arqt-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


			Form			10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from to

Commission File Number: 001-39186



ARCUTIS BIOTHERAPEUTICS, INC. (Exact name of registrant as specified in its charter)


Delaware (State or Other Jurisdiction of Incorporation or Organization)			81-2974255 (I.R.S. Employer Identification Number)
3027 Townsgate Road Suite 300 Westlake Village, California (Address of Principal Executive Offices)			91361 (Zip Code)

(805) 418-5006

(Registrant's telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.0001	ARQT	The Nasdaq Global Select Market

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

The number of shares of the registrant’s Common Stock outstanding as of August 9, 2024 was 116,891,023.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to statements regarding our future results of operations and financial position, industry and business trends, stock compensation, business strategy, plans, market growth, commercialization of approved products, and our objectives for future operations.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. Forward-looking statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements, including, but not limited to, the important factors discussed in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2024. The forward-looking statements in this Quarterly Report on Form 10-Q are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance, and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q, whether as a result of any new information, future events, or otherwise.

INDEX


		Page
PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	32
Item 4.	Controls and Procedures	32

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	37
Item 6.	Exhibits	38

Signatures

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ARCUTIS BIOTHERAPEUTICS, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and par value)


	June 30,		December 31,
	2024		2023
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	84,270	$	88,398
Restricted cash	617		925
Marketable securities	278,167		183,463
Trade receivables, net	43,411		25,807
Inventories	13,880		13,134
Prepaid expenses and other current assets	14,246		18,704
Total current assets	434,591		330,431
Property, plant, and equipment, net	1,347		1,539
Intangible assets, net	6,063		6,438
Operating lease right-of-use asset	2,163		2,361
Other assets	595		596
Total assets	$	444,759	$	341,365
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	7,943	$	11,992
Accrued liabilities	42,632		33,941
Operating lease liability	777		735
Total current liabilities	51,352		46,668
Operating lease liability, noncurrent	2,978		3,382
Long-term debt, net	203,808		201,799

Other long-term liabilities	194		849
Total liabilities	258,332		252,698
Commitments and contingencies

Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized at June 30, 2024 and December 31, 2023; no shares issued and outstanding at June 30, 2024 and December 31, 2023	—		—
Common stock, $0.0001 par value; 300,000,000 shares authorized at June 30, 2024 and December 31, 2023; 116,480,267 and 96,787,343 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively	12		9
Additional paid-in capital	1,256,327		1,070,558
Accumulated other comprehensive loss	(294)		4
Accumulated deficit	(1,069,618)		(981,904)
Total stockholders’ equity	186,427		88,667
Total liabilities and stockholders’ equity	$	444,759	$	341,365

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

Table of Contents

ARCUTIS BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues:
Product revenue, net	$	30,858	$	4,770	$	52,427	$	7,551
Other revenue	—		420		28,000		420
Total revenues	30,858		5,190		80,427		7,971

Operating expenses:
Cost of sales	3,464		776		6,720		1,559
Research and development	19,298		25,219		42,439		60,564
Selling, general, and administrative	58,173		45,958		112,967		88,876
Total operating expenses	80,935		71,953		162,126		150,999
Loss from operations	(50,077)		(66,763)		(81,699)		(143,028)

Other income (expense):
Other income, net	5,229		3,121		9,273		6,328
Interest expense	(7,484)		(7,349)		(14,964)		(14,391)

Loss before income taxes	(52,332)		(70,991)		(87,390)		(151,091)

Provision for income taxes	—		—		$	324	$	—

Net loss	$	(52,332)	$	(70,991)	$	(87,714)	$	(151,091)

Other comprehensive income (loss):
Unrealized income (loss) on marketable securities	(127)		128		(243)		852
Foreign currency translation adjustment	(34)		(6)		$	(55)	$	(58)
Total other comprehensive income (loss)	(161)		122		(298)		794

Comprehensive loss	$	(52,493)	$	(70,869)	$	(88,012)	$	(150,297)

Per share information:
Net loss per share, basic and diluted	$	(0.42)	$	(1.16)	$	(0.75)	$	(2.46)
Weighted-average shares used in computing net loss per share, basic and diluted	123,480,849		61,430,620		117,264,687		61,300,577

