Good morning, and welcome to the Aquestive Therapeutics Fourth Quarter and Full Year 2022 Conference Call. At this time, all participants are in a listen only-mode. After the speakers' presentation, there will be a question-and-answer session. Instructions will be given at that time. As a reminder, this call is being recorded. I would now like to turn the call over to your host for today’s conference call, Bennett Watson of Westwicke, Investor Relations. You may begin.

Thank you, operator. Good morning, and welcome to today's call. On today's call, I am joined by Dan Barber, Chief Executive Officer; and Ernie Toth, Chief Financial Officer, who are going to provide an overview of recent business developments and performance for the fourth quarter 2022, followed by a Q&A session. During the Q&A session, the team will be joined by Steve Wargacki, Vice President of R&D; and Ken Marshall, Chief Commercial Officer. 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 fourth quarter and full year 2022 results. A 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 yesterday’s earnings release and in the Risk Factors section and in other sections included in the company’s annual report on Form 10-K to be filed with the Securities and Exchange Commission later this month 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 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 predicted with certainty or clarity. Given these uncertainties, you should not place undue reliance on these forward-looking statements, which speak only as the date they 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 Dan.

Thank you, Bennett. The fourth quarter marked the culmination of a seven month run of improvements and execution by the Management team in 2022. I am incredibly proud of the progress the team made in the fourth quarter and quite frankly since the company's leadership transition occurred in May of last year. In the fourth quarter, the Aquestive team advanced its lead pipeline product, AQST-109, Epinephrine Sublingual Film through a CMC focused end of Phase 2 meeting with the FDA and a separate clinical and regulatory focused end of Phase 2 meeting also with the FDA. Moreover, we completed our registration batches on schedule and plan to have the required 12 months of stability, before the end of 2023. Our commercial collaborations also continued to perform at a high level. We completed the license of Sympazan to Assertio surpassed 150 million doses of shipped product to multiple licensees, announced early payments to our debt holders to reduce our debt overhang, and ended the fourth quarter with more cash than we had at the end of any other quarter last year. In 2022, we executed on three significant non-dilutive deals that generated over $25 million in cash, significantly streamlined our business to reduce ongoing costs, reduced our ongoing litigation through successfully winning a motion to dismiss in the Sympazan [Technical difficulty] trust case and gained a tentative approval for LIBERVANT, diazepam buccal film. We have also held true to our story. As I said to you during the second quarter earnings call in August, sometimes the simplest stories can be the most compelling. In my view, a pharmaceutical company with existing revenue and two acute rescue medications under development that both have strong clinical results to-date as well as long patent lives is a simple and compelling story. This remains just…

Thank you, Dan, and good morning, everyone. By now, you have seen our financial results and our earnings release that was issued last evening. As we typically do, we will address most of the discussion related to the fourth quarter and full year 2022 results in the Q&A. During the fourth quarter of 2022 and continuing into 2023 we continue to manage the company for success as we received additional non-dilutive capital and reduced expenses going forward to extend our cash runway to support the continued development of our lead product, AQST-109, the first orally administered epinephrine product. During the fourth quarter, we entered into a license agreement with Otter Pharmaceuticals, a subsidiary of Assertio Holdings to license Sympazan. Under the terms of the license agreement, we granted an exclusive worldwide license of our intellectual property for Sympazan to Assertio for an upfront payment of $9 million and a $6 million milestone payment subsequent to the notice received from the U.S. Patent and Trademark Office of allowance of an additional patent application for Sympazan. In addition, we also entered into a long-term supply agreement with Assertio for Sympazan and will receive royalty payments from Assertio on Sympazan sales during the term of the license agreement. The $15 million received from the Assertio transaction along with previously announced transactions with Haisco and Pharmanovia generated over $25 million of non-dilutive financing in 2022. These transactions, along with prudent expense management contributed to our year end cash balance of $27.3 million. The recently announced amendment to the Indivior license and supply agreement as well as the legal settlement agreement with BDSI generated $20 million of non-dilutive capital that was received in March, 2023. As we have previously stated, we will always pursue non-dilutive sources of capital first to extend our cash runway. As…

[Operator Instructions] Our first question comes from Gary Nachman with BMO. Your line is open.

