What changed in this filing

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Item 1. Business

2025-02-25 compared with 2024-02-27 · 193 added, 188 removed, 789 unchanged (33% of the section changed)

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Our current portfolio is comprised of highly differentiated topical and systemic treatments with significant potential to treat immune-mediated dermatological diseases and conditions.

We believe we have built the industry's leading platform for dermatologic product development and commercialization.

Our strategy is to focus on validated biological targets, and to use our drug development platform and deep dermatology expertise to develop differentiated products that have the potential to address the major shortcomings of existing therapies in our targeted indications.

We believe we have built a leading platform for dermatologic product development and commercialization.

Our strategy is to focus on validated biological targets, and to use our drug development platform and deep dermatology expertise to develop and commercialize differentiated products that have the potential to address the major shortcomings of existing therapies in our targeted indications.

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.

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

ZORYVE cream 0.3% is a once-daily topical formulation of roflumilast, a highly potent and selective phosphodiesterase-4 (PDE4) inhibitor.

ZORYVE cream 0.3% is approved for once-daily treatment of mild, moderate, and severe plaque psoriasis with no limitations on location or duration of use.

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In April 2023, we had our first commercial launch outside of the United States following Health Canada approval of ZORYVE cream 0.3% for the treatment of plaque psoriasis in individuals 12 years or age or older.

ZORYVE cream 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.

We have made significant progress in driving access and coverage of ZORYVE cream since launch.

Weekly prescriptions have continued to increase since launch, with approximately 165,000 prescriptions written as of February 16, 2024.

We believe this growth is due to our ability to drive prescriber awareness and use, patient engagement and positive experience with ZORYVE cream, and our efforts to establish broad, high-quality access for ZORYVE cream.

For example, we established access through three large pharmacy benefit managers in the United States within 12 months of launch.

We estimate that more than 10,700 unique prescribers have prescribed ZORYVE cream since launch.

We estimate that approximately one third of our prescriptions are currently refill prescriptions, and we experienced significant growth in refill prescriptions in the second half of 2023 following our early commercialization efforts and patient engagement.

Market research points to an increasing preference among dermatologists to prescribe ZORYVE cream as a topical treatment of plaque psoriasis, and transitions from topical corticosteroids have been the largest source of new prescriptions for ZORYVE cream since launch.

With respect to commercial payers, we have engaged multiple key insurers and estimate that insurance coverage for ZORYVE cream is available to approximately 132 million commercially covered lives in the United States.

We anticipate that we will be able to obtain Medicare and Medicaid coverage for ZORYVE as early as 2024.

In December 2023, we received FDA approval for ZORYVE ® (roflumilast) topical foam 0.3% (ZORYVE foam) for the treatment of seborrheic dermatitis in individuals aged 9 years and older, with no limitation on severity, location, or duration of use.

ZORYVE foam has been shown to provide rapid disease clearance and significant

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reduction in itch in clinical trials.

In a pivotal Phase 3 study, 80% of individuals treated with ZORYVE foam achieved the primary efficacy endpoint of IGA Success, defined as an IGA score of “clear” or “almost clear” plus a 2-point improvement at Week 8 and just over 50% of individuals achieved an IGA score of clear at Week 8.

In addition, individuals treated with ZORYVE foam reported reductions in itch from baseline within 48 hours of first application.

ZORYVE foam is a once-daily steroid-free foam and, as a PDE4 inhibitor, is the first drug approved for the treatment of seborrheic dermatitis with a new mechanism of action in over two decades.

ZORYVE foam became commercially available in late January 2024, and as of February 16, 2024, 7,000 prescriptions have been written since launch.

Seborrheic dermatitis is estimated to occur in as many as 10 million people in the United States, and is associated with a substantial psychosocial burden for those suffering from the disease.

In addition to the approval of ZORYVE cream for plaque psoriasis and ZORYVE foam for seborrheic dermatitis (collectively, "ZORYVE"), we are also developing ZORYVE cream for the treatment of atopic dermatitis.

In atopic dermatitis, we have successfully completed three pivotal Phase 3 clinical trials:

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.

We are also conducting INTEGUMENT-OLE, an open label extension study of the long-term safety of ZORYVE cream 0.15% in individuals 6 years of age or older and roflumilast cream 0.05% in subjects between the ages 2 and 5 years.

In the fourth quarter of 2022, we announced positive topline data from both INTEGUMENT-1 and -2 in atopic dermatitis, and in September 2023 we announced positive topline data from INTEGUMENT-PED and positive interim results from INTEGUMENT-OLE.

In September 2023, we submitted a supplemental new drug application (“sNDA”) for ZORYVE cream 0.15% for the treatment of mild to moderate atopic dermatitis in individuals 6 years of age or older, which was accepted by the FDA and assigned a Prescription Drug User Fee Act ("PDUFA") target action date of July 7, 2024.

Based on the positive results from the INTEGUMENT-PED study in September 2023, we expect to submit a subsequent sNDA for topical ZORYVE cream 0.05% for children ages 2 to 5 years of age if our current sNDA for ZORYVE cream 0.15% is approved for the treatment of mild to moderate atopic dermatitis in individuals 6 years of age or older.

Beyond seborrheic dermatitis, we are also developing ZORYVE foam for scalp and body psoriasis and have successfully completed our pivotal Phase 3 clinical trial.

We announced positive topline data in September 2022, and we plan to submit an sNDA in the second half of 2024.

Beyond ZORYVE, 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.

ZORYVE foam became commercially available in the United States in late January 2024, and was approved by Health Canada in October 2024 and became commercially available in Canada in December 2024.

In addition to the approval of ZORYVE cream 0.3% for plaque psoriasis and ZORYVE foam for seborrheic dermatitis, we also received FDA approval for and commercially launched ZORYVE (roflumilast) cream 0.15% (ZORYVE cream 0.15%), (collectively, ZORYVE), in July 2024 for the treatment of mild to moderate atopic dermatitis in adults and pediatric patients 6 years of age and older, with no limitation on location, body surface area treated, concomitant use, or duration of use specified in the approved labelling.

ZORYVE cream 0.15% is a once-daily, steroid-free cream that provides rapid disease clearance and significant reduction in itch and has been specifically developed to be a treatment option for long-term disease control.

We have also completed a Phase 3 trial of ZORYVE cream 0.05% in pediatric patients 2 to 5 years of age with mild to moderate atopic dermatitis (INTEGUMENT-PED).

Based on the positive results from the INTEGUMENT-PED study, and given our recent approval of ZORYVE cream 0.15% for the treatment of mild to moderate atopic dermatitis in individuals 6 years of age or older, we submitted a supplemental new drug application (sNDA) for topical ZORYVE cream 0.05% for children 2 to 5 years of age in December 2024.

We conducted INTEGUMENT-OLE, an open label extension study of the long-term safety of ZORYVE cream 0.15% in subjects 6 years of age or older and ZORYVE cream 0.05% in

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subjects between the ages 2 and 5 years, for which we reported positive results in September 2023 and August 2024, respectively.

Beyond seborrheic dermatitis, we are also developing ZORYVE foam for scalp and body psoriasis and have successfully completed our Phase 2b and pivotal Phase 3 clinical trials.

We announced positive topline data in September 2022, with ZORYVE foam showing rapid disease clearance and significant reduction in itch.

In the pivotal Phase 3 ARRECTOR study, at Week 8, 66% of individuals treated with ZORYVE foam achieved the co-primary efficacy endpoint of Scalp IGA Success, defined as a Scalp IGA score of “clear” or “almost clear” plus a 2-point improvement, and 46% of patients achieved the co-primary efficacy endpoint of Body IGA Success, defined as a Body IGA score of "clear" or "almost clear" plus a 2-point improvement.

In addition, individuals treated with ZORYVE foam reported reductions in itch from baseline within 24 hours of first application.

Based on the ARRECTOR results and a Phase 2b study, we submitted an sNDA to the FDA for a label expansion to include scalp and body psoriasis in adults and adolescents ages 12 and over, which was recently accepted by the FDA with a Prescription Drug User Fee Act (PDUFA) target action date in May 2025.

In July 2024, we entered into a co-promotion agreement with Kowa Pharmaceuticals, Inc.

(Kowa) to leverage Kowa's primary care sales force to exclusively market and promote ZORYVE in the United States to primary care practitioners and pediatricians for all FDA-approved indications until at least July 2029.

Under the terms of the agreement, Kowa will receive a commission from net sales attributed to Kowa.

