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Item 9A. Controls and Procedures

2026-02-25 compared with 2025-02-25 · 415 added, 378 removed, 937 unchanged (46% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of the our management, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of December 31, 2024 to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such required information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

Based on an evaluation under the supervision of and with the participation of our management, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Exchange Act) were effective as of December 31, 2025 to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such required information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Inherent Limitations over Controls and Procedures

2 unchanged sentences

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

Index to Financial Statements

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S.

1 unchanged sentence

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Index to Financial Statement s

Management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our internal controls will prevent or detect all errors and all fraud.

9 unchanged sentences

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during the three months ended December 31, 2024, which were identified in connection with management's evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Index to Financial Statement s

There were no changes in our internal control over financial reporting identified in connection with management's evaluation during the three months ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Index to Financial Statements

Report of Independent Registered Public Accounting Firm

2 unchanged sentences

We have audited Arcutis Biotherapeutics, Inc.’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Arcutis Biotherapeutics Inc.’s (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and our report dated February 25, 2025 expressed an unqualified opinion thereon.

In our opinion, Arcutis Biotherapeutics, Inc.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and our report dated February 25, 2026 expressed an unqualified opinion thereon.

Basis for Opinion

17 unchanged sentences

February 25, 2026

Index to Financial Statement s

Index to Financial Statements

OTHER INFORMATION

On December 13, 2024 , Patrick Burnett , our Chief Medical Officer , entered into a Rule 10b5-1 trading plan , intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act.

The plan provided for the potential sale of up to 177,732 shares of Common Stock held by Mr.

Burnett between March 11, 2025 and February 27, 2026 .

On November 18, 2025 , Keith Leonard , a member of our Board of Directors , entered into a Rule 10b5-1 trading plan , intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act.

The plan provided for the potential exercise and sale of up to 39,272 options held by Mr.

Leonard between February 17, 2026 and February 16, 2027 .

On December 13, 2025 , Sue-Jean Lin , a member of our Board of Directors , entered into a Rule 10b5-1 trading plan , intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act.

The plan provided for the potential exercise and sale of up to 77,880 options, as well as the potential sale of up to 13,004 shares of Common Stock held by Ms.

Lin between February 24, 2026 and February 19, 2027 .

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

We have adopted an insider trading policy and procedures governing the purchase, sale, and/or other dispositions of the our securities by directors, officers, employees and other covered persons that we believe are reasonably designed to promote compliance with insider trading laws, rules and regulations, and the listing requirements of the Nasdaq Global Select Market.

We have adopted an insider trading policy and procedures governing the purchase, sale, and/or other dispositions of our securities by directors, officers, employees and other covered persons that we believe are reasonably designed to promote compliance with insider trading laws, rules and regulations, and the listing requirements of the Nasdaq Global Select Market.

This policy imposes regular blackout periods during which certain individuals may not transact in our securities and pre-clearance procedures for transactions by certain specified individuals, including, among others, the members of our board of directors and our executive officers.

4 unchanged sentences

securities laws.

The remaining information required by this item is incorporated by reference to our definitive proxy statement relating to our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year to which this Annual Report on Form 10-K relates.

The remaining information required by this item is incorporated by reference to our definitive proxy statement relating to our 2026 Annual Meeting of Stockholders (the 2026 Proxy Statement) to be filed with the SEC within 120 days of December 31, 2025.

EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to our definitive proxy statement relating to our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year to which this Annual Report on Form 10-K relates.

The information required by this item is incorporated by reference to the 2026 Proxy Statement.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated by reference to the 2026 Proxy Statement.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated by reference to the 2026 Proxy Statement.

PRINCIPAL ACCOUNTING FEES AND SERVICES

Index to Financial Statement s

The information required by this item is incorporated by reference to the 2026 Proxy Statement.

Index to Financial Statements

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

9 unchanged sentences

All other schedules are omitted because they are not applicable, not required, or because the required information is included in the consolidated financial statements or notes thereto.

Index to Financial Statement s

Index to Financial Statements

(b) Exhibits.

[YET TO BE UPDATED]

Description of Document Incorporated by Reference Form Date Number Filed/Furnished Herewith

8 unchanged sentences

4.3 Description of Arcutis Biotherapeutics’ Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.

10-K 3/19/20 4.3

4.4 Form of Pre-Funded Warrant

11 unchanged sentences

S-1/A 1/21/20 10.5

Consulting Agreement, dated August 16, 2016, by and between Bhaskar Chaudhuri and the Registrant.

S-1 1/6/20 10.11

License Agreement, dated July 23, 2018, by and between AstraZeneca AB and the Registrant.

S-1 1/6/20 10.12

Exclusive Option and License Agreement, dated January 4, 2018, by and between Jiangsu Hengrui Medicine Co., Ltd.

and the Registrant.

S-1 1/6/20 10.13

Collaboration Agreement, dated June 28, 2019, by and between Hawkeye Therapeutics, Inc.

1 unchanged sentence

S-1 1/6/20 10.14

Transition and Amendment Agreement, dated December 13, 2019 by and between Bhaskar Chaudhuri and the Registrant.

S-1 1/6/20 10.15

10.12 Option Notice and Amendment No.

2 to Exclusive Option and License Agreement, dated December 5, 2019, by and between Jiangsu Hengrui Medicine Co., Ltd.

and the Registrant.

S-1 1/6/20 10.16

Severance & Change in Control Agreement, by and between the Registrant and Todd Franklin Watanabe.

S-1/A 1/21/20 10.17

10.14 Offer Letter, dated December 18, 2020, by and between the Registrant and Matthew R.

10-K 2/16/21 10.23

10.15 Severance & Change in Control Agreement, by and between the Registrant and Matthew R.

10-K 2/16/21 10.24

Supply Agreement, dated November 24, 2020, by and between Registrant and Interquim, S.A.

8 unchanged sentences

10-Q 11/4/21 10.1

Index to Financial Statement s

10.20 Offer Letter, dated December 13, 2021, by and between the Registrant and Mas Matsuda.

7 unchanged sentences

10.24 First Amendment to Amended and Restated Loan and Security Agreement dated November 1, 2023, by and among the Registrant, SLR Investment Corp., and the lenders party thereto.

Index to Financial Statements

10.25 Non-Employee Director Compensation Program

1 unchanged sentence

License Agreement, dated August 10, 2023, by and between the Registrant and Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd.

10.30 Employment Agreement, dated September 1, 2023, by and between John Smither and the Registrant

Severance & Change in Control Agreement, dated September 6, 2023, by and between John Smither and the Registrant

Employment Agreement, dated September 16, 2023, by and between Todd Edwards and the Registrant

1 unchanged sentence

Amended and Restated Sales Agreement, dated January 31, 2024, by and between the Registrant and Cowen and Company, LLC

10.35 Amendment to Employment Agreement, dated February 22, 2024, by and between the Registrant and Matthew R.

10.36 O ffer Letter of Employment Agreement, dated April 5, 2024, by and between the Registrant and Da vid Topper

10.37 Severance and Change in Control Agreement, dated April 5, 2024, by and between the Registra nt and David Topper

Li cense Agreement, dated February 27, 202 4, by and between the R egistra nt and S ato Pharmaceutical Co., Ltd.

10.39 First Amendment to the Lic ense Agreement, dated Febr uary 18 , 2024, by and between the Registrant and Hangzhou Zhongmei Hua dong Pharmaceutical Co., Ltd.

License Agreement, dated February 27, 2024, by and between the Registrant and Sato Pharmaceutical Co., Ltd.

10.39 First Amendment to the License Agreement, dated February 18, 2024, by and between the Registrant and Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd.

Second Amendment to Amended and Restated Loan and Security Agreement, dated August 9, 2024, by and among the Registrant, Arcutis Canada, Inc., SLR Investment Corp., and the lenders party thereto.

Manufacturing Supply Agreement, dated November 8, 2023, by and between the Registrant and Bora Pharmaceuticals Services Inc.

Amendment No.

1 to the Manufacturing Supply Agreement, dated March 22, 2024, by and between the Registrant and Bora Pharmaceuticals Services Inc.

Amendment No.

2 to the Manufacturing Supply Agreement, dated as of May 14, 2025, by and between the Registrant and Bora Pharmaceuticals Services Inc.

10.44 Severance & Change in Control Agreement, dated April 10, 2025, by and between the Registrant and Latha Vairavan.

10.45 Amended and Restated Non-Employee Director Compensation Program.

10.46 Transition and Consulting Agreement, dated December 3, 2025, by and between the Company and Bhaskar Chaudhuri.

10.47 Offer Letter, dated July 7, 2020, by and between the Registrant and Patrick Burnett .

10.48 Severance & Change in Control Agreement, dated July 28, 2020, by and between the Registrant and Patrick Burnett .

10.49 Offer L etter, dated February 4, 2020, by and between the Registrant and Latha Vairavan.

19 Insider Trading Policy and Procedures .

21.1 List of Subsid iaries of the Company .

Index to Financial Statements

23.1 Consent of Independent Registered Public Accounting Firm.

Index to Financial Statement s

24.1 Power of Attorney (included in the signature page to this Annual Report on Form 10-K).

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# Indicates management contract or compensatory plan.

