Greetings, and welcome to the Pelthos Therapeutics Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Mike Moyer. Please go ahead.

Good morning, everyone, and welcome to the Pelthos Therapeutics Third Quarter 2025 Financial Results Conference Call. Pelthos issued a press release today announcing its financial results for the three and nine months ended September 30, 2025. A copy can be found in the Investor Relations tab on the corporate website at www.pelthos.com. Before we begin, I'd like to remind you that during today's call, statements about the company's future expectations, plans and prospects are forward-looking statements. These forward-looking statements are based on management's current expectations. These statements are neither promises nor guarantees and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from our current expectations expressed or implied by the forward-looking statements. Any such forward-looking statements may represent management's estimates as of the date of this conference call. While the company may elect to update such forward-looking statements at some point in the future, it disclaims any obligations to do so, even if subsequent events cause its views to change. As a reminder, this conference call is being recorded and will remain available for 90 days. I'd now like to turn the call over to Scott Plesha, Chief Executive Officer. Scott, you may now begin.

Thank you, Mike. Good morning, and welcome, everyone, to today's call. We're delighted to be with you today and share with you our third quarter operating results and highlights. Joining me today are Frank Knuettel, our Chief Financial Officer; and Sai Rangarao, Pelthos Therapeutics Chief Commercial Officer. To start the third quarter of 2025 marked a significant advancement in Pelthos corporate development. In the beginning of the quarter, we successfully closed both our acquisition of the Pelthos business, at which time we commenced trading on the New York Stock Exchange and a $50 million PIPE with Ligand Pharmaceuticals, Murchinson Limited and other investors to support the launch of ZELSUVMI. Shortly thereafter, that launch occurred with the introduction in mid-July of ZELSUVMI, the company's first commercial product. ZELSUVMI is a novel topical nitric oxide releasing product indicated for the treatment of molluscum contagiosum or MC, in patients one year of age and older for up to 12 weeks. ZELSUVMI is an important advancement in the treatment of MC as it's the first and only FDA-approved therapy that can be applied by parents, patients or caregivers in the home or on the go. Additionally, we are pleased to follow up the launch of ZELSUVMI with the recently announced $18 million convertible notes financing and the acquisition of Xepi. This financing funded our acquisition of XEPI and will provide additional support for the launch of ZELSUVMI. We entered into the convertible financing agreement with Ligand, Murchinson and other investors, the same lead investors that invested in July PIPE. Frank will provide more details on the convert, but I want to note that our investors' continued support show their strong confidence in the successful launch and growth metrics of ZELSUVMI and our strategy to build a portfolio of topical treatments for cutaneous infections. Xepi…

Thank you, Scott. Good morning, everyone. I'm pleased to provide details on our Q3 launch and metrics. While we are still underway in the launch, our progress to date has gone better than expected. Shipments and prescriptions are running ahead of expectations with several HCP and patients sharing their positive experiences with ZELSUVMI. Digging into the shipment and prescription details, we shipped over 4,900 units to wholesalers and close to 3,000 units to pharmacies during the third quarter. 2,716 units were prescribed of ZELSUVMI written by 1,169 unique prescribers as reported in Symphony [Indiscernible] data. We carried this growth trend into Q4 with 2,189 units prescribed for the full month of October. That represents over a 41% increase in units prescribed from October over September. In fact, with 7 weeks remaining in this quarter, we have already had more prescriptions written this quarter than in all of Q3. Our growth continued strongly through the month of October with an all-time high of 516 units dispensed during the final week. With our wholesale acquisition cost, WAC for short for ZELSUVMI at $1,950 per unit, we had an annual gross revenue run rate of approximately $52 million during that last week. Importantly, we are closely and steadily managing our channel load to make sure there is ZELSUVMI available for patients and to minimize stockouts at the wholesaler level, led by our stellar market access and trade team. We ended the quarter with approximately 4 weeks of inventory on hand throughout the distribution system. We anticipate managing inventory on hand to the level of 3 to 4 weeks for future quarters. Digging into the payer landscape, our Q3 activity does not include any payer contracts, and we have experienced favorable prior authorization approvals. This is very healthy for a noncontracted drug, which is…

