Arcutis at Goldman Sachs Conference: Strategic Growth and Challenges

On Tuesday, 10 June 2025, Arcutis Biotherapeutics Inc. (NASDAQ:ARQT) presented at the Goldman Sachs 46th Annual Global Healthcare Conference. The company outlined its strategic growth trajectory and addressed challenges, including intellectual property litigation. Arcutis reported strong Q1 financial results, with CEO Frank and CFO Lava highlighting the company’s transition to a more established player with multiple approved indications for its flagship product, XEREVE.

Key Takeaways

• Arcutis achieved nearly $65 million in Q1 revenue, with a 10% volume growth.
• The company is expanding XEREVE’s market presence, focusing on Medicaid and primary care.
• Arcutis aims for cash flow breakeven by 2026, supported by a $200 million cash balance.
• The company is confident in its intellectual property position despite ongoing litigation.
• A PDUFA date in October could expand XEREVE’s use to younger atopic dermatitis patients.

Financial Results

• Q1 revenue reached approximately $65 million, marking a 10% increase in volume.
• Arcutis maintains a cash balance of $200 million as of March, with a $100 million debt facility and access to an additional $100 million by mid-2026.
• The company is trading at approximately five times its current year revenues, positioning itself as a unique revenue-generating biotech.

Operational Updates

• XEREVE now has five approved indications, including a recent foam approval for scalp and body psoriasis.
• Medicaid coverage is expanding, with over half of lives having access to XEREVE with single-step or better coverage.
• Arcutis is partnering with Kawa to expand into primary care, aiming to reduce reliance on topical steroids.
• The branded nonsteroidal market is growing at about 50% year-over-year, despite the overall topical market stagnation.

Future Outlook

• An October PDUFA date could allow XEREVE’s cream to be used for atopic dermatitis in children aged two to five.
• The company is exploring additional indications for XEREVE, supported by off-label data for 40 diseases.
• Phase I results for ARQ-255, a topical JAK inhibitor, are expected mid-year, while an IND for ARQ-234 is anticipated later this year.

Q&A Highlights

• The market perception of nonsteroidal topicals is improving, with dermatologists increasingly familiar with XEREVE.
• Efforts are underway to expand Medicaid coverage across all states and into the Medicare population.
• Litigation with Patagus is on pause, with Arcutis retaining 17 months to litigate if necessary.
• CEO Frank emphasized that the company is undervalued and poised to demonstrate the potential of topical treatments.

For a deeper dive into Arcutis’s strategic plans and financial outlook, refer to the full transcript below.

Full transcript - Goldman Sachs 46th Annual Global Healthcare Conference:

Rachel, Goldman Sachs: All right. Good afternoon. And we’re going to kick off the next session. It is my pleasure to introduce Frank, CEO and President of Acuitas, and also Lava, the CFO. Frank and Lava, welcome.

Thank you. It’s my time to host I think you’ve been here before. We have. So it’s my time to host you at Goldman Sachs conference. So before we kick off with the Q and A, I’ll turn it to you guys for a brief introduction of the company and also any opening remarks about the status and where things are.

Frank, CEO and President, Arcutis: Sure. Yes. So Arcutis is an emerging growth, I guess, now company. We’re not a startup anymore. We’ve been in business just over nine years.

We just had our anniversary a couple of weeks ago. We have now five approved indications. The FDA, all variations on a very potent topical PDE4 inhibitor. So we’re approved for plaque psoriasis, seborrheic dermatitis and atopic dermatitis. Our most recent approval was just about three weeks ago.

We had our foam approved for the treatment of scalp and body psoriasis. Products are very effective noncerebral it’s essentially comparable to a high potency steroid in terms of efficacy. But unlike a steroid, it’s safe to be used indefinitely for any amount and for any location on the body. So it really solves the problem that dermatologists and patients have historically struggled with, which was that steroids were very effective but weren’t safe for long term use. The nonsteroidals weren’t terribly effective and had some tolerability issues.

