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

Good day, and thank you for standing by. Welcome to the Arcutis Biotherapeutics Atopic Dermatitis Updates 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 and then Eric, he's Head of Investor Relations, Eric McIntyre, you may begin.

Thank you, Tanya. Good morning, everyone, and thank you for joining our call this morning on the exciting data we've released recently across our atopic dermatitis program. The slides for today are available on the Investors section of our website. On the call this morning, we have Frank Watanabe, President and CEO; and Patrick Burnett, Chief Medical Officer; and we are also joined by Dr. Larry Eichenfield, Chief of Pediatric and Adolescent Dermatology at Rady's Children Hospital and Professor of Dermatology and Pediatrics at UC San Diego School of Medicine. I'd remind everyone quickly that we will be making forward-looking statements during this call and any of these statements are subject to certain risks and uncertainties. With that, I'll hand the call over to Frank.

Thanks, Eric. And let me just start out by thanking Dr. Eichenfield for joining us as well. Those of you who don't know him, he's probably one of the world's leading authorities on atopic dermatitis. So we felt it would be really valuable to have his perspective and commentary on the data that we're going to walk through with you. I'm on Slide 5 of the slide deck now. Before we jump into the detailed presentation today, I just want to hit a couple of high points. I think one of the themes in our discussions with investors this year has been that 2023 has really been a year of execution for Arcutis and that continues to be the case with some of the recent AD developments. Obviously, first and foremost, the launch of Zoryve in plaque psoriasis is our top priority and that continues to strengthen in performance. We're getting -- continue to get very, very positive feedback from clinicians out in the field and patients and continue to also make steady progress on our coverage wins as we talked about on the Q3 earnings call. This latest data set that we released this morning is the fifth successful Phase III study that we've completed in the last 18 months, I think, for a small company like us or for any company, frankly, that's a pretty impressive track record and credit to Patrick and his team for their outstanding execution around clinical studies. We just recently submitted a supplemental NDA to the FDA for roflumilast cream for atopic dermatitis in children, 6 and above and adults, and that sets us up for a second launch in 2024. So we continue to expect approval of our foam in seborrheic dermatitis in mid-December, which were translating into launch early Q1 and then the supplemental NDA for AD sets us up for a launch of the new concentration of the cream probably sometime in Q3. And when you take this all together along with the soon-to-be filed scalp psoriasis indication, that's 4 different indications in 3 for concentrations, 2 formulations, all wrapped around the topical roflumilast and targeting about a 13 million patient total addressable market. So we think it's a very, very large and exciting opportunity. On Slide 6, I'll just remind you very quickly of the Arcutis pipeline and especially the yellow and orange bars at the top continue to march along steadily, but we do also continue to be very excited about ARQ-255, our topical JAK inhibitor for alopecia areata, which is in the clinic. 234, which is our biologic for atopic dermatitis that we continue to progress to the clinic and then some of our other programs like ARQ-252 and some of the other programs that we've talked about earlier. On Slide 7, just to talk a little bit more about the opportunity. We focused in the past on some of these other markets, but I'm focusing specifically on atopic dermatitis in the middle, very, very large prevalence over 25 million Americans are estimated to have atopic dermatitis. And I think probably most notably, if you look at patients in a doctor's office receiving topical treatment, there's over 2.5 million patients with mild-to-moderate AD, receiving topical treatment from a dermatologist and those are all patients readily addressed by our existing commercial infrastructure. And then about 4 million patients being treated outside of dermatology in primarily primary care and pediatric settings. And -- as we said before, we are very interested in addressing that 4 million group of patients outside of the dermatology office, but we intend to do that through some type of partnership rather than building our own infrastructure. But as you look at the slide, you can see more than 6 million, almost 7 million patients that we're targeting in dermatology's office and then about another 6 million patients outside of the dermatologist's office across the various roflumilast indications. So then finally on Slide 8. Just to update you in terms of regulatory progress Patrick? Okay. Sorry, I thought maybe I [indiscernible] slides. As I mentioned, we've submitted the sNDA for the 0.15% cream in age 6 and above, and we expect a 10-month review. So that teases up for approval -- expected approval around Q3 of '24. And then we would anticipate filing another supplemental NDA for the younger kids, the ages 2 to 5 based on the data we're going to review with you all today sometime after the approval and the sixth and above. So with that, I'm going to turn things over to Patrick to get to the exciting stuff of the data.

