Q2 2024 Arcutis Biotherapeutics Inc Earnings Call

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Operator: Hello, and thank you for standing by. Welcome to Arcutis Biotherapeutics Q2 2024 earnings call. At this time, all participants are in a listen-only mode.

Speaker Change: Hello, and thank you for standing by. Welcome to our cutest bio therapeutic Q2 2024 earnings

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised.

Speaker Change: 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 this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised.

Operator: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the call over to Latha Vairavan, Vice President Finance and Investor Relations. You may begin. Thank you, Tawanda. Good afternoon, everyone.

Speaker Change: To withdraw your question, please press star 11 again.

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

Speaker Change: Please be advised that today's conference is being recorded.

Latha Vairavan: I would now like to turn the call over to Latha Vairavan, Vice President, Finance, and Investor Relations. You may begin.

Latha Vairavan: Thank you, Tawanda. Good afternoon, everyone, and thank you for joining us today to review our second quarter 2024 financial results and business update.

Speaker Change: Slides for today's call are available on the Investor section of the Arcutis website.

Speaker Change: On the call today are Frank Watanabe, President and CEO, Patrick Burnett, Chief Medical Officer.

Speaker Change: Todd Edwards, Chief Commercial Officer, and David Topper, Chief Financial Officer.

Speaker Change: I would like to remind everyone that we will be making forward-looking statements during this call.

Speaker Change: 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 the call over to Frank.

Frank Watanabe: And thanks to everyone for joining us today. Very excited to be able to provide you with an update on on the most recent quarter of our performance. So let me start off on slide five of the deck.

Frank Watanabe: Thanks Latha and thanks to everyone for joining us today. Very excited to be able to provide you with an update on on the most recent quarter of our performance. So let me start off on slide five of the deck.

Frank Watanabe: You know, we have continued really strong performance since our last earnings call, and I continue to be delighted and very proud of the Arcutis team and our execution in the quarter and thrilled about the momentum that we're building towards the second half of the year. Once again, we saw strong growth during the quarter in our expanding Zerif portfolio as healthcare providers and their patients see how Zerif cream and Zerif foam address real needs in the treatment of psoriasis and seborrheic dermatitis, respectively.

Frank Watanabe: We have continued really strong performance since our last earnings call. And I continue to be delighted and very proud of the Arcutis team and our execution in the quarter and thrilled about the momentum that we're building towards the second half of the year.

Frank Watanabe: Once again, we saw strong growth during the quarter in our expanding Zerif portfolio as healthcare providers and their patients see how Zerif cream and Zerif foam address real needs in the treatment of psoriasis and seborrheic dermatitis, respectively.

Frank Watanabe: Solid growth in prescriptions for both the cream and the foam, coupled with additional growth to net improvements during the quarter, drove strong revenue growth in the second quarter, both year over year and compared to Q1 2024, with net revenues of $30.9 million, 56% of which was cream and 44% was the foam. We've now generated more than 351,000 prescriptions for the cream and the foam combined, from over 14,000 unique prescribers to date, as our product delivers positive clinical experience for healthcare professionals and their patients. We improved gross to net again this quarter, resulting in a blended GTN in the high 50s across both products for the second quarter, down from the low 60s last quarter.

Frank Watanabe: Solid growth and prescriptions for both the cream and the foam.

Frank Watanabe: Coupled with additional growth to net improvements during the quarter, drove strong revenue growth in the second quarter, both year over year and compared to Q1 2024, with net revenues of $30.9 million, 56% of which was cream and 44% was the foam.

Operator: Hello, and thank you for standing by. Welcome to our cutest bio therapeutic Q2 2024 earnings call. At this time, all participants aren't and listen only mode.

Operator: After the speaker's presentation, there will be a question and answer session. So ask the question during this session, you would need to press star 11 on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.

Speaker Change: We've now generated more than 351,000 prescriptions for the cream and the foam combined from over 14,000 unique prescribers to date as our product delivers positive clinical experience for healthcare professionals and their patients.

Speaker Change: We improved growth to net again this quarter, resulting in a blend in GTN in the high 50s across both products for the second quarter down from the low 60s last quarter.

Operator: Please be advised that today's conference. This conference is being recorded.

Latha Vairavan: I will now like to turn the call over to Latha, Vairavan, Vice President, Annette, and Investor Relations. You may begin. Thank you to Wanda. Good afternoon, everyone. And thank you for joining us today to review our second quarter 2024 financial results and business update. Slides for today's call are available on the investor section of the Arcutis website.

Frank Watanabe: So looking forward for the remainder of the year, we believe we are well positioned for sustained revenue growth with continued momentum on the psoriasis and seb derm launches and atopic dermatitis will be additive in the second half following the launch of that indication late in July. We're also very excited about the recently signed deal with Coah Pharmaceuticals to expand our promotion into the primary care and pediatric space. Although we wouldn't expect to see meaningful revenue contribution from those efforts until 2020.

Speaker Change: So looking forward for the remainder of the year, we believe we are well positioned for sustained revenue growth with continued momentum on the psoriasis and seb derm launches and atopic dermatitis will be additive in the second half following the launch of that indication late in July.

Speaker Change: We're also very excited about the recently signed deal with Koa Pharmaceuticals to expand our promotion into the primary care and pediatric space, although we wouldn't expect to see meaningful revenue contribution from those efforts until 2025.

Latha Vairavan: On the call today, our Frank Watanabe president and CEO. Patrick Burnett, Chief Medical Officer, Todd Edwards, Chief Commercial Officer, and David Topper, Chief Financial Officer. I would like to remind everyone that we will be making forward looking statements during this call. These statements are subject to certain risks and uncertainties and our actual results may differ. We encourage you to review all of the company's filings with the Securities and Exchange Commission, including descriptions of our business and risk factors.

Frank Watanabe: And we are delighted that we were able to favorably renegotiate the terms of our debt agreement with SLR, and David will provide more details on those terms later in the meeting. With that, let me turn it over to Todd to provide some further commentary around Zarif cream and foam launches in psoriasis, seb derma and atopic dermatitis. Todd.

Speaker Change: And we are delighted that we were able to favorably renegotiate the terms of our debt agreement with SLR, and David will provide more details on those terms later in the call.

Speaker Change: With that, let me turn it over to Todd to provide some further commentary around the reef, cream and foam launches and psoriasis to have Germany's topic dermatitis. Todd?

Todd Edwards: Thank you, Frank. I'm extremely enthusiastic about the expansion of our commercial portfolio, HCP and patient response to both the reproducts and the immense opportunities that lie ahead. We achieved $30.9 million in net product revenues for Zareef the second quarter of 2024, reflecting 43% growth over Q1. This was driven by healthy prescription growth, substantial glenogrowth-to-net percentage improvement, down to the high 50s, and the team's success in pulling through current prescriptions as well as improving coverage for the phone.

Frank Watanabe: With that, let me hand the call over to Frank. Thanks, Latha, and thanks to everyone for joining us today. Very excited to be able to provide you with an update on the most recent quarter of our performance.

Todd Edwards: Thank you Frank. I'm extremely enthusiastic about the expansion of our commercial portfolio, HCP and patient response to both the reproducts and the immense opportunities that lie ahead.

Speaker Change: We achieved $30.9 million in net product revenues for Zarif in the second quarter of 2024, reflecting 43% growth over Q1.

Frank Watanabe: So let me start off on slide five of the deck. You know, we have continued really strong performance since our last earnings call. And I continue to be delighted and very proud of the Arcutis team in our execution in the quarter and thrilled about the momentum that we're building towards the second half of the year. Once again, we saw strong growth during the quarter in our expanding's report folio as health care providers and your patients see how Zareve cream and Zareve foam address real needs and the treatment of psoriasis and separate dermatitis respectively solid growth and prescriptions for both the cream and the foam coupled with additional growth to net improvements during the quarter.

Frank Watanabe: We've now generated more than 351,000 prescriptions for the cream and the foam combined from over 14,000 unique prescribers to date as our product delivers positive clinical experience for health care professionals and their patients. We improved growth to net again this quarter, resulting in a blended GTN in the high 50s across both products for the second quarter down from the low 60s last quarter. So looking forward for the remainder of the year, we believe we are well positioned for sustained revenue growth with continued momentum on the psoriasis and septum launches and a topic, a topic dermatitis will be additive in the second half following the launch of that indication late in July. We're also very excited about the recently signed deal with co-affirmaceuticals to expand our promotion into the primary care and pediatric space, although we wouldn't expect to see meaningful revenue contribution from those efforts until 2020. Five.

Speaker Change: This was driven by healthy prescription growth, substantial Gwinnett growth to net percentage improvement, down to the high 50s.

Speaker Change: And the team's success in pulling through current prescriptions as well as improving coverage for the phone.

Todd Edwards: For the remainder of 2024, we expect continued prescription growth and some growth to that improvement. Primarily for Zareve Foam, as gross to net discounts for Zareve Cream 0.3% have already reached our expected steady state in the 50% range. Moving to slide eight.

Speaker Change: For the remainder of 2024, we expect continued prescription growth and some gross Zareve improvement. Primarily for Zareve foam, as gross Zareve discounts for Zareve Cream 0.3% have already reached our expected steady state in the 50% range.

Todd Edwards: The Zuri Portfolio performance is showing promising growth and strength, reaching for the first time close to 10,000 scripts in a week. This new high shows the momentum we can continue to create for the Zuri Portfolio. The portfolio had quarter-over-quarter volume growth of 42% over Q1. We expect continued build as we include atopic dermatitis beginning this quarter and will add a fourth indication in 2025 if approved by the FDA. On to slide nine.

Speaker Change: Moving to slide 8.

Speaker Change: The Zuri Portfolio performance is showing promising growth and strength, reaching for the first time close to 10,000 scripts in a week. This new high shows the momentum we can continue to create for the Zuri Portfolio.

Speaker Change: The portfolio had quarter-over-quarter volume growth of 42% over Q1. We expect continued build as we include atopic dermatitis beginning this quarter and will add a fourth indication in 2025 if approved by the FDA.

Todd Edwards: The Zarese psoriasis TRX performance is continuing to show strength. And these results demonstrate that we can sustain our growth in psoriasis. We see the steady trend line with 8% growth over Q1-24. Three foams experienced volume growth of 102% versus Q124. As we stated before, while the trajectory has moderated from the initial launch uptake, it is still phenomenal growth and a key factor in our portfolio's performance. On to slide 10.

Speaker Change: on to slide nine. There's a reason to rise this tier X performance is continuing to show strength and these results demonstrate that we could sustain our growth in psoriasis.

Speaker Change: We see the steady trend line with 8% growth over Q1-24.

Speaker Change: Serif Foam experienced volume growth of 102% versus Q124. As we stated before, while the trajectory has moderated from the initial launch uptake, it is still phenomenal growth and a key factor in our portfolio's performance.

Todd Edwards: We have coverage for Zareb 0.3% cream and foam from all three large PVMs and continue to progress with formulary access and downstream plans. When we examine the percent of prescriptions being covered by insurers, we see an encouraging trend in Zareeb 0.3% cream with roughly four out of five prescriptions covered. And for Zerifone, three out of four prescriptions are covered. This is very positive for the portfolio lending to the gross net improvements we have shown.

Speaker Change: On to slide 10.

Speaker Change: We have coverage for Zareeb 0.3% cream and foam from all three large PBMs and continue to progress with formulary access and downstream plans.

Frank Watanabe: And we are delighted that we were able to favorably renegotiate the terms of our debt agreement with SLR, and David will provide more details on those terms later in the call.

Todd Edwards: With that, let me turn it over to Todd to provide some further commentary around Zareve cream and foam launches and psoriasis sub-dermany topic dermatitis. Todd, thank you, Frank. I extremely enthusiastic about the expansion of our commercial portfolio, ACP and patient response to both the re-products and the immense opportunities that lie ahead. We achieve 30.9 million in net product revenues for Zareve, the second quarter of 2024, reflecting 43 percent growth over Q1.

Speaker Change: When we examine the percent of prescriptions being covered by insurers, we see an encouraging trend in Zareeb's 0.3% cream with roughly 4 out of 5 prescriptions covered.

Speaker Change: And for Zerifone, three out of four prescriptions are covered. This is very positive for the portfolio lending to the gross to net improvements we have shown.

Todd Edwards: I would also reiterate that the contribution to revenue growth. Coming from further gross to net improvements will likely moderate in coming quarters as we advance closer to our expected steady state blended gross to net. Going forward, most revenue growth will likely come from prescription demand growth in psoriasis, seb derm, and new demand in atopic dermatitis, as well as from expansion of our prescriber universe. I'm now on slide 11.

Speaker Change: I would also reiterate that the contribution to revenue growth coming from further gross-to-net improvements will likely moderate in coming quarters as we advance closer to our expected steady-state blended gross-to-net.

Todd Edwards: This is driven by healthy prescription growth, substantial glenagrosis in net percentage improvement down to the high 50s. And the team success in pulling through current prescriptions as well as improving coverage for the foam. Through the remainder of 2024, we expect continued prescription growth and some growth to net improvement. Primarily for Zareve foam, as growth to net discounts for Zareve cream, 0.3 percent have already reached our expected study state in the 50 percent range.

Speaker Change: Going forward, most revenue growth will likely come from prescription demand growth in psoriasis, seb derm, and new demand in atopic dermatitis, as well as from expansion of our prescriber universe.

Todd Edwards: Serif 0.3% cream is foundational to the brand with a value proposition that is meaningful and impactful to patients. Prescribers have an option that can resolve plaques that affect many different parts of the body, hard to treat areas like elbows and knees, but also the sensitive areas like the face, groin and underarm. The combination of efficacy, rapid response, and a tolerability profile are becoming well recognized by dermatologists as differentiating factors. And the quotes here from real patients and prescribers confirm this brings value. Moving to slide 12, and Seb Durham, Zaree brings transformational value.

Speaker Change: I'm now on slide 11.

Speaker Change: Serif 0.3% cream is foundational to the brand with a value proposition that is meaningful and impactful to patients.

Todd Edwards: Moving to slide 8.

Todd Edwards: The Zareve portfolio performance is showing promising growth and strength, reaching for the first time close to 10,000 scripts in a week. This new high shows the momentum we can continue to create for the Zareve portfolio. The portfolio had quarter, over quarter volume growth of 42 percent over Q1. We expect continued build as we include acobotermatitis, beginning this quarter, and we'll add a fourth indication in 2025 if approved by the FDA. On to slide 9.

Speaker Change: Prescribers have an option that can be used for any of the above. If you have any questions, please feel free to contact us. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.

Speaker Change: The combination of efficacy, rapid response, and a tolerability profile are becoming well recognized by dermatologists as differentiating factors.

Speaker Change: And the quotes here from real patients and prescribers confirm this brings value.

Speaker Change: Moving to slide 12.

Todd Edwards: The Zareve psoriasis terex performance is continuing to show strength, and these results demonstrate that we can sustain our growth in psoriasis. We see the steady trend line with 8 percent growth over Q1.24. Zareve foam experienced volume growth of 102 percent versus Q1.24. As we stated before, while the trajectory has moderated from the initial launch uptake, it is still phenomenal growth and a key factor in our portfolio's performance. On to slide 10.

Speaker Change: And Seb Derm, Zaree brings transformational value.

Todd Edwards: The clinician and patient feedback about xerifoam from the real-world usage gives us the insight that these patients have been yearning for solutions such as this. The happiness of patients when they experience relief in a more efficient and convenient manner reinforces how the foam is addressing the unmet need for patients whose only option for decades have been steroids and antifungals. Now on slide 13.

Speaker Change: The clinician and patient feedback about xerifoam from the World Oral Usage gives us the insight that these patients have been yearning for solutions such as this.

Speaker Change: The happiness of patients when they experience relief in a more efficient and convenient manner reinforces how the foam is addressing the unmet need for patients whose only option for decades have been steroids and antifungals.

Speaker Change: Now on slide 13.

Todd Edwards: We have coverage for Zareve 0.3 percent cream and foam from all three of our PVMs, and continue to progress with formative access and downstream plans. When we examine the percent of prescriptions being covered by insurers, we see an encouraging trend in Zareve 0.3 percent cream with roughly 4 out of 5 prescriptions covered, and for Zareve foam, 3 out of 4 prescriptions are covered. This is very positive for the portfolio's lending to the growth to net improvements we have shown.

Todd Edwards: While there have been treatment advances, significant opportunity remains in the atypical rheumatitis market today. 68% of patients are still being treated with topical corticosteroids. Non-stereotopicals only represent 19% of the total market opportunity.

Speaker Change: While there have been treatment advances, significant opportunity remains in the atypic dermatitis market today.

Speaker Change: 68% of patients are still being treated with topical corticosteroids.

Speaker Change: Non-estero topicals only represent 19% of the total market opportunity.

Todd Edwards: These are agents that have been on the market for several years now, and uptake is likely limited due to safety concerns. Well, this market has also seen an increase in biologic and oral jack treatments. These treatments still only account for 13% of the total market.

Speaker Change: These are agents that have been on the market for several years now and uptake is likely limited due to safety concerns.

Speaker Change: Well, this market has also seen an increase in biologic and oral jack treatments.

Todd Edwards: Since the benefit risk profile combined with the high cost, Typically positions are used as later lines of therapy and for hard to treat or severe patients. The incremental value that Zuri brings within this more established AD market is highly differentiated. With no box warning, no limitations on body surface area treated or location of treatment. And it can be used for any duration, which is very important for a chronic disease. Zareeb is also well tolerated and does not contain any penetration enhancers, sensitizers, or common skin irritants, and very importantly for patients.

Speaker Change: These treatments still only account for 13% of the total market.

Todd Edwards: I would also reiterate that the contribution to revenue growth coming from further growth to net improvements will likely moderate in coming quarters as we advance closer to our expected steady state blended growth to net. Going forward, most revenue growth will likely come for prescription demand growth in psoriasis, septum, and new demand in atopic dermatitis, as well as from expansion of our subscriber universe.

Speaker Change: Since the benefit-risk profile combined with the high cost

Speaker Change: Typically, positions are used in later lines of therapy and for hard-to-treat or severe patients.

Speaker Change: The incremental value that Zuri brings within this more established AD market is highly differentiated.

Speaker Change: With no box warning, no limitations on body surface area treated or location of treatment.

Speaker Change: and it can be used for any duration which is very important for a chronic disease.

Todd Edwards: I'm now on slide 11. Sirif 0.3% cream is foundational to the brand, with a value proposition that is meaningful and impactful to patients. Describers have an option that can resolve plaques that affect many different parts of the body, part of treat areas like elbows and knees, but also the sensitive areas like the face, groin, and underarms. The combination of efficacy, rapid response, and a tolerability profile are becoming well recognized by dermatologist as differentiating factors.

Speaker Change: Zareeb is also well tolerated and does not contain any penetration enhancers, sensitizers, or common skin irritants.

Todd Edwards: Zariv is the first topical AD treatment that only requires once a day application. This unique combination of benefits makes physicians well for use early and chronically in a treatment algorithm, on slide 14. With the performance in PSO and SebDerm and the recent AD approval, we are creating a portfolio of Zarif solutions for dermatologists that will sustain the brand growth. The benefits of Azuri portfolio products, which will address three different dermatological diseases where the current standard of care is topical steroids, are unprecedented and create simplicity for a dermatology prescriber and patient manager. The Common Clinical Attributes is a read across indications.

Speaker Change: And very importantly for patients, Zareeb is the first topical AED treatment that only requires once a day application.

Speaker Change: This unique combination of benefits physicians are well for use early and chronically in a treatment algorithm.

Speaker Change: On slide 14.

Speaker Change: With the performance in PSO and SebDerm and the recent AD approval, we are creating a portfolio of Xeris solutions for dermatologists that will sustain the brand growth.

Todd Edwards: And the quotes here from real patients and prescribers confirm this brings value. Moving to slide 12. In step-derm, Zaree brings transformational value. The clinician and patient feedback about Zaree phone from the world-world usage gives us the insight that these patients have been yearning for solutions such as this.

Speaker Change: The benefits of Azuree portfolio products that will address three different dermatology diseases where the current state of care is topical steroids is unprecedented and creates simplicity for a dermatology prescriber and patient management.

Todd Edwards: The happiness of patients when they experience relief in a more efficient and convenient manner reinforces how the phone is addressing the unmet need for patients whose only option for decades have been steroids and antifungals. Now in slide 13.

Todd Edwards: We'll make the prescribing simpler and we'll pair it with common market access, copay card, and an efficient and predictable fulfillment pathway, further simplifies the dermatology practice operations as well. We are well on our way to becoming the preferred, topical brand in dermatology. Now on slide 15, we are extremely pleased to have entered a co-promotion collaboration with COA that allows us to bring Zareed to primary care and pediatric physician. We have been working on identifying a primary care partner for some time, and we are thrilled that COA checks all our boxes, with respect to covering a broad PCP target universe. Having a proven track record of successful co-promotion, and Possessing the Bandwidth to Prioritize Zareve Promotion.

Speaker Change: The Common Clinical Attributes is a read across indications. We'll make the prescribing simpler, and we're paired with common market access, copay card, and an efficient and predictable fulfillment pathway.

Speaker Change: further simplifies the dermatology practice operations as well. We are well on our way to becoming the preferred

Todd Edwards: While there have been treatment advances, significant opportunity remains in the A-top of the retired market today. 68% of patients are still being treated with topical cortical steroids. Non-steerotopicals only represent 19% of the total market opportunity. These are agents that have been on the market for several years now, and uptake is likely limited due to safety concerns. While this market has also seen an increase in biological and world-jack treatments, these treatments still account for 13% of the total market since the benefit risk profile combined with the high cost, typically positions are used as later lives of therapy, and for hard to treat or severe patients.

Todd Edwards: We're working with COA to identify the PCP and pediatric targets who have the highest potential to rise or ease. The COBA sales force will have a dedicated focus on our product for at least the first two years. And there are significant commercial synergies in this co-promote with our existing dermatology focus strategy, who will use the same branding and promotional messaging and materials, and product members for training, and COAS PCP and pediatric targets will have the same access to samples as our dermatology offices. They will also be able to access dermatology experts for peer-to-peer programs to advance the understanding of Zarib in the primary care setting.

Speaker Change: Topical Brand in Dermatology.

Speaker Change: Now on slide 15, we are extremely pleased to have entered a co-promotion collaboration with COA that allows us to bring Zareed to primary care and pediatric physicians.

Speaker Change: We have been working on identifying a primary care partner for some time, and we are thrilled that COA checks all our boxes.

Speaker Change: with respect to covering a broad PCP target universe, having a proven track record of successful co-promotions and possessing the bandwidth to prioritize Zaree Promotions.

Speaker Change: We are working with COA to identify the PCP and pediatric targets who have the highest potential derisories.

Todd Edwards: The instrumental value that Zaree brings within this more established 80 market is highly differentiated. With no box warning, no limitations on body surface area treated or location of treatment, and it can be used for any duration, which is very important for a chronic disease. Zaree is also well tolerated and does not contain any penetration enhancers, sensitizers, or common skin irritants. And very importantly for patients, Zaree is the first topical 80 treatment that only requires once a day application. This unique combination of benefits positions are re-well for use early and chronically in a treatment algorithm.

Speaker Change: The COBA sales force will have a dedicated focus on our product for at least the first two years, and there are significant commercial synergies in this co-promote with our existing dermatology focus strategy.

Cole: Cole will use the same branding and promotional messaging and materials and product reimbursement training. And Cole's PCP and pediatric targets will have the same access to samples as our dermatology offices.

Cole: They will also be able to access dermatology experts for peer-to-peer programs to advance the understanding of Zareve in the primary care setting.

Todd Edwards: The patients in the PCP and pediatric offices will benefit from our existing copay card and favorable market access coverage. Our collaboration plan is built on transparency, teamwork, and shared accountability to ensure a successful partnership. Now I'll turn it over to you, Patrick.

Cole: The patients in the PCP and Pediatric offices will benefit from our existing copay card and favorable market access coverage.

Cole: Our collaboration plan is built on transparency, teamwork, and shared accountability to ensure a successful partnership.

Todd Edwards: On slide 14, with the performance in PSO and sub-derm and the recent AD approval, we are creating a portfolio of Zaree solutions for dermatologists that will sustain the brand growth. The benefits of a Zaree portfolio product that will address three different dermatology diseases, where the current state of care is topical steroids, is unprecedented and creates simplicity for dermatology prescriber and patient management. The common clinical attributes Zaree and across indications will make the prescribing simpler and prepared with common market access, co-pay card, and an efficient and predictable fulfillment pathway.

Patrick Burnett: Thank you, Tom. Starting off on slide 17, I'm extremely proud of the team's performance in delivering on the promise of Topical Riflumilab, the dermatology community in the clinic, and continuing to hit all of our timelines with regards to regulatory milestones. Echoing what you heard from Todd, I see the HCP excitement around Zareve cream for atopic dermatitis continues to grow as we release more data. Building on the foundation of their clinical experience with Zareve and psoriasis and subderm, dermatology clinicians find Zareve's product profile to be well suited for what they and their atopic dermatitis patients are looking for.

Cole: I'll turn it over to you, Patrick.

Patrick Burnett: Thank you, Tom. Starting off on slide 17, I'm extremely proud of the team's performance in delivering on the promise of topical riflumilab, the dermatology community in the clinic, and continuing to hit all of our timelines with regards to regulatory milestones.

Speaker Change: Echoing what you heard from Todd, I see that HCP excitement around the Zareb cream for atopic dermatitis continues to grow as we release more data.

Speaker Change: Building on the foundation of their clinical experience with Zareves and psoriasis and seb-derb, dermatology clinicians find Zareves' product profile to be well-suited for what they and their atopic dermatitis patients are looking for.

Patrick Burnett: We've already started looking to expand the indications also for Zarif Foam, having recently filed another FNDA with the FDA in scalp and body psoriasis in July. If approved, this will represent our fourth indication for Zarif. And I'm going to give just a brief peek at why we're so excited to bring this indication to patients. Writing out this table, we look to the submission of our FNDA for the treatment of mild to moderate AD in two to five-year-olds, which is planned for Q1 2025.

Todd Edwards: Ferther Simplifies the Dermatology Practice Operations as well. We are well on our way to becoming the preferred topical brand in Dermatology.

Speaker Change: We've already started looking to expand the indications also for xerifome, having recently filed another FNDA with the FDA in scalp and body psoriasis in July.

Todd Edwards: Now on slide 15, we are extremely pleased to have entered a co-promotion collaboration with COA. That allows us to bring Zaree to primary care and pediatric physicians. We have been working on identifying a primary care partner for some time, and we are thrilled that COA checks all our boxes with respect to covering a broad PCP target universe. Having a proven track record of successful co-promotions and possessing the bandwidth to prioritize Zaree promotion.

Speaker Change: If approved, this will represent our fourth indication for Zarif, and I'm going to give just a brief peek at why we're so excited to bring this indication to patients.

Speaker Change: Writing out this table, we look to the submission of our FNDA for the treatment of mild to moderate AD.

Patrick Burnett: And finally, we're also looking forward to our expected IND filing for ARQ234, our biologic CD200 receptor agonist for atopic dermatitis in 2025, on slide 18. We see our next new therapeutic focus is leveraging the properties of the reed foam to help patients with scalp and body psoriasis. We know that approximately 40% of psoriasis patients also suffer from scalp involvement.

Speaker Change: and two to five-year-old, which is planned for Q1 2025. And finally, we're also looking forward to our expected IND filing for AR Q2 34, our biologic CD200 receptor agonist for atopic dermatitis in 2025.

Todd Edwards: We are working with COA to identify the PCP and pediatric targets who have the highest potential to rise Zaree. The COA Salesforce will have a dedicated focus on our product for at least the first two years. And there are significant commercial synergies in this co-promote with our existing Dermatology focus strategy. COA will use the same branding and promotional messaging and materials and product reimbursement training. And COA's PCP and pediatric targets will have the same access to samples to our Dermatology offices.

Speaker Change: On slide 18, we see our next new therapeutic focus is leveraging the properties as a brief poem to help patients with scalp and body psoriasis.

Speaker Change: We know that approximately 40% of psoriasis patients also suffer from scalp involvement and our foam has demonstrated the reliable clearance of plaques as well as rapid and robust impact on itch.

Patrick Burnett: And our foam has demonstrated reliable clearance of plaques, as well as rapid and robust impact on itch. One of the major challenges for managing psoriasis patients with scalp disease is the complexity of the regimen. Often they end up with several prescriptions for their scalp and at least one or more for their body. And if these are steroids, then the potency is vastly different between the solution that might be used on the scalp versus the cream that would be used on the face.

