What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-08 compared with 2023-05-09 · 124 added, 53 removed, 238 unchanged (43% of the section changed)

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We believe this strategy uniquely positions us to rapidly advance our goal of bridging the treatment innovation gap in dermatology, while maximizing our probability of technical success and financial resources.

We launched our lead product, ZORYVE, in August 2022 after obtaining Food and Drug Administration (FDA) approval for the treatment of plaque psoriasis, including psoriasis in the intertriginous areas (e.g.

We launched our lead product, ZORYVE, in August 2022 after obtaining FDA approval for the treatment of plaque psoriasis, including psoriasis in the intertriginous areas (e.g.

groin or axillae), in individuals 12 years of age or older.

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In December 2022, we submitted a supplemental New Drug Application (sNDA) for ZORYVE for an expanded indication in plaque psoriasis down to the age of two, with potential FDA approval in the fourth quarter of 2023.

In addition, we received our first regulatory approval outside of the U.S.

in April 2023 from Health Canada for ZORYVE for the treatment of plaque psoriasis in individuals 12 years or age or older.

In addition, we had our first commercial launch outside of the United States after receiving regulatory approval from Health Canada of ZORYVE in April 2023 for the treatment of plaque psoriasis in individuals 12 years or age or older.

ZORYVE is a once-daily topical formulation of roflumilast, a highly potent and selective phosphodiesterase-4 (PDE4) inhibitor.

PDE4 is an established biological target in dermatology, with multiple PDE4 inhibitors approved by the FDA for the treatment of dermatological conditions.

In addition to the recent approval of ZORYVE for plaque psoriasis, we are also developing roflumilast cream for the treatment of atopic dermatitis.

In atopic dermatitis, we are conducting or have completed three pivotal Phase 3 clinical studies:

INTEGUMENT-1 and -2 enrolled subjects 6 years of age or older and INTEGUMENT-PED is enrolling subjects between the ages of 2 and 5 years.

In addition to the approval of ZORYVE for plaque psoriasis, we are also developing roflumilast cream for the treatment of atopic dermatitis.

In atopic dermatitis, we have completed enrollment in three pivotal Phase 3 clinical studies:

INTEGUMENT-1 and -2 enrolled subjects 6 years of age or older and INTEGUMENT-PED enrolled subjects between the ages of 2 and 5 years.

In the fourth quarter of 2022, we announced positive topline data from both INTEGUMENT-1 and -2 in atopic dermatitis.

We intend to submit an sNDA for topical roflumilast cream for the treatment of atopic dermatitis in patients aged six years or older late in the third quarter or early in the fourth quarter of 2023, based on the results of INTEGUMENT-1 and -2.

We intend to submit an sNDA for topical roflumilast cream for the treatment of atopic dermatitis in patients aged, 6 years or older late in the third quarter or early in the fourth quarter of 2023, based on the results of INTEGUMENT-1 and -2.

In May 2023, we announced the last subject enrolled in INTEGUMENT-PED, and we expect to provide topline data from this study in the third quarter of 2023.

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If approved, we would expect to launch roflumilast foam for the treatment of seborrheic dermatitis in the first quarter of 2024.

In scalp and body psoriasis, we announced

positive topline data in September 2022 and we expect the data to be a sufficient basis for an sNDA submission in the first quarter of 2024, following the potential approval of roflumilast foam for treatment of seborrheic dermatitis.

In scalp and body psoriasis, we announced positive topline data in September 2022 and we expect the data to be a sufficient basis for an sNDA submission following the potential approval of roflumilast foam for treatment of seborrheic dermatitis.

Beyond topical roflumilast, we are developing ARQ-255, a deep-penetrating topical formulation of ivarmacitinib, a potent and highly selective topical Janus kinase type 1 (JAK1) inhibitor, designed to preferentially deliver the drug deep into the hair follicle, the site of inflammation in alopecia areata, in order to potentially develop the first topical treatment for this disease.

In December 2022, we announced that the first subject had been enrolled in a Phase 1b study evaluating ARQ-255 for the treatment of alopecia areata.

The first subject in the alopecia areata cohort enrolled in the second quarter of 2023.

In September 2022, we acquired Ducentis and its lead asset, DS-234 (now ARQ-234), a fusion protein that is a potent and highly selective checkpoint agonist of the CD200 Receptor (CD200R).