So patients were constantly having to switch back and trading off between efficacy and safety. We had our launch in plaque psoriasis in August of twenty twenty two and have had a series of approvals since then. Product is growing very nicely. We printed almost $65,000,000 in the first quarter, which was volume growth about 10%. And Q2 quarter to date continues to grow very nicely, and we expect to see continued growth.

And really, the drivers of growth for the company really for the product, excuse me, really fall into four broad categories. The one is continued expansion of the label, I. E, the Scout and Body approval a couple of weeks ago. We have another approval coming up in October. And we just announced this morning that we’ve enrolled the patient in a trial studying our drug for atopic dermatitis in patients aged three to 24.

So label expansion. Secondly is expanding coverage. We have very good commercial coverage right now for the drug. We’re rapidly expanding into the Medicaid population. We reported that the Q1 earnings call that we had a little over half of the lives in Medicaid have access to XEREVE with a single step or better coverage.

And we expect that to continue to expand. And then we continue to believe that we will also be successful in gaining Medicare coverage, although frankly, that’s been a little bit delayed because of the disruptions to the Part D program due to the Inflation Reduction Act. And then we signed a deal late last year with a partner to expand in the primary care of pediatrics. That’s still very early days, but we think that will be an important contributor of growth going forward for the brand. And then lastly and probably most importantly is the shift from topical steroids to the advanced nonsteroidities.

We think we see evidence that, that momentum is really picking up, and we have a long way to go. Last year, dermatologists wrote about 16 times as many topical steroids as they did branded nonsteroidals. You can see there’s a long way to go and a lot of growth opportunity ahead of us as that shift takes place. I see.

Rachel, Goldman Sachs: Got it. So before we dive into the product, why don’t we talk a little bit about just the market and how that has been evolved? Because this is still a relatively newer type of non steroidal topicals in psoriasis, atopic dermatitis. And so how has sort of that the perception from physicians on the nonsteroidal topical ethicraft been evolving over time? Sure.

So I And how do you see that going forward?

Frank, CEO and President, Arcutis: If you think back to prior to 2021, they didn’t really have a lot of good options for drugs other than topicals, other than steroids, right? Beyond steroids, for psoriasis, you could use a vitamin D analog like calcimetryin, not very effective and not very well tolerated. In atopic dermatitis, you could use a topical calcimurin inhibitor, okay tolerability, some burning and stinging, not as effective as a steroid. And they have boxed warnings for cancer, which scared a lot of patients off. And then starting in 2017, you had Eucrisa, which wasn’t very effective and it wasn’t very well tolerated.

So it never did very well. And it burned like heck when you put it on. So that’s why doctors continue to rely on topical steroids because they just didn’t have good alternatives. Starting in 2021, you saw the emergence of three new advanced topical therapies, beginning with Insight’s product. And then right about the same point in time a year later, our product and the Organon product launched.

These drugs are, in general, very effective, again, in the range of a topical steroid. In general, they’re well tolerated. There are some tolerability issues with some of the other products. But that has really driven this change in thinking in dermatology that we’re seeing where dermatologists themselves are saying, we really need to rethink how we use topical steroids, right? These are short term treatments for a chronic disease.

We need to really think about introducing these advanced topical therapies into the treatment paradigm. And I think the momentum behind that conversion is only growing. Just since the beginning of the year, we’ve seen a number of articles and presentations at medical meetings talking about the need to reduce topical steroids and move patients towards the advanced topical therapies.

Rachel, Goldman Sachs: So you guys launched Surreve as a queen back in 2022 in psoriasis. And then recently you guys have a foam product and that launch in 2024. So maybe talk about like the interplay between these two different formulations. Why do you need both?

Frank, CEO and President, Arcutis: Yes. So if you think sequentially, right, we had the approval for the cream in plaque psoriasis in 2022, as you mentioned. We then we had the foam approved in early twenty twenty four for seborrheic dermatitis, completely different inflammatory disease and a disease that there hadn’t been a new therapy in decades, literally, for that disease. And then in July of last year, we had a different version of our cream approved for eczema. And then most recently, the foam was also approved for the treatment of psoriasis, plaque psoriasis.