Speaker Change: One of the major challenges for managing psoriasis patients with scalp disease is the complexity of the regimen. Often they end up with several prescriptions for their scalp and at least one or more for their body. And if these are steroids, then the potency is vastly different between the solution that might be used on the scalp versus the cream that would be used on the face.

Patrick Burnett: One of the consistent themes about the Zerif profile is that it simplifies treatment for a patient. And Zerif foam for psoriasis is a perfect example of that. You'll see in a moment that we designed the pivotal trial to highlight this benefit through the use of co-primary endpoints for scalp and body IGA. Zerif foam can be used once daily on any area of the body where psoriasis occurs, including hair-bearing areas such as the scalp, where creams, lotions, or ointments are suboptimal.

Todd Edwards: They will also be able to access Dermatology experts for peer-to-peer programs to advance the understanding of Zaree in the primary care setting. The patients in the PCP and pediatric offices will benefit from resisting Popeye card and favorable market access coverage. Our collaboration plan is built on transparency, teamwork, and shared accountability to ensure a successful partnership.

Speaker Change: One of the consistent themes about the Zarif profile is that it simplifies treatment for a patient.

Speaker Change: and Reef Foam for psoriasis is a perfect example of that. You'll see in a moment that we designed the Pivotal trial to highlight this benefit through the use of co-primary endpoints for scalp and body IGA.

Speaker Change: The refoam can be used once daily on any area of the body where psoriasis occurs, including hair-bearing areas such as the scalp, where creams, lotions, or ointments are suboptimal.

Patrick Burnett: I'll turn it over to you, Patrick. Thank you, Tom. Starting off on slide 17, I'm extremely proud of the team's performance and delivering on the promise of topical overlap, the Dermatology community and the clinic and continuing to hit all of our timelines with regards to regulatory milestones. Echoing what you heard from Todd, I see that HTTP excitement around Zaree Cream for atopic dermatitis continues to grow as we release more data. Building on the foundation of their clinical experience with Zaree's and Sarai assistance of Dermatology clinicians finds Zaree's product profile to be well suited to with day and their atopic dermatitis patients are looking for. We've already started looking to expand the indications also for Zaree's phone. Having recently filed another S-NDA with the FDA in scalp and body psoriasis in July.

Patrick Burnett: So I'm on slide 19. I'm just going to quickly review the data from ERECTOR, our pivotal phase 3 trial for Zerifoam in scalp and body plaques, right? We selected patients with at least moderate severity of the scalp and mild, moderate, or severe disease by body IGA, and that's investigator global assessment. We had 432 patients who were randomized two to one to receive a flumelaster vehicle foam over an eight-week dosing period, and as I mentioned, we provided, we measured two co-primary endpoints of scalp investigator global assessment, or scalp IGA, and body investigator global assessment, or body IGA success at week eight.

Speaker Change: So I'm on slide 19. I'm just going to quickly review the data from EREPTOR, our pivotal phase 3 trial for zerifoam and scalp and body plaque psoriasis.

Patrick Burnett: Now, on the right side of the slide, we have a brief summary of our results from the erector trial, which used positive and statistically significant results on both of our co-primary endpoints of SIGA success and body IGA success. Over 66% of patients experienced highly statistically significant improvements in scalp symptoms and approximately 46% of patients also achieved highly statistically significant improvements in body psoriasis with clear separation from, As a clinician, I'm very pleased to see that the foam performs essentially identically to the cream in treating body psoriasis, giving dermatology clinicians the option of treating plaques anywhere on the body, including the scalp of the reed foam, which should considerably simplify treatment regimens for these patients. The incidence of adverse events is low and generally similar between active treatment and vehicle. Overall, the most common adverse events included headache, diarrhea, and COVID-19.

Speaker Change: We selected patients with at least moderate severity of the scalp and mild, moderate, or severe disease by body IGA, and that's Investigator Global Assessment.

Speaker Change: We had 432 patients who were randomized 2 to 1 to receive a flumelaster vehicle foam over an 8-week dosing period.

Speaker Change: And as I mentioned, we provide, we measured two co-primary endpoints of scalp investigator global assessment or scalp IGA and body investigator global assessment or body IGA success at week eight.

Speaker Change: And on the right side of the slide, we have a brief summary of our results from the ERECTOR trial. We achieved positive and statistically significant results on both of our co-primary endpoints of SIGA success and body IGA success.

Patrick Burnett: If approved, let's represent our fourth indication for Zaree and I'm going to give just a brief peek at why we're so excited to bring this indication to patients. Writing out this table, we look to the submission of our S-NDA S-NDA for the treatment of mild to moderate AD in two to five year old, which is planned for Q1 2025.

Speaker Change: Over 66% of patients experienced highly statistically significant improvements in scalp symptoms, and approximately 46% of patients also achieved highly statistically significant improvements in body psoriasis with clear separation from vehicle.

Patrick Burnett: And finally, we're also looking forward to our expected IND filing for ARQ-234, our biologic CD200 receptor agonist for atopic dermatitis in 2025. On slide 18, we see our next new therapeutic focus is leveraging the properties of Zaree's phone to help patients with scalp and body psoriasis. We know that approximately 40% of psoriasis patients also suffer from scalp involvement. And our phone has demonstrated the reliable clearance of plaques as well as rapid and robust impact on itch.

Speaker Change: As a clinician, I'm very pleased to see that the foam performs essentially identically to the cream in treating body psoriasis, giving dermatology clinicians the option of treating plaques anywhere on the body, including the scalp of the reed foam, which should considerably simplify treatment regimens for these patients.

Speaker Change: The incidence of adverse events is low and generally similar between active treatment and vehicle.

Speaker Change: Overall, the most common adverse events included headache, diarrhea, and COVID-19.

David Topper: We previously announced these results in September of 2022 and are expecting a strong reception to this new indication based on the positive experience that healthcare providers have already had with foam and seborrheic dermatitis. With that, I'll pass it over to you, David. Thanks, Patrick. I'm on slide 21 showing financial results both year-over-year and quarter-over-quarter. As you've heard, our net product revenues for the quarter were $30.9 million, which is up 547% from Q2 of 2023 and 43% from Q1 of this year.

Speaker Change: We previously announced these results in September of 2022 and are expecting a strong reception to this new indication based on the positive experience that healthcare providers have already had with foam and seborrheic dermatitis. With that, I'll pass it over to you, David.

Patrick Burnett: One of the major challenges for managing psoriasis patients with scalp disease with the complexity of the regimen. Often they end up with several prescriptions for their scalp and at least one or more for their body. And if these are steroids, then the potency is vastly different between the solution that might be used on the scalp versus the cream that would be used on the face. One of the consistent themes about the Zaree profile is that it simplifies treatment for patients.

David Topper: Thanks Patrick. I'm on slide 21 showing financial results both year-over-year and quarter-over-quarter. As you've heard, our net product revenues for the quarter were $30.9 million, which is up 547% from Q2 of 2023 and 43% from Q1 of this year.

Patrick Burnett: And Zaree's phone for psoriasis is a perfect example of that. You'll see in a moment that we designed the pivotal trial to highlight this benefit through the use of co-primary endpoints for scalp and body IgA. Zaree's phone can be used once daily on any area of the body where psoriasis occurs, including hair bearing areas such as the scalp, where creams, lotions, or ointments are sub-op.

David Topper: For the second quarter, our R&D expenses, which include our clinical research, medical affairs activities, supporting the READ, and manufacturing costs for pipeline candidates, were $19.3 million, which is down from Q2 of 2023 due to continued decreases in the development costs of topical refitment labs programs, and also down sequentially from Q1 of this year due to lower spend in our early stage programs. You'll recall that we had some one-time spend in Q1 of 2024 related to 234.

Speaker Change: For the second quarter, our R&D expenses, which include our clinical research, medical affairs activities supporting the READ, and manufacturing costs for pipeline candidates were $19.3 million, which is down from Q2 of 2023 due to continued decreases in the development costs of topical refluent labs programs, and also down sequentially from Q1 of this year due to lower spend in our early stage programs.

Patrick Burnett: Benjamin.

Patrick Burnett: So, I'm on slide 19. I'm just going to quickly review the data from Arrector, our pivotal phase three trial for Zerefome and Scalp and Body Plexus. We selected patients with at least moderate severity of the scalp and mild moderate or severe disease by body, IgA, and that's a vestigated global assessment. We had 432 patients who were randomized to the one to receive a flume-laster vehicle foam over an eight week dosing period.

Speaker Change: You'll recall that we had some one-time spend in Q1 of 2024 related to 234.

David Topper: SG&A expenses were $58.2 million for the second quarter versus $46 million in the same period last year as we invested in both our current and future launches, including our field force. Our SG&A expenses were slightly higher quarter over quarter, primarily due to incremental stock comp expense incurred in connection with the retirement of a former executive.

Speaker Change: SG&A expenses were $58.2 million for the second quarter versus $46 million in the same period last year as we invested in both our current and future launches, including our field force.

Patrick Burnett: And as I mentioned, we provide, we measured two co-primary endpoints of scalp investigator global assessment or scalp IgA, and body investigator global assessment or body IgA success at week eight. Now on the right side of the slide, we have a brief summary of our results from the erector trial, which used positive and statistically significant results on both of our co-primary endpoints of SIGA success and body IgA success. Over 66% of patients experience highly statistically significant improvements in scalp symptoms and approximately 46% of patients also achieved highly statistically significant improvements in body psoriasis with clear separation from vehicle.

Speaker Change: Our SG&A expenses were slightly higher quarter over quarter, primarily due to incremental stock comp expense incurred in connection with the retirement of a former executive.

David Topper: We believe we are investing appropriately in our product launches to support the Zareeb growth trajectory while constantly looking for ways to achieve savings and efficiencies. On page 22, slide 22, you can see we had cash and marketable securities of $363 million on our balance sheet as of June 30, which translates to a cash burn in the quarter of $45 million. For more information visit www. FEMA.gov, Our current capital together with our product revenues enable us to continue operating the business for the foreseeable future, including our continued investment in commercial launches. I'd like to add, as we've said repeatedly, we do not envision a need to come back to the equity market to support our existing businesses. I'm now on slide 23.

Speaker Change: We believe we are investing appropriately in our product launches to support the Zareeb growth trajectory while constantly looking for ways to achieve savings and efficiencies.

Speaker Change: On page 22, slide 22, you can see we had cash and marketable securities of 353 million on our ballot sheet as of June 30, which translates to a cash burn in the quarter of 45 million.

Speaker Change: Our current capital together with our product revenues enable us to continue operating the business for the foreseeable future, including our continued investment in commercial launches. I'd like to add, as we've said repeatedly, we do not envision a need to come back to the equity market to support our existing businesses.

Patrick Burnett: As a clinician, I'm very pleased to see that the foam performs essentially identically to the cream in treating body psoriasis, giving dermatology clinicians the option of treating plaques anywhere on the body, including the scalp's reef foam, which should conservatively simplify treatment regimens for these patients. The incidence of adverse events was low and generally similar between active treatment and vehicle. Overall, the most common adverse events included headache, diarrhea, and COVID-19.

David Topper: This slide summarizes the key features of the recently signed amendment to our debt agreement with SLR. The management team, together with our board, took advantage of the opportunity to renegotiate our debt to provide Arcutis with considerably improved financial flexibility. The revised deal, which becomes effective at the start of October of this year, provides a number of very important improvements, including an extended maturity to 8129, a decrease in the interest rate of 150 basis points, the flexibility to repay up to $100 million in the fourth quarter of this year, together with the ability to redraw that money any time through the first half of 2026, thereby saving us considerable interest expense. We've also deferred our 6.95% exit fee on the redrawn 100 million to the to the August 2029 maturity date and remove restrictions on asset purchases.

Speaker Change: I'm now on slide 23. This slide summarizes the key features of the recently signed amendment to our debt agreement with SLR. The management team, together with our board, took advantage of the opportunity to renegotiate our debt to provide Arcutis with considerably improved financial flexibility.

Patrick Burnett: We previously announced these results in September of 2022, and are expecting a strong reception to this new indication based on the positive experience that health care providers have already had with foam and severic dermatitis.

Speaker Change: The revised deal, which becomes effective at the start of October of this year, provides a number of very important improvements, including an extended maturity to 8129, a decrease in the interest rate of 150 basis points, and a reduction in the interest rate of $1,000,000.

David Topper: With that, I'll pass it over to you, David. Thanks, Patrick. I'm on slide 21 showing financial results both year over year and quarter over quarter. As you've heard, our net product revenues for the quarter were 30.9 million, which is up 547% from Q2 of 23 and 43% from Q1 of this year. For the second quarter, our R&D expenses, which include our clinical research, medical affairs activities, supportive to read, and manufacturing costs for pipeline candidates, were 19.3 million, which is down from Q2 of 2023 due to continued decreases in the development cost of topical reflume last programs, and also down sequentially from Q1 of this year due to lower spend in our early stage programs.

Speaker Change: The flexibility to repay up to $100 million in the fourth quarter of this year, together with the ability to redraw that money anytime through the first half of 2026, thereby saving us considerable interest expense.

Speaker Change: We've also deferred our 6.95% exit fee on the redrawn $100 million to the August 2029 maturity date and removed restrictions on asset purchases.

David Topper: You will call that we had some one-time spending Q1 of 2024 related to 234. SGNA expenses were 58.2 million for the second quarter versus 46 million in the same period last year, as we invested in both our current and future launches, including our field force. Our SGNA expenses were slightly higher quarter over quarter, primarily due to incremental stock comp expense incurred in connection with the retirement of a former executive.

Frank Watanabe: With that, I'll hand it back to Frank for some closing comments and then we'll open for Q&A. Thanks, David. You know, our goal here is to make a positive and meaningful impact on the lives of people afflicted with... Chronic Dermatologic Diseases.

Speaker Change: With that I'll hand it back to Frank for some closing comments and then we'll open for Q&A.

Frank Watanabe: Thanks, David.

Speaker Change: You know our goal here is to make a positive and meaningful impact on the lives of people afflicted with

Operator: And with Zarave now launched in two indications and the atopic dermatitis launch now underway, we are proud to be helping millions of medical dermatology patients while allowing us at the same time to create additional shareholder value. We're confident that our strong performance in Q224 portends for a strong and sustained growth for the rest of 2024 and beyond. And with that, we'll wrap it up and open up to Q&A. Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star 1-1 on your telephone and then wait to hear your name announced, to withdraw your question. Please first start one, one one again.

Frank Watanabe: Chronic Dermatologic Diseases. And with the rave now launched in two indications and the atopic dermatitis launch now underway, we are proud to be helping millions of medical dermatology patients while allowing us at the same time to create additional shareholder value.

Frank Watanabe: We're confident that our strong performance in Q224 portends for a strong and sustained growth for the rest of 2024 and beyond. And with that, we'll wrap it up and open up to Q&A.

Speaker Change: Thank you. Ladies and gentlemen, as a reminder to ask the question, please press start 1-1 on your telephone and they are a way to hear your name announced. To withdraw your question, please press start 1-1 again.

David Topper: We believe we are investing appropriately in our product launches to support the Zareeb growth trajectory while constantly looking for ways to achieve savings and efficiencies. On page 22, slide 22, you can see we had cash and marketable securities of 353 million on our balance sheet as of June 30, which translates to a cash burn in the quarter of 45 million. Our current capital together with our product revenues enables us to continue operating the business for the foreseeable future, including our continued investment in commercial launches.

Operator: Now, let's begin. Please stand by while we compile the Q&A. Our first question comes from the line of Vikram Purohit with Morgan Stanley. Your line is open. Hi, good afternoon. Thanks for taking our questions. We had two.

Speaker Change: Please stand by while we compile the Q&A roster.

Speaker Change: Our first question comes from the line of Vikram Purohit with Morgan Stanley . Your line is open.

Vikram Purohit: First on the way you both for psoriasis and also for subderm. We were just curious if you could comment on your latest findings on refill rates and. And um, your, I guess, most recent estimates for how many tubes or cans per year you think patients are going to be working through. And then secondly, I just wanted to get your sense on where you think steady state growth, growth to net, excuse me, could be for the phone product, once that settles out over the coming quarters. Thanks. Yeah. Hi. Hi, Vikram.

Speaker Change: Hi, good afternoon. Thanks for taking our questions. We had two. First on Zareve, both for psoriasis and also for sebderm. We were just curious if you could comment on your latest findings on refill rates and...

David Topper: I'd like to add, as we've said repeatedly, we do not envision a need to come back to the equity market to support our existing businesses.

Speaker Change: Your, I guess, most recent estimates for how many tubes or cans per year you think patients are going to be working through. And then secondly, I just wanted to get your sense on where you think steady-state growth, growth to net, excuse me, could be for

David Topper: I'm now in slide 23. This slide summarizes the key features of the recently signed amendment to our debt agreement with SLR. The management team together with our board took advantage of the opportunity to renegotiate our debt to provide our cutest with considerably improved financial flexibility.

Todd Edwards: The phone product once that settles out over the coming quarters. Thanks. Yeah. Hi. Hi Rick. Um, yeah Todd you want to take those two? Yeah, absolutely. Yeah. Thank you, Frank So in reference to PSO and seb derm and the latest the refill rates

Frank Watanabe: Yeah. Todd, you want to take this too? Yeah, absolutely. Thank you, Frank.

Todd Edwards: So in reference to PSO and seb derm and the latest the refill rates we see on psoriasis, our refill rates are roughly around 38 percent of our of our total volume. And with seb derm, we see something similar, although we do see some signals that there will likely be a higher refill rate on seb derm eventually than that of psoriasis. So we're very encouraged with the refill rate percentages for both products.

David Topper: The revised deal, which becomes effective at the start of October of this year, provides a number of very important improvements, including an extended maturity to 8129, a decrease in the interest rate of 150 basis points. The flexibility to repay up to 100 million in the fourth quarter this year together with the ability to re-draw that money anytime through the first half of 2026, thereby saving us considerable interest expense. We've also deferred our 6.95% ex-a-c on the re-draw on 100 million to the August 2029 maturity date and remove restrictions on asset purchases.

Speaker Change: We see, on psoriasis, our refill rates are roughly around 38%.

Todd Edwards: of our total volume. And with seb derm, we see something similar, although we do see some signals that there will likely be a higher refill rate on seb derm eventually than that of psoriasis. So we're very encouraged.

Todd Edwards: And then in reference to utilization of those products, we're assessing that. And at this time, our estimates are that for a patient, average patient utilization per year for seb derm will likely be around two cans per year. And for psoriasis, it's going to be like around two to three tubes per year for psoriasis. And then reference to the steady state prostanet for foam.

Speaker Change: with the reroll rate percentages for both products.

Speaker Change: And then in reference to utilization of those products, we're assessing that, and at this time our estimates are...

Speaker Change: That for a patient, every patient utilization per year.

Frank Watanabe: With that, I'll hand it back to Frank for some closing comments and then we'll open for Q&A. Thanks, David. Our goal here is to make a positive and meaningful impact on the lives of people afflicted with chronic dermatologic diseases.

Speaker Change: for Seb Durham, it'll likely be around two pans per year.

Speaker Change: And for psoriasis, it's going to be like around two to three tubes per year.

Speaker Change: for psoriasis. And in reference to the steady state growth to net for foam, you know, we've seen an encouraging ramp relative to improvements in our

Todd Edwards: You know, we've seen an encouraging ramp relative to improvements that are prostanet for foam, especially with the line extensions of the three PBMs and that we anticipate that we're in a very good position to be able to be in that steady state high 50s. You know, well into the end of this quarter, beginning of the fourth quarter of this year. Understood. Thank you. Thank you. Please stand by for our next question. Our next question comes from the line of Tyler Van Buren with TV Cohen. Your line is open. Hey guys, congratulations on another solid quarter and all the progress. I have two for you.

Frank Watanabe: And with Zerave now launched in two indications and the atopic dermatitis launch now underway, we are proud to be helping millions of medical dermatology patients while allowing us at the same time to create additional shareholder value. We're confident that our strong performance in Q224 pretends for a strong and sustained growth for the rest of 2024 and beyond.

Speaker Change: Prost and Efrofoam, especially with the

Speaker Change: line extensions of the three PBMs, and that we anticipate that we're in a very good position to be able to be in that steady state high 50s, you know, well into the end of this quarter, beginning of the fourth quarter of this year.

Operator: And with that, we'll wrap it up and open up to Q&A. Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star 111 on your telephone and they are waiting to hear your name announced. To withdraw your question, please press star 111 again. Please stand by while we compile the Q&A up roster.

Dr. Stead: Understood. Thank you.

Dr. Stead: Thank you.

Speaker Change: Please stand by for our next question.

Speaker Change: Our next question comes from the line of Tyler Van Buren with TD Cohen. Your line is open.

Tyler Van Buren: So the first one is just the prescriptions for the cream have made a nice week over week jump over the past two weeks. So I'm curious to understand if this is pulled through from the early atopic derm launch already, and if you believe this could be a new trend line moving forward. And then the second question is, considering the latest performance for the foam, do you believe that the foam and the cream will split overall Zarif sales pretty evenly in the long term, or that one of the products will be substantially larger than the other? Sure. Todd, I hate to keep doing this to you, but... No, I'm happy to do it.

Vikram Purohit: Our first question comes from a line of Vikram Kerahid with Morgan Stanley. Your line is open. Hi, good afternoon. Thanks for taking our questions. We had two. First on Zerave, both for psoriasis and also for septum. We were just curious if you could comment on your latest findings on refill rates and your, I guess most recent estimates for how many tubes your cans per year, you think patients are going to be working through.

Speaker Change: Hey guys, congratulations on another solid quarter and all the progress. I have two for you. So the first one is just the prescriptions for the cream have made a nice week-over-week jump over the past two weeks.

Speaker Change: So, I'm curious to understand if this is pull-through from the early atopic derm launch already, and if you believe this could be a new trend line moving forward. And then the second question is, considering the latest performance...

Vikram Purohit: And then secondly, I just wanted to get your sense on where you think steady state growth, gross to net, excuse me, could be for the phone product once that settles out over the coming quarters. Thanks. Hi, hi, Vikram. Yeah.

Speaker Change: For the foam, do you believe that the foam and the cream will split overall Zareef sales pretty evenly in the long term, or that one of the products will be substantially larger than the other?

Speaker Change: Sure. Todd, I hate to keep doing this to you, but. No, I'm happy to do it. These are great questions, so thank you, Frank. In reference to the Tizard ReCream, we are pleased with the most recent week-over-week performance for that product, and I think that there's a couple things here that are creating some definitely some positive tailwinds for us.

Todd Edwards: Todd, do you want to take those two? Yeah, absolutely. Thank you, Frank. So in reference to PSO and septum and the latest the refill rates we see on on psoriasis or refill rates are roughly around 38% of our total volume. And with septum, we see something similar. Although we do see some signals that they will likely be a higher refill rate on septum eventually than that of psoriasis. So we're very encouraged with the refill rate percentages for both products.

Frank Watanabe: These are great questions, so thank you, Frank. In reference to the Tisserie Cream, we are pleased with the most recent week-over-week performance for that product, and I think that there's a couple things here that are creating some definitely some positive tailwinds for us, and that is that, you know, with the launch of Zeree Foam and creating a portfolio of products, this has really resonated with the providers as far as Zeree Cream across these two patient populations of psoriasis and seb derm, creating a halo effect on both products to include the Zeree Cream. Not only that, but, you know, we have expanded our field sales organization. We expanded it by roughly 40 representatives. That was fully executed on July 1st of this year.

Speaker Change: And that is that, you know, with the launches of Refoam and creating a portfolio of products,

Speaker Change: This has really resonated with the providers as far as the Zerique cream across these two patient populations of psoriasis and seb derm, creating a halo effect on both products to include the Zerique cream.

Todd Edwards: And then in reference to utilization of those products, we're assessing that and this time our estimates are that for a patient average patient utilization per year. For septum, it will likely be around two cans per year. And for psoriasis, it's going to be like around two to three tubes per year for psoriasis.

Speaker Change: Not only that, but, you know, we have expanded our field sales organization. We expanded it by roughly 40 representatives. That was fully executed on July 1st of this year.

Todd Edwards: So I think that additional share of voice is starting to have a positive impact relative to our Zeree Cream and psoriasis brand performance. And then in reference to, you know, foam, once again, we're very encouraged by the performance of the foam, especially in the last weeks. We're seeing very positive week-over-week prescription growth. And relative to, you know, the split on the business between psoriasis and foam, I would anticipate that we will have a higher, you know, weekly TRX prescriptions eventually in foam than we will in psoriasis. Because the market is so much larger relative to Seb Derm & Foam, there's no brand of competition within that market. There's been no innovation in many years.

Todd Edwards: And then reference to the steady state gross to net for phone, you know, we've seen an encouraging ramp relative to improvements in our gross to net for phone, especially with the line extensions of the three pvms. And that we anticipate that we're in a very good position to be able to be in that steady state high fifties, you know, well into the end of this quarter, beginning of fourth quarter of this year. Thank you.

Speaker Change: So I think that additional sheer voice is starting to have a positive impact relative to our, there's a re-cream in Sirius' brand performance.

Speaker Change: And then in reference to foam, once again, we're very encouraged by the performance of the foam, especially in the last weeks, we're seeing very positive.

Speaker Change: week-over-week prescription growth and relative to

Speaker Change: The split on the business between psoriasis and foam, I would anticipate that we will have a higher weekly TRX prescriptions eventually in foam than we want psoriasis.

Todd Edwards: Please stand by for our next question. Our next question comes from the line of Tyler Van Buren with TV Cohen. Your line is open. Hey guys, congratulations on another solid quarter and all the progress. I have two for you. So the first one is just the prescriptions for the cream have made a nice week over week. Jump over the past two weeks. So I'm curious to understand if this is pull through from the early a topic, derm launch already.

Speaker Change: Because the the market is so much larger relative to seb dermifoam, there's no brand of competition within that market. There's been no innovation in many years and so it creates a great opportunity relative to the value proposition that we offer to these patients.

Todd Edwards: And so it creates a great opportunity relative to the value proposition that we offer to these patients. And we continue to hear very, very encouraging and positive feedback, not only from the dermatology community, but from patients. So I think that that's what we can expect going forward. Thank you. Please stand by for our next question. Our next question comes from the line of Seamus Fernandez with Google Home. Your line is open. Well, thanks. Thanks very much.

Todd Edwards: And if you believe this could be a new trend line moving forward. And then the second question is considering the latest performance for the phone. Do you believe that the foam in the cream will split overalls or ref sales pretty evenly in the long term or that one of the products will be substantially larger than the other? Sure. Todd, I hate to keep doing this to you. No, I'm happy to do it.

Speaker Change: And we continue to hear very, very encouraging and positive feedback, not only from the dermatology community, but from patients. So I think that that's what we can expect going forward.

Speaker Change: [inaudible]

Speaker Change: Thank you.

Speaker Change: Please stand by for our next question.

famous Fernandez: Our next question comes from the line of Seamus Fernandez with Google Home. Your line is open.

Seamus Fernandez: And congrats on the on the quarter and all the progress. A couple questions on the progression and AB and how we should think about it. One question that I have is, is just as CALA comes on, to, you know, expand the promotion of Zareve, can you help us understand, you know, some of the key impact points, and how we should be thinking about the prospect of acceleration there? And then separately, just hoping to understand how you're thinking about the opportunity in the pediatric AD setting.

famous Fernandez: Well, thanks very much and congrats on the quarter and all the progress.

famous Fernandez: A couple questions on the progression and AB and how we should think about it. One question that I have is just as CALA comes on to, you know, expand the promotion of Zareve,

Todd Edwards: These are great questions. So thank you for any reference to the dessert cream. We are pleased with the most recent week over week performance for that product. And I think that there's a couple things here that are creating some some definitely some some positive tellwits for us. And that is that, you know, with the launches the re foam and creating a portfolio products. This is really resonated with the providers as far as this is a re cream across these two patient populations of psoriasis and said, derm, creating a halo effect on both products. So clue, there's a re cream.

Speaker Change: Can you help us understand, you know, some of the key impact points and how we should be thinking about the prospect of acceleration there?

Seamus Fernandez: Obviously, that's another SNDA file that would bring the availability of Zareve to a very important younger patient population. I'm interested to know how you're thinking about promotion in that setting, and the importance of it as well. Yeah, Seamus, your second question is about the two to five-year-olds.

Speaker Change: And then separately, just hoping to understand how you're thinking about.