Promotion of ZORYVE in primary care and pediatrics under the Kowa agreement began in late September 2024.

In addition to ZORYVE, 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.

We completed enrollment in a Phase 1b study evaluating ARQ-255 for the treatment of alopecia areata and expect data in the first half of 2025.

In September 2022, we acquired Ducentis BioTherapeutics LTD (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.

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Dermatological diseases such as psoriasis, atopic dermatitis, seborrheic dermatitis, hand eczema, alopecia areata, and vitiligo affect hundreds of millions of people worldwide each year, impacting their quality of life, and physical, functional, and emotional well-being.

We are working towards submitting an Investigational New Drug (IND) application during 2025.

Dermatological diseases such as psoriasis, atopic dermatitis, seborrheic dermatitis, and alopecia areata affect hundreds of millions of people worldwide each year, impacting their quality of life, and physical, functional, and emotional well-being.

There are many approved treatments for these conditions, but a large opportunity remains due to issues with existing treatments.

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In psoriasis, vitamin D analogs are also used, but have lower response rates than TCS and are frequently irritating.

Topical tapinarof was approved in May 2022 for the treatment of adults with plaque psoriasis, but this non-steroidal agent also carries significant application site reactions.

Topical tapinarof was approved in May 2022 for the treatment of adults with plaque psoriasis and in December 2024 for adults and children with atopic dermatitis, but this non-steroidal agent also carries significant application site reactions.

In atopic dermatitis, topical calcineurin inhibitors, or TCIs, and crisaborole (Eucrisa ® ), a topical non-steroidal PDE4 inhibitor, are used, but have lower response rates than TCS and are associated with application site burning.

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Additionally, many patients on biologic and systemic therapies still require adjunctive topical therapy to treat residual symptoms.

In atopic dermatitis, biologic and systemic therapy continues to evolve, and we see opportunity to continue to advance the standard of care for patients with moderate-to-severe disease, for example with regard to response rates and dosing frequency.

In atopic dermatitis, biologic and systemic therapy continues to evolve, and we see opportunity

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to continue to advance the standard of care for patients, for example with regard to response rates and dosing frequency.

Given the limitations associated with existing treatments, we believe patients with inflammatory skin conditions and their dermatologists are dissatisfied with their current treatment options.

We believe that there is a significant opportunity to leverage developments in other fields of medicine, particularly inflammation and immunology, to address the significant need for effective chronic treatments in immuno-dermatology.

Our initial development and commercial focus is to address patients’ significant need for innovative topical treatments that directly target molecular mediators of disease, have the potential to show significant symptomatic improvement, maintain a low risk of toxicity or side effects, and are suitable for chronic use on all areas of the body.

Based on market research and our internal estimates, we estimate there is an overall patient market of approximately 15.2 million patients in the United States that are treated with topical therapies for plaque psoriasis, seborrheic dermatitis, and atopic dermatitis in dermatology offices (approximately 7.8 million) and outside dermatology (approximately 7.4 million).

Of the patients that are treated in dermatology offices, we estimate that approximately 3.3 million of these patients (approximately 0.7 million plaque psoriasis patients, 1.5 million seborrheic dermatitis patients, and 1.2 million atopic dermatitis patients) are addressable or accessible with Medicare and Medicaid coverage and that approximately 4.4 million patients across plaque psoriasis (approximately 1.4 million), seborrheic dermatitis (approximately 1.7 million), and atopic dermatitis (approximately 1.4 million) are covered by commercial insurance.

Patients that are treated outside of dermatology offices are addressable through other physicians, especially primary care physicians, pediatricians, and allergists.

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Our primary focus since our founding has been to address patients’ significant need for innovative topical treatments that directly target molecular mediators of disease, have the potential to show significant symptomatic improvement, maintain a low risk of toxicity or side effects, and are suitable for chronic use on all areas of the body.

Based on market research and our internal estimates, we estimate there is an overall actively prescription treated patient market of approximately 17.0 million patients in the United States that are treated with topical therapies for plaque psoriasis, seborrheic dermatitis, and atopic dermatitis in dermatology offices (approximately 8.4 million) and outside dermatology (approximately 8.6 million).

Of the patients that are treated in dermatology offices, we estimate that approximately 3.7 million of these patients are covered by Medicare or Medicaid, while approximately 4.7 million are covered by private payers.

Patients that are treated outside of dermatology offices are primarily treated by primary care providers and pediatricians, and the ratio of commercial to government insurance is similar.

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Our Portfolio and Pipeline

The following chart summarizes our product portfolio and pipeline:

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Our strategy is to leverage recent innovations in inflammation and immunology to identify molecules against validated biological targets in dermatology, and to develop and commercialize best-in-class products based on those molecules that address significant unmet needs in immuno-dermatology:

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Our strategy is to leverage innovations in inflammation and immunology to identify molecules against validated biological targets in dermatology, and to develop and commercialize best-in-class products based on those molecules that address significant unmet needs in immuno-dermatology:

Key elements of our strategy include:

• Commercialize ZORYVE cream for the treatment of patients with plaque psoriasis, and obtain approval for ZORYVE cream for atopic dermatitis.

We believe ZORYVE cream is a best-in-class non-steroidal topical treatment for plaque psoriasis, with symptomatic improvement in psoriasis patients similar to the combination of a high potency steroid and calcipotriene, the ability to use anywhere on the body including sensitive areas, a rapid and significant impact on itch, coupled with a low rate of side effects and a favorable tolerability profile that enables chronic administration, including for pediatric patients.

• Commercialize ZORYVE cream 0.3% for the treatment of patients with plaque psoriasis and ZORYVE cream 0.15% for the treatment of patients with atopic dermatitis.

We commercially launched ZORYVE cream 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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Following this approval, ZORYVE cream is indicated for use in patients 6 years of age and older.

In atopic dermatitis, we have completed two pivotal Phase 3 clinical studies with ZORYVE cream, INTEGUMENT-1 and -2 in subjects 6 years of age or older, and a third pivotal Phase 3 study, INTEGUMENT-PED, in subjects between the ages of 2 and 5 years, in each case in subjects with mild to moderate atopic dermatitis.

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

In November 2023, the FDA accepted for filing our sNDA for ZORYVE cream 0.15% for the treatment of atopic dermatitis in adults and children down to age 6 and assigned a PDUFA target action date of July 7, 2024.

In September 2023, we announced positive topline data from the INTEGUMENT-PED trial.

We intend to submit a subsequent sNDA for the younger age cohort if the FDA approves our sNDA for ZORYVE cream 0.15% for treatment of atopic dermatitis in patients aged 6 years or older.

• Commercialize ZORYVE foam for the treatment of patients with seborrheic dermatitis and further expand our addressable market with potential additional foam indications.

In atopic dermatitis, we commercially launched ZORYVE cream 0.15% in July 2024 for the treatment of mild to moderate atopic dermatitis in adults and pediatric patients 6 years of age and older.

We submitted a subsequent sNDA for ZORYVE cream 0.05% for 2-5 year olds in December 2024.

• Commercialize ZORYVE foam for the treatment of patients with seborrheic dermatitis and further expand our addressable market with the potential approval of the foam in scalp and body psoriasis.

In December 2023, we received FDA approval for ZORYVE foam for the treatment of seborrheic dermatitis in individuals aged 9 years and older.

ZORYVE foam became commercially available in late January 2024.

We have also successfully completed a pivotal Phase 3 clinical trial with ZORYVE foam in scalp and body psoriasis, demonstrating promising efficacy and tolerability results.

In scalp and body psoriasis, we announced positive topline data in September 2022, and we plan to submit an sNDA in the second half of 2024.

• Establish an integrated development and commercial organization .

We have built a fully integrated commercial organization and targeted specialty sales force for the commercialization of our products among dermatology specialists.

We announced positive topline data from our Phase 3 scalp and body psoriasis trial in September 2022, and we submitted an sNDA to the FDA for a label expansion to include scalp and body psoriasis in adults and adolescents ages 12 and over, which was accepted by the FDA with a PDUFA target action date in May 2025.

• Exploit our integrated development and commercial organization to maximize the value of our products and product candidates .

We have built a fully integrated commercial organization and a targeted specialty sales force for the commercialization of our products among dermatology specialists.

Because of the concentrated prescriber base of the U.S.

dermatology segment, we believe our infrastructure should be sufficient for us to commercialize our products to dermatology specialists.

