Ladies and gentlemen, thank you for standing by and welcome to the Fourth Quarter 2020 Aquestive Therapeutics Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ms. Stephanie Carrington. Ma’am, please go ahead.

Thank you, operator. Good morning and welcome to today’s call. On today’s call, I am joined by Keith Kendall, President and Chief Executive Officer and Ernie Toth, Interim Chief Financial Officer, who are going to provide an overview of recent business developments and performance in the fourth quarter and full year 2020, followed by a Q&A session. In total, we expect today’s call to last approximately 60 minutes. 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 Therapeutics’ website within the Investors section shortly following the conclusion of today’s call. To remind you, the Aquestive team will be discussing some non-GAAP financial measures this morning as part of its review of the fourth quarter and full year 2020 results. Inscription 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 Therapeutics’ website. During the call, the company will be making forward-looking statements. A reminder 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 included in the company’s annual report on Form 10-K filed with the SEC on March 10, 2021. 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 the 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 projected 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 attributed to Aquestive Therapeutics 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, Stephanie and thank you everyone on the call for joining us this morning. I would like to take this opportunity to introduce you to Ernie Toth, the company’s Interim Chief Financial Officer and welcome him to his first Aquestive quarterly business update call. Ernie joined Aquestive in December and has already become a valued member of our management team. In our remarks today, Ernie and I will be discussing a number of important developments in our business for the fourth quarter and over the first 2 months of 2021. As always, Ernie and I will be joined by additional members of the Aquestive leadership team during the Q&A session afterwards. As we look back at the extraordinary events occurring during this past year, we are proud that as a company we were able to successfully execute on our key priorities starting with the safety of our colleagues, the people we do business with, and the patients and caregivers who interact with our products, while at the same time continuing to advance the important work of the company. Let’s look at our performance for 2020 and the progress we have made. As we committed through this period, we delivered a number of important milestones related to the key drivers of value for our company. First, we remained focused on building our CNS franchise. The company is in the process of finalizing the resubmission of our new drug application for Libervant after receiving guidance from the FDA on its expectations for information and supporting analysis relating to the PK modeling and simulations included in our prior submission to the agency in December 2020. We are developing Libervant as an alternative to the device-driven invasive, inconvenient and difficult to administer alternatives, including a rectal gel, currently available for patients with refractory…

Thank you, Keith, and good morning, everyone. By now, you will have seen our financial results in our 10-K and earnings release that were filed last evening. As we typically do, we will address most of the discussion related to the fourth quarter and full year 2020 results in the Q&A. And in my comments, I will highlight a few points from our results that are important to understand our full year 2021 financial guidance, which was published in the release. Overarching our 2021 guidance are some key principles that Keith outlined in his remarks, including we are focused on 2021 on our 2 most important value drivers Libervant’s resubmission, approval and launch and the continued development of our epinephrine program. While we are targeting a late 2021 PDUFA date, we have included zero revenue from Libervant in our full year 2021 guidance until we are certain of approval and launch timing. Our epinephrine program will continue towards development of a final product formulation and dosing regimen with a third Phase 1 PK trial expected to commence following the review of the dossier by Health Canada. While we do not specifically guide on SYMPAZAN revenue, as Keith mentioned previously, our trends on wholesaler shipments to retail pharmacies and growth in new and repeat prescribers are very solid quarter-over-quarter, and we anticipate continued growth in 2021. While Suboxone is a legacy product for us, it remains a significant part of our near-term revenue outlook. This product continued to perform well in 2020 with a branded product retaining a U.S. market share of 40%. Our revenue guidance for 2021 considers that some level of erosion of market share will continue in the future. While Suboxone provides a cash flow stream for the business, our future is the group of proprietary assets we…

Thank you. [Operator Instructions] Our first question comes from the line of Gary Nachman with BMO Capital Markets. Your line is open. Please go ahead.

Hi. Thanks, guys and good morning. Regarding Libervant, just describe in more detail what else the FDA wanted to see in terms of your analysis of the weight-based dosing with the PK modeling and why you are confident you will be able to deliver that data without giving additional clinical studies? And then some of the additional work that you are doing now for Libervant both PK and safety could that potentially be helpful to showing a meaningful improvement to patient care and getting the orphan drug designation? How much could that potentially help your case even further? And then I have a couple of follow-ups after that.

