Earnings call transcript: Arcutis Q3 2025 earnings beat expectations, stock surges

Arcutis Biotherapeutics Inc. reported its third-quarter 2025 earnings, revealing a significant earnings beat that sent its stock soaring in pre-market trading. The company posted earnings per share (EPS) of $0.06, surpassing the forecasted loss of $0.0886, marking a surprise of 167.72%. Revenue reached $99.2 million, exceeding expectations by 14.06%. Following this announcement, Arcutis’s stock price jumped 28.87% to $22.48, reflecting investor optimism about the company’s performance and future prospects. According to InvestingPro data, the stock has delivered an impressive 140% return over the past year, with current trading levels near its 52-week high. InvestingPro analysis suggests the stock is currently fairly valued based on its proprietary Fair Value model.

Key Takeaways

• Arcutis reported a net income of $7.4 million, reversing a $41.5 million loss from the same quarter last year.
• The company’s stock surged nearly 29% in pre-market trading following the earnings announcement.
• Revenue increased by 122% year-over-year, driven by strong product sales and market expansion.
• Arcutis anticipates reaching cash flow breakeven by Q4 2025.

Company Performance

Arcutis Biotherapeutics showcased a robust performance in Q3 2025, with net product revenues climbing to $99.2 million, a 122% increase compared to the same period last year. This growth was bolstered by a 22% sequential rise from Q2 2025, highlighting the company’s successful market strategies and product expansions. Arcutis has positioned itself strongly in the dermatology sector, leveraging its product portfolio and market reach to drive significant revenue gains. InvestingPro data reveals impressive gross profit margins of 89.1% and strong revenue growth of 99.5% over the last twelve months. Want deeper insights? InvestingPro offers 13 additional investment tips and comprehensive financial analysis for ARQT.

Financial Highlights

• Revenue: $99.2 million, up 122% year-over-year
• Earnings per share: $0.06, compared to a forecasted loss of $0.0886
• Net income: $7.4 million, reversing a loss of $41.5 million in Q3 2024
• Cash and marketable securities: $191 million
• Cash burn from operations: $1.8 million

Earnings vs. Forecast

Arcutis’s actual EPS of $0.06 far exceeded the forecasted loss, resulting in a positive surprise of 167.72%. The revenue of $99.2 million also surpassed expectations by 14.06%. This impressive performance contrasts with prior quarters, where the company faced challenges in meeting market expectations.

Market Reaction

The market responded positively to Arcutis’s earnings report, with the stock price surging 28.87% to $22.48 in pre-market trading. This movement is notable compared to the company’s 52-week high of $25.54 and low of $8.21, indicating strong investor confidence. The surge reflects the market’s enthusiasm for Arcutis’s financial turnaround and strategic growth initiatives.

Outlook & Guidance

Looking ahead, Arcutis projects full-year 2026 net product revenues between $455 million and $470 million. The company aims to achieve cash flow breakeven by the end of Q4 2025, supported by its expanding product portfolio and market reach. Arcutis continues to focus on innovation, with plans to advance its ARQ-234 treatment into clinical trials and explore new indications for its ZORYVE product line. InvestingPro analysis shows the company maintains a healthy current ratio of 3.2, operating with moderate debt levels. Two analysts have recently revised their earnings estimates upward, though the consensus suggests profitability remains a key milestone to achieve this year. Access the complete Pro Research Report for comprehensive analysis of ARQT’s growth trajectory and financial health.

Executive Commentary

Frank Watanabe, President and CEO of Arcutis, stated, "We are pursuing a massive treated patient population with more than 17 million patients in the obtainable market." He emphasized the company’s strategic positioning, noting, "ZORYVE is the right drug with the right profile at the right moment." Watanabe also highlighted the company’s robust development capabilities, saying, "We have built an exceptionally strong development organization at Arcutis."

Risks and Challenges

• Potential market saturation in the dermatology sector could limit growth.
• Macroeconomic pressures may impact consumer spending and healthcare budgets.
• Regulatory hurdles and competition from other pharmaceutical companies pose ongoing challenges.
• Supply chain disruptions could affect product availability and distribution.

Q&A

During the earnings call, analysts inquired about the company’s strategy for converting steroid users to its non-steroidal products, as well as the growth potential of ARQ-234. Arcutis addressed these concerns by outlining its market share growth strategy and detailing its development approach for new product indications.

Full transcript - Arcutis Biotherapeutics Inc (ARQT) Q3 2025:

Brian Schoelkopf, Head of Investor Relations, Arcutis Biotherapeutics: Today, and thank you for standing by. Welcome to the Arcutis Biotherapeutics 2025 third quarter financial results and investor day presentation. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question and answer session. To submit questions, please use the question submission field located at the bottom of your webcast interface. Please be advised that today’s conference is being recorded. I will now like to hand the conference over to your first speaker today, Brian Schoelkopf, Head of Investor Relations. Please go ahead.

Todd Edwards, Chief Commercial Officer, Arcutis Biotherapeutics: Thank you. Good morning, everyone, and thank you for joining us today to review our third quarter 2025 financial results and business update. For our extended investor day presentation, slides for today’s call are available in the investor section of the Arcutis website. Joining me on the call today are Frank Watanabe, President and CEO of Arcutis, Todd Edwards, Chief Commercial Officer, Patrick Burnett, Chief Medical Officer, and Latha Vairavan, Chief Financial Officer. We will also be joined later in the call by Douglas DiReggiero, a certified physician assistant and doctor of medical science who has specialized in dermatology for the past 25 years and is the founding president of the Georgia Dermatology Physician Assistants Society. 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 it over to Frank for a brief introduction of today’s call.

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Thanks, Brian, and thanks to all of you for joining us today and freeing up some additional time in your calendars for what we believe will be a compelling review of the strong foundation of our business today and a more in-depth look at our strategy to sustain our growth into the future. We’ll start today’s call by reviewing our commercial and financial results for the third quarter. As you’ll hear from Todd and Latha in a moment, we achieved yet another strong quarter with robust net product revenue growth and continued steady growth of prescriptions across all approved formulations and indications for ZORYVE. We’ll then move on to the investor day presentation, where we’ll do a deep dive into why we are excited by and confident in the future of Arcutis and our unique potential to address key unmet needs for patients impacted by immune-mediated dermatological diseases.

Today’s discussion on our corporate strategy is timely and pertinent as we approach cash flow breakeven, enabling us to self-fund investments in our business that will sustain the continued growth for Arcutis. Our excitement is grounded first in the outstanding growth opportunities for ZORYVE, a revolutionary topical agent that is already reshaping the treatment of chronic inflammatory skin diseases, an impact we foresee only amplifying in the years ahead. As you’ll hear today, we have multiple opportunities to grow and further expand our ZORYVE business, and we have the capabilities and resources to exploit those opportunities. We’ll also go into more detail today about our exciting pipeline-building efforts, starting with ARQ-234, a novel biologic with best-in-class potential to address a large unmet need in atopic dermatitis.

Complementing the ZORYVE franchise, ARQ-234 and future pipeline opportunities will enable us to extend our mission to champion meaningful innovation for patients impacted by immune-mediated skin conditions and strengthen Arcutis’s position as one of the industry’s most consequential medical dermatology powerhouses. I’d also like to take a moment to thank the Arcutis team for their efforts and commitment to bringing better outcomes to patients living with serious skin diseases. Their unwavering dedication underlies our achievements to date and will be the foundation for the ambitious plans we discuss today. Thank you all again for taking the time to join us today, and now I’ll return the call over to Todd for our Q3 commercial update.

Todd Edwards, Chief Commercial Officer, Arcutis Biotherapeutics: Thank you, Frank, and good morning, everyone. Turning to slide six, as Frank noted, we continue to deliver strong revenue growth driven by the increase in adoption of the ZORYVE portfolio by both patients and clinicians across all approved indications. In the third quarter, we generated net product revenues of $99.2 million, reflecting 22% sequential growth and a 122% increase compared to the same quarter of 2024. This substantial revenue expansion was fueled by growing demand for ZORYVE, supported by rising prescription volume across all products in our portfolio. The successful launch of ZORYVE Foam 0.3% for the treatment of plaque psoriasis of the scalp and body contributed meaningfully to the expansion in demand and helped to offset typical third-quarter seasonality headwinds.

Improved gross-to-net rates during the period also contributed to sequential sales growth, driven by reduced utilization of patient copay programs as patients progressed through their annual deductibles earlier in the year than anticipated. As a result, we expect that quarter-on-quarter gross-to-net improvement will be more limited in the fourth quarter, consistent with historical trends, with only modest additional benefit expected from copay program usage. On slide seven, consistent with previous quarters, our Q3 growth was driven by sustained demand growth across all strengths and indications. Total prescriptions for ZORYVE increased by 13% compared to Q2 and by 92% versus Q3 2024. Weekly prescriptions on a rolling four-week average basis reached a new record high with over 17,000 scripts.

Following the FDA approval of ZORYVE Foam 0.3% for the treatment of plaque psoriasis of the scalp and body in May, and a subsequent launch in June, we experienced particularly strong performance from the foam product, with product revenue increasing by more than 25% versus the prior quarter. The inflection in total ZORYVE volume following the launch, as illustrated in the graph, demonstrates the significant impact of this new indication launch. Importantly, we also continue to see steady and growing volume for ZORYVE Cream 0.3% during the period, reflecting sustained demand across both formulations in plaque psoriasis. Overall, our sustained momentum in Q3 highlights ZORYVE’s exceptional utility, the growing confidence in our brand among both clinicians and patients, and more importantly, the broader treatment shift driven by steroid conversion.

In today’s presentation, we will further discuss the dynamics behind the shift away from topical corticosteroids, and I look forward to sharing the additional actions we are taking to catalyze and accelerate this transition in the near term. Looking ahead to the fourth quarter, we anticipate continued strong net sales growth driven by increased patient demand, even as we expect only nominal improvements in our gross-to-net rate compared to the third quarter. This growing demand will be further supported by the launch of ZORYVE Cream 0.15% for atopic dermatitis aged two to five years old. With that, I’ll turn the call over to Latha to review Q3 financial results.

Latha Vairavan, Chief Financial Officer, Arcutis Biotherapeutics: Thank you, Todd. I’m now on slide eight. As Todd just reviewed, we generated net product revenues in the third quarter of approximately $99.2 million, which is up 122% from Q3 of 2024 and 22% from Q2 of this year. Cost of sales in the third quarter were $8.7 million compared to $5.5 million in Q3 2024, primarily driven by increased ZORYVE sales volume. For the third quarter, our R&D expenses were $19.6 million versus $19.5 million for the corresponding period in 2024. Our R&D spend was consistent with prior year as clinical expenditures shifted from ARQ-255 to pediatric roflumilast studies. Moving forward, we expect an increase in our R&D spend in 2026 as we continue to advance ZORYVE lifecycle management, clinical development activities, and initiate our phase one trial of ARQ-234.

SG&A expenses were $62.4 million for the third quarter of 2025 versus $58.8 million in the same period last year, a 6% increase attributable to investments and our continued commercialization efforts of ZORYVE. SG&A expenses were down approximately 10% as compared to the second quarter of 2025, primarily due to a decrease in promotional and marketing spend resulting from timing of expenditures between quarters. Net income for the quarter was $7.4 million compared to a net loss of $41.5 million for the same period last year and a loss of $15.9 million for the second quarter of 2025. The net profit generation in the quarter was driven by the $17.7 million of sequential increase in net sales, concurrent with a $5.4 million reduction in operating expense.

