Good morning, and welcome to the Aquestive Therapeutics First Quarter 2024 Conference Call. [Operator Instructions] As a reminder, this call will be recorded. I would now like to introduce your host for today's conference call, Bennett Watson of ICR Westwicke Investor Relations. You may begin.

Thank you, operator. Good morning, and welcome to today's call. On today's call, I'm 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 first quarter 2024, followed by a Q&A session. During the Q&A session, the team will be joined by Dr. Stephen Wargacki, Chief Science Officer. As a reminder, the company's remarks today correspond with the earnings release that was issued after market closed 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 2024 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 the Risk Factors section and other sections included in the company's quarterly report on Form 10-Q filed with the Securities and Exchange Commission on May 7, 2024. 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. 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 the cautionary statements 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, and good morning, everyone. It has been only 64 days since our last earnings call. Yet the company has been largely transformed over those 64 days. To be specific, since our last call, we have announced positive Phase III results and a positive FDA interaction for our lead product candidate, Anaphylm epinephrine Sublingual Film, raised over $75 million in new capital from high-quality investors and received FDA approval for Libervant diazepam Buccal Film for the treatment of seizure clusters in patients aged 2 to 5 years. We have realized these accomplishments while also progressing the company's long-term growth initiatives. This was truly a remarkable 64 days for the company. For me and for all of the members of the management team, it is gratifying to reach the other side of the transformation we have been planning for over the last 2 years. We continue to rapidly progress Anaphylm in the clinic. As we previously shared with you, we have 3 supportive studies to perform before our adult application is ready for filing with the FDA. We refer to these as our temperature/pH study, our self-administration study and our allergen exposure study. I am pleased to say that our temperature/pH study is well underway and remains on track to complete dosing this quarter. We submitted our protocols for our self-administration and allergen exposure studies to the FDA with a request to receive responses within 45 days. We were pleased to receive positive comments back from the FDA in less than 30 days. We are now in the process of commencing both studies. We currently expect to complete all 3 studies before the end of the third quarter. Our current guidance is that we will be able to provide clinical results from at least a portion of these studies…

Thank you, Dan, and good morning, everyone. By now, you will have seen our financial results in our earnings release that was issued last evening. As we typically do, we will address most of the discussion related to the first quarter 2024 results in the Q&A. During the first quarter, we continued to execute on our financial strategy to strengthen our financial position by raising capital that extends our cash runway and supports the continued development of our lead product, Anaphylm, the first and only nondevice-based orally delivered epinephrine product candidate. In March, we closed an underwritten public offering of 16.7 million shares of our common stock at the public offering price of $4.50 per share. The underwriters purchased approximately 600,000 shares of common stock to cover overallotments in the offering on April 22, 2024, bringing the total gross proceeds to the company from the offering to approximately $77.5 million before deducting underwriting commissions and other offering expenses payable by the company. All of the securities were sold by the company. We intend to use the net proceeds from this offering together with our existing cash and cash equivalents, primarily to advance the development and commercialization of our product pipeline, including Anaphylm for the treatment of severe life-threatening allergic reactions, including anaphylaxis and Libervant for the treatment of seizure clusters in epilepsy patients aged 2 to 5, and for working capital, capital expenditures and general corporate purposes. This capital will provide the company cash runway into 2026. We are pleased this offering included high-quality institutional health care investors. These investors' willingness to be part of our future represents another important step forward in the continued growth of Aquestive. Also, on April 3, 2024, the company filed a new prospective supplement to register the offer and sale of up to $250…

Thank you. [Operator Instructions] Our first question comes from David Amsellem with Piper Sandler.

So I wanted to pick your brain on the competitive landscape in the epi space. So there are a number of intranasal products, as you know, that are moving through development and wanted to get your thoughts on how you're thinking about not just the payer landscape in the context of a more crowded landscape, but also just patient and practitioner preferences for nasal spray modality versus an oral film modality. So that's number one. Then secondly, on Libervant, any more color on how you're thinking about the future of that product, whether you're looking at more fulsome commercialization down the road or partnering it out? Just help us better understand where your heads are at on that product. And then lastly, you mentioned the partnerships and you'll have more to say. I guess does that mean that you're looking to sort of monetize these income streams. So I'm just trying to get a better sense of what you meant by that.

