管理層發言
Ladies and gentlemen, thank you for standing by. Welcome to Arcutis Biotherapeutics Inc. Second Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during this session, you will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Brian Schoelkopf, Head of Investor Relations. Please go ahead.
Thank you, Michelle. Good afternoon, everyone, and thank you for joining us today to review our second quarter 2026 financial results and business update. Slides for today's call are available on the Investors section of the website. Joining me on the call today are Frank Watanabe, President and CEO of Arcutis, Patrick Burnett, Chief Medical Officer, and Latha Vairavan, Chief Financial Officer. I would like to remind everyone that we will be making forward-looking statements during this call. These statements are subject to certain risks and uncertainties and our actual results may differ. We encourage you to review all the company's filings with the Securities and Exchange Commission including descriptions of our business and risk factors. With that, let me hand it over to Frank to begin today's call.
Thanks, Brian, and good afternoon, everyone. As always, we appreciate you making the time to join us on our quarterly update call. I am going to start this afternoon with a review of our very productive second quarter as we continue to deliver meaningful innovation for patients with chronic inflammatory skin diseases and continue to execute against our grow, expand, build corporate strategy. Todd Edwards is not able to join us today, so I will walk you through a commercial update, followed by Patrick for an R&D update, and finally, Latha will review the quarter's financial results before we open it up to questions. I am on slide 5 in the deck. As a reminder, our three-pillar strategy to sustain near- and long-term growth includes, first, growing our core ZORYVE business in our approved indications; second, expanding into additional indications where ZORYVE's unique profile as a targeted and potent PDE4 inhibitor has significant potential to address persistent therapeutic gaps; and third, leveraging our deep clinical expertise and infrastructure to build our pipeline beyond these programs. I am happy to report that we once again made substantial progress across all three pillars during the second quarter. Starting with our grow pillar, our in-line ZORYVE business continues to strengthen and grow as we expand the reach and relevance of this medicine to the tens of millions of individuals with chronic inflammatory skin conditions in the U.S. who need new innovative therapeutic options to manage plaque psoriasis, seborrheic dermatitis, and atopic dermatitis. As ZORYVE continues to grow, we are now in a position to reinvest the significant capital generated back into the business, creating a virtuous cycle of innovation that extends our transformative impact to more patients both with ZORYVE and with current and potential future pipeline assets. Our investment in innovation encompasses a broad range of value-creating initiatives across the business that we are advancing in parallel—from multiple clinical projects to impactful patient access initiatives. Some highlights: at the end of June, we received FDA approval for ZORYVE cream 0.3% for the treatment of plaque psoriasis in children as young as age 2. This marks the seventh FDA approval for ZORYVE in four years, a remarkable accomplishment for a small company like Arcutis. Importantly, this milestone enables us to address a significant treatment gap by introducing the first once-daily steroid-free treatment for plaque psoriasis approved down to age 2. In July, the FDA also accepted our supplemental NDA for ZORYVE cream 0.05% for the treatment of mild to moderate atopic dermatitis in infants down to 3 months, with a PDUFA date set for February 23, 2027. I was recently at the Society for Pediatric Dermatology and was awestruck by the level of anticipation and excitement in the pediatric dermatology community about this potential approval, which would address an urgent unmet need for a once-daily nonsteroidal in these youngest atopic dermatitis sufferers. Both of these regulatory milestones demonstrate our commitment to delivering meaningful innovation to both adults and children across all age groups, including the youngest children impacted by these chronic inflammatory skin diseases and their caregivers. Our commitment to meaningful innovation for patients goes beyond bringing new therapies to market. We recognize that managing a chronic inflammatory skin disease like psoriasis, atopic dermatitis, or seborrheic dermatitis can be extremely challenging and burdensome for individuals and their families. With that in mind, we are innovating to enhance the patient experience and facilitate seamless access to treatment to help ease the burden on the patient and caregiver as well as the health care provider. We will detail some of our initiatives around patient access that specifically reduce barriers to care and streamline the patient journey. Our new virtual health platform and our strategic partnership with a leading AI-enabled patient access support tool are the first steps to emerge from our broader Patient Access Innovation Workstream. We are excited about these initiatives, which I will explain in greater detail shortly. Turning to expand, our second strategic pillar, we continue to make important progress evaluating