Arcutis Biotherapeutics, Inc. (ARQT) Q2 2023 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the Arcutis Biotherapeutics Second Quarter 2023 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. [Operator Instructions] Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your speaker today, Eric McIntyre, Head of Investor Relations. Please go ahead.

Thank you, Cory. Good afternoon, everyone and thank you for joining our Arcutis second quarter earnings call. Slides for today are available on the Investors section of our website. On the call today, we have Frank Watanabe, President and CEO; Ayisha Jeter, our Interim Chief Commercial Officer; Patrick Burnett, Chief Medical Officer and Scott Burrows, Chief Financial Officer. I'd remind everyone that we will be making forward-looking statements during this call. These statements are subject to certain risks and uncertainties, and actual results may differ materially. We encourage you to review the information disclosed in our latest SEC filings. With that intro, I'll hand the call over to Frank.

Thanks, Eric. And I'm going to make some brief introductory comments and then I'll turn it over to the experts here. So I'm on slide 5 of the slide deck. I'm really proud that our team is effectively executing on our strategy to build the leading innovation-driven dermatology company. The ZORYVE launch is strengthening on all fronts laying solid foundation for sustained long-term growth. Physician and patient feedback remains exceedingly positive and the launch is building momentum. We're really encouraged by our script growth as clinicians gain positive real-world experience with ZORYVE. And in Q2, we saw around 40% growth in TRxs versus Q1 and we've seen even further growth so far in Q3. And remember, we're just scratching the surface here on the broader topical steroid opportunity which is still roughly 20 times the size of the current nonsteroid market. One key element to unlocking the broad and the long-term conversion from topical steroids is our success in obtaining broad high-quality access and we're thrilled to have announced the CVS coverage decision in early July. In less than 12 months from launch, we've now secured coverage at all three of the large national PBMs as well as other large downstream health plans which is unusually fast for any launch and we think is validation of our pricing and access strategy. Currently, more than 130 million commercially insured patients have access to ZORYVE and over 90% of those patients have access without any prior authorization, which meets our goals for high-quality access. I'm also pleased to report that gross to net has improved in the second quarter as we had previously indicated. And so far in Q3 we are seeing additional improvement in part due to the expanded coverage as well as our focused execution with the percentage of scripts being covered reaching all-time highs and we expect further gross to net improvement in Q3 and additional improvement in Q4. Beyond the ZORYVE US launch, we're also executing to build for the future. In June, we launched ZORYVE in Canada and thus far we've had an excellent reception from physicians and patients as well as rapid progress in building the same high-quality access that we've achieved in the US. It's still early days, but the script growth has been healthy and we've already secured coverage for ZORYVE with the top three private payers representing more than half of the Canadian private market. We also strengthened our overall patent estate with the recent issuance of a new patent covering methods of treatment of seborrheic dermatitis with roflumilast foam and that's a U.S. patent by the way. We already enjoyed very strong IP protection on top of the roflumilast foam and cream through 2037 and this new patent extends protection for the foam and seborrheic dermatitis through 2041, which we're obviously delighted with. So turning now to slide six. We've shown this slide previously, but I think it's a good reminder of the true opportunity for topical roflumilast and also what makes it a very unique molecule with potentially four products in one as we execute multiple launches in the quarters ahead. With ZORYVE today, we're competing in a market of about 2 million patients possibly treated for their psoriasis in US dermatology offices. Then we have potential upcoming launches every two to three quarters with seb derm at the beginning of in the second half of 24 and then scalp and body psoriasis in 2025. We also have a very large opportunity outside of the dermatology office, particularly with the expected approvals in atopic dermatitis and seborrheic dermatitis, both of which are frequently treated in the primary care setting. As we have indicated before, we do not intend to build our own primary care sales force, but we'll look for a partnership to help us access this market in a cost-effective way. So when you factor in all those opportunities we're pursuing, both inside dermatology and out, that's a 13 million patient addressable market and more than a six-fold increase over the current psoriasis market we're competing in. Now, I want to turn the call over to Ayisha Jeter, our Interim Chief Commercial Officer to provide more details on the ZORYVE launch. But before I do, I want to comment on how impressed I've been with her performance as our Interim CCO over the past few months. I have no doubt about Ayisha's ability to fill in as an Interim CCO, when we appointed her to that role. And she's done incredibly well filling in while we search for a permanent Chief Commercial Officer. She is providing strong leadership. And our commercial team has not missed a beat as you can see in our recent sales performance. And with that Ayisha go ahead.

