Aquestive Therapeutics Inc (AQST) 2022 Q1 法說會逐字稿

Good day, and thank you for standing by. I would now like to introduce your host for today's call, Bennett Watson. You may begin.

Thank you, operator. Good morning, and welcome to today's call. On today's call, I am joined by Keith Kendall, Chief Executive Officer; and Ernie Toth, Chief Financial Officer, who are going to provide an overview of recent business developments and performance in the first quarter 2022, followed by a Q&A session.

As a reminder, the company's remarks today correspond with the earnings release that was issued after market close yesterday. In addition, a recording of today's call will be made available on Aquestive's website within the Investors section shortly following the conclusion of this call. To remind you, the Aquestive team will be discussing some non-GAAP financial measures this morning as part of its review of first quarter 2022 results. Description of these measures, along with a reconciliation to GAAP can be found in the earnings release issued yesterday, which is posted on the Investors section of Aquestive's website.

During the call, the company will be making forward-looking statements. We remind you of the company's safe harbor language as outlined in yesterday's earnings release as well as the risks and uncertainties affecting the company as described in the Risk Factors section and other sections included in our annual report on Form 10-K filed with the Securities and Exchange Commission on March 8, 2022, and in our quarterly reports on Form 10-Q and current reports on Form 8-K filed with the SEC.

As with any pharmaceutical company with product candidates under development and products being commercialized, there are significant risks and uncertainties with respect to the company's business and development, regulatory approval and commercialization of its products and other matters related to operations. The impact of the ongoing COVID-19 pandemic is highly uncertain and cannot be predicted with certainty or clarity. Given these uncertainties, you should not place undue reliance on these forward-looking statements, which speak only as of the date made.

Actual results may differ materially from these statements.

All forward-looking statements attributable to Aquestive or any person acting on its behalf are expressly qualified in their entirety by this cautionary statement and the cautionary statements contained in the earnings release issued yesterday. The company assumes no obligation to update its forward-looking statements after the date of this conference call, whether as a result of new information, future events or otherwise, except as required under applicable law.

With that, I will now turn the line over to Keith.

Thank you, Bennett, and thank you, everyone, on the call for joining us this morning. In our remarks today, Ernie and I will be discussing recent developments in our business during the first quarter of 2022 and through early May. As always, Ernie and I will be joined by additional members of the Aquestive leadership team during the Q&A session afterward.

The company remains keenly focused on the 2 most important value drivers for Aquestive, Libervant and AQST-109. Related to the epinephrine program, we recently reported positive top line data from Part 2 of the EPIPHAST crossover study for AQST-109 and commenced Part 3 of that study in late April. In mid-March, we received Fast Track Designation for AQST-109 from the FDA. We continue to engage with the FDA regarding the ongoing review for Libervant. And additionally, our core business remained strong in the first quarter 2022.

In April 2022, we entered into a new equity facility for up to $40 million. We believe this is good housekeeping that gives us an additional source of funds as well as some flexibility and options as we fund our ongoing operations.

Let's start with Libervant. Aquestive continues to interact with the FDA regarding the orphan-drug review of the NDA for Libervant. As you recall, we received a notification from the FDA indicating that the agency would not be ready to act by the PDUFA date of December 23, 2021. The agency was unable to provide an estimated timing of an expected action at that point in time.

In a correspondence we received in April of 2022 from the office of orphan product development. The agency communicated that, and "The agency is actively working on the orphan-drug exclusivity issues related to your NDA. OOPD is also diligently coordinating with the relevant FDA stakeholders in considering each of the arguments raised in your communications. The agency assures you that these issues are top of mind and have not fallen off the agency's radar. Although we, the agency, cannot commit to a precise date for providing a response, we can answer that we are making all efforts to respond in a reasonable time frame."

The company continues to believe that Libervant is an approvable product for safety and efficacy as evidenced by the completion of the pre-notice requirements such as labeling that we discussed previously. With respect to the FDA granting market access, given the orphan-drug exclusivity issue, we continue to believe that we have made a compelling case that Libervant represents a clinically superior product to the previous rectal and nasal products. This is based on our belief that Libervant provides a major contribution to patient care as outlined in the agency's guideline.

Libervant, if granted market access, has the potential to transform the lives of refractory epilepsy patients seeking a noninvasive and innovative product for the management of seizure clusters. Aquestive remains prepared to launch this important product for epilepsy patients, if granted market access by the FDA.