The reason for the two different formulations in plaque psoriasis and the reason that we have the foam in seborrheic dermatitis is that if you think about you have a good head of hair, right? You don’t want to put creams or ointments in your hair, right? And it’s going to make them greasy. It’s going to mess up your hairstyle. So we developed the foam for treating hair bearing areas of the body, like scalp psoriasis or seborrheic dermatitis, which always occur on the scalp.

Now you can use the foam to treat the body, too, which really simplifies management for the patient. But it was really the treatment of hair bearing areas like the scalp that we developed the foam for.

Rachel, Goldman Sachs: I see. Great. And then how’s the in terms of the launch performance compared to your initial expectation for both formulation, how has that

Frank, CEO and President, Arcutis: been tracking? Yes. So I would say the initial psoriasis launch got off a little bit to a slow start. It was our drug. We were new to dermatology.

The company was new to dermatology, but people weren’t. But and we had some kinks to work at in the launch. But that eventually we got that sorted out, and it has grown nicely. The foam launch the initial foam launch in Seb Derm wildly exceeded, I think, everyone’s expectations, including ours because of the degree of unmet need. And then atopic dermatitis, I think, has gone pretty much in line with our expectations.

The uptake has been very nice. We literally just launched the scalp indication yesterday. So it’s still too early to tell, but we expect that’s going to go very well as well. There’s a lot of excitement about the product. Doctors are very familiar with the drug at this point.

They know their patients like the foam. So we expect that to go very well.

Rachel, Goldman Sachs: I see. Okay. Then what’s the driver for growth going from here? Is it going to be continuing looking for new indications? Is there is the market growing in terms of how people are looking at this class of And also maybe talk about the reimbursement, any changes there that you guys are expecting?

Frank, CEO and President, Arcutis: Yes. So maybe I’ll start with your middle point. The overall topical market is not growing. But where we see the growth is in the branded nonsteroidal market, which is mostly being driven by us, but also the other advanced topical therapies are driving some of that growth. That market grew about 50% last year year over year.

So nice growth trend. It’s a low base, but a nice trajectory and a very, very large market that can convert to advanced topical therapies, and we expect that to continue. We do expect to see growth from continued expansion of coverage, especially in the government sector. We’ve got very good commercial coverage already. And then we have several more line extensions or label expansions coming, And we are now starting to think about what might be the next leg of the XEREVE story.

No firm plans at this point. But for example, dermatologists have now published data on about 40 different diseases that respond to XEREVE, all things off label. Some of those might be worth pursuing for an indication. I think we’re still early in the stages of evaluating that. But we have a very safe, very effective drug that seems to do a lot of things.

And so if you think about Humira or DUPIXENT, the keys to both of those drugs was the steady expansion of their label. And I think there’s an opportunity for us to do a similar thing with Zareef. I see. Got it.

Rachel, Goldman Sachs: And then you have a PDUFA date in October, And that’s to expand the use of the cream to atopic dermatitis patients who’s younger on the two to five year of age. And how important is that segment? That it seems like a very small I mean,

Frank, CEO and President, Arcutis: what kind position And actually, it’s a pretty large segment, actually. About half of all atopic dermatitis patients are under the age of 18. So there’s a lot in that six to eighteen range. But the peak onset of atopic dermatitis is actually between the ages of one and six. That’s where most patients develop atopic dermatitis.

So having that ability to capture those patients at their onset of the disease and keeping them for their lifetime is an important opportunity. And there’s a real unmet need in that space, right, because most of the drugs are not approved for that age segment. There’s also a halo on the broader business, right, when you’re approved in those younger kids. And then even beyond that, as I mentioned earlier, we just started enrolling a three to twenty four month study as well, which again, both is inherently valuable in and of itself, but also has a really valuable halo for the rest of the business if you’re approved all the way down to age three at three months.

