Arcutis Biotherapeutics, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Arcutis is a late-stage biopharmaceutical company with no approved products and no product-sales revenue; reported results primarily reflect research and development and corporate costs.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| Research and development expense | $30.8 million | $30.0 million | $52.4 million | $55.2 million |
| General and administrative expense | $11.3 million | $5.6 million | $25.8 million | $9.1 million |
| Net loss | $42.0 million | $35.4 million | $78.1 million | $63.4 million |
| Basic and diluted loss per share | $0.84 | $0.94 | $1.60 | $2.05 |
| Operating cash used | Not separately stated | Not separately stated | $82.0 million | $46.8 million |
Profit margins are not meaningful because the company had no product revenue and incurred operating losses. Q2 total operating expenses rose 18% year over year; six-month expenses rose 22%. G&A growth was a major contributor, while six-month R&D expense declined 5%.
At June 30, 2021, cash and cash equivalents were $89.1 million, restricted cash was $1.5 million, and marketable securities were $320.2 million. The combined total was $410.9 million, of which $409.4 million was cash, cash equivalents, and marketable securities excluding restricted cash. Total assets were $432.9 million; total liabilities were $18.4 million; stockholders’ equity was $414.5 million. The company had no debt outstanding.
Six-month investing cash outflow was $102.9 million, mainly reflecting purchases of marketable securities, net of maturities. Financing cash inflow was $209.0 million, primarily from the February 2021 public offering, which generated $207.5 million net. Cash, cash equivalents, and restricted cash increased $24.0 million during the period. An ATM program permits up to $100 million of stock sales; no shares had been sold under it by June 30.
Material changes versus prior periods
- Q2 net loss increased by $6.6 million year over year; six-month net loss increased by $14.6 million.
- Six-month R&D expense declined $2.8 million, largely as spending on completed roflumilast studies decreased, partly offset by higher topical JAK-program, personnel, and other costs.
- Six-month G&A expense increased $16.7 million. The increase included $5.3 million of incremental stock-based compensation related to modifications of the former CFO’s awards upon retirement, as well as higher headcount and professional services.
- Stock-based compensation was $12.8 million for the first half of 2021, versus $3.0 million a year earlier.
- Cash, cash equivalents, restricted cash, and marketable securities rose from $286.0 million at December 31, 2020 to $410.9 million at June 30, 2021, primarily following the February equity offering.
Outlook, pipeline, and risks
- Management expected to submit an NDA for roflumilast cream for plaque psoriasis in late Q3 or early Q4 2021. It expected topline Phase 3 atopic dermatitis data in the second half of 2022.
- Roflumilast foam Phase 3 topline data for seborrheic dermatitis were expected in Q2 or Q3 2022; the company planned to start a pivotal scalp-psoriasis Phase 3 trial in Q3 2021, with topline data expected in the second half of 2022.
- ARQ-252’s Phase 1/2b chronic hand eczema study missed its primary endpoint. The company reported no safety or tolerability issues, attributed the result in part to inadequate local skin delivery, and was working on a reformulation. It terminated the ARQ-252 vitiligo proof-of-concept study. ARQ-255 formulation and preclinical work for alopecia areata continued.
- Management said existing cash, cash equivalents, and marketable securities were expected to fund planned operations “well into 2023”; the financial-statement note separately states resources were sufficient for at least 12 months from issuance. The company expects continuing losses and will require additional capital; future financing may dilute shareholders or impose debt or collaboration restrictions.
- COVID-19 had caused limited trial disruptions in screening, enrollment, and monitoring, but management did not then expect delays to previously disclosed clinical timelines. It cautioned that further impact remained uncertain.
- Key risks include clinical and regulatory uncertainty, subjective trial endpoints, reliance on CROs and single-source manufacturers, reimbursement and market-acceptance uncertainty, intellectual-property challenges, and the need to build commercial capabilities. The company reported no material litigation and no off-balance-sheet arrangements.
Important facts for investors to verify
- Whether the planned roflumilast cream NDA submission and the stated trial milestones occurred on schedule, and the resulting FDA review status.
- Final clinical outcomes for roflumilast cream and foam programs, and whether trial endpoints, safety, or enrollment issues alter the outlook.
- Cash burn and the assumptions underlying the “well into 2023” runway estimate, including subsequent financing or ATM share sales.
- Future R&D and commercialization spending, including potential effects of the CFO-award modification and ongoing stock-based compensation.
- Manufacturing readiness and supply arrangements, particularly the disclosed lack of a finalized commercial drug-product manufacturing agreement at the time of filing.