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Good day, and thank you for standing by. Welcome to the Arcutis Biotherapeutics 2025 Third Quarter Financial Results and Investor Day presentation. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Brian Scholkoff, Head of Investor Relations. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining us today to review our third quarter 2025 financial results and business update. And for our extended Investor Day presentation, slides for today's call are available on the Investors 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 DiRuggiero, 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 Assistant 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.

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 in 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

Thank you, Frank, and good morning, everyone. Turning to Slide 6. As Frank noted, we continued to deliver strong revenue growth, driven by the increase in adoption of the

Thank you, Todd. I'm now on Slide 8. 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

Thanks, Latha. We founded Arcutis in 2016 to address what we saw as a significant innovation gap in the immunodermatology drug development space. We recognize 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. So 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

Thanks, Frank. Slide 15 provides a clear illustration of the sizable and realistic market opportunity for

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. And second, because it provides a key data point to support our obtainable market thesis that Todd outlined. So what exactly is driving this conversion? And why does it matter? The first successful use of corticosteroids for chronic inflammatory skin diseases was reported in 1952. In more than 70 years, we've seen remarkable scientific and medical innovations across many therapeutic areas and treatment modalities. But 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. And 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 and this is at the stage for intensifying calls to limit long-term topical corticosteroid use and embrace innovation in the topical modality. So that you can understand, what is galvanized this loud global call of concern about the use of topical corticosteroids, I want to help frame the problem at hand. And to accomplish this, we've adopted a slide from a recent review article written by Douglas DiRuggiero who I was 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 60s and include skin barrier damage, atrophic changes like stria 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 the 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 topical 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 involve a higher body surface area than adults and their immature skin barrier can result in greater permeability. And lastly, patient populations at even higher risk include those who use topical corticosteroids on the face or genital areas, as [ center ] 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, separate 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 and 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 is both effective and safe. As you can see on Slide 18, in August of this year, 2 of the primary professional dermatology societies in the U.S. The Society of Dermatology Physician Assistance, the SDPA, and the Society of Dermatology Nurse Practitioners, the SDNP, issue 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, United Kingdom and India, other professional societies, such as the International [ Eczema Council], British Dermatological Nursing Group British Association of Dermatologists and the American Academy of Family Physicians, patient advocacy groups like 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 assistance 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 DiRuggiero on the evolving topical treatment landscape for immune-mediated dermatosis. Douglas DiRuggiero 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, 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 of Physicians Assistance 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 assistance 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 failing critical gaps and ensuring patients with skin conditions have access to the vital and high-quality care they need. Well, 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. And especially, I want 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, learned a lot from it. I thought it would be great to have you come on and share your perspective that led to that.

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, unset unseating entrenched generic standards of care. These are 4 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 3 years since we received our initial indication in psoriasis just under 2 years for seb derm in 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. Now 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 nonsteroidal alternative needs to achieve in order to successfully compete. It really comes down to 2 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 cebra dermatitis, as well as many of the more rare conditions, where there may not currently be any FDA-approved treatment. So 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 dermatosis. 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 topical including difficult-to-treat areas like the scalp and sensitive areas like the face and growing, all of which can be affected by inflammatory dermatosis. I'll walk through

Thank you, Patrick. I'm now on Slide 22, expanding the breadth of prescribers beyond dermatology will be a key driver of

Great. Thank you, Todd. We'll now turn to the growth opportunities for

Thank you, Patrick. Turning to Slide 26. This morning, we've highlighted the key drivers that sustained

Thank you, Todd. Transitioning now from growing our core

Thank you, Patrick. I'm now on Slide 34. As we look to the future and potentially expand the

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

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 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 the 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 and 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 will 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 2 primary reasons. First, compared to other inflammatory dermatosis 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 AD. 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 AD 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 U.S. sales for this indication. Second, and related, clinicians are eager to be equipped with biologic options beyond dupilumab and dupilumab is a leading biologic approved for AD currently. However, a significant unmet need remains. But we have heard clearly in our conversations with clinicians is the 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 AD therapies targeting IL-4 IL-13 or OX40 and OX40 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 biopharmas targeting the CD200R access 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 observed 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. And considering a recent setback in development programs targeting other MOAs in AD such as [ OX40], 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 been -- that has best-in-class potential for more severe diseases to complement the strong position we've already established with

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

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

And I think a good place to start is just kind of what is 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. So what's your -- been your personal experience and also a little bit about how that may have evolved over that time?

