Q3 2022 Aquestive Therapeutics Inc Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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Okay.
Okay.
Good morning, and welcome to the Quest of Therapeutics third quarter 2022 conference call. At this time, all participants are in listen only mode.
After the Speakers' remarks, there'll be a question answer session.
Is that going to be given at that time.
As a reminder, this call will be recorded.
I would like to introduce your host for today's conference call Ben Watson of Westwood 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.
Chief Financial Officer, who are going to provide an overview of recent business developments and performance for the third quarter 2022, followed by a Q&A session.
During the Q&A session. The team will be joined by Dr. Steve worked Jackie.
<unk> president of R&D.
Ken.
<unk> Medical officer, and Ken Marshall Chief Commercial 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 our questions website within the investors section. Shortly following the conclusion of this call.
Sure remind you request 15, we will be discussing some non-GAAP financial measures. This morning as part of its review of third quarter 2022 results.
A description of these measures along with the reconciliation to GAAP can be found in the earnings release issued yesterday, which is posted on the investors section of our questions 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.
Described in the risk factors section and other sections included in our annual report on Form 10-K filed with the Securities Exchange Commission on March eight 2022, and in our quarterly report on Form 10-Q, and current reports on form 8-K 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 of the date made.
Actual results may differ materially from these statements all forward looking statements attributable to a question 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.
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.
I am pleased to tell you today that during the third quarter and extending into October we have made significant progress towards navigating the company through these difficult times.
Over the last 60 days, we generated over $25 million.
In licensing payments through three separate licensing agreements across three continents.
This was done in parallel to our ongoing cost savings initiatives and limited use of our ATM.
In fact, we ended the third quarter with more cash than we had at the end of the second quarter.
Let me repeat we ended the third quarter with more cash than we had at the end of the second quarter.
We are committed to continuing our efforts to generate non dilutive cash and while there is no guarantee of success or timing. We believe these efforts are critical to the ongoing strengthening of the company's financial position.
We believe some of the companies parts are significantly more valuable and our current enterprise value.
In a market such as we face today maximizing the value of our different assets.
An efficient way of generating the additional cash needed to continue the development of <unk> 109 as.
As well as the overall growth of the company.
Just as importantly during the same time period, we continued to simplify and progressed via Quest story.
Our lead asset <unk> 109, epinephrine sublingual film progressed rapidly in Q3.
We demonstrated positive results from both our <unk>, one and <unk> two states.
We continue to believe the results from both studies are compelling.
<unk> nine showed rapid absorption and uptake with a median time to maximum concentration or <unk> of 12 minutes and maximum changes to both the solid blood pressure and heart rate at under 10 minutes, which are potential indications of therapeutic effect.
We also know that in the instances, where a second dose must be given we haven't even faster medium T. Max for the second dose at only eight minutes.
We continued to make regulatory progress on <unk> 109.
In October we received an end of phase II written response from the FDA regarding our chemistry and manufacturing components.
We were pleased with the Fda's responses and believe we have a clear path forward.
We will be meeting with the FDA in an end of phase two clinical meeting later this quarter and should be able to announce the results of this meeting prior to the end of the year.
We have presented our full clinical plan to the FDA and at this meeting expect to receive significant agency feedback.
The market opportunity for <unk> 109 is compelling.
Last year more than $3 5 million scripts fulfilled for epinephrine auto injectors, representing an estimated $1 billion in net sales.
And the data we have we estimate that almost a third of these scripts are written by allergists here in the U S.
If you add in Pediatrician's, we know that around half of all scripts come from these two specialty areas.
We also believe that allergists are significant influencers of the remaining 50% of scripts that are written by other other physicians such as general practitioners.
The allergy cough, a smaller in size and scope and the neurology call point that we managed with Simpson, our recently out licensed product.
Put another way, we know that we can build and maintain the expertise to manage a reasonably sized commercial launch that directly targets a significant portion of the market.
