Pelthos Therapeutics Inc.

Good morning, everyone, and welcome to Pelthos Therapeutics 2025 Fourth Quarter and Fiscal Year Financial Results Conference Call. Pelthos issued a press release today announcing its financial results for the year ended December 31, 2025.

A copy can be found in the Investor Relations tab on the corporate website at www.pelthos.com. Before we begin, I'd like to remind you that during today's call, statements about the company's future expectations, plans and prospects are forward-looking statements.

These forward-looking statements are based on management's current expectations. These statements are neither promises nor guarantees and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from our current expectations expressed or implied by the forward-looking statements.

Any such forward-looking statements represent management's estimates as of the date of this conference call. While the company may elect to update such forward-looking statements at some point in the future, it disclaims any obligation to do so, even if subsequent events cause its views to change.

As a reminder, this conference call is being recorded and will remain available for 90 days. I'd now like to turn the floor over to Scott Plesha, Chief Executive Officer.

Sir, you may begin.

Thank you, Mike. Good morning, and welcome, everyone, to today's call.

We're delighted to be with you today and to share with you our fourth quarter and annual operating results and highlights. Joining me today are Frank Knuettel, our CFO; and Sai Rangarao, our Chief Commercial Officer.

The fourth quarter of 2025 was an exciting and busy one for Pelthos with great progress made in 3 key areas that I'll share at a high level with you. First, we had a substantial demand-generated revenue growth for our lead product, ZELSUVMI, following its launch in the third quarter of 2025.

Second, we acquired 2 highly complementary FDA-approved products, Third, we substantially bolstered our balance sheet and dramatically reduced our quarterly operating and non-GAAP net losses. Frank and Sai will provide a more detailed look at the quarter's ZELSUVMI launch metrics and reported financial results, but I'd like to share a brief overview of our results of operations.

Our top line results were driven by a 129% increase in prescriptions as reported by Symphony Health, which increased from 2,716 units in the third quarter to 6,232 units in the fourth quarter. This drove an increase in net product revenue from $7.1 million during the third quarter of 2025 to $9.1 million in the fourth quarter of 2025.

It's important to note that just under $3 million of the third quarter revenue was a result of units being shipped to our distribution partners as part of our stocking for launch. Importantly, we ended the year with slightly less days on hand of inventory in the channel than at the end of Q3.

Turning to product and operational details, I'd like to start with an update on our lead product, ZELSUVMI. As a reminder, ZELSUVMI is a novel topical nitric oxide releasing product indicated for the treatment of molluscum contagiosum or MC, in patients 1 year of age or older for up to 12 weeks.

ZELSUVMI is an important advancement in the treatment of MC as it's the first and only FDA-approved therapy that can be applied by parents, patients or caregivers in the home or on the go. Prior to the launch of ZELSUVMI, other topical treatments or destructive modalities would require patients to make multiple visits to a health care practitioner.

These in-office treatment alternatives include curettage, cryotherapy and blistering agents that could be sometimes be uncomfortable and painful, especially in the sensitive areas of the body that MC often presents. MC is a highly infectious condition caused by a Poxvirus that primarily affects children 1 year of age or older with ICD-10 claims indicating that 75% to 80% of MC patients are 10 years of age or younger.

Roughly 16 million people in the United States are affected by molluscum and on average, there are up to 6 million new cases annually. The literature also reports that in a multi-child household, if one child contracts MC, 41% of the time, the other child or children will as well.

While the disease is self-resolving, the mean time to resolution is approximately 13 months and cases can last up to 5 years. During that time, children are often ostracized and may be forced to miss school, or sporting events and cover their lesions with bandages or clothing.

This leads to considerable child and parental anxiety, which is the primary driver for patients being seen by health care providers. These factors led to significant patient demand during the fourth quarter as opposed to the third quarter during which we launched ZELSUVMI, virtually all of the revenue in Q4 was a result of units dispensed to patients.

In Q3, we had 2,760 prescribed units, representing approximately $4 million in net revenue with the balance of the $7.1 million in net revenue during the third quarter comprised of channel stocking with the launch of the product. Conversely, almost all of the revenue in Q4 was generated by units dispensed to customers with 6,232 prescribed units in Q4 and $9.1 million in net product revenue.

