Welcome back. This is Jonathan Aschoff, Senior Biotechnology Analyst at Roth Capital Partners. With me now from Pelthos Therapeutics is CEO Scott Plesha and CFO Frank Knuettel II. Welcome, guys.
Thanks, Jonathan.
We'll start this off. Give us some background on how Pelthos became public and its funding and capitalization at present.
Great. I'll maybe give some history, and we'll let Frank jump into the capitalization. Pelthos and our product, ZELSUVMI, was actually a product that was sitting within Ligand as a subsidiary for a good year and a half, almost two years. Then on July 1st, 2025, we merged into Channel Therapeutics and renamed the company Pelthos. The reason we did that was there was actually brand equity that had built up with the Pelthos name within the ZELSUVMI potential ZELSUVMI prescribers. At that same time, we also raised $50 million PIPE and began trading on the New York Stock Exchange as PTHS. Then I'll let Frank talk a little bit about the capitalization from there.
Thanks, Scott. Frank Knuettel II here, CFO. Channel went public on the NYSE American in February of 2024 and pursued both a clinical program with sodium channel modulation for the treatment of pain, but also with the intent of bringing commercial products, part of which we issued shares and also issued shares to the investors in the $50 million PIPE. All those shares were in the form of a Series A convertible preferred, which exists just for financial reporting purposes and has fixed conversion prices. The summation of which is that while we show about 3.2 million shares of common stock outstanding on an as-converted basis, we have about 8.9 million, giving us a market cap today of about $200 million or so.
Thank you for that. Regarding your lead asset that treats molluscum, describe the unmet need and how ZELSUVMI addresses that need?
Great. Yeah. Thanks, Jonathan. Our first product, ZELSUVMI, is a topical nitric oxide releasing product indicated for molluscum contagiosum in patients one year of age and older for up to 12 weeks. Prior to ZELSUVMI being approved by the FDA, really what was being done was destructive modalities. Patients would have to go into offices, and mostly dermatologists would do this or pediatric derms. They would either use curettage, cryotherapy, or blistering agents to treat these children because in a disease state, about 80% of the patients are in fact 10 and under, 90% are 20 and under. It's really a disease of young children.
Importantly, ZELSUVMI is the first and only FDA-approved product that you can use to treat at home, so it's a topical you just apply daily, again, for up to 12 weeks and has great efficacy and safety associated with it.
Maybe sort of help us understand how mechanical curettage is?
Well, curettage is really just digging out the lesions, so taking an instrument and digging it out. One of the things I'll say is the average age in our studies was 6.5 years of age for these patients with 20 different lesions. What we've learned is when doctors are treating this, they look at three different things. They'll look at the age of the patient, location of lesions, and number of lesions. You can imagine if somebody presents with, in the office as a four year-old with 40 lesions, and they're behind their knee, under the arm, groin, maybe face, it can be really difficult to use those types of treatments. Instead, you know, again, using a topical gel once a day instead is a different way of going about it.
Yeah, that's a lot of scraping.
It is, yeah. Importantly, just to know, you know, when you treat it with those destructive modalities, it's not necessarily one and done either. It could be two, three, four, five different treatments.
Yeah. This sounds a lot better than that. Can you talk about prescription volume trends as well as the number of prescribers that you have, unique prescribers and repeat prescribers?
Yeah. Appreciate that question. We just had our earnings call last week and shared this, but from Q3 to Q4, we had 129% increase in our prescriptions. Importantly, we had $7.1 million of net revenue during Q3, increasing to the $9.1 million in Q4. Of the $7.1 million, about $4 million of that was demand-driven, so really going from $4 million of demand-driven to about $9.1 million. Really nice growth there, you know, in terms of the prescriptions going forward. We've been very fortunate to be growing our business pretty much across all metrics.
It's really taken off again once we got past the holidays, when offices are closed and also when it's colder, people are covered up, they don't get treated as much for this disease state. We've seen an acceleration again in February, into March, hitting new highs on new prescribers, new RXs, refills, across the board pretty much. We're now up to just over 4,200 unique prescribers since the day we've launched the product last July 10th, 2025.
