Earnings call transcript: Arcutis Q2 2025 beats EPS and revenue forecasts

Arcutis Biotherapeutics reported its earnings for the second quarter of 2025, surpassing both earnings per share (EPS) and revenue forecasts. The company posted an EPS of -$0.13, beating the forecast of -$0.17, and reported revenue of $81.5 million, exceeding expectations by 11.26%. This financial performance contributed to a modest after-hours stock price increase of 0.26%, closing at $15.36. With an impressive gross profit margin of 88.39% and year-over-year revenue growth of 100%, InvestingPro analysis reveals strong operational efficiency despite the company not yet achieving profitability.

Key Takeaways

• Arcutis exceeded both EPS and revenue forecasts for Q2 2025.
• The company’s revenue grew by 164% year-over-year.
• FDA approval for new products and ongoing trials signal future growth.
• Arcutis is approaching cash flow breakeven, expected in 2026.
• The stock price showed a slight increase in after-hours trading.

Company Performance

Arcutis Biotherapeutics demonstrated robust growth in the second quarter of 2025, with net product revenues reaching $81.5 million. This marks a significant 164% increase compared to the same quarter last year and a 28% rise from the previous quarter. The company is making strides toward achieving cash flow breakeven, projected for 2026, and reported a slightly positive cash flow of $325,000 this quarter. InvestingPro data shows the company maintains a healthy current ratio of 3.55, indicating strong short-term liquidity position. For deeper insights into ARQT’s financial health and growth prospects, subscribers can access the comprehensive Pro Research Report, which covers what really matters about the company through intuitive visuals and expert analysis.

Financial Highlights

• Revenue: $81.5 million, up 164% year-over-year and 28% quarter-over-quarter.
• EPS: -$0.13, beating the forecast of -$0.17.
• Cash and marketable securities: $191.1 million.

Earnings vs. Forecast

Arcutis reported an EPS of -$0.13, surpassing the forecasted -$0.17 by 23.53%. The revenue of $81.5 million also exceeded the forecast of $73.25 million by 11.26%. This performance marks a notable improvement from previous quarters, indicating strong operational execution and market demand.

Market Reaction

Following the earnings announcement, Arcutis’ stock experienced a slight increase of 0.26% in after-hours trading, closing at $15.36. The stock remains within its 52-week range, with a high of $17.75 and a low of $8.03. According to InvestingPro analysis, the stock appears slightly undervalued based on its Fair Value calculation, with analysts setting price targets ranging from $18 to $29. The stock has demonstrated strong momentum with a 73.56% return over the past year, though investors should note its relatively high beta of 1.85, indicating above-market volatility.

Outlook & Guidance

Arcutis anticipates steady sales growth throughout 2025, although it expects some moderation in Q3 due to seasonal factors. The company is planning a Research and Development Day in Q4 2025 and is exploring Phase 2 studies in vitiligo and hidradenitis suppurativa. Arcutis projects potential peak sales of $700 million to $1.2 billion per indication.

Executive Commentary

"We are at an exciting point at Arcutis approaching profitability," said CEO Frank Watanabe, highlighting the company’s progress toward financial stability. He emphasized the strategic focus on internal capital allocation and noted the growing awareness among dermatology clinicians about the risks of extended steroid use.

Risks and Challenges

• Medicare Part D coverage challenges due to new IRA implementations.
• Potential market saturation in the dermatology sector.
• Dependence on continued FDA approvals and successful product launches.
• Competitive pressures in the topical treatment market.
• Economic uncertainties that could impact consumer spending.

Q&A

During the earnings call, analysts raised questions about the company’s Medicare Part D coverage, with executives noting the challenges posed by recent IRA implementations. Arcutis also addressed inquiries about its dermatology sales force, stating there are no current plans for expansion. The company remains focused on methodically investigating potential new indications and developing its pipeline assets.

Full transcript - Arcutis Biotherapeutics Inc (ARQT) Q2 2025:

Conference Operator: Good day and thank you for standing by. Welcome to the Arcutis Biotherapeutics twenty twenty five Second Quarter Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. To ask a question during this session, you will need to press star one, 1 on your telephone.

Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker, Brian Schulkopf, Head of Investor Relations. Please go ahead.

Brian Schulkopf, Head of Investor Relations, Arcutis Biotherapeutics: Thank you, Michelle. Good afternoon, everyone, and thank you for joining us today to review our second quarter twenty twenty five financial results and business update. Slides for today’s call are available on the Investors section of the Arcudis website. On the call today are Frank Watanabe, President and CEO Patrick Burnett, Chief Medical Officer Todd Edwards, Chief Commercial Officer and Matza Vyravan, Chief Financial Officer. I would like to remind everyone that we will be making forward looking statements during this call.

These statements are subject to certain risks and uncertainties and our actual results may differ. We encourage you to review all of the company’s filings with the Securities and Exchange Commission, including descriptions of our business and risk factors. With that, let me hand the call over to Frank.

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Thanks, Brian. And thank you to everyone for joining us today. I’m pleased to report that in the second quarter, we continued to see strong sales and demand growth with our Zurich franchise, demonstrating continued adoption by healthcare providers and patients and consistent execution by our commercial team. During today’s call, we will review in detail the results for the quarter, but we’ll also spend time talking in more depth about our plans to sustain our growth into the future, including the next wave of growth for Xeriv, how we intend to leverage our best in class development and commercialization capabilities to address the unmet urgent needs of patients living with immune mediated dermatologic diseases and our capital allocation framework to enable this next growth phase. Before I dive in, I want to thank the exceptional team at Arcutis that is dedicated to and instrumental in advancing our efforts to serve the needs of people living with serious skin diseases.

So on slide five honing in on the second quarter, we saw another quarter of strong revenue growth as patients and clinicians continue to adopt Zurief for the treatment of a range of inflammatory dermatoses. For the quarter, we reported net product revenues of 81,500,000.0 representing 28% quarter on quarter growth and 164% growth compared to the same quarter twenty twenty four. This substantial sequential growth reflects the continuously increasing demand for XERED with TRx volume increasing for all products. In May we received approval from the FDA for the use of XEREVE foam 0.3% for the treatment of plaque psoriasis of the scalpel and body, our fifth FDA approval for XEREVE in the last three years. We believe this new indication for our firm will provide an important and much needed new treatment option for the over half of plaque psoriasis patients who have scalp involvement.