Thanks, Frank. Moving to commercial performance on slide eight. We are proud of the growing momentum across all aspects of our launch. Everything starts with ZORYVE's strong product profile at the core, which continues to pay dividends with patients’, physicians and payers. We are seeing steady prescription growth as more clinicians gain experience and determine in the real world how ZORYVE can perform for a variety of their patients. As we've said in the past, to successfully launch drugs companies need to constantly evaluate tactics and adjust as needed and our team is doing just that. Our results in Q2 reflect our ongoing adjustments and improvements and we will look for ways to further optimize our performance going forward. On this slide, we're showing IQVIA demand data. Now, approaching one year into launch, we see healthy consistent growth trends with nearly 40% TRx growth quarter-over-quarter in Q2, plus further growth in the third quarter to date, surpassing all-time highs in both TRx and NRx post the 4th of July holiday. HCP and patient feedback on ZORYVE's performance in the real world remains exceptional, especially its rapid efficacy with the once-daily treatment that can be used anywhere on the body, the ability to use it in intertriginous and sensitive areas, as well as very positive feedback on its effectiveness in treating the most difficult plaques in areas like elbows and knees. And of course, clinicians and patients really appreciate the favorable tolerability profile of ZORYVE as well. Moving to slide nine. Since launch, we have made great strides in unblocking broad high-quality access for ZORYVE that will drive further patient demand and gross to net improvement. As Frank mentioned, ZORYVE is now covered on the top three largest commercial PBMs on their national formularies, which gives HCP's peace of mind about how easy it is for their commercially insured patients to obtain ZORYVE. With over 130 million commercial lives now covered, we have secured access for 80% of commercial lives in the US. With this broad coverage, HCPs don't have to think about where ZORYVE may or may not be reimbursed. Importantly, of that 80% of commercial lives over 90% are covered without a prior authorization, which reduces the household factor that typically limits prescribers from putting pen to paper. We believe this distinction along with our product profile is critical to facilitating the long-term conversion from topical steroid. We also expect that the high quality coverage enjoyed by ZORYVE will also help with our expected launches in seborrheic dermatitis and atopic dermatitis in 2024. On Slide 10 the slide details our broad high-quality commercial coverage for ZORYVE on the national formularies of the three largest PBMs. Payers are responding favorably to ZORYVE's clinical profile with the most recent example being CVS not requiring a step for patients with psoriasis in sensitive areas, certainly a notch or our differentiated label and aligned with what is best for these patients in practice. Our pricing and access strategy is resonating with payers as evidenced by a growing number of instances where we have an advantage in utilization management criteria preferential tier status and certainly our time to coverage compares favorably to other recently launched branded topical agents. We're also making progress with coverage outside of the commercially insured population. The VA just recently updated its clinical guidelines, where we see another example of payers valuing the clinical profile of ZORYVE. Like CVS, there is no step requirement for patients with plaques in sensitive areas. And the VA also imposed a requirement to step therapy -- to step through ZORYVE to get to the other new branded non-steroidal. As we said all along, this differentiated high quality coverage ultimately makes ZORYVE less burdensome for health care providers to write, which is critical to converting the topical steroid market over the long-term. Additionally, we're also starting to see benefits of our improved coverage and focused field execution on our gross to net. Our field reimbursement team is now fully on board. We have further fine-tuned our co-pay offerings. And our sales team is making positive strides in pulling through covered prescriptions. We have the right plan and tactics in place and are executing against that. In Q2, we saw improvement in the percentage of prescriptions covered and that improvement has accelerated in Q3. In fact, in July, we've seen our best month yet in terms of covered prescriptions giving us confidence in our plans and team's execution. We are seeing improvement in the percentage of covered prescriptions across all major PBMs. Most notably since the CVS coverage decision in early July, we have seen a more than doubling in the percentage of prescriptions reimbursed by CVS. We expect our improved coverage coupled with sales force execution to produce improved gross to net in Q3 with further improvement in Q4, which reinforces our conviction that we can achieve our target steady-state gross to net over time. On Slide 11, I will remind you all of the three pillars to commercial success that we've set out for sustained ZORYVE growth. First, driving HCP awareness and expanding the prescriber base. We have now seen over 7,500 unique writers since launch. We remain focused on increasing our reach and frequency with the highest prescribing health care providers. At the same time, there is still a lot of headroom for further expansion of providers and we're actively targeting those HCPs who have yet to begin prescribing the newer non-steroidals. Second patient engagement and experience. Refills are growing very nicely. In Q2 -- in Q1 we averaged approximately 20%. It increased in Q2 to 27%. And for the month of July, our refills were approximately 33%. Sustained growth here is important to achieve the long-term potential of ZORYVE, and also is an encouraging indicator of patient adherence to ZORYVE. We previously said, that we would look at enhancing our DTC efforts as access comes on board more broadly. With our recent progress on coverage, we feel the time is right to fuel the next leg of the ZORYVE launch into 2024 and beyond. And as a result, we will be going live with a focused connected TV campaign later this quarter, which will activate patients to ask their dermatologist for ZORYVE. In closing, we look forward to delivering on the long-term promise of ZORYVE. And with that, I will hand it over to Patrick.

