Arcutis Biotherapeutics, Inc. (ARQT) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Arcutis Biotherapeutics Topline Data Call. [Operator Instructions] I would now like to turn the call over to [ Eric McIntyre ], you may begin.

Thank you, Kevin. Good morning, everyone, and thank you for starting your Mondays off with us. We're incredibly excited here to be with you to discuss our positive top line results for the STRATUM pivotal Phase III study evaluating roflumilast foam as a potential topical treatment for seborrheic dermatitis. Today's webcast and posted presentation can be found under the Events and Presentations tab of our Investors section of our website. And then, of course, before we begin, I'd like to remind you all that the safe harbor rules govern or remarks today as well as any forward-looking statements that we make during this call. These statements are subject to any risks and uncertainties that could cause actual results to differ materially. With that, I'm extremely pleased to turn the call over to Frank Watanabe, President and CEO. Frank?

Thanks, Eric, and good morning, everyone. So I'm on Slide 3. Just briefly, we are joined today by Dr. Zoe Draelos, who is a leading dermatologist and one of the investigators in the trial. As well as Patrick Burnett, our Chief Medical Officer; and Ken Lock, our Chief Commercial Officer. Turning to Slide 5. Just to remind everyone, we talked at our Investor Day earlier this year about the fact that 2022 is going to really be a transformational year for Arcutis, and we continue to believe that. I think we're delivering on that promise. As a reminder, we talked about the fact that the topical roflumilast, we believe it has a very differential clinical profile, and we continue to target 3 distinct disease states, all with about 2 million patients a piece who are seen by dermatologists in the U.S. and treated topically. So all very large opportunities. As we're talking a little bit more today, our excitement level about the potential for roflumilast in seborrheic dermatitis continues to grow, and these results are very confirmatory of that. We're making steady progress on our commercial launch preparations and are very excited about our potential PDUFA date or PDUFA date and potential approval on July 29. And we think that we've got a very good chance of replicating the success plaque psoriasis and now seborrheic dermatitis as we readout the atopic dermatitis and scalp psoriasis and body psoriasis trials later this year. On Slide #6, again, at the beginning of the year, we talked about 4 major catalysts coming up for 2022. The first one being seborrheic dermatitis. We told you all about the middle of the year, and we're just a little bit early with the delivery for [indiscernible] of those results. We still are expecting approval on the 29th of July from the FDA. And then we expect to readout the seborrheic d scalp psoriasis and body psoriasis trial right around the end of Q3, beginning of Q4 followed by the 2, INTEGUMENT-1, INTEGUMENT-2 phase III studies in atopic dermatitis before the end of the year. On Slide 7, again, just to recap as we talked about at our Investor Day, these are all very large opportunity in psoriasis, atopic dermatitis and seborrheic dermatitis. And again, I'd call your attention to seborrheic dermatitis. I think this is an underappreciated opportunity, but there are as many seborrheic dermatitis patients in the dermatologist office receiving topical treatment as there are psoriasis patients. And as Dr. Draelos will talk a little bit more in just a moment, there is very significant unmet need. We have a really innovative profile that we think fits well with those needs, and we think this represents a really significant opportunity for us and a significant advancement in treatment for doctors and patients. So in terms of the clinical profile. I'm just going to recap, nothing -- really changed here, but what we've seen is efficacy with topical roflumilast due to the cream or now the foam that's on par with steroid vitamin D combinations. It's a very unusual thing and a very needed thing to have a non-steroid that can be used chronically and anywhere on the body, that's a very significant development. We don't expect any box warnings on our label. And again, in the study, we have seen very, very favorable like a local tolerability with none of the burning and stinging or folliculitis or contact dermatitis that are associated with some of the other topicals in the space. And we've treated well over 3,500 patients now with roflumilast, and that safety profile and tolerability profile has been consistent throughout all of those studies. So with that, I'm going to turn it over to Dr. Draelos to talk a little bit more about seborrheic dermatitis from a clinician's perspective. Dr. Draelos?

Yes. Hello. I'm Zoe Diana Draelos, and I am both a clinical and the research dermatologist. I have the opportunity to participate in a variety of roflumilast trials, both in Phase II and Phase III. And of course, I also treat patients, which is why I'm so excited about this new development in dermatology. We do not have any drug that is on label for seborrheic dermatitis at this point in time, even though approximately 10 million individuals in the U.S. are afflicted with this disease. In the past, we had challenges in treating this disease because there was nothing on label. But yet, it's a disease that needs treatment. Seborrheic dermatitis has a debilitating itch that it leads to scratch, which can cause sores, bleeding, infection. It's also going to be a socially debilitating disease because seborrheic dermatitis leads to embarrassment about stretching your scalp in public as well as flaking on clothing. So living with seborrheic dermatitis negatively impacts both patients' health and their quality of life. In the past, our treatments have been somewhat complex and suboptimal. Antifungals are commonly used, both in the form of shampoos and topicals, but neither are really highly effective, especially for the itch. Anti-inflammatory agents such as topical corticosteroids are the predominant treatment, but the problem is as their long-term safety profile is not good. Roflumilast offers an amazing opportunity. It's a very elegant foam vehicle. Nice to use in hairy areas, no sticky creams. It's also highly efficacious as the Phase III pivotal results show. It is able to improve seborrheic dermatitis and it's on label and suitable for all body areas. So topical roflumilast, for me as a clinician, represents a significant step forward by expanding the dermatologist armamentarium, but also from a patient standpoint, it's a significant step forward because now we have an on label product for seborrheic dermatitis, but also patients now have something that really works, something that's efficacious and something that's aesthetic. All of those are very, very important as we advance the treatment of seborrheic dermatitis in dermatology.