As we progress through 2023, we plan to provide more details about our intended strategy to launch <unk> 109 in the U S. As early as 2024, if approved by the FDA.
Now that we have out licensed simply we are refocusing our commercial leadership onto the launch of <unk> 109.
Over the last five years. This leadership has built the necessary infrastructure within our quest is to launch and manage a commercial product.
We will maintain certain commercial expertise, while we progress <unk> 109, thereby enabling us to properly launch <unk> 109, if approved by the FDA.
We have already begun the early outreach into the allergy community.
We established our scientific Advisory Board last month and have assembled an outstanding group of advisors, who already been extremely helpful to our development process.
We have submitted abstracts to upcoming medical meetings, and the allergy field and plan to present three abstracts at the upcoming American College of allergy asthma and immunology annual meeting.
We will launch our publication strategy and increase advocacy awareness as we progress into 2023.
Turning to Liberman, we continue to actively engage with the FDA to ensure that we have a defined hurdle to lifting the orphan drug block.
We have provided the FDA with our proposed protocol for a head to head study and are awaiting their feedback.
Once we hear back from the FDA, we will provide you with more details.
In the meantime, we continue to actively explore out licensing opportunities for this asset.
Our ultimate decision an out license versus launch will be driven by multiple factors, including the timing of an HFC 109 approval and launch.
Our findings from our continued interactions with the FDA on liberman.
And the capabilities and economics associated with potential out licensing deals and partners.
In parallel we continue to see strong performance in other areas of our business.
Our manufacturing operation continues to see solid orders for the production of Suboxone on a global basis, Ondansetron and Brazil and since event in the U S. While also preparing for the launch of <unk> in Europe .
All of these businesses represent valuable components of requested and we continue to drive performance in each area.
In conclusion.
We recognize the headwinds that we're facing and we are focused on continuing to manage our way through these turbulent times.
This means maximizing our opportunities to generate non dilutive cash with our existing levers.
We will continue to rapidly advance <unk> hundred nine and we're looking forward to the upcoming FDA end of phase II clinical meeting.
We will also continue to drive business performance across all elements of the company.
The requested product portfolio is backed by proven science Dow.
Clinical results and a compelling commercial needs.
I will now turn the call over to Ernie to touch upon the financial highlights.
Thank you Dan and good morning, everyone.
By now you will see in our financial results and 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 third quarter 2022 results into Q&A.
During the third quarter, we continued to manage the company for success as we raised additional non dilutive capital and reduced expenses going forward to extend our cash runway.
During the third quarter, we received $10 $5 million, including the $7 million upfront cash payment due under the terms of the licensing and supply agreement with high scale for extra van for AOS treatment in China and.
And $3 5 million upfront cash payments under the terms of the licensing and supply agreement with pharma novia for the exclusive license of live event buccal film for the treatment of prolonged or acute convulsive seizures across all ages in certain countries, including the European Union and the United King.
Under both agreements, we will receive additional milestone payments as well as manufacturing fees and royalty fees.
On October 26, we entered into a license agreement with a 32 licenses in oral film for the adjunctive treatment of seizures associated with Lennox <unk> syndrome in patients aged two years of age or older.
Under the terms of the license agreement, we granted an exclusive worldwide license of our intellectual property precipitous, an <unk> for an upfront payment of $9 million.
We also entered into a long term supply agreement with a 30% of that.
Under the terms of the license agreement requested we will receive a $6 million milestone payment within 30 days of notice from the U S patent and trademark office, our allowance for an additional patent application for <unk> and payment of related allowance fees, both of which were completed.
On October 27 2022.
In addition, we will receive royalty fees from <unk> on the sale of Sip to them during the term of devices degree.
Okay.
The licensing of Steppers Anne will bring in near term non dilutive capital of $15 million to support company operations eliminate the cash burn is simpler than being a standalone product without the benefit of will revert U S market access reduce our commercial head count.
