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

Good day, and thank you for standing by. Welcome to the Arcutis Biotherapeutics top line data call. [Operator Instructions] Please be advised that today's conference 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, Michelle. Good morning, everyone, and thanks for joining. We are incredibly excited to be here with you again today to discuss pivotal Phase III results from our INTEGUMENT-1 and 2 trials in atopic dermatitis and certainly also proud of the continued execution on the clinical front and progress towards realizing the long-term value for topical roflumilast. A couple of logistical details before we get started. Our Arcutis management team is all here today, and will also be joined by Dr. Larry Eichenfield during our prepared remarks as well as for Q&A. You could find today's webcast and posted presentation under the Events and Presentations section of our Investor website. And then finally, I'd like to remind all of you of the safe harbor rules governing our 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'll turn the call over to Frank Watanabe, President and CEO, to kick us off. Frank?

Thanks, Eric. Yes. So I'm on Slide 5 now of the deck. And back in March of this year, we had an Investor Day and we teed up for you all that 2022 is going to be a transformational year for Arcutis. And I think today is the final installment in that story, but I think that we have really delivered on that we have shown across now multiple different disease areas with completed Phase III studies that topical formula has a very highly differentiated clinical profile very strong efficacy, excellent tolerability. And each one of the diseases like psoriasis, seborrheic dermatitis and atopic dermatitis all address about 2 million patients each just in the U.S. Dermatology setting so very large opportunities as well. We -- I think, have built a track record at this company for many years now of execution on our clinical trials. And again, today, I think is the latest installment in that. We've now completed 3 Phase III programs this year and 4 Phase III studies, which I think is quite a remarkable accomplishment for a small company like ours. We continue to be very, very excited about the clinical profile of topical roflumilast and I think Patrick and Larry will share with you more some clinical perspectives on that. And I think the data today positions us very well to compete in the very large atopic dermatitis market. And then lastly, I'd be remiss if I didn't mention how things are going with the launch. We continue to be delighted with the progress on the launch of ZORYVE in plaque psoriasis and the recently announced wins with Express Scripts and one of the large national health plans, I think, is validation of our differentiated, let's say, access and pricing strategy. If you turn on to Slide 6, this is just a reminder of our overall pipeline where we stand. Obviously, ZORYVE at the top in plaque psoriasis is on the market. We're now in a position in atopic dermatitis, seborrheic dermatitis and scalp psoriasis to be filing sNDAs and we'll go into more detail as we go through the remarks today. I would also call out ARQ-255, which is the deep penetrating version of our JAK inhibitor, which we moved into the clinic just in the last couple of weeks. So good progress on our early pipeline as well and remind everyone of ARQ-234 biologic in atopic dermatitis for moderate to severe that we obtained through the acquisition of Ducentis earlier in '22. On Slide 7, for those of you who were at the R&D Day back in March, you may recognize the slide we teed up the time frames for various major catalysts for the year, starting with seborrheic dermatitis. We delivered Phase III data on that then the FDA approval on time in Q3, the scalp and body data right around the beginning of Q4 and now the second of the 2 Phase III studies in atopic dermatitis. So again, I think the team has done an exceptional job. I cannot give enough credit to our team for the outstanding execution that they've been able to deliver this year. And then just briefly on Slide 8, I wanted to remind you all of the opportunities as we see it across psoriasis, atopic dermatitis and seborrheic dermatitis. 2 million or more patients who are actually in a dermatologist office, receiving topical treatment and who are eligible for receiving topical roflumilast once it's approved in all 3 indications. So close to 7 million patients we're talking about in the opportunity just in U.S. derm and then a very large opportunity outside of the dermatology specialty as well across all 3 diseases, particularly in atopic dermatitis where a majority of the patients are being treated by PCPs, pediatricians and allergists and we will be looking in the coming years at how we address that opportunity as well. So with that, I want to turn it over to Dr. Patrick Burnett, our Chief Medical Officer, to get to the data.

