Q3 2023 Arcutis Biotherapeutics Inc Earnings Call
Good day and welcome to the Arcadis Biotherapeutics third quarter 2023 earnings 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 ask a question. During the session you will need to press star one one.
On your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Eric Mcintyre head of Investor Relations. Please go ahead.
Thank you Abigail and good morning, everyone and thank you for joining US this morning to discuss our Q3 2023 financial results.
The slides for today are available on the investors section of our website on the call. This morning, we have Frank <unk>, President and CEO, Tom Edwards, our chief.
Keith Commercial officer, Patrick Burnett, Chief Medical Officer, and John Smith, Our Chief Financial Officer.
I would 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 with that.
I hand, the call over to Frank.
Thanks, Eric So I'm on slide five of the deck now so we're really pleased with our curious team and our execution in the quarter. We made remarkable progress since last time, we spoke regarding our Q2 earnings.
Starting off with the <unk> launch in psoriasis that continues to gain momentum and we now have over 110000 prescriptions in about 9000 unique prescribers launch to date as our product delivers positive clinical experience for health care providers and their patients.
This positive tailwind sets us up to launch our future capital reform last formulations as well from a position of strength.
We also saw significant gross net improvements in the quarter, averaging in the low $70 for the quarter.
Once again, we had flawless execution against our clinical and regulatory milestones with a steady flow of successes. This past quarter, Patrick will go into lot more detail in his remarks, but during the quarter. We received FDA approval for an expanded psoriasis indication down to the age of six we filed a supplemental NDA for atopic dermatitis down to the age of six.
With an expected approval in early Q3 of 2024, we announced positive pivotal phase III data for <unk> in the two to five year old range.
And we really some really exciting long term data that demonstrated efficacy continues with and actually improved with treatment with <unk> long term out to 52 weeks, along with a very favorable long term safety independent bodies disease control.
We also strengthened our capital position with follow on raise we completed in October as well as the upfront from the out licensing deal we executed in Guangdong for greater China, and Southeast Asia, and John will go into more details in just a minute.
John will also talk about some more positive news around positive revisions in our SLR debt agreement that we've recently concluded.
We expect to we continue to expand our intellectual property estate with a receipt of a new formulation patent.
In in October, which is already listed in the Orange book, very importantly, and we have a number of additional pending applications that we expect that we'll issue soon and which will further build on the breadth and depth of our patent protection.
Moving on to slide six we're also very excited about 2024 as we are on the cusp of a very significant expansion of the opportunity for topical <unk> in the coming year, which will translate into a substantial acceleration in our revenue trajectory.
In the next 12 months, roughly we will expand the total addressable market for three potentially about 10 fold.
Expanding our patient opportunity in the U S from roughly $1 3 million commercial psoriasis patients today to over 13 million patients as we add about $1 2 million patients commercial patients with separate dermatitis and about $1 4 million commercial patients with atopic dermatitis treated by dermatologists following the anticipated approve.
For those indications we could also add another 3 million patients across these same indications who have Medicare or Medicaid coverage and who are also treated by a dermatologist and then finally, we are actively working towards the strategic partnership that could allow us to expand into the roughly 6 million patients treated with <unk> primary care or pediatrics.
Across those indications.
We know there've been some questions about the pace of conversion from topical steroids to the newer non steroidal.
We talked about this back in Q1 about other similar markets with established generic standards of care and how those conversions to newer class of drugs occurred over time.
And the topical dermatology market is right on track with these earlier prior examples with roughly 5% conversion one year end.
We remain optimistic that the topical market will continue to convert and we will eventually reach roughly 50% conversion.
I'm also delighted to have Todd Edwards on board as our new Chief commercial officer, and his leadership and proven credentials in the topical dermatology market will only further enhance our commercial execution.
Todd's leadership, we have a robust plan to further accelerate <unk> growth and are investing in our commercial operations to drive that growth with that let me turn it over to Todd to provide some further commentary around Missouri of psoriasis launch.
Thanks, Greg I'm very enthusiastic about joining our team and looking forward to the tremendous opportunity ahead.
Great to be speaking with all of you today to provide a brief commercial update moving to slide eight.
<unk> psoriasis launch continues to progress nicely and we have specific plans to further accelerate the launch trajectory.
Solid foundation for sustained growth in psoriasis and further growth in new indications.
As I come onboard I see healthy steady demand that was driven by the strength of the clinical profile.