In the quarter, we continued to make progress against a core objective that is the progressive conversion of topical steroid prescriptions to XEREV. We see growing evidence that dermatology clinicians are appreciating the risks associated with extended steroid use and as such are increasing their use of alternative nonsteroid topical agents. We also saw strengthening in our business fundamentals in

: the second

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: quarter. As we continue to grow Zareve sales while remaining disciplined with our expense base, we are increasing our operating leverage. Lata will go into more detail on our operating results and improving cash burn profile. As we progress towards reaching cash flow breakeven in 2026, we are rapidly approaching a point where we will have additional resources to invest in future growth. And today we will begin to lay out our plans, including the next wave of Zareeb expansion, additional pipeline opportunities and our disciplined capital allocation strategy that underpins it all.

Okay, turning now to slide six. We have been intently focused on clinical regulatory and commercial execution for Xeriv over the last several years as evidenced by our results. And so as I introduce our framework for near, medium and long term growth today, I will start by saying that we will continue to see substantial opportunities for sales and profit expansion from our current XEREVE indications and those in late stage development. While non steroidal topicals are making inroads in the treatment of immune mediated inflammatory skin diseases, there is still a tremendous amount of potential conversion to be had. As patients and prescribers continue to understand how XEREVE can serve as the foundational long term therapy for psoriasis, atopic dermatitis and seborrheic dermatitis, topical steroids will increasingly be reserved for acute treatment.

To dimensionalize the size of this opportunity, last year over sixty nine percent of all topical prescriptions in our approved indications were written for steroids. So the progressive conversion from steroids will be a sustainable growth driver for ZERIE for many years to come. Our expected label expansion for pediatric atopic dermatitis and development efforts for infant AD, which Patrick will further detail shortly, will be another component of this continued growth. Other commercial opportunities such as further access improvements and the development of the PCP and pediatric channel that we previously detailed will also support our continued momentum with XEREVE. These cumulative near term opportunities will power Xareve growth throughout 2025, 2026 and beyond.

Beyond our current Xareve portfolio, we see a next wave of growth being driven by effective and efficient life cycle management for the XERIV franchise. This has been enabled by the various formulations and concentrations available for XERIV, which has in essence created a Swiss Army knife for inflammatory skin conditions. Patrick will expand on our approach to ZERIB lifecycle management, but I will highlight that a core principle is to be data driven and disciplined matching investment to clinical promise and opportunity size. Longer term, our current development pipeline shows promise in addressing areas of high unmet needs for these patients. We will also continue to evaluate external sources of innovation based on our conviction that our core competencies give us the ability to leverage the research and early development efforts of other companies and to drive those innovations through later stages of development, regulatory approval and commercialization.

We are at an exciting point at Arcutis approaching profitability that will underwrite both the next stage of expansion for the Zurich franchise and subsequent waves of innovation. And while we are eager to apply our expertise in dermatological development and commercialization, I will again underscore that we will continue to be thoughtful and disciplined in our deployment of capital. We will continue to be stringent in our internal capital allocation by being data driven in our pipeline management decisions. As you will hear from Patrick shortly in that vein, we’ve made the difficult decision to halt the development of ARQ255 following the readout from our Phase 1b trial. Finally, in the context of these promising opportunities for capital deployment, I will reaffirm that we are committed to generating positive free cash flow.

We remain on track to achieve this milestone with our current business in 2026. It is our intention that future clinical development spend to advance our existing pipeline will be funded by cash flows from our Zeree franchise. Although we do acknowledge that a potential acquisition of some external innovation might require incremental capital. Okay, on slide seven, I want to take just a minute to expand on why we believe that pursuing further label expansion for XERIVA is a smart investment and a judicious use of our capital. First, as one of the most successful drug franchises of all time, the story of Humira’s incredible success is well known.

But the details of how that success was achieved, in particular the steady indication expansion for the franchise, provides a sense of the power of a well executed life cycle management program. HUMIRA first launched in 2022 with initial indication in rheumatoid arthritis, which produced the majority of the brand’s early revenues. But as we can see in the chart on the left hand side of the slide, it was not only the growth of that indication that powered Humira’s success, but also the consistent addition of new indications and label expansions. And by the time Humira reached its peak sales in 2022, AbbVie had added 11 indications for this drug and fully 68% of sales were derived from indications beyond rheumatoid arthritis. A more recent and developing example of effective life cycle management can be found in Sanofi and Regeneron’s Dupixent.

DUPIXENT launched in 2017 with an initial indication of adult atopic dermatitis. Since 2018, 10 additional indications for the brand had been approved. While atopic dermatitis remains the most significant revenue driver accounting for about 74% of sales as of 2024, approximately 3,700,000,000 in sales was generated by these subsequently added indications such as asthma and nasal polyps. The progressive expansion of our label for XERIV is not a new store either. Since launching an adult plaque psoriasis in 2022, we’ve expanded to cover three diseases and won four label expansions.

In the second quarter, the sales contribution from these new indications and label expansions exceeded two thirds of our total sales. And it is our strong belief that continued pursuit of new patient populations who may benefit from ZERI will sustain the brand’s growth. And with that, let me turn it over to Todd to provide some more color on the quarter. Todd?

Todd Edwards, Chief Commercial Officer, Arcutis Biotherapeutics: Thank you, Frank. I’m on slide nine. In the second quarter, we achieved $81,500,000 in net product revenue for XEREVE, reflecting 164% growth year over year and sequential growth of 28% compared to the first quarter. Importantly, growth during this period was driven by increased demand across all strengths and indications, highlighting the robust performance of the franchise and the continued adoption of Zareve across its approved indications. The meaningful revenue expansion in the quarter was a result of strong volume growth supported by stable gross to net rates for Zeeve, driven by the high percentage of prescriptions being reimbursed.

An additional factor driving product revenue growth in the quarter was the recovery of inventory levels in our distribution channels back to normal levels following a drawdown in the first quarter. Looking ahead to the remainder of 2025, we anticipate steady sales growth driven by new indication launches, increased contribution from the PCP and pediatric channel through our partnership with COA, and continued share gains in a sizable topical market primarily coming from steroid conversion. That said, Zareve is not exempt from the seasonality that typically affects prescription topical products. As a result, we anticipate a moderation in our sequential growth rate in the third quarter, before returning to robust growth in the fourth quarter. I’ll provide additional detail on this shortly.

