said, there have been nothing, nothing new in 20 years, and there's nothing else in development. So, you know, we think this is going to be a very good long-term engine of growth for ZORYVE. And I think it also speaks very well for the prospects around the scalp psoriasis indication that, you know, we'll file later this year. Very similar setup.
Almost half of psoriasis patients have scalp psoriasis, about half of psoriasis patients have scalp psoriasis. A gain, there's been a complete lack of innovation in that space. And so I think once we get that approval from the FDA, you know, sometime in 2025, that will be yet another engine of growth for ZORYVE in the long term.
Okay. I know it's still early, but are you starting to get an idea of where this is used in these new sebderm patients, or are these existing sebderm patients that are switching from their ketoconazole shampoo or lotion? Any idea at this point?
I suspect the majority of patients are patients who were already on topical treatment, you know, receiving ketoconazole and/or steroids, some combination. You know, it's a very typical treatment paradigm, and they've got now a easier, better option. You know, the problem with the ketoconazole formulations is that, you know, you have to put them in your hair and leave them in for an extended period, you know, 10 minutes or longer, before you wash them out, and you're supposed to do that daily.
Especially for women with longer hair, they don't wash their hair every day, so that's a problem. The solutions tend to be messy and difficult for patients to use, and they can often mess up people's hairstyles as well.
The challenge, I think, with steroids is that they're effective, but, you know, they're safe for short-term use, but they're not safe for long-term use, and it's very easy to get in trouble with using steroids on the face, which frequently occurs with seborrheic dermatitis. You know, in our clinical trials, two out of three patients had disease on the face.
So you know, having something that's once a day, it's a leave-in, you don't have to rinse it out, it has very strong efficacy, and we had an 80% response rate in Phase III, and it has no safety or tolerability issues. You know, the doctors are just switching all of their patients over from keto or keto and steroids to ZORYVE.
Okay. I think you mentioned the fact that it had access right off the start, unlike the psoriasis launch obviously, it's been a big tailwind. Maybe just talk about that access currently.
Yep. Yeah. So yeah, well, you know, we knew with ZORYVE that we were going to have these multiple indications and formulations, and so when we negotiated our original contracts with the PBMs back in 2022 for the cream, we made sure that we had built-in clauses that covered line extensions a nd that was how the payers viewed the foam as a line extension.
S o we received coverage by the three major national PBMs at approval for the foam. They just said, "Well, you know, we've already agreed to cover ZORYVE, and you're done. It's covered." John mentioned, or sorry, Todd mentioned, I think on our Q4 earnings call, that all the way back in, was it mid-February, late February, already we had about almost half of all prescriptions were being reimbursed.
You know, that trend will continue to improve. You know, which will also bring down our gross-to-nets very rapidly as well. I think importantly, we would expect a similar phenomenon with the cream for atopic dermatitis and the foam for scalp psoriasis as well, where, you know, we get very rapid uptake.
Now, we're not on the foam where we are with the cream 'cause we've been pursuing coverage now for 18 months with the cream. But it won't take us 18 months for the foam to match the cream in coverage. I think that'll happen very quickly.
Okay, and when you talk about the three national PBMs, like, what does that kind of represent in terms of covered lives relative the piece of the pie?
Yeah. So, so if you think about it, the three big PBMs probably represent around 80% of all commercial patients, but I think it's important to note, you know, three big PBMs being Express Scripts, Optum, and CVS, right?
Of those 130 million patients, roughly something like that, about 75 million of those patients are actually in a formulary managed by the PBM, and the other 75 million are on a formulary managed by the downstream insurance plan, you know, UnitedHealth, Aetna, Cigna, so on and so forth.
Okay.
PBMs, when they make a decision, it applies to the 75 million who are on their formulary, and then we've got to go and negotiate with the downstream insurance plans for the other 75 million, and that's why there's a little bit of a lag in getting coverage. But it's all under the PBM contract, so, you know, we have good confidence, and we've already gotten the cream covered. So, you know, we're confident that we'll get the downstream plans to cover the foam, too. We're just not quite there where we are with the cream at this point.
Nature of coverage is, if I recall, all without prior auth or minimal prior auth?
Yeah, it's a very, very favorable. In fact, it's slightly better than the cream in some places. It's generally a single step through a generic either steroid or ketoconazole, and then the patient can go on the drug, a nd, you know, to your earlier question, most of these patients have already been on keto or a steroid, and so it's a very easy requirement for the doctor to document and move on.
