Arcutis (ARQT) Q2 2026 Earnings Call Transcript

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DATE

Wednesday, Aug. 5, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer - Todd Franklin Watanabe
• Chief Medical Officer - Patrick Burnett
• Chief Financial Officer - Latha Vairavan
• Head of Investor Relations - Brian Schoelkopf

TAKEAWAYS

• Net Product Revenue -- $129.9 million, representing a 59% increase versus the second quarter of 2025.
• ZORYVE Foam 0.3% Revenue -- $67.4 million, contributing the largest portion of total product sales during the quarter.
• ZORYVE Cream 0.3% Revenue -- $35.3 million for the second quarter.
• ZORYVE Cream 0.15% Revenue -- $24.2 million for the period.
• ZORYVE Cream 0.05% Revenue -- $2.9 million, reflecting early performance in the mild to moderate atopic dermatitis market.
• Full-Year 2026 Sales Guidance -- $525 million to $540 million, raised from the previous range of $480 million to $495 million due to strong first-half performance.
• Prescription Volume -- 280,000 total prescriptions across all indications and formulations in the second quarter.
• Market Share -- Just shy of 50% for the branded nonsteroidal topical category.
• Gross-to-Net Sales Deductions -- Stable in the 50% range, with expectations to titrate to the low 50s by the end of 2026.
• Net Income -- $15 million, or $0.11 per diluted share, compared to a net loss of $15.9 million in the prior-year quarter.
• Operating Cash Flow -- Positive $12.6 million generated during the second quarter.
• Cash and Marketable Securities -- $238.9 million available as of June 30, 2026.
• Total Debt -- $101.9 million as of the end of the second quarter.
• Selling, General, and Administrative Expenses -- $82.1 million, a 19% increase year over year driven primarily by sales force expansion.
• Research and Development Expenses -- $20.4 million, remaining relatively flat compared to $19.5 million in the second quarter of 2025.
• Cost of Sales -- $10.9 million, up from $7.5 million due to higher ZORYVE sales volume.
• Orange Book Patents -- 28 patents now listable following the addition of two new formulation and method-of-use patents.
• Plaque Psoriasis Pediatric Approval -- ZORYVE cream 0.3% was approved in June 2026 for the treatment of plaque psoriasis in children down to age 2.
• Atopic Dermatitis Infant sNDA -- FDA accepted the supplemental NDA for ZORYVE cream 0.05% in infants aged 3 to 24 months with a PDUFA date of Feb. 23, 2027.
• Vitiligo Trial Enrollment -- Phase 2 proof-of-concept trial is fully enrolled, with topline results expected in the fourth quarter of 2026.
• Hidradenitis Suppurativa Program -- Enrollment is ongoing with Phase 2 results anticipated in the first quarter of 2027.
• Dermatology Salesforce Expansion -- Completed in May 2026, with revenue impact expected to begin in the third quarter of 2026.
• ARQ-234 Trial Status -- Phase 1a/1b enrollment is ongoing for the CD200 receptor fusion protein targeting moderate to severe atopic dermatitis.

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RISKS

• Burnett warned that the skin of young children is not fully developed, "which can lead to increased systemic absorption of topical treatments like steroids," creating safety challenges for infants treated with standard therapies.
• Watanabe noted that the process of delivering prescribed therapies to patients has "grown increasingly complex and time intensive over time," requiring new AI and virtual health investments to mitigate fulfillment barriers.

SUMMARY

Management reported that Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) achieved profitability in the second quarter of 2026, supported by a 59% year-over-year increase in product revenue and the expansion of the ZORYVE franchise. The company raised its full-year sales guidance and completed a strategic expansion of its dermatology sales force to capture increasing demand in plaque psoriasis and seborrheic dermatitis. Management stated that the commercial strategy now includes new digital initiatives, such as a virtual health platform and AI-enabled workflow tools, to reduce patient access barriers and streamline fulfillment. Furthermore, the company advanced its clinical pipeline with the completion of vitiligo trial enrollment and the submission of a supplemental NDA for infant atopic dermatitis.

• President Watanabe stated, "The platform provides an additional pathway for individuals who might otherwise delay or forego specialized dermatology treatment."
• The company partnered with a leading AI-enabled prescription workflow platform to provide "customized prompts and alerts to streamline the steps between a clinical decision and an individual starting ZORYVE."
• Management indicated that approximately 50% of patients with chronic inflammatory skin diseases are treated by primary care providers or pediatricians rather than dermatologists.
• A newly hired targeted sales team for primary care and pediatric providers is scheduled to enter the field by late August 2026 to address high-volume prescribers.
• CMO Burnett noted the initiation of a trial evaluating ZORYVE cream 0.3% for cutaneous adverse events in cancer patients receiving PD-1 or PD-L1 checkpoint inhibitor treatments.
• Management reported that the CD200 receptor targeted by ARQ-234 plays a central role in both innate and adaptive immunity, potentially serving patients refractory to IL-13 therapies.
• Rob Lisicki was appointed interim chief commercial officer, effective later in August 2026, following the resignation of Todd Edwards.

INDUSTRY GLOSSARY

• ZORYVE: A topical phosphodiesterase-4 (PDE4) inhibitor approved for plaque psoriasis, seborrheic dermatitis, and atopic dermatitis.
• sNDA: Supplemental New Drug Application, a request to the FDA to expand the indications or use of an already approved drug.
• PDUFA: Prescription Drug User Fee Act, the target date by which the FDA must complete its review of a drug application.
• PDE4: Phosphodiesterase-4, an enzyme involved in the inflammatory process of various skin diseases.
• Plaque Psoriasis: A chronic autoimmune condition that results in the buildup of skin cells, forming scales and itchy, dry patches.
• Seborrheic Dermatitis: A common skin condition that mainly affects the scalp, causing scaly patches, inflamed skin, and stubborn dandruff.
• Atopic Dermatitis: A chronic condition that makes the skin red and itchy, often referred to as eczema.
• Vitiligo: A disease that causes the loss of skin color in patches.
• Hidradenitis Suppurativa: A chronic skin condition characterized by painful lumps under the skin in areas like the armpits or groin.
• ARQ-234: An investigational biologic therapy targeting the CD200 receptor for the treatment of atopic dermatitis.
• GTN: Gross-to-net, the difference between the gross invoice price of a drug and the actual revenue received after rebates and discounts.