Thank you, Sai. Good morning, and thank you for joining us on today's call. As a precursor, we're going to focus on the results for the third quarter of 2025 as prior periods and year-to-date results do not reflect the current operations of Pelthos. With that said, we are delighted to report $7.1 million in net product revenues in our first full quarter of commercial operations. I'll discuss our channel inventory in a moment, but this reflects the strong initial sales of ZELSUVMI following the commercial launch in mid-July. For the quarter ended September 30, 2025, our cost of goods sold was $2.3 million, which includes expenses associated with manufacturing, the supply chain, quality assurance and other costs related to customer order fulfillment. A key item here for your consideration is that it also includes the fair value step-up of the inventory, both API and finished goods on hand at the time the merger was closed. Under the terms of the agreement, Pelthos was the acquiree, which necessitated a fair value determination of the inventory, resulting in a stepped-up basis for the value of our COGS. The normalized cost of goods is a fraction of the reported amount as set forth in the adjusted cost of goods table in the press release we issued this morning. We expect to run through the finished goods inventory by the middle of 2026, after which point, we will have a couple of quarters where there will be an impact from the fair value of the API in hand at the close of the merger. After that, we will be at our normalized cost of goods value. Similarly, we're also in the process of moving towards the expected long-term costs associated with our GTNs. Our Q3 GPN was 25.3%. And to make sure we're…

Thank you, Frank. I would now like to spend a little time speaking about our recent Xepi acquisition and the legacy channel assets. As noted in the Xepi acquisition press release, we announced that we acquired the U.S. rights to market and sell Xepi. This acquisition adds a complementary dermatology product to the Pelthos portfolio anchored by ZELSUVMI. Xepi itself is a novel FDA-approved topical treatment for impetigo, which affects approximately 3 million people in the U.S. every year and is among the most common bacterial skin infections seen in pediatric offices. Under the terms of the acquisition agreement, Pelthos paid Biofrontera $3 million and Ferrer $1.2 million upfront with additional payments on the availability of commercial quantities of Xepi and the achievement of sales-based milestones. Pelthos will pay royalties on U.S. net sales of Xepi to Ferre, Ligand and the investors. Xepi is well positioned to address antimicrobial resistance in pediatric dermatology, and we believe it will provide physicians with an important alternative to first-line impetigo treatments. Offering another novel product to the pediatric and dermatology communities creates an increasingly favorable opportunity for Pelthos as it allows us to leverage our current commercial infrastructure to promote multiple innovative brands. Ultimately, we believe this is a fantastic acquisition and represents an excellent investment opportunity, marking an exciting new chapter in the Pelthos growth story. Finally, a short note on the legacy channel therapeutics programs. As background, the legacy channel programs are clinical stage drugs for the treatment of various types of pain through the modulation of NaV1.7 sodium chain. Specifically, we have one program for the systemic treatment of acute and chronic pain, one program for the treatment of eye pain and one program for the treatment of pre and postsurgical pain. These programs are not our focus, but they…

[Operator Instructions] And our first question comes from Jeff Jones with Oppenheimer.

Congrats on a fantastic start to your launch. And congrats on your first call as a public company as well. First question, I guess, you mentioned 1,169 unique prescribers at this stage. Can you comment on how many are writing multiple prescriptions? And then what portion of your target accounts does that cover? So with your current sales force, how many target accounts do you have and sort of what penetration are you looking at?

Thanks, Jeff. I appreciate the compliments to begin with. And just, I guess, first starting out our coverage right now. We're covering about 8,000 targets with our current sales structure. We mentioned an expansion that will get us up to about 10,000 or so when all is said and done. And then as far as repeat prescribing, we gave you the unique numbers for the quarter. When we look at kind of where we are right now, probably a little bit more than half, 60% have written one script, but we've seen almost just under 500 write two or three. We have some as high as 22 to 27 range, actually three doctors in that range. So there's a wide range of prescriptions written by the HCPs.