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ARQ-234 could potentially be used to treat other inflammatory conditions as well.

As part of our continued efforts to prioritize spend on the launch of ZORYVE and the progression of the follow-on indications for topical roflumilast, we are pausing development of ARQ-252, an alternative cream formulation of ivarmacitinib for chronic hand eczema, vitiligo, and other inflammatory dermatoses.

Since our inception in 2016, we have invested a significant portion of our efforts and financial resources in clinical development activities.

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See Notes 1 and 8 to the condensed consolidated financial statements for additional information.

We have incurred net losses in each year since inception, including net losses of $80.1 million and $64.3 million for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, we had an accumulated deficit of $799.9 million and cash, cash equivalents, restricted cash, and marketable securities of $333.3 million.

As of March 31, 2023, we had $200.0 million outstanding under the Loan Agreement, with an additional $25.0 million in funding that may become available subject to the satisfaction of specified conditions.

We have incurred net losses in each year since inception, including net losses of $71.0 million and $67.4 million for the three months ended June 30, 2023 and 2022, respectively, and net losses of $151.1 million and $131.7 million for the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023, we had an accumulated deficit of $870.9 million and cash, cash equivalents, restricted cash, and marketable securities of $269.6 million.

As of June 30, 2023, we had $200.0 million outstanding under the Loan Agreement, with an additional $25.0 million in funding that may become available subject to the satisfaction of specified conditions.

We expect to continue to incur losses and significant expenses as we commercialize ZORYVE in psoriasis and as we advance our product candidates and label extensions through clinical trials, regulatory submissions, and commercialization.

We expect to incur significant and prioritized commercialization expenses related to the sales, marketing, manufacturing, and distribution of ZORYVE, while we focus our clinical development spend on ARQ-234 and ARQ-255 and ZORYVE label extensions, if we obtain regulatory approval for them.

We expect to incur significant and prioritized commercialization expenses related to the sales, marketing, manufacturing, and distribution of ZORYVE, while we focus our clinical development spend on ARQ-234, ARQ-255, and ZORYVE label extensions, if we obtain regulatory approval for them.

If our available cash and marketable securities balances, amounts available under the Loan Agreement, and anticipated future cash flows from operations are insufficient to cover these expenses, we may need to fund our operations through equity or debt financings or other sources, such as future potential collaboration agreements.

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In addition, if applicable, we will make payments amounting to a mid-single-digit percentage of any annual net sales of Ducentis’s products exceeding $1.5 billion.

As of March 31, 2023, none of the milestones were probable of achievement and, accordingly, no amounts have been recognized in the accompanying condensed consolidated financial statements with respect to these contingent payments.

As of June 30, 2023, none of the milestones were probable of achievement and, accordingly, no amounts have been recognized in the accompanying condensed consolidated financial statements with respect to these contingent payments.

Under the terms of the Share Purchase Agreement, we will develop and seek FDA approval of a therapeutic product containing Ducentis’s DS-234 product candidate, now ARQ-234, for an atopic dermatitis indication, and if FDA approval of ARQ-234 is obtained by us, to launch it in the United States.

Components of Our Results of Operations

Product Revenue, Net

In August 2022, in conjunction with the launch of our first FDA approved product, ZORYVE, we began to recognize revenue from product sales, net of rebates, chargebacks, discounts, and other adjustments.

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Additionally, if our development efforts for our other product candidates and ZORYVE label extensions are successful and result in regulatory approval, we may generate additional revenue in the future from product sales.

Other Revenue

Other revenue relates to the Iolyx Agreement.

See Note 6 to the condensed consolidated financial statements for additional information.

Cost of Sales

Cost of sales includes direct and indirect costs related to the manufacturing and distribution of ZORYVE, including raw materials, third-party manufacturing costs, packaging services, and freight-in, as well as third-party royalties payable on our net product sales and amortization of intangible assets associated with ZORYVE.

Our cost of sales will reflect a lower average per unit cost of materials over the next two years approximately, due to inventory that was previously expensed.

As of June 30, 2023 and December 31, 2022, the value of this inventory, mostly at the raw materials stage, was approximately $11.5 million and $14.1 million, respectively.

Operating Expenses

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Selling, General and Administrative Expenses

Our selling, general and administrative expenses consist primarily of salaries and related costs, including payroll taxes, benefits, stock-based compensation, and travel.