Yeah, it's been a hell of a launch. You know, what does ZELSUVMI payer access look like, and what is the split between commercial and Medicaid patients?
Okay, I'll give the split first. It's about 70% commercial, cash and copay card, so if you look at that way, and then a little bit under 30%, Medicaid. Unfortunately in the United States, 30%-35% of children are on Medicaid. You know, that's the mix there. When we went to launch, we did a lot of market research, and one of the things that popped up immediately was that payers will pay for disease states for children really well, and they don't force them through as many step edits and procedures always. Now, some will. There's definitely some of that still out there. Also, it's an acute treatment, so there's kind of a finite amount of money that it's gonna cost a payer to pay for this.
We're first and only FDA-approved at-home product, and again, it's a new chemical entity, so there's nobody else has a topical nitric oxide product indicated for the treatment of molluscum. It's very unique, and as a result, we have very good payer coverage. We just shared last week that we're about 60% of commercial lives are covered already, and 99% of Medicaid lives are covered for ZELSUVMI.
That's great. Are you buying down patient copays? You know, talk about the patient out-of-pocket costs. Also, you know, what are your thoughts on payer contracting and what a steady state gross to net will look like?
As far as paying down, we have a very, we'll call it a rich, copay card, program. It'll pay down to $0. We're looking at about 70%. As far as going forward and GTNs, we did report a 28.7% gross to net in Q4. That was up slightly from 25.1% in Q3. I'm sorry, 25.3% in Q3. We've guided towards kind of going to the mid- to upper 30s%, kind of long term for 2026.
Okay. You know, how large of a sales force are you currently deploying? Describe the recent sales force expansion and, you know, is the focus more on pediatric derms or general derms or pediatricians not being derms, you know, or is it a mix of all? What is that mix?
Being the first prescription product out there indicated for the disease state, we can't just pull down market prescriptions and just define it that easily. Instead, we use ICD-10 claims looking at unique patients going into HCPs. That can be doctors, nurse practitioners, PAs. When we look at our call file, we just look at the top, we call it the top five or six deciles for whatever specialty they are. The way it breaks down is that it's about a little bit under 50% derm and pediatric derm combined, a little over 50% pediatricians. We're seeing an uptake importantly across all specialties and a lot of nice growth there.
You know, given your recently acquired rights to Xepi for impetigo and Zeglyze for head lice, can you address, you know, what was attractive about these two assets and talk about what's unmet with both needs?
Yeah. We'll tackle Xepi first. Actually, the common theme here is I mentioned earlier, 80% of molluscum patients are 10 and under. 90% are 20 and under. With Xepi treating impetigo, it's predominantly children as well. There's about 3 million new cases a year. Then Xeglyze, which is indicated for treatment of head lice, is also a child disease. The bottom line is it allows us to leverage our sales force. We're already in the right offices in front of the right doctors, so it's kind of plug and play. What we also liked about it is we really have a minimal spend to get both those products up and running on the manufacturing side.
From a headcount standpoint, we probably only have to add three headcount total in the organization for two products, and it'll be marketing and manufacturing. It just fits very well. The unmet need there now is that right now for treating impetigo, which Xepi treats, the standard of care there is mupirocin, which is generic Bactroban. As we speak to our KOLs, there's a growing issue with resistance to mupirocin. Even when they're treating uncomplicated impetigo, they're having to use more oral antibiotics or other treatment regimens to get the results. On Xeglyze, it's truly, again, a unique product in that the market itself is about 75% OTC, 25% prescription.
Most of these products do not do what Xeglyze does in that it has kind of a dual action. It not only kills the lice, but will also kill the eggs. With a lot of the over-the-counter products, they're treating having to comb out the nits. If you don't get them all or if they're not killed, then typically you'll see lice again in 7-14 days and have to retreat. Our indication is 1 treatment and having efficacy very similar to other treatments that may take multiple treatments. Then the other thing we're seeing, and it's very well known now, I think it's in 48 out of 50 states in the United States, is the prevalence of super lice. Lice that has actually developed resistance to a lot of the OTC products out there.