Good morning. This is Dennis on for Gary. Thank you for taking our questions. Regarding 109, can you just talk a little bit more about the March FDA interaction? What information did they provide? Was this proactive on their part? Did they provide any specific suggestions as to what would and would not be a good comparative product? And did they provide any new additional colors to what they would be important to show in the pivotal trial? I've got one follow up after.

Sure. Good morning, Dennis. Thanks for the question on 109. I'm going to pass that over to our SVP of R&D Steve Wargacki to give you an answer.

Thanks Dan. And thank you, Dennis. The interaction that we had in March was initiated by us and it was designed to gain clarity. A lot of topics were covered at the end of Phase 2 meeting and we saw to gain clarity in exactly what would be required to get the proper feedback on our pivotal protocol and we got that clarification from them. The RLD selection is that our choice, but as Dan mentioned in his comments, will be informed by the study we have currently ongoing.

And Dennis, in terms of the selection of the reference listed products, that is completely up to us as the sponsor to choose the FDA's given us clear guidance, but it is our choice.

Okay, perfect. And then regarding the recent presentation of the allergy, asthma and immunology meeting last month, could you just maybe talk about the receptivity the posters got and overall, KOL physician feedback? Thank you so much.

Sure. I'm going to pass that over to our Chief Commercial Officer, Ken Marshall.

Hi, Dan. Can you guys hear me okay?

You’re great, Ken.

Yes, it was a good meeting for Aquestive. We had four posters. We had KOLs presenting on our behalf at each one of those, along with Aquestive of support and showed a range of data. I talked about our rapid Tmax. I think that was one of the highlights and one of the most impressive pieces of data to the audience. We've consistently produced a 12 minute Tmax, and that's unlike any other medicine, especially in oral medicine. And that was the other takeaway, how frustrated the medical community is and the patient community that was in attendance with needle devices. They certainly are looking for a better solution and extremely impressed with our ability to put epinephrine on a strip and deliver it orally.

Dennis, just to add out Ken's comments, gives us really excited about AQST-109. It continues to get as excited is we're the only oral product in development. We know there's a variety of nasal sprays that are coming through, but we're not aware of any significant other oral product that is in development at this time. So we think that's a really important and unique position for our product.

Great. Thanks so much, guys.

Our next question comes from Jason Butler with JMP Securities. Your line is open.

Hey, it's Roy on for Jason. Thanks for taking our questions. I had a couple follow ups on 109 and then one for Ernie. So, I guess on 109, again, on the protocol, I know you're going to submit to the agency and you're pending this reference product data. But just any details you can give us about the proposed final design at this time? And then, Dan, you made a comment about, better characterizing the market in 2023 as it evolves. Just any details you can give us on the efforts that you're going to make and the key questions you're looking to answer? Thanks.

Sure, good morning, Rogy. I'll take the market evolution question. Let me do that first and then I'll hand it over to Steve to talk about the protocol design. I think you've heard Ken talk before about our -- what we've noticed in the seizure cluster market, which has alternate products have come into the market, the market expands considerably. In that case, I think it is just about doubled. So in our view, has alternate non-injection products come into the treatment of allergic severe allergic reaction space, we believe the market will expand and we want to make sure we keep an eye on how those dynamics unfold as other products come through the system. But again, as we look at how patients think about treating anaphylaxis, we continue to believe that oral is generally a preferred method and we look forward to having that offering on the market. With that, I'll turn the second question you had on the protocol design over to Steve.

Thank you. Yes. So the pivotal protocol design remains consistent with what we've previously guided. We anticipate this being an 80 to a 100 healthy volunteer subject study looking at the pharmacokinetics and pharmacodynamics of our product against two or more reference products. And that'll allow us to demonstrate how we perform relative to the products that are available in the market.

Okay, great. That’s helpful. And then that one for Ernie, that just any details on the expense trajectory for 2023 that seems like we should expect SG&A maybe to continue down this quarter. Just anything you can give us there. Thanks.

