Arcutis Biotherapeutics, Inc.

Ladies and gentlemen, thank you for standing by and welcome to our Cuties Biotherapeutics Inc. Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are on the listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then get an automatic message advising your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host Eric McIntyre, Head of Investor Relations. Please go ahead.

Thank you, Livia. Good afternoon, everyone, and thank you for joining Arcturus' fourth quarter and full year 2022 earnings call. Slides are available on the Investors section of our website. On today's call, we have Frank Watanabe, President and CEO, Scott Burrows, Chief Financial Officer, Ken Locke, Chief Commercial Officer, and Patrick Burnett, Chief Medical Officer. During this call, I'd remind everyone that we will be making forward-looking statements. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. We'd encourage you to review the information disclosed in our latest SEC filings. With that, I'll hand the call to Frank.

Thanks, Eric. So I'm on slide five in the deck, which is on our website, if you folks haven't downloaded it yet. 2022 was really a year of exceptional execution for Arcutis and really set us up for great success in 2023 and beyond. Just to recap, we had four successful pivotal phase three trials read out. We had an on-time approval for Zareve and Plaxiriasis. We raised over $300 million to secure a strong balance sheet to support our continuing commercialization and advancing of our pipeline. And we continue to progress in building our pipeline. On slide six, we're making steady progress towards our vision of building one of biotechnology's leading dermatology companies. Some highlights from Q4 and other recent developments. With Zareve, we've got an innovative product that's really well positioned for long-term success with clinically meaningful benefits over alternative treatments. We're seeing very encouraging script growth as physicians gain positive real-world experience with Zareve. And we're also having great success in obtaining broad high quality access. We're delighted today to announce that we've received coverage from the second of the three large major national PBMs effective tomorrow. And Ken's going to comment a little bit more about the access situation. But we're really happy with our rapid progress in obtaining broad high quality coverage for Zareef. We also continued to advance additional indications for topical reform last, capitalizing on what is really turning into a unique pipeline in a product. We had the positive readouts from entanglement 1 and 2 in atopic dermatitis. Very excited about the clinical profile in AD and the approvability of the product in a large and rapidly growing market. We also just recently submitted the NDA for topical reformalized foam and seborrheic dermatitis, and that sets us up for a potential approval late this year or very, very early part of 2024. And we've also already submitted a supplemental NDA for zarebe and plaque psoriasis down to the age of two, which will further read on the safety profile of zarebe and plaque psoriasis. We also continue to progress our early pipeline with the acquisition of ARQ-234, our first biologic for atopic dermatitis, and the Phase 1B initiation of ARQ-255 in alopecia areata, which leverages our unique 4D technology and potentially could be the only topical treatment for alopecia areata. And finally, not only what we accomplish matters, but how we accomplish it matters to us as well. And so we're very proud that we issued our first ESG report in the fourth quarter, highlighting the progress that we're making on these important topics. If you move on to slide number seven, just a reminder of our broad and deep medical dermatology pipeline and the progress that we've made recently since the last call on three programs in particular. I'd call your attention to the three red arrows highlighting some of our recent progress in advancing the pipeline with the NDA and SebDerm, the initiation of Phase 1B for ARQ-255, and the acquisition of and progress on ARQ-234. Turning to slide number eight, there really are four keys to our strategy for the long-term success of Zareve. One is positioning Zareve to replace a significant percentage of topical steroids, which we're going to spend some time talking about today. Secondly, providing a positive clinical experience for doctors and patients when they use Zareve. Third is obtaining broad, high-quality coverage. And lastly is ensuring profitable growth through a rapid stabilization of our growth to NIST. If you turn to slide nine, I want to spend just a couple minutes talking about the first of these four elements of our strategy. And I think it's really important for investors to understand that the key to realizing Zareve's real potential is the conversion of a significant percentage of topical steroids over to Zareve. To give you some context, there are about 12 million prescriptions a year for topical steroids. That's something like a quarter million every week versus 5,000 prescriptions, maybe 6,000 per week, for Zareeb and the other new non-steroidal combined. We're really just scratching the surface in terms of the opportunity for Zareeb. We believe that there are three critical elements for making that conversion happen. The first one is that prescribers need to see a need, a reason to change and move away from topical steroids. The second is that Zareeb needs to provide a product profile that satisfies the needs of prescribers and patients. And the third one is it needs to be as easy to write Zorib as it is for that next topical steroid. That all sounds great, but is that possible? If you go to the next slide, to slide 10, we're showing here several different markets where you had a stable, mature, and generic market, and then an introduction of a new class of drugs. And what you can see in each one of these instances is that there is a very significant conversion over time as well as some significant market growth actually in a couple of these instances with the introduction of that new class of drugs. And so you're looking at examples here from the anticoagulation market, the conversion from warfarin over to factor Xa's, the schizophrenia market, the conversion of neuroleptics over to atypical antipsychotics, the GERD market with conversion of H2s to PPIs, and then most recently, the conversion of the oral migraine market from tryptans over to the oral CGRPs, which is still very early days, but you can see a very rapid conversion trend even in that market. And if you go to slide 11, as you look across all these markets, and we're actually, we were showing also the antidepressant market and the conversion of TCA to SSRI, what you can see is over time, there is a very dramatic shift to the new class of drugs. And that growth, that shift continues throughout the life cycle of the product. And on average, about 50% of these markets all converted by year seven or year eight after the introduction of a new class of drugs. And you think about those 12 million prescriptions I talked about, if 50% of that market converted over to new novel non-steroidals, I think that gives you some sense of the true opportunity for Zareve. So, if you move on to slide 11, you know, sorry, I'm on slide 12. So, I want to take just a moment and have Patrick comment on the first of these three elements around what we're hearing from the dermatology community about the need to shift away from topical steroids. Patrick?