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Eric Karas

Thanks, Rich.
Our commercial strategy is built on three key pillars: driving healthcare provider adoption, securing market access, and increasing patient awareness. Since launch, our sales team has directly engaged over 10,000 healthcare providers. More than 50% of these providers have prescribed neffy. Of the prescriptions submitted to date, nearly 90% have come from top-decile targets. We view this as a strong endorsement from leading experts who treat the highest number of patients at risk for allergic reactions.
Approximately 2,500 healthcare providers have also enrolled in our neffy Experience Program, and over 13,000 units have been placed in offices for use during anaphylactic events. This hands-on experience has led to numerous physician testimonials that highlight the positive impact neffy is having in clinical practice. With the recent availability of the 1-milligram dose, we'll be adding it to our neffy Experience Program, and we'll collect additional information on both the 1-milligram and 2-milligram doses. We plan to share the physician survey data from our neffy Experience Program in various medical forums later this year.
As Rich mentioned, we continue to make progress in payer access. We have secured commercial coverage across more than 30 formulary platforms, now including UnitedHealthcare. Currently, over 57% of all US commercial life have access to neffy. We are approaching a tipping point in market access that will enable more healthcare providers to prescribe neffy without restrictions.
In the coming months, as patients schedule appointments and visit their allergy care providers, we anticipate that access to neffy will become quicker and easier. For patients with commercial insurance, our assistance program ensures that most individuals will only have a $25 copay, which is less than the typical $40 for a generic injector.
We are making it easier for patients, as the copay support is now automatically applied at the point of sale in retail pharmacies. Additionally, for eligible patients who are uninsured or underinsured, we provide neffy at no cost through our Patient Assistance Program. These programs reflect our commitment to ensure that all patients at risk of an allergic reaction have access to this potentially life-saving treatment.
As we turn to the third pillar of our commercial strategy, patient awareness, we are excited to announce the launch of a broad and comprehensive direct-to-consumer campaign that will redefine the epinephrine landscape and establish neffy as a household name. Our campaign, titled Hello neffy, Goodbye Needles, will debut tomorrow. We are utilizing a multi-channel strategy to reach patients, parents, and caregivers where they are, including connected TV, broadcast, social media platforms, health-related websites, prints, pharmacies, and point-of-care settings.
Our data-driven media plan aims to engage high-value audiences during key seasonal periods, such as back to school and the availability of our 1-milligram dose. We expect to reach 95% of severe allergy patients and their caregivers.
Our investment is essential for achieving our goals of raising awareness and encouraging adoption. Every aspect of this campaign is designed to empower patients and their caregivers to position neffy as a standard of care and drive prescription growth. We believe our DTC campaign could generate significant revenue in the second half of 2025 and beyond while establishing neffy as a leading brand in severe allergy care.
I'll now pass the call over to Kathy to walk through our financials.

Kathleen Scott

Thank you, Eric. The details of our financial results can be found in our earnings press release and 10-Q filing, so I'll provide a summary.
For the first quarter of 2025, we recorded total revenue of $8 million. This is comprised of $7.8 million in US net product revenue for neffy, and we expect to see a continued ramp-up in product revenue as our commercial efforts accelerate. In addition, we had $0.2 million in collaboration revenue, which was the recognition of deferred revenue from performance obligations related to our collaboration and license agreement with ALK.
Under our new co-promotion agreement with ALK, ARS will continue to recognize all net product revenue in the US and retain full responsibility for commercialization. neffy will be detailed by ALK sales representatives in primary position for the first two years and co-primary position during the last two years of the four-year agreement. Additional terms of our co-promotional agreement can be found in our 8-K and 10-Q filings.
In terms of our operating expenses, cost of goods sold for the first quarter was $1.1 million. Our COGS continues to benefit from some inventory that was expensed prior to FDA approval in August 2024.
R&D expenses for the first quarter were $3 million, primarily related to clinical expenses and product development. Sales, general, and administrative expenses were $41.1 million for the first quarter, largely tied to personnel, sales, and marketing expenses associated with the commercialization of neffy in the US.
As Eric noted, we are launching a comprehensive DTC campaign tomorrow, which has a planned investment of $40 million to $50 million for the remainder of 2025. The bulk of this expense will be recognized in our SG&A in the second and third quarters of the year, and we believe we will start seeing the benefits of the DTC campaign starting in Q3 2025.
Also, with the planned DTC spend and additional investments in pediatric access and commercialization with our partner ALK, we project total 2025 operating expenses of between $210 million and $220 million, excluding stock-based compensation and cost of goods sold. The ALK co-promotion agreement adds approximately $8 million in operating expense to the previous guidance for 2025. We believe this is a solid investment in our future growth potential in the pediatric market.
ARS's portion of the commercial expenses under the co-promotion agreement with ALK will be recorded as an expense on our P&L for the first year of the agreement, but will accrue and not be paid in cash to ALK until the second year of the agreement. Any future performance-based payments to ALK based on achieving certain market share thresholds are expected to be recognized as operating expenses.
Lastly, we reported a net loss of $33.9 million, or $0.35 per share, for the first quarter. Overall, we are well capitalized today with a disciplined and strategic investment approach to support the commercial execution of neffy while also advancing development of our nasal epinephrine program in new indications such as urticaria.
As of March 31, 2025, we had cash, cash equivalents, and short-term investments of $275.7 million. We reiterate today that based on our current plans, we have an operating runway of at least three years.
With that, I'll pass the call back over to Rich.