Speaker Change: The opportunity in the pediatric A.D.

Speaker Change: setting. Obviously, that's another SNDA file would bring the availability of Zareef to a very important younger patient population. Interested to know how you're thinking about

Todd Edwards: Not only that, but you know, we have expanded our field sales organization that we expanded it by roughly 40 representatives that was fully executed on July 1st of this year. So I think that additional share of voice is starting to have a positive impact relative to our. There's a re cream and psoriasis brand performance. And then in reference to, you know, phone once again, we're very encouraged by the performance of the phone, especially in the last weeks.

Speaker Change: The promotion in that setting and the importance of it as well. Yeah, Seamus, your second question, you're asking about the 2- to 5-year-olds?

Seamus Fernandez: Correct. Yeah, yeah, sure. Okay. Todd, maybe if you could take the question about COA and then Patrick, maybe you could kick us off on a question around AD just from a clinical standpoint. You want to start Patrick?

Speaker Change: Correct. Yeah, yeah sure. Okay, Todd maybe if you could take the question about COA and then Patrick maybe you could kick us off on a question around AD just from a clinical standpoint.

Todd Edwards: We're seeing very positive week over week prescription growth and relative to, you know, the split on the business between psoriasis and foam. I wouldn't anticipate that we will have a higher, you know, weekly tier X prescriptions and eventually in foam that we want psoriasis. Because the market is so much larger, relative to sub derm and foam, there's no brand of competition within that market. There's been no innovation in many years. And so it creates a great opportunity, a relative to the value proposition that we offer to these patients. And we continue to hear very, very encouraging a positive feedback, not only from the dermatology community, but for patients. So I think that that's what we can expect going forward.

Speaker Change: David Buren, Ed Sheer,

Todd Edwards: Yeah, sure. I'll take that question. Thanks, Seamus, for the question. Appreciate it.

Speaker Change: You want to start, Patrick?

Patrick Burnett: So when we're thinking about pediatric AD, that two to five year old represents about 10% of the 80 patients that are in dermatologist's office. Um, you know, but I think what's really important is to keep in mind that the pediatric ad community, is already very much involved in our launch, given that we have six to 11 year olds with the 0.15% approval that we just had in July, as well as adolescents.

Operator: Thank you.

Patrick Burnett: Yeah, sure. I'll take that. Thanks, Seamus, for the question. I appreciate it. So when we're thinking about pediatric AD, that two to five year old represents about 10% of the AD patients that are in dermatologist's office.

Patrick Burnett: And both of those are kind of core patients for the pediatric AD treating community. So, you know, I think that we're already really heavily engaged with them. And then as we bring the age range down into the two to five year olds, we'll just be able to kind of build upon that. And if you think back to the data that we had for two to five year olds, it's very, very consistent with what we have for ages six and above.

Speaker Change: But I think what's really important is to keep in mind that the pediatric AV community

Speaker Change: is already very much involved in our launch.

Speaker Change: Given that we have

Speaker Change: 6- to 11-year-olds, with the .15% approval that we just had in July , as well as adolescents. And both of those are kind of core patients for this pediatric...

Speaker Change: AD treating community. So, you know, I think that we're already really heavily engaged with them. And then as we bring the age range down into the two to five year olds, we'll just be able to kind of build upon that. And if you think back to the data that we had for two to five year olds, it's very, very consistent with what we have for ages six and above. So it'll seem like a very natural extension, I think, as we add on that additional age to the indication.

Operator: Please stand by for our next question.

Seamus Fernandez: Our next question comes from a line of shameless Hernandez with Google behind your line is open. Well, thanks. Thanks very much and congrats on the on quarter and all progress. A couple of questions on the progression and AB and how we should think about it. One question that I have is just as Cala comes on to, you know, expand the promotion of Zareev. Can you help us understand, you know, some of the key impact points and how we should be thinking about the prospect of acceleration there.

Patrick Burnett: So it'll seem like a very natural extension, I think, as we add on that additional age to the indication. And then, Seamus, as I was clear, your first question, was it reference to the progression of AD, and are expanded promotion, and kind of what are some of the key impact points? That's right.

Speaker Change: And then Shane, if this all was clear, your first question was in reference to the progression of AD and our expanded promotion and kind of what are some of the key impact points?

Todd Edwards: Yeah. Yeah, yeah, absolutely. So so first and foremost, we're very pleased with the start of the atopic dermatitis launch. We're receiving very positive feedback for the dermatology community. And I think some of the key impact points that that we're looking at is, I think, first and foremost, is for the EHR electronic health records to to have them all brought online to where Zareb Cream 0.15% or 80 is loaded up into the EHRs. We've been actively working on that and expect that to to happen over the next couple of weeks.

Speaker Change: That's right, yeah.

Speaker Change: Yeah, yeah, absolutely. So, so first and foremost, we're very pleased with the start of the atopic dermatitis launch. We're receiving very positive feedback from the dermatology community. And I think some of the key impact points that that we're looking at is I think first and foremost is for the

Seamus Fernandez: And then separately, just hoping to understand how you're thinking about the opportunity in the pediatric AD setting. Obviously, that's another SNDA file would bring the availability of Zareev to a very important younger patient population. I'm interested to know how you're thinking about the promotion in that in that setting and the importance of it as well. Your second question, you're asking about the two to five year old. Correct. Yeah, yeah, sure.

Speaker Change: EHR, Electronic Health Records, to have them all brought online to where Zareeb Kareem 0.15% or 80 is loaded up into the EHRs. We've been actively working on that and expect that to happen over the next couple weeks.

Todd Edwards: The other is we've mentioned access to two of the PBMs now have treated atopic dermatitis in a line extension. I think another key driver of celebrate will be when that third PBM comes online, which will anticipate that to come online very likely next month. The other is, is that, you know, we have the EHR, we have the access, we have the promotion to make certain that we're driving coverage scripts. So we are working hand in hand with our the pharmacies within our contracted pharmacy network just to make certain that, you know, that we can drive coverage scripts with those pharmacies. We're also working with the dermatology offices relative to the process. And I think we have a significant strategic advantage here.

Speaker Change: Yeah, there is. We've mentioned access. The two of the PBMs now have treated atypic dermatitis of the line extensions. I think another key driver accelerator will be when that third PBM comes online, which will anticipate that to come online very likely next month.

Todd Edwards: Okay, Todd, maybe if you could take the question about COLA and then Patrick, maybe you could kick us off on a question around AD just from a clinical standpoint. You want to start Patrick? Yeah, sure. I'll take that. Thanks, James, for the question. Appreciate it. So when we're thinking about pediatric AD, that two to five year old represents about 10% of the AD patients that are in dermatologist office. You know, but I think what's really important is to keep in mind that the pediatric AD community is already very much involved in our launch, given that we have six to 11 year olds with the 0.15% approval that we just have in July, as well as adolescents.

Speaker Change: The other is, is that, you know, we have the EHR, we have the access, we have the promotion. We've got to make certain that we're driving covered scripts.

Speaker Change: So we are working hand in hand with the pharmacies within our contracted pharmacy network.

Speaker Change: Just to make certain that, you know, that we can drive coverage scripts with those pharmacies. We're also working with the dermatology offices.

Todd Edwards: And both of those are kind of core patients for the pediatric AD training community. So, you know, I think that we're already really heavily engaged with them. And then as we bring the age range down into the two to five year olds, we'll just be able to kind of build upon that. And if you think back to the data that we had for two to five year olds, it's very, very consistent with what we have for ages six and above. So it'll seem like a very natural extension, I think, as we add on that additional age to the indication.

Speaker Change: relative to the PA process. I think we have a significant strategic advantage here.

Todd Edwards: And as we mentioned before, that these offices or the pharmacies, you know, it's the same coverage across the three different products, same copay card, same contracted pharmacy network. So we see a lot of synergies that are being built here across the offices and pharmacies to drive those cover scripts. So I think we couple those together.

Speaker Change: And as we mentioned before, that these offices are the pharmacies.

Speaker Change: It's the same coverage across the three different products, same copay card, same contracted pharmacy network. So we see a lot of synergies that are being built here across the offices and pharmacies to drive those cover scripts. So I think we couple those together, we'll be well on our way to a very successful launch.

Todd Edwards: We'll be well on our way to a very successful launch. And Seamus, maybe I'll just add, you know, specifically with regard to COA, you know, we expect them to start promoting, you know, in the field probably towards the end of this quarter. But as I mentioned in my comments, we don't expect to see, you know, an inflection in Zarif growth from the primary care and pediatric piece probably this year. I would expect that to be more of a contributor in 25.

Speaker Change: And Seamus, maybe I'll just add, you know, specifically with regard to

Cole: to COA, you know, we expect them to start promoting.

James McIntyre: In the field probably towards the end of this quarter, but as I mentioned, my comments, we don't expect to see, you know, an inflection in growth.

Speaker Change: From the primary care and pediatric piece, probably this year. I would expect that to be more of a contributor in 25, you know, very much like when we first launched with plaque psoriasis and dermatology.

Todd Edwards: You know, very much like when we first launched with plaque psoriasis and dermatology, the primary care and the pediatric doctors don't know Zarif yet. And so, you know, there's going to be some education that has to go into that.

Patrick Burnett: And then shame, if this I was clear, your first question was it referenced the progression of AD and expanded promotion and kind of what are some of the key impact points. That's right. Yeah, yeah, absolutely.

Speaker Change: The premier care and the pediatric doctors don't know Zaree yet and so there's going to be some education that has to go into that but, you know, COA has relationships with many of these doctors, they've got a proven track record in the primary care space so we feel very good about it but I do think there's going to be a bit of a lag in terms of when we see the impact, you know, I would expect to see more in 25 from the primary care deal.

Frank Watanabe: But, you know, COA has relationships with many of these doctors. They've got a proven track record in the primary care space. So we feel very good about it.

Todd Edwards: So, so first and foremost, we're very pleased with the start of the end topic dermatologist launch. We're receiving very positive feedback for the dermatology community. And I think some of the key impact points that that we're looking at is I think first and foremost is for the EHR trying to health records to have them all brought online to where Zerecreme 0.15% for AD is loaded up into the EHRs. So we've been actively work on that and expect that to happen over the next couple weeks.

Frank Watanabe: But I do think there's going to be a bit of a lag in terms of when we see the impact. You know, I would expect to see more in 25 from the primary care deal. And then just with regard to the pediatric piece, I would also just point out that, you know, we do anticipate also in the future studying Zarif in three to 24-month-olds. That's something probably that will come post-approval in the two- to five-year-old.

Speaker Change: And then, just with regard to...

Speaker Change: The pediatric piece, I would also just point out that, you know, we do anticipate also in the future studying Zarif in three to 24 month olds. That's something probably that will come post approval in the two to five year old. But again, I think it's an important.

Frank Watanabe: But again, I think it's an important opportunity both in the dermatology setting, but also especially in the pediatric setting. As you know, there are many AD patients below the age of, Great. And then maybe just one question.

Todd Edwards: The other is we've mentioned access to two of the PBMs now have treated a type of dermatologist align extensions. I think another key driver, accelerator will be when that third PBM comes online, which will anticipate that to come online very likely next month. The other is is that we have the EHR we have the access we have the promotion going to make certain that we're driving coverage scripts. So we are working hand in hand with our the pharmacies within our contracted pharmacy network just to make certain that you know that we can drive coverage scripts with those pharmacies.

Speaker Change: Opportunity both in the dermatology setting but also especially in the pediatric setting as you know there are many 80 patients but below the age of 2.

Seamus Fernandez: Is there a point where, you know, David and Frank, you and Todd are all carefully looking at the value contribution of a broader, you know, sort of DTC campaign? Where do you think that starts to become most impactful? Is that kind of, you know, end of 2025 or 2026?

Speaker Change: Great and then maybe just one question

Speaker Change: Is there a point where, you know, David and Frank, you are, you know, and Todd are all carefully looking at?

Speaker Change: The value contribution of a broader, you know, sort of DTC campaign, where do you think that starts to become most impactful? Is that kind of, you know, end of 2025, 2026?

Frank Watanabe: There have been good returns on DTC advertising, but just wondering how you're thinking about spend? So, you know, I think. We have a direct-to-consumer program ongoing all the time and, you know, we've expanded that with SevDerm and we will expand it further with atopic dermatitis. You know, I think specifically with regard to broadcast TV, you know, that's something that we are constantly evaluating. I don't know if or when we will, you know, really ramp up broadcast TV.

Speaker Change: There have been good returns on DTC advertising, but just wondering how you're thinking about spend.

Todd Edwards: These were also working with the dermatology offices relative to the PA process. And I think we have a significant strategic advantage here. And as we mentioned before that these offices are the pharmacies, you know, the same coverage across the three different products, same copay card, same contracted pharmacy network. So we see a lot of synergies that are being built here across the offices and pharmacies to drive those coverage scripts. So I think we couple those together.

Speaker Change: So, you know, I think...

Speaker Change: We have a direct-to-consumer program ongoing all the time. And, you know, we've expanded that with SevDerm, and we will expand it further with atopic dermatitis. You know, I think specifically with regard to broadcast TV.

Speaker Change: That's something that we are constantly evaluating. I don't know if or when we will really ramp up broadcast TV.

Todd Edwards: We'll be well on our way to a very successful launch.

Frank Watanabe: It's very expensive, right, because you're competing against the likes of Coke and Ford as well as, you know, the big biologic companies for buying that advertising space. And the economics for direct-to-consumer TV for a, you know, $70,000 a year product is very different than the economics for a product that, you know, it's probably something like $2,000 a year.

Speaker Change: It's very expensive, right, because you're competing against the likes of Coke and Ford as well as, you know, the big biologic companies for buying that advertising space.

Frank Watanabe: Yeah, specifically with regard to to COA, you know, we expect them to start promoting, you know, in the field probably towards the end of this quarter. But as I mentioned my comments, we don't expect to see, you know, an inflection in Zareef growth from the primary care and pediatric piece probably this year. I would expect that to be more of a contributor in 25, you know, very much like when we first launched with plaques, rises and dermatology.

Speaker Change: And the economics for direct-to-consumer TV.

Speaker Change: for

Speaker Change: $70,000 a year product is very different than the economics for a product that is probably something like $2,000 a year. So I wouldn't say at this point we've made a commitment to going into broadcast TV. It's something that we'll continue to evaluate.

Frank Watanabe: So I wouldn't say at this point we've made a commitment to going into broadcast TV. It's something that we'll continue to evaluate. But, you know, we would only launch that if we felt that there was a really compelling business case that drove shareholder value. Great, thank you.

Speaker Change: But, you know, we would only launch that if we felt that there was a really compelling business case that drove shareholder value.

Frank Watanabe: The primary care and the pediatric doctors don't know Zareef yet. And so, you know, there's going to be some education that has to go into that. But, you know, COA has relationships with many of these doctors. They've got a proven track record in the primary care space. So we feel very good about it. But I do think there's going to be a bit of a lag in terms of when we see the impact.

Speaker Change: Great, thank you.

Uy Ear: Thank you. Please stand by for our next question. Our next question comes from Uy Ear with Muzuho. The line is open.

Speaker Change: Our next question comes from Oye Eir with Mazuhu. The line is open.

Uy Ear: Hey, guys. Yeah, congrats on a solid quarter. Thanks for taking our questions. So I guess our first question is, maybe just help us to understand a little bit about the gross net changes. I think you indicated from low 60s to high 50s.

Frank Watanabe: You know, I would expect to see more in 25 from the primary care deal. And then just with regard to the pediatric piece, I would also just point out that, you know, we do anticipate also in the future studying Zareef in 3 to 24 month olds. That's something probably that will come post approval in the 2 to 5 year old. But again, I think it's an important opportunity both in the dermatology setting, but also especially in the pediatric setting. As you know, there are many 80 patients below the age. Two.

Oye Eir: Hey guys, yeah, congrats on a solid quarter. Thanks for taking our questions.

Operator: Great.

Oye Eir: So I guess our first question is, maybe just help us to understand...

Oye Eir: A little bit about the gross net changes, I think you indicated.

Speaker Change: from Low 60s to High 50s, but if you just take the sales number and divide it by the total scripts, the net, you know, the implied price seems to be relatively flat.

Uy Ear: But if you just take the sales number and divided by the total scripts, the net, you know, the implied price seems to be relatively flat. So that's sort of the first question. And the second question is, could you maybe just help us understand, like, the proportions of pediatric patients in the Durham offices that you currently detail to versus those in the primary care and pediatric markets that you're expecting COA to go after?

Speaker Change: So that's sort of the first question, and the second question is...

Operator: And then maybe just one question. Is there a point where, you know, David and Frank, you are, you know, and and Todd are all carefully looking at the value contribution of the broader, you know, sort of DTC campaign. Where do you think that starts to become most impactful? Is that kind of, you know, end of 2025, 2026? There have been good returns on DTC advertising, but I'm just wondering how you're thinking about spend.

Speaker Change: Could you maybe just help us?

Speaker Change: Understand.

Speaker Change: like the proportions of pediatric patients in the Durham offices that you currently detail to versus those in the primary care.

Uy Ear: Yeah, and I guess, maybe thirdly, you indicated that the amended, The amended term loans has now removed restriction on asset purchases. Just wondering, what do you have in mind in terms of BD? Thanks. Okay, great. That's a lot. So let me take the easiest one first.

Speaker Change: and Pediatric Markets that you're expecting COA to go after. Yeah, and I guess maybe thirdly, you indicated that the amended...

Operator: So, you know, I think we have a direct to consumer program ongoing all the time. And, you know, we've had, we expanded that with, with, to have Durham, and we will expand it further with a topic dermatitis, you know, I think specifically with regard to broadcast TV, you know, that's something that we, we are constantly evaluating. I don't know if or when we will, you know, really ramp up direct broadcast TV, it's, it's very expensive, right?

Speaker Change: Um...

Speaker Change: The amended term loans has now removed restriction on asset purchases. Just wondering, what do you have in mind in terms of BD? Thanks. Okay, great. That's a lot. So let me take the easiest one first. So in terms of the proportion of PEDS

Frank Watanabe: So in terms of the proportion of children in DERMS versus PCP and PEDS, I think that Patrick mentioned earlier, in dermatology offices, it's only about 10% of the AD patients they're seeing are children, 90% being adolescents and adults. Very different picture in primary care where, you know, in the pediatric offices, all of the kids, obviously, are pediatric, and the majority of the pediatric AD population are sitting with pediatricians, which is why we think this PCP co-promote is so important.

Speaker Change: of Children, excuse me, in DERMS versus PCP and PEDS. I think that Patrick mentioned earlier, in dermatology offices, it's only about 10% of the AD patients they're seeing are children, the 90% being adolescents and adults.

Operator: Because you're computing against the likes of Coke and, and Ford, as well as, you know, the big biologic companies for buying that advertising space. And the economics for direct consumer TV for, you know, $70,000 your product is very different than the economics for a product that, you know, it's probably something like $2,000 a year. So, I wouldn't say at this point, we've made a commitment to going into broadcast TV, it's something that will continue to evaluate. But, you know, we would only launch that if we felt that there was a really compelling business case that grows your whole value.

Operator: Great.

Dick: David Buren,

Speaker Change: It's a very different picture in primary care where, you know, in the pediatric offices, all of the kids, obviously, are pediatric, and the majority of the pediatric AD population are sitting with pediatricians, which is why we think this PCP co-promote is so important.

Operator: Thank you.

Frank Watanabe: There are a lot of adults as well who are seen by PCPs and not by dermatologists. I think that's, you know, both a function of the difficulty of seeing a dermatologist, you know, in many cities around the country, it's a six-month wait to see a dermatologist, but also, and Patrick can comment on this too, I think many PCPs feel very comfortable treating eczema as opposed to psoriasis.

Speaker Change: There are a lot of adults as well who are seen by PCPs and not by dermatologists. I think that's...

Operator: Please stand by for our next question.

Serge Belanger: Our next question comes kind of all year with material, the line is open. Hey guys, yeah, congrats on a solid quarter. Thanks for taking our questions. So, I guess our first question is maybe just help us to understand a little bit about the growth and add changes. I think you indicated from low 60s to high 50s. But if you just take the sales number and divide it by the total scripts, the, you know, the implied price seems to be relatively flat.

Frank Watanabe: And then, you know, Todd, maybe you can talk a little bit more about the gross net changes. I'm not 100% sure I'm clear about your comment about the implied price, but Todd can talk about gross nets in a little more detail. And then after he's done, we'll get David to address the debt and business development. Yeah, in reference to the gross net, what's been driving first, what's been driving the improvement in gross net? What's probably been driving that is the increased number of covered prescriptions that we've had in place. And that's, there's kind of three factors that are driving that.

Speaker Change: And then, you know, Todd, maybe you can talk a little bit more about the gross to net changes.

Speaker Change: I'm not 100% sure I'm clear about your comment about the implied price, but Todd can talk about gross nets in a little more detail, and then after he's done, we'll get David to address the debt and business development.

Todd Edwards: Yeah, in reference to the Grosinets, what's been driving, first, what's been driving the improvement in Grosinet, what's probably been driving that is the the increased number of covered prescriptions.

Serge Belanger: So, that's sort of the first question. And the second question is, could you maybe just help us understand like the proportions of pediatric patients in the Durham offices that you currently detail to versus those in the primary care and pediatric markets that you're expecting COA to go after? Yeah. And I guess maybe thirdly, you indicated that the amended term loans has now removed restriction on passive purchases. Just wondering, what do you have in mind in terms of on BD? Thanks. Okay, great. That's a lot.

Todd Edwards: that we've had in place and there's kind of a three factors that are driving that first is we have had some improvement and relative to our market access. Let's give us the opportunity to increase the percent of product as now being covered by the insurance companies.

Todd Edwards: First, is we have had some improvements in relative to our market access, which gives us the opportunity to increase the percent of product that's now being covered by the insurance companies. The other is, is that, you know, we've, we've had, as mentioned earlier, a nice acceleration of gross net improvement was the refoam with the three PBM line extensions that have happened there. You know, a little bit of a higher volume in seb derm.

Speaker Change: The other is, is that, you know, we've, we've had, as mentioned earlier, a nice acceleration of gross net improvement was the refoam.

Todd Edwards: That's, you know, give it a positive mix when you blend the two together to give us improvements also within our gross net. In addition to that, some of the changes that we've made with our copay card to create efficiencies in covered prescriptions versus non-covered prescriptions and how those are accounted for has also lended to, to this improvement. So, I'm not sure if that explains it. If there's further questions, I'm happy to answer. No, that explains it.

Speaker Change: with the three PBM line extensions that have happened there. You know, a little bit of a higher volume in seb derm. That's, you know, give it a positive mix when you blend the two together to give us improvements also within our gross net.

Todd Edwards: So, let me take the easiest one first. So, in terms of the proportion of peeds, or children, excuse me, in Durham's versus PCP and peas, I think that Patrick mentioned earlier in dermatology offices, it's only about 10% of the 80 patients they're seeing are children. The 90% being adolescents and adults. It's a very different picture in primary care where, you know, in the pediatric offices, all of the kids obviously are pediatric and the majority of the pediatric aid population are sitting with pediatricians, which is why we think this PCP code promote is so important.

Speaker Change: In addition to that, some of the changes that we've made with our co-pay card to create efficiencies in covered prescriptions versus non-covered prescriptions and how those are accounted for has also lended to this improvement.

Speaker Change: So, I'm not sure if that explains it. If there's further questions, I'm happy to answer.

Uy Ear: Thanks. Yeah, yeah. But on the prior questions, I was also wondering, you know, whether there's a large proportion of pediatrics or patients in the primary, you know, and psoriasis as well in septum that have not that have gone on. Yeah, so yes. So, you know, we've stated before, about a third, roughly, of the primary of the psoriasis population is treated outside of dermatology. You know, that's a little bit scarier disease, quite frankly, for non dermatologists, so they tend to refer more, whereas eczema or atopic dermatitis and seborrheic dermatitis, you know, many doctors are comfortable treating those patients in in their own practice.

Speaker Change: Now that explains it. Thanks.

Speaker Change: Yeah, but on the prior questions, I was also wondering, you know, whether there's a large proportion of pediatrics or patients in the primary, you know, and psoriasis as well in septum that have not, that have gone untouched.

Todd Edwards: There are a lot of adults as well, who are seen by PCPs and not by dermatologists. I think that's, you know, both a function of the difficulty of seeing a dermatologist, you know, in many cities around the country. It's a six months wait to a dermatologist, but also, and Patrick can come on this too. I think many PCPs feel very comfortable treating eczema as opposed to psoriasis. And then, you know, Todd, maybe you can talk a little bit more about the gross and net changes.

Speaker Change: Good evening.

Speaker Change: Yes, so you know we've stated before about a third roughly of the primary of the psoriasis population is treated outside of dermatology.

Speaker Change: That's a little bit scarier disease, quite frankly, for a non-dermatologist, so they tend to refer more.

Speaker Change: Whereas, eczema or atopic dermatitis and seborrheic dermatitis.

Speaker Change: You know, many doctors are comfortable treating those patients.

Frank Watanabe: And so about half of the eczema population and roughly half of the seborrheic population are outside of dermatology. And then I think it's also important to note that particularly seborrheic, and to some extent, eczema psoriasis, there are a fair number of patients who are also not being treated. You know, they've even either given up or they don't realize they have a treatable condition.

Speaker Change: in their own practice. And so about half of.

Todd Edwards: I'm not 100% sure I'm clear about your coming about the implied price, but Todd can talk about the gross net in a little more detail. And then, after he's done, we'll get David to address the debt and business development. Yeah, in reference to the gross and net, what's been driving first, what's been driving the improvement in gross and net, what's probably been driving that is the increase number of covered prescriptions that we've had in place.

Speaker Change: The eczema population and roughly half of the seb derm population are outside of dermatology.

Speaker Change: And then I think it's also important to note that particularly seb derm and to some extent eczema and psoriasis, there are a fair number of patients who are also not being treated.

Speaker Change: You know, they've even either given up or they don't realize they have a treatable condition. And I think that over time, we may see some growth in the marketplace, particularly in seborrheic dermatitis, going for patients who weren't on drug previously coming on to our drug.

Frank Watanabe: And I think that over time, we may see some growth in the marketplace, particularly in seborrheic dermatitis, going for patients who weren't on drug previously coming on to to our drug, And David, can you maybe talk a little bit about the debt revisions as specifically a business development sort of our thinking around business development? Oh, I'm sorry, I thought you wanted us to address the some of the math around gross to net, which I can do for a moment, if you like. So, I don't know, have we addressed your questions around gross to net? Um, I think, yeah, I think I was sort of wondering about the mix.

Todd Edwards: And that's, there's kind of a three factors that are driving that first is we have had some improvement and relative to our market access. Let's give us the opportunity to increase the percent of product is now being covered by the insurance companies. The other is, is that, you know, we've, we've had, as mentioned earlier, a nice acceleration of gross and net improvement was a reform with the three PBM line extensions that have happened there.

Speaker Change: And David, can you maybe talk a little bit about the debt revisions as specifically a business development, sort of our thinking around business development?

David Topper: Oh, I'm sorry. I thought you wanted us to address some of the math around gross to net, which I can do for a moment, if you like. So, I don't know, have we addressed your questions around gross to net?

Speaker Change: I think, yeah, I think I was sort of wondering about the mixed, so...

David Topper: So, and I think you guys have sort of explained it, but David, feel free to address the math. Oh, the only thing I was going to add is, you know, same same thing we talked about multiple times at the end of last quarter, right. The way we've chosen to handle commercially covered, I'm sorry, commercially insured, but uncovered scripts makes it difficult for you to calculate the exact gross to net. You don't have all the inputs you need, but it is in the 50s.

Todd Edwards: You know, a little bit of a higher volume in sub-derm that's, you know, give it a positive mix when you blend the two together to give us improvements also within our gross and net. In addition to that, some of the changes that we've made with our copay card to create efficiencies in covered prescriptions versus non-cover prescriptions and how those are accounted for is also blended to to this improvement. So, I'm not sure if that explained it if there's further questions.

Speaker Change: Thanks for watching, and don't forget to like, share, and subscribe to my channel.

Speaker Change: And I think you guys have sort of explained it, but David feel free to address the math.

David Topper: The only thing I was going to add is, you know, same thing we talked about multiple times at the end of last quarter, right? The way we've chosen to handle commercially covered, I'm sorry, commercially insured but uncovered scripts makes it difficult for you to calculate the exact gross to net. You don't have all the inputs you need, but it is in the 50s.

