ARS Pharmaceuticals, Inc.

Good morning, and welcome to ARS Pharmaceuticals conference call. At this time, all participants are in a listen-only mode. After the company's prepared remarks, we will open the line for questions. Please be advised that today's conference is being recorded. I'll now turn the call over to Justin Chokmah, Chief Business Officer. Please go ahead.

Good morning, and thank you for joining our third quarter 2025 earnings conference call. With me on the call are Richard Lowenthal, our co-founder, president, and CEO, Eric Paris, our chief commercial officer, and Kathy Scott, our CFO. This morning, we issued a press release detailing financial results and commercial highlights. That press release and the slide presentation, which we'll refer to today during today's call, are available in the investors and media section of our website at ars-pharma.com. Before we begin, please note that today's remarks and slide presentation 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, everybody, and thank you for joining us to discuss what has been a pivotal quarter for ARS Pharma, driven by the continued momentum of NAFI in the U.S. and around the world. Third quarter marks a true inflection point for our business. As you can see on slide three, U.S. net product revenue for NEFI grew again quarter over quarter, reaching $31.3 million in Q3, representing a 2.5-fold increase from the prior quarter and exceeding consensus expectations of $28.3 million. This change reflects a strong growth in new patient starts and overall demand for NEFI. Surveys among NEFI users indicate that we can expect durable utilization and reoccurring refill behavior. Trends that we expect will continue to build as both coverage and awareness expand. These results show that our multifaceted commercial strategy is delivering results. Later this month, our first analysis of real-world treatment outcomes from the NEFI Experience Program will be published in the Annals of Allergy, Asthma, and Immunology, with a total of 554 patients treated. Findings show that about 9 out of 10 patients experiencing anaphylaxis were effectively treated with a single dose of NEFI, which is consistent with outcomes for epinephrine injections, where either IM injection or EpiPen require a second dose approximately 10% of the time to resolve the event. Updated results in 680 patients were highlighted in an oral presentation at ACAAI, and reinforce that NEFI delivers equivalent outcomes to injection products in real-world use. On top of a series of case reports also presented at ACAAI by independent physicians, we expect additional peer-reviewed publications in 2026 that will further validate NEFI's clinical experience with injection products. Before Eric reviews our commercialization details, there are two important topics I want to touch on today. why NEFI's revenue trajectory isn't accurately reflected in IQVIA script data. And second, what we've learned from recent market dynamics, including back-to-school seasonality. Starting with IQVIA, as we've noted before, the weekly IQVIA rapid data, which are generally available on a paid subscription basis, provide a directional view of prescription activity, but are not completely accurate and reliable measures of NEFI's true performance or market share. IQVIA data sets often exclude a number of channels that are central to our business, including certain retail, mail order, and specialty pharma volumes, as well as bulk purchases by institutions and clinics that buy directly through wholesalers. These additional sales are not accurately captured by IQVIA and are variable from week to week and thus cannot be predicted. Turning to market dynamics. During the back-to-school season, allergists and pediatricians experience a huge surge in patient visits, including checkups and sports physicals. That higher patient volume means that HCPs have significantly less time per an appointment, typically just five to seven minutes per patient, leaving little to no opportunity to discuss new treatment options or changing prescriptions. That challenge is even greater for patients who still need prior authorizations. As a result, In the second half of Q3, we saw a temporary pause in market share growth. Importantly, though, we view this as a one-time event. Looking ahead to Q4, market share growth has resumed, although we anticipate Q4 sales will decrease from Q3 given the overall epinephrine market typically declines about one-third due to seasonality and the holidays. Then as we move into 2026, we expect to return to quarter-over-quarter growth as both market share and overall prescription volumes rise in parallel. To further drive adoption and accessibility, we recently launched our new Get NEFI on Us program at the getnefi.com website. This is an important initiative designed to help patients switch to NEFI year-round with a hassle-free virtual prescriber at no cost to patients if covered by insurance. This program is anticipated to help accelerate sales growth year-round and circumvent the hectic back-to-school season. Eric will share more details, but this program removes much of the patient and physician burden in prescribing NEFI by shifting the prescription, prior authorizations if needed, and patient training to our virtual physician system. Once patients are on NEFI, Physicians can more easily manage refills electronically, or patients can return to getnefi.com to get additional renewal prescriptions. Together with our broader DTC campaign, this initiative makes it simpler than ever for patients to experience the benefits of NEFI and represents the key driver of long-term adoption. In fact, we already have proof of what hassle-free prescribing can do for NEFI sales. Your NEFI was launched in Germany in late June, where there is a more seamless prescribing experience without additional HCP paperwork. The slope of the market share capture in just the first few months has been three times higher than what we've seen in the U.S., showing just how impactful growth can be when administrative burdens are not a barrier. This is also a strong signal for our global growth trajectory. NEFI received approval in Japan in September with launch anticipated to start in the fourth quarter of 2025. We expect approvals in Canada by the first quarter of 2026 with launch expected in the first half of 2026. And we expect approval in China in the first half of 2026. We expect that as these launches begin, they will start to contribute to the total revenue and cash proceeds in the second half of next year as distribution scales across partner regions. On the clinical front, enrollment is ongoing in our Phase IIb urticaria trial, and we are on track for top-line data in the middle of 2026. This indication represents a major label expansion opportunity in a 2 million patient market in the United States. Early market research with allergists support that our nasal spray product, if approved, could be prescribed to more than 60% of all of their CSU patients, irrespective of whether those patients are on antihistamine, biologics, or combination therapy. Finally, in September, we secured an up to $250 million term loan facility, from which we drew down $100 million initially. Strategically, we chose this structure in partnership with our largest shareholder over other capital vehicles to increase commercial investment and further strengthen our balance sheet without dilution. This reflects our confidence and that of our investors in NEFI's durable cash flow profile and long-term potential. Our planned investments are geared towards expanding the current market and improving adherence and refill rates, reengaging lapsed patients and activating untreated patients, as well as converting the current $2 billion annual U.S. epinephrine market at NEFI's net price. With this financing, we ended Q3 with approximately $288 million in cash, cash equivalents, and short-term investments, giving us even more flexibility to support our evolving commercial initiatives. In summary, we're building momentum across every dimension of our business, from revenue growth and market share growth to access, real-world evidence, and global expansion, all while maintaining a strong balance sheet. I'll now turn it over to Eric to provide more detail on our U.S. commercial performance. Thanks, Rich.

