What changed in this filing

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Item 1. Financial Statements

2025-10-28 compared with 2025-08-06 · 179 added, 88 removed, 501 unchanged (35% of the section changed)

3 unchanged sentences

(In thousands, except share and par value)

June 30, December 31,

September 30, December 31,

Current assets:

22 unchanged sentences

Total liabilities 212,904 191,348

Commitments and contingencies

Commitments and contingencies (Note 7)

Stockholders’ equity:

Preferred stock, $ 0.0001 par value;

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

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

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

Common stock, $ 0.0001 par value;

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

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

120,288,146 and 117,848,033 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively

Additional paid-in capital 1,313,602 1,279,479

5 unchanged sentences

ARCUTIS BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except per share data)

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

2025 2024 2025 2024

8 unchanged sentences

Total operating expenses 90,693 83,821 277,183 245,947

Loss from operations ( 14,611 ) ( 50,077 ) ( 39,140 ) ( 81,699 )

Income (loss) from operations

8,526 ( 39,066 ) ( 30,614 ) ( 120,765 )

Other income (expense):

1 unchanged sentence

Interest expense ( 3,071 ) ( 6,653 ) ( 9,082 ) ( 21,617 )

Loss before income taxes

Income (loss) before income taxes

7,490 ( 41,537 ) ( 32,835 ) ( 128,927 )

Provision for income taxes

Net income (loss)

$ 7,410 $ ( 41,537 ) $ ( 33,536 ) $ ( 129,251 )

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

Other comprehensive income (loss):

Unrealized loss on marketable securities

Unrealized gain (loss) on marketable securities

68 771 ( 164 ) 528

1 unchanged sentence

Total other comprehensive income (loss) ( 27 ) 827 ( 55 ) 529

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

Per share information:

Net loss per share, basic and diluted $ ( 0.13 ) $ ( 0.42 ) $ ( 0.32 ) $ ( 0.75 )

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

Comprehensive income (loss)

$ 7,383 $ ( 40,710 ) $ ( 33,591 ) $ ( 128,722 )

Earnings (loss) per share:

$ 0.06 $ ( 0.33 ) $ ( 0.26 ) $ ( 1.08 )

Weighted-average shares used in computing earnings (loss) per share:

127,623 124,302 126,891 119,628

132,885 124,302 126,891 119,628

See accompanying notes to the condensed consolidated financial statements.

23 unchanged sentences

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

Issuance of common stock upon the exercise of stock options 197 — 1,476 — — 1,476

Issuance of common stock upon the vesting of restricted stock units 293 — — — — —

Stock-based compensation expense — — 10,240 — — 10,240

Unrealized gain on marketable securities

— — — 68 — 68

Foreign currency translation adjustment — — — ( 95 ) — ( 95 )

— — — — 7,410 7,410

Balance—September 30, 2025 120,288 $ 12 $ 1,313,602 $ ( 62 ) $ ( 1,155,479 ) $ 158,073

See accompanying notes to the condensed consolidated financial statements.

25 unchanged sentences

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

Issuance of common stock upon the exercise of stock options 139 — 394 — — 394

Issuance of common stock upon the vesting of restricted stock units 380 — — — — —

Stock-based compensation expense — — 10,530 — — 10,530

Unrealized gain on marketable securities

— — — 771 — 771

Foreign currency translation adjustment — — — 56 — 56

Net loss — — — — ( 41,537 ) ( 41,537 )

Balance—September 30, 2024 116,998 $ 12 $ 1,267,251 $ 533 $ ( 1,111,155 ) $ 156,641

See accompanying notes to the condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

28 unchanged sentences

Effect of exchange rate changes on cash 109 ( 1 )

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

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

( 24,524 ) 46,145

1 unchanged sentence

Cash, cash equivalents, and restricted cash at end of period $ 47,428 $ 135,468

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:

Milestone for intangible asset not yet paid in cash

Right-of-use assets obtained in exchange for operating lease liabilities

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

19 unchanged sentences

commercialization in June 2025.

The Company received FDA approval of ZORYVE ® (roflumilast) cream 0.05% (ZORYVE cream 0.05%) in October 2025 for the treatment of mild to moderate atopic dermatitis in children ages 2 to 5 years of age.

Initial Public Offering and Follow-On Financings

On February 4, 2020, the Company closed an initial public offering (IPO) issuing and selling shares of common stock receiving aggregate net proceeds of approximately $ 167.2 million.

