ARS Pharmaceuticals, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. ARS is a clinical-stage biopharmaceutical company developing neffy, a needle-free intranasal epinephrine candidate. It had no approved products or product sales.
Financial results and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Collaboration revenue | $10,000 | $464,000 | $30,000 | $1.127 million |
| Research and development | $7.308 million | $4.350 million | $13.860 million | $9.773 million |
| General and administrative | $13.305 million | $2.458 million | $25.486 million | $4.797 million |
| Operating loss | $20.603 million | $6.344 million | $39.316 million | $13.443 million |
| Net loss | $17.370 million | $6.420 million | $32.331 million | $13.670 million |
| Other income (expense), net | $3.233 million | $(76,000) | $6.985 million | $(227,000) |
| Basic and diluted loss per share | $(0.18) | $(0.21) | $(0.34) | $(0.45) |
For the six months, operating cash use was $29.1 million, investing cash use was $66.6 million—principally net purchases of short-term investments—and financing cash inflow was $4.2 million, mainly from option exercises and the employee stock purchase plan. Cash and cash equivalents were $119.0 million; short-term investments were $133.2 million, or $252.2 million combined, at June 30. Accumulated deficit was $109.3 million. The company reported no bank debt; its remaining lease liability was $379,000. Gross margin is not meaningful because there were no product sales.
Changes versus prior comparable periods
- Q2 operating expenses increased $13.8 million year over year. G&A rose $10.8 million, largely due to neffy pre-commercial launch activity; R&D rose $3.0 million.
- Six-month operating expenses increased $24.8 million year over year, including a $20.7 million increase in G&A, primarily reflecting pre-commercial launch costs, staffing and stock-based compensation.
- Collaboration revenue declined after termination of the Recordati agreement in February 2023. The termination eliminated future Recordati royalties and milestones, returned the territory rights to ARS, and resulted in a €3.0 million upfront payment and potential additional milestone and royalty obligations.
- Other income improved substantially, primarily from interest income and investment amortization/accretion. Net loss nevertheless widened as operating expenses rose.
Outlook, commentary and risks
- After a favorable, non-binding advisory committee vote in May, the FDA extended the neffy NDA action date by three months to September 19, 2023 for labeling and post-marketing commitment discussions. The company said FDA had not requested additional pre-marketing studies as of the filing.
- The FDA also required EpiPen to be included as a reference listed drug and requested related patent certifications. ARS provided Paragraph IV notice; the stated 45-day waiting period had elapsed.
- Management expected an EMA decision by year-end 2023 and topline results from its urticaria proof-of-concept study by Q4 2023. Interim results from 10 subjects showed responses on measured endpoints for both 1 mg and 2 mg doses versus placebo; these were preliminary findings.
- Management expected R&D spending to decrease in the remainder of 2023 as activity shifted toward potential commercialization, while G&A was expected to rise for launch preparation. The company was preparing for a potential U.S. launch in the second half of 2023, subject to approval.
- Management said available cash and investments were expected to support at least three years of planned operations. The financial-statement liquidity note separately states funds were sufficient for at least 12 months after issuance. Both are estimates subject to operating, regulatory and market uncertainties.
- Key risks include FDA or EMA delay or non-approval, commercial uptake and reimbursement uncertainty, dependence on third-party manufacturing and suppliers, reliance on a single product candidate, and potential need for additional capital.
- Patent disputes remain outstanding: Amphastar appealed an inter partes review decision that upheld some neffy-related claims and invalidated others; ARS sought dismissal, and a decision was not expected until 2024. An opposition to a European patent was filed July 28, 2023. No loss liability was recorded because a loss or range could not be reasonably estimated.
Investor verification priorities
- Verify the FDA action and final labeling, post-marketing commitments, and any implications of the EpiPen patent certification process.
- Track EMA review, urticaria study final results, and pediatric development and regulatory plans.
- Assess launch readiness, manufacturing capacity, supply arrangements, payer coverage, pricing and early demand if neffy is approved.
- Monitor cash burn against management’s runway estimate, launch spending, collaboration receipts and any financing needs.
- Follow the Amphastar appeal and European patent opposition, including potential effects on patent protection and commercialization.