the potential of ZORYVE in additional chronic inflammatory skin conditions. Specifically, we have now fully enrolled the Phase 2 proof-of-concept trial of ZORYVE in the treatment of vitiligo, and we continue to enroll the Phase 2 proof-of-concept trials of ZORYVE as a treatment for hidradenitis suppurativa. On previous calls, we have shared the extensive and growing list of conditions where clinicians have published case reports or case series showing promising signals of ZORYVE efficacy, suggesting ZORYVE's unique profile could offer additional patients an innovative nonsteroidal therapeutic option. We continue to evaluate these other potential indications and anticipate initiating one or more additional proof-of-concept trials this year. Turning to the build pillar, we continue to advance our innovative pipeline. Enrollment is ongoing in the Phase 1a/1b trial of ARQ-34, our novel biologic targeting CD200R as a potential treatment for moderate to severe atopic dermatitis. By targeting CD200R, which plays a central role in both innate and adaptive immunity, we believe ARQ-34 could be an important first-line systemic therapy and could also address the need for a treatment for patients with atopic dermatitis who relapse on or are refractory to IL-13 drugs. External innovation will likely play a central role in expanding our pipeline. We are seeing a marked increase in deal flow recently in dermatology and adjacent inflammatory areas, and our team remains actively engaged in evaluating a range of external assets. As Latha will describe, we had another very strong quarter financially. This level of performance and the cash flow it generates enables us to continue to invest in innovation while staying true to our biotech roots and mission. For the remainder of this year, you should expect consistent execution against our stated strategy, opportunistic reinvestment in the business, and a steadfast commitment to creating long-term value for both patients and shareholders. Based on the strength of our ZORYVE business to date, and in light of the incremental investments we are making to sustain demand for ZORYVE, we are delighted to raise our full-year 2026 sales guidance from the previous range of $480 million to $495 million to a range of $525 million to $540 million. You will recall we made no changes to our revenue guidance during our Q1 earnings call and we do not anticipate revising it every quarter, so this guidance really reflects the momentum the business has seen through the first half of the year. Now, a bit more detail on commercial results for the quarter. I am on slide 7. We continue to see robust sales performance and demand-driven growth in the second quarter, with net product revenues of $129.9 million, representing a 59% increase from the second quarter of 2025 and a 23% increase over Q1. Our consistently strong quarterly revenue underscores the momentum and enduring strength of the ZORYVE franchise. As expected, our gross-to-net rate improved incrementally from the prior quarter and continues to remain stable in the 50s. Looking ahead to the third quarter, we expect quarter-over-quarter net sales growth driven by sustained momentum in patient demand. Slide 8: weekly prescriptions of ZORYVE on a rolling 4-week average show sustained growth across the portfolio, and we reached a new high watermark for quarterly demand with more than 280,000 prescriptions in the quarter across all indications and formulations for ZORYVE. ZORYVE continues to experience substantial prescription growth. We anticipate this growing demand will continue through the duration of this year and beyond and will be the primary driver of ZORYVE's revenue expansion. The most important driver of ZORYVE's growth will remain conversion from topical steroids to advanced targeted topical therapies like ZORYVE as health care providers' and patients' perceptions of the risks of chronic topical steroid use evolve. Slide 9: I want to expand on the patient access initiatives we introduced this quarter. Improving patient access is an important dimension of meaningful innovation as therapeutic innovation is meaningless if patients cannot access new therapies. These patient access initiatives are separate from but complementary to our payer access efforts. They are focused on enabling seamless fulfillment and an efficient post-prescription process to help patients access ZORYVE rapidly, reliably, and efficiently. We are broadening the scope of our patient access activities with the launch of our virtual health platform and investments in AI-enabled tools that support efficient prescription fulfillment—two distinct initiatives aimed at facilitating more seamless access to ZORYVE. First, the virtual health platform, announced in June. Patients have rapidly changed how they obtain health care since the pandemic, and many seek more convenient, flexible ways to receive care. The platform meets patients where they are by helping address common barriers to dermatology care such as long wait times and the absence of specialized dermatology care in some geographies. The platform provides an additional pathway for individuals who might otherwise delay or forego specialized dermatology treatment. It is designed to complement and not replace traditional in-office dermatology care. Our goal is to help more individuals access therapies they need while continuing to partner with providers across