ARS Pharmaceuticals, Inc.

I now turn the call over to Justin Shakma, Chief Business Officer.

Please proceed.

Good morning, and thank you for joining our first quarter 2025 earnings conference call. This morning, we issued a press release detailing our financial results and commercial highlights, which is available in the investor and media section of our website at ars-pharma.com. With me on the call are Richard Lowenthal, our co-founder, president, and CEO, who will review recent corporate updates and achievements. Eric Peraz, our chief commercial officer, who will cover our commercial activities and progress. And Kathy Scott, our CFO, who will provide a summary of our financial results and cash position. Before we begin, please note that today's remarks may contain forward-looking statements. Actual results may differ materially. Please refer to our press release and SEC filings for further risk disclosures. With that, I'll turn the call over to Rich.

Thank you, Justin. Good morning, and thank you all for joining us on this call. We're off to a strong start in 2025 as we continue to execute the nationwide launch of NEFI, the first and only needle-free epinephrine treatment approved for type 1 allergic reactions, including anaphylaxis. We believe NEFI has blockbuster potential, addressing a U.S. market potential of 3 billion net sales in the near term, comprised of about 6.5 million patients who have been prescribed epinephrine over the past three years. Beyond this, an additional 13.5 million diagnosed patients have no epinephrine prescription, and many struggle with needle anxiety and portability concerns. Only 3.2 million patients actually fill their epinephrine autoinjector prescriptions underscoring the substantial unmet medical need that NEFI is uniquely positioned to solve. With only two quarters of commercialization so far, NEFI is gaining traction as a potential new standard of care in this space. In the first quarter of 2025, NEFI generated $7.8 million in U.S. net product revenue, reflecting the continuously growing demand among physicians, patients, and caregivers an alternative to traditional auto injectors. We started this year with 27% commercial insurance coverage and now have reached 57% coverage with more payer discussions ongoing. We are entering the peak epinephrine prescribing season during the summer with strong momentum and with additional health insurance coverage anticipated in the coming months, We also expect to generate additional demand through our DTC consumer awareness campaign that launches tomorrow. This demand is supported by the real-world evidence of adoption by thousands of healthcare providers who have prescribed NEFI already. In addition, thousands more have participated in our NEFI experience program, using NEFI during oral food challenges and immunotherapy treatments in the clinic. This month, we also reached a major milestone. In addition to our 2 milligram dose for children and adults weighing 30 kilograms or greater, NEFI 1 milligram was approved by the FDA in early March of this year and is now available at pharmacies across the U.S. for children weighing between 15 and 30 kilograms. The availability of this pediatric dose is particularly important as the 1 milligram dose represents 23% of all epinephrine units dispensed in 2024. and more than half of all epinephrine prescriptions for children. Nephew offers caregivers and young patients a reliable and easy to use option, and we ensured that it was available before summer travel, camps, and back to school preparations. To further strengthen our commercial reach, including to key pediatricians, we recently expanded our strategic collaboration with AOK Abello, a global leader in allergy care, ahead of this peak summer prescribing season. This co-promotion agreement expands our direct promotional network for NEFI to over 20,000 healthcare providers across the United States, including targeted outreach to approximately 9,000 pediatricians, accelerating our efforts to position NEFI as the leading epinephrine option for both adults and children. This partnership builds on our broader global relationship with ALK. Under disagreement, ARS will continue to focus on allergists and the highest volume pediatricians and PCPs in the United States and retains full control over all aspects of U.S. commercialization, including marketing, medical affairs, market access, production, and distribution. Lastly, regulatory views are underway for NEFI in the U.K., Canada, Japan, China, and Australia. with decisions and commercial launches in these countries expected to begin in mid-2025 through the first half of 2026. To summarize, this is a year of execution for ARS. We aim to deepen physician engagement, expand access, and lay the groundwork for a global commercial footprint for NEFI supported by our partners. I'll turn the call over to Eric for a more detailed review of our commercial progress.

