Arcutis Biotherapeutics, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Arcutis is a late-stage dermatology biopharmaceutical company with no products approved for sale and no product revenue. Its results reflect research and development and corporate operating costs.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | None from product sales | None from product sales |
| Research and development expense | $21.6 million | $25.2 million; down 14% |
| General and administrative expense | $14.5 million | $3.5 million; up 317% |
| Total operating expenses | $36.1 million | $28.7 million; up 26% |
| Net loss | $36.0 million | $28.0 million; loss increased 29% |
| Basic and diluted loss per share | $0.76 | $1.15 |
| Cash used in operating activities | $46.2 million | $21.0 million |
| Cash, cash equivalents and marketable securities | $444.9 million | $284.4 million at December 31, 2020 |
| Debt | None outstanding |
Including $1.5 million of restricted cash, cash, cash equivalents, restricted cash and marketable securities totaled $446.5 million at March 31, 2021. Total assets were $471.4 million; total liabilities were $20.4 million; stockholders’ equity was $451.0 million. No operating margin is meaningful because the company had no product revenue.
Cash rose substantially following the February 2021 public offering, which generated $207.5 million in net proceeds. Investing activities provided $62.0 million, mainly from maturities of marketable securities. The company reported an accumulated deficit of $238.0 million.
Material changes and notable items
- R&D expense declined $3.6 million, mainly because key roflumilast studies were completed and manufacturing costs fell; this was partly offset by increased topical JAK program, personnel and other costs.
- G&A expense increased $11.0 million. The increase included $5.3 million of incremental stock-based compensation related to modifications to the former CFO’s awards upon retirement, as well as higher headcount and professional services.
- Operating cash use more than doubled year over year, reflecting the larger net loss and working-capital movements, including higher prepaid clinical trial costs and payment timing.
- Weighted-average shares increased to 47.3 million from 24.3 million. The February offering issued 6.325 million shares, contributing to dilution.
Outlook, pipeline and risks
- Management expects operating losses and cash use to continue and increase as development advances. The company said current cash, cash equivalents and marketable securities were expected to fund planned operations well into 2023; it also states that additional capital will be needed over time. The financial statement note says resources were expected to cover at least 12 months from issuance.
- Roflumilast cream completed pivotal Phase 3 trials for plaque psoriasis; an NDA submission was expected in the second half of 2021. Phase 3 trials for atopic dermatitis had begun, with topline results expected in the second half of 2022.
- Roflumilast foam Phase 3 studies were planned for seborrheic dermatitis in Q2 or Q3 2021 and scalp psoriasis in the second half of 2021; topline results were expected in 2022.
- ARQ-252’s Phase 1/2b chronic hand eczema study did not meet its primary endpoint; further analyses were underway. A vitiligo Phase 2 study had started, with topline results expected in the second half of 2023. ARQ-255 remained in formulation and preclinical work.
- COVID-19 had caused limited screening, enrollment and monitoring disruption, but management did not then expect delays to previously disclosed clinical timelines. The company cautioned that the full impact remained uncertain.
- Key risks include clinical and regulatory failure or delay, reliance on single-source manufacturers and CROs, need for additional financing, commercial execution and reimbursement uncertainty, competition, and intellectual-property risks. No material litigation was reported.
- Subsequent events: on May 6, 2021, the company established an at-the-market program for up to $100 million of stock, subject to 3% sales-agent compensation. A February 2021 agreement made Cardinal Health the exclusive third-party logistics distribution agent for future commercial sales.
Important facts for investors to verify
- Whether the expected 2021 NDA submission for plaque psoriasis occurred, and the FDA’s review timeline and outcome.
- Progress, enrollment and results for the planned or ongoing atopic dermatitis, foam and ARQ-252 trials, including the implications of ARQ-252’s missed hand eczema endpoint.
- Quarterly cash burn and whether the stated runway assumptions remain achievable as clinical and commercialization spending grows.
- Whether the $100 million ATM has been used, and the resulting share issuance and dilution.
- Manufacturing readiness, supply continuity, and any additional financing or licensing commitments that could affect liquidity.