Arcutis Biotherapeutics, Inc.ARQT
Arcutis Biotherapeutics, Inc. Fair Value Disclosure
Fair Value Measurements
The fair value of the Company’s embedded derivative instrument is based on significant inputs not observed in the market, and thus represents a Level 3 measurement. See Note 9 for further discussion on the embedded derivative instrument.
The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):
| December 31, 2025 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
Money market funds and cash | $ | 37,541 | $ | — | $ | — | $ | 37,541 | |||||||||||||||
| Certificates of deposit | — | 5,366 | — | 5,366 | |||||||||||||||||||
Commercial paper | — | 14,789 | — | 14,789 | |||||||||||||||||||
| Corporate debt securities | — | 78,764 | — | 78,764 | |||||||||||||||||||
| U.S. Treasury and agency securities | 84,522 | — | — | 84,522 | |||||||||||||||||||
| Total assets | $ | 122,063 | $ | 98,919 | $ | — | $ | 220,982 | |||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
Assets: | |||||||||||||||||||||||
Money market funds and cash | $ | 71,335 | $ | — | $ | — | $ | 71,335 | |||||||||||||||
| Certificates of deposit | — | 5,042 | — | 5,042 | |||||||||||||||||||
| Corporate debt securities | — | 83,955 | — | 83,955 | |||||||||||||||||||
| U.S. Treasury securities | 67,623 | — | — | 67,623 | |||||||||||||||||||
Total assets | $ | 138,958 | $ | 88,997 | $ | — | $ | 227,955 | |||||||||||||||
Money market funds and U.S. Treasury and agency securities are valued based on quoted market prices in active markets, with no valuation adjustment.
Commercial paper, certificates of deposit and corporate debt securities are valued taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities; issuer credit spreads; benchmark securities; prepayment/default projections based on historical data; and other observable inputs.
The following table summarizes the estimated value of the Company’s cash, cash equivalents and marketable securities, and the gross unrealized holding gains and losses (in thousands):
| December 31, 2025 | |||||||||||||||||||||||
| Amortized cost | Unrealized gains | Unrealized losses | Estimated fair value | ||||||||||||||||||||
| Cash and cash equivalents: | |||||||||||||||||||||||
Money market funds and cash | $ | 37,541 | $ | — | $ | — | $ | 37,541 | |||||||||||||||
| Certificates of deposit | 5,366 | — | — | 5,366 | |||||||||||||||||||
| Total cash and cash equivalents | $ | 42,907 | $ | — | $ | — | $ | 42,907 | |||||||||||||||
| Marketable securities: | |||||||||||||||||||||||
Commercial paper | $ | 14,782 | 8 | (1) | $ | 14,789 | |||||||||||||||||
| Corporate debt securities | 78,687 | 81 | (4) | 78,764 | |||||||||||||||||||
U.S. Treasury and agency securities | 84,493 | 45 | (16) | 84,522 | |||||||||||||||||||
| Total marketable securities | $ | 177,962 | $ | 134 | $ | (21) | $ | 178,075 | |||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Amortized cost | Unrealized gains | Unrealized losses | Estimated fair value | ||||||||||||||||||||
| Cash and cash equivalents: | |||||||||||||||||||||||
Money market funds and cash | $ | 71,335 | $ | — | $ | — | $ | 71,335 | |||||||||||||||
| Total cash and cash equivalents | $ | 71,335 | $ | — | $ | — | $ | 71,335 | |||||||||||||||
| Marketable securities: | |||||||||||||||||||||||
| Certificates of deposit | $ | 5,042 | $ | — | $ | — | $ | 5,042 | |||||||||||||||
| Corporate debt securities | 83,855 | 100 | — | 83,955 | |||||||||||||||||||
| U.S. Treasury securities | 67,404 | 219 | — | 67,623 | |||||||||||||||||||
| Total marketable securities | $ | 156,301 | $ | 319 | $ | — | $ | 156,620 | |||||||||||||||
As of December 31, 2025, no significant facts or circumstances were present to indicate a deterioration in the creditworthiness of the issuers of the available-for-sale securities. The Company generally holds its marketable securities until maturity and does not intend to sell, and is not required to sell, the investments that are in an unrealized loss position before the recovery of their amortized cost basis. For all securities with a fair value less than its amortized cost basis, the Company determined the decline in fair value below amortized cost basis to be non-credit related and no allowance for losses has been recorded. As of December 31, 2025, there were no individual securities that were in a significant unrealized loss position. To date, the Company has not recorded any impairment charges on available-for-sale securities.
The Company has elected the practical expedient to exclude the applicable accrued interest from both the fair value and the amortized cost basis of its available-for-sale securities for purposes of identifying and measuring an impairment. Accrued interest receivable related to available-for-sale securities is presented in prepaid expenses and other current assets, separate from marketable securities, on the consolidated balance sheet. As of December 31, 2025 and 2024, accrued interest receivable was immaterial. The Company has made an accounting policy election not to recognize an allowance for credit losses for accrued interest receivables on available-for-sale securities and to write-off any uncollectible accrued interest receivable by recognizing credit loss expense. The Company has not written off any accrued interest receivables for the years ended December 31, 2025 and 2024.
As of December 31, 2025, the amortized cost and fair value of marketable securities by contractual maturity were as follows:
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||
| Amortized cost | Estimated fair value | Amortized cost | Estimated fair value | ||||||||||||||||||||
Maturing within one year | $ | 138,281 | $ | 138,395 | $ | 143,708 | $ | 144,018 | |||||||||||||||
Maturing in one to five years | 39,681 | 39,680 | 12,593 | 12,602 | |||||||||||||||||||
Total marketable securities | $ | 177,962 | $ | 178,075 | $ | 156,301 | $ | 156,620 | |||||||||||||||
The following table summarizes the change in the fair value of the embedded derivative instrument for the year ended December 31, 2025 and 2024 (in thousands). There was no activity for the year ended December 31, 2023.
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
Beginning balance | $ | 570 | $ | 849 | |||||||
| (139) | (279) | ||||||||||
Ending balance | $ | 431 | $ | 570 | |||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 16, 2021 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.