To further enhance the value of our product candidates, we may selectively seek partners to commercialize our products outside of the dermatology specialist segment, such as primary care physicians, and to develop and commercialize our products outside of the U.S.

and Canadian market.

• Execute on responsible pricing strategy and product access to enable rapid and high-quality insurance coverage .

We have also partnered with Kowa to promote our approved ZORYVE in the United States to primary care practitioners and pediatricians.

To further enhance the value of our product candidates, we have partnered with companies in Japan, China, and greater Asia to develop and commercialize ZORYVE, and may selectively seek additional partners to develop and commercialize our products in other markets.

• Execute our responsible pricing strategy and product access to enable rapid and high-quality insurance coverage and product access .

We are committed to helping patients have access to our product, including setting a responsible price, working with payers to help ensure broad high-quality payer access, and supporting programs like our Arcutis Cares TM patient assistance program and the ZORYVE Direct TM patient access support program.

• Further expand our product portfolio through the development of ARQ-25 5 and ARQ-252.

We are developing ARQ-255 and ARQ-252, both of which contain ivarmacitinib, a JAK1 inhibitor with a high relative selectivity to JAK1 over Janus kinase type 2, or JAK2, for the treatment of alopecia areata, chronic hand eczema, and vitiligo.

We are developing ARQ-255 and ARQ-252, both of which contain ivarmacitinib, a JAK1 inhibitor with a high relative selectivity to JAK1 ov er Janus ki nase type 2 (JAK2), for the treatment of alopecia areata, chronic hand eczema, and vitiligo.

Given their high relative selectivity to JAK1 over JAK2, we believe ARQ-255 and ARQ-252 have the potential to treat inflammatory diseases without causing the hematopoietic adverse effects associated with JAK2 inhibition, which in turn gives them the potential to be best-in-class treatment options, if approved.

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.

Reformulation efforts

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continue for ARQ-252.

We recently completed enrollment in a Phase 1b study evaluating ARQ-255 for the treatment of alopecia areata and expect data in the first half of 2025.

Reformulation efforts continue for ARQ-252.

• Develop ARQ-234 as a complimentary treatment to ZORYVE.

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We believe our management team's experience in developing dermatological drugs, including biologics, will enable us to move ARQ-234 into the clinic and through the development process.

ARQ-234 also has the potential to treat multiple other inflammatory diseases, which we may choose to pursue ourselves or through partnerships.

Currently, we are working towards

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submitting an IND during 2025.

• Leverage our product development platform to continue innovating and developing novel new treatments for dermatological diseases.

Our expertise in dermatological clinical development and commercialization allows us to identify areas of high unmet needs, and our product development platform may allow us to develop novel new treatments that address those needs, as it has already with ZORYVE cream, ZORYVE foam, and ARQ-252/ARQ-255.

• Evaluate strategic opportunities to in - license or acquire best-in-class dermatology assets consistent with our core strategy.

Leveraging our deep expertise in identifying promising drug candidates in dermatology, we will continue to seek best-in-class assets, similar to ARQ-234, across treatment modalities directed against validated targets.

We will continue to explore opportunities to in-license assets and develop them to address unmet medical needs in dermatology.

Leveraging our deep expertise in identifying promising drug candidates, we will continue to seek best-in-class assets, similar to ARQ-234, across treatment modalities directed against validated targets.

We will continue to explore opportunities to in-license assets and develop them to address unmet medical needs in immunology and dermatology.

We believe one of our core strengths is our leading platform for dermatology product development.

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Our platform has already generated several significant innovations, including:

• Our innovative topical cream and foam formulations of roflumilast (patented);

• The pharmacokinetic characteristics relating to improving delivery and extending half-life of both the cream and foam formulations of topical roflumilast (patented);

• Our innovative topical cream and foam formulations of ZORYVE (patented);

• The pharmacokinetic characteristics relating to improving delivery and extending half-life of both the cream and foam formulations of ZORYVE (patented);

• A novel topical cream without skin-drying surfactants (patent pending);

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• A composition of roflumilast without a paraben preservative (patent pending).

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ZORYVE Cream (ARQ-151)

Our lead product, ZORYVE cream, offers symptomatic improvement in psoriasis patients similar to the combination of a high potency steroid and calcipotriene, a favorable tolerability profile, the ability to be used chronically, and little to none of the application site reactions associated with many existing topical treatments.

Our lead product, ZORYVE cream, offers symptomatic improvement in psoriasis and atopic dermatitis patients similar to the combination of a high potency steroid and calcipotriene, a favorable tolerability profile, the ability to be used chronically, and little to none of the application site reactions associated with many existing topical treatments.

ZORYVE cream is designed for simple once-a-day application for chronic use, does not burn or sting on application, and can be used on any part of the body, including sensitive or difficult-to-treat areas, such as the face and intertriginous regions.

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We aim to further expand the indication in plaque psoriasis down to 2 years of age following the generation of additional clinical data.

We are also developing topical ZORYVE cream for atopic dermatitis, and our Phase 3 program includes four studies:

two identical studies with approximately 650 subjects each, ages 6 and above (INTEGUMENT-1 and -2) using ZORYVE cream 0.15%;

a study with more than 650 subjects ages 2-5 in each study (INTEGUMENT-PED) using ZORYVE cream 0.05%;

and an open label extension study with up to 1,500 subjects ages 2 and up (INTEGUMENT-OLE).

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

In November 2023, the FDA accepted for filing our sNDA for topical ZORYVE cream 0.15% for the treatment of mild to moderate atopic dermatitis in adults and children down to age 6 and assigned a PDUFA target action date of July 7, 2024.

In September 2023, we announced positive topline data from the INTEGUMENT-PED trial.

We intend to submit a subsequent sNDA for ZORYVE cream 0.05% for the younger age cohort if the FDA approves our sNDA for ZORYVE cream 0.15% for treatment of mild to moderate atopic dermatitis in patients aged 6 years or older.

In September 2023, we announced positive interim results regarding patients 6 years of age and older from the INTEGUMENT OLE study.

The primary objective of the study was to assess the long-term safety based on the occurrence of adverse events and serious adverse events.

The interim results regarding patients 6 years of age and older from the study demonstrated long-term safety and a tolerability profile consistent with data from our INTEGUMENT-1 and -2 trials, with no new safety signals observed up to 56 weeks of treatment.

We are also commercially launched topical ZORYVE cream 0.15% in July 2024 after obtaining approval for the treatment of mild to moderate atopic dermatitis in individuals 6 years and older.

We have developed a lower-dose-concentration, ZORYVE cream 0.05%, and have completed our Phase 2 and Phase 3 studies in this population.

Based on positive data, we submitted an sNDA in December 2024.

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In July 2018, we executed a licensing agreement with AstraZeneca AB (AstraZeneca) for exclusive worldwide rights to roflumilast as a topical product in humans solely for dermatological indications.

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Psoriasis patients are generally characterized as mild, moderate, or severe, with approximately 75% experiencing a mild-to-moderate form of the disease and 25% experiencing a moderate-to-severe form of the disease.

Pruritus (itching) is a particularly common and bothersome symptom for patients, which can be severe and

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impact sleep patterns.

Pruritus (itching) is a particularly common and bothersome symptom for patients, which can be severe and impact sleep patterns.

In addition, patients with plaque psoriasis can suffer substantial psychosocial impacts from their disease and have a 50% greater chance of depression than the general population.

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Consequently, high potency topical steroids are not recommended for chronic use, and physicians generally will not prescribe them for treatment on the face or in the intertriginous regions.

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Steroid-induced striae (left) and Steroid-induced skin atrophy (right)

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In clinical trials, treatment with tapinarof was associated with folliculitis, contact dermatitis, burning, stinging, and itching.

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Because high potency steroids and combinations containing high potency steroids provide robust symptomatic improvement for psoriasis patients, most physicians initiate treatment for nearly all patients with them.

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The rash causes significant pruritus (itching), which can lead to damage caused by scratching or rubbing and perpetuating an ‘itch-scratch’ cycle.

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Atopic Dermatitis

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Current Atopic Dermatitis Treatment Landscape

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The vast majority of atopic dermatitis patients are being treated with topical therapies, particularly low- to mid-potency topical steroids and TCIs, and these two classes of drugs constituted nearly all atopic dermatitis prescriptions in 2022.

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The label carries an extensive boxed warning for serious infections, all-cause mortality, malignancy, major adverse cardiovascular events and thrombosis.

• Tapinarof is a non-steroidal topical aryl hydrocarbon receptor (AhR) agonist approved in May 2022 for adults with plaque psoriasis.