Retaining payer and distribution expertise for <unk> 109, and allow us to focus on our most important value drivers.
Total revenues were $11 5 million in the third quarter of 2022 compared to $13 3 million in.
In the third quarter 2021.
For the third quarter 2022, compared to the prior year period, we saw a 15% increase in <unk> net revenue and a 15% increase in license and royalty revenue offset by a reduction in manufacturer and supply revenue due to ordering patterns as well as a reduction in co development and research fees.
Total revenues were $37 million for the nine months ended September 32022, compared to $39 8 million for.
For the nine months ended September 32021.
Excluding the Chem farm milestone of $2 million as well as the deferred revenue of $2 1 million.
From the terminated license and supply agreement with <unk> for Toby of Therapeutics that were recognized in 2021, but did not reoccur in 2022 total revenue increased by $1 3 million or.
Were 4%.
Our net loss for the third quarter 2022 was $12 $5 million were 23 loss per share.
The net loss for the third quarter, 2021 was $14 6 million or <unk> 37 loss per share.
The change in net loss was driven by lower revenue as mentioned earlier, a decrease in research and development expenses, largely higher operational expenses, including severance related expenses a decrease in interest expense and a decrease in noncash interest expense related to the kind of <unk> monitor.
<unk> transaction.
Our net loss for the nine months ended September 32022 was $42 1 million or 90 cents loss per share.
The net loss for the nine months ended September 32021 was $41 6 million or $1.12 loss per share to.
The change in net loss includes severance related costs of $2 7 million.
non-GAAP adjusted EBITDA loss was $7 7 million in the third quarter 2022, compared to a loss of $5 3 million.
And third quarter of 2021.
non-GAAP adjusted EBITDA loss was $25 7 million.
For the nine months ended September 32022, compared to a loss of $15 6 million for the nine months ended September 32021.
This year over year change in EBITDA loss again included severance related costs of $2 7 million.
Okay.
Cash and cash equivalents were $18 6 million as of September 32022.
As outlined in the press release issued last night after market close.
We're reconfirming, our full year 2022 financial outlook, our full year financial expectations. Our total revenues of approximately $46 million to $49 million and non-GAAP adjusted EBITDA loss of approximately $37 million to 43 million.
Yeah.
In summary, our 2022 guidance for full year non-GAAP adjusted EBITDA loss reflects continued strong performance, our manufacturing and supply operations.
Development activities and continued focus R&D investments related to the advancement of <unk>, 1% on.
In addition, we will continue to implement expense reductions to reduce our cash burn while preserving the continued development of <unk> 109.
With that I will now turn the line back to the operator to open the line for questions.
If you'd like to ask a question. Please press star one.
Our first question comes from Gary Nachman with BMO. Your line is open.
Hi, Good morning. This is Dennis on for Gary Nachman. Thank you for taking our questions. Just a couple for US can you go into more detail about where you are in the process regarding out license out licensing live event and the U S and maybe clarify what some of the deal terms might look like.
Also regarding liver fat.
<unk> being completed can we see that occurring before you'll receive alignment with the FDA on the head that clinical trial or is that something that has to come first thank you. So much.
Good morning, Dennis Thank.
Thank you for that question.
From an out licensing standpoint with Liberum.
First let me be really clear.
Where we stand with liberman.
We have not wavered on our view on the value or the better.
Bits of litter bin for a second.
We believe in the product we believe in the benefits to the patient.
We remain.
<unk> that the FDA.
It is not allowing the first oral products in this space into the market based on the existing orphan product that is in place.
<unk> said that.
We believe at this time.
When you look at where the company is going and our focus on <unk> 109 as.
As well as the continued progression of our financial position.
It makes sense to look at explore the opportunities to out license Liberman, we have had some of those conversations in the past all were doing today, saying that is now something that will be front and center for us and we'll be very active on in terms of what the deal terms look like we were not providing guidance on that today.