While we do not expect our net income to remain positive in the near term, the improving operational leverage that we demonstrated in the quarter, with growing net sales contribution from ZORYVE outpacing increases to our core expense base, speaks to the profit generation capacity of the ZORYVE franchise. We previously communicated that we anticipated achieving cash flow breakeven in 2026. However, the continued momentum of ZORYVE net sales growth, combined with our expense discipline, has facilitated the acceleration of this important milestone, and we now expect to achieve cash flow breakeven in the fourth quarter of 2025. Now turning to slide nine, our cash and marketable securities balance as of September 30, 2025, was $191 million, with cash burn from operations of $1.8 million for the period.

We have total debt of $108.5 million and have the option to withdraw another $100 million in whole or in part at our discretion through the middle of 2026, providing us with the flexibility to invest in the continued expansion of our business. The success of the ZORYVE franchise and the economies of scale we are generating will permit us to invest in the business for the sustained growth over the years ahead. I will elaborate on this when discussing our capital allocation strategy later in today’s presentation. With that, I’ll turn the call back over to Frank to kick off the investor day portion of today’s call.

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Thanks, Latha. We founded Arcutis in 2016 to address what we saw as a significant innovation gap in the immunodermatology drug development space. We recognized that the vast majority of dermatology patients were being treated by older therapies that offered inadequate efficacy, did not target specific disease mediators, and/or carried substantial safety and tolerability issues. We set out to identify, develop, and commercialize best-in-class molecules that would address unmet needs in dermatology by directly targeting immunological mediators of inflammatory diseases. We have been extremely focused, deliberate, and successful against this goal, steadily executing on the promise of ARQ-151 and ARQ-154, now known as ZORYVE Cream and ZORYVE Foam, as a true pipeline and a molecule opportunity.

As we approach the significant milestone of achieving cash flow breakeven, we’ve been thoughtfully planning Arcutis’s next phase, where we will apply the same focus and dedication to ensuring long-term growth, success, and most importantly, continued impact for patients. As outlined on slide 11, three pillars provide the strategic framework for sustaining our company’s near and long-term growth. First, we will continue to grow our core ZORYVE business as we establish ZORYVE as the foundational therapy for adults and children who need ongoing therapeutic solutions for managing plaque psoriasis, seborrheic dermatitis, and atopic dermatitis. A significant component of the growth pillar is our sustained efforts to meet the increasing calls for safer, more targeted topical alternatives to topical corticosteroids, a topic we will be spending a good deal of time today talking about.

This pillar also includes our efforts to expand into primary care and pediatric and inline growth opportunities, such as our recent launches in scalp and body plaque psoriasis and pediatric atopic dermatitis, and incremental data generation opportunities to bolster ZORYVE’s position for our currently approved indications. Second, we plan to expand the ZORYVE franchise through strategic lifecycle management. Specifically, we are evaluating new potential indications that represent significant unmet needs and where patients would benefit from ZORYVE’s unique profile. Our new indication exploration, a core tenet of our clinical development strategy, will be guided by a large body of case reports from clinicians who have used ZORYVE in various other inflammatory dermatoses and have seen encouraging signs of efficacy. Finally, we will build out our pipeline by advancing other innovative medicines for patients, leveraging the best-in-class clinical development and commercialization capabilities we have developed at Arcutis.

Our focus initially will be on ARQ-234 and in parallel on potentially sourcing promising external innovation. As you’ll see on slide 12, we’ve designed today’s agenda to align with these three strategic pillars I just reviewed. We’ll cover sustainable growth drivers for ZORYVE’s current indications. As part of the presentation, Patrick will host a Q&A with the eminent dermatology physician assistant Douglas DiReggiero to gain a clinician’s perspective on the changing treatment landscape. We’ll follow this with an overview of our expansion efforts, including our exploration of potential new indications for ZORYVE, with initial efforts in vitiligo and hidradenitis suppurativa. On the ZORYVE front, we’ll provide some insights into peak sales potential.

We’ll then move forward to a discussion of our pipeline-building strategy, which will include a review of ARQ-234 and its opportunity to address a significant unmet need in atopic dermatitis and an overview of our framework for evaluating business development opportunities. Lastly, we’ll wrap up with a review of our capital allocation and balance sheet strategy before opening up the call to Q&A. With that, let’s dive right into the agenda. Turning to slide 13, it’s been just over three years since we received our first FDA approval for ZORYVE. Since that time, and as we’ve demonstrated yet again today with our Q3 financial results, we’ve achieved meaningful and sustained growth in our three current indications through a steady drumbeat of new formulations, expanded adoption within those indications, and strong execution, leading to consistent prescription growth quarter on quarter.

Beyond these individual milestones, it’s important to consider ZORYVE from a 30,000-foot view. What we see from that perspective is that there has never been a product as uniquely suited to the treatment of immune-mediated inflammatory skin diseases as ZORYVE. As we outlined on this slide, ZORYVE’s unique profile, which is truly exceptional amongst topical agents, can be categorized into three key buckets. First is ZORYVE’s pleiotropic mechanism of action, combined with its variety of formulations. Patrick will go into more detail on the MOA later in the presentation, but at a high level, PDE-4 has demonstrated the potential to impact multiple inflammatory cytokines, decrease neuronal itch signaling, and increase melanocyte activity. Second is ZORYVE’s rapid and robust efficacy, spanning multiple dimensions in multiple dermatoses.

As you might imagine, the first and second buckets give ZORYVE remarkable potential utility across a wide breadth of inflammatory skin conditions, not only psoriasis, atopic dermatitis, and seb derm, but potentially well beyond our three initial indications. Third and critically is ZORYVE’s safety and tolerability profile, which enables its use anywhere in the body and for any duration. Safety with chronic use is a key differentiator versus topical steroids and an essential characteristic for the treatment of conditions that often require therapeutic solutions, not just for a month or two, but for years and often a lifetime.

This unique profile is set against the backdrop of an emerging sea change in dermatology, where the prolonged use of corticosteroids, historically the standard of care across many inflammatory dermatoses, is facing increased scrutiny and where there is a call to action by a growing number of dermatology clinicians and patients for long-term targeted non-steroidal treatment strategies. For immune-mediated inflammatory skin conditions, ZORYVE is the right drug with the right profile at the right moment. Because of this convergence of factors, the opportunity for ZORYVE’s sustained growth is vast. I’ll now turn the call over to Todd to review ZORYVE’s opportunity through a market landscape lens.

Todd Edwards, Chief Commercial Officer, Arcutis Biotherapeutics: Thanks, Frank. Slide 15 provides a clear illustration of the sizable and realistic market opportunity for ZORYVE. In the U.S., across our currently approved indications of plaque psoriasis, seb derm, and atopic dermatitis, the diagnosed population totals approximately 30 million patients. Of these patients, about 19 million people are already receiving topical treatment, primarily topical corticosteroids prescribed by clinicians in every specialty. Within this group, roughly 8 million are being treated in a dermatology specialty setting, the area where Arcutis has concentrated its commercialization efforts to date. As a result, the serviceable obtainable market of patients who are already under dermatology care and are already receiving a topical prescription for their plaque psoriasis, atopic dermatitis, or seb derm is both substantial and highly addressable. The key question then is what share of this market will ZORYVE capture?

Given ZORYVE’s differentiated clinical profile, the strong foundation established during the early phases of commercialization, broad reimbursement coverage, the shifting treatment landscape, and the strategic actions we are taking to drive both prescribing breadth and depth, we believe increasing ZORYVE’s share to 15% to 20% of topical steroid prescriptions or potentially more is both realistic and achievable. As we’ll outline further today, there are compelling reasons to believe ZORYVE is positioned for significant and sustained growth in the years ahead. Now turning to slide 16, the foundation of our conviction is rooted in what we are already seeing play out in the market. On the left side of the slide, you can see that over the last six quarters, the branded non-steroidal class has been carving out a meaningful foothold in the topical market.

During this period, the non-steroidal topical volume shown by the middle gray line has increased over 60%, while topical corticosteroids represented by the yellow line have essentially remained flat. Within the non-steroidal class, ZORYVE is clearly the growth driver, with volumes increasing nearly 200% for the same period as shown by the topmost line. Topical corticosteroids still account for the vast majority of topical prescriptions today, which is not surprising given they have been the topical standard of care for chronic inflammatory skin conditions for over 70 years. However, the treatment landscape is shifting. In both the U.S. and globally, there is a growing demand for innovation in the topical segment, innovation that can deliver improved outcomes and safety. As a result, we are beginning to see erosion of the topical steroid share within the topical market.

Importantly, this conversion is in its early stages, and there remains a substantial base of topical steroid prescriptions available for conversion. The chart in the center shows nearly 70% of the 24 million annual prescriptions for psoriasis, atopic dermatitis, and seb derm written by dermatology specialists are still for topical steroids. This equates to roughly 17 million topical steroid prescriptions each year, a substantial base that will continue to fuel ZORYVE’s growth for the years to come. That does not yet account for the PCP and pediatric opportunity. ZORYVE’s outsized growth compared to the broader non-steroidal topical class has already translated into a meaningful increase in market share. As shown on the right-hand side, nearly half of all branded topical prescriptions are now written for ZORYVE. With this leading position, ZORYVE is exceptionally well positioned to capture the ongoing shift away from steroids.

Next, Patrick will do a deeper dive on the state of the conversion of topical steroids and the factors driving the shift in practice. Patrick?

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Thank you, Todd, and good morning, everyone. We want to spend some time expanding on the momentum behind steroid conversion. First, because it signals a crucial paradigm shift in the treatment of immune-mediated inflammatory skin diseases. Second, because it provides a key data point to support our obtainable market thesis that Todd outlined. What exactly is driving this conversion? Why does it matter? The first successful use of corticosteroids for chronic inflammatory skin diseases was reported in 1952. In more than 70 years since, we’ve seen remarkable scientific and medical innovations across many therapeutic areas and treatment modalities. Topical steroids have remained a mainstay in the management of conditions like atopic dermatitis and psoriasis. The introduction of biologics has represented a major advancement in the treatment of immune-mediated inflammatory skin conditions.

However, even as the introduction of these novel therapeutics has benefited the subset of patients with more severe diseases, topicals overwhelmingly remain the first-line therapy for the vast majority of patients. Even patients on biologics often continue to rely on adjunctive topical treatments in order to manage residual disease and breakthrough flares. There’s an increasing recognition among health care providers, professional societies, and patients that the long-term use of topical steroids can be associated with serious adverse effects that can both be local and systemic. This has set the stage for intensifying calls to limit long-term topical corticosteroid use and embrace innovation in the topical modality. To help you understand what has galvanized this loud global call of concern about the use of topical corticosteroids, I want to help frame the problem at hand.

To accomplish this, we’ve adopted a slide from a recent review article written by Douglas DiReggiero, whom I’ll be speaking to later in this program. On the left-hand side of slide 17, we see the list of common local adverse effects of chronic steroid treatment. Most of these were well-documented all the way back into the 1960s and include skin barrier damage, atrophic changes like striae or stretch marks, cataract formation, and delayed wound healing. Importantly, adverse effects related to topical corticosteroids are not limited to local effects. What you see on the right hand of the slide is a list of systemic effects, which are broad and deep, including disruptions in reproductive endocrinology, growth suppression, osteoporosis and bone fracture, diabetes, and ophthalmic effects, including cataracts and glaucoma.

The clear association of cumulative topical steroid exposure and increased risk of bone fracture and diabetes have only been fully appreciated more recently as multiple publications emerge that validate the growing concern that long-term adverse effects of topical steroid use are not that different from the well-known adverse effects that have made systemic steroids a treatment of last resort for most inflammatory diseases. While the risk of these effects increases with steroid potency and duration of use, there have been cases reported with low potency agents or short periods of use. Additionally, infants and children may be most at risk because their skin disease typically involves a higher body surface area than adults, and their immature skin barrier can result in greater permeability.