Rachel, Goldman Sachs: I see. And have you guided in terms of what how much that would contribute to future revenues?

Frank, CEO and President, Arcutis: And We haven’t we’re not issuing guidance at this point, and we don’t necessarily break it out by cohort. But I think that both two to five and three to twenty four month will be long term will be important contributors to the growth of the atopic dermatitis franchise within the broader three I see.

Rachel, Goldman Sachs: Got it. So and then have you guys done any market research study in terms of parents willing to put their infants on drug or on some sort

Frank, CEO and President, Arcutis: In fact, the way I would think about it is what the research shows is a real reluctance on the part of parents to put their kids on steroids, right? And a reluctance to put their kids on drugs that have boxed warnings. Have eight dermatology clinicians at the company, and every one of them has lived through the argument with mom about putting their kid on a topical capsid inhibitor, right? There isn’t a dermatologist in this country that thinks TCIs cause cancer. But when mom sees that there’s a boxed warning or they go to fill the script and the pharmacist says, you know that drug causes cancer, right?

This is my baby. I’m not going to put it on. Becomes a lot of friction. So to have a really safe and effective nonsteroidal is a great option, especially in the younger kids. I see.

Rachel, Goldman Sachs: Okay. And how do you think about the interplay between the foam and the cream? Is there more I mean, you see people who like people who like to use a foam, like want to switch from the cream to the foam? Then would that cannibalize some of the or do you see more of a synergistic effect where you could expand the market totally or more or less move one patient from one product to another product?

Frank, CEO and President, Arcutis: So today, a patient who’s stable on the cream, we think it’s unlikely that they’re going to switch to the foam, right, if they’re doing well on the cream. If they have scalp psoriasis, they might add the foam on, and there’s no reason why you can’t use both. Going forward, if a patient comes in and they have scalp psoriasis, they’re probably going to get the foam, right? That’s the thing that makes the most sense. And they might use the foam everywhere in their body that we’re actually approved for, scalp and body psoriasis with the foam.

If the patient wants the foam and the cream, the doctor could do that as well. If they don’t have scalp psoriasis, then it’s really a choice of the patient and the doctor. Does the patient want the foam or the cream? Some men have more body hair, right? You and I are Asian.

We don’t have a lot of body hair, so it’s not so much a big deal. But maybe some of our Greek or Italian friends, they might prefer the So and the cost of goods our profitability is the same across SKUs. So we don’t really care as long as overall Zareve is growing.

Rachel, Goldman Sachs: I see. Got it. And then so you guys have a co commercialization partnership with Kawa. And they’re basically marketing Soreef to the primary care physicians. Can you remind us of how is that partnership going?

Maybe just the structure, and why do you set up that partnership?

Frank, CEO and President, Arcutis: Sure. So I’ll start with your last question, maybe, and work backwards. The reason we did the partnership is because it’s really, really expensive to have a primary care sales force, and it’s really hard to have a single product, right? For a small company like ours to hire 200 plus sales reps from primary care, it becomes economically very challenging. And I didn’t, frankly, want to get in the business of going out and licensing in a bunch of other primary care drugs to subsidize the cost of the sales force.

So it made more sense to partner with a company that had an existing primary care sales force who could economically reach the primary care segment. And I think it’s important for investors to understand that about half of these patients that we’re targeting across our three indications are outside of dermatology, right? So there’s a very, very large number of patients being managed, especially in pediatrics and primary care. The way that the deal is set up is that we book all sales at ArQutis, and then we pay a commission to the partner, which is a percentage of I think that might be my phone, apologies for that a percentage of sales to them. They eat what they kill.

If they don’t sell anything, we don’t pay them anything. And so we’re not using our resources to promote primary Got it.

Rachel, Goldman Sachs: And then maybe a little bit on treatment guidelines.