Importantly, while total inventory in the channel rose slightly, inventory days on hand declined by just over a day during the fourth quarter. As a reference, the balance of the $0.3 million in nonproduct revenue in each of the third and fourth quarters of 2025 was revenue recognized associated with the Sato license in Japan.

We have strong patent protection on ZELSUVMI with a composition of matter patent that runs to early 2035 and have a patent term extension on file that may extend the patent life to Q3 2037. Finally, there are significant know-how and trade secrets associated with our manufacturing process, which complement our patent protection, providing us a broad IP moat around our technology.

We believe this provides a long runway to grow ZELSUVMI's revenue. Regarding our product acquisitions, our first acquisition was of Xepi.

Xepi is a novel FDA-approved topical treatment for impetigo that addresses a critical unmet need in antibiotic-resistant skin infections caused by staph and strep infections, most commonly affecting children. Impetigo is the most common skin infection in children seen by pediatricians with approximately 3 million patients diagnosed with this bacterial infection each year.

We believe Xepi is a highly complementary product as it mostly treats children that are treated by the same health care providers as ZELSUVMI. Importantly, this allows us to leverage our commercial infrastructure, including our sales force.

We acquired the U.S. rights to Xepi in November and are currently working to establish the manufacturing process and building launch inventory.

We expect to stock this product by the end of the fourth quarter of 2026 with a launch in January of 2027. Importantly, at several recent Derm meetings, we have received very positive feedback from some of the major KOLs with respect to the relaunch of the product as resistance to current treatments have been rising dramatically.

With respect to our most recent product addition, we acquired Xeglyze in December for the treatment of head lice. Xeglyze is also a novel FDA-approved product that is also highly complementary with both of ZELSUVMI and Xepi and will require minimal additional overhead costs to bring to market.

While this indication is largely treated by nonprescription drugs, resistance to current treatment options is growing and unlike other products on the market, Xeglyze requires only one application. We believe that this will support the growth of Xeglyze becoming the standard of care when prescription medications are required and that the return on investment for Pelthos will be substantial.

At the operational level, we are standing up manufacturing for Xeglyze and expect to bring it to market in late Q2 2027. Both Xepi and Xeglyze will have tremendous call overlap for our existing sales force, providing the company with greater operational and financial leverage from our existing team and infrastructure.

Supporting the continued rollout of ZELSUVMI and the acquisition and launch of Xepi and Xeglyze, we closed a $18 million convertible note in November and a $15 million term debt loan in January, of which we drew $30 million. Frank will provide more details on both, but I wanted to note that the additional cash from these 2 transactions strengthens our cash balance and combined with our revenue growth and current business plan, strongly support our path to cash flow generation.

In summary, we are extraordinarily pleased with the receptivity of ZELSUVMI since its launch in July of 2025, the acquisition of 2 novel, highly complementary FDA products to our portfolio and the additional capital supporting our drive to profitability. We remain fully committed to maintaining strict financial discipline as evidenced by the decrease in our operating and non-GAAP EBITDA losses, and we'll continue to evaluate and optimize our commercial strategy as we want to seize every opportunity to deliver sustainable long-term shareholder value for Pelthos shareholders.

I'll now turn it over to Sai to provide more specifics on the results of the ZELSUVMI launch and key performance indicators.

Thank you, Scott. Good morning, everyone.

I'm pleased to provide an update on our Q4 2025 performance following the Q3 2025 launch of ZELSUVMI. While we are still early in the launch, our progress to date has gone better than expected.

For 2025, shipments and prescriptions were ahead of expectations, leading to an increase in internal expectations for 2026. On the qualitative side, we continue to receive very positive feedback from HCPs, patients and caregivers on the ease of use and efficacy of ZELSUVMI.

Digging into the prescription details, the number of prescriptions rose a very strong 129% to 6,232 prescribed units, and the number of unique prescribers rose from 1,169 unique prescribers in the third quarter to 2,712 unique prescribers by the end of the fourth quarter, with both sets of data reported in Symphony Metys Data. We generated this significant increase in prescriptions despite the fact that the fourth quarter is historically the weakest annual quarter for MC claims.

The average monthly MC claims in the fourth quarter, driven by lower November through December patient visits averaged approximately 33,700 claims per month, whereas for March through October in 2025, there was an average of approximately 45,100 claims per month. The fact that we were able to grow this much during the fourth quarter shows the strong value ZELSUVMI provides in the market and portrays the significant growth we expect going forward.