Index to Financial Statement s

FORM 10-K SUMMARY

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Report of Independent Registered Public Accounting Firm

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We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

federal securities laws and the applicable rules and regulations of the SEC and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

6 unchanged sentences

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Index to Financial Statement s

Index to Financial Statements

Sales deductions

2 unchanged sentences

As described in Note 2 to the consolidated financial statements, revenues from product sales are recognized net of variable consideration for invoice discounts for prompt payment and distribution service fees, government and private payer rebates, chargebacks, discounts and fees, product returns and costs of co-pay assistance programs, which are collectively recorded at the time of sale.

Reserves are established for the estimates of variable considerations.

Auditing the accrued liabilities related to private payer rebates required significant judgment.

The accrued sales deductions related to private payer rebates are based on data received from its customers, current contractual arrangements, market events and trends, external historical data, and forecasted customer buying patterns and patient utilization.

The accrued sales deductions related to private payer rebates are based on data received from its customers, current contractual arrangements, specific known market events and trends, external historical data, and forecasted customer buying patterns and patient utilization.

Auditing the Company’s accounting for accrued sales deductions related to co-pay assistance programs requires a higher degree of judgment to evaluate the relevance and reliability of audit evidence.

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Matter in Our

We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the accrued sales deduction processes.

This included testing controls over management’s review of significant assumptions and inputs used in the estimate of sales deductions, including actual sales, contractual terms, historical experience, and distributor inventory levels.

To test the adequacy of the Company’s accrued sales deductions for private payer rebates and co-pay assistance we obtained management’s calculations for the estimates and performed the following procedures, among others.

For accrued private payer rebates, we tested management’s estimation process by developing an independent expectation of the estimated accrual balance based upon actual historical payment data.

We also tested terms and conditions for a sample of contracts to the executed agreement and tested a sample of payments made throughout the year.

We agreed terms and conditions for a sample of contracts to the executed agreement and tested a sample of payments made throughout the year.

For accrued co-pay assistance programs, we assessed the company’s assumptions of distributor inventory quantities by agreeing the quantities to third party reports.

4 unchanged sentences

February 25, 2026

Index to Financial Statement s

Index to Financial Statements

ARCUTIS BIOTHERAPEUTICS, INC.

9 unchanged sentences

Total current assets 411,232 335,820

Property and equipment, net 1,041 1,539

Property, plant, and equipment, net

Intangible assets, net 14,812 9,479

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Accounts payable $ 12,528 $ 14,220

Accrued liabilities 65,973 33,941

Operating lease liability 820 735

Current portion of long-term debt, net 1,000 —

Accrued and other current liabilities

116,310 66,793

Total current liabilities 129,838 81,013

Operating lease liability, noncurrent 2,562 3,382

Operating lease liability, long-term

Long-term debt, net 107,959 107,203

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Stockholders’ equity:

Preferred stock, $ 0.0001 par value;

10,000,000 shares authorized;

no shares issued and outstanding

Common stock, $ 0.0001 par value;

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Additional paid-in capital 1,327,595 1,279,479

Accumulated other comprehensive income (loss)

Accumulated other comprehensive loss

Accumulated deficit ( 1,138,084 ) ( 1,121,943 )

1 unchanged sentence

Total liabilities and stockholders’ equity $ 432,973 $ 348,889

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

Index to Financial Statement s

See accompanying notes to the consolidated financial statements.

Index to Financial Statements

ARCUTIS BIOTHERAPEUTICS, INC.

Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

(In thousands, except per share data)

Year Ended December 31,

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Other income (expense):

Other income, net 16,173 11,786 5,821

Interest income

8,897 16,126 12,517

Interest expense ( 12,083 ) ( 27,168 ) ( 29,712 )

Other income (expense), net

443 47 ( 731 )

Loss before income taxes

2 unchanged sentences

1,171 647 3,113

$ ( 16,141 ) $ ( 140,039 ) $ ( 262,140 )

Other comprehensive income (loss):

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Weighted-average shares used in computing net loss per share, basic and diluted 127,234 120,958 69,305

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

Index to Financial Statement s

See accompanying notes to the consolidated financial statements.

Index to Financial Statements

ARCUTIS BIOTHERAPEUTICS, INC.

Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, except share data)

(In thousands)

Common Stock Additional

7 unchanged sentences

1,250 — 3,136 — — 3,136

Issuance of shares of common stock related to the acquisition of Ducentis Biotherapeutics 610,258 — 12,468 — — 12,468

Issuance of common stock upon the exercise of stock options 348 — 1,247 — — 1,247

Issuance of common stock upon the vesting of restricted stock units 440 — — — — —

Lapse of repurchase rights related to common stock issued pursuant to early exercises 75,293 — 82 — — 82

Lapse of repurchasing rights related to common stock issued pursuant to early exercises 15 — — — — —

Shares issued pursuant to the ESPP 272 — 1,175 — — 1,175

Stock-based compensation expense — — 38,813 — — 38,813

Unrealized loss on marketable securities — — — ( 831 ) — ( 831 )

Unrealized gain on marketable securities — — — 1,186 — 1,186

Foreign currency translation adjustment — — — ( 96 ) — ( 96 )

Net loss — — — — ( 262,140 ) ( 262,140 )

2 unchanged sentences

18,158 3 161,679 — — 161,682

Issuance of common stock from ATM offering, net of issuance costs of $ 116

1,250,000 — 3,136 — — 3,136

Issuance of common stock upon the exercise of stock options 649 — 2,807 — — 2,807

Issuance of common stock upon the vesting of restricted stock units 1,720 — — — — —

Lapse of repurchasing rights related to common stock issued pursuant to early exercises 14,847 — — — — —

Shares issued pursuant to the ESPP 534 — 1,713 — — 1,713

5 unchanged sentences

Balance—December 31, 2024 117,848 12 1,279,479 ( 7 ) ( 1,121,943 ) 157,541

Issuance of common stock and pre-funded warrants, net of issuance costs of $ 10,820

18,157,895 3 161,679 — — 161,682

Issuance of common stock upon the exercise of stock options 714 — 4,597 — — 4,597

Issuance of common stock upon the vesting of restricted stock units 2,271 — — — — —

Exercise of pre-funded warrants 2,285 — — — — —

Shares issued pursuant to the ESPP 215 — 2,376 — — 2,376

Stock-based compensation expense — — 41,143 — — 41,143

Unrealized gain on marketable securities — — — 219 — 219

Unrealized loss on marketable securities — — — ( 206 ) — ( 206 )

Foreign currency translation adjustment — — — 169 — 169

1 unchanged sentence

Balance—December 31, 2025 123,333 $ 12 $ 1,327,595 $ ( 44 ) $ ( 1,138,084 ) $ 189,479

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

Index to Financial Statement s

See accompanying notes to the consolidated financial statements.

Index to Financial Statements

ARCUTIS BIOTHERAPEUTICS, INC.

6 unchanged sentences

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

Depreciation 640 771 622

Non-cash lease expense 408 360 319

Stock-based compensation expense 40,364 41,730 38,813

Amortization of intangible assets 4,667 1,959 750

Acquired in-process research and development — — 29,630

Net amortization/accretion on marketable securities ( 6,901 ) ( 6,989 ) ( 2,253 )

Non-cash interest expense 1,756 5,404 4,030

Stock-based compensation 41,730 38,813 32,682

Change in fair value of embedded derivative instrument

( 279 ) 849 —

Net accretion on marketable securities ( 2,094 ) ( 6,901 ) ( 6,989 )

Other non-cash items, net 652 769 1,980

Changes in operating assets and liabilities:

8 unchanged sentences

Purchases of marketable securities ( 246,986 ) ( 254,820 ) ( 225,840 )

Proceeds from maturities of marketable securities 288,783 406,500 351,473

Proceeds from maturities and sales of marketable securities

227,419 288,783 406,500

Purchases of property and equipment ( 686 ) ( 143 ) ( 428 )

Acquisition of in-process research and development — — ( 15,450 )

Milestone payment for intangible asset ( 10,000 ) ( 5,000 ) —

8 unchanged sentences

Proceeds from issuance of common stock and pre-funded warrants, net of issuance costs

Proceeds from long-term debt — — 125,000

Proceeds from issuance of shares under ATM, net of issuance costs — — 3,136

Payment of debt issuance costs — — ( 2,187 )

Net cash provided by financing activities 6,973 66,202 101,323

6 unchanged sentences

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:

Right-of-use assets obtained in exchange for operating lease liabilities $ 2,858 $ — $ —

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Interest expense paid in cash $ 10,327 $ 22,209 $ 25,445

Acquired in-process research and development in exchange for the issuance of common stock $ — $ — $ 12,468

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

See accompanying notes to the consolidated financial statements.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

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.

