ARQT - Arcutis Biotherapeutics: PDUFA Date Before End Of 2023 Makes This Worth A Look

2023-04-24 08:58:15 ET

Summary

• Arcutis Biotherapeutics' PDUFA date of December 16, 2023 established for potential FDA approval of Roflumilast for the treatment of patients with seborrheic dermatitis.
• NDA filing of ZORYVE for the treatment of patients with atopic dermatitis expected in the 2nd half of 2023.
• FDA approval of ZORYVE for the treatment of patients with plaque psoriasis already obtained back in August of 2022.
• Arcutis Biotherapeutics had $410.8 million in cash as of December 31, 2022; Enough to fund its operations for at least the next 12 months.

Arcutis Biotherapeutics ( ARQT ) is a good speculative biotech play to look into. That's because it has already been able to receive FDA approval of ZORYVE (Roflumilast) cream 0.3% for the treatment of patients with plaque psoriasis in individuals who are age 12 and older. However, there is another major catalyst for traders/investors to look forward to towards the end of this year. That is, the FDA accepted the New Drug Application [NDA] of Roflumilast for the treatment of patients with seborrheic dermatitis and set a PDUFA date of December 16, 2023. In addition, Arcutis is hoping to expand upon its momentum further by filing an NDA of Roflumilast to the FDA for the treatment of patients with atopic dermatitis in the 2nd half of 2023. With an FDA approval of ZORYVE on hand for plaque psoriasis, plus the ability to expand it towards two other indications, these are the reasons why I believe that Arcutis Biotherapeutics is a good speculative biotech play to look into.

Earnings are Starting Off Slowly, But Could Accelerate With Expansion Opportunities

One overhang for Arcutis Biotherapeutics at the moment is whether or not it will be able to capitalize on its FDA approval of plaque psoriasis indication. It's off to a slow start though, having only generated net product revenues of ZORYVE of only $3 million in its Q4 2022 earnings. Having said that, there might be an opportunity to see a boost this year in sales. Guidance for sales of ZORYVE from one analyst have been guided down to $40 million from $48 million for 2023. If the company can get to this estimate or higher than I think it can claim to start to see pickup in sales for this sector. Regardless, the beauty of Arcutis is that there is potential for ZORYVE beyond plaque psoriasis. Matter of fact, there are two other indications it is currently targeting, so that it will be able to generate additional sales with it. The second indication, in which the biotech hopes to receive FDA approval of ZORYVE for, would be seborrheic dermatitis. There is a PDUFA date set for December 16, 2023 , whereby the FDA will determine by then whether or not it should receive regulatory approval for this indication. Then, it has another possible catalyst for investors to look forward to towards the latter part of this year. It is expected that Arcutis will file an NDA to the FDA of ZORYVE for the treatment of patients with atopic dermatitis. As far as the seborrheic dermatitis indication goes, it could do pretty well if it reaches the market. Why is that? Well, that's because it would be the first topical seborrheic dermatitis treatment to be approved with a new mechanism of action in over two decades.

FDA Approval Towards End Of 2023 Could Boost Shareholder Value

As I stated directly above, Arcutis Biotherapeutics hold the potential to receive FDA approval of ZORYVE for the treatment of patients with seborrheic dermatitis by the end of 2023. That is, a PDUFA date has been established by the FDA for review of this drug for the treatment of this patient population for December 16, 2023. There is a good chance for FDA approval of TORYVE for this specific indication, because it obtained positive results from the phase 3 STRATUM trial . This late-stage phase 3 STRATUM study recruited a total of 457 patients with moderate to severe seborrheic dermatitis who were randomized 2:1 to receive either roflumilast or vehicle. The primary endpoint of this study was defined as being the number of patients who achieved IGA Success. In order for IGA Success to be achieved, patients at the end of the study must have obtained an IGA score of clear or almost clear, along with ?2 grade improvement at week 8. The study met the primary endpoint, because it was noted that 80.1% of individuals treated with roflumilast achieved an IGA Success compared to only 59.2% of patients given vehicle treatment. Treatment with roflumilast resulted in a statistically significant IGA Success score at week 8 compared to vehicle, with a p-value of p<0.0001. Not only was the primary endpoint of this trial obtained, but it was done so early on. That is, roflumilast separated from vehicle with statistical significance at week 2. It is also good on the safety front as well, which is another important aspect for FDA approval. It was noted that most treatment emergent adverse events [TEAEs] were mild to moderate. Such adverse events were only observed in 1% of the population such as covid-19, urinary tract infection, nasopharyngitis and nausea. I would state that the most important finding from the safety portion of the study is that there were no treatment-related Serious Adverse Events [SAEs] with roflumilast.

Financials

According to the 10-K SEC Filing , Arcutis Biotherapeutics had cash, cash equivalents, restricted cash and marketable securities of $410.8 million as of December 31, 2022. This biotech will have to raise additional cash in the coming months. I make that claim, because it states in its 10-K SEC Filing that it only has enough cash to fund its operations for at least the next 12 months. It had enacted many financial transactions in 2022, just so that it would have enough to fund itself. After having received FDA approval of ZORYVE it drew down up to an additional $125 million under the Loan Agreement. As of December 31, 2022 it still had $200 million outstanding under this agreement. At least $25 million of which might be available depending upon whether or not certain conditions are met. It also enacted a public offering of common stock in 2022 where it raised $161.6 million in aggregate net proceeds. Along with the sales of stock under an ATM Facility agreement in March of 2022, which generated $14.5 million in sales. I believe that it will need to raise additional cash in 2023, thus investors should expect another cash raising event in 2023.

Risks To Business

There are several risks that traders/investors should look into before investing in this biotech. The first risk to consider would be with respect to the PDUFA date of December 16, 2023 for the potential FDA approval of Roflumilast for the treatment of patients with seborrheic dermatitis. There is no guarantee that Arcutis will receive FDA approval of Roflumilast for this indication. A second risk to consider would then be the NDA filing of Roflumilast for the treatment of patients with atopic dermatitis, which is expected to take place in the 2nd half of 2023. There is no guarantee that the FDA will accept the regulatory application upon it being filed. Even if it does accept the NDA, it will still need to be reviewed in order for the biotech to receive U.S. marketing approval for this indication as well. A final risk to consider would be with respect to what I noted above about the financial position of the biotech. It will likely need to raise cash in 2023, thus shareholders will be diluted upon such an event.

Conclusion

The final conclusion is that Arcutis Biotherapeutics is a good speculative biotech play to look into. The reason why I state that is because it has already received FDA approval of ZORYVE for the treatment of patients with plaque psoriasis. It has a PDUFA date expected on December 16, 2023 where the FDA will decide by then if ZORYVE should also be approved to treat patients with seborrheic dermatitis. This is going to be a major catalyst for investors to look forward to towards the end of this year. In addition, there is another catalyst that is rapidly approaching. This catalyst being the NDA filing of ZORYVE for the treatment of patients with atopic dermatitis, which is expected to take place in the 2nd half of 2023. With FDA approval of ZORYVE having already been achieved for psoriasis, plus the possibility to expand this approval towards two other indications, these are the reasons why I believe that Arcutis Biotherapeutics is a good speculative biotech play to look into.

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