Lastly, patient populations at even higher risk include those who use topical corticosteroids on their face or genital areas, as thinner skin is not only more prone to local adverse effects, but is associated with greater skin permeability and drug absorption, especially in those with atopic dermatitis and seborrheic dermatitis, given the skin barrier dysfunction inherent in these diseases. Clinicians are often increasingly realizing that many patients are not only exposed to topical steroids, but also may be using other steroid treatments like inhaled, intranasal, and even oral steroids. This total cumulative steroid exposure dramatically increases the risk of adverse steroid effects. Given all this, you can also understand why we are so passionate about addressing these mounting concerns and leveraging scientific innovation to bring more targeted therapeutic solutions to patients that are both effective and safe.

As you can see on slide 18, in August of this year, two of the primary professional dermatology societies in the U.S., the Society of Dermatology Physician Assistants, the SDPA, and the Society of Dermatology Nurse Practitioners, the SDNP, issued statements recognizing the emerging evidence of these potential adverse effects and the importance of incorporating advanced topical targeted therapies that reduce the reliance on chronic topical steroid use.

These statements are the latest in a growing list of high-profile calls for the limited use of topical steroids due to the adverse effects, including calls from regulatory agencies in Canada, the United Kingdom, and India, other professional societies such as the International Eczema Council, British Dermatological Nursing Group, the British Association of Dermatologists, and the American Academy of Family Physicians, patient advocacy groups like the National Eczema Society and National Eczema Association, as well as several recently published physician expert consensus panel recommendations. As you can see, this represents not merely an isolated regional appeal, but a global groundswell. In the U.S., the recent acknowledgment by the SDPA and the SDNP is particularly important given the key role physician assistants and nurse practitioners play in treatment decisions for patients with chronic inflammatory skin conditions.

Next, we’d like to share a conversation I recently had with Douglas DiReggiero on the evolving topical treatment landscape for immune-mediated dermatoses. Douglas DiReggiero is a certified physician assistant and a Doctor of Medical Science who specialized in dermatology for the past 25 years. Douglas practices with the Skin Cancer and Cosmetic Dermatology Center, a nationally recognized provider of advanced adult and pediatric dermatology care in Northwest Georgia and Southeast Tennessee. Douglas is also the founding president of the Georgia Dermatology Physician Assistant Society and recently was named a national honoree by the National Psoriasis Foundation, the first time a physician assistant ever received this award. He’s written and spoken extensively on the topic of potential adverse effects from prolonged use of topical corticosteroids.

I think it might be good to frame the conversation with Douglas by highlighting the role that physician assistants and nurse practitioners play in the dermatology field. NPs and PAs are providing an increasing amount of direct dermatology care, including prescription writing. This expanding role is in part being driven by heightened demand for dermatological care as dermatologists provide care in medical dermatology as well as surgical procedures and cosmetic services. These NP and PA providers are filling critical gaps and ensuring patients with skin conditions have access to the vital and high-quality care they need. Douglas, I want to thank you for joining me here and being willing to come on and share some of your insights over the almost 30 years of practice that you’ve had. Especially, I wanted to talk to you coming out of your paper that you published on the impact of topical corticosteroids systemically.

I found that to be a really excellent review. I learned a lot from it, and I thought it would be great to have you come on and share your perspective that led to that. I think a good place to start is just kind of what has your personal experience been with the use of topical corticosteroids? Over the time that you’ve been in practice, you’ve seen a lot change and our understanding of therapeutics change. What’s been your personal experience and also a little bit about how that may have evolved over that time?

Brian Schoelkopf, Head of Investor Relations, Arcutis Biotherapeutics: First off, an honor to be here. Thank you for inviting me. When I stepped into dermatology 26 years ago and have been there ever since, I was very easily wooed into topical corticosteroids as being the medication that is for all things. It’s had an impact, I would say, on the trajectory of dermatology, probably more than any other product in our specialty. It’s been around for a long time. 1952 is when it was first compounded into something that we could use on the skin, and it’s been used ever since. My experience when I got into this in 1999 was that topical corticosteroids were a mainstay of therapy, first line, second line, third line, maintenance therapy, all the above. We didn’t have the targeted therapeutics we have now to address some of these systemic diseases with systemic therapies.

We were using a lot of topical steroids and topical TAR and anthraine and a lot of compounded things and phototherapy and a lot of the old traditional systemic medications. The playing field has changed tremendously, not just with targeted systemic therapeutics, but now with vehicles, with delivery systems to the skin, and with active ingredients that are finally giving us the efficacy of steroids without the side effects that we have always known about, have largely, not largely, but I say to a certain extent, maybe turned a blind eye to, and we simply can’t do it any longer. There’s just too much data out there, both to the public’s knowledge and to the prescriber’s knowledge, that we have to face the facts that steroids carry a lot of dangers.

We can’t transfer that danger, or at least I can’t transfer that danger any longer onto my patients without really having a lot of information to give them. It’s a shared decision-making process.

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Yeah, that was one of the things I really took away from your paper. I think that historically, there’s been a lot of conversation around local side effects. I think a lot of people felt somewhat comfortable, especially when there wasn’t another option with that. I think one of the things that you really highlight well in the paper are some of the new areas of data that have come out, kind of highlighting these systemic effects. Is there one aspect of that in particular that impacted you the most? I know in the paper you talk about diabetes, you talk about bone fracture and osteoporosis. Any particular area that was impactful for you?

Brian Schoelkopf, Head of Investor Relations, Arcutis Biotherapeutics: I’ll tell you two stories that drove that, and I’ll answer that question indirectly through this. I had a patient who was a 13-year-old boy who came in for eczema, atopic dermatitis, and I put him on triamcinolone, which is a very commonly prescribed mid-potency prescription steroid. He was a type 1 diabetic, had been since he was about six. He had a pump and he had a monitor, and he was able to watch his sugars closely. The mother came in, this is about three years ago, and told me that we can put triamcinolone on his two forearms and we can watch his blood sugar go up 40 points in 40 minutes.

I was just shocked by that, that they could see that rapid of a rise in his glucose levels with the application of a topical steroid cream on about 5% to 7% of his body surface area, not like his whole body. I began doing some research on this and said, what are really the systemic side effects to this? We are focused in dermatology and we do a good job of counseling our patients against the cutaneous side effects. If you use it too long and in the wrong areas and in folds, it could thin the skin, what we call atrophy. You could have striae and stretch marks. You could get steroid-induced acne or folliculitis. You could get unwanted hair, hypertrichosis. It could create dyschromia, discoloration.

I asked all of these very experienced derm providers, if a mom wants steroids and she’s demanding to have them, what reasons will you give her or to an adult patient? What reason would you give them on why they should not have more steroids topically? They all listed all of those things. No one listed anything systemic because we falsely associate all the systemic side effects with giving them systemic steroids. We do not and have not been trained and do not recognize the whole body of information that shows that these medicines are highly absorbed and they act like a systemic drug, like you’re taking it orally or injecting it. Yes, we have a lot of data out there that shows that it’ll raise blood sugar, diabetes. It can create something called cushingoid syndrome or adrenal insufficiency.

The surprising one for me is the data out there on developing avascular necrosis of the hip. 20- and 30-year-olds that have only been on topicals, no other systemics case reports, haven’t had hip replacements. I highlighted a couple of those in a recent lecture I gave. Osteoporotic fractures. I talked about a case report of an 11-year-old who had been using mid to high potency corticosteroid creams only, no systemics, just topicals for three years, and had a wrist fracture. He had full body osteoporosis like an 80-year-old. This kid’s 11 and had osteoporotic fracture. We are seeing now that increase in ocular pressure in the eye. We used to think that if you just use steroids around the eye, you increased your chance of that. Now we know you can use steroids anywhere on the body and increase your risk of glaucoma and increase ocular pressure.

We can’t turn a blind eye any longer to the internal systemic impact of using an external topical steroid because it is acting like we’re giving it internally. We’ve got to face those facts. It should change the way we prescribe, and it should change the way we educate our patients about these things.

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: What are you hearing from your peers on this idea of the role of topical corticosteroids and how that may be changing over recent times?

Brian Schoelkopf, Head of Investor Relations, Arcutis Biotherapeutics: It’s really a lot of shock, to be honest with you, when they see the data because it’s just not something that’s being talked about in the clinic, that these trials and these case reports and these meta-analyses and these systemic analyses are not really being championed and put forth. Quite frankly, we’re being forced by insurance companies in a lot of areas to use topical corticosteroids first line before we can go and use the medicines that we feel like are safer and work just as well. Some of it is forced step-through therapies, and some of it is just simply lack of knowledge. The reaction I get is usually one of like, I just cannot believe. When I present this information, I really present it in a very self-reflective way because I have been one of the top writers of topical corticosteroids in my state for many years.

I’m looking in the mirror and saying, how much have I contributed to these things without knowing it, but I can’t willingly continue to contribute to it. I think that’s what a lot of people have. I’ve gotten a lot of incredible comments, emails. People have called me to tell me about the impact that this data has had on them and how it’s changing the way that they are counseling patients, how they’re beginning to keep track of the grams of steroids that they’re giving out, how they’re asking about other forms of steroids that the patients are getting.

These are just not things that we’ve been used to slowing down and monitoring what we’re calling this corticosteroid stewardship in order to catch up to some of our colleagues that are overseas or in Canada, where they’re beginning to heavily monitor these products and give patient warnings when they’re dispensed from the pharmacy. Other countries are beginning to see this and have already begun to be proactive with educating and monitoring these things. The U.S. really needs to take a role in this, in my opinion. I feel like a lot of us in dermatology have the ability and now have some momentum to make this happen.

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: You made reference to these advanced targeted topical therapies like ZORYVE. How do you think that they’ve kind of played into this evolution and this change over the course of your practice, given that topical corticosteroids are still the majority of the prescriptions that are written for patients with some of these chronic inflammatory skin diseases like atopic dermatitis, psoriasis, and seborrheic dermatitis?

Brian Schoelkopf, Head of Investor Relations, Arcutis Biotherapeutics: In the second quarter of 2025, I don’t have the third quarter numbers, but in the second quarter, so fairly recently, how many prescriptions do you think were filled of topical corticosteroids by dermatology practices? Just derm providers, not family care, not any other specialty. The highest number I have people guess is 500,000 in a quarter. Most are guessing 200,000 to 300,000 written by the 20,000 or so derm providers that are out there. When I tell them it’s 2.9 million, not over the span of a year, but in one quarter, 2.9 million prescriptions of topical corticosteroids filled, not even written, filled by patients that are receiving the prescriptions from derm providers. You talk about jaws dropping when they realize how much of this we are contributing to this. Even if I can change 1% of that, and 1% is 29,000.

If you can lessen 29,000, that’s a huge, I think, impact over one quarter time. The numbers are really alarming to us in dermatology when we are faced with them and we realize how much we are contributing to this problem. Now we have such fantastic alternatives like ZORYVE. We have had non-steroidal topical calcineurin inhibitors, TCIs. The first one was approved in 2000. The next one was approved in 2001. We had these two topical calcineurins. The problem was that their tolerability is hard, particularly tacrolimus; it stings and burns, and not as much with pimecrolimus. They don’t work very well. Their efficacy was very lackluster. Then we had a PDE-4 inhibitor, first generation, I would call it an old generation, that came out around 2014, 2016. Again, tolerability, low efficacy. Patients want to get clear, and we want to see them get clear.