Frank, CEO and President, Arcutis: Yes. So the AAD treatment guidelines are badly out of date. I want to say it’s been, I think, seven years since they updated the topical treatment So they don’t make reference to any of the new therapies. We have heard from the Academy that they’re in the midst of updating those guidelines now. In the interim, doctors aren’t following them, right?

The dermatology community does not rely on the AAD treatment guidelines because they are so out of date. And we have seen some recently some publications from the thought leaders in dermatology saying, here’s how you should use topical therapies, right? I think I made reference to that. Payers do rely on them. That’s one of the excuses they use for not covering drugs, right, is the treatment guidelines.

But I think that the treatment guidelines will catch up in the not too distant future based on what we’re hearing from

Rachel, Goldman Sachs: the Academy. And do you expect a boost in terms of the awareness or use if the treatment guidelines are updated? No.

Frank, CEO and President, Arcutis: At this point in the game, pretty much every dermatologist knows and has used XEREVE. So I don’t see the treatment guidelines having a major impact on prescribing. Where I do think they might have some impact is on the insurance companies.

Rachel, Goldman Sachs: I see. Okay. Got it.

Frank, CEO and President, Arcutis: And in a favorable way.

Rachel, Goldman Sachs: Right. Right. I think you mentioned before that 80% of the prescriptions are currently reimbursed. And then where you can grow the coverage is in the Medicare and the Medicaid setting.

Frank, CEO and President, Arcutis: That’s where the main growth opportunity, yes, is for expanded government coverage, yes. So in the commercial setting, we have about 80% of commercial lives have access to XEREVE. And it’s generally very high quality coverage as well. It’s not very difficult to get the drug. That remaining 20%, it’s probably not economically attractive to contract with that remaining 20%, right?

It’s the old eighty-twenty rule. But there’s a lot of opportunity as we expand Medicaid out to ideally all 50 states and also to expand into the Medicare population, again, given that so many of these patients are in Medicare and Medicaid. It’s almost half

Rachel, Goldman Sachs: of the patient population. So what type of efforts are you guys putting in as a company to get that?

Frank, CEO and President, Arcutis: Well, so Medicaid is well underway. We reported at the Q1 earnings call that we had over half of lives having access to Zareed through Medicaid. And with a single step or better and I say better because like, for example, in California, there is no step. We can use Zarif line for Medicaid, which is actually better than most of our commercial coverage. In New York, there’s no step for the foam.

You can go straight to Zarif, right? So it’s very high quality coverage. And we just need to pick off the individual state, the remaining states. Medicaid is managed at the state level, so you have to get all 50 states, right, to get your Medicare, we continue to work with the Part D plans. The Inflation Reduction Act dramatically changed Part D as of January one of this year, and that’s created a lot of churn in the Part D space, I would say.

And it has been difficult to get coverage for new drugs at the moment in Part D. I think that will settle out as time goes on, and they sort of figure out how they can reconfigure their business. But it’s probably delayed us a little bit on our Medicare coverage.

Rachel, Goldman Sachs: I see. And what about outside The U. S, the opportunity outside The U. S, business only in The U. Have you like what options have you considered outside The U.

S? Or and what have you what efforts have you tried to put in?

Frank, CEO and President, Arcutis: So we have our own operation in Canada. And we have cream and the foam improved on the market in Canada. Canada is doing very well. It’s contributing more than its relative population to our business. We outlicensed rights in Japan to a Japanese drug company in Sato.

And then we outlicensed our rights to China and some other parts of Asia to one of the big Japanese or Chinese drug companies, excuse me, Huadong. We’ve looked at Europe. Reimbursement for topicals in Europe is very challenging. And I think with the threat of MFN pricing in The United States, I think the risk benefit is probably not there right now for us. So I don’t anticipate probably Europe in the foreseeable future, just given particularly the MSN risk.

I see. So like a cash business that would not be feasible or not economic? No. Europeans don’t like paying for drugs out of pocket. We have a European colleague who can attest to that.