Great. Thanks, Frank. So the data that we released today from INTEGUMENT-PEDS represents the fourth data set for atopic dermatitis. If you keep in mind that we released previously INTEGUMENT-1 and then INTEGUMENT-2 and that covered ages 6 and above in AD. And we also recently read out the long-term data for that age group from INTEGUMENT OLE or open-label extension. So we understand well the profile of AD. And I think that you'll see that the data today for our 2- to 5-year-olds from INTEGUMENT-PEDS is highly consistent with these previous data. And we summarized that now on Slide 10. Here, we show the profile for atopic dermatitis. On the efficacy side, we're showing that we are getting improvement as early as 1 week. Again, this is consistent across our previous studies as well as a rapid improvement in itch as early as 24 hours after application was demonstrated in INTEGUMENT-1 and INTEGUMENT-2. Turning to safety and tolerability. This is an area of strength historically for us. This is our fourth indication that we've studied, but it's especially important in atopic dermatitis due to the high prevalence in children. And here, specifically, we're studying 2 to 5-year olds. Importantly, our formulation doesn't disrupt a skin barrier. That's one of the foundational and pathophysiological considerations for atopic dermatitis and it doesn't include any sensitizing or irritating ingredients, and it can be used anywhere on the body. I mentioned from the INTEGUMENT OLE study that we now have long-term treatment data. And I really see this as kind of the necessary bookend for our Phase III studies like INTEGUMENT-PEDS. Our INTEGUMENT-PEDS and INTEGUMENT-1 and INTEGUMENT-2 studies, we showed an early onset of efficacy, but what's really important also is that you're able to maintain that over the long term. And I think you'll see, because we're going to cover those OLE data today that we're not only able to maintain, but in fact, get a continued increase after the initial 4-week period when patients roll over. And we also do use an innovative study design where we looked at maintenance dosing. This is applied proactively to those areas that were already clear in order to maintain disease control in these patients. Now the efficacy and safety has been consistent across ages. We saw this in INTEGUMENT-1 and 2, which included 6 to 11-year-olds as well as adolescents and now we're showing the INTEGUMENT-PEDS data in ages 2 to 5. And with that, I'll transition to Slide 11 and talk about the study design. So this was an active versus vehicle Phase III trial with 4 weeks of dosing. The dose that we used in ages 2 to 5 was 0.05%. So that's different from the 0.15% that was in INTEGUMENT-1 and INTEGUMENT-2 and subjects were randomized 2:1, and we had 652 subjects in this trial that were randomized. Now the eligibility criteria for [indiscernible] are really critical. We enrolled mild or moderate patients. So that's on the validated IGA 2 or 3. Validated IGA is also going to be our primary endpoint. So I just want to explain a little bit that's a 5-point scale going from clear 0 to almost clear 1 and then mild to moderate and severe vIGA 2 or 3 and 4. So we're enrolling patients who are mild and moderate. Obviously, the ages we've already covered and importantly, we allowed a BSA of greater than or equal to 3, but we didn't cap the BSA. And this is because in atopic dermatitis, it's quite common for patients to have quite extensive disease, and this is particularly true in these pediatric population. So these patients all had to be mild to moderate in the severity of their AD, but we didn't cap the body surface area. Our primary I mentioned is validated IGA atopic dermatitis success at week 4. And then you can see the secondary endpoints all listed out on Slide 11 and those include some endpoints at weeks 1, 2 as well as week 4. Turning to Slide 12. You can see the baseline characteristics for this trial. We had about 3/4 of the patients were moderate that were enrolled. And coming back to this -- to the percent BSA, you can see that the BSA is quite high enrolled into this trial. Overall, it was about 22%. That means that the body surface area that was covered with disease in these patients was approaching 1/4 on average and the median was 17%. Now comparing this to INTEGUMENT-1 and 2, the mean body surface area in those studies was 13.6% and the median was 10%. So this is reflecting a difference in the pediatric patient population with regard to their disease as they're entering into the trial. You can see as well that over 3/4 of the patients had sufficient itch in order to be considered for the analysis of the worst-itch numeric rating scale. That means that they had to have an [indiscernible] greater on a 10-point scale. Now keep in mind that these are 2 to 5-year olds. So we're capturing that itch through the parents and asking the parents to assess the itch that they observed in their children. So that is the difference between this study and the adults and adolescents and older children that were assessed in INTEGUMENT-1 and 2. Coming on to the primary endpoint now on Slide 13. You can see that we achieved statistical significance. In fact, if I could just cover this right now, we made statistical significance not just in this primary endpoint, which is validated IGA at week 4, but in every single secondary endpoint as well. And so we anticipate releasing these data into an abstract or a presentation at some point in the future, but we're just covering some of the key data points here. So for the primary endpoint, over 25% of patients got to validated IGA success, that means they got to clear or almost clear and had a 2-point improvement. So that means that any of those patients who came in at mild in order to meet that 2-point improvement, they had to get all the way to clear, which means that they had 0 -- absolutely no disease on their skin. We also separated very nicely already at week 1 at 9% versus less than 1% for vehicle and that was also statistically significant and then had a big bump in efficacy up to 21% by week 2. So these results are very consistent with the efficacy that we saw with INTEGUMENT-1 and INTEGUMENT-2 with an early onset already at week 1 and then continuing to improve all the way through week 4. For INTEGUMENT-1 