Again, because this product hasn't been launched yet, there really isn't any resistance to it, so it's a nice add there.
A little bit of follow-up on that. With respect to Xepi, we anticipate working through standing up the manufacturing this year, and doing a full formal launch on that, early in 2027.
For Xeglyze, we look at doing the formal launch for that, you know, in the latter half of Q2 of 2027. I think it's really important to note, as Scott pointed out, the minimal additional expense, overhead expense that we have with this. There's enormous financial leverage in adding both of these products to the bag since we use the same commercial channels that we are already entertaining with ZELSUVMI.
You know, I was just curious, when you did get Xepi, you did first say the end of 2026. What is the reason for that quarterly shift.
Well, I look at it as almost like a month where we thought and we still believe we can get stocking done by the end of the year. If we wanted to really launch and do some work, you know, at the end of the year, we probably could fit that in. It's a poor time to launch, so we just thought it might be better to do so as we get back in January.
Sales are booked at what point?
When it ships to the wholesalers.
Okay. How about some background on these two, you know, the assets. The commercial, just, you know, kind of maybe help us understand the sluggishness, let's call it, of them.
Of those products? Yeah.
Right.
So-
In other hands, I will.
Yeah, no. Actually, Xepi launched quite well with a sales force that was 30 reps, only dermatology. Again, it we think it's gonna be very big in the pediatricians' offices, but they chose not to go there because they were pretty much a derm company only. That company was acquired and the product kinda got caught up in the wash there and was deprioritized. Then Xepi, the manufacturer during COVID went bankrupt. It had nothing to do with the product. It was purely the company. Really, you know, the product probably wasn't really launched fully, though we did really like the initial trends that we saw. That gave us confidence that when we got out there and they also had payer contracts in place that looked, you know, reasonable.
That also gave us greater comfort that this could be meaningful. Now in our hands, you know, again, it was in 30 reps, only in derm. We're gonna have 64 reps promoting it in derm and ped. We think it's, you know, something that's gonna have a really nice position within the impetigo disease state. Then with Xeglyze, it was actually approved in 2020 but never launched. Really an opportunistic acquisition for us. It was $1.8 million for an FDA-approved drug, never launched. We have worldwide rights to it, no milestones, no royalties whatsoever, so it's our drug. What happened there was the product received approval, there was some other work that needed to be done, and there was some. The company we acquired from was partnered with Dr. Reddy's. Dr.
Reddy decided. I don't know about all the background, but they decided to leave that agreement they had. They had to pay the company we acquired from a sizable amount of money in the $40 million range. They were just really. Hatchtech that we acquired from was just really excited about wanting to make sure that the value of the product got out to patients. Really isn't a functioning company right now. It was really kind of just selling it off.
Yeah, specifically, you know, what has payer access been like for these two drugs, and how will you know, change that?
Well, again, for Xeglyze, it was never launched.
Right.
There was no payer access to speak of. With Xepi, it was early days, but they did have contracts again, and the drug was being covered. You know, we're doing a complete relaunch. Well, we're starting to have meetings with the different payers and actually having really productive conversations. We think we're gonna be able to get the drug paid for at reasonable rebate levels and have access for patients. Especially for something like impetigo, that can be a pretty serious topical infection. It's important that patients get the drug quickly if they need it. We will have to contract more aggressively with Xepi probably than we did with Xeglyze.
you know, since these drugs, you know, have been approved, they've been around for a little while, what is the exclusivity runway for each of these? For actually all three of your products?
Yeah. With ZELSUVMI, we have patent protection out to 2035 currently. Patent term extension pending for composition of matter out to mid-2037. The other thing I'll add there is, I think it's kind of a unique situation. We actually make the API for Xepi as well in our facility in Durham, North Carolina. The facility there is purpose-built for the NITRICIL platform that we have and that ZELSUVMI is based on. The equipment doesn't exist in other places, a lot of it. It's actually made just for this. We think there's a lot of manufacturing know-how that's in this as well, so we may even have a longer runway just due to the inability for people to make it. That's really important.
