ARQT 10-K & 10-Q changes, risk factors and insider trading

We are a commercial-stage biopharmaceutical company with threefour products approved for commercial sale. We have incurred significant losses since our inception and could continue to incur losses,losses in the future, which, together with our limited history as a commercial-stage company, makes it difficult to assess our future viability.

We are a commercial-stage biopharmaceutical company with three products approved for commercial sale. Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. We have a limited history as a commercial-stage company upon which you can evaluate our business and prospects, and have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields. Our operations to date include organizing and staffing our company, business planning, raising capital, identifying potential product candidates, establishing licensing arrangements, undertaking various research and nonclinical studies, conducting clinical trials, establishing manufacturing and supply operations, and preparing for and launching commercialization activities. We have incurred losses in each year since our inception in June 2016. Our net loss for the year ended December 31, 20242025 was approximately $140.0$16.1 million. As of December 31, 2024,2025, we had an accumulated deficit of $1,121.9$1,138.1 million. We commercially launched our first product, ZORYVE cream 0.3%, in August 2022,2022; our second product, ZORYVE foam, in late January 2024, and2024; our third product, ZORYVE cream 0.15%, in July 2024.2024; and our fourth product, ZORYVE cream 0.05%, in October 2025. We expecthave togenerally continueand tomay incur losses until our revenue from product sales of ZORYVE and any other approved products exceeds expenses, which may never occur.expenses. We maycannot neveranticipate when we will achieve profitability and, even if we do, we may not be able to sustain or increase oursustained profitability. We will continue to incur research and development and other expenses related to our ongoing operations, our commercialization efforts, and the development of our product candidates. Our prior losses, combined with anticipated future losses,Losses have had and will continue tomay have an adverse effect on our stockholders’ equity and working capital. In addition, we may encounter unforeseen expenses, difficulties, complications, delays, and other known or unknown factors in achieving our business objectives.

•the ability of patients or healthcarehealth care providers to obtain coverage of or sufficient reimbursement for any current or future products;

As of December 31, 2024,2025, we had capital resources consisting of cash, cash equivalents, and marketable securities of $228.0$221.0 million. In addition, as of December 31, 2024,2025, we had $100.0 million outstanding under our loan and security agreement, or the Loan Agreement, with SLR Investment Corp., or SLR,Corp.(SLR), and the lenders party thereto. If our capital resources are insufficient to satisfy our requirements, we may need to fund our operations through the sale of our equity securities, accessing or incurring additional debt, entering into licensing or collaboration agreements with partners, grants, or other sources of financing. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.

•the ability of patients or healthcarehealth care providers to obtain coverage of or sufficient reimbursement for any current or future products;

•the timing and cost of, and level of investment in, research and development activities relating to our product candidates, which may change from time to time and are subject to inflation and other drivers;

In order to service our indebtedness, we need to generate cash from our operating activities or additional equity or debt financings. Our ability to generate cash is subject, in part, to our ability to successfully execute our business strategy, as well as general economic, financial, competitive, regulatory and other factors beyond our control. We cannot assure you that our business will be able to generate sufficient cash flow from operations or that future borrowings or other financings will be available to us in an amount sufficient to enable us to service our indebtedness and fund our other liquidity needs. To the extent we are required to use cash from operations or the proceeds of any future financing to service our indebtedness instead of funding working capital, capital expenditures or other general corporate purposes, we will be less able to plan for, or react to, changes in our business, industry, and in the economy generally. This may place us at a competitive disadvantage compared to our competitors that have less indebtedness.

For example, we have established an internal commercial infrastructure as well as a dermatologist-focused sales and distribution infrastructure to market ZORYVE and our product candidates in Norththe America,United States and Canada, and have completed hiring in areas to support commercialization, including in sales management, sales representatives, marketing, access and reimbursement, sales support, and distribution. There are significant expenses and risks involved with establishing our own sales, marketing, and distribution capabilities, including our ability to hire, retain, and appropriately incentivize qualified individuals, provide adequate training to sales and marketing personnel, and effectively manage geographically dispersed sales and marketing teams to generate sufficient demand. Any failure in the development of these capabilities could delay or negatively affect the success of our commercialization efforts and our business. For example, the commercialization of ZORYVE may not develop as planned or anticipated, which may require us to, among others, adjust or amend our business plan and incur significant expenses.

We currently have threefour products approved for commercial sale: ZORYVE cream 0.3%, a potent PDE4 inhibitor topical cream approved by the FDA onin July 29, 2022,2022 for the treatment of plaque psoriasis, including intertriginous areas, in patients 12 years of age and older (subsequently expanded to patients 6 years of age and older); ZORYVE foam, a potent PDE4 inhibitor topical foam approved by the FDA onin December 15, 2023,2023 for the treatment of seborrheic dermatitis in individuals aged 9 years and older; and ZORYVE cream 0.15%, a potent PDE4 inhibitor topical cream for the treatment of atopic dermatitis in adults and pediatric patients 6 years of age and older, which wasolder approved onby the FDA in July 9,2024; 2024. Our product candidate portfolio includesand ZORYVE foam, a potent PDE4 inhibitor topical foam approved by the FDA in May 2025 for the treatment of scalp and body psoriasis,psoriasis in adult and pediatric patients 6 years of age and older. We also received FDA approval for, and commercially launched, ZORYVE cream 0.05% for the topical treatment of mild-to-moderate atopic dermatitis in patients ageschildren 2 to 5,5 ARQ-255, a potent and highly selective topical JAK1 inhibitor under development for the treatmentyears of alopeciaage areata,in ARQ-252,October an2025. alternativeOur formulationproduct ofcandidate ourportfolio topical JAK1 inhibitor under development for the treatment of chronic hand eczema and vitiligo, andincludes ARQ-234, a CD200R fusion protein for the treatment of moderate-to-severe atopic dermatitis. We currently do not have drug discovery efforts, and we have no intention toof developdeveloping a drug discovery capability. The success of our business, including our ability to finance our company and generate any revenue in the future, will primarily depend on the successful commercialization of ZORYVE and the successful development, regulatory approval, and commercialization of other product candidates. We expect to conduct most of our clinical trials in the United States and Canada, with limited reliance on Australia, the Caribbean, and the European Union for clinical trialstrial subjects. We currently anticipate seeking additional regulatory approvals in the United States and Canada,Canada but may in the future be subject to additional foreign regulatory authorities and may out-license our product candidates or approved products, if any, in additional foreign markets. In the future, we may also become dependent on other product candidates that we may develop, acquire, or in-license. The commercial success of ZORYVE and the clinical and commercial success of other product candidates will depend on a number of factors, including the following:

•the availability of coverage and adequate reimbursement from private third-party payers and governmental healthcarehealth care programs, such as Medicare and Medicaid;

•the availability of coverage and adequate reimbursement from private third-party payers and governmental healthcarehealth care programs, such as Medicare and Medicaid;

WeThere cannotcan assurebe youno assurance that ZORYVE or our current or future product candidates, if approved, will achieve market acceptance among physicians, patients, third-party payers, or others in the medical community necessary for commercial success. Any failure by ZORYVE or such other product candidates that obtain regulatory approval to achieve market acceptance or commercial success would harm our results of operations.

For ZORYVE and any of our product candidates that become available by prescription only, our success will depend on the availability of coverage and adequate reimbursement for our product from third-party payers. Patients who are prescribed medicine for the treatment of their conditions generally rely on third-party payers to reimburse all or part of the costs associated with their prescription drugs. The availability of coverage and adequate reimbursement from governmental healthcarehealth care programs, such as Medicare and Medicaid, and private third-party payers is critical to new product acceptance. Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already available or subsequently become available. If ZORYVE or any of our product candidates fail to demonstrate attractive efficacy and safety profiles, they may not qualify for coverage and reimbursement. Even if we obtain coverage for a given product, the resulting reimbursement payment rates might not be adequate or may require co-payments that patients find unacceptably high. Patients are unlikely to use our prescription-only products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products.

Third-party payers, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcarehealth care costs. In addition, in the United States, no uniform policy of coverage and reimbursement for drug products exists among third-party payers. Therefore, coverage and reimbursement for drug products can differ significantly from payer to payer. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of ZORYVE and our product candidates to each payer separately, with no assurance that coverage and adequate reimbursement will be obtained.

The risk of failure for our product candidates is high. It is impossible to predict when or if any of our product candidates will prove effective and safe in humans or will receive regulatory approval. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete nonclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans.humans, or with respect to our product candidates regulated as biologics, the safety, purity, and potency of such product candidates. Clinical testing is expensive, difficult to design and implement, can take many years to complete, and is inherently uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of nonclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, nonclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in nonclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their drugs.

To gain approval to expand the label of our products or market our product candidates, we must provide the FDA and foreign regulatory authorities with nonclinical and clinical data that adequately demonstrate the safety and efficacyefficacy, or as applicable, the safety, purity, and potency of the product for the intended indication applied for in the applicable regulatory filing. Product development is a long, expensive, and uncertain process, and delay or failure can occur at any stage of any of our nonclinical and clinical development programs. A number of companies in the biotechnology and pharmaceutical industries have suffered significant setbacks in clinical trials, even after promising results in earlier nonclinical or clinical studies. These setbacks have been caused by, among other things, nonclinical findings made while clinical studies were underway and safety or efficacy observations made in clinical studies, including previously unreported adverse events. Success in nonclinical testing and early clinical trials does not ensure that later clinical trials will be successful, and the results of clinical trials by other parties may not be indicative of the results in trials we may conduct.

•our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory authority that any of our product candidates is safe and effective or, with respect to product candidates regulated as biologics, safe, pure, and potent for the requested indication;

•if ouran NDANDA, BLA, or other foreign application is reviewed by an advisory committee, the FDA or other relevant foreign regulatory authority, as the case may be, may have difficulties scheduling an advisory committee meeting in a timely manner or the advisory committee may recommend against approval of our application or may recommend that the FDA or other relevant foreign regulatory authority, as the case may be, require, as a condition of approval, additional nonclinical studies or clinical trials, limitations on approved labeling, or distribution and use restrictions;

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions, or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product, and our business in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities, or otherwise regarding a particular drug, product candidate, or our business. If the interim, topline, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for and commercialize our product candidates, our business, operating results, prospectsprospects, or financial condition may be harmed.