Okay. While we're on the subject of coverage, I believe one of the goals or priorities for 2024 was securing managed care. I assume it's for both the cream and the foam. Just curious where you are and when we should start getting updates on-
Yeah. Are you referring to Medicare and Medicaid?
Yes.
Yeah, yeah. So absolutely, that is a top priority for us. Excuse me. You know, the timeline for the Part D plans or Medicare Part D plans is quite defined. You know, you typically bid in the fourth quarter for five quarters later. That's the government, right? S o, you know, we have gone into the bidding process for 2025.
Having said that, some of the insurance plans may accelerate coverage into 2024. You know, we're hoping that that occurs. We would be delighted to see that happen. T hen with Medicaid, you have to negotiate with each individual state for Medicaid coverage, so you know, we've got to deal with 50 different states. I think we will start picking up states, you know, during 2024, and we'll start picking up Medicare plans in 2024. But, you know, it'll take a little time for us to get all of that, that business, just because it's so diffuse.
We think that's a very important opportunity. About half of all atopic dermatitis patients and about half of seborrheic dermatitis patients are government pay. It's a little bit less than psoriasis. It's maybe a third of the psoriasis market, but that's a very sizable opportunity. Y ou know, ZORYVE is really in a unique position in the branded topical space because we're the only branded topical that's priced below the specialty tier of Medicare and Medicaid.
So if we get coverage, it will be really pretty available to, to those patients, which, you know, the other topical branded product, branded topical products really aren't because of their price points.
Got it. C overage you expect from Medicare Part D, very similar to what you get on the commercial side in terms of prior auths or step throughs?
Yes. Yeah, we would expect something very similar, yep, and Medicaid as well.
With Medicare Part D, do you have to offer a certain level of discounting or rebating that could impact your overall gross to net?
Yeah. You know, you know, look, we're still negotiating, so we don't know what the rebate you know, you typically are giving a larger rebate to Medicare, but I think that importantly, you don't have any co-pay assistance for Medicare.
Right.
S o net-net, you know, we think that the Medicare and Medicaid book of business is going to be, you know, roughly comparable to the commercial book of business in terms of profitability. It will not be a major hit to our gross-to-net. A gain, that's, you know, I think one of the direct outcomes of our pricing strategy for ZORYVE, that we're not having to give outsized rebates to get coverage.
Yeah. O n the commercial side, where are the co-pays currently?
So, you know, what the plan charges varies from plan to plan, even within one insurance company, right? You can have different benefit designs. But, the offer that we have for commercial patients is that if your insurance company covers ZORYVE, you pay no more than... well, you pay nothing. It's zero. A zero co-pay for the patient, we buy them down. If your insurance company doesn't cover it and you're commercially insured, it's either $35 or $75, depending on which pharmacy you go to.
Got it. I think you've kind of guided us to expect gross-to-net improvements on a quarterly basis throughout the year. Is your steady-state target still around 50%? Is that achievable for-
Yeah, I think we'll probably end up like something in the mid-fifties.
Yeah.
Y ou know, I think particularly given the very good progress that we saw last year in our gross-to-net improvements, you know, we were already down in the mid-60s in Q4 of last year. You know, we feel, I think, pretty confident that we'll get to a steady state on the cream, you know, probably towards the end of 2024 a nd I think the foam will probably not be that far behind it, in terms of gross-to-nets, as we pick up these downstream plans.
Got it. Okay. Just going back to the uptake in SEB derm, do you expect it could have kind of a halo effect on the, for the foam product in psoriasis, as- [crosstalk]
No, no question. I've been out talking to customers all this week, and I was struck by how often that came up that, you know, I, I, we either, you know, they're using the foam, and it reminds them of how good ZORYVE is, and so then they start thinking about using the cream more as well.
We have a, a small number of doctors who never have written the cream yet, and there's a couple thousand doctors who haven't written the cream yet, who've now started using the foam a nd some of them now are also going back and rethinking, you know, whether to adopt ZORYVE cream. So I, I do think that there's a halo. You know, the halo really goes both ways.
The doctors who got on board with ZORYVE cream early and had very positive experiences, their adoption of the foam was, you know, immediate, right? They're like: "Wow, I get into foam now, too," right? But I think the foam is helping us with the cream business as well.
Okay. So like you mentioned earlier, this is not gonna be a rocket that goes vertical forever. At some point, it levels out, right?
I wish, but no.
But I guess as you, as more coverage comes on board, that starts generating more growth. Anything else from a sales perspective, that could also kind of drive additional growth?
