Q4 2023 Arcutis Biotherapeutics Inc Earnings Call
Participants
Derek Cole; IR; Arcutis Biotherapeutics Inc
Frank Watanabe; President & CEO; Arcutis Biotherapeutics Inc
L. Todd Edwards; Chief Commercial Officer; Arcutis Biotherapeutics Inc
Patrick Burnett; Chief Medical Officer; Arcutis Biotherapeutics Inc
John Smither; CFO; Arcutis Biotherapeutics, Inc
Uy Ear; Analyst; Mizuho Securities USA LLC
Serge Belanger; Analyst; Needham & Company LLC
Vikram Purohit; Analyst; Morgan Stanley.
Sean Kim; Analyst; JonesTrading
Presentation
Operator
Good day and welcome to the Arcutis Biotherapeutics 2023 Fourth Quarter and Full Year financial results conference call. (Operator Instructions) Once again, please be advised that today's conference is being recorded. I would now like to hand the call over to Derek Cole, Arcutis Investor Relations. Please go ahead.
Derek Cole
Thank you, Andrew. Good morning, everyone, and thank you for joining us today to review 2023 financial results and a business update slides for today's call are available on the investor 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. So we encourage you to review all 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.
Frank Watanabe
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 our Q2 team and our execution in the quarter nor more excited about the foundation.
These results lay down for progress in 2024. We're continuing to see growing momentum in this area of cream launch in psoriasis as health care providers and their patients see how it addresses real needs in their treatment of psoriasis now generated data, albeit but all under [65,000] prescriptions and over 10,700 unique prescribers to launch to date as our product delivers positive clinical experience 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 prescription growth in prescriptions coupled with continued gross to net improvements drove strong revenue growth in Q4 both versus Q3 and year over year was for fourth quarter net revenue of $13.5 million coming on top of our progress with progress with the Rave cream in psoriasis.
We also received approval for Israel foam for seborrheic dermatitis in December and launched 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 threefold. We also continued to execute against our clinical and regulatory milestones with a steady flow of successes this past quarter. Patrick will go into little more details 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 seventh, 2020, for potentially expanding our portfolio even further.
We also released very exciting interim long-term data from our open-label study in AD that demonstrated efficacy continues to improve with long-term use up 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, Seb, derm and atopic dermatitis in each of their respective pivotal trials. In addition, in October 2023, the US Patent and Trademark Office awarded the company, a new formulation patent that covers and means for inhibiting roflumilast crystal growth that is not limited actually in glycol and in November 2023. And 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.
And then 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 seb derm as well as the potential atopic dermatitis launch later this year while continuing to development the development of our pipeline.
Moving on to Slide 6. A major reason why we're so excited for this year is that we are in the midst of a very significant expansion of the opportunity for topical roflumilast, which we expect will translate into a substantial acceleration of our revenue trajectory. You've seen this before. But from the initial approval for psoriasis, the total addressable market for Reed could grow around tenfold this year alone to over [50 million] patients in the United States we have the right commercial team in place for success, and we have an excellent plan to execute against these opportunities.
With that, let me turn it over to Todd to provide some further commentary around the real cream launch in psoriasis and update you on how the film is progressing and Seb Derm?
L. Todd Edwards
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, restaurants. This 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 Seb Derm and potential further growth in new indications upon approval, interacts and TRx prescription volume is growing every quarter.
And as I read has over 165,000 TRx's launch to date, fourth quarter 2023 TRx's were up 26% compared to Q3 2023 and over 290% compared to the fourth quarter of 2022. We're starting to see a preference for sorry, relative to the nonsteroidal competitor, as evidenced by our steady gains in market share and eight intense rib riders are increasing their utilization of sorry, the new pediatric label expansion down to six years of age and incrementally expands our opportunity for growth and further strengthens Xeris 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 constitute more than one in three prescriptions, which is in line with what we want and expect to see given the positive experience patients have with their ED.
I am now on slide 9 through our multiple important dermatology conferences in January. After spending time with dermatologists, NPs and PAs currently using or retrain. The feedback I received about the product is exceptional. These prescribers spoke to me about their patients being delighted by the results achieved with Siri prescriber feedback is clear that there are some distinct attributes as retreat that make it attractive the ability to be used anywhere once daily dosing, compelling efficacy data, favorable tolerability profile, safety and appropriateness for any psoriasis patient.
