ARS Pharmaceuticals, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2023. The filing was signed November 9, 2023. ARS is a clinical-stage biopharmaceutical company developing neffy, a needle-free intranasal epinephrine product; it has no approved products or product-sales revenue.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Collaboration revenue | $0 | $0.189 million | $0.030 million | $1.316 million |
| Research and development expense | $3.002 million | $3.893 million | $16.862 million | $13.666 million |
| General and administrative expense | $14.976 million | $2.926 million | $40.462 million | $7.723 million |
| Total operating expenses | $17.978 million | $6.819 million | $57.324 million | $21.389 million |
| Net loss | $14.866 million | $6.583 million | $47.197 million | $20.253 million |
| Basic and diluted loss per share | $0.16 | $0.21 | $0.50 | $0.66 |
Q3 G&A rose sharply, primarily reflecting $6.0 million of increased neffy pre-commercial launch activity, plus higher payroll, stock compensation, consulting, legal and other costs. Nine-month G&A increased $32.7 million, including a $14.9 million increase in pre-commercial activity. Nine-month R&D rose $3.2 million, principally due to product materials and compensation-related costs, partly offset by lower device component purchases and clinical trial costs. Net loss increased year over year, while loss per share decreased as weighted-average shares increased substantially.
At September 30, 2023, cash and cash equivalents were $60.5 million and short-term investments were $181.4 million, totaling $241.9 million. Total assets were $248.6 million, current liabilities $11.2 million, total liabilities $11.3 million, and accumulated deficit $124.1 million. The company reported no bank debt; lease liabilities totaled $0.3 million. No meaningful product gross margin is available because there were no product sales.
For the first nine months of 2023, operating cash use was $41.9 million; investing cash use was $113.2 million, largely from purchases of short-term investments net of maturities; financing provided $5.1 million, primarily from option exercises and the employee stock purchase plan. Cash and cash equivalents declined $150.0 million, principally reflecting the movement of cash into investments as well as operating outflows.
Material changes and business developments
- On September 19, 2023, the FDA issued a Complete Response Letter (CRL) for neffy, requesting a repeat-dose pharmacokinetic/pharmacodynamic study under allergen-induced allergic rhinitis. The FDA also requested additional information on nitrosamine impurities under draft guidance issued after the NDA submission.
- On September 29, the company initiated a 20% workforce reduction to conserve cash pending the expected FDA action date; it expects $0.6 million of termination-benefit costs.
- In February 2023, ARS terminated its Recordati agreement, reacquired European and other territorial rights, paid Recordati €3.0 million, and accepted potential further milestone and royalty obligations. The termination eliminated the related contract liability and future collaboration revenue from that agreement.
- Amphastar appealed an inter partes review decision concerning U.S. Patent No. 10,682,414; a Federal Circuit decision was not expected until 2024. An opposition to European Patent EP 3678649 was also filed, with ARS stating it intended to defend the patent. The company had not accrued a loss because the outcome and any reasonably estimable loss were unclear.
Outlook, management commentary and risks
- Following an October 24, 2023 FDA Type A meeting, management said the FDA confirmed no additional information beyond the CRL was required, the agreed repeat-dose study design could address the outstanding questions, and an NDA resubmission would be Class 2 with an action expected within six months of receipt. ARS planned to complete the study and resubmit in the first half of 2024; if approved, it anticipated a U.S. launch in the second half of 2024. These are forward-looking expectations, not assured outcomes.
- The company expected an EMA decision in the second quarter of 2024, following an extension to respond to additional data and analysis requests. It anticipated topline results from an ongoing urticaria proof-of-concept study by the first quarter of 2024.
- Management stated in the liquidity note that available cash, cash equivalents and investments would cover anticipated requirements for at least 12 months after issuance of the financial statements. Separately, MD&A says the company believes existing cash and cash equivalents will fund operations for at least three years. These are management estimates based on assumptions; actual cash needs could be higher or runway shorter.
- Management expects operating expenses to increase over time, particularly if neffy is approved and commercial launch preparations proceed. The filing says R&D and G&A were expected to decrease for the remainder of 2023 following the study plan and workforce reduction, with G&A expected to rise substantially in the second half of 2024 for potential commercialization.
- Key risks include regulatory delay or another CRL, study outcomes that do not satisfy the FDA, reliance on a single product candidate, competition, uncertain market acceptance and reimbursement, third-party manufacturing and supply dependence, capital-market access, and patent challenges. The company has never generated product sales and expects continuing losses.
- The May 2023 FDA advisory committee voted 16–6 in favor of a favorable benefit-risk assessment for adults and 17–5 for children weighing at least 30 kg; the committee’s recommendation was non-binding and did not prevent the subsequent CRL.
Important facts for investors to verify
- Whether the repeat-dose study is completed on schedule and whether its results support the planned NDA resubmission and FDA approval timeline.
- Whether the FDA accepts the resubmission as Class 2 and acts within the anticipated six-month review period, and whether additional requests arise, including on nitrosamine testing.
- Whether the EMA review reaches a decision on the stated schedule and what labeling or post-approval requirements may apply.
- Actual cash burn and runway against management’s differing 12-month and three-year liquidity statements, including costs of the study, manufacturing and any launch preparation.
- Progress toward commercialization, including manufacturing readiness, market access, coverage and reimbursement, and the ability to establish sales and distribution capabilities.
- Developments in the U.S. patent appeal and European patent opposition, as well as any new obligations or payments under the Recordati termination agreement.