Yeah, well, I mean, I think, you know, other than the new indications that we talked about, I think Medicare and Medicaid will be an important driver of continued growth for the franchise. You know, if you think about, about half of our target patients are non-commercial patients, so that's a big opportunity for us.
T hen the other really important, I think, growth opportunity for us longer term is a lot of atopic dermatitis and seborrheic dermatitis patients are not seen by a dermatologist, right? They're either treated by primary care docs or by pediatricians a nd, you know, we have long stated that we intended to look for a partner in that space. We're in active discussions with potential partners.
You know, I think that it's likely that we'll have a primary care partnership in place, you know, probably by later this year. A gain, I think that can be a very important long-term driver of growth. You know, this product is really ideally suited for the primary care and pediatric settings, and we're approved down to age nine for the foam and down to age six for the cream, and we expect to eventually get down to age two with the cream.
You know, it's just such a safe and well-tolerated drug compared to what PCPs are using today, that we think there's probably gonna be good uptake in the primary care setting as well.
Okay. So let's talk about the ongoing psoriasis launch. It's been, well, over a year, obviously now.
It's about 18 months now. Yeah.
18 months. So maybe just give us an update on, you know, how the product is, where it's situated in the market, and where you think growth will come from in 2024.
Yeah. You know, I think we're in a very good place. We still have a lot of work to do with the psoriasis launch. There's a lot of patients yet to be converted over. You know, I think the real opportunity is moving doctors away from topical steroids, right? There are about 25 x as many prescriptions for a topical steroid as there are for non-steroidals in the psoriasis space. You know, the challenge with steroids again is that they're a really good acute treatment for a chronic disease, right? You can use a steroid for two, three, four weeks safely.
Two, three, four months, and you're having problems, right? Especially the high-potency steroids that are used in psoriasis. What we see from doctors is that, you know, their paradigm is shifting, where they're starting a patient on the steroid maybe for a couple of weeks, and then they're starting them with ZORYVE too, and then they're withdrawing the steroid after a couple weeks and just leaving the ZORYVE because they know they can maintain that patient long term, and not have any safety issues and have the efficacy continue to maintain.
Y ou know, I think slowly doctors are adopting that mindset. You know, again, I was out with customers this week, and that came up repeatedly that that's sort of how they're thinking about it. I think the other place that we're seeing, continuing to see very good uptake is in treating plaques in sensitive areas of the body, the face, the groin, the armpit, inframammary crease. You know, people should remember we're the only topical approved by the FDA for treating those sensitive areas.
There are no other products with that indication. S o, you know, that's a logical place for doctors to reach for ZORYVE, and they get very good performance, but they're using it on a whole range of patients. Even, you know, adjunctive to biologics, you know, if a patient has residual plaques after, you know, treatment with an IL-23 or an IL-17, they'll just give them some ZORYVE to clean it up.
But I think over time, we're gonna see more and more of those steroid patients either move to ZORYVE or start using ZORYVE in combination with the steroid in place of, you know, maybe a vitamin D or a tazarotene that they might have used in the past for maintenance therapy.
Is the usage here kind of in mild to moderate disease, or all the way across the entire range of...
Yeah, the doctors use it across the range, and we're approved across the range and shown efficacy in all three groups. But I would say, less than severity, it's body surface area.
Okay.
You know, most dermatologists, you know, if a patient's got 20% of their body covered in psoriasis or more, that's automatically a biologic patient. You know, even over 10%, they're probably thinking about going to systemic therapies just because of the complexity of putting a cream on, you know, a quarter of your body, right? It just becomes difficult, especially for psoriasis patients.
Now, I will say that's very different. Well, it's different than sebderm because sebderm tends to be in a very limited body surface area. But it's also different from atopic dermatitis because AD patients are typically covering all of their diseased areas twice a day with moisturizers, right? AD can be quite extensive. We had patients in our clinical trials with more than 80% of their body covered with AD.
So to ask a patient to put moisturizing cream on in place of or in addition to their moisturizer is not a big stretch. It is a stretch for psoriasis patients. So those higher body surface area patients, doctors are going to systemic therapies, and then maybe they add ZORYVE as an adjunctive therapy. They're not gonna probably manage that patient on monotherapy ZORYVE.
