What changed in this filing

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Item 1. Financial Statements

2025-08-06 compared with 2025-05-06 · 172 added, 147 removed, 417 unchanged (43% of the section changed)

3 unchanged sentences

(In thousands, except share and par value)

March 31, December 31,

June 30, December 31,

Current assets:

14 unchanged sentences

Accounts payable $ 15,082 $ 14,220

Accrued liabilities 65,758 65,973

Operating lease liability 842 820

Current portion of long-term debt, net

Accrued and other current liabilities

87,854 66,793

Total current liabilities 103,936 81,013

Operating lease liability, noncurrent 2,340 2,562

Operating lease liability, long-term

Long-term debt, net 107,049 107,203

4 unchanged sentences

Preferred stock, $ 0.0001 par value;

10,000,000 shares authorized at March 31, 2025 and December 31, 2024;

no shares issued and outstanding at March 31, 2025 and December 31, 2024

10,000,000 shares authorized at June 30, 2025 and December 31, 2024;

no shares issued and outstanding at June 30, 2025 and December 31, 2024

Common stock, $ 0.0001 par value;

300,000,000 shares authorized at March 31, 2025 and December 31, 2024;

119,137,785 and 117,848,033 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively

300,000,000 shares authorized at June 30, 2025 and December 31, 2024;

119,797,738 and 117,848,033 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively

Additional paid-in capital 1,301,886 1,279,479

3 unchanged sentences

Total liabilities and stockholders’ equity $ 352,433 $ 348,889

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

See accompanying notes to the condensed consolidated financial statements.

ARCUTIS BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

Three Months Ended March 31,

(In thousands, except per share data)

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Product revenue, net $ 81,504 $ 30,858 $ 145,350 $ 52,427

5 unchanged sentences

Selling, general and administrative

69,170 58,173 133,172 112,967

Total operating expenses 96,115 80,935 186,490 162,126

6 unchanged sentences

Provision for income taxes

342 — 621 324

Net loss $ ( 15,886 ) $ ( 52,332 ) $ ( 40,946 ) $ ( 87,714 )

3 unchanged sentences

Foreign currency translation adjustment 200 ( 34 ) 204 ( 55 )

Total other comprehensive loss

( 133 ) ( 137 )

Total other comprehensive income (loss) 105 ( 161 ) ( 28 ) ( 298 )

Comprehensive loss $ ( 15,781 ) $ ( 52,493 ) $ ( 40,974 ) $ ( 88,012 )

2 unchanged sentences

Weighted-average shares used in computing net loss per share, basic and diluted 126,997 123,481 126,519 117,265

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

See accompanying notes to the condensed consolidated financial statements.

ARCUTIS BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, except share data)

(In thousands)

Common Stock Additional

10 unchanged sentences

Balance—March 31, 2025 119,138 12 1,289,789 ( 140 ) ( 1,147,003 ) 142,658

Issuance of common stock upon the exercise of stock options 19 — 61 — — 61

Issuance of common stock upon the vesting of restricted stock units 522 — — — — —

Shares issued pursuant to the employee stock purchase plan 119 — 1,319 — — 1,319

Stock-based compensation expense — — 10,717 — — 10,717

Unrealized loss on marketable securities

— — — ( 95 ) — ( 95 )

Foreign currency translation adjustment — — — 200 — 200

Net loss — — — — ( 15,886 ) ( 15,886 )

Balance—June 30, 2025 119,798 $ 12 $ 1,301,886 $ ( 35 ) $ ( 1,162,889 ) $ 138,974

See accompanying notes to the condensed consolidated financial statements.

ARCUTIS BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands)

Common Stock Additional

9 unchanged sentences

Unrealized loss on marketable securities — — — ( 116 ) — ( 116 )

— — — ( 116 ) — ( 116 )

Foreign currency translation adjustment — — — ( 21 ) — ( 21 )

1 unchanged sentence

Balance—March 31, 2024 115,505 12 1,242,349 ( 133 ) ( 1,017,286 ) 224,942

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Issuance of common stock upon the exercise of stock options 147 — 806 — — 806

Issuance of common stock upon the vesting of restricted stock units 443 — — — — —

Shares issued pursuant to the employee stock purchase plan 384 — 649 — — 649

Stock-based compensation expense — — 12,523 — — 12,523

Unrealized loss on marketable securities

— — — ( 127 ) — ( 127 )

Foreign currency translation adjustment — — — ( 34 ) — ( 34 )

Net loss — — — — ( 52,332 ) ( 52,332 )

Balance—June 30, 2024 116,479 $ 12 $ 1,256,327 $ ( 294 ) $ ( 1,069,618 ) $ 186,427

See accompanying notes to the condensed consolidated financial statements.

ARCUTIS BIOTHERAPEUTICS, INC.