I would say to you, though is because we believe in the value and the benefits of the product.
We will have deal discipline, we will be focused on ensuring one that if we do find an appropriate partner.
They are the right partner to bring that to patients and ensure access to the product.
And to that.
Our questions.
Side of things that the company here has the right upfront component as well as milestone and royalty components.
So we will make sure that that process has gone the right way.
In terms of timing, whether it's before or after a readout on a head to head study.
I think you should look at this as a continuum, we are going to pursue our discussions with the FDA as we are right now.
Fast as we can.
And we will continue to work diligently.
To change the Fda's orphan drug block.
Whether a deal comes before after that will simply be a case of the discussions we're having externally and the speed at which our discussions with the SBA.
Great. Thank you.
Our next question comes from Jason Butler with JMP Securities. Your line is open.
Hi, Thanks for taking the questions and congrats on the progress.
Just one on <unk>.
The feedback youre expecting from from FDA on the protocol.
This feedback be specifically focused do you expect just on the trial design or do you think youll get any feedback from FDA on whether the the strategy.
Could be sufficient to overturn the orphaned block.
Sure yes so.
Jason we're of course.
<unk> to.
To make sure that we understand the orphan drug blocked component.
Our mines.
<unk> guidance.
Food effect.
Very clear.
It is not it is agnostic to the delivery method. So one.
Every method should not get a pass on with respect to compared to another delivery method. So that's the spot where of course.
Focusing on in our discussions.
I have to believe that given the mandate of the FDA and the way the reviewing division works.
It will understand the importance of that fact and in our design, we will be looking to where we are in the design, we've given them looking to highlight that difference.
No.
We're hopeful that in the feedback from the FDA, we will not only get the typical guidance on our protocol on things they'd like to see your changes they think are appropriate but also.
A confirmation from them on the importance of their own guidance and why that should be followed.
Got it and then just.
A quick follow up there I think you've said previously that.
This food effect study could could take a few weeks to a couple of months based on the protocol you submitted that is that still the case.
Yes.
The protocol is as we have put it to the FDA.
A relatively straightforward study to run.
I actually do have our chief Medical officer here with me today can true it ill, let him comment on the ease or difficulty of actually running the study thanks, Dan So as.
Dan alluded to this is to say.
Comparative food effect relative bioavailability study, it's a very simple straightforward design. There is some lengths involve simply because diazepam has sort of long lived.
Metabolites need to wash out so there probably will be a period of several months to complete the study mostly related to the washout.
Okay.
Got it thanks, and then just a last one from me on that.
A USD 109, you talked about the fact that you are doing and you will continue to do some work towards commercial preparation.
Can you talk about any research you've done with payers, so far or how you think about reimbursement and patient access for free.
The product.
Sure.
So first I just want to point out that we'll hand, it over to Ken Marshall.
Chief commercial officer and second year.
I do want to point out one of the benefits.
The deal, we announced last week, where we're out licensing <unk>.
Now.
Get to watch Ken Marshall and his.
Management team that the expertise we've kept in house move their significant experience in bringing power from <unk> onto 109. So you will see us be much more active in thinking about the commercial side going forward, but with that I'll, let Ken comment on your specific question.
Thanks, Dan Hi, Jason we've done some early work with payers that we have a little bit more to do.
And they will point towards the generics and their pricing, which is actually a pretty high price around $300 per tube packet net.
And suggest that as long as you're in that range you should get very good access.
And as you may or May not know this is going to be largely a commercial market.
So we won't have to deal with the same types of complexities, we didnt CNS, where we had about a 50 50.
Market split between Medicaid and commercial our pricing strategies will be able to be simpler.
And some of the more traditional tactics that you've seen employed biopharmaceutical companies are going to be very effective across this market by coupon offsets.
Sure.
Great.
Helpful. Thanks for taking my questions.
Okay.
