Frank Watanabe and his team at Westlake Village-based Arcutis Biotherapeutics Inc. are on a mission: to have the company’s main drug product become the leading non-steroidal alternative to treat a wide range of skin diseases and conditions.
For decades, the go-to treatment for these skin conditions has been steroid-based drugs, powerful inflammation fighters that also come with a range of powerful and harmful side effects if used for long periods of time. These include often intense skin irritation and weight gain.
“Our goal is to replace topical steroids, which are the bedrock today for the treatment of inflammatory skin diseases,” Watanabe says. “But steroids have problems, especially when used for longer terms. Also, they are not safe for sensitive parts of the body.”
Over the last couple of years, Arcutis has methodically moved to accomplish this mission by securing a series of approvals from the U.S. Food and Drug Administration for various applications of its non-steroidal drug, technically called roflumilast but marketed under the name Zoryve.
The first FDA approval, in July 2022, was for a high-concentration cream version of Zoryve to treat plaque psoriasis in people at least 12 years of age. Plaque psoriasis is the most common form of psoriasis, a skin disease that affects at least 9 million Americans. (Eventually, the FDA approved the use of the drug for anyone at least 6 years of age.)
Then, late last year, Arcutis received FDA approval for a topical foam version of Zoryve to treat seborrheic dermatitis, a chronic recurrent inflammatory skin disease that affects more than 10 million people in the United States. The approval covered the use of the Zoryve foam for anyone at least 9 years of age.
Most recently, in July, the FDA approved the use of Zoryve for the treatment of mild to moderate atopic dermatitis in adult and pediatric patients at least 6 years of age. Atopic dermatitis is the most common form of eczema, affecting nearly 10 million children and more than 16 million adults in the United States.
Watanabe says Arcutis is planning to seek two more FDA approvals of Zoryve: filing with the agency this year for an expanded range of applications for the foam version (now approved for seborrheic dermatitis) and then by late this year or early next year filing for a low-strength concentration of the cream for children under the age of 6.
“We’ve completed the clinical studies for all of these indications,” Watanabe says.
Competing against steroid treatments from pharma giants
Yet even if Arcutis secures these additional FDA approvals, it still faces substantial challenges in securing enough market penetration.
Right now, according to Seamus Fernandez, an analyst with Guggenheim Securities in New York, more than 80% of the products sold to treat skin conditions contain steroids. And this has been the case for decades.
“Steroidal products work pretty well, pretty quickly and they are cheap,” Fernandez says. “That makes them the general go-to products – sort of the Honda Civic for dermatologic treatments.”
Fernandez says that there have been attempts in past decades to bring to market non-steroidal alternatives, but few have been able to gain and maintain traction.
It doesn’t help matters for companies like Arcutis that big pharma companies dominate the skin condition treatment market, such as North Chicago-based AbbVie Inc., which posted 2023 revenue of $54 billion, and Basel, Switzerland-based Sandoz, which had nearly $10 billion in revenue last year. By comparison, Arcutis had about $60 million in revenue last year.
Also, Thousand Oaks-based Amgen Inc., (2023 revenue of $28 billion) has a non-steroidal drug sold in pill form under the marketing name Otezla that is used to treat symptoms caused by inflammatory autoimmune conditions such as plaque psoriasis. But, unlike Zoryve, Otezla is also used to treat non-skin conditions such as arthritis.
“It’s been pretty hard to break this market open,” Fernandez says.
Also not helping is the reluctance of insurers to cover non-steroidal treatments for skin conditions, though Fernandez says that has begun to change in the last two to three years.
“There’s still no Medicare coverage, but we are beginning to see some state Medicaid programs embrace non-steroidal alternatives,” he says.
Arcutis’ best hope, he says, is the growing realization among dermatologists and other doctors that products containing steroids have potentially damaging side effects, especially if the products are used for long periods of time to treat chronic conditions like psoriasis.
Watanabe concurs and says Arcutis is exploring entering into partnerships to educate both consumers and physicians about the advantages of non-steroidal treatments like Zoryve. The first of these partnerships was announced in late July with Kowa Pharmaceuticals America, a unit of Nagoya, Japan-based Kowa Co.
Share price has skyrocketed since year’s start
Investors have glommed onto Arcutis, particularly since the last two FDA approvals have come through.
From a 2023 year-end close at $3.23 a share, the stock zoomed up to $11 a share by mid-March before falling back to the $8 range. It has traded in that $7.50 to $11 range ever since. The share price closed at $8.49 on Aug. 16, up more than 160% since the beginning of the year.