And these attributes make Zurich cream an attractive treatment for patients with different types of needs. The patient who is concerned about steroids, the patient who has been cycling through various topicals are ones that are exploring different treatments to fine that works for them long term or to manage players. We know that psoriasis patients have different needs depending on where they are in their journey and see that as a real screen 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 and to reframe growth in psoriasis. Firstly, driving HCP 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 to fill team continues to deliver broad efficacy messaging to move physicians along the adoption curve from initial trial in specific regions of the body through expanded use for patients who have psoriasis plaques across a large body surface area.
Secondly, patient engagement and positive use experience for refill volume has increased to 38% of total volume as the RE patient awareness continues to improve. And finally, the broad high-quality access in commercial and anticipated Medicare and Medicaid coverage creates the opportunity for more patients to experience Siri series, differentiated pricing and access strategy continues to resonate with payers with over 132 million commercial lives. Having access to Zurich cream, the Arcutis team successfully secured coverage for repowering with all three large PBMs in the US within 12 months of the launch.
And we anticipate further improvements in our commercial coverage throughout 2024 and PAs and step edits are typical for branded products in dermatology and first read. This process is now well understood by pharmacies and dermatology offices. We are seeing very encouraging trends in prescription percentage of prescriptions being covered by insurers with a clear opportunity to expand on this front, 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 with us approaching our target gross-to-net in the 50s for the psoriasis indication for the second half of 2024, one very large incremental opportunity to accelerate prescription growth is expansion into Medicaid and Medicare, which we expect to begin as early as 2024, roughly a third of psoriasis patients and nearly half of Seb Derm and atopic dermatitis patients are on Medicare or Medicaid. So this is a very important opportunity for us. There is pricing falls below the CMS specialty threshold tier, unlike other branded topicals. So we are well positioned to access these segments.
Now moving on to Slide 11. We are seeing a tremendous early response to the launches of reform. The first drug approved for several 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 the first approved treatment unconstrained by severity, duration and location sorry, foam is different than anything else derms or patients have seen for this disease with treatment success at eight and 10 patients in our pivotal trial with over half of these patients completely clear in just eight weeks, significant impact on itch, most bothersome symptoms of this disease with improvements seen as early as 48 hours simple once daily leave an application that's much more convenient than any other option. And taken together, we believe the reform can be the new standard of care Emageon center.
I'm now on slide 12 with a product profile offering rapid dramatic disease clearance and significant reduction in itch with a simple single treatment, HCPs and patients are very enthusiastic about the availability of the revolver, 81% of surveyed prescribers, theaters refilled profile has very compelling or compelling. They also recognize the attributes applicability to any part of the body the uniqueness of the vehicle and critical efficacy needs for this patient type of rapid response and edge and erythema, which then helps to 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 PBMs who recognize the reform as a line extension under his reprint contract. This has translated into an increased volume of covered prescriptions early in the launch period with covered prescriptions already near 50% of total volume. We continue to work with the downstream health plans to bring them onboard. And this accelerated coverage would translate into a more rapid improvement in gross-to-net compared to what we saw with the cream launch. We're launching or whatever you want to hear and products.
Finally, all the key EMRs already has the reform available for electronic prescribing.
And moving to Slide 14, building on the strength, label and product profile. We are confident that we have the ingredients in place for a successful launch as their iPhone and seb derm with relationships already built with dermatologists, a field team trained on the value proposition and ready to promote and educate contracted pharmacies in place, familiarity with the co-pay card and processes that go with the product and access of PBM to sure patients 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.
Patrick Burnett
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. With regard to our regulatory milestone on slide 16, I'm going to cover these according to indication with psoriasis. First, here, we have approval down to the age of six after we have expanded the indication and the opportunity in pediatrics to reach a two to five year olds will be the subject of a future FDA review.
Next for seb derm 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 is unprecedented efficacy with a once-a-day foam in a market as big as psoriasis with no innovation in decades and no branded competition.
And 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 of this year. And finally, we're also expecting to submit another NDA with the FDA for RE 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 three AD studies and taking that one and two, that's quite notable and highly unusual that over 90% of patients saw improvement in their symptoms in just four weeks and nearly 70%, seeing at least a 50% improvement. Looking at the more demanding easy, 75 hurdle, almost 45% of patients achieved this large improvement at week four and encouragingly and the long-term study, which we've released but are showing here at the end of 56 weeks, two out of three patients had achieved a 75% improvement.