Certain of our primary and secondary endpoints in our clinical trials, including our already completed and planned clinical trials in atopic dermatitis, vitiligo, chronic hand eczema and scalp and body psoriasispsoriasis, vitiligo, and hidradenitis suppurativa involve subjective assessments by physician and subjects, which can increase the uncertainty of clinical trial outcomes. For example, one of the secondary endpoints requires subjects to report pruritus (itching) as measured by the WI-NRS and complete or deliver patient or caregiver reported outcomes over the course of our clinical trials. This and other assessments are inherently subjective, which can increase the variability of clinical results across clinical trials and create a significant degree of uncertainty in determining overall clinical benefit. Such assessments can be influenced by factors outside of our control, and can vary widely from day-to-day for a particular patient, and from patient-to-patient and site-to-site within a clinical trial. In addition, frequent reporting requirements may lead to rating fatigue and a loss of accuracy and reliability of the data resulting from our clinical trials. Further, the FDA or comparable foreign regulatory authority may not accept such patient or caregiver reported outcomes as sufficiently validated. Accordingly, these subjective assessments can complicate clinical trial design, adversely impact the ability of a study to show a statistically significant improvement, and generally adversely impact a clinical development program by introducing additional uncertainties.

As a company, we have obtained marketing approval for only threefour products and we may be unable to successfully obtain marketing approval in a timely manner, or at all, for any of our other product candidates.

Obtaining marketing approval or an additional indication for a product candidate is a complicated process. As a company, we have obtained approval for ZORYVE cream 0.3% for the topical treatment of plaque psoriasis in adults and pediatric patients 6 years of age and older in the United States and Canada, approval for ZORYVE foam for the topical treatment of seborrheic dermatitis in adults and pediatric patients 9 years of age and older in the United States and Canada, as well as approval for ZORYVE cream 0.15% for the topical treatment of atopic dermatitis in adults and pediatric patients 6 years of age and older in the United States. Due to the complexities of the marketing approval process, this process and the related activities may require more time and/or cost more than we anticipate, and we may be unable to successfully complete such process and related activities for any of our product candidates. Failure to successfully complete, or delays in, our pivotal trials or related regulatory submissions would prevent us from or delay us in obtaining regulatory approval for our product candidates. In addition, it is possible that the FDA may refuse to file for substantive review any NDAsNDAs, BLAs, or sNDAssupplements that we submit for our product candidates or may conclude after review of our applications that they are insufficient to obtain marketing approval of our product candidates. If the FDA does not accept for filing or approve any applications for our product candidates, it may require that we conduct additional clinical, nonclinical, or manufacturing validation studies and submit thatsuch data before it will reconsider such applications. Depending on the extent of these or any other FDA-required studies, approval of any NDA, sNDABLA, or supplement, or any other applications that we submit may be delayed by several years,years or may require us to expend more resources than we have available. It is also possible that additional studies, if performed and completed, may not be considered sufficient by the FDA to approve any NDAsNDAs, BLAs, or sNDAssupplements that we may submit. Additionally, similar risks could apply to receipt of marketing authorizations by comparable regulatory authorities in foreign jurisdictions.

Our license agreements and share purchase agreement with Ducentis Biotherapeutics obligatesobligate us to make certain milestone and royalty payments, some of which have been or will be triggered prior to commercialization of the applicable product candidates.

For example, we 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 (as defined below). In addition, we paid AstraZeneca2019, $7.5 million in August 2022 upon FDA approval to commercialize ZORYVE cream 0.3% in the United States andStates, $5.0 million in October 2024 upon achievement of $100.0 million in worldwide net sales, and $10.0 million in May 2025 upon achievement of $250.0 million in worldwide net sales. We are required 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 products containing roflumilast in topical forms, as well as delivery systems sold with or for the administration of roflumilast, or collectively, AZ-Licensed Products, and payments up to an additional aggregate amount of $10.0 million upon the achievement of certain aggregate worldwide net sales milestones.Products. With respect to any AZ-Licensed Products we commercialize under the agreement, we will pay AstraZeneca a low to highlow-to-high single-digit percentage royalty rate on our, our affiliates’, and our sublicensees’ net sales of such AZ-Licensed Products,Products until, as determined on an AZ-Licensed Product-by-AZ-Licensed Product and country-by-country basis, the later of the date of(i) the expiration of the last-to-expire AstraZeneca-licensed patent right containing a valid claim in such country and (ii) ten years from the first commercial sale of such AZ-Licensed Product in such country.

We are aware of several companies that are working to develop drugs that would compete against ZORYVE or our product candidates for the treatment of psoriasis,psoriasis and atopic dermatitis, chronic hand eczema, vitiligo, and alopecia areata, including a potential generic version of ZORYVE cream.

For plaque psoriasis, our primary competitors include injected biologic therapies such as Humira, marketed by AbbVie Inc. and Eisai Co., Ltd., and Enbrel, marketed by Amgen Inc.; Pfizer Inc., and Takeda Pharmaceutical Company Limited; non-injectable systemic therapies used to treat plaque psoriasis such as Otezla, marketed by Amgen Inc., and Sotyktu, marketed by Bristol Myers Squibb; topical therapies such as Vtama, marketed by Organon & Co.; branded and generic versions of clobetasol, such as Clobex, marketed by Galderma Laboratories, LP; generic versions of calcipotriene and the combination of betamethasone dipropionate/calcipotriene; and other treatments including various lasers and ultraviolet light-based therapies.

We have entered into a strategic collaboration and licensing agreement for topical roflumilast in Greater China and Southeast Asia with HangzhouHuadong, Zhongmei Huadong Pharmaceutical Co., a wholly owned subsidiary of Huadong Medicine Co., Ltd.,and a strategic collaboration and licensing agreement for topical roflumilast in Japan with Sato Pharmaceutical Co., Ltd., and a co-promotion agreement with Kowa Pharmaceuticals America, Inc. to exclusively market and promote ZORYVE to primary care practitioners and pediatricians for all FDA-approved indications in the United States.Sato. In the future, we may seek additional collaboration arrangements for the commercialization, or potentially for the development, of certain of our product candidates depending on the merits of retaining commercialization rights for ourselves, as compared to entering into collaboration arrangements. To the extent that we decide to enter into future collaboration agreements, we will face significant competition in seeking appropriate collaborators. Moreover, collaboration arrangements are complex and time-consuming to negotiate, document, implement, and maintain. We may not be successful in our efforts to establish and implement collaborations or other alternative arrangements. The terms of any collaborations or other arrangements that we may establish may not be favorable to us. Our current and future collaborations may not be successful. The success of our collaboration arrangements will depend heavily on the efforts and activities of our collaborators. Collaborations are subject to numerous risks, which may include risks that:

Furthermore, wethere cannotcan assurebe youno assurance that any collaboration or other strategic transaction will achieve the expected synergies. For example, such transactions may require us to incur non-recurring or other charges, increase our near- and long-term expenditures, and pose significant integration or implementation challenges or disrupt our management or business. These transactions entail numerous operational and financial risks, including exposure to unknown liabilities,liabilities; dependence upon the performance and discretion of counterparties that we do not control and that may underperform or fail,fail; disruption of our business, andbusiness; diversion of our management’s time and attention in order to manage a collaboration or develop acquired products, product candidates or technologies, incurrence of substantial debt or dilutive issuances of equity securities to pay transaction consideration or costs,costs; higherand thanhigher-than-expected expectedcollaboration collaboration.costs.

We depend on our information technology systems, and any failure of these systems, including due to the use of artificial intelligence (AI), or those of our CROs or other contractors or consultants we may utilize, could harm our business. Security breaches, cyber-attacks, loss of data, and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business, results of operations, financial condition, and prospects.

Our information technology systems and infrastructure, and those of our current and any future service providers, strategic partners, and other collaborators, contractorscontractors, and consultants, are vulnerable to attack, damagedamage, and interruption from computer viruses and malware (e.g., ransomware), misconfigurations, “bugs” or other vulnerabilities, malicious code, natural disasters, terrorism, war, telecommunication and electrical failures, hacking, cyberattackscyber-attacks or cyber-intrusionscyber intrusions over the Internet, phishing attacks and other social engineering schemes, employee theft or misuse, human error, fraud, denial or degradation of service attacksattacks, and,and sophisticated nation-state and nation-state-supported actors. While our controls and procedures help enable us to protect from or respond to cybersecurity threats, there can be no assurance that these controls and procedures will be adequate to protect us from any cyber incident. The threats are always evolvingevolving, and,will inbecome more advanced with the use of AI, and may become increasingly difficult or impossible to detect and prevent. In the future, our existing controls and procedures may become inadequate and may require significant additional resources to enhance systems and controls or enhancedto systems.investigate and remediate any security vulnerabilities.

The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion,intrusions, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased. Bad actors use increasingly sophisticated methods, including the use of AI, to engage in illegal activities involving the theft and misuse of personal information, Confidential Information, and intellectual property. If we or our third-party vendors were to experience a significant cybersecurity breach of our or their information systems or data, the costs associated with the investigation, remediationremediation, and potential notification of the breach to counter-partiescounterparties and data subjects could be material. In addition, our remediation efforts may not be successful. If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology and cybersecurity infrastructure, we could suffer significant business disruption, including transaction errors, supply chain or manufacturing interruptions, processing inefficiencies, data loss or the loss of or damage to intellectual property or other proprietary information. There can also be no assurance that our and our third-party service providers', strategic partners', contractors', consultants', CROs' and collaborators' cybersecurity risk management program and processes, including policies, controls, or procedures, will be fully implemented, complied with or effective in protecting our systems, networks, and Confidential Information. Additionally, if we, our third-party vendors or partners experience an actual or perceived breach or data privacy or security incident, we may lose valuable intellectual property and Confidential Information, and our reputation and the public perception of the effectiveness of our security measures could be harmed.