Thank you, Ayisha. From my end, I just wanted to provide a quick update on our near-term clinical and regulatory milestones. And these are on Slide 13. These all remain on track, building significant sustained long-term growth potential as Frank mentioned earlier. So starting off with atopic derm. We have the INTEGUMENT-PED readout on track for later this quarter. And as a reminder, this study is in the two - to five-year-old AD population. We also look forward to submitting the sNDA in late Q3 early Q4, for atopic dermatitis for ages six and above based on the INTEGUMENT- 1and 2 positive readouts. Turning to seborrheic dermatitis, we have our PDUFA set for December 16 and HCP excitement is already incredibly high. And right now, we're doing a lot of disease state awareness with the medical team in the field. Briefly on psoriasis. We look forward to the potential approval for a label expansion for ZORYVE down to the age of two, in the fourth quarter. And this builds on our existing label for adolescents and adults in psoriasis. And one additional update on the early pipeline. Recall that we started a Phase 1b study with our unique topical JAK for alopecia areata, initially in healthy volunteers and now we've progressed to enrollment of our first alopecia areata subject in that study. We'll have more to share on this study, as it nears enrollment completion. With that, I'll turn it over to Scott.

Thanks, Patrick. Turning to Page 15, of the slide deck. Total revenues were $5.2 million in the second quarter. Net product revenues were $4.8 million driven by nearly 40% quarter-over-quarter demand growth as well as improved gross to net. Recall, we communicated in our last earnings call that we expected most of our second quarter growth would be driven by demand, but we are pleased to see gross-to-net improvements meaningfully contributing to revenue growth as well in Q2. Based on the expanded insurance coverage that Ayisha highlighted, as well as our efforts to ensure prescriptions are appropriately processed as covered prescriptions, we expect further gross to net improvement in Q3 and continued improvement in Q4. In the second quarter, we also recognized $400,000 in other revenues, which was the value of an equity stake received from a previous collaboration partner. Turning to the rest of the P&L. Research and development expenses were $25 million in the second quarter. The decrease year-over-year is primarily due to lower clinical development costs, as we wind down our topical roflumilast programs. In addition to lower roflumilast development cost, the comparison versus the first quarter also benefited from the $3 million seborrheic dermatitis FDA filing fee in the first quarter, some onetime favorable clinical study true-ups and our broader efforts to reduce spend in our early-stage R&D programs. For Q3, we would expect R&D to tick back up closer to $30 million as we do not expect the same onetime favorability from study true-ups. We expect a further step down in R&D expenses in 2024. SG&A expenses were $46 million for the quarter, reflecting our continued investment in the ZORYVE launch and the upcoming launches in separate dermatitis and atopic dermatitis. As Ayisha mentioned, we will begin our focused connected TV efforts later this quarter and into Q4, driving some additional SG&A expense growth. Net loss per share was $1.16 for the quarter compared to $1.31 in the same over last year. Turning to our final slide on page 16, we provide some key balance sheet and cash flow items. We remain well capitalized with cash of $270 million as of June 30. Our burn decreased in the second quarter, driven by lower R&D costs and the timing of certain payments. Similar to my operating expense comments, we would expect cash burn to tick back up slightly in the third quarter as we invest in the psoriasis and upcoming seb derm launches. Over time, we'd expect a general downward trend in quarterly cash burn as revenues continue to grow and as we benefit from sales across multiple indications. We also remain confident in our near-term ability to further strengthen the balance sheet with non-dilutive capital through our ex-US e-licensing efforts. This concludes the financial update. I'll now turn the call back to Frank.