Description of Business

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 in October 2023), 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 in October 2024.

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.

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 December 31, 2024.

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.

The Company also granted the underwriters an option to purchase up to an additional 2,368,421 shares at $ 9.50 per share, which the underwriters exercised in full on February 29, 2024.

The aggregate net proceeds to the Company was $ 161.7 million after deducting underwriting discounts, commissions, and estimated offering expenses payable by the Company.

At-the-Market (ATM) Offerings

On May 6, 2021, the Company entered into a sales agreement (Sales Agreement) with Cowen and Company, LLC (Cowen), under which the Company may from time to time issue and sell shares of its common stock through ATM offerings for an aggregate offering price of up to $ 100.0 million.

Cowen will act as the Company's sales agent for the ATM program and is entitled to compensation for its services equal to 3 % of the gross proceeds of any shares of common stock sold under the Sales Agreement.

In March, 2022, the Company sold 882,353 shares under the ATM for $ 17.00 per share and received $ 14.5 million in net proceeds.

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.

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

All other terms of the amended and restated Sales Agreement are substantially the same as the original Sales Agreement.

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

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

The Company has incurred significant losses and negative cash flows from operations since its inception and had an accumulated deficit of $ 1,121.9 million and $ 981.9 million as of December 31, 2024 and 2023, respectively.

Management expects to continue to incur operating losses.

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 topical 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.

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

The Company received Health Canada approval for 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 October 2025, and began Canadian commercialization in November 2025.

The Company has incurred significant annual losses and negative cash flows from operations since its inception and had an accumulated deficit of $ 1,138.1 million and $ 1,121.9 million as of December 31, 2025 and 2024, respectively.

The Company may continue to incur operating losses.

The Company had cash, cash equivalents, restricted cash, and marketable securities of $ 221.3 million and $ 228.6 million as of December 31, 2025 and 2024, respectively.

The Company has $ 100.0 million outstanding under the Loan Agreement as of December 31, 2024.

The Company had $ 100.0 million outstanding under the Loan Agreement as of December 31, 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.

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Summary of Significant Accounting Policies

Basis of Presentation

Basis of Presentation and Principles of Consolidation

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

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

All material intercompany balances and transactions have been eliminated.

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

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

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

Use of Estimates

The preparation of 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.

See below for change in prior period estimates related to revenue recognition which was recorded in the fourth quarter of 2024.

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

Significant estimates and assumptions include those related to revenue recognition, accrued and prepaid research and development expenses, and income taxes.

Additionally, the Company uses available market information to assess the fair value of its marketable securities.

The Company regularly evaluates its estimates using historical experience, expectations of future impacts and other assumptions that the Company believes are reasonable, and the Company adjusts its estimates and assumptions when facts and circumstances indicate the need for change.

If actual results differ from those estimates, the Company includes the updates in its consolidated financial statements in the period the actual amounts become known.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents.

Cash equivalents consist primarily of money market funds, commercial paper, U.S.

Treasury securities, and short-term corporate debt securities.

Restricted Cash

As of December 31, 2024 and 2023, the Company held $ 0.6 million and $ 0.9 million, respectively, of restricted cash as collateral for a letter of credit related to the Company's amended office space lease.

Marketable Securities

Investments with original maturities of greater than three months are classified as marketable securities on the balance sheet.

Marketable securities consist of investment grade short to intermediate-term fixed income investments that have been classified as available-for-sale and are carried at estimated fair value as determined based upon quoted market prices or pricing models for similar securities.

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Available-for-sale securities with original maturities beyond three months at the date of purchase, including those that have maturity dates beyond one year from the balance sheet date, are classified as current assets on the consolidated balance sheets due to their highly liquid nature and availability for use in current operations.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

Unrealized gains and losses are excluded from earnings and are reported as a component of other comprehensive income (loss) on the consolidated balance sheets.

Realized gains and losses as well as credit losses, if any, on marketable securities are included in other income, net.

Interest on marketable securities is included in other income, net.

Realized gains and losses as well as credit losses, if any, on marketable securities are included in other income (expense), net in the statements of operations and comprehensive loss.

Interest on marketable securities is included in interest income in the statements of operations and comprehensive loss.

The Company evaluated the underlying credit quality and credit ratings of the issuers during the period.

In making this judgment, the Company evaluates, among other things, the duration and extent to which the fair value of a security is less than its cost, the Company's intent to sell or whether it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, the financial condition of the issuer and any changes thereto, and, as necessary, the portion of a decline in fair value that is credit-related.

This assessment could change in the future due to new developments or changes in assumptions related to any particular security.

To date, no such credit losses have occurred or have been recorded.

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The Company will reserve against trade accounts receivable for estimated credit losses that may arise and any amounts determined to be uncollectible will be written off against the reserve when it is probable that the receivable will not be collected.

The reserve amount for estimated losses was not material as of December 31, 2024 and 2023.

The reserve amount for estimated losses was not material as of December 31, 2025 and 2024 and the amounts of trade receivable amounts written off for the years ended December 31, 2025, 2024, and 2023 were not material.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

The Company values its inventories at the lower-of-cost or net realizable value.

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The Company performs an assessment of the recoverability of capitalized inventory during each reporting period, and writes down any excess and obsolete inventories to their net realizable value in the period in which the impairment is first identified.

If they occur, such charges are recorded as a component of cost of sales in the consolidated statements of operations.

If they occur, such charges are recorded as a component of cost of sales in the consolidated statements of operations and comprehensive loss.

The Company capitalizes inventory costs associated with products following regulatory approval when future commercialization is considered probable and the future economic benefit is expected to be realized.

Products that may be used in clinical development programs are excluded from inventory and their costs are charged to research and development expense in the consolidated statement of operations as incurred, as long as they do not have an alternative use.

Prior to the initial dates of regulatory approval, costs related to the production of inventory were recorded as research and development expense on the Company’s consolidated statements of operations in the period incurred.

Intangible Assets, net

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This milestone payment was capitalized as an intangible asset and will be amortized 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.

The Company paid an additional milestone payment of $ 5.0 million related to the achievement of $ 100.0 million worldwide net sales in the third quarter of 2024.

This milestone payment was recorded as a cumulative catch-up adjustment to the carrying value of the intangible asset.

The Company paid additional milestone payments of $ 5.0 million related to the achievement of $ 100.0 million worldwide net sales in October 2024 and $ 10.0 million related to the achievement of $ 250.0 million worldwide net sales in May 2025.

These milestone payments were recorded as cumulative catch-up adjustments to the carrying value of the intangible asset.

Amortization expense was $ 4.7 million, $ 2.0 million, and $ 0.8 million for the years ended December 31, 2025, 2024, and 2023 , respectively.

Estimated future amortization expense for the intangible assets subsequent to December 31, 2025 is as follows (in thousands):

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

Thereafter 3,562

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If the fair value is less than the carrying amount, an impairment loss is recognized in operating results.

No impairment losses were recorded for the years ended December 31, 2025, 2024, and 2023.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

Valuation of Other Investments

9 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 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

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The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

Level 1—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

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There were no impairments recognized during the years ended December 31, 2025, 2024 and 2023.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

The Company determines if an arrangement is or contains a lease at inception.

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The measurement of lease liabilities is based on the present value of lease payments over the lease term.

The Company uses its incremental borrowing rate, based on the information available at commencement date, to determine the present value of lease payments when its leases do not provide an implicit rate.

The Company uses its incremental borrowing rate, based on the information available at lease commencement date, to determine the present value of lease payments when its leases do not provide an implicit rate.

The Company uses the implicit rate when readily determinable.

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Further, the Company elected the short-term lease exception policy, permitting it to not apply the recognition requirements of this standard to leases with terms of 12 months or less (short-term leases) for all classes of assets.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

Accrued and Prepaid Nonclinical and Clinical Costs

The Company records accrued liabilities for estimated costs and prepaid costs for research and development activities conducted by third-party service providers, which include the conduct of nonclinical studies, clinical trials, and contract manufacturing activities.

Accrued and Prepaid Research and Development Expenses

The Company records prepaid expenses and accrued liabilities for estimated research and development activities conducted by third-party service providers, which include the conduct of nonclinical studies, clinical trials, and contract manufacturing activities.

These costs are a significant component of the Company’s research and development expenses.

The Company accrues for these costs based on factors such as estimates of the work completed and in accordance with agreements established with its third-party service providers under the service agreements.

The Company records these costs based on factors such as estimates of the work completed and in accordance with agreements established with its third-party service providers under the service agreements.

The Company makes significant judgments and estimates in determining the accrued liabilities and prepaid costs balances in each reporting period.

