Q3 2024 ARS Pharmaceuticals Inc Earnings Call
Speaker Change: Good day, and welcome to the ARS Pharmaceuticals 3rd Quarter 2024 Conference Call.
Speaker Change: At this time, all participants are in a listen-only mode. After the speaker's 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 Charles of Investor Relations. Please go ahead.
Alex Charles: Good morning, and thank you for joining. With me on the call today are Richard Lowenthal, co-founder, president, and CEO of ARS, Eric Karras, our Chief Commercial Officer, Kathy Scott, our CFO, and Justin Chakma, our Chief Business Officer.
Alex Charles: 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.
Alex Charles: For today's call, Rich will provide an overview of our recent corporate developments.
Speaker Change: Eric will provide an update on our NFE commercialization efforts, Kathy will provide a brief overview of our financial results, and the full team will join us for Q&A.
Speaker Change: During today's call, we'll be making forward-looking statements based on our current expectations and beliefs.
Speaker Change: 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.
Rich: Thank you, Alex, and thank you to everybody dialing in today.
The last several months have been transformational for ARS Pharmaceuticals.
Rich: With the approval of nephi 2 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.
Rich: NEFI is dosed as a single 2 mg 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.
Rich: As seen in the U.S. FDA prescribing information, NEFI has no contraindications and no box warnings.
Rich: 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.
Rich: 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.
Rich: 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.
Rich: 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 2024 and into 2025.
Rich: Nephi became available for shipment from BlinkRx on September 23rd, and our US sales force was deployed in early October, which was also when Nephi was made available more broadly at retail pharmacies.
Rich: We are greatly encouraged by the strong support and enthusiasm from patients, caregivers, and advocates, as well as positive feedback from our discussions with payers and the early interest shown by the medical community.
Rich: This includes notable enthusiasm from pediatricians at the recent American Academy of Pediatrics meeting where they expressed excitement about the potential for a needle-free treatment option for smaller children in the near future.
Rich: On that note, in September, we submitted a supplemental new drug application for nephi 1mg for the treatment of type 1 allergic reactions, including anaphylaxis in children who weigh only 15-30 kg or 33-66 lbs.
Rich: We just recently heard from FDA that this SNDA has been accepted for priority review with a BDUFA action date of March 6, 2025.
Rich: In addition, we are amending our EU pediatric investigational plan to adjust timelines for the post-approval commitments in Europe and plan to file for European approval for the 1 milligram in early 2025.
Rich: In Europe, we are very excited to have announced on Monday, November 11th, a strategic licensing agreement with ALK, a leading allergy-focused company with capability in 46 countries worldwide.
Rich: ALK has licensed marketing rights for NEFI for Europe, Canada, and certain geographic regions outside the United States, China, Japan, Australia, and New Zealand.
Rich: As a partner, we believe ALK has significant capabilities to work with ARS in both the conversion of the existing epinephrine auto-injector market, but also expanding the market to those severe allergy patients that are not currently protected with a community-used epinephrine product.
Rich: Finally, the cash infusion of $145 million U.S. dollars with 10 million short-term milestones gives ARS a healthy cash position of close to $350 million.
Rich: and puts us in a very strong position to accelerate our launch efforts for Nessie in the United States.
Rich: In addition, regulatory submission for approval in Australia has been filed by our partners at CSL.
Rich: And our partners in Asia are on track to complete regulatory submissions in both China and Japan in November.
Rich: Shortly after that, in December, ARS plans to file on behalf of our partner ALK in the United Kingdom and Canada.
Rich: We are rapidly expanding around the world based on significant demand for NEFI, with additional regulatory filings anticipated in 2025 to further expand its global reach. Our mission is to make sure that every person who needs NEFI can have access to it shortly.
Rich: I recently had the privilege of attending the American College of Allergy, Asthma, and Immunology, or ACAI, meeting in Boston.
Rich: There, I had the chance to connect with numerous top allergists and health care providers, and it was inspiring to hear their excitement about Mefi entering the market. Many shared positive feedback on its product profile and differentiation, as highlighted on the product labeling.
Rich: It was also rewarding to learn that patients in their offices are already asking for NEFI by name.
Rich: We are also very proud to have been able to assist during a critical time of need following the recent Hurricane Helena in North Carolina.
Rich: NEFI was approved and available just in time for that disaster, and thanks to its high temperature stability, we were able to supply 1,700 prescriptions of NEFI to the United Way of North Carolina for emergency first responders who needed it most and patients who lost their epinephrine product in the storm.
