Baron Health Care Fund is Expecting High Operating Margins for Arcutis Biotherapeutics (ARQT)

Fund Performance - Baron Health Care Fund rose 13.10% in Q4 compared to 11.92% for the Russell 3000 Health Care Index and 2.40% for the Russell 3000 Index [1] - The Fund returned 10.28% for the full year, while the indexes gained 14.56% and 17.15% respectively [1] - Strong stock selection in biotechnology contributed to the Fund's relative gains in the quarter [1] Investment Strategy - The Fund seeks to invest in businesses with secular growth opportunities, a sustainable competitive edge, and strong management [1] - The firm believes healthcare is a strong sector in the U.S. economy, offering attractive investment opportunities with positive momentum heading into 2026 [1] Company Highlight: Arcutis Biotherapeutics, Inc. - Arcutis Biotherapeutics, Inc. is a new addition to the portfolio, focusing on treatments for dermatological diseases [2] - As of February 5, 2026, Arcutis stock closed at $26.07 per share, with a one-month return of -7.62% and a twelve-month increase of 124.55% [2] - Arcutis has a market capitalization of $3.193 billion [2] Product Overview: Zoryve - Zoryve cream and foam are used for treating autoimmune dermatologic conditions, showing similar efficacy to steroids but with fewer side effects [3] - 80% of patients with commercial insurance now have access to Zoryve, which targets 30 million patients in the U.S. [3] - Assuming moderate adoption, peak sales could exceed $3 billion, with Arcutis already free cash flow positive and expected to see meaningful operating leverage [3]