ARS Pharmaceuticals, Inc. — Q1 2023 Form 10-Q
Business context and reporting period. This unaudited quarterly report covers the three months ended March 31, 2023, compared with the three months ended March 31, 2022. ARS is a clinical-stage biopharmaceutical company developing neffy, a needle-free intranasal epinephrine product candidate for emergency treatment of Type I allergic reactions, including anaphylaxis. It has no approved products or product sales.
Key financial metrics
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Collaboration revenue | $20,000 | $663,000; down 97% |
| Research and development expense | $6.6 million | $5.4 million; up 21% |
| General and administrative expense | $12.2 million | $2.3 million; up 421% |
| Total operating expenses | $18.7 million | $7.8 million; up 141% |
| Loss from operations | $18.7 million | $7.1 million |
| Other income (expense), net | $3.8 million income | $0.2 million expense |
| Net loss | $15.0 million | $7.3 million |
| Comprehensive loss | $15.3 million | $7.3 million |
| Basic and diluted loss per share | $0.16 | $0.24 |
| Net cash used in operating activities | $12.4 million | $6.9 million |
At March 31, 2023, cash and cash equivalents were $87.9 million and short-term investments were $176.7 million, totaling approximately $264.5 million. Current assets were $267.4 million and current liabilities $9.8 million. Accumulated deficit was $91.9 million. The company had no bank note outstanding; its liabilities included $0.4 million of operating lease obligations. No product-sales gross margin is reported because there were no product sales.
Cash and cash equivalents fell $122.7 million during the quarter, primarily reflecting a $111.5 million investing cash outflow, including $131.4 million of short-term investment purchases and $20.0 million of maturities. This portfolio shift should be distinguished from operating cash use.
Material changes versus the prior comparable period
- Net loss increased by $7.7 million as operating expenses rose, partly offset by a $3.9 million year-over-year improvement in other income (expense), mainly from interest income and investment amortization and accretion.
- G&A expense rose by $9.8 million, primarily reflecting $3.5 million more pre-commercial launch activity, higher payroll and stock-based compensation, and increased legal and other public-company costs.
- R&D expense increased by $1.1 million. Higher neffy product-material costs and stock compensation were partly offset by lower clinical-trial, device-manufacturing, and outside-service costs.
- Collaboration revenue fell sharply, including because the Recordati agreement was terminated in February 2023. Q1 2022 revenue included Recordati revenue; no revenue was recognized under that agreement in Q1 2023.
Outlook, commentary, risks, and unusual items
- Management expects R&D expense to decrease for the remainder of 2023 as planned clinical and manufacturing activity transitions toward commercialization; it expects G&A expense to increase with pre-commercial and potential launch activities. The company anticipated a possible U.S. launch in the second half of 2023 if neffy is approved, but regulatory timing is uncertain and outside its control.
- The FDA accepted the neffy NDA for review in Q4 2022, with a mid-2023 PDUFA target action date stated in the filing. At the May 11, 2023 advisory committee meeting, votes favored a positive benefit-risk assessment for adults (16–6) and children weighing at least 30 kg (17–5). The committee recommendation is nonbinding; FDA approval was not assured.
- Management stated that available cash, cash equivalents, and investments were sufficient for at least 12 months following issuance of the financial statements, and its operating-plan outlook projected funding for at least three years. Both are estimates subject to risks, assumptions, and potentially faster cash use.
- On terminating Recordati, ARS reacquired the licensed rights and paid an upfront €3.0 million, recorded as R&D expense; it also agreed to possible additional payments of €2.0 million upon an EMA milestone, €5.0 million upon first commercial sale in the territory, and up to €5.0 million in aggregate royalties. The termination ended the related performance obligations and the existing $3.1 million contract liability was recorded against IPR&D expense.
- Amphastar appealed an inter partes review decision concerning the ’414 patent. The USPTO found claims covering neffy patentable but found other claims unpatentable; the appeal outcome is uncertain. A separate securities case involving Silverback was dismissed with prejudice on April 12, 2023, with an appeal still possible at the filing date.
- Key business risks include dependence on neffy as the sole current product candidate, regulatory and clinical uncertainty, commercial acceptance and reimbursement, competition, reliance on third-party manufacturers and suppliers, and intellectual-property challenges. Management reported effective disclosure controls as of March 31, 2023 and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- FDA’s eventual decision, timing, approved population and labeling for neffy, including any requests for additional studies.
- Actual launch timing, commercial spending, manufacturing readiness, coverage and reimbursement, and early demand if approved.
- Cash consumption and runway against management’s three-year operating-plan estimate, especially as commercialization spending grows.
- Status and financial implications of the Amphastar patent appeal and any appeal in the dismissed securities case.
- Progress of Alfresa and Pediatrix in their licensed territories, and obligations or payments under the Recordati termination agreement.