dermatology, primary care, and pediatrics. Board-certified independent dermatologists on the platform evaluate, diagnose, and determine appropriate treatment based on their clinical judgment. Arcutis does not influence diagnoses, clinical decision making, or prescribing decisions made through the platform. If prescribed, ZORYVE prescriptions are coordinated through a national pharmacy hub designed to support a seamless experience including insurance support and at-home delivery. We believe ZORYVE has an ideal profile for the virtual health model. Dermatologists can prescribe ZORYVE confidently given its demonstrated efficacy, safety, and tolerability without worrying about patients applying the drug to an inappropriate area, and with the knowledge that the patient can use ZORYVE for any duration. It treats the three most common inflammatory diseases, all of which can be diagnosed visually using telehealth tools. Individuals suffering from these diseases are motivated to seek an effective therapy due to the burden of their symptoms. We are in the early days of the rollout, but are already seeing signals of positive impact and are confident it will meaningfully expand patient access to ZORYVE, particularly when coupled with other demand generation efforts like our Free to Be Me campaign. In late July, we launched our second patient access innovation by partnering with a leading AI-enabled prescription workflow platform to streamline the post-prescription process for ZORYVE in the dermatology office. The process for getting a prescribed therapy to a patient has grown increasingly complex and time intensive. Through this partnership, we help streamline patient access to ZORYVE after they receive the prescription. The partner is widely adopted across dermatology offices nationwide. In practices where the tool is implemented, after providers initiate a prescription, the platform helps navigate and systematize the workflow. It supports patients with real-time visibility into the process from the moment of prescription as well as other critical information and access resources. As part of the collaboration with Arcutis, the platform provides customized prompts and alerts to streamline the steps between a clinical decision and a patient starting ZORYVE, including prior authorization, financial assessment, and fulfillment routing embedded directly into provider workflows. Harnessing these types of technology-based solutions to help patients and providers with the fulfillment process for ZORYVE is where we need to be. Slide 10: these patient access initiatives are examples of how we are reinvesting the cash flow generated by ZORYVE back into the franchise to drive sustained growth and an inflection in sales in 2027 and beyond. Of course, all efforts to drive ZORYVE's growth would be meaningless without the solid foundation of ZORYVE's clinical profile. ZORYVE's rapid and robust efficacy across multiple inflammatory dermatoses, paired with its exceptional safety and tolerability profile and its patient-friendly formulation, make it a compelling choice for providers and patients looking to manage these chronic conditions, especially against the backdrop of growing concern about prolonged topical steroid use. Our commercial efforts focus on generating awareness of this differentiated profile with clinicians and patients and enabling efficient patient access when it is identified as the appropriate intervention. Building on that foundation are three broad categories of demand initiatives. First, investments to strengthen our commercial infrastructure through targeted additions to our sales force. Dermatology sales force expansion has been completed, with our new dermatology specialty reps hitting the field in early May. Since then, they have been gaining familiarity with their customers, and we anticipate beginning to see the impact on growth from these reps starting in the third quarter. We have also completed the first phase build-out of our primary care and pediatric organization, recently completing hiring of this targeted team. We anticipate this salesforce will be in the field interacting with primary care providers and pediatricians by the end of this month and expect to begin seeing the impact of this new team by 2027. We are adopting a highly targeted approach focusing on high-volume, early-adopter PCPs and pediatricians concentrated in major metropolitan areas. Second, direct-to-consumer efforts. We are driving meaningful patient engagement through our Free to Be Me patient awareness campaign featuring Tori Spelling, her daughter Stella McDermott, and professional golfer Max Homa. This campaign is helping to drive awareness of treatment options for patients with atopic dermatitis, seborrheic dermatitis, and plaque psoriasis and the promise of ZORYVE across these indications. The campaign resonates across a broad range of patient demographics. The effectiveness of this campaign is bolstered by our virtual health platform, providing a direct route to a dermatologist for individuals who discover ZORYVE through Free to Be Me. Third, facilitating seamless patient access to ZORYVE, which includes the virtual health platform and AI-enabled prescription workflow efforts described earlier. There are additional initiatives to come, and we look forward to sharing details at a future date. With that, I will take a breath and turn the call over to Patrick for an R&D update.