In clinical trials, treatment with tapinarof was associated with folliculitis, contact dermatitis, burning, stinging, and itching.

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Treatment with biologics such as Dupixent ® , as well as recently launched oral agents, remains highly restricted.

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Key Completed Trials

ARQ-151-301 and 302 (DERMIS-1 and DERMIS-2 pivotal Phase 3 studies)

DERMIS-1 and DERMIS-2 pivotal Phase 3 studies

The DERMIS-1 and DERMIS-2 studies were identical pivotal Phase 3 randomized, parallel, double-blind, vehicle-controlled, multi-national, multi-center studies in which subjects age 2 years and above with mild, moderate, or severe chronic plaque psoriasis involving between 2% and 20% body surface area received 8 weeks of (i) ZORYVE cream 0.3% once daily or (ii) matching vehicle once daily.

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Results from the eight-week treatment period demonstrated statistically significant improvement compared to the matching vehicle on key efficacy endpoints.

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achieved IGA Success, compared to 6.1% of subjects treated with vehicle (p < 0.0001) in DERMIS-1, and 37.5% of subjects treated with ZORYVE cream achieved IGA Success, compared to 6.9% of subjects treated with vehicle (p<0.0001) in DERMIS-2.

On the studies’ primary efficacy endpoint of percentage of subjects achieving Investigator Global Assessment (IGA) success, which was defined as a score of “clear” or “almost clear” plus a 2-grade improvement from baseline at Week 8, 42.4% of subjects treated with ZORYVE cream achieved IGA Success, compared to 6.1% of subjects treated with vehicle (p < 0.0001) in DERMIS-1, and 37.5% of subjects treated with ZORYVE cream achieved IGA Success, compared to 6.9% of subjects treated with vehicle (p<0.0001) in DERMIS-2.

ZORYVE cream also demonstrated statistically significant improvements over vehicle on key secondary endpoints, including on Intertriginous IGA Success, Psoriasis Area Severity Index-75, reductions in itch as measured by the Worst Itch-Numerical Rating Scale, and patient perceptions of symptoms as measured by the Psoriasis Symptoms Diary (PSD).

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The primary outcome measures of this long-term safety study were the occurrence of TEAEs and the occurrence of serious adverse events.

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In this open label study, ZORYVE cream 0.3% applied once daily for up to 52 weeks demonstrated favorable safety and tolerability over the long-term treatment period, consistent with what was seen in the randomized Phase 2b study, with only 3.6% of subjects experiencing a treatment-related adverse event during 52 weeks of treatment.

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Atopic Dermatitis

We are also developing ZORYVE cream for the treatment of atopic dermatitis.

In atopic dermatitis, we have successfully completed three pivotal Phase 3 clinical trials:

INTEGUMENT-1 and -2 enrolled subjects 6 years of age or older and studied ZORYVE cream 0.15%, and INTEGUMENT-PED enrolled subjects between the ages of 2 and 5 years and studied ZORYVE cream 0.05%.

We are also conducting INTEGUMENT-OLE, an open label extension study of the long-term safety of ZORYVE cream 0.15% in individuals 6 years of age or older and ZORYVE cream 0.05% in subjects between the ages 2 and 5 years.

In September 2023, we submitted an sNDA for topical ZORYVE 0.15% for the treatment of mild to moderate atopic dermatitis in individuals 6 years of age or older, and in November 2023, the FDA accepted for filing our sNDA and assigned a PDUFA target action date of July 7, 2024.

Based on the positive results from the INTEGUMENT-PED study announced in September 2023, we expect to submit a subsequent sNDA for children ages 2 to 5 years of age if our current sNDA for ZORYVE cream 0.15% is approved for treatment of mild to moderate atopic dermatitis in individuals 6 years of age or older.

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We commercially launched ZORYVE cream 0.15% for the treatment of mild to moderate atopic dermatitis in adults and children down to age six in August 2024.

Our NDA submission was based on three Phase 3 studies, as well as a Phase 2 dose-ranging study, and two Phase 1 pharmacokinetic studies.

We have also developed ZORYVE cream 0.05% for the treatment of atopic dermatitis between the ages of 2 and 5 years of age.

Based on positive data of our two Phase 3 studies in this age group, we submitted an sNDA in December 2024.

Key Completed Trials

ARQ-151-311 and 312 (INTEGUMENT-1 and INTEGUMENT-2 pivotal Phase 3 studies)

Our atopic dermatitis Phase 3 program includes four studies, one ongoing study (INTEGUMENT-OLE), and the three completed studies INTEGUMENT-1 and -2 and INTEGUMENT-PED.

INTEGUMENT-1 and INTEGUMENT-2 were multi-center, double-blind, vehicle-controlled Phase 3 studies, with more than 650 subjects in each study, ages 6 and above with mild to moderate atopic dermatitis.

INTEGUMENT-1 and INTEGUMENT-2 pivotal Phase 3 studies

Our atopic dermatitis Phase 3 program includes three 4-week pivotal studies and a 52-week open label extension study.

The INterventional Trial EvaluatinG roflUMilast cream for the treatmENt of aTopic dermatitis (INTEGUMENT) 1 and 2 were multi-center, double-blind, vehicle-controlled Phase 3 studies, with more than 650 subjects in each study, ages 6 and above with mild to moderate atopic dermatitis.

Subjects were randomized to receive once daily topical applications for 4 weeks of ZORYVE cream 0.15%, or vehicle.

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Over 90% of patients who were randomized to ZORYVE cream in both studies completed the full 4 weeks, and there were few discontinuations due to adverse events.

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INTEGUMENT-PED Trial

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In addition, 21.2% of patients achieved IGA success at Week 2, compared to 6.8% of patients treated with vehicle (p < 0.0001), and 9.4% of patients achieved IGA success at Week 1, compared to 0.9% of patients treated with vehicle (p < 0.0001).

In the trial, 35.3% of patients treated with ZORYVE cream 0.05% with an itch score of at

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least four at baseline achieved a four-point reduction in itch score compared to baseline, as measured by the WI-NRS, compared to 18.0% of patients treated with vehicle (p = 0.0002).

In the trial, 35.3% of patients treated with ZORYVE cream 0.05% with an itch score of at least four at baseline achieved a four-point reduction in itch score compared to baseline, as measured by the WI-NRS, compared to 18.0% of patients treated with vehicle (p = 0.0002).

ZORYVE cream 0.05% was well-tolerated, with rates of treatment-emergent adverse events (TEAEs) low across the active treatment and vehicle arms.

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There were no treatment-related serious adverse events.

Key Ongoing Trials

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INTEGUMENT OLE (long range study)

In addition, our “INterventional Trial EvaluatinG roflUMilast cream for the treatmENt of aTopic dermatitis Open Label Extension” (INTEGUMENT-OLE) study is a Phase 3, multicenter, open label extension study that has enrolled 1220 subjects who have completed INTEGUMENT-1, -2, or -PED.

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In addition, 61.5% and 66.2% of patients treated with ZORYVE cream 0.15% achieved EASI-75 at Week 28 and 56, respectively, compared to 60.9% and 64.6%, respectively, of patients treated with vehicle.

In August 2024, we announced positive results for subjects 2 to 5 years old.

In the study, ZORYVE cream 0.05% was well-tolerated, with no new safety signals observed during treatment of up to 56 weeks in duration.

Efficacy results were not only maintained but also improved over time, with 71.9% of participants who rolled over from the roflumilast cream 0.05% treatment arm in INTEGUMENT-PED achieving EASI 75 after 56 weeks.

Overall incidence of adverse events was low, with most being mild to moderate in nature.

The most frequently reported adverse events (≥3%) included:

upper respiratory tract infection, nasopharyngitis, pyrexia, influenza, COVID-19, and otitis media.

We believe these results demonstrate the durability of treatment and the potential for improvement in patient symptoms over time.

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ZORYVE Foam (ARQ-154)

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We have successfully completed our pivotal Phase 3 study of ZORYVE foam in scalp and body psoriasis (ARRECTOR), demonstrating promising efficacy and tolerability results.

We announced positive topline data in September 2022, and we plan to submit an sNDA in the second half of 2024.

We announced positive topline data in September 2022, and have submitted our sNDA with a PDUFA in May 2025.

We believe that ZORYVE foam could offer physicians and patients a highly differentiated clinical profile that is ideally suited to address unmet needs in the topical treatment of seborrheic dermatitis and potentially scalp and body psoriasis.