With respect to epinephrine, we remain focused on advancing the clinical development of AQST-109, our epinephrine-based product candidate for severe allergic reactions, including anaphylaxis. As a reminder, AQST-109 is the first and only orally-delivered epinephrine-based product candidate to demonstrate results comparable to auto-injectors such as EpiPen and Auvi-Q that are the current standards of care for the emergency treatment of severe allergic reaction.

With such a significant part of this patient population not having this medicine where they need it, when they need it, for a variety of reasons, including needle phobia, convenience, delayed or incorrect administration, AQST-109 represents a meaningful improvement in this group of patients' and caregivers' lives. In February, the FDA provided clearance for Aquestive's IND allowing clinical development in the United States.

As a reminder, the agency previously confirmed the 505(b)(2) regulatory approval path as appropriate for AQST-109. Additionally, the FDA granted Fast Track Designation in March 2022 to 109. Fast Track is an FDA process designed to facilitate the development and expedite the review of potential therapies that seek to treat serious conditions and fill unmet medical needs.

We want to highlight that we are conducting Part 3 of the EPIPHAST study and plan to complete 1 additional study in line with the guidance received from the FDA in our pre-IND correspondence. We're seeking to amass a robust data set for the end of Phase II meeting anticipated later this year.

In early April, we completed Part 2 of the EPIPHAST study evaluating AQST-109. The product candidate showed rapid absorption and conversion of the prodrug to epinephrine in subjects with a median time to maximum concentration or Tmax of 15 minutes. Part 2 confirmed earlier results in a larger population of healthy subjects. We're excited that we have again shown pharmacokinetic results that demonstrate delivery of epinephrine with the absorption and conversion speed necessary for a rescue product of this kind.

The area under the curve or AUC within the clinically relevant periods of 10 minutes, 20 minutes and 30 minutes were comparable for both AQST-109 and the 0.3-milligram manual IM injection. The median time to reach 100 picograms per milliliter, which has been suggested to be the threshold for the onset of hemodynamic effects was 8 minutes for Aquestive 109 and 10 minutes for the IM injection. Based on our interactions with the FDA, showing consistent fast absorption is key.

We commenced Part 3 of the EPIPHAST study in April 2022. The purpose of Part 3 is to continue to study the administration of the film under a variety of conditions and further characterize its pharmacokinetics, pharmacodynamics and safety. We anticipate completing Part 3 of the EPIPHAST study by the end of the second quarter of 2022.

The additional study that we plan to conduct is designed to compare AQST-109 to EpiPen, and we expect to report top line data from this study during the third quarter of 2022. We plan to incorporate data from this study into our FDA data package for the end of Phase II meeting later this year.

We plan to include the data from the EPIPHAST study and the EpiPen comparative study in our data package as per guidance received from the FDA in a written response to our pre-IND submission. We then plan to commence the pivotal study under the U.S. IND before the end of the year.

Additionally, during the quarter, our core business continued to contribute new opportunities as well as cash. Our Suboxone business remains resilient and continues to contribute at a higher level than expected. SYMPAZAN continued to perform and has now grown 13 straight quarters since its approval and launch. These will all contribute -- continue to contribute revenue and cash in 2022 and beyond.

In summary, as we progress through this second quarter 2022, we're focused on advancing our proprietary products. We'll remain in contact with the FDA regarding the application for Libervant. The FDA is continuing to evaluate the impact of orphan-drug exclusivity, as I've said repeatedly in our correspondence. We believe the Libervant is an approvable product for safety and efficacy in -- as evidenced by the completion of pre-notice requirements that I discussed earlier.

We're prepared to launch immediately if granted U.S. market access. 109 is advanced into Part 3 of the EPIPHAST study after we reported positive results from Part 2. We're planning an end of Phase II meeting with the agency in the second half and expect to commence pivotal trials before the end of the year. And our ongoing business continues to perform well, and we look forward to delivering the strong results outlined in our release, which Ernie will discuss in a minute.

We look forward to continuing to update all of you as we advance these initiatives throughout 2022. And with that, I'd like to turn the line over to Ernie, who will provide specifics on our financial performance, capital access strategy and outlook. Ernie?

Thank you, Keith, and good morning, everyone. By now, you will have seen our financial results in our 10-Q and earnings release that were filed last evening. As we typically do, we will address most of the discussion related to the first quarter of 2022 results in the Q&A.

Overall, we saw continued strong performance from our existing business and continued contribution of cash. While Suboxone is a legacy product for us, it remains a significant part of our near-term revenue outlook. This product performed well in the first quarter and exceeded our expectations with a 41% year-over-year increase in revenue.

