ARS Pharmaceuticals - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 delivered accelerating commercial traction: total revenue $15.72M, including $12.80M U.S. neffy net product revenue; net loss $(44.88)M, or $(0.46) EPS.
• Commercial coverage reached 93% (57% without prior authorization) and gross-to-net retention reached steady-state ~50% (52% in Q2), setting the base for more predictable modeling; weekly neffy two-pack volume rose ~180% from end-Q1 to end-Q2.
• Demand catalysts in place for 2H25: national DTC campaign (launched in phases mid-May/July) lifted aided awareness from ~20% to 49%; pediatric 1 mg dose available since early May; ALK co-promote expanded reach to ~55% of epinephrine Rx base.
• Ex-U.S. ramp progressing: EURneffy launched in Germany (June) and approved in the U.K. (July), triggering a $5M milestone (of which $2.6M recognized in Q2 revenue).
• S&P Global consensus for revenue/EPS was unavailable at time of analysis; estimate comparisons omitted; expect Street to revise upward neffy growth trajectory given coverage/DTC tailwinds and unit trends [GetEstimates returned no data for Q1–Q2 2025].

What Went Well and What Went Wrong

What Went Well

• Coverage and access inflected: “93% commercial coverage…57% without prior authorization…approval rates at PBMs comparable to overall epinephrine market”; GTN reached steady-state ~50% (52% in Q2).
• Demand building ahead of peak season: weekly two-pack volumes +~180% from end-Q1 to end-Q2; 9,700+ HCPs have prescribed (+73% vs April), with ~70% from highest deciles.
• Global expansion milestones: EURneffy launched in Germany (June) and approved in the U.K. (July), supporting ex-U.S. partner momentum and adding milestone revenue.

What Went Wrong

• Heavy OpEx as company leans into launch: SG&A $54.31M in Q2 (driven by national DTC and broader commercial build); net loss widened to $(44.88)M, EPS $(0.46).
• One-time inventory reserve increased COGS; CFO noted it is not expected to recur (but it weighed on Q2 gross profit).
• Estimates transparency gap: S&P Global consensus unavailable for Q2/Q1, limiting external beat/miss framing at this stage [GetEstimates returned no data for Q1–Q2 2025].

Transcript

Speaker 6

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

Speaker 4

Good morning and thank you for joining our second quarter 2025 earnings conference call. This morning, we issued a press release detailing our financial results and commercial highlights, which is available in the Investors 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 Karas, our Chief Commercial Officer, will cover our commercial activities and progress, and Kathleen 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 earnings release and SEC filings for further risk disclosures. With that, I'll turn the call over to Rich.

Speaker 1

Thank you, Justin. Good morning, everybody, and thank you for joining us to discuss our commercial momentum with neffy in the second quarter of this year and early weeks of the third quarter. We have long believed that a needle-free, portable, and reliable epinephrine treatment option could transform how patients and providers treat severe allergies. The commercial data we will share today confirms that this vision is becoming a reality. neffy is gaining traction across prescribers, payers, and patients, which we will talk about during this presentation. Our momentum is reflected in the continued quarter-over-quarter growth in the U.S. net product revenue for neffy. In Q2, we achieved $12.8 million in net product revenue, in part driven by the availability of our 1 mg pediatric dose starting in May and steady traction we have made with payers.

With 93% commercial coverage today, neffy is accessible to the vast majority of patients with commercial insurance. Perhaps more importantly, this momentum has translated into strong and accelerating growth in neffy prescriptions, a clear indicator of demand and commercial execution. From the end of the first quarter to the end of the second quarter of 2025, we saw an increase of 180% in weekly 2-pack unit volume, which was in line with our internal expectations and consistent with analysts' forecasts. This growth is particularly encouraging as it comes before we have realized the full effects of three key important drivers. First, the rollout of our national DTC campaign, which started with targeted advertising in early June and was followed by an expansion to linear TV in July. Second, our U.S. pediatric co-promotion with ALK, which was fully deployed in late June.

