Good day, and welcome to the ARS Pharmaceuticals Third Quarter 2024 Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Instructions will be given at that time. As a reminder, this call may be recorded. I would now like to turn the call over to Alex Straus of Investor Relations. Please go ahead.

Good morning and thank you for joining. With me on the call today are Richard Lowenthal, Co-Founder, President and CEO of ARS; Eric Karas, our Chief Commercial Office; Kathy Scott, our CFO; and Justin Chakma, our Chief Business Officer. Earlier today, we issued a press release detailing our third quarter 2024 results and recent business highlights, which can be found on our website at ars-pharma.com. For today's call, Rich will provide an overview of our recent corporate developments, Eric will provide an update on our neffy commercialization efforts, Kathy will provide a brief overview of our financial results, and the full team will join us for Q&A. During today's call, we'll be making forward-looking statements based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties and our actual results may differ materially. Please see the risk factors in our SEC filings for additional details. Now, let me turn the call over to Rich.

Thank you, Alex, and thank you to everybody dialing in today. The last several months have been transformational for ARS Pharmaceuticals with the approval of neffy 2.0 milligrams in both the United States and Europe as the first and only needle-free epinephrine product for the treatment of allergic reactions, including anaphylaxis in adults and children who weigh 30 kilograms or greater. neffy is dosed as a single 2.0 milligram spray in either nostril as soon as symptoms are recognized. A second dose can be administered in the same nostril as the first dose starting after five minutes in the absence of clinical improvement or deterioration. As seen in the U.S. FDA prescribing information, neffy has no contraindications and no box warnings. There are about 20 million patients in the United States diagnosed with a recent history of severe allergic reactions who are actively managed by healthcare providers. All of these patients are in need of a safe, effective, easy to use and easy to carry needle-free epinephrine treatment that they can use quickly and comfortably at the first signs of symptoms of the reaction. Early administration of epinephrine can lead to a better clinical outcome and improvements in daily living for patients and their caregivers and importantly, peace of mind. Our U.S. launch efforts are underway. And we are very proud of the progress made thus far. Eric will provide a summary of our initial launch progress, which we expect to continue to ramp up through the year end 2024 and into 2025. neffy became available for shipment from BlinkRx on September 23rd, and our U.S. sales force was deployed in early October, which was also when was neffy was made available more broadly at retail pharmacies. We are greatly encouraged by the strong support and enthusiasm from patients, caregivers…

Thank you, Rich. It's been about five weeks since neffy became available, and I'm excited to share some initial insights and commentary on our progress and the reactions from the allergy community so far. Since receiving approval, the team has been focused on executing our launch objectives. Increasing awareness amongst prescribers, minimizing barriers to access, obtaining coverage with payers and engaging patients and caregivers. We are also implementing peer-to-peer professional education and promotional programs to educate HCPs about neffy and our data. Just two weeks ago, as Rich mentioned, at the American College of Allergy, Asthma, and Immunology meeting in Boston, there were over 2,000 prescribers in attendance, with many visiting our exhibit booth with very positive engagement about neffy. And we supported key presentations covering neffy that reached more than 250 of the attending allergists. Our marketing team is deploying a combination of digital, in-office and print initiatives aimed at HCPs and consumer awareness, including social media, partnerships with national advocacy organizations, a significant promotional presence at national and regional medical conferences and ensuring awareness of our patient support programs to provide access and affordability. Our area sales managers, sales representatives and virtual team are focused on driving early adoption amongst our targeted high potential HCPs. The field sales team was hired in September, completed training and was in the field in early October. We immediately began outreach and initially prioritized the top 3,000 allergy specialists and high-decile prescribers. We are encouraged by the positive feedback and the enthusiasm we have received so far from this group and the wider allergy community. We firmly believe that neffy has the potential to significantly improve the lives of patients at risk of a severe allergic reaction. This involves converting patients who have a needle injector, but don't carry it, are hesitant…