I'm really excited to share the data with everybody. As a dermatologist, myself, I was a resident when Elidel and Protopic launched and recognized that atopic dermatitis is an area where we really have a lot of unmet need, especially for a nonsteroidal treatment. And I think that the clinical profile that you're going to see here really delivers against that unmet need extremely well. We have a really good efficacy and safety profile and particularly in atopic dermatitis, it's really important to have a drug with a strong safety profile because of the pediatric component. And I'm very excited to have Dr. Larry. I can tell as well here to talk to you about kind of contextualizing these clinical results. So moving to Slide 10. We have the scheme for INTEGUMENT-1 and INTEGUMENT-2. Just to remind you, these are 2 identical Phase III trials in patients with mild to moderate atopic dermatitis. You see on the left there, the eligibility criteria. We enrolled patients ages 6 and above into these 2 trials. We studied the 0.15% cream. Just to remind, the psoriasis dose for ZORYVE is 0.3%, and we're also studying a 0.05% cream for ages 2 to 5. So this is the ages 6 and above -- these are the ages 6 and above studies, BSA greater than or equal to 3%, and you can see the EASI score on the slide as well. Patients are randomized 2:1, and the sample size for these studies was quite large. We enrolled 654 patients in INTEGUMENT-1 and 683 subjects into INTEGUMENT-2. And treated them for 4 weeks, and our primary endpoint is validated IGA or investigator global assessment in atopic dermatitis success at the end of treatment, which is week 4. And validated IGA success means that patients had to go from mild to moderate, so that's a 2 or 3 and reach clear, almost clear, which is a zero or 1 and have a 2-step improvement. So patients who were mild then had to have a 2-step improvement and get all the way to clear in order to be considered success on this end point. The other key data that we're going to show today are the EASI-75. That's eczema area severity index, 75. That means a 75% improvement in the disease as well as the worst itch numeric rating scale. And I just want to point out that the EASI-75 and validated IGA are really very different methodologies. The IGA is a 5-point scale and some investigators just compare against the verbal descriptions of each of those and determine which class that the patients falls into. For EASI-75 each aspect of atopic dermatitis is evaluated based on different regions of the body and then those numbers, including body surface area, are plugged into a calculation and a number is then generated. And then as I mentioned, in order to be considered a EASI-75 responder, that number has to be reduced by 75% compared to baseline. So 2 very different methodologies to assess the same patients in these trials. When I move to Slide 11. This is the primary endpoint, validated IGA success at week 4. And you can see that we met statistical significance in both INTEGUMENT-1 and INTEGUMENT-2. The numbers were 32% in INTEGUMENT-1 and a just shy of 29% in INTEGUMENT-2. If you look at the delta versus vehicle, you see that it's identical between the 2 studies. Vehicle came in at 15.2% and 12%. And I think that's one of the things you'll see as we go through the data today. These studies, particularly potentially because of their size, showed very, very consistent results across the different end points between the 2 studies. And I think that, that's one of the very strong aspects of this data readout. Now we met statistical significance all the way as early as week 1 in INTEGUMENT-2 -- I'm sorry, in INTEGUMENT-1. And in INTEGUMENT-2, we met statistical figures at week 4, week 2 and narrowly missed it at week 1. And that was really, I think, one of the only kind of key secondary endpoint that we missed the statistical significance on in the INTEGUMENT-2 trial. And INTEGUMENT-1, we met every single one of our secondary endpoints. Now looking at EASI-75, which is on Slide 12. Again, this is a separate methodology that evaluates the patients. Here the responder numbers are at 43.2% at week 4 and 42% in week 4 for INTEGUMENT-2. So very, very similar EASI-75 response in patients. On this endpoint, we met statistical significance as early as week 1 in both INTEGUMENT-1 and INTEGUMENT-2. And you're saying that about 13% to 14% of patients already after a single week of treatment are reaching this success criteria of a 75% reduction in the amount of their disease according to the EASI assessment. And around 30% of patients already at week 2. So one of the aspects of the profile that we're seeing is that patients are responding quickly to treatment even within the first week and week 1 was the first day that we assessed and brought patients back into the clinic and evaluated them for EASI and [indiscernible]. As I move to Slide 13, there is an EASI-75 response of 42% and 43% all the way to the left. What we're showing here is week 4 data pulled from various different trials for other drugs that are approved or used for atopic dermatitis, just to help give kind of comparison. I do have to acknowledge that the cross-study comparison here is one that have to have a lot of caveats associated with it. Obviously, there could be different patient populations that are subtly different enrolled across these although these are really primarily mild to moderate patients as well. Some of these trials are a little bit older. So there are differences in making -- these are not within study comparison. However, I think that it's important to kind of understand where it is that the efficacy on EASI-75 stacks up against some of the other approved drugs. And EASI-75 is really emerged recently as, I say, within the last 5 to 10 years as the endpoint that is the most accessible for health care providers and patients, and it's the one that is used most commonly and thinking about assessing the efficacy of a drug in AD. So you see that 42%, 43% places us with a higher efficacy compared to Eucrisa, which is another approved PD4 inhibitor. This is from a Phase IIIb/IV study that was conducted. In that study, it included an Elidel arm, which came in at 36% and -- so again, showing slightly higher efficacy compared to Elidel and very competitive efficacy with triamcinolone, which I think is really the most important comparator on this slide. And that's because the majority of patients who are being treated with topicals for atopic dermatitis, and that's the majority of AD patients actually are being treated with a topical steroid. That is kind of the first treatment that is often given. And that's because it can help patients to respond quickly, and it's well tolerated. And I think you'll see in our efficacy and safety profile that now going to be match up well with regard to efficacy because the safety profile is one also that doesn't include speaking and burning, which can be -- which has been historically some of the problems with nonsteroidal treatments, especially in atopic dermatitis. To the right, we give the OPZELURA week 4 data and their primary endpoint was at week 8. But just for kind of an apples-to-apples comparison, we pulled the Phase III week 4 data for EASI-75, and you can see that the comparison there. But it's important to note, given the label around OPZELURA, that this is something that's positioned later in the treatment paradigm for a patient. And I know Larry will probably talk a little bit more about the treatment landscape later. So moving on to week -- I'm sorry, Slide 14. Itch is really the hallmark of atopic dermatitis. It is the most common symptom. And here, we're using worst-itch numeric rating scale to evaluate the response according to itch. And so here, we included any patient who had an itch of 4 and the maximum you can have is the scale from zero to 10, so maximum of 10. So anyone with an itch of 4 or greater when they entered the trial, it was able to be included in this population and to be considered a responder and to be considered a success you had to improve that by 4 over the duration of treatment. And again, we're showing very, very rapid response to itch with about 10% of patients getting to WI-NRS success already at week 1 and meeting statistical certificates there. And then moving up to week 2 and week 4, we have between 30% and 34% of patients responding WI-NRS success already at week 4. So key aspect of -- key symptom for atopic dermatitis is also responding quickly and then continue to progress over the 4-week period. Moving on to Slide 15. Just a couple of slides on the safety profile. Most importantly, we had overall low adverse events rate between 13 and 20 -- about 23% of patients with any adverse event and the most important AE metric, I would say, that you have is really the discontinuation due to an adverse event because subjects can always just stop their participation in the trial. They don't have to really go through any trouble to do that. So if they're seeing something in the trial from an adverse event profile that they're not comfortable with, they will just drop out. And here, what you can see is that our discontinuation due to an adverse event rates are very low, 1.4% and 1.8%, and very similar to what you see with just vehicle. Overall, we had over 90% of the subjects that completed these studies. So really good completion rates, which is historically what we've seen with our trials. And on Slide 16, we have a comparison here between [ INTEGUMENT and INTEGUMENT-1 ] on the adverse events. This is showing all adverse events that were greater than or equal to 1% in the trials. And you can see that the overall AE profile looks similar to what we've seen with other trials that specific numbers are given here. Similar AE profile between INTEGUMENT-1 and INTEGUMENT-2. The most common adverse event now being headache, if you remember from our psoriasis program had diarrhea of about 3% in patients. We're not really seeing those same numbers here. In fact 1.5% is the highest that we saw that was in INTEGUMENT-2, and that's compared to a 0.9% in vehicle. COVID-19 shows up, but it was actually more common in vehicle patients. And it's important to note here that we do have 2.1% versus 0.5% of application site pain. This is a component of atopic dermatitis itself. I think interestingly, you'll note on INTEGUMENT-2 that, that rate was actually balanced at 0.9% versus 9%. So really, really good adverse event profile here, matching similarly what we've seen in earlier studies and other indications. So I think that's starting to emerge as a consistency across different programs. Now my last slide on 17, I just want to give you a reminder on what our plans forward are with these data before I turn it over to Larry. What we're going to do is we're going to submit INTEGUMENT-1 and INTEGUMENT-2 in the second half of this year -- I'm sorry, of next year, 2023. And that's going to then -- that submission will support an approval after a 10-month FDA review time line potentially in ages 6 and above for atopic dermatitis. And with note down there and Ken's going to talk about this. that really captures the majority of the U.S. dermatology treatment AD population, ages 6 and above. So really bringing this drug to the largest population of IV patients in the U.S. We are, as I mentioned, conducting a study in ages 2 to 5 with a lower dose of 0.05% dose, we expect those results from that 2- to 5-year-old study in 2023. And then that will be submitted as a supplemental NDA after we get the potential approval in ages 6 and above. So it will be a 2-step process with the first one taking these data that I just walked you through today and bringing them to the FDA with the submission in the second half of 2023. With that, I'd like to turn it over to Larry Eichenfield to contextualize the results for you.