David, good to hear your voice. So yes, in terms of the competitive landscape for epinephrine, I will admit I have lost count of how many intranasals are in development. So -- but I know there are a number of them. But as far as I'm aware and what gets us excited and where we think we are unique is we are the only oral. We are what we believe is a very portable product and we're the only product that I'm aware of that is bio comparable to the auto injectors for the first 30 minutes following administration. This is for a rescue product designed to save someone from anaphylaxis. So I don't know how many nasal sprays are in development, but I do know I have a very differentiated product that we're very excited about. So when I look at the market research and survey work that we do, which we do the same work all companies do, there absolutely is, in our view, a difference in how patients and caregivers view our product versus medical devices, right? So our portability clearly shines through as does our speed, the speed of being able to access the product, the speed of being able to give the product, the speed of the epinephrine concentration in your blood and getting to Tmax in 12 minutes. All of those things in our mind are major differentiators that are important as we go forward. In terms of the payer landscape, we are -- as I said in my prepared comments, we are clearly doing a lot of work on the payer front. Our findings to date, which match what we've said in the past, is that payers understand this is the rescue space typical to other rescue spaces. And as long as your…

Our next question comes from François Brisebois with Oppenheimer. François Brisebois: So I was just wondering if you can comment on the allergen tests now that that seems to be the requirement and the cancellation of the angioedema test that you initially thought you would have to run. Is that helpful? Just can you help us just contextualize what that means to the company, if it's easier or harder? And angioedema in the real world, how common do you see this with anaphylaxis here?

Frank, good to hear your voice. Yes, I'm glad you brought up this topic because there -- in our view, there appears to be some confusion that out in the world around edema and what is experienced by someone going through the process of anaphylaxis. So edema -- the onset of edema with anaphylaxis is a cascade, right? So it starts as a tingle, it starts as a change that an individual may feel. And of course, if you allow time to go by, it will progress and get worse. And that's not just in the oral cavity, that can be manifested in other parts of the body, nasal cavity and many parts of the body. So when we think about angioedema, we think about the need to dose quickly, right? Which is exactly what our study will allow us to show. In our allergen exposure study, we will expose individuals to whatever oral allergen syndrome they have. So cherry, mango, kiwi, whatever it may be, and the individual will work with the clinician to say what level of discomfort they are feeling. And we will then dose our product and, of course, track the pharmacokinetic profile of that product. So that's going to, in our minds, show what a real-world experience looks like, right? As we talked about in the past, you're sitting there, you think you may have had something, you're feeling this tingling, something is progressing and then you take our product. What we don't believe is realistic or something that happens in the real world on any regular basis, is the extreme edema that I know has been shared in other settings. That's just not the experience we hear from KOLs and experts. So we think the FDA did a very good job, and we're very pleased with the way they worked with us to say, don't do an angioedema study, where you're trying to create this false level of swelling; instead show people what it really looks like in the real world. So we'll have a patient-based study, right? These are patients who will be in the allergen exposure study. So we're excited to get that going, and we'll have more to say about that over the next few months. François Brisebois: And then if I could just squeeze in one last one here. In terms of Anaphylm, obviously, gigantic market. How does a company your size? Can you just talk about a little bit -- I know you're doing a lot of work right now on this. But what can you share about commercial prep and maybe sales rep side? And what kind of docs are you going after here?

Yes. Yes. I think that's another. As we learn more and especially now as our balance sheet is appropriately sized, I think size is a misnomer, right? We believe that a relatively modest sales force and, as I said in the past, somewhere between 80 and 100 reps, is a great place to launch this product. Not only that, while the entire market is spread across a lot of call points because there is a general GP component of this, if you target allergists and pediatricians, the top 5 deciles can be targeted with 80 to 100 reps. So when I look at our nasal spray competitors and how they're approaching the market, I think everyone has a similar approach. And I don't think that you have to be a big multi-product pharmaceutical company to attack this market. This is perfect for a company of our size.

Our next question comes from Raghuram Selvaraju with H.C. Wainwright.

Firstly, with respect to the time line for the submission of the Anaphylm NDA, based on your current objectives with respect to the pre-NDA meeting, can you confirm whether you still expect to submit the NDA before the end of this year? Or if it's possible that it could slip into next year simply because of the lag between concluding the pre-NDA meeting and completing the final pediatric study?

