Executive Summary

Strong beat on top line and EPS: ZORYVE net product revenue $99.2m (+22% q/q, +122% y/y) and diluted EPS $0.06 vs S&P Global consensus -$0.09; revenue beat $99.2m vs $87.0m*; drivers were demand growth, ZORYVE Foam launch, and improved gross-to-net .
Initial FY2026 net product revenue guidance set at $455–$470m; management also pulled forward cash flow breakeven to Q4 2025 from prior 2026, citing operating leverage and GTN dynamics .
Regulatory momentum: FDA approved ZORYVE cream 0.05% for pediatric AD (ages 2–5) on Oct 6; commercial launch began Oct 30, expanding the addressable market ahead of Q4 seasonality .
Strategic narrative: management targets 15–20% share of topical steroid prescriptions over time and frames ZORYVE peak sales potential at $2.6–$3.5B across current and potential future indications, underpinning a multi-year growth runway .

Note: Consensus figures marked with an asterisk (*) are values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

Broad-based growth with operational leverage: revenue +22% q/q to $99.2m and return to GAAP profitability (net income $7.4m; EPS $0.06), with opex down ~$5m sequentially and CFO calling out improving leverage from ZORYVE .
Commercial execution and GTN: sequential growth aided by strong Foam adoption and improved gross-to-net as patients progressed through deductibles; management expects only nominal GTN improvement in Q4, implying demand is the primary driver into year-end .
Regulatory/label expansion: FDA approval of ZORYVE cream 0.05% for pediatric AD (2–5) and imminent launch by end of October provide a near-term incremental growth vector .

What Went Wrong

Continued reliance on GTN patterns: management highlighted that Q3’s non-volume uplift was largely GTN; they cautioned limited further GTN benefit in Q4, which may cap price/mix tailwinds near term .
SG&A remains elevated y/y due to commercialization investments (Q3 SG&A $62.4m vs $58.8m y/y), though down ~10% vs Q2 on timing; ongoing spend is required to expand prescriber breadth (PCP/pediatrics) .
Pipeline beyond ZORYVE remains early: ARQ-234 to start clinical in early 2026; lifecycle expansion (vitiligo/HS) in small Phase 2a PoC (n≈20 each), leaving limited near-term clinical catalysts outside ZORYVE label moves .

Financial Results

Headline Results vs Prior Periods and Consensus

Metric	Q3 2024	Q2 2025	Q3 2025	Q3 2025 vs Consensus*
Revenue ($m)	$44.8	$81.5	$99.2	$99.2 vs $87.0 → Beat*
Diluted EPS ($)	$(0.33)	$(0.13)	$0.06	$0.06 vs $(0.09) → Beat*
Net Income ($m)	$(41.5)	$(15.9)	$7.4	—

Note: Consensus values marked with an asterisk (*) are from S&P Global.

Profitability and Margins (sequential view)

Metric	Q2 2025	Q3 2025
Gross Profit Margin %	90.81%*	91.25%*
Income (Loss) from Operations ($m)	$(14.6)	$8.5
Net Income Margin %	(19.49%)*	7.47%*
Total Operating Expenses ($m)	$96.1	$90.7

Note: Margin values marked with an asterisk (*) are from S&P Global.

Product Mix Detail

Product Revenue ($m)	Q2 2025	Q3 2025
ZORYVE cream 0.3%	$27.7	$30.5
ZORYVE cream 0.15%	$14.6	$18.9
ZORYVE topical foam 0.3%	$39.2	$49.8
Total	$81.5	$99.2

Select KPIs

KPI	Q3 2025
Total prescriptions (TRx) growth q/q	+13%
TRx growth y/y	+92%
4-week avg weekly scripts (peak)	>17,000
Foam revenue growth vs Q2	>+25%
GTN comment	Limited improvement expected in Q4 vs Q3

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net product revenue	FY2026	—	$455–$470m	New
Cash flow breakeven	Timing	FY2026	Q4 2025	Pulled forward
Gross-to-net trend	Q4 2025	—	Only nominal improvement vs Q3	Commentary
Peak sales narrative (ZORYVE)	LT	—	$2.6–$3.5B potential across current/future indications	Long-term framework