Thanks, Frank. I am on slide 12. As Frank highlighted at the start of today's call, our focus is across the grow, expand, and build pillars of our corporate strategy. I would like to provide additional context for the clinical components of each pillar. Before detailing our various clinical initiatives, I want to emphasize the breadth of our ongoing activities to further bolster the profile of ZORYVE. This chart shows the range of clinical programs we are pursuing to broaden our patient population, expand into new disease areas where we have early signs of efficacy, and better define the unique aspects of ZORYVE's therapeutic profile. The breadth of approved and potential uses of ZORYVE, supported by its pleiotropic mechanism of action and its safety and tolerability profile, underpins our belief that ZORYVE is uniquely well positioned to supplant topical corticosteroids in the management of inflammatory dermatoses. Key clinical updates for the quarter: in late June, the FDA approved our supplemental NDA to expand the indication for ZORYVE cream 0.3% for topical treatment of plaque psoriasis, including in intertriginous areas, to children down to age 2. As a practicing dermatologist, I can personally attest that treating young children with plaque psoriasis presents unique challenges. Safety and tolerability concerns are amplified in young children who may face decades of treatment and are particularly susceptible to both local and systemic steroid exposure risks such as HPA suppression. In our trials in children as low as 2 years of age with plaque psoriasis, ZORYVE 0.3% demonstrated safety, tolerability, and efficacy comparable to that already demonstrated in adults and adolescents. ZORYVE is now the first once-daily steroid-free treatment for plaque psoriasis approved down to age 2. It provides providers, parents, and caregivers with an advanced targeted topical therapy that can be used anywhere on the body for any duration of time, addressing a significant treatment gap for this vulnerable population. In July, the FDA accepted our supplemental NDA for ZORYVE cream 0.05% for treatment of mild to moderate atopic dermatitis in infants down to 3 months with a PDUFA date set for February 23, 2027. We submitted this application just three months after having read out topline results from our INTEGUMENT-Infant trial, reflecting the speed with which our team is moving to meet the urgency expressed by providers who care for these youngest atopic dermatitis patients. Treating infants is challenging because infant skin is not fully developed, which can lead to increased systemic absorption of topical treatments like steroids, and these youngest patients often present with more extensive disease than adolescents and adults. During the quarter, we also initiated two new trials: one in adults to better elucidate ZORYVE's impact on pruritus (INTEGUMENT-Itch), based on compelling data from the INTEGUMENT-Infant trial showing itch reductions within 10 minutes of first application; and a trial to evaluate the impact of ZORYVE on nail psoriasis, a notoriously difficult-to-treat presentation where we have seen exciting signals of efficacy in case reports. Turning to potential new indications, we have completed enrollment in our Phase 2 proof-of-concept trial in vitiligo, and we continue to enroll the hidradenitis suppurativa (HS) Phase 2 proof-of-concept trials. We remain on track to provide a readout for the vitiligo trial and a decision on whether to advance the program in Q4 of this year. We remain on track for a similar readout for our HS program in Q1 of 2027. In the HS program, we have trials evaluating ZORYVE's safety and efficacy as well as a study looking at gene expression following ZORYVE treatment in HS patients. As we advance these Phase 2 vitiligo and HS studies, we continue to evaluate other diseases for similar proof-of-concept studies and anticipate starting one or more additional proof-of-concept studies in the latter half of the year. During Q2, we also initiated a trial evaluating the impact of ZORYVE cream 0.3% on cutaneous adverse events in cancer patients receiving PD-1 or PD-L1 checkpoint inhibitor treatment. Such side effects occur in as many as half of patients receiving these lifesaving treatments and often interfere with cancer therapy. If ZORYVE can effectively manage such treatment-related dermatoses, as suggested by some case reports, it may help cancer patients persist with their checkpoint inhibitor regimen. This trial is another example of the broad potential applications of ZORYVE across inflammatory skin conditions. Lastly, ARQ-34, our novel biologic targeting CD200R, represents the build pillar of our strategy. Targeting CD200R, which plays a central role in both innate and adaptive immunity, may enable ARQ-34 to address unmet need for systemic therapy for moderate to severe atopic dermatitis. Given the unique mechanism, it could be a compelling first-line therapy as well as an option for those refractory to IL-13 therapies. We have completed enrollment in the last cohort of healthy volunteers in the single ascending dose portion of the Phase I trial for ARQ-34. We have now begun enrolling atopic dermatitis patients into the final single ascending dose cohorts and will begin enrolling AD patients into the multiple ascending dose portion of the trial. Following the MAD portion, we will complete a small proof-of-concept portion in atopic dermatitis patients. We will not share results from this trial until it is completed, but we will continue to update you as we progress through the study. We also continue to evaluate external innovation to further build the pipeline and are encouraged by the increased deal flow in dermatology and inflammatory & immunology areas. Slide 13: At our R&D Day last fall, we outlined multiple characteristics a therapy would need to not only compete with topical steroids but to displace them. ZORYVE is comparable to topical corticosteroids in efficacy and rapidity of onset, and it exceeds the steroid benchmark in mechanism-of-action breadth, safety and tolerability, and duration and location of use. ZORYVE's unique profile, coupled with increasing provider awareness of risks associated with sustained topical steroid use, sets the foundation for substantial growth in our in-line indications and potential expansion into new indications. The breadth and ambition of our clinical pursuits are unmatched in the branded nonsteroidal topical segment and are enabled by ZORYVE's therapeutic profile. I will now hand it over to Latha to review the financial results for this quarter.