As shown on slide 10, Zareep prescriptor volume reached a record high of 16,000 weekly scripts on a rolling four week average basis. The nearly 200,000 total prescriptions in the quarter reflect a year over year volume increase of 117% and a quarter over quarter increase of 13%. This strong performance is enabled by the substantial breadth of adoption across prescribers, with over 18,000 healthcare providers have written prescriptions in the second quarter and 26,000 since launch. This quarterly figure represents a 7% increase in the number of total prescriptions quarter over quarter and nearly 70% increase year over year. We continue to see an erosion of topical steroid share within the topical market.

In Q2 twenty twenty five, branded non steroidal volume grew by 40% versus prior year, while topical steroid volume was effectively flat. XEREVE is playing a key role in driving the shift as prescribers continue to appreciate its potential for sustained treatment of chronic inflammatory skin conditions compared to the intermittent use of that is appropriate with topical steroids. We’re in the early stages of launching Zurifoam zero point three percent for patients with scalp and body psoriasis following FDA approval in May. We expect this launch along with the anticipated approval of ZERIPREME zero point zero five percent for patients aged two to five years old in October to drive further volume growth in the second half of this year. While we continue to expect strong overall growth for ZEREV in 2025, including in the third quarter, the pace of growth in Q3 will reflect the typical seasonality of the topical market.

This is influenced by non medical factors such as summer vacations and medical factors including reduced flaring of inflammatory skin conditions during the summer months. As a result, we anticipate some moderation of growth in Q3 before returning to a more robust trajectory in Q4. Let’s now turn to our recent approval for Zurif on slide 11. In May, we received FDA approval for Zurifoam zero point three percent the treatment of plaque psoriasis for scalp and body. As Frank mentioned, more than half of plaque psoriasis patients have scalp involvement.

Historically, these patients have managed their condition with a combination of topical steroids and other treatments depending on plaque location resulting in a frustrating polypharmacy approach. The ability to use a single product once daily across all affected areas offers a meaningful reduction in treatment burden. Cerre Foam 0.3% delivers reliable plaque clearance and rapid itch relief in a formulation specifically designed for hair bearing areas and appropriate for use near the eyes and other sensitive areas. We are confident this label expansion will drive incremental demand for XERIT, particularly as the foam displaces other treatment options for scalp psoriasis. Since the foam formulation for Seb Derm and psoriasis are on the same SKU across both indications, it would take additional time to accumulate sufficient longitudinal data to accurately parse out contributions by disease.

However, we have seen an acceleration in foam growth with a 9% increase in volume in the six weeks since launch compared to the prior six weeks. As previously noted, our analysis indicates that clinicians who prescribe XEREVE across multiple indications tend to generate significantly higher prescription volumes overall. They recognize the meaningful disease management benefits Zareve delivers for patients. With the introduction of Zareve Foam for this new indication, we expect this effect to compound further. Moving to slide 12, a long standing objective of Arcutis has been to drive reimbursed prescriptions, not just any prescriptions, as they directly impact top line revenue.

We continue to benefit from strong insurance coverage for XEREVE across approved indications with approximately 80% of all prescriptions being reimbursed. This favorable coverage landscape supported the revenue growth achieved during the quarter with gross to net rates remaining stable. We also made meaningful progress with Medicaid with well over half of all Medicaid recipients now having access to Zareed and the majority of covered lives only require a single step through a steroid. This advancement contributed to strong quarter over quarter unit growth from the Medicaid channel. We remain actively engaged in negotiations with Medicare Part D plans and are committed to expand access for these patients, even as payers continue to navigate financial disruptions due to the implementation of the Inflation Reduction Act.

The IRA introduced changes to the Part D benefit structure, including a shift in cautionary responsibilities between CMS, Part D plans and manufacturers. These changes are creating both operational and financial complexities for Part D plans As they work to update their systems, adjust risk models, and align on formulary strategies. This environment has led to a more protracted process to cover decisions for all new pharmaceuticals. Moving to slide 13, expanded utilization of XEREVE in the primary care and pediatric setting remains a key component of our growth strategy and we continue to make progress through our partnership with COVA. From the outset, we recognize that the primary care selling cycle requires more frequent and sustained engagement to build familiarity.

Many providers in this setting have limited exposure to topical nonsteroid treatments and tend to default to prescribing steroids. Cova’s field team continues to execute targeted high frequency outreach to drive initial trial and ultimately adoption of Zareep among these providers and their patients. This process will further be supported by recent enhancements made to streamline the prescribing and fulfillment experience of these providers. In the second quarter, we implemented a dedicated national pharmacy with improved capabilities for this channel. This pharmacy will play a pivotal role in appropriately helping offices navigate the fulfillment process that is often less familiar to primary care providers compared to dermatologists who are more accustomed to prescribing branded topicals.

The key advantage of this new dedicated pharmacy is its ability to integrate directly with EHR systems, enabling seamless incorporation of ZERBY prescribing into existing workflows. Given the diversity and volume of patients in the primary care setting, tools that reduce administrative burden and streamline access are instrumental in driving broader adoption. I’m now on slide 14. The future of Zurief is incredibly bright with multiple formulations and concentrations. We are equipping healthcare providers with the flexibility to meet patients where they are in their treatment journey by providing a treatment option suitable for long term use and the ability to better support the management of chronic inflammatory skin conditions.

This versatility combined with Surrey’s well established efficacy and safety profile continues to reinforce its position as the most prescribed brand topical across three major inflammatory skin conditions. With that, I’ll now turn the call over to Patrick for an update on R and D.

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Thanks Todd. I’m on slide 16. In the quarter, as you come to expect from us, we made significant progress against our clinical and regulatory objectives. We received FDA approval for Xerif Foam zero point three percent for scalp and body plaque psoriasis, initiated our phase two trial for XEREV cream zero point zero five percent in infants with atopic dermatitis and submitted our IND application for ARQ-two thirty four in atopic dermatitis. Today I’ll spend time describing our efforts in developing XEREV for pediatric AD patients, outlining our approach to XERIV lifecycle management and give an update on ARQ two fifty five.

First, I want to acknowledge the important milestone that our IND submission for ARQ two thirty four represents. We continue to believe that CD200 receptor modulation has the potential to be a powerful mechanism for the control of atopic dermatitis and other inflammatory conditions. We further believe that as a fusion protein with high selectivity for CD200, ARQ-two 34 has the potential to be a class leading program. We look forward to sharing more detail on this program at a later date. Turning now to slide 17, unlike other inflammatory skin conditions, atopic dermatitis often presents at early ages for patients.