Other selling, general and administrative expenses include costs related to sales and marketing of ZORYVE, legal costs of pursuing patent protection of our intellectual property, insurance, and professional services fees for marketing, auditing, tax, and general legal services.

Our selling, general and administrative expenses consist primarily of salaries and related costs, including payroll taxes, benefits, stock-based compensation, and travel, and costs related to sales and marketing of ZORYVE.

Other selling, general and administrative expenses include legal costs of pursuing patent protection of our intellectual property, insurance, and professional services fees for auditing, tax, and general legal services.

We expect our selling, general and administrative expenses to continue to increase in the future as we continue to commercialize ZORYVE and potentially other product candidates, increase our headcount, and support our operations;

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Results of Operations

Comparison of the Three Months Ended March 31, 2023 and 2022

Comparison of the Three Months Ended June 30, 2023 and 2022

The following table sets forth our results of operations for the periods indicated:

Three Months Ended March 31, Change

Three Months Ended June 30, Change

2023 2022 $ %

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Product revenue, net $ 4,770 $ — $ 4,770 *

Other revenue 420 — 420 *

Total revenues 5,190 — 5,190 *

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Product revenue, net

We began recording product revenues in the third quarter of 2022 following the FDA approval of ZORYVE and our subsequent commercial launch in the United States in August 2022.

During the three months ended March 31, 2023, we recognized $2.8 million of net product revenues related to sales of ZORYVE.

Revenues were primarily driven by end customer demand, partially offset by sales discounts, which consisted primarily of co-pay assistance discounts, managed care rebates and distribution fees.

We began recording U.S.

product revenue in the third quarter of 2022 following the FDA approval and subsequent commercial launch of ZORYVE in August 2022, and Canada product revenue in the second quarter of 2023 following the Health Canada approval and subsequent commercial launch of ZORYVE in June 2023.

During the three months ended June 30, 2023, we recognized $4.8 million of net product revenue related to sales of ZORYVE.

Revenue was primarily driven by end customer demand, partially offset by sales discounts, which consisted primarily of co-pay assistance discounts, distribution fees, and managed care rebates.

Other revenue

Other revenue is a result of shares of common stock acquired in connection with the Iolyx Agreement.

See Note 6 to the condensed consolidated financial statements for additional information.

Cost of Sales

Cost of sales of $0.8 million for the three months ended March 31, 2023 is related primarily to product costs incurred after FDA approval of ZORYVE.

Cost of sales of $0.8 million for the three months ended June 30, 2023 is related primarily to product costs incurred after FDA approval of ZORYVE, amortization of intangible assets as a result of the milestone payment to AstraZeneca in connection with the FDA approval of ZORYVE, as well as royalties on net sales payable to AstraZeneca under a license agreement.

Prior to the date on which the initial regulatory approval was received, costs of raw materials were recorded as research and development expense.

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Research and Development Expenses

Three Months Ended March 31, Change

Three Months Ended June 30, Change

2023 2022 $ %

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Total research and development expense $ 25,219 $ 38,205 $ (12,986) (34) %

Research and development expenses decreased by $5.3 million, or 13%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022.

The decrease was primarily due to the lower direct costs related to the topical roflumilast program of $9.0 million, partially offset by increases in compensation and personnel-related costs of $1.4 million, and an increase in other costs of $1.3 million.

The decrease in topical roflumilast program costs was primarily due to the completion of Phase 3 studies of roflumilast cream in atopic dermatitis and roflumilast foam in seborrheic dermatitis and scalp and body psoriasis, partially offset by the $3.0 million payment to the FDA for our roflumilast foam NDA submission.

The increase in compensation and personnel-related expenses, which includes stock-based compensation, was primarily due to an increase in headcount.

The increase in other costs was primarily due to an increase in consulting and medical affairs spending.

Research and development expenses decreased by $13.0 million, or 34%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022.

The decrease was primarily due to the completion of Phase 3 studies of roflumilast cream in atopic dermatitis and roflumilast foam in seborrheic dermatitis and scalp and body psoriasis.

Additionally, manufacturing costs recorded as research and development expenses decreased as we began capitalizing such costs to inventory upon FDA approval of ZORYVE in July 2022.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses increased by $20.9 million, or 95%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022.

Selling, general, and administrative expenses increased by $18.3 million, or 66%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022.

