ARS Pharmaceuticals (SPRY) presents a compelling investment opportunity within the underserved market for convenient, user-friendly epinephrine auto-injectors. The company’s lead product candidate, neffy™, a needle-free, intranasal epinephrine spray, is poised to disrupt the existing market landscape and address significant unmet needs. This report provides an in-depth analysis of SPRY, culminating in a “Buy” recommendation based on the company’s promising product pipeline, substantial market opportunity, and attractive valuation.
Executive Summary
SPRY is developing neffy™ to address the limitations of current epinephrine auto-injectors, primarily needle-related anxiety and complex administration. This novel approach offers advantages such as ease of use, improved patient compliance, and potentially faster absorption. We believe neffy™ has the potential to capture significant market share and drive substantial value for investors. Our 12-month price target of $25.00 represents a significant upside from the current market price and reflects our confidence in SPRY’s future prospects. Key upcoming catalysts include the anticipated PDUFA date in 2025 and subsequent commercial launch.
Industry Overview
The global epinephrine auto-injector market is estimated at $2.5 billion and is projected to grow at a CAGR of 7.2% through 2030.1 Growth is driven by rising prevalence of severe allergies, increasing awareness of anaphylaxis, and government initiatives promoting access to emergency allergy treatments. The current market is dominated by Mylan’s EpiPen®, but its market share has eroded due to pricing controversies and the emergence of competitors. This landscape presents a significant opportunity for innovative products like neffy™ to gain traction.2
Company Analysis
SPRY’s primary value driver is neffy™. The company’s pipeline also includes an intranasal glucagon spray for hypoglycemia, currently in Phase I trials, which offers further upside potential. SPRY’s management team has a proven track record in the pharmaceutical industry, and the company is backed by reputable institutional investors, providing additional confidence in its ability to execute its strategy.
Investment Thesis
Our investment thesis rests on three key pillars:
- Unmet Need: neffy™ addresses significant unmet needs in the epinephrine auto-injector market by offering a needle-free alternative, potentially improving patient compliance and reducing anxiety associated with injections.
- Market Disruption: neffy™’s ease of use and portability, along with its potential for faster absorption, positions it as a disruptive force in the market. We anticipate robust market penetration upon commercialization.
- Attractive Valuation: SPRY’s current market capitalization does not fully reflect the potential of neffy™. Our valuation analysis suggests substantial upside potential, considering the addressable market and expected market share capture.
Valuation & Forecasts
We employed a discounted cash flow (DCF) analysis to determine our price target, incorporating conservative market share assumptions and a discount rate of 11.5%. Our base-case scenario projects peak sales of $650 million by 2027, implying a significant upside from current levels.3, 4
| Year | Revenue ($M) | EBITDA ($M) | FCF ($M) |
|---|---|---|---|
| 2025 | 120 | -20 | -40 |
| 2026 | 300 | 50 | 20 |
| 2027 | 500 | 150 | 100 |
Note: These figures are projections based on our analysis and are subject to change.
Risks
Key risks include potential regulatory delays, competition from established players, and uncertainties surrounding payer reimbursement. We also acknowledge the risks associated with the successful commercialization of a novel drug delivery system. However, we believe the potential rewards outweigh these risks given the significant unmet need and neffy™’s competitive advantages.
Recommendation
We initiate coverage on SPRY with a “Buy” rating and a 12-month price target of $25.00. This target is based on our DCF valuation and reflects our confidence in SPRY’s ability to execute its strategy and capture a significant share of the epinephrine auto-injector market.
1 IQVIA Allergy Market Report.
2 SPRY SEC Filings.
3 StockAnalysis.
4 DirectorTalk Interviews.