Thank you, Eric. Earlier today, we reported our detailed third quarter 2024 results in our earnings press release and 10-Q filings. So I'll cover just the highlights. In the third quarter, we recorded $2.1 million in total revenue. This includes $0.6 million in net product revenue for neffy from just one week of sales as well as $1.5 million in collaboration revenue from CSL. Total operating expenses for the third quarter were $23.8 million, which reflects the initial build-out of our commercial infrastructure as well as sufficient manufacturing of neffy to ensure product supply to meet the needs of patients. Of the total OpEx, $19.3 million was in SG&A, which we expect will increase in the fourth quarter of 2024 with the onboarding of the remainder of our commercial team. For the third quarter of 2024, we reported a GAAP net loss of $19.1 million or $0.20 per share, which was primarily the result of expenses related to the launch of neffy. We ended the third quarter with $204.6 million in cash, cash equivalents and short-term investments, including the $145 million upfront payment from ALK in conjunction with the licensing agreement executed on November 11th, our ending third quarter cash would have been $349.6 million on a pro forma basis. We stand very well capitalized today with a balance sheet that we continue to expect will support our current operating plans for at least the next three years. With that, let me pass the call back over to Rich.

Thank you, Kathy. To wrap up, ARS is stronger than ever. We are thrilled with the early progress in our U.S. launch of neffy and the positive support we received from patients, caregivers, physicians and advocates, which only strengthens our confidence in its future trajectory. neffy is a transformational intranasal epinephrine product that many patients have described as a game changer. We are committed to making it accessible to all who may benefit. To that end, we are preparing to initiate an outpatient Phase 2b trial in patients with chronic spontaneous urticaria who are treated with chronic antihistamines, but still experience acute flares. These challenging and unpredictable flare-ups can include intense itching, discomfort and sometimes swelling in areas like the eyes and the lips. We believe our intranasal epinephrine technology can make a meaningful difference for the estimated 1.5 million U.S. patients living with chronic spontaneous urticaria. We expect to begin dosing patients in early 2025 with the potential to follow up with a single pivotal efficacy study after that. Congratulations again to the entire ARS team for their hard work and dedication in making neffy available to patients so quickly. 2024 has been an incredible year so far. We look forward to keeping you updated as our U.S. launch continues and as we execute the global expansion of neffy through this year and into 2025. With that, let's open up the line for questions-and-answers.

Thank you. [Operator Instructions] Please stand by while we compile the Q&A roster. And our first question coming from the line of Josh Schimmer with Cantor Fitzgerald. Your line is now open.

Great. Thanks for taking the questions. I have a few of them. If I may, first, what's your latest thinking in terms of your expectations for gross to net adjustments now that you've made your way through at least some of the negotiation processes?

Yes, Josh. Hi, this is Richard Lowenthal. So we're still -- we're still on track to what we've communicated before. We expect neffy to have a gross to net similar to other NC type products. So in the 50% range is what we're expecting and we believe we're still on target to achieve that.

Okay, got it. And then you mentioned you're comfortable that the launch is on track with internal estimates. There is a wide range of estimates out there on the Street. I'm not sure if you're comfortable providing any color or guidance for what we may expect at least in the fourth quarter.

Yes. As you know, we have not released or provided any guidance on our internal forecast. We believe we're tracking very, very well. We're very optimistic about the sales in the first six, seven weeks that we have data on now. And especially since it's hit pharmacies in the last three to four weeks, sales have started to really accelerate. So I'm still very early, but we are doing very, very well against what we expect and we don't believe that we'll disappoint people in the future on this.

All right. Great. And then two more quick questions. How should we think about contribution of inventory stocking either in the third quarter or in the fourth quarter?

The inventory stocking was actually probably smaller than one would have expected, certainly than what was out in some analyst reports. And it has to do not with neffy or not with ARS, it has to do with the distributors and the reluctance of distributors to take on too much inventory early. We see that accelerating very quickly and correcting. So we do believe though that the initial week of sales was very, very minimal because of the distributors not wanting to take a large amount of inventory right away.

Okay. And then last question on the estimate for the timing for the CSU data.

Well, CSU, so we'll be starting -- beginning of the year. We still have to discuss the protocols in late-stage development. We still need to discuss this with FDA. So we expect that we'll be able to initiate. We've been very engaged with the sites already and the investigators that will be involved who are all very, very well known. We expect the study to actually be run in the U.S. and in Germany. So we'll have a very well-known investigator in Germany participating in the study. And we hope to have data by the beginning of 2026 at the very latest, maybe sooner depending on how enrollment goes. But that's our current plan and then we would initiate the Phase 3 quickly after that.

Okay. Great. Thanks for the color.