Full Conference Call Transcript

Operator: Ladies and gentlemen, thank you for standing by. Welcome to Arcutis Biotherapeutics Inc. Second Quarter 26 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. And to ask a question during this session, you would need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. And 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.

Brian Schoelkopf: Thank you, Michelle. Good afternoon, everyone, and thank you for joining us today to review our second quarter 26 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 our 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.

Todd Franklin Watanabe: Thanks, Brian, and good afternoon, everyone. As always, we appreciate you guys 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 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. So I am on slide 5 in the deck.

And just as a reminder, our 3 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 PD 4 inhibitor has significant potential to address persistent therapeutic gaps. And third, leveraging our deep clinical expertise and infrastructure to build our pipeline beyond 3. I am happy to report that once again made substantial progress across all 3 pillars during the second quarter.

Start with our grow pillar, our in-line read business continues to strengthen and grow as we expand the reach and relevance of this medicine to the tens of millions of individuals with chronic inflammatory skin conditions in the U.S. who need and deserve new innovative therapeutic options to manage their plaque psoriasis 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 current and potential future pipeline assets.

As we will discuss today, our investment in innovation encompasses a broad range of value creating initiatives across the business that we are advancing in parallel for multiple clinical projects to impactful patient access initiatives. So touching on some of the highlights, at the end of June, we received FDA approval for ZORYVE cream 0.3% for the treatment of plaque psoriasis in children as young as age 2. This marks the seventh FDA approval for ZORYVE in 4 years, a remarkable accomplishment for a small company like Arcutis. And importantly, this milestone enables us to address a significant treatment gap introducing the first once daily steroid free treatment for plaque psoriasis approved down to age 2.

In July, the FDA also accepted our supplemental NDA for ZORYVE cream 0.05% for the treatment of mild to moderate atopic dermatitis in infants down to 3 months. With a PDUFA date set for February 23, 2027. And I was just recently at the Society of Pediatric Dermatology and frankly, I was awestruck by the level of anticipation and excitement in the pediatric dermatology community about this potential approval which would address an urgent unmet need for a once daily nonsteroidal in these youngest of AD sufferers. Both of these regulatory milestones demonstrate our commitment to delivering meaningful innovation to both adults and children across all age groups.

Including the youngest children impacted by these chronic inflammatory skin diseases and their caregivers. And as you will hear more today, our commitment to meaningful innovation for patients goes beyond bringing new therapies to market. We recognize that managing a chronic inflammatory skin disease like psoriasis, atopic dermatitis, or seborrheic dermatitis can be extremely challenging and burdensome for the individuals and their families. And with that in mind, we are turning our expertise to ways that we can innovate to enhance the patient experience and facilitate seamless access to treatment in order to help ease the burden on the patient and caregiver as well as the health care provider.

Todd, 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 initiative Innovation Workstream. We are really excited about these initiatives, which I will explain in greater detail shortly. Both are great examples of our commitment to delivering meaningful innovation to patients. Turning to expand our second strategic pillar, we continue to make important progress in this quarter in evaluating the potential of Xareve in additional chronic inflammatory skin conditions.

Specifically, we have now fully enrolled the phase 2 proof of concept trial of XEREVE in the treatment of vitiligo. And we continue to enroll the phase 2 proof of concept trials of XERED 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 that ZORYVE's unique profile as a targeted and potent PD4 inhibitor could offer additional patients an innovative nonsteroidal therapeutic option. We continue to evaluate these other potential indications and anticipate initiating 1 or more additional proof of concept trials this year.

And finally, turning to the third pillar, BILD, We continue to make progress advancing our innovative pipeline. Enrollment is ongoing in the phase 1 a, phase 1 b 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 not only be an important first line systemic therapy, but also has the potential to address the clear and distinct need for a treatment for patients with atopic dermatitis who have relapsed on or who are refractory to IL 13 drugs.

In addition, as we have discussed previously, external innovation will likely pay play a central role in expanding our pipeline. We are seeing a marked increase in deal flow recently, both dermatology and adjacent inflammation areas, and our team remains actively engaged in evaluating a range of external assets as we look to build our pipeline. As Lata will describe, we had another very strong quarter financially, And this level of performance and the cash flow that it generates enables us to continue to invest in innovation staying true to our biotech roots and mission.

For the remainder of this year, you should expect a 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 that 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 that we, the business has seen through the first half of the year. So let me let me delve a little bit more into some of the details on commercial results for the quarter. I am now on slide 7. We continue to see robust sales performance and demand driven growth in the fourth in the second quarter. With net product revenues of $129.9 million, representing a 59% increase From the second quarter of 25 and a 23% increase over Q1.

Our consistently strong quarterly revenue underscores the momentum and enduring strength of the of the ZORYVE franchise. As expected, our gross to net rate improved incrementally from the prior quarter and, continue to remain stable in the 50s. So looking ahead to the third quarter, we expect quarter over quarter net sales growth driven by sustained momentum in patient demand. Let me turn to Slide 8. Weekly prescriptions of XEREVE on a rolling 4 week average show sustained growth across the portfolio, and we reached new high watermark for quarterly demand with more than 280 thousand prescriptions in the quarter, across all indications and formulations for ZORYVE. As this chart highlights, XEREVE continues to experience substantial prescription growth.

We anticipate this growing demand will continue through the duration of this year and beyond and will be the primary driver of ZORYVE's revenue expansion. The most important driver of ZORYVE's growth will remain the conversion from topical steroids to advanced topical targeted topical therapies like ZORYVE as health care providers and patients' perceptions of the risk of chronic steroid topical steroid use evolves. Let's turn now to slide 9. I want to expand on the patient access initiatives we introduced this quarter. As I highlighted in the opening, improving patient access is an important dimension of meaningful innovation as we aim to deliver to patients with chronic inflammatory skin diseases.