Spending the last several weeks in meetings with dermatologist Mds Mbas currently used Missouri the feedback I receive about the product is exceptional. These prescribers spoke to me about the patient's been delighted by the results achieved with <unk>.
<unk> prescription volume is growing every quarter and as <unk> has over 100000 <unk> launch to date.
Starting to see a preference for us relative to a nonsteroidal competitor and eight intends to re riders are increasing their utilization of authority.
The new pediatric label expansion down to six years of age incrementally expands our opportunity for growth.
Further strengthens <unk> safety and Tolerability profile.
We expect demand growth as we capitalize on our investments in the launch and strengthen our field execution, one very large incremental opportunity to accelerate prescription growth is expansion into Medicaid and Medicare beginning in early 2024 rough.
Roughly a third of psoriasis patients and there we have a set derm atopic dermatitis patients.
On Medicare or Medicaid.
<unk> pricing falls below the CMS specialty threshold. Unlike other branded topical so we are much better positioned to access these patient segments.
Now on slide nine.
<unk> differentiated pricing and access strategy continues to resonate with payers.
130 million commercial lives covered 90% without a prior authorization. It was great to see that our <unk> team has secured coverage with all three large pbms in the U S. Within 12 months of the launch and most recently express scripts modified the criteria for reserve coverage, removing a double step edit for patient.
To have intertriginous plaques and recognition as it reads unique indication for treating these patients.
We anticipate further improvements as we have commercial coverage as we go into 2024.
As well as accelerated commercial coverage for the phone at launch.
With two top two of the top three pbms expected to cover the product at approval as a line extension.
We will continue to build upon the improvements seen in gross to net for Q3 and Q4 I expect that progress to continue in subsequent quarters.
Broaching or target gross to net for the psoriasis indication or the second half of 2024.
Our experience I am confident in the opportunity to improve gross to net return products.
We're already seeing very encouraging trends in the percentage of prescriptions are being covered by insurers with a clear opportunity to expand on this by enhancing our collaboration the contracted pharmacy partners to ensure willingness to improve coverage rates now.
I'm now on slide 10.
The team has been focused on three pillars of commercial success for sustaining growth.
Firstly, driving health care provider awareness in use.
Prescriber base is growing steadily with now about 9000 unique prescribers since launch and we've just completed a 15% increase in field force size focus on high volume geographies. The film team will drive a broad efficacy of messaging to move physicians along the adoption curve on <unk>.
Actual trial in specific regions of the body.
<unk> used for patients who have psoriasis plax across our larger body surface area.
Secondly, patient engagement as refills continue to be an important driver of long term growth.
The number of refills in the third quarter increased by 50% versus the second quarter, which continues to be encouraging and in line with what we want and expect to see given the positive experience patients adversaries.
As mentioned, we also went live in September with a targeted DTC campaign to drive further branded requests and finally, the broad high quality access in both commercial and incremental Medicare and Medicaid coverage creates the opportunity for more patients to experience story.
We are also looking forward to upcoming launches in new indications and so we'll hand, it over to Patrick to cover that.
Thank you Todd I'm now on slide 12.
I highlighted it's been a very busy quarter and I'm extremely proud of the team's performance in delivering on the promise of topical or fluid and last to the dermatology community and hitting all of our timelines with regard to regulatory milestones. So starting with psoriasis first here, we announced the approval down at the age of six this expands our current indication and the overall opportunity in pediatrics.
And we look forward to adding two to five year olds in psoriasis, which will be the subject of a future FDA review pending some additional data.
Moving on to <unk>, which is which would be the first indication for the film where we have an upcoming paducah on December 16th.
Early 2024 launch being plant physician excitement for stem derm is palpable driven both by our unprecedented efficacy with its once a day for element and an area, where there has been no innovation in decades and no branded competition all of this in a market as big as our ISS. So moving on to slide 13, where I want to highlight a few.
On the efficacy of <unk> on the left I'm showing that 80% of patients got the Iga success. This means that they reached clear or almost clear on the Iga scale in eight weeks and they started from a baseline of moderate or severe but what's really generated a lot of excitement is on the right, where we show that we've got 50% of <unk>.
Patients to completely clear this means they had nowhere erythema no scaling no evidence of disease not shown on this slide but also we saw improvement in itch in as little as 48 hours after initiating treatment each of the primary symptom of <unk> and really drives an impact on quality of life.
And moving on to Slide 14, now here patient surveys highlight the significant negative impact that said derm has an everyday lives.
