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Arcutis Biotherapeutics, Inc. (ARQT)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 net product revenue rose to $81.5M (+164% YoY; +28% QoQ), driven by demand across the ZORYVE portfolio and the launch of ZORYVE foam 0.3% for scalp and body psoriasis; GAAP net loss improved to $15.9M (EPS -$0.13) from $52.3M in Q2 2024 .
  • Results beat Wall Street consensus: revenue $81.5M vs $73.7M*, EPS -$0.13 vs -$0.16*; Q1 and Q4 2024 were also beats, indicating estimate momentum sustained into Q2 2025*.
  • Management flagged typical Q3 seasonality with moderated sequential growth, then a return to robust growth in Q4; gross-to-net remained “in the 50s,” and operating leverage improved with positive operating cash flow of $0.3M in Q2 .
  • Key catalysts: FDA approval of ZORYVE foam for scalp/body psoriasis (May 22), potential sNDA approval in October for ZORYVE cream 0.05% in ages 2–5 with AD, initiation of infant AD study, and ARQ‑234 IND submission .

What Went Well and What Went Wrong

What Went Well

  • Portfolio strength: ZORYVE net product revenue reached $81.5M; foam contributed $39.2M, cream 0.3% $27.7M, cream 0.15% $14.6M, with demand growth across all strengths/indications .
  • Execution and pipeline: FDA approved ZORYVE foam 0.3% for scalp/body psoriasis; sNDA filed for cream 0.05% in 2–5 year olds; infant AD study initiated; ARQ‑234 IND submitted .
  • Operating leverage and access: Positive operating cash flow ($0.3M) as gross profit and working capital timing improved; GTN stable “in the 50s”; Medicaid access now covers well over half of recipients .

Selected quotes:

  • “We generated strong net product revenues of $81.5 million… Demand for ZORYVE continues to grow steadily, and we recently surpassed 1 million prescriptions dispensed…” — Frank Watanabe, CEO .
  • “We anticipate steady sales growth… moderation in our sequential growth rate in the third quarter, before returning to robust growth in the fourth quarter.” — Todd Edwards, CCO .
  • “We remain on track to achieve [positive] free cash flow… in 2026.” — Frank Watanabe, CEO .

What Went Wrong

  • Medicare Part D delays: Part D plans are broadly challenged by IRA changes; management sees slowed/new drug add decisions, making timing of coverage gains uncertain .
  • Alopecia areata program discontinued: ARQ‑255 halted after Phase 1b showed insufficient efficacy relative to alternatives; R&D focus reallocated .
  • Seasonality headwind: Management anticipates Q3 sequential growth moderation due to typical topical prescription seasonality (vacations, reduced flaring) before re‑acceleration in Q4 .

Financial Results

P&L Summary vs Prior Year, Prior Quarter, and Estimates

MetricQ2 2024Q1 2025Q2 2025
Net Product Revenue ($USD)$30.9M $63.8M $81.5M
Total Revenue ($USD)$30.9M $65.8M $81.5M
Cost of Sales ($USD)$3.5M $8.8M $7.5M
R&D Expense ($USD)$19.3M $17.5M $19.5M
SG&A Expense ($USD)$58.2M $64.0M $69.2M
Net Loss ($USD)$(52.3)M $(25.1)M $(15.9)M
Diluted EPS ($)$(0.42) $(0.20) $(0.13)
Gross Margin %88.8% (calc from rev & CoS) 86.6% (calc) 90.8% (calc)
Net Loss Margin %(169.5%) (calc) (38.1%) (calc) (19.5%) (calc)

Notes: Q2 Gross Margin % = (81.504 − 7.492)/81.504.

Segment/Product Revenue Mix

Product Revenue ($USD)Q1 2025Q2 2025
ZORYVE cream 0.3%$23.4M $27.7M
ZORYVE cream 0.15%$10.2M $14.6M
ZORYVE foam 0.3%$30.2M $39.2M

KPIs and Balance Sheet

KPI / Balance SheetQ4 2024Q1 2025Q2 2025
Cash, Cash Equivalents, Restricted Cash, Marketable Securities ($USD)$228.6M $198.7M $191.1M
Operating Cash Flow ($USD)$(0.7)M $(30.4)M +$0.3M
Total Debt, net ($USD)$107.2M $107.6M $108.0M
Weighted Avg Shares (Basic & Diluted)124.9M 126.0M 127.0M
GTN CommentaryLow 50s blended “In the 50s” Stable “in the 50s”