As actual costs become known, the Company adjusts its accrued liabilities.

As actual costs become known, the Company adjusts its balances for these activities.

Pursuant to Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers (ASC 606), the Company recognizes revenue when a customer obtains control of promised goods or services.

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The Company’s customers subsequently resell the products to pharmacies, health care providers, and patients.

In accordance with ASC 606, the Company recognizes net product revenue from sales when the Customers obtain control of the Company’s products, which typically occurs upon delivery to the Customer.

In accordance with ASC 606, the Company recognizes net product revenue from sales when the customers obtain control of the

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

Company’s products, which typically occurs upon delivery to the customer.

The Company’s payment terms are generally between 30 - 65 days.

Revenue from product sales are recorded at the net sales price, or “transaction price,” which includes estimates of variable consideration that result from (a) invoice discounts for prompt payment and distribution service fees, (b) government and private payer rebates, chargebacks, discounts and fees, (c) product returns and (d) costs of co-pay assistance programs for patients, as well as other incentives.

Reserves are established for the estimates of variable consideration based on the amounts earned or to be claimed on the related sales.

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Where appropriate, the Company utilizes the expected value method to determine the appropriate amount for estimates of variable consideration based on factors such as the Company’s historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns.

The amount of variable consideration that is included in the transaction price may be constrained and is included in net product revenue only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.

The amount of variable consideration that is included in the transaction price may be constrained and is recognized as product revenue only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.

Actual amounts of consideration ultimately received may differ from the Company’s estimates.

If actual results vary from the Company’s estimates, the Company adjusts these estimates, which would affect net product revenue and earnings in the period such variances become known.

See below for change in prior period estimates related to revenue recognition which was recorded in the fourth quarter of 2024.

Distribution Service Fees :

The Company engages with wholesalers and specialty pharmacies to distribute its products to end customers.

The Company pays the wholesalers and certain specialty pharmacies a fee for

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

services such as:

The Company pays the wholesalers and certain specialty pharmacies a fee for services such as:

data reporting, inventory management, chargeback administration, and service level commitment.

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Product Returns :

The Company provides Customers a return credit in the amount of the purchase price paid by Customers for all products returned in accordance with the Company’s returned goods policy.

The Company provides customers a credit for all products returned in accordance with the Company’s returned goods policy.

Once the product is returned, it is destroyed.

1 unchanged sentence

In the early product launch period, the Company estimated its provision for sales returns based on industry data and adjusted the transaction price for such estimates at the time of sale to the customer.

As of the fourth quarter of 2024, the Company had collected history for its actual product returns, which it utilized to refine its estimated returns rate and adjust its accrual.

This analysis resulted in a $ 4.1 million reduction in its accrual and favorable true-up impact to product revenue in the fourth quarter of 2024 related to adjusting prior period estimates.

The Company will continue to monitor its actual returns and if they vary from estimates, the Company may need to adjust accruals and reserve rates, which would affect revenue in the period of adjustment.

As the Company continues to collect data on its actual product returns, it has and will continue to refine its estimated returns rate and adjust its accrual, which affects revenue in the period of adjustment.

No such material adjustments were recorded for the year ended December 31, 2025.

A chargeback is the difference between the manufacturer's invoice price to the wholesaler and the wholesaler’s customer's contract price.

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The Company's estimates for rebates under government programs are based on statutory discount rates and expected utilization as well as historical data it has accumulated since product launch.

Rebates are generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarters’ unpaid rebates.

If actual rebates vary from estimates, the Company may need to adjust accruals, which would affect revenue in the period of adjustment.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

Rebates are generally invoiced and paid in arrears.

The accrual balance consists of invoiced amounts not yet paid as well as an estimate of the amount expected to be incurred but not yet invoiced to the Company as of the end of the reporting period.

If actual rebates vary from estimates, the Company may need to adjust accruals, which would affect product revenue, net in the period of adjustment.

Other Revenue

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Therefore, these payments are subject to significant revenue reversal and are therefore not included in the transaction price.

At the end of each reporting period, the Company will re-evaluate the probability of achievement of each milestone and, if necessary, adjust its estimate of the overall transaction price and accordingly recognize

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

the related revenue once the probability of significant reversal of revenue is low.

Any such adjustments are recorded on a cumulative catch-up basis, and would be reported in Other revenue in the period of adjustment.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of salaries and related costs, including payroll taxes, benefits, stock-based compensation, and travel, and costs related to sales and marketing of ZORYVE.

Other selling, general and administrative expenses include legal costs of pursuing patent protection of the Company's intellectual property, insurance, and professional services fees for auditing, tax, and general legal services.

Selling, general and administrative expenses are expensed as incurred and consist primarily of salaries and related costs, including payroll taxes, benefits, stock-based compensation, and travel, and costs related to sales and marketing of ZORYVE.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

and general legal services.

Advertising costs are expensed as incurred and were $ 25.3 million, $ 6.9 million, $ 11.2 million for the years ended December 31, 2025, 2024, and 2023, respectively.

Pre-funded Warrants

Pursuant to the Company’s offering relating to the sale of securities completed in October 2023, the Company issued pre-funded warrants to purchase 7,500,000 shares of the Company's common stock at $ 2.4999 per underlying share of common stock.

The warrants had an exercise price of $ 0.0001 per underlying share of common stock, were fully exercisable upon issuance, and have no expiration date.

The shares underlying the pre-funded warrants, the exercise of which requires nominal consideration for the delivery of the shares of common stock, are included in weighted-average shares used in computing net loss per share as of December 31, 2024 and 2023.

Stock-Based Compensation

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For share-based awards that vest subject to the satisfaction of a service requirement, the fair value measurement date for such awards is the date of grant and the expense is recognized on a straight-line basis over the expected vesting period.

For share-based awards that vest subject to a performance condition, the Company will recognize compensation cost for awards if and when the Company

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

concludes that it is probable that the awards with a performance condition will be achieved on an accelerated attribution method.

For share-based awards that vest subject to a performance condition, the Company will recognize compensation cost for awards if and when the Company concludes that it is probable that the awards with a performance condition will be achieved on an accelerated attribution method.

The Company accounts for forfeitures as they occur.

Income taxes are accounted for using the asset and liability method.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period of enactment.

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dollars using average exchange rates in effect during each reporting period.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period, including prefunded warrants, without consideration for potential dilutive shares of common stock.

Diluted net loss 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.

Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share since the effects of potentially dilutive securities are antidilutive.

Shares of common stock subject to repurchase are excluded from the weighted-average shares.

Co-promotion Agreement

I n July 2024, the Company entered into a co-promotion agreement with Kowa Pharmaceuticals America, Inc.

Promotion Agreement

I n July 2024, the Company entered into a promotion agreement with Kowa Pharmaceuticals America, Inc.

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

The Company recognizes all revenue and Kowa receives a commission for the net sales attributed to Kowa, which is reflected in selling, general and administrative expense.

For the year ended December 31, 2024, revenue from sales attributed to Kowa were immaterial and related commissions were immaterial.

The Company recognizes all revenue and Kowa receives a commission for the net sales attributed to Kowa.

The commission is recorded in selling, general and administrative expense.

For the years ended December 31, 2025 and 2024, revenue from sales attributed to Kowa and related commissions paid or owed to Kowa were not material.

Effective January 23, 2026, Kowa and the Company mutually agreed to terminate the promotion agreement.

Following this termination, Kowa ceased all sales and promotions of ZORYVE and the Company will not be required to make any further payments to Kowa.

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07 , Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis.

Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis.

The Company adopted the guidance in the fiscal year beginning January 1, 2024.

There was no impact on the Company's reportable segments identified and additional required disclosures have been included in Note 13.

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 consolidated financial statements.

ARCUTIS BIOTHERAPEUTICS, INC.

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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.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The amendments should be applied prospectively;

however, retrospective application is also permitted.

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

The Company adopted the guidance for the year ended December 31, 2025 and applied any presentational changes from this new standard to all prior years to allow for comparability.

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

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$ 120,995 $ 85,082 $ 29,186

181,892 71,539 —

ZORYVE cream 0.15%

68,274 9,921 —

ZORYVE cream 0.05%

Total product revenue, net

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Other revenue relates primarily to the Sato and Huadong licensing agreements.

Product revenue, net outside the United States represented less than 10% of the Company’s consolidated product revenue, net for the years ended December 31, 2025, 2024 and 2023.

Major customers are defined as customers that individually accounted for greater than 10% of the Company's revenue.

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12 % 12 % 13 %

11 % 14 % 21 %

Total gross product sales from major customers

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* Represents less than 10% of respective balance

As of December 31, 2024, amounts due from five of these customers each exceeded 10% of gross trade receivables and accounted for 69 % of net trade receivables on a combined basis.

As of December 31, 2025, amounts due from four of these customers each exceeded 10% of gross trade receivables and accounted for 60 % of net trade receivables on a combined basis.

