What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-06 compared with 2025-05-06 · 117 added, 74 removed, 174 unchanged (52% of the section changed)

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In October 2023, we received FDA approval for an expanded indication in plaque psoriasis down to 6 years of age.

We are currently working with the FDA to potentially further expand this indication in plaque psoriasis down to 2 years of age following the generation of additional clinical data.

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.

We are currently working with the FDA to potentially further expand this indication in plaque psoriasis down to 2 years of age.

In June 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.

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.

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ZORYVE foam became commercially available in the United States in 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.

We also received FDA approval for ZORYVE foam for the treatment of plaque psoriasis of the scalp and body in adults and adolescents ages 12 and older in May 2025, followed by commercial launch in June 2025.

In addition to the approval of ZORYVE cream 0.3% for plaque psoriasis and ZORYVE foam for seborrheic dermatitis and plaque psoriasis of the scalp and body, we also received FDA approval for and commercially launched ZORYVE (roflumilast) cream 0.15% (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, with no limitation on location, body surface area treated, concomitant use, or duration of use specified in the approved labelling.

ZORYVE cream 0.15% was also approved by Health Canada in March 2025 and commercially launched in April 2025.

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, which was accepted by the FDA with a Prescription Drug User Fee Act (PDUFA) target action date in October 2025.

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, which was accepted by the FDA with a Prescription Drug User Fee Act (PDUFA) target action date in October 2025.

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 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 Phase 3 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 accepted by the FDA with a PDUFA target action date of May 22, 2025.

In June 2025, we initiated INTEGUMENT-INFANT, a Phase 2 study to evaluate the safety and efficacy of investigational ZORYVE cream 0.05% in infants as young as 3 months to less than 2 years with atopic dermatitis, which potentially could serve as the basis for a further expansion of the indication for ZORYVE cream 0.05% to this group of patients.

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

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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 middle of 2025.

In addition to ZORYVE, we had been developing ARQ-255, a deep penetrating topical formulation of ivarmacitinib, a potent and highly selective topical Janus kinase type 1 (JAK 1) inhibitor, for the treatment of alopecia areata.

Following the completion of a Phase 1b study in the middle of 2025, the Company has elected to halt further development of the program.

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.

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

We have incurred net losses in each year since inception, including net losses of $25.1 million and $35.4 million for the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, we had an accumulated deficit of $1,147.0 million and cash, cash equivalents, restricted cash, and marketable securities of $198.7 million.

As of March 31, 2025, we had $100.0 million outstanding under the Loan Agreement.

We paid down $100.0 million of principal related to the Loan Agreement using available cash on October 8, 2024, with the right to re-draw that principal for a defined period.

The Company submitted an Investigational New Drug (IND) application to the FDA in July 2025.

We have incurred net losses in each year since inception, including net losses of $40.9 million and $87.7 million for the six months ended June 30, 2025 and 2024, respectively.

As of June 30, 2025, we had an accumulated deficit of $1,162.9 million and cash, cash equivalents, restricted cash, and marketable securities of $191.1 million.

As of June 30, 2025, we had $100.0 million outstanding under the Loan Agreement.

We paid down $100.0 million of principal related to the Loan Agreement using available cash in October 2024, with the right to re-draw that principal for a defined period.

We expect to continue to incur losses and significant expenses in 2025 as we commercialize ZORYVE, and as we advance our product candidates and label extensions through clinical trials, regulatory submissions and commercialization.

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

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

While we do not anticipate the need to obtain funds through financings or other sources to support our current operations, if our available cash and marketable securities balances, amounts available under the Loan Agreement, and anticipated future cash flows from operations are insufficient to cover these expenses, we may need to fund our operations through equity or debt financings or other sources, such as future potential collaboration agreements.

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We rely on third parties to conduct our nonclinical studies and clinical trials and for manufacturing and supply of our product candidates.

We have no internal manufacturing capabilities, and we will continue to rely on

third parties, many of whom are single source suppliers, for our nonclinical and clinical trial materials, as well as the commercial supply of our products.

We have no internal manufacturing capabilities and we rely on third parties, many of whom are single source suppliers, for our nonclinical and clinical trial materials, as well as the commercial supply of our products.

Components of Our Results of Operations

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In August 2022, in conjunction with the launch of our first FDA-approved product, ZORYVE cream 0.3%, we began to recognize revenue from product sales, net of rebates, chargebacks, discounts and other adjustments.

