What changed in this filing

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Item 1A. Risk Factors

2021-11-04 compared with 2021-08-05 · 33 added, 32 removed, 1087 unchanged (6% of the section changed)

14 unchanged sentences

We have not yet demonstrated our ability to successfully obtain regulatory approvals, manufacture a drug on a commercial scale, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful commercialization.

Our net loss for the six months ended June 30, 2021 was approximately $78.1 million.

As of June 30, 2021, we had an accumulated deficit of $280.0 million.

Our net loss for the nine months ended September 30, 2021 was approximately $135.0 million.

As of September 30, 2021, we had an accumulated deficit of $337.0 million.

We expect to continue to incur losses for the foreseeable future, and we anticipate these losses will increase as we continue to develop our product candidates, conduct clinical trials, and pursue research and development activities.

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Because the outcome of any preclinical study or clinical trial is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our lead product candidates and any future product candidates.

As of June 30, 2021, we had capital resources consisting of cash, cash equivalents, and marketable securities of $409.4 million.

As of September 30, 2021, we had capital resources consisting of cash, cash equivalents, and marketable securities of $367.3 million.

Based on our planned operations, we believe that our existing cash, cash equivalents, and marketable securities will be sufficient to fund our operations well into 2023.

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Our future capital requirements depend on many factors, including, but not limited to:

• the scope, progress, results, and costs of researching and developing our lead product candidates or any future product candidates, and conducting preclinical studies and clinical trials, in particular our planned or ongoing clinical studies of roflumilast cream in plaque psoriasis and atopic dermatitis, roflumilast foam in seborrheic dermatitis and scalp psoriasis, ARQ-252 in hand eczema and vitiligo, and our formulation and preclinical efforts for ARQ-255 in alopecia areata;

• the scope, progress, results, and costs of researching and developing our lead product candidates or any future product candidates, and conducting preclinical studies and clinical trials, in particular our planned or ongoing clinical studies of roflumilast cream in plaque psoriasis and atopic dermatitis, roflumilast foam in seborrheic dermatitis and scalp and body psoriasis, ARQ-252 in chronic hand eczema and vitiligo, and our formulation and preclinical efforts for ARQ-255 in alopecia areata;

• suspensions or delays in the enrollment, issues with data collection, or changes to the number of patients we decide to enroll in our ongoing clinical trials as a result of the COVID-19 pandemic;

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• the willingness of patients to pay out-of-pocket for our product candidates, if approved, in the absence of health insurance coverage or sufficient reimbursement;

• our dependency on Contract Research Organizations (CROs) and third-party manufacturers to supply or manufacture our product candidates;

• our dependency on CROs and third-party manufacturers to supply or manufacture our product candidates;

• our ability to establish an effective sales, marketing, and distribution infrastructure in a timely manner;

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We currently have no products that are approved for commercial sale.

Our current portfolio includes our lead product candidate roflumilast cream, a potent PDE4 inhibitor topical cream for the treatment of plaque psoriasis and atopic dermatitis, and our additional product candidates roflumilast foam, a topical foam formulation of roflumilast for the treatment of scalp psoriasis and seborrheic dermatitis, ARQ-252, a potent and highly selective topical JAK1 inhibitor for the treatment of chronic hand eczema and vitiligo, and ARQ-255, a potential topical treatment for alopecia areata.

Our current portfolio includes our lead product candidate roflumilast cream, a potent PDE4 inhibitor topical cream for the treatment of plaque psoriasis and atopic dermatitis, and our additional product candidates roflumilast foam, a topical foam formulation of roflumilast for the treatment of scalp and body psoriasis and seborrheic dermatitis, ARQ-252, a potent and highly selective topical JAK1 inhibitor for the treatment of chronic hand eczema and vitiligo, and ARQ-255, a potential topical treatment for alopecia areata.

We currently do not have drug discovery efforts, and we have no intention to develop these.

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We currently have no products approved for sale;

we are currently preparing regulatory submissions for our lead product candidate, topical roflumilast cream, and our other product candidates remain in clinical development.

in September we submitted our first NDA to the FDA for our lead product candidate, topical roflumilast cream, and our other product candidates remain in clinical development.

Significant risk remains and we cannot provide assurance that they will obtain regulatory approval for commercialization as expected, or at all.

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Certain of the endpoints in our planned clinical trials rely on a subjective assessment of the effect of the product candidate in the subject by either the physician or patient, and may prove difficult to meet in patients with more severe disease, which exposes us to a variety of risks for the successful completion of our clinical trials.

Certain of our primary and secondary endpoints in our clinical trials, including our recently completed Phase 3 clinical trials of roflumilast cream in plaque psoriasis, and our previous and planned clinical trials in atopic dermatitis, vitiligo, chronic hand eczema, scalp psoriasis and seborrheic dermatitis involve subjective assessments by physician and patients, which can increase the uncertainty of clinical trial outcomes.