and INTEGUMENT-2, the numbers were numerically a little bit higher at 29 and 32 for INTEGUMENT-1 and 2, and I think this really reflects the differences in the amount of body surface area that patients had varying between these trials based on age. Now coming on to EASI-75 on Slide 14. This is an endpoint that we have focused on primarily in our atopic dermatitis releases because of the clinical relevance of EASI-75. So this endpoint is taken with a different methodology from IGA. It actually incorporates body surface area into the assessments for each of the regions as well as the different signs of the disease, such as erythema, scaling lichenification and so forth. So here, we had approximately 40%, 39.4% of patients reaching EASI-75 success -- or sorry, EASI-75 endpoint at week 4. And EASI-75 takes that baseline EASI score and in order to be considered a responder on this binary endpoint, you have to have 75% of your disease improved at the time being assessed. So here for week 4, it was 39.4% versus just over 20% for vehicles. So very good separation. And coming on to the earliest time point that we have at week 1. We're already at 19% of patients reaching that response criteria and that's compared to vehicle. So that's actually a faster improvement than what we saw in INTEGUMENT-1 and INTEGUMENT-2. And these numbers are very similar to what we saw in those earlier studies. So 42.7% was the pooled data for INTEGUMENT-1 and 2 for week 4, and this is versus 39.4%. So we saw a really good maintenance of the delta between active and vehicle as well. So we see these results as very consistent with what we saw in our previous studies. Transitioning to Slide 15 and looking at the itch response. Again, itch is assessed by parents. Nevertheless, we saw again a nice consistency here with 35.3% of patients reaching a WI-NRS response, which meant that they had at least a 4-point response from baseline. And this included all the population who had a 4 or greater at baseline and a rapid response shown by the almost 15% of patients who responded already after just 1 week. Now in the future, we will be able to talk about how quickly this came on because these data were captured with the diary, which showed those for INTEGUMENT-1 and INTEGUMENT-2. That response to INTEGUMENT-1 and INTEGUMENT-2 is as early as 24 hours after initiation. So look forward to those being presented at a future time point for INTEGUMENT-PEDS as well. Now on Slide 16, we start to look at the safety that was observed in this trial. And here, I really want to focus on the subjects discontinued due to an adverse event. We have numerically similar results between roflumilast and vehicle with 1.1% for roflumilast and slightly higher at 1.9% per vehicle. That difference for vehicle reflects primarily worsening of atopic dermatitis. 2 of those 4 subjects who discontinued due to an adverse event in vehicle or because of their atopic dermatitis worsening. So completely expected results there and a very high completion rate was observed in the study. We didn't have any subjects discontinued for nausea, vomiting or diarrhea, which are kind of typical PDE4 related adverse events. And in fact, on Slide 17, showing all of those adverse events that occurred in greater than 2% of subjects in any group. And here, you can see our top 2 were typical things that you would see in pediatric patients, upper respiratory tract infections and pyrexia, which is fever. It's not so you get down to diarrhea and vomiting, which are both less than 3%. In this study, and both of those are kind of expected PDE4 related adverse events. And in fact, if you go all the way to the bottom, you see that atopic dermatitis, which represents a worsening of the disease is more common in vehicle than it was in active exactly as you would expect. For dermatology, it's always good to show a couple of pictures. So on Slide 18 and 19, we're showing here a 3-year-old mail. He identified as Hispanic for ethnicity and had quite extensive body surface area. So kind of consistent with what we had in this trial, this young man has a 39% body surface area and an easy score of 25, which is quite high and in that range where depending on age, you would be eligible already for a biologic. This is a patient who went from the baseline IGA3 that is a moderate patient. And by week 1 was already a 1, which is almost clear and then maintain that through week 4. So this is a responder. I think it's good to see pictures because you could see just how extensive disease is at baseline, but also that a patient who gets to almost clear really has very, very little disease. So this is one of the aspects of the IGA that's really important to understand is that clear or almost clear, the difference between that can be just a couple of papules of disease in order for patients to go from clear to almost clear. So I'm going to now talk about our open-label extension results. And I really want to make it clear that now we're shifting to ages 6 and above. So our INTEGUMENT-OLE study did enroll 2- to 5-year-old subjects, but we don't have those data yet. Those patients are still in this trial and we'll read them out at a later time. Because our INTEGUMENT-1 and 2 trials wrapped up earlier in the year, those subjects were able to complete their full 52 weeks of treatment and so we have an interim analysis that focuses on these ages 6 and above. We call it an interim analysis because the study is still open with 2 to 5 years in it, but these are the complete data for these ages 6 and above subjects. And on Slide 21, you can see a diagram that kind of gives you an understanding of them. All these subjects completed INTEGUMENT-1 or INTEGUMENT-2. We had 658 in the trial. And you can see that they're split between 2 different cohorts, a 24-week cohort and a 52-week cohort. And that's important because you will see that there was a drop-off in the number of subjects that went out to 52 weeks, and that's kind of by design. You can see that not all of the subjects made it to -- were enrolled into that 52-week cohort. So I just don't want anybody reading into that too much about an artificial dropout rate. That was actually part of how the subjects were enrolled. Now in this open-label extension trial, everybody was treated with the 0.15% dose. And