Thank you, Patrick. Good morning, everyone. So Larry Eichenfield, I run the pediatric dermatology unit at Rady Children's Hospital, San Diego, and I'm Vice Chair of Dermatology and a Professor of Dermatology of Pediatrics and quite excited to hear the results this morning, and I'd like to sort of put this in perspective. So I'm on Slide 19. Just by background, atopic dermatitis, this is incredibly complex disease. It's a chronic skin disease, genetically predisposed, inflammatory disease, but also associated with intrinsic dry skin and barrier dysfunction. It presents across the lifespan, childhood disease is quite common with a prevalence in younger children of 12% to 15%. That's actually a pretty conservative number around the United States. But with a high prevalence to out like, we're really aware now of either persistence or new onset, atopic dermatitis in adults, actually a quarter of cases on our new onset, we have pretty strong data of 7% prevalence in adults as well of atopic dermatitis. And atopic dermatitis, there is some children, for instance, born with the intrinsic barrier dysfunction, and then they get sensitized and/or there is this neuro immune dysregulation, but it manifests as not just the rashes but dry skin, itch, eczema with secondary changes as well. And then once there's inflammation in the skin that further compromises the skin barrier. Itch or pruritus, as we say, is clearly both burdensome symptom. I have active videos or someone takes their clothes off on a young child and once they close are off, they start looking at their skin [indiscernible] on the skin is an itchy sensation. We still have tremendous unmet therapeutic needs for atopic dermatitis. If you move with me to Slide 20, I just put some images of not unusual patients in our practice. You can see an abdomen with the red swollen skin of atopic dermatitis and the lower left, sort of crusted eczema. Eczema in Greek means to boil over. Facial eczema, you can see thickening that we get in the middle picture on the bottom. You can see various presentations with excoriations and swelling as well. Skin color, patients have a lot of pigmentary changes as well. As you can imagine, the symptoms that come with this, there are sleep disturbance associated with it, there could be impact on neurodevelopmental aspects and a whole set of comorbidities that go along with the core rashes and signs and symptoms of atopic dermatitis. Therapeutics, basically topical corticosteroids have been a mainstay of therapy, but there's a problem with them. There is a limited -- limitation on their duration of use. There's certainly concerns about systemic absorption and mixing and matching of multiple agents. They're not suitable for long-term care due to local side effects and safety concerns and potential for steroid withdrawal and/or a rebound with discontinuation and flaring. Topical calcineurin inhibitors, and crisaborole have twice daily application, but probably bigger issues are safety warnings and tolerability and stinging and burning with those tolerability issues being present both with what we call the TCIs and crisaborole. And topical JAK inhibitor and ruxolitinib, topical rux, has been approved, but it has a pretty profound black box warning, mimicking the box warning of all the JAK inhibitors, including the orals, prohibits first-line use or use with biologics. There's significant concern with systemic absorption and tolerability, limits in the quantity of use you can put on the skin and its twice daily applications. So as Patrick said sort of niche differently in our therapeutic regimen. So from a -- first of all, I have to state that, while we do have newer systemic agents over the last few years for atopic dermatitis, which are marvelously important in our care, most treatment of atopic dermatitis spectrums across the ages is still topical treatment. And with this new data set, with both studies showing that high consistent response of great tolerance really seems to pay the patient need. Clearly, a [ bunch ] of day products, easier to use than twice a day. This is a nonsteroid that's appearing effective. We have rapid itch response. You saw the EASI-75 results at week 4, looking quite good as well as the IGA clear, almost clear. It has what we call separation from vehicle. I'll come back to that in a minute, but also the itch is an early indicator of clinical response. It has very high tolerability. So unlike some topical corticosteroids, where we make some match by strength in different parts of the body that can be used on potentially all body locations and sensitive skin, and has safety for chronic use, which is important, so people don't need to stop it because they're avoiding a side effect profile. Like you might get with skin thinning with topical corticosteroids. Formulation is very well tolerated without sensitizers or associated with atopic dermatitis. We're very excited to see this incredibly low rates of adverse events topically because that's been an issue with some of our agents. I would like to comment that the -- what matters for the FDA, right, is the separation from not placebo in the case, it's vehicle and the vehicle can have effect but also the sort of hard outcome measure, clear of almost clear in EASI-75 shows that it works, which is fundamentally what's very important for us. So very exciting data in terms of how it could fit in into many of our patients with eczema. And with that, I'll turn it over to Ken Lock.