Well, as I said in my script, we continue to manage, our expenses closely to help with our cash runway. Certainly, the reduction as I announced in my script about the, a reduction in expenses last year related to the license of Sympazan to Assertio will carry forward into 2023 and is embedded in our projection. I think the important thing about our expenses for 2023 is the continued focus on the advancement of our 109 project.

Okay, great. Thanks. Let me throw in one more on 109, just on the European and Chinese partnership discussions are, you can never predict when those are going to happen, but are you kind of waiting for the data or is it possible to finalize one of those before you get the pivotal data? Thanks.

Well, I think as you know, business development in any company is a constant part of the business. So, at this time, we will continue to look at the potential opportunities that are there. I think as we go of course and more data is available on 109, those opportunities will evolve. But I think you'll see us continue to look for the right partnerships, to make sure that we can broadly distribute 109, not just in Europe and China, but quite frankly all over the globe. So that's one of the themes of our company as we go through 2023, is making sure our products are available in a variety of markets. And 109 is of course one of those products that will be focused on, on making sure we place correctly.

Great. Thank you for taking the questions.

Thank you. Our next question comes from Francois Brisebois with Oppenheimer, your line is open.

Hi, thanks for taking the questions. Just a couple here. I was just wondering if you can maybe compare and contrast this bracketed kind of, method of showing your PK data to the FDA with reference products. And, you seem to say the reference products that you end up using are your choice. Can you just maybe compare and contrast what the process has been for the nasal spray that I think we're, you know, we're expecting a to do for mid-year here, so just the bracket approach. Did they have to use two or more or the similar products? Did they have a choice on what products to use? I'm just trying to figure out if there's been, if the FDA's been consistent with both companies here.

Yes. Good morning, Frank. Thanks for the question. So obviously we don't know exactly what the FDA is saying to the other applicants. So, we have the same public information that you have. But our view from looking at the public statements of the nasal sprays that are in development is, and also our experience with the FDA in other drug development places, is that they are being consistent with the various products. So, my opinion would be that is something that all products that are seeking this indication will have to achieve. I think the real question for the FDA will be on the speed side. How fast do you have to be in order to be relevant for this particular indication?

Understood. And the meaning that you got it to the FDA in the second half of '23 for the administration part of the label. So is there a chance, I guess, that means that, you could start the pivotal in the third quarter, and then potentially have this meeting about administration in the fourth quarter. It wouldn't be barrier to maybe starting or else with the starting the pivotal?

No, That's a great question. Just to clarify, as we outlined in December, we had a very productive end of Phase 2 meeting that Steven and his team led and we have learned, or we feel we have learned a clear set of things that the FDA wants to see in our filing. Obviously, one is the pivotal study. But the other is related to administration as we outlined. And so, Steve and the team have very smartly in my view worked with the FDA to clarify that we can separate those two things into two different activities with the FDA that then come together at the filing. So, I think that was a smart development move and it allows us to, or pivotal while also having that meeting on the administration items with the FDA.

Understood. Thank you and congrats on the progress.

Thank you. Our next question comes from Thomas Flaten with Lake Street. Your line is open.

Thanks. Just to follow-up on the last question, Dan. So, there is no risk that there would be a learning or a finding from the administration characterization that would in any way impact FDA's thinking around the pivotal, right? I just want to confirm that.

Yes. I think the way to think about it is we -- look, we have been around for -- I don't know the better part of 20 years as a company and our technology has always been oral thin film. So, when we get questions around the administration elements of our technology, we have a big body of data that we can work from, and a deep understanding. So, I think we understand completely at least based on what the comments have been from the FDA so far what they are looking for. And we are prepared to provide those that information. So right now, we don't see a reason to have: One, make it a linear process, we think, answering the administration pieces in one segment, while pivotal is going on is just fine.

And recognizing that a lot of the market characterization work is upcoming in the current year. I was curious if there is any obvious areas, where an oral film would not be the preferable route of administration that you've been able to identify or feedback you have gotten from KOLs or patient groups?