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Sequential sales trajectoryQ3 2025Continued growth in 2025 Growth to continue; moderated sequential growth in Q3, robust in Q4 Maintained; added seasonality detail
Gross-to-net (GTN)2025GTN “in the 50s” GTN stable “in the 50s”; limited variance expected Maintained
Operating cash flow / FCF2026Target positive FCF in 2026 On track to achieve cash flow breakeven/positive FCF in 2026 Maintained
Market access (Medicaid/Medicare)2025Expanding Medicaid; anticipate Medicare coverage wins Medicaid: >50% covered lives with single steroid step; Medicare Part D decisions delayed under IRA disruptions Mixed: Medicaid improved; Medicare timing uncertain
Regulatory milestones2025PDUFA May 22 (foam scalp/body) Foam approved (May); sNDA cream 0.05% ages 2–5 PDUFA Oct 13; infant AD study initiated Raised (achieved approval; added pediatric timeline)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Product performance & adoptionQ3/Q4: strong demand; GTN improvement; Kowa co‑promotion launched Demand growth across all products; record weekly scripts; inventory normalization boosted revenue Positive; broad prescriber adoption
Access & reimbursementBlended GTN low 50s; Medicaid expansion GTN stable in 50s; Medicaid >50% coverage; Medicare Part D slow under IRA Medicaid improving; Medicare delayed
RegulatoryFoam sNDA accepted; AD cream 0.15% launch Foam approval achieved; pediatric 2–5 sNDA with Oct PDUFA; infant AD study started Multiple catalysts achieved
R&D executionARQ‑234 IND planned; ARQ‑255 Phase 1b ongoing ARQ‑234 IND submitted; ARQ‑255 halted; initiating Phase 2 in vitiligo and HS (collaborative) Focused, disciplined portfolio
Legal/regulatoryPadagis litigation stayed; deadlines cancelled Litigation stay remains; periodic confidential updates; stay continues Stable (no near‑term impact)
Macro/IRANoted GTN and coverage trajectory IRA Part D changes complicate Medicare formulary additions; timing uncertain Headwind for Medicare additions

Management Commentary

  • “We remain focused on expanding the approved uses of ZORYVE to the youngest patients… we are well positioned for long-term, sustainable growth.” — Frank Watanabe, CEO .
  • “We anticipate some moderation of growth in Q3 before returning to a more robust trajectory in Q4.” — Todd Edwards, CCO .
  • “Gross‑to‑net… has been stable for the quarter and in the 50s… net’s not changing very much anymore, and I wouldn’t expect that it would.” — Latha Vairavan, CFO; Frank Watanabe, CEO .
  • “We remain on track to achieve [positive] free cash flow… in 2026.” — Frank Watanabe, CEO .
  • “It would be difficult to get just a PDE4 class [in Medicare]. They want to keep topical products in the same market basket… we’re a great value proposition to the Part D plans…” — Todd Edwards, CCO .

Q&A Highlights

  • Seasonality and trajectory: Management expects continued sequential growth in Q3 albeit moderated, then robust growth in Q4; overall momentum remains strong .
  • Access dynamics: Medicaid coverage expanded (>50% covered lives, often one steroid step); Medicare Part D decisions delayed under IRA changes; timing for coverage gains uncertain .
  • Portfolio/IP: Three US patents issued in Q2; 24 total US patents, many Orange Book‑listed; supports IP strength though not extending LOE .
  • Pipeline prioritization: ARQ‑255 discontinued after insufficient efficacy; ARQ‑234 IND submitted; Phase 2 collaborative studies in vitiligo and HS initiated/planned .
  • Commercial channel build: COA/Kowa partnership progressing; dedicated national pharmacy implemented to streamline EHR workflows for PCP/pediatric channels .

Estimates Context

MetricQ4 2024Q1 2025Q2 2025
Revenue Consensus Mean ($USD)$60.5M*$62.5M*$73.7M*
Revenue Actual ($USD)$71.4M $65.8M $81.5M
Outcome vs ConsensusBeat*Beat*Beat*
Primary EPS Consensus Mean ($)-0.264*-0.210*-0.158*
Primary EPS Actual ($)-0.09 -0.20 -0.13
Outcome vs ConsensusBeat*Beat*Beat*

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Multi‑quarter estimate momentum: ARQT beat revenue and EPS in Q4, Q1, and Q2, underscoring durable demand and GTN stability that support top‑line conversion to margin and cash flow .
  • Product mix diversification: Foam now contributes nearly half of quarterly revenue; cream 0.15% accelerating in AD; breadth across indications enhances resilience and prescriber efficiency .
  • Near‑term setup: Expect Q3 seasonality to moderate sequential growth, then re‑acceleration in Q4; traders should watch weekly script trends and foam adoption post‑label expansion .
  • Access watchpoints: Medicaid momentum continues; Medicare Part D delays are a macro headwind — monitor payer updates, GTN stability, and potential formulary progress .
  • Cash trajectory: Operating cash flow turned positive in Q2; management reiterates cash flow breakeven/positive FCF in 2026, improving optionality for pipeline and BD .
  • Pipeline discipline: ARQ‑234 IND advances biologic strategy in AD; ARQ‑255 discontinued; targeted Phase 2 proof‑of‑concept studies (vitiligo, HS) emphasize ROI‑driven lifecycle management .
  • Catalysts: October PDUFA for ZORYVE cream 0.05% in ages 2–5; continued foam uptake; infant AD study enrollment pace; R&D Day in Q4 to detail growth roadmap .