Therapeutic innovation is meaningless if patients are unable to access new therapies, So we see it as an imperative to also innovate it in reducing barriers to treatment and care. Importantly, these new patient access initiatives are separate and distinct from but complementary to our payer access efforts. These innovations are focused on enabling seamless fulfillment and an efficient post prescription process helps patient access patients access to read rapidly, reliably, and efficiently. We have applied this holistic patient first approach to innovation since bringing Xareve to market. We are now broadening the scope of our patient access activities with the launch of our virtual health platform. Platform, and investments in AI enabled tools that support efficient prescription fulfillment.

2 distinct initiatives, both with the aim of facilitating more seamless access to ZORYVE. So a little bit more about each of these initiatives starting with the virtual health platform, which we announced in June. We recognize that over the last several years, patients have been rapidly changing how they obtain health care starting with the COVID pandemic and accelerating with the emergence of multiple virtual health offerings like HIMSS or Roe. And many individuals today are seeking more convenient flexible ways to receive care.

Our virtual health platform recognizes this evolution and meets patients where they are by helping to address common barriers to dermatology care such as long wait times for dermatology appointments 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. Importantly, the platform is designed to complement and not replace traditional in office dermatology care. Our goal is to help more individuals access the therapies that they need while continuing to partner with health care providers across dermatology, primary care, and pediatrics settings.

So with model board certified independent dermatologists on the platform, evaluate diagnose, and determine appropriate treatment for each individual based on their clinical judgment. Arcudis 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 are especially excited about this new platform because we believe ZORYVE has an ideal flow profile for the virtual health model.

Dermatologists can prescribe ZORYVE confidently given its demonstrated efficacy, safety, and tolerability without worrying about a patient applying the drug to an area of the body that they and with the knowledge that the patient can use a reef for any duration. It treats the 3 most common inflammatory diseases, all of which can be diagnosed visually using telehealth tools. And additionally, in individuals suffering from these diseases are motivated to seek an effective therapy due to the burden of their symptoms.

We are still in the early days of the rollout of our virtual health platform, but we are already seeing signals of the impact that it will have and are confident that this will have a meaningful benefit in expanding patient access to ZORYVE. Particularly when it is coupled with other demand generation efforts we have like the free to be me campaign. Now in late July, we launched our second patient access innovation partnering with 1 of the leading AI enabled prescription workflow platforms to streamline the post prescription process for ZORYVE in the dermatology office. The process for getting any prescribed therapy to an individual has grown increasingly complex and time intensive over time.

But through this partnership, we are helping streamline patient access to ZORYVE after they receive the prescription. The company that we have partnered with is already widely adopted across dermatology offices as well as other therapeutic areas nationwide. And in practices where the tool is implemented, after providers initiate a prescription, the platform helps navigate and systematize that workflow. that follows. In addition, 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 ArQudis, the platform provides customized prompts and alerts to streamline the steps between a clinical decision and an individual starting ZORYVE.

Including prior authorization, financial assessment, and fulfillment routing embedded directly into health care provider workflows. We are skating to the puck. it is our belief that the heart of harnessing innovation and leveraging these types of technology based solutions to help patients and health care providers with the fulfillment process for ZORYVE is where we need to be. These initiatives mark important additional steps in our mission to deliver meaningful innovation across every part of dermatology care. And on slide 10, you know, these patient access initiatives are only the latest example how we are reinvesting the cash flow generated by ZORYVE back into the franchise to drive sustained growth and inflection in sales in 2027 and beyond.

Of course, all of our efforts to drive ZORYVE's growth would be meaningless without the solid foundation of ZORYVE's outstanding clinical profile. ZORYVE's rapid and robust efficacy across multiple inflammatory dermatose paired with its exceptional safety and tolerability profile, and its patient friendly formulation, make it a compelling choice for health care providers and patients looking to manage these chronic conditions especially against the backdrop of the growing concern about prolonged use of topical steroids. Our commercial efforts focus on generating awareness of this differentiated therapeutic profile with both clinicians and patients and then enabling efficient patient access to the product when it is identified as the appropriate therapeutic intervention.

Building on that foundation are 3 broad categories of demand initiatives. The first is the investments we are making 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 as of early May. Since then, they have been gaining familiarity with their customers, And as previously discussed, we anticipate beginning to see the impact on growth from these reps beginning in the third quarter of this year. We have also now completed the build out of the first phase of our primary care and pediatric organization, having recently completed the hiring of this targeted team.

We anticipate that 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. As a reminder, we are adopting a highly targeted approach with the sales team focusing on high volume, early adopter PTPs and pediatricians who are concentrated in major metropolitan areas. This approach positions our investment in a PCP peds sales team to begin contributing value rapidly. And as we gain more in-depth understanding of this space and how best to partner, with primary care and pediatric providers, we will evaluate further expansions of the team.

We believe that some of the same attributes of ZORYVE's profile that have led to its leadership in dermatology and will drive meaningful adoption through the virtual health platform will also drive its success in the primary care setting. Specifically, primary care and pediatricians can prescribe confidently based on its demonstrated efficacy, safety, and tolerability and without worrying where or how long patients use it. The second component of our commercial investment plan is our 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, 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. We are seeing these efforts resonate with a broad range of patient demographics, reflecting the broad swaths of the population impacted by these diseases. The effectiveness of this campaign is further bolstered by our virtual health platform enabling us to provide a direct route to a dermatologist for individuals who discover ZORYVE through Free to be Me.

We look forward to continued progress of this important direct to consumer effort as we work to capture and reflect patients' lived experiences as they manage their chronic inflammatory skin conditions including using ZORYVE in their treatment regimen. The final component of our commercial investment strategy is facilitating seamless patient access to ZORYVE as we have discussed today. The virtual health platform and AI enabled prescription workflow efforts I just described earlier are the initial efforts that we are making in this vein but there are additional exciting initiatives to come, and we look forward to sharing details with those at a future date.