Great. Thank you very much, Dr. Draelos. This is Patrick Burnett, I'm the Chief Medical Officer. If we can move to -- if you move to Slide 12. I'm just going to give a little bit of background on the Phase III trial design that we used for STRATUM and then some of the efficacy and safety results. So STRATUM enrolled 457 patients, and they were randomized 2:1, our roflumilast foam at the dose of 0.3%, applied once daily. And those were compared to patients treated with the vehicle, also treated once daily for an 8-week treatment period. The enrollment allowed patients of moderate and severe seborrheic dermatitis only, so we didn't enroll any mild patients into this trial, in that trial, and that was determined based on investigator global assessment at baseline. We included patients down to the age of 9. Seborrheic dermatitis onset is associated with puberty, and so including patients into this tipping into the highest ages of the pediatric age range allowed us to really have a comprehensive enrollment that covered the entire spectrum of age range of where patients get seborrheic dermatitis. In addition to that, we treated seb derm not just on the scalp but also on the face or anywhere on the body where it appeared with the goal of also being able to kind of cover seborrheic dermatitis wherever it appears on the patients. The primary endpoint for this trial was Investigator Global Assessment success at week 8. IGA is a 5-point scale with 0 being clear and 4 being severe. Patients needed to get to clear, almost clear, that's a 0 or 1 on the IGA in order to be considered a responder for this trial. We call that an IGA Success because patients also had to have at least a 2-point improvement. But because we only enrolled moderate and severe patients, by definition, getting to a 0 or 1 meant that you met those IGA Success criteria. So the primary endpoint was IGA Success at week 8. Secondary endpoints included IGA Success at weeks 2 and 4, as well as Investigator Global Assessment score of 0 at week 8. And I'll show you those data today. We look specifically at erythema scaling individually. These are a part of the IGA, but those were included as secondary endpoints with separate scales. And the other piece of data that we'll show today is our worst-itch numeric rating scale, or WI-NRS, data, which is how we captured itch in this study. Itch is a key component, as mentioned by Dr. Draelos, a key component of seborrheic dermatitis and can have a significant impact on quality of life. If we move to Slide 13, these are the primary endpoint data. Looking specifically at week 8, you can see that with a efficacy rate of 80.1% of patients achieving IGA Success on active compared to a vehicle of 59.2% and a P value of less than 0.0001. This was a successful trial, demonstrating a robust statistical difference between active and vehicle and also a clinically meaningful efficacy in the study at week 8. Moving down into earlier time points of week 2 and week 4, you can see already after 2 weeks of treatment, over 40% of patients met the IGA Success criteria. And that bumped all the way up to 73% by week 4. So we're really excited about these results. They actually exceed our Phase II efficacy that we demonstrated previously with the foam in seborrheic dermatitis. This is exactly the same foam product that was used in that Phase II study. And we think that these results are really going to bring a lot of benefit to patients with seborrheic dermatitis for this investigational product. Moving to Slide 14. This is IGA of clear or IGA of 0. So what this means is that these are patients who came in at moderate to severe disease and then made it all the way to clear at some point during the trial. So you can see those patients making it to clear by week 8. And then, of course, they have to maintain clearance through week 8 in order to be considered a responder for this endpoint. Greater than 50% of patients met these criteria. That's 50.7% for active and 28.2% for vehicle. Already at week 4, just over 1/3 of patients have made it all the way to an IGA of clear, and that was 16.4% at week 2. This is a really high bar for patients with seborrheic dermatitis because it essentially means that all of the manifestations of their disease on their skin has been cleared by the treatment at that endpoint. And you can see this is also supported by P values that are also similarly low to what we seen previously. Moving to Slide 15. Itch, as I mentioned, is really the key symptom that drives patients severely and impact on quality of life in seborrheic dermatitis. At week 8, we had just shy of 64% of patients reaching WI-NRS response. This meant that if we included in this endpoint, patients had to have an itch of at least 4 at baseline coming into the trial and then over the period of treatment had to have an improvement of 4 or greater in that itch response. This is the assessment of itch, which has been included in other topical products by the FDA in labeling. And so we captured it in a way that we felt would support labeling for this indication as well. This 64% response in patients was compared to 42% of patients in the vehicle response rate. If you look at earlier time points, we had about 1/3 of patients meeting those criteria at week 2 and 48% of patients at week 4 already. So this level of response is consistent with [indiscernible] and across other indications. And again, shows the benefit not just of treating the appearance of the disease, but also the key symptomatic driver of seborrheic dermatitis. The next 2 slides cover the safety that was observed in the trial. So on Slide 16, just a high-level overview, you can see that the overall adverse event rates were low and balanced between roflumilast and vehicle. We had a single serious adverse [indiscernible] by the investigator. And really kind of the key safety outcome that I think captures best the overall tolerability of the product is the discontinuation rate due to adverse events. And here, you can see that roflumilast was at 0.7%, so only 2 patients out of over 450 patients discontinued due to an adverse event. Actually, 2 patients out of 304 on active and 3 patients on vehicle. So our rate on active is 0.7% versus a 2% rate on vehicle. Overall, that's a 1.1% for the entire trial, and I think really demonstrates very good tolerability that was demonstrated, that was observed in this trial. And the final safety slide on Slide 17 chose all adverse events that occurred with a rate of greater than 1% in any group. You can see the most common adverse event reported was COVID-19, which is balanced between active and vehicle. Similarly, for urinary tract infection and nasopharyngitis is also the top 3. Nausea was seen in 1.6% of patients on roflumilast, but not reported in vehicle. And application site pain was actually more common in vehicle compared to roflumilast. This is something we've seen previously in studies and represents an unmet -- lack of treatment for vehicle patients because stinging, burning and pain are a part of disease state of seborrheic dermatitis. So we're very pleased, we feel that these safety data are consistent with what we've seen with earlier trials and in other indications and really sets us for a very nice benefit risk for the treatment of patients with seborrheic dermatitis for this investigational product. So, Zoe, Dr. Draelos, I'd like to ask you to comment, please, on what you think these data mean for patients with seborrheic dermatitis.