Third, the peak prescribing season of late summer and early fall as parents and children head back to school. As such, we expect to see even greater growth in neffy prescriptions in the third and fourth quarters of this year. Beyond our U.S. commercialization, our partners are executing well to establish neffy as a global brand. In June, ALK successfully launched EURneffy in Germany, the first country outside the United States to have commercial access to intranasal epinephrine. In July, EURneffy was approved in the UK, which is the largest market outside the U.S. for epinephrine auto-injector sales. Looking ahead, we expect additional regulatory decisions on neffy in Canada, Australia, and Japan by the end of 2025, and in China by the first half of 2026, followed by commercial rollouts starting in the first half of next year.

We also expect approval of the 1 mg pediatric dose by the European Medical Agency in the first half of 2026, which would trigger another $5 million milestone payment from ALK. Beyond our first approved indication, we're expanding the reach of our intranasal epinephrine technology with the initiation of a randomized controlled Phase IIb clinical trial in chronic spontaneous urticaria, a life-altering condition that affects millions of people. This study is underway with sites in the U.S. and Europe, and we anticipate top-line data in the first half of 2026. Let me now turn the call over to Eric to review our U.S. commercial performance in more detail.

Speaker 0

Thank you, Rich. Starting first with physician engagement and demand, our 118-person sales organization at ARS has now reached approximately 15,000 healthcare providers. More than 9,700 of them have a dispensed prescription for neffy, with over 70% coming from the highest three deciles of prescribers. These figures reinforce the strength of our physician targeting and engagement strategy. The Nefi Experience Program, which now includes the 1 mg dose, has successfully enrolled over 2,800 allergists, and approximately 20,000 doses of both the 1 mg and 2 mg neffy have been distributed for use in offices during oral food challenges. With hundreds of uses already recorded, the real-world exposure is helping to build confidence in the effectiveness and safety of neffy. We anticipate sharing more outcomes data from this program later in the year.

Over 3,200 schools have joined our Nefi in Schools program, establishing neffy as a preferred epinephrine treatment in educational settings. With the 1 mg pediatric dose availability, participating schools can now carry both 1 mg and 2 mg doses for emergency use. Since the end of the first quarter, 14 states have updated their legislation to allow designated school employees to administer our needle-free epinephrine during emergencies. This change reflects the strong demand for neffy. The advocacy for neffy was also clearly expressed at the National Association of School Nurses conference that ARS attended in June. On the payer front, we have reached a critical inflection point with 93% commercial coverage, including in scenarios where prior authorization is submitted. Approximately 57% of commercial payers do not require PAs for patients to fill neffy. For those payers that do require a PA, healthcare professionals can now manage the process more easily.

The prior authorization approval rates for neffy with payers under the major PBMs closely align with the access levels in the overall commercial epinephrine market. For example, payers under Zinc Health Services, the group purchasing organization for CVS Caremark, account for approximately 30% of neffy dispenses, in line with the overall epinephrine market. This is despite more than three quarters of CVS Caremark members still requiring PAs. It's encouraging to note that these PAs are being approved more than 80% of the time. For patients with commercial insurance, our co-pay assistance program ensures that most individuals only pay $25, which is significantly less than the average $40 for a generic injector. Additionally, co-pay support is now automatically applied at the point of sale in 95% of pharmacies, including all of the major retail pharmacies and grocery store chains such as CVS, Walgreens, Walmart, Rite Aid, Costco, Kroger, and Publix.

With increasing fill rates, this program ensures that patients can access neffy when they need it the most. Together, these changes represent a meaningful shift from our early launch phase. Broader coverage and streamlined prescribing are enabling a more confident and seamless experience for HCPs. As neffy volume increases in the coming months, we expect additional PBMs to remove prior authorization requirements and adopt contracts that recognize the value of neffy at terms that are consistent with our 50% long-term gross-to-net retention guidance. This will further eliminate potential barriers to access for patients. Turning to consumer engagement, our direct-to-consumer campaign, Hello neffy: Goodbye Needles, is gaining traction. The campaign launched in phases, connected TV and streaming platforms began in late May and early June, followed by broadcast and linear television in July.