1 unchanged sentence

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

1 unchanged sentence

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation 153 170

Non-cash lease expense 111 97

Stock-based compensation expense 20,267 22,553

Amortization of intangible assets 3,542 375

Net accretion on marketable securities

( 859 ) ( 1,725 )

Non-cash interest expense 846 2,009

Stock-based compensation expense 9,778 10,030

Changes in fair value of embedded derivative instrument

Net accretion on marketable securities

( 1,554 ) ( 4,113 )

Other non-cash items, net

Changes in operating assets and liabilities:

9 unchanged sentences

Proceeds from maturities of marketable securities 129,121 140,893

Milestone payment for intangible asset ( 10,000 ) —

Purchases of property and equipment ( 686 ) —

3 unchanged sentences

Proceeds from issuance of common stock upon exercise of stock options 456 888

Proceeds from issuance of common stock pursuant to employee stock purchase plan

Proceeds from issuance of common stock, net of issuance costs — 161,682

1 unchanged sentence

Effect of exchange rate changes on cash 204 ( 99 )

Net (decrease) increase in cash, cash equivalents, and restricted cash

Net increase (decrease) in cash, cash equivalents, and restricted cash

1,096 ( 4,436 )

1 unchanged sentence

Cash, cash equivalents, and restricted cash at end of period $ 73,048 $ 84,887

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:

Milestone for intangible asset not yet paid in cash

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Interest expense paid in cash $ 5,164 $ 13,021

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

See accompanying notes to the condensed consolidated financial statements.

ARCUTIS BIOTHERAPEUTICS, INC.

1 unchanged sentence

Organization and Description of Business

Arcutis Biotherapeutics, Inc., or the Company, is a commercial-stage biopharmaceutical company focused on developing and commercializing treatments for dermatological diseases with high unmet medical needs.

Arcutis Biotherapeutics, Inc.

(the Company) is a commercial-stage biopharmaceutical company focused on developing and commercializing treatments for dermatological diseases with high unmet medical needs.

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

The Company received U.S.

Food and Drug Administration (FDA) approval of its first product, ZORYVE ® (roflumilast) cream 0.3% (ZORYVE cream 0.3%), on July 29, 2022, for the treatment of plaque psoriasis, including intertriginous psoriasis, in individuals 12 years of age and older (subsequently approved down to 6 years old), and began U.S.

Food and Drug Administration (FDA) approval of its first product, ZORYVE ® (roflumilast) cream 0.3% (ZORYVE cream 0.3%), in July 2022, for the treatment of plaque psoriasis, including intertriginous psoriasis, in individuals 12 years of age and older (subsequently approved down to 6 years old), and began U.S.

commercialization in August 2022.

The Company also received Health Canada approval of ZORYVE cream in plaque psoriasis on April 28, 2023 and began Canadian commercialization in June 2023.

The Company received FDA approval of ZORYVE ® (roflumilast) topical foam 0.3% (ZORYVE foam), on December 15, 2023, for the treatment of seborrheic dermatitis in individuals 9 years of age and older, and began U.S.

commercialization in late January 2024.

The Company received FDA approval of ZORYVE ® (roflumilast) cream 0.15%, (ZORYVE cream 0.15%) on July 9, 2024, for the treatment of mild to moderate atopic dermatitis in adult and pediatric patients 6 years of age and older, and began U.S.

commercialization in late July 2024.

The Company received Health Canada approval of ZORYVE foam for seborrheic dermatitis in October 2024 and ZORYVE cream 0.15% for atopic dermatitis in March 2025.

The Company also received Health Canada approval of ZORYVE cream 0.3% in plaque psoriasis in April 2023 and began Canadian commercialization in June 2023.

The Company received FDA approval of ZORYVE ® (roflumilast) topical foam 0.3% (ZORYVE foam), in December 2023, for the treatment of seborrheic dermatitis in individuals 9 years of age and older, and began U.S.

commercialization in January 2024.

The Company received FDA approval of ZORYVE ® (roflumilast) cream 0.15% (ZORYVE cream 0.15%) and began U.S.

commercialization, in July 2024, for the treatment of mild to moderate atopic dermatitis in adult and pediatric patients 6 years of age and older.

The Company received Health Canada approval of ZORYVE foam for seborrheic dermatitis in October 2024, and began Canadian commercialization in December 2024.

The Company received Health Canada approval for ZORYVE cream 0.15% for atopic dermatitis in March 2025, and began Canadian commercialization in April 2025.

The Company also received FDA approval of ZORYVE foam 0.3% for the treatment of plaque psoriasis of the scalp and body in adult and adolescents 12 years of age and older in May 2025, and began U.S.

commercialization in June 2025.

Initial Public Offering and Follow-On Financings

3 unchanged sentences

The exercise price of the warrants is $ 0.0001 per underlying share of common stock.

The prefunded warrants are exercisable at any time on or after their original issuance, and were not exercised as of March 31, 2025.

The prefunded warrants are exercisable at any time on or after their original issuance, and were not exercised as of June 30, 2025.

On February 28, 2024, the Company completed an offering relating to the sale of 15,789,474 shares of the Company's common stock at $ 9.50 per share.