All right. Thank you, Dr. Eichenfield. Very exciting. So I'm now on Slide 24, and I'll talk a little bit about the commercial opportunity regarding atopic dermatitis from last screening. So very aligned with the Arcutis and its strategic approach. Atopic dermatitis is a very, very large market with significant unmet need. And so the market size, as you can see, around 26 million individuals by our estimate affected by the condition. That's roughly 2.5x almost 3x as much as the psoriasis market. And in 2021, there are around 26 million prescriptions in the U.S. for this condition. And again, roughly twice that of psoriasis. So a very large, large market here. Dr. Eichenfield talked earlier about the prevalence in children as well and that being a strong driver for even further need for safe and effective topical therapy. And on the right, we can talk a little about the roflumilast cream and once again, similar to the psoriasis profile, we finds ourselves very aligned with all of the respective stakeholders on ecosystem physicians. Going back to March, I think Frank was referencing our Investor Day, but when we ask physicians primarily, what are you looking for in next-generation topical, it's really about having the power of steroids but the ability to use everywhere and the ability to be used chronically. And so we do see ourselves here with this type of profile. Dr. Eichenfield already mentioned what patients need. But here, we have a slightly different and additional stakeholder and parents in that the condition being primarily that of being children, the parents are highly involved in the therapeutic option and selection. And so having a profile like this would be very, very congruent with the needs of parents. And lastly, payers, which, again, with our differentiated access and pricing strategy should fall in line there as well. On Slide 25, I want to comment a little bit on the market size and again, to break down further the 26 million prescriptions that we saw in 2021, a full 95% or so of those prescriptions were topical and nearly 9 out of 10 there were topical steroids specifically. So we do see steroids playing a very, very strong role here and an opportunity, very frankly, for us to change that paradigm with a product like topical roflumilast for atopic dermatitis. And the market, you can see on the right, the significant expected growth in the overall sales potential in this particular market over the next 5 years. Moving on to Slide 26. We did recently conduct a large-scale quantitative study in both dermatology clinicians on the left as well as allergists, primary care and pediatricians on the right. And of note, on the right there, that's actually the larger opportunity, Frank alluded earlier to be within derm outside of derm opportunity for atopic dermatitis. And in many cases, the allergists, primary care or pediatrician or all of them are involved early on, particularly in young children and actually treat quite a bit and prescribe quite a bit. But we did a quick survey just to assess their perception of unmet needs with topical therapies for atopic dermatitis on the left, direct you to the Top 2 Box scores. And so these are essentially separated by age groups at the bottom. Under 12, 12 to 17 and 18 and above. And the dermatology clinician subset, the greatest need was really identified 9 out of 10 in both cases for the 17 and under population was probably the highest unmet need followed only ever so slightly lower for the 18 and over, but still a great degree of unmet need for topical therapies for atopic dermatitis. Pivoting to the right, you can see an allergist, PCP and pediatrics -- sorry, primary care, that unmet need is perceived to be even higher than that of the dermatology community, where greater than 90% in all cases agreed or strongly agreed that there was still very much unmet need with topical therapies for this condition. Slide 27 speaks to some differentiation and Dr. Eichenfield alluded to the approved crisaborole product. I wanted to just take a moment to talk a little bit about the differences here. So obviously, while PDE4 inhibition is a validated mechanism in atopic dermatitis, it's a very well-understood mechanism of action, the safety profile is extremely well characterized. And is suitable for chronic use. I remember that roflumilast is actually a next-generation topical PDE4. So the only thing it has in common there with other product mechanism of action on the pathway. Roflumilast is actually 25x to 300x more potent than other approved PDE4 inhibitors, and that includes the oral. And importantly, our formulation, which is a key facet of the treatment really leverages our proprietary HydroARQ Technology, and I'll talk about that in a moment. But importantly, addresses the skin barrier as well, which is one of the key challenges in this condition. And despite the experiences that clinicians may have had in the past with PDE4 in atopic dermatitis, you can see on the right, 9 out of 10 both derm clinicians as well as allergy, peds and PCPs would be interested in a new and improved PDE4 inhibitor topical for treating this condition. On my last slide 28, just speaks to the importance of vehicle itself, atopic dermatitis treatment. And so being as though or as it has a skin bar defect in [indiscernible] and the skin barrier is compromised, you have significant moisture loss. So it's very, very important to have a high-quality vehicle to a accompany you're active. And with our proprietary HydroARQ Technology, we find ourselves with a very highly moisturizing vehicle. It also uses so much of the formulation in our psoriasis product. The emulsifiers being used are non-lipid extractants. So therefore, does not allow for lipids be extracted and loss of moisture. And then lastly and very importantly, in this condition, our formulation includes no common contact irritants, nothing that will drive allergic reactions or contact dermatitis as a reaction to the product. So no propylene glycol, no polyethylene glycol, no alcohol, et cetera. So a minimization of those things that cause additional irritation of this already inflamed and sensitive skin. So we believe with the formulation, we have a very unique water-based cream that we should -- or may excuse me promote better adherence and ultimately better therapy to effect with the product. So with that, I'll hand it back to the team for Q&A.