We've since expanded both the reach and frequency on linear TV to further increase branded awareness and encourage patients to ask for neffy by name. Since the campaign began in late Q2, aided awareness has increased significantly. In the second half of July, Kantar, a market research firm, conducted patient and caregiver surveys. The results showed that nearly 50% of respondents recognized and recalled our DTC advertisement for neffy, which is higher than the Kantar norms across approximately 150 other DTC campaigns. The branding for the neffy ad was also notably strong, with half of the respondents stating that they could not help but remember that it was for neffy. This also exceeded Kantar norms. As awareness grows, we expect a continued increase in demand for neffy over time. Historically, DTC campaigns for pharmaceuticals start to show an impact about 12 to 16 weeks after they begin.

Additionally, we know that the average consumer needs to see an ad about seven to eight times before they take action. We are confident in the feedback we've received and the expected broader impact of our DTC campaign. Lastly, we are pleased with the positive growth trajectory in the volume of neffy prescriptions. Feedback from our sales organization indicates increased adoption across all patient segments. This includes patients switching from auto-injectors, those with elapsed Rx and are returning to therapy, and new patients being prescribed epinephrine for the first time. This broad-based adoption highlights the appeal of neffy as a preferred treatment in the epinephrine market. The combination of our field execution, increased consumer awareness and demand, and a smoother prescribing experience for healthcare professionals has established a strong foundation for continued commercial growth.

I'm proud of what the team has accomplished so far and look forward to sharing more about our progress in the second half of the year. I'll now pass the call over to Kathleen Scott to walk through our financials.

Speaker 7

Thank you, Eric. We continue to maintain a strong cash position while investing significantly in the commercial growth of neffy. Starting with our revenue for the second quarter of 2025, we recorded total revenue of $15.7 million. As we go forward, it's important that we look at revenue in terms of product revenue from our core U.S. commercial efforts and then collaboration and supply revenue separately. That distinction is key as U.S. net product revenue reflects underlying demand and market penetration with neffy. The milestone and supply revenues, while important for our overall financial performance, represent one-time or partnership-related income streams. Our U.S. net product revenue for neffy in Q2 was $12.8 million, reflecting a 64% increase compared to net product revenue in the first quarter of the year.

We expect to see continued growth in product revenue as we start to recognize the impact of our DTC campaign, as well as the prescription growth and improved payer access environment that Eric described. In terms of collaboration revenue, a $5 million milestone payment from ALK was triggered related to the launch of EURneffy in Germany in June, and we generated an additional $0.3 million in supply revenue from our partners. Of the $5 million milestone, we recognized $2.6 million in revenue, and the remaining $2.4 million was recorded through the financing liability on the company's balance sheet, in accordance with the GAAP accounting treatment of our original licensing agreement with ALK. With regard to the EURneffy 1 mg dose in the EU, we anticipate EMA approval in the first half of 2026, which would trigger an additional $5 million milestone payment from ALK.

Similarly, approximately half of that $5 million would be recognized as GAAP revenue in the first quarter of 2026, and the other half would be added to the financing liability on the balance sheet. Turning to our operating expenses, R&D expenses for the second quarter were $4 million, primarily related to the initiation of our Phase IIb urticaria trial and continued clinical and development expenses for neffy. SG&A expenses were $54.3 million, reflecting our investment in a strong national DTC campaign and continued sales and marketing efforts for neffy. We remain committed to making substantial investments in the launch of neffy to ensure both short and long-term patient and physician awareness and market share capture. As a reminder, for modeling purposes, the bulk of our DTC campaign investment of approximately $50 million will be recognized in our SG&A expenses in the second and third quarters of this year.

Lastly, cost of goods sold increased from the first quarter due to higher product sales and also establishing a one-time inventory reserve for older inventory. This is not expected to recur, and COGS for neffy remains highly favorable. Another favorable aspect to our financials this quarter is the update on our gross-to-net retention. As payer coverage has improved, the trend in our gross-to-net yield has progressed as we anticipated. Our GTN retention moved from about 70% in the fourth quarter of 2024 to the mid-60% range in the first quarter of 2025, and now to the low 50% range in Q2. This progression reflects the success of our payer access strategy, with an increasing volume of patients now covered without prior authorization and therefore eligible for rebate payments under our payer contracts.