Thanks, Scott. So just in closing, first of all, I would like to thank all the members of the Arcutis team. As you can imagine, folks are working incredibly hard to deliver these results, and I am constantly impressed by the dedication of our team. I also want to thank everyone of you for taking the time out of your day to call in on our quarterly earnings call. And with that, we will wrap-up and open things up to questions-and-answers.

Thank you. We will now conduct a question-and-answer session. [Operator Instructions] Our first question comes from Tyler Van Buren of TD Cowen. Your line is open.

Hey, guys, good afternoon. It's great to see the improvement in coverage that occurred over the last quarter. And you mentioned, the percent of cover and prescriptions are at an all-time high. So the first question is, what percent -- what was the percent of covered prescriptions during Q2 and July separately relative to Q1? And -- and then for a second question, which is kind of related, but just for additional detail on the quarter. Can you talk about the cadence of improvement of gross to net during Q2? I presume May and June were better than April as the second PBM came online on May 1. But as we think about the trajectory heading into Q3 was the gross to net during June significantly improved relative to May?

So, Tyler thanks for your questions. Maybe I'll take the first one and then I'll Ayisha to go into little more detail on your second question. In terms of percentage covered prescriptions that's a level of detail that we probably aren't comfortable really getting into but I will say that we are seeing a steady trend upwards every quarter in a percentage covered. And that includes as I mentioned earlier since the end of Q2 we've seen further improvement. Ayisha, do you want to maybe talk about what we saw within the quarter in terms of the cadence of improvement?

Sure. So first off, what I would note is that as it relates to -- there was a couple of different components. One was the deductible resets. We did start to see an improvement there as patients actually got through their deductible Secondly as it relates to PBM number two coming on board once that implementation was in place we saw improvement and then further thereafter then we started to see some improvements with the pull-through related to the reimbursement field team.

I think Cory we can go to the next question.

Go ahead Cory.

Cory, go ahead.

Yeah. Our next question comes from Vikram Purohit of Morgan Stanley.

Hi, good afternoon. Thanks for taking our questions. We had two both on ZORYVE and psoriasis. First, could you just provide a bit of color on how the mix of patients being prescribed ZORYVE might be changing over time since the launch in terms of line of use, prior treatment status things like that? And then secondly, back to gross to net but taking a step back what's your current thinking on what a steady-state gross to net could look like? And what do you think your time line is for getting there? Thanks.

Yeah. So maybe I'll take the second one and then I'll ask Ayisha to talk about mix of patients. Although I will say our granularity in that data isn't perfect. But I think we've continued to say that we remain confident in our ability to get to a steady state gross to net in somewhere in the 40% to 60% range. And we still believe that today particularly with the improvement that we're seeing in Q2 and in Q3. I think it's probably going to take us a little bit longer to get there than what we had initially anticipated. But certainly, we think that's well within our reach. The exact timing I think is really difficult to predict. We're in I think a somewhat unusual circumstance that we're launching multiple products in the same window of time before we get to steady state with the expected seb derm launch in early 2024 and then AD in mid-2024 and then scalp in early 2024 sometime in 2025. And every time you launch a new product that has impact on your gross to net trends. So I think it's difficult at this point for us to say exactly when we will get to a steady state. I said before, it certainly won't be in 2023, but I also don't think it's going to be 2028. But at this point, I think it's too early to call and we'll update you guys as we get more clarity going forward on that. Ayisha, can you maybe talk about the mix of patients that we're seeing.

Absolutely. So Vikram as it relates to the patients. So first off, it's similar to what we've discussed in the past. First, it's the patients that have tried a steroid and/or other topicals. And then also it's been a mix of patients that have tried a single steroid for the most part.

Great. Can I just add just as a reminder. In any given year, 95% of psoriasis patients are continuing patients. There's not a huge amount of new patients coming into the system every year. And so most patients have been on something previously for the plaque psoriasis.

Sure. Understood. Thank you.

Thank you. Our next question comes from Seamus Fernandez of Guggenheim Securities. Your line is open.