Thanks, Rich. Our commercial strategy is built on three key pillars, driving healthcare provider adoption, securing market access, and increasing patient awareness. Since launch, our sales team has directly engaged over 10,000 healthcare providers. More than 50% of these providers have prescribed NEFI. Of the prescriptions submitted to date, nearly 90% have come from top decile targets. We view this as a strong endorsement from leading experts who treat the highest number of patients at risk for allergic reactions. Approximately 2,500 healthcare providers have also enrolled in our Nepi Experience Program, and over 13,000 units have been placed in offices for use during anaphylactic events. This hands-on experience has led to numerous physician testimonials that highlights the positive impact Nepi is having in clinical practice. With the recent availability of the one milligram dose, we'll be adding it to our NEFI experience program, and we'll collect additional information on both the one milligram and two milligram doses. We plan to share the physician survey data from our NEFI experience program in various medical forums later this year. As Rich mentioned, we continue to make progress in payer access. We have secured commercial coverage across more than 30 formulary platforms, now including UnitedHealthcare. Currently, over fifty seven percent of all U.S. commercial life have access to. We are approaching a tipping point in market access that will enable more health care providers to prescribe nephew without restrictions. In the coming months as patients schedule appointments and visit their allergy care providers, we anticipate that access to nephew will become quicker and easier. For patients within commercial insurance, our assistance program ensures that most individuals will only have a $25 copay, which is less than the typical $40 for a generic injector. We are making it easier for patients as the copay support is now automatically applied at the point of sale in retail pharmacies. Additionally, for eligible patients who are uninsured or underinsured, we provide NEPI at no cost through our patient assistance program. These programs reflect our commitment to ensure that all patients at risk of an allergic reaction have access to this potentially life-saving treatment. As we turn to the third pillar of our commercial strategy, patient awareness, we are excited to announce the launch of a broad and comprehensive direct-to-consumer campaign that will redefine the epinephrine landscape and establish NEFI as a household name. Our campaign titled, Hello NEFI, Goodbye Needles, will debut tomorrow. We are utilizing a multi-channel strategy to reach patients, parents, and caregivers where they are, including connected TV, broadcast, social media platforms, health-related websites, print, pharmacies, and point-of-care settings. Our data-driven media plan aims to engage high-value audiences during key seasonal periods, such as back to school and the availability of our one-milligram dose. We expect to reach 95% of severe allergy patients and their caregivers. Our investment is essential for achieving our goals of raising awareness and encouraging adoption. Every aspect of this campaign is designed to empower patients and their caregivers to position NEFI as a standard of care and drive prescription growth. We believe our DTC campaign could generate significant revenue in the second half of 2025 and beyond, while establishing Nepi as a leading brand in severe allergy care. I'll now pass the call over to Kathy to walk through our financials.

Thank you, Eric. The details of our financial results can be found in our earnings press release and 10Q filing, so I'll provide a summary. For the first quarter of 2025, we recorded total revenue of $8 million. This is comprised of $7.8 million in U.S. net product revenue for NEPI, and we expect to see a continued ramp up in product revenue as our commercial efforts accelerate. In addition, we had $0.2 million in collaboration revenue, which was the recognition of deferred revenue from performance obligations related to our collaboration and license agreement with ALK. Under our new co-promotion agreement with ALK, ARS will continue to recognize all net product revenue in the U.S. and retain full responsibility for commercialization. NEPI will be detailed by ALK sales representatives in primary position for the first two years and co-primary position during the last two years of the four-year agreement. Additional terms of our co-promotional agreement can be found in our 8K and 10Q filings. In terms of our operating expenses, Cost of goods sold for the first quarter was 1.1 million. Our COGS continues to benefit from some inventory that was expensed prior to FDA approval in August 2024. R&D expenses for the first quarter were 3 million, primarily related to clinical expenses and product development. Sales, general, and administrative expenses were 41.1 million for the first quarter, largely tied to personnel, sales, and marketing expenses associated with the commercialization of NEFI in the U.S. As Eric noted, we are launching a comprehensive DTC campaign tomorrow, which has a planned investment of $40 to $50 million for the remainder of 2025. The bulk of this expense will be recognized in our SG&A in the second and third quarters of the year, and we believe we will start seeing the benefits of the DTC campaign starting in Q3 2025. Also, with the planned DTC spend and additional investments in pediatric access and commercialization with our partner, ALK, we project total 2025 operating expenses of between $210 and $220 million, excluding stock-based compensation and cost of goods sold. The ALK co-promotion agreement adds approximately $8 million in operating expense to the previous guidance for 2025. We believe this is a solid investment in our future growth potential in the pediatric market. ARS's portion of the commercial expenses under the co-promotion agreement with ALK will be recorded as an expense on our P&L for the first year of the agreement, but will accrue and not be paid in cash to ALK until the second year of the agreement. Any future performance-based payments to ALK based on achieving certain market share thresholds are expected to be recognized as operating expenses. Lastly, we reported a net loss of 33.9 million or 35 cents per share for the first quarter. Overall, we are well capitalized today with a disciplined and strategic investment approach to support the commercial execution of NEPI while also advancing development of our nasal epinephrine program in new indications such as urticaria. As of March 31st, 2025, We had cash equivalents and short-term investments of $275.7 million. We reiterate today that based on our current plans, we have an operating runway of at least three years. With that, I'll pass the call back over to Rich.