The Company completed subsequent public sales of its common stock in October 2020, February 2021, and August 2022, receiving aggregate net proceeds of $ 93.4 million, $ 207.5 million, and $ 161.6 million, respectively.

The Company completed subsequent public sales of its common stock in October 2020, February 2021, August 2022, and October 2023, receiving aggregate net proceeds of $ 93.4 million, $ 207.5 million, $ 161.6 million, and $ 95.8 million, respectively.

In addition to the sale of common stock, the offering completed in October 2023 consisted of prefunded warrants to purchase 7,500,000 shares of the Company's common stock at $ 2.4999 per underlying share of common stock.

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 June 30, 2025.

The prefunded warrants are exercisable at any time on or after their original issuance, and all such warrants were outstanding as of September 30, 2025.

Subsequent to September 30, 2025, certain prefunded warrants were exercised at $ 0.0001 per share, resulting in the issuance of 2,050,000 shares of the Company's common stock.

Following such exercise, prefunded warrants to purchase 5,450,000 shares of the Company's common stock remained outstanding.

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.

6 unchanged sentences

In December 2023, the Company sold 1,250,000 shares under the ATM for $ 2.60 per share and received $ 3.1 million in net proceeds.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

In January 2024, the Company amended and restated its Sales Agreement with Cowen to reset the ATM program and provide for the offer and sale of shares of common stock having an aggregate gross offering price of up to $ 100.0 million.

1 unchanged sentence

The Company has not yet issued or sold any common stock under the amended and restated Sales Agreement.

ARCUTIS BIOTHERAPEUTICS, INC.

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 $ 1,162.9 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 $ 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 has incurred significant annual losses and negative cash flows from operations since its inception and had an accumulated deficit of $ 1,155.5 million and $ 1,121.9 million as of September 30, 2025 and December 31, 2024, respectively.

While the Company generated net income for the quarter ended September 30, 2025, the extent of any net income or losses for future periods is uncertain and the Company may continue to incur losses.

The Company had cash, cash equivalents, restricted cash, and marketable securities of $ 191.4 million and $ 228.6 million as of September 30, 2025 and December 31, 2024, respectively.

The Company had $ 100.0 million outstanding under the Loan Agreement as of September 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.

18 unchanged sentences

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.

As of September 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.

31 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

September 30,

Nine Months Ended

September 30,

2025 2024 2025 2024

12 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):

June 30, 2025

September 30, 2025

Level 1 Level 2 Level 3 Total

25 unchanged sentences

The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value.

These inputs include reported trades of and broker/dealer quotes on the same or similar securities;

These inputs include reported trades of and broker/dealer quotes on the same or

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

similar securities;

issuer credit spreads;

2 unchanged sentences

and other observable inputs.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

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):

June 30, 2025

September 30, 2025

cost Unrealized

32 unchanged sentences

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

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.

As of September 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 six months ended June 30, 2025 and 2024 (in thousands).

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

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

September 30,

Beginning balance

4 unchanged sentences

See Note 8 for further discussion on the embedded derivative instrument.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

Balance Sheet Components

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

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

Raw materials $ 6,118 $ 4,300

4 unchanged sentences

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

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

Prepaid co-pay assistance program and rebates

$ 9,262 $ 7,369

Prepaid clinical trial costs — 3,244

Prepaid insurance 1,258 844

Prepaid clinical trial costs 396 3,244

Other prepaid expenses and current assets 9,397 8,199

2 unchanged sentences

Accrued liabilities consist of the following (in thousands):

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

Accrued sales deductions $ 61,313 $ 38,430

3 unchanged sentences

Total accrued liabilities $ 92,975 $ 66,793

License Agreements

License Agreements & Acquisition

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 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.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

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.

1 unchanged sentence

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

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.

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 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.

3 unchanged sentences

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.

Other revenue under the Sato Agreement was zero for the three and nine months ended September 30, 2025, respectively, and zero and $ 25.0 million for the three and nine months ended September 30, 2024, respectively.

Huadong License Agreement

4 unchanged sentences

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.

The Company received a net payment of $ 27.0 million, which consisted of a

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

$ 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 related to the achievement of a development and regulatory milestone less the applicable tax withholding.

3 unchanged sentences

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.

(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 Huadong Licensed Product and (iii) the expiration of any regulatory exclusivity as to a Huadong Licensed Product.

