Arcutis stock holds buy rating, $19 target amid patent case

On Thursday, H.C. Wainwright maintained a positive stance on Arcutis Biotherapeutics Inc . (NASDAQ:ARQT), reiterating a Buy rating and a price target of $19.00. The company, currently valued at nearly $2 billion, has demonstrated impressive growth with revenue surging 230% over the last twelve months. According to InvestingPro data, analysts maintain a strong bullish consensus with price targets ranging from $15 to $29. The firm’s analyst highlighted the favorable outcome of a recent agreement in the patent litigation between Arcutis and the private company Padagis. This agreement extends the 30-month Hatch-Waxman regulatory approval stay by one day for each day the litigation is paused, starting from March 24. This arrangement ensures that Arcutis will retain the full benefit of the 30-month stay if litigation resumes.

The analyst emphasized the significance of Padagis being obligated to inform Arcutis about any FDA communications regarding its Abbreviated New Drug Application (ANDA) for a generic version of Zoryve cream 0.3%, used for treating plaque psoriasis. The company’s strong market position is reflected in its exceptional gross profit margins of 90%, according to InvestingPro, which offers comprehensive analysis and 8 additional key insights about Arcutis’s financial health and market performance. The agreement is unusual as it provides the brand originator, Arcutis, with considerable insight into the FDA’s review process for the generic product. The requirement for Padagis to report to Arcutis was a key condition for the litigation to be stayed.

Arcutis expressed to H.C. Wainwright that the terms of the agreement might indicate Padagis’s lack of confidence in receiving FDA approval for its generic product in the near future. This could lead to a potential need to reinitiate product development. Padagis had initially filed the ANDA in January 2024, including a Paragraph IV certification, which is a legal assertion that the patent of the branded product is either invalid, unenforceable, or will not be infringed by the manufacture, use, or sale of the proposed generic product.

The analyst also noted that first-time approvals for complex generics are rare, and while receiving a Complete Response Letter (CRL) from the FDA is not unusual, the median approval time for ANDA is 26 months and tends to be longer for complex products. The FDA’s outlined requirements for approval appear to have altered Padagis’s approach to the litigation and its assessment of the value in pursuing the case further. The reiteration of the Buy rating and the $19 price target by H.C. Wainwright reflects confidence in Arcutis’s market exclusivity and future prospects. This confidence appears well-founded, as the stock has delivered a 72% return over the past year and is currently trading near its 52-week high of $17.75, with a robust current ratio of 4.15 indicating strong liquidity position.

In other recent news, Arcutis Biotherapeutics has made significant strides with its product ZORYVE. The U.S. Food and Drug Administration (FDA) has accepted a supplemental New Drug Application for ZORYVE cream 0.05%, setting a target action date of October 13, 2025. If approved, this cream will offer a new treatment for children aged 2 to 5 with mild to moderate atopic dermatitis. This development follows successful clinical trials that demonstrated significant improvements in symptoms for young children. Additionally, Arcutis has entered a joint stipulation with Padagis to stay ongoing patent litigation, ensuring the extension of the Hatch-Waxman regulatory approval stay. Jefferies has also increased its price target for Arcutis to $19, maintaining a Buy rating, reflecting confidence in the company’s commercial prospects. The analyst noted Arcutis’s impressive growth with ZORYVE, which has an annualized run rate of approximately $260 million. This positive outlook is supported by the company’s consistent quarterly earnings surpassing expectations.

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