With that, I am going to take a breath and turn the call over to Patrick for an R&D update.

Patrick E. Burnett: Thanks, Frank. I am on slide 12. As was highlighted at the head of today's call, Frank highlighted our focus across the grow, expand, and build pillars of our corporate strategy. I would like to provide some additional context for the clinical components of each pillar. But before I detail our various clinical initiatives, I want to emphasize the breadth of our ongoing activities to further bolster the profile of ZORYVE. On this chart, I am showing 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. Underpin our belief that XEREVE is uniquely well positioned to supplant topical corticosteroids in the management of inflammatory dermatoses. Moving now to key clinical updates for the quarter. As Frank highlighted earlier, in late June, the FDA approved our supplemental NDA to expand the indication for ZORYVE cream zero point 3 percent for the topical treatment of plaque psoriasis including in intertriginous areas, to children down to the age of 2. A practicing dermatologist, I can personally attest that treating young children with plaque psoriasis presents unique challenges.

Specifically, while safety and tolerability is always a concern, that concern is amplified in young children who may face decades of treatment and who are particularly susceptible to both local and systemic steroid exposure risks. Like HPA suppression. In our trials in children as low as 2 years of age with plaque psoriasis, ZORYVE zero point 3 percent 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 2.

It provides health care providers, parents, and other 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 very young and especially vulnerable patient population. In addition, in July, we announced that the FDA 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. As we mentioned on our first quarter call, we are able to submit this application just 3 months after having read out the top line results from our INTEGUMENT-Infant trial.

This remarkable feat reflects the speed with which our team at Arcutis is moving on behalf of patients and a response to the high level of urgency shared by those HCPs who care for these youngest atopic dermatitis patients. This urgency to advance new and more effective therapies is driven by specific challenges in treating this infant patient population. The skin of young children is not fully developed, which can lead to increased systemic absorption of topical treatments like steroids. And these youngest patients also often present with more extensive disease adolescents and adults. During the quarter, we also initiated 2 new trials. 1 in adults to better elucidate ZORYVE's impact on pruritus, or itch. The trial is called INTEGUMENT-itch.

And it is based on the compelling data from the INTEGUMENT-Infant trial showing reductions in itch within 10 minutes of first application. And another to evaluate the impact of ZORYVE on nail psoriasis. A notoriously difficult to treat presentation of plaque psoriasis often even failing systemic therapy, where we have seen some really exciting signals of ZORYVE efficacy in case reports. Now turning to potential new indications for XEREVE, we have now completed enrollment in our phase 2 proof of concept trial in vitiligo, and we continue to enroll the hidradenitis suppurativa, or 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 quarter 4 of this year. And we remain on track for similar readout for our HS program in quarter 1 of 27. Now recall that in our HS program, we have trials evaluating ZORYVE's safety and efficacy in HS 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 also continue to evaluate other diseases for similar proof of concept studies. And we anticipate starting 1 or more additional proof of concept studies in the latter half of the year.

During quarter 2, 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 they often lead to interference with cancer therapy. If ZORYVE is able to effectively manage such treatment related dermatoses, as suggested by some case reports, it may help cancer patients to persist with their PD-1 or PD L1 treatment regimen. This trial is another meaningful example of the broad potential applications of ZORYVE across inflammatory skin conditions. Turning lastly to ARQ 34, our novel biologic targeting CD200R and the build pillar of our strategy.

As Frank touched on earlier today, by targeting CD200R, which plays a central role in both innate and adaptive immunity, we believe ARQ-34 has the potential to address the significant unmet need for systemic therapy for patients with moderate to severe atopic dermatitis And given the unique mechanism of action, could be a compelling first line therapy option as well as a treatment option for those who are refractory to IL-13 therapies. We have completed enrollment in the last cohort of healthy volunteers in the single ascending dose or SAD portion of the Phase I trial for ARQ-34.

We have now begun enrolling atopic dermatitis patients into the final SAD cohorts, and we will begin to enroll AD or atopic dermatitis patients in the multiple ascending dose or MAD portion of the trial. Following the MAD portion, we will complete a small proof of concept portion in atopic dermatitis patients as well. As I explained on our first quarter call, we will not share results from this trial until it is completed, but we will continue to update you as we progress through these different portions of the study. We also continue to evaluate external sources for innovation to further build out our innovative pipeline.

And as Frank mentioned earlier, we are encouraged by the increased deal flow in the dermatology and I&I space. So turning now to slide 13. We introduced this slide at our R and D Day last fall. It lays out the multiple characteristics a therapy would need to not only compete with topical steroids in chronic inflammatory skin disease settings, but also to displace them. ZORYVE is arguably comparable to topical corticosteroids in efficacy and rapidity of onset, But as depicted here, it then exceeds the steroid benchmark in mechanism of action breath, safety and tolerability, and duration and location of use. With the degree of differentiation becoming increasingly pronounced across each dimension.

ZORYVE's unique profile, coupled with increasing HCP appreciation of risks, associated with sustained topical corticosteroid use as we reviewed in-depth previously, sets the foundation not only for substantial growth in our 3 in-line indications, but also for potential expansion into a number of new indications. And I wanted to review this perspective on ZORYVE's profile today as important context for the broad set of clinical activities that we are pursuing. The breadth and ambition of our clinical pursuits are unmatched in the branded, nonsteroidal topical segment and are enabled by ZORYVE's unique therapeutic profile.

And they further demonstrate why ZORYVE is uniquely positioned to displace topical corticosteroids at a moment when there is a growing degree of concern over the deleterious side effects of extended or inappropriate use of these aging drugs. And I will now hand it over to Latha to review the financial results for this quarter.

Latha Vairavan: 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 25. 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 25. Due to increasing ZORYVE sales volume.

For the second quarter of 26, 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-224 largely offset by reduced clinical costs related to the INTEGUMENT-Infant trial in atopic dermatitis patients aged 3 to 24 months. SG and A expenses were $82.1 million for the second quarter of 26 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.

And 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.