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

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

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.

For the three and nine months ended September 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, in each case related to the achievement of a development and regulatory milestone.

For the three and nine months ended September 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, in each case related to the achievement of a development and regulatory milestone.

AstraZeneca License Agreement

7 unchanged sentences

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 AstraZeneca Agreement will be in effect.

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.

Amortization expense was $ 0.6 million and $ 4.1 million during the three and nine months ended September 30, 2025, respectively.

Amortization expense was $ 1.2 million and $ 1.6 million during the three and nine months ended September 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 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

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

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 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.

Royalty expense was $ 2.9 million and $ 7.3 million during the three and nine months ended September 30, 2025, respectively.

Royalty expense was $ 1.4 million and $ 3.0 million during the three and nine months ended September 30, 2024, respectively.

Ducentis Biotherapeutics LTD Acquisition

On September 7, 2022, the Company entered into a Share Purchase Agreement with Ducentis Biotherapeutics LTD (Ducentis) and certain stockholders of Ducentis, pursuant to which the Company acquired all of the outstanding equity interests in Ducentis for (i) 610,258 shares of the Company's common stock, valued at approximately $ 12.5 million, and $ 15.9 million in cash, inclusive of liabilities acquired, and (ii) contingent payments of up to an aggregate of $ 400 million, which may become payable upon the achievement of certain development, regulatory, and commercial milestones (the Acquisition).

Such contingent payments include a $ 10.0 million payment due within one year from the first dosing of the first human subject enrolled in the first Phase 1 clinical trial of a therapeutic drug containing Ducentis' DS-234 product candidate, now ARQ-234.

The Company anticipates commencing such Phase 1 study in the first quarter of 2026.

In addition, if applicable, the Company will make payments amounting to a mid-single-digit percentage of any annual net sales of certain products exceeding $ 1.5 billion.

The Company accounted for this purchase of equity interests in Ducentis as an in-process research and development (IPR&D) asset acquisition, as it has no alternative future use, and recorded a $ 29.6 million charge to research and development expense on the acquisition date.

Any contingent payments made under the Share Purchase Agreement will be recorded when it is probable that they will occur and they can be reasonably estimated, at which point the Company will determine whether the payment should be expensed or capitalized depending on whether the IPR&D has achieved market acceptance.

There were no payments made or due for the three and nine months ended September 30, 2025 and 2024, respectively.

Under the terms of the Share Purchase Agreement, the Company will develop and seek FDA approval of a therapeutic product containing ARQ-234 for an atopic dermatitis indication, and if FDA approval of ARQ-234 is obtained by the Company, to commercially launch it in the United States.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

Commitments and Contingencies

Operating Lease

The Company's lease for its corporate headquarters ( 22,643 square feet of office space) commenced in February 2019 and was amended in April 2020 in order to relocate to a new expanded space.

In August 2025, the Company entered into a second amendment to extend the term of the lease by five years , extending the lease expiration from August 2028 to July 2033.

This second amendment had a net effect of increasing the Company's future lease payments by approximately $ 5.4 million, primarily due to the five additional years of rent payments.

In accordance with ASC 842, the Company remeasured the present value of the aggregate lease payments over the amended lease term and recorded an increase to the Company’s operating lease liabilities and existing right-of-use lease asset of approximately $ 2.9 million in the third quarter 2025 as a result of this remeasurement.

Indemnification

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions.

Pursuant to such agreements, the Company may indemnify, hold harmless, and defend an indemnified party for losses suffered or incurred by the indemnified party.

Some of the provisions will limit losses to those arising from third party actions.

In some cases, the indemnification will continue after the termination of the agreement.

The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable.

The Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions.

The Company has also entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the fullest extent permitted by the provisions of the Company's Bylaws and the Delaware General Corporation Law.

The Company currently has directors’ and officers’ insurance coverage that reduces its exposure and enables the Company to recover a portion of any future amounts paid.

The Company believes any potential loss exposure under these indemnification agreements in excess of applicable insurance coverage is minimal.

Contingencies

From time to time, the Company may be involved in legal proceedings, as well as demands, claims, and threatened litigation, which arise in the normal course of business or otherwise.

The ultimate outcome of any litigation is uncertain, and unfavorable outcomes could have a negative impact on the Company's results of operations and financial condition.