I

Rachel, Goldman Sachs: think they pay for some obesity drugs. Obesity, you

Frank, CEO and President, Arcutis: can get almost anyone to pay for it, right?

Rachel, Goldman Sachs: So there’s Okay, let’s switch gear to some of the IP. There’s an ongoing litigation, and I think that litigation is now on pause. Maybe just give us a quick update on what’s going on there, what’s the chance of this litigation continuing back on track and what’s how you guys think about this overall? Sure. So

Frank, CEO and President, Arcutis: maybe a little bit of background. So there’s a company called Patagus that makes generic topicals. They filed an ANDA in February of twenty twenty four. And we immediately filed a lawsuit asserting our patents against them. And we were starting the process of the litigation.

When we filed that lawsuit, that triggered a thirty month stay under the Hatch Waxman Act, which prevented the FDA from approving the drug during those thirty months so we could litigate. In February of this year, the other party, Patagus, came to us and asked us to stay that litigation because they had some major issue. I don’t know the exact nature of the issue, but it was a big enough issue that they didn’t get conditional approval from the FDA at the time that they should have. So it was pretty bad. And in return for us agreeing to stay that litigation, they agreed that the seventeen months that were remaining in the Hatch Waxman stay, we retained.

So if at some point, the litigation restarts, we have seventeen months to litigate before they can launch, which is plenty of time for us to prosecute our patents. We remain very confident about our intellectual property position. I think we’ll be successful in maintaining exclusivity on the cream at least through 2037 when the patents expire. And for the foam, we have patent coverage through 02/1941. And we intend to enforce our intellectual property rates vigorously against any potential ANDA filers.

Rachel, Goldman Sachs: I see. Got it. And then let’s turn we have a couple more minutes left. Let’s turn to your pipeline. You guys have two assets there.

One is two fifty five, which is a topical JAK inhibitor. Maybe the rationale for topical JAK? And then how do you see this differentiate? And what’s the overall goal for this program? Sure.

Yes. So ARQ two fifty five, as you said,

Frank, CEO and President, Arcutis: is a topical JAK, but it’s an unusual topical JAK, right? So oral JAKs work very well in AA, right? They’re the only FDA approved treatments for AA. There have been multiple topicals that have failed in the treatment of alopecia areata. And that’s because they were just applying a cream to the surface of the skin like Xeriv, different MOA, similar formulation.

And it’s very difficult to get a topical to penetrate deep enough in the skin to get to where the inflammation is in AA, which is at the base of the hair follicle. The bloodstream tends to take the drug away before you get that deep. So our former Chief Technical Officer, who’s retired now but still works with us, invented a technology that allows us to use the hair follicle to deliver a drug down to the base of the hair follicle. And that’s the basis of ARQ two fifty five. So it’s not like any other topical that’s ever been invented.

And in fact, the technology that we use for follicular delivery is patented. We still need to see if it works, right? That’s the key. That’s why you’re in the experiment. But if you get a JAK to where it’s supposed to be, it’s going to work in AA, right?

And the challenge with topicals has just been a drug delivery issue. So two fifty five was designed to address that delivery issue in alopecia areata as opposed to psoriasis or seb derm or AD, which is very superficial, and you can treat that fairly easily

Rachel, Goldman Sachs: I see. Got it. And what’s the development timeline, the catalyst of that?

Frank, CEO and President, Arcutis: Well, so we’ve wrapped up the Phase I study and we’re just waiting for results from the Phase I study. And depending on those results, then the next phase would be to go into a traditional phase two dose finding study. And what’s that timeline for us seeing that data? So we said around the middle of the year. So it should be fairly soon when we see the data.

Rachel, Goldman Sachs: I see. Got it. And then your other asset, the ARQ-two thirty four, maybe just a little bit about that. That’s another interesting asset, a systemic novel immune checkpoint agonist for CD200. Maybe just walk through the rationale of that Yes.