<unk> and a very negative impact on both social and work life with over three and four patients expressing anxiety about their disease over 90% say it negatively impact their social lives. In addition, hcp's have expressed to me that they feel like they're failing patients in many instances.
Keep returning and docs don't have anything to offer beyond the same topical steroids and antifungals that they've been treating them with previously we also recently reported quality of life data at the MCP conference, which showed the meaningful benefit reform last film had an improving patient quality of life as measured by the dermatology life quality index.
Our <unk>.
Moving onto slide 15.
Houston Dermis, having some dynamics that are favorable for rapid adoption, we have significant pent up demand for this novel non steroidal small offering primarily due to lack of branded competition and lack of innovation, but also higher patient dissatisfaction and what we see in psoriasis and a greater need for better treatment option because many patients are on impractical.
Treatment regimens composed of topical corticosteroids and antifungals that have significant limitations of use.
We also have an opportunity to leverage the positive experience in psoriasis with those already prescribing and deleverage thumbed further expand <unk>.
Prescriber base as Todd mentioned, the benefits of accelerated commercial coverage for Soma and approval will also help with HCP confidence in prescribing.
Finally, moving on to atopic dermatitis, we made our submission of a supplemental NDA down to the age of six with an anticipated approval in early Q3 2024, and also released a positive <unk> and taking the <unk> readout for patients ages two to five in September.
On slide 16, we're highlighting our recent release of some very exciting long term data in atopic dermatitis that demonstrated efficacy continues to improve with long term use meaning four weeks in the pivotal trial and then an additional 52 weeks for a total of 56 weeks here, we're showing EZ 75, which is a very clinically relevant.
Endpoint, where the proportion of respondents grows from about 43% at week, four which is the end of the pivotal to roughly 66% of patients achieving a 75% improvement at the end of treatment, which is 56 weeks.
This is really exciting with agency and increased benefit overtime and disease under better control, but what makes these data even more impactful is that we achieved this disease control with a less frequent maintenance regimen, where patients were switched to twice weekly treatment. If they were completely clear very happy with this response it fits nicely with clinical.
And it's been very well received by dermatologists.
I'm very excited about with whom last cream clinical profile and the significant opportunity in this large growing market with annual because here are favorable also for rapid adoption showing some of the same positive tailwind to <unk> in particular in pediatric patients. There is a propensity to adopt nonsteroidal, which is higher than in psoriasis and this is driven largely by the <unk>.
<unk> patients to avoid topical steroids.
With that I'll hand, it over to John.
Thank you Patrick good morning, everybody I'm, beginning on slide 18.
For the third quarter, we reported net product revenue of $8 1 million, reflecting a 70% growth quarter over quarter on top of the about 70% growth. In Q2. This was largely driven by substantial gross to net percentage improvements down to the lower seventies, particularly with the Cvs coverage win and the team's execution to ensure.
Prescriptions are covered by insurers.
We also saw healthy demand growth in the quarter looking forward to Q4, we expect furthers, our even demand growth and gross to net improvement versus Q3.
On slide 19, I'll walk you through the rest of the P&L.
We reported total revenues of $38 million for the quarter, which included in other revenues. The upfront payment. We received from collaboration and license agreement R&D expenses of $26 2 million were down significantly from Q3 2022 due to the upfront and milestone payment for the <unk> acquisition.
As well as continued decrease of development costs of topical <unk> programs.
We expect Q4 R&D to be on par with Q3 and expect fiscal year 2020 for R&D expense to decline versus fiscal year 2023.
SG&A as a result of higher commercialization expense year over year, which reflects our continued investment in the <unk> launch and upcoming launches in <unk> in atopic dermatitis.
As Todd mentioned additional Salesforce will drive modest incremental SG&A growth in Q4 versus Q3.
Lastly, net loss per share of <unk> 73 improved by over $1 15 per share year over year moves.
Moving on to slide 20.
On the balance sheet cash and marketable securities of $228 million as of the end of the quarter, which obviously does not include the recent raise of $100 million that we completed in early October.
That raised provides a path to expand our psoriasis launch as well as capitalize on the significant expansion in market opportunity for topical removal apps into <unk> and <unk>.
We also recently undertook a reorganization to resize all not commercial efforts to align with R&D prioritization you.
You can expect us to continue to refine and sharpen our efforts around cash burn as we made continued progress on expanding or even all indications.
The net proceeds of the capital raised recently in October plus our existing cash plus what we believe to be our forecasted revenue provides a runway into 2025.