It was hard to put people on these. Now that we have something that is like ZORYVE, a medication that’s in my hands right now, that I can say this works as well as a mid to high potency steroid in my experience, and the studies can back this up. This is once a day, and you can use it anywhere. The beauty of a product like ZORYVE is that there’s no limitations on how long a patient can use it. There’s no limitations on where they can use it. We have been, I have been contributing to such a complex regimen of care where you can use this low potency steroid on your face and in your groin, this mid potency steroid here. This one is for your scalp because it’s a solution. This one’s an ointment if it’s really thick. This one’s a cream if it’s not.

These patients have these drawer fulls of creams and all of these written out plans on red lights and green lights and when to use it and not to use it. You should see the relief on their faces to say this is one cream that you can use anywhere at any time. It’s only once a day, and it’s got great clearance, and it’s got great itch data and great clearance of disease, whether that’s atopic dermatitis or psoriasis.

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: In that setting, what do you see as the biggest barrier then for some of these advanced targeted topical therapies? What do you see as kind of that barrier? You’ve talked about some of the differences in the profile between them and steroids, and we, you know, I talked about that earlier as well. You know, is it really a profile issue, or are there other things that are playing into this kind of transition that you’re talking about?

Brian Schoelkopf, Head of Investor Relations, Arcutis Biotherapeutics: I mentioned this earlier, and that’s step-through therapies. Our largest barrier is insurance plans, you know, forcing us to write things that we don’t want to write first or to try them or to make it very difficult to get these things approved. You know, really the issue when a rep comes in is not, will you give us a try? Will you try our medicine? They really need to be saying for almost every medication now, will you fight for us? You know, just to try is one thing. To try it just means they’re going to get denied, and then you move on back to your generic prescribing habit. You’re just going to have to rise up a little bit and fight for a product that you know is safer and works well. That’s how these insurance companies are going to be convinced that the demand is there.

I think it’s easy to convince patients of the safety. I think it’s easy to give them samples or to get them started on something, and they see it works. I think the two main categories are always safety. Safety is always in the driver’s seat in anything, and efficacy or its effectiveness is riding shotgun. Those are the two things in the front seat. You want it to be safe, and you want it to work. In the back seat of any car is, you know, is it convenient? Can you get it filled? Will the patient be compliant? When you’ve got something that’s once a day, compliance is high. You’ve got something that doesn’t burn or stain, compliance is high. You’ve got something that works, compliance is high.

What’s not compliant is often the insurance company trusting us to be doing the thing we think is best for our patient. I think that’s one of the larger blocks. Improvements are being made. I will say the word’s out. I have a lot more patients coming in because of TikTok. I know we kind of throw TikTok and Google Dr. Google under the bus a lot, but there are some ways where it’s been very beneficial. In terms of informing patients about corticosteroid withdrawal and all the dangers of it, I have a lot of patients who come in, and they sit there and they ask me, is what you’re writing me a steroid because I don’t want my child on a steroid? You know, they’re now preemptively saying, I don’t want to be on a topical steroid.

I’ve seen a shift in the last two years in particular when more and more patients, despite their insurance, despite their economic status, they themselves are beginning to say, I don’t want to be on this. I’m in rural Georgia. This is not like it’s a highfalutin area where you’d expect that to happen. I’m in a very rural area, and I still have patients on a weekly basis who are questioning me, is this more steroid because I don’t want to be on that? Pediatricians already tried it. I don’t want my child on it. I don’t want to be on it. I had a guy come in the other day with atopic dermatitis. He’s 40 years old, had it since he was, you know, birth. He says, if you’re going to write me a prescription for triamcinolone, this would be the last time you ever see me.

It was his first visit with me. I was like, whoa, OK. I don’t plan to do that, but nice to know I don’t have to convince you. He says, my wife makes me come in every two years to see if there’s anything new that’s out. Tell me what I’ve got as my options. We’re seeing a shift. It may not be as fast as we want it to be, but it’s happening. It’s happening.

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Next on slide 20, I want to come back to an analysis that we shared in 2023 on historical analogs where newer classes of medicines disrupted established treatment paradigms, unsettling, unseating, entrenched generic standards of care. These are four different diseases that had firmly established generic standards of care that were disrupted by safer, more effective, or more convenient innovative treatments across the market for anticoagulation, depression, GERD, and schizophrenia. It required between 5 and 10 years before the newer innovative therapies were able to capture 50% of the serviceable obtainable market. It’s just been over three years since we received our initial indication in psoriasis, just under two years for seb derm, and only 15 months since our launch in AD. We’re just getting started and look forward to the continuing evolution of the treatment paradigm for these diseases.

Imagine the growth potential if the topical anti-inflammatory market only converted half as much as these other markets. On slide 21, we highlight key aspects of the topical steroid profile that have driven their wide adoption in dermatology so that we can understand the profile that a non-steroidal alternative needs to achieve in order to successfully compete. This really comes down to two key characteristics. First, like topical corticosteroids, the drug needs to be effective in resolving both inflammation and itch, and it needs to do so quickly. Second, topical steroids work on many of the most common skin diseases like atopic dermatitis, psoriasis, and seborrheic dermatitis, as well as many of the more rare conditions where there may not currently be any FDA-approved treatment. Like topical corticosteroids, the drug also needs to work broadly across indications.

This is distinct from the expectation for a systemic treatment where a more targeted therapy is desired. Now consider what characteristics a drug would need to move beyond competing with topical steroids, but rather displacing them as a superior therapy for chronic inflammatory dermatoses. Patients with these chronic conditions desperately need topical drugs that can be used safely over an extended period of time to avoid flare-ups while mitigating the risks and adverse effects associated with prolonged topical corticosteroid use. In addition, the treatment needs to be safe and convenient to use in multiple areas of the body, including difficult-to-treat areas like the scalp and sensitive areas like the face and groin, all of which can be affected by inflammatory dermatoses. I’ll walk through ZORYVE’s MOA in detail a bit later in my presentation.

Like steroids, ZORYVE has a broad impact on multiple biological processes implicated in immune-mediated inflammatory skin conditions. This distinguishes ZORYVE from biologics that target very specific pathways and other branded topicals that work on a narrower set of mechanisms. In fact, as Frank mentioned earlier, ZORYVE, as a potent inhibitor of PDE-4, has even broader effects than steroids, directly impacting neuronal itch signaling and melanocyte function in addition to reducing inflammation. We’ve amassed a substantial body of clinical data supporting our six FDA approvals that demonstrate the safety and efficacy profile of ZORYVE with prolonged use across multiple disease states and essentially every area of the body. As you can see, ZORYVE checks all of the boxes for the ideal profile, not only to compete with but also to potentially replace topical steroids, helping explain why ZORYVE continues to rapidly gain share from topical corticosteroids.

I’ll now turn it over to Todd to discuss our ongoing commercial efforts in the primary care, physician, and pediatric specialties.

Todd Edwards, Chief Commercial Officer, Arcutis Biotherapeutics: Thank you, Patrick. I’m now on slide 22. Expanding the breadth of prescribers beyond dermatology will be a key driver of ZORYVE’s continued growth. Our initial focus was on dermatology practices, which provided a time and resource-efficient rollout, given that the relatively small base of dermatology prescribers account for roughly half of all topical scripts for inflammatory dermatoses. While we continue to make strong inroads among dermatology practitioners, we have also ramped up efforts to expand ZORYVE utilization in primary care and pediatric settings, where over 13 million topical prescriptions are written a year for our current indications. These initiatives are being advanced through our partnership with COA. In the primary care and pediatric settings, many providers have had limited exposure to topical non-steroidal treatments and tend to default to prescribing steroids.

COA’s field team is deploying a targeted, high-frequency approach to drive initial trial and ultimately adoption of ZORYVE among these providers and their patients. As a steroid conversion movement continues to gain momentum and visibility, we expect it will increasingly influence prescribing habits in these settings. While the overall universe of providers in primary care and pediatrics is vast, our joint commercial strategy with COA is both strategic and highly focused. As shown in the pie charts on the right side of this slide, of the more than half a million total PCP and pediatricians in the U.S., the top 30,000 prescribers, or about 5%, write 4 million prescriptions or nearly one-third of all prescriptions in these segments. These high-volume prescribers are the focus of our efforts and give us confidence that we will be able to efficiently drive growth with this strategy.

Our activation in primary care and pediatrics is still in the early days, and we are determined to drive ZORYVE’s penetration in these settings to ensure this large pool of patients is provided with an alternative treatment option to topical steroids. I will now turn the call back over to Patrick, who will discuss in more depth the opportunities to continue growing ZORYVE in psoriasis, seb derm, and atopic dermatitis through targeted clinical activities. Patrick?

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Great. Thank you, Todd. We’ll now turn to the growth opportunities for ZORYVE presented by further extension of our current indications. Ensuring that we can deliver ZORYVE to as broad a number of patients with psoriasis, seborrheic dermatitis, and atopic dermatitis as possible, who would benefit from the unique profile of this drug, remains a key priority. Our planned and ongoing label expansion efforts to support pediatric patients with plaque psoriasis and pediatric and infant patients suffering with atopic dermatitis are central to advancing this goal, as we’ve outlined here on slide 23. Pediatric and infant atopic dermatitis patients urgently need innovative alternatives to topical corticosteroids. Unlike other inflammatory skin conditions, atopic dermatitis often presents at early ages for patients. Nearly 10 million children in the U.S. are impacted by atopic dermatitis, with roughly 60% developing symptoms in their first year of life.

Atopic dermatitis presents 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 their total body surface area compared to adolescents and adults. Parents of these pediatric patients are particularly sensitive to potential negative effects from topical steroids. These concerns range from the impact of chronic steroid use on the child’s growth and bone development to more immediate complications like application to the child’s face or contact with the eyes and mouth and can be difficult to control. Given the size of the patient population and the acute need and desire for safer and more tolerable therapeutic interventions, we’ve been methodically pursuing label expansions for ZORYVE to younger ages of atopic dermatitis patients.

Earlier this month, we received approval of our supplemental NDA for ZORYVE (roflumilast) Cream 0.05% for the treatment of children aged two to five years old with atopic dermatitis, a population of about 1.8 million patients. Commercial launch efforts are underway, and we’re excited to be bringing this important news, this new therapeutic option to clinicians and, most importantly, to pediatric patients and their caregivers. We’re simultaneously pursuing development of ZORYVE (roflumilast) Cream 0.05% in atopic dermatitis for even younger AD patients, ages 3 months to 24 months. Enrollment in our Integument Infant trial for this age range has been brisk and exceeded typical enrollment patterns and our expectations, confirming that there is significant interest in non-steroidal treatment options. In addition to atopic dermatitis, we’re also pursuing a label expansion to treat pediatric plaque psoriasis patients.

While this patient population is smaller than that of pediatric atopic dermatitis, there is still an acute need for better therapeutic options that we’re always trying to meet. On September 2, we announced that we are submitting a supplemental NDA for ZORYVE (roflumilast) Cream 0.3% to expand its indication to the treatment of plaque psoriasis in children ages two to five. If approved, ZORYVE (roflumilast) Cream would be the first and only topical PDE-4 inhibitor indicated for plaque psoriasis in children as young as two, offering patients and caregivers an important alternative to topical steroids and vitamin D analogs. ZORYVE (roflumilast) Cream is uniquely formulated to be effective, safe, and well tolerated for all areas of the body, including sensitive areas such as intertriginous skin, where plaque psoriasis often presents in children. There are very limited FDA-approved treatment options for plaque psoriasis for children under six.

