Arcutis Biotherapeutics, Inc. Q4 FY2023 Earnings Call

Good day and welcome to the Arcutis Biotherapeutics' 2023 Fourth Quarter and Full Year Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Derek Cole, Arcutis Investor Relations. Please go ahead.

Thank you, Andrew. Good morning everyone and thank you for joining us today to review 2023 financial results and business updates. Slides for today are available on the Investors section of the Arcutis website. On the call today we have Frank Watanabe, President and CEO; Patrick Burnett, Chief Medical Officer; Todd Edwards, Chief Commercial Officer; and John Smither, Chief Financial Officer. I'd remind everyone that we will be making forward-looking statements during this call. These statements are subject to certain risks and uncertainties and our actual results may differ. We encourage you to review all of the company's filings with the Securities and Exchange Commission, including descriptions of our business and risk factors. With that, let me hand the call over to Frank.

Thanks Derek. I'm now on Slide 5 of the deck. We've had a lot of really exciting progress since we last spoke for our Q3 earnings call, and I couldn't be more pleased with the Arcutis team and our execution in the quarter. We're more excited about the foundation these results laid out for progress in 2024. We continue to see growing momentum in the ZORYVE cream launch in psoriasis as healthcare providers and their patients see how it addresses real needs in their treatment of psoriasis. To date, we have seen 165,000 prescriptions and over 10,700 unique prescribers since the launch, as our product delivers positive clinical experiences for HCPs and their patients. We continue to make significant progress on our gross-to-net each quarter, with improvement in Q4 over Q3 of a similar magnitude as seen in Q3 over Q2, taking us to an average in the mid-60s for the fourth quarter. The solid growth in prescriptions, coupled with continued gross-to-net improvements, drove strong revenue growth in Q4, both versus Q3 and year-over-year with fourth quarter net revenue of $13.5 million. Coming on top of our progress with ZORYVE cream in psoriasis, we also received approval for ZORYVE foam for seborrheic dermatitis in December and launched it in late January. I don't think I've ever seen comparable levels of excitement amongst patients and dermatologists as what we're hearing about ZORYVE foam. We also continue to execute against our clinical and regulatory milestones with a steady flow of successes this past quarter. Patrick will go into a little more detail in a minute. But during the quarter, the FDA accepted our supplemental NDA for atopic dermatitis down to the age of six and assigned a target date of July 7, 2024, potentially expanding our portfolio even further. We also released very exciting interim long-term data from our open-label study in AD that demonstrated that efficacy continues to improve with long-term use out to 52 weeks, along with favorable long-term safety and dependable disease control. We've seen robust, consistent, and predictable efficacy across all targeted indications, including psoriasis, seborrheic dermatitis, and atopic dermatitis in each of their respective pivotal trials. In addition, in October 2023, the U.S. Patent and Trademark Office awarded the company a new formulation patent that covers a means for inhibiting roflumilast crystal growth that is not limited to hexylene glycol. And in November 2023, the company was also awarded a new method of treatment patent covering a topical roflumilast formulation with an extended half-life. Both patents do not expire until 2037. In October, we completed a secondary offering that raised $102 million, putting us in a strong financial position to continue investing in the ongoing launches in plaque psoriasis and seborrheic dermatitis, as well as the potential atopic dermatitis launch later this year while continuing to develop our pipeline.