We also remain confident in progressing and out license deal in Japan potentially by the end of 2003 and to bring in additional non dilutive capital, which would further extend our runway.
I also want to provide some important updates on our amended loan terms, which we recently agreed to with our lender SLR.
As many of you are aware on the existing $200 million, we have on the balance sheet that we've drawn down there were two in particular financial covenants in place our market cap covenant and a revenue covenant.
I'm glad to report that the market cap market cap covenant has been removed and thats been replaced with a capital Covenant, where the company has to obtain $31 million by the end of Q1, 2024, which could largely come from an upfront payment that I just mentioned around the Japanese out license the.
The revenue Covenant has been modified requirement is to achieve at least 75% of our agreed upon product revenue forecast, which replaces the previous minimum net product revenue table.
Our year end 2023, this has an effect of reducing the $30 million trailing revenue requirement.
To below $25 million five.
Finally, the final loan tranche of $25 million has been eliminated.
We appreciate <unk> continued partnership and are delighted with these changes and feel they provide the companys significant operating flexibility going forward with that I will hand back to Frank.
The speaker and for some closing comments and then we will open for Q&A. Thanks, Sean.
John mentioned, we continue to evaluate all of our activities as we transitioned from a development stage to a commercial stage company in order to effectively manage our expenses back in Q1, we announced a prioritization of a number of our R&D programs.
And then based on those changes and as our ongoing large phase III trials are winding down earlier this quarter.
Completed a limited restructuring to better align our organization with our ongoing activities.
Today with the expected approval of reform last foam and the successful submission of the 80 S. NDA, we're announcing some further changes in our leadership to further align our organization with our priorities.
Patricia Attorney will be stepping down as our senior Vice President of operations and David <unk> will be retiring as our chief Technical officer, both Patricia and David will continue on its consultants to the company to facilitate this organizational transition and to lend their extensive expertise in the future.
We will be merging our technical operations and product development organizations and Bethany do that <unk> is being promoted to the role of Chief Technical officer overseeing the range of these activities.
We're excited to have Bethany, taking over our <unk> operations. She has been with our curious for the past three years as the head of quality and has done an outstanding job I would add I've worked with Bethany off and on for the past 15 years. She has an outstanding executive and I feel very confident about her she brings to her new position extensive experience across product development quality.
And manufacturing built over a 28 year career at <unk>.
Novartis and Amgen.
So with the ongoing <unk> launch and all of the additional opportunities ahead of US I believe we are incredibly well positioned to execute on our mission of building the preeminent immuno dermatology company and continuing to build shareholder value and with that we'll open it up for Q&A.
Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment our first question.
Our first question comes from Tyler Van Buren with TD Cowen Your line is open.
Hey, guys. Good morning, and congratulations on all the progress during the quarter a couple for you related to <unk>. So.
Petzel popcorn Houma approval for sub Derm can you elaborate on where you are with the regulatory review and if you've started labeling discussions and then the second question just regarding the launch trajectory and the coverage relative to <unk> I think you mentioned that two or three two of the three major pbms expect to approve a line.
Extension, so does that happen immediately upon approval or what's the timeframe on logistics and then also how long do you think it will take to get the <unk> DBM online.
Yes, that's a great great to hear from you.
With regard to <unk> as a as a policy we don't comment on ongoing reviews with the FDA. So I don't feel it would be appropriate for me to make any comments on the process I will say that I think we feel very confident about that.
At the upcoming <unk> date.
And we think that the data speaks for itself with.
With regard to the coverage I think I'd ask Todd to respond to that one if you could both.
To clarify around the first two and then our timing on the <unk> Yeah, absolutely Frank Thank you and good good question relative to the to the contracts and et cetera. So with two of the as mentioned with two of the large pbms within our contracts today. The scepter launch will be treated as a line extension so what that translates to is that.
We're starting to launch at a position of strength, meaning that at launch those two pbms will cover.
Scepter is it covered product.
Which will help us also with strong <unk>.
Start to our gross to net.
<unk>.
Currently in negotiations with and those negotiations are very positive right now so we look to.
To further those conversations with the ambition of having coverage at launch with that third PVM.
Alright, Thanks, Abigail we can go to the next session.
Thank you one moment for our next question.
Our next question comes from Seamus Fernandez with Guggenheim Securities. Your line is open.
Thanks for the question.
So maybe just as a first.
A discussion point.
Would you guys mind sort of comparing and contrasting.
The launch of <unk>.