Our belief remains strong that ZELSUVMI is revolutionizing the treatment of MC and becoming the first-line treatment of choice. From January 1, 2026, through the week ending March 6, 2026, we recorded 5,297 prescribed units for ZELSUVMI written by HCPs and recently hit an all-time high of 695 prescribed units in 1 week.

On top of that, since early February, we are regularly seeing new weekly highs in new prescriptions, total prescriptions, repeat prescribers and continue to add new HCP writers. Relatedly, we are closely and steadily managing our channel inventory to make certain there is ZELSUVMI available for patients and to minimize stockouts at the wholesaler level, led by our stellar market access and trade team.

We ended the fourth quarter with just over 1 day fewer units of inventory on hand throughout the distribution system. While we expect that days on hand might gradually decline over time, we are currently managing to an estimated 3- to 4-week inventory level.

We launched ZELSUVMI without any commercial contracts following a selective contracting approach, but entered into a commercial contract with a PBM during the fourth quarter. With approximately 20 million covered lives from this PBM, we executed a contract with this PBM to increase access to patients.

Importantly, the contract removed friction on access to ZELSUVMI almost immediately and helped numerous patients gain the clinical benefits of ZELSUVMI quickly at a contract rate that does not impinge on our Medicaid rate and provides for annual price increases. The effect of this contract, which kicked off in early December, along with improved Medicaid coverage is an expansion of our covered lives and access to patients.

As of today, we have a 59% coverage rate for commercial insurance plans and an incredible 99% coverage rate of Medicaid. This is a testament to the fact that ZELSUVMI as the first FDA-approved at-home treatment for MC is being adopted as the first-line treatment option and is being well received by HCPs and coverage providers.

For Medicaid coverage, a number of larger states, including New York, do not require a prior authorization. And in most other states, Medicaid only requires a prior authorization written to label, meaning that a patient over 1 year of age presenting with MC qualifies for coverage.

Overall, this is very healthy for a drug at our stage of launch, which is supported by the fact that our drug largely treats children is the first and only at-home treatment option and is acute. Due to ZELSUVMI being an acute treatment, payers have a limit on their overall cost exposure and therapeutic programs largely aimed at children have a better approval profile in general.

We continue to have very good gross to nets or GTNs. Our current GTNs largely revolve around distribution costs, Medicaid discounts, payer contracts and our co-pay voucher program.

With the latter, it is our goal to pay down with the co-pay card program so the prescription costs are 0 or close to 0 in almost all instances for the patient. For the fourth quarter of 2025, we had favorable GTNs at 28.7%, in line with our expectations.

And going forward, we are expecting our GTNs to move to the mid- to upper 30% range. Next, I would like to provide an update on our sales team.

We commenced our launch with 50 territory managers, placing them in locations based on the ICD-10 data of most prevalent MC cases. With that said, it's important to note that MC is an underreported indication largely because there has been no at-home FDA-approved product until ZELSUVMI.

With the success of our launch, as we previously announced, we made the decision to add 14 territory managers in metropolitan areas not previously supported, including Seattle, Minneapolis, San Francisco, Salt Lake and elsewhere. We have added those additional team members who have been trained and now active in the field.

Early data suggests that it was a very advantageous expansion as prescriptions in some of those territories have jumped markedly to the point where in a very short time, they are already covering the cost of their sales efforts. We continue to grow awareness for ZELSUVMI as the first and only at-home prescription treatment option for MC through various channels and venues.

On top of the efforts we launched in Q3, which includes our Moms Against Molluscum movement, strong HCP engagement in offices and conferences, including our broad social media campaigns, we launched our first-ever YouTube commercial in Q4. This commercial has been very successful with more than 4.5 million total views.

This unique and informative short-form video has prompted parents and caregivers, along with adult patients to ask their HCPs about ZELSUVMI. Finally, we will be attending the largest dermatology congress in the U.S.

at the end of the month with full promotional and medical engagement activities. The American Academy of Dermatology meeting brings thousands of HCPs together and is an ideal opportunity for us to further engage with HCPs and inform them about the featured benefits of ZELSUVMI for their appropriate patients.

We will continue to build off the great success of these tactics, and we'll be adding more to keep the momentum going. I am very pleased with our performance and strong launch success to date alongside our highly passionate, dedicated and hard-working commercial team.

And with that, I now turn the call over to Frank to discuss our financials. Frank?

