HLS Therapeutics Inc.

Good morning and welcome to the second quarter fiscal 2026 financial results conference call for HLS Therapeutics. At this point, I would like to turn the call over to David Mason, Investor Relations, for the introductory remarks. Please go ahead.

Good morning, everyone, and thank you for joining us today. With me on the call are Craig Millian, Chief Executive Officer, John Hanna, Chief Financial Officer, and Brian Walsh, Chief Operating Officer. Earlier this morning, we issued a news release announcing our financial results for the three and six months ended June 30, 2026. This news release, along with our MD&A and financial statements, is available on our website and on CDAR+. Please note that slides accompanying today's call can be viewed via the webcast, a link to which is available in our earnings press release and on our website on the events page. Certain matters discussed in today's conference call or answers that may be given to questions could constitute forward-looking statements. Actual results could differ materially from those anticipated. Risk factors that could affect results are detailed in the company's annual information form, which has been filed on CDAR+. During the call, we will refer to adjusted EBITDA, Adjusted EBITDA does not have any standardized meaning prescribed by IFRS. Adjusted EBITDA is defined in our press release and annual filings that are available on CDAR Plus and on our website. Please note that all financial information provided is in U.S. dollars unless otherwise specified. I would now like to turn the meeting over to Mr. Millian. Please go ahead.

Thanks, Dave.

Good morning, everyone, and thank you for joining us today. On our call today, I'll take you through our second quarter performance along with a corporate update. Brian will then follow with a closer look at each of our products. John will cover the financials in detail. And then I'll be back with a few closing thoughts before we open it up for questions. Starting with the big picture, the story of this quarter is the acceleration of our cardiovascular growth engines. Our cardiovascular portfolio delivered second quarter net sales growth of 25% year-over-year, driven by double-digit PSEPA growth, along with a strong first quarter of sales for newly launched Nalemdo. At the same time, our plosural patient base in Canada has grown sequentially for five consecutive months, including July. This is a positive sign that business is stabilizing. HLS is consistently generating cash, and with the strongest balance sheet in many years, we can invest in growing the company while also returning capital to shareholders. Now let's briefly review the second quarter financial highlights. Starting with the top line, revenue in Q2 was $14.7 million, up 3.5% year over year. The cardiovascular portfolio led the way with a 25% increase in net sales in both local and reporting currency. The SEPA net sales grew 18%, which was a slight improvement over the strong growth it had in the first quarter. And Nalemdo, in its first full quarter on the market, generated over $300,000 in net sales. This is slightly ahead of our forecast, and particularly encouraging in that meaningful private payer coverage only started to take effect late in the quarter. In addition, as we announced last week, Nalemdo has now secured reimbursement with the largest private payers in Canada and achieved the unanimous recommendation for public reimbursement from Canada's drug agency. Brian will take you through greater detail on the Nalemdo launch and the near-term catalyst on the horizon. Turning to Clozeril. In Canada, the trend we highlighted last quarter continued with consistent monthly gains in the base of patients on branded Clozeril. Net sales were down just 1% versus the second quarter of last year in both local and reporting currency, a further positive sign that the business is stabilizing. In the U.S., Q2 Clozeril net sales were down versus the prior year, and are down about 600,000 year-to-date. This is in part due to a slight decrease in demand, but also reflected a challenging year-over-year comparison, as the second quarter of last year accounted for 28% of full-year U.S. clausural sales. We expect a relatively flat year-over-year sales comparison for U.S. clausural for the second half of 2026. Adjusted EBITDA for the quarter was $4.7 million, about 10% less than prior year, similar to the Q1 decline, and in line with our expectations related to the incremental first half launch investment in Nalemdo. As we're now seeing the expected uptick in revenue growth driven by the Nalemdo launch, we expect margin expansion for our cardiovascular portfolio in the coming quarters. Even with the incremental investment to launch Nalendo, and with only one full quarter of sales, the direct brand contribution from our cardiovascular portfolio is breaking even for the year. And that brings me to capital allocation. Over the past couple of years, we set out to put HLS on a stronger financial footing, and that work is largely done. We have successfully delevered the balance sheet, reduced our interest costs, and built a business that is now consistently generating significant cash flow. Cash from operations is up 14% year to date, which reflects the operational improvements made over the past two years. With that foundation in place, our capital priorities have shifted to responsibly investing new growth opportunities and returning capital to shareholders. In June, we launched a normal course issuer bid for up to 1.5 million shares and have been active buyers since. And on the growth side, we continue to pursue business development opportunities that are consistent with our strategic focus, organizational capabilities, and financial resources. HLS is highly regarded as a potential partner in Canada based on our capabilities and customer relationships in specialty therapeutic areas. Our intent is to bring in assets at a reasonable cost that can meaningfully grow the top line are creative in the near term and allow us to more fully leverage the infrastructure we've built in Canadian specialty markets. With our balance sheet in great shape, we will remain disciplined in our approach with the capacity to act when attractive opportunities present themselves. Moving to guidance, we are reaffirming our 2026 outlook. Revenue of $56 to $60 million and adjusted EBITDA of $18.5 to $21 million. Consistent with the quarterly gating we outlined last quarter, we expect year-over-year adjusted EBITDA comps to improve in the second half of the year as the cardiovascular portfolio revenue continues to ramp. With that, let me hand things over to Brian. And before I do, you may have noticed in Dave's introduction that Brian is now our Chief Operating Officer. Brian has been an impactful leader since joining HLS three years ago as Chief Commercial Officer. In his expanded role, Brian will continue to lead our commercial organization and will also oversee our field medical and patient support functions, creating even stronger alignment at the field and customer level. Brian, over to you.