We’re very proud of this clinical data package that we have compiled to support this sNDA, and we look forward to the FDA’s decision. Next, on slide 24, I’ll discuss incremental data generation opportunities that our clinical team is pursuing to further bolster ZORYVE’s position within our currently approved indications. The utility of these efforts is to produce clinical data that can be referenced with health care providers that further support the robust and diverse effects of ZORYVE in plaque psoriasis, atopic dermatitis, and seborrheic dermatitis. The intent of these efforts is to enhance the label of current indications by establishing ZORYVE among health care providers as a foundational choice amongst various options in controlling these dermatoses. Examples of note in this effort include palmar plantar psoriasis, nail psoriasis, and cicatricial or scarring alopecia when it occurs alongside seborrheic dermatitis.

Like nail psoriasis, palmar plantar psoriasis is a manifestation of plaque psoriasis in a particular body area, and both conditions are part of our indicated patient treatment population for ZORYVE. Palmar plantar and nail psoriasis present unique clinical challenges and have historically been less responsive to standard-of-care topical therapies and even available systemic therapies. However, we’ve received indications from the field, both through formal case reports and informal dialogue with HCPs, that ZORYVE is impactful in addressing these challenging locations. Our intention is to validate this impact through generation of data that can be made available to the HCPs we engage with. We believe that demonstrating efficacy in these difficult-to-treat patients will incline practitioners to default towards the use of ZORYVE in their preferred topical therapy for their psoriasis patients. Now, currently, scarring alopecia, a group of related conditions leading to irreversible hair loss, has no FDA-approved treatment.

Clinicians tell us that many patients with scarring alopecia also present with seborrheic dermatitis, and there’s a belief that these two conditions may be linked. This comorbidity is particularly well documented in publications that demonstrate that over half of patients with central centrifugal cicatricial alopecia, also known as CCCA, one form of scarring alopecia, also have seborrheic dermatitis. Researchers have proposed that aggressive management of their seb derm may reduce the disease incidence, reduce its severity, and a psychological burden in patients with CCCA. If the clinical data that we produce validates a unique efficacy profile for patients with seborrheic dermatitis and scarring alopecia, we believe that it will drive preferential usage of ZORYVE versus other seb derm treatments. This incremental data generation opportunity requires small data sets, a minimal investment, while driving depth of prescriptions in these underserved subpopulations. As such, they’re highly resource-efficient.

This effort will help further guide clinical treatment decisions. Now, turning to slide 25, you can see select images from case reports that we’ve received in both palmar plantar psoriasis and nail psoriasis. While the meaningful effect of ZORYVE represented in these pictures needs to be validated through our own clinical evaluation, it’s easy to see why we’re receiving such excited feedback from the field on the potential for this subset of patients. I will turn it back over to Todd to contextualize the impact that the components of our strategy we have reviewed so far to grow and expand ZORYVE will have on our market opportunity.

Todd Edwards, Chief Commercial Officer, Arcutis Biotherapeutics: Thank you, Patrick. Turning to slide 26. This morning, we’ve highlighted the key drivers that will sustain ZORYVE’s growth in our current indications: continued conversion from steroids, expansion into the PCP and pediatric specialties, label extension, and generation of incremental clinical data for patient subpopulations. These levers of growth will expand our market opportunity in two distinct ways. First, our obtainable market will increase to 17 million patients as we continue to broaden our focus beyond the dermatology setting, doubling the patient population across specialties where we have a commercial presence. Second, we expect to drive continued expansion in ZORYVE’s share of total topical prescriptions. To frame the opportunity, just within the subset of health care providers we target across dermatology, primary care, and pediatrics, every 1% of share gain in topical steroid prescriptions equates to approximately $150 million in annual net sales.

As we build share from our current position to the 15% to 20% range that we believe is achievable, ZORYVE will establish itself as a blockbuster franchise across these three indications alone. Now, Patrick will discuss our plans to expand ZORYVE into new markets.

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Thank you, Todd. Transitioning now from growing our core ZORYVE business in our currently approved indications to expanding the ZORYVE franchise by exploring potential new indications for ZORYVE. Pursuing new patient populations that may benefit from ZORYVE has been a principal focus for our clinical development strategy from the outset. This is evidenced by the five expansions we’ve secured across plaque psoriasis, seborrheic dermatitis, and atopic dermatitis following our initial plaque psoriasis approval in 2022. We believe that there are additional skin diseases that may respond to and more patients who may benefit from ZORYVE. This belief is not only supported by our understanding of ZORYVE’s broadly applicable anti-inflammatory and antipruritic properties, as well as its potential impact on stimulating melanocytes, but also by the direct and ongoing feedback we’ve received from health care providers in the field on their real-world ZORYVE experiences.

That you can understand how and why ZORYVE has potential across such a breadth of skin diseases, I want to take a moment to reorient you to ZORYVE’s MOA, its mechanism of action, notably its pleiotropic nature. ZORYVE inhibits phosphodiesterase 4, or PDE-4. It’s an enzyme that plays a key role in inflammation. PDE-4 regulates inflammation by increasing levels of cyclic adenosine monophosphate, or cyclic AMP, an intracellular messenger in immune cells. The increase in cyclic AMP, in turn, impacts multiple biological processes implicated in immune-mediated inflammatory skin conditions. Specifically, it reduces the expression of multiple key pro-inflammatory cytokines, including interferon gamma, type 1 interferon alpha, TNF alpha, IL-4, IL-6, IL-17, and IL-23, which span signaling through the TH1, TH2, and TH17 immune-mediated responses. PDE-4 also plays a key role in sensory neuron activation. Inhibiting PDE-4 likely directly mediates the itch sensation.

PDE-4 inhibition also normalizes keratinocyte activation and differentiation, which can lead to mitigation of the epidermal barrier dysfunction that occurs in many inflammatory dermatoses. Finally, it increases melanocyte proliferation, melanocyte gene and protein expression, and protects melanocytes from apoptosis. The breadth of mechanisms and pathways that ZORYVE impacts stands in stark contrast to the very limited and specific pathways targeted with biologics for inflammatory dermatoses. These targeted therapies generally impact one or a handful of cytokines involved in the inflammatory cascade. This narrow focus limits the ability of these therapeutics to be applied widely across dermatoses in the same way that ZORYVE is. For example, inhibiting IL-23 is wonderful to treat psoriasis, but it has no impact on atopic dermatitis or many other inflammatory dermatoses. ZORYVE’s unique pleiotropic MOA may also be an important differentiator between it and other topical anti-inflammatory treatments.

Critically, ZORYVE affects this broad set of inflammatory pathways in inflammatory dermatoses without causing systemic immune suppression and thus avoids the deleterious effects that often accompany knocking down the immune system broadly with systemic therapy. It

Brian Schoelkopf, Head of Investor Relations, Arcutis Biotherapeutics: also avoids many of the deleterious side effects of topical steroid usage, including local skin adverse effects, as well as systemic adverse effects such as HPA axis suppression, glycemic rate dysregulation, osteoporosis, and osteoporotic fractures, and ophthalmological AEs. ZORYVE’s comprehensive MOA, coupled with a very favorable safety and tolerability profile, enables us uniquely to have broad application across an exceptionally wide range of indications and patient populations. To date, this has spanned plaque psoriasis, atopic dermatitis, and seborrheic dermatitis. It may also enable us to treat diseases where topical corticosteroids have no impact or are not used, such as hidradenitis suppurativa and Hailey-Hailey disease, or where their efficacy is low and use is limited due to topical adverse events, as is the case in vitiligo and cutaneous lupus. Now, I’d like to talk about how ZORYVE’s pleiotropic MOA translates broadly in the clinical setting.

As part of our obligations as a manufacturer of ZORYVE, our medical team monitors this clinical feedback. To date, as shown on slide 29, we’ve identified more than 40 published case reports from clinicians who’ve used ZORYVE in a multitude of other inflammatory dermatoses and have seen encouraging signs of efficacy. These clinicians have experienced the safe, tolerable, versatile, and effective profile of ZORYVE in their psoriasis, atopic dermatitis, and seborrheic dermatitis patients and have independently chosen to investigate novel applications of the therapy. The efforts of these clinicians serve as valuable initial signals that our lifecycle management process then builds upon. This pursuit of potential new indications is aligned with our original understanding of ZORYVE’s pipeline in a molecule opportunity. Our approach to assessing these potential opportunities is stepwise and resource efficient, as outlined by the simple graphic on the right-hand side of this slide.

As indications of interest come to light, we’ll conduct exploratory 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 unmet need and the addressable patient populations for a given disease, as well as discussions with regulatory agencies, will then decide if proceeding with a registrational trial is prudent use of capital, given the anticipated return on investment. Importantly, the investment we plan to make in pursuit of these additional potential indications involves very efficient deployment of capital. Were the FDA to approve ZORYVE for these additional patient populations, we would immediately realize operating leverage on our existing sales force, supply chain, and operational foundation already in place to serve patients for our core ZORYVE business.

As we reviewed on our Q2 call, we’ve selected two initial exploratory indications, vitiligo and hidradenitis suppurativa, or HS, and are underway with proof of concept phase 2a studies. We anticipate initiating several other phase 2 studies in 2026. On slide 30, you can see select images from compelling case reports we’ve received in patients with just some of the skin diseases that were listed on the previous slide: lupus, Hailey-Hailey disease, and neurodermatitis of the scalp. Now I’d like to turn to the unmet needs and potential opportunity in vitiligo and hidradenitis suppurativa, the first two potential indications we’re exploring based on case reports from the field, starting with vitiligo on slide 31. This immune-mediated inflammatory condition is characterized by the loss of pigment, or melanin, in patches of the skin, resulting in white or light-colored areas.

In vitiligo, the body’s immune system mistakenly attacks and destroys melanocytes, which are cells responsible for pigment production and skin pigmentation. There are several vitiligo types based on pattern and distribution of depigmented patches, and non-segmental or generalized is the most common. There’s no cure for vitiligo. Topical corticosteroids have been standard of care, but have limited efficacy, and the prolonged use side effects can be a challenge. Opzelura received approval by the FDA in 2022 for the treatment of non-segmental vitiligo, and nearly half of Opzelura’s current usage is for this indication. You’ll recall that as part of the multi-pathway MOA, PDE4 inhibition with roflumilast, the active ingredient in ZORYVE, not only regulates inflammation, the underlying cause of vitiligo, but also increases melanocyte proliferation, melanocyte gene and protein expression, and protects melanocytes from apoptosis.

In line with the MOA, we’ve been highly encouraged by multiple case reports from clinicians who pursued vitiligo as a novel application of ZORYVE and showed success treating vitiligo with ZORYVE (roflumilast) Cream 0.3% once a day. In the ongoing phase two proof of concept study, we plan to enroll 20 patients. In determining whether to advance the program to a phase three trial, we’ll consider the clinical profile we see in the phase two trial, along with data observed in the field. A rigorous evaluation of the commercial opportunity we would expect based on clinical results and how that compares to results from our other lifecycle management trials. For vitiligo in particular, a clinical result that we may find compelling could be Opselura-like efficacy with more rapid onset of symptom relief and a more convenient dosing regimen.

While we, of course, need input from regulatory agencies in determining what an appropriate phase three trial design might look like, we anticipate the size and cost of a registrational program would be similar to those that we’ve conducted with ZORYVE in approved indications. However, the duration of treatment and how quickly the disease responds to treatment could impact development cost. We believe that there are aspects of ZORYVE’s profile that would make it a compelling therapeutic option relative to the currently available treatments, such as a once-daily dosing and the fact that ZORYVE is not contraindicated with therapeutic biologics or immunosuppressants. Now let’s take a look at ZORYVE’s potential opportunity in hidradenitis suppurativa, or HS, on slide 32. HS is a chronic, recurrent, and inflammatory skin condition that causes painful nodules, abscesses, and tunnels. Currently, diagnosis and treatment rates remain low as treatment options are limited.