11 unchanged sentences

Notes to Condensed Consolidated Financial Statements

The Company has incurred significant losses and negative cash flows from operations since its inception and had an accumulated deficit of $ 1,147.0 million and $ 1,121.9 million as of March 31, 2025 and December 31, 2024, respectively.

The Company has incurred significant losses and negative cash flows from operations since its inception and had an accumulated deficit of $ 1,162.9 million and $ 1,121.9 million as of June 30, 2025 and December 31, 2024, respectively.

Management expects to continue to incur operating losses.

The Company had cash, cash equivalents, restricted cash, and marketable securities of $ 198.7 million and $ 228.6 million as of March 31, 2025 and December 31, 2024, respectively.

The Company has $ 100.0 million outstanding under the Loan Agreement as of March 31, 2025.

The Company had cash, cash equivalents, restricted cash, and marketable securities of $ 191.1 million and $ 228.6 million as of June 30, 2025 and December 31, 2024, respectively.

The Company has $ 100.0 million outstanding under the Loan Agreement as of June 30, 2025.

The Company believes that its existing capital resources will be sufficient to meet the projected operating requirements for at least 12 months from the date of issuance of its financial statements.

If the Company's available cash, cash equivalents and marketable securities and anticipated future cash flows from operations are insufficient to satisfy its liquidity requirements, the Company may need to raise additional capital to fund its operations.

No assurance can be given as to whether additional needed financing will be available on terms acceptable to the Company or at all.

No assurance can be given as to whether additional financing will be available on terms acceptable to the Company or at all.

If sufficient funds on acceptable terms are not available when needed, the Company may be required to curtail certain planned activities.

1 unchanged sentence

Summary of Significant Accounting Policies

Basis of Presentation

The Company’s condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (U.S.

The condensed consolidated financial statements include the Company's wholly-owned subsidiaries.

All material intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

On an ongoing basis, management evaluates such estimates and assumptions for continued reasonableness.

In particular, management makes estimates with respect to revenue recognition, accruals for research and development activities, stock-based compensation expense, and income taxes.

Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation.

Actual results could differ from those estimates.

Unaudited Interim Condensed Consolidated Financial Statements

The interim condensed consolidated balance sheets as of March 31, 2025, the interim condensed consolidated statements of operations and comprehensive loss, and the condensed consolidated changes in convertible preferred stock and stockholders’ equity and cash flows for the three months ended March 31, 2025 and 2024 are unaudited.

These unaudited interim condensed consolidated financial statements have been prepared on the same basis as the Company’s audited annual financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the Company’s financial information.

The financial data and the other financial information disclosed in these notes to the condensed consolidated financial statements related to the three month periods are also unaudited.

The condensed consolidated results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results to be expected for the year ending December 31, 2025 or for any other future annual or interim period.

The condensed consolidated balance sheets as of December 31, 2024 included herein was derived from the audited financial statements as of that date.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (U.S.

GAAP), on the same basis as the Company’s audited annual financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the Company’s financial information.

Results of operations for any interim period are not necessarily indicative of future or annual results.

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S.

1 unchanged sentence

Therefore, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2024.

Significant Accounting Policies

These condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and all intercompany balances and transactions have been eliminated.

Certain prior year amounts, which are not material, have been reclassified to conform to current year presentation in the condensed consolidated balance sheets, condensed consolidated statement of cash flows and the notes to the condensed consolidated financial statements.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes.

Actual results could differ from those estimates.

Restricted Cash

As of June 30, 2025 and December 31, 2024, the Company held $ 0.3 million and $ 0.6 million, respectively, of restricted cash as collateral for a letter of credit related to the Company's lease of office space.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

There have been no significant changes to the accounting policies during the three months ended March 31, 2025, as compared to the significant accounting policies described in Note 2 of the Company’s audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2024.

Restricted Cash

As of March 31, 2025 and December 31, 2024, the Company held $ 0.6 million of restricted cash as collateral for a letter of credit related to the Company's amended office space lease.

Concentration of Credit Risk and Other Risks and Uncertainties

2 unchanged sentences

The Company is exposed to credit risk in the event of a default by either the financial institutions holding its cash or by its customers owing trade receivables to the extent recorded on the condensed consolidated balance sheets.

To manage accounts receivable credit risk, the Company continuously evaluates the creditworthiness of its customers and the need for an allowance for potential credit losses.

To manage accounts receivable credit risk, the Company continuously evaluates the creditworthiness of its customers and the need for an allowance for credit losses.

Fair Value Measurement

11 unchanged sentences

Recently Issued Accounting Pronouncements

The Company considers the applicability and impact of any recent Accounting Standards Update (ASU) issued by the Financial Accounting Standards Board (FASB).