And where you are in the launch relative to the impact of the sort of bit of Lego launch.
For the brands that you used to work with.
I think it's sort of an important and interesting comparison relative to.
The coverage dynamics as well as the opportunity for warehousing and sort of accelerated growth.
So just trying to get a relative sense of where you feel awareness.
As a comparison what this could mean for the overall brand.
Because unique indications really do seem to accelerate brands overall.
And then.
Just maybe if you can provide us a little bit of color on how you see the.
This sort of expansion of coverage impacting gross to net should we be thinking about overall gross to net having a.
Stepped down or even a slight movement down in the fourth quarter to kind of accommodate.
That case and then just a question for John It does state in terms of the covenants. The 75% can you just clarify.
The 75% of.
Revenue target is that just for this year or is it the sort of sequential targets that are that are laid out so 75% of all of the targets that are laid out.
And that in that sort of revenue.
Planning phase.
So seamus it's always good to hear from you. So just so we're clear.
We're asking Todd about.
<unk> and sort of the dynamics between psoriasis and <unk> and how that compares to.
<unk> and the dynamics with atopic dermatitis and vitiligo.
Yes, I just didn't get the product.
Yes.
Yes, that's okay, I can say that.
So go ahead, Todd yes, great. Thank you. So the first thing relative to <unk> launch. So so currently we're working on some disease state awareness activity for both patients and dermatologists are targeted education, which will likely be focused obviously prelaunch with the emphasis on the frustration of the condition.
The impact on quality of life as well as the polypharmacy that occurs here.
Talking about 5% to six treatments per patient and often it takes 15 to 30 minutes a day spent with this regimen. So it's a it's a very frustrating situation for patients Theres been no innovation branded products within this space for over.
Two decades, and if you think about the number of available patients, but you talked about a warehouse of patients. So there isn't ready for patients that are yearning for a product like <unk>.
<unk> provides a very unique value proposition because this product you can use.
Once a day product.
But you can use it's one product versus polypharmacy and delivers long term disease control.
You think about it there's about 10 million patients that are diagnosed with separate dermatitis.
That $7 million of them are treated within Rx. If you continue to break it down about 4 million are treated within our accident <unk> setting.
That $3 2 million are treated with the Tcs.
And then if you drop it into our treatment zone $2 2 million of those are moderate to severe patients that are currently taken of Tcs, So theres significant opportunity here.
To really bring this is already utilized.
Furthermore.
We're starting from a position of strength with this formulary position as mentioned were two of the three Pbms will cover as a line extension of that launch and you asked a question about gross to net so we expect that.
With the <unk> launch, we're not starting from ground zero launching a new asset into the market, where you have the variety of free goods program is going to have an adverse impact on your gross to net will have coverage with the two two pbms.
Those will be reimbursed claims and a positive gross to net so the gross to net will for scepter at launch will be higher relative to the gross to net that we have in psoriasis, but nonetheless, we believe that that gap will rapidly close over time in 2024, as we bring on that third pbms coverage and maximize our.
October claims.
Yes, Hi, Seamus it's John.
To answer your question on the covenants, the 75% applies to the yearend number for 2023.
A year of plan number and then it's a monthly calculation in 2024 with a six month lagging average so whenever that number is 575% or above it we're good.
And thats the measured each month in 2024.
Great. Thank you and maybe just ask.
Just a quick final follow up.
In terms of the stocking necessary.
To really have this be executed as a robust launch when should we anticipate the sort of official launch of the phone.
Regardless of the sort of produce.
Approval timelines.
Is this a day of kind of hitting the ground running or should we think about this as more of a.
A potential sort of stocking the pharmacies.
In the last few weeks of the year.
Followed by.
Maybe a mid January to kind of.
February launch timeframe, just trying to get a little bit of ink.
Incremental granularity before we get too excited too.
To track the sub derm scripts.
Yes.
So as mentioned the <unk> December 16th.
A full commercial launch anticipated to be mid to late January so we want to make certain that we have ample time to be able to stop the channel mix.
Certain pharmacies have product on shelf as we launch this and drive demand.
And maybe just to put a fine point on that.
Seamus with topical a little challenging because of labeling.
More challenging than pills or biologics. So I don't think you should anticipate to see any stocking in Q4.
Okay.
Perfect. Thanks somebody altogether.
Yes, we can go to the next question.
Our next question.
Our next question comes from Vikram <unk> with Morgan Stanley. Your line is open.