Todd Franklin Watanabe: Alright. Thanks, Latha. So 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 wanna thank Todd for his leadership over these last 3 years. he is 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 Zareep'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 And 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 the inflammation and immunology space. And in driving rapid sales expansion to build blockbuster franchises. Expertise that Rob will contribute to our commercial operation in Arcutis is well timed as we drive towards a period of continued and increasing sales inflection for ZORYVE in the near term.

Q2 was yet another quarter of exceptionally strong execution by the Arcudis team. I am 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 out as 3 guys and an idea has blossomed into a powerhouse biotechnology company with 4 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 in the future.

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 agreed to participate in our trials, and the investors who believed in us enough to entrust their money to us. I sincerely thank you. And with that, I will open up the call to Q&A.

Operator: 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.

Seamus Fernandez: Great. Thanks for the questions. So just wanted to start off the guidance raise definitely impressive, Frank. Take your point to not expect updates to the guidance every quarter. But just in terms of the momentum in the back half of the year, where are you seeing the kind of key drivers of growth at this point? Really looks like the foam, is just starting to truly stand out. But even the early sales of the 0.05% are coming on nicely. So I just wanted to get a little bit of a better sense of how you are thinking about the back half of this year's growth trajectory.

You know, and where you know, you see incremental opportunities from the access point that you are opening up via telehealth? It seems like the telehealth opportunity could be quite substantial But I guess, we are all probably wondering where the price points are likely to end up on that front. And then just, you know, as it relates to Todd's resignation, I think we saw in the 8 k that he is pursuing another opportunity away from Arcutis But, you know, it seems like the team is extremely well built at this point. The strategy has worked effectively, and you are transitioning, to an interim leader who is got a great background.

You know, what is it that you are most focused on during this transition in particular?

Todd Franklin Watanabe: Yeah. Hi, Seamus. Thanks for your questions. So let me start with the first 1. Frankly, we continue to see growth across the portfolio. You as you mentioned, the foam is our leading product. It is a really unique highly differentiated asset. it is the only nonsteroidal in a foam. Know, it is effectively the only foam available for doctors. it is very hard to get the topical foams these days. And I think it is been something that doctors and patients have responded to extremely well. But we see growth across the board. As you mentioned, the 0.05, it continues to grow very nicely.

I think that speaks to the unmet need for good 0.05 in the in the 3 to 24 month olds if we get the approval in February, as we expect. So we would expect, you continued growth across the portfolio in the second half of the year, primarily driven by demand growth We may see some marginal incremental improvements in gross to net, but I would not expect anything dramatic given the strength of our gross to nets already. At this point in the year. And, you know, I think as the year progresses, we are gonna start seeing the impact of a variety of initiatives that we have been talking about today.

Know, the Durham expansion, I think we will see kick in the second half of the year. I think it is probably too early for primary care, but, you know, I think in 2027, we will see that. On the telehealth front, you know, I think the majority of these patients are going to have access to ZORYVE through their insurance coverage. And we have set up, with the platform to allow patients to go that route. So this is not like some of the other offerings out there today where the patient has to pony up the money themselves to pay for the product, like, you know, for example, the GLP ones.

Here, the doctor it would be just like if the patient was going in the doctor's office and the doctor is diagnosing the patient. Choosing a therapy, And if they choose Zuriev and they do not have to choose Zuriev, but it is a it is a great choice for all 3 of these diseases. If they choose a reed, then that immediately kicks them into a work stream where we get the PA done, we get the insurance paying for this reap, and then we ship it to the patient. And so the cost of the patient for XEREV is no different than if they went to the dermatologist's office. Let's see.

And then lastly, with regard to the transition, yeah, you know, Todd has built a very, very strong commercial leadership team. Know, I think just in the last 6 months, we have we have added Katie Swoss to run primary care effort. She's doing an outstanding job. We brought in, Chris, Clock from, from AbbVie to lead the sales team. So we have a really strong commercial team I am not the least bit worried about them managing our commercial performance through the transition. And, you know, Rob will be starting before Todd's departure so that there is a seamless transition between the 2 of them.

And I could not think of a better person to be coming in and helping us only with Zaree, frankly, but with the pipeline as well, given Rob's background. And excited to get to work with him again.

Seamus Fernandez: Great. Congrats. I will jump back in the queue.

Operator: Thank you. And the next question will come from Tyler Van Buren with D. D. Cohen. Your line is open.

Tyler Van Buren: Hey, guys. Thank you, and congrats on the solid quarterly performance. A couple. First, just would it be reasonable to expect a similar quarter over quarter sales growth for the ZORYVE franchise in Q3 over Q2 as compared to Q2 to over Q1 that we just saw. And then on vitiligo, given the upcoming data next quarter, right around the corner, can you talk more about enrollment and the demands you guys have seen at sites of and the demand for a topical option, and specifically, what data you want to see to move forward with this program and invest more.

Todd Franklin Watanabe: Sure. Latha, you wanna take the first 1, and then maybe, Patrick, can you take the vitiligo question?

Latha Vairavan: Yeah. I will take it. Sorry. I had to unmute myself. Hey, Tyler. Thanks for the question. So we expect continued quarter over quarter growth in our net sales. I would not anchor to you to any of this current quarterly run rate. I think you should anchor to the initiatives that we outlined. And with the guide that we have given and what we expect to happen in the quarter, I think you will be able to your way into what will happen in the second half of the year.

I want to kind of give you the answer to the question on the growth rates, but we do expect quarter over quarter net sales growth Q3 versus Q2, and, of course, naturally, Q4 versus Q3. And as Frank alluded to, sort of moderate the gross to net improvement, so everything will be volume and demand based.

Patrick E. Burnett: Yeah. And I can pick up the vitiligo study. So, as we mentioned, the vitiligo trial fully enrolled. We were really happy with the enrollment pace for that. Now keeping in mind that was in pediatric patients as well that are oftentimes more difficult to enroll. So I think that bodes well for kind of a future vitiligo program where that to materialize. And your question about what we are looking for. So, you know, I think the Opzelura really, you know, has set a bar for a branded nonsteroidal in vitiligo. But we think that there is a lot of room for us to compete there. Right? there is essentially 1 other drug in this category.