Thanks, Craig. Good morning, everyone. I'll take you through the portfolio this morning, starting with our cardiovascular growth drivers, the SEPA and the LEMDO, then Clozeril in Canada and the US. Starting with Wasipa, net sales grew 18% in Q2 year-over-year and units grew 16%. Year-to-date, net sales grew 14% and units grew 17%. That's our second consecutive quarter of double-digit growth, reflecting the changes we made to the cardiovascular sales team in 2025. Prescriber breadth and depth both continue to track positively meaning we are expanding a writer base, not just deepening it, and payer mix remains stable, supporting brand profitability. With patent protection through the late 2030s, the SIPA remains a durable growth driver in its seventh year on the market, and will become an increasingly meaningful contributor to margin going forward. Now to Nalemdo, which completed its first full quarter on the market. Net sales were ahead of forecast, with wholesaler reorders continuing and the weekly ex-factory run rate strengthening as the quarter progressed. I've shared previously the enthusiasm that prescribers across Canada have shown for Nalemdo. Many reported having created lists of their patients that they pre-identified for this therapy. In Q2, we witnessed this excitement translate to action, where at the end of Q2, prescribers had started nearly 1,200 new patients on Nalemdo as measured by new-to-brand RX, or NBRX. For comparison, this is about three and a half times greater than where Vesipa was at the same point in its launch. What makes these early results especially encouraging is that most of the quarter was ahead of the full private coverage now coming into effect in Q3. On that front, private payer access is running ahead of our plan. As we announced on August 5th, we have now secured reimbursement with the largest private payers in Canada, representing approximately 80% of privately insured Canadians. The vast majority of these patients can now access Nalemdo as a full benefit without restrictions. Several of these agreements are already in effect, with the remainder taking effect during the third quarter. On the public side, also announced, Canada's drug agency has finalized its reimbursement recommendation for Nalemdo, with its expert committee voting unanimously to recommend reimbursement by participating public drug plans. This opens the window for us to begin negotiations with the Pan-Canadian Pharmaceutical Alliance for product listings. We intend to commence these negotiations later this year, keeping us on track for initial provincial listings in the first half of 2027. And on Nexilzet, the fixed-dose combination, we remain on track for a health counter decision by year end with launch to follow in the first half of 2027. As we have described, Nalemdo is a differentiated new entity, benfidoic acid, and it establishes the foundation. Once approved, Nexilzet, which combines benfidoic acid with a commonly used lipid-lowering drug azetamide, will bring the combined benefits of both medicines to patients in one daily pill. Nexilzet potentially gives us another important growth catalyst within 12 months. Turning now to Clozarel in Canada, our national patient-based has now grown for five consecutive months through July, and that growth is broad-based. Ontario puts in sequential gains in each of those months, and in Western Canada, we saw double-digit patient growth in British Columbia versus last year, and growth rates accelerating in both Alberta and Saskatchewan. The fundamentals are intact. The brand continues to hold about a 50% market share, and Clauseril remains a strong, stable cash contributor. For Clauseril in the US, as Craig noted, The year-over-year decline primarily reflects a comparably large Q2 last year. The timing of the July 4th holiday last year pulled some ordering into June, contributing to the outsized comparable. This remains a high-margin cash-generating business, and we continue to look for ways to maintain patient volumes and expand the specialty pharmacy program. With that, I'll turn it over to John for a detailed look at our financials. John?