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Seborrheic Dermatitis

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Current Seborrheic Dermatitis Treatment Landscape

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Scalp psoriasis can also be associated with hair loss, likely due to damage to the hair from excessive scratching, rubbing, or combing of the affected area.

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Scalp Psoriasis

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Key Completed Trials

ARQ-154-304 (STRATUM pivotal Phase 3 Study)

STRATUM pivotal Phase 3 Study

The " ST udy of R oflumilast foam A pplied T opically for the red U ction of seborrheic der M atitis" (STRATUM) was a Phase 3, parallel group, double blind, vehicle-controlled study of the safety and efficacy of ZORYVE foam 0.3% administered once-daily.

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ARQ-154-214 (Long-Term Safety)

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Study ARQ-154-214 was a multi-center, open label Phase 2 long-term safety study of ZORYVE foam 0.3% applied once daily in subjects with seborrheic dermatitis.

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Key Completed Trials

ARQ-154-309 (ARRECTOR pivotal Phase 3 Study)

ARRECTOR pivotal Phase 3 Study

The “ A R andomized t R ial E mploying topi C al roflumilasT foam to treat scalp ps OR iasis” (ARRECTOR) study was a parallel group, double blind, vehicle-controlled pivotal Phase 3 study of the safety and efficacy of ZORYVE foam 0.3% or a matching vehicle administered once-daily in subjects with scalp and body psoriasis ages 12 and older.

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ARQ-234 binds to CD200R and has the potential to restore immune homeostasis by inducing inhibitory signaling on immune cells that regulate inflammation.

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CD200R has been validated as a target in atopic dermatitis, with preclinical data for ARQ-234 and clinical data for a similar molecule under development by another company each providing evidence of a robust and durable therapeutic response, even after discontinuation of treatment.

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We plan to develop ARQ-234 in atopic dermatitis, where it could be a potentially highly complementary treatment option to ZORYVE cream in that indication, if approved.

We believe the acquisition of this preclinical asset is a transformative opportunity for Arcutis and, in leveraging our team's deep dermatology expertise and broad biologics experience, that our leadership and operational team will enable us to rapidly move ARQ-234 into the clinic and through the development process.

We believe the acquisition of this preclinical asset is a transformative opportunity for Arcutis and, in leveraging our team's deep dermatology expertise and broad biologics experience, that our leadership and operational team will enable us to move ARQ-234 into the clinic and through the development process.

We are working towards submitting an IND in 2025.

We are developing ARQ-255, an innovative topical formulation of ivarmacitinib, a potent and highly selective small molecule inhibitor of JAK1, for the treatment of alopecia areata.

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We believe that due to its high selectivity for JAK1 over JAK2, ARQ-255 has the potential to treat inflammatory diseases without causing the hematopoietic adverse effects associated with JAK2 inhibition.

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

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

Alopecia Areata

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Alopecia Areata

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Current Alopecia Areata Treatment Landscape

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ARQ-255-126 Study (Phase 1b Study)

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.

We completed enrollment in a Phase 1b study evaluating ARQ-255 for the treatment of alopecia areata and expect data in the first half of 2025.

The Phase 1b study is a vehicle-controlled, double-blind, multi-center study designed to evaluate the safety, tolerability, and pharmacokinetics of treatment with ARQ-255 topical suspension 3% or vehicle in healthy adult subjects and individuals with patchy alopecia areata.

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The impact of hand eczema on patients can be significant, leading to work absences or disability, social stigmatization, and psychosocial distress.

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Current Hand Eczema Treatment Landscape

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

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

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non-injectable systemic therapies used to treat plaque psoriasis such as Otezla, marketed by Amgen Inc., and Sotyktu ® , marketed by Bristol Myers Squibb;

topical therapies such as tapinarof, marketed by Dermavant Sciences, Inc.;

topical therapies such as tapinarof, marketed by Organon;

branded and generic versions of clobetasol, such as Clobex ® , marketed by Galderma Laboratories, LP;

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In addition, there are several prescription product candidates under development that could potentially be used to treat atopic dermatitis and compete with ZORYVE cream and ARQ-234, including but not limited to:

topical tapinarof, under development by Dermavant Sciences, Inc., topical delgocitinib, under development by LEO Pharma A/S and Japan Tobacco, Inc.

topical tapinarof, under development by Organon, topical delgocitinib, under development by LEO Pharma A/S and Japan Tobacco, Inc.

(approved as Corectim in Japan), topical PF-07038124, under development by Pfizer Inc, topical difamilast ointment, under development by Medimetriks/Otsuka Pharma, injectable lebrikizumab, under development by Eli Lilly and Company, injectable rocatinlimab, under development by Amgen, and injectable amlitelimab, under development by Sanofi.

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oral PF-06651600 and oral PF-06700841, both under development by Pfizer Inc.

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Commercial Operations

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As of February 25, 2025, we own 20 issued U.S.

patents, two issued European patents, four issued Canadian patents, five issued Japanese patents, one issued Chinese patent, one issued Hong Kong patent, two issued Eurasian patents, one issued Indian patent, two issued Mexican patents, one issued Korean patent, and one issued New Zealand patent.

patents, three issued Australian patents, three issued Canadian patents, two issued Chinese patents, two issued Eurasian patents, two issued European patents (validated in various EPO member states), one issued Hong Kong patent, two issued Indian patents, two issued Israeli patents, seven issued Japanese patents, three issued Mexican patents, two issued New Zealand patents, and two issued South Korean patents.

We also own 19 pending U.S.

patent applications, and 70 pending foreign applications (three in Canada, six in Hong Kong, six in Japan, five in Mexico, seven in New Zealand, one in India, six in Australia, six in Europe, six in Israel, six in Brazil, seven in China, five in Korea and one in Eurasia, one in Singapore, and four under the Patent Cooperation Treaty), relating to a roflumilast cream and/or roflumilast foam.

Six of our U.S.

patents are listed in the FDA’s Orange Book for our roflumilast 0.3% cream product, and seven of our U.S.

patent applications, and 76 pending foreign applications (four in Australia, seven in Brazil, five in Canada, ten in China, one in Eurasia, eight in Europe, seven in Hong Kong, two in India, five in Israel, five in Japan, four in Mexico, seven in New Zealand, five in South Korea, three in Singapore, and three under the Patent Cooperation Treaty), relating to a roflumilast cream and/or roflumilast foam.

Twelve of our U.S.

patents are listed in the FDA’s Orange Book for our roflumilast 0.15% and 0.3% cream products, and thirteen of our U.S.

patents are listed in the Orange Book patents for our roflumilast 0.3% foam product.

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Data exclusivity for oral roflumilast expired on January 23, 2021.

Our issued patents relating to a roflumilast cream and/or a roflumilast foam contain claims directed to, among other things, pharmaceutical compositions comprising roflumilast and hexylene glycol, methods of making such compositions, and methods of treatment using such compositions, methods of treating a patient by topically administering compositions comprising roflumilast, diethylene glycol monoethyl ether, and an emulsifier blend comprising cetostearyl alcohol, dicetyl phosphate, and ceteth-10 phosphate, methods of treating fungal infections by administering compositions comprising roflumilast, and methods for improving treatment adherence by improving delivery and extending the plasma half-life of a roflumilast composition.

Our issued patents relating to a roflumilast cream and/or a roflumilast foam contain claims directed to, among other things, pharmaceutical compositions comprising roflumilast and hexylene glycol, pharmaceutical compositions comprising roflumilast and diethylene glycol monoethyl ether, pharmaceutical compositions comprising roflumilast and cetostearyl alcohol, dicetyl phosphate, and ceteth-10 phosphate, methods of making such compositions, and methods of treatment using such compositions, methods of treating fungal infections by administering compositions comprising roflumilast, and methods for improving treatment adherence by improving delivery and extending the plasma half-life of a roflumilast composition.

These issued U.S.

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We also have a method of treatment patent for roflumilast foam in the treatment of seborrheic dermatitis which expires 2041.

Our pending patents relating to roflumilast cream and roflumilast foam contain claims directed to, among other things, pharmaceutical compositions of roflumilast and diethylene glycol monoethyl ether, pharmaceutical compositions of roflumilast and cetostearyl alcohol, dicetyl phosphate, and ceteth-10 phosphate, methods of treatment using such compositions, methods of manufacturing such compositions,

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and other aspects of our roflumilast formulations, including unique pharmacokinetic aspects of topical roflumilast compositions.

