ARS Pharmaceuticals(SPRY) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and detailed notes Item 1. Financial Statements This section provides the company's unaudited condensed consolidated financial statements and comprehensive notes Condensed Consolidated Balance Sheets This section presents a snapshot of the company's assets, liabilities, and equity at specific points in time | Metric | Dec 31, 2024 (in thousands) | Jun 30, 2025 (in thousands) | Change (in thousands) | | :----------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Cash and cash equivalents | $50,817 | $51,540 | $723 | | Short-term investments | $263,205 | $188,590 | $(74,615) | | Accounts receivable, net | $8,175 | $25,126 | $16,951 | | Inventories | $10,519 | $22,112 | $11,593 | | Total assets | $351,153 | $313,472 | $(37,681) | | Total liabilities | $94,355 | $121,151 | $26,796 | | Total stockholders' equity | $256,798 | $192,321 | $(64,477) | Condensed Consolidated Statements of Operations and Comprehensive Loss This section details the company's revenues, expenses, and net loss over specific reporting periods | Metric (in thousands) | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change | | :-------------------- | :-------------------------- | :-------------------------- | :----- | :-------------------------- | :-------------------------- | :----- | | Total revenue | $15,717 | $500 | $15,217 | $23,690 | $500 | $23,190 | | Cost of goods sold | $4,984 | $0 | $4,984 | $6,078 | $0 | $6,078 | | R&D expenses | $4,035 | $6,896 | $(2,861) | $6,987 | $12,130 | $(5,143) | | SG&A expenses | $54,312 | $8,944 | $45,368 | $95,416 | $16,902 | $78,514 | | Loss from operations | $(47,614) | $(15,340) | $(32,274) | $(84,791) | $(28,532) | $(56,259) | | Net loss | $(44,883) | $(12,516) | $(32,367) | $(78,823) | $(22,808) | $(56,015) | | Net loss per share | $(0.46) | $(0.13) | $(0.33) | $(0.80) | $(0.24) | $(0.56) | Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in the company's equity, including net loss and additional paid-in capital | Metric (in thousands) | Dec 31, 2024 | Mar 31, 2025 | Jun 30, 2025 | | :-------------------- | :----------- | :----------- | :----------- | | Total Stockholders' Equity | $256,798 | $228,974 | $192,321 | | Accumulated Deficit | $(123,305) | $(157,245) | $(202,128) | | Additional Paid-in Capital | $379,873 | $386,137 | $394,485 | | Net loss and comprehensive loss (3 months ended Mar 31, 2025) | N/A | $(34,088) | N/A | | Net loss and comprehensive loss (3 months ended Jun 30, 2025) | N/A | N/A | $(45,001) | Condensed Consolidated Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities | Cash Flow Activity (in thousands) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(80,334) | $(13,989) |\n| Net cash provided by (used in) investing activities | $77,635 | $(21,159) |\n| Net cash provided by financing activities | $3,422 | $803 |\n| Net increase (decrease) in cash and cash equivalents | $723 | $(34,345) |\n| Cash and cash equivalents at end of period | $51,540 | $36,626 | Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. Nature of Business This note describes the company's core business, financial status, and liquidity outlook - ARS Pharmaceuticals is a biopharmaceutical company focused on the commercialization and development of nef y (EURnef y in EU), the first FDA and European Commission-approved needle-free epinephrine product for Type I allergic reactions[26] - The company has an accumulated deficit of $202.1 million as of June 30, 2025, and has not generated positive cash flows from operations in most years since inception[28] - Current cash, cash equivalents, and short-term investments of $240.1 million as of June 30, 2025, are sufficient to meet anticipated cash requirements for at least the next 12 months[28] 2. Summary of Significant Accounting Policies This note outlines the key accounting principles and estimates used in preparing the financial statements - The financial statements are prepared in conformity with U.S. GAAP and presented on a condensed consolidated basis, including ARS Pharmaceuticals, Inc. and its subsidiaries[30] - Significant estimates are made for revenue under collaboration agreements, variable components of product revenue, R&D accruals, and valuation of equity awards[33] - Inventories are stated at the lower of cost or net realizable value, determined on a first-in, first-out basis, and capitalized after regulatory approval when commercialization is probable[42][43] - Revenue is recognized in accordance with ASC Topic 606, requiring identification of performance obligations, determination of transaction price, allocation, and recognition upon satisfaction of obligations[50] 3. Revenue This note details the company's revenue recognition policies and models for product and collaboration revenues - Product revenue from nef y began in September 2024 after FDA approval in August 2024[70] - Revenue is recognized under two models: a title model (when title transfers from Title Agent to wholesale distributor/pharmacy) and a consignment model (when sold to a patient)[71][72] - Product revenue is recorded net of Gross-to-Net Adjustments, including distribution service fees, commercial pharmacy discounts, prompt pay discounts, chargebacks, rebates, and co-payment assistance[73] 4. Inventories This note provides a breakdown of inventory categories and the company's capitalization policy - Inventory capitalization for nef y began in August 2024 upon FDA approval[83] | Inventory Category (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Raw materials | $17,784 | $4,674 | | Finished goods | $6,488 | $5,826 | | Inventory reserve | $(2,160) | $0 | | Total inventories, net | $22,112 | $10,519 | - The company held $9.8 million in zero-cost inventory as of June 30, 2025, and expects to fully utilize it in future periods, with depletion anticipated by mid-2026[85][239] 5. Fair Value Measurements This note presents fair value measurements for financial assets, including cash and short-term investments | Asset Category (in thousands) | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :---------------------------- | :----------------------- | :--------------------------- | | Cash and cash equivalents | $51,248 | $48,893 | | Short-term investments | $188,590 | $263,205 | | Total | $239,838 | $312,098 | - Net unrealized loss on available-for-sale securities was $0.1 million for the three months and $0.3 million for the six months ended June 30, 2025[89] 6. Balance Sheet Details This note provides specific details on selected balance sheet accounts, including prepaid and accrued items | Account (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Prepaid marketing | $3,447 | $3,169 | | Accounts payable | $15,559 | $9,870 | | Accrued gross-to-net adjustments | $11,341 | $2,179 | | Accrued marketing related expenses | $6,374 | $1,855 | 7. Intangible assets, net This note details the company's intangible assets, including capitalized milestone payments and amortization - Capitalized milestone payments for intangible assets increased by $5.9 million in June 2025 due to the first commercial sale of EURnef y in the Recordati Territory[93][115] | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Capitalized milestone payments | $13,360 | $7,500 | | Less accumulated depreciation | $(388) | $(129) | | Total intangible assets, net | $12,972 | $7,371 | - Amortization expense for intangible assets was $0.1 million for the three months and $0.3 million for the six months ended June 30, 2025[95] 8. Collaboration, Out-Licensing and Related Agreements This note describes key collaboration and licensing agreements, including revenue recognition and milestone payments - The company's collaboration agreements typically involve upfront license fees, clinical/regulatory/commercial milestone payments, and royalties or transfer prices on net sales[97] - Milestone payments are included in the transaction price only when achievement is probable and a significant revenue reversal is unlikely[100] - The ALK Collaboration Agreement resulted in a $145.0 million upfront payment in November 2024 and a $5.0 million commercial milestone earned in June 2025 for the first commercial sale of EURnef y in the ALK Territory[127][138] - The transaction price allocated to the EEA License under the ALK Collaboration Agreement ($69.4 million) is accounted for as a financing liability due to the company's repurchase option[135] - The ALK Co-Promotion Agreement, entered in May 2025, involves ALK U.S. co-promoting nef y in the U.S. to pediatricians and other prescribers, with the company paying a base fee and potential performance-based bonuses[142][146] 9. Commitments and Contingencies This note outlines the company's contractual obligations, lease payments, and ongoing legal proceedings - The company's future minimum non-cancelable operating lease payments total $1.864 million as of June 30, 2025, with an annualized payment of $0.6 million for the new office space[151][155] - Legal proceedings include an EPO opposition to EP 3678649 (nasal spray patent) and a lawsuit by Aptar alleging trade secret misappropriation and breach of contract[157][158] | Obligation Category | Total Amount (as of Jun 30, 2025) | 2025 (remaining) | 2026 | 2027 | 2028 | 2029 | | :------------------ | :-------------------------------- | :--------------- | :--- | :--- | :--- | :--- | | Raw materials supply | $57.6 million | $0.9 million | $10.5 million | $11.8 million | $13.8 million | N/A (then $2.9M/yr through 2035) | | ALK Co-Promotion Agreement | $26.8 million | $0 | $4.4 million | $14.2 million | $4.6 million | $3.6 million | | Corporate sponsorship | $10.0 million | $4.0 million | $5.0 million | $1.0 million | $0 | $0 | | Hosted software license | $2.5 million | $0.6 million | $1.5 million | $0.4 million | $0 | $0 | 10. In-Licensing and Supply This note details in-licensing agreements and reliance on