Thank you, Brian, and good morning, everyone. In my section, I'll review Q2 results, the balance sheet, and our capital allocation priorities. My comments are all in US dollars, as per our reported numbers, unless otherwise noted. Starting with revenue, total revenue for Q2 was $14.7 million, up 3.5% from Q2 last year, and up 2.8% year-to-date. The increase was driven by our CV portfolio, which, as Craig mentioned, grew 25% in Q2 in local currency, reflecting continued growth in VSIPA and the first full quarter of net sales from Nalendo. Clauserol net sales in Canada were down just 1% in local currency versus Q2 last year, a significant improvement from Q1 comparables. Basural net sales in the U.S. were $3 million compared to $3.5 million in Q2 last year and were impacted by the factors discussed by Craig and Brian earlier. Finally, royalty revenue was $205,000 in Q2 compared to $148,000 in Q2 last year. Cost of sales in Q2 was up 14% compared to Q2 last year and up 13% year-to-date with the increases due to demand growth in VSIPA and initial sales of Nalemdo. On the expense side, Q2 operating expenses, comprising sales and marketing, medical, regulatory, and patient support, as well as G&A, were $7.2 million, up 10% compared to Q2 last year. Year-to-date operating expenses were up 8%. The increases reflect our investment in Nalemdo launch. Q2 adjusted EBITDA was $4.7 million compared to $5.2 million in Q2 last year. Adjusted EBITDA was impacted by the Nalemdo launch investment as just described. As we have discussed, we expect margins to improve for the second half of the year as Nalemdo revenue ramps. There is generally seasonal variation by quarter in adjusted EBITDA, as those of you on the webcast can see on this slide. We expect a similar pattern in 2026 with a first half dip followed by improving adjusted EBITDA in the second half. Looking past the quarterly variation, since 2024, adjusted EBITDA margin excluding royalty revenue on a trailing 12-month basis has increased from 20% to 32%. This reflects the operational improvements we've made as well as growth in our CV portfolio. For Q2, the direct brand contribution from Clauseril to adjusted EBITDA was $6.7 million. For the year-to-date period, the direct brand contribution was $12.4 million. Turning to the cardiovascular portfolio, even with additional launch expenses, the direct brand contribution was breakeven in both the Q2 and year-to-date periods. Cash from operations in Q2 was $2.9 million, compared to $4.6 million in Q2 last year, While year-to-date, cash from operations was $9.3 million compared to $8.1 million, up 14%. The year-to-date increase reflects the operational improvements made over the last two years, along with significantly lower interest expense. Interest was $1.3 million year-to-date compared to $3.1 million in the same period last year, the result of our 2025 credit agreement and a lower debt balance overall. This next slide highlights our cash generation. We can start by taking adjusted EBITDA as a useful proxy for cash flow over time. From that, we first deduct royalty revenue, which is not core to our ongoing business, and then deduct net interest paid. What is left, shown in the bars, is a view of the capital we have available to allocate on a trailing 12-month basis. Excluding royalty matters here, because at the start of this period, royalties were contributing more than 9 million a year to adjusted EBITDA. The dotted line shows trailing 12-month interest paid over the same period. Two things are happening at once. Our net interest paid has fallen from as high as 8.8 million in 2024 to 3.2 million, reflecting the debt we have repaid and the improved terms of our 2025 credit agreement. At the same time, we stripped out considerable sales and marketing expense while still growing the underlying business. Put that all together and what the core business generates after servicing interest on our debt has grown from $2.3 million at the beginning of 2024 to $14.7 million at the end of Q2 this year. That combination is funding the capital priorities I'll turn to next. As Craig outlined, with the balance sheet work largely complete, our capital allocation priorities have shifted. Let me take each in turn First, investing in growth. We have the flexibility to pursue business development opportunities that meet the goals Craig outlined earlier. And we are well positioned to act when the right opportunity presents itself. Second, returning capital to shareholders. In June, we launched a normal course issuer bid, allowing us to purchase up to 1.5 million common shares. And we have been active purchasers under the bid since inception. Through to July 31st, We have repurchased approximately 340,000 shares, returning 1.4 million Canadian to shareholders. We believe our shares represent compelling value at current prices, and the NCIB provides a flexible vehicle for returning capital as our cash flow allows. Third, on debt, the heavy lifting of de-levering is behind us. In Q2, we made a principal repayment of $1.1 million. At June 30, 2026, the principal balance on our term loan stood at $42.2 million, down 16% from the end of 2025. And net debt stood at $28.5 million, down 26% from the end of 2025. Taken together, our leverage ratio has declined significantly over the past two years. This is the strongest balance sheet position we've been in for years and is what gives us the flexibility Craig described. Going forward, debt will continue to decline through scheduled amortization with any additional payments made at our discretion. Finally, looking at balance sheet, cash was $13.7 million at quarter end, up from $11.7 million at the end of 2025. I would note that provisions rose to $14.6 million at the end of Q2. As a reminder, one of our largest provincial rebates settles only once a year, typically in Q3. So we see a cyclical trend whereby provisions rise for three quarters and then drop back when the annual rebate is settled. In summary, the business is generating cash to fund both of our capital priorities simultaneously, while debt continues to decline through scheduled prepayments. We are well positioned to act on the right business development opportunities as they arise. And with that, I'll pass it back to Craig for his closing comments.