again, it's 0.15% because this is age of 6 and above. And the primary endpoints were efficacy, but we also looked at -- I'm sorry, primary point with safety, but we also looked at efficacy endpoints as well. So going to Slide 22, we'll cover safety first because this is an open-label safety study. And what you see is that even over 52 weeks of treatment, the discontinuation due to an adverse event was only 3.2%. This is very low for a 52-week trial. And if you look at the most common treatment-emergent adverse events here, again, it's greater than or equal to 2% overall because we only had a single arm in this trial. You see that what we're reporting here is COVID-19 upper respiratory tract infection, nasopharyngitis and headache, nothing greater than 5%. So really, we don't even see the PDE4 adverse events that are commonly -- that are the most common -- that are the most common reported in our Phase III trials, we're not seeing those in this open-label extension as one of the more common. These are the typical things that you would anticipate in patients. As we move on to Slide 23, this looks at our efficacy over time by validated IGA atopic dermatitis. So this was the primary endpoint in our Phase III trials. And here again, we're kind of following them out. So just to orient you on this, percent of patients is along the left, weeks in treatment along the bottom from 0 to 56. It goes to 56 because patients are included for the first 4 weeks that they were in the pivotal trial INTEGUMENT-1 and INTEGUMENT-2, and then they rolled over and received either 24 or 52 weeks of additional treatment. So the period in the Phase III studies, INTEGUMENT-1 and INTEGUMENT-2 is highlighted in yellow along the left and then as they transition, we show the efficacy for this cohort of patients. So this is -- these numbers are slightly different from our overall efficacy because here, we're looking at this cohort of patients that rolled over into the OLE, how did they do at week 4 and then how did they do as we got to weeks 28 and 56. And what you can see is that we are showing 2 arms -- or I'm sorry, 2 different groups, and that's because your trajectory could be different based on whether you were on active or vehicle in the parent study, especially earlier in that trial, even though after that yellow period is completed at week 4, from that point forward, everybody is on the 0.15% dose. So they really aren't 2 arms. We're just tracking patients because of the coming from vehicle or active in the original study. And what you could see is that focusing on the active patients, 28.5%, they get up to 40 -- over 45% already [indiscernible] IGA success at week 28. That's 24 weeks after completing that trial. And then by week 56, which is the last time point they're up over 50% of responders. So we're seeing a continued increase in efficacy over time. And I'm going to talk a little bit also about our maintenance dosing at the end. So just keep in mind that these efficacy results are with patients actually when they get to clear, decreasing the amount of time that they're using their drug. So this is really kind of a more real-world study approach where patients can go on and off this maintenance dosing depending on how their response is. Looking at Slide 24. I mentioned previously that we really like to focus on EASI-75 because we think that this is a very relevant endpoint, and it also incorporates body surface area. So starting to same orientation to this graph, starting at 42.6% of patients responding coming out of the pivotal trials, that number goes up to 61.5% and then up to 66% by the time they get to week 56. For those on active, you can see the patients that are on vehicle after they roll over kind of quickly get to exactly the same level of efficacy as their cohorts who were on active 4 weeks earlier. Again, really good maintenance, not just maintenance of efficacy but also efficacy build over time, which we hadn't seen in any of our previous open-label extensions for other indications, and I think really represents an aspect of atopic dermatitis where patients getting under good control, actually continue to see benefit over time. And as I move to my last Slide on Page 25, this looks at the maintenance dosing, just to give you a little bit more understanding of what we mean by that. So we proactively treated patients when they got to clear stopping the every day dosing, the QDA dosing, and it is switching to twice a week. And then patients were able to maintain on that twice-a-week dose for as long as they could. Now they would switch back to daily dosing if 1 of 2 things happens. If they consider that their signs or symptoms were not adequately controlled. So that is a very low bar. So if the patients themselves is not happy with how they're doing, they go off twice weekly dosing and go back to once a day dosing or if we kind of step in and intervene if they get to a validated IGA of mild because that was the eligibility criteria to come into the store -- into the trial. So even if patients think, oh no, no, I'm totally fine, we still continue -- we switch them over to once a day dosing if the investigator assesses them as mild when they come in for a visit. And what we're able to show is that this maintenance dosing was able to keep 2/3 of patients to remain on maintenance dosing twice weekly for over half of their time in the study, which meant that when patients went on to it, it was quite like that they were going to remain on it for the kind of remainder of the study. We're very happy with this response and we feel that it fits quite nicely with clinical practice because this is how steroids are commonly used and this is the feedback that we got from our atopic dermatitis advisers, including Larry Eichenfield. So with that, I'm going to turn it over to Larry to give some context on his -- how he sees these results in both the INTEGUMENT-PEDS study as well as the open-label extension. Larry is uniquely positioned because he's both an investigator and really participating in every significant atopic dermatitis trial that conducted, but as well a very active practitioner. So he's able to kind of translate these types of clinical results into real-world practice in a very unique way. So with that, I'll turn it over to you, Dr. Eichenfield.