Thank you, Frank, and I'm very enthusiastic about our growing commercial portfolio, recent progress, and the tremendous opportunity I see ahead. Moving to Slide 8. The ZORYVE psoriasis launch is accelerating, and our execution strategies are showing signals that we are able to push the launch trajectory in psoriasis. These efforts also lay a solid foundation for sustained growth in seborrheic dermatitis and potential further growth in new indications upon approval. The new prescription volume is growing every quarter, and ZORYVE has over 165,000 total prescriptions launched to date. In the fourth quarter of 2023, total prescriptions were up 26% compared to Q3 2023 and over 290% compared to the fourth quarter of 2022. We are starting to see a preference for ZORYVE relative to the non-steroidal competitor, as evidenced by our steady gains in market share, with eight in 10 ZORYVE prescribers increasing their utilization of ZORYVE. The new pediatric label expansion down to six years of age incrementally expands our opportunity for growth and strengthens ZORYVE's safety and tolerability profile. Refills continue to be an important driver of long-term growth. The number of refills in the fourth quarter increased by around 39% versus the third quarter and now constitutes more than one in three prescriptions. This aligns with what we want and expect to see given the positive experience patients have with ZORYVE. I am now on Slide 9. There are multiple important dermatology conferences in January. After spending time with dermatologists, nurse practitioners, and physician assistants currently using ZORYVE cream, the feedback I received about the product is exceptional. These prescribers have reported that their patients are delighted by the results achieved with ZORYVE. The prescriber feedback is clear that there are distinct attributes of ZORYVE cream that make it attractive: the ability to be used anywhere, once-daily dosing, compelling efficacy data, favorable tolerability, safety, and appropriateness for any psoriasis patients. These attributes make ZORYVE cream an attractive treatment for patients with various needs, including those who are concerned about steroids, those who have been cycling through various topicals, or those who are exploring different treatments to find what works for them long-term or to manage flares. We know that psoriasis patients have different needs depending on where they are in their journey, and we believe ZORYVE cream can really be a solution for most of these patients. I'm now on Slide 10. The team has been focused on three pillars of commercial success for sustaining ZORYVE cream growth in psoriasis. Firstly, driving healthcare provider awareness and use. The prescriber base is growing steadily, with now over 10,700 unique prescribers since launch. Our experienced field sales team is focused on high-volume geographies. The field team continues to deliver broad efficacy messaging to move physicians along the adoption curve from initial trial in specific regions of the body to expanded use for patients who have psoriasis plaques across a large body surface area. Secondly, patient engagement and positive usage experience. Refill volume has increased to 38% of total volume, as patient awareness continues to improve. Finally, broad high-quality access in commercial and anticipated Medicare-Medicaid coverage creates the opportunity for more patients to experience ZORYVE. ZORYVE's differentiated pricing and access strategy continues to resonate with payers, with over 132 million commercial lives having access to ZORYVE cream. The Arcutis team successfully secured coverage for ZORYVE cream with all three large pharmacy benefit managers in the U.S. within 12 months of the launch. We anticipate further improvements in ZORYVE commercial coverage throughout 2024. Prior authorizations and step edits are typical for branded products in dermatology, and for ZORYVE, this process is now well understood by pharmacies and dermatology offices. We are seeing very encouraging trends in the percentage of cream prescriptions being covered by insurers, with a clear opportunity to expand on this by working with contracted pharmacy partners. From my experience, I am confident in our ability to continue to improve our gross-to-net. We saw very good improvements in gross-to-net during Q4 and expect that progress to continue in subsequent quarters, approaching our target gross-to-net in the 50s for the psoriasis indication by the second half of 2024. A very large opportunity to accelerate prescription growth is the expansion into Medicaid and Medicare, which we expect to begin as early as 2024. Roughly one-third of psoriasis patients and nearly half of those with seborrheic dermatitis and atopic dermatitis are on Medicare or Medicaid. So, this is a very important opportunity for us. ZORYVE's pricing falls below the CMS specialty threshold tier, unlike other branded topicals, so we are well-positioned to access these segments. Now, moving to Slide 11. We are seeing a tremendous early response to the launch of ZORYVE foam, the first drug approved for seborrheic dermatitis with a new mechanism of action in over two decades. As you have likely seen in IQVIA data, we have a strong start to the launch with a very positive launch trajectory. This is the first approved treatment unconstrained by severity, duration, and location. ZORYVE foam is different from anything else dermatologists or patients have seen for this disease. With treatment success in eight out of 10 patients in our pivotal trial, with over half of these patients achieving complete clearance in just eight weeks, significant impact on itch—one of the most bothersome symptoms of this disease—with improvements seen as early as 48 hours, and a simple, once-daily leave-in application that is much more convenient than any other option. Taken together, we believe ZORYVE foam can be the new standard of care for seborrheic dermatitis. I'm now on Slide 12. With our product profile offering rapid dramatic disease clearance and significant reduction in itch with a simple single treatment, healthcare providers and patients are very enthusiastic about the availability of ZORYVE foam. Eighty-one percent of surveyed prescribers view ZORYVE foam's profile as very compelling or compelling. They also recognize its applicability to any part of the body, the uniqueness of the vehicle, and the critical efficacy needs for this patient type of rapid response to itch and erythema, which helps reduce the number of treatments in the regimen and potentially leads to improved compliance. On Slide 13, as mentioned previously, we have secured access with the three national pharmacy benefit managers who recognize ZORYVE foam as a line extension under the ZORYVE cream contracts. This has translated into an increased volume of covered prescriptions early in the launch period, with covered prescriptions already nearing 50% of total volume. We continue to work with downstream health plans to hasten this accelerated coverage, which translates into a more rapid improvement in gross-to-net compared to what we saw with the cream launch. Finally, all key electronic medical records already have ZORYVE foam available for electronic prescribing. Moving to Slide 14. Building on the strength of our label and product profile, we are confident we have the ingredients in place for a successful launch of ZORYVE foam in seborrheic dermatitis. With relationships already built with dermatologists, a field team trained on our value proposition and ready to promote and educate, contracted pharmacies in place, familiarity with the co-pay card and associated processes, and access to pharmacy benefit managers that ensure patients can get the drug, I look forward to updating you further on our commercial progress throughout the year. We are also looking forward to upcoming launches in new indications. And so I will hand it over to Patrick to cover that.

