ARS Pharmaceuticals, Inc. Q3 FY2024 earnings call

• neffy 2.0 milligrams was approved in the US and Europe for treating allergic reactions. US launch efforts are underway with sales force deployed and neffy available at retail pharmacies.
• Submitted a supplemental new drug application (sNDA) for neffy 1 milligram for children, which was accepted for priority review with a PDUFA date of March 6, 2025. Also amending EU pediatric investigational plan and planning to file for European approval of 1 milligram in early 2025.
• Entered a strategic licensing agreement with ALK for marketing rights of neffy in Europe, Canada, and certain regions. Cash position is close to $350 million after a $145 million infusion.
• Regulatory submissions ongoing in Australia, Asia (China, Japan), UK, and Canada. Planning Phase 2b trial for chronic spontaneous urticaria patients starting in early 2025.
• neffyConnect patient support program launched, offering services like home delivery and help with formulary exceptions. Positive feedback from medical conferences and patients asking for neffy by name. Assisted during Hurricane Helene by supplying neffy to emergency responders.

In the third quarter, ARS Pharmaceuticals recorded $2.1 million in total revenue. This included $0.6 million in net product revenue for neffy from one week of sales and $1.5 million in collaboration revenue from CSL. The neffy product segment contributed $0.6 million to the total revenue, which is a portion of the overall revenue for the quarter.

• Expect neffy to have a gross to net ratio in the 50% range. Launch is on track with sales accelerating.
• CSU trial to start in early 2025, with data expected by early 2026 at the latest. Potential to accelerate launch plans with additional cash from ALK deal.

• Actual results may differ materially from forward-looking statements due to certain risks and uncertainties. See risk factors in SEC filings for additional details.

Q: 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?

A: We expect neffy to have a gross to net similar to other NC type products, in the 50% range and we believe we're still on target to achieve that.

Q: Comfortable providing any color or guidance for what we may expect at least in the fourth quarter?

A: 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.

Q: How should we think about contribution of inventory stocking either in the third quarter or in the fourth quarter?

A: 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.

Q: Estimate for the timing for the CSU data?

A: 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.

Q: 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?

A: 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.

Q: 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?

A: 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.

Q: 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?

A: 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.

Q: Evidence of bulk orders from first responders, airlines, etc.?

A: 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.

Q: Doctors' willingness to prescribe now versus want to wait and see real-world experience?

A: 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. Of course, 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.

Q: Does the upfront from ALK allow to accelerate plans?

A: 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.

Q: Is that upfront expected to be booked as revenue in the fourth quarter?

A: 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.