We and certain of our service providers are from time to time subject to cyberattackscyber-attacks and security incidents. While we do not believe that we have experienced any significant system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations, whether due to a loss, corruption or unauthorized disclosure of our trade secrets, personal information or other proprietary or sensitive information or other similar disruptions. It could also expose us to risks, including an inability to provide our services and fulfill contractual demands, and could cause management distraction and the obligation to devote significant financial and other resources to mitigate such problems, which would increase our future information security costs, including through organizational changes, deploying additional personnel, reinforcing administrative, physical and technical safeguards, further training of employees, changing third-party vendor control practices and engaging third-party subject matter experts and consultants and reduce the demand for our technology and services.

While we have implemented security measures to protect our data security and information technology systems, our efforts to address these problems may not be successful, and these problems could result in unexpected interruptions, delays, cessation of service, and other harm to our business and our competitive position. Further, while we maintain liability coverage, we cannot be certain that our coverage is adequate for all material incidents or losses incurred. Any security compromise affecting us, our service providers, strategic partners, other contractors, consultants, or our industry, whether real or perceived, could harm our reputation, erode confidence in the effectiveness of our security measures and lead to regulatory scrutiny. If such an event were to occur, it could result in a material disruption of our product development programs and commercial operations. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Moreover, if a computer security breach affects our systems or results in the unauthorized release of confidential, proprietary, or personal information, our reputation could be materially damaged. In addition, such a breach may require notification to governmental agencies, supervisory bodies, the media or individuals pursuant to various federal and state privacy and security laws, if applicable. Any adverse impact to the availability, integrity or confidentiality of our or third-party systems or Confidential Information can result in legal claims or proceedings (such as class actions), regulatory investigations and enforcement actions, fines and penalties, negative reputational impacts that cause us to lose existing or future customers, and/or significant incident response, system restoration or remediation and future compliance costs. We would also be exposed to a risk of loss or litigation and potential liability, which could materially adversely affect our business, results of operations, and financial condition. Further, our existing insurance policies may not cover, or may cover only a portion of, any potential claims related to security breaches to which we are exposed or may not be adequate to indemnify us for all or any portion of liabilities that may be imposed.

As our operations and business grow, we may become subject to or affected by new or additional data protection laws and regulations and face increased scrutiny or attention from regulatory authorities. In the United States, HIPAA imposes, among other things, certain standards relating to the privacy, security, transmission and breach reporting of individually identifiable health information. Certain states have also adopted comparable privacy and security laws and regulations, some of which may be more stringent than HIPAA. Such laws and regulations will be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us and our future customers and strategic partners. InFor addition, California enactedexample, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act (collectively, the CCPA) requires covered businesses that process the personal information of California residents to, among other things: (i) provide certain disclosures to California residents regarding the business’s collection, use, and disclosure of their personal information; (ii) receive and respond to requests from California residents to access, delete, and correct their personal information, or to opt out of certain disclosures of their personal information; and (iii) enter into specific contractual provisions with service providers that process California resident personal information on the business’s behalf. Additional compliance investment and potential business process changes may also be required. Similar laws have been passed in other states, and are continuing to be proposed at the state and federal level, reflecting a trend toward more stringent privacy legislation in the United States. The enactment of such laws could have potentially conflicting requirements that would make compliance challenging. In the event that we are subject to or affected by HIPAA, the CCPA, or other domestic privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.

We are exposed to the risk that our commercial partners, as well as our employees and independent contractors, including principal investigators, consultants, suppliers, service providers, and other vendors may engage in misconduct or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or other unauthorized activities that violate the laws and regulations of the FDA and other similar foreign regulatory authorities, including those laws that require the reporting of true, complete, and accurate information to such foreign regulatory authorities; manufacturing standards; U.S. federal and state healthcarehealth care fraud and abuse, data privacy laws and other similar non-U.S. laws; or laws that require the true, complete, and accurate reporting of financial information or data. Activities subject to these laws also involve the improper use or misrepresentation of information obtained in the course of clinical trials, the creation of fraudulent data in our nonclinical studies or clinical trials, or illegal misappropriation of product, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other third-parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. In addition, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and financial results, including, without limitation, the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgements, possible exclusion from participation in Medicare, Medicaid and other U.S. healthcarehealth care programs, imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

We do not currently have the infrastructure or capability internally to manufacture supplies of ZORYVE or our product candidates or the materials necessary to produce ZORYVE or our product candidates for use in the conduct of our nonclinical studies or clinical trials, and we lack the internal resources and the capability to manufacture ZORYVE or any of our product candidates on a nonclinical, clinical or commercial scale. Instead, we currently rely on single source third-party manufacturers to manufacture nonclinical, clinical, and commercial supplies of ZORYVE and intend to rely on third-party manufacturers for any future approved product. As an early commercial-stage company with a limited history of product sales, the quantity and quality of deliveries received to date may not represent what will be required to meet our future commercial requirements.

Furthermore, there are a limited number of suppliers for materials we use in ZORYVE and our product candidates, which exposes us to the risk of disruption in the supply of the materials necessary to manufacture ZORYVE and our product candidates for our nonclinical studies and clinical trials, and for commercial sale. In the case of ARQ-252 and ARQ-255, Hengrui is supplying ivarmacitinib API for nonclinical studies and clinical trials. We do not have control over the process or timing of the acquisition or manufacture of materials by our manufacturers. In addition, any significant delay in, or quality control problems with respect to, the supply of ZORYVE or a product candidate, or the raw material components thereof, for an ongoing study or trial could considerably delay completion of our nonclinical studies or clinical trials, product testing and potential regulatory approval of our product candidates.

In addition, to manufacture our product candidates in the quantities that we believe would be required to meet anticipated market demand, our third-party manufacturers may need to increase manufacturing capacity and, in some cases, we are securing alternative sources of commercial supply, which could involve significant challenges and may require additional regulatory approvals. Neither we nor our third-party manufacturers may successfully complete any required increase to existing manufacturing capacity in a timely manner, or at all. If either we or our manufacturers are unable to purchase the raw materials necessary for the manufacture of our product candidates on acceptable terms, at sufficient quality levels, or in adequate quantities, if at all, the commercial launch of our lead product candidates or any future product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of such product candidates, if approved, or impact the costs of procuring sufficient demand of materials or costs of manufacturing the product. Additionally, the imposition of tariffs and other orders or restrictions impacting trade could adversely impact our business, including by increasing or otherwise impacting the costs and expenses we incur in connection with our operations and supply chain.

Due to legal standards relating to patentability, validity, enforceability, and claim scope of patents covering pharmaceutical inventions, our and our licensor’s ability to obtain, maintain, and enforce patents is uncertain and involves complex legal and factual questions. Accordingly, rights under our existing patents or any patents we might obtain or license may not cover ZORYVE or our product candidates,candidates or may not provide us with sufficient protection for ZORYVE or our product candidates to afford a commercial advantage against competitive products or processes, including those from branded and generic pharmaceutical companies. For example, even if patent protection for our product candidates is successfully obtained, we may face competition from generic or biosimilar medications once the patent has expired. Manufacturers of generic or biosimilar drugs may also challenge the scope, validity, or enforceability of the patents to which we have rightrights in court or before a patent office, and we may not be successful in enforcing or defending those intellectual property rights and, as a result, may not be able to develop or market the relevant product exclusively. On February 14, 2024, we received a Paragraph IV Notice Letter advising that Padagis Israel Pharmaceuticals Ltd. (Padagis) had submitted an ANDA to the FDA seeking authorization to manufacture, use, sell, and import a generic version of ZORYVE cream.cream 0.3%. On July 16, 2024 and September 12, 2024, we received additional Paragraph IV Notice Letters from Padagis,Padagis. Padagis' Paragraph IV certifications stated that our patents listed in the FDA's Orange Book will not be infringed by Padagis’ proposed product, are invalid and/or are unenforceable. We filed suit against Padagis in the U.S. District Court for the District of Delaware on March 27, 20242024, for infringement of certain of our patents and amended our complaint on July 19, 20242024, to add additional patents to our infringement allegations. On August 2, 2024, Padagis responded to the first amended complaint, denying infringement and asserting counterclaims seeking a declaratory judgment that the asserted patents are not infringed, invalid, and/or unenforceable. The court issued a scheduling order on June 10, 2024, which sets trial at the court’s convenience, or around April 13-17, 2026. The complaint triggered the automatic 30-month stay of FDA approval of the ANDA, which expiresexpiring on August 14, 2026,2026. In March 2025, Arcutis agreed to file a joint stipulation to stay the ongoing patent litigation with Padagis at the request of Padagis. On April 3, 2025, the court stayed the case and wecancelled all case deadlines, including the trial. The 30-month stay of FDA approval will be extended for each day the stay in the case is in place, starting March 24, 2025, until the stay in the case is lifted. We plan to vigorously defend our extensive intellectual property rights in ZORYVE.ZORYVE cream 0.3%.

Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Various extensions may be available; however, the life of a patent,patent and the protection it affords,affords isare limited. In addition to potentially being open to competition from generic versions without patent protection for ZORYVE or our product candidates, the extensive period of time between patent filing and regulatory approval for a product candidate limits the time during which we can market a product candidate under patent protection, which may particularly affect the profitability of our early-stage product candidates. Our issued U.S. patents relating to ZORYVE with claims directed to, among other things, formulating roflumilast in combination with hexylene glycol and a method of treatment with a topical roflumilast formulation with an extended half-life are currently projected to expire in mid-2037, our method of treatment patent specifically for roflumilast foam in the treatment of seborrheic dermatitis is currently projected to expire in 2041, and the issued U.S. patents which we have exclusive rights to from Hengrui as a result of the exercise of our exclusive option with Hengrui in December 2019 for the amount of $1.5 million cash,patent related to theZORYVE compositionfoam of matter of the active ingredient in ARQ-252 and ARQ-255 (or bisulfate or crystal forms thereof) areis currently projected to expire betweenin December 19, 2032 and October 15, 2035 unless any PTE is granted.2042. Additionally, an issued U.S. patent related to the composition of matter in ARQ-234 is currently projected to expire on July 14, 20382038, unless any PTE is granted. Proprietary trade secrets and unpatented know-how are also very important to our business. Although we have taken steps to protect our trade secrets and unpatented know-how by entering into confidentiality agreements with third parties,parties and intellectual property protection agreements with certain employees, consultants, and advisors, third parties may still obtain this information or we may be unable to protect our rights. We also have limited control over the protection of trade secrets used by our suppliers, manufacturers, and other third parties. There can be no assurance that binding agreements will not be breached, that we would have adequate remedies for any breach, or that our trade secrets and unpatented know-how will not otherwise become known or be independently discovered by our competitors. If trade secrets are independently discovered, we would not be able to prevent their use. Enforcing a claim that a third party illegally obtained and is using our trade secrets or unpatented know-how is expensive and time-consuming, and the outcome is unpredictable. In addition, courts outside the United States may be less willing to protect trade secret information.