Thank you, Sai. Good morning, and thank you all for joining us on today's call.

Overall, we had a very good fourth quarter and are delighted to report that net product revenue rose approximately 28% from $7.1 million in the third quarter of 2025, which was our first quarter of launch, to $9.1 million in the fourth quarter of 2025. For the year and quarter ended December 31, 2025, our cost of goods sold was $4.0 million and $1.7 million, respectively.

The quarter-over-quarter decline from the third quarter of 2025 to the fourth quarter of 2025 in cost of goods on an absolute basis as well as a percentage of revenue is due to the write-off of one out-of-specification API batch in the third quarter. A key reminder is that our cost of goods also includes the fair value step-up of the inventory, both API and finished goods on hand at the time the merger was closed.

We expect to run through the stepped-up fair value finished goods inventory by late summer of 2026 and approximately a year to 15 months later to run through the stepped-up fair valued API inventory. After that, we will be at our true cost of goods value, which is mid-single-digit percentage of our WAC price.

Similarly, we're also in the process of moving towards the expected long-term costs associated with our GTNs. Our GTNs for the fourth quarter were 28.7% and to make sure we're looking at this the same way, it means that 28.7% of our gross revenue is allocated to third-party distribution, Medicaid, commercial PBM contract, co-pay cards and similar fees.

With the PBM contract and a meaningful percentage of our business coming from Medicaid thus far, we are expecting GTMs going forward to move towards the mid- to high 30% range. The bulk of our expenses during the quarter were for SG&A with low levels of expenses associated with R&D.

We provided a table in the 10-K that provides a detailed breakdown of our SG&A expenses, but at a high level, the bulk of the cash expenses can be attributed to personnel, marketing, professional services and royalties. Of the $18.5 million in SG&A for the fourth quarter of 2025, approximately $2.1 million are noncash charges associated with equity compensation expenses and depreciation.

A further amount of approximately $1.2 million are onetime items associated with the convertible note and term debt that we were unable to capitalize, and we booked a royalty obligation of $1.6 million. This resulted in a steady-state cash amount for SG&A of $13.5 million for the fourth quarter of 2025.

The continuing cash SG&A expenses in the fourth quarter are down approximately 5% from the third quarter, demonstrating our intent to manage our expenses tightly. Notwithstanding that, the quarterly SG&A will rise in 2026 with the increase in the size of the sales team we have discussed and getting Xepi and Xeglyze ready to launch.

But in all instances, we expect to closely manage our expenses. The quarterly cost of the additional sales team and other support personnel will be approximately $1 million per quarter, and the cost for the Xepi and Xeglyze launch prep are both in the low single-digit millions each for the entirety of 2026.

And of course, the royalty amount will grow in direct proportion to the growth in net revenues. Betting this out, our quarterly net operating loss improved from a loss of $15.4 million during the third quarter to $12.0 million in the fourth quarter.

And on an adjusted EBITDA basis, our EBITDA loss improved from a loss of $11.5 million in the third quarter to a loss of $9.0 million in the fourth quarter. Our balance sheet at December 31 was strong with $18.0 million in cash and $8.9 million in accounts receivable, up from $14.2 million in cash and $8.0 million, respectively, at the end of the third quarter.

We added to our $18 million cash balance at December 31 with the issuance of $30 million in term debt in January 2026. I will discuss the terms of the debt issuance in more detail shortly, but wanted in the meantime to note the additional capital from the term debt gives us comfort going forward with our cash balance and hitting our goals and cash flow generation.

I would also like to provide some insight into some of the specific line items in the balance sheet and income statement. On the balance sheet, the $3.8 million in other short-term liabilities and the $30.1 million in other long-term liabilities are largely the result of the fair value assessment of the future royalty obligations.

These are not general obligations and the amounts related thereto will be recognized with the payment of actual royalties resulting from actual net sales. On the income statement, we booked a noncash expense in the amount of $15.0 million attributable to the fair value assessment of the convertible notes issued in November.

The full breakdown is available in the 10-K, but the expense is largely attributable to a fair value valuation of the future royalty streams and a beneficial conversion feature associated with the convertible notes. The note holders are entitled to royalties on the future sales of Xepi and revenues from the Japanese license for ZELSUVMI.

The beneficial conversion feature is associated with the conversion price relative to our market price. And as our stock is fairly variable, the quarter-over-quarter valuation could potentially swing considerably.

