Arcutis Biotherapeutics, Inc.

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q, and the audited financial statements and notes thereto as of and for the year ended December 31, 2025 and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2025, which has been filed with the SEC. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans, objectives, expectations, projections, and strategy for our business, includes forward-looking statements that involve risks and uncertainties. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “should,” “estimate,” or “continue,” and similar expressions or variations. Such forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. As a result of many factors, including those factors identified below and those set forth in the “Risk Factors” section of our 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.

Overview

We are a commercial-stage biopharmaceutical company focused on developing and commercializing treatments for dermatological diseases with high unmet medical needs. Our current portfolio is comprised of highly differentiated topical and systemic treatments with significant potential to treat immune-mediated dermatological diseases and conditions. We believe we have built a leading platform for dermatologic product development and commercialization. Our strategy is to focus on validated biological targets and to use our drug development platform and deep dermatology expertise to develop and commercialize differentiated products that have the potential to address major shortcomings of existing therapies in our targeted indications. We believe this strategy uniquely positions us to rapidly advance our goal of bridging the treatment innovation gap in dermatology, while maximizing our probability of technical success and efficient use of financial resources.

Commercial and Regulatory Overview

ZORYVE® (roflumilast) cream 0.3%

Our initial product, ZORYVE (roflumilast) cream 0.3% (ZORYVE cream 0.3%), is a once-daily, steroid-free topical phosphodiesterase-4 (PDE4) inhibitor approved for the treatment of mild, moderate, and severe plaque psoriasis, with no limitations on severity, location, or duration of use, and is the first and only topical specifically approved for use in intertriginous areas (e.g., groin or axillae). Key milestones for ZORYVE cream 0.3% include:

•In July 2022, we received our first U.S. Food and Drug Administration (FDA) approval for individuals aged 12 years and older, and we commercially launched in the United States in August 2022.

•In June 2023, we commercially launched in Canada for individuals aged 12 years and older following approval by Health Canada, achieving our first commercial launch outside the United States.

•In October 2023, we commercially launched an expanded indication in the United States for individuals aged 6 years and older.

•In February 2026, Health Canada accepted for review our Supplement to a New Drug Submission (SNDS) for an expanded indication for individuals down to 2 years of age.

•In June 2026, we commercially launched an expanded indication in the United States for individuals down to the age of 2.

ZORYVE foam 0.3%

ZORYVE foam 0.3% (ZORYVE foam) is a once-daily, steroid-free topical foam PDE4 inhibitor approved for the treatment of both seborrheic dermatitis and plaque psoriasis of the scalp and body, with no limitations on severity, location, or duration of use. It was the first drug approved for the treatment of seborrheic dermatitis with a new mechanism of action in over two decades. Key milestones for ZORYVE foam include:

•In January 2024, we commercially launched in the United States for treatment of seborrheic dermatitis in individuals aged 9 years and older.

•In November 2024, we commercially launched in Canada for the treatment of seborrheic dermatitis in individuals aged 9 years and older.

•In June 2025, we commercially launched in the United States for the treatment of plaque psoriasis of the scalp and body in individuals aged 12 years and older.

•In November 2025, we commercially launched in Canada for the treatment of plaque psoriasis of the scalp and body in adults and adolescents aged 12 years and older.

•We have completed enrollment of a Maximum Usage Systemic Exposure (MUSE) trial in children aged 2 to 11 years old with plaque psoriasis of the scalp and body, which we believe could be sufficient basis for an expansion of the indication of this product in the future.

ZORYVE cream 0.15% and ZORYVE cream 0.05%

ZORYVE cream 0.15% and ZORYVE cream 0.05% are once-daily steroid-free topical PDE4 inhibitors approved for the topical treatment of mild-to-moderate atopic dermatitis, with no limitation on location, body surface area treated, concomitant use with systemic therapies, or duration of use in the approved labeling. Both strengths provide rapid disease clearance and significant reduction in itch and have been specifically developed as treatment options for long-term disease control of atopic dermatitis. Key milestones for ZORYVE cream 0.15% and ZORYVE cream 0.05% include:

•In July 2024, we commercially launched ZORYVE cream 0.15% in the United States for the treatment of atopic dermatitis in individuals aged 6 years and older.