We may become subject to claims alleging infringement of third parties’ patents or proprietary rights and/or claims seeking to invalidate our patents, which would be costly, time consuming and, if successfully asserted against us, delay or prevent the development and commercialization of ZORYVE cream 0.3%, ZORYVE cream 0.15%, ZORYVE cream 0.05%, ZORYVE foam, ARQ-252, ARQ-255, ARQ-234, or any other product candidates.

There have been many lawsuits and other proceedings asserting patents and other intellectual property rights in the pharmaceutical and biotechnology industries. WeThere cannotcan assurebe youno assurance that our exploitation of ZORYVE cream 0.3%, ZORYVE cream 0.15%, ZORYVE cream 0.05%, ZORYVE foam, ARQ-252, ARQ-255, or ARQ-234 will not infringe existing or future third-party patents. Because patent applications can take many years to issue and may be confidential for 18 months or more after filing, there may be applications now pending of which we are unaware and which may later result in issued patents that we may infringe by commercializing ZORYVE cream 0.3%, ZORYVE cream 0.15%, ZORYVE cream 0.05%, ZORYVE foam, ARQ-252, ARQ-255, or ARQ-234. Moreover, we may face claims from non-practicing entities that have no relevant product revenue and against whom our own patent portfolio may thus have no deterrent effect. We may be unaware of one or more issued patents that would be infringed by the manufacture, salesale, or use of ZORYVE cream 0.3%, ZORYVE cream 0.15%, ZORYVE cream 0.05%, ZORYVE foam, ARQ-252, ARQ-255, or ARQ-234.

In addition to infringement claims against us, if third parties prepare and file patent applications in the United States that also claim technology similar or identical to ours, we may have to participate in interference or derivation proceedings in the U.S. Patent and Trademark Office (USPTO), to determine which party is entitled to a patent on the disputed invention. We may also become involved in similar opposition proceedings in the European Patent Office or similar offices in other jurisdictions regarding our intellectual property rights with respect to our products and technology. For example, Teva Pharmaceutical Industries Ltd. filed Oppositions with the European Patent Office against two of our European patents, European Patent Nos. EP 3634380 B1 and EP 3684334 B1, on September 20, 2024 and August 13, 2024, respectively. After Oral Proceedings for each of the respective patents, the EPO panel found in favor of Arcutis and maintained both patents. Both decisions are subject to potential appeals by Teva. Since patent applications are confidential for a period of time after filing, we cannot be certain that we were the first to file any patent application related to our product candidates.

The validity, scope, and enforceability of any patents listed in the Orange Book that cover ZORYVE cream 0.3%, ZORYVE cream 0.15%, ZORYVE Cream 0.05%, or ZORYVE foam, ARQ-252, ARQ-255, or ARQ-234foam can be challenged by competitors.

One or more third parties may challenge the patents covering ZORYVE cream 0.3%, ZORYVE cream 0.15%, or ZORYVE foam, or if approved by the FDA, ZORYVE foam for scalp and body psoriasis, ZORYVE cream 0.05%, ARQ-252, or ARQ-255, which could result in the invalidation of, or render unenforceable, some or all of the relevant patent claims or a finding of non-infringement. For example, if a third-party files an abbreviated NDA, or ANDA,ANDA for a generic drug bioequivalent to ZORYVE cream 0.3%, ZORYVE cream 0.15%, ZORYVE cream 0.05%, or ZORYVE foam, ARQ-252, or ARQ-255, and relies in whole or in part on studies conducted by or for us, the third-party will be required to certify to the FDA that either: (1) there is no patent information listed in the FDA’s Orange Book with respect to our NDA for the applicable approved drug candidate; (2) the patents listed in the Orange Book have expired; (3) the listed patents have not expired, but will expire on a particular date and approval is sought after patent expiration; or (4) the listed patents are invalid or will not be infringed by the manufacture, use or sale of the third-party’s generic drug. A certification that the new drug will not infringe the Orange Book-listed patents for the applicable approved drug candidate, or that such patents are invalid, is called a paragraph IV certification. If the third-party submits a paragraph IV certification to the FDA, a notice of the paragraph IV certification must also be sent to us once the third-party’s ANDA is accepted for filing by the FDA. We may then initiate a lawsuit to defend the patents identified in the notice. The filing of a patent infringement lawsuit within 45 days of receipt of the notice automatically prevents the FDA from approving the third-party’s ANDA until the earliest of 30 months from the date of receipt of the notice or the date on which the patent expires, the lawsuit is settled, or the court reaches a decision in the infringement lawsuit in favor of the third-party. If we do not file a patent infringement lawsuit within the required 45-day period, the third-party’s ANDA will not be subject to the 30-month stay of FDA Approval. Litigation or other proceedings to enforce or defend intellectual property rights are often very complex in nature, may be very expensive and time-consuming, may divert our management’s attention from our core business, and may result in unfavorable results that could limit our ability to prevent third parties from competing with ZORYVE or our product candidates.

On February 14, 2024, we received a Paragraph IV Notice Letter advising that Padagis had submitted an ANDA to the FDA seeking authorization to manufacture, use, sell, and import a generic version of ZORYVE 0.3% cream. On July 16, 20242024, and September 12, 2024, we received additional Paragraph IV Notice Letters from Padagis. Padagis' Paragraph IV certifications stated that our patents listed in the Orange Book will not be infringed by Padagis’ proposed product, are invalidinvalid, and/or are unenforceable. We filed suit against Padagis in the U.S. District Court for the District of Delaware on March 27, 20242024, for infringement of certain of our patents and amended our complaint on July 19, 20242024, to add additional patents to our infringement allegations. On August 2, 2024, Padagis responded to the first amended complaint, denying infringement and asserting counterclaims seeking a declaratory judgment that the asserted patents are not infringed, invalidinvalid, and/or unenforceable. The court issued a scheduling order on June 10, 2024, which sets trial at the court’s convenience, or around April 13-17, 2026. The complaint triggered the automatic 30-month stay of FDA approval of the ANDA, expiring on August 14, 2026. In March 2025, Arcutis agreed to file a joint stipulation to stay the ongoing patent litigation with Padagis at the request of Padagis. On April 3, 2025, the court stayed the case and wecancelled all case deadlines, including the trial. The 30-month stay of FDA approval will be extended for each day the stay in the case is in place, starting March 24, 2025, until the stay in the case is lifted. We plan to vigorously defend our extensive intellectual property rights in ZORYVE 0.3% cream as appropriate.

Our commercial success will largely depend on our ability to obtain and maintain patent and other intellectual property in the United States and other countries with respect to our proprietary technology, ZORYVE, other product candidates, and our target indications. Our issued U.S. patents, with claims encompassing ZORYVE, directed to roflumilast formulations with reduced crystal growth and beneficial pharmacokinetic parameters and methods of treatment with a topical roflumilast formulation with an extended half-life and that decrease gastrointestinal side effects relative to oral roflumilast formulations are currently projected to expire in mid-2037. We also have a method of treatment patent specifically for roflumilast foam in the treatment of seborrheic dermatitis which expires 2041. Certain issued U.S. patents that we have licensed from Hengrui relating to, among other things, treatment of several diseases or disorders, including various cancers, allograft rejection, graft versus host disease, rheumatoid arthritis, atopic dermatitis, and psoriasis with ivarmacitinib, or bisulfate and crystal forms thereof, are currentlyis projected to expire beginning2041. We also have a composition patent that covers ZORYVE foam which is projected to expire in December 2032.2042. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting our product candidates might expire before or shortly after such candidates begin to be commercialized. We expect to seek extensions of patent terms in the United States and, if available, in other countries where we are prosecuting patents.

Filing, prosecuting, and defending patents on ZORYVE and product candidates, including all of the licensed rights under our exclusive supply and license agreements with AstraZeneca and Hengrui,AstraZeneca, in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries, including China and certain other developing countries, do not protect intellectual property rights, particularly those relating to biotechnology, to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

We have received Registrations and Notices of Allowance from the USPTO for commercial trade names for certain of our lead product candidates in the United States. We will be required to obtain similar approvals in certain foreign jurisdictions and will be required to undertake similar registrations with respect to any future product candidates. During trademark registration proceedings, we may receive rejections and may be unable to overcome such rejections. In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. Moreover, any name we propose to use with our product candidates in the United States must be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark. The FDA typically conducts a review of proposed product names, including an evaluation of potential for confusion with other product names. While we have received Notices of Allowance from the USPTO for commercial trade names for certain of our lead product candidates, we have not received final FDA Approval of such names. If the FDA objects to any of our proposed product names, we may be required to expend significant additional resources in an effort to identify a suitable substitute name that would qualify under applicable trademark laws, not infringe the existing rights of third parties, and be acceptable to the FDA.