As Scott referenced earlier, we entered into a $50 million term debt with Horizon in January, of which we drew $30 million. The debt has a 5-year term with 3 years of interest only and has an interest rate of prime plus 3.75% currently at 10.5% in total.

We can draw upon additional capital upon reaching certain milestones, but based on our current business plan, have no expectations of needing to or actually doing so. Regarding our capitalization, as of 12/31/2025, excluding the convertible notes, we had 8.9 million shares of stock outstanding on an as-converted basis.

This is comprised of approximately 3.2 million shares of common stock outstanding and 5.7 million shares of common stock underlying our Series A and Series C convertible preferred stock. Both of the Series A and Series C have fixed conversion prices with no down round protection, no special voting rights and no paying or accruing dividends.

Other than the warrant for 65,488 shares of common stock issued to Horizon as part of the term debt, there has been no change in our capitalization since the end of the year. For the convertible notes to convert to common stock at the conversion price, we would issue approximately 605,000 shares, leaving us with approximately 9.5 million total shares of common stock outstanding on an as-converted basis.

Summing it up, we believe we have made excellent progress and continue to maintain good fiscal discipline and act as wise stewards of our investors' capital. With growing revenue, tight controls on expenses and revenue from new product introductions, we believe we're in a strong position for solid future growth and ultimately positive cash flow and profitability.

I will now turn the call back to Scott to discuss some key points regarding our future progress and thoughts.

Thank you, Frank. In closing, I would now like to highlight a few key points regarding our strategy and path forward for Pelthos.

Again, we are extremely pleased with the success of the ZELSUVMI launch and the financial results to date. The rapid increase in prescriptions during our Q3 2025 launch paid for our initial sales force in slightly over 2 months, justifying the expansion of the sales force this quarter and our drive to cash flow.

As we remain early in our launch, we have not yet provided discrete revenue and EPS guidance. Overall, we remain extremely confident about our revenue growth trajectory and believe that our current cash balance provides a runway to execute on our business plan.

Furthermore, we are extremely happy to have acquired 2 new novel FDA-approved products that are near perfect supplements to ZELSUVMI. While we expect ZELSUVMI to remain the main driver of revenue growth, we believe that with the acquisition of Xepi and Xeglyze, we now have a portfolio of products that will add to our revenue growth, margins and profit.

I want to thank you for joining us today to learn more about the Pelthos story. We'll now turn the call over to the operator for any questions.

Maybe for Frank, the step-up in the gross to net discount from where you were 29% up to the mid- to upper. I understand the first quarter, you might get hit with a lot more co-pay assistance, et cetera.

But can you maybe factor out for us what the other components of that increase are going to look like? I'm assuming it's contracting, but if you could help with that, that would be great.

Sure. Thank you, Thomas.

So there's a couple of components to it, one of which is the contract that we signed in December. So that will start impacting the GTN in December and obviously, we'll have a full quarter's effect in this quarter.

Additionally, as we pointed out, the co-pay cards, and we have had slightly higher utilization on our Medicaid business than we had originally forecasted. So I think those 3 are the primary drivers to the increased returns.

Great. And then for my follow-up, anything you can share on the competitive dynamics between yourselves and Ycanth counter detailing?

What are you hearing from physicians, maybe even from patients?

Yes. Thomas, it's Scott.

I'll provide a little bit of background then Sai will also fill in the gaps for me. So anyways, we still believe this is a large market that both of us can do quite well in.

Obviously, our uptake has been exceeding our expectations and a lot of positive feedback from offices, HCPs and patients about the efficacy, the ability to treat at home for the first time, and parents even saying they just like they will have control and do something versus sitting back and waiting. We view them as very different products, once in an office treatment, kind of multiple visits to the office versus being able to treat in the privacy of your own home and probably more convenient not having absenteeism going in.

So I'll let Sai maybe add a little bit more to those comments.

Sure. Thanks, Scott.

Thomas, thanks for the question. So just to add on to Scott's commentary, we firmly believe our positioning for ZELSUVMI as a first-line and monotherapeutic option.

So how we detail with practitioners and how it's positioned for patients is that it can and should be used first line. Now as an HCP within their current practice dynamics choose to potentially use us in combination or use other procedures that are out there beyond the traditional competitor as Ycanth, that's their decision as an HCP practitioner, but we don't perform any sort of counter detailing strategy.