Thank you, Kathy. As you heard, we are executing from a position of strength. We've seen the momentum across the board from strong early revenue and formulary wins to physician testimonials and real-world adoption. This reinforces our belief that NEFI is a truly transformative product. I am proud of the work our team has done and am grateful to our partners, the medical and advocacy communities, and above all else, the patients and caregivers for their support and enthusiasm. Operator, please open the line for questions.

Thank you. And as a reminder, to ask a question, press star 11 on your telephone and wait for your name to be announced. To remove yourself, press star 11 again. Thank you.

Please stand by for our first question.

And it comes from the line of Ryan Jessner with Raymond James. Please proceed.

Good morning. Thanks for the question. I'm curious how much of the 1Q sales figure is attributed to inventory and how you're thinking about inventory over the next two quarters, you know, going into peak epinephrine season as well as following it and have a follow-up.

Yeah. Hi. This is Rich Lowenthal-Ryan. How are you? Our first quarter numbers were very little influenced by inventory. We're seeing fairly steady inventories at this point. And it was prior to the one milligram being launched, so this was all two milligram sales, of course. But we don't think the committee had much influence on the sales this quarter.

Got it. And what did gross and net discount look like in the first quarter? How meaningful was that change from fourth quarter to first quarter?

Kathy can give you the full details, but as expected, the gross to net will slowly come down towards the 50% mark. We're seeing a good uptake of insurance coverage and fewer cash sales, and that will obviously bring down our gross to net when we get better insurance coverage. But Kathy, do you want to speak to the gross to net in this quarter?

Sure. Good morning, Ryan. Yes, Q4 was definitely a higher gross net than Q1. As Rich said, our payer coverage is coming online. And we were kind of hovering around the 60, a little over 60% for Q1. But do expect that to go down to closer to 50% as we go forward into 2025.

Thanks, Kathy. Thanks, Rich.

Thank you so much. One moment for our next question. And he comes from the line of Josh Shimmer with Kantor. Please proceed.

Thanks for taking the questions. Just a couple of quick ones. First, when you've worked through the inventory on hand, what do you expect cost of goods to settle out at? And then for the, I think, 50% of inventory, commercial lives that have access, can you confirm that there are no prior auth requirements for access to NEFI for them?

Sorry, can you repeat the second question, Josh?

The update was over 50% of commercial lives have access to NEFI. Just want to make sure that there are no prior auth requirements for those patients.

Right. Okay. So let's start there. Currently, about 57% of people have coverage with no prior authorization. Okay. If you count with prior authorization, we're probably close to 90%, Josh. So we're not really considering the prior authorization as a full coverage, partial but not full. We do see good approval rates of prior authorizations, between 60 and 80%, depending on the insurer. But again, we got to get the doctors to write those prior authorizations, so that's a barrier. But 57% right now have coverage on NEFI without any prior authorization or any other paperwork required. They can get a prescription and go to the pharmacy and pick up the prescription at the pharmacy. Okay. And then with regards to the first question, I don't believe we've given details on the cost other than generally the cost of goods are, you know, in the in the ballpark of less, you know, they're pretty low.

I don't think we've given exact guidance. Have we, Justin, on this? No, I think the question was whether as we use up our inventory, what happens to the cost of goods? Kathy, do you want to speak to that?

Sure. No, we definitely have, as just was in our 10Q, we've got some no-cost inventory that was expensed prior to FDA approval. So as we wean that into our inventory, which should be kind of over the next 18 months or so, we would expect that inventory COGS would, the COGS would increase slightly. But for the most part, that zero-cost inventory is the raw material, so we're still paying for manufacturing for the inventory that's being called in the near term.

Okay, thank you.

Thank you. One moment, please. And as a reminder, if you do have a question, press star 1-1 to get in the queue. Our next question is from the line of Roana Reese with Learing Partners. Please proceed.

Hey, morning, everyone. A couple from me. Could you talk about the strength of the NEFI experience program in helping to convert possible later adopter physicians into broader prescribers of NEFI? And what has the feedback been so far in terms of some details you've heard recently about use of NEFI there? Any updates on single versus twice dosing of NEFI, for example? Yeah.