So I’m sure

Frank, CEO and President, Arcutis: investors are familiar with checkpoint inhibitors in oncology. When you inhibit the immune checkpoints, it revs the immune system up, right? And the immune system attacks your cancer cells. Checkpoint agonists do the opposite thing. If you agonize the immune checkpoints, the effect is to essentially reset the immune system.

And these autoimmune disorders are overactive immune systems, are caused by an overactive immune system. And so this is, I think, one of the newer routes of treating autoimmune disorders. There was another company that was developing an asset against the same target and published some very compelling data that the target works. And that by treating this target, you could actually induce a state of remission where the patient would do very well for long periods off of drug as well. And that was what really got us excited.

We went and found a company in The U. K. That had an even better agonist for this checkpoint, and we acquired that company, Doosentis, and we’ve been developing the drug since then. We expect to open up an IND for $2.34 later this year and look forward to putting that into the clinic as well and evaluating both the safety and tolerability and the efficacy of the pathway and the drug.

Rachel, Goldman Sachs: Got it. And then can you remind us about the cash balance and how much and also the one way guidance, what that includes or not including these pipeline assets? I will ask my CFO to answer that.

Lava, CFO, Arcutis: Thought I was just sitting here. I’m glad I got a question. So at the March, we had about $200,000,000 of cash. We have a debt facility where we have $100,000,000 of debt on our balance sheet and the ability to draw another 100,000,000 by in whole or in part by mid of twenty twenty six. I think I didn’t hear the full part.

Frank, CEO and President, Arcutis: Cash runway.

Lava, CFO, Arcutis: Cash runway. So we basically said we’re very comfortable with our current cash balance and the ability to draw the debt, and we don’t expect to go back to the equity markets under the status quo of our business with the Zurief trajectory. We have also alluded to that we will be cash flow breakeven sometime in 2026.

Rachel, Goldman Sachs: I see. Got it. And that guidance includes the pipeline kicking off

Lava, CFO, Arcutis: Yes, does. That the IND

Rachel, Goldman Sachs: Yes, it does. pivotal studies of that. Okay. Fantastic. And what’s the in terms of looking here, what’s the long term aspiration for the company?

Sure. You guys have a pipeline going. It was just before, it was just the topicals and the creams. Then now you’re getting into more traditional type of therapy. Right.

Frank, CEO and President, Arcutis: I have to say, after the last couple of years, I love having this question, right? I’m back to being a biotech company We founded this company nine years ago really at a recognition that there were not a lot of companies investing in innovative dermatology assets, right? It’s improved somewhat over the last nine years, but we think there’s still immense opportunities in dermatology for novel assets. And I think we have shown that we have built one of the best teams in dermatology, both development wise, but also now we’ve shown with commercialization as well that we have a very effective team. So our vision is to become one of the leading companies in dermatology.

I think XERIP gives us a very strong foundation. And if you think about other opportunities, I think as you mentioned, we have ARQ two thirty four and ARQ two fifty five. Secondly, we’re at a point now where we’ve completed all of the registrational studies with ZAREV, And we’re starting to think about is there another leg to the Xeriv story, right? I think I made reference earlier to about 40 different case reports or case series of Xeriv treating different diseases than what we’re already approved for. Some of them aren’t worth pursuing, but some of them might be, right?

And so we’re evaluating that and trying to decide, do we start some registrational programs in other indications as And then thirdly, we’ve always been active in business development. Two thirty four was acquired. Our JAK inhibitor was acquired from outside. I think it’s a very high bar. We’re in the, I think, enviable position of not having to do business development.

But we’re also in the enviable position that if we find something that’s really attractive, I think we have the team and can get the resources to in license and add something to the pipeline. So I think across those three dimensions, the focus really will be on rejuvenating our pipeline and continuing to grow Zurief that will generate the resources to pay for all of this.