Thanks, John.

Before we open it up to Q&A, three quick thoughts on the quarter and where we're headed. First, HLS is a fundamentally stronger company than at any time in my tenure. The de-levering work we set out to do is largely accomplished. We have our strongest balance sheet in years, and with consistent cash generation, we've begun returning capital to shareholders through a buyback. Second, the growth engine is starting to deliver. The cardiovascular portfolio grew approximately 25% this quarter. The SEPA is sustaining double-digit growth. Nalemdo is ahead of plan with payer coverage expanding. And in Canada, the clavicle patient base is growing once again. And third, several catalysts are ahead of us. Private coverage for Nalemdo continues to ramp. With a favorable CDA recommendation, we will begin to pursue public reimbursement. And Nexoset remains on track for a Health Canada decision by year end, followed by a first half 2027 launch. In addition, we have the resources to act on business development opportunities that fit our criteria. Our goal is to build scale in the coming years, both organically and through disciplined business development. This will increase operating leverage, broaden reach with our customers, and create greater value for shareholders. That concludes my prepared remarks and we look forward to keeping you updated on our progress. At this point, I'll ask our operator to please provide instructions for asking a question.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the two. And if you are using a speakerphone, please lift the handset before pressing any key. First question comes from Michael Freeman with Raymond James. Please go ahead.

Hey, good morning, Craig, John, Brian, and congratulations, Brian, on your new role. My first question here is on the SEPA. I'm really encouraged to see this return to growth. I wonder if you could describe any of the ingredients involved in this and perhaps the contribution of sales inquiries into docs for the purpose of advertising or showing them a lendo while also having to seep it in the bag.

Thanks, Mike, for the question.

Hi, Michael. Good morning. Thank you. Yeah, great question. I think credit to the team. A lot of enthusiasm behind the Nalemba launch, but remaining focused on both products and the franchise. One of our hypotheses with extending the franchise was it creates more time in front of the customers, and we're seeing that. I'm seeing it firsthand, and our managers are reporting that back, that creating more Absolutely time for the SEPA and their interactions with customers. The Lemdo story has a very clear value proposition and they can move through that in their details and create an opportunity to stand on the benefits of the SEPA for cardiovascular reduction. We've talked in the past about how these are really synergistic in that way and that we're talking largely to the same customers about a So to the team, we're seeing that strengthening in Q2 and optimistic it continues through the rest of the year moving forward.