In terms of, I guess, competition, obviously, there's, there's another branded topical out there. There's orals. Are those kind of the ZORYVE competitors, or, or you still think the steroids are, are the main hurdle and-
Yeah. The orals really are more in competition with the biologics for those higher body surface area, more severe patients, and, you know, and they will likely be getting adjunctive topical treatment as well. So we really don't see the orals or the injectables as competition. There are other products in the space, including... Yeah, there was another recently launched product that is competition, quite frankly.
But I do think, again, when you look at where the patients are, topical steroids are where the action is. That's the real opportunity, is getting dermatologists to move away from topical steroids. And, you know, I think along those lines, we believe that having multiple indications, multiple formulations, multiple concentrations is an important part of that because, you know, then ZORYVE can become, you know, kind of like the Swiss Army knife.
You know, typical dermatologist, when you have AD, sebderm, psoriasis, and scalp psoriasis, that's a pretty high percentage of their patient load, a nd they can be using ZORYVE eventually when we get the FDA approvals in all of those patients, and that's what we think will, you know, allow us to eventually become sort of the go-to topical in dermatology.
Okay. So in terms of continuing growth here for this year, I guess as you can continue to expand coverage and access, that starts driving more scripts and more sales?
Yeah, that's right. Yep.
Perfect.
T hen obviously continued penetration in the commercial psoriasis patients as well, and sebderm patients.
Let's talk about next launches. Nothing wrong with additional launches of the same product. So I guess the next one, July 7th, the PDUFA for AD. I mean, how confident are you here? I assume it's already been approved for two indications. I mean-
We think-
I know you're not going to call it a layup, but... [crosstalk]
You know, nothing's ever for certain with the FDA, right? But, you know, if you think about it, why does the FDA not approve a drug? Efficacy, safety, or manufacturing, right? Well, manufacturing is easy. They've already approved our product twice, so that's, that's not a risk, right?
F rom an efficacy standpoint, the efficacy in our Phase II trials is very, very clear, right? We separate as early as week one, on our primary endpoint. We separated on itch in 24 hours, right? I mean, the drug works. No question about that a nd from a safety and tolerability standpoint, you know, A, it's already approved. You know, this is a known class, a known drug with the FDA. And B, if you look at our clinical data, there are no safety or tolerability concerns whatsoever. So I can't imagine why the FDA wouldn't approve us.
Yeah.
But it's never over till it's, right. T hen, you know, post-approval, you know, we think we have a really compelling product profile. You know, you think in, in atopic dermatitis, a lot of the patients are kids, and, you know, regardless of what dermatologists think, a lot of parents are concerned about giving their kid a steroid, and they're really concerned about giving their kid a drug with a boxed warning, right?
Which all of the other products for atopic dermatitis have boxed warnings other than the steroids. So to have a really effective drug that's safe, and well-tolerated, no boxed warning, and I think importantly, will be the first once-a-day cream, well, first once-a-day product, topical product for atopic dermatitis.
You know, anyone who's got a kid, imagine if you had to strip your kid down twice a day and slather them in, you know, Vaseline, which is what you're doing with an ointment, right? Or even a, you know, slathering them in a cream. That's a heavy lift for a parent, right? So having something that's once a day, it's a cream, very easy, you know, well-tolerated, that's gonna be a big plus for, especially for parents of kids with atopic dermatitis.
I imagine since this is another cream product, whatever coverage you have for psoriasis will just be extended here to AD? Pretty similar.
We would expect it to be something very similar to the foam, right? Where we get the PBMs right away, and we're able to get the downstream plans relatively quickly. So again, much accelerated compared to what we were able to achieve in plaque psoriasis, which already was pretty accelerated by industry standards because of our unusual pricing strategy.
Okay. I think in the past, you've talked about AD as kind of the trigger to expand the sales footprint. Meaning-
Yeah, that's right. Yep, we, we would expect to expand our team in dermatology around the atopic dermatitis launch, excuse me. T hen, as I mentioned before, also probably expand into primary care then sometime after that.
Okay. What kind of expansion are we talking about here?
Yeah, so, in dermatology, you know, it's probably not a doubling in size of our sales team. You know, I would say it's a meaningful increase, but probably won't be a doubling. T hen, you know, in primary care, we're looking for a partner, so that won't actually be on our shareholders' nickel.
Okay. S o that would be somebody that already has a primary care sales force and is already involved in the derm?
I wouldn't necessarily. You know, I mean, the crazy thing about primary care docs is they treat everything, right? You know, I used to be a sales manager in primary care. You know, we carried, you know, diabetes drugs, depression drugs, pain drugs, GI drugs, and the doctors wrote all of them, right?