Sure. And I'm glad you brought that up because there was -- in our prepared remarks and in the supplemental materials we've given, we did show everyone something a little different than last time. And I want to make sure we're clear with everyone what that difference is. We believe -- so before, we had laid out a plan where we would do all of our studies and then go have our pre-NDA meeting. Looking at it now, we actually think it's much more efficient for both us and the FDA given that we're moving so rapidly through the 3 supportive adult studies, we think it's more efficient for everyone, if once those 3 studies wrap up, we just have a pre-NDA meeting. And why? Because we want to show that data to the FDA anyway before starting the pediatric study. So why not just turn it into your pre-NDA meeting, especially since the pediatric study is a very straightforward study. We are literally giving 1 dose to a child between the ages of 7 and 17 who is over 30 kilos and that's it. So is it possible that things change? Of course, that's our industry, right, who knows. But our guidance, our goal, our focus remains exactly like we said it was before: filing by the end of this year, and we'll do that by having a pre-NDA meeting at the end of our supportive studies and then doing a very straightforward pediatric study that we've laid out.

Okay. That's helpful. And then secondarily, with respect to all of this discussion around the commercialization of Anaphylm and the likely sales and marketing infrastructure that would be necessary, can you comment on the following 2 things? Firstly, what kind of promotional effort do you anticipate is likely to be most applicable here, let's say, in the hypothetical scenario where Aquestive launches Anaphylm independently? Is it digital marketing driven? Is there any meaningful DTC through traditional channels? How -- what does that look like? Just frame that for us, if you can. And secondly, this may be a question for Ernie. The financial guidance that has been promulgated, particularly with respect to the length of your current cash runway post the most recent raise, does that actually factor in both prelaunch as well as the launch activities related to Anaphylm?

Sure, Ram. So also a great question and something that's really important to highlight for everyone. When you look at the launch of this product, and we have, by the way, done a considerable amount of effort over the last 90 days to start bringing in some commercial expertise, make some changes in our commercial organization to be ready for Anaphylm as well as bringing experts around us. So obviously, and I'm sure Ernie will at some point in the discussion here talk a little bit about expenses. But that's where we're spending our money, right, on R&D and commercial for Anaphylm. So having said that, what -- so we spend all this money to build a commercial infrastructure. What are they going to do, right? And that is a -- when you think about the 20-year span of this product being on the market, there are several phases. The first phase, so the first couple of years of launch, the very straightforward obvious place to focus are on these scripts that exist, right? So the health care providers who are writing scripts to patients today. So I'm sure just like our competitors, that's where our focus will be, right? Converting those existing low-hanging prescriptions to Anaphylm. As time goes on and as our brand is established, yes, of course, there will be more of a digital direct-to-patient advertising component, but that is not what you do, in our view, day 1. Day 1 is about the existing base. The second phase is about the expansion of the market. I'll let Ernie give you his thoughts on your expense question.

So I think you're referring to our mention of our cash runway based on the recent capital raise of where that would get us, and we've stated that, that would get us into '26. So though we haven't given specific guidance for 2025, both our 2024 guidance, what we expect to spend in '25 will -- does -- and get us into '26 on that cash does include some anticipated spend on pre-commercial activities this year more around the payer perspective and then next year of an increased spend to be prepared to launch the product.

So, Ram, let me just add to what Ernie said, just put a finer point on that. We have plenty of money right now. We're very happy with our balance sheet right now. And as Ernie said in his prepared remarks, while we have an ATM in place, we're not using it. Right? So we think we're well set up for what we need to execute on. And we think that fits us not just to our approval but past our approval and into the launch phase. And at that point, obviously, there's a lot of different parts of our business. We'll have to see how things go over the next 2 years.

If I could just sneak in one more thing. With respect to optimizing the value of Anaphylm as an asset, how do you see the picture changing outside of the United States, particularly given where you currently are with the product, all the clinical data that has already been generated? What are you seeing in terms of the potential partnering interest or other opportunities to potentially optimize the value of Anaphylm as an asset looking at ex U.S. territories?

Yes. No. Ram, you're absolutely right. We think Anaphylm is a global product. And we think there are a variety of places where -- well, I mean take the word variety. We think on a global basis, anyone who can have access to Anaphylm we think will benefit. When we look at the ex U.S. markets, there's a few dynamics going on, right? So let's take China. China right now is just not a good market for, I believe, I'll make a macro statement of our industry, in general pharmaceutical products. It's just that not only the geopolitical world, but the pricing world's just not a good place. So I don't think you'll see us focus on China. Europe, however, is a very different story. We have done the work, and we do believe Europe is a bigger opportunity than perhaps we had previously thought. So we do -- we do have business development activities going on in Europe. I think the timing remains to be seen. I will admit, I don't think our competitors have done us any favors in that regard because the products have struggled a little bit in Europe on the regulatory side. So I think we need to be clear with our story and make sure we've positioned ourselves correctly. But ultimately, I do believe Europe will be important to us.

