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Item 1. Financial Statements

2026-05-06 compared with 2025-10-28 · 237 added, 286 removed, 394 unchanged (57% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

(In thousands, except share and par value)

September 30, December 31,

(In thousands, except par value)

March 31, December 31,

Current assets:

3 unchanged sentences

Trade receivables, net 144,377 146,229

Inventories 22,419 14,526

37,391 22,634

Prepaid expenses and other current assets 31,980 21,079

18 unchanged sentences

Stockholders’ equity:

Preferred stock, $ 0.0001 par value;

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

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

Common stock, $ 0.0001 par value;

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

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

300,000 shares authorized at March 31, 2026 and December 31, 2025;

125,042 and 123,333 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively

Additional paid-in capital 1,339,529 1,327,595

5 unchanged sentences

ARCUTIS BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except per share data)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2025 2024 2025 2024

Three Months Ended March 31,

Product revenue, net $ 105,398 $ 63,846

5 unchanged sentences

Selling, general, and administrative 74,076 64,002

62,404 58,817 195,576 171,784

Total operating expenses 114,487 90,375

Income (loss) from operations

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

Loss from operations ( 9,089 ) ( 24,529 )

Other income (expense):

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

Interest income

Interest expense ( 4,368 ) ( 2,982 )

Income (loss) before income taxes

Other income (expense), net

Loss before income taxes

( 11,202 ) ( 24,781 )

Provision for income taxes

Net income (loss)

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

Net loss $ ( 11,295 ) $ ( 25,060 )

Other comprehensive income (loss):

Unrealized gain (loss) on marketable securities

Unrealized loss on marketable securities

( 351 ) ( 137 )

Foreign currency translation adjustment ( 119 ) 4

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

Comprehensive income (loss)

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

Earnings (loss) per share:

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

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

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

Total other comprehensive loss

( 470 ) ( 133 )

Comprehensive loss $ ( 11,765 ) $ ( 25,193 )

Net loss per share, basic and diluted $ ( 0.09 ) $ ( 0.20 )

Weighted-average shares used in computing net loss per share, basic and diluted 129,365 126,037

See accompanying notes to the condensed consolidated financial statements.

3 unchanged sentences

Common Stock Additional

Capital Accumulated Other Comprehensive Income (Loss) Accumulated

Capital Accumulated Other Comprehensive Loss

Deficit Total Stockholders’ Equity

8 unchanged sentences

Balance—March 31, 2026 125,042 $ 12 $ 1,339,529 $ ( 514 ) $ ( 1,149,379 ) $ 189,648

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

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

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

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

Unrealized loss on marketable securities

— — — ( 95 ) — ( 95 )

Foreign currency translation adjustment — — — 200 — 200

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

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

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

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

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

Unrealized gain on marketable securities

— — — 68 — 68

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

— — — — 7,410 7,410

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

See accompanying notes to the condensed consolidated financial statements.

ARCUTIS BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands)

Common Stock Additional

Capital Accumulated Other Comprehensive Income (Loss) Accumulated

Capital Accumulated Other Comprehensive Loss

Deficit Total Stockholders’ Equity

1 unchanged sentence

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

Issuance of shares of common stock net of discount and issuance costs of $ 10,820

18,158 3 161,679 — — 161,682

Issuance of common stock upon the exercise of stock options 110 — 395 — — 395

5 unchanged sentences

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

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

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

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

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

Unrealized loss on marketable securities

— — — ( 127 ) — ( 127 )

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

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

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

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

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

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

Unrealized gain on marketable securities

— — — 771 — 771

Foreign currency translation adjustment — — — 56 — 56

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

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

See accompanying notes to the condensed consolidated financial statements

2 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

5 unchanged sentences

Net accretion on marketable securities ( 182 ) ( 859 )

( 2,105 ) ( 5,805 )

Other non-cash items, net 214 54

1 unchanged sentence

Accounts receivable, net 1,852 ( 12,349 )

Inventories ( 7,324 ) ( 135 )