So they don't really need to be derm, especially this isn't a complicated sell, right? You know, it's safe, it works, it's easy. Just write it, and, you know, you're off to the races, right? So I don't think it has to be a company that is already in dermatology. They just need to be in primary care.
Okay. W ould you need to... I would imagine most of the PCPs aren't that familiar about ZORYVE. I mean, it's mostly a dermal-
I don't think, I mean, there's hardly any prescriptions for any of the new topicals coming out of primary care at this point. So, you know, there'd be, you know, some education involved. Yeah.
Okay. So the AD approval is kind of the trigger for partnership here, or?
Yeah. Yeah, that's right. You know, I think sebderm represents an opportunity as well, but we've really been indexing on AD, and part of that is also, there's a temporal dimension to this, too. You know, primary care docs look to dermatologists for guidance on treating dermatologic diseases, right?
So we didn't necessarily need the foam in primary care right away because we're still building that dermatologist experience. By the time we get the AD launch, you know, there'll be a fair bit of experience with ZORYVE, and the dermatologist can then, you know, influence their peers in terms of the adoption of ZORYVE.
Makes sense. I don't expect you to give guidance, but maybe just your expectations on how this launch could be. Is it sebderm, or is it psoriasis?
You know... That means it's always hard to tell, right?
Sure.
I certainly wouldn't expect it to look like subderm. You know, I think the two unique characteristics about subderm is the complete lack of innovation for decades and the lack of competition, right? You just don't find those facts very often in pharma. I think that's what you're seeing with this, this really stratospheric uptake. Atopic dermatitis is a very competitive marketplace, and I think we need to recognize that.
There have been, you know, some other topicals in the last decade that have come out in AD. You know, we think we have some real advantages over them, but they're out there, so we'll have to deal with the competition. It's a bigger market, so I think eventually it will become the largest of all of our indications, but I think it will probably be somewhere.
I would guess it'll fall between seborrheic dermatitis and psoriasis because, you know, again, we have the advantage of it's the same thing, right? The doctor already has used the product. They know how effective it is, how safe and well-tolerated it is, and they know how to get it reimbursed and, you know, and fulfilled for their patient. S o the AD launch should go faster than psoriasis, but I wouldn't expect it to look like sebderm.
Got it. Okay. The other indication, scalp and body psoriasis, any timelines on... Well, I guess remind me again if it's been filed or not, and-
No, we haven't filed yet, and that's really just a function of, you know, we're a small company and have a limited regulatory team.
Sure.
Filing NDAs and Canadian NDAs left and right, and they just, you know, we've got to sequence the work. What we've said is that we expect to file in the second half of this year and we would expect a ten-month review. So, you know, whenever it gets submitted, you know, fairly quickly we'll know what the PDUFA date is.
But, you know, I think probably sometime around middle 2025 for scalp a nd, you know, unlike AD, I suspect that scalp will be quite a bit of uptake, you know, maybe more like sebderm because, again, you know, there's a lack of innovation and a lack of competition for those scalp psoriasis patients.
Okay. But in terms of overall market size, it's probably the smallest one relative to psoriasis, AD, and sebderm?
Well, yeah, I mean, I think if you have to think about that as a subset of the psoriasis market, right? It's about, about 40% of psoriasis patients have scalp psoriasis.
Okay.
So it, you know, will get caught up in that, and will probably replace the cream in some cases, because when we did our Phase III study, we actually did co-primary endpoints of treatment, the clearance on the scalp and clearance on the body, right? So that we showed that you could use the same foam everywhere. You don't have to use the cream on the body and the foam on the scalp a nd, you know, the foam performs identically to the cream on the body.
Got it.
The IGA was identical to what we saw in Phase III with the cream. So, you know, there, there might be some cannibalization between the foam and the cream, but, you know, ultimately, you know, what, what matters to shareholders, I think, is growth of the overall ZORYVE franchise, and we think this will be a, a, an important driver of growth going forward.
I guess lastly is the other sNDA for the pediatric label extension in AD, but I guess can't file that until you have the AD approval?
Exactly. That's right. Yep. Yeah, you stack two NDAs on top of each other, and it slows everything down. The FDA does not like that.
We actually had a question come in, regarding the sebderm launch, whether there was any type of support or co-pay buy downs to make sure patients get the foam? Whether-
Yeah, actually, and this is an important feature of ZORYVE. The access process and the access offering is identical for the foam and the cream, right? So the doctor doesn't have to think about, "Oh, it's this for this one and that for that one." It's exactly the same, and I think that's helped with the uptake because, you know, they figured it out already for psoriasis, and so when they want to write the foam, it's very easy for them just to switch and go with the foam b ut it's the same 0.35 or 0.75 offer.