Speaker Change: I'm extremely impressed with our team's engagement with the allergy community so far, and I'm confident they'll continue working diligently to connect with healthcare providers and other key stakeholders. Let me pass the call over to Eric to walk through early launch successes.
Eric Karras: Thank you, Rich. It's been about five weeks since NEFI 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.
Eric Karras: 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
Eric Karras: We are also implementing peer-to-peer professional education and promotional programs to educate HCPs about NEFI and our data.
Speaker Change: 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 NEFI.
Speaker Change: And we supported key presentations covering NEPI that reached more than 250 of the attending allergists.
Thank you.
Speaker Change: Our marketing team is deploying a combination of digital, in-office, and print initiatives aimed at HCPs and consumer awareness.
Speaker Change: 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.
Speaker Change: Our area sales managers, sales representatives, and virtual team are focused on driving early adoption amongst our targeted high-potential HCPs.
Speaker Change: 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.
Speaker Change: We are encouraged by the positive feedback and the enthusiasm we have received so far from this group and the wider allergy community.
Speaker Change: We firmly believe that NEPI has the potential to significantly improve the lives of patients at risk of a severe allergic reaction.
Speaker Change: This involves converting patients who have a needle injector, but don't carry it, are hesitant to self-administer, or don't treat at all due to needle-related barriers.
Speaker Change: Further, we are also engaging those without treatment who are diagnosed but unprepared in the event of a serious allergic reaction.
Thank you.
Speaker Change: We have partnered with BlinkRx to create a comprehensive patient support program called DeafyConnect.
Speaker Change: NEPI Connect offers various support services to assist patients in a treatment journey. This includes convenience-saving applications, free home delivery, refill reminders, and help with navigating the formula exception and prior authorization requests.
Speaker Change: Our NEPI access initiatives have made significant strides in providing support services to HCPs and their patients.
Speaker Change: To date, our sales force has reached more than 5,700 healthcare providers and more than 1,700 physicians have already submitted prescriptions through Nepi Connect.
80% of these HCPs are in the highest SL category.
Speaker Change: We have also successfully implemented our NEPI experience program, which provides courtesy packs of NEPI to allergists who perform oral food challenges that can result in patients experiencing an anaphylactic event requiring epinephrine treatment.
Speaker Change: This important initiative allows them to gain greater confidence firsthand and build trust in NEFI as a treatment of choice for their patients.
Speaker Change: More than a thousand allergists have enrolled in the NEPI experience program in less than four weeks, which is a
Speaker Change: As discussed on previous calls, access and affordability are critical, and especially what a patient pays out of pocket. For patients with commercial insurance, we offer a copay savings program that allows individuals to pay as little as $25 for each prescription.
Speaker Change: This amount is lower than the average co-pay for a generic needle injector device.
Speaker Change: For patients who are uninsured or have a high-deductible health plan, we offer a cash price of $199.
Speaker Change: This is available through BlinkRx and GoodRx. Additionally, eligible U.S. residents who are uninsured or underinsured and meet specific criteria may qualify for our patient assistance program, which can provide NEPI at no cost.
Speaker Change: We are actively engaging in contracting and discussions with many of the key payers and we expect coverage decisions to begin in the fourth quarter of this year.
Speaker Change: This includes negotiations with the three major group purchasing organizations that service the major PBMs and insurers.
Speaker Change: We are encouraged by their interest in our product and are working diligently to secure formulary placement. We are pleased with our progress so far and we believe we are on track to achieve 60% commercial coverage within six months of our launch and more than 80% commercial coverage within a year.
Speaker Change: Additionally, we supported the efforts of the American College of Allergy, Asthma, and Immunology to develop resources for formulary appeal letters designed to help HCPs advocate for their patients.
Speaker Change: These letters aim to support access to NEPHE, particularly in cases where there are challenges related to needle anxiety and hesitancy, when the prior authorization is not approved.
Speaker Change: So far, our fourth-quarter performance of NEFI is on track with our internal projections, and we look forward to updating you on our progress during the next quarterly call.
Speaker Change: In summary, I'm proud of the dedicated, passionate, and talented team we have assembled to commercialize Nefi.
Speaker Change: We are making significant progress towards our launch objectives and goal of establishing NEFI as the treatment of choice for patients, caregivers, and healthcare providers. I'll now turn the call over to Kathy to discuss our financial results.
Kathy Scott: Thank you, Eric. Earlier today, we reported our detailed third quarter 2024 results in our earnings press release and 10-2 filings, so I'll cover just the highlights.