Other than the ASUs listed below, all other ASUs were assessed and determined to be either not applicable to the Company or are expected to have minimal impact on the Company's condensed consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which requires qualitative and quantitative updates to the rate reconciliation and income taxes paid disclosures, among others, in order to enhance the transparency of income tax disclosures, including consistent categories and greater disaggregation of information in the rate reconciliation and disaggregation by jurisdiction of income taxes paid.

The Company is currently evaluating the impact of adopting ASU 2023-09.

The Company will adopt ASU 2023-09 for its Annual Report on Form 10-K for the year ended December 31, 2025 and does not expect the standard to have a material impact on its disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

6 unchanged sentences

The following table presents the Company's disaggregated revenue for the periods presented (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

2025 2024 2025 2024

ZORYVE cream 0.3%

$ 27,675 $ 17,258 $ 51,062 $ 32,284

39,212 13,600 69,452 20,143

ZORYVE cream 0.15% 14,617 — 24,836 —

2 unchanged sentences

Other revenue

— — 2,000 28,000

Total revenues

3 unchanged sentences

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

March 31, 2025

June 30, 2025

Level 1 Level 2 Level 3 Total

1 unchanged sentence

$ 72,740 $ — $ — $ 72,740

Commercial Paper

— 7,774 — 7,774

Certificates of deposit

28 unchanged sentences

The following table summarizes the estimated value of the Company’s cash, cash equivalents and marketable securities, and the gross unrealized holding gains and losses (in thousands):

March 31, 2025

June 30, 2025

cost Unrealized

6 unchanged sentences

Marketable securities:

Commercial Paper

$ 7,773 $ 1 $ — $ 7,774

Certificates of deposit

22 unchanged sentences

(1) This balance includes cash requirements settled on a nightly basis.

As of March 31, 2025 and December 31, 2024, all securities have a maturity of 18 months or less and there were no individual securities that were in a significant unrealized loss position.

As of June 30, 2025 and December 31, 2024, all securities have a maturity of 18 months or less and there were no individual securities that were in a significant unrealized loss position.

The Company generally holds its marketable securities until maturity and does not intend to sell, and is not required to sell, the investments that are in an unrealized loss position before the recovery of their amortized cost basis.

The following table summarizes the change in the fair value of the embedded derivative instrument for the three months ended March 31, 2025 and 2024 (in thousands).

The following table summarizes the change in the fair value of the embedded derivative instrument for the six months ended June 30, 2025 and 2024 (in thousands).

Beginning balance

3 unchanged sentences

The fair value of the Company’s embedded derivative instrument is based on significant inputs not observed in the market, and thus represents a Level 3 measurement.

Refer to Note 7 for further discussion on the embedded derivative instrument.

See Note 7 for further discussion on the embedded derivative instrument.

ARCUTIS BIOTHERAPEUTICS, INC.

2 unchanged sentences

The components of inventory are summarized as follows (in thousands):

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Raw materials $ 6,724 $ 4,300

4 unchanged sentences

Prepaid expenses and other current assets consist of the following (in thousands):

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Prepaid co-pay assistance program and rebates

6 unchanged sentences

Accrued liabilities consist of the following (in thousands):

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Accrued sales deductions $ 63,560 $ 38,430

3 unchanged sentences

Total accrued liabilities $ 87,854 $ 66,793

License Agreements & Acquisition

License Agreements

Sato License Agreement

On February 27, 2024, the Company entered into a license agreement with Sato Pharmaceutical Co., Ltd.

Pursuant to the terms of the License Agreement, the Company grants to Sato an exclusive, sublicensable (under certain circumstances) license under certain patent rights and know-how controlled by the Company for Sato to develop, conduct medical affairs activities for, manufacture, commercialize, and otherwise exploit roflumilast formulations (the 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 the Company’s approval and oversight rights.

Pursuant to the terms of the License Agreement, the Company 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

Pursuant to the terms of the license agreement with Sato (the Sato Agreement), the Company grants to Sato an exclusive, sublicensable (under certain circumstances) license under certain patent rights and know-how controlled by the Company for Sato to develop, conduct medical affairs activities for, manufacture, commercialize and otherwise exploit roflumilast formulations (the Sato Licensed Products) for all therapeutic uses for certain dermatological indications in humans (the Field) in Japan.

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

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

Pursuant to the terms of the Sato Agreement, the Company 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 Sato Licensed Product-by-Sato Licensed Product basis, commencing from the first commercial sale of such Sato Licensed Product in Japan until the latest of (i) the

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

the last valid claim in the intellectual property rights licensed by the Company 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, the Company 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, the Company 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 the Company to Sato.

The Company 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.

No milestones were achieved for the three months ended March 31, 2025.

Other revenue under the Sato agreement was $ 25.0 million for the three months ended March 31, 2024.

Huadong License and Collaboration Agreement

In August 2023, the Company entered into a license and collaboration agreement with Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd (Huadong), a wholly owned subsidiary of Huadong Medicine Co., Ltd.

expiration of the last valid claim in the intellectual property rights licensed by the Company to Sato under the Sato Agreement covering such Sato Licensed Product in Japan, (ii) the expiration of regulatory exclusivity for such Sato Licensed Product in Japan, or (iii) ten years after the first commercial sale of such Sato Licensed Product in Japan, the Company 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 Sato Licensed Products, subject to certain royalty reductions.