third-party manufacturers for product supply - Under the Aegis Agreement, the company licensed exclusive worldwide rights to proprietary technology for epinephrine products, including nef y[169] - Milestone payments under Aegis Agreement: $2.5 million for FDA approval (Aug 2024) and $5.0 million for first commercial sale of nef y (Sep 2024) were capitalized as intangible assets[170] - The company relies on Renaissance Lakewood, LLC for drug product manufacturing and final packaging, and Nuova Ompi S.r.l. for glass microvials, with committed annual minimum quantities for microvials[176][178] 11. Common Stock and Stockholders' Equity This note provides information on common stock, shares reserved, and equity offerings - As of June 30, 2025, 98,697,658 shares of common stock were issued and outstanding[16] | Reserved for (shares) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Common stock options | 17,271,990 | 15,161,180 | | Future awards/grants | 8,062,484 | 5,905,773 | | ESPP issuances | 2,811,182 | 2,223,100 | | Warrants | 45,456 | 45,456 | | Total | 28,192,494 | 23,338,272 | - An automatic shelf registration statement on Form S-3ASR was filed in January 2025, allowing for the offer and sale of up to $200.0 million in common stock through an Equity Sales Agreement, though no securities have been sold as of June 30, 2025[184] 12. Stock-Based Compensation This note details stock-based compensation expenses and unrecognized compensation for employee options | Expense Category (in thousands) | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Research and development | $664 | $913 | $1,327 | $1,824 | | Selling, general and administrative | $4,707 | $2,452 | $9,342 | $4,856 | | Total | $5,371 | $3,365 | $10,669 | $6,680 | - Total unrecognized stock-based compensation expense for outstanding employee options was $53.9 million as of June 30, 2025, to be recognized over approximately 2.6 years[186] - The weighted-average grant date fair value per share of option grants increased to $8.60 for the six months ended June 30, 2025, from $4.52 in the prior year[193] 13. Employee Benefit Plans This note describes the company's 401(k) plan and associated matching contribution expenses - The company matches up to 5% of employee contributions to its 401(k) plan[198] | Metric (in thousands) | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Matching contribution expenses | $400 | $100 | $800 | $200 | 14. Related-Party Transactions This note discloses transactions with related parties, including consulting and royalty expenses - Consulting expenses of $0.6 million (3 months) and $1.3 million (6 months) were incurred with an entity owned by the CEO/CMO[199] - Royalty expense of $0.9 million (3 months) and $1.4 million (6 months) was incurred payable to OrbiMed, a related party, for nef y sales[202] 15. Segment Information This note clarifies that the company operates as a single segment and provides a breakdown of operating expenses - The company operates and manages its business as a single operating segment[203] | Segment Operating Expenses (in thousands) | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Cost of goods sold | $4,984 | $0 | $6,078 | $0 | | Clinical | $1,250 | $1,226 | $2,454 | $4,042 | | Development | $2,151 | $2,591 | $3,252 | $4,099 | | Medical affairs | $1,073 | $421 | $2,018 | $754 | | Sales and marketing | $40,925 | $2,694 | $67,682 | $4,145 | | General and administrative | $7,118 | $5,505 | $15,837 | $9,195 | | Stock-based compensation | $5,371 | $3,365 | $10,669 | $6,680 | | Total segment operating expenses | $63,331 | $15,840 | $108,481 | $29,032 | 16. Subsequent Events This note reports significant events occurring after the balance sheet date, such as new legislation - The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, bringing significant changes to federal tax law and regulatory provisions[207] - The company is evaluating the potential impact of OBBBA on its financial statements, with certain provisions effective in 2025 and others through 2027[207] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operational results, liquidity, and capital resources Overview This section provides a high-level summary of nef y's market position, commercialization efforts, and financial performance - nef y is the first and only FDA and European Commission-approved needle-free epinephrine product for Type I allergic reactions, including anaphylaxis[210] - Commercial launch of nef y 2 mg in the U.S. began in September 2024, and nef y 1 mg in May 2025[216] - The estimated U.S. addressable market for nef y is approximately $3 billion in annual net sales for currently prescribed patients and an additional $7 billion for undiagnosed patients[210] - The company had an accumulated deficit of $202.1 million as of June 30, 2025, and incurred net losses from operations of $47.6 million for the six months ended June 30, 2025[223] ALK Collaboration Agreement This section details the