Okay. Appreciate that. With the upcoming holiday season with Thanksgiving, Christmas, how does that impact patient visits, prescriptions? How should we sort of think about that impact given, obviously, a really nice growth trend already in October?

Yes. So I think it varies by holiday. But one of the things, like for example, over like Labor Day, we did kind of grow through that a bit that week. But we do think because this is an acute medication, you have to be in office to get a prescription. We're not as dependent upon refills here. This is about new patients coming on therapy. So I do think -- we do feel that the impact of the holidays, while we're growing, could soften it a little bit because of that... When offices aren't open, it's really difficult. We just don't see as many prescriptions.

Sure, sure. Totally makes sense. Then the last question, as you just mentioned refills, the first the first set of tubes is for a 30-day coverage. Any color on how many patients are getting a refill? So is 1 patient typically 1 unit or 1.5, 2 otherwise?

Yes. So I guess the first ground on it, everything here. When you prescribe it, it's indicated for up to 12 weeks of therapy. So if you get that initial unit, that should last up to 30 days if there are 40 lesions or less. And if they use it as directed. So if you look at it and somebody required to go to the full 12 weeks, we're probably looking at 3 units. We're seeing some prescriptions. It's a small percentage, but there are a number of prescriptions that are actually going out with more than 1 unit. So obviously, they wouldn't have a refill if that was the case. And then on the refill side, you also have to think about when you're looking at the numbers and kind of calculating, you have to go back 5 to 10 weeks really to look at like where we are now to understand what's eligible. We think we're probably in about the 1.2 range right now, give or take a little bit. And we do think that could track up over time. Yes. I'd say the other thing we're hearing that this is a good news thing is that anecdotally that the HCPs and patients have been quite happy with the efficacy they're seeing. The quickness at which they're seeing resolution, just the whole experience, I guess, has been very positive across the board pretty much of what we're hearing from HCPs. So that could affect our refill rate if they're seeing really good results. But ultimately, I think that's a great thing for patients and the brand.

Our next question comes from James Molloy with Alliance Global Partners.

Congratulations on an excellent launch. Could you just walk through -- I know you mentioned the overall -- the reps overall are profitable. Could you walk through how many the reps of the 50 are currently profitable and sort of the expectations for the additional 14, how quickly for them to cover their own costs? And clearly, it seems like the product is priced correctly. Do you think there's opportunity for taking price going forward?

So I'll answer the price one first, Jim, and then I'll let Sai weigh in on the sales force and productivity. So right now, we mentioned this in our script, but we don't have any active commercial contracts. So we haven't been paying rebates. So typically, those plans, you'll have price protection clauses in there, and so we haven't. I think our goal is to be responsible on price going forward. I think we're priced at the right point right now, and we'll take responsible price increases going forward. At this point, we're not disclosing what that might look like, but it is something we can do. And without having the commercial contracts, if we do take price, and if you go above those commercial contracts, it impacts Medicaid. So that's what's good about not having the commercial contracts is it doesn't really impact the rebates at the Medicaid level. So anyways, we're going to be thoughtful about price going forward. And more to come on that, I guess. I'll pass it over to Sai.

Yes. Thanks, Scott. Thanks for the question. So when we think about our field force and the productivity analysis that we look at really on a daily to weekly basis, we're seeing some strong growth trajectory across the multitude of quarters that we have divided up around the country and the regions in specific. When we look back on the analysis week-over-week, obviously, there's performance metrics that we work towards to ensure that we're getting higher growth, higher trajectory at each territory level. As Scott mentioned in his prepared remarks, we are moving towards an expansion, which really tells us that the field force activity and the productivity at the territory level has been profitable for us going forward. So that's where we see our growth trajectory and our growth trends increasing over time based on our current footprint and the one that we intend to expand into.