Our next question comes from Francois <unk> with Oppenheimer. Your line is open.
Alright, thanks for taking the questions just a couple here on the Ecu SD Wan or nine on the commercial side, you kind of talked a little bit about a third of the targets here might be allergists and pediatricians can you just maybe breakdown I know youre, probably going to share more of your research down the road, but for now just.
To be clear on who exactly your target.
We are and why this is such a smaller call point and much more manageable than dinner outside.
Thanks, Frank and I'll again turn it over to Ken Marshall and second here, what I'll just preface it with is what we're very focused on is making sure people understand that while epinephrine, maybe prescribed across a wide base, including PCP called <unk>.
There is a significant market that is concentrated in this particular with this particular product, but I'll, let ken expand from there.
Sure. Thanks, Dan, Yes, allergist is going to be very important and that is a very small clients. There's about 3500 allergists in the U S.
We haven't done the physician level that filing yet, but you can always be certainty that they'll be that 80 20 type of rule that seems to be present in just about every market because some of those outages to be more important than others for sure. So there'll be a very efficient allergy call point and then you say the same thing with pediatricians and I think Dan referenced that account account.
For about a third of prescriptions.
To get you to about 50% of that market you need those high desktop pediatricians quite a few more pediatricians theres, probably 50000 in the U S. Certainly not all of those will be important to us it will be a very small subset of them right.
A significant portion of the balance of those prescriptions to get you to 50%.
And then as Dan suggested you get into a lot of onesie Twosies in primary care. They generally are executing a treatment plan outlined by an allergist.
They do a lot of refills.
Youll find some high volume <unk>, but I think those will be few and far between.
Okay, Great and then any thoughts on this might be a little ahead of it but any thoughts on DTC here, just because it's such a year.
A known issue.
Sure I think look.
We would love to have.
PTC like anyone else watching this product I think what youll see us focused on though is making sure that we can launch the right way for the company that we are so I would think DTC is something that is down the line its not something that will be focused on in the in the short term.
Thank you.
Okay.
Our next question comes from Thomas Flaten with Lake Street. Your line is open.
Hey, good morning, Thanks for taking the questions. Dan I was curious if you could maybe provide some more detail on the CMC feedback that you received on 109, if theres anything that.
You guys need to adjust your manufacturing process anything that you need to overcome prior.
Prior to submitting hopefully by year end next year.
Sure Good morning, Thomas Im going to pass that actually have Steve.
Steve <unk>, our head of R&D here with me today, So I'll, let him walk you through the findings from that interaction.
Sure. Thank you.
Thanks for your question.
The feedback we got was very very much aligned with our plan and allowed us to proceed through with our with our registration batches.
Alignment to ensure that.
Sure.
The package that we ultimately produce is going to be aligned with the agency's expectations and there was nothing nothing thats set us back.
Great and just a quick question maybe for Ernie.
Given the cost reductions that are possible from the <unk> sale is there any is it is a straight removal so to speak given that the product was nearing breakeven or is there a significant component of allocated overhead that stays in the P&L I'm just trying to adjust.
SG&A to be to reflect the sale.
Well as we had mentioned, especially if my script.
The <unk> P&L did include some expertise therefore for payer.
Commercial.
Knowledge that we will keep.
For 109, so the entire simpler that cost structure is not leaving us.
Most of it would be.
So we've got to be retaining.
We've talked about a couple of different ways here.
Yes, the payer expertise distribution expertise that we need for 109.
Great I appreciate you taking the questions. Thank you.
Our next question comes from Andreas <unk> with Wedbush. Your line is open.
Good morning, and thanks for taking our question.
So for 109 have you considered expiring biological signals of sites on PK pressure on pulse how are you exploring PK profiles across age groups such that when children.
Think sublingual would be restricted to older age groups since children have issues with swallowing.
Thanks.
Yes.
So Andre.
Andreas I want to make sure I have that last part clear.