We had previously guided to a steady state gross-to-net retention of approximately 50%, which we reached in the second quarter. Looking ahead, we expect our gross-to-net retention to be maintained around this level, providing greater predictability in future revenue modeling. Lastly, on our cash position, maintaining a strong balance sheet with over three years of operating runway remains foundational to our corporate strategy, enabling us to advance our commercial efforts with focus and flexibility. We ended the second quarter of 2025 with cash, cash equivalents, and short-term investments of $240.1 million. This balance sheet strength means we are well positioned to fully capitalize on the U.S. commercial opportunity for neffy while maintaining financial discipline and resilience in a dynamic market environment. With that, I'll pass the calls back over to Rich.

Speaker 1

Thank you, Kathy. As we move into the second half of 2025, we remain focused on our top priorities. First, sustaining and accelerating market share growth through the peak back-to-school season, driven by our DTC investment in the coming weeks and months. Second, enabling neffy's global expansion through the international launches across our partner network, including in the UK later this year. Finally, advancing our urticaria program towards a potential label expansion. We are fundamentally changing the treatment of Type 1 allergies. The barriers that kept patients from carrying and using epinephrine before, including the fear of needles, device complexity, portability, and shelf life concerns, are gone with neffy, and its delivery is easy for both patients and caregivers.

Backed by neffy's growing awareness and adoption in the United States, expanding global reach, and our advancing pipeline, I believe we're well positioned to deliver both near and long-term value for our stakeholders and improve outcomes for patients worldwide. Thank you for your continued support. Operator, please open the line for questions.

Speaker 6

Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press *11 on your telephone. If your question has been answered and you wish to move yourself from the queue, please press *11 again. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Lachlan Hanbury-Brown with William Blair. Your line is open.

Speaker 3

Hey, guys. Thanks for the questions and congrats on the progress. I guess the first question would just be, can you confirm sort of the number of prescriptions written or shipped during the quarter? Second, it sounds like you're seeing encouraging progress on DTC in terms of awareness. I'm wondering if there's any early signs that you can see that this is translating into actual sort of prescribing behavior, either from doctors or patients, you know, asking for it or anything along those lines?

Speaker 1

Yeah, Lachlan. Hi, Richard Lowenthal. With regards to the number of prescriptions, you can calculate it. We have $12.8 million in net sales, and gross-to-net was roughly 52%. It's about 35,000 prescriptions in the quarter, two packs, I should say. Some prescriptions are for two or three two packs, but 35,000 two packs. That compares to 19,000 in the first quarter. With regards to the DTC campaign, the linear TV, which tends to give the greatest impact on sales, started at the beginning of July. Normally the norm in the industry is 12 to 16 weeks to start seeing significant impact from that return on investment. We are getting a lot of feedback.

Certainly, a lot of people, even just people that are trying to find a case, are mentioning the ads, the DTC campaign, and seeing the neffy carry case in the ad, and they want to know how to get it. We get a lot of feedback like that, that people are definitely seeing the ad. They're definitely acting on it. It takes a few months to get an appointment if you're a naive patient. Maybe you have an appointment scheduled, but we're hoping that that starts to translate to significant uptick in the near future. We would expect it to take 12 to 16 weeks to start seeing significant impact.

Speaker 3

Got it. Thanks. I think, Eric, you mentioned that you've seen some patients who previously lapsed prescriptions coming back in and filling prescriptions for neffy. Can you give a sense of how much, like, is that a sort of one-off patient doing that, or are you seeing a sort of consistent trend there?

Speaker 5

I can take this one. Good morning. It's still very early to kind of break all the data out. We do plan on doing a pretty extensive claims analysis in the fourth quarter end of the year. The feedback that we're hearing, and I interact quite a bit with our field team and physicians, is it really is a mix of patients that are switching. Those are those patients that are also re-engaged because now they have an option that is needle-free, easy to carry, and obviously less invasive. We're also getting patients that, to your point, are lapsed, that really opted out because of the needle. We see that kind of across the board in feedback from all physicians and what we're seeing from our field feedback as well.