HS involves dysregulation of several key immune pathways addressed by ZORYVE’s MOA, including TNF-alpha, IL-6, IL-17 and 23, and interferon gamma. Topical and oral antibiotics are common first-line therapies for mild HS but provide insufficient relief with a high proportion of patients not improving or relapsing. Beyond antibiotics, options are limited to systemic therapeutics, including corticosteroids, expensive biologics, or difficult surgical procedure-based therapies. It’s also worth noting that there are extensive off-label experiences with apremilast, an oral PDE4 inhibitor, in the treatment of HS. In short, this is a painful, very difficult to manage chronic disease with many patients not served by the currently available therapeutic approaches. It’s our belief that an effective non-antibiotic topical anti-inflammatory would be an important therapeutic option in the treatment paradigm of these underserved patients, particularly at the milder end of the severity spectrum.

In the ongoing phase two proof of concept study, we plan to enroll 20 patients, evaluate the efficacy, tolerability, and rate of relief onset provided by ZORYVE. How we approach the decision on whether to advance the program to a phase three trial will be equivalent to the approach in vitiligo. We’ll evaluate the strength of clinical data and implicit commercial opportunity and hold that against other opportunities we have across our lifecycle management program. The addressable patient population is also compelling, with a 3 to 3.5 million patient prevalence. Unfortunately, the diagnosis rate amongst these patients is low, at less than 15%, in part driven by a dearth of effective therapeutic interventions which are available.

Industry projections predict substantial expansion of the diagnosis and treated hidradenitis suppurativa population over the next decade based on the belief that, much like psoriasis and atopic dermatitis before it, new therapeutic options should drive greater disease awareness, diagnosis, and broader treatment. Currently, development of novel therapeutics for hidradenitis suppurativa is most concentrated in the more severe stages of disease and primarily consists of systemic treatments. We believe that ZORYVE, if it demonstrates activity in the clinic, could be an important topical therapy for mild to moderate disease and used in complement to systemic treatments currently approved and in development. Now, on slide 33, you can see compelling examples of the impact of ZORYVE in patients with vitiligo and hidradenitis suppurativa. On the left-hand side, there’s visible repigmentation in two vitiligo patients over a period of seven and five months.

On the right-hand side, you can see meaningful clearance of hidradenitis suppurativa lesions over just a 30-day period with reduction of inflammation and also a normalization of pigment. These select examples help demonstrate the encouraging signals that we’re receiving from clinicians and why we are excited to further validate the effects of ZORYVE for these conditions in a controlled clinical setting. I’ll now turn it over to Todd.

Todd Edwards, Chief Commercial Officer, Arcutis Biotherapeutics: Thank you, Patrick. I’m now on slide 34. As we look to the future and potentially expand a ZORYVE portfolio, it is pertinent to reemphasize the compelling effect of additional indications on prescriber behaviors that we have previously highlighted. We have observed that clinicians who prescribe ZORYVE across multiple indications generate significantly higher prescription volume overall as they recognize both the broad disease management benefits and exceptional tolerability profile ZORYVE provides their patients. We expect the potential introduction of additional label expansions and new indications will further compound this trend, serving as a key driver of depth of prescription writing among HCPs and supporting sustained volume growth for ZORYVE in the years ahead. Now to slide 35. The important efforts being undertaken by the clinical team at Arcutis have the potential to expand the patient population that can benefit from ZORYVE.

Should these clinical efforts prove successful and regulatory approval is secured, we will see increases to our total serviceable and obtainable market that drive increased commercial opportunity for the franchise. I’ll now hand it back to Frank.

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Thank you. Before shifting gears and spending time on our vision for building our clinical pipeline, I want to take a minute to pull together all the foundational elements of the exceptional opportunity that we have with ZORYVE. We are pursuing a massive treated patient population with more than 17 million patients in the obtainable market. In ZORYVE, we have a drug that shares all of the most important qualities that have led to topical corticosteroids being a backbone in dermatology for decades, primarily its magnitude of efficacy across multiple inflammatory dermatoses. What ZORYVE delivers that topical corticosteroids do not is the characteristic of being safe and tolerable for prolonged use in these chronic diseases, the ability to be used in every area of the body, and mechanistic dimensions with respect to neuronal signaling and melanocytes that are not part of the topical corticosteroid profile.

We are bringing this therapy to market at a time when there is a seismic shift occurring in how clinicians and patients think about the appropriate use of topical steroids to manage these diseases. This confluence of factors gives us tremendous confidence in the meaningful and sustainable growth prospects of ZORYVE. Taken together, we see a future for ZORYVE where our share of the topical steroid market increases from the 3% roughly level where we are currently sitting to a share of 15% to 20% or greater. This growth of share will not happen overnight. As we discussed earlier, this type of therapeutic conversion takes time to effect. For the reasons discussed, we are confident that we are on a course to achieve this level of penetration.

What’s more, as we approach this inflection point of generating positive cash flows from our core business, we will have additional resources to reinvest in ZORYVE to catalyze the shared growth. Beyond the immediate opportunity offered by our currently approved indications, the peak potential for ZORYVE will also be driven by expanding our indicated patient population through lifecycle management, as Patrick just walked us through. With consideration of both of these dynamics, we see a peak market potential across the ZORYVE portfolio of somewhere between $2.6 billion and $3.5 billion. We’d like to now move to the final pillar of our corporate strategy, building for the future through a pipeline of innovative medicines. As I touched upon at the outset of today’s presentation, our mission is to bring meaningful innovation to patients impacted by immune-mediated inflammatory skin diseases.

As we approach sustained profitability, we are well positioned to extend our focus to building and advancing an innovative pipeline to address additional unmet needs in line with our mission. These pipeline efforts include initiating the phase one clinical study of ARQ-234 in atopic dermatitis and ongoing efforts to evaluate externally sourced assets. Patrick will come back now to walk us through both of these components of our innovative pipeline strategy. Thanks, Frank. I’m now on slide 39. As we highlighted in our last call, we achieved an important milestone with our IND submission in Q2 for ARQ-234 as a novel systemic treatment for moderate to severe atopic dermatitis. As we gear up to initiate our clinical study of ARQ-234, we want to spend some time today highlighting the untapped opportunity in the atopic dermatitis market and the important potential role that this molecule may play in it.

ARQ-234 is an agonist of the CD200R immune checkpoint, which is a clinically validated target found on activated immune cells. The use of immune checkpoint inhibition in oncology revolutionized the treatment of many cancers. Harnessing the body’s own immune system by inhibiting immune checkpoints, such as PD-1, PD-L1, has transformed the paradigm for how oncologists approach and think about treating many cancers. By acting upon the CD200R mechanism, we’re looking to use immune checkpoints in reverse, agonizing versus inhibiting the immune checkpoint in order to reestablish homeostasis of the immune system in patients experiencing excessive immune activation that drives autoimmune diseases. This sort of checkpoint agonism represents a novel and potentially powerful approach to the control of atopic dermatitis and other autoimmune diseases.

While there’s reason to believe that this mechanism could be impactful across multiple autoimmune and inflammatory diseases, we’ll first evaluate its impact in atopic dermatitis, where clinical validation is strongest. AD still offers a compelling opportunity for the development of new biologics for two primary reasons. First, compared to other inflammatory dermatoses like plaque psoriasis, penetration of biologics is in the early stages. Roughly 25% of eligible patients receive systemic therapies for plaque psoriasis, while only 10% of eligible patients receive systemic therapy in atopic dermatitis. There’s reason to believe that as new biologics enter the category, the total biologic penetration of the market will expand in turn, as was observed in plaque psoriasis, where the market grew by nearly 300% from 2014 to 2024, to approximately $23 billion following the introduction of IL-23 and IL-17 targeting therapies.

Similar growth is anticipated in atopic dermatitis in the years ahead, with projections reflecting a greater than 10% CAGR through the end of the decade, resulting in greater than 80% growth in the U.S. sales for this indication. Second, and related, clinicians are eager to be equipped with biologic options beyond dupilumab. Dupilumab is the leading biologic approved for atopic dermatitis currently. However, a significant unmet need remains. What we have heard clearly in our conversations with clinicians is a desire for new mechanisms to address atopic dermatitis in patients who do not adequately respond to dupilumab, which works by blocking the inflammatory mediators IL-4 and IL-13. CD200R agonism represents a unique mechanism of action, complementary to and differentiated from other atopic dermatitis therapies targeting IL-4, IL-13, or OX-40 and OX-40 ligand.

ARQ-234 has the potential to differentiate on multiple metrics, including efficacy, responder sets, durability of response, frequency of dosing, and safety. What’s been demonstrated in clinical development efforts from other biopharmaceuticals targeting the CD200R axis is that the durability of response off treatment after final dose is promising. This may be a unique benefit of restoring immune homeostasis more broadly with the checkpoint mechanism versus targeting specific cytokines or other components of the greater immune cascade. The development landscape for CD200R is relatively nascent, but I will still highlight a few aspects of our candidate that we believe give us the potential to differentiate our program from other CD200R programs being or previously having been pursued. ARQ-234 targets a different, and we believe, optimized binding site at the native location. It also has a higher affinity as a fusion protein versus a monoclonal antibody.

We also observe an extended half-life for the molecule, driven by selective mutations engineered into the fusion protein. Given its unique profile, ARQ-234 has the potential to be a class-leading program and highly differentiated from other systemic therapies in the AD market, a market we believe will produce ample and compelling opportunity for new therapeutic entrants for years to come. Considering a recent setback in development programs targeting other MOAs in AD, such as Ox-40, the time is right for us to move this program into clinical development. From a portfolio strategy perspective, we also believe there are compelling reasons to advance a program like ARQ-234 that has best-in-class potential for more severe diseases to complement the strong position we’ve already established with ZORYVE. I’d like to touch on our framework for evaluating potential external innovations.

From the outset, our stated strategy at Arcutis was to identify, develop, and commercialize best-in-class molecules against validated targets, enabling us to develop differentiated products in less time, at lower cost, and at substantially lower risk than other approaches. As you can see on slide 20, the strategy remains unchanged and continues to guide our business development evaluation framework. In addition to clinically validated targets and differentiated product profiles, we’re seeking opportunities that are at a stage where the clinical and commercial expertise we’ve already amassed will create shareholder value. Perhaps most importantly, we’re interested in opportunities that will deliver substantial innovation to address significant unmet medical needs in immune-mediated disease. Finally, as Frank has stated previously, given the number of internal opportunities in front of us, we see business development as an attractive opportunity, not as a strategic imperative.

We will remain disciplined in evaluating business development opportunities and in deciding whether to acquire additional assets. I’ll now hand the call over to Latha to discuss our 2026 sales outlook and our capital allocation strategy.

Latha Vairavan, Chief Financial Officer, Arcutis Biotherapeutics: Thank you, Patrick. I’m on slide 42. As we detailed at the opening of today’s call, Q3 2025 was yet another strong quarter for ZORYVE. Tailwinds from our ongoing product launches and continued demand growth, despite the typical seasonality, led to substantial sequential growth. We are confident that this momentum will continue through the end of 2025 into 2026 and beyond. As we begin to exit the launch period across our ZORYVE indications, we anticipate more predictability in our rate of growth, allowing us to be more precise in anticipating the trajectory of sales for future periods. Considering this, today we will provide sales guidance for the first time. In 2026, we anticipate full-year net product revenues to be in the range of $455 million to $470 million.