Our pending patents relating to roflumilast cream and roflumilast foam contain claims directed to,

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among other things, pharmaceutical compositions comprising roflumilast and diethylene glycol monoethyl ether, pharmaceutical compositions comprising roflumilast, cetostearyl alcohol, dicetyl phosphate, and/or ceteth-10 phosphate, methods of treatment using such compositions, methods of manufacturing such compositions, and other aspects of our roflumilast formulations, including unique pharmacokinetic aspects of topical roflumilast compositions.

• ARQ-252 & ARQ-255 :

As of February 25, 2025, we have an exclusive license from Hengrui to six issued U.S.

patents, five issued Japanese patents, and five issued EU patents (validated in various European Patent Organisation (EPO) member states) relating to ivarmacitinib.

patents, five issued Japanese patents, and five issued EU patents (validated in various EPO member states) relating to ivarmacitinib.

These patents and patent applications contain claims directed towards the composition of matter of the ivarmacitinib compound and bisulfate and crystalline forms thereof, pharmaceutical compositions and treatment methods.

The issued patents and pending applications, if issued, relating to ivarmacitinib will not begin to expire until December 2032.

We own one issued U.S.

patent and have filed four pending U.S.

patent applications and 38 pending foreign patent applications (three in each of Australia, Brazil, Canada, Europe, Israel, Japan, Korea, Mexico, Singapore, and New Zealand, two in each of China and India, one in each of Indonesia, Thailand, and Vietnam, and one under the Patent Cooperation Treaty) relating to, among other things, ivarmacitinib compositions and methods of treatment using ivarmacitinib compositions.

We own four issued U.S.

patents, two issued Japanese patents, and have filed four pending U.S.

patent applications and 44 pending foreign patent applications (three in each of Australia, Brazil, Canada, China, Europe, India, Israel, Japan, Mexico, Singapore, South Korea, and New Zealand, two in each of Hong Kong, Indonesia, Thailand, and Vietnam) relating to, among other things, ivarmacitinib compositions and methods of treatment using ivarmacitinib compositions.

We anticipate filing additional patent applications directed towards compositions, methods and other aspects of our technology relating to ARQ-252 and ARQ-255 which we may develop in the future.

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As of February 25, 2025, we own one issued U.S.

patent, one issued Australian patent, one issued Chinese patent, one issued Eurasian patent, one issued Israeli patent, one issued Indian patent, one issued Japanese patent, one issued Mexican patent, one issued South Korean patent, one issued Singapore patent, one issued South African patent, and 9 pending foreign applications (one each in Brazil, Canada, Europe, Great Britain, Hong Kong, Korea, New Zealand;

and three under the Patent Cooperation Treaty), relating to ARQ-234 and other CD200 mutant proteins.

patent, one issued Australian patent, one issued Chinese patent, one issued Eurasian patent, one issued Israeli patent, one issued Indian patent, one issued Japanese patent, one issued Mexican patent, two issued South Korean patents, one issued Singapore patent, one issued South African patent, and 3 pending U.S.

applications, and 37 pending foreign applications (four in each of Canada and Europe, three in each of China, Japan, and New Zealand, two in each of Australia, Brazil, India, Israel, and South Korea, and one in each of Eurasia, Great Britain, Hong Kong, Indonesia, Mexico, Philippines, Singapore, South Africa, Thailand, and the Patent Cooperation Treaty), relating to ARQ-234 and other CD200 mutant proteins.

Obtaining patent protection is not the only method that we employ to protect our propriety rights.

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We also require any third-party that may receive our confidential information or materials to enter into confidentiality agreements prior to receipt of that information or material.

Exclusive License and Option Agreements

License, Collaboration and Co-Promotion Agreements

Kowa Co-Promotion Agreement

In July 2024, we entered into a co-promotion agreement with Kowa Pharmaceuticals, Inc.

to leverage Kowa's primary care sales force to exclusively market and promote ZORYVE in the United States to primary care practitioners and pediatricians for all FDA-approved indications until at least July 2029.

Under the terms of the agreement, Kowa receives a commission from net sales attributed to Kowa.

Promotion of ZORYVE in primary care and pediatrics under the Kowa agreement began in late September2024.

Sato License Agreement

On February 27, 2024, we entered into a License Agreement with Sato Pharmaceutical Co., Ltd.

Pursuant to the terms of the License Agreement, we grant to Sato an exclusive, sublicensable (under certain circumstances) license under certain patent rights and know-how controlled by us for Sato to develop, conduct medical affairs activities for, manufacture, commercialize, and otherwise exploit roflumilast formulations (the

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Licensed Products) for all therapeutic uses for certain dermatological indications in humans (the Field) in Japan (the Territory).

The License Agreement sets forth each party’s respective obligations with respect to the development, medical affairs activities, manufacture and supply, and commercialization of the Licensed Products.

Pursuant to the terms of the License Agreement, Sato will, at its expense, develop, obtain regulatory approval for, commercialize, and conduct medical affairs activities related to the Licensed Products in the Field in Japan, subject to certain of our approval and oversight rights.

Pursuant to the terms of the License Agreement, we received an upfront payment of $25.0 million and will potentially receive additional payments (i) up to an aggregate amount of $10.0 million upon the achievement of certain regulatory milestones and (ii) up to an aggregate amount of $30.0 million upon the achievement of certain sales milestones.

In addition, on a Licensed Product-by-Licensed Product basis, commencing from the first commercial sale of such Licensed Product in Japan until the latest of (i) the expiration of the last valid claim in the intellectual property rights licensed by us to Sato under the License Agreement covering such Licensed Product in Japan, (ii) the expiration of regulatory exclusivity for such Licensed Product in Japan, or (iii) ten years after the first commercial sale of such Licensed Product in Japan, we will receive low double-digit to mid-teen double-digit percentage royalties on Sato’s, its affiliates’ and sublicensees’ total annual net sales of all Licensed Products, subject to certain royalty reductions.

The term of the License Agreement continues until, on a Licensed Product-by-Licensed Product basis, the expiration of the Royalty Term.

The License Agreement may be terminated by either party in its entirety if the other party commits a material breach, subject to a cure period, or if the other party becomes insolvent.

Sato may terminate the License Agreement at-will in its entirety upon 90 days’ written notice.

Unless unenforceable under applicable law, we may terminate the License Agreement in its entirety if Sato, its affiliate or sublicensee contests or assists a third party in contesting the scope, validity or enforceability of any patent or patent application licensed by us to Sato.

We may also terminate the License Agreement if Sato or any director, officers, employee, agent, affiliate, sublicensee, or subcontractor is charged by a governmental authority for a violation of any anti-corruption, anti-money laundering, sanctions or export or import control laws or regulations, or, subject to the terms of the License Agreement, if Sato, its affiliates and sublicensees do not conduct any material development or commercialization activities of a Licensed Product in Japan for a certain period of time.

Huadong License and Collaboration Agreement

In August 2023, we entered into a license and collaboration agreement (Huadong Agreement) with Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd.

(Huadong), a wholly owned subsidiary of Huadong Medicine Co., Ltd., whereby Pursuant to the terms of the agreement, we granted to Huadong an exclusive, sublicensable (under certain circumstances) license under certain patent rights and know-how controlled by us for Huadong to develop, conduct medical affairs activities for, manufacture, commercialize and otherwise exploit both ZORYVE cream and ZORYVE foam (the Huadong Licensed Products) for all therapeutic uses for certain dermatological indications (the Field) in Greater China (mainland China, Hong Kong, Macau and Taiwan) and Southeast Asia (Indonesia, Singapore, The Philippines, Thailand, Myanmar, Brunei, Cambodia, Laos, Malaysia, and Vietnam) (the Huadong Territories).

Pursuant to the terms of the License Agreement, Huadong will, at its expense, develop, obtain regulatory approval for, commercialize and conduct medical affairs activities related to the Huadong Licensed Products in the Field in the Huadong Territory, subject to certain of our approval and oversight rights.

We will retain exclusive rights for the development, manufacture and commercialization of topical roflumilast outside the Huadong Territories.

In addition, we received payments of $3.0 million and $2.0 million in March 2024 and December 2024, respectively, related to the achievement of a development and regulatory milestones.

We may also potentially receive additional payments (i) up to an aggregate amount of $19.0 million upon the achievement of certain development and regulatory milestones and (ii) up to an aggregate amount of $40.3 million upon the achievement of certain sales milestones.