Thank you, Patrick. So my job is really put it in the data into context and I'll start with the big picture, which is you saw the population data but translate that to clinical practice, I'll be seeing patients in a few hours. There's a lot of atopic dermatitis -- there's a lot of atopic dermatitis in younger children. And there's a desire for us to bring long-term control of itch in a rash of atopic dermatitis to patients and their families and to do this safely and effectively. And really, there's a clinical need to be able to do this without relying on traditional topical corticosteroids alone because there's issues with them and concerns about them. And certainly, no methodology that allows someone to use chronic topical corticosteroids, daily topical steroids as a way to control more significant disease that needs more consistent anti-inflammatory therapy. So that might look at the data set and relationship to that is to say how will this work in clinical practice. And first of all, I'll start off with the INTEGUMENT-PED study, right, which is that the data was very consistent with the INTEGUMENT-1 and 2 with the older children and adult results. The lower dose that was developed for these 2- to 5-year olds is effective, safe and appropriate. And probably the biggest takeaway, which is nerdy but translate the clinical practice, it's very common younger children to have relatively high body surface areas involvement, a 22% body surface area involvement in an adult is considered systemic therapy. It's one of those -- we have a -- remember, psoriasis, 10% body surface area is in the severe category, atopic dermatitis, you can have a higher body surface area in our older patients, but it's very common in the younger patients. And that's what you see in interpreting these results, 2/3 of the patients were moderate at baseline. It's very important to know there was no cap on BSA and they ended up with this 22% body surface area. So a lot of atopic dermatitis to clear in the period of time. Also remember that this -- this drug and we're looking at this data, this drug is being used once a day with a 4-week time course for evaluation. And we're not doing comparison analysis here, but that's a quick time point that's being looked at because it was thought when the studies were designed and they'd be able to show their differential from vehicle within that time point, I think that's really important. And then the itch response is rapid and consistent even week 1, you see that efficacy, which showing -- which is showing rapid offset of effectiveness. And I think the EASI-75 data in the INTEGUMENT-PEDS is a very relevant time for. It gives you a real sense of these patients who come in with mostly moderate disease with pretty significant EASI score. We don't necessarily do EASI scores in practice. But with a lot of body surface area and a lot of eczema, they get their improvement within that time course very effectively. Now the other data set, again, it's 6-year old plus right now, the INTEGUMENT open label is my pending or land cape pending, and I'm really excited that the company elected to be willing to test in their open-label extension rather than go through a traditional methodology of okay, if you clear, you stop it and go back and use it and then continue to use that drug as needed with disease players that they really tested this maintenance regimen with incredibly great results because we see safety and tolerability with chronic long-term treatment and atopic dermatitis and required chronic long-term treatment very commonly across the landscape of ages. There was very low discontinuation rate due to adverse events in the study. You showed the increasing efficacy over time up to that -- up to 56 weeks as measured by both the global score and that EASI-75. And the concept of being able to say to a patient or a family, after you're clear, why don't you go twice a week for the next 6 weeks, 4 weeks, 8 weeks and show -- let's make sure we can continue to keep the patient clear with twice a week rather than this sort of wait until there's a flare and then treat in a medicine that's bringing with it good tolerance and safety is something that could be a real shift in our management. So the proactive maintenance approach is incredibly strong data. And so both looking at the data in context, consistency of roflumilast with the younger kid studies and the open-label really showing that increase in efficacy over time, capturing more of the population who makes it the EASI-75 and that proactive maintenance, which I think is really important to help to allow us to direct our patients to use a medicine in a long-term regimen of care in a way that they'll feel comfortable and we can really help to control both the symptoms, the itch of atopic dermatitis and to keep most of the patients clear.

