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Item 7. Management’s Discussion and Analysis

2025-03-20 compared with 2024-03-21 · 229 added, 150 removed, 125 unchanged (75% of the section changed)

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Risk Factors.”

We are a biopharmaceutical company focused on the development of ARS-1 (brand name neffy ), a proprietary product candidate for the needle-free intranasal delivery of epinephrine for the emergency treatment of Type I allergic reactions, including anaphylaxis.

neffy is a proprietary composition of epinephrine with an innovative absorption enhancer called Intravail ® , which allows neffy to provide intranasal delivery of epinephrine.

We believe neffy ’s “no needle, no injection” approach will address a significant unmet need in the use of epinephrine, which is currently approved only in injectable formulations for the emergency treatment of Type I allergic reactions.

We are a biopharmaceutical company focused on the commercialization and development of neffy (previously referred to as ARS-1 and, in the case of the 2 mg form, currently identified in the EU by the tradename EURneffy ) for the needle-free intranasal delivery of epinephrine for the emergency treatment of Type I allergic reactions, including anaphylaxis.

neffy is the first and only FDA and EC-approved needle-free epinephrine product, and the first new delivery method for epinephrine in more than 35 years.

neffy is a proprietary composition of epinephrine with an innovative absorption enhancer called Intravail, which allows neffy to safely provide intranasal delivery of epinephrine at a low dose within the exposures of approved injectable products across a range of dosing conditions (including repeat dosing and allergen challenge).

We believe neffy ’s “no needle, no injection” approach addresses a significant unmet need in the use of epinephrine, which, except for neffy , is currently approved only in injectable formulations for the emergency treatment of Type I allergic reactions.

There are approximately 40 million people in the United States who experience Type I allergic reactions.

Of this group, approximately 20 million people have been diagnosed and experienced severe Type I allergic reactions that may lead to anaphylaxis, but only 3.2 million currently have an active epinephrine autoinjector prescription, and of those, only half consistently carry their prescribed autoinjector with them due to the many drawbacks of these devices.

In aggregate, we estimate that 90% of patients prescribed an epinephrine device are not achieving an optimal treatment outcome today.

These drawbacks include the use of needles in the devices, which can result in patient and caregiver injury as well as hesitation and delays in administration due principally to apprehension and pain of needles, allowing the allergic reaction to progress in severity leading to symptoms that seriously impact patient quality of life, to potential need for emergency services and/or hospitalizations, and to life-threatening symptoms or events.

Intra-muscular injections also are subject to dosing errors and risk of accidental blood vessel injections, which can cause a significant spike in the intravascular delivery of epinephrine potentially leading to serious cardiovascular complications or events.

We believe neffy ’s “no needle, no injection” delivery that eliminates apprehension, pain and safety concerns, small size allowing for ease of portability, ease of use, and high reliability provide it with a user-friendly profile that will increase prescriptions for epinephrine and make it more likely for patients and caregivers to administer epinephrine sooner, achieve more rapid symptom relief and prevent the allergic reaction from progressing to a level of severity that could lead to hospitalization or even death.

Data from our studies of neffy demonstrated nasally delivered epinephrine reached blood levels comparable to those of already approved epinephrine injectable products, and produced statistically significant responses compared to injection on pharmacodynamic surrogates for efficacy even one minute after dosing with neffy .

Following the acceptance of our NDA in October 2022 for review by the FDA, on May 11, 2023, the FDA held a virtual meeting of its Pulmonary-Allergy Drugs Advisory Committee (“PADAC”).

At that meeting, on the question of whether the data from our neffy pharmacokinetic (“PK”)/pharmacodynamic (“PD”) results support a favorable benefit-risk assessment in adults for the emergency treatment of Type I allergic reactions including anaphylaxis, the PADAC voted 16 (yes) and 6 (no).

On the question of whether the neffy PK/PD results support a favorable benefit-risk assessment in children ≥30 kg for the emergency treatment of Type I allergic reactions including anaphylaxis, the PADAC voted 17 (yes) and 5 (no).

Although the FDA considers the recommendations of the PADAC, the recommendation by the PADAC is non-binding.

On September 19, 2023, the FDA issued a Complete Response Letter (“CRL”) for our NDA requesting completion of a PK/PD study assessing repeat doses of neffy compared to repeat doses of epinephrine injection product under allergen-induced allergic rhinitis.

This request came after the favorable benefit-risk assessment of the PADAC to approve neffy without need for additional studies.

In addition, we had aligned with the FDA in May 2023, and re-confirmed in August 2023 to conduct this repeat-dose study under allergen-induced allergic rhinitis study as a post-marketing requirement as informative for labeling.

The CRL also requested additional information on nitrosamine impurities to be tested based on new draft guidance issued in August 2023 after the neffy NDA submission.

Our testing, based on methods in the older guidance, did not detect any nitrosamines above or close to the recommended acceptable daily intake limit for chronic exposure.

neffy is for acute use.

We held a type A meeting with the FDA to discuss the contents of the CRL on October 24, 2023.

The FDA reiterated that no other information is required beyond the contents of the CRL.

The FDA also confirmed that the previously agreed design for the repeat-dose clinical study to evaluate the similarity of twice dosing injection and twice dosing neffy under allergen-induced allergic rhinitis will generate the necessary data to answer its outstanding questions regarding neffy .

In addition, the neffy resubmission will be classified as Class 2, with an action expected within six months of receipt date.

We reported topline data in February 2024 from this additional repeat dose study requested by the FDA, and plan to submit our response to the FDA’s CRL early in the second quarter of 2024, with an anticipated PDUFA target action date in the middle of the second half of 2024.

We have also completed the additional nitrosamine testing based on the new draft guidance issued by the FDA in August 2023, and no measurable levels of nitrosamines were detected.

If approved, we believe neffy will be the first “no needle, no injection” marketed epinephrine product for the emergency treatment of type I allergic reactions.

Our marketing authorization application for neffy is also under review by the European Medicines Agency (“EMA”) with a decision expected by mid-2024 following a grant of an extension to respond to additional requests for data and analysis.

We reported positive topline results demonstrating statistically significant and clinically meaningful improvements in treatment-refractory chronic urticaria patients at the American Academy of Allergy and Immunology medical conference in February 2024, and anticipate initiating a Phase 2 clinical trial in the outpatient urticaria setting during 2024.

Since our inception in 2015 as ARS Pharmaceuticals, Inc., we have devoted substantially all of our efforts and financial resources to organizing and staffing our company, business planning, raising capital, performing research and development activities, pre-commercial activities, and providing general and administrative support for these operations.

We do not have any products approved for sale and have not generated any product sales.

We have funded our operations primarily with proceeds from the Merger (as more fully described below), private placement of convertible preferred stock, licensing, supply and distribution arrangements with our commercialization partners, and bank debt.

Of this group, approximately 20 million people have been diagnosed and experienced severe Type I allergic reactions that may lead to anaphylaxis, and approximately 6.5 million were prescribed an epinephrine autoinjector.

However (in 2023, for example), only 3.2 million filled their active epinephrine autoinjector prescription, and of those, only half consistently carry their prescribed autoinjector with them due to the many drawbacks of these devices.