Rachel, Goldman Sachs: I see. Got it. And where’s the biggest pushback from investors? Is it in terms of

Frank, CEO and President, Arcutis: the overall pipeline of things? The number one question we’ve been getting is the one that you just asked about, okay, what’s next, right? What’s the next leg of the story? I think that in the past, one of the pushbacks that we got was, well, topicals are just never that big. And that historically, think has been true.

It’s been twenty years since there was a really big topical in the market. But if you just look at your own models, we’re well on our way to disproving that hypothesis that topicals can’t be big. And I think particularly as we continue to execute and expand coverage and expand indications and this conversion happens, we are going to prove out that this is a billion plus product.

Rachel, Goldman Sachs: I see. And I mean, would there be a point where patients are just no longer responding to topicals and need that more potent systemic therapy and they get off the creamer Sure.

Frank, CEO and President, Arcutis: Thus far, there’s no evidence of tachyphylaxis with PD-four inhibition. What I will say though is I think certainly in seborrheic dermatitis sorry, excuse me, in psoriasis and in atopic dermatitis, more severe patients are probably going to go on systemic therapies, right? And there are excellent systemic therapies for both diseases. As good as those systemic therapies are, they’re not curative. And you take a drug like rizenkizumab or bimekizumab, they’re getting half, maybe sixty percent of patients completely clear, which is unreal.

That’s a phenomenal result. That means almost half the patients aren’t clear, right? And dermatologists will typically prescribe a topical adjunctively to treat those residual symptoms. And even the patients that do get clear sometimes will flare in the future and they’ll use a topical in that situation too. That’s even more true in atopic dermatitis, when four thirteen’s are maybe getting forty percent of your patients seventy five percent clear.

That’s a lot of residual symptoms, right? And so Xeriv is being used adjunctively there as well. Xeriv is really an ideal adjunct treatment with systemic therapies. The patient can’t hurt themselves. It doesn’t matter where they use it, how much they use it, how long they use it.

The doctor can confidently prescribe it and just say, use it when you need it. They don’t have to worry about it, right? Is not true of topical steroids. They have to monitor the patient’s topical steroid use very Right, see, interesting.

Rachel, Goldman Sachs: Yeah, because when we look at Otezla, Otezla’s a similar mechanism. And it works. And I think majority of patients after one year don’t respond Otezla. So remember

Frank, CEO and President, Arcutis: Otezla or you may not know this, but Otezla is a much, much weaker PDE4 inhibitor than reflumilast is. And it’s associated with pretty significant side effects as well. So if you look at our long term studies, we don’t see any decrease in efficacy. And in fact, in the atopic dermatitis long term study, which was recently published, what you actually saw was the longer patients were on it, the better they did, right? At four weeks, we had about a forty two percent EZ-seventy five.

It’s pretty good. It’s on par with maybe DUPIXENT. At a year, was two out of three patients had an EZ seventy five. So that’s a fifty percent increase in efficacy over a year as patients stay on XEREVE. And one of the other things that we’ve seen in all of our long term studies is that retention adherence to the therapy is very good even for long during long term treatment.

Rachel, Goldman Sachs: Got it. So before I turn it to you for final remarks, why do you think this is the right time for investors to get excited about a stock?

Frank, CEO and President, Arcutis: Well, for starters, I think it’s really undervalued. It’s a bargain. We’re like trading at five times our current year revenues, right? I mean that’s hard to find. We’re a kind of a unique asset, right?

We’re a revenue generating biotech rapidly coming up on cash breakeven. We don’t need to raise capital again. We have lots of runway in terms of our IP, a lot of levers for growth. The stock is a pipeline. We have a pipeline, and the stock has, I think, immense upside.

So I think it’s a great buying opportunity. And I don’t have a whole lot more to say than that.

Rachel, Goldman Sachs: Well, Frank and Lapa, thank you so much for being here. It was great host you, at least for me the time, at Goldman Sachs.

Frank, CEO and President, Arcutis: It was a pleasure. Thanks for having us. Appreciate it, Rachel.

Lava, CFO, Arcutis: Thank you.

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