Thanks Todd. I'm extremely proud of the team's performance in delivering on the promise of topical roflumilast in the dermatology community and hitting all our timelines regarding our regulatory milestones. On Slide 16, I'm going to cover these according to indication, starting with psoriasis. Here, we have received approval down to the age of six after we expanded the indication, and the opportunity in pediatrics to reach the two to five-year-olds will be the subject of a future FDA review. Next, for seborrheic dermatitis with our approval in December and the recent launch, physician excitement is palpable, and the feedback at Medical Congresses has been very positive. The profile here boasts unprecedented efficacy with a once-a-day foam in a market as large as psoriasis, with no innovation in decades, and no branded competition. Moving on to atopic dermatitis, as Frank mentioned, the FDA accepted our supplemental NDA for roflumilast cream as a potential treatment for atopic dermatitis for patients down to the age of six, and they assigned a PDUFA action date of July 7th of this year. Finally, we are also expecting to submit another sNDA with the FDA for ZORYVE foam in scalp and body psoriasis in the second half of 2024. On Slide 17, I want to highlight some recently released pooled data from our Phase III atopic dermatitis studies, INTEGUMENT-1 and 2. It's quite notable and highly unusual that over 90% of patients saw improvement in their symptoms in just four weeks, with nearly 70% experiencing at least a 50% improvement. Looking at the more demanding EASI-75 hurdle, almost 45% achieved this significant improvement at week four. Encouragingly, in the long-term study, which we have released but aren't showing here, two out of three patients achieved a 75% improvement at the end of 56 weeks. It's exciting to see such a high proportion of patients responding early, and then witnessing increased benefits over time with long-term treatment. In that long-term study, we also examined our ability to control the disease with a less frequent maintenance regimen, where patients switched to a twice-weekly treatment if they achieved complete clearance. We're very pleased with the response, and this regimen aligns nicely with current clinical practice, resonating strongly with dermatologists. We're excited about the roflumilast cream clinical profile for atopic dermatitis and the significant opportunity in this large and growing market. The dynamics here for atopic dermatitis are favorable towards rapid adoption, sharing some of the positive tailwinds we experienced with seborrheic dermatitis. In pediatric patients, especially in atopic dermatitis, the propensity to adopt non-steroidals is higher than in the psoriasis patient population, largely driven by parents' avoidance of steroids. So, moving on to Slide 18, I want to highlight the itch response across our product portfolio. Here, we are showing WIN-NRS (worst-itch numeric rating scale) results from our Phase III studies. These are pooled results for psoriasis and seborrheic dermatitis, and the atopic dermatitis INTEGUMENT studies, and include individual study results for STRATUM and ARRECTOR. Itch is a primary symptom for these conditions and a key driver impacting our patients' quality of life. Both ZORYVE cream and foam at 0.3%, as well as topical roflumilast 0.15% cream for atopic dermatitis, provided consistent and rapid improvements in itch across psoriasis, seborrheic dermatitis, and atopic dermatitis, respectively, with improvements as early as 24 to 48 hours compared with vehicle-treated patients. This includes scalp psoriasis in the ARRECTOR study, which is particularly difficult to control, seen in just four weeks of treatment in the INTEGUMENT studies. Across indications, we have a significant proportion of patients achieving an itch-free state. And with that, I'll pass it over to John.

Operator, can you hear me? This is Frank.

Yes, I can hear you now.

