Arcutis Biotherapeutics, Inc.

Comparison of the Three Months Ended June 30, 2026 and 2025

Product revenue, net

*Not applicable

The increase in product revenue, net, for ZORYVE cream 0.3% was primarily driven by greater patient demand for ZORYVE 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 and the commercial launch of ZORYVE foam for plaque psoriasis of the scalp and body in the United States in June 2025.

The increase in product revenue, net, for ZORYVE cream 0.15% was primarily driven by greater patient demand.

The increase in product revenue, net, for ZORYVE cream 0.05% was due to its commercial launch in the United States in October 2025.

Cost of sales increased by $3.4 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The increase was primarily due to higher sales volumes and the associated increase in expenses recognized for product sold and royalties.

Research and development expense remained materially consistent, with an increase in indirect costs primarily attributable to growth in headcount and investments in medical education. This was partially offset by a decrease in direct program development costs, which included lower topical roflumilast costs as we close out the INTEGUMENT-INFANT trial.

We expect research and development expenses to continue to increase in 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 and administrative expenses increased by $13.0 million, or 19%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 primarily due to increases in compensation and employee benefit related expenses of $9.5 million, sales and marketing expenses of $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.

We expect our selling, general and administrative expenses to continue to increase in future periods as we continue to commercialize ZORYVE and potentially other product candidates, as well as support our operations.

Interest expense increased by $0.4 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, primarily due to the extension fee incurred with respect to the tranche C-1 and C-2 term loans that remained unfunded after December 31, 2025 through June 30, 2026.

Comparison of the Six Months Ended June 30, 2026 and 2025

Product revenue, net

*Not applicable

The increase in product revenue, net, for ZORYVE cream 0.3% was primarily driven by greater patient demand for ZORYVE 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 and the commercial launch of ZORYVE foam for plaque psoriasis of the scalp and body in the United States in June 2025.

The increase in product revenue, net, for ZORYVE cream 0.15% was primarily driven by greater patient demand.

The increase in product revenue, net, for ZORYVE cream 0.05% was due to its commercial launch in the United States in October 2025.

Other Revenue

Other revenue of $2.0 million for the six months ended June 30, 2025 was related to a milestone payment received in connection with the Huadong Agreement. See Note 6 to the condensed consolidated financial statements for additional information.

Cost of sales increased by $4.4 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, due to higher sales volumes and the associated increase in expenses recognized for product sold and royalties, partially offset by $2.7 million of catch-up amortization expense recognized in the comparative period for an AstraZeneca milestone achieved.

The increase of $14.0 million in research and development expenses was primarily due to the $10.0 million milestone that became payable to certain former Ducentis stockholders in the first quarter of 2026 upon the dosing of the first patient in the ARQ-234 Phase 1a/1b trial, with the remaining increase primarily attributable to higher indirect costs, including growth in headcount and investments in medical education. The decrease in other program expenses primarily reflected lower JAK inhibitor–related direct costs, following the completion of the Phase 1b clinical study for our ARQ-255 program in 2025.

Selling, general and administrative expenses increased by $23.0 million, or 17%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, primarily due to increases in compensation and employee benefit related expenses of $13.9 million and sales and marketing expenses of $7.8 million, 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 $1.8 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, primarily due to fees incurred to maintain the availability of the tranche C-1 and tranche C-2 term loans through March 31, 2026 and June 30, 2026, respectively.

Liquidity, Capital Resources, and Requirements

Sources of Liquidity

Our primary sources of capital to date have been private placements of preferred stock, our IPO completed in January 2020, our follow-on financings in October 2020, February 2021, August 2022, October 2023, and March 2024, our Loan Agreement, our ATM program, and revenue from the sale of ZORYVE 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 June 30, 2026, we had cash, cash equivalents, restricted cash, and marketable securities of $238.9 million, an accumulated deficit of $1,134.4 million, and $100.0 million outstanding under the Loan Agreement.

We believe that our existing capital resources will be sufficient to meet the projected operating requirements for at least 12 months from the date of issuance of our financial statements.

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. 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.

We have based our projected operating requirements on assumptions that may prove to be incorrect, 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:

•the timing, receipt, and amount of sales of any current and future products;

•the scope, progress, results, and costs of researching and developing our product candidates or any future product candidates, and conducting nonclinical studies and clinical trials, in particular our planned or ongoing development activities and our formulation and nonclinical efforts;

•suspensions or delays in the enrollment or changes to the number of subjects we decide to enroll in our ongoing clinical trials;

•the number and scope of clinical programs we decide to pursue, and the number and characteristics of any product candidates we develop or acquire;

•the timing of, and the costs involved in, obtaining regulatory approvals for any future product candidates;

•the number and characteristics of any additional product candidates we develop or acquire;

•the cost of manufacturing ZORYVE or any future product candidates and any products we successfully commercialize, including costs associated with building out our supply chain;

•the cost of commercialization activities for ZORYVE or any future product candidates that are approved for sale, including marketing, sales and distribution costs, and any discounts or rebates to obtain access;

•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 or any future collaborator or licensing partner, upon the achievement of predetermined milestones;

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

•the expenses needed to attract and retain skilled personnel;

•any disputes, lawsuits, or other legal proceedings related to contracts or employment matters;

•the costs involved in preparing, filing, prosecuting, maintaining, defending, and enforcing our intellectual property portfolio; and

•costs associated with any adverse market conditions or other macroeconomic factors.