( 14,579 ) ( 1,951 )

Prepaid expenses and other current assets ( 11,728 ) ( 3,282 )

2 unchanged sentences

Operating lease liabilities ( 137 ) ( 200 )

Net cash used in operating activities ( 31,810 ) ( 111,410 )

Net cash provided by (used in) operating activities

2,239 ( 30,380 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of marketable securities ( 62,153 ) ( 56,110 )

Proceeds from maturities of marketable securities 172,418 231,507

Milestone payment for intangible asset ( 10,000 ) —

Proceeds from maturities and sales of marketable securities

50,821 68,468

Purchases of property and equipment — ( 608 )

Net cash provided by (used in) investing activities ( 11,332 ) 11,750

3,926 ( 6,057 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock upon exercise of stock options

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

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

Net cash provided by financing activities 1,067 395

Effect of exchange rate changes on cash ( 119 ) 4

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

Net decrease in cash, cash equivalents, and restricted cash

( 8,145 ) ( 18,231 )

3 unchanged sentences

Milestone for intangible asset not yet paid in cash $ — $ 10,000

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

Purchases of property and equipment included in accounts payable $ 158 $ —

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

6 unchanged sentences

(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%), in July 2022, for the treatment of plaque psoriasis, including intertriginous psoriasis, in individuals 12 years of age and older (subsequently approved down to 6 years old), and began U.S.

commercialization in August 2022.

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

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

commercialization in January 2024.

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

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

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

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

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

commercialization in June 2025.

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

Initial Public Offering and Follow-On Financings

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

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

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

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

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

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

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

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

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.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

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

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.

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

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

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

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

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

The Company received United States (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.

Since that time, the Company has obtained regulatory approvals and commercially launched ZORYVE in various formulations to treat additional disease states, in additional concentrations for various age groups, and in both the United States and Canada.

To date, ZORYVE has received regulatory approval and has been commercially launched, or is awaiting regulatory approval, as detailed below.

Product / Indication

Concentration Region Age Stage

2022 2023 2024 2025 2026

ZORYVE cream for Plaque Psoriasis

Commercial Launch

0.3% Canada > 12 yrs

Commercial Launch

6 yrs -11 yrs

Commercial Launch

2 yrs - 5 yrs

sNDA Acceptance

2 yrs - 12 yrs

SNDS Acceptance

ZORYVE foam for Seborrheic Dermatitis

Commercial Launch

0.3% Canada > 9 yrs

Commercial Launch

ZORYVE cream for Atopic Dermatitis

Commercial Launch July

0.15% Canada > 6 yrs

Commercial Launch April

2 yrs - 5 yrs

Commercial Launch October

2 yrs - 5 yrs

SNDS Acceptance

3 mos - 2 yrs

sNDA Submittal

ZORYVE foam for Scalp & Body Psoriasis 0.3% U.S.

Commercial Launch June

0.3% Canada > 12 yrs

Commercial Launch

The Company has incurred significant annual losses and negative cash flows from operations since its inception and had an accumulated deficit of $ 1,149.4 million and $ 1,138.1 million as of March 31, 2026 and December 31, 2025, respectively.

While the Company generated net income for the quarters ended September 30, 2025 and December 31, 2025, the extent of any net income or losses for future periods is uncertain, and the Company may continue to incur operating losses.

The Company had cash, cash equivalents, restricted cash, and marketable securities of $ 224.3 million and $ 221.3 million as of March 31, 2026 and December 31, 2025, respectively.

The Company had $ 100.0 million outstanding under the Loan Agreement as of March 31, 2026.

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.

3 unchanged sentences

Failure to manage discretionary spending or raise additional funds, as needed, may adversely impact the Company’s ability to achieve its intended business objectives and have an adverse effect on its results of operations and future prospects.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

Summary of Significant Accounting Policies

7 unchanged sentences

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

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

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

Use of Estimates

2 unchanged sentences

Actual results could differ from those estimates.