The increase was primarily due to higher compensation and personnel-related expenses of $10.0 million, higher sales and marketing expenses of $5.8 million, and higher professional services of $1.8 million.

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Other Income, Net

Other income, net increased by $3.1 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily due to the impact of rising interest rates for the three months ended March 31, 2023.

Other income, net increased by $2.7 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022, primarily due to the impact of higher interest rates, partially offset by a lower marketable securities balance.

Interest Expense

Interest expense increased by $5.2 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, due to an increase in our long-term debt balance and the impact of rising interest rates.

Interest expense increased by $5.3 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022, due to an increase in our long-term debt balance and the impact of higher interest rates.

See Note 8 to the condensed consolidated financial statements for additional information.

Comparison of the Six Months Ended June 30, 2023 and 2022

The following table sets forth our results of operations for the periods indicated:

Six Months Ended June 30, Change

2023 2022 $ %

(in thousands)

Product revenue, net $ 7,551 $ — $ 7,551 *

Other revenue 420 — 420 *

Total revenues 7,971 — 7,971 *

Operating expenses:

Cost of sales 1,559 — 1,559 *

Research and development 60,564 78,827 (18,263) (23) %

Selling, general, and administrative 88,876 49,628 39,248 79 %

Total operating expenses 150,999 128,455 22,544 18 %

Loss from operations (143,028) (128,455) (14,573) 11 %

Other income (expense):

Other income, net 6,328 563 5,765 1024 %

Interest expense (14,391) (3,838) (10,553) 275 %

Total other income (expense) (8,063) (3,275) $ (4,788) 146 %

Net loss $ (151,091) $ (131,730) $ (19,361) 15 %

______________

*Not applicable

Product revenue, net

We began recording product revenue in the third quarter of 2022 following the approval of ZORYVE by the FDA and our subsequent commercial launch in the United States in August 2022, and Canada product revenue in the second quarter of 2023 following the Health Canada approval and subsequent commercial launch of ZORYVE in June 2023.

During the six months ended June 30, 2023, we recognized $7.6 million of net product revenue related to sales of ZORYVE.

Revenue was driven by end customer demand.

Sales discounts consisted primarily of co-pay card discounts and distribution fees.

Other revenue

Other revenue is a result of shares of common stock acquired in connection with the Iolyx Agreement.

See Note 6 to the condensed consolidated financial statements for additional information.

Cost of Sales

Cost of sales of $1.6 million for the six months ended June 30, 2023 is related primarily to amortization of intangible assets as a result of the milestone payment to AstraZeneca in connection with the FDA approval of ZORYVE and product costs incurred after FDA approval of ZORYVE.

Prior to the date on which the initial regulatory approval was received, costs of raw materials were recorded as research and development expense.

Therefore, cost of sales will reflect a lower average per unit cost until the related inventory is sold, which is expected to occur over the next two years.

See Note 6 to the condensed consolidated financial statements for additional information.

Research and Development Expenses

Six Months Ended June 30, Change

2023 2022 $ %

(in thousands)

Direct external costs:

Topical roflumilast program $ 22,955 $ 46,311 $ (23,356) (50) %

Topical JAK inhibitor program 1,854 1,393 461 33 %

Other early stage programs 1,843 492 1,351 275 %

Indirect costs:

Compensation and personnel-related 22,494 19,630 2,864 15 %

Other 11,418 11,001 417 4 %

Total research and development expense $ 60,564 $ 78,827 $ (18,263) (23) %

Research and development expenses decreased by $18.3 million, or 23%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022.

The decrease was primarily due to the completion of Phase 3 studies of roflumilast cream in atopic dermatitis and roflumilast foam in seborrheic dermatitis and scalp and body psoriasis.

The decrease was partially offset by an increase in compensation and personnel-related expenses, which includes stock-based compensation, primarily due to an increase in headcount.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses increased by $39.2 million, or 79%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022.

The increase was primarily due to an increase in compensation and personnel-related expenses of $21.0 million, an increase in sales and marketing expenses of $13.4 million, and an increase in professional services of $3.4 million.

These increases were primarily related to commercialization efforts for ZORYVE.

Other Income, Net

Other income, net increased by $5.8 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, primarily due to the impact of higher interest rates, partially offset by a lower marketable securities balance.

Interest Expense

Interest expense increased by $10.6 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, due to an increase in our long-term debt balance and the impact of higher interest rates.