Hi, good morning, Thanks for taking our questions. We had two first on <unk> psoriasis, specifically could you just unpack for us a bit more detail on what drove the quarter to quarter gross to net change we saw from <unk> to <unk> and then okay.
Specifically what needs to happen from here on out.
To compress gross to net from where it is now to kind of steady state and I think you mentioned second half of next year and then secondly on February dermatitis apologies. If you mentioned this in a response to a previous question that I missed it but.
How do you think the actual uptake in script trajectory.
<unk> excuse me for scepter for the initial couple of quarters could compared to what we saw with <unk> for psoriasis post the launch of that product. Thanks.
Yes so.
Both for Todd.
Absolutely. So let me first cover off on relative to.
The gross to net and what drove the change in gross to net what we need to continue to do to to amplify improvements. So the prudent and cover Rx as we saw in Q2, obviously accelerated in Q3. So we saw an improvement in the percentage of cover prescriptions across all.
All of the major Pbms in Q3 with Cvs driving the most dramatic improvement.
We're also seeing improvement across the other two large pbms.
Do you think about it this translates into reduced co pay expenses and provides us a springboard to continue to improve gross to net and leverage this progress further.
We expect our field force execution and to be a continued focus on point through our coverage to produce improved.
Gross to net in Q4 and beyond.
And as we roll forward, we're going to be building and working developing partnerships in a dermatology pharmacies, which reinforces our conviction that we can achieve our target gross to net.
So through <unk> coverage through our partnerships with these independent pharmacies will translate into further improvements as we go forward with.
With our gross to net.
And then the other question was sub derm uptake relative to psoriasis septum uptake relative to psoriasis as mentioned there is a ready pool of patients that are dirty and for new treatment options with <unk>.
There is no branded competition within the market no innovation the market for over two decades, and so I would anticipate a robust uptake.
At launch with scepter, whereas compared to the psoriasis market.
A highly competitive market multiple competing products within there, which September is very much unlike that.
And Vikram I'd just remind you.
To touch point, we picked up that Cvs covering 71, so right at the beginning of Q3. So that was certainly a major contributor but not the only contributor to the improvements in gross to net.
Yes.
Understood. Thank you.
One moment our next question.
Our next question comes from <unk> <unk> with Mizuho. Your line is open.
Hey, guys congrats on the good quarter and all the progress.
I guess my question is for <unk>.
Todd you've been there for a little while now and just wondering.
What are some of the changes that are different.
You were looking into executing I noted that <unk> added some sales force increase the sales force size, but what are some other changes that you might.
Put in play to improve script uptake for psoriasis and maybe.
As well as for the SAP them.
Upcoming launch thanks.
Yes, absolutely.
A few things.
After.
<unk> in dermatology I see a tremendous opportunity to change the treatment paradigm in these three largest disease areas that we've been talking about here today to include psoriasis. Eventually set there are many atopic dermatitis.
If you think about if the dermatology community and the earning for non steroidal options that still fit with there are what I'll call. It a topical first mentality.
Terms are oriented towards their local treatment.
Are you thinking about series data package, especially the long term data of DSO or September and is exceptional in my view and it really hits the outcomes of dermatologists and.
Patients are looking for so I see a ready opportunity advancing the car competitive share of voice or messaging, which of course are known levers that can drive utilization within the dermatology community and.
In addition to that.
If you look at it.
The perceptions of efficacy they are very encouraging and differentiating attributes attributes as <unk> are resonating with prescribers.
And as mentioned that the long term data I think is extremely meaningful and really differentiates that long term value of sorry, but.
Dark dermatologists, they are well ingrained are creatures of habit and it takes time to get them to critical mass.
Ah patients that affirms <unk> place within the treatment paradigm and by creating depth within our current prescriber base moving them along the adoption curve and moving up the average number of <unk> patients per prescriber will continue to accelerate the uptake of <unk>.
And as mentioned, we hired the representatives to amplify our share of voice in September.
Launched a targeted direct to consumer campaign, which we will continue to move forward and we're going to.
We have an expansion on the efficacy message to dermatologists to include a broader target patient with a higher BSA and then I think as mentioned earlier theres, a exceptional opportunity for expansion within Medicare and Medicaid and Thats also to mention that expanded pediatric indication.
Down to the age of six will provide us with our expansion opportunity in psoriasis.
Maybe I'll just add.
Because Todd is modest.
We ran a very extensive search for our new Chief commercial officer and it was very clear to me that time was the right person to join this team I believe that leadership matters.