While we're working on John, I'll take over for him for just a minute. So, if you're listening, I am on Slide 20. We achieved $29.2 million in net product revenue for ZORYVE for the full year 2023, with $13.5 million of that in Q4, reflecting a 67% growth from Q3 to Q4, which comes on top of the approximately 70% sequential growth we saw from Q2 to Q3. This was driven by substantial gross-to-net percentage improvement down to the mid-60s and the team's success in pulling through covered prescriptions. We also saw healthy prescription growth in the quarter. So, looking forward to 2024, we expect continued prescription growth and gross-to-net improvements for ZORYVE cream in psoriasis, as well as continued prescription momentum and gross-to-net improvements for ZORYVE foam. However, there will likely be a temporary erosion in psoriasis gross demand improvements in Q1 2024 versus Q4 2023 due to the typical deductible resets and patients changing their coverage that always occurs at the beginning of the year. Turning to Slide 21, you can see the strong performance in the fourth quarter with net product revenues for the quarter of $13.5 million, up over $10 million from Q4 of 2022. R&D expenses for the fourth quarter were $23.8 million, which is down significantly from Q4 2022 due to the continued decrease of development costs on topical roflumilast programs. Recall that our R&D expense includes research, operations, and medical affairs spending. On Slide 22, looking at the full year, total revenues amount to $60 million, with $29.2 million in net product revenues and $30 million in other revenues related to the upfront payment in connection with the Huadong collaboration and licensing agreement we received in Q3. R&D expenses for the full year were $111 million, which is down approximately $70 million due to the one-time $30 million fee associated with the Ducentis acquisition in 2022, the winding down of our major roflumilast Phase III studies, and lower pre-commercial production. We expect full year 2024 R&D expenses to decline meaningfully versus full year 2023 as we continue completing the few remaining Phase III studies, continue with regulatory filings, reduce our prelaunch production costs, and maintain our medical affairs activities to support the launches. SG&A expenses for the year were $185 million, primarily due to higher commercialization expenses year-over-year, driven by continued investments in ZORYVE cream and preparing for the ongoing launch of ZORYVE foam and the potential upcoming launch of atopic dermatitis, should it be approved. As we head into 2024, we expect SG&A to increase over 2023, aligning with the investment behind our seborrheic dermatitis launch and preparations for the atopic dermatitis launch, including our previously announced incremental expansion in our sales force. We will continue to focus on appropriate investments to support our commercial activities. Launching drugs properly requires substantial investments in staff and promotional activities, and having multiple launches in a short time significantly magnifies these resource demands. It's important to note that we have made concerted efforts to adjust our operating expenses to reflect our transition from being exclusively a pre-commercial company to a commercial enterprise, ensuring we invest appropriately in current launches and potential future launches if approved. We don't want to be in a position of under-investing and harming the trajectory for the ongoing launches in psoriasis and seborrheic dermatitis or future launches if approved. Earlier in the year, we undertook a reorganization and reprioritization of non-commercial efforts to align with our commercial execution focus in 2024, which will result in approximately $50 million of reduced expenses over the next two years compared to previous internal forecasts. You can expect us to continue to focus on cash burn as we seek opportunities to maximize our operating expenses while making continued progress on maximizing the ZORYVE opportunity across multiple unique indications. A top priority for our team is being good stewards of the investor capital entrusted to us, and we believe we have demonstrated an excellent track record thus far. We have made appropriate levels of investment that established our pipeline, achieved nine positive Phase III clinical trials, and now two FDA approvals, with a third potentially coming mid-year, while launching two products to date and if approved, another in the second half of 2024 and a fourth in 2025. On Slide 23, our final slide, we had cash and marketable securities of $272.8 million as of December 31st. As I mentioned on a previous slide, our current capital enables us to continue to invest appropriately in commercial initiatives. We also remain confident about concluding an out-licensing deal in Japan to bring in additional non-dilutive capital, which would further extend our runway and largely address the capital requirement covenant with SLR. Additionally, we are actively pursuing a primary care partnership and are seeing early interest from our efforts there. So, that's it for our comments today. If I step back for a minute, we founded Arcutis with a vision of bringing meaningful innovation to the medical dermatology space, especially in the topical market. With our second launch in less than 18 months, I'm proud that our team is making that vision a reality and helping a growing number of people suffering from dermatologic conditions. As we continue to execute on the psoriasis and seborrheic dermatitis launches and hopefully adding an atopic dermatitis launch later this year, we look forward to helping millions of people, allowing us to create additional shareholder value. We are confident that 2024 will be a transformational year for Arcutis. And with that, we will open it up for Q&A.

Thank you. Our first question comes from Tyler Van Buren with TD Cowen. Your line is now open.