Thank you, Patrick, and good afternoon, everyone. I am on slide 15. In the second quarter, we generated net product revenues of $129.9 million, representing a 59% increase over the second quarter of 2025. This year-over-year increase was driven primarily by increased patient demand as well as improvements in gross-to-net sales deductions. As anticipated, our gross-to-net in Q2 remained stable in the 50s. Cost of sales in the second quarter were $10.9 million compared to $7.5 million in the second quarter of 2025, due to increasing ZORYVE sales volume. For the second quarter of 2026, our R&D expenses were relatively flat at $20.4 million versus $19.5 million for the corresponding period in 2025, as increased investments in medical affairs initiatives and clinical expense related to ARQ-34 were largely offset by reduced clinical costs related to the INTEGUMENT-Infant trial in atopic dermatitis patients aged 3 to 24 months. SG&A expenses were $82.1 million for the second quarter of 2026 compared to $69.2 million in the same period last year, up 19% driven primarily by personnel costs, including our dermatology sales force expansion. We produced net income of $15 million for the quarter as compared with a net loss of $15.9 million for the same period in 2025 as strong top-line growth continued to outpace expenses. While we may continue to generate positive net income in some quarters, our focus as an innovative biotech remains on investing to continue to drive top-line growth and advance our pipeline. Moving to slide 16, we ended the quarter with cash and marketable securities of $238.9 million as we produced positive cash flow from operating activities of $12.6 million for the period. We expect to maintain positive cash flow throughout the rest of the year. As we have stated previously, we intend to continue to invest the capital we generate back into our business to inflect growth in 2027 and beyond. We have total debt of $101.9 million. As Frank announced at the beginning of today's call, we are increasing our full-year 2026 net revenue guidance to be between $525 million and $540 million. This updated range contemplates the contribution of the new commercial initiatives Frank detailed today as well as the continued strength of our core ZORYVE business. With that, I will now turn the call back to Frank for some final updates.
Alright. Thanks, Latha. We are also announcing today that Todd Edwards will resign from his role as Chief Commercial Officer at Arcutis to pursue other opportunities for personal reasons, effective later this month. I want to thank Todd for his leadership over these last three years. He has helped to build the commercial infrastructure that has enabled ZORYVE's success to this point and that will continue to serve as the basis of ZORYVE's continued growth. I am also delighted to announce that Rob Lisicki will be stepping in as the interim Chief Commercial Officer while we conduct a national search for a permanent CCO. Rob is a highly experienced biopharma executive with a career spanning 30 years in the industry. Most recently, Rob was the CEO at Zura Bio. Prior to that, he was Chief Commercial Officer at Revance Pharmaceuticals until its acquisition by Pfizer in 2022, and before that he was CCO at Daiichi Sankyo USA. Rob and I have known each other for decades from our time together working on Enbrel, and he brings a wealth of experience in leading best-in-class commercial teams in the inflammation and immunology space and in driving rapid sales expansion to build blockbuster franchises. His expertise will contribute to our commercial operation at Arcutis and is well timed as we drive towards a period of continued and increasing sales inflection for ZORYVE in the near term. Rob will start before Todd's departure to ensure a seamless transition. Q2 was another quarter of exceptionally strong execution by the Arcutis team. I'm incredibly proud of the team and the dedication they demonstrate every day to advancing our mission, delivering value for shareholders, and remaining steadfastly committed to the patients we are serving today and aim to serve in the future. In early June, Arcutis celebrated its 10th anniversary. What started as three people and an idea has grown into a biotechnology company with four FDA-approved products and a pipeline of promising programs and assets. More importantly, over the past decade, we have helped nearly 1 million people manage their chronic inflammatory disease and we are poised to help millions more. As I look back on the past decade, I am humbled by and deeply appreciative of the contributions of our team members, the dermatology clinicians who partnered with us, the patients who participated in our trials, and the investors who believed in us. I sincerely thank you. With that, I will open up the call to Q&A.