This is truly where we're positioned as a first-line monotherapeutic option for HCPs and patients.

Congrats on all the progress. Two from me, a few multiparts, but I'll keep it to 2.

As we look out to 2026, can you just talk about the growth drivers in terms of breadth versus depth of prescribing? With adding the additional 14 reps, should we think about breadth still being perhaps the biggest growth driver in 2026 for ZELSUVMI?

And where do you think you could get the high prescribers to write in terms of number of prescriptions? Or maybe asked another way, how concentrated is the high-decile molluscum prescriber?

Yes. I'll give a really -- thanks, Brandon.

This is Scott. I'll give you a very quick overview and then maybe Sai dig a little deeper on the prescribers.

For me, when we look at the key drivers, first off, the PBM contract, we're seeing a really nice impact there. To give you some metrics, we look at Q4, the total number of prescriptions, we already surpassed that after February.

So we still have another month, and it's gaining momentum. So we anticipate that to have a nice impact.

Sai mentioned in his prepared comments that we added 14 reps and really probably 5 or 6 have only been in the field a few weeks. And the ones that are there are -- if you looked at their body of work, they're already paying for themselves just literally 4 or 5 weeks into the world.

So they're definitely having an impact. There was some business there, but it's been nice to see the quick uptake there.

And then the other thing that we see -- we had in our comments that we -- typical drop-off in unique patients seeking treatment in November, December. And that's due to typically offices not being open.

This is an acute drug and then the weather. We think it reduces the numbers.

And it typically starts to bounce back in January. It didn't this January as much as it usually does.

But we anticipate the rest of the year, March through really October being very strong as far as the increase in patients being seen. So anyway, those are drivers for us, just even more patients in the funnel.

And then I'll give it to -- pass over to Sai a little bit more detail on the prescriber base.

Yes. Thanks, Scott.

Brandon, just to add on, I think the perspective we have through the first part of your question as it pertains to breadth versus depth, yes, we're still very much in gathering more prescribers as a big part of our strategy. So breadth being 8 months into our launch still is a big component of ours, and we're growing new prescribers week-over-week, as I shared.

We're seeing that go as a really, really high marker for us and a key performance indicator as we move forward, especially with the newly expanded sales force. From a concentration standpoint, we definitely have a cohort of larger prescribers.

It is spread geographically. So it's not concentrated to one particular state or particular region.

But that continues to be our main focus for the entire field force and for that matter, the entire promotional mix that we have, growing that depth amongst top prescribers and growing the cohort of early prescribers to get to that next point of depth is a bigger part of our strategy.

Yes. The one other data point I'll share is we're approaching 4,000 unique prescribers through March 6.

So we're just about 70 or 80 underneath that. So we've seen really nice growth in that.

And importantly, the repeat prescribers is trending quite well also every week. It's been growing week over week.

Very helpful. My second question, again, can you just maybe talk about the unaided awareness of ZELSUVMI?

And in particular, in terms of sort of where you think that could get to by the time you launch Xepi later this year, should we think about ZELSUVMI...

Brandon, you broke up on the first part of your question. We didn't really catch that.

Can you hear me?

Yes, we can hear you.

Can you talk about unaided awareness of ZELSUVMI? How are you thinking about where you can get that to when you launch Xepi later this year?

And with this growth in prescribers, should we think about ZELSUVMI remaining as the #1 in the bag across all the prescribers that you're calling on? Or could we see Xepi in the #1 position to some prescribers versus ZELSUVMI?

Thanks, Brandon. This is Sai.

So from an unaided awareness perspective, a bigger part of our executional strategy, as we've shared, in addition to the great work that's happening with the field force is a lot of digital promotions. So as we shared, we have a plethora of digital media that's out there from an awareness standpoint, but we've also done a tremendous amount of work with some, let's call it, force media with our YouTube commercial.

So those elements continue to drive a tremendous amount of awareness as we go forward. And as I shared in the prepared remarks, those efforts are actually prompting patients and caregivers and even adult patients to go in and ask for the product, which is very DTC like of some bigger brands that are out there.

From a perspective of then moving into the view of our proverbial commercial bag, we do intend to have ZELSUVMI as the first position as we go forward towards the Xepi launch and beyond. And truly, our promotional synergies there really come to fruition and as a big benefit for our entire commercial approach going forward.