As Keith mentioned previously, SYMPAZAN generated sequential quarterly revenue growth for 13 straight quarters. Our trends on wholesaler shipments of SYMPAZAN to retail pharmacies and growth in new and repeat prescribers represented a very solid 28% increase when you compare the first quarter 2022 with the same period last year. We anticipate continued growth for SYMPAZAN in the rest of 2022.

On April 12, the company entered into a purchase agreement with Lincoln Park Capital Fund, which provides that upon the terms and subjects of the conditions and limitations under the purchase agreement, the company has the right, but not the obligation to sell to Lincoln Park up to $40 million of its common stock from time to time over the 36-month term of the purchase agreement. This facility along with our ATM are important tools for Aquestive. Together with our strong ongoing business, our expense and capital management activities as well as the additional funds available under our existing debt facility should Libervant be approved and gain market access, provide the tools and flexibility as we fund our ongoing business activities.

Looking forward, we expect royalty streams from license agreements to contribute to our future revenue. These royalty streams include Azstarys, which was launched in 2021 by Corium under license from KemPharm, Suboxone in markets outside of the U.S. with Indivior, Exservan in the U.S. with Mitsubishi Tanabe and in the EU with Zambon as well as the launch of ondansetron by Hypera in Brazil following their recent approval.

In addition to contributing revenue and cash to the company, these assets also represent potential opportunities to monetize streams of royalties as we did for the KYNMOBI royalties.

As outlined in the press release issued last night after market close, we reconfirmed our full year 2022 financial outlook. SYMPAZAN growth, the continued performance of our manufacturing and supply operations and our other ongoing business activities are expected to provide strong results during 2022. Spending on R&D is projected to accelerate as we continue development of AQST-109 during 2022.

As a reminder, our full year financial expectations are as follows: Total revenues of approximately $42 million to $47 million, non-GAAP adjusted gross margin of approximately 70% to 75%; non-GAAP adjusted EBITDA loss of approximately $51 million to $58 million. It is worth reiterating that this 2022 financial guidance does not include any revenues from Libervant and will not until U.S. market access is certain and the launch is underway.

In summary, our 2022 guidance for full year non-GAAP adjusted EBITDA loss reflects a lower projected revenue base from Suboxone as compared to 2021, partially offset by steady growth in SYMPAZAN and significant additional focused R&D investments related to the advancement of AQST-109. At the same time, we will continue to prudently manage our cost across our business to be as capital efficient as possible.

With that, I will now turn the line back to the operator to open the line for questions.

(Operator Instructions) And our first question comes from Gary Nachman from BMO Capital Markets.

This is Wen Hua on for Gary Nachman. A couple of questions for me, for Libervant. Is there any more active discussions recently with a different groups of FDA, including the orphan-drug group? And are you still committed to launching Libervant depending on approval timing and what other options are being considered for it, if any? And then I have a few follow-ups after that.

We remain in contact with the FDA as we take, I think, the unusual step of sharing the actual letters word for word as we get them. So everybody sees in an unvarnished way how the agency is communicating with us. We have spoken to the Office of the Commissioner. We've spoken to the Head of CDER. We've spoken to the Head of OOPD. We've spoken to all of the levels within the CDER Project Group, and we continue to be active with the ombudsperson in the FDA and the commissioner's office. And we'll continue to communicate with them and try to get some clarity from them. But their answer, as we just read it to you, the most recently from the office of orphan-drug is that they're working on it. They know it's there. It's top of mind, and they'll get to us in a reasonable period of time, whatever that means.

We'll continue to try to clarify that and shake that loose. At the same time, we'll also continue to monitor the legislative progress of the refresh of the PDUFA statue, which we believe has some language in it around changes to the orphan-drug law. So we're not sure if those are related unless the agency tells us, but we'll monitor that as well to understand or try to understand what the agency is thinking about orphan-drug exclusivity.

The second part of your question, we're prepared to launch. Obviously, we have a fiduciary responsibility to realize or extract the maximum amount of value for our assets. So if there's a better way to extract value as opposed to launching it directly will certainly be considerate of that.

Great. And another question I had was on AQST-109. Could you review the Part 3 of the EPIPHAST study? And were you're hoping to show there? And then what are you planning for in terms of the pivotal PK study, especially with the final formulation size and dose? Is that that is still expected in the first half of 2023 and would that be sufficient for filing?

Well, you do a great job of stuffing 12 questions into 2, but I'll give Dan Barber the opportunity to answer that for you.