I think this is a really important advance forward in the treatment of seborrheic dermatitis. One, extremely high efficacy, which is really amazing. In dermatology, a lot of times, many drugs have difficulty separating from vehicle. And here the vehicle is so nice and so excellent that it might provide some aesthetic enhancement, but yet the drug pass -- surpass the vehicle, and this is excellent efficacy data. And the second point, of course, is the low side effects. We learned to accept some side effects in drugs in dermatology and they sting, they may burn. But here, you had very, very excellent safety profile. And then finally, the aesthetics of treatment are critically important, especially on the scalp. Many of our current treatments are creams or oily lotions or alcoholic vehicles that sting when you put them on the scalp. And all those are burdened for the patient. Not only do they have seborrheic dermatitis, but now they have to have a itchy, greasy hair because the product is not aesthetic. The foam in which the roflumilast has been placed for seborrheic dermatitis treatment is excellent, does not leave residue. And thus, patients can really treat themselves, still have their self-confidence restored and break away from the horrible itching, stinging, burning and physical disfigurement of seborrheic dermatitis.

All right. Thank you, Dr. Draelos. And so we'll just move on very quickly to the commercial opportunity. Just following along with me on Slide 19. So given the profile and exciting data that we just heard about, we really feel that roflumilast foam could be the new standard of care in seborrheic dermatitis. If you walk across here at the bottom, you can see the different attributes. First and foremost, the incredible efficacy that the product demonstrated imagining 8 out of 10 patients being able to achieve full clinical benefit and a full half of those patients are 50% being able to get completely clear. The ability for it to be used on all effective areas of the body. And in the case of seborrheic dermatitis, we're seeing manifestations in the scalp, bows, face and trunk. And so again, consistent with the profile of topical roflumilast as we saw in psoriasis, extremely well tolerated and the ability to be used everywhere. Obviously, the safety and tolerability data that supports potential for chronic use. And again, as Dr. Draelos articulated, the current standard of care really involves, particularly for the moderate to severe patient, really involves topical corticosteroids, which we all know the shortcomings of that. We won't be limited by that aspect in terms of duration of use. Again, the simplicity, the ease of use, the once a day -- once daily foam and the aesthetic benefit is very clear. And last but not least, the dual mechanism of the product itself being both antifungal and anti-inflammatory in nature. On the next slide, I'll just sort of recap some of the statistics that Frank provided, reminding everyone that, again, the opportunity with respect to seb derm is comparable in size to psoriasis with no current other products being promoted in the space. Starting at the top of the funnel, you can see that 10 million moving down to 7 million or so being topically treated, 4 million being prescription topically treated by dermatologists, which is the focus of our commercial strategy. And then at the very bottom, you see the topically treated moderate to severe population, which also coincides specifically with those being treated with topical corticosteroids today. From a patient volume standpoint, we've talked about this before. On average, about 75 patients seen for seborrheic dermatitis in a typical month. That triangulates approximate with about 80 that we see for psoriasis. So very large numbers of patients. And this condition is well characterized and understood by physicians in terms of the ability to diagnose. And then at the very bottom, you see just in terms of as you move into the moderate-to-severe population, the urgency and ultimately, the treatment rate is extremely high. Well over 90% of patients who present and are identified with this condition are given treatment of some sort in terms of a prescription. So over 9 out of 10 patients who have moderate to severe disease do get some kind of prescription therapy. It was not on the slide, but notable of note is that we had conducted a survey back in late 2020 upon the arrival of our Phase II data. And at that time, this new data has actually improved upon that. But at that time, over 85% of physicians already were indicating the likelihood of either likely or very likely to prescribe this agent. So a lot of interest and excitement and enthusiasm around the potential for something in seborrheic dermatitis, which has largely been a very dormant market for some time. Moving on to Slide 21 and my last slide here is just to talk a little bit about the patient perspective. And as Dr. Zoe articulated again, the current standard of care have many, many limitations, including limitations in efficacy, safety, tolerability as well as aesthetic appeal. But what we found actually in a very recent survey we conducted of over 300 patients or 300 patients here. We discovered that the treatments used, or the number of treatments being used to manage one's condition on seborrheic dermatitis was tremendous. And on average, you can see nearly 6 different types of treatments being used by a patient and they're spending well over 30 minutes a day managing their condition. So you can see sort of a combination there of prescription therapies over the counter as well as alternative treatments on average, which is quite a bit of burden, frankly, for a patient and the ability to ultimately potentially transition to a single agent that could manage all of this, reducing hours to minutes or minutes to seconds in terms of the treatment will be a tremendous advantage to patients. And when we survey them with the potential of -- just even the idea of reduction of prescription or treatment burden, well over 90% of patients actually agree that they would more likely stick to the treatment plan if they're simply met reduction of the number of treatments, let alone the enhanced efficacy and safety profile that we provide. On the right, just a quick snippet, again, 90% of patients are agreeing that they are very, very interested in trying new treatment options for this condition. So with that, let me just close on Slide 22 and open it up to our question-and-answer portion of the call.