Restricted Cash

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

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

Concentration of Credit Risk and Other Risks and Uncertainties

11 unchanged sentences

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 Condensed Consolidated Financial Statements

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

5 unchanged sentences

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

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

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

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

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

Disaggregation of Income Statement Expenses , which requires disclosure about the types of costs and expenses included in certain expense captions presented on the income statement.

Disaggregation of Income Statement Expenses , which requires disclosure of the types of costs and expenses included in certain expense captions presented on the income statement.

ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted.

The Company is currently evaluating the impact of adopting ASU 2024-03.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

Revenues are recognized under guidance within ASC 606, Revenue from Contracts with Customers .

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

2025 2024 2025 2024

Three Months Ended March 31,

ZORYVE cream 0.3%

2 unchanged sentences

ZORYVE cream 0.15%

21,741 10,219

ZORYVE cream 0.05% 1,360 —

Total product revenue, net

1 unchanged sentence

Other revenue

— — 2,000 28,000

Total revenues

$ 105,398 $ 65,846

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

Other revenue for the three months ended March 31, 2025 relates to the Huadong licensing agreement.

Product revenue, net outside the United States represented less than 10% of the Company’s consolidated product revenue, net, for the three months ended March 31, 2026 and 2025.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

Fair Value Measurements

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

September 30, 2025

March 31, 2026

Level 1 Level 2 Level 3 Total

Money market funds (1)

$ 47,120 $ — $ — $ 47,120

Commercial paper

Money market funds and cash

$ 27,950 $ — $ — $ 27,950

1 unchanged sentence

— 5,414 — 5,414

Commercial paper

— 6,898 — 6,898

Corporate debt securities — 92,534 — 92,534

2 unchanged sentences

Total assets $ 119,154 $ 104,846 $ — $ 224,000

______________

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

December 31, 2025

Money market funds (1)

$ 71,335 $ — $ — $ 71,335

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

Total assets $ 138,958 $ 88,997 $ — $ 227,955

Treasury and agency securities

$ 84,522 — — 84,522

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

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

Money market funds and U.S.

2 unchanged sentences

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

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

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

similar securities;

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

issuer credit spreads;

2 unchanged sentences

and other observable inputs.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

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

September 30, 2025

March 31, 2026

cost Unrealized

2 unchanged sentences

Cash and cash equivalents:

Money market funds (1)

Money market funds and cash

$ 27,950 $ — $ — $ 27,950

Certificates of deposit 5,414 — — 5,414

Treasury & agency securities

1,398 — — 1,398

Total cash and cash equivalents $ 34,762 $ — $ — $ 34,762

2 unchanged sentences

$ 6,900 $ 1 $ ( 3 ) $ 6,898

Certificates of deposit

2,633 — — 2,633

Corporate debt securities 92,685 11 ( 162 ) 92,534

2 unchanged sentences

Total marketable securities $ 189,476 $ 13 $ ( 251 ) $ 189,238

______________

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

December 31, 2025

3 unchanged sentences

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.

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

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

As of March 31, 2026, 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 each security with a fair value less than its amortized cost basis, the Company determined the decline in fair value below the amortized cost basis to be non-credit related, and no allowance for losses has been recorded.

As of March 31, 2026, 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 March 31, 2026 and December 31, 2025, 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 as of March 31, 2026 and December 31, 2025.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

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

September 30,

Beginning balance

Gain from changes in fair value

The following table summarizes the amortized cost and fair value of marketable securities by contractual maturity at March 31, 2026 and December 31, 2025.

March 31, 2026 December 31, 2025

cost Estimated

fair value Amortized

cost Estimated

Maturing within one year

$ 140,444 $ 140,367 $ 138,281 $ 138,395

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.