Great. Thank you so much, Larry. I really appreciate the comments. And we are going to transition now to Frank to take question and answer. And I'm sure there'll be some questions for you. So Frank?

Yes. Thank you, also, Larry, that was very helpful. Yes. So we're going to open things up for Q&A. And operator, if you could help facilitate or Eric, if you could help facilitate questions as they come in.

[Operator Instructions] And our first question will be coming from Seamus Fernandez of Guggenheim Partners.

Congratulations on the INTEGUMENT-PED results and the OLE structure. Just a couple of questions. Historically, I think if we look back -- and this is maybe a little bit of a history question for Dr. Eichenfield and also for the team. Just wanted to get a sense for where we saw some unique uptake of products like Elidel historically? My recollection is that it was that younger 2 to 5 patient population where we saw some pretty extraordinary uptake of those products because parents really want to avoid topical steroids pretty aggressively. So just hoping to better understand how you are thinking about that opportunity? But my understanding is also it was a very significant uptake among pediatricians in particular, maybe more so than dermatologists. So just interested to get your thoughts and feedback on that, the opportunity to broaden into different physician prescribing populations? And then separately, as we think about the OLE opportunity, is that a labeling opportunity for the team? Or is that more of a marketing study such that, that can be promoted more from publications, things like that, just in terms of the promotional opportunity from the OLE study?

Yes, sure. Thanks, Seamus. Yes. So Larry, do you want to maybe start off by addressing Seamus' question about sort of the history with the TCI -- yes, the TCIs and where we saw the most adoption? And then Patrick, maybe you can address the other question.

Yes. I see the history question as being right on. There certainly when Elidel came out, there was a rapid uptake, especially in the younger kids. And it was true that, that was amongst non-dermatologists as well as dermatologists with the pediatric community being very happy for exactly the reasons that were stated. There's always big concerns about topical corticosteroids with younger kids, in particular, where there's more body surface area and concern about absorption and Elidel was sort of used very broadly. And so the follow-up of that, do I think there's potential for it similarly to be brought to use? I think there's a clinical need in that younger age group. The data is very strong and brings -- especially a strong in the age group, but of course, it's also strong because of the consistency of roflumilast across the age study. So I do think that if it could fit the bill for the patient, then the different practitioners, not just dermatologists, may look at its futility. And I do think that the design of the -- and the discussion of the open-label extension is really exciting and something that can bring a lot of interest from practitioners as well and I'll defer to the team in terms of the question of whether they think that's a labeling opportunity or just a different aspect to differentiate in the market.

Yes, I can handle that. So the study -- the open-label extension trial in INTEGUMENT-OLE was designed as a safety study. And as such, we expect that it will be described in the label. So if we're following the example of our open-label extension for DERMIS-1 and DERMIS-2, those -- that study was included in the label, in particular, to comment on the safety over time. So then as the study gets described in the label, then there is an opportunity, depending on the promotions for it to be promoted as consistent with label. So we do see that as a study that will appear in the label. So we're quite excited about it.

Great. And maybe just as my final question and then I'll turn it over. As we think about the sort of promotional needs, can you just help us understand a little bit of where you think the reach is necessary? I think, Frank, one thing that you've talked about is an opportunity to actually separate the sort of promotional opportunity and that it might be possible to bring on a larger partner who has a presence -- strong presence in the pediatric and primary care market such that the reach of the topical roflumilast can actually broaden. Can you maybe just walk through a little bit of that opportunity as you see it? And when something like that would make the most sense as a potential partnership?

Sure. Yes. Absolutely, Seamus. Yes, I think I made reference to this earlier in my comments. As we look at the marketplace today, almost half of the patients, who are currently receiving treatment for either psoriasis subderm or atopic dermatitis and about 2/3 of atopic dermatitis patients are being treated in primary care or pediatricians offices or in some cases, with AD in allergist offices, although there are a huge number of allergists in the country. We intend to continue to promote roflumilast for its various indications in the dermatology office as Arcutis, but that we would be looking for a partner to help us promote that in primary care and pediatrics and we'll have to sort out who takes allergy as we move forward. So you hit that exactly on the head. We just don't think that it's a good use of shareholder value for us to build a 500-person primary care sales team. And as you think about what that might look like, I think our preferred sort of structure is some sort of arrangement where there's a -- it's a co-promote, but there's revenue sharing so that the partner has sufficient skin in the game and we feel like that's the best alignment of the 2 companies' interest. In terms of timing, what we've said and we continue to believe is that it's important to have this partnership sometime around the atopic dermatitis approval in Q3. And I emphasize around because I think that the primary care community and the pediatric community are going to be looking to dermatologists to 4 Qs about the adoption of any new topical therapy. And so the first and most important thing is for us to win with dermatologist and that will be our focus right out of the gate. If in the first month or 2, we don't have that primary care partnership in place, it's probably not the end of the world as we're getting trial in dermatology. But certainly, very quickly, we would want to have that primary care partnership in place so that we could drive uptake in the other specialties as well.

And our next question will be coming from Louise Chen of Cantor.