collaboration agreement with ALK, including licensing terms, upfront payments, and milestone eligibility - ALK Collaboration Agreement grants ALK exclusive worldwide license (excluding specific territories) for intranasal epinephrine products[227] - ALK made a $145.0 million upfront payment in November 2024, and the company earned a $5.0 million commercial milestone in June 2025[229] - The company is eligible for up to $15.0 million in additional regulatory milestones and up to $300.0 million in sales-based milestones, plus tiered royalties in the mid-to-high teens[229] ALK Supply Agreement This section outlines the company's obligations to supply ALK's product requirements under a five-year agreement - The ALK Supply Agreement obligates the company to supply ALK's Product requirements for five years at a specified supply price[231] ALK Co-Promotion Agreement This section describes the co-promotion agreement with ALK U.S. for nef y in the U.S., including fees and performance terms - ALK U.S. will co-promote nef y to up to 9,000 specified pediatricians and other prescribers in the U.S[232] - The company will pay ALK U.S. a base fee, with first-year payments deferred to the second year, and performance-based bonuses starting in the second year[235] - The ALK Co-Promotion Agreement expires on the fourth anniversary of promotion activities, with termination clauses for material breach, insolvency, or failure to meet performance thresholds[236] Financial Overview This section provides a general overview of the company's financial performance, including revenue and expense trends Revenues This section discusses the company's revenue sources, including product sales and collaboration agreements - Limited net product sales recognized since nef y's commercial launch in September 2024[238] - Future revenues are expected to fluctuate based on nef y's commercial launch, regulatory and commercial milestones from collaboration agreements, and supply agreements[238] Cost of Goods Sold This section explains the components of cost of goods sold and the impact of zero-cost inventory - Cost of goods sold includes product costs, inventory reserve, and royalties[239] - Initial cost of goods sold is lower due to the use of zero-cost inventory, which is expected to be depleted by mid-2026[239] Research and Development Expenses This section details R&D expenses, their primary drivers, and future expectations - R&D expenses are primarily for clinical development, process development, and manufacturing of nef y and other intranasal epinephrine product candidates[242] - R&D expenses are expected to remain relatively consistent in 2025, but are subject to unpredictability due to clinical development and manufacturing activities[244] - Key components of R&D expenses include personnel costs, external CRO/CMO fees, manufacturing for clinical trials, regulatory compliance, and indirect expenses[243][245] Selling, General and Administrative Expenses This section outlines SG&A expenses and anticipated increases due to commercialization efforts - SG&A expenses include salaries, stock-based compensation, marketing, legal, and professional fees[247] - SG&A expenses are expected to increase substantially in 2025 due to sales force expansion, marketing campaigns, the ALK Co-Promotion Agreement, and commercialization infrastructure[248] Other Income, net This section describes the sources of other income, primarily from interest and short-term investments - Other income, net, is mainly derived from interest income on cash, cash equivalents, and short-term investments, and net amortization/accretion on short-term investments[250] Results of Operations This section provides a comparative analysis of the company's financial performance over different reporting periods Comparison of the Three Months Ended June 30, 2025 and 2024 This section compares the company's financial results for the three-month periods ended June 30, 2025 and 2024 | Metric (in thousands) | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Dollar Change | % Change | | :-------------------- | :-------------------------- | :-------------------------- | :------------ | :------- | | Total revenue | $15,717 | $500 | $15,217 | * | | Product revenue, net | $12,800 | $0 | $12,800 | * | | Revenue under collaboration agreements | $2,594 | $500 | $2,094 | * | | Cost of goods sold | $4,984 | $0 | $4,984 | * | | R&D expenses | $4,035 | $6,896 | $(2,861) | (41%) | | SG&A expenses | $54,312 | $8,944 | $45,368 | * | | Net loss | $(44,883) | $(12,516) | $(32,367) | * | - The $45.4 million increase in SG&A expenses was primarily due to $28.2 million in marketing-related expenses, $9.0 million in personnel-related expenses, and $2.3 million in stock-based compensation[255] Comparison of the Six Months Ended June 30, 2025 and 2024 This section compares the company's financial results for the six-month periods ended June 30, 2025 and 2024 | Metric (in