•In April 2025, we commercially launched ZORYVE cream 0.15% in Canada for the treatment of atopic dermatitis in individuals aged 6 years and older.

•In October 2025, we commercially launched ZORYVE cream 0.05% in the United States for children with atopic dermatitis aged 2 to 5 years.

•In February 2026, we announced positive topline 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 a supplemental New Drug Application (sNDA) to the FDA 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, which has been assigned a Prescription Drug User Fee Act (PDUFA) target action date of February 23, 2027.

•In October 2026, we commercially launched ZORYVE cream 0.05% in Canada for children with atopic dermatitis aged 2 to 5 years..

Business Relationships

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 have built a dedicated commercial team to execute those activities.

In August 2023, we entered into a strategic collaboration and licensing agreement (the Huadong Agreement) for topical roflumilast in Greater China and Southeast Asia with Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. (Huadong), a wholly owned subsidiary of Huadong Medicine Co., Ltd. In February 2024, we entered into a strategic collaboration and licensing agreement (the Sato Agreement) for topical roflumilast in Japan with Sato Pharmaceutical Co., Ltd. (Sato).

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, the first subject was enrolled in our Phase 1a/1b clinical study evaluating the safety and tolerability of ARQ-234. In October 2026, the first atopic dermatitis patient was enrolled in the multiple ascending dose (MAD) portion of the trial.

In July 2018, we executed a licensing agreement with AstraZeneca AB (AstraZeneca) for exclusive worldwide rights to roflumilast as a topical product for use in humans solely for dermatological indications. Moreover, we have our own intellectual property portfolio around topical uses of roflumilast, with issued and pending formulation, pharmacokinetic, and method-of-use patents in the United States and other jurisdictions from several distinct patent families, which provides us with exclusivity in the United States for our product cream formulation through 2037 and foam formulation through 2042.

Financial Overview

We have incurred annual net losses in each year since inception. We had net income of$12.5 million and a net loss of $33.5 million for the nine months ended September 30, 2026 and 2025, respectively. As of September 30, 2026, we had an accumulated deficit of $1,125.6 million and cash, cash equivalents, restricted cash, and marketable securities of $259.8 million, and had $100.0 million principal outstanding under a loan and security agreement, as amended, with SLR and the lenders party thereto.

While we have generated net income for certain recent fiscal 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 and as we advance our product candidates and label extensions through clinical trials, regulatory submissions, 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.

Manufacturing

We do not own or independently operate any manufacturing facilities, and currently have no plans to establish any such 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.

Components of Our Results of Operations

Revenue

Product Revenue, Net

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 in which we began to recognize product revenue, net of deductions, related to the launches of each of our products and indications:

Other Revenue

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 Territories.

Operating Expenses

Cost of sales includes direct and indirect costs related to the manufacturing and warehousing 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 September 30, 2026 and December 31, 2025, the value of this expensed inventory on hand was $0.1 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 testing, and consultants. In addition, employee costs, including salaries, payroll taxes, benefits, stock-based compensation, and travel for employees contributing to research and development activities, 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.

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 development of ARQ-234 for atopic dermatitis and for ZORYVE label expansions and lifecycle management.

We have entered, and may continue to enter, into in-license agreements to access and utilize certain molecules for the treatment of dermatological diseases and disorders. We evaluate whether an in-license agreement is an acquisition of an asset or a business. To date, none of our in-license agreements have been considered to be an acquisition of a business. For asset acquisitions, the upfront payments, as well as any milestone payments made before regulatory approval, are immediately recognized as research and development 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 label expansions and lifecycle management, ARQ-234 for atopic dermatitis, 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.

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, legal, 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 Income

Interest income consists of interest earned on our cash, cash equivalents, and marketable securities.

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

Provision for Income Taxes

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 agreements, and domestic state income tax.