We also began recognizing revenue net of deductions for ZORYVE cream 0.3% in Canada in June 2023, ZORYVE foam in the United States in January 2024, ZORYVE cream 0.15% for atopic dermatitis in July 2024, and ZORYVE foam in Canada in December 2024.

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

We also began recognizing revenue net of deductions for ZORYVE cream 0.3% in Canada in June 2023, ZORYVE foam for seborrheic dermatitis in the United States in January 2024, ZORYVE cream 0.15% for atopic dermatitis in July 2024, ZORYVE foam for seborrheic dermatitis in Canada in December 2024, ZORYVE cream 0.15% in Canada in April 2025, and ZORYVE foam for scalp and body psoriasis in the United States in June 2025.

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

Other Revenue

Other revenue relates to our license agreements, primarily the Sato License Agreement and the Huadong License and Collaboration Agreement .

Other revenue relates to our license agreements, primarily the Sato Agreement and the Huadong Agreement .

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

Operating Expenses

Cost of Sales

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

Our cost of sales will reflect a lower average per unit cost of materials until inventory that was previously expensed is sold, which is expected to occur in 2025.

As of March 31, 2025 and December 31, 2024, the value of this inventory, mostly at the raw materials stage, was approximately $2.7 million and $5.5 million, respectively.

Operating Expenses

Prior to the date on which the initial regulatory approval was received for each product, costs of inventory production were recorded as research and development expense.

Subsequent to initial regulatory approval, costs of production are capitalized into inventory, and as that inventory is sold and recognized as revenue, the cost is recognized in cost of sales.

During the second half of 2025, the Company expects to have sold its remaining finished goods inventory produced using raw material components for which the cost was previously recognized as research & development expense.

As of June 30, 2025 and December 31, 2024, the value of this inventory, mostly at the raw materials stage, was approximately $0.7 million and $5.5 million, respectively.

Research and Development Expenses

Since our inception, we have focused significant resources on our research and development activities, including conducting nonclinical studies and clinical trials, manufacturing development efforts, and activities related to regulatory filings for our product candidates.

Since our inception, we have focused significant resources on our research and development activities, including conducting nonclinical studies and clinical trials, manufacturing development efforts, activities related to regulatory filings for our product candidates, and medical affairs activities related to ZORYVE.

Research and development costs are expensed as incurred.

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In addition, employee costs, including salaries, payroll taxes, benefits, stock-based compensation and travel for employees contributing to research and development activities are classified as research and development costs.

We allocate direct external costs on a program specific basis (topical roflumilast program, topical JAK inhibitor program, and early stage programs).

We allocate direct external costs on a program specific basis (topical roflumilast program, topical JAK inhibitor program, CD200R program, and early stage programs).

Our internal costs are primarily related to personnel or professional services and apply across programs, and thus are not allocable on a program specific basis.

We expect to continue to incur research and development expenses in the future as we develop our product candidates.

In particular, we expect to incur research and development expenses for the phase 1 ARQ-255 study for alopecia areata, and early development of ARQ-234 for atopic dermatitis.

In particular, we expect to incur research and development expenses for the development of ARQ-234 for atopic dermatitis and for ZORYVE label expansions.

We have entered, and may continue to enter, into license agreements to access and utilize certain molecules for the treatment of dermatological diseases and disorders.

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The successful development of our product candidates is highly uncertain.

At this time, we cannot reasonably estimate the nature, timing, or costs required to complete the remaining development of ZORYVE cream and ZORYVE foam, ARQ-255, and ARQ-234 or any other product candidates.

This is due to the numerous risks and

uncertainties associated with the development of product candidates.

At this time, we cannot reasonably estimate the nature, timing, or costs required to complete the remaining development of ZORYVE cream and ZORYVE foam, and ARQ-234 or any other product candidates.

This is due to the numerous risks and uncertainties associated with the development of product candidates.

See “Risk Factors” for a discussion of the risks and uncertainties associated with the development of our product candidates.

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Provision for Income Taxes

Provision for income taxes is related to the Huadong License and Collaboration Agreement .

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

Provision for income taxes is primarily related to foreign income tax expense and foreign withholding taxes incurred in relation to a license agreement.

Results of Operations

Comparison of the Three Months Ended March 31, 2025 and 2024

Comparison of the Three Months Ended June 30, 2025 and 2024

Product Revenue, Net

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In the first quarter of 2024, we began recording U.S.

product revenue following the FDA approval and subsequent commercial launch of ZORYVE foam in January 2024.

product revenue following the FDA approval and subsequent commercial launch of ZORYVE foam for seborrheic dermatitis in January 2024.