Xepi, it's to 2032, early 2032. Right now for Xeglyze, it's 2034, with the possibility of other patents pending right now to extend that out.
Okay.
One comment I'd like to make with respect to the API that I think is important that people know with respect to Xeglyze, and that is that our current manufacturing facility, while not large, can accommodate more than substantially whatever we expect to produce out of it for the domestic market. There's not gonna be any wholesale capital expenditures or other items, just normal maintenance along the way.
Nice.
Yeah, the API process is the most complicated part of the drug product, probably not as much. We've been very strategic about making sure we've, lack of a better term, stockpiled API because it's kind of a gating factor going forward. We keep extra not only in our facility, but also at our drug product manufacturing building in Finland.
Gotcha. You know, what is your interest in potentially acquiring a, you know, additional asset or assets? You've got three pediatric derms, you know, they're all infectious disease products. Is this mainly going to be the commercial focus, or do you cast a wider net in derm over time beyond this?
Well, first and foremost, our number one focus is getting ZELSUVMI done right. You know, what we like about our launch timelines is we now have another 9-10 months to focus just on ZELSUVMI. I fully believe, and I know Frank and I talk about this a lot, but we need to get ZELSUVMI right to get credit for anything we do going forward. We have to build up credibility and show that we can execute, which we've been doing. That's great. We gotta keep doing that as we launch into these other launches. We'll continue to, you know, consider other things that may pop up. We don't have to go. We have plenty to do in the next year and a half and going forward.
Importantly, there is the NITRICIL platform, though, that a lot of work was done by Pelthos' predecessor company, looking at a lot of different indications. We'll be evaluating those. Importantly, the majority of those, the rights to those, do sit within Ligand, who we were a subsidiary at one point. You know, we'd have to in-license those.
Yeah. Can you mention another NITRICIL indication that would be a front-runner?
Yeah. I mean, I don't know if we have a front-runner right now. I can share a little bit, like some of the different programs, onychomycosis, atopic dermatitis, psoriasis, acne. We do have the rights to external genital warts, you know, for that indication. That's something we have to do a little bit more work to decide whether, first off, that we can provide a benefit there, if there's unmet need, make sure we'll get reimbursed, all those different things.
that would all be on your dime.
Yes, it would.
for clinical development.
If we were to do anything there, that's correct.
With the PIPE closed and the convertible and the term debt, how are you feeling about cash levels and your business plan? You know, $48 cash, $48 debt, just, you know, what's that gonna do for you?
Yeah. As you noted, we raised $50 million when we closed the merger in the form of equity, and then we raised a convert in November for $18 million, and then drew $30 million on a $50 million term debt facility in January of this year, giving us, you know, just over $48 million just after the new year when we closed the term debt. You know, given our current business plan, with the three products, the growth trajectory we're on, I will say we're very, very comfortable with our cash balance and being able to execute on that business plan, and don't have any, certainly immediate need or intent to do any additional financing.
Of course, a strategic transaction or launching a clinical program might alter that, but, you know, given our current cash balance and business plan, we're extremely comfortable with where we are.
Would you be comfortable also giving any sort of revenue estimate, or at least how do you feel about the and what is that consensus?
We've previously provided an indication that we expect to reach $175 million in revenue in 2028. That is not actually a cap because we do have patent coverage and potential IP trade secret coverage well beyond that, and there's normal cost of annual increases as well as any potential continued growth. You know, the guidance we've given for ZELSUVMI is $175 million in 2028 net revenue. We've not thus far given any guidance on either Xepi or Xeglyze. We're working through some of the final pricing right now, and we'll be evaluating that in the months before the launch. With respect to this year's consensus guidance, it's just over $60 million, and I would say we're very comfortable with that number.
Excellent. Scott and Frank, thank you very much for talking.