Earnings Call Themes & Trends

Topic	Prior Two Quarters (Q1–Q2 2025)	Q3 2025	Trend
Steroid conversion/market share	Emphasized ZORYVE non-steroidal adoption; broad PBM/Medicaid coverage ramping	Intensifying “steroid stewardship” tailwind; ZORYVE ~half of branded topicals; share aspiration 15–20%	Strengthening tailwind
Gross-to-net dynamics	GTN in the 50s; improving for 0.15% AD cream in 2025	Q3 uplift from patients hitting deductibles; limited GTN improvement expected in Q4	GTN stable near-term
Access expansion	Three largest PBMs covering portfolio; expanding Medicaid	Working to expand Medicaid further; aiming for Medicare in future	Coverage broadening
Label/indication expansion	PDUFA for Foam scalp/body (May) and pediatric AD 0.05% (Oct)	FDA approved pediatric AD 2–5; launch late Oct	Executing on label growth
Pipeline (ARQ-234)	IND planned 2025	IND submitted; first-in-human start early 2026; CD200R agonist rationale and differentiation vs prior mAb efforts	Advancing to clinic
Lifecycle management	Early PoC in vitiligo/HS planned	Phase 2a PoC enrolled/initiating (n≈20 each) leveraging pleiotropic PDE4 MOA	Building optionality

Management Commentary

“We achieved yet another strong quarter with robust net product revenue growth and continued steady growth of prescriptions across all approved formulations and indications for ZORYVE.” — CEO Frank Watanabe .
“We now expect to achieve cash flow breakeven in the fourth quarter of 2025.” — CFO Latha Vairavan .
“ZORYVE net product sales…were $99.2 million, reflecting 22% sequential growth and 122% year-over-year growth…driven by…ZORYVE foam 0.3%…and improved gross-to-net pricing.” — Press release .
“We believe increasing ZORYVE’s share to 15% to 20% of topical steroid prescriptions…is both realistic and achievable.” — CCO Todd Edwards ; echoed by CEO .
“Drive to potential peak ZORYVE sales of $2.6–$3.5 billion per annum across current and potential future indications.” — Press release/Investor Day .

Q&A Highlights

Steroid conversion acceleration: Management sees an organic clinician-led shift, supported by SDNP/SDPA statements; Arcutis will lean in via salesforce coverage, access, and targeted marketing .
Market share glidepath: From ~3% of steroid market today toward 15–20% over 5–10 years, aided by PCP/pediatrics activation and incremental data in hard-to-treat subsets (nail, palmar plantar) .
ARQ-234 differentiation: Fusion protein targeting native CD200R site with higher affinity and extended half-life vs a prior mAb approach; first clinical study planned early 2026 .
Vitiligo/HS LCM rationale: Once-daily dosing, potential faster onset (vitiligo), and topical anti-inflammatory for mild/moderate HS to complement systemic therapies; small PoC trials underway .
Revenue bridge: 13% TRx growth to 22% revenue growth mainly from GTN improvement as patients moved through deductibles; expect stable GTN from Q3 to Q4 .
Foam vs cream: Limited cannibalization, with Foam capturing new psoriasis starts; economics similar across SKUs .

Estimates Context

Q3 2025 actual vs S&P Global consensus: Revenue $99.2m vs $87.0m (beat); EPS $0.06 vs -$0.09 (beat)* .
Q4 2025 outlook (consensus): Revenue ~$109.8m; EPS ~$0.073*; management expects continued strong net sales growth into Q4 driven by demand, with only nominal GTN improvement .

Note: Values marked with an asterisk (*) are retrieved from S&P Global.

Key Takeaways for Investors

ZORYVE is scaling into a durable, cash-generative franchise: sequential growth (+22%) with a swing to GAAP profitability and breakeven pulled forward to Q4 2025 .
The steroid-conversion narrative is a material multi-year tailwind; early data show ZORYVE as the leading branded non-steroidal topical, with a plausible path to mid-teens share over time .
Pediatric AD approval (2–5) and immediate launch expand reach ahead of seasonally stronger periods; expect prescriptions to benefit as access ramps .
FY2026 sales guide ($455–$470m) anchors a higher revenue base; investors should watch Q4 demand momentum and payer coverage evolution as near-term proof points .
Mix breadth (Cream/ Foam, multiple strengths/indications) and access strength should mitigate SKU cannibalization risk; growth remains volume-led as GTN normalizes .
Optionality from lifecycle and pipeline: small, cost-efficient PoCs in vitiligo/HS and a differentiated CD200R agonist (ARQ-234) entering the clinic in 2026 support the medium-term innovation story .

Appendix: Additional Tables

Detailed Income Statement Line Items

Metric ($m)	Q3 2024	Q2 2025	Q3 2025
Revenues	44.8	81.5	99.2
Cost of Sales	5.5	7.5	8.7
R&D	19.5	19.5	19.6
SG&A	58.8	69.2	62.4
Total Opex	83.8	96.1	90.7
Income (Loss) from Operations	(39.1)	(14.6)	8.5
Other Income (Expense), net	(2.5)	(0.9)	(1.0)
Net Income (Loss)	(41.5)	(15.9)	7.4
Diluted EPS ($)	(0.33)	(0.13)	0.06

Q3 2025 vs S&P Global Consensus

Metric	Actual	Consensus*	Surprise
Revenue ($m)	99.2	87.0*	+12.2
EPS ($)	0.06	(0.09)*	+0.15