We also anticipate continued strong net sales growth in the fourth quarter of 2025, driven by increased patient demand, even as we expect only nominal improvement in our gross-to-net rate compared to the third quarter. Turning now to our capital allocation strategy. As we highlighted earlier today, we anticipate achieving the meaningful milestone of cash flow breakeven beginning in Q4 of this year. The expense base considered in these cash flow forecasts contemplates our continued investment in growing and expanding ZORYVE, as we detailed today, and the advancement of ARQ-234. We are confident that we will be able to fund these investments with the capital produced from our core ZORYVE business. This will be enabled by a dynamic where the timing of continued improvement of cash flow generation from the ZORYVE franchise lines up with increasing resource requirements.

We will continue to be protective of shareholder capital and be attentive to managing our capital allocation to ensure that this dynamic plays out. We are fortunate to have a portfolio of high ROI investment opportunities paired with a cash flow-generating franchise like ZORYVE. I will now hand the call back to Frank for some closing remarks.

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Thank you, Latha. We are at an exciting inflection point at Arcutis. We have built a solid foundation for our business with the successful launch of ZORYVE and look forward to sustained and substantial growth with the franchise. Our initial success with ZORYVE will not only allow us to reinvest in that core business, but also to invest in expanding to potential new indications to ensure that sustained momentum and also allow us to continue to build and advance a pipeline of innovative therapies to bring new solutions to patients impacted by immune-mediated skin diseases, the grounding mission and guiding force of our enterprise. With that, we’ll open up the call to Q&A.

Brian Schoelkopf, Head of Investor Relations, Arcutis Biotherapeutics: Thank you, Frank. Unfortunately, Todd is under the weather today and will not be able to join us for the Q&A session, but I am joined by Frank, Latha, and Patrick. As a reminder, you may submit your questions through the question submission box located in the webcast platform at this time. We have already received a lot of questions, and we’ll do our best to address as many of these questions as time allows. Let’s jump right in. First question for the team here on the conversion of topical steroids. You spoke in the call to the evolution in treatment paradigm with topical corticosteroids starting to be displaced with nonsteroidal topicals. What actions are you taking or do you plan to take to accelerate this transition?

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Yeah, Brian, thanks. This is, I think, an extremely important question given the criticality of this process to the future for ZORYVE. I think it’s really important to emphasize that this trend towards topical steroid stewardship and being more judicious in the use of topical steroids for really short-duration treatment is a trend that’s emerging in dermatology, and it’s really being driven by the dermatology clinicians themselves. As you heard from Patrick and Douglas on the call today, there’s this growing body of evidence that demonstrates the serious adverse effects that come from prolonged topical corticosteroid use, both locally and systemically, the side effects. Dermatology clinicians are learning about that. As Doug shared, they’re talking about it, and they’re adjusting their practice. I was actually at the Fall Clinical Conference this past weekend, and there was quite a bit of discussion from the podium about this.

Patrick mentioned the SDNP and the SDPA statement. This is something that’s happening organically, and it’s going to benefit the entire nonsteroidal topical class as a whole. Specifically, it’s going to help us given our very strong share of that nonsteroidal market. In terms of what Arcutis specifically is going to be doing to accelerate that trend, I think really there are three levers you can think about. The first one is the sales force. The second is around market access, and the third is around our marketing activities. We’re already in a very good place vis-à-vis the sales force and market access. We added about 40 reps last year around the atopic dermatitis launch. We have a very strong field presence that covers the dermatology clinicians that are writing about 90% of all the topical prescriptions in dermatology.

From an access standpoint, I think folks know we have very strong coverage across commercial beneficiaries as well as Medicaid beneficiaries. We’re working on expanding the Medicaid even further. We’re also hoping to start obtaining Medicare coverage as well. I think we’re in a really good place from a coverage standpoint. Finally, with regard to marketing, again, I think we’re in a very strong position. We’ve been very thoughtful as a company about our marketing investments because we have to be careful about how we allocate capital, but also because we’ve been benefiting from this organic shift that I mentioned before that’s happening from the grassroots in dermatology. I think as ZORYVE, the franchise starts generating cash, as Latha just mentioned, this is probably one of those areas where we’ll be making some incremental investments in our marketing spend.

Brian Schoelkopf, Head of Investor Relations, Arcutis Biotherapeutics: Great, thank you. The next question here relates to the commentary on peak sales. The question is, as part of your peak sales guidance, you said you can reach 15% to 20% share of the topical corticosteroid market. What gives you confidence that you can grow from your current roughly 3% share position to that range? Any commentary on how long that process and that share gain will take?

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Sure. You’re going to hear from me a lot since Todd’s sick today. I think the best indicator that this transition is already happening and is going to continue to is the rate with which we’re already seeing the nonsteroidal topicals take share from topical corticosteroids. As mentioned earlier in the call, the nonsteroidal class is growing very rapidly, albeit from a small base. Taking into account the fact that the nonsteroidal market has grown 50% roughly just in the last year alone, there’s a very, very strong growth trend, and a lot of that’s being driven by ZORYVE. I think that it’s important to remember that while we’re seeing this very strong growth trend in steroid conversion and in this conversation around topical steroid stewardship, it is a very recent phenomenon. If you think about it, the lead wallpaper just came out in January of this year.

The SDNP and SDPA statements just came out a few months ago. These conversations are happening right now, and they really weren’t happening nearly as much a year ago. I think we’re really just at the very beginning of seeing the impact of this change in the thinking amongst dermatologists. In terms of specifically what’s going to be the drivers for ZORYVE’s market share going forward, again, I think that the most important driver is the increased focus on stewardship of topical steroids that we just talked about. That’s going to necessitate, excuse me, a much greater reliance on nonsteroidal topicals like ZORYVE. Again, we stand to differentially benefit from that shift given our very, very strong share of the nonsteroidal class and our growing share of the nonsteroidal class, as we’ve discussed already.

I think a second lever is our expansion into new treatment settings as we continue to gain awareness and adoption in primary care and pediatrics via our COLA partnership. Third, I think the incremental data generation that Patrick highlighted today is going to be a driver of prescriber behavior for certain key populations like patients with nail psoriasis or palmar plantar psoriasis, which are in our current indication, but we don’t have all that much data around that yet. That’ll be an important incremental data set. On the access front, we’re in a great place with reimbursement, but we have further opportunities to go in terms of expanding our Medicaid coverage and also picking up Medicare coverage.

Lastly, actions that we take really highlight or drive patient awareness to reinforce the trends that we’re already seeing, where patients are coming in and asking their doctors for something that’s not a steroid. There’s a great deal of public conversation around this topic, and I think that’s going to be another important driver for forward growth. From a timing perspective, again, if you look at the analogs that Patrick spoke about earlier, these paradigm shifts in treatment practice do take time to effect. I think we’re very encouraged by the rate of adoption that we’re seeing already. I think the demand growth that you saw this quarter is a good data point to show that that’s happening. The shift from these outdated topical steroids to the newer advanced topical therapies is going to take some time.

If you look at the analogs, somewhere between 5 and 10 years for that to happen, and we’re still very early in that process with the topical steroids. I think it’s hard to say, but it’s not going to happen overnight. I think we’re very confident it is going to happen for all the right clinical reasons, and we’re already starting to see these trends play out.

Brian Schoelkopf, Head of Investor Relations, Arcutis Biotherapeutics: OK, great. We’ll shift gears here to ARQ-234. We’ve had a few questions come in on this, several of them just making reference to any clinical evidence that already exists de-risking the class or the target. More specifically, a question regarding ARQ-234. Eli Lilly discontinued its CD200R agonist after stopping a phase two trial in atopic dermatitis for strategic reasons. Are there any learnings you’ve taken from that program that can be applied to 234 or any comments you can make on differentiation between the two programs?

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Yeah, so Patrick, do you want to take that one? Yeah. Thanks, Frank. Yeah, no, we’ve watched the Lilly program very closely. I touched on this a little bit in the presentation. I think one of the key reasons why we are confidently moving forward with ARQ-234 really has to do with the structure. The Lilly molecule was a monoclonal antibody that bound outside of the native binding site, whereas we’re a fusion protein that’s engineered for an extended half-life and also has two high-affinity modified CD200 ligands. Really a very different molecular approach. We have preclinical evidence that suggests that we’re getting a higher affinity. We feel very good about that, as well as this kind of extended PK half-life that we think could have benefit with regard to our dosing frequency.

Of course, that has to be proven out in this study that we’re planning to get started at the beginning of 2026. We have watched that program very carefully. A lot of times it comes down to also execution of a study. We’ve conducted many studies in atopic dermatitis. I think we have an excellent clinical development and clinical operations team. I think that will also help us to get a very clear understanding. The GWAS data and the kind of early evidence that pushed Lilly into atopic dermatitis still remains. We think that that’s very compelling. We think that ARQ-234 is the right molecule, and atopic dermatitis is the right disease for us to study further. We’re looking forward to getting that kicked up.

Brian Schoelkopf, Head of Investor Relations, Arcutis Biotherapeutics: OK, great. The next question here is on the lifecycle management activity with vitiligo and hidradenitis suppurativa. The question is, as you’re investigating ZORYVE in vitiligo and hidradenitis suppurativa, how do you think about the competitive dynamic with other drugs that are already approved or in development for those indications? As a second part to this question, can you say more about trial design, for example, size, whether or not it’s controlled, and duration of study?

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Sure. Yeah, Patrick, I think that’s probably best handled by you again. OK, sounds good. Yeah, looking at our lifecycle management and competitive dynamics with hidradenitis suppurativa and vitiligo, I think the best place for us to start is to look at these indications where we’re already approved and already in a competitive situation with both topical corticosteroids and branded topicals. Here, what are the elements of our profile that have allowed us to be so successful? It really comes down to efficacy, safety, tolerability, once daily dosing, ease of use pretty much anywhere on the body, as well as our commercial execution and our access. We have a lot of confidence in our clinical development and our commercial execution and our ability to leverage these capabilities for both of these new indications.

Now, thinking specifically about vitiligo, this is a disease where I believe that once daily dosing is going to be really important for patients. Vitiligo patients have to treat for a long period of time, months typically, before they start to see benefit with pretty much any treatment. The ability to do that just once a day has typically offered improved compliance compared to twice daily dosing. For the same reason, the rate of repigmentation is another key potential differentiator. This is something that we’re going to be looking at really closely as we conduct this next study. We’ll have to see those results once they get into the clinic. Turning to hidradenitis suppurativa, there’s a lot of white space for a topical therapeutic that’s targeting inflammation. Right now, treatments are primarily topical antibiotics, and then patients leap all the way to a systemic therapy.

Being able to have an effective topical treatment that could be used in the earlier stage patients as monotherapy and for later stage patients as adjunctive treatment to complement their systemic therapy is a very, very strong profile. That’s similar to what we’ve seen in atopic dermatitis and psoriasis. In fact, hidradenitis suppurativa systemic therapies leave a lot of room for some adjunctive therapy to really help patients to get to their target treatment. We’re very optimistic about how this profile fits with both of those indications.

Brian Schoelkopf, Head of Investor Relations, Arcutis Biotherapeutics: Perfect, thank you. OK, moving on to the next question here. This is focused on the results for quarter three, specifically on net sales. The question is, can you bridge us from the 13% sequential total prescription demand growth to the 22% sequential revenue growth for the quarter?

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Yeah, sure, it’s a great question. I think that the primary thing that’s driving the non-volume component of the growth of our product revenue is really improvement in gross-to-net. I think what we saw in the quarter was, if you think about it, if a patient is still in their deductible for the year, we’re buying them down to $0 or $35. Arcutis is having to pick up that additional cost from their deductible until they reach their annual deductibles. What we saw in Q3 was that patients have progressed through their annual deductibles probably at a rate higher than we had expected. We’re seeing reduced usage of our copay programs, and that directly translates into more revenue per prescription. It happened earlier than we had anticipated.