Yeah, so I can give you a little update. So as Eric pointed out earlier, the Nephe Experience Program's been very, very successful. More than 2,500 physicians are enrolled and have Nephe. A lot of them have used everything we provided, so we are going to be expanding the program to not only include the one milligram, but possibly also for those doctors that have already used their supply of Nephe two milligram to give them additional supply of 2 mg. With the outcome so far, we're seeing very good results just by surveying the sites that have actually administered NEFI to patients. The experiences are coming back very positive. We're still, the results are basically looking like injections, so still around 90% are getting a response with a single dose of NEFI. About 10% are needing a second dose. That's the same as what's observed with injection. So we believe that's very positive feedback. And in general, the doctors have been very positive about their experience so far. So we are planning to potentially publish some of this shortly. We could then obviously be able to use that to help other doctors that may be still reluctant or still questioning whether real-world data is available because this is a very large subset of real-world data right now. And then we are looking forward to the one milligram being out there and being used as well since a lot of these children that get oral food challenge are younger. And then maybe towards the American College meeting, we may also put out an abstract on the NFA experience program and the results.

Got it. That helps. And a quick follow-up from me. On the payer fronts and insurance coverage, how are you tracking against your goal of, I think, 80% commercial lives by 3Q? And could you remind us, are there any payers still in negotiations or in progress right now that you would need to secure to get there?

Yeah. I think, well, there's certainly a number of payers that we're still working with. We do have the contract with Zinc, but we're still working with Caremark and Aetna to cover NEFI under that agreement. So that's obviously a big insurer that we're still working with to get final agreement on. We're also working with Prime and other Blue Cross companies, of course, to get agreement with a lot of them. We do have some Blue Cross companies already covering. We generally have a scorecard on our website, so it's fairly transparent as to who's covering and who's still pending coverage. But again, even Caremark right now is accepting PAs and approving at a very high percentage, as I said, in the upper range of the 60 to 80% I mentioned. So they are very, very quickly approving of prior authorizations, but they are still requiring a prior authorization for NEFI at this point. But we are trying to work through that. So those are some of the bigger ones that we want to try to get across the finish line to get towards that 80% coverage. But in general, with prior authorization, we're already above 90%. There's only handful of companies that are actually blocking Nephi right now.

So that's actually very positive as well.

Sounds good. Thanks. Thank you.

Our next question comes from Andres Argarides with Oppenheimer. Please proceed. Andres, your line is open. We're ready for your question. Okay, we'll go back to the next question if you can re-queue up, please. One moment. Our next question comes from Lachlan Hanbury Brown with William Blair. Please proceed.

Hey, guys. Thanks for the questions. I was wondering if you could provide any detail on the number of prescriptions that were actually written and filled in the quarter as we try to understand what the sort of capture rate of IQV and other providers are. Could you provide any color on, you know, you've talked about the PAs and the high success rate there. Can you talk about how many of the prescriptions in the past quarter have been covered versus required prior auth?

Okay, I think Eric, you should probably take that question.

Sure. Sounds good. So first, when we look at the prescription data through IQVA, we've talked about this before, and it's not 100% capture of everything. Our cash prescriptions through Blink are not covered. But roughly, if you look at the extended unit data on a weekly basis, it's about 13,000 prescriptions or units. But again, that's not a complete capture. And then as far as the PAs, if you look at the beginning of this year, we were looking at about 70% of prescriptions required a PA. That's down to about 45%. So as Rich went through and I went through in our comments, we're seeing the PAs come down, which is a very positive thing. We work closely with the doctors and obviously their staff to submit the PAs. We're continuing to drive that. And I think with six to seven months under our belt, we have really good insights in terms of the criteria that's evaluated in terms of an approval of a PA. So our sales team continues to share that information with office managers and those individuals in the office that are responsible for those PAs.

Thanks. And could you also talk about the sort of overlap between the NEFI experience docs and the high prescribers? I mean, are the two and a half thousand odd doctors in the NEFI experience program, are they all in that sort of the high prescribing bucket at the moment? How's that sort of conversion looking?

Yeah, Rich, I can take that one too. So when we start looking at kind of our, first I'll say from a decile perspective, About 81% of our decile 10s, that's the highest volume of physicians, are writing for NEFI, which is great. If you look at the combination of 8s, 9s, and 10s, it's about 75%. We do see that doctors that are part of the experience program, on average, are writing about 2.5 to 3 times more than the overall average that we're seeing at a national level. So that program is exactly doing what we expected in terms of building trust and confidence. Doctors really like it because they're able to get firsthand experience. And when they talk to patients, they can reference that and tell stories about what they've seen in their own clinical practice. So as Rich said, we're looking to get that out more broadly in the second half of the year. But we're starting to do that already too with our peer-to-peer education, our speaker programs. Most of the speakers are part of the program. and have had firsthand experience. So they're able to share that when they're speaking to other healthcare providers and their peers. So we're gonna continue driving that because we clearly know that this program is really hitting the mark of what we expected it to do.