Regardless of outcome, litigation can have an adverse impact on the Company because of the defense costs, the diversion of management resources, and other factors.

As of September 30, 2025 and December 31, 2024, the Company determined that no loss contingencies from legal proceedings—including the patent infringement complaint filed against the Company by Teva Pharmaceutical Industries, Ltd.—met the threshold of "reasonably possible", as defined in ASC 450.

Accordingly, no material amounts have been accrued related to loss contingencies under ASC 450.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

Long-term debt

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

As of September 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 June 30, 2025, the rate was 10.27 %.

On September 30, 2025, the rate was 10.20 %.

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 June 30, 2025.

The Company was in compliance with all covenants under the Loan Agreement as of September 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.

3 unchanged sentences

At the inception of the Loan Agreement, the fair value of the embedded derivative was determined to be immaterial.

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.

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.

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

The fair value of the embedded derivative instrument as of September 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.

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

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.

At September 30, 2025 and December 31, 2024, the effective interest rate was 11.31 % and 11.57 %, respectively.

Interest expense relating to the term loan was $ 3.1 million and $ 9.1 million for the three and nine months ended September 30, 2025, respectively, and $ 6.6 million and $ 21.6 million for the three and nine months ended September 30, 2024, respectively.

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

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

Long-term debt, gross

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Expired ( 2,865 ) 26.87

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.

Balance—September 30, 2025 6,725,216 $ 8.83 7.87 $ 69,596

Exercisable—September 30, 2025

2,941,734 $ 8.33 6.62 $ 33,111

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 September 30, 2025.

The intrinsic value of options exercised for the nine months ended September 30, 2025 and 2024 was $ 2.9 million and $ 1.7 million, respectively.

The total grant-date fair value of the options vested during the nine months ended September 30, 2025 and 2024 was $ 6.6 million and $ 3.1 million, respectively.

The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2025 and 2024 was $ 9.69 and $ 3.64 , respectively.

Restricted Stock Unit Activity

6 unchanged sentences

Forfeited ( 743,035 ) 9.99

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

Unvested Balance—September 30, 2025 6,189,884 $ 10.28

ARCUTIS BIOTHERAPEUTICS, INC.

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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 June 30, Six Months Ended June 30,

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

2025 2024 2025 2024

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$ 10,035 $ 10,241 $ 30,304 $ 32,337

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 and six months ended June 30, 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 June 30,

As of September 30, 2025, there was $ 28.1 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 2.7 years.

As of September 30, 2025, there was $ 50.5 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 2.8 years.

Earnings (Loss) Per Share

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

Diluted net earnings per share is computed by dividing the net loss by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method.

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 basic and diluted net income (loss) per share for the three and nine months ended September 30, 2025 and 2024.

The following table is a reconciliation of the share amounts used in calculating basic and diluted earnings (loss) per share:

Three Months Ended

September 30,

Nine Months Ended

September 30,

2025 2024 2025 2024

Weighted-average common shares outstanding - Basic

127,622,860 124,302,317 126,891,285 119,627,687

Effect of dilutive securities

5,261,707 — — —

Weighted-average common shares outstanding - Diluted

132,884,567 124,302,317 126,891,285 119,627,687

Potential dilutive securities, which include unvested RSUs and unvested performance-based RSUs for which established performance criteria have been achieved as of the end of the respective periods, vested and unvested options to purchase common stock and shares to be issued under the Company's employee stock purchase plan (ESPP), have been excluded from the calculation of diluted net income (loss) per common share in each period in which the Company recorded a net loss, as the effect is antidilutive.

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

As of September 30,

Stock options to purchase common stock 2,672,832 5,634,494

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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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

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Total operating expenses 90,693 83,821 277,183 245,947

Operating loss ( 14,611 ) ( 50,077 ) ( 39,140 ) ( 81,699 )

Operating income (loss)

8,526 ( 39,066 ) ( 30,614 ) ( 120,765 )

Other income, net 2,035 4,182 6,861 13,455

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Provision for income taxes 80 — 701 324

Segment and consolidated net loss $ ( 15,886 ) $ ( 52,332 ) $ ( 40,946 ) $ ( 87,714 )

Segment and consolidated net income (loss)

$ 7,410 $ ( 41,537 ) $ ( 33,536 ) $ ( 129,251 )

(1) Other segment expenses include professional services related to research and development, medical affairs, depreciation and amortization expenses.

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