Well, 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 [ would ] into topical corticosteroids as being the medication that is for all things. And it's had an impact, I would say, on the trajectory of dermatology, probably more than any other product in our specialty. And so it's -- and it's been around for a long time, 1952 when it was first compounded into something that we could use on the skin, and it's been used ever since. And so my experience when I got into this in 1999, it was a topical corticosteroids were a mainstay of therapy, first line, second line, third line, maintenance therapy, all of the above. But we didn't have the targeted therapeutics we have now to address some of these systemic diseases with systemic therapy. So we were using a lot of topical steroids and topical tar and [ Anthera ] lot of compounded things in phototherapy and a lot of the old traditional systemic medications. So 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'd say, to a certain extent, maybe turn a blind eye to and we simply can't do any longer. There's just too much data out there, both to the public knowledge and to the prescribers knowledge that we have to face the facts that steroids carry a lot of dangerous. And we can't transfer that danger or at least I can't transfer that danger any longer on to my patients without really having a lot of information to give them. So it's a shared decision-making process.

Yes. 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. And I think a lot of people felt somewhat comfortable, especially when there wasn't another option with that. But 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 kind of like one aspect of that in particular that impacted you the most? I know in the paper, you talked about diabetes, you talk about bone fracture and osteoporosis. Any particular area that was impactful for you?

Well, I'll tell you 2 stories that drove that, and I'll answer that question indirectly through this. I had a patient who is a 13-year-old boy, who came in for eczema, atopic dermatitis and I put them on triamcinolone, which is a very commonly prescribed mid-potency prescription steroid and he was a type 1 diabetic. He had been since he was about 6. So he had a pump and he had a monitor, and he was able to watch his sugars closely. And the mother came in, this is about 3 years ago and told me that we can put [ triamcinolone ] on his 2 forearms, and we can watch his blood sugar go up 40 points in 40 minutes. And I was just like 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 service here, not like this whole body. I began doing some research on this and say, what are really the systemic side effects to this. We are focused in dermatology, and we do a good job of counting our patients against the cutaneous side effects. If you use it too long, and in the wrong areas and unfolds, it could extend the skin, what we call [indiscernible], you could have [ strand ] stretch marks, you would get steroid-induced acne or folliculitis, you get unwanted hair or hypertrycosis. 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. And they all listed all of those things. No one listed anything systemic because we [ fastly ] associate all the systemic side effects with giving them systemic steroids. And we do not and have not been trained and do not recognize the whole body of information is out that shows that these medicines are highly absorbed, and they act like a systemic drug like you're taking it orally or injecting it. And so yes, we have a lot of data out there that shows that it will raise blood sugar, diabetes, it can create something called [ cushanoid ] syndrome or adrenal insufficiency. But the surprising one for me is the data out there on developing a vascular necrosis of the hip. 20 and 30-year olds that have only been on topicals, no other systemic case reports, having had hip replacements. I highlighted a couple of those in the recent lecture I gave. [ Osteopritic ] fractures, I did -- talked about a case report an 11-year-old we've been using mid- to high potency corticosteroid creams only, no systemics, just topicals for 3 years and had a [ wrist ] fracture and a full body osteoporosis like an 80-year-old and this kid's 11 and had [ osteopretic ] fracture. And so 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 increased ocular pressure. So 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, and we've got to face those facts. And it should change the way we prescribe and it should change the way we educate our patients about these things.

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?

It's really a lot of shock to be honest with you, when they see the data because it's not something that's being talked about in the clinic that these trials and these case reports and these meta-analysis and the system analysis of are not really being championed and put forth. And 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. And so some of it is for step through therapies and some of it is just simply lack of knowledge. So the reaction I get is using one of like, I just cannot believe. And when I present this information, I really present it in a very self-reflective way because I have been one of the top [ riders ] of topical corticosteroids in my state for many years. So I mean 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. And so I think that's what a lot of people have. I've got a lot of incredible comments, e-mails, 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 [indiscernible] 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 were 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 in the U.S. really needs to take a role in this, in my opinion. And I feel like a lot of us in dermatology have the ability and now have some momentum to make this happen.

And you made reference to these advanced targeted topical therapies like

In the second quarter of 2025. So I don't have the third quarter numbers, but in the second quarter, so fairly recently, how many prescriptions do you think were field of topical corticosteroids by dermatology practices? So just derm providers, not family care, not any other specialty. Most -- the highest number I have people guess is 500,000 in a quarter. Most we're guessing 200,000 to 300,000 written by the 20-or-so thousand derm providers that are out there. And when I tell them it's 2.9 million not over the span of a year, but in 1 quarter, 2.9 million prescriptions of topical corticosteroids filled, not even written filled by patients that are receiving the prescriptions from derm providers. I mean you talk about jaws dropping when they realize how much of this we are contributing to this. And so I mean, even if I can change 1% of that, I mean, at 1%, 29,000, if even if you can less than 29,000, that's a huge, I think, impact over 1 quarter time. So I think 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 to this problem. And so now we have such fantastic alternatives like

So in that setting, what do you see as the biggest barrier then for some of these advanced targeted topical therapies? What do you see is kind of that barrier, you've talked about some of the differences in the profile between them and steroids. And we -- I talked about that earlier as well. But is it really a profile issue? Or are there other things that are playing into this kind of transition that you're talking about?