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

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ARCUTIS BIOTHERAPEUTICS, INC. Condensed Consolidated Statements of Changes in Stockholders’ Equity (In thousands, except share data) (unaudited)


	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit		Total Stockholders’ Equity
		Shares					Amount
Balance—December 31, 2023		96,787,349	$	9	$	1,070,558		$	4	$	(981,904)	$	88,667
Issuance of shares of common stock net of discount and issuance costs of $10,820		18,157,895	3		161,679			—		—		161,682
Issuance of common stock upon the exercise of stock options		21,863	—		82			—		—		82
Issuance of common stock upon the vesting of restricted stock units		538,330	—		—			—		—		—
Stock-based compensation expense		—	—		10,030			—		—		10,030
Unrealized loss on marketable securities		—	—		—			(116)		—		(116)
Foreign currency translation adjustment		—	—		—			(21)		—		(21)
Net loss		—	—		—			—		(35,382)		(35,382)
Balance—March 31, 2024		115,505,437	12		1,242,349			(133)		(1,017,286)		224,942
Issuance of common stock upon the exercise of stock options		147,490	—		806			—		—		806
Issuance of common stock upon the vesting of restricted stock units		443,365	—		—			—		—		—
Shares issued pursuant to the employee stock purchase plan		383,975	—		649			—		—		649
Stock-based compensation expense		—	—		12,523			—		—		12,523
Unrealized loss on marketable securities		—	—		—			(127)		—		(127)
Foreign currency translation adjustment		—	—		—			(34)		—		(34)
Net loss		—	—		—			—		(52,332)		(52,332)
Balance—June 30, 2024		116,480,267	$	12	$	1,256,327		$	(294)	$	(1,069,618)	$	186,427

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

Table of Contents


ARCUTIS BIOTHERAPEUTICS, INC. Condensed Consolidated Statements of Changes in Stockholders’ Equity (In thousands, except share data) (unaudited)


	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit		Total Stockholders’ Equity
		Shares					Amount
Balance—December 31, 2022		61,037,403	$	6	$	930,425		$	(1,086)	$	(719,764)	$	209,581
Issuance of common stock upon the exercise of stock options		31,497	—		100			—		—		100
Issuance of common stock upon the vesting of restricted stock units		285,314	—		—			—		—		—
Lapse of repurchase rights related to common stock issued pursuant to early exercises		3,718	—		—			—		—
Stock-based compensation expense		—	—		9,479			—		—		9,479
Unrealized loss on marketable securities		—	—		—			724		—		724
Foreign currency translation adjustment								(52)				(52)
Net loss		—	—		—			—		(80,100)		(80,100)
Balance—March 31, 2023		61,357,932	6		940,004			(414)		(799,864)		139,732
Issuance of common stock upon the exercise of stock options		35,700	—		74			—		—		74
Issuance of common stock upon the vesting of restricted stock units		77,221	—		—			—		—		—
Lapse of repurchase rights related to common stock issued pursuant to early exercises		3,719	—		—			—		—		—
Shares issued pursuant to the employee stock purchase plan		155,446	—		993			—		—		993
Stock-based compensation expense		—	—		10,578			—		—		10,578
Unrealized gain on marketable securities		—	—		—			128		—		128
Foreign currency translation adjustment		—	—		—			(6)		—		(6)
Net loss		—	—		—			—		(70,991)		(70,991)
Balance—June 30, 2023		61,630,018	$	6	$	951,649		$	(292)	$	(870,855)	$	80,508

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

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ARCUTIS BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)


	Six Months Ended June 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(87,714)	$	(151,091)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	334		373
Non-cash lease expense	198		175
Amortization of intangible assets	375		376

Net accretion on marketable securities	(4,113)		(3,985)
Non-cash interest expense	2,009		1,998
Stock-based compensation expense	22,553		20,057
Changes in fair value of embedded derivative instrument	(655)		—
Changes in operating assets and liabilities:
Accounts receivable, net	(16,524)		(8,749)

SEC Form 10-Q filed by Arcutis Biotherapeutics Inc.