We have licensed or acquired certain intellectual property rights covering ZORYVE and our current product candidates from third parties, including AstraZeneca and Hengrui.AstraZeneca. We are heavily dependent on our agreements with such third parties for ZORYVE and our current product candidates.ZORYVE. If, for any reason, one or more of our agreements with such third parties is terminated or we otherwise lose those rights, it could harm our business. Our license and other agreements impose, and any future collaboration agreements or license agreements we enter into are likely to impose various development, commercialization, funding, milestone, royalty, diligence, sublicensing, insurance, patent prosecution and enforcement or other obligations on us. If we breach any such material obligations, or use the intellectual property licensed to us in an unauthorized manner, we may be required to pay damages and the licensor may have the right to terminate the license, which could result in us being unable to develop, manufacture, and sell products that are covered by the licensed technology, or having to negotiate new or reinstated licenses on less favorable terms, or enable a competitor to gain access to the licensed technology.

Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful infringement or other intellectual property claim against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our affected products, which may be impossible or require substantial time and monetary expenditure. We cannot predict whether any such license would be available at all or whether it would be available on commercially reasonable terms. Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates, and we have done so from time to time. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize one or more of our product candidates, which could harm our business significantly. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.

The following discussion and analysis of our financial condition and results of operations should be read together with our “Selected Financial Data” and our audited financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. For a discussion of the year ended December 31, 20232024 compared to the year ended December 31, 2022,2023, refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2023.2024. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans, objectives, expectations, projections and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors identified below and those set forth in the “Risk Factors” section of this Annual Report on Form 10-K, our actual results and the timing of selected events could differ materially from the forward-looking statements contained in the following discussion and analysis. Please also see the section entitled “Special Note Regarding Forward-Looking Statements.”

We launched our lead product, ZORYVE® (roflumilast) cream 0.3% (ZORYVE cream 0.3%)0.3%, in August 2022 after obtaining our initial U.S. Food and Drug Administration (FDA) approval for the treatment of plaque psoriasis, including psoriasis in the intertriginous areas (e.g. groin or axillae), in individuals 12 years of age or older. ZORYVE cream 0.3% is a once-daily topical formulation of roflumilast, a highly potent and selective phosphodiesterase-4 (PDE4) inhibitor. ZORYVE cream 0.3% is approved for once-daily topical treatment of mild, moderate, and severe plaque psoriasis with no limitations on location or duration of use. In October 2023, we received FDA approval for an expanded indication in plaque psoriasis down to 6 years of age. WeIn areNovember currently2025, workingour withsupplemental New Drug Application (sNDA) was accepted for filing by the FDA to potentially further expand thisthe indication inof ZORYVE cream 0.3% for the treatment of plaque psoriasis in children down to 2the yearsage of age2, followingwith thea generationPrescription ofDrug additionalUser clinicalFee data.Act (PDUFA) target action date set for June 29, 2026. In AprilJune 2023, we had our first commercial launch outside of the United States following Health Canada approval of ZORYVE cream 0.3% for the treatment of plaque psoriasis in individuals 12 years or age or older. In February 2026, Health Canada accepted our Supplement to a New Drug Submission (SNDS) for ZORYVE cream 0.3% for individuals down to 2 years old.

In December 2023, we received FDA approval for ZORYVE® (roflumilast) topical foam 0.3% (ZORYVE foam) for the treatment of seborrheic dermatitis in individuals aged 9 years and older, with no limitation on severity, location, or duration of use. ZORYVE foam is a once-daily steroid-free foam and, as a PDE4 inhibitor, iswas the first drug approved for the treatment of seborrheic dermatitis with a new mechanism of action in over two decades. ZORYVE foam became commercially available in the United States in late January 2024, and was approved by Health Canada in October 2024 and became commercially available in Canada in December 2024.2024 following approval by Health Canada. We received FDA approval for ZORYVE foam for the treatment of plaque psoriasis of the scalp and body in adults and adolescents ages 12 and older in May 2025, followed by commercial launch in the United States in June 2025. ZORYVE foam for the treatment of plaque psoriasis of the scalp and body in adults and adolescents ages 12 and older was also approved by Health Canada in October 2025, followed by commercial launch in November 2025.

In addition to the approval of ZORYVE cream 0.3% for plaque psoriasis and ZORYVE foam for seborrheic dermatitis, weWe also received FDA approval forfor, and commercially launchedlaunched, ZORYVE (roflumilast) cream 0.15% (ZORYVE cream 0.15%), (collectively, ZORYVE), in July 2024 for the topical treatment of mild to moderate atopic dermatitis in adults and pediatric patients 6 years of age and older, with no limitation on location, body surface area treated, concomitant use, or duration of use specified in the approved labelling. ZORYVE cream 0.15% iswas aalso once-daily,approved steroid-freeby creamHealth thatCanada providesin rapidMarch disease clearance2025 and significantcommercially reductionlaunched in itchApril 2025. We also received FDA approval for, and hascommercially been specifically developed to be a treatment option for long-term disease control. We have also completed a Phase 3 trial oflaunched, ZORYVE cream 0.05% in pediatric patients 2 to 5 years of age with mild to moderate atopic dermatitis (INTEGUMENT-PED). Based onfor the positive results from the INTEGUMENT-PED study, and given our recent approval of ZORYVE cream 0.15% for thetopical treatment of mild to moderate atopic dermatitis in individuals 6 years of age or older, we submitted a supplemental new drug application (sNDA) for topical ZORYVE cream 0.05% for children 2 to 5 years of age in DecemberOctober 2024. We conducted INTEGUMENT-OLE, an open label extension study of the long-term safety of2025. ZORYVE cream 0.15% in subjects 6 years of age or older and ZORYVE cream 0.05% are once-daily, steroid-free creams that provide rapid disease clearance and significant reduction in subjectsitch, betweenand have been specifically developed to be treatment options for long-term disease control. In February 2026, we announced positive topline data for INTEGUMENT-INFANT, a Phase 2 study to evaluate the agessafety and efficacy of investigational ZORYVE cream 0.05% in infants as young as 3 months to less than 2 andyears 5with years,atopic dermatitis. We intend to submit an sNDA to the FDA in the second quarter of 2026 based on the results of this trial to potentially expand the indication for whichZORYVE wecream reported0.05% positivefor resultsthe intreatment Septemberof 2023infants andwith Augustatopic 2024,dermatitis respectively.down to the age of 3 months.

In July 2024, we entered into a co-promotionpromotion agreement with Kowa Pharmaceuticals,Pharmaceuticals America, Inc. (Kowa) to leverage Kowa's primary care sales force to exclusively market and promote ZORYVE in the United States to primary care practitioners and pediatricians for all FDA-approved indications until at least July 2029. Under the terms of the agreement, Kowa will receive a commission from net sales attributed to Kowa. Promotion of ZORYVE in primary care and pediatrics under the Kowa agreement began in late September 2024. Effective January 23, 2026, we mutually agreed to terminate the promotion agreement. Following this termination, Kowa ceased all sales and promotions of ZORYVE and we will not be required to make any further payments to Kowa.

In September 2022, we acquired Ducentis BioTherapeutics LTD (Ducentis) and its lead asset, DS-234 (now ARQ-234), a fusion protein that is a potent and highly selective checkpoint agonist of the CD200 Receptor (CD200R). Currently in the preclinical stage, weWe plan to develop ARQ-234 in atopic dermatitis, where we believe it could be a potentially highly complementary biologic treatment option to ZORYVE cream 0.15% in that indication, if approved. ARQ-234 could potentially be used to treat other inflammatory conditions as well. We are working towards submittingsubmitted an Investigational New Drug application (IND) applicationto duringthe 2025.FDA in July 2025, and anticipate commencing a Phase 1 study of ARQ-234 in the first quarter of 2026.

We have incurred annual net losses in each year since inception, including net losses of $140.0$16.1 million, $262.1$140.0 million and $311.5$262.1 million for the years ended December 31, 2024,2025, 20232024 and 2022,2023, respectively. As of December 31, 2024,2025, we had an accumulated deficit of $1,121.9$1,138.1 million and cash, cash equivalents, restricted cash and marketable securities of $228.6$221.3 million. As of December 31, 2024,2025, we had $100.0 million outstanding under the Loan Agreement. We paid down $100.0 million of principal related to the Loan Agreement using available cash onin October 8, 2024, with the right to re-draw that principal for a defined period.

The extent of any net income or losses for future periods is uncertain and we may continue to incur net losses in future periods. We expect to continue to incur losses and significant expenses as we commercialize ZORYVE, and as we advance our product candidates and label extensions through clinical trials, regulatory submissions,submissions and commercialization. We expect to incur significant and prioritized commercialization expenses related to the sales, marketing, manufacturing, and distribution of ZORYVE, while we focus our clinical development spend on ARQ-234, ARQ-255,ARQ-234 and ZORYVE label extensions,expansions. ifWhile we do not anticipate the need to obtain regulatoryfunds approvalthrough forfinancings them.or Ifother sources to support our current planned operations, if our available cash and marketable securities balances, amounts available under the Loan Agreement,balances and anticipated future cash flows from operations are insufficient to cover these expenses, we may need to fund our operations through equity or debt financings or other sources, such as future potential collaboration agreements. Adequate funding may not be available to us on acceptable terms, or at all. Any failure to obtain sufficient funds on acceptable terms if or when needed could have a material adverse effect on our business, results of operations, and financial condition. See “Liquidity, Capital Resources, and Requirements” below and Note 1 to the consolidated financial statements for additional information.

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

Since our inception, we have focused significant resources on our research and development activities, including conducting nonclinical studies and clinical trials, manufacturing development efforts, and activities related to regulatory filings for our product candidates.candidates, and medical affairs activities related to ZORYVE. Research and development costs are expensed as incurred. These costs include direct program expenses, which are payments made to third parties that specifically relate to our research and development, such as payments to clinical research organizations, clinical investigators, manufacturing of clinical material, nonclinical testing,testing and consultants. In addition, employee costs, including salaries, payroll taxes, benefits, stock-based compensation,compensation and traveltravel, for employees contributing to research and development activities are classified as research and development costs. We allocate direct external costs on a program specific basisbasis, (such as the topical roflumilast program, topical JAK inhibitor program, and early-stage programs).program. Our internal costs are primarily related to personnel or professional services and apply across programs, and thus are not allocable on a program specific basis.