As of December 31, 2024, amounts due from five of these customers each exceeded 10% of gross trade receivables and accounted for 69 % of net trade receivables on a combined basis.

ARCUTIS BIOTHERAPEUTICS, INC.

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Level 1 Level 2 Level 3 Total

Money market funds (1)

Money market funds and cash

$ 37,541 $ — $ — $ 37,541

Certificates of deposit — 5,366 — 5,366

Commercial paper

— 14,789 — 14,789

Corporate debt securities — 78,764 — 78,764

Treasury securities 67,623 — — 67,623

Treasury and agency securities 84,522 — — 84,522

Total assets $ 122,063 $ 98,919 $ — $ 220,982

December 31, 2024

Money market funds (1)

Money market funds and cash

$ 71,335 $ — $ — $ 71,335

Commercial paper — 11,806 — 11,806

Certificates of deposit — 5,042 — 5,042

Corporate debt securities — 83,955 — 83,955

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$ 138,958 $ 88,997 $ — $ 227,955

______________

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

Money market funds and U.S.

Treasury securities are valued based on quoted market prices in active markets, with no valuation adjustment.

Commercial paper, certificates of deposits, and corporate debt securities are valued taking into consideration valuations obtained from third-party pricing services.

Treasury and agency securities are valued based on quoted market prices in active markets, with no valuation adjustment.

Commercial paper, certificates of deposit and corporate debt securities are valued taking into consideration valuations obtained from third-party pricing services.

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.

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and other observable inputs.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to 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):

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Cash and cash equivalents:

Money market funds (1)

Money market funds and cash

$ 37,541 $ — $ — $ 37,541

Certificates of deposit 5,366 — — 5,366

Total cash and cash equivalents $ 42,907 $ — $ — $ 42,907

Marketable securities:

Certificates of deposit

Commercial paper

$ 14,782 8 ( 1 ) $ 14,789

Corporate debt securities 78,687 81 ( 4 ) 78,764

Treasury securities 67,404 219 — 67,623

Total marketable securities $ 156,301 $ 319 $ — $ 156,620

Treasury and agency securities

84,493 45 ( 16 ) 84,522

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

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

Total marketable securities $ 177,962 $ 134 $ ( 21 ) $ 178,075

December 31, 2024

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Cash and cash equivalents:

Money market funds (1)

$ 73,544 $ — $ — $ 73,544

Corporate debt securities

Money market funds and cash

$ 71,335 $ — $ — $ 71,335

1 unchanged sentence

Marketable securities:

Commercial paper $ 11,817 $ 1 $ ( 12 ) $ 11,806

Certificates of deposit $ 5,042 $ — $ — $ 5,042

Corporate debt securities 83,855 100 — 83,955

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Total marketable securities $ 156,301 $ 319 $ — $ 156,620

______________

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

As of 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 December 31, 2025, no significant facts or circumstances were present to indicate a deterioration in the creditworthiness of the issuers of the available-for-sale securities.

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.

For all securities with a fair value less than its amortized cost basis, the Company determined the decline in fair value below amortized cost basis to be non-credit related and no allowance for losses has been recorded.

As of December 31, 2025, there were no individual securities that were in a significant unrealized loss position.

To date, the Company has not recorded any impairment charges on available-for-sale securities.

The Company has elected the practical expedient to exclude the applicable accrued interest from both the fair value and the amortized cost basis of its available-for-sale securities for purposes of identifying and measuring an impairment.

Accrued interest receivable related to available-for-sale securities is presented in prepaid expenses and other current assets, separate from marketable securities, on the consolidated balance sheet.

As of December 31, 2025 and 2024, accrued interest receivable was immaterial.

The Company has made an accounting policy election not to recognize an allowance for credit losses for accrued interest receivables on available-for-sale securities and to write-off any uncollectible accrued interest receivable by recognizing credit loss expense.

The Company has not written off any accrued interest receivables for the years ended December 31, 2025 and 2024.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

As of December 31, 2025, the amortized cost and fair value of marketable securities by contractual maturity were as follows:

December 31, 2025 December 31, 2024

cost Estimated

fair value Amortized

cost Estimated

Maturing within one year

$ 138,281 $ 138,395 $ 143,708 $ 144,018

Maturing in one to five years

39,681 39,680 12,593 12,602

Total marketable securities

$ 177,962 $ 178,075 $ 156,301 $ 156,620

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

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Loss (gain) from changes in fair value

( 139 ) ( 279 )

Ending balance

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 9 for further discussion on the embedded derivative instrument.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

See Note 9 for further discussion on the embedded derivative instrument.

Balance Sheet Components

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Prepaid clinical trial costs 2,577 3,244

Prepaid insurance 844 864

Other prepaid expenses and current assets 9,017 9,043

Total prepaid expenses and other current assets $ 21,079 $ 19,656

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

Accrued Liabilities

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Total accrued liabilities $ 116,310 $ 66,793

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

Property and Equipment, net

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All other fixed asset depreciation is recorded using the straight-line method over the estimated useful lives of the assets ( two to five years ).

License Agreements & Acquisition

License Agreements & Ducentis 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, 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 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,

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 Sato 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 Sato 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 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,

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

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.

Other revenue under the Sato agreement was $ 25.0 million for the year ended December 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.

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.

There was no other revenue recorded pursuant to the Sato Agreement for the year ended December 31, 2025 and $ 25.0 million recorded for the year ended December 31, 2024.

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).

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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 December 2024 which consisted of $ 2.0 million related to the achievement of a development and regulatory milestone 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, March 2025 and November 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 $ 19.0 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:

(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.

(i) up to an aggregate amount of $ 15.0 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, all of which would be subject to applicable tax withholding obligations.

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 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 Consolidated Financial Statements

Other revenue and related income tax expense related to the Huadong agreement was $ 4.0 million and $ 0.4 million, respectively, for the year ended December 31, 2025.

Other revenue and related tax income expense related to the Huadong agreement was $ 5.0 million and $ 0.5 million, respectively, for the year ended December 31, 2024.

Other revenue and related income tax expense related to the Huadong agreement was $ 30.0 million and $ 3.0 million, respectively, for the year ended December 31, 2023.

AstraZeneca License Agreement

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

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.

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 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.

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.

In the third quarter of 2022, the Company paid $ 7.5 million to AstraZeneca as a result of the approval of ZORYVE cream 0.3%, which was recorded as an intangible asset.

In the third quarter 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.

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.

In October 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 May 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 $ 4.7 million, $ 2.0 million and $ 0.8 million for the years ended December 31, 2025, 2024, and 2023, 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, and a payment of $ 10.0 million when the Company achieves $ 250.0 million in worldwide sales.

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 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 year ended December 31, 2024 was $ 5.0 million.

Royalty expense during the years ended December 31, 2023 and 2022 was no t material.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

Royalty expense during the years ended December 31, 2025, 2024 and 2023 was $ 11.2 million, $ 5.0 million and $ 0.9 million, respectively.

Hengrui Exclusive Option and License Agreement

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(Hengrui), whereby Hengrui granted the Company an exclusive option to obtain certain exclusive rights to research, develop, and commercialize products containing the compound designated by Hengrui as ivarmacitinib, a Janus kinase type 1 inhibitor, in topical formulations for the treatment of skin diseases, disorders, and conditions in the United States, Japan, and the European Union (including for clarity the United Kingdom).

The Company made a $ 0.4 million upfront non-refundable cash payment to Hengrui upon execution of the Hengrui Option and License Agreement, which was recorded as research and development expense.

In December 2019, the Company exercised its exclusive option under the agreement, for which it made a $ 1.5 million cash payment, which was recorded in research and development expense, and also contemporaneously amended the agreement to expand the territory to additionally include Canada.

In December 2019, the Company exercised its exclusive option under the agreement and contemporaneously amended the agreement to expand the territory to additionally include Canada.

In addition, the Company has agreed to make cash payments of up to an aggregate of $ 20.5 million upon achievement of specified clinical development and regulatory approval milestones with respect to the licensed products and cash payments of up to an additional aggregate of $ 200.0 million in sales-based milestones based on certain aggregate annual net sales volumes with respect to a licensed product.

With respect to any products the Company commercializes under the Hengrui License Agreement, it will pay tiered royalties to Hengrui on net sales of each licensed product by the Company, or its affiliates, or its sublicensees, ranging from mid single-digit to sub-teen percentage rates based on tiered annual net sales bands subject to specified reductions.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

subject to specified reductions.

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

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There were no payments made or due in connection with Hengrui for the years ended December 31, 2025, 2024 and 2023.

Following the completion of a Phase 1b study in the middle of 2025, the Company elected to halt further development of ARQ-255, a topical formulation of ivarmacitinib, for the treatment of alopecia areata.