We think that we have, in some ways, really a superior product profile. We are talking about once-a-day dosing, eligible for adjunctive use. We anticipate there will be some systemics that are gonna be moving into this space as well, especially for the more severe patients. So that would be something that we think would be advantageous. And then also no black box and then price. So these are a lot of the same features that make us very competitive in AD and our other indications as well. So we really feel like even if we have equivalence on efficacy and rate of onset, that we are going to be very competitive here based on those factors.

But what we are really looking for is superiority on either of these 2 axes, especially on speed of onset. And 1 of the reasons we potentially believe that is because, the PD4 mechanism of action being based both on anti inflammatory as well as, potentially working directly on melanocytes. And the fact that the mechanism of action, we have really seen some brisk response based on being able to have such a potent PD4 inhibitor. So, the rate of effect is a place that we are also, optimistic, but we will have to obviously see those results when they come in at the end of the year. With the readout for that.

Tyler Van Buren: Thank you.

Operator: And the next question is going to come from Judah Frommer with Morgan Stanley. Your line is open.

Judah Frommer: Yes. Hi, guys. Congrats on the quarter and thanks for taking the questions. Maybe could you provide a little more color on some trends in share of the branded topical non sterile class, maybe specifically on new to brand trends that you are seeing? And then separately, just curious on enrollment trends for the 4 trial. Obviously, crowded space, but it seems like new mechanisms are in demand. So just curious how enrollment is tracking there. Thanks.

Todd Franklin Watanabe: Sure. Thanks, Jay. So with regard to trends in share, you know, ZORYVE continues to be the leading brand in nonsteroidal in the market. We are hovering just shy of 50% market share. And so, you know, ZORYVE is the primary product driving the growth of the class. And, you know, those are, as we talked about before, patients who are coming over from topical steroids. You know, I think we have really just scratched the surface. And if anything, given the discussions in dermatology, that trend is likely to accelerate going forward.

You know, and the on the new to brand data, off the top of my head, I do not wanna miss folks to speak, so I do not have those, numbers right at my fingertips. But you know, clearly, ZORYVE is doing very well competitively versus the other brand in nonsteroidos, and we expect that to continue. And then with regard to the enrollment trends, Patrick, again, could you maybe address that?

Patrick E. Burnett: Yeah. Absolutely. So just a reminder, for ARQ-34, we are exiting the healthy volunteer section of our single ascending dose. And we have a couple of cohorts that are, of the single dose, that are actually in atopic dermatitis, but otherwise healthy patients who also have atopic dermatitis. And so we are moving into those AD cohorts. And then we are also gonna be initiating recruitment into the first, multiple ascending dose, and those are all in atopic dermatitis patients. So we do not have any experience yet from this trial in enrolling atopic dermatitis patients.

But I agree with your point that especially with the departure of OX40 from the kind of pipeline and competitive landscape here for atopic dermatitis patients, that a new mechanism of action is something that is going to be very beneficial for our recruitment And I think that this mechanism in particular, 1 where there is gonna be a lot of interest. So, you know, it is a competitive space. There is a lot that is going on, but I think that we are well positioned to be able to recruit these trials.

Judah Frommer: Thanks.

Operator: Thank you. And the next question will come from Uy Ear with Mizuho. Your line is open.

Uy Ear: Hey guys, yes. Thanks for taking our question. Maybe just help us understand about the change in gross to net a little bit. I just wanna make sure I understood you guys correctly. I just know Wait. Sorry. Could you could you say that 1 more time? I did not catch your question. Yeah. I wanted to see if you can help us understand the change in gross to net a little bit as we go from this quarter to the Q3 and Q4. I, you know, I guess in the first quarter, you were saying to expect gross to net to go to the low fifties by towards the end of the year.

Is that still the case, or is it more steady now? And my second question is, could you maybe elaborate a little more on the PD L1s study? Side effect study. Like, when do you expect it to finish? And what is the is that sort of a go-to--is there going to be a go to decision that you move into phase 3, or is it a study where you can publish and use the data to help with adoption? Thanks.

Todd Franklin Watanabe: Okay. Alright. Thanks, Uy. Yeah. So, Latha, do you want to maybe take the gross-to-net question on our view on gross-to-net for the rest of the year? And then, Patrick, can you talk a little bit more about the PD-L1 study?

Latha Vairavan: Okay. Hi, Uy. So we do expect the gross net to be in the 50s throughout the year and titrate down to the low fifties as we have said. We just think that the level of improvement will moderate. We started from a point that was lower than last year even though it was in the higher fifties. And I am sure your model will show you the improvement that we experienced in Q2. It will be some improvement in Q3 and Q4, not to the degree of last year. But it will come down to the low fifties.

Uy Ear: Okay. Thanks. That was helpful.

Patrick E. Burnett: Yeah. And then, Uy, just to kinda give a little more context to this study, you know, I think your question really is, is on point with trying to understand, you know, what we are looking for here. So you know, we really see this not as a, you know, necessarily a full development program, but really more of a way to create some data that can be helpful in order to ensure that patients may have access to this because there will be some data that will be published that will be out there. And we will give them another option.

A lot of these patients are going into topical steroids as first line, and then they may need to be on them for many years. So I think having additional data really for this you know, patient population to keep them from having to abandon a therapy that is usually working for them. it is really just about publishing, getting access to it, and not necessarily a full development program. And so the timing of the study is 1 that, you know, will obviously keep you posted as we get further into it, but it is just getting started now.

Uy Ear: Okay. Thank you.

Operator: Thank you. And the next question will come from Andrew Tsai with Jefferies. Your line is open.

Matt: Hey, good afternoon, and congrats on the quarter. This is Matt on for Andrew Tsai at Jefferies. And I just wanted to on the revised guidance you fundamentally talk about some of the push pulls behind the continued growth and acceleration? And are you aware of any other investigator sponsored or independent studies with ZORYVE that may be starting out over the next year? And then if so, like, you just talk about the market opportunities there for each of those indications?

