Arcutis Biotherapeutics Inc

Arcutis Biotherapeutics Inc. (NASDAQ: ARQT) is a biopharmaceutical business in the late stages of development. Its main goal is to create and market medicines for dermatological illnesses with unmet medical requirements. It builds treatments targeting physiologically verified targets using its dermatological development platform. It has a powerful dermatology development platform with various clinical studies for a variety of inflammatory dermatological disorders.

Key Highlights

• Non-dilutive term loan: SLR Capital Partners provided the Company with a USD 225 million non-dilutive term loan facility in December 2021 at an attractive cost of capital, extending the cash runway into 2024. The facility's conditions provide for USD 75 million to be drawn at closure, with an additional USD 125 million to be made available after the FDA approves roflumilast cream for plaque psoriasis. If specific revenue goals are met, an extra USD 25 million is available. The loan is interest-only for the duration of the five-year term and is secured by the Company's assets.
• Cash and cash equivalent balance: As of December 31, 2021, cash, cash equivalents, restricted cash, and marketable securities were USD 388.6 million, up from USD 286.0 million as of December 31, 2020. Present cash, cash equivalents, and marketable securities, as well as its committed credit capacity, will be enough to sustain its activities through 2024.
• Increase R&D expense for FY21: R&D costs were USD 145.6 million for the year ending December 31, 2021, compared to USD 115.3 million for the same period in 2020. Higher personnel to handle the increasing clinical initiatives, as well as increased professional services expenditures, drove the year-over-year rise for the year ending December 31, 2021.
• Increased net loss for FY21: The net loss for the year ended December 31, 2021, was USD 206.4 million, or USD 4.18 per basic and diluted share, compared to USD 135.7 million, or USD 3.80 per basic and diluted share, for the same period in 2020.
• Technical analysis: The current price for AQRT is currently in a high resistance zone with continuously facing the range of USD 21- USD 22. On the support side, short-term (50-day) SMA and long-term (200-day) SMA are acting as support at the price levels of USD 18.74 and USD 19.63 respectively. Broken on either side will decide the future price movement for the stock.

1-year technical chart (as of May 03, 2022). Source: REFINITIV, Analysis by Kalkine Group

Stock recommendation

Arcutis Biotherapeutics Inc. is in the late stages of development in a few of its drugs such as roflumilast cream for plaque psoriasis, once successful will create an outstanding revenue stream for the business. It is expected from a company like Arcutis to generate big net losses because of huge investments in research and development. As per technical analysis, ARQT is in a range of USD 20 -USD 22 if broken will decide its future stock movement.

We recommend a "Watch" rating on the stock at the closing price of USD 21.51 as of May 03, 2022, with a further evaluation when the range of USD 20-USD 22 is broken as per the technical analysis or any major announcement regarding drug approval.

Technical analysis summary

* Closing price as of May 03, 2022.

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.