The term of the Sato Agreement continues until, on a Sato Licensed Product-by-Sato Licensed Product basis, the expiration of the Royalty Term, which is the (i) the expiration of the last valid claim in the licensed technology covering such Sato 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.

The Sato 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 Sato Agreement at-will in its entirety upon 90 days’ written notice.

Unless unenforceable under applicable law, the Company may terminate the Sato 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 the Company to Sato.

The Company may also terminate the Sato 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 Sato Agreement, if Sato, its affiliates and sublicensees do not conduct any material development or commercialization activities of a Sato Licensed Product in Japan for a certain period of time.

Other revenue under the Sato agreement was zero for the three and six months ended June 30, 2025, respectively, and zero and $ 25.0 million for the three and six months ended June 30, 2024, respectively.

Huadong License Agreement

In August 2023, the Company entered into a license agreement with Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd (Huadong), a wholly owned subsidiary of Huadong Medicine Co., Ltd.

Pursuant to the terms of the agreement, the Company granted to Huadong an exclusive, sublicensable (under certain circumstances) license under certain patent rights and know-how controlled by the Company for Huadong to develop, conduct medical affairs activities for, manufacture, commercialize, and otherwise exploit both cream and foam topical roflumilast for all therapeutic uses for certain dermatological indications (Huadong Licensed Products) 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) (Huadong Territories).

1 unchanged sentence

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

As consideration for the rights granted under the Huadong Agreement, Huadong paid the Company a non-refundable upfront fee pursuant to the terms of the agreement, upon closing in September 2023.

As consideration for the rights granted under the license agreement with Huadong (the Huadong Agreement), Huadong paid the Company a non-refundable upfront fee pursuant to the terms of the agreement, upon closing in September 2023.

The Company received a net payment of $ 27.0 million, which consisted of a $ 30.0 million upfront payment less the applicable tax withholding obligation in China of $ 3.0 million.

In addition, the Company received a net payment of $ 2.7 million in March 2024, which consisted of $ 3.0 million related to the achievement of a development and regulatory milestone less the applicable tax withholding of $ 0.3 million.

The Company received a net payment of $ 1.8 million in each of December 2024 and March 2025, which consisted of $ 2.0 million related to the achievement of development and regulatory milestones less the applicable tax withholding of $ 0.2 million.

In addition, the Company received a net payment of $ 2.7 million in March 2024 related to the achievement of a development and regulatory milestone less the applicable tax withholding.

The Company received a net payment of $ 1.8 million in each of December 2024 and March 2025, related to the achievement of development and regulatory milestones less the applicable tax withholding.

The Company may also potentially receive additional payments:

(i) up to an aggregate amount of $ 17.0 million upon the achievement of certain development and regulatory milestones, (ii) up to an aggregate amount of $ 40.3 million upon the achievement of certain sales milestones, and (iii) low double-digit to high-teen double-digit tiered percentage royalties on net sales of the Huadong Licensed Products.

The term of the Huadong Agreement continues on a Licensed Product-by-Licensed Product and country or region-by-country or region basis, until the expiration of the Royalty Term, which is:

The term of the Huadong Agreement continues on a Huadong Licensed Product-by-Huadong Licensed Product and country or region-by-country or region basis, until the expiration of the Royalty Term, which is:

(i) the date of expiration of the last valid patent claim related to the Huadong Licensed Products, (ii) ten years after the first commercial sale of a the Huadong Licensed Product and (iii) the expiration of any regulatory exclusivity as to a Huadong Licensed Product.

The License Agreement may be terminated by both parties under certain circumstances.

For the three months ended March 31, 2025, the Company recognized $ 2.0 million of Other revenue and $ 0.2 million of income tax expense related to the achievement of a development and regulatory milestone.

The Huadong Agreement may be terminated by both parties under certain circumstances.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

three months ended March 31, 2024, the Company recognized $ 3.0 million of Other revenue and $ 0.3 million of income tax expense related to the achievement of a development and regulatory milestone.

For the three and six months ended June 30, 2025, the Company recognized zero and $ 2.0 million, respectively, of Other revenue and zero and $ 0.2 million, respectively, of income tax expense related to the achievement of a development and regulatory milestone.

For the three and six months ended June 30, 2024, the Company recognized zero and $ 3.0 million, respectively, of Other revenue and zero and $ 0.3 million, respectively, of income tax expense related to the achievement of a development and regulatory milestone.

AstraZeneca License Agreement

In July 2018, the Company entered into an exclusive license agreement, or the AstraZeneca License Agreement, with AstraZeneca AB (AstraZeneca), granting the Company 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.