I think that also probably means that there might not be as much improvement in Q4 on that component as we saw in Q3. We expect gross-to-net to be very stable probably between Q3 and Q4. I think it’s important to emphasize that all of the other things that can contribute to non-demand revenue growth really were not material in this period. It’s really just the demand growth and then the improvement in gross-to-net, which is driving this outperformance.

Brian Schoelkopf, Head of Investor Relations, Arcutis Biotherapeutics: OK, great. The next question here is on the topic of external innovation and business development. The question reads, Frank mentioned sourcing external innovation. Would you elaborate on the stage of development, the type of assets from a modality perspective, and then therapeutic categories that you’re interested in specifically? Are you looking for something more adjacent to ZORYVE or more distant from ZORYVE from a diversification perspective?

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Yeah, sure. Patrick’s leading all these efforts. I think I’m going to ask Patrick to take that one. I think if you look at our pipeline, we have ARQ-234 that’s just going to be entering into the clinic. Obviously, spending a lot of time talking about the lifecycle management opportunities for ZORYVE. Ideally, we’d be looking for an asset which is kind of fitting in between those two. I think we’re really opportunistic with regard to, most importantly, finding something that we’re very confident about and we’re very excited about is fitting an unmet need. Again, we’re prioritizing dermatology because we think that fits best with our expertise. Just given the breadth of knowledge across the team and experience outside of dermatology, we’re not limiting ourselves to dermatology. We’re really looking across inflammation at adjacencies there for assets that would fit very well into our development pipeline.

I think what we’re really, as I mentioned in the discussion, what we’re really looking for is the right asset. We don’t feel compelled to necessarily bring one in just because of where we are with our pipeline, because we feel very confident about moving 234 forward and all of the opportunity that we have with ZORYVE and lifecycle management.

Brian Schoelkopf, Head of Investor Relations, Arcutis Biotherapeutics: OK, great. Staying maybe for a moment on 234, a question came in here. Will ARQ-234 target in AD patients overlap with the ZORYVE target population for that indication? How should we think about that?

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Patrick, that’s probably back to you again. Our approved indication for atopic dermatitis goes down to the age of two and is in the mild to moderate space. Development in systemics and biologics in particular typically focuses on moderate to severe. There is some overlap between the two of them. I think most importantly, one of the advantages of the ZORYVE profile is that with its label, with its safety profile, it’s not excluded from being used with systemic therapy. That’s one of the areas that we’ve heard from a lot of our customers that they found it to be helpful. Oftentimes, patients who are in that moderate to severe area will get pushed down into a more mild to moderate category where they would be, while on a biologic or systemic, appropriate for use with ZORYVE.

We don’t see them necessarily as competitive, just as we don’t see ourselves competing with systemic treatments, but more as complementing each other in the ability to be able to maintain a patient for this chronic disease for their lifetime without having them resort to topical corticosteroids.

Brian Schoelkopf, Head of Investor Relations, Arcutis Biotherapeutics: OK, great. The next question here is back on the topic of BD. I think we hit on this a little bit. Given your foothold in dermatology offices, would you consider adding a biologic against a novel dermatology target to develop? Would you also consider partnering one already in development for U.S. rights, just to better kind of titrate on what we’re looking at there?

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: That was a two-part question. I think the question was, would we consider a biologic in atopic dermatitis, and would we consider partnering a commercial stage product?

Brian Schoelkopf, Head of Investor Relations, Arcutis Biotherapeutics: Correct.

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Yeah, so look, on the first one, we absolutely would consider partnering a biologic in the space of me. I think that’s really the long and the short of what Patrick was just talking about. We’re really agnostic to modality at Arcutis treatment modality. Whether that’s an oral, an injectable, or a topical, we can work on any of those. We’re evaluating that full landscape in terms of our business development efforts. In terms of partnering on something that’s already commercial stage and in the marketplace, I wouldn’t say never, but it’s probably not the highest priority. We’ve built an exceptionally strong development organization at Arcutis across clinical and manufacturing. You think about nine successful phase threes, six FDA approvals. I think this team has proven time and again its ability to execute development programs and create shareholder value.

Part of our thinking around business development is how we continue to leverage this really very strong development engine that we’ve built. In a commercial stage, it is more leveraging the commercial organization that we have. The commercial organization we have is pretty busy with launching all these various indications for ZORYVE. I would say that’s probably a lower priority for us in terms of the business development in commercial stage products.

Brian Schoelkopf, Head of Investor Relations, Arcutis Biotherapeutics: OK, great. Another one here, staying on the BD topic. This one is more about how we think about potential size constraints. Is there any limit in terms of size that we would consider? Depending on the size, are there different considerations from financing strategy to support that?

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: I would say with the stock performance today, it’s probably a little bit bigger. Latha, you want to maybe take that one?

Latha Vairavan, Chief Financial Officer, Arcutis Biotherapeutics: Absolutely. I think our core focus on the balance sheet is based on ZORYVE. As ZORYVE’s trajectory builds, we will, as I said, focus on our milestone of hitting cash flow breakeven in Q4 of this year. From there, we focus on our grow and expand, as Frank outlined today, and funding those activities. Next, if you think about innovative BD, we have quite a bit of flexibility with our debt facility with SLR. Also, depending on the asset and the quantum, and as Frank said, based on today’s stock price, we’ll think about the funding mechanisms that are optimal for our capital strategy and how to allocate them for BD.

Brian Schoelkopf, Head of Investor Relations, Arcutis Biotherapeutics: OK, great. Next question here is going back to the topic of lifecycle management for ZORYVE. This is a two-part question. First, across the different indications that we highlighted in the presentation earlier, how do we think about prioritizing those? What is the framework for choosing where we would go next? The second is, how do you think the addition of new indications will potentially benefit your commercial efforts in psoriasis, seborrheic dermatitis, and atopic dermatitis?

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Yeah, maybe I’ll take the second half of that question. Patrick, I’ll turn it over to you to talk about the first one. I think that as you think about really replacing topical steroids as the go-to topical therapy in dermatology, the more opportunities the doctor has to write our product, the better. It starts becoming a habit. It’s the default treatment choice. You see that in the data that we presented before in terms of what happens when a doctor goes from writing ZORYVE for one indication to two indications to three indications. It doesn’t go up in steps. It goes up exponentially. One to two is threefold. Two to three is a tenfold increase in the prescribing. We would expect to see a similar kind of dynamic when they can use ZORYVE for almost every patient they have walking through their office door.

I think that there will be a synergistic effect with our existing indications as doctors use ZORYVE more and more. One of the things that we’ve actually found, particularly on the access front, is the more doctors use ZORYVE, the more they use ZORYVE because they know how effective it is, how well tolerated it is, and most importantly, how easy it is to get for their patients. There’s a growing confidence with familiarity. I think expanding indications, we should see something very similar happen with that, in addition to the growth from the new indication itself. Patrick, do you want to maybe address the prioritization question? Yeah, absolutely. As we think about prioritizing, we’re starting with hidradenitis suppurativa and vitiligo, but those are not the extent of all of the indications that we’re looking at. We shared kind of this broad list.

I think that is one of the key components for replacing steroids. You can’t replace steroids if they work across many, many indications with a treatment that only works across one or two. I think that’s a really critical part of our topical corticosteroid replacement. As we think about prioritizing those, it really comes down to what’s the clinical profile that we’re seeing, what’s the efficacy and the safety that we’re seeing. That will come from both our studies that we’re conducting, as well as from reports coming in from the field. Every day, we’re hearing more and more about those. That shapes our kind of understanding of what’s the level of unmet need and what is the kind of profile and efficacy that we expect to be able to see. It is combining that with the commercial assessment so that we can really understand how that profile fits.

I touched on that just a little bit with the first question we had about lifecycle management, about what do we want to see in vitiligo, what do we want to see in hidradenitis suppurativa. That really gets at trying to fit in that commercial assessment to make sure that we’re developing in an indication where we’re going to have a market when we get to the other side. We know for both hidradenitis suppurativa and vitiligo that these are very favorable. We’ll do the same kind of activity as we look towards new indications beyond those two.

Brian Schoelkopf, Head of Investor Relations, Arcutis Biotherapeutics: Very good. Turning now to the recent launch of ZORYVE (roflumilast) Foam 0.3% in scalp and body-involved plaque psoriasis, the recent growth for the Cream 0.3% was more muted compared to the foam. This is in quarter three. Is this a result of plaque psoriasis patients switching to foam from cream, or how do you see that dynamic playing out between the two products?

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Yeah, we’ve gotten this question on a number of occasions. I think it’s very unlikely that a patient who is stable on the cream is going to switch to the foam. I certainly have heard of patients who have received prescriptions for both products, and there’s no reason why patients can’t. If you had plaque on your elbow and a plaque on your scalp, maybe the doctor gives you both. Although you can use the foam on the body, and it works just the same as the cream. I think we continue to see growth in prescriptions for the cream. I don’t think that we get this question about cannibalization. I don’t think there’s any cannibalization going on because the cream is still growing.

What I do think we’re probably seeing is that for new patients, who haven’t been on ZORYVE yet, more patients now, especially psoriasis patients, are getting the foam. In some cases, those are patients maybe who might have gotten the cream in the past. I think it’s also important to emphasize, and I’ve said this before, but from a shareholder standpoint, it really doesn’t matter which SKU they get as long as they’re getting ZORYVE. The COGS is essentially the same across the products. The price is the same. The access is very similar. As long as total ZORYVE volume is growing, shareholders are benefiting from that growth.

I think having both the cream and the foam as options in psoriasis and now having two different presentations for atopic dermatitis tailored for those patients and having the foam for seb derm is just giving doctors more and more opportunities to use ZORYVE to treat their patients with inflammatory skin diseases.

Brian Schoelkopf, Head of Investor Relations, Arcutis Biotherapeutics: OK, we probably have time for just one more question here. This final question will be on the incremental data generation opportunities that Patrick was referring to in the presentation earlier. The question is, for the data generation opportunities in your current indications, the patient figures indicated on the slide, are those incremental new patients that will be covered and add to the market opportunity? How do we think about that?

Frank Watanabe, President and CEO, Arcutis Biotherapeutics: Yeah, another great question. In terms of incremental data generation, those are really patients that are already in our serviceable obtainable market. For example, the nail psoriasis patient population, we talked about 3 to 5 million psoriasis patients having nail psoriasis. That is part of the already targeted psoriasis market that we talked about. We do expect that we’ll drive differentially greater uptake in these subpopulations, particularly the really hard subpopulations. Nail psoriasis is one of the hardest things to treat. Even with a biologic, it often doesn’t clear. Palmar plantar psoriasis is another form of plaque psoriasis that is often very difficult to treat. If we can generate very strong data on ZORYVE’s efficacy in those very tough-to-treat patient populations, you would expect to see even greater adoption of ZORYVE in those subsets of patients. That’s why we think that this incremental data generation is so important.

Patrick, I don’t know if you have any other thoughts that you wanted to add to that. Yeah. No, I completely agree. If you see a patient come in with psoriasis, and you always check their nails, every psoriasis patient gets their nails and elbows checked, and you see nail psoriasis, and the first thing that you think about is that ZORYVE is going to benefit that and nobody else with a topical therapy, and you might not have to stick them on a systemic therapy, I think that is a huge advantage for us and really kind of changes someone’s perception of the profile in an even more favorable way. I totally agree with what you said, Frank.

Brian Schoelkopf, Head of Investor Relations, Arcutis Biotherapeutics: OK, great. That will take us to time for the Q&A session. We’d just like to thank you all again for making time in your busy schedule today to join us for this Investor Day.

Latha Vairavan, Chief Financial Officer, Arcutis Biotherapeutics: Thank you.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.