Great. Thanks for the question. So just two quick questions. Can you guys help us understand the number of accounts that you are currently in and marketing to at this point in time? Just trying to get a better sense of that. Some of the survey work that we've done has shown actually pretty strong penetration among physicians and users of both ZORYVE and Vitama with good growth expectations for their internal use. But it seems like the kind of growth that that would deliver, if there isn't a lot of additional growth in the practices that you're promoting to that it really is kind of practice growth and greater experience that's going to drive script growth for ZORYVE. And then separate and incremental to that, can you just help us understand whether you believe you're fully resourced with the current sales force and the marketing efforts to launch the foam once the Seb Derm indication is launched -- is approved? Thanks.

Sure. Seamus, when you say accounts, you're talking about physician accounts, right?

Correct. Yeah, yeah. Exactly.

Yeah. So I think Ayisha mentioned on the call that right now, about 7,000 unique physicians have prescribed ZORYVE, and that's out of about 13,000 targets. So there's still quite a bit of headroom in terms of bringing new doctors on to prescribing ZORYVE. And then I think the other facet, and I made reference to this, if you think about the size of the topical steroid market today being in 20 times the size of the non-serial market, even in those markets, those offices that have started to adopt ZORYVE, there's still a great deal of upside in terms of deepening the prescribing base as well. So we think about growth as being both of those, both an expansion of the base as well as the deepening of the prescribing base. And I think, as I mentioned, I think, in my introductory comments, we really think that we're just scratching the surface particularly as, I think, the momentum around the move away from steroids built in the dermatology community. And then with regard to your same question around resourcing for Seb Derm launch maybe again I'll ask Ayisha to comment on that as CCO.

Absolutely Frank. So as it relates to the resourcing the team is well-resourced from the sales force as well as a marketing perspective. Right now we're hyper-focused on doing the disease state awareness education to providers and ensuring that it is more focused on not just providers but more importantly to patients. So definitely feel very confident in the resources that we currently have right now to help us to accelerate our approvals -- excuse me -- not approvals, our launch for Seborrheic Dermatitis.

Great. Thanks for the questions.

Thank you. One moment for our next question. Our next question comes from Uy Ear of Mizuho. Your line is open.

Hey, guys, thanks for taking my question. Just a quick one. Could you, sort of, I don't know if it's probably too early, but can you speak to the persistent rate? Like I think you mentioned, the number, what is it 3% refills or something. But are you seeing a lot more patient -- are patients also going off continuing to use the therapy or not? And I guess the second question financially, I think, Scott you mentioned that in 2024 you're going to see a downtick. Could you help us quantify that in terms of R&D spend? Thank you.

Yeah, okay. Yeah. So in terms of persistence, persistence on ZORYVE, I think it's still very early days to gauge exactly what that is. Ayisha mentioned that refills in July have grown now to 33% of total volume. And so we certainly have seen a steadily increasing number of refills from patients. There are some patients who are refilling quite frequently. I think Ken previously mentioned that we've seen patients refill as many as five times. But I think that's really at the skinny end of the tail the bell-shaped curve. We continue to think that is probably something like three tubes a year. And so the bulk of patients may be just coming up on their first prescription refill right now but that's something that we'll continue to monitor. In terms of discontinuation due to a lack of efficacy or due to side effects and tolerability I think that's one of the really encouraging things we continue to hear from clinicians is that they very rarely if ever see non-response to ZORYVE, which I think is consistent with the data that we've shared in the past where 95% of patients in our clinical trial improved on ZORYVE. And the side effect profile what we hear anecdotally is that it's at least as good if not better than what's in the label. And again in our long-term extension study you probably recall, we saw about 50% higher adherences in our long-term study than what has been historically the case in topical trials. So we are definitely encouraged by the early signs around adherence. And then Scott, can you maybe take the Uy's question around expenses?

Yeah. Yeah. Hi Uy. So on R&D spend for ZORYVE I'd say, it's a bit early to get too specific but the key drivers would be we still have our pediatric AD study and our long-term extension study ongoing. That spend will reduce again in 2024. And until we're approved in seb derm some of our ongoing for example like manufacturing efforts continue to hit the R&D line. So once that's approved, that will come out of the R&D line. And so that's -- those are kind of the key drivers that we'd expect going into 2024.

Okay. Thank you.

Thank you. One moment for our next caller. Our next question comes from the line of Chris Shibutani at Goldman Sachs. Your line is open.