In the third quarter of 2024, we began recording U.S.

product revenue following the FDA approval and subsequent commercial launch of ZORYVE cream 0.15% in July 2024.

In the fourth quarter of 2024, we began recording Canada product revenue following the Health Canada approval and subsequent commercial launch of ZORYVE foam in December 2024.

Three Months Ended March 31, Change

In the fourth quarter of 2024, we began recording Canada product revenue following the Health Canada approval and subsequent commercial launch of ZORYVE foam for seborrheic dermatitis in December 2024.

In the second quarter of 2025, we began recording Canada product revenue following the Health Canada approval and subsequent launch of ZORYVE cream 0.15% in April 2025, as well as U.S.

product revenue following the FDA approval and subsequent commercial launch of ZORYVE foam for scalp and body psoriasis in June 2025.

Three Months Ended June 30,

2025 2024 $ %

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*Not applicable

Product revenue, net, for ZORYVE cream 0.3% increased by $8.4 million for the three months ended March 31, 2025 compared to three months ended March 31, 2024, primarily driven by higher-end customer demand for ZORYVE cream in the United States and Canada.

Product revenue, net, for ZORYVE foam increased by $23.7 million for the three months ended March 31, 2025 compared to three months ended March 31, 2024, driven by its commercial launch in the United States in January 2024, higher-end customer demand, and its commercial launch in Canada in December 2024.

Product revenue, net, for ZORYVE cream 0.15% increased by $10.2 million for the three months ended March 31, 2025 compared to three months ended March 31, 2024, driven by its commercial launch in the United States in July 2024.

Other revenue

Other revenue of $2.0 million for the three months ended March 31, 2025 related to license revenues received in connection with the Huadong Agreement.

Other revenue for the three months ended March 31, 2024 related to license revenues received in connection with the Sato License Agreement of $25.0 million and the Huadong License and Collaboration Agreement of $3.0 million.

Product revenue, net, for ZORYVE cream 0.3% increased by $10.4 million for the three months ended June 30, 2025 compared to the three months ended June 30, 2024, primarily driven by higher end customer demand for ZORYVE cream in the United States and Canada.

Product revenue, net, for ZORYVE foam increased by $25.6 million for the three months ended June 30, 2025 compared to the three months ended June 30, 2024, driven by its commercial launch in the United States in January 2024, higher end customer demand, and its commercial launch in Canada in December 2024.

Product revenue, net, for ZORYVE cream 0.15% increased by $14.6 million for the three months ended June 30, 2025 compared to the three months ended June 30, 2024, driven by its commercial launch in the United States in July 2024.

Cost of Sales

Cost of sales increased by $5.6 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

The increase was primarily due to the cumulative catch-up amortization expense recorded in connection with the $10.0 million AstraZeneca milestone achieved in the first quarter of 2025, coupled with an increase in ZORYVE cream and foam product sales.

Prior to the dates on which the initial regulatory approvals were received for each product, costs of raw materials were recorded as research and development expense.

Therefore, cost of sales will reflect a lower average per unit cost until the related inventory is sold, which is expected to occur in 2025.

Cost of sales increased by $4.0 million for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

The increase was primarily due to greater ZORYVE cream and foam product sales relative to the comparative period.

Research and Development Expenses

Three Months Ended June 30, Change

2025 2024 $ %

(in thousands)

Direct external costs:

Topical roflumilast program $ 2,827 $ 2,931 $ (104) (4) %

Topical JAK inhibitor program 343 595 (252) (42) %

Other early stage programs 1,695 1,835 (140) (8) %

Indirect costs:

Compensation and personnel-related 9,779 9,362 417 4 %

Other 4,809 4,575 234 5 %

Total research and development expense $ 19,453 $ 19,298 $ 155 1 %

Research and development expenses increased slightly by $0.2 million, or 1%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $11.0 million, or 19%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

The increase was primarily due to our continued commercialization efforts and growing revenue for ZORYVE and consisted of $7.3 million in sales and marketing expenses and $4.7 million in compensation and personnel-related expenses.

Other Income, Net

Other income, net decreased by $3.1 million for the three months ended June 30, 2025 compared to the three months ended June 30, 2024, primarily due to less interest income resulting from lower cash, cash equivalents, and marketable securities balances.

Interest Expense

Interest expense decreased by $4.5 million for the three months ended June 30, 2025 compared to the three months ended June 30, 2024, due to a lower outstanding principal balance on our long-term debt driven by our $100.0 million principal paydown in October 2024, coupled with the impact of lower interest rates.