We expect to continue to incur research and development expenses in the future as we develop our product candidates. In particular, we expect to incur research and development expenses for the phase 1 ARQ-255 study for alopecia areata, and early development of ARQ-234 for atopic dermatitis.dermatitis and for ZORYVE label expansions and life cycle management.

We have entered, and may continue to enter, into licensein-license agreements to access and utilize certain molecules for the treatment of dermatological diseases and disorders. We evaluate if the licensein-license agreement is an acquisition of an asset or a business. To date, none of our license agreements have been considered to be an acquisition of a business. For asset acquisitions, the upfront payments, as well as any future milestone payments made before productregulatory approval, are immediately recognized as research and development expense when due,expense, provided there is no alternative future use of the rights in other research and development projects.

The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing, or costs required to complete the remaining development of ZORYVE cream and ZORYVE foam, ARQ-255, and ARQ-234ARQ-234, or any other product candidates. This is due to the numerous risks and uncertainties associated with the development of product candidates. See “Risk Factors” for a discussion of the risks and uncertainties associated with the development of our product candidates.

OtherInterest Income, NetIncome

OtherInterest income, net primarilyincome consists of interest income earned on our cash, cash equivalents, and marketable securities, as well as changes in the fair value of the derivative related to our debt. See Note 9 to the consolidated financial statements for additional information.securities.

Interest expense is related to interest incurred on our long term debt.

Product revenue, net, for ZORYVE cream 0.3% increased by $55.9$35.9 million for the year ended December 31, 20242025 compared to the year ended December 31, 2023,2024, primarily driven by highergreater end customerpatient demand and improving gross-to-net discounts for ZORYVE cream 0.3% in the United States.States and Canada.

Product revenue, net, for ZORYVE foam increased by $71.5$110.4 million for the year ended December 31, 20242025 compared to the year ended December 31, 2023,2024, primarily driven by itsgreater patient demand for seborrheic dermatitis in the United States, the commercial launch of ZORYVE foam for plaque psoriasis of the scalp and body in Januarythe United States in June 2025, as well as the commercial launch of ZORYVE foam for seborrheic dermatitis in Canada in December 2024.

Product revenue, net, for ZORYVE cream 0.15% increased by $9.9$58.4 million for the year ended December 31, 20242025 compared to the year ended December 31, 2023,2024, primarily driven by its commercial launch in the United States in July 2024.

Other revenue in the year ended December 31, 2025 is a result of milestone payments earned and received in connection with the Huadong License and Collaboration Agreement of $4.0 million. Other revenue for the year ended December 31, 2024 is a result of license revenues received in connection with the Sato License Agreement of $25.0 million and the Huadong License and Collaboration Agreement of $5.0 million. Other revenue for the year ended December 31, 2023 primarily included licensed revenues received in connection with the Huadong License and Collaboration Agreement of $30.0 million. See Note 7 to the consolidated financial statements for additional information.

Selling, general and administrative expenses increased by $44.2$45.2 million, or 24%,million for the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024. The increase was primarily due to an increase in sales and marketing expenses of $30.8 million and an increase in compensation and personnel related expenses of $28.9 million and an increase in sales and marketing expenses of $14.1$13.3 million. These increases were primarily due to our continued commercialization efforts for ZORYVE.

OtherInterest Income, NetIncome

OtherInterest income,income net increaseddecreased by $4.4$7.2 million for the year ended December 31, 20242025 compared to the year ended December 31, 2023,2024, primarily due to lower cash, cash equivalents, and marketable securities balances, coupled with the impact of higherlower investment yields resulting from reductions in market interest rates on a higher marketable securities balance for the first three quarters of the year.rates.

Interest expense decreased by $2.5$15.1 million for the year ended December 31, 20242025 compared to the year ended December 31, 2023, primarily2024, due to a lower outstanding principal balance on our long-term debt driven by our $100.0 million principal paydown in October 2024, coupled with the impact of lower interest rates and the partial prepayment of principal related to the Loan Agreement.rates. See Note 9 to the consolidated financial statements for additional information.

Income tax expense ofcontinues $0.6to millionnot be material, as we remain in a loss position for the year ended December 31, 20242025. and $3.1 million for the year ended December 31, 2023 were due toThe income tax expense for the periods presented primarily related to withholding taxes on payments received in connection with the Huadong License and Collaboration Agreement. See Note 7Agreement and Notetax 11 toon the consolidatedincome financialearned statementsin for additional information.Canada.

Our primary sources of capital to date have been private placements of preferred stock, our IPO completed in January 2020, our follow-on financings in October 2020, February 2021, August 2022, October 2023, and March 2024, our Loan Agreement, our ATM program, and revenue from the sale of ZORYVE.ZORYVE products. We have incurred annual operating losses since our inception and have an accumulated deficit as a result of ongoing efforts to develop and commercialize our products and product candidates, including conducting nonclinical and clinical trials and providing selling, general and administrative support for these operations. As of December 31, 20242025 and 2023,2024, we had cash, cash equivalents, restricted cash, and marketable securities of $228.6$221.3 million and $272.8$228.6 million, respectively, and an accumulated deficit of $1,121.9$1,138.1 million and $981.9$1,121.9 million, respectively. We maintain cash balances with financial institutions in excess of insured limits. As of December 31, 2024,2025, we had $100.0 million outstanding under the Loan Agreement. We paid down $100.0 million of principal related to the Loan Agreement using available cash onin October 8, 2024, with the right to re-draw that principal for a defined period. See Note 9 to the consolidated financial statements for additional information.

If our capital resources are insufficient to satisfy our requirements, we may need to fund our operations through the sale of our equity securities, accessing or incurring additional debt, entering into licensing or collaboration agreements with partners, grants, or other sources of financing. There can be no assurance that sufficient funds will be available to us at all or on attractive terms when needed from these sources. If we are unable to obtain additional funding from these or other sources if or when needed it may be necessary to significantly reduce our current rate of spending through, among other things, reductions in staff and delaying, scaling back, or stopping certain research and development programs, nonclinical studies, clinical trials or other development activities, and commercialization efforts. Insufficient liquidity may also require us to relinquish rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. In addition, market conditions impacting financial institutions could impact our ability to access some or all of our cash, cash equivalents and marketable securities, and we may be unable to obtain alternative funding when and as needed on acceptable terms, if at all.

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

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

On December 22, 2021, we entered into a loan and security agreement (the Prior Loan Agreement) with SLR Investment Corp (SLR) and the lenders party thereto. The Prior Loan Agreement was amended and restated on January 10, 2023 (the AR Loan Agreement) to include Arcutis Canada, Inc., a corporation incorporated under the laws of the Province of Ontario, as a borrower and party. On November 1, 2023, we entered into an amendment to the AR Loan Agreement to, among others, (i) modify the financial covenant relating to minimum net product revenue, and (ii) include an additional minimum financing covenant. On August 9, 2024, we entered into a second amendment to the AR Loan Agreement (the AR Loan Agreement, as amended by the first and second amendments, the Loan Agreement) to, among others, (i) permit, during the period commencing on October 7, 2024 and ending on December 15, 2024, an optional partial prepayment of term loans outstanding, subject to a 1.0% prepayment penalty (the 2024 Partial Prepayment), (ii) add the tranche C-1 and tranche C-2 term loans, and (iii) facilitate certain other changes, including with respect to the applicable interest rate and maturity date in the event of a 2024 Partial Prepayment. The term loan facility is comprised of (i) a tranche A term loan of $75.0 million, (ii) a tranche B-1 term loan of $50.0 million, (iii) a tranche B-2 term loan of up to $75.0 million, (iv) a tranche C-1 term loan of up to $50.0 million, and (v) a tranche C-2 term loan of up to $50.0 million (collectively, the Term Loans). The tranche A term loan was funded in December 2021. With the approval of ZORYVE cream 0.3% on July 29, 2022, the tranche B term loans were funded in August 2022. As of December 31, 20242025 and 2023,2024, the aggregate principal amount outstanding under the Loan Agreement was $100.0 million and $200.0 million, respectively.million.

In October 2024, we made a 2024 Partial Prepayment of $100.0 million, which reduced the aggregate principal amount outstanding under the Loan Agreement to $100.0 million. In connection with the 2024 Partial Prepayment, we are 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 us 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 our projected net product revenue as set forth in its annual plan for the respective period, we 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 (such date, the Maturity Date), (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) we are no longer subject to certain cost and purchase price restrictions regarding acquisitions, and (iv) we 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.

We launched our lead product, ZORYVE® (roflumilast) cream 0.3% (ZORYVE cream 0.3%), in August 2022 after obtaining our initial U.S. Food and Drug Administration (FDA) approval for the treatment of plaque psoriasis, including psoriasis in the intertriginous areas (e.g., groin or axillae), in individuals 12 years of age or older. ZORYVE cream 0.3% is a once-daily topical formulation of roflumilast, a highly potent and selective phosphodiesterase-4 (PDE4) inhibitor. ZORYVE cream 0.3% is approved for once-daily topical treatment of mild, moderate, and severe plaque psoriasis with no limitations on location or duration of use. In October 2023, weWe received FDA approvalapprovals for an expanded indicationindications in plaque psoriasis down to 6 years of age.age Inand November 2025, our supplemental New Drug Application (sNDA) was accepted for filing by the FDA to potentially expand the indication of ZORYVE cream 0.3% for the treatment of plaque psoriasis in childrensubsequently down to the2 years of age ofin 2,October with2023 a Prescription Drug User Fee Act (PDUFA) target action date assigned forand June 29,2026, 2026.respectively. In June 2023, we achieved our first commercial launch outside of the United States following Health Canada approval of ZORYVE cream 0.3% for the treatment of plaque psoriasis in individuals 12 years of age or older. In February 2026, Health Canada accepted for review our Supplement to a New Drug Submission (SNDS) for ZORYVE cream 0.3% for individuals down to 2 years of age.