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sale of such Licensed Product in such country or region (the Royalty Term), we will receive low double-digit to high-teen double-digit percentage royalties on Huadong’s, its affiliates’ and sublicensees’ total net sales, subject to certain royalty reductions.

The term of the License Agreement continues until, on a Licensed Product-by-Licensed Product and country or region-by-country or region basis, the expiration of the Royalty Term.

The License Agreement may be terminated by either party in its entirety if the other party commits a material breach, subject to a cure period, or if the other party becomes insolvent.

Huadong may terminate the License Agreement at-will in its entirety upon 90 days’ written notice.

Unless unenforceable under applicable law, we may terminate the License Agreement in its entirety if Huadong, its affiliate or sublicensee contests or assists a third party in contesting the scope, validity or enforceability of any patent or patent application licensed by us to Huadong.

We may also terminate the License Agreement if Huadong (a) is convicted in a final and non-appealable judgment of a violation of any anti-corruption, anti-money laundering, sanctions or export or import control laws or regulations or (b) any director, officer, employee, agent, affiliate, sublicensee or subcontractor of Huadong is convicted in a final and non-appealable judgment of a violation of any anti-corruption, anti-money laundering, sanctions or export or import control laws or regulations in relation to the performance of the License Agreement or, subject to the terms of the License Agreement, if Huadong, its affiliates and sublicensees do not conduct any material development or commercialization activities of a Licensed Product in the Territory for a certain period of time.

See Note 7 to the consolidated financial statements.

In July 2018, we entered into an exclusive license agreement, or the AstraZeneca License Agreement, with AstraZeneca, pursuant to which we obtained a worldwide exclusive license, with the right to sublicense through multiple tiers, under certain AstraZeneca-controlled patent rights, know-how and regulatory documentation, to research, develop, manufacture, commercialize, and otherwise exploit products containing roflumilast in topical forms, as well as delivery systems sold with or for the administration of roflumilast, or collectively, the AZ-Licensed Products, for all diagnostic, prophylactic, and therapeutic uses for human dermatological indications, or the Dermatology Field.

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We subsequently paid AstraZeneca the first milestone cash payment of $2.0 million upon the completion of a Phase 2b study of roflumilast cream in plaque psoriasis in August 2019 for the achievement of positive Phase 2 data for an AZ-Licensed Product.

We also paid AstraZeneca $7.5 million upon ZORYVE cream's FDA approval in plaque psoriasis and have agreed to make additional cash payments to AstraZeneca of up to an aggregate of $5.0 million upon the achievement of specific regulatory approval milestones with respect to the AZ-Licensed Products, and payments up to an additional aggregate amount of $15.0 million upon the achievement of certain aggregate worldwide net sales milestones, of which $5.0 million will be come payable when we achieve $100 million in

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worldwide sales.

With respect to any AZ-Licensed Products we commercialize under the AstraZeneca License Agreement, we will pay AstraZeneca a low to high single-digit percentage royalty rate on our, our affiliates’, and our sublicensees’ net sales of such AZ-Licensed Products, until, as determined on an AZ-Licensed Product-by-AZ-Licensed Product and country-by-country basis, the later of the date of the expiration of the last-to-expire AstraZeneca-licensed patent right containing a valid claim in such country and ten years from the first commercial sale of such AZ-Licensed Product in such country.

We also paid AstraZeneca $7.5 million upon ZORYVE cream's FDA approval of ZORYVE cream 0.3% and have agreed to make additional cash payments to AstraZeneca of up to an aggregate of $5.0 million upon the achievement of specific regulatory approval milestones with respect to the AZ-Licensed Products.

W e paid AstraZen eca $5.0 million upon achievement of $100.0 million in worldwide net sales and have agreed to m ake an additional payment of $10.0 million when the company achieves $250.0 million in worldwide net sales.

With respect to any AZ-Licensed Products we commercialize under the AstraZeneca License Agreement, we will pay AstraZeneca a low to high single-digit percentage royalty rate on our, our affiliates’, and our sublicensees’ net sales of such AZ-Licensed Products, subject to specified reductions, until, as determined on an AZ-Licensed Product-by-AZ-Licensed Product and country-by-country basis, the later of the date of the expiration of the last-to-expire AstraZeneca-licensed patent right containing a valid claim in such country and ten years from the first commercial sale of such AZ-Licensed Product in such country.

We began making quarterly royalty payments in the first quarter of 2023.

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The agreement continues in effect until the expiration of all royalty obligations as described above, unless earlier terminated:

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With respect to any products we commercialize under the agreement, we will pay tiered royalties to Hengrui on net sales of each licensed product by us, or our affiliates, or our sublicensees, ranging from mid single-digit to sub-teen percentage rates based on tiered annual net sales bands subject to specified reductions.

We are obligated to pay royalties until the later of (1) the expiration of the last valid claim of the licensed patent rights

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covering such licensed product in such country and (2) the expiration of regulatory exclusivity for the relevant licensed product in the relevant country, on a licensed product-by-licensed product and country-by-country basis.

We are obligated to pay royalties until the later of (1) the expiration of the last valid claim of the licensed patent rights covering such licensed product in such country and (2) the expiration of regulatory exclusivity for the relevant licensed product in the relevant country, on a licensed product-by-licensed product and country-by-country basis.

Additionally, we are obligated to pay Hengrui a specified percentage, ranging from the low-thirties to the sub-teens, of certain non-royalty sublicensing income we receive from sublicensees of our rights to the licensed products, such percentage decreasing as the development stage of the licensed products advance.

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The agreement continues in effect until the expiration of our obligation to pay royalties as described above, unless earlier terminated in accordance with the following:

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

Huadong License Agreement

In August 2023, we entered into a license agreement ("Huadong Agreement") with Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd.

("Huadong"), a wholly owned subsidiary of Huadong Medicine Co., Ltd., whereby Huadong received an exclusive, sublicensable (under certain circumstances) license under certain patent rights and know-how controlled by us for Huadong to develop, conduct medical affairs activities for, manufacture, commercialize and otherwise exploit ZORYVE cream and ZORYVE foam (the “Licensed Products”) for all therapeutic uses for certain dermatological indications (the “Field”) in Greater China (mainland China, Hong Kong, Macau and Taiwan) and Southeast Asia (Indonesia, Singapore, The Philippines, Thailand, Myanmar, Brunei, Cambodia, Laos, Malaysia, and Vietnam) (the “Territory”).

Pursuant to the terms of the License Agreement, Huadong will, at its expense, develop, obtain regulatory approval for, commercialize and conduct medical affairs activities related to the Licensed Products in the Field in the Territory, subject to certain of our approval and oversight rights.

Pursuant to the terms of the License Agreement, we received a net payment of $27.0 million in September 2023, which consisted of a $30.0 million upfront payment less the applicable tax withholding obligation in China of $3.0 million, and may potentially receive additional payments (i) up to an aggregate amount of $24.0 million upon the achievement of certain development and regulatory milestones and (ii) up to an aggregate amount of $40.25 million upon the achievement of certain sales milestones.

In addition, on a Licensed Product-by-Licensed Product and country or region-by-country or region basis, commencing from the first commercial sale of such Licensed Product in such country or region until the latest of (i) the expiration of the last valid claim in the intellectual property rights licensed by us to Huadong under the License Agreement covering such Licensed Product in such country or region, (ii) the expiration of regulatory exclusivity for such Licensed Product in such country or region, or (iii) ten years after the first commercial sale of such Licensed Product in such country or region (the “Royalty Term”), we will receive low double-digit to high-teen double-digit percentage royalties on Huadong’s, its affiliates’ and sublicensees’ total net sales, subject to certain royalty reductions.

The term of the License Agreement continues until, on a Licensed Product-by-Licensed Product and country or region-by-country or region basis, the expiration of the Royalty Term.

The License Agreement may be terminated by either party in its entirety if the other party commits a material breach, subject to a cure period, or if the other party becomes insolvent.

Huadong may terminate the License Agreement at-will in its entirety upon 90 days’ written notice.

See Note 6 to the consolidated financial statements.

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Government Regulation

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Pharmaceutical product development for a new product or certain changes to an approved product in the United States typically involves nonclinical laboratory and animal tests, the submission to the FDA of an IND, which must become effective before clinical testing may commence, and adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug for each indication for which FDA approval is sought.

Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required may vary substantially based upon the type, complexity, and novelty of the product or disease.

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of FDA pre-market approval requirements typically takes many years and the actual time required may vary substantially based upon the type, complexity, and novelty of the product or disease.