Under this agreement, the Company has sole responsibility for development, regulatory, and commercialization activities for the AZ-Licensed Products in the Dermatology Field, at its expense, and it shall use commercially reasonable efforts to develop, obtain and maintain regulatory approvals for, and commercialize the AZ-Licensed Products in the Dermatology Field in each of the United States, Italy, Spain, Germany, the United Kingdom, France, China, and Japan.

The Company paid AstraZeneca an upfront non-refundable cash payment of $ 1.0 million and issued 484,388 shares of Series B convertible preferred stock, valued at $ 3.0 million on the date of the AstraZeneca License Agreement, which were both recorded in research and development expense.

In July 2018, the Company entered into an exclusive license agreement with AstraZeneca AB (AstraZeneca), granting the Company 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 (collectively, the AZ-Licensed Products), for all diagnostic, prophylactic and therapeutic uses for human dermatological indications (the Dermatology Field).

Under the license agreement with AstraZeneca (the AstraZeneca Agreement), the Company has sole responsibility for development, regulatory and commercialization activities for the AZ-Licensed Products in the Dermatology Field, at its expense, and it shall use commercially reasonable efforts to develop, obtain and maintain regulatory approvals for, and commercialize the AZ-Licensed Products in the Dermatology Field in each of the United States, Italy, Spain, Germany, the United Kingdom, France, China and Japan.

The Company paid AstraZeneca an upfront non-refundable cash payment of $ 1.0 million and issued 484,388 shares of Series B convertible preferred stock, valued at $ 3.0 million on the date of the AstraZeneca Agreement, which were both recorded in research and development expense.

The Company subsequently paid AstraZeneca the first milestone cash payment of $ 2.0 million upon the completion of a Phase 2b study of ZORYVE cream 0.3% in plaque psoriasis in August 2019 for the achievement of positive Phase 2 data for an AZ-Licensed Product, which was recorded in research and development expense.

1 unchanged sentence

In the second half of 2024, the Company paid $ 5.0 million to AstraZeneca upon achievement of $ 100.0 million in worldwide net sales, which was recorded as a cumulative catch-up adjustment to the carrying value of the intangible asset.

In the first quarter of 2025, $ 10.0 million became payable to AstraZeneca upon achievement of $ 250.0 million in worldwide net sales and was recorded as a cumulative catch-up adjustment to the carrying value of the intangible asset.

The Company is amortizing the intangible asset to cost of sales over its useful life of 10 years from the date of first commercial sale as this is the minimum amount of time that the related License Agreement will be in effect.

Amortization expense was $ 3.0 million and $ 0.2 million for the three months ended March 31, 2025 and 2024, respectively.

In the first half of 2025, the Company paid $ 10.0 million to AstraZeneca upon achievement of $ 250.0 million in worldwide net sales and was recorded as a cumulative catch-up adjustment to the carrying value of the intangible asset.

Amortization expense was $ 0.6 million and $ 3.5 million during the three and six months ended June 30, 2025, respectively.

Amortization expense was $ 0.2 million and $ 0.4 million during the three and six months ended June 30, 2024, respectively.

The Company has agreed to make additional cash payments to AstraZeneca of up to an aggregate of $ 5.0 million upon the achievement of specified regulatory approval milestones with respect to the AZ-Licensed Products.

With respect to any AZ-Licensed Products the Company commercializes under the AstraZeneca License Agreement, it will pay AstraZeneca a low to high single-digit percentage royalty rate on the Company’s, its affiliates’ and its 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.

With respect to any AZ-Licensed Products the Company commercializes under the AstraZeneca Agreement, it will pay AstraZeneca a low to high single-digit percentage royalty rate on the Company’s, its affiliates’ and its 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.

As a result of the commercialization of ZORYVE cream 0.3% in August 2022, the Company began accruing royalties payable to AstraZeneca, which are recorded in cost of sales and accrued liabilities.

Royalty expense during the three months ended March 31, 2025 was $ 1.9 million.

Royalty expense during the three months ended March 31, 2024 was not material.

Royalty expense was $ 2.5 million and $ 4.4 million during the three and six months ended June 30, 2025, respectively.

Royalty expense was $ 0.9 million and $ 1.6 million during the three and six months ended June 30, 2024, respectively.

ARCUTIS BIOTHERAPEUTICS, INC.

11 unchanged sentences

With the approval of ZORYVE cream 0.3% on July 29, 2022, the tranche B term loans were funded on August 2, 2022.

As of March 31, 2025 and December 31, 2024 , the aggregate principal amount outstanding under the Loan Agreement was $ 100.0 million.

As of June 30, 2025 and December 31, 2024 , the aggregate principal amount outstanding under the Loan Agreement was $ 100.0 million.

On October 8, 2024, the Company made a 2024 Partial Prepayment of $ 100.0 million, which reduced the aggregate principal amount outstanding under the Loan Agreement to $ 100.0 million.

6 unchanged sentences

As a result of such 2024 Partial Prepayment, the applicable interest rate will be a per annum interest rate equal to 5.95 % plus the greater of (a) 2.50 % and (b) the one-month SOFR.