Yeah, and just maybe to add one additional point, I would say we've done a lot of work over the last couple years also kind of rebuilding the commercial organization. We've had some departures and some restructuring over the past couple years, and I think the strength of our portfolio and bringing in new assets has really made, I think, HLS a desired destination for a lot of really strong talent. So we've been able to recruit both at the sales rep level, at the manager level, really experienced, talented professionals with extensive experience and relationships in cardiovascular. So I think the team is as strong as it's ever been right now.

Great.

All right. Thanks very much for that. Now, looking at the guidance, it looks like there's an implied acceleration in second half EBITDA. I wonder if you could help build the bridge from here to there, talk about the growth drivers of that second half strength.

Sure. Yeah, I'll start, and then maybe, John, if I missed anything, maybe you can weigh in. I think... Obviously, we just had our first full quarter of Nalemdo in Q2, and we expect, as Brian said, we're really encouraged by the week-over-week growth in ex-factory sales. And now with private payer coverage in many respects just hitting the end of Q2 or into Q3, we have no reason to expect that acceleration not to continue. So I think generally we're holding the line on the expense side, and we expect to see Some nice growth in continued growth and accelerated growth, quite frankly, on the cardiovascular side, driven in large part by the Nalemdo RAM. We expect to continue to see the growth in the SEPA that we've seen in the first half of the year. And we're really encouraged, Michael, by the sequential growth in patients on the clodural side, which suggests that, and as we predicted, as the year goes by, we'll see increasing stabilization on the on the clausural side as well. So I think essentially managing our costs responsibly, which is what we, I think, have a pretty good track record of doing, and now starting to see that ramp in the top line, we think will deliver improved margins in the back half of the year. John, I don't know if there's anything to add there.

No, I think that's right. In the back half of the year, as compared to the first two quarters, there will be a small decrease in the OPEX as compared to the second half to the first half, but primarily driven by what Craig had already outlined.

Okay. All right. Thank you very much. Congrats on the quarter. I'm going to pass it on. Thanks, Michael. Michael.

Thank you. Next question comes from Max Shmielewski with Staple. Please go ahead.

Good morning, everyone. This is Max on for Justin. Nice quarter. Just the first question on Clozaril. I understand CSAN has historically been a pretty important tool in defending market share from generics. Can you maybe qualify what dynamics you're seeing more recently at the prescriber level as it relates to CSAN? Hi, Max. Good morning. This is Brian Walsh.

Thanks for the question. Yeah, we're seeing, as you said, CSUN is an important differentiator for the Canadian business, Health Canada Mandated Registry. Where we've seen across the country the differentiation play out, we've described previously some disruptions in Ontario, more from GPO contracts, but as a result of CSUN, the services we provide, the Pronto devices integrated as part of that program, We've seen large numbers of patients move to pharmacies where they can get branded clozarel, move to different ways to stay on the brand, and that's driven by the support that community physicians have for brand over generic because of the services and the device. Likewise, a lot of the growth in the West is driven by market share gains within the clozapine, so taking share from generics largely because of that service. We've had... Smaller whole account conversions in the West in Q2, which sets up encouraging for the rest of the year as well. And those are driven by the efforts of our team and the services that we provide on behalf of patients, again, with the devices is an important part of that.

And we find patients are incredibly sticky, unless they're forced to switch, which typically they're not, except in rare cases. You know, for example, in Quebec, we've had a really strong retention rate, and part of that is based on the resources we've brought to bear in our customer-facing model, our go-to-market model, which provides a high level of support, as well as, you know, the preference for the Pronto device in many cases, as well as the, again, the high touch that CSUN provides. So, you know, we think the suite of services that we provide around branded Clozeril, you know, has enabled us to maintain a very stable market share over an extended period of time and, you know, certainly allowed us to weather, you know, some of these temporary disruptions that happen from time to time.

That's great. Thank you.

Switching gears, can you maybe describe the current status of payer mix for Visipa and what growth you've seen in the public channel sales versus the last few quarters?

John, do you want to take that question?

Yeah, I would say the public share as we exited the last couple of quarters of 2025 was sort of in the just shade over 50% range. And as we've progressed and seen some growth in 2026, we're moving up towards the 55% range. And probably through the year, we'll stay in that high end of the 50 to 55% range.