Nearly ten million children in The US are impacted by atopic dermatitis with roughly sixty percent developing symptoms in their first year of life. Eighty percent unique challenges in these younger age groups, not only because the skin is more sensitive, but also because the condition often covers a greater percentage of the total body surface area compared to adolescents and adults. Parents of these pediatric patients are highly sensitive, potential negative side effects of topical steroids. These concerns range from the impact of chronic steroid use on a child’s growth and bone development to more immediate complications like application to the child’s face, where contact with the eyes and mouth can be difficult to control. Given the size of the patient population and the need for safer and more tolerable therapeutic intervention, we’ve been enthusiastically pursuing label expansion for XERIVE to younger ages of atopic dermatitis patients where we see a great fit for the XERIVE clinical profile.

In February, we submitted our sNDA for ZERIPREME zero point zero five percent for the treatment of children aged two to five years old with atopic dermatitis. Population of roughly one point eight million patients. The submission was supported by data from the integument PED Phase three trial, which demonstrated efficacy and a safe and tolerable profile in this age group. Highlighted by thirty nine percent of children treated with XERIV achieving a seventy five percent improvement in EASI score, also called an EASI 75. This was done in just four weeks.

In June we presented new results from the Integument OLE long term open label study that demonstrated children ages two to five who achieved disease clearance and switched to a proactive twice weekly application of Xerif cream zero point five percent were on average able to maintain disease control for two thirty eight days or nearly eight months without the need to return to daily dosing. And we believe that the potential to control AD without disease flares with less frequent dosing may be a particularly compelling benefit for patients in this age range and their caregivers. It speaks to the differentiated profile of Zareve as a foundational treatment for chronic inflammatory skin conditions. We look forward to our target PDUFA date for this application in October. We’re also actively pursuing development of Zareve cream zero point zero five percent in patients ages three to 24 and enrolled the first patient in this integument infant trial for this population in June.

We’re seeing brisk enrollment in the trial, which confirms our belief that amongst these young vulnerable atopic dermatitis patients, there’s an acute desire for alternative treatments to current therapies, most of which are topical corticosteroids. Pursuing these potential expansions into younger AD patient populations delivers on a core principle for Arcutis to deliver innovation that solves everyday challenges that significantly impact the lives of patients and their families. Now moving on to slide 18, as Frank remarked at the beginning of this call, pursuing new patient populations that may benefit from XERIVE has been a core tenant of our clinical development strategy. This is evidenced by the four label expansions we’ve secured across plaque psoriasis, seborrheic dermatitis and atopic dermatitis following our initial approval in 2022. We believe that there are additional skin diseases that may respond to and more patients who may benefit from Xeriv.

This believe is not only supported by our understanding of Xeriv’s broadly applicable anti inflammatory and antipruritic properties, but also by our feedback we’ve received from healthcare providers in the field. As part of our obligation to sponsor, our medical team monitors the feedback. To date we’ve identified more than forty case reports from clinicians who have used the Reeve in a multitude of other inflammatory dermatoses and seen signs of efficacy. These clinicians have experienced the safe, tolerable, versatile and effective profile of XEREVE in their psoriasis, AD and Sept derm patients and have chosen to investigate novel applications of the therapy. These case reports are listed on the left side of the slide and include many diseases which are not well managed by topical steroids and therefore present a challenge for dermatology providers.

Our approach to assessing these potential opportunities is stepwise and resource efficient. As indications of interest come to light, we’ll engage in the collaborative research conducting phase two proof of concept studies where appropriate to evaluate the degree of response and understand potential safety and efficacy. Based on the results of these initial studies, our analysis of the addressable patient population for a given disease and feedback received by regulatory agencies, we may then identify additional indications for which a registrational trial conducted by Arcudis is a prudent investment. We’re already pursuing this strategy with efforts underway to begin enrolling Phase two studies in vitiligo and hidradenitis suppurativa. We anticipate initiating additional Phase two proof of concept studies going forward.

This evaluation of new indications and program planning will be comprehensive and evolve over time. Each project will be carefully assessed relative to potential return on investments. Our progress in this process is another topic that we plan to detail further at a future date. And moving on to slide 19, as Frank mentioned in his remarks, and as you’ve heard throughout this call, Acuitas is fortunate to have multiple opportunities for clinical investment to pave the way for our future growth. As we evaluate our current and future portfolio of clinical programs, we will continue to be data driven and apply a high bar for advancement.

In line with this rigorous portfolio management approach, we’ve announced today our decision to halt further development of ARQ two fifty five following our review of the results from our Phase 1b trial. We’ve always known that the ARQ two fifty five program was a high risk endeavor. Multiple other topical JAK inhibitors had previously failed in alopecia areata. A preclinical study suggested that our novel four d technology might be able to overcome the challenges of treating alopecia areata topically. This study demonstrated a trend for positive efficacy in both the clinical endpoint of SALT change from baseline and SALT improvement to fifty percent or greater suggesting that in fact 4D is able to deliver drug to the site of inflammation.

Unfortunately, the magnitude of improvement was not sufficiently large to justify a continuation of the program. Here we show the efficacy data alongside that from other independent clinical trials conducted with oral JAK inhibitors in alopecia areata. Although we were pleased to see the favorable trend that validates our topical formulation approach after extensive consideration of potential profile relative to alternatives. We decided that this level of efficacy we observed with ARQ two fifty five would not be a meaningful addition to the treatment options for patients with alopecia areata. We look forward to finding other opportunities outside of ARQ two fifty five to expand our pipeline and provide meaningful innovation in dermatology.

I want to thank the investigators, our advisors and the patients who participated in this program, as well as the excellent ArQuda team that conducted a very well run study. And with that, I’ll turn it over to Lata.

Lata Vyravan, Chief Financial Officer, Arcutis Biotherapeutics: Thank you, Patrick. I want to start by reiterating the strength of this quarter. Our improved operating leverage allowed the strong top line growth to translate to a reduction in cash burn and reemphasizes that our disciplined approach to capital allocation has us on a path to cash flow breakeven in 2026. I’m on slide 21 showing financial results, both year over year and quarter over quarter for the 2025. As Todd has stated earlier, we generated net product revenues in the quarter of approximately $81,500,000 which is up 164% from 2024 and twenty eight percent from Q1 of this year.