Nonclinical tests include laboratory evaluation of product chemistry, formulation, and toxicity, as well as animal studies to assess the characteristics and potential safety and activity of the product.

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The product candidate is administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites.

These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval.

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These clinical trials are intended to

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establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval.

In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the product.

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These review periods may be reduced from ten months to six months for an application designated for priority review.

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The FDA may also refer applications for novel drug products, or drug products that present difficult questions of safety or efficacy, to an advisory committee—typically a panel that includes clinicians and other experts—for review, evaluation, and a recommendation as to whether the application should be approved.

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If regulatory approval of a product is granted, such approval will be granted for particular indications and may include limitations on the indicated uses for which such product may be marketed.

For example, as a condition

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of approving an NDA, the FDA may require a risk evaluation and mitigation strategy (REMS) to help ensure that the benefits of the drug outweigh the potential risks.

For example, as a condition of approving an NDA, the FDA may require a risk evaluation and mitigation strategy (REMS) to help ensure that the benefits of the drug outweigh the potential risks.

A REMS is a safety strategy to manage a known or potential serious risk associated with a medicine and to enable patients to have continued access to such medicine by managing its safe use, and can include medication guides, communication plans for healthcare professionals, and elements to assure safe use, or ETASU.

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The FDA must send a non-compliance letter to any sponsor that fails to submit the required assessment, keep a deferral current or fails to submit a request for approval of a pediatric formulation.

In addition, the Best Pharmaceuticals for Children Act, or BPCA, provides NDA holders a six month extension of any exclusivity—patent or nonpatent—for a drug, if a sponsor conducts clinical trials in children in response to a written request from the FDA.

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request from the FDA.

The issuance of a written request does not require the sponsor to undertake the described clinical trials.

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The designation includes all of the Fast Track program features, as well as more intensive FDA interaction and guidance beginning as early as Phase 1 and an organizational commitment to expedite the development and review of the product candidate, including involvement of senior managers.

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Any marketing application for a drug submitted to the FDA for approval, including a product candidate with a Fast Track designation and/or Breakthrough Therapy designation, may be eligible for other types of FDA programs intended to expedite the FDA review and approval process, such as priority review and accelerated approval.

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Orphan drug designation and exclusivity

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Under the Orphan Drug Act, the FDA may grant orphan designation to a drug intended to treat a rare disease or condition, defined as a disease or condition with a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 individuals in the United States and when there is no reasonable expectation that the cost of developing and making available the drug in the United States will be recovered from sales in the United States for that drug.

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There also are continuing, annual program fee requirements for any marketed products.

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Adverse event reporting and submission of periodic reports is required following FDA approval of an NDA.

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• refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension, or revocation of product approvals;

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• product seizure or detention, or refusal to permit the import or export of products;

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However, companies may share truthful and not misleading information that is otherwise consistent with a product’s FDA-approved labelling.

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The Hatch-Waxman Act

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The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification.

The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification automatically prevents the FDA from approving the application until the earlier of 30 months, expiration of the patent, settlement of the lawsuit, or a decision in the infringement case that is favorable to the applicant, or such shorter or longer period as may be ordered by a court.

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decision in the infringement case that is favorable to the applicant, or such shorter or longer period as may be ordered by a court.

This prohibition is generally referred to as the 30-month stay.

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Thus, approval of an ANDA or 505(b)(2) NDA could be delayed for a significant period of time depending on the patent certification the applicant makes and the reference drug sponsor's decision to initiate patent litigation.

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Hatch-Waxman Exclusivity

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The majority of states also have statutes or regulations similar to the federal Anti-Kickback Statute and False Claims Act, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer.

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Other federal statutes pertaining to healthcare fraud and abuse include the civil monetary penalties statute, which prohibits, among other things, the offer or payment of remuneration to a Medicaid or Medicare beneficiary that the offeror or payer knows or should know is likely to influence the beneficiary to order a receive a reimbursable item or service from a particular supplier, and the additional federal criminal statutes created by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) which prohibits, among other things, knowingly and willfully executing or attempting to execute a scheme to defraud any healthcare benefit program or obtain by means of false or fraudulent pretenses, representations or promises any money or property owned by or under the control of any healthcare benefit program in connection with the delivery of or payment for healthcare benefits, items or services.

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Even if one or more products are

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successfully brought to the market, these products may not be considered cost-effective, and the amount reimbursed for such products may be insufficient to allow them to be sold on a competitive basis.

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Therefore, coverage and reimbursement can differ significantly from payer to payer.

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Healthcare Reform

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pharmaceutical industry.

The ACA, among other things, (i) subjected therapeutic biologics to potential competition by lower-cost biosimilars by creating a licensure framework for follow-on biologic products, (ii) established a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs and therapeutic biologics that are inhaled, infused, instilled, implanted or injected, (iii) increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, (iv) established annual nondeductible fees and taxes on manufacturers of certain branded prescription drugs and therapeutic biologics, apportioned among these entities according to their market share in certain government healthcare programs, (v) established a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs and therapeutic biologics to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs and therapeutic biologics to be covered under Medicare Part D, which has since been increased to 70%, (vi) expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability, (vii) expanded the entities eligible for discounts under the Public Health program, (viii) created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research, and (ix) established a Center for Medicare and Medicaid Innovation at Centers for Medicare and Medicaid Services (CMS) to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.

The ACA, among other things, (i) subjected therapeutic biologics to potential competition by lower-cost biosimilars by creating a licensure framework for follow-on biologic products, (ii) established a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs and therapeutic biologics that are inhaled, infused, instilled, implanted or injected, (iii) increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, (iv) established annual nondeductible fees and taxes on manufacturers of certain branded prescription drugs and therapeutic biologics, apportioned among these entities according to their market share in certain government healthcare programs, (v) expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability, (vi) expanded the entities eligible for discounts under the Public Health program, (vii) created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research, and (viii) established a Center for Medicare and Medicaid Innovation at Centers for Medicare and Medicaid Services (CMS) to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.

Since its enactment, there have been judicial, executive, and Congressional challenges to certain aspects of the ACA.

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Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA.

Thus, the ACA will remain in effect in its current form.

Thus, the ACA will remain in

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effect in its current form.

In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted to reduce healthcare expenditures.

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On August 16, 2022, the Inflation Reduction Act of 2022, or IRA, was enacted into law.

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increases that outpace inflation (first due in 2023), and replaces the Part D coverage gap discount program with a new discounting program (beginning in 2025).

Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023), and replaces the Part D coverage gap discount program with a new discounting program (which began in 2025).

The IRA permits the Secretary of the Department of Health and Human Services to implement many of these provisions through guidance, as opposed to regulation, for the initial years.

On August 29, 2023, HHS announced the list of the first ten drugs that will be subject to price negotiations.

HHS has issued and will continue to issue guidance implementing the IRA, although the Medicare drug price negotiation program is currently subject to legal challenges.

CMS has published the negotiated prices for the initial ten drugs, which will first be effective in 2026, and the list of the subsequent 15 drugs that will be subject to negotiation, although the Medicare drug price negotiation program is currently subject to legal challenges.

For that and other reasons, it is currently unclear how the IRA will be effectuated.

At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure, drug price increase disclosure, and other transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

Some states have enacted legislation creating so-called prescription drug affordability boards, which ultimately may attempt to impose price limits on certain drugs in these states.

We anticipate that these new laws will result in additional downward pressure on coverage and the price that we receive for any approved product, and could seriously harm our business.

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In addition, certain foreign laws govern the privacy and security of personal data, including health-related data.

Privacy and security laws, regulations, and other obligations are constantly evolving, may conflict with each other to complicate compliance efforts, and can result in investigations, proceedings, or actions that lead to significant civil and/or criminal penalties and restrictions on data.

Human Capital Resources and Employees

As of December 31, 2024, we had 342 full-time employees.

Of these full-time employees, three have an M.D., four have been Nurse Practitioners or Physician Assistants, and 8% have a PhD or Pharm.

From time to time, we also retain independent contractors to support our organization.

Of these full-time employees, three have an M.D., and five are Nurse Practitioners or Physician Assistants.

From time to time, we also retain independent

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contractors to support our organization.

None of our employees are represented by a labor union or covered by collective bargaining agreements, and we believe our relationship with our employees is good.

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Additional information required by this item is incorporated herein by reference to Part II, Item 6, “Selected Financial Data.”

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About Arcutis Biotherapeutics

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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-K

Item 1. Business