Speaker 3

Got it. Thanks. I'll pop back in with you.

Speaker 6

One moment for our next question. Our next question comes from Roanna Ruiz with Blair. Your line is open.

Speaker 3

On to Roanna. Just one quick one. Congratulations on the remarkable progress in commercial coverage. Just one on that. With CVS Caremark requiring the prior authorization for subpayers under Zinc, what's the realistic ceiling for coverage without prior authorization? Would you be able to quantify the revenue impact of moving that remaining Zinc portion over the full budget?

Speaker 1

I'm not sure. Sorry, Mazi, I'm not sure exactly what you're asking with regards to the ceiling.

Speaker 3

Do you expect that 93% is the peak, or do you think that there's still room to grow in terms of commercial coverage?

Speaker 1

Yeah, so hopefully I'm answering your question correctly. About 25% of the companies under CVS, under Caremark, are covering neffy without prior authorization, right? The rest are requiring a prior authorization, but there are no companies within the Zinc network that are blocking neffy or require any kind of medical exception. What's happening is as we're getting better and better coverage without prior authorizations, it frees up doctors to write those prior authorizations for those companies that are still remaining. We haven't really seen any signs of a ceiling. The prior authorizations are staying fairly steady, but they're concentrating towards the companies that are not covering without prior authorization yet, that don't have it on open access. That's where we're at at the moment. I'm not sure if that answers your question exactly or not, but hopefully.

Speaker 3

No, that's exactly right. Thank you for that.

Speaker 1

Okay, great. Thank you.

Speaker 6

One moment for our next question. Our next question comes from Andreas Argyrides with Oppenheimer. Your line is open.

Speaker 2

All right, good morning and congrats on the quarter, guys. I'll try to keep it to one question here. We're seeing strong growth in weekly scripts. Which of the many levers do you see driving the inflection point in the second half of the year? Maybe one follow-up.

Speaker 1

The DTC campaign, Andreas, is going to be a major driver. We also, as we mentioned in our talk, expanded the sales force with the partnership with ALK. They're focused on the pediatricians, the ones that are prescribing. We think that will help dramatically. It's adding 10% reach to our current market force, about 55% overall. We think those are really the major drivers. Seasonality we mentioned, but that's kind of routine and that's going to happen regardless. There's just an increase in the overall number of scripts over the summertime. What we think are the big drivers are the DTC campaign to start raising awareness, not only among patients and caregivers, but among physicians too. Even the physicians that we don't reach hopefully will see these ads and realize there's a new product and research it. Obviously, that sales force expansion.

We'll continue to evaluate things as we go forward as to what else we can do. Given our cash position, we have a lot of flexibility, and we'll continue to evaluate things as we go forward.

Speaker 2

All right, can you, along the lines of the DTC, remind us how long you plan to have the campaign last? One more on back-to-school. How are you seeing the impact on scripts from the back-to-school season? Any thinking, along the same lines, any thoughts around patients getting multiple packs in these types of back-to-school periods for the year as they kind of, given the ease of use and the multiple areas, the car, the house, et cetera. Any thoughts around that?

Speaker 1

Yeah, with the DTC campaign, first of all, we're budgeted. We're actually looking at possibly even adding more to the budget for this year, and then we're budgeted for next year. We anticipate that continuing at a similar pace, with the exception of some seasonality around holidays and things, we may slow down, but certainly at a similar pace to what you're seeing now, and we would continue that through 2026. We're continually assessing that, and as we start seeing impact and we get data back on the effectiveness of our DTC campaign, we have some very good companies that we use to collect data on that. We'll obviously concentrate our efforts in those channels that are most effective and then also potentially increase the budget overall. We do want to do that assessment over time, and it's pretty typical at this stage. Sorry, what is your the multiple packs?

