ARS Pharmaceuticals, Inc. Common Stock 2026 Q2 Earnings Call

Please go ahead. Good afternoon, and thank you for joining us.

With me on the call today is Donn Casale, President and CEO of ARS Pharmaceuticals. Kathleen Scott, our Chief Financial Officer, will join us for the Q&A session. Earlier today, we issued a press release outlining ARS Pharmaceuticals' corporate priorities and commercial highlights and detailing its financial results for the second quarter of 2026. That press release can be found in the Investors and Media section of the company's website at ars-pharma.com. Before we begin, please note that today's remarks may contain forward-looking statements and actual results may differ materially. Please refer to our press release and SEC filings for further risk disclosures. With that, I'll turn the call over to Don.

Thank you, Monique, and good afternoon, everyone. It's an absolute honor to host my first earnings call as CEO. This is a pivotal time for ARS Pharmaceuticals, and I look forward to sharing my strategic vision today, along with the corporate priorities that will drive our next chapter of growth. Over the past month, I've conducted a deep review with our commercial, clinical, and corporate teams and met with many of our investors and shareholders. Those conversations confirm both the significant market opportunity ahead and the need for a disciplined operational approach going forward. Today, I want to walk you through how I see the business, what's working, what's changing, and what to expect from ARS. What I'm outlining is more than a shift in our commercial strategy. It is a fundamental change in how we manage our business and allocate capital.

Against that backdrop, I'm laying out three strategic priorities that will guide our next phase. First, targeted provider commercial execution. We are prioritizing our resources and focus where they make the greatest immediate impact on neffy market share, the healthcare provider. Second, financial discipline. We are implementing a rigorous strategic cost optimization framework, significantly reducing SG&A expense with a focus on building a profitable neffy franchise with a predictable path to cash flow breakeven. Third, pipeline expansion, starting with chronic spontaneous urticaria or CSU. We are extending our intranasal epinephrine platform into a second large market, where we see significant opportunity to bring the first FDA-approved treatment for CSU acute flares. CSU addresses a critical unmet need and offers a compelling market expansion opportunity. Let me expand on the first strategic priority in more detail. Targeted provider commercial execution. neffy should be the standard of care in this multi-billion dollar market.

Our primary objective is to increase market share, which we believe is the best indicator of commercial success for a product like neffy. Starting this quarter, we will report on both total market share and share within our field targeted call universe so you can track our progress directly. To level set where we are today, second quarter U.S. net product revenue was $26.2 million, and total U.S. market share reached 5%, doubling from 2.5% in the same period last year. Importantly, within our field sales targeted universe, market share increased to 8%, up from 4% in the prior year quarter. Additionally, we saw over 16,000 unique neffy prescribers in the second quarter, representing more than a threefold increase from the same period last year. neffy is an acute life-saving rescue therapy.

Unlike a traditional product that a patient takes to treat a condition, neffy is prescribed, filled, and carried long before an event ever occurs. In commercial terms, this is more like a prevention-based market versus a treatment market. That distinction is critical. In a treatment market, a patient is symptomatic and actively seeks immediate relief. In prevention market, patients and providers default to the status quo unless there's a compelling reason or need to change. At launch, ARS invested heavily in broad direct consumer digital advertising. While that builds brand awareness, consumer advertising in a prevention-based market carries a high cost and does not always convert to utilization. Today, millions of patients remain inadequately protected, either because they were never offered a prescription or due to the fear or hesitation of carrying traditional needle-based injectors. That is the exact clinical gap neffy solves.

Closing the gap relies less on broad consumer awareness and far more on changing long-established provider prescribing habits. Going forward, we have an opportunity to drive market share growth with a more efficient commercial strategy, but not at the expense of revenue. We are prioritizing our investments where they deliver the highest return. Our sales team calling on high volume locations to build provider conviction office by office. Our data highlights the impact of field engagement. Where our sales team is deployed, neffy has an 8% market share compared to approximately 1% in the non-targeted universe. Growth in this market is won through repeated high-quality clinical interactions, not through a single promotional campaign or market event. On the topic of reimbursement, we will continue to aggressively work towards expanding commercial and Medicaid coverage. Securing formulary position is the first step.

