According to data from the World Health Organization (WHO), approximately 900 million individuals worldwide, and one in four in the U.S., suffer from skin diseases at any given moment. Late in 2023, Arcutis Biotherapeutics (NASDAQ:ARQT) successfully brought to market a treatment with several applications that have exceeded expectations due to pent-up demand. The stock has soared over 392% in the past six months, with more room for substantial growth. It is a compelling option for growth investors interested in a biotech stock with long-term upside potential.
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Arcutis Biotherapeutics is a commercial-stage medical dermatology company developing innovative solutions to enduring patient problems in dermatology through its unique and growing portfolio. This portfolio is powered by Arcutis’ dermatology development platform, which, combined with its dermatology expertise, enables the building of differentiated therapies targeting biologically validated points.
The company’s robust development pipeline includes multiple clinical programs that target various inflammatory dermatological conditions, including scalp and body psoriasis, atopic dermatitis, seborrheic dermatitis, and alopecia areata.
Arcutis’ Successful Launch
Arcutis recently introduced its lead candidate, Roflumilast (under the commercial name ZORYVE), with several FDA-approved applications. Roflumilast cream is approved in the U.S. and Canada for treating plaque psoriasis and is being developed for atopic dermatitis (with a target action date set for July 07, 2024). The Roflumilast foam is a formulation designed for easier application on hair-bearing areas. It has been approved in the U.S. for treating seborrheic dermatitis and is also in development for scalp and body psoriasis.
The company estimates the total addressable market for currently approved applications of Roflumilast is 15.2 million patients. This could potentially double if approved for atopic dermatitis. Overall, the global psoriasis treatment market is projected to grow at a CAGR of 8.8%, reaching $51.48 billion by 2030.
Analysis of Arcutis’ Recent Financial Results
Arcutis recently reported Q1 financials that exceeded top and bottom-line expectations. Net sales of $21.6M beat the consensus of $14.68M, growing 59% compared to Q4 2023. On a product basis, revenues for the quarter included $15.0 million for ZORYVE cream and $6.5 million for ZORYVE topical foam.
Despite the revenue increases, the net loss for this period was -$35.4 million, or -$0.32 per share. However, this is a notable improvement from the Q1 2023 net loss of -$80.1 million, or -$1.31 per share.
As of March 31, 2024, the company held $404.5 million in cash, cash equivalents, restricted cash, and marketable securities, a significant increase from $272.8 million at the end of 2023. This increase was due to the company raising approximately $172.5 million via a public offering, reinforcing its financial position to grow distribution for ZORYVE while continuing pipeline candidate development.
What Is the Price Target for ARQT Stock?
Analysts following the company have been mostly optimistic about the stock. For instance, Mizuho Securities analyst Uy Ear recently raised the price target from $17 to $18 while reiterating a Buy rating on the shares, noting Zoryve’s better-than-expected performance and raised sales forecasts.
Overall, Arcutis Biotherapeutics is rated a Moderate Buy based on the aggregate ratings and price targets assigned over the past three months by six Wall Street analysts. The average price target for ARQT stock is $17.20, which represents an upside of 83.76% from current levels.
The stock is highly volatile but has been trending upward recently, climbing over 207% year-to-date. It sits in the upper quartile of its 52-week price range of $1.76-$13.17 and continues to show strong price momentum, trading above its 20-day (8.97) and 50-day (8.97) moving averages. Despite the run-up in price, it trades at a relative discount with a P/S ratio of 7.42x compared to the Biotechnology industry average of 10.30x.
ARQT Trades at a Reasonable Valuation
Arcutis Biotherapeutics has done an excellent job of commercializing its lead treatment thus far, with more potential label expansion on the horizon. Sales have been robust, with plenty of room to run. The stock shows positive momentum but trades at a reasonable valuation, making it an attractive option for biotech investors looking for upside potential.