Yes. So I think before we jump into the Q&A, maybe I'll just very briefly wrap it up. But I think we remain very excited about the profile of topical roflumilast across psoriasis, atopic dermatitis and seborrheic dermatitis. The product consistently shows efficacy that's comparable to or better than the standard of care across our targeted diseases. We continue to show a very rapid onset of efficacy. We've seen a consistent dramatic impact on itch. It also continues to demonstrate exceptional safety and tolerability, both in the clinic and in the real world, which is really unique amongst topical therapies. Product that's easy to use, which I think is very important. And somewhat contrarian pricing and access approach is beginning to pay dividends for us as we are acquiring differentiated access for ZORYVE for commercial patients. We are excited to now be in a position to progress multiple regulatory filings, seborrheic dermatitis and sometime probably in Q1 of '23, atopic dermatitis, as Patrick mentioned, in the second half of '23. And then for scalp in body psoriasis, sometime down the road post the [ sebderm ] approval. We also look forward to updating you all on the progress of the ZORYVE launch early in 2023 at our Q4 earnings call. And I'd be remiss if I didn't and by thanking Larry, I can feel for getting up very early. He's in San Diego. So this is a very early morning for him to join us, and he's one of the world's leading authorities in the atopic dermatitis, if not, the leading authority, and so we're really honored to have him join us on the call. So thank you, Larry. And with that, I'm going to turn it back over to Eric for the Q&A.

Yes. Michelle, we can open the line.

[Operator Instructions] Our first question comes from Ken Cacciatore with Cowen.

Congratulations team on the great data. Dr. Eichenfield, I guess, I would just start with you. You gave a nice review. Just wondering though if you could give us some sense of what percentage of your patients do you think will actually touch this. And you talked about maybe where it would be slotted but maybe what percent ultimately do you think would have -- would be useful of the roflumilast cream? And then also, maybe there is some discussion often about absolute effect or placebo-adjusted effect. I know you talked about it briefly, but maybe just get your view of that once again.

Yes. So let's start with the first. So it's an incredibly high percentage of children's and teens who could use this. The situation is that if I have a new patient who hasn't been on treatment before and they're coming in fresh, we may still start with topical corticosteroids as a quick fix. But it's a quick fix, and we all have concerns sometimes even with that initial topical corticosteroid use, but as we're building then regimens that care to keep people in good shape and to minimize their disease, going to a nonsteroid is something we consider with pretty every patient who we see. But the nonsteroids have been limited in terms of stinging and burning safety warnings. So tolerance issues -- and with ruxolitinib is a different ball game. It's has effectiveness, but is limited as body surface area has its own set of warnings associated with it. So there is -- I truly believe that there is this need for a nonsteroid to be very useful facial dermatitis, delicate skin areas that otherwise, you don't like to use topical corticosteroids for other than maybe a few days. Facial disease, disease around the eyes is very, very common. So it's going to be significantly high percentage with -- as well as access is there, the company has done a very good job I believe, so far at playing the access game, getting it into the hands of patients at a reasonable cost. So I'm very positive of that. In terms of placebo adjusted and vehicle adjusted, so this is a principle that's easy for me to understand, having done it for so many years. But our placebos can have an active component to them in the clinical studies because when you put moisturizers on the skin, you might minimize your skin barrier dysfunction and have a mild anti-inflammatory effect. And so when studies are designed for topicals, you have to show that they were much better than the cream or the ointment that you have as a base active chemical is delivering the stuff, right, the delivery of anti-inflammatory effect. On the other hand, having a well-formulated vehicle matters and can help to bring overall efficacy. So this performed very well, incredible consistency in the 2 studies with that delta. And the delta -- I think the delta is important to get your approval because you have to show the you're active is -- it works as compared to vehicle. But fundamentally, you want a drug that's going to work well on the patients because that's what's going to have them happy that it's impacting their symptoms and their signs of their disease. And if it is tolerated well, that's when they're going to want to continue to use.

Our next question comes from Seamus Fernandez with Guggenheim.

So congrats on the data. Just a couple of quick questions. So maybe first, Patrick, if you can help us understand the opportunity in the younger patient population, particularly given the choice of the 0.05% formulation. It did look like in the previous Phase II data that the 0.05 actually performed quite well. So just wanted to get a sense of the choice of the 0.05 in the zero to -- sorry, the 2 to 5 patient population studied. And for Dr. -- for the physicians, you can just give us maybe a sense of the opportunity that you see under the age of 6 as well, just to kind of give us a sense of sort of the frequency of disease and the concerns of parents at that age -- in that age range. And then just a last question. Do you guys see opportunities to really expand your coverage in 2023, perhaps with some off-cycle potential reviews? How do you feel about those opportunities?