Liquidity, Capital Resources, and Requirements

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We have incurred operating losses since our inception and have an accumulated deficit as a result of ongoing efforts to develop and commercialize our products and product candidates, including conducting nonclinical and clinical trials and providing selling, general and administrative support for these operations.

As of March 31, 2023, we had cash, cash equivalents, restricted cash, and marketable securities of $333.3 million, and an accumulated deficit of $799.9 million.

As of June 30, 2023, we had cash, cash equivalents, restricted cash, and marketable securities of $269.6 million, and an accumulated deficit of $870.9 million.

We maintain cash balances with financial institutions in excess of insured limits.

See Notes 1 and 8 to the condensed consolidated financial statements for additional information.

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• the timing, receipt, and amount of sales of any current and future products;

• the scope, progress, results, and costs of researching and developing our lead product candidates or any future product candidates, and conducting nonclinical 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-255 in alopecia areata, and our formulation and nonclinical efforts for ARQ-234;

• the scope, progress, results, and costs of researching and developing our lead product candidates or any future product candidates, and conducting nonclinical studies and clinical trials, in particular our planned or ongoing development activities of roflumilast cream in plaque psoriasis and atopic dermatitis, roflumilast foam in seborrheic dermatitis and scalp psoriasis, ARQ-255 in alopecia areata, and our formulation and nonclinical efforts for ARQ-234;

• suspensions or delays in the enrollment or changes to the number of subjects we decide to enroll in our ongoing clinical trials;

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(or on any successor or substitute published rate) for a term of one month, subject to a replacement with an alternate benchmark rate and spread in certain circumstances.

On March 31, 2023, the rate was 12.12%.

On June 30, 2023, the rate was 12.61%.

Starting in July 2023, the Secured Overnight Financing Rate (SOFR) for a term of one month was substituted for the benchmark rate.

Interest payments are payable monthly following the funding of any Term Loan.

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The Loan Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among others, restrictions on our ability to merge or consolidate with any other entity, to incur additional indebtedness, or to pay any dividends or other distributions on capital stock.

We have also agreed to a financial covenant whereby, beginning with the month ending December 31, 2023, we must generate net product revenue in excess of specified amounts for applicable measuring periods;

provided, however, that such financial covenant shall not apply if our average market capitalization over the trailing five day period prior to the last day of any measurement month is equal to or in excess of $400.0 million.

We were in compliance with all covenants under the Loan Agreement as of March 31, 2023.

We were in compliance with all covenants under the Loan Agreement as of June 30, 2023.

In addition, the Loan Agreement contains customary events of default that entitle the lenders to cause any indebtedness under the Loan Agreement to become immediately due and payable, and to exercise remedies against us and the collateral securing the Term Loans.

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The following table sets forth our cash flows for the periods indicated:

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

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Net Cash Used in Operating Activities

During the three months ended March 31, 2023, net cash used in operating activities was $80.3 million, which consisted of a net loss of $80.1 million and a change in net operating assets and liabilities of $9.0 million, partially offset by net non-cash charges of $8.8 million.

The net non-cash charges were primarily related to stock-based compensation expense of $9.5 million.

During the three months ended March 31, 2022, net cash used in operating activities was $57.0 million, which consisted of a net loss of $64.3 million and a change in net operating assets and liabilities of $0.4 million, partially offset by net non-cash charges of $7.8 million.

During the six months ended June 30, 2023, net cash used in operating activities was $146.8 million, which consisted of a net loss of $151.1 million and a change in net operating assets and liabilities of $14.7 million, partially offset by net non-cash charges of $19.0 million.

The net non-cash charges were primarily related to stock-based compensation expense of $20.1 million.

During the six months ended June 30, 2022, net cash used in operating activities was $119.0 million, which

consisted of a net loss of $131.7 million and a change in net operating assets and liabilities of $4.0 million, partially

offset by net non-cash charges of $16.8 million.

The net non-cash charges were primarily related to stock-based

compensation expense of $14.6 million.

Net Cash Provided by Investing Activities

During the three months ended March 31, 2023, net cash provided by investing activities was $107.8 million, which was comprised primarily of proceeds from the maturities of marketable securities of $147.5 million, partially offset by purchases of marketable securities of $39.7 million.