Cost of sales in the second quarter were $7,500,000 compared to $3,500,000 in 2024, primarily driven by increased Zareve sales volume. Cost of sales decreased 15 sequentially versus the 2025, despite increasing sales volume due to an expense recognized in the first quarter for the catch up amortization of a $10,000,000 sales milestone owed to AstraZeneca for reaching $250,000,000 in cumulative net sales. For the 2025, our R and D expenses were $19,500,000 versus 19,300,000.0 for the corresponding period in 2024. Our R and D spend has remained consistent year on year as decreased development costs for roflumolast in adult atopic dermatitis and plaque psoriasis were partially offset by an increase in development costs for pediatric atopic dermatitis. SG and A expenses were $69,200,000 for the ’5 versus $58,200,000 in the same period last year, up 19 as we invested in our commercial organization to support our current and upcoming launches.

Recall, we expanded our sales force in the 2024. SG and A expenses were also up approximately 9% as compared to the ’25, primarily due to increased sales and marketing costs related to our launch and scalp and body psoriasis. Net loss for the quarter decreased by $36,400,000 compared to the same period last year and net $9,200,000 versus the 2025. While this rate of improvement in operating results will fluctuate across quarters in line with sales, it clearly demonstrates that we are making substantial progress towards reaching cash flow breakeven in 2026 and that the foundation of our business is strong and getting stronger. Now I’m on slide 22.

You can see that we had cash and marketable securities of $191,100,000 on our balance sheet as of 06/30/2025, and we’re slightly cash flow positive from operating activities this quarter. This positive net cash flow from operating activities of $325,000 was due in part to our increased gross profit driven by our top line revenue growth, a highly encouraging signal of our progress towards cash flow positivity, but also in part due to timing changes in net working capital that reduced cash used in operations. This is a good example of the type of factors that lead to the quarter to quarter fluctuations I mentioned earlier, and that we expect to see on occasion in the future. We expect our quarterly cash burn to continue trending down as our revenues grow and we approach stable positive cash flow from operations sometime in 2026. We have total debt of 108,000,000 and have the option to withdraw another $100,000,000 in whole or in part at our discretion through the 2026, providing us with significantly enhanced flexibility.

The success of Zareve’s portfolio and the economies of scale we are generating will permit us to invest in the business for continued growth and long term durability. With that, I’m going to hand it back to Frank for some closing remarks.

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Thanks, Lava. As you’ve heard throughout today’s call, we’ve built a strong and sustainable foundation for our business and our prospects for continued near, medium and long term growth at Arcutis are strong. As we continue to execute our multifaceted plans to sustain this growth, we look forward to sharing updates on our progress. And to that end, we will be holding an R and D Day in the fourth quarter of this year to go into greater detail on several key aspects of our clinical development plans and corporate strategy. And with that, we’ll open up the call to Q and A.

Conference Operator: Thank you. Our first question is going to come from the line of Seamus Fernandez with Guggenheim Securities. Your line is open. Please go ahead.

Seamus Fernandez, Analyst, Guggenheim Securities: Thanks so much for the question and congrats on the great quarter and reaching, at least for this quarter, cash flow positivity. A couple questions here. Maybe just to start off, as we think about the sort of progression of revenue from second quarter to third quarter, It sounds like we should think about this as a little bit of a perhaps even a slightly down quarter. Or should we think about it more as a sort of flat progression or moderating growth as we think about third quarter. And then, you know, Frank, think it’s very obvious the opportunity to continue to really pursue the switch from topical steroids more broadly, especially considering the range of areas where topical steroids are utilized.

But wanted to just get a better sense of how far reaching you feel the the opportunity is to move beyond the the four initial indications here. Obviously, there’s there’s a number of indications that were listed on the slide on the r and d side. But you also mentioned potential business development, you know, pursuits moving forward beyond the existing pipeline. What do you feel would be kind of a good right fit for the company, as you look beyond this? Is it to be able to scale the, the business with on market assets, or is it more to, you know, really release your r and d organization given the the sort of clinical excellence that’s been demonstrated so far?

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: So Seamus, maybe I’ll answer your second question first and then I’ll ask Todd to address the question around revenue. I think that from a clinical standpoint, it’s pretty clear that XEREVE has very broad applicability across a whole range of diseases. I think potentially even some non inflammatory conditions, But they’re not probably all worth us pursuing an indication for. I think we will look to generate data to inform the dermatology community where it’s appropriate And then we’ll look at those opportunities and determine is the market big enough? Is the magnitude of clinical improvement versus existing therapies big enough that it justifies pursuing an indication?

And so we’ll be very rigorous and selective in choosing those diseases where we think it’s worth spending the money to do a full registrational program. But I’m pretty confident that there are going to be other diseases that it makes sense for us to pursue an indication, particularly given how stringent insurance companies have become about the off label reimbursement of drugs. It’s very different than it was ten years ago even. So I think there’s a lot of upside opportunity for us. There are a lot of steroid prescriptions for diseases other than our currently approved indications.

And so we’ll just need to be very rigorous and methodical in choosing which ones would just generate data on, which ones we pursue an indication for. Turning to the business development side, I would say that our primary focus is really on development stage assets. Patrick and his team and Bethany and her team on the tech upside have I think proven that they are really outstanding, I would even say best in class in dermatology and their ability to complete clinical development, regulatory approval. And then Todd and his team have shown how they can effectively operate commercially as well. So we think that’s probably the best area for us to focus on in terms of creating value for shareholders.

We are not a spec pharma company. I’m not interested in going around just buying revenue and adding that to the pipeline. I don’t think that’s a good way for us to create shareholder value. But leveraging the development expertise of this company, I think is a great opportunity. And we continue to focus primarily on drugs where there is biological validation of the target.

So we’re not taking on too much biologic risk, where there’s a large unmet need and where we find an asset that is really differentiated from other assets. We’re not going to be pursuing a bunch of me too assets. Hopefully that addresses your question. And we’ll again, we’ll talk about this a lot more at the R and D Day and then I’ll turn it over to Todd to talk about Q3 and the rest of the year.

Todd Edwards, Chief Commercial Officer, Arcutis Biotherapeutics: Yeah, great. Thank you, Frank. And Seamus, we still anticipate sequential growth in the third quarter as we expect continued growth across all indications. The rate of growth in the third quarter will be slightly moderated due to the seasonality that we spoke about. But nonetheless, we remain very optimistic about the growth.

And I’ll just frame it that we continue to want to see sustained momentum within this franchise and will in Q3 and beyond.

Seamus Fernandez, Analyst, Guggenheim Securities: Super. Thanks so much.