Congratulations on all the great data. So I wanted to just follow up and ask you on this partnership that you were discussing here. Have you identified certain candidates that are ideal for you? And would they also be interested in European rights? I also wanted to ask you on spending how much incremental spend you need to launch AD, if everything is approved as anticipated? And how do you feel about the resource to launch both AD and also psoriasis? And then last question is just on the uptake of AD versus psoriasis. How do you compare and contrast those 2 types of launches?

Yes. Louise, great to hear from you. So in terms of potential candidates, there's a finite number of companies that have existing primary care presences. And some of them do and some of them don't call on pediatrician. So yes, we've mapped out the landscape and we know who are potentially partners for us. We don't have a deal done yet. So we'll have to see who it ends up being at the end of the day. In terms of European rights, that's hard to say. I think that's something that will come in the context of any discussions. But certainly, many of the companies that have large primary care footprint in the United States are multinational companies that do have European presence and so that certainly might be a factor in as well. In terms of resourcing question, there's certainly will be some incremental marketing spend associated with atopic dermatitis launch. Probably the most notable incremental expenses that we have communicated previously, we anticipate a modest sales force expansion associated with atopic dermatitis approval. We will, at that point, have topical roflumilast or Zoryve for plaque psoriasis, topical roflumilast foam for seborrheic dermatitis we'll have just launched, and then we'll be launching yet a third indication in short order. And I think there's just a finite capacity for a sales rep to optimally promote a number of products. I think 3 launches in short order is probably exceeding that. And so we believe that expanding sales force is the right thing to do in terms of driving shareholder value. And then with regard to your question about uptake, I think Larry touched on this, too. But my sense is that the uptake in atopic dermatitis may be somewhat faster than in psoriasis. And that's primarily because of some of the dynamics that Larry touched on that parents are very motivated to get away from topical steroids. And I think there's also some lingering concerns in the parent community around topical calcineurin inhibitors. And so to have a really good, safe non-steroidal that can be used chronically and used everywhere, I think there will be a big push, especially from the parent community to adopt this therapy and to switch their kids over. So we would expect to see, I think, somewhat faster uptake in the atopic dermatitis realm than we've seen in psoriasis.

And our next question will come from Chris Shibutani of Goldman Sachs.

This is Steven on for Chris. I had one for Dr. Eichenfield. Just curious if you see roflumilast cream, particularly in the atopic derm setting being used as a monotherapy or potentially in combination with other topicals or even biologics? And then for the Arcutis team, just curious what kind of utilization management you might expect for the cream in atopic derm? And if we should expect this to be similar to what's kind of played out for the plaque psoriasis indication?

Eichenfield? Go ahead.

Yes, happy to take that up. I spent a lot of my time when I'm lecturing to dermatologists and occasionally pediatricians saying that part of our job is to figure out from the clinical studies which are monotherapy against vehicle has been split into real life with regimens of care. And I do think that this drug has the ability to be used as a monotherapy but also very much used in regimens of care. Someone may get someone under control acutely with topical corticosteroids for a week and then shift over to this as maintenance therapy. In critical practice, you're always trying to get a sense of somewhat have persistent disease is a disease that comes under quick control and then they go weeks at a time or months at a time or days at a time before they have active size or symptoms of the disease again. So this has versatility. It can certainly be used as a monotherapy, but it also has the versatility because it can be used in a clinical response for flared eczema or as in the open-label extension in regimens that can sort of proactively treat the disease to minimize the ration symptoms.

Yes. And then with regard to the access question, certainly, that's something that we will need to discuss with payers as we get this approval. But particularly with our pricing and access strategy, we have not seen a lot of utilization management for Zoryve in plaque psoriasis, and we wouldn't expect it to be substantially more draconian in the atopic dermatitis space, either given the prevalence of topical steroids that Larry just made reference to. I think it wouldn't surprise me if there was a step through a generic steroid to get to Zoryve or to topical roflumilast for atopic dermatitis. But I wouldn't expect anything dramatically different than what we've seen in psoriasis.

Our next question will come from Tyler Van Buren of TD Cowen.

This is Tara on for Tyler. So I was wondering if the responses were consistent across -- in children across the spectrum of body surface area. I know you showed the case study of the patient with a 39% BSA, but curious to know about the child with 82% body surface area coverage? And then given the increased concerns over using steroids in this population, would you expect the younger population to be easier to penetrate with a safe and well-tolerated and targeted product like Zoryve considering the higher BSA?

Yes, Patrick?