Yeah, I would add that the rate of growth on the public side relative to private has slowed considerably. We are seeing much greater stability in terms of payer mix in those provinces where we've been on public listings for a longer period of time. So, for example, Ontario and Quebec have become quite stable, which is good for us to be able to really kind of predict our gross to net. Where we've seen some continued expansion on the public side, which is, as we expected, is the provinces where we were more recently listed. those being British Columbia and Alberta, where I think we've only been on listings for the last couple of years. So the good news is, you know, we are now, as predicted, starting to see that stabilization. I think we had expected to flatten out at about 50-50. I think, as John said, we're probably a shade beyond that, but still, you know, still within range.

Great, thank you. And just one last question. 13, almost 14 million in cash at the end of the quarter. As I understand it, somewhere in the range of 30 million in revolver capacity. So the balance sheet's been meaningfully improved. So well done on that front. As you focus on the Nalemdo launch, do you anticipate maybe a reduced focus on business development? And as a follow-up to that, with the investments you've recently made on Nalemdo, How would you expect the commercial infrastructure to need to look like with the addition of presumable additional products within cardiovascular?

Yeah, that's a good question. So I think our focus, first of all, is executing with our core assets, no question. So that's job one. In parallel, we think we have the capacity to continue to be disciplined and thoughtful in terms of how we approach business development. So we are looking at We continue to screen assets very actively and look at a lot of stuff, and they have to meet our criteria of what is sensible for us to add at this stage of our evolution. And we think there are attractive assets out there. A good example is the deal we did with Asparion on the Pembodoc acid assets. Wherever possible, we strive to leverage the infrastructure we've built in Canada, both on the cardiovascular side and on the neuropsych side, and I think even more broadly, the capabilities we have, for example, in patient support services, which in many ways are transferable across multiple high-touch therapeutic areas. So we think we've got capacity. I think on a case-by-case basis, we'll evaluate The return on investment of an expansion of infrastructure. So certainly there may come a time where, for example, in cardiovascular, if we wanted to move into different facets of cardiovascular, we might look to expand. But rest assured, it'll be well thought through and in a disciplined way with an opportunity to very quickly generate a positive return.

Wonderful. Thanks so much, guys.

Thank you. Thank you. Next question comes from David Martin from Bloombergton. Please go ahead.

Good morning. When Bacepa was first launched, if I recall correctly, a material proportion of doctors waited to prescribe the drug until there was coverage for all patients. So in other words, they're privately insured patients. They didn't prescribe for them until public reimbursement was in place. Do you expect the same with Nalando?

Hi, David. Good morning. This is Brian. It's not an either or. Obviously, with public reimbursement, it just creates a wide open access picture and makes it much easier for physicians to prescribe. I wouldn't say physicians intentionally wait, but it becomes just more nuanced for them to find those public patients. There's private patients in their practice. That's the work that our teams do with them to help identify the support we provide to our assistance program. But no question, now we have a message of very broad private access so physicians can identify at that level. And there's really not a lot of nuance beyond the surface for us on the private side where we're landed with Pretty broad coverage and no restrictions, essentially. So we're excited for that catalyst we see going into Q3 to accelerate, as Craig mentioned. But as we go into next year, we expect to achieve public listings, and that will certainly make those conversations and prescribing even easier for physicians and lift both sides at that point.

Yeah, and I think, you know, Launching the LEMDO into this market, I think in a sense there was almost more pent-up demand because this truly fits an unmet need that exists within a very prevalent existing paradigm as it relates to reducing cardiovascular risk and patients at risk requiring LDL reduction and unable to get there with the current standard of care. We know there's a lot of those patients out there. So this is a product that I think many of our physicians that we call them were eagerly anticipating this launch. And I think that bears out in terms of the pretty rapid uptake that Brian described on new to brand. I think the SIPA required a little bit more, and I've talked about this in earlier calls, a little bit more category building, so to speak, because it really is very unique in terms of what it does. And so that required, in some respects, a little bit more education in terms of exactly how to fit that in. And that's why I think we continue to see progress with the SEPA even many years in because I think the data are so robust. But it's also we're creating a treatment paradigm with the SEPA that, frankly, already existed in a sense with methadone acid.