Conference Operator: Thank you. And one moment for our next question. Our next question is gonna come from the line of Tyler Van Buren with TD Cowen. Your line is open. Please go ahead.

Brian Schulkopf, Head of Investor Relations, Arcutis Biotherapeutics: Yeah. Is is Ikenna on for Tyler. I had a question about the co partnership,

Ikenna, Analyst, TD Cowen: and you guys also mentioned that you set up a national dedicated pharmacy.

Brian Schulkopf, Head of Investor Relations, Arcutis Biotherapeutics: I was wondering what the early utilization of that looked like and again, could you elaborate on the contribution of the COAP partnership today?

Todd Edwards, Chief Commercial Officer, Arcutis Biotherapeutics: Yeah, this is Todd. Yeah, thank you for the question. And as discussed before, we anticipated a slower adoption of Zareve in the primary care market versus the dermatology market due to the longer selling cycle that’s required. Also with primary care physicians not being as familiar with non steroidal topicals. And we are seeing that slower adoption of Zurie within the primary care market.

However, POA is taking the right actions to make certain that we have the right frequency on the right targets with the right messaging, and also making certain that they continue to educate primary care physicians at other opportunities like peer to peer programs, speaker programs, and such. Relative to the national pharmacy, we’re seeing very positive signals with the early launch of that national pharmacy, and as mentioned, it’s critical that we provide a dedicated pharmacy that will appropriately enable and support the primary care physicians relative to the fulfillment process with Zurief. And once again, we’re seeing positive signals with that and are encouraged by COA’s continuing to adapt and execute on the right targets, the right frequency, and what we expect from this national pharmacy.

Brian Schulkopf, Head of Investor Relations, Arcutis Biotherapeutics: Thank you and congrats again on the quarter.

Conference Operator: Thank you and one moment for our next question. Our next question will come from the line of Weir with Mizuho. Your line is open. Please go ahead.

Weir, Analyst, Mizuho: Hey, guys. Yeah. Thanks for taking our questions. Congrats on the quarter. So, maybe just first question is, could you maybe just help us understand the gross to net dynamics in the quarter was better than what we expected, particularly for each of the individual product, if it’s possible, or just the phone?

Thanks.

Lata Vyravan, Chief Financial Officer, Arcutis Biotherapeutics: Hi, Oi.

Weir, Analyst, Mizuho: A couple. Do you have

Lata Vyravan, Chief Financial Officer, Arcutis Biotherapeutics: additional questions? You want to finish them off?

Weir, Analyst, Mizuho: No, no, that’s fine. I’ll follow-up. Okay,

Lata Vyravan, Chief Financial Officer, Arcutis Biotherapeutics: so in regards to gross to net, as Todd commented, we are gross and has been stable for the quarter and in the fifties. And beyond that, we haven’t quite ever commented on the product. So I’m going leave it at the 50s.

Weir, Analyst, Mizuho: Okay. I’ll just say,

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: net’s not changing very much anymore, and I wouldn’t expect that it would.

Weir, Analyst, Mizuho: Okay. And I guess, you know, on the press release, you guys commented on three patents that you that was allowed, I guess, in the quarter. Could you sort of elaborate on that?

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Yes, we had three additional patents that were issued in the quarter from the US Patent Office. None of those extended LOE for the product. But I think they further expand the strength of our IP portfolio. We now have 24 issued US patents and many of those listed in the Orange Book. And I just think that it speaks to the continued strength of our intellectual property portfolio around XEREVE.

Weir, Analyst, Mizuho: And sorry, last question. You mentioned two studies, two phase two studies that are ongoing, and I guess one of them is the atopic study in pediatric three months to two years old. What’s the other one or?

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: So, talked about initiation of a three to twenty four month old study in atopic dermatitis with the read that’s the point five percent. That is a sponsored clinical trial that’s part of a post marketing commitment that we have in order to continue to set the age down that we are conducting as a sponsored registrational clinical trial. The other two phase two studies that we’re talking about are collaborative research trials, which are being done to get an early understanding of the potential efficacy in two of these indications, which are not currently approved indications, but where we have seen some evidence of efficacy coming from case reports. And so that’ll give us a kind of quick and early understanding of what the efficacy might and safety might be in that disease state to help us to then make decisions on whether or not to pursue a registrational program for one of these indications. Just to clarify, those phase two studies are in HS and vitiligo.

I believe both of them are posted on clintrust.gov now.

Weir, Analyst, Mizuho: Okay. Thank you.

Conference Operator: Thank you. And one moment for our next question. Our next question is going to come from the line of Andrew Tye with Jefferies. Your line is open. Please go ahead.

: Hey, thanks. Good afternoon. Congrats on the execution. Thanks for taking my questions. Maybe a bigger question.

Can you give us your latest and greatest thinking on how you’re thinking about the peak sales opportunity across your three current indications and how that’s changed compared to your original thinking?

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: So, hey, Andrew, we have not given peak sales guidance for quite some time. I think it was 2022, last time we did. At that point, we had said that we thought that each one of the indications, I. E. Psoriasis, AD and subderm could be in the range of 700,000,000 to $1,200,000,000 per indication.

I think we have not dramatically changed that view of the opportunity. If you just sit down and do some quick back of the envelope calculations, we’re sitting at something like 2.5% market share in the total topical market. You know, if that grows

Weir, Analyst, Mizuho: to

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: 10%, you know, you’re well north of a billion dollars. And I think that 10%, of the topical market is very achievable and probably is a low bar given the clinical profile that we see. And particularly, you know, if we expand beyond the three initial indications, as Patrick just mentioned. What I will say is that, you know, we continue to evaluate this and I think you can expect some further guidance from us in the future about what we think the peak sales potential is. Clearly we are really just scratching the surface in the total commercial opportunity for XEREVE.

: Agreed. And then a follow-up to the last question on vitiligo and HS. Is it possible that we get initial data from the IST studies in 2026 or is it sometime later? Just want to gauge your new flow. Thank you.

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Yeah, I mean, now we’re not putting out any expected timeline for those trials. As we get engaged into our collaborative research that we’re pursuing for these phase two trials, we’ll have a more clear understanding of what that might be. We would expect to provide some guidance as we get further into them. But at the current time, we’re not able to give a milestone or expected timeline to deliver the data.

: Makes sense. Thank you.

Conference Operator: Thank you. And one moment for our next question. Our next question will come from the line of Judah Frommer with MS. Your line is open. Please go ahead.