Certain of our primary and secondary endpoints in our clinical trials, including our Phase 3 clinical trials of roflumilast cream in plaque psoriasis, and our previous and planned clinical trials in atopic dermatitis, vitiligo, chronic hand eczema, scalp and body psoriasis and seborrheic dermatitis involve subjective assessments by physician and patients, which can increase the uncertainty of clinical trial outcomes.

For example, one of the secondary endpoints requires patients to report pruritus (itching) as measured by the WI-NRS and complete or deliver patient or caregiver reported outcomes over the course of our clinical trials.

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Further, different results may be achieved depending upon the characteristics of the population enrolled in our studies and which analysis population is used to analyze results.

For example, the primary endpoint in our Phase 3 clinical trials of roflumilast cream in plaque psoriasis and atopic dermatitis as well as our Phase 3 clinical trials of roflumilast foam in seborrheic dermatitis and scalp psoriasis is based on the percentage of patients achieving a score of “clear” or “almost clear” plus at least a 2-grade improvement from baseline on the 5 point IGA scale, referred to as IGA Success.

For example, the primary endpoint in our Phase 3 clinical trials of roflumilast cream in plaque psoriasis and atopic dermatitis as well as our Phase 3 clinical trials of roflumilast foam in seborrheic dermatitis and scalp and body psoriasis is based on the percentage of patients achieving a score of “clear” or “almost clear” plus at least a 2-grade improvement from baseline on the 5 point IGA scale, referred to as IGA Success.

Success in our clinical trials with these or similar endpoints, requires the enrollment of patients with conditions that are severe enough to facilitate a 2-grade improvement in the IGA scale, but not so severe that they cannot achieve a “clear” or “almost clear” in IGA score in light of the severity of their disease.

33 unchanged sentences

As a company, we have never obtained marketing approval for any product candidate and we may be unable to successfully do so in a timely manner, if at all, for any of our product candidates.

Conducting Phase 3 clinical trials and preparing, and obtaining marketing approval for, a product candidate is a complicated process.

Obtaining marketing approval for a product candidate is a complicated process.

Although members of our management team have participated in pivotal trials and obtained marketing approvals for product candidates in the past while employed at other companies, we as a company have limited experience doing so.

As a result, these activities may require more time and cost more than we anticipate, and we may be unable to successfully complete them for any of our product candidates.

To date, we have completed two Phase 3 studies and three Phase 2 studies in plaque psoriasis with roflumilast cream, a Phase 2 study in atopic dermatitis with roflumilast cream, and two Phase 2 studies in seborrheic dermatitis and scalp psoriasis with roflumilast foam.

We have also recently initiated pivotal Phase 3 clinical trials of roflumilast cream for the treatment of atopic dermatitis and of roflumilast foam in seborrheic dermatitis.

As a result, the approval process and related activities may require more time and cost more than we anticipate, and we may be unable to successfully complete them for any of our product candidates.

To date, we have submitted an NDA and have completed two Phase 3 studies and three Phase 2 studies in plaque psoriasis with roflumilast cream, a Phase 2 study in atopic dermatitis with roflumilast cream, and two Phase 2 studies in seborrheic dermatitis and scalp and body psoriasis with roflumilast foam.

We have also recently initiated pivotal Phase 3 clinical trials of roflumilast cream for the treatment of atopic dermatitis and of roflumilast foam in seborrheic dermatitis and scalp and body psoriasis.

Failure to successfully complete, or delays in, our pivotal trials or related regulatory submissions would prevent us from or delay us in obtaining regulatory approval for our product candidates.

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Such competition could lead to reduced market share for our product candidates and contribute to downward pressure on the pricing of our product candidates, which could harm our business, financial condition, operating results, and prospects.

We are aware of several companies that are working to develop drugs that would compete against our product candidates for the treatment of psoriasis, atopic dermatitis, hand eczema, vitiligo, and alopecia areata.

We are aware of several companies that are working to develop drugs that would compete against our product candidates for the treatment of psoriasis, atopic dermatitis, chronic hand eczema, vitiligo, and alopecia areata.

For psoriasis, our primary competitors include injected biologic therapies such as Humira, marketed by AbbVie Inc.

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In addition, there are several prescription product candidates under development that could potentially be used to treat psoriasis and compete with roflumilast cream, including topical tapinarof, under development by Dermavant Sciences, Inc., deucravacitinib, an oral Tyk2 inhibitor under development by BMS, Inc., and PF-06700841, an oral Tyk2/JAK1 inhibitor under development by Pfizer, Inc.