Todd Franklin Watanabe: Thanks for the question, Matt. So with regard to the first question, I think that in the second half of the year, the primary driver of growth is going to be growth in prescriptions. You know, as Latha just mentioned, we do expect to see some improvement in gross to net in Q3 and Q4.

But probably moderated compared to what we saw in Q1 and Q2. and not be the major driver of growth And, you know, that demand growth is, you know, going to likely be a combination of the momentum that we already have generated and then the impact of a number of the commercial demand drivers that rolled out, like the Salesforce expansion, the continued DTC efforts, the virtual health platform that we just announced. You know, all of these things are really synergizing to help us continue to drive, growth of the prescription growth for ZORYVE. And then on your second question with regard to IITs, so we do not actually support a lot of investigator initiated trials at ArQudis.

The IIT process is pretty clunky, to be quite honest. And our preference is to do what I refer to as collaborative research studies where the company is able to work with the investigators And a number of the studies that we mentioned, including the vitiligo trial, the HS trial, the nail psoriasis trial, the PD L1 trial that Patrick was just mentioning, those are all collaborative research studies. We, as I mentioned earlier in my comments, you know, we continue to explore other opportunities, other potential indications. And, you know, I think it is likely that we will start at least 1 more of these proof of concept studies this year for another indication. You know, maybe more.

We have more options, probably, than we have resources. With, you know, 47 diseases having some efficacy data. And we are not gonna pursue all of them either. But I do think you will probably see 1 or more start this year, and we very well may start some additional studies next year as well. These are really cost and time efficient ways for us to get an evaluation of a potential indication and then enable us to make an informed decision about whether we wanna actually pursue a large registrational study for that indication. Patrick, I do not know.

Patrick E. Burnett: Any additional comments that you would wanna add on that part? No. I think that I think that covers it, Frank.

Matt: Thanks. I appreciate it.

Operator: Thank you. Thank you. And our next question will come from Serge Belanger with Needham. Your line is open.

Serge Belanger: Hey. Good afternoon, and congrats on a nice quarter. Couple questions around the virtual health platform effort. Are you trying to target a different set of patients than what you are currently able to access, and will it be able to drive patients to this platform via DTC efforts? And secondly, No. that is alright. Go ahead. I was going to ask, I believe I read that you were granted a couple of new patents -- I hope that was from your press release and not another 1 I read in the last hour. But just curious how they add to the ZORYVE patent portfolio and whether those new patents are eligible for the Orange Book.

Todd Franklin Watanabe: Yeah. Okay. So with regards to your first question, yes, I do think of it as a different set of patients. Right? The bulk of the patients that we are picking up today, really almost all of them, right, are patients who have already been seen by a dermatologist and, you know, are coming in for a refill or an annual checkup or in many cases, they are flaring, because of, you know, their existing therapy is not working, and the doctor is looking to do something different for those patients. But that is a patient that is already in the dermatology care system, and, you know, has access to a dermatologist because they have an appointment. Right?

You know, the advantage of the virtual health platform is you know, like, where I live, it is a 6-month wait to see a dermatologist. And even if you are in acute situation, I had I had shingles a number of years ago, and it was it was gonna be a month before I could see a dermatologist. When you have an urgent acute problem, you want to see someone, like, that day or the next day. Right? And that is just not practical in many places in The United States. Because of the mismatch between supply and demand of dermatology specialist care. Are also a lot of places in the country that just do not have dermatologists. Right?

For example, you know, Patrick and I were in Roswell, New Mexico a couple years ago. there is a dermatologist in 1.95 thousand So, you know, for those patients, they just do not have that option to see a dermatologist. So we think that the virtual health platform is really gonna complement the patients who are already seeing a dermatologist by allowing patients who do not have access to a dermatologist either because of scheduling or geography to see a dermatologist that day. And yes, to your earlier question, absolutely, we think direct to consumer is an important driver here.

You know, if you think about it, know, a patient sees an interview with Tori or Max Homa, they have the disease as well, and they think, gee, I wanna look into this more. You know, they can go right to our website. there is a click right on the homepage. You click on it, and it pulls you straight into the platform where the dermatologists sit. And the patient is able to schedule a visit with the dermatologist right then and there. So we think this is an important expansion of the opportunity set for ZORYVE particularly, again, given some of the idiosyncrasies of dermatology in The United States. And then on the new patents. Yeah.

So there are 2 new patents, that cover, 1 is the formulation and the other 1 is method of use. I cannot say definitively, but it is likely that they are orange book listable. You know, we have a very, very strong patent position around all of these reformulations. We have, I think, 18 patents listed in the Orange Book at the moment. So, you know, we continue to incrementally strengthen our IP portfolio. You know, these are not dramatically differentiated. They do not change the loss of exclusivity. Timelines of 37 for the cream and 2042 for the foam.

But, you know, we are always looking to strengthen that already strong IP portfolio and these 2 patents are just the product of that overall effort.

Serge Belanger: Thank you.

Operator: Thank you. And the next question is gonna come from Douglas Tsao with H. C. Wainwright. Your line is open.

Douglas Tsao: Just following up on telehealth initiative, I am just curious, Frank, what the conversion rate from an initial online intake to a prescription for ZORYVE. Are patients still needing to sort of sometimes maybe do some kind of step edit, or had they typically gone through that already And have you seen evidence of patients sort of maybe going through sort of initial intake, maybe having because of their plan, needing to try a TCS and then coming back to ultimately still get a script for ZORYVE.

Todd Franklin Watanabe: Sure. Yeah. Thanks, Doug. Great question. You know, it is still very early days. Right? So, you know, I think we will have to see over time what kinds of patients flow into the system and what happens. You know, I think a couple points. The first 1, again, is when the doctor when the dermatologist is evaluating the patient, the dermatologist can choose any therapy for that patient. It does not have to be ZORYVE, obviously. Right? We think ZORYVE is a great choice. But it does not have to be. And if the patient has something other than 1 of our approved indications, they are obviously gonna get something else. As well.