Well, I've mentioned this earlier, and that's step-through therapies. Our largest barrier are insurance plans 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. So really, the issue when a rep comes in, it's not where you give us a trial or you try medicine. They really need to be saying for almost every medication now is, will you fight for us. Just to try it is 1 thing. The try it just means they're going to get denied, and then you move on back to your generic prescribing habit. But he's 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. So I think the 2 main categories is always safety. Safety is always in the driver seat and anything in efficacy or its effectiveness is ride and shotgun. So those are the 2 things in the front seat, you want to be safe and you want it to work. And then in the back seat of any car, is it convenient? Can you get it filled, does -- will the patient be compliant and when you got something once a day, compliance is high. You've got something that doesn't burn or [indiscernible] compliance is high. You've got something that works. Compliance is high. What's not compliant is often an insurance company trusting us to be doing the name we think is best for our patient. And I think that's one of the larger blocks. Improvements are being made I will say the words 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. And 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 are -- they sit there and they asked me, what is what you're writing me a steroid stairway because I don't want my child on a steroid. They're now preemptively saying, "I don't want to be on a topical steroid." And so I've seen a shift in the last 2 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. And I'm in [ World Georgia]. [indiscernible] not like there's a high [ fluting ] 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 [indiscernible] steroid because I don't want to be on that. Pediatricians already tried. I don't want my chart on it. I don't want to be on it. I had a guy came in the other day when they talk of dermatitis, he's 40 years old, had it since he was -- birth. He says, if you're going to write me a prescription for [indiscernible], this would be the last time you've ever seen me. It was his first visit with me. I was like, well, okay. Well, I don't plan to do that, but it's nice to know to convince you and says, "My wife makes you come in every 2 years to see if there's anything new that's out. Tell me what I've got, list my options." And so -- so we're seeing a shift. It may not be as fast as we want it to be, but it's happening. It's happening.

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. [Operator Instructions]. So we'll 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?

This is, I think, an extremely important question given the criticality of this process to the future for

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? And any commentary on how long that process and that share gain will take?

Sure. So you're going to hear from me a lot since Todd is sick today. But I think the best indicator this transition is already happening and it's 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 non-steroidal class is growing very rapidly albeit from a small base, but taking into account the fact that the nonsteroidal market has grown 50% roughly just in the last year alone, right? So there's a very, very strong growth trend and a lot of that's being driven by

Okay. Great. And 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 derisking the class or the target. But more specifically a question regarding ARQ-234. Eli Lilly discontinued its CD200R agonist after stopping the Phase II 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 2 programs?

Yes. So Patrick, do you want to take that one?

Yes. Thanks, Frank. Yes. No, we've watched the [ OLE ] program very, very closely. And 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 bind outside of the native binding site, whereas we're a fusion protein that's engineered for an extended half-life and also has 2 high-affinity modified CD200 ligand. So really a very different molecular approach. And we have preclinical evidence that suggests that we're getting a higher affinity. So we feel very good about that and 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. So we have watched that program very carefully. And again, a lot of times, it comes down to also execution of a study, and we've conducted many studies in atopic dermatitis. And I think we have an excellent clinical development and clinical operations team. And so I think that will also help us to get a very clear understanding. The [ GWAS ] data and the kind of early like evidence that pushed Lilly into atopic dermatitis still remains. We think that, that's very compelling. And we think the ARQ-234 is the right molecule and atopic dermatitis is the right disease for us to serve further. So we're looking forward to getting that kickoff.

Okay. Great. The next question here is on the LCM activity. With vitiligo and HS, the question is, as you're investigating

Sure. Yes. Patrick, I think that's probably the best handled by you again.

Okay. Sounds good. Yes. So looking at our life cycle management and competitive dynamics with the HS 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. And here, what are the elements of our profile that have allowed us to be so successful. And it really comes down to efficacy, safety, tolerability once daily in ease of use, pretty much anywhere on the body as well as our commercial execution and our access. So 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. And so the ability to do that just once a day is going to -- it's typically offered improved compliance compared to daily dosing. Now for the same reason, the rate of repigmentation is another key potential differentiator. So this is something we're going to be looking at really closely as we conduct this next study, and we'll have to see those results once they get into the clinic. So turning to [ hidradenitis suprtiva]. Here, 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 kind of leap all the way to a systemic therapy. So being able to have an effective topical treatment that could be used in the earlier stage patients as monotherapy and for later-stage patients in as adjunctive treatment to complement their systemic therapy is a very, very strong profile. And that's similar to what we've seen in atopic dermatitis and psoriasis. And in fact, [ hidradenitis Supertea ] systemic therapies leave a lot of room for some adjunctive therapy to really help patients to get to their target treatment. So we're very optimistic about how this profile fits with both of those indications.