Beyond that, providers must appreciate and acknowledge the clinical gap neffy fills before coverage translates into prescriptions. Building that provider conviction is our highest operational priority. Executing this strategy requires leadership that understands the nature of a prevention-based market and what it takes to change prescriber behavior. That's why I'm thrilled to welcome Meg Smith to ARS as our new Chief Commercial Officer. A dynamic commercial leader with over 25 years of executive experience, Meg brings a proven track record of combining disciplined investment with deep operational accountability. Having worked closely with Meg during my time at Dynavax, I saw firsthand her inspirational leadership and operational rigor. She brings the exact playbook needed for this market, and I'm confident she'll hit the ground running, leading this next chapter of the neffy launch. In addition to strengthening our commercial leadership, we have completed the expansion of our field sales organization.

Salesforce efforts will focus primarily on the highest value prescribers, which represents 44% of the total market opportunity. I look forward to seeing what our now fully deployed, highly motivated, and focused sales team can do going forward. Looking ahead, we expect steady market share gains over successive quarters, not an overnight spike. We are focused on driving the next phase of growth with disciplined commercial execution, clear accountability, and prudent expense management. That brings me to our second strategic priority, financial discipline and greater OPEX control. Our total revenue in the second quarter was $33.7 million, reflecting a combination of net product, collaboration, and supply revenue. Total operating expenses were $95.1 million, which included $12.8 million in cost of goods sold. As discussed, our prior commercial strategy emphasized broad consumer awareness, which was costly, resulting in an SG&A spend of approximately $77.6 million for the second quarter.

It is critical that we adjust our operating expenses to align with neffy adoption to build a durable, profitable business. To get there, we will plan and spend based on reasonable expectations and more efficient commercialization efforts. To give a clear baseline for our future runway, we've adjusted our aggregate SG&A and R&D expenses for the second half of 2026 to be in the range of $114 million to $126 million, which includes stock-based compensation of about $14 million to $16 million. As a result, total cash based SG&A and R&D expenses for the second half of 2026 are expected to be in the range of $100 million to $110 million, driven by a more than 40% reduction in cash-based SG&A expenses from the first half of 2026. Importantly, we expect this spending trend to continue throughout 2027. We believe this operational rigor is what makes our outlook predictable.

We ended the second quarter with $143.8 million in cash equivalents, and short-term investments. With that capital, alongside our revised expense base, we see a path to cash flow breakeven by the end of 2027, which would position neffy to be a foundation for long-term optionality and future value unlock for our shareholders. Part of that value unlock will come from our third strategic priority, advancing our CSU program and maximizing the opportunities with our intranasal epinephrine platform. Beyond our foundational business with neffy, we believe we possess a compelling upside with our CSU program. Personally, I'm very excited about this opportunity. To start, we previously projected a data readout from our Phase IIb trial by the end of this year.

While enrollment in the interim patient population was recently completed, the design of this trial required a patient to experience and log three separate flare episodes, treating them with placebo and varying doses of intranasal epinephrine. Given the real-world time required for patients to complete all three episodes for valid data collection, the interim readout is now expected in Q1 2027. This modest change in timeline does not change the value of this program. CSU is a meaningful market with a major unmet public health need. There are currently no FDA-approved on-demand products to manage acute CSU flares, representing a clear expansion opportunity. Epinephrine's role in rapid systemic symptom relief is well established. The challenge in the past has never been the molecule. It's been the delivery mechanism and the dose. This is where our intranasal technology changes the dynamic, delivering rapid, non-invasive relief during acute flares.

Because we can leverage our existing commercial infrastructure and overlapping targeted prescribers, this program could represent a high margin growth driver built entirely on top of our neffy foundation. We look forward to updating you in the future on this exciting program. In closing, our strategic priorities for the next phase of ARS are established, and the baseline for how we operate will be defined by discipline, provider-targeted commercial strategy, and strong financial stewardship. We believe that doing this well yields a profitable company built on durable, recurring neffy franchise with additional upside driven by our CSU program. That is the business we're out to build and why I'm excited about our future. I look forward to updating you on our progress in the quarters ahead. With that, we'll now open the line for your questions.