Got it. I'm curious, I'm sure you've had experience with various co-pays. At what level of co-pays do patients start pushing back?
Yeah, $50 is usually where you see a really rapid drop-off, in patient fulfillment of the prescriptions, right? They go to the pharmacy, pharmacist say, "Hey, it's gonna be $75." The patient says, "Eh, eh, you know, no, I'm not interested." Right? So that, that's really... Being below $50 is important.
It's also important to look at what your competitors are offering. You don't necessarily have to match them, but you don't want to be way, way out of whack with the other products out there. You know, I think we're at a good place right now with co-pay offer. You know, we've kind of tweaked it throughout the last 18 months to find out what the sweet spot was and, you know, I think where we've landed is probably where we're gonna stay for a while yet.
Okay. M aybe just to wrap up the ZORYVE conversation, I don't know if you can give any update on the... I think there's a generic filer. You've since initiated Hatch-Waxman, so maybe just-
Yeah. We have filed a lawsuit against the ANDA filer, and so that triggers a 30-month stay under Hatch-Waxman. As folks probably are aware, you know, we have a very extensive IP portfolio around ZORYVE, and, you know, we feel very confident that we will prevail in the case. We expect- we intend to fully enforce our intellectual property.
You know, this is, this would be an exceedingly difficult drug for someone to genericize a nd, you know, we will discover as we go through the process with them, you know, which of their patents, patent or patents that they've infringed, but we fully intend to enforce those patents and maintain our exclusivity. You know, we've got patent protection through 2037 for the cream, and we actually have patent protection through 2041 for the foam.
Okay. I think we only have a few minutes, so on the pipeline, I know the focus has been on the launches, and pipeline's kind of taking a back seat, but maybe, you know, which one is closest to being in the clinic or delivering clinical data?
Yeah. So ARQ-255, which is our topical JAK inhibitor, is in the clinic currently for alopecia areata, and 255 is really unique. You know, there have been several failures in alopecia areata with topical JAKs, but those were all creams, formulated as creams. We've developed a suspension that allows us to actually deliver drug down the hair follicle, down to the bulb, and that's where the inflammation is occurring in alopecia areata.
It's difficult to drug the bulb with a cream, and so we had to invent this new way of delivering the drug topically, and that's patented as well, that technology. It worked very well pre-clinically, and now we're testing it in humans to see if it works in humans as well. So we're excited to see the readout from that.
That has proven to be a difficult trial to enroll, quite frankly, and I think it's primarily because, you know, now we have oral JAKs available for alopecia areata. S o patients, you know, if there's a chance you're gonna get placebo, they just go on the oral JAK instead. But, you know, ultimately, once we get... If it works and we get approved, you know, we think that the topical will be very complementary to the orals, not competing with the orals. Different patient profile or different point in the disease history.
But we think that's a very exciting molecule, and I think also if the technology works, it, it can enable some other very interesting programs for treating inside the follicular unit, you know, which is where acne occurs, you know, male pattern baldness occurs, alopecia areata. There's other, other types of alopecia, excuse me, we might look to treat. So we're excited about our FD technology.
I think I mentioned we also have ARQ-234, which is our biologic, immune modulating agent. It's a checkpoint agonist, as opposed to a checkpoint inhibitor in oncology a nd we hope to have an IND opened, you know, in the not-too-distant future, with 234 , and then we'd progress to the clinic for that as well.
Great. Maybe just to finish off with the financials, I guess, where your cash balance is and-
Sure. Lottie, you gotta, you gotta earn your pay now. You wanna take that one?
So we ended the year at, as we said, $272 million of cash, but we recently did the raise. In February, and also had a milestone payment from our partnership with Japan, with Sato Pharmaceutical. So, we're in a good position from a cash balance, probably well into 2026.
Great. All right. I guess we'll wrap it up there.
Thanks.
W e're out of time. I wanna thank you.
Thanks for having us. It's always great talking.
Great update, and I think you guys have given renewed interest in looking at weekly Friday scripts since you have... ZORYVE is doing so.
You and me both. You and me both.
I was going to say, I think everyone has renewed interest.
Yeah.
Yes, Serge.
All right, well, thanks again, and-
Thank you, Serge.
... appreciate your time.
Bye.
Bye.