thousands) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Dollar Change | % Change | | :-------------------- | :-------------------------- | :-------------------------- | :------------ | :------- | | Total revenue | $23,690 | $500 | $23,190 | * | | Product revenue, net | $20,563 | $0 | $20,563 | * | | Revenue under collaboration agreements | $2,804 | $500 | $2,304 | * | | Cost of goods sold | $6,078 | $0 | $6,078 | * | | R&D expenses | $6,987 | $12,130 | $(5,143) | (42%) | | SG&A expenses | $95,416 | $16,902 | $78,514 | * | | Net loss | $(78,823) | $(22,808) | $(56,015) | * | - The $78.5 million increase in SG&A expenses was primarily due to $45.7 million in marketing-related expenses, $18.0 million in personnel-related expenses, and $4.5 million in stock-based compensation[262] Liquidity and Capital Resources This section discusses the company's ability to meet its short-term and long-term financial obligations Sources of Liquidity and Capital This section identifies the primary funding sources and available capital for the company's operations - The company's primary funding sources include merger proceeds, equity offerings, licensing agreements, bank debt, and limited product sales[264] - As of June 30, 2025, cash, cash equivalents, and short-term investments totaled $240.1 million[264] Cash flows This section provides a summary of cash flows from operating, investing, and financing activities | Cash Flow Activity (in thousands) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(80,334) | $(13,989) | | Net cash provided by (used in) investing activities | $77,635 | $(21,159) | | Net cash provided by financing activities | $3,422 | $803 | | Net increase (decrease) in cash and cash equivalents | $723 | $(34,345) | Operating Activities This section details cash flows generated from or used in the company's core business operations - Net cash used in operating activities was $80.3 million for the six months ended June 30, 2025, driven by a $78.8 million net loss and increases in operating assets ($14.4 million in accounts receivable, $13.2 million in inventories)[266] - Non-cash charges included $10.7 million in stock-based compensation and $2.2 million for inventory reserve[266] Investing Activities This section describes cash flows related to the purchase and sale of long-term assets and investments - Net cash provided by investing activities was $77.6 million for the six months ended June 30, 2025[268] - This was primarily due to $143.5 million in maturities of short-term investments, offset by $65.7 million in purchases[268] Financing Activities This section outlines cash flows from debt, equity, and dividend transactions - Net cash provided by financing activities was $3.4 million for the six months ended June 30, 2025[269] - Funds were primarily from stock option exercises and common stock issuance under the employee stock purchase plan[269] Future Funding Requirements This section discusses anticipated capital needs and potential funding strategies for future operations - Existing cash, cash equivalents, short-term investments, and revenues are expected to fund operations for at least the next three years[270] - Future funding requirements depend on R&D scope and costs, commercialization activities, regulatory approvals, and intellectual property protection[272][275] - Additional funding may be sought through equity offerings (potentially dilutive), debt financings (with restrictive covenants), or collaborations (relinquishing rights)[272] Material Cash Requirements This section details significant contractual obligations and contingent payments requiring future cash outlays | Obligation Category | Total Amount (as of Jun 30, 2025) | 2025 (remaining) | 2026 | 2027 | 2028 | 2029 | | :------------------ | :-------------------------------- | :--------------- | :--- | :--- | :--- | :--- | | Raw materials supply | $57.6 million | $0.9 million | $10.5 million | $11.8 million | $13.8 million | N/A (then $2.9M/yr through 2035) | | ALK Co-Promotion Agreement | $26.8 million | $0 | $4.4 million | $14.2 million | $4.6 million | $3.6 million | | Corporate sponsorship | $10.0 million | $4.0 million | $5.0 million | $1.0 million | $0 | $0 | | Hosted software license | $2.5 million | $0.6 million | $1.5 million | $0.4 million | $0 | $0 | - Remaining contingent milestone payments to OrbiMed (under Aegis Agreement) are $11.0 million, plus indeterminate mid-single-digit royalties on net product sales[277] - Remaining milestone payments to Recordati are €5.0 million ($5.9 million), plus royalties up to €5.0 million ($5.9 million) in aggregate from sales in the Recordati Territory[278] Critical Accounting Policies and Estimates This section highlights key accounting policies and estimates that require significant management judgment - Key estimates and judgments include revenue, accrued expenses, stock-based compensation, and valuation allowances for deferred tax assets[281] - No material changes to critical accounting