In December 2023, we received FDA approval for ZORYVE foam 0.3% (ZORYVE foam) for the treatment of seborrheic dermatitis in individuals aged 9 years and older, with no limitation on severity, location, or duration of use. ZORYVE foam is a once-daily steroid-free foam and, as a PDE4 inhibitor, was the first drug approved for the treatment of seborrheic dermatitis with a new mechanism of action in over two decades. ZORYVE foam became commercially available in the United States in January 2024 and in Canada in November 2024. We also received FDA approval for ZORYVE foam for the treatment of plaque psoriasis of the scalp and body in adults and adolescents aged 12 and olderolder, inwhich Maywas 2025,commercially followed by commercial launchlaunched in the United States in June 2025. ZORYVE foam for the treatment of plaque psoriasis of the scalp2025 and body in adults and adolescents ages 12 and older was also approved by Health Canada in October 2025, followed by commercial launch in November 2025. We have completed enrollment in a Maximum Usage Systemic Exposure (MUSE) trial for ZORYVE foam in children aged 2 to 11 years old with plaque psoriasis of the scalp and bodybody, 2which towe 11believe yearscould old.be sufficient basis for an expansion of the indication of this product in the future.

We also received FDA approval for, and commercially launched, ZORYVE cream 0.15% in July 2024 for the topical treatment of mild to moderate atopic dermatitis in adults and pediatric patients 6 years and older, with no limitation on location, body surface area treated, concomitant use, or duration of use specified in the approved labeling. ZORYVE cream 0.15% was also approvedcommercially by Health Canadalaunched in March 2025 and commercially launchedCanada in April 2025. We also received FDA approval for, and commercially launched, ZORYVE cream 0.05% for the topical treatment of mild to moderate atopic dermatitis in children 2 to 5 years of age in October 2025. In October 2025, Health Canada accepted for review our SNDS for ZORYVE cream 0.05% for the topical treatment of mild to moderate atopic dermatitis in children 2 to 5 years old. In February 2026, we announced positive toplinetop-line data for INTEGUMENT-INFANT, a Phase 2 study evaluating the safety and efficacy of investigational ZORYVE cream 0.05% in infants as young as 3 months to less than 2 years of age with atopic dermatitis. We submitted ana Supplemental New Drug Application (sNDA) to the FDA in April 2026 based on the results of this trial to potentially expand the indication for ZORYVE cream 0.05% for the treatment of infants with atopic dermatitis down to the age of 3 months.months, which has been assigned a Prescription Drug User Fee Act (PDUFA) target action date of February 23, 2027. ZORYVE cream 0.15% and ZORYVE cream 0.05% are once-daily, steroid-free creams that provide rapid disease clearance and significant reduction in itch and have been specifically developed to be treatment options for long-term disease control.

In July 2024, we 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 in the United States to primary care practitioners and pediatricians for all FDA-approved indications until at least July 2029. Under the terms of the agreement, Kowa received a commission from net sales attributed to Kowa. Promotion of ZORYVE in primary care and pediatrics under the Kowa agreement began in late September 2024. Effective January 23, 2026, we mutually agreed to terminate the promotion agreement. Following this termination, Kowa ceased all sales and promotions of ZORYVE, and we will not be required to make any further payments to Kowa. We have now assumed all responsibility for promotion of ZORYVE to primary care practitioners and pediatricians in the United States, and has built a dedicated commercial team to execute those activities.

In September 2022, we acquired Ducentis BioTherapeutics LTD. (Ducentis) and its lead asset, DS-234 (now ARQ-234), a fusion protein that is a potent and highly selective checkpoint agonist of the CD200 receptor (CD200R). We are developing ARQ-234 for moderate to severe atopic dermatitis, where we believe it could be a highly complementary biologic treatment option to ZORYVE cream 0.15% in that indication, if approved. ARQ-234 could potentially be used to treat other inflammatory conditions as well. In March 2026, we announced that the first participant had beenwas enrolled in aour Phase 1a/1b clinical study evaluating the safety and tolerability of ARQ-234.

We have incurred annual net losses in each year since inception,inception. includingWe had a net lossesincome of $11.3$3.7 million and $25.1a net loss of $40.9 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. As of MarchJune 31,30, 2026, we had an accumulated deficit of $1,149.4$1,134.4 million andmillion, cash, cash equivalents, restricted cash, and marketable securities of $224.3$238.9 million.million, As of March 31, 2026, we hadand $100.0 million outstanding under a loan and security agreement, as amended, with SLR Investment Corp. (SLR) and the lenders party thereto.

While we have generated net income for thecertain quartersrecent endedfiscal September 30, 2025 and December 31, 2025,quarters, the extent of any net income or losses for future periods is uncertain, and we may continue to incur net losses in future periods. We expect to continue to incur significant expenses as we commercialize ZORYVE,ZORYVE and as we advance our product candidates and label extensions through clinical trials, regulatory submissionssubmissions, and potentially commercialization. We expect to incur commercialization expenses related to the sales, marketing, manufacturing, and distribution of ZORYVE, while we focus our clinical development spending on ARQ-234 and ZORYVE label expansions. While we do not anticipate the need to obtain funds through financings or other sources to support our current planned operations, if our available cash and marketable securities balances, amounts available under financing arrangements, and anticipated future cash flows from operations are insufficient to cover these expenses, we may need to fund our operations through equity or debt financings or other sources, such as potential future collaboration agreements. Adequate funding may not be available to us on acceptable terms, or at all. Any failure to obtain sufficient funds on acceptable terms if or when needed could have a material adverse effect on our business, results of operations, and financial condition.

We do not own or operate,independently operate any manufacturing facilities, and currently have no plans to establish any manufacturingsuch facilities. We rely on third parties to conduct our nonclinical studies and clinical trials, as well as for the manufacturing and supply of our product candidates and for the commercial supply of our products. Many of these suppliers that we rely on are single-source suppliers.

In August 2022, in conjunction with the launch of our first FDA-approved product, we began to recognize revenue from product sales, net of deductions. Below are the time periods thatin which we began to recognize product revenue, net of deductions, related to the launches of each of our products and indications:

Other revenue recognized to date is derived primarily from upfront license fees and milestone payments received pursuant to the Sato Agreement and Huadong Agreement. We expect that any other revenue we generate pursuant to these agreements will fluctuate from period to period as a result of the timing of potential milestone achievements and any potential regulatory approvals within the respective Sato Territory and Huadong Territory.Territories.

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

Prior to the date on which the initial regulatory approval was received for each product, costs of inventory production were recorded as research and development expense. As of MarchJune 31,30, 2026 and December 31, 2025, the value of this expensed inventory on hand was approximately $1.7$0.9 million and $2.6 million, respectively. Subsequent to initial regulatory approval, costs of production are capitalized into inventory, and as that inventory is sold and revenue is recognized, the cost of the inventory is recognized in cost of sales.

Since our inception, we have focused significant resources on our research and development activities, including conducting nonclinical studies and clinical trials, manufacturing development efforts, activities related to regulatory filings for our product candidates, and medical affairs activities related to ZORYVE. Research and development costs are expensed as incurred. These costs include direct program expenses, which are third-party expenses incurred related to our research and development programs, including for clinical research organizations, clinical investigators, the manufacturing of clinical material, nonclinical testingtesting, and consultants. In addition, employee costs, including salaries, payroll taxes, benefits, stock-based compensation, and travel for employees contributing to research and development activitiesactivities, are classified as research and development costs. Direct external costs relate to a specific program. Our internal costs are primarily related to personnel or professional services, apply across programs, and, thus, are not allocable to a specific program.

Our selling, general and administrative expenses consist primarily of salaries and related costs, including payroll taxes, benefits, stock-based compensation, and travel, for sales, commercial operations, human resources, information technology, legallegal, and finance employees. Other selling, general and administrative expenses include costs related to the sales and marketing of ZORYVE; outbound distribution; commissions earned by Kowa under our promotion agreement, which was terminated effective January 23, 2026; professional services costs for patent protection, accounting, auditing, tax, and general legal services; other outside services and consulting costs; information technology; and other overhead.

Interest expense is related to interest and fees incurred on our debt.

Provision for income taxes is primarily related to foreign income tax expense, foreign withholding taxes incurred in relation to payments received pursuant to our in-license agreementsagreements, and state income tax expense related to jurisdictions with minimum taxes or taxes based on revenue.

Comparison of the Three Months Ended MarchJune 31,30, 2026 and 2025

The increase in product revenue, net, for ZORYVE cream 0.3% was primarily driven by greater patient demand for ZORYVE cream in the United States and Canada.cream.

The increase in product revenue, net, for ZORYVE foam was primarily driven by greater patient demand for ZORYVE foam for the treatment of seborrheic dermatitis in the United States and Canada,and the commercial launch of ZORYVE foam for plaque psoriasis of the scalp and body in the United States in June 2025 and Canada in November 2025.

The increase in product revenue, net, for ZORYVE cream 0.15% was primarily driven by greater patient demand in the United States, as well as its commercial launch in Canada in April 2025.demand.

Cost of sales increased by $1.0$3.4 million for the three months ended MarchJune 31,30, 2026,2026 compared to the three months ended MarchJune 31,30, 2025,2025. The increase was primarily due to higher sales volumes and the associated increase in expenses recognized for product sold and royalties, partially offset by $2.4 million of catch-up amortization expense recognized in the comparative period for an AstraZeneca milestone achieved.royalties.

We expect research and development expenses to continue to increase in 2026,future periods, primarily due to our clinical development program for ARQ-234, as well as the development costs associated with ZORYVE label expansions and lifecycle management efforts.

Selling, General,General and Administrative Expenses

Selling, general,general and administrative expenses increased by $10.1$13.0 million, or 16%,19%, for the three months ended MarchJune 31,30, 2026,2026 compared to the three months ended MarchJune 31,30, 2025. The increase was2025 primarily due to an increase in sales and marketing expenses of $5.9 million and an increaseincreases in compensation and employee benefit related expenses of $4.4$9.5 million.million, Thesesales increasesand weremarketing primarilyexpenses dueof $1.9 million, and other outside spend, partially offset by lower commissions paid out to Kowa following termination of our promotion agreement with Kowa in January 2026. A portion of the higher personnel costs was related to an increase in headcount, including the expansion of our dermatology sales force, to support our continued commercialization efforts for ZORYVE.

