Arcutis Biotherapeutics, Inc 10-Q for FY2020 Q2

Arcutis Biotherapeutics, Inc. (ARQT)

10-Q 2020-08-11 For: 2020-06-30

Added on April 12, 2026

About this 10-Q

Arcutis Biotherapeutics, Inc filed this 10-Q on August 11, 2020, covering the quarter ended June 30, 2020 (FY2020 Q2).

Headline figures

Quarter ended June 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Net loss: $35.41M; compared with a net loss of $8.29M a year earlier

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Delaware (State or Other Jurisdiction of Incorporation or Organization)			81-2974255 (I.R.S. Employer Identification Number)
2945 Townsgate Road Suite 110 Westlake Village, California (Address of Principal Executive Offices)			91361 (Zip Code)


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


		Page
PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Condensed Balance Sheets	1
	Statements of Condensed Operations and Comprehensive Loss	2
	Statements of Condensed Convertible Preferred Stock and Stockholders’ Equity (Deficit)	3
	Statements of Condensed Cash Flows	5
	Notes to Unaudited Condensed Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	33
Item 4.	Controls and Procedures	33

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	80
Item 3.	Defaults Upon Senior Securities	80
Item 4.	Mine Safety Disclosures	80
Item 5.	Other Information	80
Item 6.	Exhibits	80

Signatures


	June 30,		December 31,
	2020		2019
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	171,546	$	63,336
Marketable securities	52,429		37,929
Prepaid expenses and other current assets	4,060		5,209
Total current assets	228,035		106,474
Property, plant, and equipment, net	228		227
Operating lease right-of-use asset	3,629		264
Other assets	78		47
Total assets	$	231,970	$	107,012
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	8,253	$	1,405
Accrued liabilities	10,948		3,654
Operating lease liability	80		178
Total current liabilities	19,281		5,237
Operating lease liability, noncurrent	3,610		129
Other long-term liabilities	156		184
Total liabilities	23,047		5,550
Commitments and contingencies (Note 6)
Convertible preferred stock, $0.0001 par value; no shares and 48,787,898 shares authorized at June 30, 2020 and December 31, 2019, respectively; no shares and 24,385,388 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	—		166,491
Stockholders’ equity (deficit):
Preferred stock, $0.0001 par value; 10,000,000 and no shares authorized at June 30, 2020 and December 31, 2019, respectively; no shares issued and outstanding at June 30, 2020 and December 31, 2019;	—		—
Common stock, $0.0001 par value; 300,000,000 and 65,820,000 shares authorized at June 30, 2020 and December 31, 2019, respectively; 38,189,287 and 2,879,763 shares issued at June 30, 2020 and December 31, 2019, respectively; 37,690,058 and 2,120,853 shares outstanding at June 30, 2020 and December 31, 2019, respectively	3		—
Additional paid-in capital	338,617		1,244
Accumulated other comprehensive income (loss)	—		(1)
Accumulated deficit	(129,697)		(66,272)
Total stockholders’ equity (deficit)	208,923		(65,029)
Total liabilities, convertible preferred stock and stockholders’ equity (deficit)	$	231,970	$	107,012


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Operating expenses:
Research and development	$	30,009	$	7,214	$	55,191	$	13,417
General and administrative	5,618		1,324		9,087		2,073
Total operating expenses	35,627		8,538		64,278		15,490
Loss from operations	(35,627)		(8,538)		(64,278)		(15,490)
Other income, net	215		248		853		542
Net loss	$	(35,412)	$	(8,290)	$	(63,425)	$	(14,948)
Other comprehensive income (loss):
Unrealized gain (loss) on marketable securities	(19)		2		1		3
Comprehensive loss	$	(35,431)	$	(8,288)	$	(63,424)	$	(14,945)
Per share information:
Net loss per share, basic and diluted	$	(0.94)	$	(4.69)	$	(2.05)	$	(8.79)
Weighted-average shares used in computing net loss per share, basic and diluted	37,587,330		1,767,658		30,921,866		1,700,549


ARCUTIS BIOTHERAPEUTICS, INC. Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) (In thousands, except share data) (unaudited)


	Convertible Preferred Stock				Common Stock						Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit	Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance—December 31, 2018	16,262,425	$	72,252	1,557,900	$	—	$	289	$	—	$	(24,276)	$	(23,987)
Vesting of founder shares subject to repurchase	—	—		68,931	—		—		—		—		—
Lapse of repurchase rights related to common stock issued pursuant to early exercises	—	—		65,868	—		29		—		—		29
Stock-based compensation expense	—	—		—	—		76		—		—		76
Unrealized gain on short term investments	—	—		—	—		—		1		—		1
Net Loss	—	—		—	—		—		—		(6,658)		(6,658)
Balance—March 31, 2019	16,262,425	$	72,252	1,692,699	$	—	$	394	$	1	$	(30,934)	$	(30,539)
Vesting of founder shares subject to repurchase	—	—		68,931	—		—		—		—		—
Lapse of repurchase rights related to common stock issued pursuant to early exercises	—	—		65,868	—		29		—		—		29
Stock-based compensation expense	—	—		—	—		139		—		—		139
Unrealized gain on short term investments	—	—		—	—		—		2		—		2
Net Loss	—	—		—	—		—		—		(8,290)		(8,290)
Balance—June 30, 2019	16,262,425	$	72,252	1,827,498	$	—	$	562	$	3	$	(39,224)	$	(38,659)