[Operator Instructions] Our first question comes from Seamus Fernandez with Guggenheim.

Congratulations on the data. Hoping to get a couple of points of color. Just can you talk about how this data compares on a relative basis versus your Phase II results? It looks very consistent to me, but just hoping to get a little bit more color on some of the new endpoints and some of the shorter-term data that looks quite robust relative to the Phase II? Second question is you guys have done a really impressive job of taking your Phase II results and then bringing that forward to a strong execution in Phase III. How does this kind of have you thinking about the opportunity in AD. We continue to get a lot of questions about the Phase II data that didn't hit statistical significance, but we know that there was clear separation between the active and the vehicle in that study. So I just wanted to kind of get your thoughts there and it seems to me like this is another opportunity to kind of -- higher conviction in that regard? And then the last question, can you guys just help us understand where the patient populations actually sit in the reimbursed landscape? It's our understanding that many elderly are actually impacted by seborrheic dermatitis, but just wanted to get a bit of a better understanding of the separation. And where the moderate to severe patients actually sit with this condition and what the reimbursement landscape looks like for seb derm?

Okay. Great to talk to Seamus. Patrick, maybe you could address Seamus' questions around Phase II, the Phase III and the read-through to atopic dermatitis. And then, Ken, maybe you can adjust the [ payer ] question, the patient question?

Great. Thanks, Frank. And thanks for your question, Seamus. Yes, so we see these results as really being very consistent with what was demonstrated in Phase II. Obviously, we're happy to see the increased efficacy we went from just around 74% in Phase II on IGA success at week 8 [ 0 ] to 80.1%. We were sitting right at around 40% for vehicle. The vehicle also increased now to 59.2%. So this is a larger study. We had about 300 patients on active treatment here. So obviously, numerically increased rates across both active and vehicle. But really, I would say, very consistent results in this study compared to the earlier trial as well. And I'm never going to be disappointed with an increased efficacy going from Phase II to Phase III. So I think that this study really captures the benefit for patients there. Itch as well at week 8 was very similar in the overall amount. We had 65% Phase III; I think 64% here. And so as well, the importance of that end point, we've already talked about with regard to kind of capturing the key symptom for patients. So I think that consistency is also helpful for us as we kind of move towards putting together an NDA and getting this hopefully prove to patients and out to patients. With regard to the read-through in atopic dermatitis, obviously, different product. This is a foam versus the cream formulation previously we're using in atopic dermatitis. Different dose. This is 0.3% versus 0.05% to 0.15% and obviously, a different indication there. But I think what this really -- the read-through here for me, the largest is really our ability -- and you mentioned that the ability of our organization to be able to kind of move programs into Phase III to successfully execute against that. We've done it with psoriasis and now we've been able to do it with seborrheic dermatitis. With regard to the Phase III studies that are ongoing in AD, we remain very, very confident in those. You alluded to the fact -- importantly, that we had met our primary endpoint in that smaller Phase II trial. And that did have a component of a higher vehicle rate in atopic dermatitis, which similar to seb derm that is known to be a component of that disease as well. Just like here, we're not looking to try and reduce the vehicle effect because it really is an intrinsic part of that formulation which now, we spent some time talking about with regard to our product. And I think that's one of the kind of key benefits of our product. So we designed the atopic dermatitis Phase III studies to really be able to demonstrate a difference between active and vehicle. And that meant that we had a sample size of about 650 patients which are enrolling in each of those Phase III studies, which is about 10x more than what we had in that Phase II trial, and that gives us a power of greater than 95% to see the kind of delta that we [indiscernible]. So we think that we have a really well-designed Phase III program for AD. We're looking to demonstrate kind of similar success in execution as we move towards the end of the year there.