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

Maturing in one to five years

49,032 48,871 39,681 39,680

Total marketable securities

$ 189,476 $ 189,238 $ 177,962 $ 178,075

Balance Sheet Components

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

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

Raw materials $ 16,381 $ 5,047

1 unchanged sentence

Finished goods 14,679 12,554

Total inventories $ 22,419 $ 14,526

Total inventory

$ 37,391 $ 22,634

Prepaid Expenses and Other Current Assets

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

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

Prepaid co-pay assistance program and rebates

$ 15,689 $ 9,485

Prepaid insurance 1,258 844

Prepaid clinical trial costs 2,971 2,577

3 unchanged sentences

Accrued liabilities consist of the following (in thousands):

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

Accrued sales deductions $ 99,529 $ 78,308

Accrued compensation 10,323 20,533

Accrued Ducentis milestone

Clinical trial accruals 692 425

1 unchanged sentence

Total accrued liabilities $ 136,957 $ 116,310

License Agreements & Acquisition

Sato License Agreement

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

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

controlled by the Company for Sato to develop, conduct medical affairs activities for, manufacture, commercialize and otherwise exploit roflumilast formulations (the Sato Licensed Products) for all therapeutic uses for certain dermatological indications in humans (the Field) in Japan.

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 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 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.

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) of up to an aggregate amount of $ 10.0 million upon the achievement of certain regulatory milestones and (ii) of 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, 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 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 (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 Sato Licensed Product in Japan, or (ii i) ten years after the first commercial sale of such Sato 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.

1 unchanged sentence

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

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

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

The Company may also terminate the Sato Agreement if Sato or any director, officer, 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.

No revenue was recorded pursuant to the Sato Agreement for the three months ended March 31, 2026 and 2025.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

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.

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).

2 unchanged sentences

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

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

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

$ 30.0 million upfront payment less the applicable tax withholding obligation in China of $ 3.0 million.

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

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

The Company 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 $ 17.0 million upon the achievement of certain development and regulatory milestones, (ii) up to an aggregate amount of $ 40.3 million upon the achievement of certain sales milestones, and (iii) low double-digit to high-teen double-digit tiered percentage royalties on net sales of the Huadong Licensed Products, all of which would be subject to applicable tax withholding obligations.

(i) of up to an aggregate amount of $ 15.0 million upon the achievement of certain development and regulatory milestones, (ii) of 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:

1 unchanged sentence

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

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

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

Other revenue and related income tax expense related to the Huadong Agreement was zero for the three months ended March 31, 2026.

Other revenue and related income tax expense related to the Huadong Agreement was $ 2.0 million and $ 0.2 million, respectively, for the three months ended March 31, 2025.

AstraZeneca License Agreement

1 unchanged sentence

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

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

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

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

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

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

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

Amortization expense was $ 1.2 million and $ 1.6 million during the three and nine months ended September 30, 2024, respectively.

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

With respect to any AZ-Licensed Products the Company commercializes under the AstraZeneca

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

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

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

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

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

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

AstraZeneca upon achievement of $ 250.0 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 AstraZeneca Agreement will be in effect.

Amortization expense was $ 0.6 million and $ 3.0 million for the three months ended March 31, 2026 and 2025, respectively.

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 in August 2022, the Company began accruing royalties payable to AstraZeneca, which are recorded in cost of sales and accrued liabilities.

Royalty expense during the three months ended March 31, 2026 and 2025 was $ 3.2 million and $ 1.9 million, respectively.

Ducentis Biotherapeutics LTD Acquisition

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

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

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

On September 7, 2022, the Company entered into an agreement with Ducentis Biotherapeutics LTD.

(Ducentis) and certain stockholders of Ducentis (the Share Purchase Agreement), 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 $ 396.0 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 certain products exceeding $ 1.5 billion.

1 unchanged sentence

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

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

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

In March 2026, the Company initiated a Phase 1a/1b clinical trial of ARQ-234 for the treatment of moderate-to-severe atopic dermatitis.

Upon dosing of the first patient in this trial, the Company became obligated to pay a $ 10.0 million milestone to former stockholders of Ducentis under the terms of the Share Purchase Agreement.

The Company paid $ 0.8 million of this amount in April 2026.