分析師問答
Thank you. As a reminder, to ask a question, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. The first question will come from Seamus Fernandez with Guggenheim.
Great. Thanks for the question. I just wanted to start off on the guidance raise, which is impressive. You mentioned not expecting updates to the guidance every quarter, but in terms of momentum in the back half of the year, where are you seeing the key drivers of growth at this point? It looks like the foam is starting to truly stand out, but even the early sales of the 0.05% are coming on nicely. Could you give a better sense of how you're thinking about the back half of this year's growth trajectory and where you see incremental opportunities from the access initiatives you're opening via telehealth? It seems like the telehealth opportunity could be substantial, though I imagine pricing points could matter. And then regarding Todd Edwards' resignation, I saw in the Form 8-K that he is pursuing another opportunity, but the team seems well built and you're transitioning to an interim leader with a great background. What are you most focused on during this transition?
Hi, Seamus. Thanks for your questions. We continue to see growth across the portfolio. The foam is a leading product; it is the only nonsteroidal foam available and physicians and patients have responded well to it. However, we see growth across the board. The 0.05% continues to grow nicely, which speaks to the unmet need in the 3 to 24-month-old population if we receive approval in February as expected. We expect continued growth across the portfolio in the second half of the year, primarily driven by demand growth. We may see some marginal improvements in gross-to-net, but I would not expect dramatic changes given our strength already. As the year progresses, you'll start seeing the impact of initiatives we've discussed: the dermatology salesforce expansion, the virtual health platform, and ongoing direct-to-consumer efforts. The primary care expansion is likely to be more impactful in 2027 than in the remainder of 2026. On telehealth, the majority of these patients should have insurance coverage for ZORYVE. The platform is set up so that, when a dermatologist prescribes ZORYVE, the patient is funneled into a workflow where we handle the prior authorization and insurance coordination and ship it to the patient. So patient costs for ZORYVE through the platform should be no different than if they went to a dermatologist's office. Regarding the transition, Todd built a very strong commercial leadership team. Over the past six months, we've added Katie Swoss to run the primary care effort and brought in Chris Clock to lead the sales team. I am confident in the commercial team's ability to manage through the transition. Rob Lisicki will begin before Todd departs to ensure a seamless handoff. I'm excited to work with Rob again.
Great. Congrats. I will jump back in the queue.
Thank you. The next question will come from Tyler Van Buren. Your line is open.
Hey, thanks and congrats on a solid quarterly performance. A couple of questions. First, would it be reasonable to expect a similar quarter-over-quarter sales growth for the ZORYVE franchise in Q3 over Q2 as we saw from Q2 over Q1? And on vitiligo, given the upcoming data next quarter, can you talk more about enrollment and the demand you've seen at sites for a topical option? Specifically, what data would you want to see to move forward with the program and invest more?
Sure. Latha, would you like to take the first question on Q3 growth, and then Patrick can address the vitiligo question?
Hi, Tyler. Thanks for the question. We expect continued quarter-over-quarter growth in net sales. I would not anchor to any current quarterly run rate; instead, anchor to the initiatives we've outlined, our updated guide, and what we expect to happen in the quarter. We expect Q3 versus Q2 and Q4 versus Q3 to show net sales growth. Improvements in gross-to-net will be moderate, so growth will be primarily volume and demand based.
On the vitiligo trial: we have fully enrolled the vitiligo study and are pleased with the enrollment pace, including pediatric patients who can be more difficult to enroll. That bodes well for future vitiligo programs should we pursue them. In terms of the data we want to see, Opzelura set a bar for branded nonsteroidals in vitiligo, but we believe there is room for competition. ZORYVE has attributes that could be advantageous: once-daily dosing, potential for adjunctive use, no black-box warnings, and competitive pricing. We think we can be competitive even with equivalent efficacy, but we are particularly looking for superiority on either rate of onset or efficacy. We are optimistic about rate of onset because the PDE4 mechanism offers potent anti-inflammatory effects and potential direct activity on melanocytes. We'll need to see the actual results at readout to evaluate advancing the program.