Uy Ear: Okay, thanks. And then, David, can you take the question about business development? Yeah, I'm sorry, could you repeat the business development question? You removed the restrictions on the asset purchase restriction on the amended term loan.

Speaker Change: Okay, thanks.

Todd Edwards: I'm happy to answer. Now that that explains it. Thanks. Yeah, by, on the prior questions, I was also wondering, you know, whether there's a lawyer. There's a large proportion of pediatric or patients in the primary, you know, and psoriasis as well in sub-derm that have not, that have gone untouched. Yes. So, you know, we've stated before about a third roughly of the primary, as of the psoriasis population is treated outside of dermatology.

Speaker Change: And then, David, can you take the question about business development?

David Topper: Yeah, I'm sorry, could you repeat the business development question? You removed the restrictions on the asset purchase restriction on the amended term loan. Just wondering what you have in mind.

David Topper: Just wondering what you have in mind. Well, the original agreement had a hard dollar cap on asset acquisitions. In our amendment, that has been removed.

David Topper: Well, the original agreement had a hard dollar cap on asset acquisitions. In our amendment, that has been removed.

David Topper: Yeah, and then, you know, I think more broadly, you know, I think we think of business development as a potential opportunity, but not a necessity, right? You know, we've got, you know, three very strong products now approved, a fourth one we just filed, you know, we have some earlier stage programs in our pipeline. And we have a pretty high bar in terms of buying things, right?

Todd Edwards: You know, that's a little bit scarier disease, quite frankly, for non-dermatologists, so they tend to refer more. Whereas eczema or atopic dermatitis and sub-dermatitis, you know, many doctors are comfortable treating those patients in their own practice. And so about half of the eczema population and roughly half of the sub-derm population are outside of dermatology. And then I think it's also important to note that particularly sub-derm and to some extent eczema psoriasis, there are a fair number of patients who are also not being treated. You know, they've even either given up or they don't realize they have a treatable condition.

Speaker Change #100: Yeah, and then, you know, I think going more broadly, you know, I think we think of business development as a potential opportunity but not a necessity.

Speaker Change #101: We've got three very strong products now approved, a fourth one we just filed. We have some earlier stage programs in our pipeline.

Frank Watanabe: We don't need to go out and buy revenue because of the products that we have and the products we have in our pipeline. But, you know, we're always looking, you know, and if something came along that we felt we could create additional shareholder value with, we certainly would would think very seriously about that. You know, I think we've built a wonderful development organization, both in R&D and in technical operations. And so, you know, finding something that we think is a diamond in the rough, like ARQ 234, is something we're always looking for.

Speaker Change #101: The End of The End of The End of The End of The End

Speaker Change #101: And we have a pretty high bar in terms of buying things, right? We don't need to go out and buy revenue because of the products that we have and the products we have in our pipeline.

Speaker Change #101: But, you know, we're always looking, you know, and if something came along that we felt we could...

Speaker Change #101: Crate, additional shareholder value with, we certainly would think very seriously about that.

Frank Watanabe: And I think that over time, we may see some growth in the marketplace, particularly in sub-dermatitis, going for patients who weren't on drug previously coming on to our drug, and David, can you maybe talk a little bit about the debt revisions as specifically a business development sort of our thinking around business development? I'm sorry, I thought you wanted us to address some of the math around growth to that, which I can do for a moment, if you like.

Speaker Change #101: You know, I think we've built a wonderful development organization both in R&D and in technical operations.

Speaker Change #101: And so finding something that we think is a diamond in the rough like ARQ 234 is something we're always looking for. But we're not looking to do, at this point in the game, some sort of a roll-up where we're just adding a bunch of revenue that doesn't really create shareholder value.

Frank Watanabe: But we're not looking to do, you know, at this point in the game, you know, some sort of a roll up where we're just adding a bunch of revenue that doesn't really create shareholder value. Okay, thank you. Thank you. Please stand by for our next question. Our next question comes from the line of Serge Belanger with Needham. Your line is open. Good afternoon.

Speaker Change #102: Okay, thank you.

Frank Watanabe: So, a way of we addressed your questions around growth to that? I think, yeah, I think I was sort of wondering about the next, so, and I think you guys have sort of explained it, but David, feel free to address the math, yes. Oh, the only thing I was going to add is, you know, same same thing we talked about multiple times at the end of last quarter, right? The way we've chosen to handle commercially cover, I'm sorry, commercially insure, but uncovered scripts makes it difficult for you to calculate the exact growth to net.

Speaker Change #103: Thank you. Please stand by for our next question.

Speaker Change #104: Our next question comes from the line of Serge Belanger with Needham. Your line is open.

Serge Belanger: Thanks for taking my question. First one on managed care coverage, and they go over the last couple updates you've highlighted and secured. Take coverage from, Permanent State.

Serge Belanger: Thank you for taking my questions. First one on managed care coverage.

Speaker Change #106: I think over the last couple updates, you've highlighted and secured coverage from some prominent states.

Serge Belanger: Chris, where do you stand on Medicare and, I guess where you expect to be once we flip to 2025 and the co-op. Co-Promoted, begin, and also related to that, I think in the past, you mentioned that you expected your Medicare and Medicaid business to be as profitable as the commercial. I don't expect anything to change now that you.

Speaker Change #106: Chris, where do you stand on Medicare and...

Speaker Change #107: I guess where you expect to be once we flip to 2025 and the COA.

Frank Watanabe: You don't have all the inputs you need, but it isn't the 50s. Okay, thanks. And then, David, thank you for the question about business development. Yeah, I'm sorry, could you repeat the business development question? Autumn, you removed the restrictions on the asset restrictions, asset purchase restrictions on the amended term loans, just wondering what you have in mind. Well, the original agreement had a hard dollar cap on asset acquisitions. That's in our amendment that has been removed.

Cole Promote: Co-Promote begins.

Frank Watanabe: Yeah, and then, you know, I think going more broadly, you know, I think we think of business development as a potential opportunity, but not a necessity, right? You know, we've got, you know, three very strong products now approved. A fourth one, we just filed, you know, we have some earlier stage programs in our pipeline. And we have a pretty high bar in terms of buying things, right? We don't need to go out and buy revenue because of the products that we have in the products we have in our pipeline.

Speaker Change #109: And also related to that, I think in the past, you mentioned that you expected your Medicare, Medicaid book...

Speaker Change #109: business to be as profitable as the commercial book.

Speaker Change #110: I don't expect anything to change now that you.

Serge Belanger: Scientific Tune-In. Yeah, sure. Great question, Serge. Todd, you want to take those two?

Speaker Change #111: You signed into the queue in that coverage.

Todd Edwards: Yeah, absolutely. First, in reference to Medicaid, as mentioned earlier, we've been able to secure coverage in Texas, Florida, and New York. We are, you know, in negotiations with other states for Medicaid and those negotiations are moving forward, and we're having very positive conversations. And so, I expect to pick up additional coverage with Medicaid states as we roll through 2024. In reference to Medicare, we continue to have positive dialogues with the PBMs that manage the Part D plans.

Todd Edwards: Yeah, sure. Great question, Serge. Todd, you want to take those two? Yeah, absolutely. First, in reference to Medicaid, as mentioned earlier, we've been able to secure coverage in Texas, Florida.

Todd Edwards: In New York, we are, you know, in negotiations with other states for Medicaid, and those negotiations are moving forward, and we're having very positive conversations.

Todd Edwards: I expect to pick up additional coverage with Medicaid states as we roll through 2024.

Speaker Change #112: In reference to Medicare, we continue to have positive dialogues with the PBMs that manage the Part D plans.

Todd Edwards: And we expect, as you mentioned, we roll over 2025 and into the partnership relative to Medicare, we do expect to be able to have some Medicare access as we initiate and go into 2025. Those conversations with those Part D plans are going well. And the coverage would very likely be initiated on 2025, although we are having conversations about the potential to pull some of that forward into 2024. And then, Todd, can you also comment on what we expect gross-to-nets to look like in Medicare and Medicaid versus commercial?

Speaker Change #112: And we expect, as you mentioned, we roll over 2025 and into the partnership relative to Medicare. We do expect to be able to have some Medicare access.

Frank Watanabe: But, you know, we're always looking, you know, and if something came along that we felt we could create additional shareholder value with, we certainly would, would think very seriously about that. You know, I think we built a wonderful development organization, both in R&D and in technical operations. And so, you know, finding something that we think is a diamond in the rough like ARQ-234 is something we're always looking for, but we're not looking to do, you know, at this point in the game, you know, some sort of a roll-up where we're just adding a bunch of revenue that doesn't really create shareholder value. Okay, thank you. Thank you.

Speaker Change #112: As we initiate and go into 2025, those conversations with those Part B plans are going well.

Operator: Please stand by for our next question.

Speaker Change #112: And the coverage would very likely be initiated on 2025, although we are having conversations about the potential to pull some of that forward into 2024.

Speaker Change #112: And then, Todd, can you also comment on what we expect gross to NETs to look like in Medicare and Medicaid versus commercial?

Todd Edwards: Yeah, absolutely. So, relative to gross-to-nets, we're in a very good position, and that's a result of the strategic pricing, the WAC pricing for Zareve that falls below the specialty product threshold within Medicare. So, we won't have to pay exorbitant remits to the Part D plans to be able to secure that access. Once we secure that access, it should have a very nominal impact on our gross-to-net.

Todd Edwards: Yeah, absolutely. So relative to grossing that we're in a very good position and that's a result of the strategic pricing, the Black pricing for Zaree that falls below.

Chris Shibutani: How next question comes from the line of search, Belanger, with Needham, Yilan is open.

Todd Edwards: Specialty Product Threshold within Medicare so we won't have to pay

Speaker Change #113: you know, exorbitant rebates to the Part D plans to be able to secure that access.

Chris Shibutani: I get up from this with my question. The first one on managed share coverage, I think over the last couple of days, we've highlighted the security and take coverage from some prominent states, just curious where you stand on Medicare. I guess where you expect to be once we flip to 2025 and the COA co-promote began, and also related to that. I think in the past, you've mentioned that you expected your Medicare, Medicaid, book of business to be as profitable as the commercial process.

Speaker Change #114: Once we secure that access, it should have a very nominal impact on our growth standard.

Todd Edwards: Likewise, within Medicaid, we're in a very good position, and what we've had to negotiate there relative to discounts, we should have minimal to no impact on our growth relative to the Medicaid access that we're securing. So, we strategically priced the product that way, and it's starting to play out strategically for us, both across Medicaid and Medicare, very positive. It may be a follow up on, for a question regarding the Griffinite calculations for the quarter, and we're going to work specifically to, program where you count.

Speaker Change #114: Likewise within Medicaid we're in a very good position and what we've had to negotiate there relative to discounts we should have you know minimal to no impact.

Speaker Change #114: on our growth relative to the Medicaid access that we're securing. So, you know, we strategically priced the product that way and it's starting to play out strategically for us both across Medicaid and Medicare very positively.

Speaker Change #115: And maybe a follow-up on...

Speaker Change #116: A prior question regarding the grid-connect calculations for the quarter, and regarding more specifically to...

Chris Shibutani: Is that, I'm going to expect this in change now that you decide to detune that coverage. Yeah, sure. Great question, Serge. Todd, do you want to take those two? Yeah, absolutely. First, the reference to Medicaid, as mentioned earlier, we've been almost secure coverage in Texas, Florida, in New York. We are, you know, in negotiations with other states for Medicaid and those that goes negotiations are moving forward and we're having very positive conversations.

Todd Edwards: Collitionally insured but non-covered script, and how they don't impact the copay card. Unknown Speaker, Unknown Speaker, The volume of scripts going through that program, and whether it's increasing or stable, including, Yeah, yeah, I'd be happy to address that question.

Speaker Change #117: A program where you count commercially insured the non-covered scripts and how they don't impact the co-pay card.

Speaker Change #117: I don't know if you can disclose how many...

Speaker Change #117: The volume of scripts going through that program and whether it's increasing or stable.

Serge Belanger: So relative to the program that we've mentioned as far as the volume going through that versus the, what I'll frame as the traditional program that we have, we do see a high level of the volume going through that new program, which is having a positive impact on our gross net, and we anticipate that that will, you know, it is a high volume. So it will increase, but modestly, because it is a pretty significant part of our volume that is now flowing through there.

Speaker Change #117: and Cody. Thank you. Thank you.

Speaker Change #118: Yeah, yeah, I'd be happy to address that question. So relative to the program that we've mentioned as far as the volume going through that versus the what I'll frame as the traditional

Chris Shibutani: And so I expect to pick up additional coverage with Medicaid states as we roll through 2024. In reference to Medicare, we continue to have positive dialogues with the, the PBMs that manage the Part D plans. And we expect, as you mentioned, we roll over 2025 and into the core partnership relative to Medicare. We do expect to be able to have some Medicare access as we initiate and go into 2025. Those conversations with those Part D plans are going well.

Speaker Change #118: program that we have. We do see a high level of the Zaree volume going through that new program, which is having a positive impact on our gross net.

Speaker Change #118: And we anticipate that that will, you know, it is a high volume, so it will increase but modestly because it is a pretty significant part of our volume that is now flowing through there. And we anticipate this as we ramp up in atopic dermatitis, we would expect the same thing.

Serge Belanger: And we anticipate this as we ramp up in atopic dermatitis, we would expect the same thing. Yeah, Serge, I might just emphasize again, you know, What we're really focused on is covered prescriptions, right? Because, you know, shareholders don't make money on a non-covered script. In fact, you know, normally you lose money on a non-covered script.

Speaker Change #119: Yeah, and Serge, I might just emphasize again, you know,

Chris Shibutani: And the coverage would very likely be initiated on 2025. Although we are having conversations about the potential to pull some of that forward into 2024. And then, Todd, can you also comment on what we expect gross tenets to look at Medicare and Medicaid versus commercial? Yeah, absolutely. So relative to gross tenets, we're in a very good position and that's a result of the strategic pricing, the whack pricing for Zaree that falls below the specialty product threshold within Medicare.

Speaker Change #119: What we're really focused on is covered prescriptions, right, because...

Todd Edwards: Shareholders don't make money on a non-covered script. In fact, normally, you lose money on an uncovered script. So we have taken to telling you guys what percentage of our scripts are covered. And Todd mentioned, I think, earlier in the conversation, about four in five of the cream scripts currently are being reimbursed by insurance.

Frank Watanabe: So we have taken to telling you guys what percentage the scripts, our scripts are covered. And Todd mentioned, I think earlier in the conversation, about four and five of the cream scripts currently are being reimbursed by insurance. And about three and four of the foam scripts are being reimbursed by insurance. So those are fully paid scripts, right? And so you guys can do the math. And the gross net that we're reporting is on the scripts that are covered because there is no gross net on a non-covered script, right? Because you're not getting paid any.

Speaker Change #120: And about three and four of the foam scripts are being reimbursed by insurance. So those are fully paid scripts, right? And so you guys can do the math and the gross net that we're reporting is on the scripts that are covered because there is no gross net on an uncovered script.

Chris Shibutani: So we won't have to pay exorbitant rebates to the Part D plans to build a secure that access. Once we secure that access, it should have a very nominal impact on our gross tenets. Likewise, within Medicaid, we're in a very good position and what we've had to negotiate their relative to discounts. We should have minimal to no impact on our growth relative to the Medicaid access to the securing. So we strategically price the product that way, and it's starting to play out strategically before it's both across Medicaid and Medicare very positively.

Todd Edwards: Yeah, and Frank, on that note, I will mention that if we look at branded topical products, and when you were able to accomplish four out of five prescripts are covered, that's a very high number of scripts as far as covered when you look at branded topical. Yeah, good point. Thank you. As a reminder, ladies and gentlemen, that's star 11 to ask the question. Please stand by for our next question. Our next question comes from the line of Chris Shibutani with Goldman Sachs. Your line is open.

Speaker Change #120: Because you're not going to pay anything for them.

Speaker Change #120: Yeah, and Frank, on that note, I will mention that we look at branded topical products and when you were able to accomplish four out of five prescripts are covered, that's a very high number of scripts as far as covered when you look at branded topicals.

Speaker Change #120: [inaudible]

Speaker Change #121: Yep, good point, yep.

Speaker Change #122: Thank you. As a reminder, ladies and gentlemen, that's star 11 to ask the question.

Todd Edwards: It may be a follow-up on a prior question regarding the growth and acceleration for the quarter. And we're going more specifically to a program where you count commercially insured but non-covered scripts and how they don't impact the co-pay card. I don't know if you can disclose how many, the volume of scripts will enter that program and whether it's increasing or stable, how it's included for it. Yeah, you have to be happy to address that question.

Speaker Change #123: Our next question comes from the line of Chris Shibutani with Goldman Sachs. Your line is open.

Chris Shibutani: Great. Thank you very much, Frank and team. Congratulations on the progress. Two questions directionally, if I could. One financial. As I think about operating expenses and the possibility that you could inflect towards positive EBITDA at some point over the next several quarters or years, what are the factors that now that you have the partnership in place are guiding how we should be thinking about your own SG&A leverage?

Speaker Change #124: Great. Thank you very much, Frank and team. Congratulations on the progress. Two questions directionally, if I could. One financial. As I think about operating expenses and the possibility that you could inflect towards

Speaker Change #125: positive EBITDA

Speaker Change #126: at some point over the next several quarters or years.

Speaker Change #127: What are the factors that, now that you have the partnership in place, are guiding how we should be thinking about your own SG&A levers? That seems to be one of the toggles that could help drive towards that profitability here.

Todd Edwards: So relative to the the program that we've mentioned as far as the volume going through that versus the, what I'll frame is the traditional program that we have. We do see a high level of the zary volume going through that new program which is having a positive impact on our gross tenet. And we anticipate that that will, you know, it is a high volume. So it will increase but modestly because it is a pretty significant part of our volume that is now flowing through there.

Chris Shibutani: That seems to be one of the toggles that could help drive towards that profitability here. And then secondly, to talk about the pipeline a little bit, 255, any insight into when we could learn about that? Because, you know, we get impatient. And what have you done for me lately?

Speaker Change #128: And then secondly, to talk about...

Speaker Change #128: the pipeline a little bit, 255.

Speaker Change #129: Any insight into when we could learn about that, because you know we get inpatient, and what have you done for me lately? You do have a pipeline, your focus on dermatology, tremendous commercial success, but we're going to be increasingly curious in the months ahead and quarters ahead about what else you could be having in terms of

Todd Edwards: And we anticipate this as we ramp up in a top notch or a tightest, we would expect the same thing. Yeah, and Serge, I might just emphasize again, you know, what we're really focused on is covered prescriptions, right? Because, you know, shareholders don't make money on a non-covered script. In fact, you know, normally you lose money on a non-covered script. So we have taken to telling you guys what percentage the scripts or scripts are covered.

Chris Shibutani: You do have a pipeline. You're focused on dermatology. Tremendous commercial success, but we're going to be increasingly curious in the months ahead and quarters ahead about what else you could be having in terms of portfolio and particularly in the pipeline. Thank you. Yeah, sure. So, David, you want to take the question around profitability and then Patrick, could you maybe address the. Sure. Well, I'm not going to comment on timing to profitability or breakeven, but what I will say, obviously, if you break SG&A into S on the one hand and G&A on the other hand, selling, obviously, is always going to be pretty closely correlated with revenue.

Patrick Burnett: portfolio and particularly in the pipeline. Thank you. Yeah, sure Shib. So David, you want to take the question around profitability and then Patrick could you maybe address the pipeline?

Todd Edwards: And Todd mentioned, I think earlier in the conversation, about four and five of the cream scripts currently are being reimbursed by insurance, and about three and four of the foam scripts are being reimbursed by insurance. So those are fully paid scripts, right? And so you guys can do the math, and the gross net that we're reporting is on the scripts that are covered, because there is no gross demand on an uncovered script, right?

David Topper: Well, I'm not going to comment on timing to profitability or break even, but...

Speaker Change #130: What I will say, obviously, if you break SG&A into S on the one hand and G&A on the other hand, selling obviously is always going to be pretty closely correlated with revenue.

David Topper: So the way you get to breakeven in this kind of business, obviously, is through economies of scale on the G and the A items, and we're certainly experiencing that already. We watch it very closely. We look at it in our own internal projections, and I think it's well on its way to the sort of levels that you'd want it to be at. Now, obviously, circumstances can change. When you launch products like AD, for example, or launch a PCP program, you do incur some startup costs and things like that. But in general, if you strip out those one-time items, the G and the A are moving in the direction that you'd like to see them in, to achieve what you're referring to.

Speaker Change #131: The way you get to break even in this kind of business, obviously, is through economies of scale on the G and the A items, right? And we're certainly experiencing that already.

Speaker Change #131: We watch it very closely, and we look at it in our own internal projections.

Todd Edwards: Because you're not getting paid in any form. Yeah, and Frank, on that note, I will mention that we look at branded topical products, and when you're able to accomplish four out of five prescriptions or cover, that's a very high number of scripts as far as cover when you look at branded topicals.

Speaker Change #131: I think, you know, it's well on its way to the sort of levels that you'd want it to be at, okay? Now, obviously, circumstances can change.

Speaker Change #131: When you launch products like AD, for example, or launch a PCP program, you do incur some startup costs and things like that. But in general, if you strip out those one-time items, the G and the A are moving in the direction that you'd like to see them in.

Operator: Yep, please let me go. Good point, yep. Thank you. As a reminder, ladies and gentlemen, that start 11 to ask the question. Please stand by for our next question.

Frank Watanabe: I think the only the only amplifying comment I would I would add to that is, you know, should as primary care starts to kick in and drive top line revenue, you know, that that's that's, We aren't spending our money or shareholders money, you know, to drive that business, right? That's really coming from the partner side. And so that's something that will give us more leverage in terms of profitability. It's revenues without expenses.

Speaker Change #131: to achieve what you're referring to.

Speaker Change #132: The only amplifying comment I would add to that is, you know, Shib, as primary care starts to kick in and drive top line revenue, you know, that's, that's, that's, that's,

Operator: Our next question comes from the line of Chris Shabby-Tainey with Goldman Sachs. Yalan is open. Great, thank you very much. Frank and Dean, congratulations on the progress. Two question directionally, if I could, one financial. If I think about operating expenses and the possibility that you could inflect towards positive EBITDA at some point over the next several quarters or years, what are the factors that now that you have the partnership in place are guiding how we should be thinking about your own SGNA levers?

Speaker Change #132: Arrgh. [inaudible]

Speaker Change #133: We aren't spending our money or shareholders money, you know, to drive that business, right? That's really coming from the partner side. And so that's something that will give us more leverage in terms of profitability. It's revenues without expenses, really.

David Topper: Yeah, that's reassuring on the partnership front. So, and then on pipeline 255, I think we're in phase one. When do we get to see some of the profiles? Patrick, do you want to take that one?

Speaker Change #133: [inaudible]

Speaker Change #134: Yeah, that's reassuring on the partnership front, so. And then on the pipeline 255, I think we're in phase one. When do we get a sense of some of the profile?

Patrick Burnett: Yeah, absolutely. So, so, you know, our kind of historical precedent has been that we're when we're conducting a clinical trial, when we get to where we've had the last patient enrolled, then we'll kind of make a statement about when we anticipate having the data, you know, up until that point. You know, we just want to make sure that we're being precise with regard to, you know, any prognostication that we provide on, on timing.

Operator: That seems to be one of the troubles that could help drive towards that possibility here. And then secondly, to talk about the pipeline a little bit, 255, any insight into when we could learn about that because you know we get impatient and what have you done for me lately? You do have a pipeline, you're focused on dermatology, tremendous commercial success, but we're going to be increasingly curious in the months ahead and quarters ahead about what else you could be having in terms of portfolio and particularly in the pipeline.

Speaker Change #134: Patrick McIntyre, Sean Kim, Seamus Fernandez, Sean Kim, Seamus Fernandez,

Patrick McIntyre: Yeah, absolutely. So, so, you know, our, our kind of historical precedent has been that we're when we're conducting a clinical trial, when we get to where we've had the last patient enrolled, then we'll kind of make a statement about when we anticipate having the data, you know, up until that point, you know, we just want to make sure that we're being precise with regard to, you know, any prognostication that we provide on, on timing.

Patrick Burnett: So, you know, as we move towards having last patient, and we'll like make an announcement on the on 255, you know, just today, we did include an update on ARC 234, which is the CD 200 receptor agonist, you know, kind of noting that we're planning to do an IND filing there in 2025. As we get closer to that, we will kind of continue to refine the date. So now we've kind of put that up on the map as well. Thank you. That's all.

Patrick McIntyre: So, you know, as we move towards having the last patient in, we'll, like, make an announcement on the, on 255. You know, just today we did include an update on ART 234, which is the CD 200.

Operator: Thank you. Yeah, Shabby. So David, you want to take the question around profitability and then Patrick, could you maybe address the pipeline? Sure. Well, I'm not going to comment on timing to profitability or break even, but what I will say, obviously, if you break SGNA and to ask on the one hand and GNA, on the other hand, selling obviously is always going to be pretty closely correlated with revenues. So the way you get to break even in this kind of business, obviously, is through economies of scale on the G and the A items, right?

Patrick McIntyre: Receptor Agonist, you know, kind of noting that we're planning to do an IND filing there in 2025. You know, as we get closer to that, we will kind of continue to refine the date. So now we've kind of put that up on the map as well today.

Patrick McIntyre: Thank you. That's helpful. Thank you.

Patrick Burnett: I would now like to turn the call back to Frank for closing remarks. Okay, well, I appreciate everyone making time in their day to join us today and for the great questions, and I look forward to speaking to everyone in about 90 days for the next quarter. Thanks again for joining us. Take care.

Speaker Change #136: Ladies and gentlemen, I'm showing no further questions in the queue. I will now like to turn the call back to Frank for closing remarks.

Frank Watanabe: Okay, well appreciate everyone making time in their day to join us today and for the great questions and look forward to speaking to everyone in about 90 days for the next quarter. Thanks again for joining us. Take care. Bye-bye.

Operator: And we're certainly experiencing that already. We watch it very closely. We look at it in our own internal projections and I think it's well on its way to the sort of levels that you'd want it to be at. Now, obviously, circumstances can change when you launch products like AD, for example, or launch a PCP program. You do, you do encourage some startup costs and things like that. But in general, if you strip out those one-time items, the G and the A are moving in the direction that you'd like to see them in, to achieve what you're referring to.

Frank Watanabe: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Goodbye.

Speaker Change #137: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change #137: Goodbye.

Operator: The only amphine comment I would add to that is Shibut, as primary care starts to kick in and drive top line revenue, we aren't spending our money or shareholder's money to drive that business, right? That's really coming from the partner side, and so that's something that will give us more leverage in terms of profitability, it's revenues with that expenses really. Yeah, that reassuring on the partnership front, so, and then on the pipeline 255, I think we're in phase one, when do we get to see some of the files?

Operator: A.D. C. S. L. T. M. J. M. S. S. M. T. M. S. M. S. M. S. M. S. M. S. M. M. S. M. S. M. S. M. S. M. S. M. S. M. M. N. D. M. N. N. O. M.. Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music, [music] Hello, and thank you for standing by. Welcome to Arcutis Biotherapeutics Q2 2024 earnings call. At this time, all participants are in a listen-only mode.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised.

Latha Vairavan: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the call over to Latha Vairavan, Vice President, Finance and Investor Relations. You may begin. Thank you, Tawanda. Good afternoon, everyone.

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

Frank Watanabe: And thanks to everyone for joining us today. Very excited to be able to provide you with an update on on the most recent quarter of our performance. So let me start off on slide five of the deck.

Frank Watanabe: You know, we have continued really strong performance since our last earnings call, and I continue to be delighted and very proud of the Arcutis team and our execution in the quarter, and thrilled about the momentum that we're building towards the second half of the year. Once again, we saw strong growth during the quarter in our expanding Zerif portfolio as healthcare providers and their patients see how Zerif cream and Zerif foam address real needs in the treatment of psoriasis and seborrheic dermatitis, respectively.

Frank Watanabe: Solid growth in prescriptions for both the cream and the foam, coupled with additional growth to net improvements during the quarter, drove strong revenue growth in the second quarter, both year over year and compared to Q1 2024, with net revenues of 30.9 million, 56% of which was cream and 44% was the foam. We've now generated more than 351,000 prescriptions for the cream and the foam combined, from over 14,000 unique prescribers to date, as our product delivers positive clinical experience for healthcare professionals. We improved gross to net again this quarter, resulting in a blended GTN in the high 50s across both products for the second quarter, down from the low 60s last quarter.