Perfect. Okay. So moving on to next question here, and this is focused on the results for quarter 3, specifically on net sales. And the question is, can you bridge us from the 13% sequential total prescription demand growth to the 22% sequential revenue growth for the quarter?

Yes. Sure. It's a great question. I think that the primary thing that's driving the nonvolume 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. And so 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. And so we're seeing reduced usage of our co-pay program, and that directly translates into more revenue per prescription, happened earlier than we had anticipated. But I think that also probably means that there might not be as much improvement in Q4 on that component as we saw in Q3. So I think we expect [ GTN ] to be very stable, probably between Q3 and Q4. And 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. So it's really just the demand growth and then the improvement in gross net, which is driving this outperformance.

Okay. 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

Yes, sure. So Patrick is leading all these efforts. So I think I'm going to ask Patrick to take that one.

Yes. I think if you look at our pipeline, we have ARQ-234 that's just going to be entering into the clinic and then not spending a lot of time talking about the life cycle management opportunities for

Okay. Great. And then -- and staying maybe for a moment on 234, A question came in here. Will ARQ-234 target in AD patients overlap with the

Yes, Patrick, that's probably back to you again.

Yes. So our approved indication for atopic dermatitis, goes down to the age of and is in the mild to moderate space. So development in systemics and biologics, in particular, typically focuses on moderate to severe. So there is some overlap between the 2 of them. But I think most importantly, one of the advantages of the

Okay. Great. The next question here is back on the topic of BD, and I think we hit on this a little bit, but given your foothold in dermatology offices, would you consider adding a biologic against a novel dermatology target to develop or would you also consider partnering one already in the development for U.S. rights, just to better kind of titrate on what we're looking at there.

So that was a 2-part question, right? I think the question was would we consider a biologic in AD? And would we consider partnering commercial stage product?

Correct.

Yes. So look, on the first one, we absolutely would consider partnering a biologic in the space in and I think that's really the long and the short of what Patrick was just talking about. We're really agnostic to modality and our Arcutis treatment modality. So whether it's an oral and injectable or a topical, we can work on any of those. And so 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 9 successful Phase IIIs, 6 FDA approvals and I think this team has proven time and again, its ability to execute development programs and create shareholder value. And 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 is more leveraging the commercial organization that we have, but the commercial organization we have is pretty busy with launching all these various indications for

Okay. Great. And then another one here, staying on the BD topic, and this one is more about how we think about potential size constraints. So is there any limit in terms of size that we would consider? And then depending on the size, different considerations from financing strategy to support that?

Well, I would say with the stock performance today, we -- it's probably a little bit bigger. But Latha, you want to maybe take that one?

Absolutely. So I think -- our core focus is on the balance sheet is based on

Okay. Great. Next question here is going back to the topic of life cycle management for

Yes. So maybe I'll take the second half of that question and then 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, right? And you see that in the data that we presented before in terms of what happens when a doctor goes from writing

Yes, absolutely. So as we think about prioritizing and we're starting with HS and vitiligo. But those are not the extent of the indications that we're looking at, and we shared kind of this broad list. And I think that is one of the key components for replacing steroids as you can't replace steroids if they work across many, many indications with a treatment that only works across 1 or 2. So 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 and that will come from both -- are studies that we're conducting as well as from reports coming in from the field. And every day, we're hearing more and more about those, and 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. And then it's combining that with the commercial assessment so that we can really understand how that profile fits. And I touched on that just a little bit with the kind of the first question we had about life cycle management, about what do we want to see in vitiligo, what do we want to see in HS. And 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. But we know for both HS and vitiligo that these are very favorable. We'll do the same kind of activity as we look towards new indications beyond those.

Very good. So turning now to the recent launch of

Yes. We've gotten this question on a number of occasions. And 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 a 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 [ NRxs ] for the cream. So 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

Okay. And then we probably have time for just one more question here, and this final question will be on the incremental data generation opportunities that Patrick was referring to in the presentation earlier. And 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? Or how do we think about that?

Yes. Another great question. So in terms of incremental data generation, those are really patients that are already in our serviceable obtainable market. So for example, the nail psoriasis patient population, we talked about 3 million to 5 million psoriasis patients having nail crisis. That is part of the already targeted psoriasis market that we talked about. But what we do expect is that will drive a 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 palmoplantar psoriasis is another form of plaque psoriasis that is often very difficult to treat. And so if we can generate very strong data on

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've seen nail psoriasis and the first thing that you think about is that