Our next question comes from Jason Butler with JMP Securities.

This is [ Jose ] for Jason. Just a very quick one, a follow-up clarifying question. Is the pediatric trial needed for approval? Or do you plan to include the safety data from the study to FDA during the NDA review? For the temperature and pH trials, we're just wondering what you're expecting to share? And lastly, on the topical product, do you also need to look at the potential of accidental exposure to another person, whether it's another subject, a health care provider, or a family member?

So I apologize, you were very soft coming through. I think I captured some of it, but not all of it. I heard you asked on the temperature/pH study when -- what our thoughts are in sharing data. I heard you ask on the topical product I think a sizing question about what the opportunity looks like. Did I miss one of the other questions?

For the topical product, if you need to look at the potential exposure or accidental exposures to another subject or a health care provider?

Did you catch that? Exposure? Okay. Well, let me -- I apologize I'm just not quite hearing it, but I'll give you my thoughts on what I think you asked. So on the temperature/pH study, yes, we will share that data. I think the timing of when we share it is what we need to clarify with everyone, and that's why we gave guidance today that definitely at the Q2 earnings call in August, if not earlier, we will share the clinical data that we have. But I think the important thing to remember around not just the temperature/pH study, but those 3 supportive studies is unlike the Phase III pivotal study, this is not a [ PASTEL ] series of endpoints. This is comparison work, right? So we are comparing, we are showing in the temperature/pH study, as an example, what our curves look like single dose after a variety of different liquids are administered. You can actually see the liquids in the supplemental materials we gave. So while we expect -- we don't expect any differences. Even if there are differences, we think that all we're doing is quantifying those differences so that it's complete in our NDA. So these 3 supportive studies we think are exactly that, supportive. So we're excited to share that data in the future. In terms of the AQST-108 topical gel product, I know we haven't shared a lot of information on this product yet. We do plan to in the second half, but I will tell you we are very excited about being able to penetrate the skin with the epinephrine prodrug. And we think that opens up a host of opportunity that is very meaningful. If your question on exposure was around absorption, I think we'll have more to share in the future. Does that capture a reasonable amount of your questions?

Yes. So I mean exposure as in accidental transference to another patient, another subset or a health care provider.

Yes. So with any topical gel, transference is always something you have to manage, right? So we would be no different than any other topical gel that is on the market today. But we would expect to be no better, no worse than all of the other topic gels, which, as you know, is a substantial market.

Our next question comes from Gary Nachman at Raymond James.

So first on Anaphylm, and just a follow-up. I think it was just asked but not answered. So on the pre-NDA meeting and the pediatric study, is there a scenario where you would file for just adults without that pediatric study? Or is it just a question of confirming the design of that pediatric study that you laid out? I'm assuming 7 to 17 is a big portion of the market that you need in the filing.

Yes. And I will admit to being disappointed you didn't ask a Libervant question, since you've been with us on Libervant for quite some time.

Well, I'm not done yet. I have a question on that.

All right. We'll get to that then. We'll get to that. And I appreciate you asking that question so that I'm clear with everyone. Yes, we have no intention. I'll even repeat it. We have no intention of filing our NDA without the pediatric component. So we're not signaling in any way that we are going to do just an adult filing. This is just, in our view, the most efficient way of getting to a complete filing. So we would expect our label at launch to be the same as the EpiPen dose label. So 30 kilos and up in terms of ability to dose.

Okay. And just, again, how long would it take for you to run that study? And just when you break down the market, peds versus adults, can you quantify that a little bit just so we have a sense?

Yes. My memory of the difference between peds and adults is somewhere around that 50-50 mark. So about half the market is adults, half the market is kids. In terms of how long it will take to run the pediatric study. We don't believe this is a difficult study to run at all. It is a -- again, it's a single dose. So there's no crossover. There's no having the pediatric patient come back and go again. So literally, the child comes in, they take a dose of our Anaphylm, we track their PK for a period of time. And Steve, do you recall how long we track for?