Frank Watanabe: So looking forward for the remainder of the year, we believe we are well positioned for sustained revenue growth with continued momentum on the psoriasis and seb derm launches, and atopic dermatitis will be additive in the second half following the launch of that indication late in July. We're also very excited about the recently signed deal with Coah Pharmaceuticals to expand our promotion into the primary care and pediatric space. Although we wouldn't expect to see meaningful revenue contribution from those efforts until 2025.

Frank Watanabe: And we are delighted that we were able to favorably renegotiate the terms of our debt agreement with SLR, and David will provide more details on those terms later in the meeting. With that, let me turn it over to Todd to provide some further commentary around Zarif cream and foam launches in psoriasis, seb derma, and atopic dermatitis. Todd?

Todd Edwards: Thank you, Frank. I'm extremely enthusiastic about the expansion of our commercial portfolio, HCP and patient response to both the reproducts and the immense opportunities that lie ahead. We achieved $30.9 million in net product revenues for Zareef the second quarter of 2024, reflecting 43% growth over Q1. This is driven by healthy prescription growth, substantial glenogrowth to net percentage improvement down to the high 50s, and the team's success of pulling through current prescriptions as well as improving coverage for the phone.

Speaker Change #137: [inaudible]

Todd Edwards: For the remainder of 2024, we expect continued prescription growth and some gross to net improvement, primarily for Zareve Foam as gross to net discounts for Zareve Cream, 0.3%, have already reached our expected steady state in the 50% range. Moving to slide eight.

Todd Edwards: The Zari Portfolio performance is showing promising growth and strength, reaching for the first time close to 10,000 scripts in a week. This new high shows the momentum we can continue to create for the Zari Portfolio. The portfolio had quarterly-over-quarter volume growth of 42% over Q1. We expect continued growth as we include atopic dermatitis beginning this quarter and will add a fourth indication in 2025 if approved by the FDA.

Operator: Patrick, you want to take that one? Yeah, absolutely, so our kind of historical precedent has been that when we're conducting a clinical trial, when we get to where we've had the last patient enrolled, then we'll kind of make a statement about when we anticipate having the data, up until that point, we just want to make sure that we're being precise with regard to any prognostications that we provide on timing. So, as we move towards having last patient, and we'll make an announcement on the 255, just today, we did include an update on the air C-234, which is the CV200 receptor agonist, you know, kind of noting that we're planning to do an IND filing there in 2025.

Todd Edwards: The Zarese psoriasis TRX performances continue to show strength, and these results demonstrate that we can sustain our growth in psoriasis. We see the steady trend line with 8% growth over Q1-24. Meanwhile, Saree Fong experienced volume growth of 102% versus Q124.

Todd Edwards: As we stated before, while the trajectory has moderated from the initial launch uptake, it is still phenomenal growth and a key factor in our portfolio's performance. On to slide 10. We have coverage for Zareb 0.3% cream and foam from all three large PVMs and continue to progress with formulary access and downstream plans. When we examine the percent of prescriptions being covered by insurers, we see an encouraging trend in Zerid 0.3 percent cream with roughly four out of five prescriptions covered.

Todd Edwards: And for Zerifone, three out of four prescriptions are covered. This is very positive for the portfolio lending to the gross net improvements we have shown. I would also reiterate that the contribution to revenue growth. Coming from further gross to net improvements will likely moderate in coming quarters as we advance closer to our expected steady state blended gross to net. Going forward, most revenue growth will likely come from prescription demand growth in psoriasis, seb derm, and new demand in atopic dermatitis, as well as from expansion of our prescriber universe. I'm now on slide 11.

Todd Edwards: Serif 0.3% cream is foundational to the brand with a value proposition that is meaningful and impactful to patients. Prescribers have an option that can resolve plaques that affect many different parts of the body. Hard to treat areas like elbows and knees, but also the sensitive areas like the face, groin and underarm.

Todd Edwards: The combination of efficacy, rapid response, and a tolerability profile are becoming well-recognized by dermatologists as differentiating factors. And the quotes here from real patients and prescribers confirm this brings value. Moving to slide 12, and Seb Durham, Zaree brings transformational value.

Todd Edwards: The clinician and patient feedback about xerifoam from the real-world usage gives us the insight that these patients have been yearning for solutions such as this. The happiness of patients when they experience relief in a more efficient and convenient manner reinforces how the foam is addressing the unmet need for patients whose only option for decades have been steroids and antifungals. Now on slide 13.

Todd Edwards: While there have been treatment advances, significant opportunity remains in the atypical dermatitis market today. 68% of patients are still being treated with topical corticosteroids. Non-stereotopicals only represent 19% of the total market opportunity.

Todd Edwards: These are agents that have been on the market for several years now, and uptake is likely limited due to safety concerns. Well, this market has also seen an increase in biologic and oral jack treatments. These treatments still only account for 13% of the total market. Since the benefit risk profile combined with the high cost, typically physicians are used in later lines of therapy and for hard to treat or severe patients.

Todd Edwards: The incremental value that Zuri brings within this more established AD market is highly differentiated. With no box warning, no limitations on body surface area treated or location of treatment. And it can be used for any duration, which is very important for a chronic disease. Zareeb is also well tolerated and does not contain any penetration enhancers, sensitizers, or common skin irritants, and very importantly for patients.

Todd Edwards: Zariv is the first topical AD treatment that only requires once a day application. This unique combination of benefits physicians are well for use early and chronically in a treatment algorithm, on slide 14. With the performance in PSO and SebDerm, and the recent AD approval, we are creating a portfolio of Zarif solutions for dermatologists that will sustain the brand growth. The benefits of Azuri portfolio products that will address three different dermatology diseases. Where the current standard of care is topical steroids, is unprecedented and creates simplicity for a dermatology prescriber and patient manager. The Common Clinical Attributes is a read across indications.

Todd Edwards: We'll make prescribing simpler, and we are paired with common market access, a copay card, and an efficient and predictable fulfillment pathway, which further simplifies the dermatology practice operations as well. We are well on our way to becoming the preferred topical brand in dermatology. Now on slide 15, we are extremely pleased to have entered a co-promotion collaboration with COA that allows us to bring Zareed to primary care and pediatric physicians. We have been working on identifying a primary care partner for some time, and we are thrilled that COA checks all our boxes with respect to covering a broad PCP target universe. Having a proven track record of successful co-promotion, and possessing the bandwidth to prioritize Zareve promotion.

Todd Edwards: We're working with COLA to identify the PCP and pediatric targets who have the highest potential to rise or ease. The COBA sales force will have a dedicated focus on our product for at least the first two years. And there are significant commercial synergies in this co-promote with our existing dermatology focus strategy, who will use the same branding and promotional messaging and materials, and product reimbursement training, and COAS PCP and Pediatric TARBIS will have the same access to samples to our dermatology offices. They will also be able to access terminology experts for peer-to-peer programs to advance the understanding of Zareeb in the primary care setting.

Patrick Burnett: The patients in the PCP and pediatric offices will benefit from our existing copay card and favorable market access coverage. Our collaboration plan is built on transparency, teamwork, and shared accountability to ensure a successful partnership. I'll turn it over to you, Patrick.

Patrick Burnett: Thank you, Tom. Starting off on slide 17, I'm extremely proud of the team's performance in delivering on the promise of topical rifluminolab, the dermatology community in the clinic, and continuing to hit all of our timelines with regards to regulatory milestones. Echoing what you heard from Todd, I see the HCP excitement around Zareve cream for atopic dermatitis continues to grow as we release more data. Building on the foundation of their clinical experience with Zareve and psoriasis and subderm, dermatology clinicians find Zareve's product profile to be well suited for what they and their atopic dermatitis patients are looking for.

Speaker Change #138: Sean Kim, Seamus Fernandez, Eric McIntyre

Speaker Change #138: [inaudible]

Operator: As we get closer to that, we will kind of continue to refine the date, so now we've kind of put that up on the map as well today. Thank you, that's helpful. Thank you. Ladies and gentlemen, I'm showing over the questions in the queue.

Frank Watanabe: I will now like to turn the call back to Frank for closing remarks. Okay, well, appreciate everyone making time and their day to join us today and for the great questions, and look forward to speaking to everyone in about 90 days for the next quarter. Thanks again for joining us. Take care. Bye-bye. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Good-bye. . Hello and thank you for standing by.

Speaker Change #138: [inaudible]

Patrick Burnett: We've already started looking to expand the indications also for Zarif Foam, having recently filed another FNDA with the FDA in scalp and body psoriasis in July. If approved, this will represent our fourth indication for Zarif. And I'm going to give just a brief peek at why we're so excited to bring this indication to patients. Writing out this table, we look to the submission of our FNDA for the treatment of mild to moderate AD in two to five-year-olds, which is planned for Q1 2025.

Speaker Change #139: Hello and thank you for standing by. Welcome to our QTUS Biotherapeutics Q2 2024 earnings call.

Speaker Change #140: At this time, all participants are in a listen-only mode.

Speaker Change #140: After the speaker's presentation, there will be a question and answer session.

Speaker Change #140: To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised.

Speaker Change #140: To withdraw your question, please press star 11 again.

Patrick Burnett: And finally, we're also looking forward to our expected IND filing for ARQ 234, our biologic CD200 receptor agonist for atopic dermatitis in 2025, on slide 18. We see our next new therapeutic focus is leveraging the properties of the reed foam to help patients with scalp and body psoriasis. We know that approximately 40% of psoriasis patients also suffer from scalp involvement.

Speaker Change #140: please be advised that today's conference is being recorded.

Latha Vairavan: I would now like to turn the call over to Latha Vairavan, Vice President, Finance and Investor Relations. You may begin.

Patrick Burnett: And our foam has demonstrated the reliable clearance of plaques as well as rapid and robust impact on itch. One of the major challenges for managing psoriasis patients with scalp disease is the complexity of the regimen. Often they end up with several prescriptions for their scalp and at least one or more for their body. And if these are steroids, then the potency is vastly different between the solution that might be used on the scalp versus a creed that would be used on the face.

Latha Vairavan: Thank you to Wanda, good afternoon everyone and thank you for joining us today to review our second quarter of 2024 financial results and business update.

Speaker Change #141: Slides for today's call are available on the Investor section of the Arcutis website.

Speaker Change #142: On the call today are Frank Watanabe, President and CEO , Patrick Burnett, Chief Medical Officer, Todd Edwards, Chief Commercial Officer, and David Topper, Chief Financial Officer.

Speaker Change #143: I would like to remind everyone that we will be making forward-looking statements during this call.

Speaker Change #144: 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 the call over to Frank.

Patrick Burnett: One of the consistent themes about those reef profile is that it simplifies treatment for patients and the reef foam for psoriasis is a perfect example of that. You'll see in a moment that we designed the pivotal trial to highlight this benefit through the use of co-primary endpoints for scalp and body IgAs. The reef foam can be used once daily on any area of the body where psoriasis occur, including hair bearing areas such as the scalp where creans, lotions, or ointments are sub-op.

Patrick Burnett: So I'm on slide 19. I'm just gonna quickly review the data from ERECTOR, our pivotal phase three trial for Zerifoam in scalp and body plaques. Right. We selected patients with at least moderate severity of the scalp and mild, moderate, or severe disease by body IGA, and that's the Investigator Global Assessment.

Patrick Burnett: We had 432 patients who were randomized two to one to receive a flume laughter vehicle foam over an eight week dosing period. And as I mentioned, we provide we measured two co-primary endpoints of scalp investigator global assessment or scalp IGA and body investigator global assessment or body IGA success at week eight. And on the right side of the slide, we have a brief summary of our results from the ERECT-R trial. We achieved positive and statistically significant results on both of our co-primary endpoints of SIGA success and body IGA success.

Frank Watanabe: Thanks Latha and thanks to everyone for joining us today. Very excited to be able to provide you with an update on on the most recent quarter of our performance. So let me start off on slide five of the deck.

Patrick Burnett: Over 66% of patients experienced highly statistically significant improvements in scalp symptoms and approximately 46% of patients also achieved highly statistically significant improvements in body psoriasis with clear separation from vehicle. As a clinician, I'm very pleased to see that the foam performs essentially identically to the cream in treating body psoriasis, giving dermatology clinicians the option of treating plaques anywhere on the body, including the scalp as re-foam, which should considerably simplify treatment regimens for these patients. The incidence of adverse events was low and generally similar between active treatment and vehicle. Overall, the most common adverse events included headache, diarrhea and COVID-19.

Frank Watanabe: You know, we have continued really strong performance since our last earnings call. And I continue to be delighted and very proud of the Arcutis team and our execution in the quarter and thrilled about the momentum that we're building towards the second half of the year.

Patrick Burnett: We previously announced these results in September of 2022 and are expecting a strong reception to this new indication based on the positive experience that health care providers have already had with foam and seborrheic dermatitis. With that, I'll pass it over to you, David. Thanks Patrick.

Frank Watanabe: Once again, we saw strong growth during the quarter in our expanding Zareve portfolio as healthcare providers and their patients see how Zareve cream and Zareve foam address real needs in the treatment of psoriasis and seborrheic dermatitis, respectively.

Frank Watanabe: Solid growth and prescriptions for both the cream and the foam.

Frank Watanabe: Coupled with additional growth to net improvements during the quarter, drove strong revenue growth in the second quarter, both year over year and compared to Q1 2024, with net revenues of $30.9 million, 56% of which was cream and 44% was the foam.

David Topper: I'm on slide 21 showing financial results both year-over-year and quarter-over-quarter. As you've heard, our net product revenues for the quarter were $30.9 million, which is up 547% from Q2 of 2023 and 43% from Q1 of this year. For the second quarter, our R&D expenses, which include our clinical research, medical affairs activities, supporting the REIT, and manufacturing costs for pipeline candidates, were $19.3 million, which is down from Q2 of 2023 due to continued decreases in the development costs of topical refueling last programs, and also down sequentially from Q1 of this year due to lower spend in our early stage programs.

Frank Watanabe: Welcome to our cutest bio therapeutic Q2 2024 earnings 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 the question during this session, you will need to press star 11 on your telephone. You will then hear automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded.

David Topper: You'll recall that we had some one-time spend in Q1 of 2024 related to 234. SG&A expenses were $58.2 million for the second quarter versus $46 million in the same period last year, as we invested in both our current and future launches, including our field force. Our SG&A expenses were slightly higher quarter over quarter, primarily due to incremental stock comp expense incurred in connection with the retirement of a former executive.

Frank Watanabe: We've now generated more than 351,000 prescriptions for the cream and the foam combined from over 14,000 unique prescribers to date as our product delivers positive clinical experience for healthcare professionals and their patients.

Frank Watanabe: We improved gross to net again this quarter, resulting in a blended GTN in the high 50s across both products for the second quarter, down from the low 60s last quarter.

Frank Watanabe: I will now like to turn the call over to Latha, Vairavan, Vice President, Annette, and Investor Relations. You may begin. Thank you to Wanda. Good afternoon everyone and thank you for joining us today to review our second quarter 2024 financial results and business update. Slides for today's call are available on the Investor section of the Arcutis website. On the call today are Frank Watanabe, President and CEO, Patrick Burnett, Chief Medical Officer, Todd Edwards, Chief Commercial Officer, and David Topper, Chief Financial Officer.

Frank Watanabe: So looking forward for the remainder of the year, we believe we are well positioned for sustained revenue growth with continued momentum on the psoriasis and seb derm launches and atopic dermatitis will be additive in the second half following the launch of that indication late in July.

Frank Watanabe: We're also very excited about the recently signed deal with Koa Pharmaceuticals to expand our promotion into the primary care and pediatric space, although we wouldn't expect to see meaningful revenue contribution from those efforts until 2025.

Frank Watanabe: And we are delighted that we were able to favorably renegotiate the terms of our debt agreement with SLR, and David will provide more details on those terms later in the call.

Frank Watanabe: 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 filing for the Securities and Exchange Commission, including descriptions of our business and risk factors. With that, let me hand the call over to Frank. Thanks, Latha, and thanks to everyone for joining us today.

David Topper: We believe we are investing appropriately in our product launches to support the Zareeb growth trajectory while constantly looking for ways to achieve savings and efficiencies. On page 22, slide 22, you can see we had cash and marketable securities of $363 million on our balance sheet as of June 30, which translates to a cash burn in the quarter of $45 million. Our current capital, together with our product revenues, enables us to continue operating the business for the foreseeable future, including our continued investment in commercial launches. I'd like to add, as we've said repeatedly, we do not anticipate a need to come back to the equity market to support our existing businesses.

David Topper: This slide summarizes the key features of the recently signed amendment to our debt agreement with SLR. The management team, together with our board, took advantage of the opportunity to renegotiate our debt to provide Arcutis with considerably improved financial flexibility. The revised deal, which becomes effective at the start of October of this year, provides a number of very important improvements, including an extended maturity to 8129, a decrease in the interest rate of 150 basis points, the flexibility to repay up to $100 million in the fourth quarter of this year, together with the ability to redraw that money any time through the first half of 2026, thereby saving us considerable interest expense. We've also deferred our 6.95% exit fee on the redrawn 100 million to the to the August 2029 maturity date and remove restrictions on asset purchases.

Todd Edwards: With that, let me turn it over to Todd to provide some further commentary around Zarif cream and foam launches in psoriasis, sebderm, and atopic dermatitis. Todd?

Frank Watanabe: With that, I'll hand it back to Frank for some closing comments and then we'll open for Q&A. Thanks, David. You know, our goal here is to make a positive and meaningful impact on the lives of people afflicted with. Chronic Dermatologic Diseases.

Frank Watanabe: And with Zarave now launched in two indications and the atopic dermatitis launch now underway, we are proud to be helping millions of medical dermatology patients while allowing us at the same time to create additional shareholder value. We're confident that our strong performance in Q224 portends for a strong and sustained growth for the rest of 2024 and beyond. And with that, we'll wrap it up and open up to Q&A. Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star 1-1 on your telephone and then wait to hear your name announced. To withdraw your question, please press star 111 again.

Todd Edwards: Thank you, Frank. I'm extremely enthusiastic about the expansion of our commercial portfolio, HCP, and patient response to both the reproducts and the immense opportunities that lie ahead.

Frank Watanabe: Very excited to be able to provide you with an update on the most recent quarter of our performance. Let me start off on slide five of the deck. We have continued really strong performance since our last earnings call, and I continue to be delighted and very proud of the Arcutis team and our execution in the quarter and thrilled about the momentum that we're building towards the second half of the year. Once again, we saw strong growth during the quarter in our expanding report folio as health care providers and your patients see how Zareev cream and Zareev foam address real needs in the treatment of psoriasis and separate dermatitis respectively.

Speaker Change #145: We achieved $30.9 million in net product revenues for Zerif the second quarter of 2024, reflecting 43% growth over Q1.

Speaker Change #146: This was driven by healthy prescription growth, substantial Glennett-Grosse net percentage improvement down to the high 50s.

Speaker Change #146: And the team's success of pulling through current prescriptions as well as improving coverage for the phone.

Speaker Change #146: For the remainder of 2024, we expect continued prescription growth and some gross to net improvement, primarily for Zareve foam, as gross to net discounts for Zareve cream, 0.3%, have already reached our expected steady state in the 50% range.

Frank Watanabe: Lee. Solid growth in prescriptions for both the cream and the foam, coupled with additional growth to net improvements during the quarter, drove strong revenue growth in the second quarter, both year over year and compared to Q1 2024, with net revenues of 30.9 million, 56% of which was cream and 44% with the foam. We've now generated more than 351,000 prescriptions for the cream and the foam combined from over 14,000 unique prescribers to date as our product delivers positive clinical experience for healthcare professionals and their patients.

Operator: Please stand by while we compile the Q&A. Our first question comes from the line of Vikram Purohit with Morgan Stanley. Your line is open. Hi, good afternoon. Thanks for taking our questions. We had two.

Vikram Purohit: First on Zariv, both for psoriasis and also for sebderm. We were just curious if you could comment on your latest findings on refill rates and, your, I guess most recent estimates for how many tubes or cans per year you think patients are going to be working through. And then secondly, I just wanted to get your sense on where you think steady state growth, growth to net excuse me, could be for the phone product once that settles out over the coming quarters. Thanks. Yeah. Hi. Hi, Vikram.

Speaker Change #146: Moving to slide 8

Speaker Change #146: The Zuri Portfolio performance is showing promising growth and strength, reaching for the first time close to 10,000 scripts in a week. This new high shows the momentum we can continue to create for the Zuri Portfolio.

Speaker Change #146: The portfolio had quarter-over-quarter volume growth of 42% over Q1. We expect continued build as we include atopic dermatitis beginning this quarter, and we'll add a fourth indication in 2025 if approved by the FDA.

Frank Watanabe: We improve growth to net again this quarter, resulting in a blend of GTN in the high 50s across both products for the second quarter, down from the low 60s last quarter. So looking forward for their remainder of the year, we believe we are well positioned for sustained revenue growth with continued momentum on the psoriasis and septum launches and atopic dermatitis will be additive in the second half following the launch of that indication late in July.

Frank Watanabe: Yeah. Todd, you want to take this too? Yeah, absolutely. Yeah. Thank you, Frank.

Todd Edwards: So in reference to PSO and seb derm and the latest, the refill rates we see on psoriasis, our refill rates are roughly around 38% of our total volume. And with seb derm, we see something similar. Although we do see some signals that there will likely be a higher refill rate on seb derm eventually than that of psoriasis. So we're very encouraged with the refill rate percentages for both products. And then in reference to utilization of those products, we're assessing that.

Speaker Change #146: on to slide 9. There's a reason to rise this tier X performance is continuing to show strength, and these results demonstrate that we can sustain our growth in psoriasis.

Speaker Change #146: We see the steady trend line with 8% growth over Q1-24.

Speaker Change #146: Serif Foam experienced volume growth of 102% versus Q124. As we stated before, while the trajectory has moderated from the initial launch uptake, it is still phenomenal growth and a key factor in our portfolio's performance.

Frank Watanabe: We're also very excited about the recently signed deal with co-affirmaceuticals to expand our promotion into the primary care and pediatric space, although we wouldn't expect to see meaningful revenue contribution from those efforts until 2025. And we are delighted that we were able to favorably renegotiate the terms of our debt agreement with SLR, and David will provide more details on those terms later in the call. With that, let me turn it over to Todd to provide some further commentary around Zareve cream and foam launches in psoriasis, septum and atopic dermatitis.

Speaker Change #146: On to slide 10.

Speaker Change #146: We have coverage for Zaree 0.3% cream and foam from all three of our PBMs and continue to progress with the form of our access and downstream plans.

Speaker Change #146: When we examine the percent of prescriptions being covered by insurers, we see an encouraging trend in the series, 0.3% premium with roughly 4 out of 5 prescriptions covered.

Frank Watanabe: Todd? Thank you Frank. I extremely enthusiastic about the expansion of our commercial portfolio, HCP and patient response to both the re-products and the immense opportunities that lie ahead. We achieved 30.9 million in net product revenues for Zareve, the second quarter of 2024, reflecting 43 percent growth over Q1. This is driven by healthy prescription growth, substantial glenagrosin net percentage improvement down to the high 50s. And the team's success in pulling through curve prescriptions as well as improving coverage for the foam.

Speaker Change #146: And for Zerifone, three out of four prescriptions are covered. This is very positive for the portfolio lending to the gross to net improvements we have shown.

Speaker Change #146: I would also reiterate that the contribution to revenue growth

Speaker Change #146: Coming from further gross to net improvements will likely moderate in coming quarters as we advance closer to our expected steady-state blended gross to net.

Todd Edwards: And at this time, our estimates are that for a patient, average patient utilization per year for seb derm will likely be around two cans per year. And for psoriasis, it's going to be like around two to three tubes per year for psoriasis. And then reference to the steady state prostanet for foam.

Speaker Change #146: Going forward, most revenue growth will likely come from prescription demand growth in psoriasis, seb derm, and new demand in atopic dermatitis, as well as from expansion of our prescriber universe.

Todd Edwards: We've seen an encouraging ramp relative to improvements that are prostanet for foam, especially with the line extensions of the three PVMs. And that we anticipate that we're in a very good position to be able to be in that steady state high 50s well into the end of this quarter, beginning of the fourth quarter of this year. Understood. Thank you. Thank you. Please stand by for our next question. Our next question comes from the line of Tyler Van Buren with TV Cohen. Your line is open. Hey guys, congratulations on another solid quarter and all the progress. I have two for you.

Frank Watanabe: The remainder of 2024 will expect continued prescription growth and some growth to net improvement. Primarily for Zareve foam, as growth to net discounts for Zareve cream, 0.3 percent have already reached our expected study state in the 50 percent range. Moving to slide 8, the Zareve portfolio performance is showing promising growth and strength, reaching for the first time close to 10,000 scripts in a week. This new high shows the momentum we can continue to create for the Zareve portfolio.

Tyler Van Buren: So the first one is just the prescriptions for the cream have made a nice week over week jump over the past two weeks. So I'm curious to understand if this is pulled through from the early atopic derm launch already, and if you believe this could be a new trend line moving forward. And then the second question is, considering the latest performance for the foam, do you believe that the foam and the cream will split overall Zerif sales pretty evenly in the long term, or that one of the products will be substantially larger than the other? Sure, Todd, I hate to keep doing this to you, but I'm happy to do it. These are great questions. So thank you, Frank.

Frank Watanabe: In reference to the Tizzerie cream, we are pleased with the most recent week-over-week performance for that product. And I think that there's a couple of things here that are creating some definitely some positive tailwinds for us. And that is that, you know, with the launch of Tizzerie foam and creating a portfolio of products, this has really resonated with the providers as far as Tizzerie cream across these two patient populations of psoriasis and seb derm, creating a halo effect on both products to include the Tizzerie cream.

Speaker Change #147: I'm now on slide 11.

Speaker Change #147: Sareeb 0.3% cream is foundational to the brand with a value proposition that is meaningful and impactful to patients.

Todd Edwards: Not only that, but, you know, we have expanded our field sales organization that we expanded by roughly 40 representatives that was fully executed on July 1st of this year. So I think that additional share of voice is starting to have a positive impact relative to our Tizzerie cream and psoriasis brand performance. And then in reference to, you know, foam, once again, we're very encouraged by the performance of the foam, especially in the last weeks, we're seeing very positive week-over-week prescription growth and relative to, you know, the split on the business between psoriasis and foam, I would anticipate that we will have a higher, you know, weekly TRX prescriptions and eventually in foam than we will in psoriasis. Because the market is so much larger relative to Seb Derm & Foam, there's no brand of competition within that market. There's been no innovation in many years.

Speaker Change #147: Prescribers have an option that can resolve plaques that affect many different parts of the body, hard to treat areas like elbows and knees, but also the sensitive areas like the face, groin, and underarms.

Todd Edwards: And so it creates a great opportunity relative to the value proposition that we offer to these patients. And we continue to hear very, very encouraging and positive feedback, not only from the dermatology community, but from patients. So I think that that's what we can expect going forward. Thank you. Please stand by for our next question.

Frank Watanabe: The portfolio had quarter over quarter volume growth of 42 percent over Q1. We expect continued build as we include 8 top dermatitis beginning this quarter and we'll add a fourth indication in 2025 if approved by the FDA. On to slide 9. The Zareve psoriasis tier X performance is continuing to show strength and these results demonstrate that we can sustain our growth in psoriasis. We see the steady trend line with 8 percent growth over Q1.24.

Speaker Change #147: The combination of efficacy, rapid response, and a tolerability profile are becoming well recognized by dermatologists as differentiating factors.

Speaker Change #148: And the quotes here from real patients and prescribers confirm this brings value.

Operator: Our next question comes from the line of Seamus Fernandez with Google Home, your line is open. Well, thanks. Thanks very much.

Seamus Fernandez: And congrats on the quarter and all the progress. A couple questions on the progression and AB and how we should think about it. One question that I have is, is just as CALA comes on, to, you know, expand the promotion of Zareve, can you help us understand, you know, some of the key impact points, and how we should be thinking about the prospect of acceleration there? And then separately, just hoping to understand how you're thinking about the opportunity in the pediatric AD setting.

Speaker Change #149: Moving to slide 12.

Speaker Change #150: And Seb Durham, Zaree Brings Transformational Value.

Speaker Change #150: The clinician and patient feedback about xerifoam from the real-world usage gives us the insight that these patients have been yearning for solutions such as this.