All right. I think that's me. Good morning, guys. Thanks for taking the question. So, the seborrheic dermatitis prescriptions for ZORYVE foam have risen significantly very early in the launch and have reached levels that ZORYVE cream and Botama took significantly longer to reach. I understand that having coverage from day one is a huge benefit, and there's not a direct competitor, but what else would you attribute the success to early on? And do you think ZORYVE foam could ultimately end up being significantly larger than the cream?

Yeah, I think maybe, Todd, if you could take that, and then Patrick, see if you have any additional comments after Todd's comment from a commercial standpoint.

Yeah, thank you, Frank. As mentioned, we're very pleased with the uptake of ZORYVE foam. I'd say it's too early to comment on how much of that is coming from a warehouse of patients. One big driver of this initial uptake is that there’s a ready pool of patients who have been waiting for ZORYVE foam. Patients have been looking for a more convenient, more effective treatment. We expect continued strong growth for the product. However, I caution that a linear progression based on the current rates is probably overly optimistic. But I believe there is a long runway for ZORYVE foam, and we're looking forward to continuing to grow this product.

Yeah, just to add to that, the context is important. Seborrheic dermatitis patients can be a challenging population in a dermatology practice, as you've often seen them for many years. There is a very long runway for patients before they receive a diagnosis, and they’ve typically tried everything available. Having gone without innovation for 10 to 20 years, this is the first new mechanism of action for a prescription topical in that period. There is a lot of interest in having a new therapy, which can translate into a level of frustration for dermatologists who have lacked effective options to provide. There has been a high level of anticipation for this drug due to these unmet needs.

Thank you. And our next question comes from the line of Uy Ear with Mizuho.

Hey, guys. Yeah, thanks for taking my question. So, just on the launch, the seborrheic dermatitis launch, could you explain the warehousing effect you mentioned earlier? Are you suggesting primarily that these are patients who have limited options? What kind of patients are you seeing generally? Are they more on the severe side or the mild side? And could you provide some of the demographics if you have that data?

You know, Uy, I think that the point we're trying to make is that it has been over 20 years since there was a truly new drug for seborrheic dermatitis. There is a very large pool of patients, as Todd or Patrick mentioned earlier, who have been eagerly awaiting ZORYVE foam's availability. Some of the very early demand likely stems from these patients who have been cycling through treatments for years, and now that the doctor has a new option, they are likely being prescribed ZORYVE foam. We don't want folks to think that this pool will exist forever with a constant stream of very large patients. That being said, our research reveals that dermatologists see about 75 patients with seborrheic dermatitis per month. It's a large population that should sustain long-term growth for us. Regarding demographics, it's too early for us to have that data. We'll look into adoption trends and where doctors are using it as we progress in the launch, and we will share that data in the future.

Okay. Can you help us understand the current situation regarding the prescriptions that were waiting at pharmacies? Are you still seeing a significant number of prescriptions that have not been filled or shipped to consumers? Or are the prescriptions readily being shipped now? I'm wondering if there is a large discrepancy. Also, in regard to your ZORYVE Direct program, are there any differences between the cream and the foam in terms of getting it processed?

Todd, can you take those?

Absolutely. Prior to the commercial launch, we had a number of prescriptions that were sitting at pharmacies, but those prescriptions have all been filled and distributed to patients. So we don't see any warehouse of prescriptions sitting at pharmacies currently. Regarding our ZORYVE Direct program, we're utilizing the same process for both ZORYVE cream and ZORYVE foam. That creates a great efficiency for dermatology offices, as we have two unique products for two distinct patient populations but one process for fulfilling those prescriptions. This is a distinct advantage.

Thank you. And our next question comes from the line of Chris Shibutani with Goldman Sachs.

Hi. Thanks for taking our question. This is Steven on for Chris. One, regarding the seborrheic dermatitis launch, should we expect any inventory or channel stocking effects in the first quarter? And, as for the commercial team, do you believe you currently have the right size for the psoriasis and seborrheic dermatitis opportunities? Should we anticipate any changes ahead of the atopic dermatitis launch?

Thank you. John, would you like to take the channel question?

With respect to Q1, no, we're not anticipating any channel buildup.

In anticipation of the potential atopic dermatitis launch, we will expand our field sales organization. Today, roughly, we have around 100 field sales individuals within that team, and we will likely expand that by approximately another 50 sales representatives to ensure that we have the necessary breadth and depth of prescribing across the two products that are approved today, and potentially the atopic dermatitis product.

Thank you. And our next question comes from the line of Seamus Fernandez with Guggenheim Securities.