Got it, thanks. Thank you.

Our next question is from Andre Argyris with Oppenheimer. Please proceed.

Good morning, and thanks for taking our question. Sorry for the... for the disruption there earlier. Rich, can you just talk about how you're thinking about the rest of the year in terms of, I know you're not providing guidance, but how the Q1 results are tracking for the inflection point in the second half of the year?

Thanks. Yeah, I think we're still tracking according to plan and exactly where we believe we should be right now. We are obviously expecting to see that inflection in the third quarter. The August-September timeframe tends to be peak sales for this product, especially with the children. Our sales are still heavily weighted towards children with the 2 milligram. We expect that to even be expanded, greater focus on children with the 1 milligram. So, we do expect to see that inflection point start this summer, and with the DTC campaign and one milligram available, we think that that's where we'll start to see a real upturn in market share.

And then just a quick follow-up. Do you still think that prior-offs are the biggest impediment at the moment, and so when you get to broad access that you're guiding towards, that'll be a real boost?

Yeah, I mean, I think the prior authorizations, when we have low insurance coverage, is an impediment. When we start to get higher and higher up in insurance coverage, there's fewer prior auth the docs have to deal with, and they're more than happy to write prior authorizations, they just don't want to write too many. So it's It's a matter of volume, right? And so we do see the number of prior authorizations coming down. We see the approval rates increasing. So that's a good sign. And that encourages doctors to continue to write prior authorizations for those patients that are not getting automatic insurance coverage without paperwork. So that's encouraging. So we do think it's, you know, a headwind, but it becomes less and less and less as time goes by because the remaining patients that are not covered are those insurance companies that are delaying. The doctors are more willing to write the prior authorizations because there's just fewer of them. Does that make sense?

It does. Thanks, and congrats on the quarter. Thanks. I'll jump back in with you. Thank you.

Thank you. Our next question comes from the line of Louis Chen with Scotiabank.

Hi, thanks for taking my questions here. So I just wanted to ask you how we can think about the sales targets that ALK has to hit in order to get to the performance-based payments that you've discussed. And then the second thing is what is your market share now and where do you hope to be by the end of the year? Thank you.

Eric, I think you should take that question if okay.

Yeah, let me take the second part first. So when you look at a market share overall in the category of the basket of epinephrine across the board, brand and generic, we have about a 1.3% share. But what we also focus on more importantly is our targets of the doctors that we're calling on directly. That's about 6.2. And then we also have super targets, which is about 7.5. So these are doctors that we spend you know, extra time in terms of our promotion and focus. As far as the ALK co-promote, this is a great opportunity that we are very excited about. Obviously, we're able to expand our footprint, the number of reps. You know, we're going to grow from about 12,500 physicians with direct promotion up to about 20,000. So we have some milestone targets in terms of market share. that we think is very reasonable to hit those targets. And especially as we've articulated, we've got so many catalysts coming up in the next three to six months here with the one milligram, the DTC commercial, and continued pair coverage improving. So we feel really confident about this co-promote and look forward to the impact that they're gonna have in the pediatric space.

Okay, thank you.

Thank you. And our last question is from Lachlan Hambury Brown with William Blair. Please proceed.

Hey, thanks for the follow-up. I just wanted to confirm, Cathy, I think you said you're expecting most of the sort of DTC marketing to be in Q2 and Q3. So I wanted to confirm, should we sort of expect a tail-off in Q4, or is it more that most of the sort of growth will be Q2 and Q3, and then it will be steady thereafter?

Sure, we do expect to spend some in Q4, but as I said in my remarks, the majority in Q2 and Q3. And as Rich said, the inflection point for sales, we would expect to start really in Q3. So does that answer your question?

Yep. Yep, thanks. And Lachlan, just to add to that, I mean, we obviously are doing that very intentionally to front load the – Awareness campaign before the summer period, right? Which is really August September is where you'll see the big peak in epinephrine sales. So we want to make sure we get to all the consumers and make sure they're aware the nephew's available. So the sooner we can do that in the summer period, the better. So we've obviously put a lot of the spend earlier and then we'll taper off after that and get to a steady state.

Okay, thanks.

Thank you. And with that, ladies and gentlemen, we conclude our Q&A session and program for today. Thank you all for participating. You may now disconnect.