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Tuesday, May 17, 2022

Arcutis Jumpstarts Year With $159 Million IPO

 In January, dermatology research company Arcutis Biotherapeutics Inc.

raised $159 million when its stock debuted on the Nasdaq for $17 a share.The biopharmaceutical startup sold 9.4 million shares during its initial public offering – 1.6 million more than planned. The stock climbed to $21.80 by closing, up $4.80 on its first day trading.“We ended up raising 150 percent of what we were planning on raising at a very attractive price and very attractive valuation. I’m delighted by how it went,” Chief Executive Frank Watanabe told the Business Journal in a March interview. “This cash gives us the wherewithal to continue to execute on our existing programs so we’re very much focused, heads down, on flawless execution for the remainder of this year.”Arcutis’ research focuses on finding topical treatments for skin conditions like psoriasis and dermatitis. It has four products in the development pipeline. Two are made with roflumilast, an anti-inflammatory drug that Arcutis believes is more efficient at treating plaque psoriasis and atopic dermatitis than competing drugs. The other two are creams to heal hand eczema, vitiligo and alopecia areata – all skin conditions.Even through the worst of the coronavirus pandemic, when many biotechs paused clinical trials, Arcutis forged ahead and its investors stayed comfortable with their positions. The stock never dipped below its IPO price, and on the year has risen $8.75. Shares closed Dec. 2 at $25.75.In an interview with the Business Journal in August, Watanabe chalked the performance up to a strong investor base.“It’s late stage, and investors view our data as being quite compelling,” he said.That rang true in October when the company made a secondary offering with 4 million shares. At a price of $25 per share, and with an oversubscription allowance of an additional 600,000 shares, the offering grossed around $128 million. In conjunction with the offering, Arcutis agreed to sell $35 million in stock representing an 11.7 percent share to OrbiMed Advisors, an affiliate of one of its directors, in a private placement. Other major shareholders include Frazier Life Sciences, which owns almost 29 percent of Arcutis’ stock, and Bain Capital Life Sciences, which owns a little more than 10 percent.Commercial launchWatanabe said he expects Arcutis’ economic boom to continue into next year and beyond.“We will grow substantially in the coming year as we prepare to commercially launch our product. Probably the biggest growth will be growing out our commercial organization,” he said.

Watanabe is referring to ARQ-151, the roflumilast drug to treat psoriasis, which is the furthest along out of Arcutis’ dermatology-focused topicals. The team expects to report results from its Phase 3 clinical trial for ARQ-151 in the first quarter of 2021 with goals of filing a New Drug Application by the end of 2021 and getting Food and Drug Administration approval in 2023. Meanwhile, the other roflumilast drug, ARQ-154, returned positive topline data late last month after completing its phase 2b clinical trial.

“If successful in Phase 3 clinical trials and approved for commercialization, roflumilast foam will be the first novel mechanism of action for the treatment of scalp and body psoriasis in decades,” said Chief Medical Officer Patrick Burnett in a statement.“This reflects our overall strategic approach – addressing dermatological areas with significant unmet medical need via biologically validated targets, thereby increasing Arcutis’ chances for clinical and commercial success,” Watanabe said in an email to the Business Journal last week.Watanabe added Arcutis is ready for the growth that will come as it nears its market entry. The company is in the process of migrating its headquarters down the street on Townsgate Road to accommodate new employees.“It’s four times the size of our current office. The new office should last us for quite some time,” Watanabe said.

In its third quarter earnings report to the Securities and Exchange Commission, Arcutis reported a loss of $38.2 million, or -$1.01 a share, for the three months ended Sept. 30, missing Yahoo Finance’s estimate of -9 cents a share. That’s compared to a loss of $14.5 million, or -$7.56 a share, for the same period in 2019.Operating at a loss is expected of a biotech startup at this stage.“We all know drug development is an expensive endeavor,” Watanabe said in his email. “As a public company, we have more access to capital, and lower cost capital, than we would as a private company. That was the driving factor in the decision to take the company public.”

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