policies or estimates occurred during the six months ended June 30, 2025[282] Recent Accounting Pronouncements This section refers to disclosures regarding recently adopted and issued accounting standards - Refer to Note 2 for information on recently adopted and issued accounting pronouncements[283] Emerging Growth Company and Smaller Reporting Company Status This section explains the company's status as an EGC and SRC and its implications for reporting requirements - The company is an Emerging Growth Company (EGC) and a Smaller Reporting Company (SRC), utilizing exemptions from certain public company reporting requirements[284][287] - Effective December 31, 2025, the company will be considered a "large accelerated filer" due to its market value exceeding $700 million, but can use scaled disclosures until Q1 2026[288] Item 3. Quantitative and Qualitative Disclosures About Market Risk This item is not required for the company due to its status as a smaller reporting company - Not required for a "smaller reporting company"[289] Item 4. Controls and Procedures This section evaluates the effectiveness of disclosure controls and reports on changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures This section assesses the effectiveness of the company's disclosure controls and procedures - Disclosure controls and procedures were evaluated as effective at the reasonable assurance level as of June 30, 2025[290] Changes in Internal Control over Financial Reporting This section reports on any material changes to the company's internal control over financial reporting - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[291] PART II OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and equity sales Item 1. Legal Proceedings This section details the company's involvement in various legal proceedings and claims, with further information in Note 9 - The company is involved in various legal proceedings and claims, with details provided in Note 9 – Commitments and Contingencies[294] Item 1A. Risk Factors This section outlines various risks that could materially impact the company's business, financial condition, and operational results Risks Related to Our Business This section identifies key business risks, including commercialization challenges and market acceptance of nef y - High dependence on successful commercialization of nef y in the U.S. and EU; failure would materially adversely affect business and stock price[296][297] - nef y may fail to achieve market acceptance by physicians, patients, and payors, especially against established injectable products, limiting revenue[305] - Inability to achieve and maintain adequate third-party payor coverage and reimbursement for nef y on reasonable pricing terms could severely hinder commercial success[307] - Competitive products, including established epinephrine autoinjectors and other intranasal candidates, may reduce or eliminate nef y's commercial opportunity[313] Risks Related to Our Results of Operations and Financial Position This section details risks associated with financial performance, including operating losses and funding requirements - Operating results are expected to fluctuate significantly due to the ongoing commercial launch of nef y, making future performance difficult to predict[386] - The company has incurred significant losses since inception, with an accumulated deficit of $202.1 million as of June 30, 2025, and expects continued losses[389] - Additional funding may be required, and if unavailable on favorable terms, could force delays or reductions in product development or commercialization efforts[391] - Raising additional capital through equity could dilute stockholders, while debt financing may impose restrictive covenants[397] Risks Related to our Legal and Regulatory Environment This section outlines risks stemming from ongoing regulatory review, healthcare laws, and data privacy regulations - nef y is subject to ongoing regulatory review and post-marketing obligations, with potential for restrictions, withdrawal, or penalties for non-compliance[402][403] - Business activities are subject to federal and state healthcare fraud and abuse laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA), with potential for significant penalties for violations[428][430] - The company is subject to stringent and evolving U.S. and foreign data privacy and security laws (e.g., GDPR, CCPA), with non-compliance risking regulatory actions, fines, litigation, and reputational harm[431][436][437][444] - Recent and future legislative changes, such as the IRA and potential "Most-Favored-Nation" pricing policies, could increase costs and adversely affect product commercialization and pricing[406][411][412] Risks Related to Our Dependence on Third Parties This section highlights risks associated with reliance on third parties for manufacturing, supply, and commercialization - Complete reliance on third parties for manufacturing and