ARS Pharmaceuticals achieves $12.8 million in Q2 net product revenue, driven by strong NEFI demand and robust DTC campaign ahead of back-to-school season.

OPERATOR - (00:02:12)

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'll now turn the call over to Justin Chakpa, Chief Business Officer. Please go ahead.

Justin Chakpa - Chief Business Officer - (00:02:30)

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 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 Peraz our Chief Commercial Officer, 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 earnings release and SEC filings for further risk disclosures. With that, I'll turn the call over to Rich.

Rich Lowenthal - (00:03:22)

Thank you Justin. Good morning everybody and thank you for joining us to discuss our commercial momentum with NEFI 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 confirm that this vision is becoming a reality. NEFI 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 US net products revenue for NEFI. In Q2 we achieved $12.8 million in net product revenue, in part driven by the availability of our 1mg pediatric dose starting in May and steady traction we have made with payers. With 93% commercial coverage today, NEFI is accessible to the vast majority of patients with commercial insurance. Perhaps more importantly, this momentum has translated into strong and accelerating growth in NEFI 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 two 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 2, our US pediatric co promotion with AOK, which was fully deployed in late June and 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 NEFI prescriptions in the third and fourth quarters of this year. Beyond our U.S. commercialization, our partners are executing well to establish Nefi as a global brand. In June, ALK successfully launched Urnefi in Germany, the first country outside the United States to have commercial access to intranasal epinephrine. In July, Urnefi was approved in the United Kingdom, which is the largest market outside the US for epinephrine auto injector sales. Looking ahead, we expect additional regulatory decisions on NEFI 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 AOK beyond our first approved indication, we're expanding the reach of our intranasal epinephrine technology with the initiation of a randomized, controlled phase 2b clinical trial in chronic spontaneous urticaria, a life altering condition that affects millions of people. This study is underway with sites in the US 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 US Commercial performance in more detail.

Eric Peraz - Chief Commercial Officer - (00:07:01)

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 NEFI, with over 70% coming from the highest 3 deciles of prescribers. These figures reinforce the strength of our physician targeting and engagement strategy. The NEFI Experience program, which now includes the 1mg dose, has successfully enrolled over 2,800 allergists and approximately 20,000 doses of both the 1mg and 2mg NEFI have been distributed for use in offices during oral food challenges. With hundreds of uses already recorded. The the real world exposure is helping to build confidence in the effectiveness and safety of nefi. 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 NEFI as a preferred epinephrine treatment in educational settings. With the 1mg 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 nefi. The advocacy for NEFI was also clearly expressed at the national association of School Nurses Conference that ARS Pharmaceuticals 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 NEFI. For those payers that do require a PA, healthcare professionals can now manage the process more easily. The prior authorization approval rates for NEFI with payers are 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 NEFI dispenses in line with the overall epinephrine market. This is despite more than 3/4 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 copay assistance program ensures that most individuals only pay $25, which is significantly less than the average $40 for a generic injector. Additionally, copay support is now automatically applied at the point of sale in 95% of pharmacies, including all 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 NEFI 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 and seamless experience for HCPs. And as NEFI volume increases in the coming months, we expect additional PBMs to remove PA requirements and adopt contracts that recognize the value of NEFI 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 Nappy, Goodbye Needles is gaining traction. The campaign launch 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, encourage patients to ask for Nefi by name. Since the campaign began in late Q2, aided awareness has increased significantly. In the second half of July, Kantor, a market research firm, conducted patient and caregiver surveys. The results showed that nearly 50% of respondents recognized and recalled our DTC advertisement for Nefi, which is higher than the Cantor norms across approximately 150 other DTC campaigns. The branding for the Nefi ad was also notably strong with half of the respondents stating that they could not help but remember that it was for Nefi. This also exceeded Kantor norms. As awareness grows, we expect a continued increase in demand for Nefi 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 Nefi 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 NESI 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 am 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 Kathy to walk through our financials.