The fundamentals of our commercial execution continue to strengthen, and I'm pleased to share how our strategy is translating into tangible results. Starting with revenue drivers, our 31.3 million in U.S. net product revenue reflects not only traditional retail pharmacy prescriptions captured in IQVIA data, but also institutional sales to universities and colleges. as well as retail orders from clinics and hospital networks. This quarter, we've observed modest improvements in gross-to-net retention, with cash prescriptions decreasing from about 20% to approximately 12% of total volume. By offering cash prescriptions through BlinkRx and other directly managed programs and optimizing our copay buy-down program at the point of sale, we've gained greater control, which led to favorable gross-to-net performance and improved profitability. Our DTC campaign is also delivering meaningful engagement as seen on slide four. Consumer awareness has climbed from 20% pre-campaign to 56% as of September. An intent to get NEFI remains high. Approximately 80% of surveyed patients say they are very likely or extremely likely to ask their healthcare provider about NEFI after learning about it. The early lift from the campaign aligns with benchmarks for promotionally sensitive brands. and we believe it will continue to improve as awareness grows. To accelerate greater adoption, we're excited to introduce our Get Nephi on Us initiative, which is part of our direct-to-consumer campaign. As outlined in slide five, this program was designed to simplify access to Nephi. Patients can schedule a quick virtual visit with a prescriber to get started. Once prescribed, Nephi can be shipped directly to their home or picked up at the pharmacy of their choice. typically with a zero copay for most commercially insured patients. Importantly, patients are not required to wait for their current auto-injector prescription to expire. They can transition to NEPI immediately without the need of an additional appointment with their HCP. By minimizing hassle, assisting with coverage and the prior authorization, and enabling straightforward auto-refills, this program makes it easier than ever for patients to choose NEPI and stay protected. We've incorporated the Get Neffy and Us program into all of our DTC materials, and early survey feedback shows that a majority of patients are open to using the virtual prescriber option. We believe this initiative will encourage consistent prescription switches throughout the year, extending beyond the usual back-to-school period and maintaining growth even during traditionally low-volume months. We are also seeing meaningful expansion in reach and adoption, turning to slide six To date, over 18,000 healthcare providers have prescribed NEFI, an 85% increase since August of this year, with 81% of prescriptions coming from top decile 7 through 10 prescribers. Market share amongst new prescribers is at 10.3, outpacing existing ones with the same call frequency, signaling faster uptake as new doctors benefit from refined messaging, an easier prescribing experience, and growing real-world evidence. These operational improvements are driving momentum and scaling our efforts. On the pediatric front, our ALK co-promotion has efficiently extended our reach to approximately 9,000 pediatricians, where our market share continues to grow. In addition, approximately 6,500 schools have opted into our Nephian Schools program, providing access to emergency doses at no cost. Perhaps most importantly, we're seeing early signs that NEFI is expanding the overall epinephrine market, not just taking share. We're reaching new patient segments. As seen on slide 7, amongst patients prescribed NEFI, approximately 19% were lapse patients who had stopped filling prescriptions, and 7% had never filled at all, despite being diagnosed. These patients who stayed away primarily due to needle anxiety or device complexity. In total, about a quarter of patients prescribed NEFI are from these new segments. As summarized in slide eight, patient satisfaction is remarkably high. 87% of NEFI patients report a positive impact on their daily and social lives. 95% say they are likely to refill their prescription compared to actual refill rates of around 30% for needle injectors. The current epinephrine market is valued at $2 billion annually at NEFI's net price. growing at 6% to 8% organically prior to NEFI's entry and branded promotion. And this year, we've seen year-over-year growth at 9% and year-to-date growth at 8%. As both NEFI captures share and expands the market through improved refill rates, new patient adoption, and higher devices per patient, the opportunity is significant. In summary, our U.S. launch execution is progressing well, and we are gaining momentum. We are excited about the ongoing investment in direct-to-consumer initiatives, the launch of the Get NEFI on Us program, discussions with payers, and our efforts in the field to increase market share amongst targeted HCPs. We look forward to driving growth, and our commercial infrastructure is optimized to scale sales rapidly through 2026. I'll now turn it over to Kathy to discuss our financials.