For atopic dermatitis, our primary competitors include topical therapies such as Eucrisa, marketed by Pfizer Inc., and generic and branded versions of low to mid-potency steroids such as hydrocortisone and betamethasone;

For atopic dermatitis, our primary competitors include topical therapies such as Eucrisa, marketed by Pfizer Inc., Opzelura, marketed by Incyte Corporation, and generic and branded versions of low to mid-potency steroids such as hydrocortisone and betamethasone;

and the injected biologic therapy Dupixent, marketed by Regeneron Pharmaceuticals, Inc.

In addition, there are several prescription product candidates under development that could potentially be used to treat atopic dermatitis and compete with roflumilast cream, including but not limited to:

topical tapinarof and topical cerdulatinib, both under development by Dermavant Sciences, Inc., topical ruxolitinib, under development by Incyte Corporation, topical delgocitinib, under development by LEO Pharma A/S and Japan Tobacco, Inc., topical PF-06700841, a Tyk2/JAK1 inhibitor under development by Pfizer, Inc., topical difamilast ointment, under development by Medimetriks/Otsuka Pharma, oral PF-04965842, under development by Pfizer Inc., oral upatacitinib, under development by AbbVie, Inc., and injectable lebrikizumab, under development by Eli Lilly and Company.

For hand eczema, our primary competitors include topical therapies such as branded and generic versions of clobetasol, such as Clobex, and generic versions of betamethasone dipropionate.

The only other prescription product candidate we are aware of under development for the treatment of hand eczema that would compete with ARQ-252 is delgocitinib, which recently showed proof of concept in a Phase 2a trial and has been approved in a different formulation in Japan (Corectim).

topical tapinarof and topical cerdulatinib, both under development by Dermavant Sciences, Inc., topical delgocitinib, under development by LEO Pharma A/S and Japan Tobacco, Inc., topical PF-06700841, a Tyk2/JAK1 inhibitor under development by Pfizer, Inc., topical difamilast ointment, under development by Medimetriks/Otsuka Pharma, oral PF-04965842, under development by Pfizer Inc., oral upatacitinib, under development by AbbVie, Inc., and injectable lebrikizumab, under development by Eli Lilly and Company.

For chronic hand eczema, our primary competitors include topical therapies such as branded and generic versions of clobetasol, such as Clobex, and generic versions of betamethasone dipropionate.

The only other prescription product candidate we are aware of under development for the treatment of chronic hand eczema that would compete with ARQ-252 is delgocitinib, which recently showed proof of concept in a Phase 2a trial and has been approved in a different formulation in Japan (Corectim).

For vitiligo, our primary competitors include topical therapies such as generic and branded versions of calcineurin inhibitors, including Elidel, marketed by Bausch Health;

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We will need to increase the size of our organization, and we may experience difficulties in executing our growth strategy, and managing any growth.

As of June 30, 2021, we had 108 full-time employees.

As of September 30, 2021, we had 143 full-time employees.

We will need to continue to expand our managerial, clinical, commercial, operational, financial, and other resources in order to manage our operations and clinical trials, continue our development activities, and commercialize our lead product candidates or any future product candidates.

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Some of these materials are available from only one source.

Although we have engaged in a commercial supply agreement and scale-up activities with our Drug Substance contract manufacturing organization (CMO), we have not yet finalized a Drug Product manufacturing agreement for the commercial supply of our product candidates.

We intend to enter into such agreements prior to commercial launch of any of our product candidates, we may be unable to enter into any such agreement or do so on commercially reasonable terms, which could have a material adverse impact upon our business.

Moreover, if there is a disruption to one or more of our third-party suppliers’ relevant operations, or if we are unable to enter into arrangements for the commercial manufacture of our product candidates, we will have no other means of producing our lead product candidates until the affected facilities are restored or alternative manufacturing facilities or sources of supply are procured.

If there is a disruption to one or more of our third-party suppliers’ relevant operations, we will have no other means of producing our lead product candidates until the affected facilities are restored or alternative manufacturing facilities or sources of supply are procured.

Our ability to progress our preclinical and clinical programs could be materially and adversely impacted if any of the third-party suppliers upon which we rely were to experience a significant business challenge, disruption or failure due to issues such as financial difficulties or bankruptcy, issues relating to other customers such as regulatory or quality compliance issues, or other financial, legal, regulatory, or reputational issues.

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Neither we nor our third-party manufacturers may successfully complete any required increase to existing manufacturing capacity in a timely manner, or at all.

If either we or our manufacturers are unable to purchase the raw materials necessary for the manufacture of our product candidates on acceptable terms, at sufficient quality levels, or in adequate quantities, if at all, the commercial launch of our lead product candidates or any future product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of such product candidates, if approved.

of our lead product candidates or any future product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of such product candidates, if approved.

