Arcutis Biotherapeutics, Inc. Common Stock 2026 Q2 Earnings Call

Good afternoon, everyone, and thank you for joining us today to review our second quarter 2026 financial results and business update. 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, Patrick Burnett, Chief Medical Officer, and Latha Vairavan, 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 factors. With that, let me hand it over to Frank to begin today's call.

Thanks, Brian, good afternoon, everyone. As always, we appreciate you guys making the time to join us on our quarterly update call. I'm going to start this afternoon with a review of our very productive second quarter as we continue to deliver meaningful innovation for patients with chronic inflammatory skin diseases and continue to execute against our grow, expand, build corporate strategy. Todd isn't able to join us today, I'll walk you through a commercial update, followed by Patrick for an R&D update, and finally, Latha will review the quarter's financial results before we open it up to questions. I'm on slide five in the deck. Just as a reminder, our three-pillar strategy to sustain near and long-term growth includes, first, growing our core ZORYVE business in our approved indications.

Second, expanding into additional indications where ZORYVE's unique profile as a targeted and potent PDE4 inhibitor has significant potential to address persistent therapeutic gaps. Third, leveraging our deep clinical expertise and infrastructure to build our pipeline beyond ZORYVE. I'm happy to report that once again, we made substantial progress across all three pillars during the second quarter. Let's start with our grow pillar. Our in-line ZORYVE business continues to strengthen and grow as we expand the reach and relevance of this medicine to the tens of millions of individuals with chronic inflammatory skin conditions in the U.S. who need and deserve new, innovative therapeutic options to manage their plaque psoriasis, severe dermatitis, and atopic dermatitis.

As ZORYVE continues to grow, we're now in a position to reinvest the significant capital generated back into the business, creating a virtuous cycle of innovation that extends our transformative impact to more patients, both with ZORYVE and current and potential future pipeline assets. As we'll discuss today, our investment in innovation encompasses a broad range of value-creating initiatives across the business that we're advancing in parallel from multiple clinical projects to impactful patient access initiatives. Touching on some of the highlights, at the end of June, we received FDA approval for ZORYVE cream 0.3% for the treatment of plaque psoriasis in children as young as age 2. This marks the seventh FDA approval for ZORYVE in four years, a remarkable accomplishment for a small company like Arcutis.

Importantly, this milestone enables us to address a significant treatment gap, introducing the first once-daily steroid-free treatment for plaque psoriasis approved down to age 2. In July, the FDA also accepted our supplemental NDA for ZORYVE cream 0.05% for the treatment of mild to moderate atopic dermatitis in infants down to three months with a PDUFA date set for February 23, 2027. I was just recently at the Society for Pediatric Dermatology, and frankly, I was awestruck by the level of anticipation and excitement in the pediatric dermatology community about this potential approval, which would address an urgent unmet need for a once-daily nonsteroidal in these youngest of AD sufferers. Both of these regulatory milestones demonstrate our commitment to delivering meaningful innovation to both adults and children across all age groups, including the youngest children impacted by these chronic inflammatory skin diseases and their caregivers.

As you'll hear more today, our commitment to meaningful innovation for patients goes beyond bringing new therapies to market. We recognize that managing a chronic inflammatory skin disease like psoriasis, atopic dermatitis, or seborrheic dermatitis can be extremely challenging and burdensome for the individuals and their families. With that in mind, we are turning our expertise to ways that we can innovate to enhance the patient experience and facilitate seamless access to treatment in order to help ease the burden on the patient and caregiver as well as the healthcare provider. Today, we'll detail some of our initiatives around patient access that specifically reduce barriers to care and streamline the patient journey. Our new virtual health platform and our strategic partnership with a leading AI-enabled patient access support tool are the first steps to emerge from our broader patient access initiative innovation workstream.

We're really excited about these initiatives, which I'll explain in greater detail shortly. Both are great examples of our commitment to delivering meaningful innovation to patients. Turning to expand our second strategic pillar, we continue to make important progress in this quarter in evaluating the potential of ZORYVE in additional chronic inflammatory skin conditions. Specifically, we have now fully enrolled the phase II proof of concept trial of ZORYVE in the treatment of vitiligo, and we continue to enroll the phase II proof of concept trials of ZORYVE as a treatment for hidradenitis suppurativa. On previous calls, we've shared the extensive and growing list of conditions where clinicians have published case reports or case series showing promising signals of ZORYVE efficacy, suggesting that ZORYVE's unique profile as a targeted and potent PDE4 inhibitor could offer additional patients an innovative non-steroidal therapeutic option.