Thank you. And our next question coming from the line of Ryan Deschner with Raymond James. Your line is now open.

Hi, there, good morning. A couple of questions from me. First, what does the current cash price versus co-pay split look like this early into the launch? And how do you see this evolving as the launch progresses? And then I have a follow-up.

Yes. So I'll refer that over to Eric as far as the split between people who are paying cash and people who are paying or any insurance coverage or full price that that we're getting. Eric, do you want to speak to that a little bit?

Of course. Good morning. We are seeing the cash redemption a little bit higher than what we expected, but we also know that there's a significant interest in this product. So what we're seeing is when patients are being submitted through BlinkRx, about a third of them are being covered without any type of additional paperwork. When the doctor's office submits a prior authorization, what we see is about a 50% to 55% success rate. And then if those patients aren't covered, we are offering the cash price to them. So as I said, we're seeing a little bit higher than what we expected, but not surprising given the interest in this product and that people want to get it.

Terrific. Thank you. And then next question. It sounds like you are receiving appreciable numbers of scripts for multiple neffy two packs. When a script is submitted with multiple two packs of neffy for a given patient, does this log as a single TRX unit or multiple units? Thanks.

It's logged as multiple units, but I believe, Eric, are we combining them for the co-pay? Is that -- you should speak to that.

Yes, we are, but if you're looking at IQVIA data, depending on what information and I know there's a lot of different ways that's reported, it could be reported as TRX, but then there's also information in there that looks at each individual like a unit and that's one device. So that takes into account if you divide that by two, how many prescriptions are actually being dispensed, which takes into account more than one unit per patient. So we are seeing that in line with our expectations of what we expected, but we often hear from physicians that patients want to have one for home. They want to have one for kind of office travel, for the kids when they go to school. So we are seeing the number of prescriptions per patient in line with our expectations.

Terrific. Thanks for the question.

Thank you. And our next question coming from the line of Roanna Ruiz with Leerink Partners. Your line is now open.

Hi, good morning, everyone. So on the neffy launch so far, can you talk a bit about the types of patients that are early adopters or users of neffy? And can you tell if these patients had already been receiving autoinjector prescriptions or are they newer allergy patients that may not have been exposed to autoinjectors yet?

Rich, do you want me to take that one?

Yes, I actually didn't hear her question for some reason, but go ahead.

Yes. From a broader perspective, it is in line with what we had projected. We are seeing the patients that have current needle injectors, about 80% to 90% of them we know are not compliant. So we're seeing patients that are opting to obviously get something that's going to be easier to fit into their lifestyle, needle-free, non-invasive, safer. So that's probably on the higher side. But within that group, we are also seeing that parents that have children that have a food allergy are some of the early adopters. But in our data, we also see that patients that haven't had a needle injector in the past or epinephrine are also opting to have a conversation with their doctor and doctors are prescribing to those patients as well.

Got it. And in terms of the early revenues --

Operator, just so you know I cannot hear Roanna for some reason.

Oh, can you guys still hear me?

I can hear you.

Okay. I guess I'll keep going. I was curious on the preliminary revenues for the quarter. Is there any sort of evidence that you're seeing bulk orders from first responders, airlines, et cetera, like different groups that may want to see neffy and use neffy going forward? Or are you still in discussions about that? And could we see that flow through in subsequent quarters?

Sure. I can comment on that one. Specifically, to kind of the outside of the retail segment when I kind of consider more public interest, there is significant interest, especially with the companies that support -- the airliners are putting together their emergency kits. So we are in active discussions with both of the two major suppliers of those emergency kits to the airliners as well as they supply physician offices, also other public buildings, hotels, things along those lines. Very, very strong interest in the product for various reasons that the broader group here knows around the shelf life, the ability for temperature excursion, you could imagine. Sometimes the temperatures on a plane when it's sitting can be quite high. So they're very interested in the 2 milligram. They're also very interested in the 1 milligram. They see this as something that's going to be much easier, safer for a flight attendant, somebody that's not a medical professional to quickly be able to quickly be able to administer in a time of need. So I would say those conversations, those discussions are ongoing and we would see some obviously movement on that probably in the first quarter.

Okay, great. Thanks.

Thank you. And our next question coming from the line of Lachlan Hanbury-Brown with William Blair. Your line is now open.