Okay. Ken, do you want to pick up on...

Yes. Let me pick up on the population a little bit, Seamus. So with respect to seborrheic dermatitis, you're correct in terms of the overall presentation and sort of age, this tends to skew a little bit higher into the older populations. And also the distribution that sort of treated within the dermatology setting is a little bit different than psoriasis as well. I think importantly, as you compare to psoriasis, which is at least 2/3 sort of commercially insured patients, that comes down a little bit with respect to seb derm. It's more of a maybe a 50-50 kind of mix with respect to commercial and government pay types. So Medicare and Medicaid sort of come into play a little bit more with this condition. And of course, the -- so Medicare being what it is and then Medicaid being both children as well as pregnant women and people over 65 years old. So it's important to be mindful of that. But I think the focus on dermatology office is a still 60% of the patients overall are prescription treated by a dermatologist in this case. So I think it's still very much aligned with sort of our promotional strategy.

Kevin, maybe next question.

Next question comes from Ken Cacciatore with Cowen and Company.

Congratulations on this data. Dr. Draelos, this might surprise you, but in the investment community, we know a lot less about seb derm. And so I was just wondering if you can further bring to life kind of the day-to-day in your practice and kind of help us understand in terms of patient flow. Is it kind of 1:1, meaning psoriasis patients to seb derm patients? Any kind of qualitative comparisons you can give us in understanding the treatment burden and kind of what's in your office? And then also, just wondering, obviously, there was a high placebo effect. Do you look at just the absolute you care really much about the difference? Or is it the absolute that's most interesting to you? And then lastly, Frank, I'd be remiss if I didn't ask, you touched a little bit on 151, if you want to comment at all about the ongoing discussions with the FDA in psoriasis?

Well, I certainly can answer the questions about the seborrheic dermatitis patient and the vehicle effect. You know it's really interesting in dermatology, as many times, companies make their vehicle as awful as possible because the worse your vehicle is, the easier it's going to be to separate your vehicle plus your active versus your vehicle. And while that approach is very useful for getting through the FDA, a horrible vehicle will perform horribly and your active doesn't have to be as good. When you enter the marketplace that actually backfires on you because a horrible vehicle with the drug mixed into it, it's still a horrible drug because the patient doesn't want to use it, it stings, it itches, it burns. A really good example of that would be Eucrisa or crisaborole. The board derivative excellent drug. It was put in a horrible vehicle. It's stings and burns when you put it on your skin, the drug has underperformed. But here with roflumilast and the excellent formulation capabilities that they have at Arcutis, they took the risk of making a superb vehicle. And the vehicle is superb. So what does that mean? That means you're going to get a higher vehicle effect. What does that mean? That means that your drug has to perform even better. So your drug plus vehicles split from vehicle and so you can get a positive Phase III trial and FDA approval. So the current approval system really encourages horrible vehicles. Here, Arcutis made an excellent vehicle. This means that people are going to want to use this product, they're going to want to purchase it, you're going to get excellent results, but you're going to get a little bit higher vehicle effect. And those 2 things go hand-in-hand. So I really think and applaud Arcutis for taking that risk, willing to make a great vehicle for an excellent drug. Then to answer your question about the seborrheic dermatitis patients, I'll actually, in my practice, see more seborrheic dermatitis patients than I do psoriasis patients. I think seborrheic dermatitis is kind of an understated, almost taboo kind of disease because people don't want to admit that they have horrible itching of their scalp. Somehow, either through the media, a personal perception, people feel that if they have flaking on their clothing and they have to scratch in public, that's just not socially acceptable. And some of that might have been a lot of messaging that was put forth quite successfully by Procter & Gamble in their Head & Shoulders campaign many years ago. So when people come in, a lot of times seborrheic dermatitis is kind of an afterthought. I also think a lot of patients with seborrheic dermatitis don't come to the dermatologists because we haven't had anything good to give them. And so we tell them, okay, use a tar shampoo, then you smell like a road, or we tell them to use an antifungal shampoo and then your hair is real wiry and it takes the color out of your hair, if you happen to have dyed here. And so a lot of people don't get treatment because they feel it's not worth their time or they're not willing to use the treatment. So I think having an elegant efficacious treatment is going to draw a lot of closet seborrheic dermatitis patients into the dermatologist office. And then furthermore, I think seborrheic dermatitis is an underappreciated disease in terms of the burden of disease. It takes about 45 minutes of scratching to remove the entire cuticle of your hair. That's the protective layer. And once you remove it, the hair brakes. So many people complain of hair loss, worried that they're losing their hair, especially men. Think that they have male pattern baldness, but what they really have is seborrheic dermatitis and the hair is just breaking off from the scratching. So a lot of seborrheic dermatitis is misdiagnosed by both the patient and the non-dermatologists. But dermatologists can step in here now with a highly efficacious drug, and then people don't lay awake scratching all night. They're not socially embarrassed because they have to scratch during an office meeting. Their hair can still look wonderful. They can still do all the various fashionable perming, waving, coloring, combing, cutting that they want because the roflumilast foam won't interact with any other of those cosmetic alterations to the hair. So this is really, for me, a game changer. Kind of like the biologics, we're in psoriasis. They were a huge game changing. Now we could control psoriasis without icky, sticky creams. The roflumilast foam, now we can control seborrheic dermatitis without itchy, sticky creams.