Sure. Thanks, Gary. Dan, do you want to take care of that?

Sure. Good morning, Gary. Good to hear your voice. So as we shared in our previous press release on the feedback from the FDA, we are actually generating no new data for our resubmission on Libervant. What we received back from the FDA and if we go back, if you recall, we had a very positive Type A meeting in November, where the FDA gave us guidance allowing us to use simulations and modeling to defend our revised dosing regimen. They did ask that we provide a dosing regimen to the FDA for their review prior to resubmitting which we did. And as you know, unfortunately, it took about 2 months to hear back from the FDA which we heard back a couple of weeks ago. And in that feedback, the FDA asked for formatting, but essentially to be changed on our safety component and on the PK piece, they simply ask for us to ensure that we are showing the predictive nature of our model when compared to the observed data in our Crossover study. So both of those things, we are happy to do. They unfortunately do take time, which is why we have a little bit of time before our resubmission, but there is absolutely no new information that we will include in our NDA resubmission.

Okay. No, that’s helpful. And then maybe just on the additional work that you are doing now in terms of your case on the meaningful improvement to patient care. If you think the additional analysis, the additional safety data in fact could potentially help your case further?

Sure. Well, to start with, we had a very strong case. We believe we have a very strong case in our view. We have multiple ways in which our product is different than any other product currently on the market. We have, as we have shared with you before, put that position before the orphan drug group at the FDA and walk them through our views. We will continue to do that as we go through the resubmission process. And yes, of course, as we develop new ways of defining our safety and population of PK modeling, if the FDA requested, we will include components of those changes in our discussion with the FDA, but we remain very confident that there are differentiating factors with our product that are important to patients and we are hopeful that the FDA will see the value in those differences.

Okay. And how soon can you engage with FDA on that after you resubmit at the end of the second quarter? Is that immediate or would it take a while that it would have to be closer to the PDUFA date?

We are – we can engage the orphan drug group whenever we want. Our view is that around the resubmission time is the time to reengage simply because human nature. We want to make sure as they are reviewing our application, they are also thinking about the components of value that we bring to patients. So we will look to engage them in the summertime, would be the best guidance I can give you.

Okay, that’s great. And then just a couple more, Keith, when will you consider expanding the commercial infrastructure. Will it only be once Libervant is approved? Will you wait until you get the orphan drug designation? And if you are getting some more traction with SYMPAZAN, would you consider doing that sooner, potentially? And then I have just one on epinephrine, just quickly. I know you’ll talk more at the R&D Day. But when you talk about the breadth of that pipeline, is that different formulations or something else that you are referring to, if you could just give us a sneak peek on that? Thanks.

Sure. I’ll go back to epinephrine after we deal with Libervant. Look, we’ve worked really hard to establish a position in the prescribers’ offices with SYMPAZAN. As modest as that product is, it does serve an important purpose in advance of Libervant. I think as we get close to the date based on our interactions with the agency, if we’re feeling confident or if SYMPAZAN is continuing to grow at the pace it is, we’ll start to slowly expand the sales force. But I don’t think you’ll see a meaningful increase in the footprint, at least, until we get an approval. We still don’t know, as we’ve discussed before, how quickly after an approval on the product should we get one the decision on market access will come. So we’ve got a couple of variables there to manage, but as Libervant – I’m sorry, SYMPAZAN continues to grow, we certainly will look to add a couple of people into the sales force. And as we get the approval on Libervant, then we’ll materially change the size of the sales force in advance of that launch. Did that get to your question on that, Gary?

Yes, they did. They did. Thank you.

Okay, great. Dan, do you want to give them a little color on epinephrine?

Sure. And obviously, Gary, we’re excited for the R&D Day on March 25. So I don’t want to give too much of the details because I’d like you to join and be excited for that call as well. But suffice it to say that we have learned a lot from both studies on AQST-108 that we have done. We’ll be outlining in detail of the results from those studies on the 25, and we’ll also walk you through what’s different about the formulation that is going into the clinic immediately in the future and why we are excited about where that will take us going forward.

Okay, that’s fair. We will tune in on the 25th. Thank you.

Thank you. And our next question comes from the line of Randall Stanicky with RBC Capital Markets. Your line is open. Please go ahead.