Frank Watanabe: Zareve foam experienced volume growth of 102 percent versus Q1.24. As we stated before, while the trajectory has moderated from the initial launch uptake, it is still phenomenal growth and a key factor in our portfolio's performance. Antoslide 10. We have coverage for Zaree 0.3% cream and foam from all three of our PVMs and continue to progress with formative access and downstream plans. When we examine the percent of prescriptions being covered by insurers, we see an encouraging trend in Zaree 0.3% cream with roughly four out of five prescriptions covered.

Speaker Change #150: The happiness of patients when they experience relief in a more efficient and convenient manner reinforces how the foam is addressing the unmet need for patients whose only option for decades have been steroids and antifungals.

Speaker Change #151: Now on slide 13.

Speaker Change #152: While there have been treatment advances, significant opportunity remains in the atypic dermatitis market today.

Speaker Change #152: 68% of patients are still being treated with topical cortical steroids.

Speaker Change #152: Non-stereotopicals only represent 19% of the total market opportunity.

Speaker Change #152: These are agents that have been on the market for several years now and uptake is likely limited due to safety concerns.

Frank Watanabe: And for Zaree, foam, three out of four prescriptions are covered. This is very positive for the portfolio lending to the gross to net improvements we have shown. I would also reiterate that the contribution to revenue growth coming from further gross to net improvements will likely moderate in coming quarters as we advance closer to our expected steady state blended gross to net. Going forward, most revenue growth will likely come for prescription demand growth in psoriasis, septum, and new demand in atopic dermatitis as well as from expansion of our prescriber universe.

Speaker Change #152: While this market has also seen an increase in biologic and oral jack treatments, these treatments still only account for 13% of the total market since the benefit-risk profile combined with the high cost typically positions their use as later lines of therapy and for hard-to-treat or severe patients.

Speaker Change #153: The incremental value that Zuri brings within this more established AD market is highly differentiated.

Speaker Change #153: With no box warning, no limitations on body surface area treated or location of treatment.

Speaker Change #153: And it can be used for any duration, which is very important for a chronic disease.

Frank Watanabe: I'm now on slide 11. Zaree 0.3% cream is foundational to the brand with a value proposition that is meaningful and impactful to patients. Describers have an option that can resolve plaques that affect many different parts of the body, part of treat areas like elbows and knees, but also the sensitive areas like the face, groin, and underarms. The combination of efficacy, rapid response, and a tolerable profile are becoming well recognized by dermatologists as differentiating factors.

Speaker Change #154: Zareeb is also well tolerated and does not contain any penetration enhancers, sensitizers, or common skin irritants.

Speaker Change #154: And very importantly for patients, Zareeb is the first topical AD treatment that only requires once a day application.

Speaker Change #154: This unique combination of benefits physicians are well for use early and chronically in a treatment algorithm.

Speaker Change #154: On slide 14.

Speaker Change #154: With the performance in PSO and seb derm and the recent AD approval, we are creating a portfolio of Xeris solutions for dermatologists that will sustain the brand growth.

Frank Watanabe: And the quotes here from real patients and prescribers confirm this brings value. Moving to slide 12. In septum, Zaree brings transformational value. The clinician and patient feedback about Zaree foam from the world-world usage gives us the insight that these patients have been yearning for solutions such as this. The happiness of patients when they experience relief in a more efficient and convenient manner reinforces how the foam is addressing the unmet need for patients whose only option for decades have been steroids and antifungals.

Speaker Change #154: The benefits of a Zuri portfolio of products that will address three different dermatology diseases where the current standard of care is topical steroids is unprecedented and creates simplicity for a dermatology prescriber and patient management.

Speaker Change #154: The Common Clinical Attributes is a read across indications. We'll make the prescribing simpler, and we're paired with common market access, copay card, and an efficient and predictable fulfillment pathway.

Speaker Change #154: Further simplifies the dermatology practice operations as well.

Frank Watanabe: Now in slide 13, while there have been treatment advances, significant opportunity remains in the atopic dermatitis market today. 68% of patients are still being treated with cortical steroids. Non-stero topicals only represent 19% of the total market opportunity. These are agents that have been on the market for several years now, and uptake is likely limited due to safety concerns. While this market has also seen an increase in biological and world-jack treatments, these treatments still only account for 13% of the total market, since the benefit risk profile combined with the high cost, typically positions are used as later lines of therapy, and for hard to treat or severe patients.

Speaker Change #154: We are well on our way to becoming the preferred

Speaker Change #154: topical brand in dermatology.

Speaker Change #155: Now on slide 15, we are extremely pleased to have entered a co-promotion collaboration with COA that allows us to bring Zareed to primary care and pediatric physicians.

Seamus Fernandez: Obviously, that's another SNBA file would bring the availability of Zareve to a very important younger patient population. Interested to know how you're thinking about the promotion in that, in that setting, and, and the importance of it as well. Yeah, Seamus, your second question, you're asking about the two to five year olds.

Seamus Fernandez: Correct. Yeah, yeah, sure. Okay. Todd, maybe if you could take the question about COA and then Patrick, maybe you could kick us off on a question around AD just from a clinical standpoint. You want to start Patrick?

Speaker Change #155: We have been working on identifying a primary care partner for some time, and we are thrilled that COA checks all our boxes with respect to covering a broad PCP target universe.

Patrick Burnett: Yeah, sure. I'll take that. Thanks, Seamus, for the question. I appreciate it.

Patrick Burnett: So when we're thinking about pediatric AD, that two to five year old represents about 10% of the 80 patients that are in dermatologist's office. Um, you know, but I think what's really important is to keep in mind that the pediatric ad community, is already very much involved in our launch, given that we have six to 11 year olds with the 0.15% approval that we just had in July, as well as adolescents.

Patrick Burnett: And both of those are kind of core patients for the pediatric AD treating community. So, you know, I think that we're already really heavily engaged with them. And then as we bring the age range down into the two to five year olds, we'll just be able to kind of build upon that. And if you think back to the data that we had for two to five year olds, it's very, very consistent with what we have for ages six and above.

Speaker Change #155: having a proven track record of successful co-promotions and possessing the bandwidth to prioritize Zareve promotion.

Speaker Change #155: We are working with COIT to identify the PCP and pediatric targets who have the highest potential to rise or ease.

Frank Watanabe: The instrumental value that Zaree brings within this more established 80 market is highly differentiated. With no-box warning, no limitations on body surface area treated or location and it can be used for any duration which is very important for a chronic disease. Zareeb is also well tolerated and does not contain any penetration enhancers, sensitizers, or common skin irritants. And very importantly for patients, Zareeb is the first topical AD treatment that only requires once a day application.

Speaker Change #155: The COBA sales force will have a dedicated focus on our product for at least the first two years, and there are significant commercial synergies in this co-promote with our existing dermatology focus strategy.

Cole Promote: Cole will use the same branding and promotional messaging and materials and product reimbursement training. And Cole's PCP and pediatric targets will have the same access to samples as our dermatology offices.

Cole Promote: They will also be able to access terminology experts for peer-to-peer programs to advance the understanding of Zareeb in the primary care setting.

Cole Promote: The patients in the PCP and pediatric offices will benefit from our existing copay card and favorable market access coverage.

Frank Watanabe: This unique combination of benefits positions are re-well for use early and chronically in the treatment algorithm. On slide 14, with the performance in PSO and sub-derm and the recent AD approval, we are creating a portfolio of Zareeb solutions for dermatologists that will sustain the brand growth. The benefits of a Zareeb portfolio products that will address three different dermatology diseases, where the current state of care is topical steroids, is unprecedented and creates simplicity for dermatology prescriber and patient management.

Cole Promote: Our collaboration plan is built on transparency, teamwork, and shared accountability to ensure a successful partnership.

Todd Edwards: So it'll seem like a very natural extension, I think, as we add on that additional age to the indication. And then, Seamus, if this all was clear, your first question was in reference to the progression of AD and our expanded promotion and kind of what are some of the key impact points? That's right.

Todd Edwards: Yeah. Yeah, yeah, absolutely. So so first and foremost, we're very pleased with the start of the atopic dermatitis launch. We're receiving very positive feedback from the dermatology community. And I think some of the key impact points that that we're looking at is I think first and foremost is for the EHR electronic health records to to have them all brought online to where Zariq Cream 0.15% or 80 is loaded up into the EHRs.

Cole Promote: Now I'll turn it over to you, Patrick.

Patrick: Thank you, Tom. Starting off on slide 17, I'm extremely proud of the team's performance in delivering on the promise of Topical Riflumilab, the dermatology community in the clinic, and continuing to hit all of our timelines with regards to regulatory milestones.

Todd Edwards: We've been actively working on that and expect that to to happen over the next couple of weeks. The other is we've mentioned access to two of the PBMs now have treated atopic dermatitis to the line extension. I think another key driver accelerator will be when that third PBM comes online, which will anticipate that to come online very likely next month.

Todd Edwards: The other is is that we have the EHR. We have the access. We have the promotion.

Todd Edwards: Got to make certain that we're driving coverage scripts. So we are working hand in hand with our the pharmacies within our contracted pharmacy network just to make certain that, you know, that we can drive coverage scripts with those pharmacies. We're also working with the dermatology offices relative to the PA process. And I think we have a significant strategic advantage here. And as we mentioned before, that these offices or the pharmacies, you know, it's the same coverage across the three different products, same copay card, same contracted pharmacy network. So we see a lot of synergies that are being built here across the offices and pharmacies to drive those cover scripts. So I think we couple those together.

Todd Edwards: We'll be well on our way to a very successful launch. Seamus, maybe I'll just add, you know, specifically with regard to COA, you know, we expect them to start promoting, you know, in the field probably towards the end of this quarter. But as I mentioned in my comments, we don't expect to see, you know, an inflection in Zerif growth from the primary care and pediatric piece probably this year, I would expect that to be more of a contributor in 25.

Todd Edwards: You know, very much like when we first launched with plaque psoriasis and dermatology, the primary care and the pediatric doctors don't know Zerif yet. And, and so, you know, there's going to be some education that has to go into that.

Speaker Change #157: echoing what you heard from Todd, I see that HCP excitement around Zareed Cream for H-Hopper Dr. Watanabe continues to grow at really more data.

Frank Watanabe: The common clinical attributes Zareeb across the locations will make the prescribing simpler and prepared with common market access, co-pay card, and an efficient and predictable fulfillment pathway further simplifies the dermatology practice operations as well. We are well on our way to becoming the preferred topical brand in dermatology. Now on slide 15, we are extremely pleased to have entered a co-promotion collaboration with COA that allows us to bring Zareeb to primary care and pediatric positions.

Speaker Change #157: Building on the foundation of their clinical experience with Zareves and psoriasis and seb-derb, dermatology clinicians find Zareves' product profile to be well-suited for what they and their atopic dermatitis patients are looking for.

Speaker Change #158: We've already started looking to expand the indications also for Zarif Foam, having recently filed another FNDA with the FDA in scalp and body psoriasis in July . If approved, this will represent our fourth indication for Zarif, and I'm going to give just a brief peek at why we're so excited to bring this indication to patients.

Frank Watanabe: But, you know, COA has relationships with many of these doctors, they've got a proven track record in the primary care space. So we feel very good about it. But I do think there's going to be a bit of a lag in terms of when we see the impact. You know, I would expect to see more in 25 from the primary care deal. And then just with regard to the pediatric piece, I would also just point out that, you know, we do anticipate also in the future, studying Zerif in 3 to 24 month olds, that's something probably that will come post approval in the two to five year old.

Frank Watanabe: But again, I think it's an important opportunity both in the dermatology setting, but also especially in the pediatric setting, as you know, there are many AD patients below the age of. Great, and then maybe just one question. Is there a point where, you know, David and Frank, you are, you know, and Todd are all carefully looking at the value contribution of a broader, you know, sort of DTC campaign? Where do you think that starts to become most impactful? Is that kind of, you know, end of 2025, 2026?

Speaker Change #158: Writing out this table, we look to the submission of our SNDA for the treatment of mild to moderate AD.

Seamus Fernandez: There have been good returns on DTC advertising, but just wondering how you're thinking about spend? So, you know, I think. We have a direct-to-consumer program ongoing all the time and, you know, we've expanded that with SevDerm and we will expand it further with atopic dermatitis. You know, I think specifically with regard to broadcast TV, you know, that's something that we are constantly evaluating. I don't know if or when we will, you know, really ramp up broadcast TV.

Frank Watanabe: We have been working on identifying a primary care partner for some time and we are thrilled that COA checks all our boxes with respect to covering a broad PCP target universe, having a proven track record of successful co-promotions and possessing the bandwidth to prioritize Zareeb promotion. We are working with COA to identify the PCP and pediatric targets who have the highest potential to raise Zareeb. The COA Salesforce will have a dedicated focus on our product for at least the first two years, and there are significant commercial synergies in this co-promote with our existing dermatology focus strategy.

Seamus Fernandez: It's very expensive, right, because you're competing against the likes of Coke and Ford, as well as, you know, the big biological companies for buying that advertising space. And the economics for direct-to-consumer TV for a $70,000 a year product are very different than the economics for a product that is probably something like $2,000 a year.

Operator: Thank you. Please stand by for our next question. Our next question comes from Uy Ear with Mazuhu, the line is open.

Frank Watanabe: So I wouldn't say at this point we've made a commitment to going into broadcast TV. It's something that we'll continue to evaluate. But, you know, we would only launch that if we felt that there was a really compelling business case that drove shareholder value. Great, thank you.

Uy Ear: Hey guys, yeah, congrats on a solid quarter. Thanks for taking our questions. So I guess our first question is, maybe just help us to understand a little bit about the gross net changes. I think you indicated from low 60s to high 50s.

Uy Ear: But if you just take the sales number and divided by the total scripts, the net, you know, the implied price seems to be relatively flat. And so that's sort of the first question. And the second question is, could you maybe just help us understand, like, the proportions of pediatric patients in the Durham offices that you currently detail to versus those in the primary care and pediatric markets that you're expecting COA to go after? Yeah. And I guess maybe thirdly, you indicated that the amended, the amended term loans has now removed restriction on asset purchases. Just wondering what do you have in mind in terms of BD?

Uy Ear: Thanks. Okay, great. That's a lot. So let me take the easiest one first.

Frank Watanabe: So in terms of the proportion of children in DERMS versus PCP and PEDS, I think that Patrick mentioned earlier, in dermatology offices, it's only about 10% of the AD patients they're seeing are children, 90% being adolescents and adults, very different picture in primary care where, you know, in the pediatric offices, all of the kids, obviously, are pediatric. And the majority of the pediatric AD population are sitting with pediatricians, which is why we think this PCP co-promote is so important.

Speaker Change #158: and 2-5-year-old, which is planned for Q1 2025. And finally, we're also looking forward to our expected IND filing for ARQ-234, our biologic CD200 receptor agonist for atopic dermatitis in 2025.

Frank Watanabe: There are a lot of adults as well, who are seen by PCPs, and not by dermatologists. I think that's, you know, both a function of the difficulty of seeing a dermatologist, you know, in many cities around the country, it's a six-month wait to see a dermatologist.

Frank Watanabe: But also, and Patrick can comment on this too, I think many PCPs feel very comfortable treating eczema, as opposed to psoriasis. And then, you know, Todd, maybe you can talk a little bit more about the gross net changes. I'm not 100% sure I'm clear about your comment about the implied price, but Todd can talk about gross nets in a little more detail. And then after he's done, we'll get David to address the debt and business development.

Todd Edwards: Yeah, in reference to the to the gross net, what's been driving first, what's been driving the improvement in gross net, what's probably been driving that is the, the increased number of covered prescriptions that we've had in place. And that's, there's kind of a three factors that are driving that first, is we have had some improvements in relative to our, our market access, which gives us the opportunity to increase the percent of product is now being covered by the insurance companies.

Todd Edwards: The other is, is that, you know, we've, we've had, as mentioned earlier, a nice acceleration of gross to net improvement was the refoam with the three PBM line extensions that have happened there, you know, a little bit of a higher volume in seb derm, that's, you know, give it a positive mix when you blend the two together, to give us improvements also within our gross to net. In addition to that, some of the changes that we've made with our copay card, to create efficiencies in covered prescriptions versus non-covered prescriptions, and how those are accounted for, has also lended to, to this improvement. So I'm not sure if that explains it. If there's further questions, I'm happy to answer. No, that explains it.

Todd Edwards: Thanks. Yeah, yeah. But on the prior questions, I was also wondering, you know, whether there's a large proportion of pediatrics or patients in the primary, you know, and psoriasis as well in septum that have not that have gone on.

Frank Watanabe: Yeah, so yes. So, you know, we've stated before about a third roughly of the primary of the psoriasis population is treated outside of dermatology. You know, that's a little bit scarier disease, quite frankly, for non dermatologists, so they tend to refer more, whereas eczema or atopic dermatitis and seborrheic dermatitis, you know, many doctors are comfortable treating those patients in, in their own practice.

Frank Watanabe: And so about half of the eczema population and roughly half of the seb derm population are, are outside of dermatology. And then I think it's also important to note that particularly seb derm, and, and to some extent, eczema psoriasis, there are a fair number of patients who are also not being treated. You know, they've even either given up or they don't realize they have a treatable condition.

Frank Watanabe: And I think that over time, we may see some growth in the marketplace, particularly in seborrheic dermatitis, going for patients who weren't on drug previously coming on to, to our drug. And David, can you maybe talk a little bit about the debt revisions as specifically a business development sort of our thinking around business development? Oh, I'm sorry, I thought you wanted us to address the some of the math around growth to net, which I can do for a moment, if you like. So, so I don't know if we addressed your questions around gross net. Um, I think, yeah, I think I was sort of wondering about the mix.

Speaker Change #158: On slide 18.

Speaker Change #158: We see our next new therapeutic focus is leveraging the properties of the Reed Foam to help patients with scalp and body psoriasis.

Speaker Change #158: We know that approximately 40% of psoriasis patients also suffer from scalp involvement and our foam has demonstrated reliable clearance of plaques as well as rapid and robust impact on itch.

Frank Watanabe: COA will use the same branding and promotional messaging and materials and product reimbursement training. And COA's PCP and pediatric targets will have the same access to samples to our dermatology offices. They will also be able to access dermatology experts for peer-to-peer programs to advance the understanding of Zareeb in the primary care setting. The patients in the PCP and pediatric offices will benefit from resisting Popeye card and favorable market access coverage. Our collaboration plan is built on transparency, teamwork, and shared accountability to ensure a successful partnership.

Speaker Change #158: One of the major challenges for managing psoriasis patients with scalp disease is the complexity of the regimen. Often they end up with several prescriptions for their scalp and at least one or more for their body. And if these are steroids, then the potency is vastly different between the solution that might be used on the scalp versus the cream that would be used on the face.

Speaker Change #159: One of the consistent themes about the Zarif profile is that it simplifies treatment for a patient. And Zarif Foam for psoriasis is a perfect example of that. You'll see in a moment that we designed the pivotal trial to highlight this benefit through the use of co-primary endpoints for scalp and body IGA.

Speaker Change #159: Dory foam can be used once daily on any area of the body where psoriasis occurs, including hair-bearing areas such as the scalp, where creams, lotions, or ointments are suboptimal.

Frank Watanabe: Now, turn it over to you, Patrick. Thank you, Tom. Starting off on slide 17, I'm extremely proud of the team's performance in delivering on the promise of topical overlap, the dermatology community and the clinic, and continuing to hit all of our timelines with regards to regulatory milestones. Echoing what you heard from Todd, I see that HCP excitement around Zareeb creams for atopic dermatitis continues to grow as we release more data. Building on the foundation of their clinical experience with Zareeb and psoriasis and sub-durb, dermatology clinicians finds Zareeb's product profile that will be well suited to what they and their atopic dermatitis patients are looking for. We've already started looking to expand the indications also for Zareeb's foam. Having recently filed another SNDA with the FDA in scalp and body psoriasis in July.

Speaker Change #160: So I'm on slide 19. I'm just going to quickly review the data from EREPTOR, our pivotal phase 3 trial for zerifoam and scalp and body plaque psoriasis.

Speaker Change #160: We selected patients with at least moderate severity of the scalp and mild, moderate, or severe disease by body IGA, that's Investigator Global Assessment.

Speaker Change #160: We had 432 patients who were randomized 2 to 1 to receive a flumelaster vehicle foam over an 8-week dosing period.

Speaker Change #160: And as I mentioned, we measured two co-primary endpoints of scalp investigator global assessment or scalp IGA and body investigator global assessment or body IGA success at week eight.

Speaker Change #160: and on the right side of the slide, we have a brief summary of our results from the director trial.

Patrick Burnett: If approved, let's represent our fourth indication for Zareeb, and I'm going to give just a brief peek at why we're so excited to bring this indication to pace. Riding out this table, we look to the commission of our FNDA, FNDA, for the treatment of mild to moderate AD in two to five year old, which is planned for Q1 2025.

Speaker Change #160: We achieved positive and statistically significant results on both of our co-primary endpoints of SIGA success.

Speaker Change #160: and Body IGA success. Over 66% of patients experienced highly statistically significant improvements in scalp symptoms and approximately 46% of patients also achieved highly statistically significant improvements in body psoriasis with clear separation from vehicle.

Patrick Burnett: And finally, we're also looking forward to our expected IND filing for ARQ 234, our biologic CD200 receptor agonist for atopic dermatitis in 2025. On slide 18, we see our next new therapeutic focus is leveraging the properties as a red foam to help patients with scalp and body psoriasis. We know that approximately 40% of psoriasis patients also suffer from scalp involvement, and our foam has demonstrated the reliable clearance of plaques as well as rapid and robust impact on itch.

Speaker Change #161: As a clinician, I'm very pleased to see that the foam performs essentially identically to the cream in treating body psoriasis, giving dermatology clinicians the option of treating plaques anywhere on the body, including the scalp of the reed foam, which should considerably simplify treatment regimens for these patients.

Speaker Change #162: The incidence of adverse events was low and generally similar between active treatment and vehicle.

Speaker Change #163: Overall, the most common adverse have been concluded, headache, diarrhea, and COVID-19.

Patrick Burnett: One of the major challenges for managing psoriasis patients with scalp disease is the complexity of the regimen. Often, they end up with several prescriptions for their scalp and at least one or more for their bodies. And if these are steroids, then the potency is vastly different between the solution that might be used on the scalp versus the creed that would be used on the face. One of the consistent themes about this reef profile is that it simplifies treatment for patients and the reef foam for psoriasis is a perfect example of that.

David Topper: We previously announced these results in September of 2022 and are expecting a strong reception to this new indication based on the positive experience that healthcare providers have already had with foam and seborrheic dermatitis. With that, I'll pass it over to you, David.

David Topper: So, and I think you guys have sort of explained it, but David, feel free to address them now. Oh, the only thing I was going to add is, you know, same, same thing we talked about multiple times at the end of last quarter, right? The way we've chosen to handle commercially covered, I'm sorry, commercially insured, but uncovered scripts, makes it difficult for you to calculate the exact gross to net. You don't have all the inputs you need, but it is in the 50s.

Uy Ear: Okay, thanks. And then, David, can you take the question about business development? Yeah, I'm sorry, could you repeat the business development question? You removed the restrictions on the asset purchase restriction on the amended term loan.

David Topper: Thanks Patrick. I'm on slide 21 showing financial results both year-over-year and quarter-over-quarter. As you've heard, our net product revenues for the quarter were $30.9 million, which is up 547% from Q2 of 2023 and 43% from Q1 of this year.

David Topper: Just wondering what you have in mind. Well, the original agreement had a hard dollar cap on asset acquisitions. In our amendment, that has been removed.

Frank Watanabe: Yeah, and then, you know, I think more broadly, you know, I think we think of business development as a potential opportunity, but not a necessity, right? You know, we've got, you know, three very strong products now approved, a fourth one we just filed, you know, we have some earlier stage programs in our pipeline. And we have a pretty high bar in terms of buying things, right? We don't need to go out and buy revenue because of the products that we have and the products we have in our pipeline.

Patrick Burnett: You'll see in a moment that we designed the pivotal trial to highlight this benefit through the use of co-primary endpoints for scalp and body IgA. The reef foam can be used once daily on any area of the body where psoriasis occurs, including hair bearing areas such as the scalp, where creens, lotions, or ointments are suboptimal. So I'm on slide 19. I'm just going to quickly review the data from a raptor or pivotal phase three trial for psoriasis reef foam and scalp and body plaque psoriasis.

Speaker Change #164: For the second quarter, our R&D expenses, which include our clinical research, medical affairs activities, supporting the READ, and manufacturing costs for pipeline candidates were $19.3 million, which is down from Q2 of 2023 due to continued decreases in the development costs of topical refluent labs programs, and also down sequentially from Q1 of this year due to lower spend in our early-stage programs.

Patrick Burnett: We selected patients with at least moderate severity of the scalp and mild moderate or severe disease by body IgA and that's investigator global assessment. We had 432 patients who were randomized to the one to receive a flume laughter vehicle foam over an eight week dosing period. As I mentioned, we measured 2 co-primary endpoints of scalp investigator global assessment or scalp IgA and body investigator global assessment or body IgA success at week eight.

Speaker Change #164: You'll recall that we had some one-time spend in Q1 of 2024 related to 234.

Speaker Change #164: SG&A expenses were $58.2 million for the second quarter versus $46 million in the same period last year as we invested in both our current and future launches, including our field force. Our SG&A expenses were slightly higher quarter over quarter, primarily due to incremental stock comp expense incurred in connection with the retirement of a former executive.

Patrick Burnett: On the right side of the slide, we have a brief summary of our results from the erector trial, which is positive and statistically significant results on both of our co-primary endpoints of SIGA success and body IgA success. Over 66% of patients experienced highly statistically significant improvements in scalp symptoms and approximately 46% of patients also achieved highly statistically significant improvements in body psoriasis with clear separation from vehicle. As a clinician, I'm very pleased to see that the foam performs essentially identically to the cream in treating body psoriasis giving dermatology clinicians the option of treating plaques anywhere on the body, including the scalp is re foam, which should considerably simplify treatment regimens for these patients. The incidence of adverse events was low and generally similar between active treatment and vehicle overall the most common adverse events included headache diarrhea and COVID-19.

Speaker Change #164: We believe we are investing appropriately in our product launches to support the Zareeb growth trajectory while constantly looking for ways to achieve savings and efficiencies.

Speaker Change #164: On page 22, slide 22, you can see we had cash and marketable securities of $363 million on our balance sheet as of June 30, which translates to a cash burn in the quarter of $45 million.

Speaker Change #164: Our current capital, together with our product revenues, enable us to continue operating the business for the foreseeable future, including our continued investment in commercial launches. I'd like to add, as we've said repeatedly, we do not envision a need to come back to the equity market to support our existing businesses.

Speaker Change #164: [inaudible]

Speaker Change #165: I'm now on slide 23. This slide summarizes the key features of the recently signed amendment to our debt agreement with SLR. The management team, together with our board, took advantage of the opportunity to renegotiate our debt to provide Arcutis with considerably improved financial flexibility.

Patrick Burnett: We previously announced these results in September of 2022 and are expecting a strong reception to this new indication based on the positive experience that health care providers have already had with foam and several dermatitis.

Speaker Change #165: The revised deal, which becomes effective at the start of October of this year, provides a number of very important improvements, including an extended maturity to 8129, a decrease in the interest rate of 150 basis points.

David Topper: With that, I'll pass it over to you, David. Thanks, Patrick. I'm on slide 21 showing financial results both year over year and quarter over quarter. As you've heard, our net product revenues for the quarter were 30.9 million, which is up 547% from Q2 of 23 and 43% from Q1 of this year.

Speaker Change #165: The flexibility to repay up to $100 million in the fourth quarter of this year, together with the ability to redraw that money anytime through the first half of 2026, thereby saving us considerable interest expense.

Speaker Change #165: We have also deferred our 6.95% exit fee on the redrawn $100 million to the August 2029 maturity date and removed restrictions on asset purchases.

David Topper: For the second quarter, our R&D expenses, which include our clinical research, medical affairs activity, supportive to read, and manufacturing costs for pipeline candidates, were 19.3 million, which is down from Q2 of 2023 due to continued decreases in the development costs of topical perfume last programs, and also down sequentially from Q1 of this year due to lower spending in our early stage programs. You will call that we had some one-time spending Q1 of 2024 related to 234.

Speaker Change #165: With that, I'll hand it back to Frank for some closing comments and then we'll open for Q&A.

Frank Watanabe: But, you know, we're always looking, you know, and if something came along that we felt we could create additional shareholder value with, we certainly would would think very seriously about that. You know, I think we've built a wonderful development organization, both in R&D and in technical operations. And so, you know, finding something that we think is a diamond in the rough like ARQ 234 is something we're always looking for.