Hey team. This is Stephen on for Chris. Thanks for taking my question. Two from us, can you help us characterize the physicians who have not yet prescribed ZORYVE and how you think about gaining mind share among that group of physicians? And to the extent that they are either -- they don't see the value in the product versus they haven't been adequately detailed to this point? And then our second question is, can you just talk about why you think now is the right time to do TV marketing ads. I think you had talked previously about until you felt you had a sufficient level of payer coverage. So that would make sense. But I just want to hear your thoughts there. Thank you.

Yes sir, Ayisha, can you maybe take those two?

Yeah. Absolutely. So I think as it relates to the prescribers that have yet -- those prescribers have yet to write ZORYVE, I think we do have to do is at first is recognize that there are this ingrained habits with providers that are using topical steroids. So our team is consistently going in and helping them to understand what the value proposition is of ZORYVE and reminding them of the importance, because as we have a reminder that out there when you're talking to prescribers those that have utilized ZORYVE absolutely love and are bought in on the clinical profile. Now, secondly, as it relates to your question on DTC, you are correct, that and the fact that we've been evaluating this tactic for quite some time, but we wanted to wait for our ZORYVE coverage to be in place. And we are now at that critical mass where we feel great to go ahead and flip the switch and turn it on.

Perfect. Thank you very much.

Thank you. One moment for our next question. Our next question comes from Louise Chen of Cantor. Your line is now open.

Hi. Thank you for taking my question. So I wanted to ask you on seb derm what gives you confidence that you could build a greenfield opportunity here? Secondly, can you leverage any of the payer work you did for ZORYVE in psoriasis for your atopic derm opportunity? And then, lastly, how do you think about a primary care partner? What would be an ideal company for you? And any thoughts on timing of when we might see something would it be this year more likely next year and beyond? Thank you.

Sure. So, I'll address the PCP piece, and then I'll ask Ayisha to talk a little bit about our thoughts around seb derm and then -- sorry, excuse me, I think around seb derm, I'm going to make sure Patrick is not asleep and I'm going to ask him to talk about that as a clinician. And then we'll ask Ayisha to talk about the coverage piece. Just with regard to PCP partnership, I think from a timing standpoint we have been saying consistently, we feel like that is something that we really want to have in place around the atopic dermatitis launch, which is probably the second half of next year. There could be a benefit to doing it earlier. Again, seb derm is often treated in the primary care setting as well. But we didn't feel like we had to rush to get the partnership ready for seb derm. It will contribute I think as we get momentum going. So yes, I would look to something second half of next year probably is the most likely time frame. And then in terms of the IDeA [ph] partner, in an IDeA World, it's a company with a very capable and large primary care sales force calling on both, primary care physicians internists and GPs as well as pediatricians who are seeing a lot of the atopic dermatitis patients. And if there is a little bit of allergists in the mix that would be great too but I think that that's less critical just because of the sheer -- relative size of the three opportunities. I think for us the most important thing is having someone who's very good at execution and someone who works well with our team. And then Patrick, can you maybe talk a little bit about the seb derm opportunity and how much building we really need to do versus just stepping into an existing market.

Yes, absolutely. I think one of the key things about seborrheic dermatitis patients is that they're already in dermatologists' office. And we heard this very early when we started talking to them. And it's been borne out by repeated ad boards and just more and more conversations. They have just as many seborrheic dermatitis patients in their office as they do psoriasis. And that's just people come in. Keep in mind that there hasn't been a new drug for seborrheic dermatitis for decades. And so now we're going to be bringing a non-steroidal treatment that is really kind of the first opportunity for them as HCPs to be able to offer something new to their patients. For the entirety of most of their practice, they've been using topical steroids and antifungals in some combination. And when a patient gets referred to them with seborrheic dermatitis they've oftentimes been treated with these already. And now they don't really have anything to offer them. So I think that's one of the reasons I mentioned that we have just very high HCP excitement over this launch is, because it really fits with patients that they're already seeing and now it's going to give them something new to be able to treat them. And I think that's one of the things that makes being a physician rewarding. And so, I think it fits really nicely with the current practice.

And then Ayisha, do you want to talk a little bit about coverage, and how psoriasis and seb derm might interact?

Yes, absolutely. So what we've done to date is we built the groundwork with certain key payer agreements with psoriasis that's actually going to help us to build the foundation for our access with seborrheic dermatitis. I know in the past that we have alluded to having agreements already in place. And so that is what's going to be able to provide us with the access -- the foundation that we need in order to secure the access for seborrheic dermatitis.