Interest expense increased by $1.4$0.4 million for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025, primarily due to feesthe extension fee incurred with respect to maintain the availability of the tranche C-1 and tranche C-2 term loans throughthat Marchremained unfunded after December 31, 20262025 andthrough June 30, 2026, respectively.2026.

Our primary sources of capital to date have been private placements of preferred stock, our IPO completed in January 2020, our follow-on financings in October 2020, February 2021, August 2022, October 2023, and March 2024, our Loan Agreement, our ATM program, and revenue from the sale of ZORYVE products. We have incurred annual operating losses since our inception and have an accumulated deficit as a result of ongoing efforts to develop and commercialize our products and product candidates, including conducting nonclinical and clinical trials and providing selling, general and administrative support for these operations. As of MarchJune 31,30, 2026, we had cash, cash equivalents, restricted cash, and marketable securities of $224.3$238.9 million, and an accumulated deficit of $1,149.4$1,134.4 million.million, As of March 31, 2026, we hadand $100.0 million outstanding under the Loan Agreement.

If our capital resources are insufficient to satisfy our requirements, we may need to fund our operations through the sale of our equity securities, accessing or incurring additional debt, entering into licensing or collaboration agreements with partners, grants, or other sources of financing. There can be no assurance that sufficient funds will be available to us at all or on attractive terms when needed from these sources. If we are unable to obtain additional funding from these or other sources if or when neededneeded, it may be necessary to significantly reduce our current rate of spending through, among other things, reductions in staff and delaying, scaling back, or stopping certain research and development programs, nonclinical studies, clinical trialstrials, or other development activities, and commercialization efforts. In addition, market conditions impacting financial institutions could impact our ability to access some or all of our cash, cash equivalentsequivalents, and marketable securities, and we may be unable to obtain alternative funding when and as needed on acceptable terms, if at all.

We have based our projected operating requirements on assumptions that may prove to be incorrectincorrect, and we may use all our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development, and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Any future funding requirements will depend on many factors, including, but not limited to:

On December 22, 2021, we entered into a loan and security agreement (the Prior Loan Agreement) with SLR Investment CorpCorp. (SLR) and the lenders party thereto. The Prior Loan Agreement was amended and restated on January 10, 2023 (the AR Loan Agreement) to include Arcutis Canada, Inc., a corporation incorporated under the laws of the Province of Ontario, as a borrower and party. On November 1, 2023, we entered into an amendment to the AR Loan Agreement to, among others, (i) modify the financial covenant relating to minimum net product revenue, and (ii) include an additional minimum financing covenant. On August 9, 2024, we entered into a second amendment to the AR Loan Agreement (the AR Loan Agreement, as amended by the first and second amendments, the Loan Agreement) to, among others, (i) permit, during the period commencing on October 7, 2024 and ending on December 15, 2024, an optional partial prepayment of term loans outstanding, subject to a 1.0% prepayment penalty (the 2024 Partial Prepayment), (ii) add the tranche C-1 and tranche C-2 term loans, and (iii) facilitate certain other changes, including with respect to the applicable interest rate and maturity date in the event of a 2024 Partial Prepayment. The term loan facility is comprised of (i) a tranche A term loan of $75.0 million, (ii) a tranche B-1 term loan of $50.0 million, (iii) a tranche B-2 term loan of up to $75.0 million, (iv) a tranche C-1 term loan of up to $50.0 million, and (v) a tranche C-2 term loan of up to $50.0 million (collectively, the Term Loans). The tranche A term loan was funded in December 2021. With the approval of ZORYVE cream 0.3% on July 29, 2022, the tranche B term loans were funded in August 2022. As of MarchJune 31,30, 2026 and December 31, 2025, the aggregate principal amount outstanding under the Loan Agreement was $100.0 million.

In October 2024, we made a 2024 Partial Prepayment of $100.0 million, which reduced the aggregate principal amount outstanding under the Loan Agreement to $100.0 million. In connection with the 2024 Partial Prepayment, we are obligated to paypaid a prepayment penalty of $1.0 million byduring Junethe 30,second quarter of 2026 and are obligated to pay a final fee of $6.95 million, representing the final fee applicable to the amount of the 2024 Partial Prepayment, on January 1,4, 2027. As a result of such 2024 Partial Prepayment, subject to us 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 our projected net product revenue as set forth in itsour annual plan for the respective period, we 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, 20262026, and the tranche C-2 term loan availability will expireexpired on June 30, 2026. Neither tranche was drawn prior to its expiration. In addition, as a result of the 2024 Partial Prepayment, (i) the maturity date of the Loan Agreement is August 1, 2029 (such date, the Maturity Date), (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) we are no longer subject to certain cost and purchase price restrictions regarding acquisitions, and (iv) we 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 theAugust first9, anniversary of the second amendment2025 and prior to theAugust second9, anniversary of the second amendment,2026 or (cb) 1.0% for any prepayment made after theAugust second9, anniversary of the second amendment2026 and prior to the Maturity Date.

Principal amounts outstanding under the Term Loans will generally 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. Prior to the 2024 Partial Prepayment, the applicable rate was a per annum interest rate equal to 7.45% plus the greater of (a) 0.10% and (b) the one-month SOFR. As a result of such 2024 Partial Prepayment, the applicable interest rate will beis a per annum interest rate equal to 5.95% plus the greater of (a) 2.50% and (b) the one-month SOFR. On MarchJune 31,30, 2026, the rate was 9.61%.9.57%. The benchmark SOFR is subject to change in the event of certain events with respect to the benchmark rate. Interest payments are payable monthly following the funding of any Term Loan. Any principal amounts outstanding under the Term Loans, if not repaid or prepaid, are due and payable on August 1, 2029.

In connection with the Loan Agreement, we are obligated to pay (i) a final fee equal to 6.95% of the aggregate original principal amount of the Term Loans outstanding as of the date of the second amendment, (xA) with respect to any 2024 Partial Prepayment, upon the earliest to occur of (Aa) January 1,4, 2027, (Bb) the acceleration of all outstanding Term LoansLoans, and (Cc) the prepayment, or refinancing, substitution or replacement of all outstanding Term Loans, and (yB) with respect to the Term Loans outstanding as of the date of the second amendment (other than 2024 Partial Prepayment), upon the earliest to occur of (Aa) the Maturity Date, (Bb) the acceleration of all outstanding Term Loans and (Cc) the prepayment, or refinancing, substitution or replacement of all outstanding Term Loans,Loans. We were also obligated to pay (iii) a 2.00%$1.0 million facility fee with respect to tranche C term loans, duewhich andwas payablepaid onin the earliestsecond to occurquarter of (A) the Maturity Date,2026, (B) the acceleration of all outstanding Term Loans and (C) the prepayment, or refinancing, substitution or replacement of all outstanding Term Loans, (iiiii) a 2.00%$1.0 million extension fee with respect to tranche C term loans whichthat remainremained unfunded after December 31, 20252025, which shallwas accrueaccrued for and paid out during the period commencing January 1, 2026, and ending on theJune earliest30, to occur of (A) the expiration of the tranche C term loan availability,2026, and (B) the date on which tranche C term loan is fully drawn, and (iviii) a certain amount of lenders’ expenses incurred in connection with the execution of the Loan Agreement. Additionally, in connection with the original Prior Loan Agreement, we had previously had entered into an Exit Fee Agreement, whereby we agreed to pay an exit fee in the amount of 3.0% of each Term Loan funded upon (i) any change of control transaction or (ii) a revenue milestone, calculated on a trailing six-month basis. Notwithstanding the prepayment or termination of the Term Loan,Loans, the exit fee will expire 10 years from the date of the Loan Agreement.

We were in compliance with all covenants under the Loan Agreement as of MarchJune 31,30, 2026.

During the threesix months ended MarchJune 31,30, 2026, net cash provided by operating activities consisted of a net lossincome of $11.3 million, adjusted for certain non-cash charges of $11.7$3.7 million and net changes in operating assets and liabilities of $1.8$14.4 million. Non-cash items primarily related to stock-based compensation expense of $10.7$23.5 million. The overall increasedecrease in cash from changes in our net operating assets and liabilities was the result of increasing collections of our accounts receivable primarily related to increased sales volume and higher prepaid assets primarily related to the timing of payments, partially offset by an increase in accrued liabilities,liabilities. The increase in partaccrued liabilities was primarily due to higher accrued sales deductions from higher sales volume as well as the $10.0 million Ducentis milestone liability recorded and payable as of MarchJune 31,30, 2026, partially offset by a reduction in accrued compensation as a result of paying our prior year annual bonus for employees in the first quarter of the current year. Other fluctuations in our operating assets and liabilities were due to the timing of payments made to third parties.

During the threesix months ended MarchJune 31,30, 2025, net cash used byin operating activities was $30.1 million, which consisted of a net loss of $25.1$40.9 million and a change in net operating assets and liabilities of $12.6 million, adjustedpartially foroffset certainby net non-cash charges of $12.4$23.4 millionmillion. and offset by a decrease inThe net workingnon-cash capitalcharges of $17.7 million. Non-cash itemswere primarily includedrelated to stock-based compensation expense of $9.8$20.3 million and amortization of intangible assets of $3.0$3.5 million.

During the threesix months ended MarchJune 31,30, 2026, net cash used byin investing activities was comprised primarily of purchases of marketable securities of $62.2$127.7 million, partially offset by maturities of marketable securities of $50.8$101.3 million.

During the threesix months ended MarchJune 31,30, 2025, net cash provided by investing activities was $29.2 million, which was comprised primarily of proceeds from the maturities of marketable securities of $68.5$129.1 million, partially offset by purchases of marketable securities of $56.1$89.3 million and a milestone payment made to AstraZeneca of $10.0 million.

During the threesix months ended MarchJune 31, 2026 and March 31,30, 2025, net cash provided by financing activities was $1.8 million, which was comprised primarily of $1.3 million of proceeds from the issuance of our common stock uponpursuant exerciseto ofour employee stock options.purchase plan.