In aggregate, we estimate that up to 90% of patients prescribed an epinephrine device are not achieving an optimal treatment outcome today.

We believe the market opportunity for neffy in the United States alone is significant.

At the current list price for a two-pack of neffy and our target total gross-to-net yield, the estimated 6.5 million patients currently prescribed an epinephrine autoinjector in the United States represents an initial addressable market opportunity of approximately $3 billion in annual net sales, while the remaining 13.5 million diagnosed patients that have not been prescribed an epinephrine product represent an additional addressable market opportunity of approximately $7 billion in annual net sales.

These drawbacks include the use of needles, which can result in patient and caregiver injury as well as hesitation and delays in administration due principally to apprehension and pain of needles, allowing the allergic reaction to progress in severity leading to symptoms that seriously impact patient quality of life, to potential need for emergency services and/or hospitalizations, and to life-threatening symptoms or events.

In particular, intra-muscular injections are subject to dosing errors and risk of accidental blood vessel injections, which can cause a significant spike in the intravascular delivery of epinephrine potentially leading to serious cardiovascular complications or events.

We believe neffy’s and our intranasal epinephrine technology product candidates’ design, particularly the compact size and “no needle, no injection” delivery, eliminates needle-related apprehension and pain, improves portability and ease of use, is highly reliable, and will increase prescriptions for epinephrine, making it more likely that patients and caregivers will administer epinephrine sooner, achieve more rapid symptom relief, and prevent the allergic reaction from progressing to a level of severity that could lead to hospitalization or even death.

Data from our studies of neffy and our intranasal epinephrine technology product candidates demonstrated nasally delivered epinephrine reached blood levels comparable to those of already approved epinephrine injectable products across single dosing, repeat dosing, self-administration or allergen challenge conditions, and produced statistically significant responses compared to injection on pharmacodynamic surrogates for efficacy even one minute after dosing with neffy and our intranasal epinephrine technology product candidates.

On August 9, 2024, the FDA approved neffy 2 mg for the emergency treatment of Type I allergic reactions, including anaphylaxis, in adults and children who weigh 30 kg or greater.

As a result, we initiated commercial launch of neffy 2 mg in the United States, with product becoming available for shipment on September 23, 2024.

This commercialization effort currently includes a direct sales force of 118 individuals targeting high-volume epinephrine prescribers that is supported by branded direct-to-consumer marketing, disease awareness campaigns with advocacy groups and non-personal promotion such as non-personal promotion including continuing medical education programs in collaboration with allergist societies, speaker bureaus, peer-to-peer programs and participation in regional and national medical conferences.

On March 5, 2025, the FDA approved neffy 1 mg for the emergency treatment of Type I allergic reactions, including anaphylaxis, in patients who are four years of age and older and weigh 15 kg to less than 30 kg.

Commercial Launch Initiated in September 2024

Our launch strategy for neffy in the United States involves an initial direct sales force outreach to high-volume prescribers of epinephrine accounting for 40% to 45% of prescriptions in the last year through an efficient sales force comprised of 118 individuals serving as sales reps, virtual reps and areas sales managers that began field operations in early October 2024;

active participation since November 2024 of approximately 2,500 healthcare professionals in our neffy experience program that allows healthcare professionals to use neffy firsthand as rescue therapy for anaphylaxis during in-clinic allergen challenge;

extensive non-personal promotion including continuing medical education programs in collaboration with allergist societies, speaker bureaus, peer-to-peer programs and participation in regional and national medical conferences;

engagement and contracting with payers to obtain timely coverage with favorable gross-to-net discounting;

our neffyconnect program that provides support to physicians and patients including our $25 co-pay savings card, $199 cash price and patient assistance programs;

a telemedicine service to conveniently obtain a prescription online;

partnerships with patient advocacy organizations including disease awareness campaigns in 2025;

and branded direct to consumer advertising including a celebrity that is expected to commence in the second quarter of 2025.

On August 22, 2024, the EC granted marketing authorization in the EU for EURneffy (the trade name for neffy 2 mg in the EU), for the emergency treatment of allergic reactions (anaphylaxis), in adults and children who weigh 30 kg or greater.

Through our collaboration with ALK (discussed below), we anticipate that EURneffy will be made available to patients in certain EU member states in 2025.

Regulatory review of neffy is ongoing in Canada, the United Kingdom, China, Japan, and Australia with filings submitted by the partners, or by ARS Pharma on behalf of our partners, during the fourth quarter of 2024.

neffy has already been approved or is under regulatory review in countries representing approximately 98% of the current global epinephrine autoinjector sales.

Regulatory decisions are anticipated by mid-2025 in the U.K., the second-half of 2025 in Japan, year-end 2025 in Canada, and in the first-half of 2026 in China and Australia.

We reported positive topline results demonstrating statistically significant and clinically meaningful improvements in treatment-refractory chronic urticaria patients at the American Academy of Allergy and Immunology medical conference in February 2024, and anticipate initiating a Phase 2b randomized, placebo controlled outpatient clinical trial in chronic spontaneous urticaria patients on a chronic antihistamine treatment regimen who still experience flares or exacerbations.

This Phase 2b study is anticipated to initiate in the second quarter of 2025, with topline data anticipated in early 2026, followed by the potential initiation of a single pivotal efficacy study in 2026.

Since our inception in 2015 as ARS Pharmaceuticals, Inc., we have devoted substantially all of our efforts to developing intellectual property, conducting product development and clinical trials, organizing and staffing, business planning, raising capital, building infrastructure, pre-commercial and commercial activities, and providing general and administrative support for these operations.

We began commercial operations in September 2024 and therefore have had limited net product sales.

We have funded our operations primarily with proceeds from the Merger (see Note 1 - Nature of Business to the notes to the consolidated financial statements included in this report), private placement of convertible preferred stock, licensing, supply and distribution arrangements with our commercialization partners, bank debt, and limited net product sales.

From inception to December 31, 2024, we have raised $262.3 million in cash, cash equivalents and short-term investments, net of transaction costs, from the Merger;

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$181.0 million from our collaboration, licensing, supply and distribution arrangements;

and $10.0 million from bank debt.

$10.0 million from bank debt, $7.3 million from net product sales and $0.4 million in revenue under supply agreements.

As of December 31, 2024, we had cash, cash equivalents, and short-term investments of $314.0 million.

We have incurred net losses from operations since our inception.

Our net losses were $54.4 million and $34.7 million for the years ended December 31, 2023 and 2022, respectively.

We have incurred net losses from operations in most years since our inception.

Our net income was $8.0 million for the year ended December 31, 2024 and our net loss was $54.4 million for the year ended December 31, 2023.

As of December 31, 2024, we had an accumulated deficit of $123.3 million.

Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials, our expenditures on other development activities, the cost for regulatory filings, expenses for pre-commercial activities to establish sales, marketing and distribution capabilities for our product candidates, and our ability to earn potential regulatory and commercial milestones under our collaboration arrangements.

We expect our expenses and operating losses will increase substantially as our product candidate, neffy potentially is approved by the FDA and we commence commercialization efforts, any future product candidates advance through clinical trials, and we expand our clinical, regulatory, quality, manufacturing and pre-commercial sales and marketing capabilities.

If we obtain marketing approval for any of our product candidates, we will incur significant commercialization expenses for marketing, sales, manufacturing and distribution activities, and added expenditures to expand our operational, financial and management systems and increase personnel to support these operations.

We do not expect to generate any revenues from product sales unless and until we successfully obtain regulatory approval for one or more product candidates, if ever.

Until such time, if ever, as we can generate substantial product revenue, we may finance our operations through our existing cash, cash equivalents, short-term investments, equity offerings, debt financings and other capital sources which may include collaborations, strategic alliances, marketing, distribution or licensing arrangements or other arrangements with third parties.

Until we consistently generate positive net income, if ever, our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials, our expenditures on other development activities, the cost for regulatory filings, expenses for commercial activities to establish, maintain and enhance sales, marketing and distribution capabilities for neffy , the timing and volume of our product sales, and our ability to earn potential regulatory and commercial milestones under our license and collaboration arrangements.

Until such time, if ever, that we can generate substantial product revenue, we may finance our operations through our existing cash, cash equivalents, short-term investments, equity offerings, debt financings and other capital sources which may include collaborations, strategic alliances, marketing, distribution or licensing arrangements or other arrangements with third parties.

However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all.

In addition, any future debt agreements may limit our ability to enter into certain debt financings without the consent of the lenders thereunder.

Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and may require us to delay, reduce or terminate our research and development programs or other operations, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and may require us to delay or reduce our marketing and sales efforts, or delay, reduce or terminate our research and development programs or other operations, or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

We do not own or operate manufacturing facilities.

We currently rely on third-party manufacturers and suppliers for neffy , and we expect to continue to do so to meet our nonclinical, clinical and any commercial activities.

Our third-party manufacturers are required to manufacture our product candidates under cGMP requirements and other applicable laws and regulations.

On November 8, 2022 (the “Closing Date”), Silverback Therapeutics, Inc., a Delaware corporation (“Silverback”), now known as ARS Pharmaceuticals, Inc., completed its reverse merger (the “Merger”) with privately-held ARS Pharmaceuticals, Inc., in accordance with the terms of the agreement and plan of merger and reorganization, dated July 21, 2022, as amended on August 11, 2022 and October 25, 2022 (the “Merger Agreement”), whereby Sabre Merger Sub, Inc.

(“Merger Sub”), a Delaware corporation and wholly-owned subsidiary of Silverback, merged into ARS Pharma, with ARS Pharma surviving as Silverback’s wholly-owned subsidiary.

At the completion of the Merger, the prior ARS Pharma equityholders owned 62% and the prior Silverback equityholders owned 38% of the combined company, in each case on a fully diluted basis using the treasury stock method and excluding out-of-money options of Silverback.

Upon completion of the Merger, Silverback changed its name to ARS Pharmaceuticals, Inc.

As, among other facts, the stockholders of privately-held ARS Pharma owned a majority of the combined company, the Merger was treated for accounting purposes as if ARS Pharma had acquired Silverback.

As a result of the Merger being accounted for as if ARS Pharma had acquired Silverback, all financial statements prior to the Merger are of ARS Pharma.

At the effective time of the Merger (the “Effective Time”), each share of ARS Pharma common stock outstanding immediately prior to the Effective Time, after giving effect to the automatic conversion of all shares of preferred stock of ARS Pharma into shares of ARS Pharma common stock immediately prior to the Effective Time, (excluding shares held as treasury stock by ARS Pharma or held or owned by Silverback, Merger Sub or any subsidiary of Silverback or ARS Pharma and dissenting shares) were automatically converted into the right to receive shares of Silverback common stock equal to the exchange ratio of 1.1819.

Outstanding and unexercised options and warrants to purchase shares of ARS Pharma common stock were converted into options and warrants to purchase shares of Silverback common stock.

Recordati Termination Agreement

In September 2020, we entered into a license and supply agreement (the “Recordati License and Supply Agreement”) with Recordati Ireland, Ltd (“Recordati”).

Pursuant to the Recordati License and Supply Agreement, we granted Recordati an exclusive, royalty-bearing, sublicensable license under our patents relating to neffy to (i) perform Recordati’s development activities on the epinephrine compositions (“Recordati Licensed Compositions”) and related products (“Recordati Licensed Products”) for commercialization in the EU, United Kingdom, and certain countries in the Middle East, Africa and Eurasia (the “Recordati Territory”), (ii) manufacture (or have manufactured) the Recordati Licensed Products for commercialization in the Recordati Territory, (iii) file and hold regulatory approvals for the Licensed Products in the Recordati Territory, and (iv) commercialize the Recordati Licensed Products in the Recordati Territory (collectively, the “Recordati Rights”).

On February 22, 2023, we entered into the Termination Agreement with Recordati, pursuant to which, among other things, we and Recordati agreed to terminate the Recordati License and Supply Agreement.

Pursuant to the Termination Agreement, we reacquired all of the Recordati Rights, paid Recordati a one-time upfront payment of €3.0 million, and have agreed to pay additional payments upon achievement of certain milestones including:

(i) an EMA regulatory milestone payment of €2.0 million, (ii) a milestone payment of €5.0 million upon first commercial sale of a Recordati Licensed Product in the Recordati Territory, and (iii) royalty payments of up to €5.0 million in the aggregate from sales of Recordati Licensed Product(s) in the Recordati Territory.

Reduction in Force

On September 19, 2023, the FDA issued a CRL regarding our NDA for neffy .

On September 29, 2023, we initiated a 20% reduction in force (“RIF”) in order to conserve our cash resources and manage operating expenses until the anticipated PDUFA target action date in the middle of the second half of 2024.

We provided severance payments, continuation of group health insurance coverage, and other benefits for a specified period to the affected employees.

We incurred costs of $0.6 million for termination benefits resulting from the RIF, of which $0.1 million remains accrued for as of December 31, 2023.

We currently rely on third-party manufacturers and suppliers for neffy and our intranasal epinephrine technology product candidates, and we expect to continue to do so to meet our nonclinical, clinical and commercial activities.

Our third-party manufacturers are required to manufacture our product under cGMP requirements and other applicable laws and regulations.

ALK Agreement

In November 2024, the Company entered into a collaboration, license and distribution agreement (the “ALK Agreement”) with ALK-Abelló A/S (“ALK”).

Pursuant to the ALK Agreement, the Company granted to ALK a worldwide (other than the United States, Japan, mainland China, Hong Kong, Taiwan, Macau, Australia and New Zealand) (“ALK Territory”), exclusive license under certain of the Company’s patents and know-how to develop, manufacture and commercialize products containing epinephrine administered intranasally, including EURneffy (the tradename for neffy 2 mg in the European Union) (“Products”), for all human uses, including the immediate or emergency treatment of allergic reactions (including Type I) and anaphylaxis and urticaria, and other future indications as agreed by the parties.

If the Company develops any new intranasally administered product that contains epinephrine and files a new drug application in the United States for such product (“New Product”), upon ALK’s request such New Product will be included as a Product under the ALK Agreement, subject to ALK bearing the costs of development of such New Product for its licensed territory.

Under the ALK Agreement, we are obligated to transfer to ALK the existing marketing authorizations for the Products in ALK’s territory.

We are also required to conduct certain development and regulatory activities for Products in support of obtaining further regulatory approval of Products in ALK’s territory, and will transfer such regulatory approvals to ALK.

ALK is obligated to use commercially reasonable efforts to obtain and maintain regulatory approval for Products through the European Commission and within specified countries within ALK’s territory.

Following such approval for a Product in each indication within specified countries within ALK’s territory, ALK is obligated to use commercially reasonable efforts to commercialize such Product in such indication in such countries and to achieve first commercial sale of a Product in certain countries in accordance with a timeline specified in the ALK Agreement.

Under the ALK Agreement, ALK made an upfront payment to us of $145.0 million in November 2024.

We are eligible to receive regulatory and commercialization milestones of up to $20.0 million and sales-based milestones of up to $300.0 million, provided that $55.0 million of such sales-based milestones are contingent upon us obtaining regulatory approval for the Product in Canada by a specified time.

We are entitled to receive tiered royalty payments on net sales in the mid- to high-teens, subject to certain standard reductions and offsets.

Royalties will be payable, on a Product-by-Product and country-by-country basis, until the latest of the expiration of the licensed patents covering such Product in such country, 15 years from first commercial sale of such Product in such country, or expiration of regulatory exclusivity for such Product in such country.

The contract will expire upon the expiration of the last to expire royalty term for all Products in the ALK Territory, unless terminated earlier.

Either we or ALK may terminate the ALK Agreement in the case of the other party’s insolvency or in the event of an uncured material breach of the other party, except that we may not terminate the ALK Agreement for ALK’s material breach of its commercial diligence obligations.

ALK may terminate the ALK Agreement for convenience upon 12 months’ prior written notice or for a safety or regulatory concern.

We may terminate the ALK Agreement in the event ALK makes certain challenges to certain of our patents.

Prior to a change of control and outside of a set period of time after which we commence change of control negotiations, we may terminate the ALK Agreement with respect to all countries in the European Economic Area (“EEA”) upon prior written notice to ALK and payment of a termination fee that is the higher of an agreed mid-nine digit amount and the fair market value of the Products business in the EEA at the time of such termination.

We may also terminate the ALK Agreement if ALK commercializes a non-injectable epinephrine product or manufactures such a product in the United States.

ALK Supply Agreement

In November 2024, in connection with the ALK Collaboration Agreement, ARS and ALK also entered into a commercial supply agreement (the “Supply Agreement”), under which ARS will supply ALK’s requirements (and ALK will purchase from ARS its requirements) of Products for five years for a specified supply price, after which ALK may elect to transition to itself or its contract manufacturer the manufacture and supply of Products.

Either the Company or ALK may terminate the Supply Agreement in the event of an uncured material breach of the other party.

Financial Overview

To date, we have not generated any revenues from the commercial sale of any products, and we may not generate revenues from the commercial sale of any products.

We have signed collaboration and license agreements including supply and distribution for neffy with Alfresa Pharma in Japan and Pediatrix in China.

We have recognized limited net product sales in the United States since the commercial launch of neffy in September 2024.

We have signed collaboration and license agreements for neffy for all geographies outside of the United States.

The terms of these agreements may include payment to us of one or more of the following:

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and royalties or a transfer price on net sales of licensed products if neffy receives marketing approval in these regions.

In addition, we previously entered into the Recordati License and Supply Agreement, which was terminated in February 2023.

We expect revenues to fluctuate in future periods based on our ability to meet various regulatory milestones, and contingent on successfully obtaining regulatory approval for neffy in the US and the licensed regions, US product sales, commercial milestones, royalties or transfer price earned from our partner’s net sales and the supply of commercial product as set forth in the agreements described earlier.

We expect product revenues to fluctuate in future periods as we continue with the commercial launch of neffy .

We expect revenues under collaboration agreements to fluctuate in future periods based on our ability to meet various regulatory milestones, and contingent on successfully obtaining regulatory approval for neffy in the licensed regions, commercial milestones, royalties or transfer price earned from our partner’s net sales and the supply of commercial product as set forth in the agreements described earlier.

Cost of Goods Sold

Cost of goods sold consists primarily of direct and indirect costs related to the manufacture of neffy for commercial sale, including third-party manufacturing costs, raw material and component costs, packaging services, freight, storage costs, distribution fees, amortization of capitalized in-licensed costs, and royalties on product sales.

Prior to the FDA approval of neffy in August 2024, costs incurred for the manufacture of neffy were recorded as research and development expenses, which resulted in zero-cost inventory.

As a result, the cost of goods sold related to neffy will initially reflect a lower average per unit cost of materials, as previously expensed zero-cost inventory is utilized for commercial production and sold to customers.

We expect the cost of goods sold for neffy to increase in relation to product revenues as we deplete these inventories.

As of December 31, 2024, we had $11.7 million in zero-cost inventory remaining and based on our current forecast, we expect zero-cost inventory to be depleted by mid-2026.

The Company periodically evaluates zero-cost inventory for obsolescence.

This evaluation considers the shelf life of raw materials, work in process, and finished goods as well as estimated sales trends.

As of December 31, 2024, no zero-cost inventory was determined to be obsolete.

Research and Development Expenses

To date, our research and development expenses have been related primarily to clinical development, process development and manufacturing costs of our product candidate.

To date, our research and development expenses have been related primarily to clinical development, process development and manufacturing costs of neffy and our intranasal epinephrine technology product candidates.

Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.

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external research and development expenses incurred under agreements with contract research organizations, or CROs, investigative sites and consultants and other third-party organizations to conduct our clinical studies and development activities;

costs related to manufacturing our product candidates for clinical trials and process validation studies, including fees paid to third-party manufacturers;

costs related to manufacturing neffy and our intranasal epinephrine technology product candidates for clinical trials and process validation studies, including fees paid to third-party manufacturers;

costs related to compliance with regulatory requirements and regulatory filings;

indirect expenses including insurance and facility-related expenses.

Our external research and development expenses for our clinical stage product candidate consist primarily of fees, materials and other costs paid to CROs, CMOs, consultant and contractors.

Our external research and development expenses for neffy and our intranasal epinephrine technology product candidates consist primarily of fees, materials and other costs paid to CROs, CMOs, consultant and contractors.

Our clinical, regulatory, manufacturing, and non-clinical development costs for the periods presented below reflect an allocation of expenses associated with personnel costs, equity-based compensation expense, and indirect costs incurred in support of overall research and development, such as facilities-related costs.

We expect that our research and development expenses will likely decrease in 2024 based on our planned clinical development and manufacturing activities, as we plan to transition to commercialization efforts for the potential launch of our first product in the second half of 2024.

However, the timing for regulatory approvals is outside our control, may be delayed and is uncertain.

We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future clinical trials and the manufacturing costs of our product candidates due to the inherently unpredictable nature of clinical development and manufacturing activities.

We expect our research and development expenses to increase moderately in 2025 based on our planned clinical development and manufacturing activities.

We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future clinical trials and the manufacturing costs of neffy and our intranasal epinephrine technology product candidates due to the inherently unpredictable nature of clinical development and manufacturing activities.

Clinical development and manufacturing timelines, the probability of success and development costs can differ materially from expectations.

We anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential.

In addition, we cannot forecast to what degree our licensing, supply and distribution arrangements would affect our development plans and capital requirements.

The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors that include:

The duration, costs and timing of clinical trials and development of neffy and our intranasal epinephrine technology product candidates for the treatment of additional indications will depend on a variety of factors that include:

per patient trial costs;

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potential additional safety monitoring or other studies requested by regulatory agencies;

the efficacy and safety profile of our product candidates;

the cost to seek regulatory approvals for any product candidates that successfully complete clinical trials;

the efficacy and safety profile of neffy and our current and future intranasal epinephrine technology product candidates;

the cost to seek regulatory approvals for our intranasal epinephrine technology product candidates in additional indications and any product candidates that successfully complete clinical trials;

the timing, receipt, and terms of any approvals from applicable regulatory authorities including the FDA and non-U.S.

maintaining a continued acceptable safety profile of our product candidates following approval, if any, of our product candidates;

maintaining a continued acceptable safety profile of neffy and our intranasal epinephrine technology product candidates;

establishing or maintaining commercial manufacturing capabilities or making arrangements with third-party manufacturers in order to ensure that we or our third-party manufacturers are able to make product successfully;

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the extent to which we establish additional strategic collaborations or other arrangements.

A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate.

A change in the outcome of any of these variables with respect to the development of neffy and our intranasal epinephrine technology product candidates could significantly change the costs and timing associated with the development of that future product candidate.

The process of conducting the necessary clinical research and manufacturing to obtain regulatory approval is costly and time-consuming.

The actual probability of success for our product candidates or any future candidates may be affected by a variety of factors.

We may never succeed in achieving regulatory approval for our product candidates or any future candidates.

Further, a number of factors, including those outside of our control, could adversely impact the timing and duration of our product candidates’ or any future candidates’ development, which could increase our research and development expenses.

General and Administrative

General and administrative expenses consist primarily of salaries, benefits, equity-based compensation for personnel in executive, finance, business development, sales and marketing and other corporate administrative functions.

General and administrative expenses also include pre-commercial launch activities, legal fees incurred relating to corporate and patent matters, professional fees incurred for accounting, auditing, tax and administrative consulting services, market research costs, and insurance costs.

We expect that our general and administrative expenses will increase substantially in 2024 as we add sales and marketing personnel, infrastructure and programs to support pre-commercial activities, and if our product candidates receive marketing approval, commercialization activities.

The actual probability of success for any future candidates may be affected by a variety of factors.

Further, a number of factors, including those outside of our control, could adversely impact the timing and duration of our product’s or any future candidates’ development, which could increase our research and development expenses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of salaries, benefits, equity-based compensation for personnel in executive, finance, business development, sales and marketing and other corporate administrative functions.

Selling, general and administrative expenses also include pre-commercial launch activities prior to product launch, the initiation of commercialization activities in September 2024, legal fees incurred relating to corporate and patent matters, professional fees incurred for accounting, auditing, tax and administrative consulting services, market research costs, and insurance costs.

We expect our selling, general and administrative expenses to increase substantially in 2025.

The increase in expenses is due to our sales force which was established in the third quarter of 2024, the development and commencement of our marketing campaigns and initiatives, the hiring of additional sales and marketing personnel to support full commercialization activities, and the addition of infrastructure and programs to support commercialization activities.

We expect to continue to incur audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums, board of director fees, investor relations costs associated with operating as a public company, patent costs and defense, and general and administrative personnel.

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Comparison of the Years Ended December 31, 2024 and 2023:

The following table summarizes our results of operations for the years ended December 31, 2023 and 2022 (in thousands, except percentages):

The following table summarizes our results of operations for years ended December 31, 2024 and 2023 (in thousands, except percentages):

Year Ended December 31,

Product revenue, net

Revenue under collaboration agreements

Revenue under supply agreements

Total revenue

Operating expenses:

Cost of goods sold

Research and development (1)

General and administrative (1)

Selling, general and administrative (1)

Total operating expenses

Loss from operations

Total other income:

Other income, net

Income (loss) before income taxes

Income tax provision

Net income (loss)

Change in unrealized gains and losses on available-for-sale securities

Comprehensive loss

Comprehensive income (loss)

______________

(1) Includes stock-based compensation expense as follows (in thousands):

* Not meaningful

(1) Includes stock-based compensation expense as follows (in thousands):

Year Ended December 31,

Research and development

General and administrative

Revenues under collaboration agreements were less than $0.1 million and $1.3 million for the years ended December 31, 2023 and 2022, respectively.

The revenues for the years ended December 31, 2023 and 2022 include the recognition of revenue for the portion of upfront and clinical and regulatory milestone payments under our collaboration agreement with Alfresa that have been allocated to research and development services provided for during these periods.

The revenues for the years ended December 31, 2022 also included similar revenues under our collaboration with Recordati.

We expect revenues to fluctuate in future periods based on our ability to meet various regulatory milestones, and contingent on successfully obtaining regulatory approval for neffy in the licensed regions, commercial milestones, royalties or transfer price earned from our partner’s net sales and the supply of commercial product as set forth in these agreements.

Selling, general and administrative

Revenues were $89.1 million and less than $0.1 million for the years ended December 31, 2024 and 2023.

The revenues for the year ended December 31, 2024 includes $81.5 million in revenues under collaboration agreements, $7.3 million in net product revenues for sales of neffy, and $0.4 million in revenue under supply agreements .

The revenues under collaboration agreements consists of $73.1 million under the ALK agreement for the delivery of a license to develop, manufacture and commercialize products containing epinephrine administered intranasally in the ALK territory excluding the EEA, $0.4 million under the ALK agreement for revenue recognized under the regulatory services performance obligations, $6.0 million from a regulatory milestone under the Alfresa agreement, $1.5 million for the first event milestone under the Seqirus Agreement, and $0.5 million for the delivery of the license for neffy in the Seqirus Territory in combination with the transfer of know-how under the Seqirus Agreement.

The revenues for the year ended December 31, 2023 includes the recognition of revenue for the portion of upfront and clinical and regulatory milestone payments under our collaboration agreement with Alfresa that have been allocated to research and development services provided for during that period.

Cost of Goods Sold.

Cost of goods sold were $1.0 million and $0.0 million for the years ended December 31, 2024 and 2023, respectively.

Since prior to August 2024, costs incurred for the manufacture of neffy were recorded as research and development expenses, the cost of goods sold for the year ended December 31, 2024 utilized zero-cost inventory and therefore consisted primarily of distribution fees, royalties, and intangible assets amortization.

Research and Development Expenses .

Research and development expenses were $19.6 million and $20.3 million for the years ended December 31, 2024 and 2023, respectively.

The increase of $1.9 million was primarily due to a $2.1 million increase in stock-based compensation, a $1.1 million increase in payroll-related expenses, a $0.9 million increase in consulting fees, and a $0.5 million increase in other operating expenses.

These aggregated increases were partially offset by a $1.0 million decrease in license milestone expenses, a $0.9 million decrease in in-process research and development expenses, a $0.5 million decrease in clinical trial costs associated with neffy, and a $0.3 million decrease in regulatory filing fees.

The decrease of $0.7 million was primarily due to a $1.3 million decrease in product development expenses, a $1.2 million decrease in consulting fees, a $0.8 million decrease in clinical trial costs associated with neffy, a $0.4 million decrease in payroll-related expenses, and a $0.6 million decrease in other operating expenses.

These aggregated decreases were partially offset by a $2.1 million increase in expense related to an EMA regulatory milestone under the Recordati Termination Agreement, a $0.8 million increase in outside services, and a $0.7 million increase in stock-based compensation,

The following table summarizes our research and development expenses for the years ended December 31, 2024 and 2023 (in thousands):

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Total research and development expenses

General and Administrative Expenses.

General and administrative expenses were $47.3 million and $18.5 million for the years ended December 31, 2023 and 2022, respectively.

The increase of $28.8 million was primarily due to a $13.6 million increase in pre-commercial launch activities related to neffy , a $6.8 million increase in payroll-related expenses, a $2.6 million increase in consulting fees, a $1.3 million increase in stock-based compensation, a $0.7 million increase in insurance costs, a $0.7 million increase in legal expenses, a $0.7 million increase in general overhead, a $0.6 million increase in conference expenses, a $0.5 million increase in recruiting fees, a $0.3 million increase in professional fees for accounting, auditing and tax, and a $1.0 million increase in other operating expenses.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses were $71.7 million and $47.3 million for the years ended December 31, 2024 and 2023, respectively.

The increase of $24.4 million was primarily due to a $11.8 million increase in marketing-related expenses, a $10.6 million increase in payroll-related expenses, a $4.6 million increase in stock-based compensation, a $2.3 million increase in outside services, a $1.6 million increase in legal fees, a $1.4 million increase in meals and travel-related expenses predominantly incurred by the sales team, a $0.4 million increase in professional fees for accounting, auditing and tax, and a $0.3 million increase in conference and seminar expenses.

These aggregated increases were partially offset by a $6.6 million decrease in pre-commercial launch activities related to neffy , a $1.8 million decrease in consulting fees, and a $0.2 million decrease in other operating expenses.

Other Income, Net.

Other income, net was $11.4 million and $13.2 million for the years ended December 31, 2024 and 2023, respectively.

The increase of $12.3 million was primarily due to a $11.7 million increase in interest income from our cash, cash equivalents, and short-term investments, a $0.6 million decrease in interest expense due to the Silicon Valley Bank loan payoff in November 2022, and $0.3 million from the sale of in-process research and development obtained in the Merger.

The decrease of $1.8 million was primarily due to a $2.1 million decrease in interest income from our cash, cash equivalents, and short-term investments, a $0.3 million decrease from the sale of in-process research and development obtained in the Merger, which occurred in the year ended December 31, 2023, and a $0.3 million decrease in other items.

These aggregated decreases were partially offset by a $0.9 million increase in net amortization and accretion associated with our short-term investments.

Liquidity and Capital Resources

Sources of Liquidity and Capital

Since our inception, we have not generated any revenue from any product sale and have incurred significant operating losses and negative cash flows from our operations.

We have not yet commercialized any of our product candidates and we do not expect to generate revenue from sales of any product candidates until the second half of 2024 or after, if at all.

We have funded our operations to date primarily with proceeds from the Merger, the sale of preferred and common stock, revenue earned under collaboration, licensing, supply and distribution agreements, and bank debt.

From inception to December 31, 2023, we have raised $262.3 million in cash, cash equivalents and short-term investments, net of transaction costs, from the Merger, net proceeds of $76.3 million from the issuance of convertible preferred and common stock, $27.8 million from our collaboration, licensing, supply and distribution arrangements, and $10.0 million from bank debt.

Since our inception, we have incurred significant operating losses and negative cash flows from our operations.

We have recognized limited net product sales since the commercial launch of neffy in September 2024.

From inception to December 31, 2024, we have raised $262.3 million in cash, cash equivalents and short-term investments, net of transaction costs, from the Merger, net proceeds of $76.3 million from the issuance of convertible preferred and common stock, $181.0 million from our collaboration, licensing, supply and distribution arrangements, $10.0 million bank debt, and $7.3 million from net product sales, and $0.4 million in revenue under supply agreements.

As of December 31, 2024, we had cash, cash equivalents, and short-term investments of $314.0 million.

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Year Ended December 31,

Net cash and cash equivalents used in operating activities

Net cash and cash equivalents provided by (used in) operating activities

Net cash and cash equivalents used in investing activities

Net cash and cash equivalents provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net decrease in cash and cash equivalents

Operating Activities

During the year ended December 31, 2024, net cash provided by operating activities was $13.5 million.

This consisted primarily of net income of $8.0 million, an increase in our operating liabilities of $18.5 million, an increase in our operating assets of $20.3 million, and non-cash charges of $7.4 million.

The increase in our operating assets was primarily due to an increase in accounts receivable of $8.2 million, an increase in prepaid and other assets of $6.2 million, and an increase in inventories of $5.9 million.

The increase in our operating liabilities was due to an increase in accounts payable and accrued liabilities of $16.4 million and an increase in contract liability of $2.1 million.

The non-cash charges consisted primarily of non-cash stock-based compensation of $14.5 million, partially offset by $7.3 million in net amortization of discounts on short-term investments.

During the year ended December 31, 2023, net cash used in operating activities was $59.3 million.

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The non-cash charges consisted of non-cash stock-based compensation of $9.2 million, partially offset by $6.9 million in net amortization of discounts on short-term investments.

During the year ended December 31, 2022, net cash used in operating activities was $40.1 million.

This consisted primarily of a net loss of $34.7 million, a decrease in our operating liabilities of $11.6 million, an increase in our operating assets of $1.2 million, partially offset by non-cash charges of $7.4 million.

The decrease in our operating liabilities was primarily due to a decrease in accounts payable and accrued liabilities of $10.3 million and a decrease in contract liability of $1.3 million.

The increase in our operating assets was primarily due to an increase in prepaid and other assets of $1.2 million.

The non-cash charges primarily consisted of non-cash stock-based compensation of $5.8 million, expense of acquired in-process research and development of $1.1 million, depreciation, amortization and accretion expense of $0.3 million, and change in fair value of warrant liability of $0.1 million.

Investing Activities

During the year ended December 31, 2024, the cash and cash equivalents used in investing activities was $106.1 million.

This consisted primarily of purchases of short-term investments of $356.0 million, maturities of short-term investments of $258.0 million, payments of milestone obligations under license agreements of $7.5 million, and purchases of property and equipment of $0.6 million.

During the year ended December 31, 2023, the cash and cash equivalents used in investing activities was $87.2 million.

This consisted primarily of purchases of short-term investments of $272.0 million, maturities of short-term investments of $185.0 million, and purchases of property and equipment of $0.2 million.

During the year ended December 31, 2022, the cash and cash equivalents used in investing activities was $0.2 million due to purchases of property and equipment.

Financing Activities

During the year ended December 31, 2024, the cash and cash equivalents provided by financing activities was $72.4 million.

This consisted of $69.4 million from the upfront payment from ALK that was allocated to the EEA License and $3.0 million from stock option exercises and the employee stock purchase plan.

During the year ended December 31, 2023, the cash and cash equivalents provided by financing activities was $6.9 million, which consisted of proceeds from stock option exercises and the employee stock purchase plan.

During the year ended December 31, 2022, the cash and cash equivalents provided by financing activities was $190.7 million which consisted of $198.8 million in net proceeds from the Merger, $0.6 million of proceeds from stock option exercises and the employee stock purchase plan, partially offset by $8.7 million for repayment of the bank note.

Future Funding Requirements

Based on our current operating plan, we believe that our existing cash and cash equivalents will be sufficient to meet our anticipated cash requirements through at least the next three years.

In particular, we expect our cash, cash equivalents, and short-term investments will allow us to fund our expenses related to resubmission and the FDA’s review of our NDA for neffy , fund proof of concept clinical trials of neffy for additional indications, fund pre-commercial manufacturing and sales and marketing activities, and if and when neffy is approved by the FDA, fund our commercial launch.

Based on our current operating plan, we believe that our existing cash, cash equivalents, short-term investments, and revenues from product sales and cash proceeds from collaboration and out-licensing agreements will be sufficient to meet our anticipated cash requirements through at least the next three years.

In particular, we expect our existing cash, cash equivalents, short-term investments, and revenues from net product sales and cash proceeds from collaboration and out-licensing agreements will allow us to fund commercial manufacturing and sales and marketing activities, general operating activities and working capital requirements, and proof of concept clinical trials of neffy for additional indications.

However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially.

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Our future funding requirements will depend on many factors, including:

the scope, progress, results and costs of researching and developing our current product candidates, as well as other additional product candidates we may develop and pursue in the future;

the scope and costs of manufacturing our product candidates and commercial manufacturing activities;

the timing of, and the costs involved in, obtaining marketing approvals for our product candidates;

the number of future product candidates that we may pursue and their development requirements;

subject to receipt of regulatory approval, the costs of commercialization activities for our product candidates, to the extent such costs are not the responsibility of any collaborators, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities;

subject to receipt of regulatory approval, revenue, if any, received from commercial sales of our product candidates or any other additional product candidates we may develop and pursue in the future;

the timing and amount of any milestone and royalty payments under the Aegis License Agreement and the Termination Agreement;

the scope, progress, results and costs of researching and developing our intranasal epinephrine technology for additional indications;

the scope and costs of clinical and commercial manufacturing of neffy and our intranasal epinephrine technology product candidates;

the timing of, and the costs involved in, obtaining marketing approvals for our intranasal epinephrine technology for additional indications;

the number of additional indications for our intranasal epinephrine technology that we may pursue and their development requirements;

the costs of commercialization activities for neffy and our intranasal epinephrine technology product candidates, to the extent such costs are not the responsibility of any collaborators, including the costs and timing of building and maintaining product sales, marketing, distribution and manufacturing capabilities;

revenue received from commercial sales of neffy ;

the timing and amount of any milestone and royalty payments under the ALK Agreement, Pediatrix Agreement, Aegis Agreement, Alfresa Agreement, Recordati Termination Agreement, and the Seqirus Agreement;

the extent to which we in-license or acquire rights to other products, product candidates or technologies;

our headcount growth and associated costs as we expand our employee headcount and establish a commercial infrastructure;

our headcount growth and associated costs as we expand our employee headcount and building and maintaining a commercial infrastructure;

the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights, including enforcing and defending intellectual property related claims;

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If we raise funds through additional collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, development programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock.

Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and disruptions to and volatility in the credit and financial markets in the US, including due to bank failures, and worldwide resulting from macroeconomic factors.

Because of the numerous risks and uncertainties associated with product development, we cannot predict the timing or amount of increased expenses and cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.

Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and disruptions to and volatility in the credit and financial markets in the United States, including due to bank failures, and worldwide resulting from macroeconomic factors.

Because of the numerous risks and uncertainties associated with product development and commercialization, we cannot predict the timing or amount of increased expenses and cannot assure you that we will generate profits or positive cash flows from operating activities in the future.

Material Cash Requirements

Under our license agreement with Aegis, we paid an aggregate $1.5 million for an upfront license fee and meeting certain regulatory milestones, and have remaining payment obligations of up to $18.5 million contingent upon our achievement of certain other regulatory and commercial milestones.

We are also required to make royalty payments in connection with the sale of products developed under that agreement.

We are unable to estimate the timing or likelihood of achieving additional milestones or royalty payments under this agreement.

We are also responsible for reimbursing Aegis for patent costs incurred in connection with prosecuting and maintaining patent rights that are specific to epinephrine or epinephrine products.

Pursuant to the Termination Agreement with Recordati, we made a one-time upfront payment of €3.0 million, and have remaining payment obligations of up to €7.0 million contingent upon our achievement of certain regulatory and commercial milestones, and up to €5.0 million based on a low double-digit percentage of sales of Recordati Licensed Product(s) in the Recordati Territory.

We are unable to estimate the timing or likelihood of achieving these milestones and sales-based payments under this agreement.

In October 2021, we entered into a lease agreement to rent office space with a lease commencement date of December 2021.

The lease has a term of 38 months.

Annual rent expense is $0.2 million and is subject to annual increases of 3%, plus our share of operating expenses and taxes.

The total amount of unconditional purchase obligations related to the supply of raw materials is $64.9 million as of December 31, 2024.

Payment obligations by year are as follows:

2025 ($8.2 million), 2026 ($10.5 million), 2027 ($11.8 million), 2028 ($13.8 million), and $2.9 million per year thereafter through 2035.

The total amount of unconditional purchase obligations related to hosted software license subscription fees is $3.3 million as of December 31, 2024.

Payment obligations by year are as follows:

2025 ($1.4 million), 2026 ($1.5 million), and 2027 ($0.4 million).

In August 2024, we entered into a corporate sponsorship agreement with Food Allergy Research and Education, Inc.

pursuant to which we have payment obligations of $9.0 million over a 28-month period.

Our remaining payment obligations as of December 31, 2024 are $7.0 million.

Estimated payments by year are as follows:

2025 ($4.0 million), and 2026 ($3.0 million).

In June 2018, we entered into a License Agreement (the “Aegis Agreement”) with Aegis Therapeutics, LLC (“Aegis”).

In November 2024, OrbiMed Advisors LLC (“OrbiMed”) entered into an agreement with Aegis, to purchase the rights, royalty interests, and related sales milestone payments on net product sales of neffy .

Our remaining payment obligations to OrbiMed under the Aegis Agreement are contingent upon our achievement of certain commercial milestones and have been reduced to $11.0 million as of December 31, 2024.

Under the Aegis Agreement, we are also required to make royalty payments to OrbiMed based on a mid-single-digit percentage of net product sales.

Future royalty payment amounts are indeterminate since they depend on future revenues, which are uncertain.

On February 22, 2023, we entered into a termination agreement (the “Recordati Termination Agreement”) with Recordati Ireland, Ltd.

(“Recordati”) to reacquire the rights to neffy in Europe and certain European Free Trade Association, Russia/the Commonwealth of Independent States, Middle East and African countries (the “Recordati Territory”).

Pursuant to which, we are obligated to make milestone payments to Recordati that are contingent upon our achievement of certain regulatory and commercial milestones.

Our remaining milestone payment obligations to Recordati have been reduced to €5.0 million (approximately $5.2 million in U.S.

dollars) as of December 31, 2024.

Under the Recordati Termination Agreement, we are also required to make royalty payments to Recordati of up to €5.0 million (approximately $5.2 million in U.S.

dollars) in the aggregate from sales of Recordati Licensed Product(s) in the Recordati Territory.

Future royalty payment amounts are indeterminate since they depend on future revenues, which are uncertain.

We enter into contracts in the normal course of business with third-party contract organizations and vendors for clinical studies, manufacturing and other services and products.

These contracts generally provide for termination after a notice period.

To date, we have not recognized any reserves related to uncertain tax positions.

As of December 31, 2024, we have not recognized any reserves related to uncertain tax positions.

As of December 31, 2024, we had no accrued interest or penalties related to uncertain tax positions.

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The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements.

On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses, stock-based compensation, and valuation allowances for deferred tax assets.

On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue, accrued expenses, stock-based compensation, and valuation allowances for deferred tax assets.

We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

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While our significant accounting policies and estimates are described in more detail in Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements, we believe the following accounting policies and estimates to be most critical to the preparation of our consolidated financial statements.

Accrued Research and Development

We have entered into various agreements with CROs, CMOs, and other service providers.

Our research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs.

The estimated costs of research and development provided, but not yet invoiced, are included in accrued liabilities on the balance sheet.

If the actual timing of the performance of services or the level of effort varies from the original estimates, we will adjust the accrual accordingly.

Payments made to third parties under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period.

To date, our estimated accruals have not differed materially from actual costs incurred.

Net Product Revenue

Our revenues generally consist of product sales of neffy and licenses and milestone revenue generated from license and collaboration agreements.

We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers.

The provisions of ASC 606 require the following steps to determine revenue recognition:

(i) identification of the promised goods or services in the contract;

(ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract;

(iii) measurement of the transaction price, including the constraint on variable consideration;

(iv) allocation of the transaction price to the performance obligations based on estimated selling prices;

and (v) recognition of revenue when (or as) we satisfy each performance obligation.

At contract inception, we assess the goods or services promised within each contract, determine whether each promised good or service is distinct and identify those that are performance obligations.

We recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Product revenue is recorded with each sale at wholesale acquisition cost , net of reserves for variable components, including but not limited to distribution service fees, prompt pay discounts, product returns, chargebacks, rebates, and co-payment assistance, which are collectively referred to as “Gross-to-Net Adjustments.” In accordance with ASC 606, the Company must make significant judgments to determine the estimates for certain Gross-to-Net Adjustments.

Estimates for Gross-to-Net Adjustments are reassessed each reporting period, and adjustments are recorded on a cumulative catch-up basis, which would affect product revenue and net income in the period of adjustment.

The Company utilizes the expected value method when estimating the amount of variable consideration to include in the transaction price with respect to each of the foregoing variable components.

Variable consideration is included in the transaction price only to the extent it is probable that a significant revenue reversal will not occur when the uncertainty associated with the variable consideration is resolved.

Collaboration and License Agreements

The Company has entered into collaboration and licensing agreements, including supply and distribution, to license certain rights to neffy to third parties.

The terms of these arrangements typically include payment to the Company of one or more of the following:

non-refundable, up-front license fees;

clinical, regulatory, and/or commercial milestone payments;

payment for clinical and commercial supply and royalties or a transfer price on the net sales of licensed products.

Licenses of Intellectual Property .

If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, revenue is recognized from non-refundable, up-front payments allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license.

If the license is subject to repurchase by the Company, at its option, control of the license is not considered transferred to the customer, and in such case, the Company would account for the proceeds allocated to such license as either a financing obligation or a lease in accordance with ASC 606.

Future amounts received related to the license which is subject to our repurchase would be accounted for as additional financing proceeds and would increase the financing obligation on our consolidated balance sheet.

The Company would record such financing obligation as revenue when the right to repurchase has lapsed or was exercised.

If the license is not a distinct performance obligation, the Company evaluates the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees.

The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone Payments.

At the inception of each arrangement that includes clinical, regulatory or commercial milestone payments, the Company evaluates whether achieving the milestones is considered probable and estimates the amount to be included in the transaction price using the most likely amount method.

If it is probable that a significant revenue reversal would not occur, the value of the associated milestone is included in the transaction price.

Milestone payments that are not within the Company’s control, such as approvals from regulators or where attainment of the specified event is dependent on the development activities of a third party, are not considered probable of being achieved until those approvals are received or the specified event occurs.

Revenue is recognized when the underlying performance obligation has been met.

Transaction Price Allocation.

At the inception of each arrangement, the Company identifies the distinct performance obligations included in the arrangement, and allocates the transaction price to the performance obligations based upon their relative standalone selling prices.

Standalone selling price is the price at which an entity would sell a promised good or service separately to a customer.

The best evidence of standalone selling price is an observable price of a good or service when sold separately by an entity in similar circumstances to similar customers.

Since the Company typically does not have such evidence, the Company estimates standalone selling price so that the amount that is allocated to each performance obligation equals the amount that the Company expects to receive for transferring the promised goods or services.

The methods that the Company uses to make such estimates include (1) the adjusted market assessment approach, under which the Company forecasts product sales in the appropriate market, considers probability of commercialization success, and estimates discount rates;

and (2) the expected cost of satisfying the performance obligations inclusive of a reasonable margin, or the expected cost plus margin approach.

Research and Development Revenues .

For arrangements that contain research and development commitments, any arrangement consideration allocated to the research and development work is recognized as the underlying services are performed over the research and development term, if the criteria for over-time recognition are met.

If the over-time recognition criteria are not met, research and development performance obligations are recognized at a point in time, when the research and development work is completed.

Clinical and Commercial Supply .

Arrangements that include a promise for the future supply of drug product for either clinical development or commercial supply at the licensee’s discretion are generally considered customer options.

The Company assesses if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations.

Royalty/Transfer Price Revenues .

For arrangements that include sales-based royalties or transfer price, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

The Company has not received any royalty or transfer price revenues as of December 31, 2024.

Recent Accounting Pronouncements

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As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

We will remain an emerging growth company until the earliest to occur of:

(i) the last day of the fiscal year in which we have at least $1.235 billion in annual revenue;

(ii) the date upon which we are deemed to be a “large accelerated filer,” as defined in Rule 12b-2 under the Exchange Act;

(iii) the date on which we have issued more than $1.0 billion in nonconvertible debt securities during the prior three-year period;

and (iv) December 31, 2025.

We will remain an emerging growth company until the earlier of:

(i) the date on which we have issued more than $1.0 billion in nonconvertible debt securities during the prior three-year period;

and (ii) December 31, 2025.

We are also a “smaller reporting company” as defined in the Exchange Act.

We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million measured on the last business day of our second fiscal quarter.

We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year for which audited financial statements are available as of the date of determination and the market value of our stock held by non-affiliates is less than $700 million measured on the last business day of our most recently completed second fiscal quarter.

If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.

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What changed 10-K

Item 7. Management’s Discussion and Analysis