Indebtedness

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 June 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 paid a prepayment penalty of $1.0 million during the 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 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 our 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, 2026, and the tranche C-2 term loan availability expired 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) 2.0% for any prepayment made after August 9, 2025 and prior to August 9, 2026 or (b) 1.0% for any prepayment made after August 9, 2026 and prior to the Maturity Date.

Principal amounts outstanding under the Term Loans will accrue interest at a floating rate equal to the applicable rate in effect from time to time, as determined by SLR on the third business day prior to the funding date of the applicable Term Loan and on the first business day of the month prior to each payment date of each Term Loan. 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 is a per annum interest rate equal to 5.95% plus the greater of (a) 2.50% and (b) the one-month SOFR. On June 30, 2026, the rate was 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.

As security for the obligations under the Loan Agreement, we granted SLR, for the benefit of the lenders, a continuing security interest in substantially all of our assets, including our intellectual property, subject to certain exceptions.

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

The Loan Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among others, requirements as to financial reporting and insurance and restrictions on our ability to dispose of our business or property, to change our line of business, to liquidate or dissolve, to enter into any change in control transaction, to merge or consolidate with any other entity or to acquire all or substantially all the capital stock or property of another entity, to incur additional indebtedness, to incur liens on our property, to pay any dividends or other distributions on capital stock other than dividends payable solely in capital stock or to redeem capital stock. We also agreed to a financial covenant whereby we must generate a minimum net product revenue equal to 75% of our projected net product revenue as set forth in our annual plan for the respective period, tested on a trailing six-month basis as of the end of each month. Each annual plan shall be approved by our board of directors and SLR, in its capacity as collateral agent, in its reasonable discretion. Any failure by us to deliver such annual plan on or before December 15 of the prior year shall be an immediate event of default.

In addition, the Loan Agreement contains customary events of default that entitle the lenders to cause any indebtedness under the Loan Agreement to become immediately due and payable, and to exercise remedies against us and the collateral securing the Term Loans. Upon the occurrence and for the duration of an event of default, an additional default interest rate (the Default Rate) equal to 4.0% per annum will apply to all obligations owed under the Loan Agreement.

In connection with the Loan Agreement, we are obligated to pay 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, (A) with respect to any 2024 Partial Prepayment, upon the earliest to occur of (a) January 4, 2027, (b) the acceleration of all outstanding Term Loans, and (c) the prepayment, or refinancing, substitution or replacement of all outstanding Term Loans, and (B) with respect to the Term Loans outstanding as of the date of the second amendment (other than 2024 Partial Prepayment), upon the earliest to occur of (a) the Maturity Date, (b) the acceleration of all outstanding Term Loans and (c) the prepayment, or refinancing, substitution or replacement of all outstanding Term Loans. We were also obligated to pay (i) a $1.0 million facility fee with respect to tranche C term loans, which was paid in the second quarter of 2026, (ii) a $1.0 million extension fee with respect to tranche C term loans that remained unfunded after December 31, 2025, which was accrued for and paid out during the period commencing January 1, 2026, and ending on June 30, 2026, and (iii) 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 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 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 June 30, 2026.

Cash Flows

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

Net Cash Provided by (Used in) Operating Activities

During the six months ended June 30, 2026, net cash provided by operating activities consisted of net income of $3.7 million and net changes in operating assets and liabilities of $14.4 million. Non-cash items primarily related to stock-based compensation expense of $23.5 million. The overall decrease in cash from changes in our net operating assets and liabilities was the result of increasing 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. The increase in accrued 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 June 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 six months ended June 30, 2025, net cash used in operating activities was $30.1 million, which consisted of a net loss of $40.9 million and a change in net operating assets and liabilities of $12.6 million, partially offset by net non-cash charges of $23.4 million. The net non-cash charges were primarily related to stock-based compensation expense of $20.3 million and amortization of intangible assets of $3.5 million.

Net Cash Provided by (Used in) Investing Activities

During the six months ended June 30, 2026, net cash used in investing activities was comprised primarily of purchases of marketable securities of $127.7 million, partially offset by maturities of marketable securities of $101.3 million.

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

Net Cash Provided by Financing Activities

During the six months ended June 30, 2026, net cash provided by financing activities was $3.1 million, which was comprised primarily of $2.4 million of proceeds from the issuance of common stock upon the exercise of stock options, and $1.6 million of proceeds from the issuance of our common stock pursuant to our employee stock purchase plan, partially offset by a $1.0 million payment of the prepayment penalty associated with our tranche A term loan.

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

Contractual Obligations and Contingent Liabilities

Other than the change related to Ducentis described in Note 6 to the condensed consolidated financial statements in Item 1, there have been no material changes to our contractual obligations and commitments outside the ordinary course of business as described in “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, 2025.