Ducentis Biotherapeutics LTD Acquisition

On September 7, 2022, the Company entered into a Share Purchase Agreement with Ducentis Biotherapeutics LTD (Ducentis), pursuant to which the Company acquired (the Acquisition) all of the outstanding equity interests in Ducentis for (i) 610,258 shares of the Company 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.

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

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

The contingent payments incurred in connection with the Acquisition 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 in connection with the Ducentis acquisition for the years ended December 31, 2024, 2023 and 2022.

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

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 years ended December 31, 2025, 2024 and 2023.

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.

Commitments and Contingencies

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

Operating Lease

The Company leases a facility in Westlake Village, California which terminates in July 2028, with a renewal option for a term of five years .

The Company also has a one-time option to cancel the lease in July 2026.

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.

The lease also requires the Company to have an available letter of credit which has a related restricted cash account of $ 0.3 million and $ 0.6 million as of December 31, 2025 and 2024, respectively.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

The minimum annual rental payments of the Company’s operating lease liability as of December 31, 2025 are as follows (in thousands):

Thereafter 3,398

Total minimum lease payments 8,144

1 unchanged sentence

Present value of future minimum lease payments $ 5,560

Current portion operating lease liability 820

Operating lease liability, noncurrent 2,562

Accrued and other current liabilities

Operating lease liability, long-term

Total operating lease liability $ 5,560

Straight-line rent expense recognized for operating leases was $ 745,000 , $ 737,000 , and $ 716,000 for the years ended December 31, 2024, 2023, and 2022, respectively.

Operating lease costs recognized was $ 0.8 million, $ 0.7 million, and $ 0.7 million for the years ended December 31, 2025, 2024, and 2023, respectively.

The following information represents supplemental disclosure for the consolidated statements of cash flows related to the Company’s operating lease (in thousands):

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The following summarizes additional information related to the operating lease:

December 31, 2024

December 31, 2025 December 31, 2024

Weighted-average remaining lease term (in years) 7.6 3.6

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Manufacturing Agreements

The Company has entered into manufacturing supply agreements for the commercial supply of ZORYVE which include certain minimum purchase commitments.

Firm future purchase commitments under these agreements are approximately $ 7.5 million for 2025 and $ 0.9 million per year for 2026 and 2027.

This amount does not represent all of the Company’s anticipated purchases, but instead represents only the contractually obligated minimum purchases or firm commitments of non-cancelable minimum amounts.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

In the normal course of business, the Company enters into manufacturing supply agreements for the commercial supply of ZORYVE which include certain minimum purchase commitments.

As of December 31, 2025, firm future purchase commitments that are subject to these agreements with a term of greater than one year, excluding those recognized on the consolidated balance sheets, are $ 1.7 million in 2026 and $ 0.9 million in 2027, respectively.

These future purchase commitments do not represent all of the Company’s anticipated purchases, but instead represents only the contractually obligated minimum purchases or firm commitments of non-cancelable minimum amounts.

Indemnification

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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.

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

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

Long-term debt

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 December 31, 2025 and 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 "probable" and "reasonably estimable", as defined in ASC 450.

On December 22, 2021, the Company entered into a loan and security agreement (the Prior Loan Agreement) with SLR Investment Corp.

8 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 December 31, 2024 and 2023, the aggregate principal amount outstanding under the Loan Agreement was $ 100.0 million and $ 200.0 million, respectively.

As of December 31, 2025 and 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.

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The tranche C-1 term loan availability will expire on March 31, 2026 and the tranche C-2 term loan availability will expire on June 30, 2026.

In addition, as a result of the 2024 Partial Prepayment, (i) the maturity date of the Loan Agreement is August 1, 2029, (ii) the applicable per annum interest rate is equal to 5.95 % plus the greater of (a) 2.50 % per annum and (b) the one-month Secured Overnight Financing Rate (SOFR), (iii) the Company is no longer subject to certain cost and purchase price restrictions regarding acquisitions, and (iv) the Company may prepay principal amounts outstanding under the Term Loans in minimum increments of $ 25.0 million, subject to a prepayment premium of (a) 3.0 % for any prepayment made prior to the first anniversary of the second amendment, (b) 2.0 % for any prepayment made prior after the first anniversary of the second amendment and prior to the second anniversary of the second amendment, or (c) 1.0 % for any prepayment made prior after the second anniversary of the second amendment and prior to the maturity date.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

for any prepayment made prior after the second anniversary of the second amendment and prior to the maturity date.

Principal amounts outstanding under the Term Loans will accrue interest at a floating rate equal to the applicable rate in effect from time to time, as determined by SLR on the third business day prior to the funding date of the applicable Term Loan and on the first business day of the month prior to each payment date of each Term Loan.

4 unchanged sentences

Interest payments are payable monthly following the funding of any Term Loan.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

If the Term Loans are accelerated due to, among others, the occurrence of a bankruptcy or insolvency event, the Company is required to make mandatory prepayments of (i) all principal amounts outstanding under the Term Loans, plus accrued and unpaid interest thereon through the prepayment date, (ii) any fees applicable by reason of such prepayment, (iii) the prepayment premiums set forth in the paragraph above, plus (iv) all other obligations that are due and payable, including expenses and interest at the Default Rate (as defined below) with respect to any past due amounts.

10 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 consolidated statement of operations and comprehensive loss.

During the year ended December 31, 2024 and 2023, the Company recognized a $ 0.3 million gain and $ 0.8 million loss, respectively, in Other income, net.

The amounts recognized in Other income, net related to the change in fair value of the embedded derivative instrument during the year ended December 31, 2025 and 2024 were not material.

No gain or loss was recognized during the year ended December 31, 2023.

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

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to 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.

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 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.

3 unchanged sentences

At December 31, 2025 and 2024, the effective interest rate was 10.92 % and 11.57 %, respectively.

Interest expense relating to the term loan was $ 27.2 million, $ 29.7 million and $ 15.7 million, respectively, for the year ended December 31, 2024, 2023 and 2022.

Interest expense relating to the term loan was $ 12.1 million, $ 27.2 million and $ 29.7 million, respectively, for the years ended December 31, 2025, 2024 and 2023.

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

3 unchanged sentences

Unamortized debt issuance costs ( 865 ) ( 1,121 )

Total carrying value of debt 108,959 107,203

Less current portion ( 1,000 ) —

Long-term debt, net $ 107,959 $ 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.

Stock-Based Compensation

Stockholders' Equity

The Company's authorized capital stock consists of 310,000,000 shares, all with a par value of $ 0.0001 per share, of which 300,000,000 shares are designated as common stock and 10,000,000 shares are designated as preferred stock.

There were no shares of preferred stock outstanding as of December 31, 2025 and 2024.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

Equity Offerings

In October 2023, the Company completed a public sale of its common stock, receiving aggregate net proceeds of $ 95.8 million.

In addition to the sale of common stock, the Company issued 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, were fully exercisable upon issuance, and have no expiration date.

In October 2025, certain prefunded warrants were exercised, resulting in the issuance of 2,285,000 shares.

As of December 31, 2025, prefunded warrants to purchase 5,215,000 shares of the Company's common stock remained outstanding.

In February 2024, the Company completed a public sale of its common stock, receiving aggregate net proceeds of $ 161.7 million.

At-the-Market (ATM) Offerings

Cowen will act as the Company's sales agent for the ATM program and is entitled to compensation for its services up to 3 % of the gross proceeds of any shares of common stock sold under the Sales Agreement.

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.

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.

All other terms of the amended and restated Sales Agreement are substantially the same as the original Sales Agreement.

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

Equity Incentive Plans

In January 2020, the Company’s board of directors approved the 2020 Equity Incentive Plan (2020 Plan), which became effective January 30, 2020 in connection with the IPO.

The 2020 Plan serves as the successor incentive award plan to the Company’s 2017 Equity Incentive Plan (2017 Plan) and initially reserved 2,134,000 shares of common stock available for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights, restricted stock awards, restricted stock unit (RSU) awards, and other stock-based awards, plus 1,550,150 shares of common stock that were reserved for issuance pursuant to future awards under the 2017 Plan at the time the 2020 Plan became effective, plus shares represented by awards outstanding under the 2017 Plan that are forfeited or lapsed unexercised and which following the effective date of the 2020 Plan are not issued under the 2017 Plan.

In addition, the 2020 Plan reserve will increase on January 1 of each year beginning in 2021 through 2030, by an amount equal to the lesser of (a) four percent of the shares of stock outstanding (on an as converted basis) on the day immediately prior to the date of increase and (b) such smaller number of shares of stock as determined by the Company's board of directors;

In addition, the 2020 Plan reserve will increase on January 1 of each year beginning in 2021 through 2030, by an amount equal to the lesser of (a) 4 % of the shares of stock outstanding (on an as converted basis) on the day immediately prior to the date of increase and (b) such smaller number of shares of stock as determined by the Company's board of directors;

provided, however, that no more than 11,000,000 shares of stock may be issued upon the exercise of incentive stock options.