Great, thanks. Just a couple for me. Keith, how has your view of the Libervant opportunity evolved over the last couple of years as you’re watching the market, and specifically, Neurelis, VALTOCO. I’m not sure how accurate IQVIA is and it’s still only seeing a few thousand scripts per month. Has it changed in terms of what you think Libervant could do from a peak perspective, assuming it gets to market? So that’s the first question. And I am going to ask the second upfront because it’s related. Do you guys have good visibility into other potential diazepam filers? And specifically, how are you thinking about the competitive dynamics here over the next 1, 2 to 3 years, understanding that getting around the ODE is going to be a hurdle for other filers as well?

Sure. Well, Randall, it’s good to talk to you again. Thank you for the question. I think, let me think about the right way to lay this out. I think our thinking on Libervant has evolved this way. Our initial belief that led us to invest in this product was that if we can deliver it effectively, orally, given the options that this patient population had and given the number of patients in this population that actually forego treatment because they don’t want to interact with those options has only actually grown as we’ve gone through this. As we’ve watched the two nasals enter the market and be restricted to one end of the age group in the market, for the most part, we continue to believe, perhaps even more strongly than we did in the past, that we have a solution for this patient population to be very attractive. The middle part of your question will always be, we think, conservative when we talk about what we think the peak sales for this product will be. So I’ll tell you, I still think it’s a $250 million to $300 million product, just as we’ve said before. But the nasals have not really penetrated the market in any meaningful way. They have brought a minor number of patients into the space, and they have eaten the rectal gel, as you would expect. But they still haven’t cracked the overall population of patients that are searching for a solution, and we feel very strongly that we have a solution for them given the preference, especially in the United States, for oral medications versus deliveries of other types. In terms of the pipeline, I think that, technologically, we have solved the problem in terms of delivering this molecule effectively in some alternative – in some oral way. Some of the alternatives back in the pipeline including injection, we, again, feel very strongly that the market data we’ve developed in talking to patients, advocacy groups and prescribers that an oral solution will always be preferred over an injection or other invasive delivery. Now is there room for alternatives? Sure. But we’re confident in a fairly significant patient population that we’ll be able to carve a place out for ourselves with our product that we’ll be very happy with.

Great. I appreciate that. One more question, if I could. What is your appetite to in-license another product here to further leverage what you’d previously talked about, which is going to be obviously a potentially bigger commercial sales footprint post the assumed Libervant approval? And are you seeing opportunities in the market? And then I guess the kind of adjunct to that would be, does that appetite increase or decrease if you see – or I should say, does it increase if you see another potential delay around Libervant?

Alright. That’s a great question. Thank you. I think our view is we’ve got a great product in Libervant. We want to get it out into the market. Our strategic imperative, once it’s out in the market, obviously, will be how do we build on the CNS franchise represented by SYMPAZAN and Libervant that we’re selling ourselves as well as the products we’ve out-licensed like EXSERVAN. And we absolutely, without a doubt, will look to a number of places for the products that lever that, and one of them, obviously, would be in-licensing. We can’t develop every product that we want to bring to the market and the time frame for developing a product internally is long. So if we want to expand, I think in-licensing is going to be a very big part of that. Obviously, if you have a strategy built around creating a beachhead in CNS and the central product is delayed further, we’ll rethink the urgency we have about complementing SYMPAZAN and growing the footprint in the short-term. Right now, we’re absolutely focused on getting Libervant to the market and then starting to assess or develop a case around additions on the other side of an approval and a launch.

Great. Thanks, Keith.

Thanks, Randall.

Thank you. And our next question comes from the line of Shveta Dighe with Wedbush Securities. Your line is open. Please go ahead.

Hi, this is Shveta for Liana. Thank you for taking my question. For the Mitsubishi license agreement, can you remind us of the market opportunity for well, EXSERVAN? And does your 2021 revenue guidance include royalty payments from Mitsubishi?

Sure. There is an amount of money for royalties for EXSERVAN in 2021. Obviously, with it launching in the middle of the year, it’s not a very large number, although we’re happy with the deal. It is a – it is probably a modest product by everybody’s calculation. What the top end for it is will depend on how much it penetrates against some of the other products there. But this is not a $500 million product. It’s a much smaller product than that. Probably sub-$100 million, my guess would be at best.