The Company will issue promissory notes for the remaining $ 9.2 million owed to the former stockholders of Ducentis pursuant to the Share Purchase Agreement.

The promissory notes bear no interest, become payable 12 months from issuance, and are callable by the holders as early as seven months from issuance.

The Company recognized the $ 10.0 million in research and development expense in the first quarter of 2026.

After this milestone payment, the Company has $ 386.0 million of contingent payments remaining that may become payable upon the achievement of certain development, regulatory, and commercial milestones.

ARCUTIS BIOTHERAPEUTICS, INC.

5 unchanged sentences

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.

Manufacturing Agreements

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.

There have been no material changes to the Company's minimum purchase commitments during the three months ended March 31, 2026.

Indemnification

12 unchanged sentences

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

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

As of March 31, 2026 and December 31, 2025, the Company determined that no loss contingencies from legal proceedings met the threshold of "probable" and "reasonably estimable", as defined in ASC 450.

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

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

Long-term debt

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

As of March 31, 2026 and December 31, 2025 , 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.

In connection with the 2024 Partial Prepayment, the Company is obligated to pay a prepayment penalty of $ 1.0 million by June 30, 2026 and a final fee of $ 6.95 million, representing the final fee applicable to the amount of the 2024 Partial Prepayment, on January 1, 2027.

As a result of such 2024 Partial Prepayment, subject to the Company generating a minimum net product revenue for the trailing six ( 6 ) month period ending as of the month prior to the borrowing date equal to 80 % of the Company’s projected net product revenue as set forth in its annual plan for the respective period, the Company will be able to draw down the tranche C-1 and tranche C-2 term loans.

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.

As a result of such 2024 Partial Prepayment, subject to the Company generating a minimum net product revenue for the trailing six ( 6 ) month period ending as of the month prior to the borrowing date equal to 80 % of the Company’s projected net product revenue as set forth in its annual plan for the respective period, the Company obtained the ability to draw down the tranche C-1 and tranche C-2 term loans.

The tranche C-1 term loan availability expired 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 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 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.

1 unchanged sentence

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

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

On March 31, 2026, the rate was 9.61 %.

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

7 unchanged sentences

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

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

The Company was in compliance with all covenants under the Loan Agreement as of March 31, 2026.

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

3 unchanged sentences

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

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

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

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

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

The fair value of the embedded derivative as of March 31, 2026 and December 31, 2025 was immaterial and any gains (losses) recognized as a result of the change in fair value during the three months ended March 31, 2026 and 2025 were immaterial.

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.

7 unchanged sentences

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

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

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

At March 31, 2026 and December 31, 2025, the effective interest rate was 10.75 % and 10.92 %, respectively.

Interest expense relating to the term loan for the three months ended March 31, 2026 and 2025 was $ 4.4 million and $ 3.0 million, respectively.

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

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

Long-term debt, gross

4 unchanged sentences

Total carrying value of debt 109,420 108,959

108,498 107,203

Less current portion ( 7,950 ) ( 1,000 )

Total long-term debt, net

$ 107,498 $ 107,203

Long-term debt, net $ 101,470 $ 107,959

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.

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 March 31, 2026.

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 prefunded warrants have an exercise price of $ 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 March 31, 2026, 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.

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 Condensed Consolidated Financial Statements

Stock-Based Compensation

Equity Incentive Plans

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 and April 2026, the 2022 Plan reserve was increased by 1,500,000 and 1,200,000 shares, respectively.

As of March 31, 2026, the Company had 112,325 shares available for future grant under the 2022 Plan, excluding the April 2026 increase.

Stock Option Exchange Program

13 unchanged sentences

( 60,490 ) 9.16

Expired ( 2,865 ) 26.87

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

Exercisable—September 30, 2025

Balance—March 31, 2026 7,603,593 $ 12.39 7.91 $ 90,568

Exercisable—March 31, 2026

3,090,137 $ 8.45 6.45 $ 47,502

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

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

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

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

The aggregate intrinsic value is calculated as the difference between the exercise price of the options and the fair value of the Company’s common stock as of March 31, 2026.