So just a couple for me. I know you addressed seasonality to some extent, but help us better understand how pronounced the seasonality is, I guess, in a good way during the warmer weather months.

In other words, thinking about cadence of volumes this year, should we think about 2Q and 3Q essentially being the high watermark for volumes? That would be helpful color.

So that's number one. And then number two, just stepping back regarding the overall business.

So you have Xepi, you have Xeglyze, there are obviously launches that are coming. But how do you think philosophically about the optimal number of products in the sales force bag, and are you continuing to prioritize the addition of other assets where you can leverage the commercial infrastructure, particularly given that you've got 2 launches coming up and obviously, you have the recent launch of ZELSUVMI.

Yes. Thanks, David.

I'll jump in on that. And if anybody else wants to comment, they can also.

But yes, seasonality is important with this. We've learned as we spent our first 8 months now in the market.

But looking at claims you can get from Veeva on a monthly basis, I'll give the exact numbers that we have at this point. They backfill a little bit still.

But like November and December, you're looking at like 34,000, 33,000 unique patients. But then last year, in like March, April, May, 43,000, 47,500, 46,000.

So it's a pretty pronounced difference. And January did not bounce back, at least it hasn't as much.

It's still probably somewhere between 10% to 15% less than what we had seen in previous years as far as unique patients. And I think that was the extreme weather that came about.

So important, though, is we've really started to see a nice trend since after the holidays and putting us in a great position for growth for this year. And we -- I think part of it also is we were early in launch, and we're still building prescriber base.

And as we have a wider prescriber base, we'll be able to endure and grow through the down months, I think, as we have more shots on goal. Now philosophically, obviously, we have 3 highly complementary products that we were really opportunistic on those.

They became available to us and we got them for, I think, a really favorable. We can get a nice ROI in long term.

We're staggering those launches so we can always focus on ZELSUVMI. The thing we got to -- no matter what we're doing here, we got to make sure we execute there.

But if we did have something to present that made sense, we would look at it. There's no doubt.

We'd be opportunistic there. The other thing we're still evaluating also, as a reminder, our Nitricil platform, which ZELSUVMI is built around.

There's a lot of work that's been done there previously. The rights to many of those different indications and the IP there sits within ligand.

So we would have to in-license that. But we are evaluating that, but that's more long term.

Those would be programs that would take time. And if and when we were to commit some of that, obviously, we'd make everybody aware of that.

But that -- again, that's more a long-term thing that we're looking at right now.

I guess as you look to your experience from your first 6 months in the market with pediatricians, dermatologists, can you speak to sort of where you're seeing uptake? Is it amongst pediatricians who haven't had an option?

What are you seeing from dermatologists? Maybe what kind of pushback do you get when you get it?

And maybe comment on how your strategy adapts now that you're 6 months in?

Jeff, this is Sai. I'll take that question first.

So from an adoption perspective, as expected, being a cutaneous condition, we do see fast adoption amongst the dermatology community and then concentrated within there are pediatric dermatologists and then the NP/PA community that serves that dermatology specialty. We are seeing a better-than-expected uptake within the pediatrician community.

It's definitely where they see it first line and they're the first to truly diagnose it either before referral or the decision to actually treat. And I think to date, they have not really had that first and only at-home prescription treatment option until ZELSUVMI launched.

So I think the uptake is very much in line with a need for a tool within the toolkit to serve the disease state. So we are seeing, again, better-than-expected traditional uptake there.

As it pertains to your second question with pushback, as with any launch within this therapeutic category or adjacent or others for that matter, it's typically going to be market access related or access to medication. And to date, outside of the typical friction that you might see from a launch, there have been no really truly major hurdles.

So from an enablement standpoint within our field force, within everything else that we conduct and execute upon within our market access team broadly and patient services team broadly, we're really able to get over those hurdles by offering strong co-pay assistance, as we mentioned, other support mechanisms as it pertains to the PA process or medical necessity process should it get to those steps. So we are surely and truly seeing the uptake occur because we are getting over those hurdles literally every day.

And Jeff, I'll add that our approval rates early in launch are quite good based on past experiences. And we went in with this strategic plan to contract where we have friction.

We've done that with one plan. There may be a plan or 2 still that we would like to address going forward, but we got to make sure they make sense from rebates and whatnot.