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

Comparison of the Six Months Ended June 30, 2025 and 2024

Product Revenue, Net

We began recording U.S.

product revenue in the third quarter of 2022 following the FDA approval and subsequent commercial launch of ZORYVE cream 0.3% in August 2022, Canada product revenue in the second quarter of 2023 following the Health Canada approval and subsequent commercial launch of ZORYVE cream 0.3% in June 2023, and additional U.S.

revenue in the first quarter of 2024 following the FDA approval and subsequent commercial launch of ZORYVE foam for seborrheic dermatitis in January 2024.

In the third quarter of 2024, we began recording U.S.

product revenue following the FDA approval and subsequent commercial launch of ZORYVE cream 0.15% in July 2024.

In the second quarter of 2025, we began recording Canada product revenue following the Health Canada approval and subsequent launch of ZORYVE cream 0.15% in April 2025, as well as U.S.

product revenue following the FDA approval and subsequent commercial launch of ZORYVE foam for scalp and body psoriasis in June 2025.

Six Months Ended June 30, Change

2025 2024 $ %

(in thousands)

Product revenue, net

ZORYVE cream 0.3%

$ 51,062 $ 32,284 $ 18,778 58 %

69,452 20,143 49,309 245 %

ZORYVE cream 0.15%

24,836 — 24,836 *

Total product revenue, net

$ 145,350 $ 52,427 $ 92,923 177 %

______________

*Not applicable

Product revenue, net, for ZORYVE cream 0.3% increased by $18.8 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024, primarily driven by higher end customer demand for ZORYVE cream in the United States and Canada.

Product revenue, net, for ZORYVE foam increased by $49.3 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024, driven by its commercial launch in the United States in January 2024, higher end customer demand, and its commercial launch in Canada in December 2024.

Product revenue, net, for ZORYVE cream 0.15% increased by $24.8 million for the six months ended June 30, 2025, driven by its commercial launch in the United States in July 2024.

Other Revenue

Other revenue of $2.0 million for the six months ended June 30, 2025 relates to license revenues received in connection with the Huadong Agreement.

Other revenue for the six months ended June 30, 2024 includes $25.0 million received as an upfront payment in connection with the Sato Agreement and a $3.0 million milestone payment received in connection with the Huadong Agreement.

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

Cost of Sales

Cost of sales increased by $9.6 million for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, and was primarily due to the increase in ZORYVE cream and foam product sales, amortization expense recorded in connection with the AstraZeneca milestones achieved in the first quarter of 2025 and the second half of 2024, and greater royalties paid to AstraZeneca.

Research and Development Expenses

Three Months Ended March 31, Change

Six Months Ended June 30, Change

2025 2024 $ %

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Total research and development expense $ 36,996 $ 42,439 $ (5,443) (13) %

Research and development expenses decreased by $5.6 million, or 24%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Research and development expenses decreased by $5.4 million, or 13%, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

The decrease was primarily due to the completion of Phase 3 studies of roflumilast cream in atopic dermatitis, coupled with lower costs related to the development of early stage programs.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses increased by $9.2 million, or 17%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

The increase was primarily due to an increase in compensation and personnel-related expenses of $7.7 million, driven by our continued commercialization efforts for ZORYVE.

Selling, general and administrative expenses increased by $20.2 million, or 18%, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

The increase was primarily due to $12.4 million higher compensation and personnel-related expenses and $7.7 million higher sales and marketing expenses.

These higher expenses were primarily due to our continued commercialization efforts for ZORYVE.

Other Income, Net

Other income, net, decreased by $1.3 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to the impact of lower interest rates.

Other income, net decreased by $4.4 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024, primarily due to less interest income resulting from lower cash, cash equivalents, and marketable securities balances.

Interest Expense

Interest expense decreased by $4.5 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, due to a lower outstanding principal balance on our long-term debt driven by our $100.0 million principal paydown in October 2024, coupled with the impact of lower interest rates.

Interest expense decreased by $9.0 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024, due to a lower outstanding principal balance on our long-term debt driven by our $100.0 million principal paydown in October 2024, coupled with the impact of lower interest rates.

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

Provision for Income Taxes

Income tax expense of $0.3 million for the three months ended March 31, 2025 was primarily due to withholding tax on milestone payments related to the Huadong License and Collaboration Agreement.

Liquidity, Capital Resources, and Requirements

Sources of Liquidity

Our primary sources of capital to date have been private placements of preferred stock, our IPO completed in January 2020, our follow-on financings in October 2020, February 2021, August 2022, October 2023, and March 2024, our Loan Agreement, our ATM program, and revenue from the sale of ZORYVE.