Richard Lowenthal

Thank you, Kathy.
As you heard, we are executing from a position of strength. We've seen the momentum across the board, from strong early revenue and formulary wins to physician testimonials and real-world adoption. This reinforces our belief that neffy is a truly transformative product. I am proud of the work our team has done, and I'm grateful to our partners, the medical and advocacy communities, and above all else, the patients and caregivers for their support and enthusiasm.
Operator, please open the line for questions.

Question and Answer Session

Operator

(Operator Instructions) Ryan Deschner, Raymond James.

Ryan Deschner

Good morning. Thanks for the question. I'm curious how much of the 1Q sales figure is attributed to inventory and how you're thinking about inventory [contribution] over the next two quarters, going into the peak epinephrine season as well as following it, and I have a follow-up.

Richard Lowenthal

Yeah, hi. This is Rich Lowenthal, Ryan. Our first-quarter numbers were very little influenced by inventory. We're seeing fairly steady inventories at this point, and it was prior to the 1-milligram being launched, so this was all 2-milligram sales, of course. But we don't think anybody had much influence on the sales this quarter.

Ryan Deschner

Got it. And what would the growth in that discount look like in the first quarter? How meaningful would that change from fourth quarter to first quarter?

Richard Lowenthal

Kathy can give you the full details, but as expected, the growth in that will slowly come down towards the 50% mark. We're seeing a good uptake of insurance coverage and fewer cash sales, and that will obviously bring down our gross to net when we get better insurance coverage.
But Kathy, do you want to speak to the gross to net in this quarter?

Kathleen Scott

Sure. Good morning, Ryan. Yes, Q4 was definitely a higher gross to net than Q1. As Rich said, our payment coverage is coming online, and we were kind of hovering around the 60% -- a little over 60% for Q1, but do expect that to go down to closer to 50% as we go forward in 2025.

Ryan Deschner

Thanks, Kathy. Thanks, Rich.

Operator

Josh Schimmer, Cantor.

Josh Schimmer

Thanks for taking the questions. Just a couple of quick ones. First, when you've worked through the inventory on hand, what do you expect cost of goods to settle out at? And then for the, I think, 50% of commercial lives that have access, can you confirm that there are no prior author requirements for access to neffy for them?

Richard Lowenthal

Sorry. Can you repeat the second question, Josh?

Josh Schimmer

The update was over 50% of commercial lives have access to neffy. Just want to make sure that there are no prior author requirements for those patients.

Richard Lowenthal

Right. Okay, so let's start there. Currently, about 57% of people have coverage with no prior authorization. If you count with prior authorization, we're probably close to 90%, Josh. So we're not really considering the prior authorization as a full coverage, partial but not full.
We do see good approval rates of prior authorizations between 60% and 80%, depending on the insurer. But again, we've got to get the doctors to write those prior authorizations. So that's a barrier. But 57% right now have coverage on neffy without any prior authorization or any other paperwork required. They can get a prescription, go to the pharmacy, and pick up the prescription at the pharmacy.
And then with regards to the first question, I don't believe we've given details on the COGS, other than generally the cost of goods are in the ballpark of less -- they're pretty low. I don't think we've given exact guidance. Have we, Justin, on this?

Justin Chakma

No. I think the question was whether, as we use up our inventory, what happens to cost of goods.

Richard Lowenthal

Kathy, do you want to speak to that?

Kathleen Scott

Sure. No, we definitely have, as included in our 10-Q, we've got some no-cost inventory that was expensed prior to FDA approval. So as we wean that into our inventory, which should be kind of over the next 18 months or so, we would expect that inventory at COGS would -- the COGS would increase slightly. But for the most part, that zero-cost inventory is the raw material. So we're still paying for manufacturing for those -- for the inventory that's being COGS in the near term.

Josh Schimmer

Okay. Thank you.

Operator

(Operator Instructions) Roanna Ruiz, Leerink Partners.

Roanna Ruiz

Hey. Morning, everyone. A couple for me. Could you talk about the strength of the neffy Experience Program in helping to convert possible later adopter physicians into broader prescribers of neffy? And what has the feedback been so far in terms of some details you've heard recently about use of neffy there? Any updates on single versus twice dosing of neffy, for example?