Yes. That analysis that you're asking about with regard to response across both severity and body surface area, our data points that we will do. So we'll have those data and we'll bring them out. Historically, what we saw with INTEGUMENT-1 and 2 was that we saw consistent results regardless of their incoming body surface area. So there's always some variation. But historically, we've seen a really good maintenance of that efficacy regardless of that. So we will be forthcoming with those data. This is just kind of the top line data. And then as I mentioned in the presentation, we are going to come back and talk about this at an upcoming congress and we'll have more data kind of coming out over time and we'll include that. With regard to the younger patients and the penetration in higher body surface area, we took the decision to use the 0.05% dose in this 2- to 5-year old patient population. Really coming out of the Phase II study that we conducted where we saw very similar safety and efficacy in 0.05% and 0.15%, there was just a little bit of an efficacy edge on the 0.15% dose. So we took that into the ages 6 and above. But just, again, kind of anticipating the population that we actually ended up enrolling into this study where we expected to have higher body surface areas and we wanted to make sure that we really kind of maintained our safety profile. And we didn't really see a falloff in efficacy as being a risk because of the consistency that we've seen in that earlier small Phase II study. We really see this as a validation of our dose selection. Now these kids have very high body surface areas, but the safety -- and if you think about our data across all of the -- I think Frank said, we released 5 successful pivotal Phase III trials in the last 18 months. If you look across that, the safety that we track is a very low percentage of patients who have a little bit of a kind of first blush of a PDE4 profile. So in dermis, that was diarrhea. We saw some nausea and vomiting at very low rates, always less than 3% in INTEGUMENT-1 and 2. We wanted to make sure that we get the same safety profile as we move down into these younger age versus with the high body surface areas, and that's exactly what we saw. So we really see this as a validation of our kind of dose selection because we have the same efficacy, and we have the same safety and tolerability, despite a shift in the demographics of the patients.

Patrick, if I can make one comment. It's really important to recognize that in -- when they chose the population here that the study set up with no cap on body surface area and that's different to some of our other drugs where we're restricted in the percent of body surface area. Happy to be that, right, the mean was pretty high, right? It's -- the size of a kid's hand is 1%. So when you're at 20% body surface area, it's a lot. But to be true from a translation to patients, if I have a patient covenant they only have -- they have 5% body surface area. The family still wants to know what's safe and effective, and they still might desire -- it's not like family say, "Oh, we only have 4% body surface area, we'll use topical steroids and not worry about it." We may discuss that they don't need to worry about it, but they still might be very happy with a nonsteroid option that's going to be effective and has the good safety associated with it.

And our next question will come from Vikram Purohit of Morgan Stanley.

This is [indiscernible] on for Vikram. We have 2 questions. The first one is, how would you size the commercial opportunity for patients aged 2 to 5 versus patient age 6 plus? And then how many tubes would you expect the pediatric population to walk through annually? And which areas of the body do you expect the cream to be used for most heavily in this population?

Sure. So thanks for the question. Let me address a couple of those, and I'm going to call a friend here and ask Larry and Patrick to respond as well from a clinical standpoint. But -- so in terms of tube utilization, looking at data across different products, we think that atopic dermatitis patients in general are probably going to consume something like 4 tubes a year. And that's really a reflection of the higher body surface areas that are associated with this disease. With younger kids, as you get very small, their consumption will probably go down because their body surface area is just less so they need less drug, right? And then in terms of the opportunity, in the dermatology practice, the 2.6 million patients in dermatology, about 90% of those patients are ages 6 and above. About 10% are under the age of 6. That shifts as you go out into the primary care, especially the pediatric population. And off the top of my head, I don't know if Larry and Patrick, you recall, about 40% of atopic dermatitis patients are under the age of 18, but I don't remember the split across all specialties of 6 and above and 5 and below. But if one of our dermatologists recall, maybe you can answer that. And then Patrick, Larry, maybe you can also address that last clinical question.

Yes. Larry, do you want to maybe talk about where in this patient population of 2 to 5 year olds, like where the most common areas for presentation would be in your practice?

Yes. I'll take it as what part of the body surface area will people treat with this? And the answer is any. One of the big issues we haven't mentioned the general concern that we have amongst our doctors and other health care practitioners about topical steroids on the face because of skin that can be seen in thinner skin surfaces one of the major advantages of having a very well formulated nonsteroids that has -- is very tolerable. So I do think that -- this could be used pretty much anywhere, but people are going to be very excited about using this for facial areas that are skin areas, body folds because they are more vulnerable to having skin sitting with a topical corticosteroids. So that may drive use and exposure to patients early on and then people will then sort of put -- to see how much they'll use it depending upon the total body surface area involve.

And I'm showing no further questions. I would now like to hand the call back to Frank for closing remarks.

Okay. Well, let me just thank all of our participants for calling in this morning. We felt like it was really important given the amount of data that we've released just recently in atopic dermatitis to get you all together to go through it. And I think having Larry on the call was, from my perspective, invaluable. He's a trusted adviser and someone that we value his opinion greatly as the dermatology community does. So I want to thank him again as well for his participation. And with that, we'll wrap things up. Thank you.

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