We are seeing a lot of orders coming in for two or three packs of neffy, two packs. Certainly with the case ordering as well, we're seeing a lot of people asking for two or three cases. We think that is a good sign that people are looking to get multiple packs of neffy. I don't know, Eric, if we have any statistics on that, or we're just still at the early stage of that. One other thing, Andreas, as we've talked about in the past, a lot of people who are in a cash-based situation would buy a pack very easily, but then once they get insurance coverage or they meet their deductibles, they seem to be coming back to get more packs. Eric, do you have anything to add to that?

Speaker 5

Yeah, Andreas, we track kind of these numbers, and I can tell you that what we're seeing in terms of number of cartons, devices per patient for that initial prescription is slightly higher than what we've seen previously in the market. These are things that we continue to drive our field teams to the points you made, especially with kids. Parents want the kids to have one with them at all times. They want to have one in the house just in case. As Rich said, we are seeing multiple packs. It's messaging that we'll continue to drive. There are a lot of programs too that we're doing through Nefi Connect. Also, even at the point of purchase, if a patient goes in and is covered, one thing that we updated a few months back was that we'll just charge one copay, the $25, for multiple cartons.

We see this as an opportunity to drive that even higher in the months to come. Definitely, a really nice increase that we're seeing over the last couple of weeks and months in terms of the number of cartons per prescription.

Speaker 3

Congrats on all the progress, guys. I'll jump back.

Speaker 6

Again, ladies and gentlemen, if you have a question or a comment at this time, please press *11 on your telephone. One moment for our next question. Our next question comes from Ryan Deschner with Raymond James. Your line is open.

Speaker 5

Thanks, and congratulations on the quarter and the script growth. I wanted to ask, how are you thinking about the timeline for feeling the full impact of the DTC campaign ramp, expanded reach from the ALK promotion, and availability of the 1 mg neffy? Do you feel like these factors have come online quickly enough to fully take advantage of the August epinephrine peak? Will these factors still be in enough of an acceleration mode to potentially even sustain quarter-on-quarter growth in fourth quarter despite seasonality?

Speaker 1

Yeah, Ryan, I'll start out on that. The typical norm is 12 to 16 weeks, but we do know that because of the August-September peak, we would expect that awareness we're seeing to have an impact during that period because people have already had their appointments scheduled. A lot of the delay and the impact of DTC is people have to see the ad multiple times. They have to think about it, do their research, and act on it. When they do that, especially in the allergy market, there's around a three-month waiting list to get an appointment. Once they've seen it multiple times and decide, hey, I think I'm interested in that, they schedule an appointment. During the summer period, we do know that a lot of these, especially children, will already have their appointments pre-scheduled.

We're expecting to see a good impact, and we expect to see that this does propel us through a nice second half of the year. Sorry, what was your second question?

Speaker 5

Will these factors be enough to be in enough of an acceleration mode to sustain quarter-on-quarter growth in fourth quarter despite that seasonality? I also wanted to ask, what would you consider the biggest indicators going forward that neffy is starting to make or starting to take meaningful bites out of the larger blue-sky market that doesn't regularly carry or use epinephrine?

Speaker 1

Yeah, right now, I think we are pretty confident about the quarter-over-quarter growth continuing. That's not in question in my mind, to answer your question. Right now, we, as Eric said, haven't done really a thorough market analysis of where all the prescriptions are coming from. Anecdotally, we know that there are a lot of people that have never had an auto-injector that have gone and purchased neffy. We even have some investors that were allergy patients that have never gotten an auto-injector because they don't like them and have gone and gotten neffy. Most of our input right now is anecdotal, but I think that there is a fairly healthy number coming from all segments. The switchers are the easier, low-hanging fruit patients that have those auto-injectors. They already are conscious about having epinephrine. They've already accepted epinephrine in general.

They just don't like to either carry or use the auto-injector, so they're switching. We do hear anecdotally that there's people coming from all segments.

Speaker 5

Got it. Thanks, Rich.

Speaker 1

As Eric said, we'll do a more thorough market analysis later this year after we get to a certain point where we have a certain market share, and then it makes sense to do that kind of work and start really dissecting where these patients are coming from.

Speaker 6

I am not showing any further questions at this time. As such, this does conclude today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.