Thanks, Dr. Draelos. Yes. And then just with regard to the question about the FDA, the company's policy is not to comment on regulatory reviews while they're ongoing. I would just say that we continue to be very confident in the approvability of roflumilast cream in plaque psoriasis, and we look forward to hearing from the FDA to 29th of July.

Next question comes from Louise Chen with Cantor.

Congratulations on the great data. So I had a couple of questions for you. First question is, how do you plan to build out the seborrheic dermatitis market? What gives you confidence that you can successfully do this since it's a new market here? And then second, why do you think there hasn't been more innovation in seborrheic dermatitis? And last question I have for you is, if the positive data today have any read-throughs to the other products in your pipeline?

Thanks, Louise. So maybe I'll take your second question, and then I'll ask Ken to comment on the first, and Patrick to read or to discuss briefly your third question. So I think the lack of innovation, it's a good question, and I don't think we have a particularly good answer. I would just say, if you look at the topical space in general, the most recent drug just recently approved in plaque psoriasis was the first novel topical in psoriasis in 26 years -- excuse me, 1996 was the last time prior to the recent approval. Atopic dermatitis is seen too in over 2 decades. So there's just generally a real lack of innovation in topicals. And then I think also there are some real similarities between, I think, where atopic dermatitis, let's say, 10 years ago prior to the approval of drugs like Eucrisa and DUPIXENT. And where seborrheic dermatitis is today, and we think there's going to be a very significant increase in interest by physicians, patients and pharmaceutical companies going forward as people realize just how large and unsatisfied the market has been. Ken, do you want to talk a little about the market?

Yes, certainly. So just wanted to talk about the market. This is a new market, but it's not, meaning that I think the people understand what seborrheic dermatitis is specifically physicians and they've been treating this for a very, very long time with the older standard of care, antifungal, corticosteroids, sort of what's been available to them. I think the so-called gap in terms of market, I think, really lies in terms of patient education and really helping them understand that first of all, I think separating the idea that this is just your sort of garden variety of dandruff, but in fact, it's not. And secondly, I think the current amount of education around this condition is quite limited. As I mentioned earlier, if you were to kind of Google seb dermatitis, you're not going to find much information on this, frankly, and I think really presenting a good suite of education to patients and simply making them aware of something brand new and exciting that's actually highly efficacious. I think, will be sort of part and parcel to our strategy here. The good news is, again, we're not -- it's not a new condition, and we're not needing to educate everybody on to do something that they're not already familiar with, that is treating the condition. But again, really identifying it. And what we found in addition to kind of the overall patient interest is that oftentimes it takes a little bit longer than -- it takes a little bit of time to get positive diagnosis at the dermatologists. So recognizing the symptoms early and ultimately finding one's way to the dermatologists will be key for us. But there already, like you said, 2-plus million patients getting therapy today, specifically topical corticosteroids for seb derm. And I think that is obviously a very rich kind of pool of patients to tap into from the start.

Patrick, do you want to maybe opine on implications for the remainder of our pipeline?

Yes, absolutely. So we have 2 key readouts, I think the rest of this -- the rest of this year. Scalp psoriasis, as Frank mentioned, Q3, Q4 and then atopic dermatitis. I would say the read-through of these data, this being our first Phase III study that we've conducted with the foam has clear implications for scalp psoriasis. We had really excellent Phase II data in both seb derm and scalp psoriasis. So now we've been able to kind of check the box on the first one here at seborrheic dermatitis today. And then -- so we think our ability to -- for the product to deliver excellent Phase III results has now been shown for foam as well as the team to be able to execute another Phase III program really has some nice read-through for scalp psoriasis. With regard to atopic dermatitis, I touched on that one a little bit better. For me there, it's really about again, the ability of this organization to kind of construct, execute Phase III studies and bring them successfully forward with data so that we can move into getting approval for some of these investigation products.

Next question comes from Chris Shibutani with Goldman Sachs.

This is Stephen on for Chris. Congratulations on the data. Maybe one on the clinical and one on commercial. I was curious if you did any subgroup analyses for patients with either face or scalp involvement or moderate versus severe disease? And then commercially, are the dermatologists that you plan on targeting for plaque psoriasis the same doctors that you'd be targeting for seb derm indication?

Sure. So Patrick, can you maybe take the first, and Ken, the second question?