Sure. So, Thomas, that's a tough question to ask a CEO in the earnings call, right? I'm obviously very biased towards our technology. I think our technology works broadly in the patient population and that's why we are pursuing this product. We think that, the fact that a majority of patients don't have any product at all with them during an allergic reaction, speaks volumes to the need for something that's easier to carry and simple to use. And we think we fit both of those criteria. So, look, are there instances where other technologies might be preferred short, but we are very focused on where our technology benefits patients and we think in this area, we have a really strong and compelling value proposition to the patient

Okay. And then just a final one for Ernie, the drop in gross margin or non-GAAP gross margin, in particular, Ernie from third quarter to fourth quarter was pretty strong. Anything you could share with us with respect to that in going into 2023?

Well, Thomas, I think, there's a number of things that play there. It's a change in product mix. Certainly, removing high margin products such as Sympazan that we're selling is important. When you compare year-over-year the fact that, again, because the gross margin is on total revenue, the fact that there was incremental, non-recurring revenue last year of $4 million impacts the margin. And then when we factor in, again, related to Sympazan, the manufacturing revenue, which is at a different margin basis than manufacturing the product, and then taking into account the new product launches for Hypera Brazil, that's at a different margin. So, you -- it's really a change in product mix along with just some incremental higher expenses related to materials and production.

Got it, appreciate. Thanks for taking my question.

Our next question comes from Ram Selvaraju with HC Wainwright. Your line is open.

Thanks, very much for taking my question. Just a few here. Dan, I was wondering if you could provide us with a little bit more color on the relationship within Indivior as it currently stands, and what additional advances or progress you expect over the course of 2023, and how you expect that to specifically positively impact Aquestive's business. Secondly, thought that you could perhaps offer us some additional detail on your updated thinking regarding AQST-108, and then lastly, with respect to Libervant was wondering if you could give us a sense of how you are thinking about the best possible path forward commercially for the drug in the United States, and how that's being colored by the specific timing with which the product may receive market authorization. Thank you.

Sure. Thanks, Ram, and good morning. First, to start with your first question on our relationship with Indivior. I don't think there's any other way to characterize our relationship with Indivior other than it's a very important one. We value the relationship with them and we're -- we continue to work with them to make sure that we are always providing high quality product to their patients. And I think they appreciate that. In terms of the amendment and agreement we just announced, I think that was a really positive step forward for our company. One, it showed the continued view on both sides that the relationship is important, because one of the things that was extended is the term of the contract, which we were very happy to see. And two, I think there's a recognition that what we do for Indivior is important. And so, in terms of making sure that the components of value that we received from Indivior are in line with where they should be. I think we found a partner who -- or a relationship that is looking to work with us. So very excited about where that relationship is. In terms of where it progresses from here. Look, there is generic competition of Suboxone. We recognize that. we know that over time the volumes or the market share in the U.S. will slowly decline as outlined buying Indivior and will continue to look to see how the overall volume offsets versus the market decline. While we don't control that, I think that's something we continue to watch carefully. In terms of 108, as I always say, when we're asked on the AQST-108, we love this product. We think this is a great opportunity to develop yet another product out of the Epinephrine Prodrug…

Okay. And just one more question for Ernie. I was just wondering if you could clarify whether the financial guidance you've given for 2023 includes the impact of additional litigation settlements or not?

Hi Rob. And no, it does not take into account any impact for additional litigation settlements at this point.

Thank you.

Our next question comes from James Malloy with Alliance Global Partners. Your line is open.

Hi, guys. Thanks for taking my question. A remarkable job on the non-dilutive cash in the early part of the year here. Just a quick follow-up on the additional settlements actually, what -- is there anything in 2023 or 2023 we should be potentially anticipating look for and then follow-up on that on the Libervant question, how would you characterize any potential partnership discussions? Is it really -- there really a path forward on a partnership in advance of claim and the FDA or is it always going to wait on that? Thank you for taking the questions.

Good morning, James. Vent to your voice. Could you repeat the first question? There was a ding that occurred right in the middle of you speaking. We didn't quite catch that first question.