Your question was.
Do we do we think it will be restricted to older Youre, saying would it be restricted to older pediatric patients sublingual.
Correct, yes.
I'll answer the last part first and then I'm going to turn it over to Kent.
Kent through it.
To answer the rest of it in the work we have done so.
Obviously, we've been working on film for almost 20 years now.
And the work we've done on other products as well as this product we have spent time with pediatric subjects down to the age of Steve.
Steve two or three three and we have done multiple.
The <unk> studies for a variety of different disease States and we do not see a difference in the data we have and how.
Children, who are three versus children, who are 912 or 15 interact with a sublingual products. So I don't think.
We see that from the data we have and also the humans back to work we will do for 109 or are doing.
We will prove that out from a filing perspective.
Let me pass it over to Ken to talk about.
Other parts of your question, Yes. So I think you asked a question on the pharmacodynamics and Youre correct in that we continue to focus primarily on the cardiovascular parameters So heart rate.
Like blood pressure diastolic blood pressure.
Cetera.
That is what we're focusing on as proxy for therapeutic benefit.
Also a question about approaching PK.
<unk>.
Pediatric population and this would be done by an approach that's fairly typical.
<unk> developed a PK model based on adult data steps down with a sparse sampling strategy in children, because thats really.
What's practical to get the data one needs.
And then continued matching as we stepped down in age so thats, how we would characterize the PK and children relative to what we've demonstrated for adults.
Okay. Thank you.
As a reminder to ask a question. Please press star one one.
Our next question comes from lore Serra.
With Alliance your line is open.
Hello. This is <unk>, calling in for Jim Malloy. Thank you for taking my question.
So going back to the potential licensing of Libre event.
With the recent out licensing of Suzanne how would you characterize the current licensing and Brian .
And any potential indications of interest of possible partners for these candidates that are interested.
Right, so within the United States.
Yes.
Thank you so are finding our observation and what what we have seen talking with a variety of people.
Throughout the marketplace as well.
While the equity markets may seem challenging or be challenging.
For a lot of companies.
The licensing process at least from our perspective remains strong.
With our simpler than process, we we saw strength in that process and we.
Felt very good about how that process unfolded.
We have as I mentioned earlier.
Ben.
<unk>.
Then in the market I'll call it <unk> been talking to people about liberman.
While we won't talk about the process in terms of specific.
Levels of interest or timing.
I would say.
We have seen signs of and we believe there will be strong demand for for the process here. The last thing I would say, though is we will be disciplined in this process and we will make sure that we either maximize that products by holding onto it if that becomes the right path or if the right partner comes along.
With the right economics and footprint for the patient population.
Entering into the out licensing arrangement.
Understood and.
I also understand updates most efforts are being placed on number.
109, but do you have any updates regarding your Illinois candidate and a possible timeline for an IND submission.
Sure.
As I think I've said in the last few calls we really like the concept of 108 and we do continue to do work in house on the.
Determining whether it can be the next pipeline product for us or not.
Often official way.
The however, part is.
Where we sit right now as a company.
Three priorities are <unk> 109, continuing to strengthen.
Lead up to some degree our financial position and driving a.
Removal of the orphan drug block on literally so while we're focused on those three 108 will be.
Limited activity once we've cleared some of the hurdles on those first three that's where want to weight in our pipeline in general will become more of a central theme.
Got it thank you for taking my question.
There are no further questions at this time I would like to turn the call back over to Dan Barber for closing remarks.
Thank you.
Well, we appreciate everyone's time this morning.
As discussed today, we remain excited by the opportunity that <unk> 109 represents for us and patients.
We will continue to focus on progressing <unk> hundred nine while at the same time, continuing to focus on reducing our debt and strengthening our financial position.
With that I will turn the call back over to the operator.
Okay.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect everyone have a great day.
The conference will begin shortly to raise Johan during Q&A, you can dial star one one.
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