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


	June 30, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds(1)	$	171,546	$	—	$	—	$	171,546
Commercial paper	—		52,429		—		52,429

Total assets	$	171,546	$	52,429	$	—	$	223,975


	December 31, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds(1)	$	43,558	$	—	$	—	$	43,558
Commercial paper	—		44,689		—		44,689
U.S. government securities	13,018		—		—		13,018
Total assets	$	56,576	$	44,689	$	—	$	101,265


	June 30, 2020
	Amortized cost		Unrealized gains		Unrealized losses		Estimated fair value
Cash and cash equivalents:

Money market funds(1)	$	171,546	$	—	$	—	$	171,546

Total cash and cash equivalents	$	171,546	$	—	$	—	$	171,546
Marketable securities:
Commercial paper	$	52,429	—		—		$	52,429

Total marketable securities	$	52,429	$	—	$	—	$	52,429


	Amounts
2020 (July through December)	$	81
2021	172
2022	803
2023	967
2024	997
Thereafter	3,733
Total minimum lease payments	$	6,753
Less: Amounts representing interest	(1,818)
Less: Tenant improvement allowance	(1,245)
Present value of future minimum lease payments	$	3,690
Current portion operating lease liability	80
Operating lease liability, noncurrent	3,610
Total operating lease liability	$	3,690


	June 30, 2020
Weighted-average remaining lease term (in years)	7.8
Weighted-average discount rate	7.0	%


Convertible Preferred Stock	Shares Authorized	Shares Issued and Outstanding	Net Carrying Value		Liquidation Preference
Series A	13,800,000	6,897,575	$	14,340	$	13,800
Series B	18,736,270	9,364,850	57,912		58,000
Series C	16,251,628	8,122,963	94,239		94,500
Total	48,787,898	24,385,388	$	166,491	$	166,300


	Number of Options		Weighted- Average Exercise Price		Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Balance—December 31, 2019	2,516,470		$	3.47	9.44	$	7,673
Granted	851,325		$	27.68
Exercised	(123,024)		$	2.22
Balance—June 30, 2020	3,244,771		$	9.87	9.15	$	66,436
Exercisable—June 30, 2020	1,411,813	(1)	$	6.74	9.05	$	33,176


	Number of Units	Weighted-Average Grant Date Fair Value
Balance—December 31, 2019	—	$	—
Granted	130,060	$	27.61
Vested	—	$	—
Forfeited	—	$	—
Unvested Balance—June 30, 2020	130,060	$	27.61


	Six Months Ended June 30, 2020	Year Ended December 31, 2019
Expected term (in years)	5.5 – 6.2	5.1 – 6.6
Expected volatility	78.4 – 80.6%	68.6 – 72.5%
Risk-free interest rate	0.4 – 1.4%	1.6 – 2.6%
Dividend yield	—%	—%


			Form			10-Q


	Three Months Ended June 30,						Change
	2020		2019		$		%
	(unaudited)
	(in thousands)
Direct Costs:
Preclinical and clinical	$	22,691	$	4,416	$	18,275	414	%
Manufacturing	2,803		1,427		1,376		96	%

Indirect Costs:
Compensation and personnel-related	3,109		1,049		2,060		196	%
Other	1,406		322		1,084		337	%
Total research and development expense	$	30,009	$	7,214	$	22,795	316	%


	Six Months Ended June 30,						Change
	2020		2019		$		%
	(unaudited)
	(in thousands)
Direct Costs:
Preclinical and clinical	$	41,427	$	8,743	$	32,684	374	%
Manufacturing	6,057		2,119		3,938		186	%

Indirect Costs:
Compensation and personnel-related	5,376		1,871		3,505		187	%
Other	2,331		684		1,647		241	%
Total research and development expense	$	55,191	$	13,417	$	41,774	311	%


	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
	(in thousands)
Operating leases	$	6,753	$	81	$	1,457	$	1,994	$	3,221
Total obligations	$	6,753	$	81	$	1,457	$	1,994	$	3,221


	As of June 30,
	2020	2019
Convertible preferred stock on an as-converted basis	—	16,262,425
Stock options to purchase common stock	3,244,771	1,756,085
Early exercised options subject to future vesting	499,235	612,395
RSU's subject to future vesting	130,060	—
ESPP shares subject to future issuance	5,933	—
Restricted stock subject to future vesting	—	275,726
Total	3,879,999	18,906,631