The intrinsic value of options exercised for the three months ended March 31, 2026 and 2025 was $ 2.5 million and $ 1.2 million, respectively.

The total grant-date fair value of the options vested during the three months ended March 31, 2026 and 2025 was $ 1.9 million and $ 0.7 million, respectively.

The weighted-average grant-date fair value of options granted during the three months ended March 31, 2026 and 2025 was $ 18.58 and $ 9.70 , respectively.

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

Restricted Stock Unit Activity

3 unchanged sentences

Balance—December 31, 2025 6,007,515 $ 10.83

Granted 2,876,897 13.73

1,823,875 26.81

Vested ( 1,575,709 ) 10.47

Forfeited ( 123,437 ) 11.19

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

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

Unvested Balance—March 31, 2026 6,132,244 $ 15.67

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

The total grant-date fair value of the RSUs vested during the three months ended March 31, 2026 and 2025 was $ 16.5 million and $ 10.3 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

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

2025 2024 2025 2024

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

Three Months Ended March 31,

Research and development

1 unchanged sentence

Selling, general, and administrative 7,538 6,758

6,976 6,899 21,017 21,996

Total stock-based compensation expense

$ 10,690 $ 9,778

As of September 30, 2025, there was $ 28.1 million of total unrecognized compensation cost related to unvested options that are expected to vest, which is expected to be recognized over a weighted-average period of 2.7 years.

As of September 30, 2025, there was $ 50.5 million of total unrecognized compensation cost related to RSUs that are expected to vest, which is expected to be recognized over a weighted-average period of 2.8 years.

Earnings (Loss) Per Share

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

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

Pre-funded warrants to purchase 7,500,000 shares of the Company's stock were included in the weighted-average common shares outstanding used in calculating basic and diluted net income (loss) per share for the three and nine months ended September 30, 2025 and 2024.

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

2025 2024 2025 2024

Weighted-average common shares outstanding - Basic

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

Effect of dilutive securities

5,261,707 — — —

Weighted-average common shares outstanding - Diluted

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

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

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

As of September 30,

As of March 31, 2026, there was $ 46.7 million of total unrecognized compensation cost related to unvested options that are expected to vest, which is expected to be recognized over a weighted-average period of 3.25 years.

As of March 31, 2026, there was $ 88.4 million of total unrecognized compensation cost related to RSUs that are expected to vest, which is expected to be recognized over a weighted-average period of 3.3 years.

Net Loss Per Share

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

Pre-funded warrants to purchase 5,215,000 and 7,500,000 shares of the Company's common stock were included in the weighted-average common shares outstanding used in calculating net loss per share for the

ARCUTIS BIOTHERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

three months ended March 31, 2026 and 2025, 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.

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.

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 antidilutive effect:

As of March 31,

Stock options to purchase common stock 7,603,593 6,962,327

8 unchanged sentences

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):

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

2025 2024 2025 2024

Three Months Ended March 31,

Total revenues $ 105,398 $ 65,846

1 unchanged sentence

Topical roflumilast program costs

3,340 1,320 7,613 7,839

Topical JAK inhibitor program costs

61 1,089 780 2,351

Other early-stage programs costs

1,379 2,910 5,069 8,878

ARQ-234 program costs

Other program costs

Research and development compensation and personnel-related expenses 11,045 9,638

Selling, general, and administrative expenses

Other segment expenses (1)

73,954 63,884

Other segment expenses (1)

Total operating expenses 114,487 90,375

Operating income (loss)

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

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

Operating loss ( 9,089 ) ( 24,529 )

Interest income 2,275 2,537

Interest expense ( 4,368 ) ( 2,982 )

Other income (expense), net

Provision for income taxes 93 279

Segment and consolidated net income (loss)

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

Segment and consolidated net loss $ ( 11,295 ) $ ( 25,060 )

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

Table of Content s

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

What changed 10-Q

Item 1. Financial Statements