Richard Lowenthal

Yeah. So I can give you a little update. So as Eric pointed out earlier, where the neffy Experience Program's been very, very successful, more than 2,500 physicians are enrolled and have neffy. A lot of them have used everything we provided. So we are going to be expanding the program to not only include the 1-milligram, but possibly also for those doctors that have already used their supply of neffy 2-milligram to give them additional supply of 2-milligram.
With the outcome so far, we're seeing very good results just by surveying the sites that have actually administered neffy to patients. The experiences are coming back very positive. We're still -- the results are basically looking like injections. So still around 90% are getting a response with a single dose of neffy; about 10% are needing a second dose. That's the same as what's observed with injection. So we believe that's very positive feedback.
And in general, the doctors have been very positive about their experience so far. So we are planning to potentially publish some of this shortly. We could then obviously be able to use that to help other doctors that may be still reluctant or still questioning whether real-world data is available, because this is a very large subset of real-world data right now.
And then we are looking forward to the 1-milligram being out there and being used as well, since a lot of these children that get oral food challenge are younger. And then maybe towards the American College meeting, we may also put out an abstract on the neffy Experience Program and the results.

Roanna Ruiz

Got it. That helps. And a quick follow-up from me. On the payer front and insurance coverage, how are you tracking against your goal of, I think, 80% commercial lives by 3Q? And could you remind us, are there any payers still in negotiations or in progress right now that you would need to secure to get there?

Richard Lowenthal

Yeah. I think, well, there's certainly a number of payers that we're still working with. We do have the contract with Zinc, but we're still working with Caremark and Aetna to cover neffy under that agreement. So that's obviously a big insurer that we're still working with to get final agreement on.
We're also working with Prime and other Blue Cross companies, of course, to get an agreement with a lot of them. We do have some Blue Cross companies already covering. We generally have a scorecard on our website, so it's fairly transparent as to who's covering and who's still pending coverage.
But again, even Caremark right now is accepting PAs and approving at a very high percentage, as I said, in the upper range of the 60% to 80% I mentioned. So they are very, very quickly approving of prior authorizations, but they are still requiring a prior authorization for neffy at this point. But we are trying to work through that.
So those are some of the bigger ones that we want to try to get across the finish line to get towards that 80% coverage. But in general, with prior authorization, we're already above 90%. There's only a handful of companies that are actually blocking neffy right now, so that's actually very positive as well.

Roanna Ruiz

Yeah, sounds good. Thanks.

Operator

Lachlan Hanbury-Brown, William Blair.

Lachlan Hanbury-Brown

Hey, guys. Thanks for the questions. I was wondering if you could provide any detail on the number of prescriptions that were actually written and filled in the quarter as we try to understand what the sort of capture rate of IQVIA and other providers are. And could you provide any color on -- you've talked about the PAs and the high success rate there. Can you talk about how many of the prescriptions in the past quarter have been covered versus required prior off?

Richard Lowenthal

Okay. I think, Eric, you should probably take that question.

Eric Karas

Sure. Sounds good. So first, when we look at the prescription data through IQVIA, we've talked about this before, and it's not 100% capture of everything. Our cash prescriptions through Blink are not covered. But roughly, if you look at the extended unit data on a weekly basis, it's about 13,000 prescriptions or units. But again, that's not a complete capture.
And then as far as the PAs, if you look at the beginning of this year, we were looking at about 70% of prescriptions required a PA. That's down to about 45%. So as Rich went through and I went through our comments, we're seeing the PAs come down, which is a very positive thing.
We work closely with the doctors and obviously their staff to submit the PAs. We're continuing to drive that. And I think with six to seven months under our belt, we have really good insights in terms of the criteria that's evaluated in terms of an approval of the PA. So our sales team continues to share that information with office managers and those individuals in the office that are responsible for those PAs.

Lachlan Hanbury-Brown

Great, thanks. Could you also talk about the sort of overlap between the neffy experience docs and the high prescribers? I mean, are the 2,500 odd doctors in the neffy Experience Program, are they all in that sort of the high prescribing bucket at the moment? How's that sort of conversion looking?

Eric Karas

Yeah. Rich, I can take that one, too. So when we start looking at kind of our, first, I'll say from a decile perspective, about 81% of our decile 10s, that's the highest volume of physicians, are writing for neffy, which is great. If you look at the combination of 8s, 9s and 10s, it's about 75%. We do see that doctors that are part of the experience program, on average, are writing about 2.5 to 3 times more than the overall average that we're seeing at a national level.
So that program is exactly doing what we expected in terms of building trust and confidence. Doctors really like it because they're able to get firsthand experience. And when they talk to patients, they can reference that and tell stories about what they've seen in their own clinical practice.
So as Rich said, we're looking to get that out more broadly in the second half of the year. But we're starting to do that already, too, with our peer to peer education, our speaker programs. Most of the speakers are part of the program and have had firsthand experience. So they're able to share that when they're speaking to other healthcare providers and their peers. So we're going to continue to drive that because we clearly know that this program is really hitting the mark of what we expected it to do.