And we chose Todd because.
He has a proven track record he's done this before he successfully launched other topical products in this space very recently and it's very effectively driven demand and is also very effectively manage gross to nets.
And I have complete confidence in him and his ability to lead our commercial team. We also did announce.
The promotion of Isa <unk>, two had both marketing and market access she had been previously where she was the interim chief commercial officer and had been running market access and I think along with Todd.
Confidence in their ability to launch these additional indications and continue to drive the growth is or even psoriasis.
Can I follow up with just a question on gross to net.
So I guess, if you target is to reach steady state somewhere sometime in the second half of next year.
It sort of implies that the.
The quarterly pace improvement is pretty significant.
Just wondering if you can sort of just talk a bit perhaps.
Help us quantify what the improvement could be in the fourth quarter at least thanks.
Okay.
Thank you <unk>.
We tend not to give forward guidance on gross adds I would say we saw a very significant improvement in Q3 over Q2 was a nice improvement Q2 or Q1.
I think we will see further improvement in Q4 versus Q3, I won't commit that it will be of a similar magnitude as what we saw in Q3, because that was a it was a pretty big move but I think.
Q4, you may see a little bit of noise in Q1, with the copay resets, but we'll continue to make progress there in Q2 next year as well I think it is.
It's not a miracle occurred here sort of phenomenon for us to get to our target gross to net with continued execution.
Execution against.
The programs, we already have in place and the coverage we have in place.
Okay. Thank you.
One moment our next question.
Our next question comes from Chris <unk> with Goldman Sachs. Your line is open.
Thank you very much good morning on the commercialization effort.
Increase in the sales footprint that you have can you give us a sense for how maybe more specifically the composition of this group might be able to be impactful and what's the appropriate way to think about the timing for a potential inflection from that and then frankly I think historically you've acknowledged how a D as in.
Market certainly quite back into <unk>.
Market to us.
Primary care type.
Potential market.
Wood.
Contemplate a partnership or that market, specifically can you talk about what's your latest thinking is there. Thank you.
Yes, sure maybe I'll take the second question first and then I'll ask Todd to talk about the sales force.
Yes, Jeff.
Absolutely correct, you recall correctly, our previous comments.
Half of the atopic dermatitis market and also about half of the February dermatitis market exist out of dermatology.
A lesser portion of the psoriasis market Theres not insignificant number of psoriasis patients also treated outside of dermatology.
The challenge for the primary care in Pediatrics markets, which is where most of those patients said is just the breadth of the prescriber base.
You are talking 250000 prescribers versus 13000 prescribers.
It's not.
Economically viable for a company like ours to build a primary care sales force and so we have been saying all along our intention was to find a partner that had an existing primary care sales force that could do a co promote for us in those markets that continues to be our plan and I would just say at this point that we're in active discussions with potential partners.
To try and strike an agreement we also have said in the past.
From a timing standpoint, ideally we want to have that partnership in place sometime around the atopic dermatitis approval and I say around because.
The <unk> are going to be looking to the dermatologist for guidance.
And so we have to win with a dermatologist first I don't think we need to have that PCP partnership in place at launch, but you would want to have it sometime shortly after that launch or.
It wouldn't be any downside to having it before either right. So I think you should really be thinking about hoping to have that in place in the second half of 2022 2024 excuse me and then how do you want to talk a little bit the salesforce expansion relative to the Salesforce expansion, the 15% increase in share of voice so that 15%.
We picked up 15% and we overlaid.
The current sales force when we did is look at the high prescribing geographies to make certain that.
We can continue to obtain the desired frequency and reach and engagement with those high prescribing physicians. So we overlaid that 15% into those geographies. In addition to that as we move through 2024 and week.
And then the atopic dermatitis launch.
At that time give consideration to potentially another expansion to make certain that we have.
The share of voice required to be able to.
Engage across the three indications and don't forget.
Ed.
The 2023, our <unk> aligned a group called the pharmacy access managers.
Within the field this team engages directly with the independent pharmacies as well as the staff within the dermatology offices to ensure that we're getting.
Appropriate prescription fulfillment.
So I feel that the organizations at a very good place right now to have the appropriate share of voice that we need to be able to continue the acceleration of the reach of psoriasis and make certain we start.
From a position of strength and a quick start to the center of a launch.
And that expansion, we completed October one so.
We will see some impact even in the fourth quarter and that will continue on into 'twenty four yes, absolutely.
Great. Thank you and look forward to the momentum from that new sales force.