On March 31, 2025, the rate was 10.27 %.

On June 30, 2025, the rate was 10.27 %.

The benchmark SOFR is subject to change in the event of certain events with respect to the benchmark rate.

7 unchanged sentences

Any failure by the Company to deliver such annual plan on or before December 15 of the prior year shall be an immediate event of default.

The Company was in compliance with all covenants under the Loan Agreement as of March 31, 2025.

The Company was in compliance with all covenants under the Loan Agreement as of June 30, 2025.

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

4 unchanged sentences

The embedded derivative instrument is remeasured at fair value each reporting period with any future changes in fair value reported in Other income, net in the condensed consolidated statement of operations and comprehensive loss.

During the three months ended March 31, 2025 and 2024, the Company recognized a $ 0.2 million and $ 0.5 million gain, respectively, in Other income, net related to the change in fair value of the embedded derivative instrument.

The fair value of the embedded derivative instrument as of March 31, 2025 and December 31, 2024 was a liability of $ 0.4 million and $ 0.6 million, respectively, and is included in Other long-term liabilities in the accompanying condensed consolidated balance sheets.

The amounts recognized in Other income, net related to the change in fair value of the embedded derivative instrument during the three and six months ended June 30, 2025 and 2024 were not material.

The fair value of the embedded derivative instrument as of June 30, 2025 and December 31, 2024 was a liability of $ 0.4 million and $ 0.6 million, respectively, and is included in Other long-term liabilities in the accompanying condensed consolidated balance sheets.

I n connection with the Loan Agreement, the Company is obligated to pay (i) a final fee equal to 6.95 % of the aggregate original principal amount of the Term Loans outstanding as of the date of the second amendment (x) with respect to any 2024 Partial Prepayment, upon the earliest to occur of (a) January 1, 2027, (b) the acceleration of all outstanding Term Loans and (c) the prepayment, or refinancing, substitution or replacement of all outstanding Term Loans, and (y) with respect to the Term Loans outstanding as of the date of the second amendment (other than the 2024 Partial Prepayment), upon the earliest to occur of (a) the maturity date, (b) the acceleration of all outstanding Term Loans and (c) the prepayment, or refinancing, substitution or replacement of all outstanding Term Loans, (ii) a 2.00 % fee with respect to tranche C term loans, due and payable on the earliest to occur of (a) the maturity date, (b) the acceleration of all outstanding Term Loans and (c) the prepayment, or refinancing, substitution or replacement of all outstanding Term Loans, (iii) a 2.00 % extension fee with respect to tranche C term loans which remain unfunded after December 31, 2025, which shall accrue during the period commencing January 1, 2026, and ending on the earliest to occur of (a) the expiration of the tranche C term loan availability, and (b) the date on which tranche C term loan is fully drawn, and (iv) a certain amount of lenders’ expenses incurred in connection with the execution of the Loan Agreement.

Additionally, in connection with the original Prior Loan Agreement, the Company previously had entered into an Exit Fee Agreement, whereby the Company agreed to pay an exit fee in the amount of 3.0 % of each Term Loan funded upon (i) any change of control transaction or (ii) a revenue milestone, calculated on a

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

each Term Loan funded upon (i) any change of control transaction or (ii) a revenue milestone, calculated on a trailing six-month basis.

trailing six-month basis.

Notwithstanding the prepayment or termination of the Term Loan, the exit fee will expire 10 years from the date of the Loan Agreement.

2 unchanged sentences

The final maturity payment of $ 13.9 million is recognized over the life of the term loan through interest expense.

At March 31, 2025 and December 31, 2024, the effective interest rate was 11.38 % and 11.57 %, respectively.

Interest expense relating to the term loan for the three months ended March 31, 2025 and 2024 was $ 3.0 million and $ 7.5 million, respectively.

At June 30, 2025 and December 31, 2024, the effective interest rate was 11.37 % and 11.57 %, respectively.

Interest expense relating to the term loan was $ 3.0 million and $ 6.0 million for the three and six months ended June 30, 2025, respectively, and $ 7.5 million and $ 15.0 million for the three and six months ended June 30, 2024, respectively.

The following summarizes additional information related to the Company's long-term debt (in thousands):

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Long-term debt, gross

3 unchanged sentences

Unamortized debt issuance costs ( 998 ) ( 1,121 )

Long-term debt, net $ 107,618 $ 107,203

Total carrying value of debt

108,049 107,203

Less current portion

Total long-term debt, net

$ 107,049 $ 107,203

Upon the contractual maturity of the Company's long-term debt, a payment of principal and final fees of $ 107.0 million is due on August 1, 2029.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

Stock-Based Compensation

5 unchanged sentences

The Replacement RSU Awards will vest based on continued service with the Company over a period of either 1 , 2 or 3 years, depending on the grant date of the exchanged options.