warehousing nef y and product candidates, creating risks of supply shortages, interruptions, and price fluctuations[450][452] - Dependence on third-party manufacturers for cGMP compliance and quality control; failure could impact sales and regulatory approvals[454] - Dependence on international third-party licensees for ex-U.S. development and commercialization; their failure to perform could adversely affect business and results of operations[456] - Reliance on third parties to conduct nonclinical studies and clinical trials; their failure to meet deadlines or comply with regulations could delay development programs[460] Risks Related to Our Intellectual Property This section discusses risks concerning patent protection, potential infringement, and marketing exclusivity - Commercial success depends on obtaining and maintaining patent protection for nef y and product candidates; failure would materially harm the business[465][466] - Patent protection may not be sufficiently broad, or may be lost, adversely affecting the ability to prevent competitors from commercializing similar products[470] - Litigation for infringing third-party IP rights could be costly, time-consuming, and prevent or delay commercialization[501] - The company has not received U.S. non-patent marketing exclusivity for nef y, potentially leading to earlier generic competition[515] - In the EU, EURnef y received eight years of data protection and ten years of marketing protection[516] Risks Related to Employee Matters and Managing Growth This section addresses risks related to attracting talent, managing organizational growth, and employee misconduct - Success is highly dependent on the ability to attract and retain highly skilled executive officers and employees in a competitive industry[530][531][532] - Rapid expansion of the organization and headcount (from 23 to 162 full-time employees between July 2024 and June 2025) presents difficulties in managing growth[535] - Misconduct by employees, contractors, or partners (e.g., fraudulent conduct, non-compliance with regulations) could lead to significant liability and reputational harm[534] Risks Related to the Securities Markets and Ownership of Our Common Stock This section covers risks related to stock price volatility, corporate governance, and dividend policy - The market price of common stock is subject to significant fluctuations due to various factors, including financial performance, regulatory approvals, competition, and macroeconomic conditions[538] - Delaware law and provisions in the company's certificate of incorporation and bylaws could make a merger, tender offer, or proxy contest difficult, potentially depressing the stock price[542][544] - The company does not anticipate paying any cash dividends in the foreseeable future, with capital appreciation being the sole source of gain for stockholders[550] General Risk Factors This section includes broader risks such as geopolitical events impacting global trade and supply chains - Geo-political events (e.g., Russia-Ukraine war, Middle East conflict) could adversely impact global trade, currency exchange rates, inflation, and supply chains, affecting the company's business and stock price[552] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item reports no unregistered sales of equity securities or use of proceeds for the period - No unregistered sales of equity securities or use of proceeds to report[557] Item 5. Other Information This section provides other information, including Rule 10b5-1 trading arrangements adopted or modified by directors and officers Rule 10b5-1 Trading Arrangements This section details Rule 10b5-1 trading plans adopted or modified by company directors and officers - Several directors and officers adopted or modified Rule 10b5-1 trading plans during Q2 2025[559] | Name and Position | Action | Adoption/Termination Date | Type of Trading Arrangement | Total Shares of Common Stock to be Sold | Expiration Date | | :---------------- | :----- | :------------------------ | :-------------------------- | :-------------------------------------- | :-------------- | | Richard Lowenthal, CEO (on behalf of trusts) | Adoption | May 21, 2025 | Rule 10b5-1 | 2,100,000 | May 14, 2027 | | Sarina Tanimoto, CMO (on behalf of trusts) | Adoption | May 21, 2025 | Rule 10b5-1 | 2,100,000 | May 14, 2027 | | Laura Shawver, Director | Adoption | May 21, 2025 | Rule 10b5-1 | 128,562 | Dec 31, 2025 | | Kathleen Scott, CFO | Adoption | May 22, 2025 | Rule 10b5-1 | 50,000 | May 22, 2026 | | Alexander Fitzpatrick, CLO | Termination/Adoption | May 29, 2025 | Rule 10b5-1 | 100,000 | Jan 30, 2026 | Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including key agreements and certifications - Key exhibits include the Co-Promotion Agreement with ALK-Abelló Inc., the Third Amendment to the Manufacturing Agreement with Renaissance Lakewood, LLC, and certifications from the Principal Executive and Financial Officers[564]