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

As of March 31, 2025, we had cash, cash equivalents, restricted cash, and marketable securities of $198.7 million, and an accumulated deficit of $1,147.0 million.

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

As of March 31, 2025, we had $100.0 million outstanding under the Loan Agreement.

As of June 30, 2025, we had cash, cash equivalents, restricted cash, and marketable securities of $191.1 million, and an accumulated deficit of $1,162.9 million.

As of June 30, 2025, we had $100.0 million outstanding under the Loan Agreement.

We paid down $100.0 million of principal related to the Loan Agreement using available cash on October 8, 2024, with the right to re-draw that principal for a defined period.

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• our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of any such agreements that we may enter into;

• the costs related to milestone payments to AstraZeneca, Hengrui, or any future collaborator or licensing partner, upon the achievement of predetermined milestones;

• the costs related to milestone payments to AstraZeneca or any future collaborator or licensing partner, upon the achievement of predetermined milestones;

• any product liability or other lawsuits related to our products;

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

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

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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.

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Upon the occurrence and for the duration of an event of default, an additional default interest rate (the Default Rate) equal to 4.0% per annum will apply to all obligations owed under the Loan Agreement.

In connection with the Loan Agreement, we are 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 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 March 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.

In connection with the Loan Agreement, we are 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 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, we previously had entered into an Exit Fee Agreement, whereby we 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 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.

We were in compliance with all covenants under the Loan Agreement as of March 31, 2025.

We were in compliance with all covenants under the Loan Agreement as of June 30, 2025.

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

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

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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)

Net Cash Used in Operating Activities

During the three months ended March 31, 2025, net cash used in operating activities was $30.4 million, which consisted of a net loss of $25.1 million and a change in net operating assets and liabilities of $17.7 million, partially offset by net non-cash charges of $12.4 million.

During the six months ended June 30, 2025, net cash used in operating activities was $30.1 million, which consisted of a net loss of $40.9 million and a change in net operating assets and liabilities of $12.6 million, partially offset by net non-cash charges of $23.4 million.

The net non-cash charges were primarily related to stock-based compensation expense of $20.3 million and amortization of intangible assets of $3.5 million.

During the three months ended March 31, 2024, net cash used in operating activities was $31.6 million, which consisted of a net loss of $35.4 million and a change in net operating assets and liabilities of $5.4 million, partially offset by net non-cash charges of $9.2 million.

During the six months ended June 30, 2024, net cash used in operating activities was $76.7 million, which consisted of a net loss of $87.7 million and a change in net operating assets and liabilities of $9.7 million, partially offset by net non-cash charges of $20.7 million.

The net non-cash charges were primarily related to stock-based compensation expense of $22.6 million.

Net Cash Provided by (Used in) Investing Activities

During the three months ended March 31, 2025, net cash provided by investing activities was $11.8 million, which was comprised primarily of proceeds from the maturities of marketable securities of $68.5 million, partially offset by purchases of marketable securities of $56.1 million.

During the three months ended March 31, 2024, net cash used in investing activities was $28.7 million, which was comprised primarily of purchases of marketable securities of $106.0 million, partially offset by proceeds from the maturities of marketable securities of $77.3 million.

During the six months ended June 30, 2025, net cash provided by investing activities was $29.2 million, which was comprised primarily of proceeds from the maturities of marketable securities of $129.1 million, offset by purchases of marketable securities of $89.3 million and a milestone payment made to AstraZeneca of $10.0 million.

During the six months ended June 30, 2024, net cash used in investing activities was $90.8 million, which was comprised primarily of purchases of marketable securities of $231.7 million, offset by proceeds from the maturities of marketable securities of $140.9 million.

Net Cash Provided by Financing Activities

During the three months ended March 31, 2025, net cash provided by financing activities was $0.4 million, which was comprised of proceeds from the issuance of our common stock upon exercise of stock options.

During the three months ended March 31, 2024, net cash provided by financing activities was $161.8 million, which was comprised primarily of $161.7 million of net proceeds from our February 2024 public stock offering.

During the six months ended June 30, 2025, net cash provided by financing activities was $1.8 million, which was comprised primarily of $1.3 million of proceeds from the issuance of our common stock pursuant to our employee stock purchase plan.

During the six months ended June 30, 2024, net cash provided by financing activities was $163.2 million, which was comprised primarily of $161.7 million of net proceeds from our February 2024 public stock offering.

Contractual Obligations and Contingent Liabilities

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What changed 10-Q

Item 2. Management’s Discussion and Analysis