You know, many, many patients are on a steroid or have used a topical steroid before. And I would expect that many of the patients that come in to into the telehealth platform will have been on a prior topical steroid and are looking for a nonsteroidal alternative. You know,, maybe they have heard, again, Max or Stella or Tory talk about their experiences and their frustrations. Maybe they are afraid of topical steroids based on what they have read about topical steroid risks, and they wanna look for something different. So I think that many of the patients coming in are likely to have already been on a topical steroid.

And as I mentioned, we have the infrastructure in place to provide the insurance and fulfillment support for these telehealth patients that compares very favorably to what they would see if they went to a dermatologist's office. And so we are really looking at how we streamline this process whether you are seeing a dermatologist in person or you are seeing them online. Yeah. I think it is possible that some of the patients may end up needing step through another product if they are a new onset patient.

But you know, even in that scenario with the issues related to topical steroids, those patients are likely to be coming back in the not too distant future to get XEREV after they have met the STEP requirement. Okay.

Douglas Tsao: Okay. Great. that is really helpful. Thank you.

Operator: And the next question will come from Richard Law with Goldman Sachs. Your line is open.

Kehlani Usman: Hi, everyone. This is Kehlani Usman on for Richard Law. Thanks for taking our questions. The first 1 on the commercial front. As you guys 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 dermatologists from the PCPs and Pediatricians? So in other words, about how many patients do you think would be served by that new sales force?

Todd Franklin Watanabe: Sure. Yeah. Very good question. So we know that about half of all patients with psoriasis, AD, and sebderm are not seen by a dermatologist. Right? that is very well-established in the data. The majority of those patients are sitting are being seen by either a primary care doctor or a pediatrician. You know, that is leaving aside patients who are not currently being actively treated. We do not really look at those patients because it is always difficult to mobilize patients who are not in the system. But of patients, currently receiving prescription therapy, about half of those patients are seen by non dermatologists, the overwhelming majority being, primary care and pediatricians.

You know, with this initial sales force, you know, we are only calling on a fairly small chunk of the primary care and pediatric community. You know, as I mentioned in my prepared remarks earlier, we are focusing on very high volume doctors who have a proclivity to adopt new therapies in some cases, doctors who have actually written ZORYVE already. And we think that is where we are gonna get the fastest initial traction. And then as we evaluate and fine tune our approach, and get a sense of the return on investment from the primary care initiative, we will evaluate how large this primary care sales force should be, how far into primary care and pediatrics we reach.

And that may evolve over time just as it did with the dermatology sales team as well. But early on, we will be focusing on a small piece of a very large pie You know, 1 of the statistics that we shared on a prior quarterly call is that you know, there is something like 500 thousand primary care providers in The United States. it is a massive And we are not going after 500 thousand providers, obviously. But it turns out that there are about 5% of those primary care doctors and pediatricians, so about 25 thousand doctors, write A third of all the topical scripts come out of primary care and pediatrics.

So there is a very, very rich vein of potential in the primary care and pediatric community of highly concentrated, higher volume doctors and that is really where we are gonna be focusing our efforts initially and as we expand.

Kehlani Usman: Okay. Really helpful. Thank you. And then 1 more on atopic specifically. How will the potential approval of ZORYVE in the infant 3 to 24 months, expand that market opportunity? And what types of prelaunch activities, if any, are you guys pursuing to support a strong uptake in that setting?

Todd Franklin Watanabe: Yeah. So, we think it is going to be a very important catalyst. You know, there are about 1 million patients in that age group, the 3 to 24 month that have atopic dermatitis. So it is a large market. And, you know, the only things approved right now for 3 to 24 month olds are that 6 of the topical steroids are approved in that age group. And Eucrisa is approved in that age group. And that is it. So doctors are either having to treat patients, these infants off label or they are having to use 1 of those 7 drugs that is approved.

And I think that is really why we are seeing so much excitement from the especially the pediatric dermatology community because they do not have very many options. They do not have good options, especially nonsteroidal. And, you know, they have all used ZORYVE already, and they know how good it is, and they are very excited to be able to use it in this very young population. And, you know, and Patrick can speak to this too, but the concerns around steroids, you the there are concerns around steroids for every patient, but they are particularly acute. This 3 to 24 month population. No parent wants to put their kid on steroids. Quite honestly. Right?

And if we are able to offer a really effective and very safe and well tolerated non steroidal option to treat those patients, we think we are gonna see very, very meaningful uptake in that population. Patrick, anything that you would add to that?

Patrick E. Burnett: Yeah. I mean, I think you are absolutely right. And what that kind of steroid avoidance leads to is some real challenges in you know? And I think the best place to see this is in the pediatric dermatology community. And, Frank, I know you were just at the Society for PDerm meeting. And even going back last year when we were there, there was already tremendous awareness of this study going on even before we had the data and an interest in getting it to their patients because of these very few treatment options. That Frank outlined.

So now having the data out there, having it already been presented at the AAD, you know, the activities that we have are really sitting within the medical affairs team and just, you know, kind of, reacting to a lot of the questions and interest in what do our data show, how is this similar or different to what we have with the ages 2 and above particularly in atopic dermatitis, and just really making sure that everybody is getting their questions answered as we kind of prepare and move towards that launch in the beginning of next year.

Kehlani Usman: Makes sense. Thank you.

Operator: 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.

Todd Franklin Watanabe: Okay. And before I close, this is real time service here. Serge, I have an answer to your question and a correction. I must state that we have 28 patents. Not 18 patents on ZORYVE. Maas, our general counsel, corrected me. And he did confirm that both of these new patents are also Orange Book listable. So I wanted to clarify that. So, Yeah. Listen, another I another great quarter. Really appreciate everyone taking your time to call in today. I know it is a very, very busy time of the year with everyone doing quarterly results, and we appreciate your time and attention and all the great questions.

And we look forward to, talking to everyone again at, the Q3 call. Thanks. Bye.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

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