It's really exciting to see where we have a high proportion of patients responding early and then seeing an increased benefit over time with long-term treatments. And in that long-term study, we also looked for the first time and our ability to control the disease with a less frequent maintenance regimen for patients were switched to twice weekly treatment if they reach complete clearance. We're really happy about the response there. And this regiment fits nicely with the current clinical practice.
And these data have really resonated with dermatologists. We're excited about the reform ice cream clinical profile for AD and the significant opportunity in this large and growing market. The dynamics here at AIG are favorable towards rapid adoption and share some of the positive tailwinds as Seb Derm in pediatric patients, especially here in AD, there's a propensity to adopt nonsteroidals higher than in the psoriasis patient population and that's largely driven by parents avoidance of steroids.
So moving on to slide 18, I want to highlight the itch response across our portfolio of products. So here, we're showing WINRS. WERE Worst Itch Numeric Rating Scale results of our Phase three studies. These are pooled results for psoriasis, dermis and the AD into human studies.
And these are individual study results for stratum and erector H as a primary symptom for these conditions and a key driver of our quality of life impact as Rave cream and foam at 0.3% and topical roflumilast 0.15% cream for AD provided consistent and rapid improvements in itch across psoriasis, Seb Derm and AD, respectively, with improvements as early as 24 to 48 hours as compared with vehicle-treated patients. This includes scalp psoriasis and the Rector study, which is particularly difficult to control and only four weeks of treatment in the entire human studies across indications, we have a significant proportion of patients achieving and each free state.
Frank Watanabe
And with that, I'll pass it over to John Operator, can you hear me this is Frank.
Operator
Yes, I can hear you, Nick.
Frank Watanabe
While we're working on John, I'll take over for him for just a minute. So maybe if you're listening so I'm on slide 20. So 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 seven 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 growth of gross-to-net excuse me, a percentage improvement down in the mid 60s and the team's success in pulling through recovered prescriptions. We also saw healthy prescription growth in the quarter.
So looking forward to 2024, we expect continued prescription growth and gross net improvements for recruitment, psoriasis and continued prescription momentum and GT. and improvements for reform, although there will likely be a temporary erosion in psoriasis. Gross net improvements in Q1 24 versus Q4 23 due to the typical deductible resets and patients changing their coverage that always occurs in 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 22. R&d expenses for the fourth quarter were $23.8 million which is down significantly from Q4 22 due to continued decrease in development costs on topical roflumilast programs and recall that our R&D expense includes research operations and medical affairs spending on Slide 22.
Looking at full year full year total revenues of $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 one on collaboration and licensing agreement we received in Q three. R&D expenses for full year were $111 million which is down $70 million approximately due to the one-time $30 million fee associated with the new centers acquisition in 2022, the winding down of our major roflumilast Phase three studies and lower pre-commercial production. We expect full year 2024 R&D expense to decline meaningfully versus full year '23 as we continue completing the few remaining Phase three studies, continuing with regulatory filings, reduce our pre-launch production costs and maintain our medical affairs activities support the launches.
SG&A expenses for the year were $185 million, primarily due to higher commercialization expenses year over year, driven by continuing investments in roof cream and preparing for the ongoing launches of reform and the potential upcoming launch in atopic dermatitis. If approved as we head into 2024, we expect SG&A to increase over 2023, which aligns with the investment behind our center launch and preparations for the atopic dermatitis launch, including our previously announced incremental expansion sales force.
We will continue to focus on appropriate investments to support our commercial activities. Launching drugs properly require substantial investments in staff and promotional investment and having multiple launches in a short period of time, really 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 and ensuring we invest appropriately in current launches and if approved, ensuring the same for our future launches.
We don't want to be in a position of underinvesting and harming the trajectory for the ongoing launches in psoriasis and Seb Derm for future launches, if approved earlier in the year, we undertook a reorganization and reprioritization of noncommercial efforts to align with our commercial execution focus in 2024, which will result in aggregate approximately $50 million of reduced expenses over the next two years as compared to previous internal forecasts.
You can expect us to continue to focus on cash burn as we look for opportunities to maximize our OpEx while making continued progress on maximizing the reef 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 three clinical trials and now two FDA approvals with the third potentially coming midyear while launching two products to date and if approved another in the second half of '24 and a fourth in 2025 on slide 23, our final slide on the balance sheet.
