Arcutis Biotherapeutics has a lofty goal for 2025 — and it could help Arcutis stock continue the quadruple-digit run it blazed in 2024.
The Westlake, Calif.-based company launched in 2016 to focus on treatments for skin diseases. Over the course of two years, Arcutis won Food and Drug Administration for three drugs. This year, says Chief Executive Frank Watanabe, the company could add two more.
Arcutis stock lit up in 2024. Shares started the year trading under $4. It ended the year trading around 14, netting a gain worth north of 330%.
Watanabe points to what's driving the rally: Investors appreciate the laser focus on dermatology.
Arcutis Biotherapeutics' treatment for plaque psoriasis, alongside a competitor's drug, were the first new topical treatments for the condition in 26 years. The company's second drug treats seborrheic dermatitis, a chronic skin condition that causes scaly patches. It was the first new product for the disease in over 20 years.
"There has been a lot of consolidation in the dermatology space over the last 20 years or so," Watanabe told Investor's Business Daily. "And that consolidation led to, really, an atrophying of the R&D pipeline in dermatology. So, when we started this company it was really driven by recognition that people weren't developing new, especially topical, drugs."
Arcutis Biotherapeutics' Pipeline In A Product
Arcutis' three products are different formulations of the same active ingredient, roflumilast, which works by blocking an enzyme called PDE4. AstraZeneca sells a tablet formulation to prevent flare-ups in patients with chronic obstructive pulmonary disease, or COPD.
For decades, steroids have been a mainstay in treating dermatologic conditions. But they come with a host of side effects, including skin irritation and thinning, hair growth and systemic problems. This is particularly problematic for children, who are much more likely to have conditions like eczema.
Enter Arcutis Biotherapeutics' Zoryve.
The cream is approved for plaque psoriasis in people as young as 6 years old. The FDA approved a foam version for seborrheic dermatitis in December 2023. It's available for people age 9 and older. Arcutis added a lower concentration of its cream for eczema in people age 6 and up. It's now seeking approval for that product in children age 2 to 5.
Watanabe expects to win FDA approval for its fourth product — a new use for its foam in scalp and body psoriasis — in the middle of 2025. The younger eczema approval could follow later in the year.
Arcutis Biotherapeutics has also finished enrolling patients in a study of its alopecia areata treatment. This drug would block JAK1, a protein kinase. There are other JAK-blocking drugs on the market for alopecia, however. They include meds from Pfizer, Sun Pharmaceutical and Eli Lilly. Arcutis also plans to test blocking CD200, an immune-system protein, to treat eczema.
'Deep And Unique Insight'
Watanabe and his team knew the dermatology space well before launching Arcutis Biotherapeutics. As of September, the company employed eight dermatology clinicians and three dermatologists. Some of them still see patients every week.
"We have a deep and unique insight into what clinicians and patients are dealing with," he said.
He said Arcutis isn't competing with products like Dupixent, Regeneron Pharmaceuticals and Sanofi's massive blockbuster biologic for eczema and other inflammatory conditions. Dupixent is injected, while Arcutis' Zoryve is a topical treatment. Notably, it's applied once a day to treat eczema. That compares with twice-a-day administration for other topical eczema treatments.
"What we offer patients is different than anything else we've had," he added.
The enthusiasm is apparent in Arcutis' earnings. Arcutis expects $63 million in fourth-quarter sales, up 366% year over year. Sequentially, sales would rise 41%. Analysts call for a lower $59.4 million, according to FactSet.
Needham analyst Serge Belanger says Arcutis Biotherapeutics is set up for a "period of Zoryve growth acceleration to close out 2024 and begin 2025." He has a buy rating on Arcutis stock.
In fact, of the eight analysts following Arcutis stock, seven rate it a buy, according to FactSet. The eighth analyst has a hold rating.
Arcutis Stock Has High Ratings
That could help explain that major gap-up in Arcutis stock over the past year.
Shares broke out of a long consolidation with a buy point at 13.17 in late November. They made a sprint for the profit-taking zone in mid-December before pulling back slightly at the end of the year. As of midday on Feb. 5, Arcutis stock was just below the buy zone, which runs up to 13.82.
Arcutis stock is narrowly below its 50-day line but remains well above its 200-day moving average, according to MarketSurge. And the biotech stock has a strong IBD Digital Relative Strength Rating of 95. This means Arcutis Biotherapeutics shares rank in the leading 5% of all stocks based on 12-month performance.
The Composite Rating is lower at 78. This 1-99 measure scores a stock's fundamental and technical measures.
Institutional ownership has also climbed every quarter since December 2023 — a bullish sign.