Just a follow-up on the prior question on any additional settlements, is there anything that we should potentially anticipate over 2023, even if it's not in the guidance?

Sure. So, look on the legal side. On the litigation side, I'm very pleased with how our company and our general counsel in particular has worked to reduce our legal spend over the last several months. First, we were able to have a motion to dismiss granted in the Suboxone antitrust case. Now we have successfully reached a settlement with BDSI on a long, outstanding litigation case that was costing us money. So, both of those items are positive news for us and reduce our legal spend going forward. Will there be other settlements this year? Look, we don't have much left in terms of litigation inside of this company, so I don't know if I see big things on the horizon for that area, but I suppose you never know. In terms of Libervant potential partnerships, yes, we do believe that there are potential partnerships to be had with Libervant, both outside the US and in the US. I think that the critical thing for Ernie, myself and the team is the discipline around what is the right partnership. And what does the value look like? What does the pathway look like and how do we make sure that patients are maximized in that partnership? So that's where I think you'll see us just be really thoughtful. But yes, if all we wanted to do was find a partner, I don't think that's the difficult part. It's finding the right one that's the difficult part.

Hey, would you be able to characterize sort of how many of the right partners have come in and you're still trying, you trying to judge it between them? Or is it really, again, lot's going to depend on if you can actually get approved by the FDA. Certainly, big issue for it.

Sure. I think the right way to characterize it is, we have a lot of active discussions. So, whether those are the right partners or there's more right partners to come, I think is kind of an amorphous thing for us to know. But I think we have a reasonable set of potential collaborations that could occur.

Excellent. Thank you for taking the questions.

Thanks James.

Thank you. [Operator Instructions] Our next question comes from Andreas Argyrides with Wedbush. Your line is open.

Good morning. This is Caroline on for Andreas. Thanks for taking our questions. So, I just have one question on 109. In the press release it was mentioned that you continue to characterize the administration of 109 under potential conditions of allergic reactions. Just wondering if you can elaborate on the conditions you are evaluating 109 under and if this was requested specifically by the FDA during the end of phase two meeting or in their March correspondence. And then what else might the FDA want to see besides the altered dosing conditions evaluated in part three of the EPIPHAST study?

Sure. Thanks Caroline. I'll pass that over to Steve.

Yeah. And so, at the phase two meeting, we discussed with the agency a variety of topics. Some of them were in ensuring the ability to administer and deliver our product under the conditions of a severe allergic reaction, which is expected. And, certainly a conversation we look forward to. And we do continue to evaluate all of those conditions, right? And that ultimately is, all tied to your risk benefit in your NDA. And that's part of the, that meeting that we talked about having later in the year with the agency is to present all of our work on it line that we've characterized everything in the right way and ensure that we have a robust filing in the future. That is the intention.

Okay. Great, thanks. And then I just have one follow-up, if I may. So, with the PDUFA for ARS Pharmaceuticals, nephrine [ph] coming up in mid-2023, if approved, do you think it is possible that FDA would eventually want to see 109 PK compared to nephrine?

I don't think that's the -- I'm just thinking through the patent, looking at Steve. I don't think that's the way the pathway works. So, this is not an orphan drug block, where suddenly there would be a need for some comparison or we don't see why that would occur. But we think our pharmacokinetic curve is very compelling and we will continue to compare it to the existing already approved products. And we think that will be sufficient for the FDA.

Okay, great. Thank you so much.

Thank you. This concludes our question-and-answer session. I'd like to turn the call back over to Dan for closing remarks.

Thank you and thank you to all of you for joining us today. As I stated earlier in the call, we are going to remain very disciplined this year on ensuring we deliver on things we have laid out and that will continue to be rapidly progressing AQST-109 towards our pivotal site. We will continue to focus on expanding our collaborations, which will allow us to further strengthen our balance sheet. And of course, we do remain serious about finding the pathway for Libervant both here and abroad, to get it in the hands of patients. With that, we appreciate your joining us today and we will talk to you soon.

Ladies and gentlemen, this does conclude the program. You may now disconnect. Everyone, have a great day.