Yes. Chris (sic) [ Stephen ], thanks for your question. This is -- what we have right now in front of us is just the top line data for the study. So as we get the full data set coming in, we also will move to bring additional abstracts and publications on these data out that will include those subgroup analyses. I think the ones that you identify with regard to different body locations as well as different severity are really interesting ones that we're going to definitely want to address. So I would say kind of a less space, we'll definitely bringing that out as quickly as we can get it.

Yes. And with respect to the commercial sort of target question, Stephen. I think it is the same subset, meaning that we -- and across the 4 conditions that we seek to address a topical roflumilast. There's a very high crossover. This is medical dermatology. And whether you're talking about seb derm, AD, scalp.

Plaque psoriasis.

Yes, plaque psoriasis. This is all the same universe of things that are medical -- key medical dermatologists see, so would likely be the same physicians. I think the one caveat, as I mentioned earlier, was with respect to kind of the setting in which many of these patients present. And so and are treated. And in this case, there's a little bit more sort of outside of dermatology component ever so slightly and about a 60-40 ratio. So there are few patients outside and primary care offices also getting therapy. But with respect to the derms that we're thinking about, absolutely the same subset same group.

Our next question comes from Vikram Purohit with Morgan Stanley.

Great. So I have one for Dr. Draelos. We were just curious to learn a bit more about how you think roflumilast foam could be used in the real-world setting, assuming approval, particularly when it comes to which areas of the body you think the foam would be best used for? And how you think your patients might evaluate which treatment option, whether it's the foam, whether it's antifungals, whether it's topical corticosteroids, which to use across the different areas of the body, and what you think a day of treatment could look like for one of your typical patients now that the foam could be available?

That's an excellent question. Well, seborrheic dermatitis doesn't just affect the scalp. We focused on the scalp, but it's very common in the eyebrow, it's very common around the corners of the nose. It's very common in the beard area, off of the corners of the mouth. It also can occur in the arm pit. It can occur on the central chest; it can occur in the groin area. So basically, seborrheic dermatitis occurs in areas that are sebum-rich, which is the oil the body produces and also sweat-rich. And so the treatment of seborrheic dermatitis typically involves moist areas of the body, a foam is ideally suited for that. It typically also involves hairy areas of the body, and the foam is identical -- is ideal for that. You don't get very good results when you use cream in those areas because they tend to stick on the hair and they tend to hold moisture, which can cause other skin issues. So the foam vehicle is really ideal for all body and scalp and face treatment areas of seborrheic dermatitis. One nice thing about this medication is that you don't have to use it multiple times a day. You can apply it. And the other thing that's very easy, foams are very easy to apply and spread. Creams usually take more rubbing for a longer period of time with greater force. The foam just can be spread very easily. So elderly individuals that have seborrheic dermatitis wouldn't have any problems with application of the product. I think patients would find that the application of the foam is esthetically pleasing to them. So instead of having a horrible disease with a horrible treatment, they'll find that they get disease control with an excellent treatment. And in the clinical studies that I conducted; resolution of the seborrheic dermatitis occurred very, very quickly. It was very easy for me to go down and roll of people enrolled in the study and say, "Oh, you got the active, you didn't". "You got the active, you didn't". Because we saw reduction in redness, reduction and evidence of scratching and reduction in flaking within 4 weeks in initiation of treatment. And that is one of the problems with the antifungals currently. They take a long time to work. And then the corticosteroids, of course, seborrheic dermatitis of disease that can come and go depending upon the state of health of the individual. And so a lot of times, people do need to continue treatment on and off for various periods of time. And so corticosteroids don't lend themselves to that type of treatment, but there are no such issues with topical roflumilast. So this is a treatment that can be used not only for acute disease with results in my 4 weeks, but also on and off as the patient needed treatment over the course of a lifetime.

Kevin, next question, please.

Our next question comes from Uy Ear with Mizuho.

Congrats on the data. Just a few questions from me. The first question is, what else do you need to have in order to file the NDA in the first half of next year? And I guess a second question is now that you've seen pricing for Opzelura and for the Dermavant's product. How does this change your thinking on pricing with your own products? And I guess, for Dr. Draelos, just kind of curious, how many -- how do you see the frequency of use for roflumilast foam in seb derm that is -- are you expecting your patients to use this on a continuous basis or if it's on an intermittent basis, like how many tubes do you think they'll go through on an annual basis?

So maybe we'll start out with Dr. Draelos and then Patrick, if you could address the NDA and Ken, you could touch on pricing.

Yes. There is a wide range in the severity of seborrheic dermatitis. And seborrheic dermatitis is linked to the immune status of the patient. So some people will treat their seborrheic dermatitis maybe for a month, maybe 3 times a year. As you get older, and the immune system begins to fail, seborrheic dermatitis becomes more common, and it also becomes more persistent. So I would see patients using roflumilast foam continuously, which can be done safely now in a more mature population. Remember that seborrheic dermatitis also occurs in babies. I mean it's called cradle cap, but it's seborrheic dermatitis, especially when it gets severe. So in that situation, a child might use this product for a month or so. But as you get older, the use will increase, and I would anticipate that patients would want to keep a tube of roflumilast cream and foam when they both become available for a variety of diseases in their medicine shelf consistently. And the use of the foam, I would anticipate that depending upon the body surface area evolve, people will probably go through a can of roflumilast foam probably every 2 to 3 months. Possibly every month that they had arm pit, central chest and groin involvement.