Judah Frommer, Analyst, Morgan Stanley: Yes, hi. Thanks for taking the questions and congrats on the quarter. Just a couple for us. I guess first, we’re hoping you can maybe elaborate a little bit on the pediatric opportunity in atopic derm, kind of what penetration ramp could look like there relative to in adults given kind of potentially arguably greater unmet need or safety concerns there for those patients. And then, separately, I think this week we saw a second joint status update on the Patagus litigation.

Just curious if there was anything you could add there. Is the case just stayed and we’re waiting for an update or was there more to that? Thank you.

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Yeah, Patrick, you wanna take the first of those questions? Yeah, we’re really excited about the opportunity in two to five year olds that’s upcoming with a point 05% when that’s the approval that has a PDUFA in October. Out of the nine point six million pediatric patients with AD, about one point eight million of them are in this two to five year old age range that are being topically treated. And we were just at the Society for Pediatric Dermatology meeting in Seattle and really got a very good understanding of just how important this age group is to them. Think because many of these are kind of difficult to manage patients.

As I mentioned, this is a disease that comes on early in life and there’s a lot of avoidance of topical steroids from parents. So what we’re looking to be able to do is to present option into these deeper ages, age ranges. And two to five year olds is the first step for us. As we mentioned, we’re getting started with the three to twenty four month old trial as well with the same concentration. I think it’s just a very good fit between the need and the expectation of parents to be able to manage their kids without topical steroids and the profile that we’ve been able to show so far.

So we’re really excited about the upcoming approval. Yeah, and Patrick and I were both just at the Society of Pediatric Dermatologists two weeks ago. Do you want to maybe just give some color about the tenor of the conversations at SPD? Yeah, I mean, conversations were about a very large patient flow in their offices for this age range, because of the challenges of topical corticosteroid use. And it’s common for a patient to be seen in a pediatrician’s office.

They might get one topical corticosteroid as their kind of start off. And then if that’s not able to completely manage the disease, then they’re looking to be referred oftentimes either to a pediatric dermatologist, this way if one is available. But dermatologist, it’s very common for them, even if they are seen as adult dermatologists to be seeing patients down into the age of two and sometimes even younger than that. So not all of these patients are managed by pediatric derms. Pediatric derms definitely represent kind of the core for education within this age group.

And they influence a lot pediatrician prescribing and pediatrician openness to being able to use a new therapy. So we think our contact points within both the pediatric dermatology community are really important. And that’s what we were seeing when we were at the Society for Pediatric Dermatology, but also the adult dermatology healthcare providers are really important point for managing these patients. And then just with regard to the Patagus case, recall that there is a requirement in the litigation stay that the two parties jointly provide periodic updates to the court. The first one of those updates has just recently been provided.

Those updates are confidential. In fact, even I don’t see them. But it was provided for in the stay. And I think the one relevant data point that all of us should be aware of was is that everyone agreed that the stay should and will remain in place.

Todd Edwards, Chief Commercial Officer, Arcutis Biotherapeutics: Great. Thank you.

Conference Operator: Thank you. And one moment as we move on to our next question. Our next question comes from the line of Serge Belanger with Needham. Your line is open. Please go ahead.

Brian Schulkopf, Head of Investor Relations, Arcutis Biotherapeutics0: Hi, good afternoon and congrats on a great quarter. First question, regarding the 2Q performance, I think you mentioned that sales were up 28% quarter over quarter. I believe scripts were up 13%. So maybe just reconcile the difference. Was it just a bump up in gross to nets from Q1?

And I guess the follow-up to that is, I think you mentioned you expect gross to nets to be stable for the rest of the year. So should we expect script growth to be the main driver for sales over the remainder of 2025? Second question, Todd talked a little bit about the issues regarding Medicare Part D. Can you remind us what part of the TAM Medicare Part D represents for Zurif and when do you think you’ll be in a position to kind of capture that opportunity and get coverage from those plants? Thanks.

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: You want to maybe address them, bridge on sales?

Todd Edwards, Chief Commercial Officer, Arcutis Biotherapeutics: Yeah, address the bridge on sales. The main driver of the product revenue growth over demand growth was a recover in distribution inventory levels back to normal following a drawdown in the first quarter. What I want to be clear about is that we did not see abnormal inventory stocking levels in the second quarter. This was simply recovery back to normal levels as a result of the drawdown in the first quarter. In reference to gross to net, as mentioned and as Lathar reinforced, we expect gross to net to be stable for the remainder of the year.

So yes, that will primary growth driver will be volume and demand. We’re very encouraged in what we see across the portfolio. We recently launched a Zarefoam 0.3 for scalp and body psoriasis that will continue to be a growth driver. And then as Patrick mentioned with the patent approval in October for 0.05% to five, we continue to be very optimistic and encouraged by future growth in our demand.

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Yeah, and then, you know, with just with regard to Serge, your question around Part D, you know, the three diseases, you know, keep in mind, roughly about half of those patients across our three indications are government pay, either Medicare or Medicaid. And the relative split between Medicare and Medicaid really varies by disease. Atopic dermatitis is much more heavily Medicaid because of the age of the patients. Seb derm is much more heavily Medicare because of the age of the patients. And psoriasis is somewhere in between, although less psoriasis patients are government than with Seb derm or AD.

So I think in totality, again, it’s about half our government. We’re rapidly penetrating into Medicaid, slightly less than half of that half is Medicare. Did that address your question around the Medicare piece?

Brian Schulkopf, Head of Investor Relations, Arcutis Biotherapeutics0: Yeah, I guess the other part of that question was, when do you think you’ll be in a position to start capturing that coverage?

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Yeah, is hard to say because unfortunately it’s completely outside of our control, right? As Todd mentioned, the dynamic that we’re seeing is, and you all probably have seen this if you cover the insurance companies, you know, with the changes in the IRA that were adopted January 1, the insurance companies are losing a substantial amount of money on their Part D book of business. And a number of them had to issue earnings warnings even as a result of that, you know, and that disruption then is leading them to be, I think, very conservative and to be looking at their businesses. You know, to the best of our knowledge, I don’t think any new drugs have been added this year to the Medicare Part D formularies across all indications. That tells you just sort of how perturbed We they don’t know when things are going to settle out and they’re going to start moving forward again.

You know, we continue to have, I think, constructive dialogues with the Medicare Part D plans, but you know, when your boat is sinking, the last thing you’re thinking about is picking up new passengers. Think that’s a little bit how they feel right now. You know, I expect it will stabilize. We think Medicare is still an important opportunity for us and will contribute to our growth in the future. It’s very difficult at this point for us to call the ball on what the timing would be for that.