Sure. Yes, the final formulation size and dose, we feel very good about where we are from the Part 2 data that we recently put out. So as Keith walked you through with that Part 2 data and as you saw in the press release we put out a few weeks ago, we believe we have hit the key marks around Tmax, Cmax PD and so on, based on the formulation we have. So we don't see or we don't envision at this point additional changes to the formulation, size or dose. So that will remain the same. In terms of Part 3, as we said before, that is really additional characterization of the products in anticipation of our end of Phase II meeting in the fall.

And so what do I mean by that? We will do things that we know the FDA would like to see. So one is what happens if you swallow the film rather than put it under your tongue, what happens when you take the film after having a peanut butter sandwich? What happens under different dosing administration parameters? So that data is really about rounding out the data we already have. One thing I would also point out is Keith walked through before is in the summertime, we will do a crossover study versus EpiPen, which will provide us with a nice set of data for that end of Phase II meeting. If in that end of Phase II meeting, the FDA agrees with where we are in our plan. As you mentioned in your question, we will move forward with a pivotal PK study, and we would, at this time, expect that to read out in the first half of 2023. I just want to make sure, I answered all the parts of your question.

And our next question comes from Jason Butler from JMP Securities.

Just a couple of follow-ups on 109. I think part 2, one of the goals was informing the powering assumptions for a potential pivotal if you use DIM as a competitor. Do you have any updated thoughts on whether you have that information now and what a sample size could look like for a pivotal study? And then second question, just on the trial, the head-to-head versus crossover versus epinephrine other than the obvious difference of the comparator arm, any differences here in trial design versus EPIPHAST or what information you're looking to gain from this study?

Yes, the -- so the first part of your question, in terms of the powering for the pivotal PK study, we did get what we need from the Part 2. And right now, we would envision the pivotal PK study being somewhere between 80 and 100 healthy volunteers. So pretty standard for what others have done with this molecule, if you look at the other injectable products like Auvi-Q or Symjepi or so on. So that part, we feel good about where we are and the information we have.

And on the additional study that we will do in the summertime, to your point, it does have a different design than the EPIPHAST design, and that's because there is an additional element to it that we will used to fill out our end of Phase II work. So we'll do -- it will be 24 subjects. It will be crossover EpiPen 0.3 versus our product, but we will also do a repeat dosing of the film and a repeat dosing of the IM injection. So there really are 2 things that will get out of that study. One will be the compared to EpiPen and 2 will be the repeat dosing data, which we know is a requirement that the FDA wants to see.

Really helpful. And then sorry if I missed this on Libervant, but just a clarification point. Has the FDA asked you for any new information in the last several weeks or since the April meeting? Or is it just a case of them needing to do their work and get back to you at this point?

Yes. Jason, they've said repeatedly since the communication in December and every time we've talked to them since that there's no additional information they require from us that they have to do their work. And as you heard in the last letter, they're working on it. They're focused on it. It's top of mind, I think, is the language that they used and they'll get to us in a reasonable time, whatever that definition is for them.

And our next question comes from Thomas Flaten from Lake Street.

Just to round out 109. So assuming success in the pivotal study and data readout in the first half of '23, timing for submission to FDA would be, what, second half of the year, kind of late early '24, something like that?

Yes, Thomas, this is Dan, again. Yes, we -- if the FDA in our end of Phase II meeting agrees with our plan, there would be 2 things that we would come out of that study doing or out of that meeting doing. One would be the pivotal PK study. And the second is there is -- that we will do a small pediatric study in parallel to the pivotal PK study. Both of those things we see happening in the first half of 2023, and both of them would lead us to our continued goal of a filing at the end of 2023 as we see it right now.

Great. And then back to Libervant. Are there -- have you found any precedents or precedent situations where FDA has acted in a similar manner to how they've done with Libervant. Anything you can learn from what they've done in the past with respect to timing or outcomes, anything like that?

There is another company that's in a similar situation to us right now. There have been other companies in the past where we -- I don't know whether or not they were orphan-drug related or not, but the FDA did not act on time. The FDA didn't give a follow-up date. Ultimately, some of those companies went to court to try to force action. So I think with the orphan-drug exclusivity issue, I'm not sure there are many precedents I think that the FDA is following a couple of court cases. I think the FDA is trying to understand and ensure and protect exactly what authority and ability they have. And I think we're caught up in that.

And then just one final one. Any updates, anything to share on AQST-108?

Yes. So we remain excited about the profile we've created with 108, and we do believe that there are additional indications, and we have done work to identify what some of those indications could be. At this time, though, we want to make sure that Libervant and 109 get to the right place. So you'll see us continue to focus on those 2 assets with 108 coming up behind those 2 as they get further along.

And our next question comes from Andreas Argyrides from Wedbush Securities.

Two for us here on 109. First, can you help us better interpret the differences in the arithmetic and geometric mean Cmax values that are in the EPIPHAST study? And then how should we also interpret the lower AUC year to 10-minute value at the greater than you see year to 20 and year to 30 values are compared to the point we made epinephrine?

So I'll do my best on the first one without delving into the statistician world. So the main difference between arithmetic and geometric is I'm sure you're very aware, would be how they're calculated, right? When arithmetics just literally average and geometric is the mean of the means. So geometric gives you a better indication. Traditionally, geometric is seen as giving you a better indication of what your number would look like in a larger population. And the difference between arithmetic and a geometric mean in this case, would largely be due to variability.

So we know variability with this molecule. We know epinephrine has an inherent high level of variability, and we're continuing to focus on that as we do larger studies going forward. The second question around the AUCs at 10, 20 and 30 minutes, we feel really good about all 3 of those. At 10 minutes, while we are below 100%, which I think is what you're referring to, we are within the 80 to 125 window that you would typically, broadly think of it as kind of a comparable window. So I think we're in the low to mid-80s. What we like even more is at the 20-minute and 30-minute marks, we are above the 125. So we're at, I think, 144 or something like that for the 20. And we think that shows a significant improvement or a potential for a significant improvement versus what the IM is providing. So we're really happy with the 10, 20 and 30 minute data.

(Operator Instructions) Our next question comes from Raghuram Selvaraju from H.C. Wainwright.

With respect to 109, I was just wondering if you could comment on, firstly, if a special protocol assessment is likely in any way to be a possible applicable route that you would seek with respect to the FDA, for example, in the context of the end of Phase II discussions? And secondly, if you could provide us with any color on 109 commercialization or optimization of value initiatives that you may take outside of the United States?

Sure, Ram. This is Dan. I'll take the first part, and then I'll hand it over to my colleague, Ken who's here with us. We have thought about using the SPA process, but we don't see it as necessary for this program. As you know, from our understanding, one of the benefits is especially things like Fast Track Designation, getting a fast response and good agreement with the FDA. But we don't think with the types of studies that we're running and the availability we have with the end of Phase II meeting that it will be necessary to take that action. So we are planning on a very traditional request to meeting, put a briefing book in, have our study designs in the briefing book and ask our questions in that end of Phase II setting. So I'll pass it over to Ken for the commercial part.

Your question was optimizing value outside of the U.S., not in the U.S.

Yes, exactly 109, yes.

Ram, this is Keith. Typically -- well, as you know, we have no intent at this point in time or at this stage in the company's life to commercialize anything outside the United States on our own. Typically, we would wait until a product like this get a little further along where its value is a little bit greater. I think the time for us to start looking at partners, and that's how we would do this outside the United States as we've done with some of the other approved products that we've licensed I think the time to do that is after we get through the end of Phase II discussion with the agency, we have good clarity around what the pivotal study would look like. And we could demonstrate that full robust set of data 2 people outside the United States to get them interested in the product. That's the time we'll start thinking about and start our efforts to find a partner outside the United States in the various regions.

And then with respect to Libervant, just engaging in a hypothetical here. If whatever reason, Libervant does not have a path to regulatory approval in the U.S. for the moment. Are there any ways to optimize its value in ex U.S. territories?

Yes, I think that's a great question. Look, Libervant is a great product. And Libervant is going to get to the market at the end of 2026. We're working really hard to get it to the market much sooner based on what we believe the regulatory opportunities are. And we'll continue to work as hard as we possibly can. But Libervant is going to get to the market. It's going to compete with products we believe it has a great chance of beating competitively when it gets there. Outside the United States, where we're at a place where we were with the other products we've licensed with Libervant, where we are talking to people who may be interested in the different parts of the world in the product. And obviously, with the product that's gone through the regulatory process at the level that Libervant has, those are attractive conversations. We'll continue to have those until we find a partner that we like.

And now I'm showing no further questions. I would now like to turn the call back over to Keith Kendall for closing remarks.

Thank you, operator. Thank you, everyone, for joining today's call. We appreciate your time. The next few months, obviously, are going to be a critical period for Aquestive as we continue the clinical development of AQST-109, and we get prepared for the end of Phase II meeting and begin and kick off the pivotal trials before the end of the year. Obviously, we're all frustrated and anxious around where we are with Libervant. We're going to continue to stay in contact with the FDA and try to get either clarity or action from them around the Libervant filing. And as we go through all of those things, we'll make sure that we stay in touch with all of you, and we continue to share with you the progress that we make. We appreciate your time today, and we look forward to talking to you again soon.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.