Thanks. Patrick?

Yes. So thanks for the question, Uy. So we -- these data really represent kind of the last major chunk of information that we're really looking for to be able to get started on the NDA. So my team and others will kind of pivot within the organization to start putting this together now to meet that deadline of getting our submission out in the first half of next year.

Great. And then, Ken?

Yes. So with respect to pricing, yes, we've seen now, I think, 2 key price points with respect to Opzelura and [ Betame ]. Both of those products have taken sort of the highest respective price point in the class for their respective conditions. But I would say, fundamentally, our philosophy still doesn't change. I think we mentioned this at our Investor Day that sort of irrespective of what our competitors are pricing at, I think we focus -- we place a premium on high-quality access, which is actually not specifically just coverage, but it's more about quality of that coverage itself and how many hurdles and step-throughs and prior authorizations might a physician or a physician office have to do to get to the therapy. And so we still believe that our sort of more modest pricing will lead to more simplicity and ease of achieving -- getting the prescription itself. And speaking about -- when we think about Opzelura which now has had some time [indiscernible], while we're seeing sort of "access" in terms of coverage, the number of steps, double, triple step at its couple of prior authorizations. I don't believe that actually aligns with the way that physicians want to use topical specifically. And so it remains to be seen ultimately how that plays out for the [ Betame ] products. But in the case of seborrheic dermatitis, if we're talking about that specifically, I think we aim to keep the -- whatever price we choose for psoriasis. We are likely to price similarly in that same range, being cautious not to sort of decouple, I think the core pricing between the cream and foam. And also importantly, as mentioned earlier, because of the composition of the patient types and the reimbursement status or type of insurance, it's also very important to be a little bit more conservative there to make sure that more patients can access those therapies.

Next question comes from Greg Fraser with Truist Securities.

Congrats on the results. I was hoping you could comment more on the itch results to help put the improvement there in the context. What were the baseline scores, did the responders have a little to no itching by week 8? Just any additional color on teens results would be helpful.

Sure. Patrick, and thanks for the question, Greg. Patrick, do you want to take that one?

Yes. So thanks for question, Greg. What we'll do is we're -- I think we're going to continue to do some more analysis on these. And I think that will help answer kind of your question with regard to where patients got to with itch on that 10-point scale. We looked at this Worst Itch-Numerical Rating Scale responder analysis, which was I described included in patients coming in with a 4 and then having a 4-point or greater improvement. In order to look at that, we would need to do a kind of subgroup analysis and then also look at patients getting to some of the lower itch scores to comment specifically on that. But I think just kind of stepping back and looking at the analysis that we do have, this is the one that the FDA has determined to really be conducted in patients who have a clinically meaningful level of itch coming in. So at baseline, they have a 4. In trials like this, and we typically see averages in the 5 to 6 range for patients with this condition. So -- and then in order to be considered a responder, you have to have, as I mentioned, a 4 or greater improvement. That kind of setting by the FDA of this type of analysis to be potentially included in labeling. Required a lot of back and forth and also discussion with patients in order to elucidate exactly where the clinical meaningfulness of baseline as well as improvement sits so that we could be confident that when we're kind of communicating with patients that they would be in this response group, that it would be a benefit that they would be able to observe themselves. So we feel that this is a good way to look at the data, but we will bring additional cuts of it to abstracts and publications as well. We've done that historically by focusing on itch and some of our earlier trials and other indications and we plan to do the same here.

Got it. One more. What percentage of the seb derm patients have involved on body surface area up to 20%? And is an indication with that language based on the Phase III design? Is that something that you expect in the label?

Yes. So the eligibility criteria of up to 20% really is very, very inclusive. Typically, you see body surface area percentages in 3% for both mean and median in this indication. Just given the distribution, which we've talked about earlier, primarily on the scalp and face, but then also touching on some of these other areas, a patient with body surface area greater than 5% or 6% is really pretty unusual for seborrheic dermatitis. Your typical patient, again, is going to be significantly lower than that. So I think that the inclusion in the label will be focused really on more having a broad label that would be inclusive of patients [ age is ] 9 and above. And then also with regard to severity of moderate to severe. So we wouldn't anticipate necessarily having that eligibility criteria spelled out in the label, but it would be reflected in the breadth of the label itself.

And I'm not showing any further questions at this time. I'd like to turn the call over to Frank for any closing remarks.

Okay. Well, thank you. And I'll just wrap up by thanking everyone for making the time to join us for the call today, and I hope everyone shares our enthusiasm for the data. I appreciate the questions, and we look forward to talking to you all again very soon. Thanks.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.