Thank you, Eric. We continue to maintain a strong financial position. while investing significantly in the commercial growth of NEFI. Looking at our third quarter 2025 financial results on slide nine, starting with revenue, we recorded total revenue of $32.5 million. As we've discussed, it's important to look at U.S. net product revenue separately from collaboration and supply revenue. Our U.S. net product revenue for NEFI in Q3 was $31.3 million. representing a near 2.5-fold increase from the prior quarter. We recognized $1.1 million in supply revenue from partners during the quarter. We also earned royalties of $0.1 million from ALK related to the launch of URNEPI in Germany. In accordance with GAAP, these royalties were recorded to the financing liability on the balance sheet rather than our P&L. Turning to our operating expenses, R&D expenses for the third quarter were $2.8 million, primarily related to our ongoing Phase IIb urticaria trial and continued development expenses for NEFI. SG&A expenses were $74.8 million, reflecting our ongoing investment in our national DTC campaign and sales and marketing efforts. While SG&A spend increased with DTC expansion, these are deliberate investments designed to drive durable share growth with spend efficiency and improving quarter over quarter. We remain committed to making substantial investments in NEPI to ensure both short and long-term market share capture and brand awareness. Our gross to net retention in the third quarter was modestly higher than in the second quarter due to certain channel dynamics. Looking ahead, we expect gross to net retention to remain in the low to mid 50% range, even with the reduced $0 copay program. Net loss for the third quarter of 2025 was $51.2 million, or 52 cents per share. Lastly, as of September 30, 2025, we had cash, cash equivalents, and short-term investments of $288.2 million. In September, We secured a senior secure terminal facility with RE Capital, our largest shareholder, and Ober's Life Sciences of up to $250 million. We drew an initial $100 million from this facility, which will be used primarily to accelerate NEPI's commercial growth. The funding will also support our marketing and medical affairs initiatives to generate and disseminate real-world evidence about NEPI's effectiveness. This financing provides several strategic advantages. First, it's an attractive cost of capital at SOFR plus 5.5% with interest-only payments through September 2030, zero dilution, and terms similar to recent commercial stage deals such as Verona Pharma. Second, it comes from high-quality investors who understand our business and are aligned as long-term partners. Third, it maximizes our flexibility for commercial initiatives, including DTC campaigns and real-world evidence generation. Our current cash position is expected to be sufficient to achieve cash flow break-even without additional equity financing, while maintaining the resources needed to fully capitalize on the U.S. commercial opportunity for NEFI and benefit from the continued U.S. growth and expanding international revenue. With that, I'll pass the call back to Rich.

Thanks, Cathy. As we look ahead, we remain laser-focused on our key priorities. First, sustaining and accelerating NEFI U.S. market share growth through the fourth quarter and into 2026. Second, enabling NEFI global expansion through launches in multiple geographies across our partner network. And finally, advancing our clinical stage urticaria program towards a potential label expansion. Our momentum continues to build across every dimension of our business, and we are confident in our path towards long-term growth and profitability. Most importantly, we're executing our mission of transforming how severe allergic reactions are managed and fundamentally impacting the lives of patients, families, and caregivers. Thank you for your continued support. Operator, please open the line for questions.

Thank you. We'll now begin the Q&A session. If you'd like to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Lachlan Hanbury-Brown with William Blair.

Hey, guys. Thanks for the question and congrats on the quarter. First question is maybe just, I know there were obviously some high expectations in Q3 and would be curious to hear how these results sort of stack up to your internal expectations heading into the quarter.

Hello. Rich and team, can you please come off mute? Please remain on the line.