Hi, this is Colleen on for Seamus. Thanks for taking our question and congrats on the quarter. We're seeing around 6,000 prescriptions per week for ZORYVE over the past few weeks. As a conservative estimate, if we analyze those 6,000 prescriptions for 48 weeks and assume a 60% growth, by our math, that gives us a little under $100 million for ZORYVE sales. Are we thinking about this in the right way as a conservative minimum for 2024, which also doesn't take the atopic dermatitis launch into account? Or are there other factors we should be considering for the year?

I will let John answer that one.

Thanks, Frank. Specifically, we’re not providing revenue guidance, and the 6,000 number you quoted is for both cream and foam. As Todd mentioned, we're seeing early signs of strong seborrheic dermatitis uptake and improvement around psoriasis. We're in the early part of the launch, and while we are quite enthusiastic about how the year will turn out, we’re not giving specific revenue guidance. Concerning gross-to-net, just as a reminder, we exited 2023 in the mid-60s, and there is a reset in Q1 due to deductible resets and changes in medical plans. You'll see that rise for psoriasis and seborrheic dermatitis, but we're confident that gross-to-net will continue to improve toward the end of 2024.

Thank you. Our next question comes from the line of Serge Belanger with Needham.

Hi. Good morning. Thanks for taking my questions, and congrats on the progress. I have a question for Todd related to gross-to-net. You reiterated your target to be in the mid-50s by the end of the year for ZORYVE cream in psoriasis. How should we think about the other products, especially ZORYVE foam? What will happen to overall growth assumptions once the atopic dermatitis indication launches and the managed care component also expands next month?

As mentioned earlier by John, we anticipate reaching the gross-to-net target of 50s in the second half of the year for the psoriasis indication. It's too early to comment on the seborrheic dermatitis gross-to-net. One signal is that the coverage prescriptions for seborrheic dermatitis are approaching 50% of the total volume now. For atopic dermatitis, we expect it to be treated as a line extension as ZORYVE foam was, which will support rapid uptake of covered prescriptions upon launch.

Thank you. Our next question comes from the line of Vikram Purohit with Morgan Stanley.

Hi, good morning. Thank you for taking my questions. I have two: one on seborrheic dermatitis and one on atopic dermatitis. For seborrheic dermatitis, could you remind us how many cans of product you expect patients on the foam to use annually? Are there any observations you're picking up from this launch on where patients are using the product, how much they're using, and whether they're using it as monotherapy or as a combination agent? For atopic dermatitis, where do you see ZORYVE cream fitting in, if approved, compared to other topical brands that may be on the market by the time it launches?

Sure. Todd, can you take the first question?

For the anticipated number of units, we're expecting that each patient will use one to two cans of SebDerm foam annually. As for the areas of the body patients are using the product, we will need more time to gather definitive data on that, as our label allows for use on any part of the body or scalp. While we anticipate feedback from dermatologists regarding the convenience of the product being a monotherapy, it’s still too early to determine specific usage patterns.

Thank you. And our next question comes from the line of Sean Kim with Jones Trading.

Yeah. Hi. Congratulations, and thank you for taking my questions. I have a question on the Medicaid and Medicare expansion opportunity. What are some of the remaining steps to realize the expansion opportunity in managed care? Regarding patient awareness, you mentioned about 17% among patients being aware of your branded products. Has the demand for your products been more doctor-recommended or patient-requested? What are your expectations for increased awareness going forward?

Todd, I think those both are for you.

Absolutely. Regarding Medicaid, we are currently in negotiations with several Part D Medicare plans. We anticipate that Medicare coverage for some of those Part D plans will be initiated in the second half of 2024. For Medicaid, we expect a similar timeframe, as we actively engage with a number of state Medicaid plans, which we anticipate will come online near the middle to the second half of the year. Regarding patient awareness, currently, it’s primarily driven by healthcare providers, given the newness of the product. However, as we create more direct engagement opportunities with patients, we envision that the demand will further shift towards patient requests for our products as awareness grows.

Sean, just to clarify for you and other analysts, neither Medicare nor Medicaid is a binary coverage decision. For Medicare, most patients are covered by Part D plans managed by various pharmacy benefit managers or insurance companies. We'll get coverage with individual Medicare providers, which will not come all at once. For Medicaid, that is administered as a state program with block grants from the federal government. Therefore, we have to negotiate with individual states, leading to a piecemeal coverage process, which is even more fragmented due to the number of states involved.

Thank you. There are no further questions. Thank you for joining our Q&A today. This does conclude the call, and you may now disconnect.