When you say no restrictions, I know VSIPA has significant restrictions on the public payer side of things, but is that differentiated on the private payer side? In other words, did VSIPA with private payers have restrictions that you're not seeing with Nalemdo?

Yeah, exactly, Dave. We estimate about half of patients on the SEPA through our private coverage have a prior authorization to conform to the various criteria. And we, at this point, with the private access we've achieved with Nalendo, that 80% is without the need for a prior authorization. So it's a full benefit, and physicians can prescribe it without the need to do paperwork. So patients That majority of patients should be able to go to the pharmacy and fill a script, where half the patients in the SEPA would need to go through some paperwork process, which we support through our assistance program, but it is a barrier. It takes time, and the physicians are busy. It just creates a bit of that element of a bit of a barrier.

Great. And last question, if I can. The 300,000-plus of Nalemdo sales, How much of that do you think was stocking in the channel? And should we expect a dip in the second quarter?

No, we see continued growth into the quarter. The channel build stays on hand. So as we grow, they'll continue to hold more. But we're seeing this through the IQVIA data. We're seeing the pull through from actual prescriptions, the nudibrand patients. So the algorithms are pretty sophisticated at this point with the wholesalers and last mile to patients the next day. So they're not holding a lot of inventory. We're seeing this being demand driven.

Yeah, there was no heavy initial stocking. As Brian said, the stocking builds as the demand grows and the days on hand tend to be consistent. So we continue to see on a weekly basis increases in orders increasing. So, in other words, our weekly run rate in July certainly is better than June, better than May, and now we haven't even yet been able to really activate our teams around some of the new access wins that we have. So, we are looking at our internal forecast and raising them around Nalendo. We expect third quarter to be much stronger than second quarter, and then, you know, growing momentum as we head into 2027.

Okay, thanks. That's it for me. Thanks, Dan.

Thank you. The next question comes from Christopher Pugh with Canaccord. Please go ahead.

Hey, good morning. Thanks for taking my question. I'm on the line for Tanya right now. Considering it's still early, but I'm interested to hear on perhaps Are you seeing any cross-selling synergies with the SEPA for Nalemdo? And like are kind of the Salesforce leveraging existing relationships with the specialists to drive the trial of Nalemdo and any trends on perhaps dual prescriptions? Sure. This is Brian.

Thanks for the question. Exactly. And that's one of our key questions. drivers for this deal was the synergy essentially at the base of the customer between the SEPA and the phenoic acid franchise. It's almost a complete overlap with the call point, the same customer base. So we are seeing exactly that synergy you described. The SEPA, any product where you're going into year six or seven, it's a little bit more difficult to bring new information. Our teams do the best thing every day to do that and support patients. Bringing something new, exciting, creates an opportunity for more time in front of the customer. And what I've seen and what our teams have reported is the Nalemdo story is straightforward. It's a very established on that need, as Craig described. We've created an access milieu, which is very efficient and easy. And so it's creating more time for a receiver. And as we went through the quarter of Q2, despite the loss of Nalemdo, we saw you know, acceleration in new patients, new brand, new to brand patients for the SEPA. And we've seen that strong year over year growth. So those hypotheses are playing out that we have a strong foundation as a franchise to build on. And, you know, we're excited to do so with Nexel's that going into 27 as well. That's great to hear.

I just got one last question regarding the expenses. So you mentioned that you're holding the line. on the expense side. So would it be fair to say that the Q2 was perhaps like peak spend on the S&M for Lendo?

I think that is fair to say that it's likely the peak of the four quarters.

And I would say, you know, we do a lot of dynamic budgeting at HLS. So we're always looking at where we can generate the best return on any dollar we spend. And so we look across the entire portfolio. So it may very well be where we're generating growth with the LEMDO. We might increase some investment there, but we'll look at other areas that we might be able to find some savings. So that's a dynamic process. But on net, we're looking obviously to make sure we're maintaining our profitability.

As John mentioned. Okay, that's it for me. Thanks. Thank you.

Thank you. We have no further questions. I will turn the call back over to Craig Millian for closing comments.

Great. Thank you. And thank you all for participating on today's call. We look forward to reporting to you on our progress in the coming quarters and speaking with you again soon. Bye, goodbye, and have a great afternoon.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.