Brian Schulkopf, Head of Investor Relations, Arcutis Biotherapeutics0: Okay. Maybe one last one. Obviously, your Salesforce has executed well, growing sales here in the second quarter, and it sounds like Koa had still has little contribution so far. So with the additional approvals coming up later this year, is there a case to be made to continue expanding your own sales force to continue executing well and growing the piece within the derm offices?

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: So I don’t think we see or see at this point any need to expand in dermatology. We have a very well sized dermatology sales force and we have good coverage, good frequency on our dermatology targets. What we will have to continue to evaluate is opportunities outside of dermatology and think about how we address those opportunities. We felt that the Coa partnership was a smart way, an economical way for us to access the primary care and pediatric opportunities. But at this point in the game, we don’t have any plans for any further sales force expansions on the ArQuda sales force.

Brian Schulkopf, Head of Investor Relations, Arcutis Biotherapeutics0: Got it. Thank you.

Conference Operator: Thank you. And one moment for our next question. Our next question is going to come from the line of Douglas Tau with H. C. Wainwright.

Your line is open. Please go ahead.

Brian Schulkopf, Head of Investor Relations, Arcutis Biotherapeutics1: Hi, good afternoon. And thanks for taking my questions and congrats on the progress. I’m just curious, you know, when we look at, I think it’s slide 11 and you obviously, you know, as writers or as doctors write more for more indications, you sort of get a real economy scale or sort of logarithmic effect in terms of the scripts that they’re writing. How long does it typically take for docs to write for multiple scripts? Are they sort of coming at it sort of incrementally?

And are there things that you can do or have started to do to sort of increase the indications that an individual doc is writing for?

Todd Edwards, Chief Commercial Officer, Arcutis Biotherapeutics: Yeah, thank you for the question. Our thesis is in a very good position with Zuriev. And what I mean by that is that with the recent launches that we’ve had with indications, dermatology prescribers have already had experience with Zeree, whether it be with the zero cream zero point three percent for psoriasis or the home formulation for seborrheic dermatitis. This drives rapid uptake relative to the other indications or formulations that we’ve launched, and we do see that within the data that a good portion of our prescribing base has adopted the full formulary. This creates efficiencies with their prescribing, both with the patient but also on the fulfillment side, given that’s the same copay card, same pharmacy, same process.

So that you know, it’s a differentiation herb disease, excuse me, Xeriv as an asset, meaning that you know across the different formulations and products, you can write the product relative to any duration on time, anywhere on the body. We have a proven efficacy, proven safety. So this type of differentiation really compels the providers to continue to adopt the new formulations and indications we put into the market.

Brian Schulkopf, Head of Investor Relations, Arcutis Biotherapeutics1: And I’m just curious if I can follow-up. Just to the extent that some doctors might only still be writing for one indication, is it your sense that perhaps they don’t have awareness of the breadth of the label? Or is it perhaps unique to their practice where they just might see sort of have a concentration into one of the indications? Thank you.

Todd Edwards, Chief Commercial Officer, Arcutis Biotherapeutics: Yeah. Within our dermatology target universe, the dermatologists that have only adopted one indication is truly the exception and usually that’s something that’s unique to their practice or to their patient population. We continue to engage those dermatologists, educate them on the Zurich differentiation and opportunity, and expect that over time they will have adoption of the portfolio.

Brian Schulkopf, Head of Investor Relations, Arcutis Biotherapeutics1: Okay, great. Thank you so much.

Conference Operator: Thank you. And one moment for our next question. Our next question comes from the line of Richard Law with Goldman Sachs. Your line is open. Please go ahead.

Brian Schulkopf, Head of Investor Relations, Arcutis Biotherapeutics2: Hey, guys. Congrats on the progress. A couple of questions from us. So following up on the Medicare discussion, what drug classification would SORI fall into in your Medicare coverage discussions or negotiations? Is it classified along with topical steroid, or can you get your own separate classes of topical PDE4?

And also, what is the progress in Medicaid over the last quarter?

Todd Edwards, Chief Commercial Officer, Arcutis Biotherapeutics: Relative to with regard to Medicare, relative to the class, the market basket, if you will, we would be within the dermatology topical basket as how Medicare would position Zareve. In reference to Medicaid, we’ve had exceptional success in expanding our Medicaid access. You think about it, and as mentioned, more than half of Medicaid patients now have access to Zareve, and most often that’s only a single step through a steroid, and we continue to be steadfast expanding that access, ensuring that Medicaid recipients continue to have an expanded access to Zereve.

Brian Schulkopf, Head of Investor Relations, Arcutis Biotherapeutics2: Okay. I just kind follow-up on that. So basically, is there a way to get a separate classes like a topical PDE4 or just the broad basket that you mentioned?

Todd Edwards, Chief Commercial Officer, Arcutis Biotherapeutics: Yeah, it would be difficult to get just a PDE4 class. They want to keep the topical products in the same market basket. And actually that’s advantageous for us given Zaree’s differentiation not only from an asset but how we strategically price the product within the market. So you take that strategic pricing within the market and you also take into consideration the average utilization of tooth per patient per year is two to three. We’re a great value proposition to the Part D plans as well as the beneficiaries.

Brian Schulkopf, Head of Investor Relations, Arcutis Biotherapeutics2: I see. Great. And then just one more question. Any new thinking around the ex US opportunity, especially in Europe based on how ABSOLUTE RA is performing? Thank you.

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: I would say at this point, no change. I think that APHTORA is really a distinct situation, especially because of the label they have in Europe and the lack of comparators for that indication in Europe. I think for Xeriv and some of the other advanced topical therapies, the reimbursement landscape in Europe is particularly challenging. And you lay on top of that, you know, of the potential domestic risks around MFN pricing. And we feel that the business case right now in Europe isn’t compelling enough for us to pursue that.

Todd Edwards, Chief Commercial Officer, Arcutis Biotherapeutics: Got it. Very helpful. Thank you.

Conference Operator: Thank you. And I would now like to hand the conference back over to Frank Watanabe for closing remarks.

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Okay. Well, as always, we appreciate all the great questions and appreciate you guys making the time to join us on the call today. I know it’s a very, very busy time of the year, so we look forward to talking to you all again in another quarter and hopefully putting up another great number next quarter. Thanks again.

Conference Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.

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