Thank you.
Thank you. The next question will come from Judah Frommer with Morgan Stanley. Your line is open.
Hi, thanks for taking the questions. Could you provide a bit more color on trends in share of the branded topical nonsteroidal class, maybe specifically on new-to-brand trends you are seeing? And separately, curious on enrollment trends for the ARQ-34 trial. It is a crowded space, but new mechanisms are in demand—how is enrollment tracking?
ZORYVE continues to be the leading brand in the nonsteroidal class. We are hovering just shy of 50% market share, and ZORYVE is the primary product driving growth of the class. These patients are often converting from topical steroids. I don't have the new-to-brand numbers off the top of my head, but ZORYVE is performing very well competitively and we expect that to continue. Patrick, would you address the ARQ-34 enrollment trends?
For ARQ-34, we are exiting the healthy volunteer section of the single ascending dose portion and have a couple of cohorts that include atopic dermatitis patients who are otherwise healthy. We will move into the multiple ascending dose portion in AD patients next. We have not yet enrolled many AD patients in the MAD portion, but we are optimistic about recruitment given interest in new mechanisms for atopic dermatitis, particularly with changes in the competitive landscape. We believe this mechanism will generate investigator and patient interest, which should help recruitment.
Thanks.
Thank you. The next question will come from Uy Ear with Mizuho. Your line is open.
Hi, thanks for taking my question. Could you help us understand the change in gross-to-net as we go from this quarter into Q3 and Q4? In the first quarter you mentioned to expect gross-to-net to move to the low fifties by the end of the year. Is that still the expectation, or is it steadier now? And my second question: can you elaborate on the PD-1/PD-L1 side-effect study—timeline, purpose, and whether it is intended to support a registration program or more as published data to aid adoption?
Latha will address the gross-to-net question, and Patrick will comment on the PD-1/PD-L1 study.
Hi, Uy. We expect gross-to-net to remain in the 50s throughout the year and to titrate down to the low fifties as we previously said. The level of improvement will moderate compared to prior quarters. We started from a point that was lower than last year, even though it was in the higher fifties, and the improvement you saw in Q2 will continue into Q3 and Q4 but not to the same degree as earlier in the year.
Okay. Thanks. That was helpful.
To add context on the PD-1/PD-L1 trial, we view this study not as a full development program but as a way to generate data that can be published and be helpful to ensure patients have access. Cutaneous adverse events on checkpoint inhibitors are common and can interfere with cancer therapy. If ZORYVE can effectively manage these treatment-related dermatoses, it could help patients persist with therapy. The study will produce data we can publish and use to support access rather than being a registration program. The study has just started and we'll update on timing as it progresses.
Okay. Thank you.
Thank you. The next question will come from Andrew Tsai with Jefferies. Your line is open.
Hi, good afternoon and congrats on the quarter. On the revised guidance, could you talk about the push-pulls behind continued growth and acceleration? Also, are you aware of any investigator-sponsored or independent studies with ZORYVE that may be starting over the next year, and how you think about the market opportunities for those indications?
Thanks, Matt. For the second half of the year, the primary driver of growth is prescription growth. We expect some improvement in gross-to-net in Q3 and Q4, but it will be moderate compared to the improvement seen in Q1 and Q2. Demand growth will be driven by the momentum we already have and the commercial demand drivers we've rolled out, including salesforce expansion, continued DTC efforts, and the virtual health platform. Regarding investigator-initiated trials, we do not support many IITs; our preferred approach is collaborative research where we work with investigators. Many of the studies we mentioned—vitiligo, HS, nail psoriasis, the PD-1/PD-L1 study—are collaborative research studies. These are cost- and time-efficient ways to evaluate potential indications and decide whether to pursue larger registrational studies. We expect to start one or more additional proof-of-concept studies this year and possibly more next year.
No additional comments to add on that point.
Thanks, I appreciate it.
Thank you. The next question will come from Serge Belanger with Needham. Your line is open.