Kathy Scott - Chief Financial Officer - (00:13:21)

Thank you Eric. We continue to maintain a strong cash position while investing significantly in the commercial growth of NEFI. 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 US Commercial efforts and then collaboration and supply revenues separately. That distinction is key as US Net product revenue reflects underlying demand and market penetration with nepe. The milestone and supply revenues, while important for our overall financial performance, represent one time or partnership related income streams. Our US net product revenue for NEFI 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 Urnefi 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 as revenue and the remaining $2.4 million was recorded to the financing liability on the company's balance sheet in accordance with the Generally Accepted Accounting Principles (GAAP) accounting treatment of our original licensing agreement with Alkal. With regard to the year NEPI 1 milligram dose in the EU, we anticipate EMA approval in the first half of 2026 which would trigger an additional 5 million milestone payments from ALK. Similarly, approximately half of that 5 million would be recognized as Generally Accepted Accounting Principles (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, RD expenses for the second quarter were 4 million, primarily related to the initiation of our Phase 2B urticaria trial and continued clinical and development expenses for NFI. SGA expenses were 54.3 million, reflecting our investment in a strong national DTC campaign and continued sales and marketing efforts for nefe. We remain committed to making substantial investments in the launch of NEFE 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 and 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 NEFI remain 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% to 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 options 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 US Commercial opportunity for NEFE while maintaining financial discipline and resilience in a dynamic market environment. With that, I'll pass the call back over to Rich.

Rich Lowenthal - (00:18:07)

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 NEFI's global expansion through the international launches across our partner network, including in the UK later this year and 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 nefi and its delivery is easy for both patients and caregivers. Backed by NEFI'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.

OPERATOR - (00:19:23)

Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star 11 on your telephone. If your question has been answered, you wish to move yourself from the queue, please press star 1 1. Again, we'll pause for a moment while we compile our Q and A roster. Our first question comes from Lachlan Henberry Brown with William Blair. Your line is open.

Lachlan Henberry Brown - (00:19:48)

Hey guys, thanks for the questions and congrats on the progress. First question which can you confirm sort of the number of prescriptions written or shipped during the quarter? And second, it sounds like you're seeing encouraging progress on DTC in terms of awareness. Wondering if there's any early signs that you can see that this is translating into actual prescribing behavior either from doctors or patients asking for it or anything along those lines.

Rich Lowenthal - (00:20:18)

Yeah, Lachlan, hi, Rich Lowenthal. So yeah, I mean, with Regards to number of prescriptions, you can calculate it. We have 12.8 million in net sales and gross-to-net was roughly 52%. So it's about 35,000 prescriptions in the quarter packs. 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, really the linear TV which tends to give the greatest impact on sales, start 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. But we are getting a lot of feedback. Certainly a lot of people, even just people that are trying to find the case are mentioning the ads, the DTC campaign and seeing the NEFI carry case in the ad and they want to know how to get it. We get a lot feedback like that that people are definitely seeing the ad, they're definitely acting on it. And again, 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. But we would expect it to take 12 to 16 weeks to start seeing significant impact.

Lachlan Henberry Brown - (00:21:55)

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

Eric Peraz - Chief Commercial Officer - (00:22:14)

Yeah, I can take this one. And good morning. So 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. But 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 patients that are also re engaged because now they have an option that is needle free, easy to carry and obviously less invasive; But we're also getting patients that, to your point, that are lapsed, that really opted out because of the needle. So we see that kind of across the board and feedback from physicians and kind of what we're seeing from our field feedback as well.

Lachlan Henberry Brown - (00:23:04)

Thanks.

OPERATOR - (00:23:07)

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

Macy - (00:23:18)

Hi. Thanks. This is Macy. I'm for Luana. Just one from us. So congratulations on the remarkable progress in commercial coverage. Just one on that. So with CVS Caremark still requiring prior authorization for some payers under Zinc. What's the realistic ceiling for coverage without prior authorization? And would you be able to quantify the revenue impact of moving that remaining Zinc portion over the 1200?

Rich Lowenthal - (00:23:46)

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

Macy - (00:23:56)

Ceiling. In terms of commercial companies, do you expect that 93% is the peak or do you think that there's still room to grow?

Rich Lowenthal - (00:24:07)

Yeah, so hopefully I'm answering your question correctly, but. So about 25% of the CVS companies under CVS, under Caremark, are covering NEFI without prior authorization and then the rest are requiring a prior authorization. But there are no companies within the Zinc Health Services network that are blocking nefi, so 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. So 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. So that's where we're at at the moment. But I'm not sure if that answers your question exactly or not, but hopeful.

Macy - (00:25:12)

No, no, actually that's exactly what I was asking. Thank you for that.

Rich Lowenthal - (00:25:15)

Okay, great. Thank you.

OPERATOR - (00:25:17)

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

Andres Agarides - (00:25:27)

All right. Good morning and congrats on the quarter, guys. I'll try to keep it to one question here. So 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 and then maybe one follow up?

