Arcutis Biotherapeutics, Inc.

Good day and welcome to the RQD's Biotherapeutics 2024 Third Quarter Financial Results Conference Call. 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 participate, you will need to press star 1-1 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press star 1-1 again. Please be advised that today's conference is being recorded. Now I'll pass the call to Lefa Beiravan, Vice President, Finance and Investor Relations. Please go ahead.

Thank you, Carmen. Good afternoon, everyone, and thank you for joining us today to review our third quarter 2024 financial results and business update. Slides for today's call are available on the investor section of the Arcudis website. On the call today, we have Frank Watanabe, President and CEO, Patrick Burnett, Chief Medical Officer, Todd Edwards, Chief Commercial Officer, and David Topper, Chief Financial Officer. I would like to remind everyone that we will be making forward-looking statements during this call. These statements are subject to certain risks and uncertainties, and our actual results may differ. We encourage you to review all the company's filings with the Securities and Exchange Commission, including descriptions of our business and risk factor. With that, let me hand the call over to Frank.

Thank you, Vata, and thank you to everyone for joining us today. With that, let me turn to slide five of the deck. I'm pleased to report that we maintained our robust growth trajectory in the third quarter, and I'm constantly impressed by the entire Arcutus team and its exceptional execution. Our expanding Zareeb portfolio now encompasses psoriasis, seborrheic dermatitis, and atopic dermatitis, providing physicians and their patients multiple forms of Zareeb cream and Zareeb foam to address their needs. Zareeb is the first and only topical anti-inflammatory agent with indications for all three of these very highly prevalent conditions, and physicians are becoming increasingly familiar with our product portfolio. Zareve portfolio sales grew 452% year-over-year and 45% quarter-to-quarter, reaching $44.8 million, which is remarkably strong, particularly following the impressive growth we've had in previous quarters. Furthermore, our third quarter revenue run rate is an encouraging sign for an excellent finish to 2024 and provides us with strong momentum going into 2025, continuing to demonstrate the significant opportunity for Zareve. From a volume demand perspective, TRXs for the Zrief portfolio grew 25% quarter-over-quarter. New prescription growth was also impressive, increasing 23% quarter-over-quarter. Also on this call, you will hear Todd discuss the ongoing growth to net improvements progress we are attaining, and I'm delighted that we are now in the low 50% range, a meaningful improvement from the high 50s last quarter. Our atopic dermatitis launch has been steadily gaining since the late July launch, and we're excited about the long-term potential of this additional indication and its expected contribution to the overall brand. Looking forward to the remainder of the year and into 2025, we believe we are well positioned to maintain strong revenue growth. Historically, many topicals have struggled to grow revenues or to sustain that growth long-term, but we are confident that Zareeb is different, and I'd like to share with you all the reasons for our confidence in the long-term growth potential of Zareeb. On slide six, we have already achieved impressive revenue growth with the Zareve family of products, driving both prescription growth and significant growth to net improvements. But we are just beginning, and I would point to four significant factors that are going to allow us to sustain the growth of Zareve and to redefine what can be achieved with the topical product. We are building out the Zareve product label with the expected approval of scalp and body psoriasis in the middle of 2025, as well as expanded indications for pediatric patients in atopic dermatitis and psoriasis. These new and expanded indications will further physicians' ability to rely on Zareve as their go-to first-line topical agent. Having successfully penetrated commercial payers, we are now working to make Zareve accessible to government pay patients across both Medicare and Medicaid, opening access to as many as 3.3 million incremental patients in the dermatology offices, and Todd will update you on our progress thus far on this front. Securing access to the large government-insured population has been a priority for us from the start, and our progress here is clear validation of our pricing strategy. Our partners, COA, are now promoting Zareef to high potential primary care doctors and pediatricians, and the early feedback is very positive. The new and expanded indications and broader insurance coverage across commercial Medicare and Medicaid will amplify the impact of their promotional effort. We expect meaningful contribution from this co-promote beginning in 2025 and growing from there. Finally, there are approximately 16 million topical steroid prescriptions written by dermatologists for our approved indications each year, and we are just scratching the surface of penetrating this large segment. The first three elements I discussed will be foundational in shifting topical use away from steroids as we emphasize the safety of using Xareeb for any duration and anywhere in the body, coupled with its strong efficacy. We are also increasingly hearing from the dermatology community their recognition of the need to reduce their reliance on steroids, so that will be another tailwind behind Xareeb's growth. We are confident that we will drive this shift away from steroids over time. Turning to slide seven, to spend just a few more minutes to help quantify the very large expansion in our target markets that I just mentioned, We keep highlighting the slide to provide a concrete sense of how significant this expansion is, as well as how attainable it is. Up to this point, we have been primarily focused on the roughly 4.5 million commercially insured patients with our target indications treated in the dermatology office. And we are expanding our penetration of the psoriasis, seborrheic dermatitis, and atopic dermatitis patient segments and continue to take share from other topical agents. As Todd will discuss, In a bit more detail in just a minute, we are very proud that Zareeb is now the number one branded topical anti-inflammatory agent for new prescriptions, and we anticipate taking the number one spot for total prescriptions very shortly. Our dramatic growth in market share in the branded topical space is a testament to physician preference for Zareeb, driven by our rapid, robust, and reliable efficacy, our strong safety and tolerability profile, the patient-friendly one-to-day formulation, and our broad and ever-increasing insurance coverage. And as we gain Medicare and Medicaid coverage, we will be able to expand Zurich usage to the more than 3 million dermatologists treated psoriasis, atopic dermatitis, and seborrheic dermatitis patients with government insurance. In addition, our new co-promotional partner, COA, is allowing us to simultaneously expand into the more than 7 million commercially and government-insured patients treated for their psoriasis seborrheic dermatitis, or atopic dermatitis outside of the dermatology office. A very large percentage of all of these patient segments are currently treated with topical steroids, and momentum is growing in the shift away from topical steroids, although this is really only just begun. Xareeb is the perfect replacement for topical steroids, offering physicians and patients robust efficacy, the ability to be used anywhere, tolerability that allows chronic use unlike steroids, and broad insurance coverage. Todd will further expand on this in just a few minutes. This immense market size and the continued expansion of the market segments where we are competing are what make us so optimistic about the blockbuster potential of Zareem. I did want to take just a moment to also touch on an important governance announcement we made this morning. Our board of directors has appointed Keith Leonard as the chair of our board effective this Monday. I'm delighted to have Keith taking over the leadership of our board. We've worked together closely for many years across several companies, and he has been on our board for the past three years. He possesses an incredible level of board and operational experience and commercial acumen, which will be invaluable to us as we continue to drive our growth of the Zareve franchise. So congratulations to Keith. I also want to sincerely thank Patrick Herron, our previous chair, for everything he has done for Arcutis and for me personally. Patrick has been with us from the very beginning and has been our chair since 2018, guiding us through our IPO, our commercial launch, and so many other significant milestones. Equally important, he has been, and I'm sure he will continue to be, a fantastic mentor and coach to me. And I couldn't be happier that Patrick has agreed to stay on the board as one of our independent directors. With that, let me turn it over to Todd to provide some further commentary around Xareev, cream and foam launches in psoriasis, sebderm, and atopic dermatitis.