Hey guys, thanks for taking the question. One of the things that you and others have pointed out that sort of -- could sort of slow adoption is just the doctors that you sort of want to wait and see real world experience versus just jump right in and start prescribing. So can you maybe talk about what you're seeing from that? I mean, from the over 5,000 you've reached so far, how many of them are sort of ready and willing to prescribe now versus want to wait and see a bit of real-world experience?

Yes, I'll start on that and then let Eric talk about neffy experience and what we're doing, how that's progressing. But I think especially at the American College, I think there's been a fairly dramatic shift in fact in a lot of those doctors and even some of the speakers at the meeting who in the past were a little bit on the skeptical side before FDA approval came out very much endorsing the use of neffy. And I think the reluctance is very rapidly dissipating. And certainly, we have doctors that have never had any hesitation that understand the data very well and have not been concerned at all. And those that are probably less informed are learning very quickly why -- what the basis of FDA's approval was and the rationale for the use of neffy. And also the tremendous benefits in neffy where [Technical Difficulty] which is really 90% of the battle here. You're talking about first of all, if you don't have the epinephrine with you, it's obviously not helpful. And the vast, vast majority of hospitalizations and deaths in this indication are due to people not having access to epinephrine at all. And then dosing more quickly is so critical of this disease. So I think they very quickly recognized that that's the primary benefit. And at the college, we saw a big shift. But Eric, why don't you just talk about neffy experience and where we are with that because I think that's a critical program we've kind of developed and launched in order to give the doctors that first-hand experience so that we get over that hesitancy very, very quickly.

Yes. Absolutely, Rich. I mean, there's been great interest in the program. As I mentioned in my comments about a little over 1,000 as of yesterday, it was about 1,100 allergists have enrolled in the program. So as Rich said, this really allows them to have first-hand experience and not only the product profiling within the oral food challenge clinic setting, but all the staff is trained. And then when that physician is talking to a patient about getting neffy, they can tap into the first-hand experience that they've seen in their own clinical setting. So we continue to drive that program. Our sales team is very focused on those physicians that have enrolled and driving prescriptions in the retail setting with those physicians. And then as Rich said, when we were at the college meeting a few weeks ago in Boston, there were several presentations with several other physicians attending where there's very, very good information shared about our PK, PD, our oral food challenge study. So I think more and more of that information is getting out there and doctors are comfortable as they see that data.

Okay, great. Thanks. And I guess, you obviously got a pretty big upfront from ALK and you've said previously that you have cash to get to sort of breakeven. So I'm curious, like does that extra cash allow you to accelerate plans in any way or increase investment in the launch earlier than expected [indiscernible] sooner?

Yes, absolutely. Yes, absolutely. We had sufficient cash previously to get to a breakeven fairly comfortably based on our internal plan. But of course, with that large infusion of cash, of course, we are looking now at opportunities to accelerate the launch and especially our direct-to-consumer approach. And again, we have certain key triggers for that. We can speak about some of those later, but certainly, we're seeing that progress very, very well. And once we start to achieve some of those triggers, we have the cash now to accelerate our plans by many months moving things ahead. And I think that's really a key factor of the deal and the fact that the cash infusion was -- wasn't addressed any possible needs we could have going forward.

All right. Thanks. I guess if I could just quickly squeeze another one. Is that upfront expected to be booked as revenue in the fourth quarter?

So the majority of it, but Kathy, do you want to explain it's a very complicated handling of that kind of cash. So you want to maybe just give your two cents on that?

Sure. So while we'll receive the $145 million upfront and actually expect to receive the funds this week, we do expect to recognize the revenue over time. As Rich said, it is complicated. There are certain performance obligations embedded into the licensing agreement. We're very confident that we'll complete all those performance obligations and the upfront payment is non-refundable. But per GAAP accounting, we need to allocate a portion of the value of the contract to each performance obligation separately and recognize that portion of the $145 million at the time such obligation is fulfilled. And so we're working on the technical accounting now and we'll have additional disclosures when our 10-K is filed in March next year.

And we really can't give you a better answer because it requires some serious expertise to figure this out from the tax law.

Yes. No problem. Completely understand that. Thank you.

Thank you. And ladies and gentlemen, at this time, we have no further questions in the queue. This will conclude today's conference call. Thank you for your participation. And you may now disconnect.