The exchange of stock options was treated as a modification for accounting purposes, which requires an incremental expense of $ 8.6 million to be recognized for the Replacement RSU Awards over their new service

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

periods ( 1 - 3 years).

In addition, any unamortized expense remaining on the exchanged options as of the modification will be recognized over their original remaining service period.

7 unchanged sentences

Expired ( 2,865 ) 26.87

Balance—March 31, 2025 6,962,327 $ 8.68 8.33 $ 52,018

Exercisable—March 31, 2025

2,188,154 $ 8.07 6.39 $ 20,021

The aggregate intrinsic value is calculated as the difference between the exercise price of the options and the fair value of the Company’s common stock as of March 31, 2025.

The intrinsic value of options exercised for the three months ended March 31, 2025 and 2024 was $ 1.2 million and $ 0.1 million, respectively.

The total grant-date fair value of the options vested during the three months ended March 31, 2025 and 2024 was $ 0.7 million and $ 0.5 million, respectively.

The weighted-average grant-date fair value of employee options granted during the three months ended March 31, 2025 and 2024 was $ 9.70 and $ 2.71 , respectively.

Balance—June 30, 2025 6,922,441 $ 8.77 7.99 $ 40,747

Exercisable—June 30, 2025 2,805,705 $ 8.26 6.40 $ 20,359

The aggregate intrinsic value is calculated as the difference between the exercise price of the options and the fair value of the Company’s common stock as of June 30, 2025.

The intrinsic value of options exercised for the six months ended June 30, 2025 and 2024 was $ 1.4 million and $ 0.8 million, respectively.

The total grant-date fair value of the options vested during the six months ended June 30, 2025 and 2024 was $ 4.6 million and $ 2.2 million, respectively.

The weighted-average grant-date fair value of options granted during the six months ended June 30, 2025 and 2024 was $ 9.69 and $ 3.59 , respectively.

Restricted Stock Unit Activity

3 unchanged sentences

Balance—December 31, 2024 6,055,087 $ 8.04

2,529,525 13.67

Granted 2,783,897 13.70

Vested ( 1,703,742 ) 8.64

Forfeited ( 552,782 ) 10.06

Unvested Balance—March 31, 2025 7,192,947 $ 9.89

The grant date fair value of an RSU equals the closing price of the Company's common stock on the grant date.

RSUs generally vest equally over four years , except for those issued in connection with the Option Exchange as previously described.

Unvested Balance—June 30, 2025 6,582,460 $ 10.11

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

The grant date fair value of an RSU equals the closing price of the Company's common stock on the grant date.

RSUs generally vest equally over four years , except for those issued in connection with the Option Exchange as previously described.

Stock-Based Compensation Expense

Stock-based compensation expense included in the condensed consolidated statements of operations and comprehensive loss was as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Research and development

1 unchanged sentence

Selling, general and administrative

Total stock-based compensation expense

7,281 8,724 14,039 15,097

As of March 31, 2025, there was $ 37.0 million of total unrecognized compensation cost related to unvested options that are expected to vest, which is expected to be recognized over a weighted-average period of 3.0 years.

As of March 31, 2025, there was $ 63.0 million of total unrecognized compensation cost related to RSUs that are expected to vest, which is expected to be recognized over a weighted-average period of 3.1 years.

The fair value of stock option awards granted was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions:

Three Months Ended March 31, 2025 Year Ended

December 31, 2024

Expected term (in years)

Expected volatility

79.4 – 79.5 %

Total stock-based compensation expense

$ 10,489 $ 12,523 $ 20,267 $ 22,553

Risk-free interest rate

Dividend yield

As of June 30, 2025, there was $ 32.3 million of total unrecognized compensation cost related to unvested options that are expected to vest, which is expected to be recognized over a weighted-average period of 2.8 years.

As of June 30, 2025, there was $ 56.9 million of total unrecognized compensation cost related to RSUs that are expected to vest, which is expected to be recognized over a weighted-average period of 3.0 years.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average common shares outstanding.

Pre-funded warrants to purchase 7,500,000 shares of the Company's stock were included in the weighted-average common shares outstanding used in calculating net loss per share for the three months ended March 31, 2025 and 2024.

The following outstanding potentially dilutive shares have been excluded from the calculation of diluted net loss per share for the periods presented due to their anti-dilutive effect:

As of March 31,

As of June 30,

Stock options to purchase common stock 6,922,441 5,872,080

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The table below is a summary of the segment profit or loss, including significant segment expenses (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Total revenues $ 81,504 $ 30,858 $ 147,350 $ 80,427

1 unchanged sentence

Topical roflumilast program costs

2,827 2,931 4,273 6,519

Topical JAK inhibitor program costs

343 595 719 1,262

Other early-stage programs costs

1,695 1,835 3,690 5,968

Research and development compensation and personnel-related expenses 9,779 9,362 19,417 19,740

1 unchanged sentence

Other segment expenses (1)

5,509 4,885 12,694 9,571

Total operating expenses 96,115 80,935 186,490 162,126

6 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements