ARS Pharmaceuticals, Inc.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis together with our financial statements and related notes included in “Item 8. Financial Statements and Supplementary Data” in this Annual Report. The following discussion contains forward-looking statements that involve risks and uncertainties. For a complete discussion of forward-looking statements, see the section above entitled “Forward Looking Statements.” Our actual results could differ materially from those expressed or implied in any forward-looking statements as a result of various factors, including those set forth under the caption “Item 1A. Risk Factors.”

Overview

We are a biopharmaceutical company focused on the commercialization and development of neffy (currently identified in the European Union (“EU”) and United Kingdom (“U.K.”) by the trade name EURneffy and in China by the trade name 优敏速) for needle-free intranasal delivery of epinephrine for emergency treatment of Type I allergic reactions, including anaphylaxis. neffy is the first and only U.S. Food and Drug Administration (“FDA”) and European Commission-approved needle-free epinephrine product, also has approvals in the U.K., Japan, Australia, and China. It is 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 the market opportunity for neffy in the United States is significant. At the current list price for 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 $3.5 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 $7.0 billion in annual net sales.

We believe neffy’s “no needle, no injection” approach addresses a significant unmet need in the use of epinephrine. There are approximately 40 million people in the U.S. who experience Type I allergic reactions. Of this group, approximately 20 million people are reported to have been diagnosed and experienced severe Type I allergic reactions that may lead to anaphylaxis, and approximately 6.5 million of those were prescribed an epinephrine autoinjector. However, in recent years, only an estimated one-half of those consistently carry their prescribed autoinjector with them. We believe the market opportunity for neffy in the U.S. is significant. Those estimated 3.2 million patients who currently fill their active epinephrine autoinjector prescription would represent approximately $1.8 billion in annual U.S. net sales at neffy’s target estimated gross-to-net yield based on epinephrine device unit volume in 2025.

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In August 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, with neffy 1 mg subsequently approved in March 2025 for patients who are four years of age and older and weigh 15 kg to less than 30 kg. Our launch strategy for neffy in the United States involves direct outreach to high-volume prescribers of epinephrine accounting for approximately 55% of prescriptions in the last year through an efficient sales force. As of December 31, 2025, our sales force is comprised of approximately 106 ARS Pharma employees, who serve as sales reps, key account managers, area sales managers, and national sales directors, as well as 10 virtual sales reps, and approximately 70 sales reps via our co-promotion partner, ALK U.S., who began field operations in June 2025 and will target up to 9,000 specified pediatricians and other prescribers in the U.S. We plan to expand our internal sales force to approximately 150 individuals beginning in the second quarter of 2026. For more information regarding our partners and collaboration agreements, see “Business—Our Collaboration and Licensing Agreements.”

Our launch strategy is also supported by: active participation since November 2024 of approximately 2,800 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 as well as for the ongoing collection of real-world evidence that supports neffy’s clinical equivalence to injection; extensive non-personal promotion including 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 payors 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; our neffyinSchools programs, where more than 9,000 schools to date have opted into receiving two cartons of neffy at no cost with accompanying school nurse education about neffy; partnerships with patient advocacy organizations including disease awareness campaigns; and multi-channel branded direct to consumer advertising including connected television, point of care, endemic and programmatic display, social media, and paid search that initiated in May 2025, as well as linear television advertising that started in June 2025. To reduce the time burden of an in-person healthcare provider visit, we also launched a new commercial initiative in November 2025 called “Get neffy on Us” that offers patients a free visit with a virtual prescriber, along with a $0 co-pay for eligible patients with commercial insurance. We also initiated a U.S. post-marketing registry-based study for neffy for the treatment of anaphylaxis in oral food challenge or allergen immunotherapy clinics in the second quarter of 2025, which is ongoing.

The EC has granted marketing authorization in the EU for EURneffy 2 mg (the trade name for neffy 2 mg in the EU and U.K.), for the emergency treatment of Type I allergic reactions, including anaphylaxis, in adults and children who weigh 30 kg or greater and on January 29, 2026, the Committee for Medicinal Products for Human Use of the EMA adopted a positive opinion, recommending marketing authorization in the EU for EURneffy 1 mg for children who are four years of age and older and weigh 15 kg to less than 30 kg. Through our collaboration with ALK, EURneffy 2 mg was launched in Europe, beginning with Germany in June 2025, followed by the U.K. in October 2025. We received approval of neffy 2 mg and 1 mg in Japan in September 2025, which is expected to launch in the first quarter of 2026 by our collaboration partner, Alfresa. We also received approval of neffy 2 mg and 1 mg doses in Australia in December 2025, with commercial launch by our collaboration partner, Seqirus, initiated in February 2026. In December 2025, we received approval in China of 优敏速 (the trade name for neffy 2 mg in China), with commercial launch by our collaboration partner, Pediatrix, expected to start in the first half of 2026. neffy 2 mg is under review by Health Canada, with a regulatory decision expected in the second quarter of 2026 and if approved, with commercial launch by our collaboration partner, ALK, expected to start later in 2026. neffy has already been approved or is under regulatory review in countries representing approximately 98% of the current global epinephrine autoinjector sales.

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Real-world data supports that neffy delivers similar response rates as injections for the emergency treatment of Type I allergic reactions. In September 2025, we reported survey results of anaphylaxis treatment outcomes in the neffy experience program, which provides 1 mg and 2 mg doses of neffy to allergists for in-office use if patients experience an anaphylactic event during oral food challenges or allergen immunotherapy. These results showed that approximately 90% of patients experiencing anaphylaxis symptoms were effectively treated with a single dose of neffy, which is consistent with that historically reported for epinephrine injection. The results were presented as an oral presentation at the American College of Allergy, Asthma and Immunology (“ACAAI”) meeting in early November 2025 and was also published in the Annals of Allergy, Asthma and Immunology, the official peer-reviewed journal of the ACAAI, in December 2025.

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. In the second quarter of 2025, we initiated a Phase 2b randomized, placebo-controlled outpatient clinical trial involving chronic spontaneous urticaria patients, on chronic treatment regimens, who still experience flares or exacerbations. Interim data from this clinical trial is anticipated in the second half of 2026, followed by the potential initiation of a single pivotal efficacy study in mid-2027.

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 have funded our operations primarily with proceeds from the merger with Silverback Therapeutics, Inc. (“Silverback”) in November 2022, private placement of convertible preferred stock, issuance of common stock, licensing, supply and distribution arrangements with our commercialization partners, debt, and net product sales. As of December 31, 2025, we had cash, cash equivalents, and short-term investments of $245.0 million.

We have incurred net losses in most years since our inception. Net loss for the year ended December 31, 2025 was $171.3 million, and net income for the year ended December 31, 2024 was $8.0 million. As of December 31, 2025, we had an accumulated deficit of $294.6 million. 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 royalties and 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. On September 29, 2025 we entered into a Credit Agreement (the “Credit Agreement”) with RA Capital Agency Services, LLC (as the “Administrative Agent”) and affiliates of OMERS Administration Corporation and RA Capital Management, L.P. as lenders (the “Lenders”), which provides for an aggregate principal amount of up to $250.0 million of term loans from the Lenders to us (the “Credit Facility”). Subject to limited exceptions, we are prohibited from incurring additional indebtedness and entering into certain strategic and licensing transactions without the prior written consent of the Lenders pursuant to the Credit Agreement. 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 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.

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Financial Overview

Revenues

We have recognized 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: non-refundable, upfront license fees; clinical, regulatory, and/or commercial milestone payments; clinical development fees; and royalties or a transfer price on net sales of licensed products if neffy receives marketing approval in these regions. 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 to manufacture neffy for commercial sale, including third-party manufacturing costs, raw material and component costs, excess or obsolete inventory adjustment charges, inventory write offs, packaging services, freight, storage costs, distribution fees, amortization of capitalized in-licensed costs, royalties on product sales, salaries and related expenses for personnel, and stock-based compensation. Prior to the FDA approval of neffy in August 2024, certain inventory components were purchased to manufacture neffy and recorded as research and development expenses, resulting in zero-cost inventory components. 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 inventory components are consumed in commercial production and sold to customers.

As of December 31, 2025, we had $6.7 million in zero-cost inventory components remaining, and no zero-cost inventory components were determined to be obsolete. Based on our current forecast, we expect zero-cost inventory components to be substantially consumed in commercial production by mid-2026. The time over which the zero-cost inventory components are included in cost of goods sold will depend on several factors, but primarily the timing of future neffy sales.

Research and Development Expenses

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.

Research and development expenses include:

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, stock-based compensation expense, and indirect costs incurred in support of overall research and development, such as facilities-related costs.

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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. 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 neffy and our intranasal epinephrine technology product candidates for the treatment of additional indications will depend on a variety of factors that include:

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 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, stock-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, and insurance costs.

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Selling, general and administrative expenses have increased since the third quarter of 2024 due to the establishment of our sales force, the development and commencement of our marketing campaigns and initiatives, the ALK Co-Promotion Agreement, 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.

Other Income, net

Other income, net consists primarily of interest income from our cash, cash equivalents, and short-term investments, interest expense on our outstanding debt, and net amortization and accretion associated with our short-term investments.

Results of Operations

Comparison of the Years Ended December 31, 2025 and 2024

The following table summarizes our results of operations for the years ended December 31, 2025 and 2024 (in thousands, except percentages):

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* Not meaningful

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