We had cash and marketable securities of $272.8 million as of December 31. As I mentioned in 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 runway and largely address the capital requirement covenant with SLR. Additionally, we are actively pursuing a primary care partnership and are seeking for and seeing early interest from our efforts there. So that's it for our comments today.
If I step back for a minute, we founded art to this with a vision of bringing meaningful innovation to the medical dermatology space, especially in the topical space and with our second launch in less than 18 months. I'm proud that our team is making that vision a reality and in the process is helping a growing number of people suffering from dermatologic conditions as we continue to execute on the psoriasis and seb derm launches and hopefully adding the 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.
Question and Answer Session
Operator
Thank you. (Operator Instructions)
Tyler (multiple speakers) TD. Cowen.
All right. I think that's we Good morning, guys. Thanks for taking the question. So the Seb Derm prescriptions for reform have gone vertical very early in the launch and have reached levels that reef cream and the time it took significant longer significant longer to reach. So 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 threefold could ultimately end up being significantly larger than the cream?
Frank Watanabe
Yes, I think maybe, Todd, if you could take that. And then, Patrick, see if you have any additional comments from Todd come in from a commercial standpoint.
L. Todd Edwards
Yes, thank you, Frank. And yes, as mentioned, we were very pleased with the uptake as their (inaudible) . And I mean, with the weekly demand trends, I'd say it's too early to comment on how much of that is coming from warehouse of patients. But but I would say that one big driver of this initial uptake is just that, that there's a ready for patients that are out there. And these patients have been waiting for Z foam on the way for a more convenient, more effective treatment. And so I think that that's been driving this but on We expect continued strong growth, the product. But I just caution that a linear progression based on rate trend is probably overly optimistic on that. But I think that there's a long runway for VeriFone and we look forward to continuing to grow this product.
Patrick Burnett
(multiple speakers) I think just kind of adding the ear of the perspective of how that might fit into practice for dermatologists and seborrheic dermatitis patients. It can be a challenging patient type in the dermatology practice. Just because you've had them in your practice for 10, 15 years sometimes.
Yes, we know that there's a very long runway for patients and before they actually get to a diagnosis and oftentimes they've they've tried everything that's out there in this space where we haven't really had any innovation for 10, 20 years member. This is the first new mechanism of action for a prescription topical in over two decades?
Yes, I think there really is a lot of interest in having a new therapy, and that translates into a level of frustration for the dermatologist that was kind of pent-up prior to this because when a patient would come back in, they just had nothing to offer them.
That wasn't a topical antifungal or a topical corticosteroid. So I think that this is simply a component of solving an unmet need where there are patients who are dissatisfied with the treatment and health care providers who haven't really have anything new to offer. And we've heard that in anticipation of the approval and launch for the two or three years while we were running our Phase three study looking for the FDA to approve the drug that there was a high level of anticipation for this for those reasons.
Operator
Thank you.
Uy Ear, Mizuho Securities USA LLC.
Uy Ear
Yeah, thanks for taking my question. So just on the on the launch, does the Scepter launch on, could you you speak of warehousing effect on. Are you sort of suggesting primarily that these are kind of patients who have limited options? And I guess, are you seeing on what kind of patients are you seeing generally are they do they tend to be more on the severe side or the mild side? And could you sort of just maybe provide some of the demographics a little bit if you have such data on?
Yes. So that's my first question. I'll follow up with a second question. Thanks.
Frank Watanabe
Oh, yes, I think the point we're trying to make as you're thinking about it, it's been over 20 years since there was a truly new drug for seborrheic dermatitis. And so there's a very large pool of patients at Patrick or Tom mentioned, excuse me, who are have been eagerly awaiting refunds availability.
And I think that some of the very early demand is probably these these patients who have been as Patrick mentioned have been cycling for three years and they've been just sitting in the office. And now all of a sudden, the doctor has a new option and they're going to put them on their (inaudible) . So we don't we think that there is this pool of ready-made patients that is helping early launch, but we want to make sure that folks don't think that that pool will exist forever with this constant stream of very large patients.
Having said that, you know, our research suggests that dermatologists see about 75 seb derm patients a month. So it's a very large population of patients which should sustain long-term growth for us.