Got it. Thank you.

Thank you. And our next question comes from the line of Jason Butler with JMP Securities. Your line is open. Please go ahead.

Hi, thanks for taking the question. Again, not wanting to take the attention away from your upcoming Analyst Day, could you maybe just give us an outline of the current patent estate for 108 and how you’re thinking about durability of market exclusivity?

Sure. Dan, do you want to take that question?

Sure, sure. Good morning, Jason. So we will – I think the right way to frame it is we believe that we have an extensive and deep patent position on our epinephrine delivery system that we’re bringing forward. And I would frame it as patents that go out late into – or patent applications that will eventually become patents that will go out until late 2030s and early 2040s. And well, at the R&D Day, we’ll talk about – as we’ve shared with you before, we are using some unique technology along with our film platform to deliver epinephrine transmucosally. And those two pieces together, the film and the other technology component, provides a very blocking – in our view, a very blocking position. And we will talk specifically about patents on the 25 as well.

Okay, great. And then, I guess, just a follow-up question on the longer term strategy, Keith. As well as considering in-licensing additional assets, how do you think about long-term leveraging of the PharmFilm technology, bringing additional products or candidates into the clinic and both maintaining those yourself and out-licensing opportunities?

Well, I think PharmFilm still plays an important part in our business, obviously. I think there is a lot that can still be accomplished with that technology. And when we take you through the newest step-up in complexity that we can solve with the technology on the epinephrine day, I think you’ll get some sense. But I don’t think that’s the only way that we’re going to get products to the market. I think we are happy when we talk about building out our CNS franchise and if we’re lucky enough to get epinephrine done on allergy franchise. I don’t think it has to be exclusively film. I don’t think we can wait for the cycles to develop products exclusively in film. But I do think it has – it still has applicability. It’s still capable of solving significant delivery problems, we think. And we’ll continue to not only look for opportunities to apply it ourselves, but to continue to work with others like Mitsubishi and Indivior in the past to solve problems with the products that they have. I do think that that’s still – the film still has some value to extract over the coming years.

Okay, great. Thanks for taking the questions.

Thanks, Jason.

Thank you. And our next question comes from the line of Thomas Flaten with Lake Street Capital Markets. Your line is open. Please go ahead.

Good morning. Thanks for taking the questions. Just – and correct me if I did my math wrong here, but I know you pointed to volumes for SYMPAZAN being up about 6% sequentially, but it looks like sales were down by about the same amount. Could you comment on that dynamic, assuming my math is right there?

Sure. Good to talk to you this morning, Thomas. Ernie, do you want to handle that?

Sure. So Thomas, let me just – just so I understand your question that the – on SYMPAZAN, it is down sequentially quarter-over-quarter. Most of that related as an impact of COVID-19 and not being able to get into the doctors’ offices, but it is up compared to prior year by 132%.

Right. But Thomas, your question is how did shipments to the pharmacies go up, but yet the revenue quarter-over-quarter was down, right? I think that’s just timing of shipments that affect revenue recognition.

Yes, okay. And then Ernie, in the past, we’ve gotten guidance on cash burn, I wonder if you could share with us what your expectation for cash burn for the year is?

Well, Thomas, we’re no longer providing a cash burn guide as for the press release last night. We really believe that the EBITDA is the most relevant metric, given the complexity of our business, being a commercial business, a manufacturing business, an R&D business. And so we have given directional guidance on our cash runway. With the cash on hand, the ATM activity and the expense management, that along with the capital options that we have, it really provides us with 12 months or more of capital. So as far as managing to a specific number, we’ve just decided as a company not to provide specific cash burn guidance going forward.

Got it. And then just one final one, I am not sure if we’ve discussed this previously, Keith. But if you can, could you share what the trigger is for the $15 million KYNMOBI payment that’s due in the next 18 months or so, or could be in the next 18 months or so?

Yes. It’s actually a couple of payments, and it’s all triggered on net sales achievement by Sunovion.

Got it. Appreciate taking the questions. Thank you.

Thanks, Thomas.

Thank you. [Operator Instructions] Our next question comes from the line of Ram Selvaraju with H.C. Wainwright. Your line is open. Please go ahead.