Sure. Patrick, maybe you can take the first one around dose selection.

Yes, absolutely. Thanks, Seamus. Thanks for the question. What we're looking for with that 0.05% dose is really to find the kind of optimal safety and efficacy in that younger age group. And I think you hit on the key point, Seamus, which is that in the Phase IIb study, we looked at 0.05 and 0.15, and what we saw in that trial was that both of them performed very, very well, and they also had a comparable response across multiple endpoints, including EASI-75 and validated IGA clear, almost clear, as well as the percent reduction in the EASI score, which is a continuous endpoint. And the safety profile looked very similar. So we were in a situation there where we had the ability to be able to kind of chose between the 2 of them. Now we went with a 0.15% for the age of 6 and above because in that older population, we wanted to make sure that we had the most amount of drug that we could really optimize the efficacy. In 2- to 5-year-olds, given that the profile was similar in the Phase II study, we felt with the skin barrier defect and the lower body weight relative to the body surface area, a better choice for that patient population would be the lower dose. And based on the results that we have, we don't feel like we're going to be giving up any kind of efficacy in that population. But we will be able to kind of maintain, we feel the strong safety profile that we've shown in the INTEGUMENT-1 and INTEGUMENT-2.

And then, Larry, do you want to maybe address Seamus' question?

Yes, sure. I think there's tremendous opportunity when you get to the younger age kids as well. I think there are lots of -- basically a few months of age onward, they're a high prevalence data about 12% in California, it's up to 15%. We basically 8% to 15% of [indiscernible] in the first [ few ] years of life. And families are quite concerned about topical corticosteroids. I think most families would come in are concerned, especially after a week of use or 2 weeks of use, if that's where someone starts, then what are they going to do? There's a significant percent of patients that are going to have continued diseases basically a chronic disease. So I think there's tremendous opportunity. And just to be clear, it's partially because this type of drug. This is a PDE4 and the PDE4 inhibitors are considered to be an incredibly safe class of drugs that they don't have systemic effects in different formulations that some of our other drugs do. So I think that there'll be a tremendous opportunity in younger age children. There's [indiscernible] children even more so are going to be managed with topicals as compared to systemics. There's this variability in the severity of the disease. I think use in regimens of care can be very high in that under 6 group.

And Ken, lastly, do you want to maybe take the question around access.

Sure. Seamus, just, it's unclear, you're referring to [indiscernible] psoriasis as it relates to this data or...

Yes, for psoriasis.

Yes. So as we previously talked about, the expected or anticipated time frame typically would be that for 12 to 18 months. I think we are pleased with our progress thus far and I think for psoriasis, would expect a strong progression. We're not quite obviously announcing all these different deals quite yet. But I don't know that this data necessarily sort of portends derived for the access picture. Basically, what I would expect is this will be a stand-alone indication that will [indiscernible] its own access at the time of approval. So what this will necessarily lean into the psoriasis or weigh into the psoriasis decisions that will be made.

Our next question comes from Vikram Purohit with Morgan Stanley.

So 2 from my side, both on commercial. The first, Frank and team, could you talk a bit more about how you plan to detail dermatologists versus PCPs? If and when the approval comes through and speak a bit more about -- what you'd be looked to establish in terms of commercial infrastructure and field force, et cetera? And then secondly, now that you have both Phase III data sets in hand, do you have any updated thoughts on duration and [ tubes ] per year that you think patients would be using for AD?

Sure. Ken, do you want to take those?

Sure. So we've spoken to this before in terms of to really unlock the full potential of this indication we'd likely have to partner with a company that has a footprint in primary care or pediatrics or both the numbers. You could see earlier on slide, I think it was in the Frank's section, that talked about there were 2.6 million amount of moderate in the derm setting and another 4 million or so outside of derm setting and really I think that's the linchpin there for us. So we've also talked about kind of the timing of that. And so previously, we said that we thought that we'd want to potentially wait until approval. We are continuously scouring that landscape to see what the best partner and fit would be. And I think that situation would be probably a bifurcation of audiences given that we are clearly focused on medical dermatology specifically, we want to keep that for ourselves and have our team work on promotion to that audience. and allow the partner to really focus on the primary care part. So it doesn't change our thoughts in fact probably this emboldens our desire to really leverage this data and leverage this opportunity outside -- both within and outside of dermatology. And again, this is the timing of TBD, but we've talked about that in the past. As for the unit consumption, I think also we've talked about this in the past to be somewhere between, I think, the 3 and 5 units per year. And I think our profile, again, with the extreme tolerability that we have and kind of profile that's played out, we think that we should have some additional adherence. We won't have the limitations of body surface area nor duration and likely -- or any sort of other prohibition of use of another agent. So I think that sets us up nicely for additional adherence with a profile like our.

Our next question comes from Chris Shibutani with Goldman Sachs.

This is Steven on for Chris. Maybe 1 on the data and 1 on the commercial opportunity. Just wondering if you expect additional patients would respond in terms of IGA success or EASI-75 responders with additional exposure beyond week 4, and if we should expect to see any of that data in the future. And on the commercial opportunity, have you talked with physicians about feedback on having 2 or potentially 3 different doses of this cream that -- something that they're managing right now with other therapies. I'm just wondering if you should add a challenge in that marketplace.