But going back to like the pediatricians, I think the only thing there is really getting them to take action. If you think about it, they -- looking at claims data, they really don't -- haven't really treated a lot in the past with the destructive modalities, maybe 10%, 15% of the time.

So a lot of times, they're wait and see or prescribing things like topical steroids or antibiotics that really don't treat the virus. So now that there's something available, it's getting them to feel comfortable.

Fortunately, we have not only an efficacious product, but I think a very safe product as well based on the AE profile that fits really well in their practice. So it enables them to actually go out and treat now, which is kind of the first time for them.

I had a question on -- can you talk a little bit about the gross to net discount in the quarter? And then I see SG&A is up pretty sharply, even taking out the noncash and the one-timers.

Is this kind of the jump we should be expecting SG&A to do as sales ramp? Or at some point, does SG&A kind of level off and sales ramp, sales ramp exponentially off that base?

James, this is Frank. I'll take the second item first.

So with respect to the SG&A, there's the noncash and nonoperating components to it. And with respect to the fourth quarter, actually, cash SG&A went down.

And that strips out the noncash equity compensation component. It also excludes onetime items that we were unable to capitalize for both of the convertible note and the term debt.

And most importantly, with respect to looking at it going forward, there are 2 aspects of it of note. One, included in there is the royalty obligation.

So to the extent that revenues continue to rise, the royalty obligation and payment will rise with it. So that will rise.

The other thing is, as we chatted about, there will be additional expenses that are layered in, in Q1 associated with the increase in the sales team, a couple of headcount associated with the launch of Xepi and Xeglyze, and then throughout the course of the year, there'll be low single-digit million in total for prep costs associated with the launch for Xepi and Xeglyze, primarily outsourced manufacturing consultants, et cetera. So that sort of is the baseline we expect going forward.

So with respect to the operating cash component, I think we'll -- you'll see a rise in Q1 associated with those items and then we'll remain largely flat throughout the year. It will move up a bit towards the end of the year as the launches get closer.

And the variable component will be the royalty payment. With respect to the GTN, I'll stop.

Do you have any questions on that, Jim?

No, that covered. Thank you.

Okay. With respect to the GTN, the GTNs moved up in Q4 as we had expected.

and that's really attributable to slightly higher Medicaid usage than we had originally forecast and the execution of the PBM contract that launched on December 1. We do expect that over time, that number will continue to increase to the mid- to upper mid-30% range with additional co-pay card usage, the PBM contract and potentially just some other expenses in our go-to-market campaign.

Yes. The only thing I'll add, Jim, is that from my experience, 28.7% GTN.

Our second quarter in the market is quite good, especially when you look at the space we're in, and we're really excited about the fact that we've been able to maintain that type of GTN. And there'll be things we're trying to pull down as we do more volume, DSA fees, the fees to the wholesalers could come down.

And I think that 35% -- that kind of mid- to high 30% GTN range gives us room even to do other contracts if we chose to do so.

Okay. Maybe a quick follow-up, if I could.

When do you guys -- I know you don't haven't given any guidance yet given second quarter of launch, but do you have any internal expectations on when sort of ZELSUVMI on an all-in basis becomes profitable? I know you got a couple of new launches to come up here in the next year -- over the next couple of years.

And when does Pelthos itself overall turn profitable, do you think?

So with respect to your first question, ZELSUVMI, frankly, as you know, we are off to a very strong start. And on an absolute basis, for both it and the company, to the extent there are no changes to our business plan or our outlook, we do expect that towards the end of the year, we will cross over the line.

But that does not contemplate any change to the business plan, as Scott referenced earlier there, might be a Nitricil platform opportunity or any other changes we make to the business plan or changes in the outlook. But clearly, we have a very strong feeling for the path forward and I think at the end of the year, we'll probably cross over that line with what we know now in our current business plan.

Thank you, operator. I want to reiterate that even though it's early days, Pelthos is uniquely positioned to capitalize on a large addressable market with the first FDA-approved at-home prescription product or MC.

We built a strong foundation for the growth of ZELSUVMI and with Xepi and Xeglyze, 2 highly synergistic products launching by the end of 2026 and mid-2027, respectively, we believe that there are strong growth opportunities before us. Finally, I'd like to thank the employees at Pelthos for all their hard work and dedication in supporting patients, caregivers and health care providers.

Thank you again for joining our call, and we look forward to updating you on our continuing progress in the future. Have a great day.