Frank Watanabe: Thanks, David.

Speaker Change #166: Our goal here is to make a positive and meaningful impact on the lives of people afflicted with.

Frank Watanabe: chronic dermatologic diseases. And with Zarave now launched in two indications and the atopic dermatitis launch now underway, we are proud to be helping millions of medical dermatology patients while allowing us at the same time to create additional shareholder value.

David Topper: SG&A expenses were 58.2 million for the second quarter versus 46 million in the same period last year, as we invested in both our current and future launches, including our field force. Our SG&A expenses were slightly higher quarter over quarter primarily due to incremental stock comp expense incurred in connection with the retirement of a former executive. We believe we are investing appropriately in our product launches to support the Zareeb growth trajectory while constantly looking for ways to achieve savings and efficiencies.

Frank Watanabe: We're confident that our strong performance in Q224 portends for a strong and sustained growth for the rest of 2024 and beyond. And with that, we'll wrap it up and open up to Q&A.

Speaker Change #167: Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star 1-1 on your telephone and then wait to hear your name announced.

Frank Watanabe: But we're not looking to do, you know, at this point in the game, you know, some sort of a roll up where we're just adding a bunch of revenue that doesn't really create shareholder value. Okay, thank you. Thank you. Please stand by for our next question. Our next question comes from the line of Serge Belanger with Needham. Your line is open. Good afternoon.

Speaker Change #168: To withdraw your question, please press star 1-1 again.

Speaker Change #168: Please stand by while we compile the Q&A roster.

Serge Belanger: Thanks for taking my question. First one on managed care coverage. Makeover, the last couple updates you've highlighted, you've secured. Take Coverage from Hell.

David Topper: On page 22, you can see we had cash and marketable securities of 353 million on our balance sheet as of June 30, which translates to a cash burn in the quarter of 45 million. Our current capital together with our product revenues enable us to continue operating the business for the foreseeable future, including our continued investment in commercial launches. I'd like to add, as we said repeatedly, we do not envision a need to come back to the equity market to support our existing businesses.

Serge Belanger: Permanent State. Chris, where do you stand on Medicare and, I guess where you expect to be once we flip to 2025 and the COA. Co-Promoted, again, and also related to that, I think in the past, you mentioned that you expected your Medicare and Medicaid business to be as profitable as the commercial. I don't expect anything to change now that you are gone, and the rest of the team.

Speaker Change #169: Our first question comes from the line of Vikram Purahid with Morgan Stanley. Your line is open.

Serge Belanger: Thank you. Thank you. Yeah, sure. Great question, Serge. Todd, you want to take those two?

Vikram Purahid: Hi, good afternoon. Thanks for taking our questions. We had two. First on Zareve, both for psoriasis and also for sebderm. We were just curious if you could comment on your latest findings on refill rates and...

Speaker Change #171: your, I guess, most recent estimates for how many tubes or cans per year you think patients are going to be working through. And then secondly, I just wanted to get your sense on where you think steady-state growth, growth to net, excuse me, could be for

David Topper: I'm now in slide 23. This slide summarizes the key features of the recently signed amendment to our debt agreement with SLR. The management team, together with our board, took advantage of the opportunity to renegotiate our debt to provide our cutest with considerably improved financial flexibility.

Todd Edwards: The phone product once that settles out over the coming quarters. Thanks. Yeah. Hi. Hi, Vikram. Yeah, Todd, you want to take those two?

Todd Edwards: Yeah, absolutely. First, in reference to Medicaid, as mentioned earlier, we've been able to secure coverage in Texas, Florida, and New York. We are, you know, in negotiations with other states for Medicaid and those negotiations are moving forward, and we're having very positive conversations. And so, I expect to pick up additional coverage with Medicaid states as we roll through 2024. In reference to Medicare, we continue to have positive dialogues with the PBMs that manage the Part D plans.

Todd Edwards: Yeah, absolutely. Yeah, thank you, Frank. So in reference to PSO and seb derm and the latest the refill rates

David Topper: The revised deal, which becomes effective at the start of October of this year, provides a number of very important improvements, including an extended maturity to 8129. It decreased in the interest rate of 150 basis points, the flexibility to repay up to 100 million in the fourth quarter of this year, together with the ability to redraw that money anytime through the first half of 2026, thereby saving us considerable interest expense. We've also deferred our 6.95% ecstasy on the region on 100 million to the August 2029 maturity date and remove restrictions on asset purchases.

Speaker Change #172: We see on psoriasis, our refill rates are roughly around 38%.

Todd Edwards: of our total volume. And with SebDerm, we see something similar. Although we do see some signals that there will likely be a higher refill rate on SebDerm eventually than that of psoriasis. So we're very encouraged with the refill rate percentages for both products.

Todd Edwards: And then, in reference to utilization of those products, we're assessing that, and at this time our estimates are...

Todd Edwards: that for a patient, every patient utilization per year.

Frank Watanabe: With that, I'll hand it back to Frank for some closing comments and then we'll open for Q&A. Thanks, David. Our goal here is to make a positive and meaningful impact on the lives of people afflicted with chronic dermatologic diseases.

Todd Edwards: Perseverance will likely be around two cans per year.

Todd Edwards: And for psoriasis, it's going to be like around two to three tubes per year.

Todd Edwards: for psoriasis, and then reference to the the study state gross to net for foam.

Frank Watanabe: And with Zareve now launched in two indications and the atopic dermatitis launch now underway, we are proud to be helping millions of medical dermatology patients while allowing us at the same time to create additional shareholder value. We're confident that our strong performance in Q224 pretends for a strong and sustained growth for the rest of 2024 and beyond.

Speaker Change #173: We've seen an encouraging ramp relative to improvements that are close to net for foam, especially with the line extensions of the three PBMs, and that we anticipate that we're in a very good position to be able to be in that steady state high 50s.

Operator: And with that, we'll wrap it up and open up to Q&A. Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star 1-1 on your telephone and they're a way to hear your name announced. To withdraw your question, please press star 1-1 again. Please stand by while I be compiled the Q&A up roster.

Speaker Change #173: well into the end of this quarter, beginning of the fourth quarter of this year.

Dr. Anderson: Understood. Thank you.

Dr. Anderson: Thank you.

Speaker Change #175: Please stand by for our next question.

Todd Edwards: And we expect, as you mentioned, we roll over 2025 and into the partnership relative to Medicare. We do expect to be able to have some Medicare access as we initiate and go into 2025. Those conversations with those Part D plans are going well, and the coverage would very likely be initiated on 2025, although we are having conversations about the potential to pull some of that forward into 2024.

Speaker Change #176: Our next question comes from the line of Tyler Van Buren with TV Cohen. Your line is open.

Vikram Purohit: Our first question comes from the line of Vikram Purohit with Morgan Stanley. Your line is open. Hi, good afternoon. Thanks for taking our questions. We had two first on the way you both for psoriasis and also for septum. We were just curious if you could comment on your latest findings on refill rates and your I guess most recent estimates for how many tubes or cans per year. You think patients are going to be working through.

Speaker Change #177: Hey guys, congratulations on another solid quarter and all the progress. I have two for you. So the first one is just the prescriptions for the cream have made a nice week-over-week jump over the past two weeks.

Speaker Change #177: So I'm curious to understand if this is pull-through from the early atopic derm launch already and if you believe this could be a new trend line moving forward. And then the second question is considering the latest performance

Vikram Purohit: And then secondly, I just wanted to get your sense on where you think steady state growth, growth genetics. Excuse me. Could be for the phone product once that settles out over the coming quarters. Thanks. Yeah. Hi.

Speaker Change #178: for the foam. Do you believe that the foam and the cream will split overall Zareef sales pretty evenly in the long term or that one of the products will be substantially larger than the other?

Todd Edwards: Hi, Ray from Todd, do you want to take those two? Yeah, absolutely. Yeah.

Todd Edwards: Sure, Todd, I hate to keep doing this to you, but I'm happy to do it. These are great questions, so thank you, Frank. In reference to the Thyssery cream, we are pleased with the most recent week-over-week performance for that product, and I think that there's a couple things here that are

Todd Edwards: And then, Todd, can you also comment on what we expect gross-to-nets to look like in Medicare and Medicaid versus commercial? Yeah, absolutely. So, relative to gross-to-nets, we're in a very good position, and that's a result of the strategic pricing, the WAC pricing for Zareve that falls below the specialty product threshold within Medicare. So, we won't have to pay exorbitant remits to the Part D plans to be able to secure that access. Once we secure that access, it should have a very nominal impact on our gross-to-net.

Todd Edwards: Thank you, Frank. So in reference to PSO and septum and the latest the refill rates. We see on on psoriasis or refill rates or roughly around 38% of our total volume. And with septum, we see something similar. Although we do see some signals that there will likely be a higher refill rate on septum eventually than that of psoriasis. So we're very encouraged with the refill rate percentages for both products. And then in reference to utilization of those products, we're assessing that and at this time our estimates are that for a patient average patient utilization per year for septum will likely be around two cans per year.

Todd Edwards: Likewise, within Medicaid, we're in a very good position, and what we've had to negotiate there relative to discounts, we should have minimal to no impact on our growth relative to the Medicaid access that we're securing. So, we strategically price the product that way, and it's starting to play out strategically for us, both across Medicaid and Medicare, very positively, and maybe a follow up on, for a question regarding the Griffin calculations for the quarter, and we're going to work specifically to. Program, where you count the, Unknown Speaker.

Serge Belanger: And we anticipate that that will, you know, it is a high volume, so it will increase, but modestly, because it is a pretty significant part of our volume that is now flowing through there. And we anticipate this, as we ramp up in atopic dermatitis, we would expect the same thing. Yeah, Serge, I might just emphasize again, you know, What we're really focused on is covered prescriptions, right? Because, you know, shareholders don't make money on a non-covered script. In fact, you know, normally you lose money on a non-covered script.

Serge Belanger: Coercially insured but non-covered script.., and how they don't impact the copay card. I don't know if you can disclose how many... The volume of scripts going through that program, and whether it's increasing or stable, included. Yeah, yeah, I'd be happy to address that question. So relative to the program that we've mentioned, as far as the volume going through that versus the, what I'll frame as the traditional program that we have, we do see a high level of the Zaree volume going through that new program, which is having a positive impact on our gross to net.

Frank Watanabe: So we have taken to telling you guys what percentage the scripts of our scripts are covered. And Todd mentioned, I think, earlier in the conversation, about four and five of the cream scripts currently are being reimbursed by insurance and about three and four of the foam scripts are being reimbursed by insurance. So those are those are fully paid scripts. Right. And so you guys can do the math. And the gross net that we're reporting is on the scripts that are covered because there is no gross net on an uncovered script. Right. Because you're not getting paid.

Frank Watanabe: Yeah, and Frank, on that note, I will mention that if we look at branded topical products, and when you were able to accomplish four out of five prescripts are covered, that's a very high number of scripts as far as covered when you look at branded topical. Yep, good point. Thank you. As a reminder, ladies and gentlemen, that's star 11 to ask the question.

Operator: Please stand by for our next question. Our next question comes from the line of Chris Shibutani with Goldman Sachs. Your line is open.

Chris Shibutani: Great. Thank you very much, Frank and team. Congratulations on the progress. Two questions directionally, if I could. One financial. As I think about operating expenses and the possibility that you could inflect towards positive EBITDA at some point over the next several quarters or years, what are the factors that now that you have the partnership in place are guiding how we should be thinking about your own SG&A leverage?

Chris Shibutani: That seems to be one of the toggles that could help drive towards that profitability here. And then secondly, to talk about the pipeline a little bit, 255, any insight into when we could learn about that? Because, you know, we get inpatient. And what have you done for me lately?

Chris Shibutani: You do have a pipeline. You're focused on dermatology. Tremendous commercial success, but we're going to be increasingly curious in the months ahead and quarters ahead about what else you could be having in terms of portfolio. And particularly in the pipeline. Thank you. Yeah, sure. So, David, you want to take the question around profitability and then Patrick, could you maybe address the. Sure. Well, I'm not going to comment on timing to profitability or breakeven, but what I will say, obviously, if you break SG&A into S on the one hand and G&A on the other hand, selling, obviously, is always going to be pretty closely correlated with revenues.

David Topper: So the way you get to breakeven in this kind of business, obviously, is through economies of scale on the G and the A items, and we're certainly experiencing that already. We watch it very closely, and we look at it in our own internal projections, and I think it's well on its way to the sort of levels that you'd want it to be at. Now, obviously, circumstances can change. When you launch products like AD, for example, or launch a PCP program, you do incur some startup costs and things like that, but in general, if you strip out those one-time items, the G and the A are moving in the direction that you'd like to see them in, to achieve what you're referring to.

David Topper: I think the only the only amplifying comment I would I would add to that is, you know, should as primary care starts to kick in and drive top line revenue, you know, that that's that's, We aren't spending our money or shareholders money, you know, to drive that business, right? That's really coming from the partner side. And so that's something that will give us more leverage in terms of profitability. It's revenues without expenses.

Todd Edwards: creating some definitely some some positive tailwinds for us. And that is that you know with the launches of Reefoam and creating a portfolio of products

Speaker Change #179: This has really resonated with the providers as far as the Zurique cream across these two patient populations of psoriasis and seb derm, creating a halo effect on both products to include the Zurique cream.

Speaker Change #179: Not only that, but we have expanded our field sales organization. We expanded it by roughly 40 representatives. That was fully executed on July 1st of this year.

Todd Edwards: And for psoriasis, it's going to be like around two to three tubes per year for psoriasis. And then reference to the steady state growth and net for phone. We've seen an encouraging ramp relative to improvements in our growth and net for phone, especially with the line extensions of the three pbms. And that we anticipate that we're in a very good position to be able to be in that steady state high 50s. You know, well into the end of this quarter, beginning a fourth quarter of this year.

Operator: Roger said, thank you.

Tyler Van Buren: Thank you.

Todd Edwards: Please stand by for our next question. Our next question comes from the line of Tyler van Buren with TV Cohen. Your line is open. Hey guys, congratulations on another solid quarter and all the progress. I have a two for you. So the first one is just the prescriptions for the cream have made a nice week over week jump over the past two weeks. So I'm curious to understand if this is pulled through from the early a topic derm launch already.

Todd Edwards: And if you believe this could be a new trend line moving forward. And then the second question is considering the latest performance for the phone. Do you believe that the foam in the cream will split overalls or ref sales pretty evenly in the long term or that one of the products will be substantially larger than the other?

Speaker Change #180: Our next question comes from the line of Seamus Fernandez with Guggenheim. Your line is open.

Seamus Fernandez: Alright, thanks, Thanks, very much and congrats on the quarter and all the progress.

Seamus Fernandez: A couple questions on the.

Todd Edwards: Sure. Todd, I hate to keep doing this to you. No, I'm happy to do it. These are great questions. So so thank you for any reference to the dessert cream. We are pleased with the most recent week over week performance for that product. And I think that there's a couple of things here that are creating some some definitely some some positive tell wins for us. And that is that you know with the launches the reform and creating a portfolio of products.

Seamus Fernandez: Progression in <unk>, and how we should think about it.

Seamus Fernandez: One question that I have is just as Cal it comes on to expand the promotion.

Speaker Change #182: <unk> can you help us understand some of the key impact points.

Speaker Change #183: How we should be thinking about the prospect of acceleration there.

Speaker Change #183: And then separately just.

Speaker Change #184: Hoping to understand how you're thinking about.

Speaker Change #185: The opportunity in the pediatric setting.

Todd Edwards: This is really resonated with the providers as far as this is a re cream across these two patient populations of psoriasis and subderm creating a halo effect on both products include this a re cream. Not only that but you know we have expanded our field cells organization. That we expanded it by roughly 40 representatives that was fully executed on July 1st of this year. So I think that additional share of voice is starting to have a positive impact relative to our.

Speaker Change #184: Setting.

Speaker Change #186: Obviously, that's another NDA file would bring the availability of jewelry to a very important younger patient population.

Speaker Change #187: Interested to know how you're thinking about.

Speaker Change #188: The promotion.

Greg: And that in that setting and Greg and the importance of it as well. So I missed your second question Youre asking about the two to five year olds.

Greg: Correct, Yes, yes sure okay.

Todd Edwards: There's a re cream and psoriasis brand performance. And then in reference to you know phone once again we're very encouraged by the performance of the phone especially in the last weeks we're seeing a very positive week over week prescription growth and relative to. You know the split on the business between psoriasis and foam I wouldn't anticipate that we will have a higher. You know weekly tier X prescriptions and eventually in foam that we want psoriasis.

Frank Watanabe: Yeah, that's reassuring on the partnership front. So and then on the pipeline, 255, I think we're in phase one. When do we get there? Patrick, do you want to take that one?

Greg: Todd maybe if you could take the question about color and then Patrick maybe you could kick us off on a question around <unk> just from a clinical standpoint.

Greg: You want to start Patrik.

Patrick: Yes, sure I'll take that Ryan Thanks, Seamus for the question I appreciate it.

Patrick: We're thinking about.

Speaker Change #190: Pediatric AED that two to five year old represents about 10% of the 80 patients that are in dermatologists office.

Todd Edwards: Because the market is so much larger relative to subderm and foam there's no brand competition within that market there's been no innovation in many years. And so it creates a great opportunity relative to in the value proposition that we offer to these patients. And we continue to hear very very encouraging a positive feedback not only from the dermatology community but from patients. So I think that that's what we can expect going forward.

Speaker Change #190: But I think what's really important is to keep in mind that the pediatric AIDS community.

Speaker Change #190: He is already very much involved in our launch given that we have six to 11 year old.

Todd Edwards: Thank you. Please stand by for our next question.

Speaker Change #190: With that one 5% approval that we just had in July as well as adolescents and both of those are kind of core patients for the pediatric <unk>.

Speaker Change #190: Trading community. So I think that we're already really heavily engaged with them and then as we bring that age range down into the two to five year olds, we will just be able to kind of build upon that and if you think back to the data that we had for two to five year old, but very very consistent with what we have for ages six and above.

Seamus Fernandez: Our next question comes from the line of Seamus Fernandez, the Google behind. Your line is open. Well, thanks, thanks very much and congrats on the on the quarter and all progress. A couple of questions on the progression and AB and how we should think about it. One question that I have is just as Calla comes on to, you know, expand the promotion of Zaryve. Can you help us understand, you know, some of the key impact points and how we should be thinking about the prospect of acceleration there.

Speaker Change #190: Seemed like a very natural extension I think as we add on that additional HD indication.

Speaker Change #191: And then treatment facade was clear your first question was it referenced that progression of AED.

Speaker Change #192: Our expanded promotion and kind of what are some of the key impact points.

Patrick Burnett: Yeah, absolutely. So, so, you know, our kind of historical precedent has been that we're when we're conducting a clinical trial, when we get to where we've had the last patient enrolled, then we'll kind of make a statement about when we anticipate having the data, you know, up until that point. You know, we just want to make sure that we're being precise with regard to any prognostication that we provide on on timing.

Speaker Change #193: That's right yeah, yeah, yeah, absolutely. So so first and foremost we're very pleased with the start of the atopic dermatitis launch.

A very positive feedback for the dermatology community.

Seamus Fernandez: And then separately, just hoping to understand how you're thinking about the opportunity in the pediatric AD setting. Obviously, that's another S N D A file would bring the availability of Zaryve to a very important younger patient population. Interested to know how you're thinking about the promotion in that in that setting. And the importance of it as well. Yeah, Seamus. Your second question. You're asking about the two to five year olds. Correct. Yeah, yeah, sure. Okay.

Speaker Change #194: Some of the key impact points that we're looking at is I think first and foremost is for the <unk>.

<unk> electronic Health Records.

To have them, all brought online to where Zurich cream, 0.15% or $80 loaded up into the EHR is we've been actively working on that and I expect that to happen over the next couple of weeks. Yes. There is we've mentioned access to two of the Pbms now have treated atopic dermatitis or the line extension.

Speaker Change #194: I think another key driver accelerator will be when that third PVM comes online, which we anticipate that to come online very likely next month.

Speaker Change #194: The other is is that we have the EHR. We have the access we have the promotion kind of make certain that we're driving coverage scripts.

Patrick Burnett: Todd, maybe if you could take the question about Calla and then Patrick, maybe you could kick us off on a question around AD just from a clinical standpoint. You want to start, Patrick? Yeah, sure. I'll take that. Thanks, Seamus, for the question. Appreciate it. So when we're thinking about pediatric AD, that two to five year old represents about 10% of the AD patients that are in dermatologist office. You know, but I think what's really important is to keep in mind that the pediatric AD community is already very much involved in our launch, given that we have six to 11 year olds with the 0.15% approval that we just had in July, as well as adolescents and both of those are kind of core patients for the pediatric AD training community.

Speaker Change #194: So we are working hand in hand with our.

Speaker Change #194: The pharmacies within our contracted pharmacy network just to make certain that the.

Speaker Change #194: We can drive.

Speaker Change #194: Coverage scripts with those pharmacies, we're also working with the dermatology offices.

Speaker Change #194: Relative to the process and I think we have a significant strategic advantage here and as we've mentioned before that these offices are the pharmacies. The same coverage across the three different products same copay card same contract that pharmacy network. So we see a lot of synergies that are being built here across the offices and pharmacies to <unk>.

Patrick Burnett: So, you know, I think that we're already really heavily engaged with them. And then as we bring the age range down into the two to five year olds will just be able to kind of build upon that. And if you think back to the data that we had for two to five year olds, it's very, very consistent with what we have for ages six and above. So it'll seem like a very natural extension, I think, as we add on that additional age to the indication.

Speaker Change #194: Drivers cover scripts.

Speaker Change #194: So I think we couple those together, we'll be well on our way to a very successful launch.

Yeah, maybe I'll just add specifically with regard to.

Speaker Change #195: <unk> color.

Speaker Change #196: We expect them to start promoting.

Speaker Change #196: In the field probably towards the end of this quarter.

Speaker Change #196: But as I mentioned in my comments, we don't expect to see.

Speaker Change #196: An inflection in <unk> growth from the primary care and pediatric piece, probably this year I would expect that to be more of a contributor in 'twenty five.

Much like when we first launched with plaque psoriasis in dermatology that primary carrier in the pediatric doctors don't know <unk> yet.

Todd Edwards: And then, Seamus, as I was clear, your first question was a reference to the progression of AD and expanded promotion and kind of what are some of the key impact points. That's right. Yeah. Yeah, absolutely. So first and foremost, we're very pleased with the start of the end topic dermatologist launch. We're receiving very positive feedback from the dermatology community. And I think some of the key impact points that we're looking at is, I think first and foremost is for the EHR.

And.

Speaker Change #196: And so there's going to be some education that has to go into that.

Speaker Change #196: But.

Speaker Change #196: Color has relationships with many of these doctors they've got a proven track record in the primary care space. So we feel very good about it but I do think theres going to be a bit of a lag in terms of when we see the impact I would expect to see more than 25 from the primary care deal.

Speaker Change #196: And then <unk>.

Speaker Change #196: With regard to that.

Todd Edwards: EHR is trying to help records to have them all brought online to where Zareed Cream 0.15% or 80 is loaded up into the EHRs. We've been actively working on that. I expect that to happen over the next couple of weeks. The other is we've mentioned access to two of the PBMs now have treated a top of dermatologist of the line extension. I think another key driver at Celebrator will be when that third PBM comes online, which will anticipate that to come online very likely next month.

Speaker Change #196: The pediatric piece I would also just point out that we do anticipate also in the future studying <unk> in three to 24 month olds, that's something probably that will come post approval in the two to five year old, but again I think it's an important opportunity both.

Speaker Change #196: In the dermatology setting, but also especially in the pediatric setting as you know there are many 80 patients below the age of two.

Speaker Change #197: Great and then maybe just one question is there a point, where David and Frank you are.

Speaker Change #197: And Todd are all carefully looking at the value contribution of <unk>.

Todd Edwards: The other is that we have the EHR, we have the access, we have the promotion, kind of make certain that we're driving coverage scripts. So we are working hand in hand with the pharmacies within our contracted pharmacy network, just to make certain that we can drive coverage scripts with those pharmacies. We're also working with the dermatology offices relative to the PA process. And I think we have a significant strategic advantage here.

Speaker Change #197: Water sort of DTC campaign.

Speaker Change #198: Where do you think that starts to become most impactful is that kind of <unk>.

Speaker Change #199: End of 2025 2026.

Speaker Change #200: There have been good returns on DTC advertising, but I'm, just wondering how youre thinking about spend.

Patrick Burnett: So, you know, as we move towards having last patient and we'll like make an announcement on the on 255, you know, just today, we did include an update on the ARQ 234, which is the CD 200 receptor agonist, you know, kind of noting that we're planning to do an IND filing there in 2025. As we get closer to that, we will kind of continue to refine the date. So now we've kind of put that up on the map as well.

Patrick Burnett: Thank you. That's helpful. Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. I will now like to turn the call back to Frank for closing remarks. Okay, well, appreciate everyone making time in their day to join us today and for the great questions. And look forward to speaking to everyone in about 90 days for the next quarter. Thanks again for joining us. Take care. Bye bye. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change #201: So I think.

We have a direct to consumer program ongoing all the time and we've added we've expanded that with with SAB Durbin, we will expand it further with atopic dermatitis I think specifically with regard to broadcast television.

Todd Edwards: And as we mentioned before that these offices or the pharmacies. You know, it's the same coverage across the three different products, same copay card, same contracted pharmacy network. So we see a lot of synergies that are being built here across the offices and pharmacies to drive those cover scripts. So I think we couple those together. We'll be well on our way to a very successful. Mitch.

Speaker Change #201: That's something that we are constantly evaluating.

Don't know if or when we will really ramp up direct broadcast TV.

Speaker Change #202: It's very expensive right, because you're competing against the likes of Coke and and Ford as well as the big biologic companies for buying that advertising space and the economics for direct to consumer TV four <unk>.

Frank Watanabe: Yeah, and they say, maybe that's a little bit bad, you know, specifically with regard to, you know, we expect them to start promoting, you know, in the field, probably towards the end of this quarter. But as I mentioned, my comments, we don't expect to see, you know, an inflection in Zareef growth from the primary care and pediatric piece, probably this year. I would expect that to be more of a contributor in 25, you know, very much like when we first launched with plaque psoriasis in dermatology, the primary care and the pediatric doctors don't know Zareef yet.

Speaker Change #202: $70000 of your product is very different than the economics for a product that it's probably something like $2000 a year. So I wouldn't say at this point, we have made a commitment to going into broadcast television, it's something that we'll continue to evaluate.

Speaker Change #202: But we would only launch that if we felt that there was.

Speaker Change #202: A really compelling business case that drove shareholder value.

Frank Watanabe: And, and so, you know, there's going to be some education that has to go into that. But, you know, Coa has relationships with many of these doctors, they've got a proven track record in the primary care space. So we feel very good about it, but I do think there's going to be a bit of a lag in terms of when we see the impact, you know, I would expect to see more in 25 from the primary care deal.

Speaker Change #203: Great. Thank you.

Thank you.

Speaker Change #204: Please standby for our next question.

Speaker Change #205: Our next question comes kind of OE ear with Mizuho. Your line is open.

OE ear: Hey, guys congrats on a solid quarter. Thanks for taking our questions. So I guess I'm. Our first question is maybe just help us to understand.

Frank Watanabe: And then just with regard to the pediatric piece, I would also just point out that, you know, we do anticipate also in the future studying Zareef in 3 to 24 month olds, that's something probably that will come post approval in the 2 to 5 year old. But again, I think it's an important opportunity both in the dermatology setting, but also especially in the pediatric setting, as you know, there may 80 patients below the age of two. Great.

A little bit about the gross to net changes I think you indicated from low <unk> to high <unk>, but if you just take the sales number and divide it by the total scripts.

Speaker Change #207: The net the implied price seems to be relatively flat.

Speaker Change #207: So that's sort of the first question and the second question is.

Could you maybe just help us.

Frank Watanabe: And then maybe just one question, is there a point where, you know, David and Frank, you are, you know, and Todd are all carefully looking at the value, contribution of the broader, you know, sort of DTC campaign. Where do you think that starts to become most impactful, is that kind of, you know, end of 2025, 2026. There have been good returns on DTC advertising, but just wondering how you're thinking about spend.

Speaker Change #208: I understand.

Speaker Change #209: The proportions of pediatric patients in the derm offices.

Speaker Change #210: Detailed to you versus those in.

Speaker Change #210: In the primary care.

Speaker Change #211: And PD.