In terms of your question around the demographics, I think it's really too early for us to have any data on that. We'll be looking at adoption and where doctors are using it as we get farther into the launch and we'll be able to share some of those data in the future. But at this point, again, we don't have any data on that yet
Uy Ear
And maybe even it may help us understand a little bit on so you during the earlier call the launch call, you indicated there was a script some that were waiting at the pharmacies. And are you still seeing significant number of scripts that have not been we have not been filled or ship to consumers or at this point, these scripts Now are they come in and they are, I guess, readily shipped. I'm just wondering if there's a large delta and maybe along that line, could you kind of also help us understand the end user we direct program? Is there any differences between the cream and the foam and in terms of getting it processed and if there's any on yeah, wondering a little more clarity on that.
Frank Watanabe
Thanks. Yeah, sure, Todd, can you take those two?
L. Todd Edwards
Yes, absolutely. As mentioned on prior to the commercial launch, there was a number of prescriptions that were sitting at the pharmacy, but those prescriptions have all been filled and distributed to the patient. So we don't see what I'll call a warehouse prescription sitting currently at the at the pharmacy today and then relative to ours, a redirect program. And I think this is a big strategic advantage for us is that the program's identicals the same program for retreatment, psoriasis or treasury phone and seborrheic dermatitis. And that creates a great efficiency for the dermatology offices given that two unique products for two distinct patient populations, psoriasis and Seb Derm, but one process and fulfilling that prescription and so that it is a common process across across both products.
Uy Ear
Okay. Thank you.
Operator
Thank you.
Chris Shibutani, Goldman Sachs.
Thanks for taking our question. This is Stephen on for Chris. On one on the subdermal launch, curious if we should expect any inventory or channel stocking effects in the first quarter? And then as far as the commercial team goes on, do you believe the team is currently right-sized for the psoriasis and seb derm opportunities? And if we should anticipate any changes ahead of a topic Derm. Thank you.
Frank Watanabe
John, do you want to maybe take the channel question and Todd, could you address the team?
John Smither
but with respect to Q1, no, we're not anticipating any channel buildup with respect to Q1.
L. Todd Edwards
Yes. And then on the question relative to being right-sized, especially for the potential atopic dermatitis launch in anticipation of that launch, we will expand our field sales organization today, roughly, we have around 100 and a field sales individuals within the team, and we'll likely expand that by approximately another 50 sales representatives to make certain that on, we can get the breadth and depth of prescribing across the two products that are approved today and potentially the atopic dermatitis products. So we will be expanding and that will be initiated shortly.
Okay. Thank you very much.
Operator
Thank you.
Seamus Fernandez, Guggenheim Securities.
This is [Collen] on for Seamus. Thanks for taking my question and congrats on the quarters. Sourcing around 6,000 scripts per week for three over the past few weeks. So as a conservative estimate if we annualize those 6,000 scripts for 48 weeks.
And if you have a 60% gross-to-net by our math, that gives us a little under $100 million for the resales. Are we thinking about this the right way for a conservative minimum for 2024, which also isn't taking the atopic dermatitis launch into account or are there other factors we should be considering for the year? Thanks.
Frank Watanabe
I think I'll let John answer that one as a follow-up.
John Smither
Thanks, Frank. Specifically, we're not giving revenue guidance on the 6,000 number, I believe you quoted is both frame and foam on this. As Todd had mentioned, we're seeing early signs of strong Seb Derm. We're seeing improvement around psoriasis.
We're in the early part of the launch. So I think we're standing back and thoughtfully and looking at how that launch is going. We're quite enthusiastic about how the year will turn out, but we're not giving specific guidance on revenue as it relates to gross to net, just as a reminder, we exited 2023 essentially in the mid 60s and there is a reset that happens in Q1 as a result of folks' deductible reset and as folks also changed their medical plans. So you'll you'll see that probably tick up for psoriasis and Seb Derm, but we're confident as the year progresses, that's gross and that will continue to improve toward the end of 2024. And I believe in our script, we mentioned our target is in the 50s.
Thanks.
Operator
Thank you.
Serge Belanger with Needham.
Serge Belanger
Good morning. Thanks for taking my questions and congrats on the progress. And I guess 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 four, I believe it was Zorik cream in psoriasis. I'm just curious how we should think about the other products, especially sorry, foam and what will happen to overall gross-to-net some once the NET indication comes on board and the managed care component also expense?
L. Todd Edwards
Yes. Yes, thank you. On you had mentioned just by John earlier that we are anticipating to second half of the year to achieve that. The 50s for the gross to net that is for the indication of psoriasis. That's too early to comment on their iPhone for several dermatitis. I think the one signal that I mentioned earlier was relative to the coverage, Scripps approaching 50% now of the total volume.