Kathy Scott: In the third quarter, we recorded $2.1 million in total revenue. This includes $0.6 million in net product revenue for Nepi from just one week of sales, as well as $1.5 million in collaboration revenue from CSL.
Kathy Scott: Total operating expenses for the third reflects the initial build-out of our commercial infrastructure as well as sufficient manufacturing of NEPI to ensure product supply to meet the needs of patients.
Kathy Scott: 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.
Kathy Scott: For the third quarter of 2024, we reported a gap net loss of $19.1 million, or $0.20 per share, which was primarily the result of expenses related to the launch of NEPI.
Kathy Scott: We ended the third quarter with $204.6 million in cash, cash equivalents, and short-term investments.
Kathy Scott: 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.
Kathy Scott: 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.
Rich: Thank you, Cathy. To wrap up, ARS is stronger than ever. We are thrilled with the early progress in our U.S. launch of NEFI and the positive support we've received from patients, caregivers, physicians, and advocates, which only strengthens our confidence in its future trajectory.
Rich: NEFI is a transformational intranasal epinephrine product that many patients have described as a game changer.
Rich: We are committed to making it accessible to all who may benefit.
Rich: 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.
Rich: These challenging and unpredictable flare-ups can include intense itching, discomfort, and sometimes swelling in areas like the eyes and the lips.
Rich: 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.
Rich: We expect to begin dosing patients in early 2025 with the potential to follow up with a single pivotal efficacy study after that.
Speaker Change: Congratulations, again, to the entire ARS team for their hard work and dedication in making NASI available to patients so quickly.
Speaker Change: 2024 has been an incredible year so far. We look forward to keeping you updated as our US launch continues, and as we execute the global expansion of NEPI through this year and into 2025. With that, let's open up the line for questions and answers.
Speaker Change: Thank you. Ladies and gentlemen, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 11 again. Please stand by while we compile the Q&A roster.
Speaker Change: Now, first question coming from the line up. Josh Wimmer with Cancer Fitzgerald, your line is now open.
Josh Wimmer: 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?
Josh Wimmer: Yeah, Josh. Hi, this is Richard Lowenthal. So we're still we're still on track to what we've communicated before.
Josh Wimmer: Okay, got it. And then you mentioned you are 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 are comfortable providing any color or guidance for what we may expect at least in the 4th quarter.
Speaker Change: Yeah, 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.
Speaker Change: And especially since it's at pharmacies in the last three to four weeks, the sales have started to really accelerate. So 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.
Speaker Change: 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?
Speaker Change: 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 NEFI or not with ARS. It has to do with the distributors and the reluctance of distributors to take on too much inventory early.
Speaker Change: 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.
Speaker Change: Okay. And then last question, any estimate for the timing for the CSU data?
Speaker Change: 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. We're all very, very well-known.
Speaker Change: We expect the study to actually be run in the U.S. and in Germany.
Speaker Change: 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.
Speaker Change: at the very latest, maybe sooner, depending on how enrollment goes. But that's our current plan, and then we would initiate the phase three quickly after that.
Okay, great. Thanks for the color.
Thank you.
Speaker Change: And our next question coming from the line of Ryan Tushner with Raymond James, your line is now open.
Thank you.
Speaker Change: Hi there, good morning. A couple questions for 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.
Speaker Change: Yes, 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 we're getting. Eric, do you want to speak to that a little bit?
Of course.
Good morning.
Speaker Change: We are seeing the cash redemption a little bit higher than what we expected, but
Speaker Change: We also know that there's a significant interest in this product.
Speaker Change: 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.
Speaker Change: When the doctor's office submits a prior authorization what we see is about a 50 to 55 percent 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.
Speaker Change: Next question. It sounds like you were receiving appreciable numbers of scripts for multiple NEFI 2-PACs. When a script is submitted with multiple 2-PACs of NEFI for a given patient, is this logged as a single TRX unit or multiple units? Thanks.
Bye.
Speaker Change: It's logged as multiple units, but I believe, Eric, are we are we combining them for the copay? Is that you should speak to that.
Eric Karras: Yeah, 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.
Eric Karras: So, that takes into account, if you divide that by two, how many prescriptions are actually being dispensed.
Eric Karras: which takes into account the more than one unit per per patient. So we are seeing that in line with our expectations of what we expected.
Eric Karras: 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.
Perfect. Thanks for the question.
Speaker Change: Thank you. And our next question, coming from the line of Roana Ruiz with Levering Partners Ceylon is now open.