Rich Lowenthal - (00:25:44)

Well, certainly 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 AOK. So 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. So we think those are really the major drivers. I mean, seasonality we mentioned, but that's kind of routine and that's going to happen regardless. I mean, there's just an increase in the overall number of scripts over the summertime. But really what we think are the big drivers of the DTC campaign to start raising awareness not only among patients and caregivers, but among physicians too. So even the physicians that we don't reach hopefully will see these ads and realize there's a new product and research it. And then obviously that sales force expansion. And 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.

Andres Agarides - (00:27:02)

All right. And then just can you along the lines of the DTC, can you remind us how long you plan to have the campaign last? And then just one more on back to school. How are you seeing the impact on Scripps from the back to school season? And any thinking and along the same lines, any thoughts around patients getting multiple packs during this back to school period for the year as they given the ease of use and the multiple areas that the car, the house, et cetera. Any thoughts around that?

Rich Lowenthal - (00:27:35)

Yeah. So 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. So we anticipate that continuing at a similar pace. You know, with 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 26. And again, we're continually assessing that. And as we start seeing impact and we get data back on the 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. But we do want to do that assessment over time and it's pretty typical at this stage. And sorry, what was your the multiple packs? Yeah, we are seeing a lot of orders coming in for two or three packs of Nefi. Two packs. And certainly with the case ordering as well, we're seeing a lot of people asking for two or three cases. And that we think is a good sign that people are looking to get multiple packs of Nefi. But I don't know, Eric, if we have any statistics on that or we're just still at the early stage of and also 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 PACs. Eric, do you have anything to add? Andreas?

Eric Peraz - Chief Commercial Officer - (00:29:32)

We track these numbers and I can tell you that what we're seeing in terms of number of of cartons devices per patient for that initial prescription is slightly higher than what we've seen previously in the market. So these are things that we continue to drive our field teams. 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. So as Rich said, we are seeing multiple paths. It's messaging that will continue to drive and there's a lot of programs too that we're doing through NEFI Connect. But 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. So again, we see this as an opportunity to drive that even higher in the months to come. But definitely significant increase that we're seeing over the last couple of weeks and months in terms of number of cartons per prescription.

Andres Agarides - (00:30:32)

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

OPERATOR - (00:30:36)

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

Ryan Deschner - (00:30:53)

Thanks. And congratulations on the quarter in 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 AOK promotion and availability of the one mg NEFI? Do you feel like these factors have come online quickly enough to take to fully take advantage of the August epinephrine peak? And will these factors still be in enough of an acceleration mode to potentially even sustain quarter on quarter growth in 4Q despite seasonality and.

Rich Lowenthal - (00:31:25)

Yeah, Ryan, so I'll start out on that. So you know the typical norm is 12 to 16 weeks. But we do know that because of the especially the August September peak and we would expect that awareness that we're seeing to have an impact right during that period because people have already had their appointments scheduled. But a lot of the delay in the impact of DTC is that people need to see the ad multiple times. They have to think about it, they do their research, they act on it. And then when they do that, especially in the allergy market, there's around a three month waiting list to get an appointment. So once they've seen it multiple times and they decide, hey, I think I'm interested in that schedule an appointment. But during the summer period we do know that a lot of these, especially children, will already have their appointments pre scheduled. So 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. So sorry, what was your second question?

Ryan Deschner - (00:32:37)

Yeah, will these factors be enough really to be in enough of an acceleration mode to sustain quarter on quarter growth in 4Q despite that seasonality? And then also wanted to ask what would you consider the biggest indicators going forward that NEFI is starting to make or take meaningful bites out of the larger blue sky market that doesn't regularly carry or use epinephrine?

Rich Lowenthal - (00:33:04)

Yeah. So right now I think we are pretty confident about the quarter over quarter growth continuing. So that's not in question in my mind. But to answer your question. Right now, as Eric said, we 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 nefi. We even have some investors that were allergy patients that have never gotten an auto-injector-injector because they don't like them and have gone and got a NEFI. So most of our input right now is anecdotal, but I think that there is a fairly healthy number coming from all segments. But the switchers are the kind of 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 and then they just don't like either carry or use the auto-injector. So they're switching. But we do hear anecdotally that there's people coming from all segments.

Ryan Deschner - (00:34:27)

Got it. Thanks Rich.

Rich Lowenthal - (00:34:30)

And as Eric said, we'll do a more thorough market analysis later this year after we get we want to 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.

OPERATOR - (00:34:50)

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