The loss of these suppliers or their failure to comply with applicable regulatory requirements or to provide us with sufficient quantities at acceptable quality levels or prices, or at all, would materially and adversely affect our business.

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Our issued U.S.

patents relating to roflumilast cream and roflumilast foam with claims directed to, among other things, formulating roflumilast in combination with hexylene glycol are currently projected to expire on June 7, 2037 and the issued U.S.

patents relating to roflumilast cream and roflumilast foam with claims directed to, among other things, formulating roflumilast in combination with hexylene glycol and pharmacokinetic properties of topical roflumilast for improving delivery and extending half-life are currently projected to expire on June 7, 2037 and August 25, 2037, and the issued U.S.

patents which we have exclusive rights to from Hengrui as a result of the exercise of our exclusive option with Hengrui in December 2019 for the amount of $1.5 million cash, related to the composition of matter of the active ingredient in ARQ-252 and ARQ-255 (or bisulfate or crystal forms thereof) are currently projected to expire between January 21, 2033 and October 15, 2035 unless a PTE is granted.

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Our issued U.S.

patents, with claims directed to roflumilast formulations with reduced crystal growth, encompassing roflumilast cream, are currently projected to expire on June 7, 2037.

patents, with claims directed to roflumilast formulations with reduced crystal growth, encompassing roflumilast cream and pharmacokinetic properties of topical roflumilast for improving delivery and extending half-life are currently projected to expire on June 7, 2037 and August 25, 2037.

Certain issued U.S.

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In such cases, over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then our marketing abilities may be impacted.

We have not yet received regulatory approval of our commercial tradename and registered trademarks for a commercial trade name for our lead candidates in the United States or foreign jurisdictions and failure to secure such approval in a timely fashion could adversely affect our business.

We have not yet registered trademarks for a commercial trade name for our lead product candidates in the United States or any foreign jurisdiction.

During trademark registration proceedings, we may receive rejections.

Although given an opportunity to respond to those rejections, we may be unable to overcome such rejections.

We will require final regulatory approval of, and registered trademarks for, any commercial tradename and registered trademarks for a commercial trade name for our lead candidates in the United States or foreign jurisdictions and failure to secure such approval in a timely fashion could adversely affect our business.

We have received Notices of Allowance from the USPTO for commercial trade names for certain of our lead product candidates in the United States.

We will be required to obtain similar approvals in certain foreign jurisdictions and will be required to undertake similar registrations with respect to any future product candidates.

During trademark registration proceedings, we may receive rejections and may be unable to overcome such rejections.

In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks.

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The FDA typically conducts a review of proposed product names, including an evaluation of potential for confusion with other product names.

If the FDA objects to any of our proposed proprietary product names, we may be required to expend significant additional resources in an effort to identify a suitable substitute name that would qualify under applicable trademark laws, not infringe the existing rights of third parties, and be acceptable to the FDA.

While we have received Notices of Allowance from the USPTO for commercial trade names for certain of our lead product candidates, we have not received final FDA approval of such names.

If the FDA objects to any of our proposed product names, we may be required to expend significant additional resources in an effort to identify a suitable substitute name that would qualify under applicable trademark laws, not infringe the existing rights of third parties, and be acceptable to the FDA.

If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and products could be adversely affected.

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Our license and other agreements impose, and any future collaboration agreements or license agreements we enter into are likely to impose various development, commercialization, funding, milestone, royalty, diligence, sublicensing, insurance, patent prosecution and enforcement or other obligations on us.

If we breach any such material obligations, or use the intellectual property licensed to us in an unauthorized manner, we may be required to pay damages and the licensor may have the right to terminate the license, which could result in us being unable to develop, manufacture, and sell products that are covered by the licensed technology, or having to negotiate new or reinstated licenses on less favorable terms, or enable a competitor to gain access to the licensed technology.

that are covered by the licensed technology, or having to negotiate new or reinstated licenses on less favorable terms, or enable a competitor to gain access to the licensed technology.

We may become involved in lawsuits to protect or enforce our patents, or other intellectual property or the patents of our licensors, which could be expensive and time-consuming.

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On May 6, 2021, we entered into a sales agreement, or Sales Agreement, with Cowen and Company, LLC, or Cowen, to sell shares of our common stock, from time to time, with aggregate gross sales proceeds of up to $100,000,000, through an ATM equity offering program under which Cowen will act as our sales agent.

During the six months ended June 30, 2021, we did not issue or sell any shares of our common stock through our ATM Offering Program.

During the nine months ended September 30, 2021, we did not issue or sell any shares of our common stock through our ATM Offering Program.

If we issue common stock or securities convertible into common stock, our common stockholders would experience additional dilution and, as a result, our stock price may decline.

143 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors