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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 (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, 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 candidatesdemonstrated 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.

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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.

neffy U.S. 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.

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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; 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 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 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. 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 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.

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.

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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

Revenues

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: non-refundable, up-front 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.

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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 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:

• indirect expenses including insurance and facility-related expenses.

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

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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;

• the number of patients that participate in the trials;

• the number of sites included in the trials;

• the countries in which the trials are conducted;

• the length of time required to enroll eligible patients;

• the number of doses that patients receive;

• the drop-out or discontinuation rates of patients;

• significant and changing government regulation and regulatory guidance;

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, 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.

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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.

Other Income, net

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

Results of Operations

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

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

Year Ended December 31, Dollar %

Revenue:

Product revenue, net $ 7,255 $ — $ 7,255 * %

Revenue under supply agreements 365 — 365 *

Operating expenses:

Income tax provision 288 — 288 *

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* Not meaningful

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

Year Ended December 31,

Selling, general and administrative 11,579 6,961

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Revenues. 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 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):

Year Ended December 31,

Manufacturing and non-clinical development 11,547 11,209

Total research and development expenses $ 19,580 $ 20,266

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 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.

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Liquidity and Capital Resources

Sources of Liquidity and Capital

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. 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 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, 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.

Cash flows

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

Year Ended December 31,

Net cash and cash equivalents used in investing activities (106,101 ) (87,180 )

Net cash and cash equivalents provided by financing activities 72,399 6,899

Net decrease in cash and cash equivalents $ (20,154 ) $ (139,547 )

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. This consisted primarily of a net loss of $54.4 million, a decrease in our operating liabilities of $5.9 million, an increase in our operating assets of $1.4 million, and non-cash charges of $2.4 million. The decrease in our operating liabilities was primarily due to a decrease in contract liability of $3.1 million and a decrease in accounts payable and accrued liabilities of $2.8 million. The increase in our operating assets was primarily due to an increase in prepaid and other assets of $1.4 million. 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.

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.

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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.

Future Funding Requirements

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. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Additionally, the process of testing product candidates in clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.

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

• revenue received from commercial sales of neffy;

• the costs of operating as a public company.

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Until such time, if ever, as we can generate substantial product revenues to support our cost structure, we expect to finance our cash needs through a combination of 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. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. In addition, our current or future debt agreements may limit our ability to incur additional debt. 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 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

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.

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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Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). 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 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. Actual results may differ from these estimates under different assumptions or conditions.

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.

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.

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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

See Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements for information about recent accounting pronouncements, the timing of their adoption, and our assessment, if any, of their potential impact on our financial condition and results of operations.

Emerging Growth Company and Smaller Reporting Company Status

We are an emerging growth company, as defined in the JOBS Act. For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved.

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Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. 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 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 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. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation and other matters.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not required for a “smaller reporting company” as defined under Item 10(f)(1) of Regulation S-K of the Securities Act.

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Item 8. Financial Statements and Supplementary Data

Page

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 121

Consolidated Balance Sheets 122

Consolidated Statements of Operations and Comprehensive Income (Loss) 123

Consolidated Statements of Stockholders’ Equity 124

Consolidated Statements of Cash Flows 125

Notes to Consolidated Financial Statements 126

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of ARS Pharmaceuticals, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of ARS Pharmaceuticals, Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2019.

San Diego, California

March 20, 2025

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ARS Pharmaceuticals, Inc.

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share amounts)

Assets

Current assets:

Accounts receivable, net 8,175 —

Prepaid expenses and other current assets 6,886 3,366

Long-term inventories 5,307 —

Intangible assets, net 7,371 —

Liabilities and stockholders’ equity

Current liabilities:

Contract liability, current 557 —

Lease liability, current 42 237

Financing liability 69,383 —

Contract liability 1,532 —

Lease liability, net of current portion — 37

Commitments and contingencies (Note 10)

Stockholders’ equity

Accumulated other comprehensive gain, net 220 49

Total liabilities and stockholders’ equity $ 351,153 $ 233,188

The accompanying notes are an integral part of these financial statements.

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ARS Pharmaceuticals, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except share and per share information)

Year Ended December 31,

Revenue:

Product revenue, net $ 7,255 $ —

Revenue under collaboration agreements 81,529 30

Revenue under supply agreements 365 —

Operating expenses:

Income (loss) before income taxes 8,286 (54,365 )

Income tax provision 288 —

Comprehensive income (loss) $ 8,169 $ (54,723 )

Net income (loss) per share:

The accompanying notes are an integral part of these financial statements.

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ARS Pharmaceuticals, Inc.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

Common Stock

Stock-based compensation — — 9,347 — — 9,347

Net income and comprehensive income — — — 171 7,998 8,169

The accompanying notes are an integral part of these financial statements

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ARS Pharmaceuticals, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended December 31,

Cash flows from operating activities:

Amortization and accretion, net (7,254 ) (6,848 )

Changes in operating assets and liabilities:

Accounts receivable (8,175 ) —

Inventories (5,945 ) —

Prepaid and other assets (6,191 ) (1,435 )

Operating right-of-use assets and lease liabilities, net (19 ) (12 )

Net cash provided by (used in) operating activities 13,548 (59,266 )

Cash flows from investing activities:

Purchases of short-term investments, available-for-sale (356,038 ) (272,005 )

Maturities of short-term investments, available-for-sale 258,000 185,000

Payments of milestone obligations under license agreements (7,500 ) —

Purchase of property and equipment (563 ) (175 )

Net cash used in investing activities (106,101 ) (87,180 )

Cash flows from financing activities:

Financing liability 69,383 —

Net cash provided by financing activities 72,399 6,899

Net change in cash and cash equivalents (20,154 ) (139,547 )

Cash and cash equivalents at beginning of period 70,971 210,518

Cash and cash equivalents at end of period $ 50,817 $ 70,971

Supplemental cash flow information:

Stock-based compensation capitalized into inventory $ 319 $ —

Purchases of inventories included in accounts payable $ 4,255 $ —

The accompanying notes are an integral part of these financial statements.

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ARS Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements

1. Nature of Business

Description of Business

ARS Pharmaceuticals, Inc. (“ARS”, “ARS Pharma” or the “Company”) is a biopharmaceutical company focused on the commercialization and development of neffy (previously referred to as ARS-1 and currently identified in the EU by the trade name 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 European Commission-approved needle-free epinephrine product, and the first new delivery method for epinephrine in more than 35 years.

The Company incorporated in Delaware in January 2016 and is located in San Diego, California. The Company has a wholly owned subsidiary, ARS Pharmaceuticals Operations, Inc., incorporated in Delaware in August 2015, through which it conducts substantially all its operations. ARS Pharmaceuticals Operations, Inc. has a wholly owned subsidiary in Ireland, ARS Pharmaceuticals IRL, Limited, to facilitate the filing of regulatory approval for neffy in European countries.

Liquidity and Capital Resources

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred net operating losses since its inception and had an accumulated deficit of $123.3 million as of December 31, 2024. The Company had cash, cash equivalents, and short-term investments of $314.0 million as of December 31, 2024 and has not generated positive cash flows from operations. To date, the Company has funded its operations primarily with proceeds from the merger with Silverback in November 2022 (the “Merger”), the issuance of convertible preferred stock, payments earned under collaboration agreements, bank debt, and limited net product sales. The Company’s currently available cash, cash equivalents, and short-term investments as of December 31, 2024 are sufficient to meet its anticipated cash requirements for at least the 12 months following the date these financial statements are issued.

From August 5, 2015 (inception) through December 31, 2024, the Company has devoted substantially all of its efforts to developing intellectual property, conducting product development and clinical trials, organizing and staffing the Company, business planning, raising capital, building infrastructure, pre-commercial and commercial activities, and providing general and administrative support for these operations. The Company has a limited operating history, and the sales and income potential of the Company’s business and market are unproven. Management expects operating expenses to increase for the foreseeable future and there can be no assurance that the Company will ever achieve profitability, or if achieved, that it will be sustained on a continuing basis.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”), and Accounting Standards Update (“ASU”), of the Financial Accounting Standards Board (“FASB”). The Company’s financial statements are presented on a consolidated basis, which include the accounts of ARS Pharmaceuticals, Inc., ARS Pharmaceuticals Operations, Inc. and ARS Pharmaceuticals IRL, Limited. All intercompany accounts and transactions have been eliminated in consolidation. The Company’s functional and reporting currency is the U.S. dollar. Assets and liabilities that are not denominated in the functional currency are remeasured into U.S. dollars at foreign currency exchange rates in effect at the balance sheet date except for nonmonetary assets, which are remeasured at historical foreign currency exchange rates in effect at the date of transaction. Net realized and unrealized gains and losses from foreign currency transactions and remeasurement are reported in other income in the consolidated statements of operations and comprehensive income (loss). All adjustments considered necessary for a fair presentation have been included.

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Use of Estimates

The preparation of the Company’s consolidated financial statements requires it to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes. The most significant estimates in the Company’s consolidated financial statements relate to revenue recognized for its collaboration agreements, accruals for variable components of product revenue, and accruals for research and development expenses and valuation of equity awards. These estimates and assumptions are based on current facts, historical experience and various other factors 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 and the recording of revenue and expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

Cash and Cash Equivalents

Cash and cash equivalents include cash readily available in checking, money market mutual funds, and short-term investments with remaining maturities when purchased of 90 days or less. The Company considers all highly liquid investments with remaining maturities when purchased of 90 days or less to be cash equivalents.

Trade Accounts Receivable and Allowance

Trade accounts receivable are amounts owed to the Company by its customers for product that has been delivered. Trade accounts receivable are recorded at wholesale acquisition cost (“WAC”), less purchase price discounts, prompt pay discounts, chargebacks, and an allowance for credit losses, if any. The allowance for credit losses is the Company’s estimate of losses over the life of the receivables. The Company determines the allowance for credit losses based on each customer’s trade accounts receivable balance and age, their financial condition, and the general economic environment. The Company must also use professional judgment because neffy was commercially launched in September 2024 and historical data is limited. The Company is currently operating under the Title Agreement (as defined in Note 4 - Revenue) with its 3PL Agent (as defined in Note 4 - Revenue) and the 3PL Agent retains all credit and collection risk on sales to the Company’s wholesale distributors and pharmacy customers.

When the collectability of an invoice is no longer probable, the Company will create a reserve for that specific receivable. If a receivable is determined to be uncollectible, it is charged against the general credit loss reserve or the reserve for the specific receivable, if one exists. No allowance for credit losses was deemed necessary at December 31, 2024.

Investments

The Company invests excess cash in investment grade fixed income securities. These investments are included in short-term investments on the balance sheets, classified as available-for-sale, and reported at fair value with unrealized gains and losses included in accumulated other comprehensive gain, net. Realized gains and losses on the sale of securities are recognized in net income or loss.

Fair Value of Financial Instruments

Cash, cash equivalents, and short-term investments are carried at fair value. The carrying amounts of all accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities, and contract liability, are considered to be representative of their respective fair values because of the short-term nature of those instruments.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, and short-term investments. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits and limits its exposure to cash risk by placing its cash with high credit quality financial institutions.

The Company reviews its financial instruments portfolio on a quarterly basis to determine if any unrealized losses have resulted from a credit loss or other factors. As part of the review, management considers factors such as historical experience, market data, issuer-specific factors, and current economic conditions. This review is subjective, as it requires management to evaluate whether an event or change in circumstances has occurred in that period that may be related to credit issues.

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The Company is also subject to credit risk related to its trade accounts receivable from product sales. neffy is distributed primarily through wholesale distributors and pharmacies. These entities are not obligated to purchase any set number of units and they distribute neffy on demand as orders are received. The Company extends credit to its customers in the normal course of business after evaluating their overall financial condition. As stated above, the Company is currently operating under the Title Agreement with its 3PL Agent (as defined in Note 4 - Revenue) and the 3PL Agent retains all credit and collection risk on sales to the Company’s wholesale distributors and pharmacy customers. As of December 31, 2024, the Company’s 3PL Agent made up 93% of its trade accounts receivable balance. For the year ended December 31, 2024, the Company’s seven largest customers combined made up 94% of its gross product sales. Historically, the Company has not experienced any credit losses from product sales. For the year ended December 31, 2024, the Company’s three largest customers combined made up 100% of its revenue under collaboration agreements.

Inventories

Inventories consist of finished goods held for sale and distribution, raw materials and work in process, and include labor and overhead. Inventories are stated at the lower of cost or net realizable value, and are determined on a first-in, first-out basis. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company periodically reviews its inventory to identify obsolete, slow-moving, or otherwise unsalable inventories, and establishes allowances for situations in which the cost of the inventory is not expected to be recovered. Such impairment charges, if any, are recorded in cost of goods sold, on the consolidated statements of operations.

The Company capitalizes inventory costs after regulatory approval, when future commercialization is considered probable and a future economic benefit is expected to be realized. Prior to regulatory approval, the Company records inventory costs as research and development expenses. As such, when regulatory approval is received, this may result in zero-cost inventory which does not have a carrying value. This inventory is available to the Company to utilize for commercial operations as well as ongoing research and development activities.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, generally five years. Repair and maintenance costs are charged to expense as incurred.

Impairment of Long-Lived Assets

Long-lived assets consist primarily of property and equipment and intangible assets. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability is measured by comparison of the carrying amount to the future undiscounted net cash flows which the asset or asset group are expected to generate, including its eventual residual value. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds its fair value. The Company has not recognized any impairment losses from inception through December 31, 2024.

Leases

The Company determines the initial classification and measurement of its right-of-use (“ROU”) asset and lease liabilities at the lease commencement date and thereafter, if modified. The Company recognizes a ROU asset for its operating leases with lease terms greater than 12 months. The lease term includes any renewal options and termination options that the Company is reasonably assured to exercise. The lease liability is calculated by using the present value of all lease payments, with the present value determined by using the incremental borrowing rate for operating leases determined by using the incremental borrowing rate of interest that the Company would pay to borrow on a collateralized basis an amount equal to the lease payments in a similar economic environment as well as a review of peer companies. Variable charges for common area maintenance and other variable costs are recognized as expense as incurred. Rent expense for operating leases is recognized on a straight-line basis over the reasonably assured lease term based on the total lease payments and is included in research and development and general and administrative expenses in the consolidated statements of operations and comprehensive income (loss).

Intangible Assets

Intangible assets are measured at fair value as of the acquisition date or, in the case of commercial milestone payments, the date they become due. The evaluation of intangible assets includes assessing the amortization period for which the asset is expected to contribute to the future cash flows of the Company. Intangible assets with finite useful lives are amortized over their estimated useful lives, primarily on a straight-line basis when the Company is unable to reliably estimate the pattern of cash flow.

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Revenue Recognition

The Company’s revenues consist of product sales of neffy and revenue derived from its collaboration and out-licensing agreements. See Note 4 - Revenue for more detail on product revenue, and Note 9 - Collaboration and Out-Licensing for more detail on revenue from collaboration and out-licensing agreements.

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). 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) the Company satisfies each performance obligation. At contract inception, the Company assesses the goods or services promised within each contract, determines whether each promised good or service is distinct and identifies those that are performance obligations. The Company recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

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, supply agreement fees, 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.

Research and Development Costs

Research and development are expensed in the period incurred. Research and development costs primarily consist of salaries and related expenses for personnel, stock-based compensation expense, external research and development costs incurred under agreements with contract research organizations, investigative sites and consultants to conduct clinical studies, costs related to compliance with regulatory requirements, costs related to manufacturing the Company’s product candidates (including neffy prior to FDA approval in August 2024) for clinical trials and other allocated expenses.

Payments for research and development activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and payments made in advance of performance are reflected in the accompanying consolidated balance sheets as prepaid expenses. The Company records accruals for estimated costs incurred for ongoing research and development activities. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the services, including the phase or completion of events, invoices received and contracted costs. The Company uses judgments and estimates to determine the prepaid or accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates.

Advertising

Costs for producing advertising are expensed when incurred. Costs for communicating advertising, such as search engine marketing, banner advertisements, social media advertisements, and print advertisements, are recorded as prepaid expenses and then expensed when the advertisement occurs. The Company’s advertising expense was $12.5 million for the year ended December 31, 2024.

Patent Costs

Costs related to filing and pursuing patent applications are recorded as general and administrative expenses in the statements of operations and expensed as incurred since recoverability of such expenditures is uncertain.

License Fees

Costs incurred to acquire technology licenses and milestone payments made on existing agreements are charged to research and development expense or capitalized based upon the asset achieving technological feasibility in accordance with management’s assessment regarding the ultimate recoverability of the amounts paid and the potential for alternative future use.

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Acquired in-process research and development expense

Acquired in-process research and development expense (“IPR&D”) is expensed on the acquisition date if there is no alternative future use. Contingent consideration payments in asset acquisitions are recognized when the contingency is resolved and the consideration becomes payable. Milestone payments made to third parties subsequent to regulatory approval will be capitalized as intangible assets and amortized over the estimated remaining useful life of the related product.

Stock-Based Compensation

Stock-based compensation expense represents the cost of the grant date fair value of stock option grants recognized over the requisite service period of the awards (usually the vesting period) on a straight-line basis. The Company recognizes expense for awards subject to performance-based milestones over the remaining service period when management determines that achievement of the milestone is probable. Management evaluates when the achievement of a performance-based milestone is probable based on the expected satisfaction of the performance conditions at each reporting date. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model and recognizes forfeitures as they occur. In the event that stock-based awards are granted in contemplation of or shortly before a planned release of material non-public information, and such information is expected to result in a material increase in the share price of the Company’s common stock, the Company may consider whether an adjustment to the observable market price is required when estimating the grant date fair value.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. The Company’s comprehensive income or loss typically consists of the change in unrealized gains and losses on available-for-sale securities.

Segment Reporting

Operating segments are components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker for purposes of making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business as one operating segment.

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (ASU 2023-07), which requires issuers to make additional disclosures with respect to segment expenses, including required disclosure on an annual and interim basis for significant segment expenses and other segment items. ASU 2023-07 also permits the disclosure of more than one measure of a segment’s profit or loss. ASU 2023-07 was effective for the Company on January 1, 2024 for annual periods and on January 1, 2025 for interim periods. The adoption of this new standard did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements — Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. The new standard requires a company to expand its existing income tax disclosures, specifically related to the rate reconciliation and income taxes paid. The standard is effective for the Company beginning in fiscal year 2025, with early adoption permitted. The Company does not expect to early adopt the new standard. The new standard is expected to be applied prospectively, but retrospective application is permitted. The Company is currently evaluating the impact of ASU 2023-09 on the financial statements and related disclosures.

3. Net Income (Loss) Per Share

Basic net income (loss) per share attributable to common stockholders is calculated using the weighted-average number of shares of common stock outstanding for the period, without consideration of potentially dilutive securities. Diluted net income (loss) per share attributable to common stockholders is calculated using the weighted-average number of common stock outstanding and, when dilutive, potential shares of common stock outstanding during the period. The impact of potential shares of common stock outstanding is generally antidilutive during periods of net loss.

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The following table provides the calculation of basic and diluted net income (loss) per share (in thousands, except share and per share information):

As of December 31,

Net income (loss) per share, basic:

Shares used in computation:

Net income (loss) per share, basic $ 0.08 $ (0.57 )

Net income (loss) per share, diluted:

Shares used in computation:

Weighted-average effect of potentially dilutive securities:

Shares to be purchased under Employee Stock Purchase Plan 47,237 —

Restricted stock units 1,882 —

Net income (loss) per share, diluted $ 0.08 $ (0.57 )

The following securities are excluded from the calculation of weighted-average dilutive common shares because their inclusion would have been antidilutive.

As of December 31,

Warrants to purchase common stock — 45,456

Restricted stock units — 4,144

4. Revenue

The Company’s revenues consist primarily of product sales of neffy and revenue derived from its collaboration and out-licensing agreements. See Note 9 - Collaboration and Out-Licensing for further discussion related to those arrangements.

Product Revenue

neffy was approved by the FDA in August 2024, and the Company began generating product revenue from sales of neffy in September 2024. The Company uses a third party logistics provider (“3PL Agent”) to fulfill orders of neffy to the Company’s customers. The 3PL Agent provides services to the Company that include warehousing, distribution, order and accounts receivable management, and data management.

The Company entered into a title model agreement (“Title Agreement”) with the 3PL Agent so that the 3PL Agent may purchase and take title to neffy and then sell it to the Company’s wholesale distributors and pharmacy customers that have contracted to make a purchase. Under the Title Agreement, the economic substance of the transaction is such that the Company does not recognize revenue until neffy is sold and title has transferred from the 3PL Agent to a wholesale distributor or pharmacy.

The Company also entered into sales agreements with pharmacies that are not subject to the Title Agreement. Under these agreements, the pharmacy holds neffy under consignment. Under the consignment model, the Company recognizes revenue when neffy is sold to a patient, at which point title transfers from the Company directly to the patient.

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Product revenue is recorded with each sale at the transaction price, 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.” 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. Trade accounts receivable due to the Company from contracts with its customers are stated separately in the balance sheet, net of various allowances as described in the Trade Accounts Receivable and Allowance policy in Note 2 - Summary of Significant Accounting Policies.

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.

In accordance with ASC 606, the Company must make significant judgments to determine the estimate for certain Gross-to-Net Adjustments. The specific considerations that the Company uses in estimating the amounts related to Gross-to-Net Adjustments are as follows:

Distribution services fees – The Company pays distribution service fees to its wholesale distributors. These fees are a contractually fixed percentage of WAC and are calculated at the time of sale based on the purchased amount. These fees are recorded as other current liabilities on the consolidated balance sheets.

Commercial pharmacy discounts – The Company provides discounts to its pharmacy customers. These discounts are a contractually fixed percentage of WAC and are a direct reduction from the WAC price they are charged. They are calculated at the time of sale based on the purchased amount. These discounts are recorded as contra trade accounts receivable on the consolidated balance sheets.

Prompt pay discounts – The Company incentivizes on time invoice payments through prompt pay discounts. Prompt pay discounts are typically taken by customers, so an estimate of the discount is recorded at the time of sale based on the purchased amount. Prompt pay discount estimates are recorded as contra trade accounts receivable on the consolidated balance sheets.

Chargebacks – Certain government entities and covered entities (e.g. Veterans Administration, 340B covered entities) can purchase the product at a price discounted below WAC. The difference between the government or covered entity purchase price and WAC will be charged back to the Company. The Company estimates the amount of chargebacks based on the expected number of claims and the related cost that is associated with the revenue being recognized for product that remains in the distribution channel at the end of each reporting period. Estimated chargebacks are recorded as contra trade accounts receivable on the consolidated balance sheets.

Rebates – The Company provides commercial rebates to pharmacy benefit managers and managed care organizations and is subject to mandatory discount obligations under the Medicare, Medicaid, and Tricare programs. The rebate amounts for these programs are determined by contractual arrangements or statutory requirements. Rebates are owed after the product has been dispensed to a patient and the Company has been invoiced. The Company estimates the amount in rebates based on the expected number of claims and the related cost that is associated with the revenue being recognized for product that remains in the distribution channel at the end of each reporting period. Rebate estimates are recorded as other current liabilities on the consolidated balance sheets.

Co-payment program – The Company offers co-payment assistance programs to commercially insured patients whose insurance requires a co-payment to be made when filling their prescription. The Company estimates the amount of co-payment assistance based on the expected volume and the average buy down rate associated with the revenue being recognized for product that remains in the distribution channel at the end of each reporting period. Co-payment programs estimates are recorded as other current liabilities on the consolidated balance sheets.

Product returns – Customers have the right to return damaged product, product that is within six months or less of the labeled expiration date, or product that is past the expiration date by no more than twelve months. neffy was commercially launched in September 2024 and due to the lack of historical sales and returns data, the Company used professional judgment and industry data to estimate returns. A reserve for potential product returns is recorded as other current liabilities on the consolidated balance sheets.

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5. Inventories

The Company began to capitalize the inventory costs associated with neffy upon FDA approval in August 2024 when future commercialization was considered probable and it was determined that the inventory had a probable future economic benefit. These inventory costs consist primarily of purchased materials, third-party manufacturing costs, and packaging and serialization services. Noncurrent inventory consists of inventory anticipated to remain on hand for more than one year from the balance sheet date.

Capitalized inventories consisted of the following (in thousands):

As of December 31,

Finished goods $ 5,212 —

Total inventory, current 5,212 —

Raw materials, noncurrent 4,674 —

Work in process, noncurrent 19 —

Finished goods, noncurrent 614 —

Total inventory $ 10,519 $ —

Prior to FDA approval in August 2024, costs incurred for the manufacture of neffy were recorded as research and development expenses, which upon approval resulted in zero-cost inventory. The Company had $11.7 million in zero-cost inventory remaining as of December 31, 2024, none of which was determined to be obsolete.

6. Fair Value Measurements

The Company categorizes its assets and liabilities measured at fair value in accordance with the authoritative accounting guidance that establishes a consistent framework for measuring fair value and expands disclosures for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

The following table identifies the Company’s assets that were measured at fair value on a recurring basis (in thousands):

Cash and cash equivalents - Money market mutual funds 1 $ 6,506 $ — $ — $ 6,506

Cash and cash equivalents - U.S. Treasury securities 2 42,382 5 — 42,387

There were no transfers between the Level 1 and Level 2 categories or into or out of the Level 3 category during the periods presented. During the year ended December 31, 2024, the Company purchased $356.0 million in short-term investments, and there was $258.0 million in maturities of short-term investments. During the year ended December 31, 2023, the Company purchased $272.0 million in short-term investments, and there was $185.0 million in maturities of short-term investments.

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The Company’s short-term investments portfolio contains investments in U.S. Treasury securities that have an effective maturity date that is less than one year from the respective balance sheet date. The Company's money market mutual fund holdings are highly liquid and invest primarily in cash and U.S. Treasury securities.

There was a $0.2 million net unrealized gain on available-for-sale securities for the year ended December 31, 2024 and a $0.4 million net unrealized loss on available-for-sale securities for the year ended December 31, 2023. For the year ended December 31, 2023, $0.3 million was reclassified from accumulated other comprehensive gain to other income. Management determined that the gross unrealized losses on the Company’s available-for-sale securities as of December 31, 2024 were primarily attributable to current economic and market conditions and not credit risk. As of December 31, 2024 and 2023, no allowance for credit losses was recorded. It is neither management’s intention to sell nor is it more likely than not that the Company will be required to sell any investments prior to recovery of its amortized cost basis, which is expected to be at maturity.

Accrued interest on the Company's available-for-sale securities was $1.0 million as of December 31, 2024 and is included in prepaid expenses and other current assets in the accompanying consolidated balance sheet.

As of December 31, 2024 and 2023, the Company did not have any liabilities that were measured at fair value on a recurring basis.

7. Balance Sheet Details

Prepaid expenses and other current assets consisted of the following (in thousands):

Fixed assets, net consisted of the following (in thousands):

Furniture and fixtures 255 81

Leasehold improvements 24 24

Less accumulated depreciation (200 ) (121 )

Depreciation expense was $0.1 million for the years ended December 31, 2024 and 2023.

Other long-term assets consisted of the following (in thousands):

Prepaid supply agreement fee $ 2,800 $ —

Capitalized software implementation costs 314 617

Security deposit — 21

Accounts payable and accrued liabilities consisted of the following (in thousands):

Accrued inventory 4,255 —

Accrued gross-to-net adjustments 2,179 —

Accrued marketing related expenses 1,855 42

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8. Intangible assets, net

As described in Note 11 - In-Licensing and Supply, under the Aegis Agreement the Company capitalized a $2.5 million milestone payment in August 2024 and a $5.0 million milestone payment in September 2024. The assets are amortized on a straight-line basis over the estimated life of the intellectual property of 14.5 years, beginning from the first commercial sale of neffy in September 2024.

Intangible assets, net, all of which are finite-lived, consisted of the following (in thousands):

Capitalized milestone payments $ 7,500 $ —

Less accumulated depreciation (129 ) —

The amortization expense for the year ended December 31, 2024 was $0.1 million.

As of December 31, 2024, estimated future amortization expense for capitalized intangible assets is as follows for the next five years (in thousands):

Amount

9. Collaboration and Out-Licensing

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 the Company’s repurchase would be accounted for as additional financing proceeds and would increase the financing obligation on the Company’s 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.

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Transaction Price Allocation. At the inception of each arrangement, the Company identifies its distinct performance obligations, 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, also known as 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.

Alfresa Agreement

In March 2020, the Company signed a Letter of Intent (“LOI”) with Alfresa Pharma Corporation (“Alfresa”) for the right to negotiate a definitive agreement for the exclusive license and sublicensable right to develop, register, import, manufacture and commercialize neffy in Japan in exchange for an upfront payment of $2.0 million. In April 2020, the Company entered into a Collaboration and License Agreement for the rights pursuant to the LOI. Under the agreement, the Company delivered a license to neffy technology, completed a required clinical study, and remains obligated to use commercially reasonable efforts to develop and commercialize neffy in Japan. The parties agreed to share the cost of any additional clinical studies required for approval of neffy in Japan. Alfresa is solely responsible for regulatory and commercialization activities and may elect to assume responsibility for manufacturing and supplying drug product for commercial use in Japan. Either party may terminate the agreement for certain breaches of the agreement. Unless terminated earlier by either or both parties, the term of the agreement will continue until the later of (i) expiration of the last-to-expire patent in Japan; or (ii) 10 years after the commercial sale of neffy in Japan.

In addition to the $2.0 million received under the LOI, the Company was initially eligible to receive up to $13.0 million of milestone payments upon achievement of certain clinical and regulatory milestones. Further, the Company is eligible to receive a negotiable transfer price expected to be in the low-double-digit percentage on net sales subject to the regulatory approval to commercialize neffy in Japan.

At the commencement of this collaboration, the Company identified the following performance obligations: the license for neffy and research and development services, both of which have been completed. The Company determined the initial transaction price to be $7.0 million, which includes a clinical milestone as it was deemed not probable of significant reversal at the inception of the agreement. Due to the uncertainty in the achievement of the regulatory and commercial milestones, the variable consideration associated with these future milestone payments has been fully constrained and is excluded from the transaction price until such time that the Company concludes that it is probable that a significant reversal of previously recognized revenue will not occur. These estimates will be reassessed at each reporting period. The transaction price was allocated to the performance obligations based on the estimated stand-alone selling price of each performance obligation.

In July 2020, the Company earned a $5.0 million milestone payment upon the completion of a clinical milestone in Japan. In November 2024, the Company earned a $6.0 million milestone payment upon the completion of a regulatory milestone in Japan. Of the $13.0 million in milestone payments that the company was eligible to earn, $11.0 million in milestone payments has been earned and a final $2.0 million regulatory milestone remains. The Company recognized $6.0 million and less than $0.1 million in revenue for the years ended 2024 and 2023, respectively, in the accompanying consolidated statements of operations and comprehensive income (loss). There was no contract liability as of December 31, 2024.

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Recordati Agreement

In September 2020, the Company entered into a License and Supply Agreement (the “Recordati Agreement”) with Recordati Ireland, Ltd. (“Recordati”) for the exclusive license and sublicensable right to develop, import, manufacture or have manufactured commercial product, file and hold regulatory approvals and commercialize neffy in Europe and certain European Free Trade Association, Russia/the Commonwealth of Independent States, Middle East and African countries (the “Recordati Territory”).

Under the terms of the Recordati Agreement, the Company received an upfront payment of $11.8 million and a regulatory milestone payment of $6.0 million during 2020.

At the commencement of this collaboration, the Company identified the following performance obligations: the license for neffy in the defined territory and the research and development services. The Company determined the initial transaction price to be the $11.8 million. Due to the uncertainty in the achievement of all the developmental and commercial milestones, at inception of the contract, the variable consideration associated with future milestone payments was fully constrained and excluded from the transaction price until such time that the Company concludes that it is probable that a significant reversal of previously recognized revenue will not occur. The transaction price was allocated to the performance obligations based on the estimated stand-alone selling price of each performance obligation. In November 2020, the Company earned a regulatory milestone of $6.0 million.

On February 22, 2023, the Company and Recordati entered into a termination agreement (the “Recordati Termination Agreement”), pursuant to which, among other things, the Company and Recordati agreed to terminate the Recordati Agreement. Pursuant to the Recordati Termination Agreement, the Company reacquired all of the Recordati rights, paid Recordati a one-time upfront payment of €3.0 million ($3.3 million in U.S. dollars), and has 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 (collectively, the “Recordati Rights”).

The Company determined that the Recordati Rights at the time of entering into the Recordati Termination Agreement had no alternative future use and therefore recorded the €3.0 million upfront payment to Recordati as an IPR&D expense presented within research and development expense. The Recordati Termination Agreement ended the Company’s performance obligations pursuant to the Recordati Agreement and consequently the existing contract liability of $3.1 million previously received from Recordati was recorded against IPR&D expense presented within research and development expense in the accompanying consolidated statements of operations and comprehensive income (loss). Accordingly, no revenue has been recognized subsequent to the Recordati Termination Agreement. In June 2024, the EMA regulatory milestone was met and a €2.0 million ($2.1 million in U.S. dollars) expense was recorded in research and development expense in the accompanying consolidated statements of operations and comprehensive income (loss). The Company paid the EMA regulatory milestone to Recordati in July 2024.

Pediatrix Agreement

In March 2021, the Company entered into a Collaboration and Distribution Agreement with Pediatrix Therapeutics, Inc. (“Pediatrix”) for the exclusive license and sublicensable right to develop, import, manufacture or have manufactured commercial product, file and hold regulatory approvals and commercialize neffy in the People’s Republic of China, Taiwan, Macau, and Hong Kong. Under the agreement, Pediatrix is responsible, at its sole cost and expense, for all ongoing development work that is necessary for or otherwise supports regulatory approval in the defined territory, including all clinical trials, and activities related to post approval commitments and commercialization tests. In addition, Pediatrix is responsible for commercialization activities and may elect to assume responsibility for manufacturing and supplying drug product for commercial use. The Company is responsible for the manufacturing of product for clinical studies as well as commercial supply, all at a negotiated transfer price. Either party may terminate the agreement for certain breaches of the agreement. Unless terminated earlier by either or both parties, the term of the agreement will continue as long as Pediatrix has commercial sales of neffy in the region, or 10 years after the first commercial sale.

Under the terms of the agreement, the Company received an upfront payment of $3.0 million. In addition, the Company is eligible to receive up to $84.0 million of milestone payments upon achievement of certain regulatory and commercial sales milestones. The next eligible milestone is a $4.0 million regulatory milestone. Subject to regulatory approval, the Company will earn tiered royalties in the low-double-digits on annual net sales in the region and will receive a per unit supply price for the sale of commercial supply to Pediatrix.

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At the commencement of this collaboration, the Company identified performance obligations related to the delivery of the license for neffy in the defined territory and manufacturing of product for clinical studies and commercial supply. The Company concluded that the license was distinct from potential supply obligation. The supply provisions are effectively options granted to Pediatrix to purchase future goods and did not contain a material right. The Company determined the initial transaction price to be the $3.0 million. Due to the uncertainty in the achievement of all the developmental and commercial milestones, the variable consideration associated with these future milestone payments has been fully constrained and is excluded from the transaction price until such time that the Company concludes that it is probable that a significant reversal of previously recognized revenue will not occur. These estimates will be reassessed at each reporting period. The Company recognized revenue of the full $3.0 million during the year ended December 31, 2021.

Seqirus Agreement

In March 2024, the Company entered into a License and Distribution Agreement (the “Seqirus Agreement”) with Seqirus Pty, Ltd. (“Seqirus”) for the exclusive license to commercialize neffy in Australia and New Zealand (the “Seqirus Territory”). Under the Seqirus Agreement, the Company is responsible for the transfer of know-how, which includes regulatory materials, regulatory data, and commercialization data, and also for the manufacturing of product for commercial supply which is available to Seqirus at a negotiated price. Seqirus is solely responsible for all regulatory and commercialization activities in the Seqirus Territory. Either party may terminate the Seqirus Agreement for certain breaches. Unless terminated earlier by either or both parties, the initial term of the Seqirus Agreement is 15 years from the first commercial sale of neffy in the Seqirus Territory. The Seqirus Agreement will automatically renew for two-year periods unless either party gives a notice to terminate at least 12 months prior to the end of the initial or any renewal term.

Under the terms of the Seqirus Agreement, the Company received an upfront payment of $0.5 million in May 2024. In addition, the Company was eligible to receive up to $4.5 million of milestone payments upon achievement of certain event milestones. Subject to regulatory approval in Australia and New Zealand, the Company will also receive a per unit supply price for the sale of commercial supply to Seqirus.

At the commencement of this collaboration, the Company identified one performance obligation which is the delivery of the license for neffy in the Seqirus Territory in combination with the transfer of know-how. The Company determined that the option to purchase the commercial supply does not represent a material right. The Company determined the initial transaction price to be the $0.5 million upfront payment. Due to the uncertainty in the achievement of all the regulatory milestones, the variable consideration associated with these future milestone payments has been fully constrained and is excluded from the transaction price until such time that the Company concludes that it is probable that a significant reversal of previously recognized revenue will not occur. The variable consideration will be reassessed at each reporting period. In May 2024, the Company delivered the license for neffy in the Seqirus Territory in combination with the transfer of know-how and recognized $0.5 million in revenue. In August 2024, the first milestone event was met and the Company recognized $1.5 million in revenue. In summary, the Company recognized $2.0 million in revenue for the year ended December 31, 2024 in the accompanying consolidated statements of operations and comprehensive income (loss).

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 trade name for neffy in the European Union) (epinephrine nasal spray) (“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, the Company is obligated to transfer to ALK the existing marketing authorizations for the Products in ALK’s territory. The Company is 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.

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Under the ALK Agreement, ALK made a $145.0 million upfront payment to the Company in November 2024. The Company is 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 the Company obtaining regulatory approval for the Product in Canada by a specified time. The Company is 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 the Company 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 the Company 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. The Company may terminate the ALK Agreement in the event ALK makes certain challenges to certain of the Company’s patents. Prior to a change of control and outside of a set period of time after which the Company commences change of control negotiations, the Company 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 (the “Repurchase Option”). The Company may also terminate the ALK Agreement if ALK commercializes a non-injectable epinephrine product or manufactures such a product in the United States.

In connection with the ALK Agreement, the Company and ALK also entered into a commercial supply agreement (the “Supply Agreement”) in November 2024, under which the Company will supply ALK’s requirements (and ALK will purchase from the Company 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. The contract term for the Supply Agreement is coterminous with the ALK Agreement. Either the Company or ALK may terminate the Supply Agreement in the event of an uncured material breach of the other party.

Accounting Assessment

The Company concluded that the ALK Agreement and the Supply Agreement qualify as a contract with a customer under ASC 606 as one combined arrangement. The Company identified the following performance obligations: (i) exclusive commercialization license in the European Economic Area (the “EEA License”); (ii) exclusive commercialization license in the rest of the ALK Territory (the “ROW License”) and; (iii) five separate development and regulatory services performance obligations. The Company also evaluated the (i) promise to add a New Product and new indications to the ALK Agreement, and (ii) the promises under the Supply Agreement, and concluded that these promises did not meet the definition of a performance obligation nor did these promises convey a material right to ALK.

The Company determined that the non-refundable upfront payment of $145.0 million is the estimated transaction price at contract inception. The outstanding regulatory milestone payments (totaling $15.0 million) were fully constrained at contract inception and as of December 31, 2024, as a result of the uncertainty of whether any of the milestones will be achieved. In making the assessment of the constraint utilizing the most likely amount method, the Company considered the stage of development and the risks associated with the remaining development required to achieve the milestones, as well as whether the achievement of the milestone is outside the control of the Company or ALK. The Company has determined that the commercial milestone ($5.0 million) and the sales-based milestones and royalties will be recognized on the later of when the related sales occur or when control of the associated license has been transferred, as the Company determined that such sales-based consideration relates predominantly to the licenses granted to ALK. The Company reevaluates the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur, and will include regulatory milestones in the transaction price if it is probable that a significant revenue reversal will not occur in future periods.

At contract inception, the Company determined the estimated standalone selling prices for each performance obligation in order to allocate the transaction price among the performance obligations. The standalone selling price for the licenses was estimated using the adjusted market assessment approach. Under this method, the Company forecasted future cash flows expected in the ALK Territory, the probability of commercialization success, and a market discount rate. To estimate the standalone selling prices of the development and regulatory services, the Company forecasted its expected costs of satisfying each performance obligation inclusive of an appropriate margin for that service.

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The Company allocated the total transaction price to each performance obligation on a relative standalone selling price basis and determined whether revenue should be recognized at a point in time or over time. The Company allocated $69.4 million to the EEA License performance obligation; $73.1 million to the ROW License performance obligation and; $2.6 million to the development and regulatory services performance obligations.

Revenue should be recognized when, or as, an entity satisfies a performance obligation by transferring a promised good or service to a customer, i.e., when the customer obtains control of the good or service. The licenses granted to ALK are being accounted for as distinct performance obligations. The licenses relate to functional intellectual property for which revenue is recognized at a point in time. In the case of the EEA License, the Company evaluated the impact of the Company’s Repurchase Option, and determined that, as a result of the Company’s ability to repurchase the license, control of the EEA License has not been transferred to ALK under ASC 606. The Company determined that the transaction price allocated to the EEA License should be accounted for as a financing liability, due to the repurchase price being greater than the original selling price of this performance obligation. Control of the EEA License will not be considered transferred to ALK until such time that the Repurchase Option lapses, which under the terms of the ALK Agreement, will occur upon the expiration of the contract, or exercise by the Company of the Repurchase Option. The Company recognized the transaction price allocated to the EEA License of $69.4 million as a financing liability in its consolidated balance sheet as of December 31, 2024.

In the case of the ROW License, the point in time for recognition of revenue was shortly after the inception of the contract because the customer obtained control of the license and was able to use and benefit from its right to use the intellectual property at that point. The Company recognized the transaction price allocated to the ROW License of $73.1 million as revenue under collaboration agreements in its consolidated statements of operations and comprehensive income (loss) for the year ended December 31, 2024.

The development and regulatory services performance obligations under the ALK Agreement each represent a separate performance obligation. The development and regulatory services, which are transferred to the customer over time, were provided to ALK from inception of the agreement and are expected to continue through 2028. Revenue related to the development and regulatory services performance obligations was initially recorded as contract liability and is being recognized as services are performed based on the costs incurred through the end of each reporting period, as a percentage of the estimated total costs to be incurred for these performance obligations. The Company recognized $0.5 million of revenue related to the development and regulatory services performance obligations during the year ended December 31, 2024 on its consolidated statements of operations and comprehensive income (loss). As of December 31, 2024, the accompanying consolidated balance sheet includes a contract liability of $0.6 million classified as current and $1.5 million classified as noncurrent, associated with these performance obligations, based on the expected period of performance for the development and regulatory services.

Contract Liability

A reconciliation of contract liability from collaboration and licensing agreements is as follows (in thousands):

Balance at December 31, 2023 $ —

Contract liability at inception under the ALK Agreement 2,563

Revenue recognized under the ALK Agreement (474 )

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10. Commitments and Contingencies

Leases

In October 2021, the Company entered into a 38-month noncancelable lease for its current headquarters location consisting of 4,047 rentable square feet of office space in San Diego, California. Under the terms of the agreement, there is no option to extend the lease, and the Company is subject to additional charges for common area maintenance and other costs. Monthly rental payments due under the lease commenced on December 6, 2021 and escalate through the lease term. The Company prepaid the first month’s rent upon execution of the lease, and the lease agreement provided full rent abatement for the second and third months of the rental term. As of December 31, 2024, the remaining lease term of the Company’s operating lease was 2 months, and the discount rate on the Company’s operating lease was 8%. As there was not an implicit rate within the lease, the discount rate was determined by using a set of peer companies incremental borrowing rates. The Company’s operating lease expense was $0.2 million for each of the years ended December 31, 2024 and 2023. The Company’s variable lease expense was immaterial for each of the years ended December 31, 2024 and 2023. Cash paid for amounts included in the measurement of lease liabilities was $0.2 million for each of the years ended December 31, 2024 and 2023.

As of December 31, 2024, future minimum noncancelable operating lease payments are as follows (in thousands):

Year ending December 31, Amount

Total lease payments 42

Less imputed interest —

Lease liability 42

Less current portion of lease liability (42 )

Lease liability, net of current portion $ —

Contingencies

From time to time, the Company may be involved in various legal proceedings and subject to claims that arise in the ordinary course of business.

On August 12, 2021, Amphastar Pharmaceuticals, Inc. (“Amphastar”) filed a Petition for Inter Partes Review with the United States Patent and Trademark Office (“USPTO”), seeking to invalidate claims 1-20 of United States Patent No. 10,682,414 (the “‘414 patent”). The ‘414 patent issued on June 16, 2020 and is entitled “Intranasal Epinephrine Formulations and Methods for the Treatment of Disease.” The claims of the ‘414 patent are directed to methods of treating a type-1 hypersensitivity reaction, including anaphylaxis, using an aqueous nasal spray pharmaceutical formulation containing epinephrine or a salt thereof in a single dose. On February 9, 2023, the USPTO issued a Final Written Decision finding claims 3-6 and 18-20, which encompass the Company’s neffy product candidate, patentable, and claims 1-2 and 7-17 unpatentable. On April 12, 2023, Amphastar filed a notice of appeal with the United States Court of Appeals for the Federal Circuit. On March 5, 2025, following the completion of briefing by the parties, Amphastar stipulated to the dismissal of its appeal. As a result, the USPTO’s Final Written Decision stands – affirming the validity of claims 3-6 and 18-20 of the ’414 patent.

On July 24, 2023, Aera A/S, an IP consultancy firm in Denmark representing an unidentified opponent, filed a notice of opposition with the European Patent Office (the “EPO”) in respect of EP 3678649 (the “EP ‘649 Patent”), which is a patent directed to a nasal spray formulation of epinephrine, and uses thereof. The Company filed a response to the notice of opposition on December 15, 2023. The EPO scheduled oral proceedings on October 7, 2025, and the Company will continue to vigorously defend the EP ‘649 Patent. The results of any notice of opposition are inherently unpredictable and uncertain, and could result in the EPO finding the patent to be invalid or unenforceable.

Regardless of the outcome, involvement in legal proceedings may have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors. The Company cannot predict the outcome of these suits, and failure by the Company to obtain favorable resolutions could have a material adverse effect on its business, results of operations, and financial condition. The Company’s chances of success on the merits of these suits are still uncertain and any possible loss or range of loss cannot be reasonably estimated and as such the Company has not recorded a liability as of December 31, 2024.

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Except as described above, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or other body pending or, to the knowledge of the Company’s executive officers, threatened against or affecting the Company, the Company’s common stock, any of its subsidiaries or its subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Unconditional Purchase Obligations and Commitments

Unconditional purchase obligations and commitments are defined as agreements to purchase goods or services that are enforceable and legally binding (non-cancelable, or cancelable only in certain circumstances). In the normal course of business, the Company enters into arrangements with suppliers, manufacturers, and various other companies that supply goods or services. These arrangements can include unconditional purchase obligations and commitments.

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. During the year ended December 31 2024, the Company made $0.2 million in purchases under these obligations.

The total amount of unconditional purchase obligations related to hosted software license subscription fees is $3.3 million as of December 31, 2024. Payments by year are as follows: 2025 ($1.4 million), 2026 ($1.5 million), and 2027 ($0.4 million). During the year ended December 31 2024, the Company made $0.6 million in payments under this agreement.

The total amount of commitments related to a corporate sponsorship agreement with Food Allergy Research and Education, Inc. is $7.0 million as of December 31, 2024. Payments by year are as follows: 2025 ($4.0 million) and 2026 ($3.0 million). During the year ended December 31 2024, the Company made $2.0 million in payments under this agreement.

The amounts above do not represent the entire anticipated spend in the future but represent only those items for which the Company is contractually obligated. For this reason, these amounts do not provide an indication of the Company’s expected future cash outflows related to purchases and commitments.

11. In-Licensing and Supply

License Agreement with Aegis

In June 2018, the Company entered into a License Agreement (the “Aegis Agreement”) with Aegis Therapeutics, LLC (“Aegis”). Under the Aegis Agreement, the Company licensed the exclusive, worldwide, royalty-bearing, sublicensable, rights to certain proprietary Aegis technology, patent rights and know-how to develop and commercialize epinephrine products. The Company utilizes this technology in its sole commercial product, neffy. As consideration for the license, the Company paid an upfront license fee of $50,000, which was recorded in research and development expenses in the consolidated statement of operations.

The Company is required to make aggregate milestone payments of up to $20.0 million upon achievement of certain regulatory and commercial milestones. Regulatory milestone payments under the Aegis Agreement are recorded upon completion of the required events, as the triggering events are not considered to be probable until they are achieved. Prior to the FDA approval of neffy in August 2024, regulatory milestone payments were recorded as research and development expenses in the consolidated statement of operations. The Company made a $0.5 million milestone payment to Aegis upon the achievement of a regulatory milestone during 2019, and a $1.0 million milestone payment to Aegis upon the FDA’s acceptance of the Company’s new drug application submission for neffy, which occurred in the third quarter of 2022. Since the approval of neffy in August 2024, regulatory milestone payments have been capitalized as intangible assets in the accompanying consolidated balance sheets. Amortization expense has been recorded to cost of goods sold, in the accompanying consolidated statements of operations and comprehensive income (loss), on a straight-line basis over the estimated life of the intellectual property of 14.5 years. In August 2024, a $2.5 million milestone was met for achieving FDA approval of neffy. In September 2024, a $5.0 million milestone was met for the first commercial sale of neffy. As a result, the Company capitalized $7.5 million as intangible assets in the accompanying consolidated balance sheets in the third quarter of 2024. The Company paid the $2.5 million milestone for achieving FDA approval of neffy in September 2024, and paid the $5.0 million milestone for the first commercial sale of neffy in October 2024. The next milestone payment of $2.0 million is due upon the achievement of certain annual net sales.

The Company also pays royalties based on a mid-single-digit percentage of net product sales on its or its sublicensees’ net sales of the Licensed Products (as defined in the Aegis Agreement) on a product-by-product basis. Royalties are recorded to cost of goods sold in the period the related product revenue is recognized.

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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. Therefore the Company will make all future payments under the Aegis Agreement to OrbiMed. As described in Note 16 - Related Party Transactions, a member of the Company’s Board of Directors is a General Partner at OrbiMed.

The Company is responsible for reimbursing Aegis for patent costs incurred in connection with prosecuting and maintaining patent rights that are specific to epinephrine or epinephrine products. There were no expenses recognized in connection with legal patent fees for the years ended December 31, 2024 and 2023.

The Company may terminate the Aegis Agreement with 30 days written notice or either party may terminate the Aegis Agreement for certain breaches of the Aegis Agreement. Unless terminated earlier by either or both parties, the term of the Aegis Agreement will continue until the final expiration of all royalty obligations under the Aegis Agreement.

In conjunction with the Aegis Agreement, the Company also entered into a supply agreement (the “Aegis Supply Agreement”) with Aegis that allows the Company to purchase materials for preclinical, development and commercial use at predetermined prices. The Company may elect to have Aegis supply minimum quantities but there are no minimum or maximum purchase obligations under the Aegis Supply Agreement unless this election is made. The parties may terminate the Aegis Supply Agreement at any time by mutual agreement. In addition, the parties may terminate the Aegis Supply Agreement in the event of certain breaches of the Aegis Supply Agreement or upon the earlier of the expiration or termination of the Aegis Agreement or June 2028. The Aegis Supply Agreement term may be extended by mutual written agreement. Under the Aegis Supply Agreement, the Company paid $0.7 million and $0.3 million for the years ended December 31, 2024 and 2023, respectively.

Manufacturing Agreement with Renaissance

In September 2020, the Company entered into a manufacturing agreement with Renaissance Lakewood, LLC (“Renaissance”), which was subsequently amended in July 2023 and September 2024 (the “Renaissance Agreement”). Pursuant to the Renaissance Agreement, Renaissance agreed to manufacture for, and provide to the Company, neffy nasal unit dose sprays (“Renaissance Products”). The Company is obligated to provide Renaissance with certain supplies to manufacture the Renaissance Products and to purchase from Renaissance a mid-double-digit percentage of the Company’s annual aggregate Renaissance Product requirements in the EU, and a high-double-digit percentage of the Company’s annual aggregate Renaissance Product requirements in the U.S. The Renaissance Agreement contains conventional commercial pharmaceutical manufacturing provisions including certain minimum purchase amounts to be determined in the future based on forecast needs and minimum batch size projections. The Company may also request Renaissance to perform certain services related to the Renaissance Product, for which the Company will pay reasonable compensation to Renaissance.

Pursuant to the amendment in September 2024, the amended initial term of the Renaissance Agreement commenced on September 17, 2024, and will terminate (a) for Renaissance Product designated for commercial sale in the U.S., on December 31 immediately following the fifth anniversary of the initial U.S. launch date (“U.S. Initial Term”), and (b) for Renaissance Product designated for commercial sale in the EU, on December 31 immediately following the fifth anniversary of the initial EU launch date (“EU Initial Term”), in each case unless earlier terminated by one of the parties. The U.S. Initial Term and EU Initial Term automatically renew for successive two-year terms (“Renewal Term”). Either party may elect not to renew the U.S. Renewal Term and/or the EU Renewal Term by providing the requisite prior notice to the other party, with the initial terms automatically renewing for successive two-year terms, unless either party gives notice pursuant to the Renaissance Agreement. Either party may terminate the Renaissance Agreement (1) for uncured material breach of the other party, (2) upon notice for insolvency-related events of the other party that are not discharged within a defined time period, (3) on a product-by-product basis if the manufacture, distribution or sale would materially contravene any applicable law, (4) by providing the requisite notice if (a) the authorization and approval to distribute or sell Renaissance Product in the U.S. is not granted on or before a specified date, (b) the authorization and approval representing more than a certain number of units of Renaissance Product sold in the U.S. during the last calendar year is withdrawn by the FDA, or (c) the Company decided in its sole discretion to cease commercializing the Renaissance Product in the U.S., (5) in the case of a force majeure event that continues for six months or more, or (6) a violation by the other party of trade control or anti-corruption laws.

Supply Agreement with Ompi

In October 2024, the Company entered into a supply agreement (the “Ompi Agreement”) with Nuova Ompi S.r.l. (“Ompi”), pursuant to which Ompi has agreed to supply glass microvials to support the Company’s manufacture and commercialization of neffy. Under the Ompi Agreement, the Company has committed to purchase, and Ompi has committed to supply, specified annual minimum quantities of glass microvials, which may be increased with prior notice by the Company or through the rolling forecast process, subject to a specified annual cap. Ompi is obligated to establish the relevant manufacturing force, assets and capabilities needed to comply with its supply obligations.

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In December 2024, as partial consideration for the supply arrangement, the Company made an upfront payment of €3.0 million (approximately $3.2 million in U.S. dollars) to Ompi. The supply price for the glass microvials is specified in the Ompi Agreement, subject to an annual adjustment that is capped at a specified percentage except in the case of material and extraordinary increase in Ompi’s cost of manufacturing the glass microvials.

The Ompi Agreement will expire on December 31, 2035, and may be terminated (i) upon the parties’ mutual written consent, (ii) by the Company for any reasonable business reasons (in which case the termination will become effective at the end of the following calendar year), or (iii) by the non-breaching party if the other party is in material breach of the Ompi Agreement and fails to cure such breach within 90 days after receipt of notice thereof from the non-breaching party.

12. Common Stock and Stockholders’ Equity

Authorized Shares

The Company’s current Amended and Restated Certificate of Incorporation authorizes 200,000,000 shares of common stock, par value $0.0001 per share, and 10,000,000 shares of preferred stock, par value $0.0001 per share.

Common Stock

Common stock reserved for future issuance consisted of the following:

Restricted stock units granted and outstanding 2,763 4,144

Common stock reserved for future awards or option grants 5,905,773 6,220,866

13. Stock-Based Compensation

Stock-based compensation expense recognized for all equity awards has been reported in the consolidated statements of operations and comprehensive income (loss) as follows (in thousands):

Year Ended December 31,

Research and development expense $ 2,955 $ 2,274

Selling, general and administrative expense 11,579 6,961

Total stock-based compensation expense $ 14,534 $ 9,235

During the years ended December 31, 2024 and 2023, $0.3 million and no stock compensation expense was capitalized into inventory, respectively.

As of December 31, 2024, the total unrecognized stock-based compensation expense related to outstanding employee options was $41.1 million, which is expected to be recognized over a remaining weighted-average period of approximately 2.52 years.

There were 2,763 and 4,144 and restricted stock units outstanding as of December 31, 2024 and 2023, respectively,

Equity Incentive Plans

In September 2018, ARS Pharma adopted the 2018 Equity Incentive Plan. As a result of the Merger, on November 8, 2022 ARS Pharma assumed Silverback’s 2016 and 2020 Equity Incentive Plans, and Employee Stock Purchase Plan (“ESPP”). During the years ended December 31, 2024 and 2023, there were 69,686 and 44,961 shares of common stock purchased under the ESPP, respectively.

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As of December 31, 2024, 20,839,408 shares were authorized under the 2016 and 2020 Equity Incentive Plans, of which 5,608,428 shares were available for future grant, and 10,721,740 shares were outstanding. As of December 31, 2024, 6,634,333 shares were authorized under the 2018 Equity Incentive Plan, of which 297,345 shares were available for future grant, and 4,442,203 shares were outstanding. The Company does not intend to grant future stock options or other equity awards under the 2016 or 2018 Equity Incentive Plans.

Stock Options

Stock options granted under the Company’s equity incentive plans expire no later than 10 years from the date of grant and generally vest over a four-year period, with vesting either occurring at a rate of 25% at the end of the first year and thereafter in 36 equal monthly installments or on a monthly basis. In the case of awards granted to the Company’s non-employee board members, vesting generally occurs on a monthly basis over three years or in full on an annual basis. The Company issues new shares of common stock upon the exercise of stock options.

A summary of the Company’s stock option activity for the year ended December 31, 2024 is as follows:

The exercisable shares subject to options outstanding at December 31, 2024 in the table above include vested and early exercisable awards. The aggregate intrinsic value in the table above is calculated as the difference between the exercise price of the underlying options and the estimated fair value of the Company’s common stock for all options that were in-the-money at December 31, 2024. The aggregate intrinsic value of options exercised during the years ended December 31, 2024 and 2023 was $14.7 million and $8.5 million, respectively.

The weighted-average grant date fair value per share of option grants for the years ended December 31, 2024 and 2023 was $6.51 and $6.31, respectively. The total fair value of shares vested during the years ended December 31, 2024 and 2023 was $14.1 million and $4.5 million, respectively.

The fair value of stock options granted was estimated using a Black-Scholes option-pricing model (“Black-Scholes”) with the following weighted-average assumptions:

Year Ended December 31,

Expected term (in years) 6.0 6.0

Expected volatility 93.8 % 95.3 %

Risk-free interest rate 3.9 % 3.9 %

Expected dividend yield — —

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The fair value of stock options was determined using the Black-Scholes assumptions below. Each of these inputs is subjective and generally requires significant judgment.

14. Income Taxes

Income tax (benefit) expense consisted of the following (in thousands):

Years Ended December 31,

Current:

Federal $ 260 $ —

Foreign — —

Total current 288 —

Deferred:

Federal — —

State — —

Foreign — —

Total deferred — —

Income tax provision $ 288 $ —

A reconciliation of the federal statutory income tax rate to the Company’s effective tax rate is as follows (in thousands):

Years Ended December 31,

Tax computed at federal statutory rate $ 1,740 $ (11,416 )

State income taxes, net of federal benefit 47 (22 )

FDII deduction (161 ) —

Research and development credits (1,008 ) (1,179 )

Provision for income taxes $ 288 $ —

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Significant components of the Company’s net deferred tax assets were as follows (in thousands):

Years Ended December 31,

Deferred tax assets:

Research and development credits 4,364 4,143

Deferred tax liabilities:

ROU asset (8 ) (53 )

Total deferred tax liabilities (138 ) (112 )

Net deferred tax assets $ — $ —

The Company has established a valuation allowance against net deferred tax assets due to the uncertainty that such assets will be realized. The Company periodically evaluates the recoverability of the deferred assets. At such time as it is determined that it is more likely than not that the deferred tax asset will be realized, the valuation allowance will be reduced. The change in the valuation allowance for the year ended December 31, 2024 was an increase of $7.8 million.

At December 31, 2024, the Company had federal and state net operating loss carryforwards (NOL) of $60.5 million and $2.8 million, respectively. Federal NOL carryforwards of $60.5 million, generated after 2017, may be carried forward indefinitely but can only be utilized to offset 80% of future taxable income. The state NOL carryforwards begin expiring in 2036. State NOLs totaling $1.9 million may be carried forward indefinitely. In addition, the Company has federal and state research and development credit carryforwards totaling $3.7 million and $0.8 million, respectively. The federal research and development credit carryforwards will begin to expire in 2036 unless previously utilized. Of the total state research credits, $0.3 million begin to expire in 2038 unless previously utilized, the remainder does not expire. The NOL and credit carryovers noted above do not include the pre-Merger amounts attributable to Silverback as noted in the IRC Section 382 disclosure in the paragraph below.