Arcutis Biotherapeutics, a California-based biopharmaceutical company specializing in dermatological treatments, has been on a steady climb. Their recent Q1 2024 earnings call revealed a potential gold mine that analysts seem to have overlooked. While headlines focused on strong revenue growth and the promising FDA PDUFA target date for their atopic dermatitis treatment, a deeper dive into the transcript suggests that Arcutis' seborrheic dermatitis (seb derm) treatment, ZORYVE foam, may be poised to explode into a billion-dollar blockbuster.

Why the "Foam Frenzy"?

Why the "Foam Frenzy"?

Several factors are driving the excitement surrounding ZORYVE foam:

Massive unmet need: Seb derm affects millions, and innovation has been stagnant for decades. ZORYVE foam, a non-steroidal, once-daily treatment, offers a breakthrough in efficacy.

Phenomenal launch: In just three months, ZORYVE foam garnered over 46,000 prescriptions, outpacing the launch of its sister product, ZORYVE cream, for psoriasis.

Strong insurance coverage: Arcutis secured coverage from major pharmacy benefit managers quickly, resulting in over 50% of ZORYVE foam prescriptions being covered in its first quarter.

Cross-indication prescribing: 40% of physicians prescribing ZORYVE cream for psoriasis are also prescribing ZORYVE foam for seb derm, demonstrating the strength of the "ZORYVE portfolio" concept.

The Billion-Dollar Potential

Arcutis expects a steady-state gross-to-net (GTN) in the 50s for both ZORYVE cream and foam. They've already exceeded this, achieving a blended GTN in the low 60s for Q1.

Hypothesis:

If ZORYVE foam reaches 2 million annual prescriptions within the next few years...

And maintains a GTN of 55%...

With an estimated net price of $400 per prescription...

Annual revenue from ZORYVE foam could reach $800 million.

This projection excludes international expansion, including a licensing deal in Japan, which could further boost revenue. Additionally, Arcutis plans to file for ZORYVE foam's use in scalp and body psoriasis, expanding its market even more.

Prescription Growth: Cream vs. Foam

The chart below illustrates the impressive prescription growth of ZORYVE foam compared to the cream:

Key Numbers from the Q1 2024 Earnings Call:

ZORYVE Foam Prescriptions in Q1 2024 46,000 ZORYVE Cream Prescribers Also Prescribing Foam 40% Projected Steady-State GTN for ZORYVE Foam 55% Estimated Net Price per Prescription $400

Conclusion: A "Foam Frenzy" for Arcutis?

While atopic dermatitis holds a central position in Arcutis' near-term strategy, the "foam frenzy" in seb derm could redefine the company's future. The combination of a large unmet need, rapid adoption, strong insurance coverage, and a savvy pricing strategy suggests that ZORYVE foam has the potential to become a dominant force in dermatology, potentially generating billions in revenue and transforming Arcutis into a major biopharmaceutical player.

"Fun Fact: Foam formulations, like ZORYVE foam, are often preferred by patients due to their ease of application, quick absorption, and non-greasy feel. This improved patient experience can lead to better treatment adherence and outcomes."