7 unchanged sentences

However, all outstanding awards under the 2017 Plan will continue to be governed by their existing terms.

In December 2021, the Company’s board of directors approved the 2022 Employment Inducement Incentive Plan (2022 Plan).

The 2022 Plan initially reserved 1,250,000 shares of common stock available for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

rights, restricted stock awards, RSU awards, and other stock-based awards.

In December 2021, the Company’s board of directors approved the 2022 Employment Inducement Incentive Plan (2022 Plan).

The 2022 Plan initially reserved 1,250,000 shares of common stock available for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights, restricted stock awards, RSU awards, and other stock-based awards.

In November 2022, the 2022 Plan reserve was increased by 1,500,000 .

16 unchanged sentences

Forfeited ( 534,345 ) 9.55

( 5,384,872 ) 22.37

Expired ( 2,865 ) 26.87

2 unchanged sentences

2,903,391 $ 8.46 6.63 $ 59,750

______________

(1) The number of stock options forfeited includes those exchanged in the Option Exchange as described above.

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 December 31, 2025.

1 unchanged sentence

The total grant-date fair value of the options vested during the years ended December 31, 2025, 2024, and 2023 were $ 8.5 million, $ 4.0 million and $ 28.0 million, respectively.

The weighted-average grant-date fair value of employee options granted during the years ended December 31, 2024, 2023, and 2022 were $ 3.70 , $ 8.01 and $ 14.08 , respectively.

Restricted Stock Unit Activity

The following table summarizes information regarding the Company's RSUs:

The weighted-average grant-date fair value of options granted during the years ended December 31, 2025, 2024, and 2023 were $ 9.94 , $ 3.70 and $ 8.01 , respectively.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

Restricted Stock Unit Activity

The following table summarizes information regarding the Company's RSUs:

Number of Units Weighted-Average

6 unchanged sentences

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 .

The total grant-date fair value of the RSUs vested during the years ended December 31, 2025, 2024, and 2023 were $ 18.8 million, $ 17.4 million, and $ 9.3 million, respectively.

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

Stock-Based Compensation Expense

9 unchanged sentences

As of December 31, 2025, there was $ 47.5 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.

In April 2024, in connection with the retirement of the former Chief Financial Officer, the Company modified the terms of this individual's historical stock awards.

As a result of the modifications, the Company recognized $ 1.7 million of incremental stock compensation expense during the period, which is included in selling, general and administrative expenses.

In determining the fair value of the stock options granted, the Company uses the Black-Scholes option-pricing model and assumptions discussed below.

31 unchanged sentences

As of December 31, 2025, the Company had 2,806,818 shares available for future grant under the ESPP.

Stock-based compensation expense related to the ESPP was $ 914,000 , $ 942,000 , and $ 880,000 for the years ended December 31, 2024, 2023 and 2022, respectively.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

Stock-based compensation expense related to the ESPP was $ 1.0 million, $ 0.9 million, and $ 0.9 million for the years ended December 31, 2025, 2024 and 2023, respectively.

The Company recorded income tax expense of $ 1.2 million during the year ended December 31, 2025.

Of the $ 0.6 million recorded, $ 0.5 million was related to foreign withholding taxes on the milestone payments received in connection with the Huadong Agreement and $ 0.1 million was related to other foreign tax expense.

Of the $ 1.2 million recorded, $ 0.4 million was related to foreign withholding taxes on the milestone payments received in connection with the Huadong Agreement and the remaining related to U.S.

state income tax expense and other foreign tax expense.

The Company recorded income tax expense of $ 0.6 million during the year ended December 31, 2024.

Of the $ 3.1 million recorded, $ 3.0 million was related to foreign withholding taxes on the up-front fee in connection with the Huadong Agreement and $ 0.1 million was related to foreign tax expense.

The Company had no material U.S.

federal income tax and state income tax expense for the years ended December 31, 2024, 2023 and 2022.

Of the $ 0.6 million recorded, $ 0.5 million was related to foreign withholding taxes on the up-front fee in connection with the Huadong Agreement and the remaining was related to other foreign tax expense.

The Company recorded income tax expense of $ 3.1 million during the year ended December 31, 2023.

Of the $ 3.1 million recorded, $ 3.0 million was related to foreign withholding taxes on the up-front fee in connection with the Huadong Agreement and the remaining was related to other foreign tax expense.

A reconciliation of loss before income taxes for domestic and foreign locations for the years ended December 31, 2025, 2024 and 2023 (in thousands):

5 unchanged sentences

$ ( 14,970 ) $ ( 139,392 ) $ ( 259,027 )

A reconciliation of income tax expense for the years ended December 31, 2024, 2023 and 2022 is as follows (in thousands):

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

A reconciliation of provision for income taxes for the years ended December 31, 2025, 2024 and 2023 is as follows (in thousands):

Year Ended December 31,

2025 2024 2023

Current tax provision:

Federal $ — $ — $ —

State 273 — —

Foreign 844 799 3,113

Total current income tax expense

Total current

1,117 799 3,113

Deferred tax provision:

Federal — — —

Foreign 54 ( 152 ) —

Total deferred income tax expense

Total income tax expense

Total deferred

Provision for income taxes

$ 1,171 $ 647 $ 3,113

A reconciliation of income tax computed at federal statutory rates to the reported provision for income taxes is as follows (in thousands):

A reconciliation of income tax computed at federal statutory rates to the reported provision for income taxes for the years ended December 31, 2025, 2024 and 2023 is as follows (in thousands) (1) :

Year Ended December 31,

2025 2024 2023

Tax provision at U.S.

statutory rate

federal statutory rate

$ ( 3,144 ) 21.0 % $ ( 29,272 ) 21.0 % $ ( 54,396 ) 21.0 %

State income taxes, net of federal benefit

State and local income tax, net of federal income tax effect (2)

836 ( 5.6 ) % ( 11,367 ) 8.2 % 1,512 ( 0.6 ) %

Research and development tax and other credits ( 973 ) ( 4,834 ) ( 2,968 )

Change in valuation allowance

Foreign tax effects

United Kingdom

Statutory tax rate differential

( 319 ) 2.1 % ( 389 ) 0.3 % ( 160 ) 0.1 %

Permanent differences

Change in valuation allowances

2,071 ( 13.8 ) % 2,427 ( 1.7 ) % 999 ( 0.4 ) %

Ducentis IPR&D — — 6,223

Non-deductible compensation

( 77 ) 0.5 % — — % — — %

Withholding tax

402 ( 2.7 ) % 500 ( 0.4 ) % 3,000 ( 1.2 ) %

233 ( 1.6 ) % — — % ( 6 ) — %

( 1,288 ) 8.6 % ( 804 ) 0.6 % ( 4,763 ) 1.8 %

Change in valuation allowances

( 3,145 ) 21.1 % 37,731 ( 27.1 ) % 52,716 ( 20.2 ) %

Nontaxable or nondeductible items

162(m) limitation

1,426 ( 9.5 ) % 633 ( 0.5 ) % 3,386 ( 1.3 ) %

Stock-based compensation

3,197 ( 21.4 ) % ( 185 ) 0.1 % 1,787 ( 0.7 ) %

Other 857 ( 5.7 ) % 654 ( 0.5 ) % ( 95 ) — %

Provision for income tax

Other adjustments

122 ( 0.8 ) % 719 ( 0.5 ) % ( 867 ) 0.3 %

Provision for income taxes

$ 1,171 ( 7.8 ) % $ 647 ( 0.5 ) % $ 3,113 ( 1.2 ) %

(1) The prior years included in the effective tax rate table have been recast from the financial statements filed previously to align with the new presentation created through adherence to ASU 2023-09.

Consideration has only been given to 2025 amounts in terms of the balances that are separately stated within the table.

(2) The states and local jurisdictions that contribute to a majority (greater than 50%) of the tax effect in this category include Texas, California and New York based on the distribution of sales and the current year state income tax obligations.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

Significant components of the Company’s deferred income taxes were as follows (in thousands):

The components deferred tax assets and liabilities were as follows (in thousands):

Deferred tax assets:

5 unchanged sentences

Accruals and reserves 25,226 16,085

Right-of-use liability 837 957

Lease liability

Stock-based compensation 7,744 15,761

Gross deferred tax assets 256,696 256,963

Less valuation allowance ( 255,482 ) ( 256,270 )

Net deferred tax assets 1,214 693

Deferred tax liabilities:

2 unchanged sentences

Gross deferred tax liabilities ( 1,110 ) ( 541 )

Net deferred tax assets 256,422 216,165

Less valuation allowance ( 256,270 ) ( 216,165 )

Total deferred tax assets $ 152 $ —

Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain.

Due to the lack of earnings history, the net deferred tax assets for the United States have been fully offset by a valuation allowance.