During the three months ended March 31, 2022, net cash provided by investing activities was $15.3 million, which was comprised primarily of proceeds from the maturities of marketable securities of $70.9 million, partially offset by purchases of marketable securities of $55.5 million.

During the six months ended June 30, 2023, net cash provided by investing activities was $196.9 million, which was comprised primarily of proceeds from the maturities of marketable securities of $282.5 million, partially offset by purchases of marketable securities of $85.3 million.

During the six months ended June 30, 2022, net cash provided by investing activities was $67.9 million,

which was comprised primarily of proceeds from the maturities of marketable securities of $203.8 million, partially

offset by purchases of marketable securities of $135.7 million.

Net Cash Provided by Financing Activities

During the three months ended March 31, 2023, net cash provided by financing activities was $0.1 million, which related to proceeds from the issuance of common stock upon the exercise of stock options.

During the three months ended March 31, 2022, net cash provided by financing activities was $14.7 million, which was comprised primarily of the net cash proceeds received from shares sold under our ATM of $14.5 million.

During the six months ended June 30, 2023, net cash provided by financing activities was $1.2 million, which was comprised primarily of $1.0 million in proceeds from the issuance of common stock as part of our ESPP.

During the six months ended June 30, 2022, net cash provided by financing activities was $15.8 million,

which was comprised primarily of the net cash proceeds received from shares sold under our ATM of $14.5 million.

Contractual Obligations and Contingent Liabilities

The following summarizes our significant contractual obligations as of March 31, 2023.

The following summarizes our significant contractual obligations as of June 30, 2023.

Facility Operating Lease

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The amended lease agreement required that we deliver a letter of credit to the landlord of $1.5 million upon occupying the space, which is allowed to be reduced throughout the lease period as rent obligations are met.

Accordingly, as of March 31, 2023, we have a letter of credit and related restricted cash account of $0.9 million.

The total commitment under the operating lease agreement is $5.5 million, including $0.7 million for the remaining nine months of 2023, $1.0 million for each of the years 2024 through 2025, $1.1 million for each of the years 2026 through 2027, and $0.6 million for the year 2028.

Accordingly, as of June 30, 2023, we have a letter of credit and related restricted cash account of $0.9 million.

The total commitment under the operating lease agreement is $5.3 million, including $0.5 million for the remaining six months of 2023, $1.0 million for each of the years 2024 through 2025, $1.1 million for each of the years 2026 through 2027, and $0.6 million for the year 2028.

See Note 7 to the condensed consolidated financial statements for additional information.

Long-Term Debt Obligations

As of March 31, 2023, we had $200.0 million outstanding under our Loan Agreement.

As of June 30, 2023, we had $200.0 million outstanding under our Loan Agreement.

We have $25.0 million in additional funding remaining that may become available subject to the satisfaction of specified conditions.

See Notes 1 and 8 to the condensed consolidated financial statements for additional information.

The total commitment under the Loan Agreement as of March 31, 2023 is $307.7 million, including $18.8 million for the remaining nine months of 2023, $25.0 million for each of the years 2024 through 2026, and $213.9 million for 2027.

The total commitment under the Loan Agreement as of June 30, 2023 is $304.2 million, including $13.0 million for the remaining six months of 2023, $25.9 million for the year 2024, $25.7 million for each of the years 2025 through 2026, and $213.9 million for the year 2027.

These amounts do not represent or include any future draw downs, but instead represent only the contractually obligated minimum payments of interest, principal, and loan fees related to the funding of the $75.0 million tranche A term loan on December 22, 2021 and the $125.0 million tranche B term loan on August 2, 2022.

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We have entered into manufacturing supply agreements for the commercial supply of ZORYVE, which include certain minimum purchase commitments.

Firm future purchase commitments under these agreements are approximately $5.1 million within the next nine months, and approximately $0.8 million per year for 2024 and 2025.

Firm future purchase commitments under these agreements are approximately $4.9 million within the next six months, and approximately $0.8 million per year for 2024 and 2025.

This amount does not represent all of our anticipated purchases, but instead represents only the contractually obligated minimum purchases or firm commitments of non-cancelable minimum amounts.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2022.

There were no material changes to our critical accounting policies during the three months ended March 31, 2023.

There were no material changes to our critical accounting policies during the six months ended June 30, 2023.

Recent Accounting Pronouncements

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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 2. Management’s Discussion and Analysis