Lachlan Hanbury-Brown

Got it. Thanks.

Operator

Andre Argyrides, Oppenheimer.

Andre Argyrides

All right. Good morning, and thanks for taking our question. Sorry for the disruption there earlier. Rich, can you just talk about how you're thinking about the rest of the year in terms of -- I know you're not providing guidance, but how the Q1 results are tracking for that inflection point in the second half of the year? Thanks.

Richard Lowenthal

Yeah. I think we're still tracking according to plan and exactly where we believe we should be right now. We are obviously expecting to see that inflection in the third quarter. The August-September timeframe tends to be peak sales for this product, especially with the children.
Our sales are still heavily weighted towards children with the 2-milligram. We expect that to even be expanded, greater focus on children with the 1-milligram. So we do expect to see that inflection point start this summer. And with the DTC campaign and 1-milligram available, we think that that's where we'll start to see a real upturn in market share.

Andre Argyrides

And then just a quick follow-up, do you still think that prior offs are the biggest impediment at the moment? And so when you get to the broader access that you're guiding towards that that will be a real a real boost.

Richard Lowenthal

Yeah. I mean, I think the prior authorizations when we have low insurance coverage is an impediment when we start to get higher and higher up in insurance coverage. There is fewer prior off the docks have to deal with. And they're more than happy to write prior authorizations. They just don't want to write too many. So it's a matter of volume.
And so we do see the number of prior authorizations coming down. We see the approval rates increasing. So that's a good sign. And that encourages doctors to continue to write prior authorizations for those patients that are not getting automatic insurance coverage without paperwork. So that's encouraging.
So we do think it's a headwind. But it becomes less and less and less as time goes by, because the remaining patients that are not covered are those insurance companies that are delaying. They're -- the doctors are more willing to write the prior authorizations because there's just fewer of them.
Does that make sense?

Andre Argyrides

It does. Thanks, and congrats on the quarter. Thanks. I'll jump back to the queue.

Operator

Louise Chen, Scotiabank.

Louise Chen

Hi. Thanks for taking my questions here. So I just wanted to ask you how we can think about the sales targets that ALK has to hit in order to get to the performance-based payments that you've discussed.
And then the second thing is, what is your market share now? Where do you hope to be by the end of the year? Thank you.

Richard Lowenthal

Eric, I think you should take that question, if okay.

Eric Karas

Yeah, let me take the second part first. So when you look at a market share overall in the category of the basket of epinephrine across the board, brand and generic, we have about a 1.3% share. But what we also focus on, more importantly, is our targets of the doctors that we're calling on directly. That's about 6.2. And then we also have super targets, which is about 7.5. So these are doctors that we spend extra time in in terms of our promotion and focus.
As far as the ALK co-promote, this is a great opportunity that we are very excited about. Obviously, we're able to expand our footprint, the number of reps. We're going to grow from about 12,500 positions with direct promotion up to about 20,000. So we have some milestone targets in terms of market share that we think is very reasonable to hit those targets.
And especially, as we've articulated, we've got so many catalysts coming up in the next three to six months here with the 1-milligram, the DTC commercial, and continued pair coverage improving. So we feel really confident about this co-promote and look forward to the impact that they're going to have in the pediatric space.

Louise Chen

Okay. Thank you.

Operator

Lachlan Hanbury-Brown, William Blair.

Lachlan Hanbury-Brown

Hey, thanks for the follow-up. I just wanted to confirm, Kathy, I think you said you're expecting most of the DTC marketing to be in Q2 and Q3. So I wanted to confirm, should we sort of expect a tail off in Q4, or is it more that most of the sort of growth will be Q2 and Q3 and then it will be steady thereafter?

Kathleen Scott

Sure, we do expect to spend some in Q4, but as I said in my remarks, the majority in Q2 and Q3. And as Rich said, the inflection point for sales, we would expect to start really in Q3.
So does that answer your question?

Lachlan Hanbury-Brown

Yeah. Thanks.

Richard Lowenthal

And Lachlan, just to add to that, I mean, we obviously are doing that very intentionally to front-load the awareness campaign before the summer period, which is really August, September is where you'll see the big peak in epinephrine sales. So we want to make sure we get to all the consumers and make sure they're aware the neffy is available. So the sooner we can do that in the summer period, the better. So we've obviously put a lot of the spend earlier and then we'll taper off after that and get to a steady state.

Lachlan Hanbury-Brown

Okay. Thanks.

Operator

Thank you. And with that, ladies and gentlemen, we conclude our Q&A session and program for today. Thank you all for participating. You may now disconnect.