We continue to evaluate these other potential indications and anticipate initiating one or more additional proof of concept trials this year. Finally, turning to the third pillar, build. We continue to make progress advancing our innovative pipeline. Enrollment is ongoing in the phase I-A, phase I-B trial of ARQ-234, our novel biologic targeting CD200R as a potential treatment for moderate to severe atopic dermatitis. By targeting CD200R, which plays a central role in both innate and adaptive immunity, we believe ARQ-234 could not only be an important first-line systemic therapy, but also has the potential to address the clear and distinct need for a treatment for patients with atopic dermatitis who have relapsed on, or who are refractory to IL-4/13 drugs. In addition, as we've discussed previously, external innovation will likely play a central role in expanding our pipeline.

We're seeing a marked increase in deal flow recently in both dermatology and adjacent inflammation areas. Our team remains actively engaged in evaluating a range of external assets as we look to build our pipeline. As Lotta will describe, we had another very strong quarter financially. This level of performance and the cash flow that it generates enables us to continue to invest in innovation, staying true to our biotech roots and mission. For the remainder of this year, you should expect consistent execution against our stated strategy, opportunistic reinvestment in the business, a steadfast commitment to creating long-term value for both patients and shareholders.

Based on the strength of our ZORYVE business to date, in light of the incremental investments we are making to sustain demand for ZORYVE, we are delighted to raise our full year 2026 sales guidance from the previous range of $480 million-$495 million, to a range of $525 million-$540 million. You will recall that we made no changes to our revenue guidance during our Q1 earnings call. We don't anticipate revising it every quarter, this guidance really reflects the momentum that the business has seen through the first half of the year. Now let me delve a little bit more into some of the details on commercial results for the quarter. I'm now on slide seven.

We continue to see robust sales performance and demand-driven growth in the second quarter, with net product revenues of $129.9 million, representing a 59% increase from the second quarter of 2025, a 23% increase over Q1. Our consistently strong quarterly revenue underscores the momentum and enduring strength of the ZORYVE franchise. As expected, our gross net rate improved incrementally from the prior quarter continued to remain stable in the 50s. Looking ahead to the third quarter, we expect quarter-over-quarter net sales growth driven by sustained momentum in patient demand. Now let me turn to slide eight. Weekly prescriptions of ZORYVE on a rolling four-week average show sustained growth across the portfolio. We reached a new high watermark for quarterly demand with more than 280,000 prescriptions in the quarter across all indications and formulations for ZORYVE.

As this chart highlights, ZORYVE continues to experience substantial prescription growth. We anticipate this growing demand will continue through the duration of this year and beyond and will be the primary driver of ZORYVE's revenue expansion. The most important driver of ZORYVE's growth will remain the conversion from topical steroids to advanced targeted topical therapies like ZORYVE, as healthcare providers' and patients' perceptions of the risk of chronic topical steroid use evolves. Let's turn now to slide nine. I want to expand on the patient access initiatives we introduced this quarter. As I highlighted in the opening, improving patient access to ZORYVE is an important dimension of meaningful innovation as we aim to deliver to patients with chronic inflammatory skin diseases. Therapeutic innovation is meaningless if patients are unable to access new therapies, so we see it as an imperative to also innovate in reducing barriers to treatment and care.

Importantly, these new patient access initiatives are separate and distinct from, but complementary to, our payer access efforts. These innovations are focused on enabling seamless fulfillment and an efficient post-prescription process that helps patients access ZORYVE rapidly, reliably, and efficiently. We've applied this holistic patient-first approach to innovation since bringing ZORYVE to market, but we're now broadening the scope of our patient access activities with the launch of our virtual health platform and investments in AI-enabled tools that support efficient prescription fulfillment. Two distinct initiatives, both with the aim of facilitating more seamless access to ZORYVE. A little bit more about each of these initiatives, starting with the virtual health platform, which we announced in June.