Hi, Keith. And I’m [indiscernible] on behalf of Ram. Firstly, regarding Libervant, if it’s approved by the end of 2021, how swiftly do you think you could be able to introduce the product? And what the principal gating items would be to make it commercially available?

Yes. I think the fact that we have an active commercial sales force interacting with the prescribers that will be central to Libervant. Right now, we’ll be able to introduce the product to the market very quickly after an approval. We’ll ramp up the sales force starting at that point and make it significantly bigger to reflect the opportunity and the number of prescriber points for Libervant. But because we’ve invested in this commercial footprint up to this point, I think we’ll be ready to introduce the product to the market very quickly.

Okay, great. And just to double check that I got this right. The revenues for 2021 Libervant sales, there is no meaningful contribution from those. Is that correct?

There is nothing in ‘21 for Libervant revenue, that’s correct.

Excellent. Okay. And just shifting quickly to AQST-108, we were interested in the 3 PK studies and if they constitute the entirety of the PK package for the drug. If not, what other work would need to be done? And how quickly could the third PK trial read out top line data?

Well, we filed with Health Canada to start that trial. We’re prepared to start it as soon as they give us the go ahead. We have – all along, as we’ve been telling you targeted, doing – kicking that study off before the end of the quarter, probably reading out sometime after the end of the next quarter, I would think. We’re in the process of tweaking the formulation in order to create certain predictable PK results. Once we do that on a pilot scale, we’ll interact with the agency and talk about what the rest of the development or regulatory path would be or the rest of the clinical and regulatory path would be. It would only be at that time that I’d be able to answer you conclusively about what else is required. But there is going to be a larger study required of some sort. We’re just not sure what that is until we interact with the agency again.

Okay, excellent. We respect that. Just a couple more, and then I’ll get back on the queue. We were interested in these expense management efforts that you alluded to in the press release. Would you be able to clarify what the nature of this and the magnitude of these are?

I’m sorry. I’m not sure I got the question. Could you just say it again?

I was wondering if you could clarify the nature and the magnitude of the expense management efforts that you alluded to in the press release, and if that’s related to continue into 2021?

Yes. I mean, we’re not going to comment on specific cost items that we’ve managed. I’ll tell you, at a macro level, obviously, the choice to invest in building up the commercial organization, whether it’s marketing, medical affairs or sales in advance of a Libervant approval is an opportunity. Focusing on Libervant and epinephrine is an opportunity for us to manage costs related to other things in our business. But I don’t think we’re going to comment on specific cost actions. Just that directionally, as we’ve said, we have a clear path to 12 months or more of capital runway.

Okay. That’s helpful nonetheless. And finally, you gave us some color on the KYNMOBI roll out. How do you think this is going, other product sales outperforming expectations in the U.S.? And how do you think this could impact Aquestive’s financial performance?

I think it’s early days for that. I don’t think we’ve got a good enough view of the product’s traction in the market. And I’m not sure how much their rollout’s been affected by COVID, just as we had to manage it with SYMPAZAN. I think, obviously, there is $75 million worth of milestone payments that are still available to us under that deal, and we’d like to collect all of those. And I think that – I think it’s a little just too early to comment on whether we’re happy or unhappy about how that launch is going.

Okay, makes sense. Thanks so much for taking the questions, Keith and congrats on the quarter.

Thank you very much.

Thank you. And that does conclude today’s question-and-answer session. And I would like to turn the conference back over to Mr. Keith Kendall for any further remarks.

Well, everyone thank you again for joining us this morning. As always, we enjoy the interaction and the questions. We hope that we’ve provided you the information that you were looking for. We look forward to focusing on the things that are central and critical to our business. Obviously, we want to get Libervant re-filed and convince the agency that it is a major contribution to patient care. We feel good about the product. We feel good about the arguments we have, and we’ve now got to advance them and let the agency do their work. We are very excited about what we’ve demonstrated we can do on epinephrine, obviously, a difficult molecule to manage in the oral cavity. And we’re excited about walking you through that in March. And as we go through the year, we’ll continue to focus you and update you on all of those, and we look forward to the next conversation. So thank you all. Have a great day and we will talk soon.

Ladies and gentlemen, this concludes today’s conference. You may all disconnect. Everyone, have a great day.

Thank you.