So yes, I think, Patrick, probably you're the best to address the first question and then maybe, Ken, you can address the second question.

Absolutely. Thanks for the question, Steve. So we don't have data yet beyond week 4, and our Phase IIb was also a 4-week study. So I don't have data to be able to answer with regard to the potential increase in efficacy beyond. We do know, however, just kind of looking across all of our studies that this is a mechanism of action, especially with the potency of roflumilast that gives an early response, and we saw that very clearly in INTEGUMENT-1 and INTEGUMENT-2 data with clinical responses, especially on itch as early as week 1. We met statistical significance in INTEGUMENT-1 and IgA response, as early as week 1. So -- and then extrapolating those results over to where we do have data, which is in psoriasis, we saw that once we move beyond that, that efficacy was sustained over the treatment period through a year. So just kind of taking a step back and looking, we expect that we're probably pretty close to our kind of optimal efficacy with this week 4 data, but we'll kind of have to wait and see once we get the open-label extension readout that would kind of support our NDA.

Steve, on the second question with respect to the comfort level, I think dermatologists are very comfortable with different strengths of therapies, whether you're talking about steroids. In the case of, for example, psoriasis, you're using a much higher potency steroid first-line therapy and atopic dermatitis, much more of a mid potency steroids and sort of moving between those has not seemed to be a problem. We also see that with the calcineurin inhibitors in which there are 2 doses. And so I think it's a very well and understood common phenomena to have different dosing. So I don't believe that's going to be a problem.

Yes, I would just add, I think the key is -- and Dr. Eichenfield mentioned this, is the ability to use the same dose for an individual patient, right? And one of the struggles that dermatologists often face is that they're having to give multiple different steroids or different formulation, different drugs to the patient for different places in the body, and that's not an issue with topical roflumilast and that just simplifies adherence is safe to dermatologist time during the visit and so forth. And so that's really the key, I think, complexity we're trying to avoid is giving the same patient two different concentrations for different parts of their body.

Our next question comes from Louise Chen with Cantor.

I had a few for you. First, what I wanted to ask you was this WI-NRS, it appears to be better on the second study than the first. And just curious which one you think will more reflect real-world usage. And the second question I had is, do you have any more specific timing on the INTEGUMENT-PED data coming in 2023? Is it first half, second half? And the last question I had is, do you have any update on branding for roflumilast in AD, will you use the same name for the drug? Anything to think about that will expand your sales force?

So maybe I'll take the last one first, and then I'll ask Patrick to comment on the others. The trade name will be a matter of review for the FDA. We obviously will ask to probably use [indiscernible] but that will be something that will be reviewed as part of the sNDA, whether the FDA wants the same trade name or not. And then Patrick, do you want to talk about WI-NRS?

Yes. Louise, thanks for the question. WI-NRS, which assesses itch, I would say it's pretty similar across INTEGUMENT-1 and INTEGUMENT-2. If you kind of take a look at the numbers, we're sitting right at around 10% at week 1. And then by the time you get up to week 4 on active, we're 33.6 for INTEGUMENT-1 and 30.2 for INTEGUMENT-2. So I see those numbers as 3 out of 10 or 1/3 of patients getting to this response. You have to keep in mind the WI-NRS is evaluating a subjective report from the patient. And these kind of subjective end points sometimes have more variability in them. So I'm actually really happy with how closely aligned the numbers are. And I think that's really reflective of just the overall size of these studies. Keep in mind WI-NRS is assessed only in patients who have a 4 or above an itch. So the simplifies is slightly lower than the overall trial size itself because it really is a subpopulation of those patients who had clinically meaningful itch at baseline. So I think if you think about -- it is about 1/3 of patients are getting to itch response at week 4. And with regards to INTEGUMENT-PED readout, we'll give further guidance on that as we get down the road with that trial. Enrolling patients ages 2 to 5 is always challenging and we are making good progress, we feel on that trial. But we want to definitely be able to kind of refine that guidance only once we are able to do that confidently. So we're going to stick with the current 2023 guidance right now.

Actually, just to be a little bit more clear, I'm sorry, I wasn't more clear. And I know you don't like to look at it like this, but just the placebo adjusted result on the WI-NRS is what I was asking, the difference there.

Yes. So Louise, remember, it's not placebo, it's vehicle. And as Larry mentioned, the vehicle does have some therapeutic effect. But Patrick, do you want to maybe comment on the vehicle adjusted difference.

Yes. I mean I would say that difference. So you're talking about the difference between 20.7 and 12 -- and 12.4 on those. Yes, I would say -- so if you look at the sample size for vehicle, keep in mind that it's a 2:1 randomization. So we got -- let's just focus on INTEGUMENT-1. We've got 278 subjects on with roflumilast and 135 subjects on vehicle. So your vehicle size is about the size of roflumilast cream population. So that means that you're going to have a slightly wider confidence interval on the vehicles just because of the smaller sample size. So if you wanted to say what's the true vehicle response there, I think the safest thing to do is probably go split the difference between the 2 of those, which is what happens when you pool the efficacy results. So we will take these data from INTEGUMENT-1 and INTEGUMENT-2, that's part of the NDA process, and we pull them together and then that gives you a sample size that's going to be effectively twice the size of it. But what you end up with there is that, that vehicle rate is then going to sit right between 20% and 12%. So it's going to be around 16%. That might be another way to think about that.

Our next question comes from Uy Ear with Mizuho.