Yes. And Jim, I'll add. When we went into the market initially, we wanted to get in market, see the uptake, see what the market access landscape looked like. We have had really good growth across the sales force. And really, it's an opportunity here to add these 14 reps. I mean, there are large metropolitan areas we don't have reps in like Seattle, Portland, Las Vegas, Salt Lake, St. Louis, Kansas City, Memphis. So some pretty large cities that we don't have coverage. So this is an opportunity to now invest. And the way we look at this always is we had to earn the right to do that, to have that expansion, and we feel like we have a proof of concept now that it makes sense to kind of add incrementally going forward.

Can you walk through, is there seasonality? I know you mentioned that you expect it to be a little softer when people aren't taking the office visits over the holidays. Is this sort of a back-to-school did you guys launch at a perfect time? And then would you look to sort of any thoughts on peak sales guidance? And then I have one last follow-up.

I'll take the question on seasonality. So when we look at the ICD-10 data, as Scott mentioned, that really tells us about the overall diagnosis of molluscum, there is no real kind of peak season or sort of valley that you might see over any of the quarters and in particular, any of the months. In pediatric sort of conditions, you might see a little bit more of an influx of prescription activity, like you mentioned, during back-to-school only because there's an influx right before that time frame of pediatric visits, et cetera. But from a seasonality perspective, the data does look pretty, I would say, standard and static from what we've seen as we built out our overall approach to commercialization.

Yes. And I'll add a little bit and then answer your peak revenue question, Jim. But the other thing to think about is when patients contract this disease, it could take months for them to go into the office. So somebody could have really started 4 or 5 lesions could have popped up on a child back in July, but they didn't seek care at the time. So it may not be going into now. So our thought leaders are kind of split on whether there's seasonality or even regional differences. So we think it's pretty steady throughout the year. Absent when offices are closed, again, patients are not being seen and we're an acute medication. Regarding peak revenue, we've stated publicly in the past that we're looking at a base case of $175 million peak revenue in 2028. And we're not prepared to change that at this time. We, again, while we're happy with where we are and how we've gotten out of the gate, we want to get more data before we make any adjustments. I think that's the wise thing to do.

That makes a lot of sense as well. Last question then, the Xepi acquisition, I think that makes a ton of sense. Can you walk -- are there any additional compounds you guys are seeing for potential acquisitions to bring in over the next 2 to 3 quarters to slip into the bag like Xepi?

No, I appreciate that. Xepi is a highly complementary product to ZELSUVMI in that we don't have to change our sales force. It's calling on the same targets. Our targets see a lot of Impetigo. And even some of the KOLs did our studies for ZELSUVMI that did them for Xepi. So a lot of overlap and synergy there. We'll continue to look for the right opportunities. I'll also point to the fact that we do have the rights after post-merger, we have the rights, if we'd like to pursue external general words using our NitroCil platform. It's actually a like formulation to ZELSUVMI. So that's something we're evaluating. And the rest of the NitroCil platform still sits within Ligand. So we're evaluating it. There's a lot of work done by our predecessor company around NitroCil and different indications, and those are things we're evaluating as we speak here basically.

And this now concludes our question-and-answer session. I would like to turn the floor back over to Scott Plesha for closing comments.

Great. Thank you, operator. I want to reiterate that even though it's early days, Pelthos is well positioned to capitalize on a large addressable market with the first FDA-approved at-home therapy for MC. We've built a strong foundation for the growth of ZELSUVMI and with ZEPI, a second highly synergistic product in the bag by the end of 2026. We believe there are strong growth opportunities before us. Finally, I wanted to thank the Pelthos employees for all their hard work and dedication in supporting patients, caregivers and health care providers. Thank you again for joining the call, and we look forward to updating you on our continuing progress in the future. Have a great day.

And ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.