Roana Ruiz: Hi, good morning, everyone. So, on the NEFI launch so far, can you talk a bit about the types of patients that are early adopters or users of NEFI, 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?
Speaker Change: Yeah, I actually didn't hear her question for some reason, but go ahead.
Speaker Change: Yeah, 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
Speaker Change: Probably on the on the higher side, but within that group. We are also seeing that parents that have children that have a food allergy
Speaker Change: 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.
Speaker Change: Got it. And in terms of the early revenues... Operator, just so you know, I cannot hear Rowana for some reason.
Oh, can you guys still hear me?
I can hear you.
OK.
Speaker Change: I guess I'll keep going. I was curious in the preliminary revenues for the quarter.
Speaker Change: 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 NEFI and use NEFI going forward? Or are you still in discussions about that and can we see that flow through in subsequent quarters?
Speaker Change: Sure. I can comment on that one. Specifically to the outside of the retail segment, when I consider more public interest, there is significant interest, especially with the
Speaker Change: companies that support the airliners of 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
Speaker Change: physician offices, also other public buildings, hotels, things along those lines.
Speaker Change: very very strong interest in the product for various reasons that the the broader group here knows around the shelf life
the ability for temperature excursion, you can imagine.
Speaker Change: Sometimes the temperatures on a plane when it's sitting can be quite high so
Speaker Change: They're very interested in the two milligram. They're also very interested in the one 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.
Speaker Change: 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.
Speaker Change: And our next question coming from the line of Blacklin-Henbury Brown with William Blair-Yolanda Snelson.
Speaker Change: Hey guys, thanks for taking the question. One of the things that you and others have pointed out that sort of...
Speaker Change: good 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
Speaker Change: So 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?
Speaker Change: Yeah, I'll start on that and then let Eric talk about NEPHE 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.
Speaker Change: who in the past were a little bit on the skeptical side before FDA approval, came out very much endorsing the use of NEFI. And I think the reluctance is very rapidly dissipating.
Speaker Change: Um, and certainly we have doctors that have never had any hesitation that that, you know, understand the.
Speaker Change: The data very well and have not been concerned at all and those that are are probably less informed
Speaker Change: are learning very quickly what the basis of FDA's approval was and the rationale for the use of NEPHE. And also, you know, the tremendous benefits of NEPHE, which is really 90% of the battle here. You know, you're talking about...
Speaker Change: And then, and then dosing more quickly is so critical, this disease. So.
Speaker Change: I think they very quickly recognized that, that that's the primary benefit, and at the college we saw a big shift. But Eric, why don't you just talk about NESTE experience and where we are with that, because I think that's...
Speaker Change: 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.
Eric Karras: Yeah, absolutely, Rich. I mean, there's been great interest in the program as I mentioned in my comments about a little over a thousand as of yesterday was about 1,100 allergists have enrolled in the program. So as Rich said, this really allows them to have first-hand experience.
Eric Karras: 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 NEPI, you know, they can tap into the first-hand experience that they've seen in their own clinical settings. So
Eric Karras: We continue to drive that program. Our sales team is very focused on those physicians that have enrolled.
Eric Karras: 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.
Eric Karras: with several hundred physicians attending where there's very, very good information shared about our PK, PD, our oil 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.
All right, thanks, and I guess.
Speaker Change: You know, you've obviously got a pretty big upfront from ALK and you've said previously that you have cash to get to sort of break even. So I'm curious, does that extra cash allow you to accelerate plans in any way? Or increase investment in the launch earlier than expected? Bring DTC sooner?
Speaker Change: Yeah, absolutely. We had sufficient cash previously to get to a break-even fairly comfortably based on our internal plan.
Speaker Change: 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.
Speaker Change: And, again, we have certain key triggers for that. We can speak about some of those later.
Bye. Bye.
Speaker Change: 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.
Speaker Change: our plans by many months, moving things ahead. I think that's really a key factor of the deal and the fact that the cash infusion was addressed any possible needs we could have going forward.
Speaker Change: All right, thanks. I guess if I could just quickly squeeze another one. Is up front expected to be booked as revenue in the fourth quarter?
Speaker Change: The majority of it, but Cassie, 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 up front, and actually expect to receive the funds this week,
Cassie: 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.
Cassie: We're very confident that we'll complete all of 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.
Cassie: 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.
Cassie: And we really can't give you a better answer because it requires some serious expertise to figure this out from the tax law.
Yeah, no problem. I completely understand that. Thank you.
Thank you.
Speaker Change: 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.