A few hours.

A few hours and they leave. So we do not believe that is a long study in any fashion.

Okay. And then on Libervant, so congrats on getting that approval in 2 to 5. And I'm curious on the commercial side. So what you're doing now with Libervant currently, how much are you going to be able to leverage that for Anaphylm, setting up a distribution network? I know that Anaphylm is still a ways away, but how much of a consideration is that in terms of the investments that you're putting behind Libervant? And then I also did want to get a sense from you guys, given the whole situation with the ODE. if you're expecting a challenge from Neurelis at some point on this approval? And do you think it's even possible to sign a potential partner before having better visibility on that? I know ideally, you would like to find a partner if you can, but do you think you'll need better visibility on the legal front for that to happen?

Yes. Yes. No, it's -- Gary, you know us well. It's like you've been sitting in our Board room with us. The Libervant products are the really, I'll call it, tantalizing thing for us with Libervant is if we were to keep it, we do get to build out pieces of infrastructure and not only build it but get to use it well ahead of the Anaphylm launch. So think of distribution, payer access, all of those pieces, you can almost think of it as getting the cobwebs out a little bit of the system before Anaphylm launch. So that is appealing. I don't know ultimately that, that will drive the decision because I think we have to stay true to our mission statement, which is we want to help patients and you need to maximize getting this product into patients' hands. But it is definitely a factor that we are aware of. In terms of ODE, yes, really interesting situation on that front, as you noted. So first, on our product, we're still in the waiting phase to get the determination from the FDA on our orphan drug exclusivity for the 2- to 5-year-old space. As I said in the prepared comments, we anticipate receiving ODE. There's no reason we shouldn't. When we look at analogs, they received ODE. So we think that's just a matter of waiting and seeing. So once we have that, obviously, for our product, we would have 7 years of the 2- to 5-year-old space for just our product and the existing products. In terms of being challenged, the approval and market access of our product, while obviously, we don't control the actions of any of our competitors, all we can say is, as of 8:50 Eastern Time on May 8, we are not aware of a complaint being filed against the FDA by anyone. So it is -- as you know, it's no small undertaking to effectively sue the FDA. You would think that if you were going to, you would want to get that started. So I don't have any more color for you on what others will do in this space.

And then the partnership yes.

Yes, I'm sorry. You did have 1 last part to that question. Yes, we absolutely do think it is -- we can partner, we can license out the Libervant product at our discretion. I don't think that from our interactions with the various companies that are interested, this does not appear to be a roadblock at this time.

Okay. Great.

[Operator Instructions] Our next question comes from Thomas Flaten with Lake Street Capital Markets.

Just on that last point, Dan, I know you guys had backed off a little bit your engagement with FDA around the 6-plus Libervant approval because you wanted to get the 2- to 5-year-old out. Now that that's been approved, how are you thinking about reengaging with FDA kind of on a major contribution to patient care basis to see if you can overturn the ODE that is in place in that space?

Yes, Thomas. And by the way, we noted you were the first one on the line this morning, so definitely impressed considering you're in a different time zone. But in terms of -- in terms of your question on that front, I think that the engagement with the FDA will happen -- sorry, I was looking across the room at my colleagues here. In terms of our engagement with the FDA, we will -- now that we've gotten this particular filing out of the way, we will pursue the adult again. As you know, while we think we have very good arguments of the wheels, I think FDA moves at a certain pace, so we will just continue to follow that process and see where it leads.

And then you mentioned earlier that with a sales force of 80 to 100, you could hit the top 5 deciles. Was that based on specialty? Or was that just EpiPen prescribing period regardless of whether it's specialty or primary care?

My understanding from the deciling that we have seen is that is across the universe. So look, there are a couple of nonallergy nonpediatric call points that would just be high prescribers that are baked in there to some degree, but very minor. But no, that's a decile world.

Thank you. I'm showing no further questions. I'd like to turn the call back over to Dan for closing remarks.

Thank you, Michelle, and thank you, everyone, for joining us today. I couldn't be happier with where we are in the company right now. We're in a great place, and we are focused on the execution of our business plan as we've shared with you. We have a variety of what we believe are important milestones between now and our Q2 earnings call in August, and we look forward to keeping you updated over the next several months. With that, I will close it off.

Thank you for your participation. This does conclude the program, and you may now disconnect. Everyone, have a great day.