Speaker Change #211: Pediatric markets that youre expecting in <unk>.

Speaker Change #211: To go after.

Yeah.

Speaker Change #211: I guess, maybe thirdly, you indicated that the amended.

Frank Watanabe: So, you know, I think we have a direct to consumer program ongoing all the time. And, you know, we've had, we've expanded that with, with said, Durham, and we will expand it further with atopic dermatitis. You know, I think specifically with regard to broadcast TV, you know, that's something that we, we are constantly evaluating. I don't know if or when we will, you know, really ramp up direct broadcast TV, it's, it's very expensive, right, because you're computing against the likes of Coke and, and Ford, as well as, you know, the big biologic companies for buying that advertising space.

Speaker Change #211: The amendment.

Speaker Change #212: <unk> loans now removes restriction on asset purchases just wondering why do you have in mind in terms of BD. Thanks.

Speaker Change #211: Okay great.

Frank Watanabe: And the economics for direct consumer TV for, you know, a $70,000 your product is very different than the economics for a product that, you know, it's probably something like $2,000 a year. So I wouldn't say at this point we've made a commitment to going into broadcast TV. It's something that will continue to evaluate. But, you know, we would only launch that if we felt that there was a really compelling business case that grows your whole value. Great. Thank you. Please stand by for our next question.

Speaker Change #213: So let me take the easiest one first.

Speaker Change #214: So in terms of the proportion of peds.

Speaker Change #215: Children excuse me in endurance versus PCP in peds.

Speaker Change #215: I think that.

Speaker Change #215: Patrick mentioned earlier in dermatology offices, it's only about 10% of the 80 patients theyre seeing our children.

Speaker Change #216: The 90% being adolescence and adults.

Speaker Change #217: It's very different picture in primary care, where in the pediatric offices all of the kids, obviously, our pediatrics and the majority of the in the pediatric <unk> population, we're sitting with pediatricians, which is why we think this PCP co promote is so important there are a lot of adults as well who are seen by PCP.

Speaker Change #217: And not by Dermatologists I think that's both a function of the difficulty of seeing a dermatologist in many cities around the country. It's a six month wait to see a dermatologist, but also and Patrick can comment on this too I think many pcp's feel very comfortable treating.

Uy Ear: Our next question comes out of Oy, Ear, with Muzzuhu. The line is open. Hey guys. Yeah, congrats on a solid quarter. Thanks for taking your questions. So I guess our first question is maybe just help us to understand a little bit about the growth in that change is, I think you indicated. From low 60s to high 50s. But if you just take the sales number and divide it by the total scripts, the, you know, the implied price seems to be relatively flat. Scott, so that's sort of a first question.

Patrick: Zimmer as opposed to psoriasis.

Speaker Change #217: Im.

Speaker Change #217: And then.

Speaker Change #217: Todd maybe you can talk a little bit more about the gross to net changes.

Speaker Change #218: I am not 100% sure I am clear about your comment about the implied price, but Todd can talk about that.

Speaker Change #219: Net in a little more detail than what after he is done we will get David as you address the debt.

David Topper: Business development.

Speaker Change #220: Yes in reference to the to the gross to net some.

Speaker Change #221: What's been driving first what's been driving the improvement in gross to net.

Speaker Change #222: It was primarily driving that is the the.

Todd Edwards: And the second question is, could you maybe just help us understand like the proportions of pediatric patients in the Durham offices that you currently detailed to versus those in the primary care and pediatric markets that you're expecting COA to go after? Yeah, and I guess maybe thirdly, you indicated that the amended term loans as now removes restriction on asset purchases, just wondering what do you have in mind in terms of on BD?

Speaker Change #223: The increased number of covered prescriptions.

Speaker Change #223: We've had in place and Thats.

Speaker Change #224: Kind of a three factors that are driving that first as we have had some improvements in relative to our our market access which gives us the opportunity to increase the percent of product is now being covered.

Speaker Change #224: By the insurance companies.

Speaker Change #224: Other is is that.

Speaker Change #224: We've had as mentioned earlier, a nice acceleration of gross to net improvement was the reform with the three <unk> line extensions that have happened there.

Speaker Change #224: A little bit of a higher volume and <unk>.

Speaker Change #224: Given a positive mix when you blend the two together to give us improvements also.

Speaker Change #224: Within our gross to net in addition to that some of the changes that we've made with our copay card.

Todd Edwards: Thanks. Okay, great. That's a lot. So let me take the easiest one first. So in terms of the proportion of peeds, or children, excuse me, in Durham's versus PCP and peas, I think that Patrick mentioned earlier, in dermatology offices, it's only about 10% of the 80 patients they're seeing are children, the 90% being adolescents and adults. It's very different picture in primary care where, you know, in the pediatric offices, all of the kids obviously are pediatric.

Speaker Change #224: To create efficiencies and covered prescriptions versus non covered decryption and how those are accounted for us also.

Speaker Change #224: We ended two to this improvement.

Speaker Change #225: Well I am not sure if that explains that if there's further questions I'm happy to answer.

Speaker Change #226: Now that that explains it thanks, yes, yes.

Speaker Change #227: On the prior questions I was also wondering whether there was a large proportion of them.

Speaker Change #228: Pediatrics or.

Todd Edwards: And the majority of the pediatric AD population are sitting with pediatricians, which is why we think this PCP code promote is so important. There are a lot of adults as well who are seen by PCPs and not by dermatologists. I think that's, you know, both a function of the difficulty of seeing a dermatologist, you know, in many cities around the country, it's a six months way to a dermatologist, but also in Patrick and coming on this too.

Speaker Change #229: Patients in dose.

Speaker Change #230: Primary psoriasis as well and <unk> done that up not that have gone on touched.

Speaker Change #231: So yes, so we stated before about a third roughly of the primary psoriasis population is treated outside of dermatology.

Speaker Change #231: That's a little bit scarier disease quite frankly for non dermatologists. So they tend to refer more whereas eczema or atopic dermatitis in February dermatitis.

Todd Edwards: I think many PCPs feel very comfortable treating eczema as opposed to psoriasis. And then, you know, Todd, maybe you can talk a little bit more about the gross and net changes. I'm not 100% sure I'm clear about your coming about the implied price, but Todd can talk about the gross nets in a little more detail. And then what, after he's done, we'll get David's address, the debt and business development. Yeah, in reference to the gross and net, what's been driving?

Speaker Change #231: Many doctors are comfortable treating those patients.

Speaker Change #231: In in their own practice, and so about half of the eczema population and roughly half of the <unk> population.

Speaker Change #231: Our outside of Dermatology and then I think it's also important to note that particularly sub derm.

Speaker Change #231: And to some extent eczema psoriasis there are a fair number of patients who are also not being treated.

They've even either given off are they don't realize they have a treatable condition and I think that over time, we may see some growth in the marketplace.

Todd Edwards: First, what's been driving the improvement in gross and net? What's probably been driving that is the increased number of covered prescriptions that we've had in place. And that's, there's kind of a three factors that are driving that first is we have had some improvement and relative to our market access. Let's give us the opportunity to increase the the percent of product is now being covered by the insurance companies. The other is, is that, you know, we've, we've had, as mentioned earlier, a nice acceleration of gross and net improvement was a reform with the three PBM line extensions as it happened there.

Speaker Change #231: Particularly in February dermatitis.

Speaker Change #231: For patients who weren't on drug previously coming onto to our drug.

Speaker Change #231: And then David can you maybe talk a little bit about the debt revisions is specifically a business development sort of our thinking around business development.

David Topper: Oh, I'm, sorry, I thought you wanted us to address some of the math around gross to net which I can do for a moment if you like.

David Topper: So.

Speaker Change #232: Well, if we address your questions around gross to net.

Speaker Change #233: I think yes, I think I was sort of wondering about the mixed.

Speaker Change #232: So.

Todd Edwards: You know, a little bit of a higher volume in subderm that's, you know, give it a positive mix when you blend the two together to give us improvements also within our gross and net. In addition to that, some of the changes that we've made with our copic hard to create efficiencies in covered prescriptions versus non-cover prescriptions and how those are accounted for has also landed to, to this improvement. So I'm not sure if that explained it if there's further questions on happy to answer.

Speaker Change #232: And I think you guys have sort of explained it but David feel free to address the math, yes.

David Topper: The only thing I was going to add the same thing we've talked about multiple times at the end of last quarter right. The way we've chosen to handle <unk>.

Speaker Change #234: Commercially covered.

Speaker Change #235: Commercial insurer, but uncovered Scripps makes it difficult for you to calculate the exact gross to net.

Speaker Change #235: Have all the inputs you need but it is in the <unk>.

Speaker Change #236: Okay. Thanks.

Speaker Change #236: And then David I am sorry to ask a question.

Speaker Change #236: <unk> business development.

Todd Edwards: No, that explains it. Thanks. Yeah, but on the prior questions, I was also wondering, you know, whether there's a large proportion of pediatrics or patients in the primary, you know, and psoriasis as well in subderm that have not, that have gone on. Yes. So, you know, we've stated before about a third roughly of the primary, of the psoriasis population is treated outside of dermatology. You know, that's a little bit scarier disease, quite frankly, for non dermatologist, so they tend to refer more.

David Topper: Yes, I am sorry could you repeat the business development question.

David Topper: You remove the restrictions on the asset risk selection asset purchase we sit down on the amended.

Speaker Change #237: Term loans, just wondering like do you have in mind.

Speaker Change #237: Well.

Speaker Change #238: The original agreement had a had a hard dollar cap.

On after the acquisition.

Speaker Change #239: Our amendment that has been removed.

Speaker Change #239: Yes.

Speaker Change #239: I think more broadly.

Speaker Change #239: I think we think of business development as.

Todd Edwards: Whereas, eczema or atopic dermatitis and separate dermatitis, you know, many doctors are comfortable treating those patients in their own practice. And so about half of the eczema population and roughly half of the sub-derm population are outside of dermatology. And then I think it's also important to note that particularly sub-derm and to some extent, eczema psoriasis, there are a fair number of patients who are also not being treated. You know, they've even either given off or they don't realize they have a treatable condition. And I think that over time, we may see some growth in the marketplace, particularly in in separate dermatitis, going for patients who weren't on drug previously coming on to to our drug.

Speaker Change #240: A potential opportunity, but not a necessity right we've got.

Speaker Change #240: Three very strong products now approved a fourth one we just filed we have some earlier stage programs in our pipeline.

Speaker Change #240: And we have a pretty high bar in terms of buying things right. We don't need to go out and buy revenue because of the products that we have and the products we have in our pipeline.

Speaker Change #240: But.

Speaker Change #240: We're always looking.

Speaker Change #240: And if something came along that we felt we could create additional shareholder value with we certainly would think very seriously about that.

Speaker Change #240: I think we built a wonderful development organization, both in R&D and in technical operations and so finding something that we think is a diamond in the rough like Air Q2 to 34 is something we're always looking for but we're not looking to do at this point in the game some sort of a rollout where we're just adding a bunch of revenue that doesn't really create shareholder value.

Frank Watanabe: And that David, can you maybe talk a little bit about the debt revisions as specifically a business development sort of our thinking around business development. So I'm sorry. I thought you wanted us to address some of the math around growth to that, which I can do for a moment, if you like. So, a way of we address your questions around growth to that. I think, yeah, I think I was sort of wondering about them mixed.

Speaker Change #240: Hi.

Speaker Change #241: Okay. Thank you.

Speaker Change #241: Thank you.

Speaker Change #242: Please standby for our next question.

search Bollinger: Our next question comes from the line of search Bollinger with Needham Your line is open.

search Bollinger: Hey, good afternoon.

Frank Watanabe: And I think you guys have sort of explained it. But David, feel free to address the math. Yes. The only thing I was going to add is the same thing we talked about multiple times at the end of last quarter, right? The way we've chosen to handle commercially cover, I'm sorry, commercially insured, but uncovered scripts makes it difficult for you to calculate the exact growth to net. You don't have all the inputs you need, but it isn't the 50s.

search Bollinger: My question.

search Bollinger: The first one on managed care coverage.

Speaker Change #244: I think over the long.

Speaker Change #245: A couple of updates.

Speaker Change #245: Sure.

Speaker Change #245: Good coverage from.

Speaker Change #245: Prominent states.

Speaker Change #246: Just curious where you stand on Medicare.

Speaker Change #247: I guess, what do you expect could be once we flip to 2025 and Nicola co.

Speaker Change #246: Co promote.

Speaker Change #246: Again.

Speaker Change #248: And also related to that I think in the past you've mentioned that you expected your Medicare and Medicaid book of business.

Frank Watanabe: Okay. Thanks. And then David. Yeah, I'm sorry. Could you repeat the business development question? You removed the restrictions on the asset restrictions, asset purchase restrictions on the amended term loans, just wondering what you have in mind. Well, the original agreement had a hard dollar cap on asset acquisitions. That's in our amendment that has been removed. Yeah. And then, you know, I think we're more broadly. You know, I think we think of business development as a potential opportunity, but not a necessity, right?

Speaker Change #246: <unk> to be profitable.

Speaker Change #246: The commercial market.

Speaker Change #249: Is that correct.

Speaker Change #249: It can change now that you.

Speaker Change #249: Turning to procure that coverage.

Speaker Change #250: Yes sure.

Tom: Great question Tom.

Tom: Todd do you want to take those two yes. So we first in reference to Medicaid as mentioned earlier, we've been able to secure coverage.

Speaker Change #252: Is Florida.

Speaker Change #252: New York.

Speaker Change #252: <unk>.

Speaker Change #254: In negotiations with other states for Medicaid and those that goes the negotiations are moving forward and we're having very positive conversations and so.

Speaker Change #254: I expect to pick up additional coverage with Medicaid states as we roll through 2024.

Frank Watanabe: You know, we've got, you know, we very strong products now approved a fourth one, we just filed, you know, we have some earlier stage programs in our pipeline. And we have a pretty high bar in terms of buying things, right? We don't need to go out and buy revenue because of the products that we have in the products we have in our pipeline. But, you know, we're always looking, you know, and if something came along that we felt we could create additional shareholder value with, we certainly would would think very seriously about that.

Speaker Change #254: In reference to Medicare, we continue to have positive dialogues with the pbms that manage the part D plans and we expect as you mentioned, we rollover 2025 and enter the Corp.

Speaker Change #254: Partnership relative.

Speaker Change #254: To Medicare we.

Speaker Change #254: We do expect to be able to have some Medicare access.

Speaker Change #254: As we initiate and go into 2025, those conversations with those part D plans are going well and the coverage would very likely be initiated on 2025, although we are having conversations about the potential to pull some of that forward.

Frank Watanabe: You know, I think we built a wonderful development organization, both in R&D and in technical operations. And so, you know, finding something that we think is a diamond in the rough like ARQ 234 is something we're always looking for. But we're not looking to do, you know, at this point in the game, you know, some sort of a roll up where we're just adding a bunch of revenue that doesn't really create shareholder value.

Speaker Change #254: Into 2024.

Speaker Change #254: And then Todd can you also comment on what we expect gross to nets to look like Medicare and Medicaid versus commercial yes, so where we sit relative to gross to net.

Todd Edwards: We're in a very good position and that's a result of the strategic pricing the WAC pricing towards read that falls below the specialty product threshold within.

David Topper: Hi. Okay, thank you. Thank you. Please stand by for our next question. Our next question comes from the line of Serge Belanger with Needham, Yilan is open. Take it up, please. This is my question. The first one on managed their coverage. I think over the last couple of days, you highlighted your care and take coverage from some prominent space. Just Chris, where you stand on Medicare and I guess where you expect to be once we flip to 2025 and the COA, co-promote, began and also related to that.

Speaker Change #255: Medicare So we won't have to pay.

Todd Edwards: Exorbitant.

Todd Edwards: <unk> to the part D plans to go to secure that access.

Once we secure that access it should have a very nominal impact on our gross to net.

Todd Edwards: Likewise within Medicaid, we're in a very good position and what we've had to negotiate there relative to discounts.

Todd Edwards: We should have.

Todd Edwards: Minimal to no impact.

Todd Edwards: On our growth relative to the Medicaid access to securing so.

Todd Edwards: We strategically priced product that way and thats, starting to play out strategic before spokes across Medicaid Medicare very positively.

David Topper: I think in the past, you've mentioned that you expected your Medicare and Medicaid book business to be as profitable as the commercial process, as that I've been with expectation change now that you signed the picture in that coverage. Yeah, sure. Great question, Serge. Todd, do you want to take those two? Yeah, absolutely. First, the reference to Medicaid. As mentioned earlier, we've been almost secure coverage in Texas, Florida, in New York. We are, you know, in negotiations with other states for Medicaid and those to cause negotiations are moving forward and we're having very positive conversations.

Todd Edwards: Okay.

Speaker Change #256: We have a follow up on world.

Speaker Change #257: Question regarding the <unk> connect.

Speaker Change #258: And that calculation for the quarter.

Speaker Change #259: More specifically to <unk>.

Speaker Change #260: Program, where you count.

Speaker Change #260: Commercially insured the non covered scripts and how they don't impact of co pay cards.

David Topper: And so I expect to pick up additional coverage. With Medicaid states as we roll through 2024. In reference to Medicare, we continue to have positive dialogues with the the PBMs that manage the Part D plans. And we expect, as you mentioned, we roll over 2025 and into the core partnership relative to Medicare, we do expect to be able to have some Medicare access as we initiate and go into 2025. Those conversations with those Part D plans are going well.

Speaker Change #261: I'm, taking this call.

Speaker Change #261: The volume of scripts going through that program.

Whether it's increasing or stable.

Speaker Change #262: Yes, yes, I'd be happy to address that question. So relative to the program that we mentioned is for the volume going through that versus the what ill frame is the traditional <unk>.

Speaker Change #262: Program that we have we.

Speaker Change #262: We do see a high level of the re volume going through that new program, which is having a positive impact on our gross to net.

Speaker Change #262: We anticipate that that will.

Speaker Change #262: It is a high volume so it will increase but modestly because it is a pretty significant part of our volume that is now flowing through there.

Speaker Change #262: And we anticipate this as we ramp up in atopic dermatitis, we would expect the same thing.

Speaker Change #262: Yes sure.

Speaker Change #262: Just to emphasize again.

David Topper: And the coverage would very likely be initiated on 2025, although we are having conversations about the potential to pull some of that forward into 2024. And then, Todd, can you also comment on what we expect gross tenets to look at Medicare and Medicaid versus commercial? Yeah, absolutely. So relative to gross tenets, we're in a very good position and that's a result of the strategic pricing and the whack pricing for Zaree that falls below the specialty product threshold within Medicare.

Speaker Change #262: Okay.

Speaker Change #263: What we're really focused on is covered prescriptions right.

Todd Edwards: Shareholders don't make money on our non covered scrap in fact normally you lose money on an uncovered script. So we have taken to telling you guys what percentage the scripts of our scripts are covered and Todd mentioned I think earlier in the conversation about four and five of the cream scripts currently are being reimbursed by insurance and about three and four of.

Todd Edwards: Foam scripts are being reimbursed by insurance.

Those are fully paid scripts.

David Topper: So we won't have to pay, you know, exorbitant rebates to the Part D plans to build a secure that access. Once we secure that access, it should have a very nominal impact on our gross tenets. Likewise, within Medicaid, we're in a very good position and what we've had to negotiate there relative to discounts. We should have, you know, minimal to no impact on our growth to the Medicaid access to persecution. So, you know, we strategically price the product that way and it's starting to play out strategically before it's both across Medicaid and Medicare very positively.

Speaker Change #264: So you guys can do the math and the gross net that we're reporting is on the scripts that are covered because there is no gross to net and uncovered script right because youre not getting paid anything for them.

Speaker Change #264: Yes, Frank on that note I will mention that when you look at branded topical products and we use when you are able to accomplish four out of five for scripts are covered that's a.

Speaker Change #264: That's a very high number of scripts as far as coverage when you look at branded topical.

Speaker Change #265: Yes, thanks for the color.

Speaker Change #265: Yep.

Speaker Change #266: Thank you.

Speaker Change #267: As a reminder, ladies and gentlemen that stopped one wanted to ask a question.

Speaker Change #268: Please standby for our next question.

Speaker Change #269: Our next question comes from the line of Chris <unk> with Goldman Sachs. Your line is open.

Todd Edwards: A program where you count, commercially insured, but non-covered scripts, and how they don't impact the co-pay card. I don't know if you can disclose how many, the volume of scripts will enter that program, and whether it's increasing or stable, I can clearly report it. Yeah, yeah, I'd be happy to address that question. So relative to the program that we've mentioned as far as the volume going through that versus the, what I'll frame as the traditional program that we have, we do see a high level of the Zaree volume going through that new program, which is having a positive impact on our growth and that, and we anticipate that that will, it is a high volume, so it will increase, but modestly because it is a pretty significant part of our volume that is now flowing through there.

Chris: Great. Thank you very much Frank and team congratulations on the progress to question Directionally, If I could one financial Okay think about operating expenses and the possibility that you could inflect towards.

Speaker Change #271: Positive EBITDA at some point over the next.

Speaker Change #272: Several quarters or years, what are the factors right now that you have a partnership in place are guiding how we should be thinking about your own SG&A leverage that seems to be one of the toggles that could help drive towards that profitability here.

Speaker Change #273: And then secondly to talk about the pipeline a little bit to five 5%.

Speaker Change #274: Any insight into when we can learn about that because you know we get inpatient and what have you done for me lately you do have a pipeline you focus on dermatology.

Speaker Change #275: <unk> tremendous commercial success, but we're going to be increasingly curious in the months ahead and quarters ahead about what else you could be having in terms of portfolio and particularly in the pipeline. Thank you.

Todd Edwards: And we anticipate this as we ramp up in a copy to Arcutis, we would expect the same thing. Yeah, and you know, Serge, I might just emphasize, again, you know, what we're really focused on is covered prescriptions, right? Because you know, shareholders don't make money on a non-covered script, in fact, you know, normally you lose money on a non-covered script. So we have taken to telling you guys what percentage the scripts or scripts are covered, and Todd mentioned, I think, earlier in the conversation, about 4 and 5 to the cream scripts currently are being reimbursed by insurance, and about 3 and 4 of the foam scripts are being reimbursed by insurance.

Todd Edwards: So those are, those are fully paid scripts, right? And so you guys can do the math, and the growth net that we're reporting is on the scripts that are covered, because there is no growth to men on non-covered script, right? Because you're not getting paid in any form. Yeah, Frank, on that note, I will mention that we look at branded topical products, and we used, when you were able to accomplish 4 out of 5 prescriptions are covered.

Speaker Change #276: Yes sure ship so David do you want to take the question around profitability and then Patrick could you maybe address the pipeline.

Speaker Change #275: Yeah.

Speaker Change #275: Sure.

Speaker Change #277: Im not going to comment on timing to profitability or breakeven, but what I will say obviously.

Speaker Change #278: If you break SG&A and to ask on the one hand and G&A on the other hand, felling, obviously is always going to be pretty closely correlated with with with revenue. So.

Speaker Change #278: The way the way you get to break even in this kind of business, obviously is through economies of scale on the <unk>.

EMEA items right and we are certainly experiencing that already we watch it very closely we look at it in our own internal projections.

Speaker Change #278: I think it's.

Speaker Change #278: Well on its way to sort of level that you would want it to be okay. Now obviously circumstances can change.

Speaker Change #278: When you launch products like <unk> for example, or launch a PCP program you do incur some startup costs and things like that but in general if you strip out those one time items, the G&A or are moving in the direction that you'd like to see them.

Todd Edwards: That's a, that's a very high number of scripts as far as covered when you look at branded topicals. Yep, we should go. Good point, yep. Thank you. As a reminder, ladies and gentlemen, that start 1-1 to ask the question. Please stand by for our next question. Our next question comes from the line of Chris Shabby-Tagney with Goldman Sachs. Yalan is open. Great. Thank you very much. Frank and Dean, congratulations on the progress.

Speaker Change #279: To achieve what you're referring to.

Speaker Change #279: Okay.

Speaker Change #280: The only amplifying comment I would add to that is.

Speaker Change #280: And as primary care starts to kick in and drive topline revenue.

Speaker Change #280: That's.

Speaker Change #281: We are spending our money or shareholders' money.

Todd Edwards: Two question directionally, if I could, one financial. If I think about operating expenses and the possibility that you could inflect towards positive EBITDA at some point over the next several quarters or years, what are the factors that now that you have the partnership in place are guiding how we should be thinking about your own S-GNA levers? That seems to be one of the troubles that could help drive towards that possibility here.

Speaker Change #282: To drive that business right, that's really coming from the partner side.

Speaker Change #282: So thats something that will give us more leverage in terms of profitability its revenues without expenses really.

Speaker Change #283: Yes, that's reassuring on the partnership fraud, So and then on the pipeline 255, I think we are in phase one when do we get it yes, I'm not sure if all Patrick you can take that one.

Patrick: Yeah, absolutely. So so yeah, our kind of historical precedent has been conducting a clinical trial when we get to where we've had the last patient enrolled then we'll kind of make a statement about when we anticipate having that data up until that point.

Todd Edwards: And then secondly, to talk about the pipeline a little bit, 255, any insight into when we could learn about that, because you know we get impatient, and what have you done for me lately? You do have a pipeline, your focus on dermatology, tremendous commercial success, but we're going to be increasing the curious in the months ahead and quarters ahead about what else you could be having in terms of portfolio and particularly in the pipeline.

We just want to make sure that we're being precise with regard to any prognostication that we provide on a on timing.

Patrick: As we move towards having last patient and will like making an announcement on the on two five.

Todd Edwards: Thank you. Yeah, Shabby. David, you want to take the question around profitability and then Patrick, could you maybe address these? I'm not going to comment on timing to profitability or break even, but what I will say, obviously if you break SGNA into S on the one hand and GNA on the other hand, selling obviously is always going to be pretty closely correlated with revenue. So the way you get to break even in this kind of business obviously is through economies of scale on the G and the eight items.

Patrick: Just today. We did include an update on the <unk> hundred 34, which is the C V 200.

Speaker Change #284: Ms. After agonist kind of noting that we're planning to do an IND filing there in 2025 as we get closer to that we will kind of continue to refine the data. So now we've kind of put that up on the map as well today.

Speaker Change #284: Thank you that's helpful.

Speaker Change #285: Thank you.

Speaker Change #286: Ladies and gentlemen, im showing no further questions in the queue.

Todd Edwards: And we're certainly experiencing that already. We watch it very closely. We look at it in our own internal projections and I think it's well on its way to the sort of levels that you'd want it to be at. Now obviously circumstances can change when you launch products like AD for example or launch a PCP program, you do incur some startup costs and things like that. But in general, we strip out those one time items that G and the A are moving in the direction that you'd like to see them in to achieve what you're referring to.

Speaker Change #286: I would now like to turn the call back to Frank for closing remarks.

Frank Watanabe: Okay, well I appreciate everyone, making time in their day to join US today and for the great questions and look forward to speaking to everyone. In about 90 days for the next quarter. Thanks again for joining us take care Bye bye.

Speaker Change #287: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

Todd Edwards: I think maybe you'll be the only Amphine comment I would add to that is you should as primary care starts to kick in and drive top line revenue, you know, that's, that's. We aren't spending our money or shareholders money, you know, to drive that business, right? That that's really coming from the partner side. And so that that's something that will will give us more leverage in terms of profitability. It's revenues with that expenses really. Yeah, that reassuring on the partnership front.

David Topper: So and then on the pipeline 255. I think we're in phase one. When do we get a file? Patrick, you want to take that one? Yeah, absolutely. So, so, you know, our kind of historical precedent has been that we're conducting a clinical trial. When we get to where we've had the last patient enrolled, then we'll kind of make a statement about when we anticipate having the data. You know, up until that point, you know, we just want to make sure that we're being precise with regard to any prognostication that we provide on timing.

David Topper: So, you know, as we move towards having last patient and we'll like making an announcement on the on 255, you know, just today we did include an update on the air to 234, which is the CD 200 receptor agonist, you know, kind of noting that we're planning to do an I and D filing there in 2025. Yeah, as we get closer to that, we will kind of continue to refine the date. So now we've kind of put that up on the map as well today. Thank you, that's helpful. Thank you. Ladies and gentlemen, I'm showing no further questions in the queue.

Frank Watanabe: I will now let this on the call back to Frank for closing remarks. Okay. Well, I appreciate everyone making time in their day to join us today and for the great questions and look forward to speaking to everyone in about 90 days for the next quarter. Thanks again for joining us. Take care. Bye.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.