The Company has an immaterial deferred tax asset related to foreign jurisdictions.

The valuation allowance increased by approximately $ 40.1 million and $ 53.4 million during the years ended December 31, 2024 and 2023, respectively.

The Company has NOL carryforwards for federal and state income tax purposes of approximately $ 731.3 million and $ 624.1 million, respectively, as of December 31, 2024.

Total net deferred tax assets

The Company regularly evaluates the positive and negative evidence in determining the realizability of its deferred tax assets.

Based upon the weight of available evidence, which includes historical operating performance and reported cumulative net losses since inception, a valuation allowance on the majority of net deferred tax assets has been recorded as of December 31, 2025 and 2024.

The Company intend to maintain its substantially full valuation allowance on its deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance.

The Company has an immaterial deferred tax asset related to a foreign jurisdiction.

The valuation allowance decreased by approximately $ 0.8 million and increased by approximately $ 40.1 million during the years ended December 31, 2025 and 2024, respectively, due to similar changes in the underlying deferred tax asset balances.

The Company has net operating loss (NOL) carryforwards for federal and state income tax purposes of $ 761.3 million and $ 636.1 million, respectively, as of December 31, 2025.

Of the federal NOLs, $ 3.5 million originated before the 2018 tax year and will expire beginning in 2036.

1 unchanged sentence

Of the $ 636.1 million in state net operating loss carryforwards, $ 550.2 million will begin to expire in 2027 and the remaining NOLs carry forward indefinitely.

In addition, the Company has foreign NOL carry forwards of approximately $ 13.7 million as of December 31, 2024, which can be carried forward indefinitely.

In addition, the Company has foreign NOL carry forwards of $ 23.2 million as of December 31, 2025, which can be carried forward indefinitely.

As of December 31, 2025, the Company also had federal and California research and development tax credit carryforwards of $ 23.2 million and $ 4.6 million, respectively.

1 unchanged sentence

The California research and development tax credit carryforwards are available indefinitely.

Federal and California tax laws impose significant restrictions on the utilization of NOL carryforwards in the event of a change in ownership of the Company, as defined by Internal Revenue Code Section 382 and 383.

The Company believes it has had ownership changes in the past, and may have additional ownership changes in the future.

These ownership changes could limit its ability to use all of its NOL carryforwards, credit carryforwards, or other tax attributes.

The Inflation Reduction Act 2022 (IRA) which incorporates a Corporate Alternative Minimum Tax (CAMT) was signed on August 16, 2022.

The changes were effective for the tax years beginning after December 31, 2022.

The CAMT will require companies to compute two separate calculations for federal income tax purposes and pay

Under Internal Revenue Code Sections 382, as amended, and 383, substantial restrictions exist on the utilization of tax attributes in the event a corporation experienced an “ownership change.” Generally, a Section 382 “ownership change” occurs if one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a specified testing period.

Accordingly, the Company's ability to utilize net operating loss and tax credit carryforwards may be limited as a result of such ownership changes, and such a limitation could result in the

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

the greater of the new minimum tax or their regular tax liability.

The CAMT does not currently have an impact on the Company.

Uncertain Tax Benefits

No liability related to uncertain tax positions is recorded on the financial statements.

The following table summarizes the activity related to the unrecognized benefits (in thousands):

expiration of carryforwards before they are utilized.

The Company has completed Section 382 studies that concluded the Company has experienced ownership changes since inception.

However, this is not expected to result in the expiration of federal tax attribute carryforwards prior to utilization.

Similar rules may apply under state tax laws.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law.

The OBBBA contains numerous business tax provisions, including business extenders made permanent such as restoration of 100% bonus depreciation, IRC Section 174 expensing for US-based research, and the EBITDA-based business interest expense limitation under Section 163(j).

The enacted legislation had an immaterial impact on the Company’s effective tax rate for the year ended December 31, 2025.

The following table summarizes the activity related to the unrecognized tax benefits (in thousands):

Year Ended December 31,

2 unchanged sentences

$ 42,286 $ 41,390 $ 42,505

Increases (decreases) related to tax positions taken during a prior year ( 131 ) ( 3,097 ) 490

Increases related to tax positions taken during a prior year

Decreases related to tax positions taken during a prior year

( 91 ) ( 131 ) ( 3,097 )

Increases related to tax positions taken during the current year

3 unchanged sentences

Included in unrecognized tax benefits of $ 43.4 million at December 31, 2025 was $ 36.2 million of tax benefits that, if recognized, would not impact the Company's income tax benefit or effective tax rate to the extent that the Company continues to maintain a full valuation allowance against its deferred tax assets.

The Company does not expect that there will be a significant change in the unrecognized tax benefits over the next 12 months.

The Company files tax returns in the United States, state jurisdictions, Canada, and the United Kingdom.

The tax years for 2016 and forward are subject to examination by the U.S.

tax authorities and the tax years for 2016 and forward are subject to examination by the California tax authorities.

tax authorities and the tax years for 2016 and forward are subject to examination by the state tax authorities.

Due to net operating loss carryforwards and research and development credits in the United States and state tax jurisdictions, all years effectively remain open.

The Company is subject to examination by the tax authorities in Canada and the United Kingdom for the year ended December 31, 2022 to the present period.

It is the Company's practice to recognize interest and/or penalties related to income tax matters in income tax expense.

It is the Company's policy to recognize interest and/or penalties related to uncertain tax benefits as a component of the provision for income taxes.

For the years ended December 31, 2025, 2024 and 2023, the Company has no t recognized any interest or penalties related to income taxes.

The Company has no accrued interest and penalties as of December 31, 2025 and 2024 due to available tax losses.

The amount of cash income taxes paid were not material for the years ended December 31, 2025, 2024 and 2023.

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 years ended December 31, 2024 and 2023.

Pre-funded warrants to purchase 6,941,438 , 7,500,000 , and 1,417,808 shares of the Company's stock were included in the weighted-average common shares outstanding used in calculating net loss per share for the years ended December 31, 2025, 2024 and 2023, respectively, as the exercise price of the pre-funded warrants is negligible and the pre-funded warrants are fully vested and exercisable.

Diluted net loss 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.

Shares of common stock subject to repurchase are excluded from the weighted-average shares.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Consolidated Financial Statements

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 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 loss per share for the periods presented due to their anti-dilutive effect:

2 unchanged sentences

Stock options to purchase common stock 6,436,972 5,342,909 7,919,699

Early exercised options subject to future vesting — — 14,853

RSUs subject to future vesting

6 unchanged sentences

The Company has one reportable segment relating to the development and commercialization of treatments for dermatological diseases.

The Company’s Chief Operating Decision Maker (the CODM) is its Chief Executive Officer.

The Company’s Chief Operating Decision Maker (CODM) is its Chief Executive Officer.

The CODM evaluates financial information on a consolidated basis for the purposes of allocating resources and assessing performance.

Substantially all of the Company's assets are located in the United States.

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

15 unchanged sentences

Operating loss ( 12,227 ) ( 128,397 ) ( 241,101 )

Other income, net 16,173 11,786 5,821

Interest income

8,897 16,126 12,517

Interest expense ( 12,083 ) ( 27,168 ) ( 29,712 )

Other income (expense), net

443 47 ( 731 )

Provision for income taxes 1,171 647 3,113

1 unchanged sentence

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

Other segment expenses for the year ended December 31, 2022 includes in-process research and development (IPR&D) related to the acquisition of Ducentis in 2022.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

6 unchanged sentences

February 25, 2026 By:

/s/ David Topper

/s/ Latha Vairavan

Latha Vairavan

Chief Financial Officer

1 unchanged sentence

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Todd Franklin Watanabe, David Topper and Mas Matsuda, his or her true and lawful attorney-in-fact and agent, with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S.

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Todd Franklin Watanabe, Latha Vairavan and Mas Matsuda, his or her true and lawful attorney-in-fact and agent, with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S.

Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or their, his or her substitutes or substitutes, may lawfully do or cause to be done by virtue hereof.

4 unchanged sentences

Todd Franklin Watanabe

/s/ David Topper

/s/ Latha Vairavan

Chief Financial Officer

(Principal Accounting and Financial Officer) February 25, 2026

Latha Vairavan

Leonard Director, Chairman February 25, 2026

/s/ Bhaskar Chaudhuri Director February 25, 2025

Bhaskar Chaudhuri, Ph.D.

/s/ Terrie Curran Director February 25, 2026

4 unchanged sentences

Director February 25, 2026

/s/ Neha Krishnamohan Director February 25, 2026

Neha Krishnamohan

/s/ Sue-Jean Lin Director February 25, 2026

/s/ Amit Munshi

Director February 25, 2026

/s/ Howard G.

Welgus Director February 25, 2026

/s/ Neha Krishnamohan Director February 25, 2025

Neha Krishnamohan

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

What changed 10-K

Item 9A. Controls and Procedures