Congratulations on the positive study. Just a question on IGA success versus EASI-75. So the IGA success here on an absolutely value basis seems a little lower than INTEGUMENT-1, but the EASI-75 seems relatively comparable. Could you kind of explain the differences between the 2 and why one might be more important than the other if that's the case. And I guess my second question is now that you have them, I guess, data from both studies, what do you think you need to have in the label that could help you differentiate, I guess, from what is already -- we kind of know what could help differentiate from what is already out there. But in terms of perhaps other products that are coming into the market as well.

Yes. Sure. Patrick, maybe you can take that, and I don't know if Dr. Eichenfield, if you have any other thoughts you want to add after Patrick's responded.

Uy Ear, thanks for the question. I think you strike on a really important point with this question about EASI-75 versus IGA. When we look at psoriasis, we find a very tight correlation between PASI-75 and IGA. And those are very, very similar methodologies between eczema or atopic dermatitis and psoriasis. So the EASI score is -- the EASI methodology is very similar to the PASI methodology. But in psoriasis you have this kind of crush where PASI-75 and IGA almost always track hand-in-hand. They end up with very similar responses. And we saw that in DERMIS-1 and DERMIS-2. When you look at atopic dermatitis the EASI-75 does not track. And I'm not just talking about our trials, when you look across multiple trials, the EASI-75 does not track with IGA. And we've actually spent quite a bit of time internally thinking about this even before we got these data because we wanted to understand what are these 2 things really assessing. And I think the reason why in atopic dermatitis that you start to see a difference between these 2 is that the diseases between psoriasis and atopic dermatitis are quite different. With atopic dermatitis, you have a typically higher percentage of body surface area. We also have uninvolved skin, which we know has an abnormality to it in the skin barrier defect. And it's also a disease that can change relatively quickly even in a day's time. These are all very different from psoriasis. And so I think the inclusion of a body surface area of component in EASI-75 allows that measure to be much more sensitive to changes than IGA. If you look at the IGA -- validated IGA readout, it really is just a description of what the patient has on their skin. It doesn't include a body surface area component to it. The body service area is so critical to a patient's experience of atopic dermatitis. If you have a 2% body surface area, that's very, very different from 20% body surface area. But that's not captured very clearly in IGA. In EASI-75, it's captured very, very well. So that's why I think the atopic dermatitis community, especially with the advent of biologics has really moved towards EASI-75 is how they think about understanding improvement in the patient. And that's why we really focused on that end point as well.

Yes. Larry here I'll reiterate. I think that's really the right approach. So the vIGA to get you're clear, almost clear success and with the miles, you have to be totally clear. It takes very little left over to not make it for that perimeter even though it says the IGA is this general description it's hard to get there. And EASI-75 is really [indiscernible] what percentage of the population makes that 75% of group. So I think that's [indiscernible] consistent with other studies. We always read both. We like to try to see what's been driven to clear, almost clear within the time using that vIGA, it takes very little. If it clear means, there's nothing other than maybe post-inflammatory changes that are allowed on this that will keep you from being judged clear in a mild patient who might have responded but they may not make it to that particular endpoint.

And then Patrick, I think there was a question on just like what are we looking to see in the label that might be differentiating?

Yes. I would say what we see in the potential like label as we take these studies and translate them in our mind as to what could appear on that label. And again, the piece that's still to come is the long-term safety because I think safety is really critical for this. Our initial indication we're looking for is going to be ages 6 and above. Dr. Eichenfield spoke clearly about the need for tolerability and safety as we go down into those younger ages. And that's what's really going to clearly differentiate us from what is standard of care right now in patients, which is topical steroids. So the ability to use a treatment, which is once daily -- if you look at even the nonsteroidal treatments that are out there, they are twice daily applications, something like Eucrisa or Protopic, those are also in an ointment formulation. So we have a moisturizing cream that's a once-daily nonsteroidal treatment and a safety profile that we think is really going to be consistent with long-term treatment, and I extrapolate the kind of what we've seen in other indications as well. And then I think that this efficacy profile, which I put stacked up against some of the other most important approved drugs that are out there right now, is very, very competitive. So I think that overall profile, which will be reflected in the label puts us in a good position for a potential approval here.

I know we're kind of up on time, but maybe Michelle will just do one more and then we'll close out.

Our next question comes from Greg Fraser with Truist.

Congrats on the results. I apologize if I missed it, on tolerability, what were the AEs that led to discontinuation? I realize the numbers are low, but I'm curious about what those were.

Yes. So our adverse event rate leading to discontinuation was low, as I mentioned and that's in the slide. When we look across those AEs leading discontinuation, there are a couple of important things to note. Like one is, is that there wasn't a single adverse event that led to discontinuation that was actually repeated in another patient. So if I look at INTEGUMENT-2, where we had 8 patients. There wasn't an event that was seen in more than one patient. So we're not seeing any trend towards a patient who's having a trend towards any kind of like group effect on adverse events. We're also not seeing any local tolerability. This is leading to discontinuation there. We did have some patients who had worsening of their atopic dermatitis, for example, things like that. So I think it's -- obviously, those data will eventually be released in a published form, but there's no pattern there that worries me with regard to what's driving discontinuation is more related to the individual patient's experience.

Well, thanks for the great questions, everyone.

I would now like to turn the conference back over to Frank Watanabe for closing remarks.

Yes. No, I'll just say thank you for taking the time to call in. We're obviously delighted to be able to show these results with you, and we look forward to releasing more details at a major scientific conference sometime in the near future. And I appreciate everyone's time.

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