Hey, good afternoon and congrats on a nice quarter. A couple questions around the virtual health platform effort. Are you trying to target a different set of patients than what you currently access, and will you be able to drive patients to this platform via DTC efforts? Second, I read you were granted a couple of new patents. How do they add to the ZORYVE patent portfolio and are those patents eligible for Orange Book listing?
Yes, I view the virtual health platform as targeting a different set of patients. Many patients we pick up today have already been seen by a dermatologist and are within the dermatology care system—refills, annual checkups, or flares. The virtual platform allows patients who might face long wait times or lack local dermatology access to see a dermatologist quickly, often the same or next day. This complements in-office dermatology by meeting patients who otherwise might delay or forgo care. Direct-to-consumer is an important driver here: a patient seeing our campaign can go to our website and be routed directly into the platform to schedule a visit with a dermatologist in real time. On the patents, we have two new patents—one covering a formulation and the other a method of use. They are likely Orange Book listable. We continue to strengthen a very strong IP portfolio around our reformulations; we currently have 28 patents listed for ZORYVE in the Orange Book. These incremental patents strengthen our position, although they don't materially change the loss of exclusivity timelines we have discussed previously: timelines such as 2037 for the cream and 2042 for the foam remain in place.
Thank you.
Thank you. The next question will come from Douglas Tsao with H.C. Wainwright. Your line is open.
Following up on the telehealth initiative: what conversion rate are you seeing from initial online intake to a prescription for ZORYVE? Are patients still needing step edits or prior therapy steps, and have you seen evidence of patients being asked to try topical steroids first before ultimately receiving a ZORYVE prescription?
It's still early days for the virtual platform, so we are learning. A few points: the dermatologist on the platform can choose any therapy based on clinical judgment. Many patients coming into the platform will have been on topical steroids previously and are looking for a nonsteroidal alternative. We have the infrastructure to provide insurance and fulfillment support for telehealth patients comparable to in-office experiences. Some patients, particularly new-onset patients, might need to step through another product depending on their insurance and clinical scenario, but even in those situations, we have workflows to help them and many will return to ZORYVE after meeting step requirements. Overall, we are focused on streamlining the process so whether the patient sees a dermatologist in person or virtually, the prior authorization and fulfillment process is efficient.
Okay, great. That is really helpful, thank you.
Thank you. The next question will come from Richard Law with Goldman Sachs. Your line is open.
Hi, this is Kehlani on for Richard. Thanks for taking our questions. First, as you think about launching the PCP and pediatric sales team for ZORYVE in the coming months, how many patients do you believe are not adequately referred to dermatology from PCPs and pediatricians—i.e., how many patients might be served by the new sales force? Second, how will the potential approval of ZORYVE in infants 3 to 24 months expand that market opportunity and what prelaunch activities are you pursuing to support a strong uptake in that setting?
About half of all patients with psoriasis, atopic dermatitis, and seborrheic dermatitis are not seen by a dermatologist; most of those patients are seen by primary care or pediatric clinicians. We are initially targeting a small, high-impact portion of primary care and pediatrics—high-volume, early-adopter physicians concentrated in major metropolitan areas. Prior data show roughly 5% of primary care physicians and pediatricians write about a third of topical prescriptions in primary care, so we are focusing on that concentrated group to get rapid traction. Over time, we'll evaluate ROI and consider expanding the primary care team if warranted. Regarding the potential approval in infants 3 to 24 months: this would be a meaningful catalyst. There are approximately 1 million patients in that age group with atopic dermatitis. Currently, options are limited; approved treatments for that age group are few, and physicians often treat infants off-label. Pediatric dermatologists have shown strong interest in having a safe, effective nonsteroidal option for these patients. Given the heightened concerns about steroid use in infants and the desire of parents to avoid steroids, we expect meaningful uptake in that population if approved. Our medical affairs team is actively engaging with the pediatric dermatology community to answer questions about the data and prepare for launch activities leading into early next year.
Makes sense. Thank you.
I show no further questions in the queue at this time. I will now turn the call back to Frank for closing remarks.
Before I close, a correction on patents: we have 28 patents listed in the Orange Book for ZORYVE, not 18, and both of the new patents I referenced are Orange Book listable. Thanks again—another great quarter. We appreciate everyone taking time to join the call. We know this is a busy period for companies reporting quarterly results. We look forward to speaking with you again on our Q3 call. Thanks and goodbye.
This concludes today's conference call. Thank you for participating. You may now disconnect.