One moment for our next question.
Our next question comes from Sean Kim with Jones trading your line is open.
Yeah, Hi, congratulations on the quarter and thank you for taking my questions I guess, so just a few quick questions.
So first question is.
As you look to move into the government.
Medicare and Medicaid.
Patient populations can you comment on the potential.
Additional operational.
As far as maybe financial burden that will be required.
To tap into that market.
And maybe potential sales opportunities there.
And my second question is about.
Sales force expansion as we look to launch that firm and also.
Hey, Patrick Stomatitis.
I believe you mentioned up on 9000 unique prescribers.
Yes.
Got it.
Prescribed.
So are you so far.
Just wanted to.
Here's your thoughts.
On the efficiency of shelves fore sight.
About a little over 10 prescriptions per prescriber so.
I'm just wondering if there is some opportunities to expand the number of prescriptions per.
Per prescriber.
And then also the potential expansion to reach 30000 target that you mentioned last time around.
So my last question is about the SLR.
Our loan agreement.
Modifications to the finished cognizant.
Make sure.
Did I understand correctly that regional threshold minimum thresholds.
It remains for year 2025, and 2026. Thank you.
Okay, maybe I'll, let me take your second question and then I'll have Todd address your first question and John address your third question. So yes.
With regard to.
Our breadth and depth we've talked about this before there are about 13000 targets that we are targeting with our sales force they represent over 90% of the relevant prescriptions in dermatology out of that 13000 about 9000 are currently writing.
So there clearly is an opportunity to expand the breadth of our prescribing base.
I don't think we will ever get all 13000 of them because.
Have some some doctors who are just.
R.
Ultra conservative and are never going to change from using their old topical steroids, but I think we will eventually get very high penetration and we've been adding roughly about 500 doctors a month for quite some time now to that prescribing base.
We're sitting at <unk>.
7000, I think in the last in the last quarter right something like that so we will continue to expand the prescribing base I'm confident of that and I think as Todd mentioned I think the phone could actually help us with that.
<unk> of the of the Prescriber base and then I think you also are correct that there is an opportunity for a lot of deepening of the prescribing base.
If you look at the topical steroid.
Market today compared to the topical non throughout our market.
In the topical steroid market is about 20 times the size of the non steroidal market right. So even doctors who are writing <unk> scripts.
Our probably writing 20 times that in topical steroids and so there is immense opportunity for us to continue to expand that market and that really gets back to my earlier comment about the conversion. We are in early stages of the conversion process, but we're exactly where we would expect we would be in terms of conversion and if you look at any new.
There are other markets you can get a pretty good sense of how thats going to progress in the coming coming quarters in coming years, and we feel very confident of that conversion will happen as it has happened in other markets just because of the new non <unk> offer doctors and patients. So many benefits.
Todd do you want to maybe talk about what sort of the lift looks like for us getting into Medicare and Medicaid both financially and operationally.
Medicare and Medicaid as I've mentioned in the opening remarks, there is approximately 3 million patients that are in play here and as you think about <unk>, it's more more so on the Medicare side in atopic dermatitis on the Medicaid side.
<unk> been actively engaging in the Medicaid space to be able to secure coverage for patients in 2020 for preparation for.
For the atopic dermatitis launch in addition to that we're having conversations with the big three pbms relative to the part D plans and Medicare.
With the ambition to secure that coverage in the first half of 2024, I think what's very important to note here, especially with the Medicare or is that or is.
<unk> pricing strategy, given where our price point is and it's below the CMS specialty tier.
We will very likely to be able to gain this coverage in Medicare.
A nominal impact on our gross to net so so we're actively engaged in those.
Those conversations are progressing.
Let me take that and then if you want to.
On the SLR Covenant the way. It works is if you were to look at it today. There is a table with specific revenue targets that prior to the amendment we were held to.
With respect to the loan agreement that's been replaced with an agreement around a plan, which we do every year as due course.
And there is agreement and approval of that plan by our board and SLR.
And whatever that plan is you apply this 75% and if we're above the 75% we've met the covenant is how it mechanically works.
Thank you that concludes.
That concludes the question and answer session. At this time I would like to turn the call back to Frank <unk> for closing remarks.
Okay well.
I appreciate everyone, making the time to call into our earnings call. This quarter and we look forward to talking to you all in another quarter with the an update on further progress at <unk>. Thanks again.
Thank you for your participation in today's conference. This does conclude the program you may now goodbye.
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