Thank you.

Thank you. One moment for our next call. Our next call comes from Sean Kim of JonesTrading. Your line is open.

Hi. Thank you for taking my questions. I guess just one follow-up question on the prescriber base. So of that 3,000 dermatologists that you mentioned earlier in the call, how many are considered high prescribers? And all of the 7,500 unique prescribers that you mentioned, how many are also considered high prescribers? And if you're seeing any improvements in terms of the number of prescriptions per prescriber. And one question on pipeline is just for alopecia areata. Just wondering what the timing of top line readout might be and if there are any efficacy endpoints for that program? Thank you.

Sure. So with regard to prescriber base, I think it's a relative term. There are probably around 20,000 clinicians working in dermatology that's MDs, Dos, as well as nurse practitioners and physicians' assistants. So the 13,000 that we're targeting already are the higher prescribing clinicians. And then within that there obviously are gradations as well. There's a relatively small group of the very highest physician prescribers or clinician prescribers, the so-called decile 8, decile 9, decile 10 doctors. That's a relatively small number. And then you've got middling doctors and then the lower end of the high prescribing volume right if you can think about it. And I think as Ayisha mentioned,. there's no correlation between likeliness to use the newer nonsteroidals and volume. You have some very large volume doctors who aren't using the new nonsteroidals. You have some very low volume doctors or relatively low volume doctors who are. And then fortunately you have high-volume doctors who are writing a lot of the newer nonsteroidals including ZORYVE as well. But it really – it comes back to just looking at their total volume across the entirety of the prescribing basket right the relevant prescription basket. Ayisha, I don't know if you have any additional comments that you wanted to add about the characterization of the prescriber base.

Nothing else Frank. I think you've covered it.

And then Patrick can you maybe talk a little bit about the Phase I study?

Yes, absolutely. So yes this is a Phase Ib trial. So it's not really designed to give us a clear read on efficacy. We're really looking at PK profile, safety tolerability data, as well as certain biomarkers that we would use to potentially inform our efficacy expectations within the next trial a Phase II trial. We've completed the healthy volunteer portion and we're enrolling alopecia areata patients right now as I mentioned. With regard to the timing of that study, I think as we get further into the enrollment and we have a clearer idea of exactly what that time line will be we'll come back to you with a little bit more information on that. But as of right now, given where we are in the study we're just not ready to give anything more about it.

Yes, thank you.

Thank you. Next question comes from Rohit Bhasin of Needham. Your line is open.

Hi, this is Rohit on for Serge. Can you just talk about where you currently stand in terms of managed care coverage and where you expect to be down the line? And then what are your expectations for the upcoming INTEGUMENT-PED trial? Should we expect different results than previous Phase III trials? Thanks.

Sure. Ayisha can you maybe address the managed care question then Patrick talked about INTEGUMENT-PED?

Sure. So, first off, as it relates to our managed care coverage as it relates to commercial as I noted earlier in our remarks, we have 80% of commercial coverage for our patients for plaque psoriasis for ZORYVE excuse me. And then of the 80% 90% of those patients do not have to there is no prior authorization. Additionally, I will say is outside of the commercial patient population we did receive notice from the VA that we did receive access for ZORYVE. And so the clinical guidelines have been updated where there is no step required for patients with ZORYVE that have sensitive that have plaques in sensitive areas.

Yes. And I can pick up on INTEGUMENT-PED. So just as a reminder that is a study in the two to five-year olds with atopic dermatitis and it's with a 0.05% dose the 0.05% and the 0.15% were both studies in the Phase II and the efficacy looked similar between those two doses in that trial. And our expectation for the readout of INTEGUMENT-PED is that we would see a very similar safety and efficacy profile to what we showed in INTEGUMENT one and two with ages six and above. In general, atopic dermatitis tends to have similar efficacy across the different age ranges when looking at earlier clinical development program.

Thank you.

Thank you. At this time, I would now like to turn the conference back to Frank Watanabe, CEO.

Okay. Well, first of all, thanks once again to everyone for calling in and thank you for as usual a group of really good questions. I think we're blessed with a wonderful group of analysts that are covering the company. And we look forward to talking to everyone again in about 90 days for the next quarterly call. Thanks a lot.

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.