And then relative to a atopic dermatitis. Um, just as a reminder, these are three unique and distinct products have separate NDC. So therefore, they have a separate unique gross-to-nets that relative to the launch potential launch in atopic dermatitis on the PBMs. Similar to what happened with the reform will treat the AT launch as a line extension, which will be able to support rapid uptake of covered prescriptions. It launched for the atopic dermatitis product.
Operator
Thank you.
Vikram Purohit, Morgan Stanley.
Vikram Purohit
Hi, good morning. Thank you for taking our questions. We had two one on seb derm and one on AD. So for seb derm, could you remind us how many cans of product, do you expect patients on the farm to work through annually? I'm understanding it's still pretty early in the launch.
And are there any interesting observations you're picking up from the initial phase of this launch on which areas of the body patients are using the product and how much they're using and whether they're using it either as monotherapy or as a combination agent? And then on AD would just be curious what your latest thinking is on where's the reef cream could fit and if approved, versus other branded topicals that are or may be on the market by the time that we have just thanks.
Frank Watanabe
Yes, Todd, do you want to maybe take the first questions?
L. Todd Edwards
Yeah, the first question relative to on the anticipated number of units. So we're anticipating that the per patient on average per year a patient would use one to two. I served there seb derm units and then relative to on, it's a little bit early to be able to tell where patients are using this on the body. It will have our labels very open relative to anywhere in the body or Scout there relative to monotherapy or not.
Once again, it's too early to tell specifically how dermatologists will likely be using this product, although I will mention and that there has been a lot of feedback from dermatologists relative to the convenience of this product being a monotherapy. And I think that leads back to patients really yearning for something that's more convenient and not having to use home six products on average per week. And so I think that, Gil, this is one significant differentiator of the product to be able to use as a monotherapy, highly effective product anywhere on body and scale.
Operator
Thank you.
Sean Kim, JonesTrading.
Sean Kim
Yes, hi, congratulations, and thank you for taking my questions. I guess one question on Medicaid and Medicare expansion opportunity on. So just curious, what are some of the remaining gating steps to realize that expansion opportunity in the managed care?
And my second question is about the patient awareness. As you mentioned, Alpha approximate 70%, 17%. I'll make patients aware of your brand the product. I'm just curious to hear where there's a demand for your product has been and more on the doctors recommending their products to patients or or vice versa patients kind of requesting the product and then your expectations going forward, whether that order and this will further increase. Thank you.
Frank Watanabe
I'm sorry, but I think those probably both. Are you too?
L. Todd Edwards
Yes, thank you. And just a clarification. The first question that was relative to the Medicaid expansion opportunity, right, (multiple speakers) both Medicaid and Medicare were fantastic.
Yes, relative to Medicare, we are currently in negotiations with a couple of the Part D Medicare plans, and we're anticipating Medicare coverage of some of those Part D plans to be initiated in the second half of 2024. And then relative to a Medicaid, very similar timeframe.
We're at we're also actively talking and working with some of the state Medicaid plans, and we anticipate that those plants will come online near the middle of the year to the second half of the year for the for the Medicaid plans and then on the other relative to patient awareness and also whether it's a physician or doctor driven?
I think right now, it's primarily for the most part, Doctor driven given just it's a new product to market. There has not been any new innovation within this space in two decades. And if you ask them, I providers around this product. So I think there's a tremendous push by physicians to their patients to them to take this product. However, I think over time that paradigm shift to the patient as we continue to engage more directly with patients creates awareness, two patients through a different mode of engagement opportunities.
Frank Watanabe
And Sean, maybe just to clarify for you and the other ones, neither Medicare nor Medicaid are binary coverage decisions, right? So you know, in Medicare, the majority of patients are covered by these Part D plans that are run by various PBMs or insurance companies. And so we'll get coverage with individual Medicare providers, just as we have with commercial, it won't all come at once we get a little bit here a little bit there a little bit and get a place.
And then in the case of Medicaid, that's administered as it's state program through block grants from the federal government. And so you have to negotiate with individual states for Medicaid coverage. And so again, that will be in a kind of a piecemeal coverage process, in fact, even more fragmented since you're dealing with such a large number of states.
Sean Kim
Okay. That's very helpful. Thank you for the clarification.
Operator
Thank you. There are no further questions. Thank you for joining our Q2 as today. This does conclude the call and you may now disconnect.
