Aquestive Therapeutics Inc. Q1 2023 Earnings Call
Speaker 1: Good morning and welcome to the Aquestiv Therapeutics first quarter 2023 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during that session, you will need to press star 1 1 on your phone.
Speaker 1: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. As a reminder, this call will be recorded, and I would now like to introduce your host to today's conference call, Bennett Watson of ICR Westwick Investor Relations.
Speaker 1: You may begin.
Speaker 2: Thank you, operator. Good morning and welcome to today's call.
Speaker 2: 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 2023, followed by a Q&A session. During the Q&A session, the team will be joined by Dr. Steve Wargacki.
Speaker 2: Senior Vice President of R&D, and Ken Marshall, Chief Commercial Officer.
Speaker 2: 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 Questa's website within the investors section shortly following the conclusion of this call.
Speaker 2: To remind you, the Eauquestive team will be discussing some non-GAAP financial measures this morning as part of its review of first quarter 2023 results. The 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 a Equestive Requests Box on April 8, 2018.
Speaker 2: During the call, the company will be making forward-looking statements. We remind you of the company's safe harbor language as outlined in yesterday's earnings release, as well as the risks and uncertainties affecting the company as described in the Risk Factors section and other sections included in our annual report.
Speaker 2: on Form 10-K filed with the Securities Exchange Commission on March 31, 2023, and in our quarterly reports on Form 10-Q and current reports on Form 8-K filed with the FCC.
Speaker 2: 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.
Speaker 2: The impact of the ongoing COVID-19 pandemic is highly uncertain. It cannot be predicted with certainty or clarity. Given these uncertainties, you should now place a new reliance.
Speaker 2: on these forward-looking statements, which speak only as of the date made. Actual results may differ materially from these statements.
Speaker 2: All Ford looking statements, but Tributable to a collective, where 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.
Speaker 2: 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.
Speaker 3: Thank you, that.
Speaker 2: As I shared with you recently on our March 8th earnings call, this remains an exciting time for a quest as we continue to execute against our 2023 key initiatives. We had a successful first quarter and the momentum continued into April .
Speaker 4: In the first four months of the year, we reduced our debt by over $9 million, thereby reducing our interest payments by over $1 million a year, entered into an amendment with an idea that significantly deepened our relationship and solidified our economics.
Speaker 4: Fettled, our lawsuit with BDSI generating $8.5 million in non-dilutive financing.
Speaker 4: expanded our relationship with pharmacovia to support the eventual distribution of Libervant Dazam Bucco film to patients around the world.
Speaker 4: One motion to dismiss on our outstanding shareholder class action and derivative lawsuits and announce the branding of AQST 109 as Anifilm, Appanephone buckle film after receiving conditional approval of the name from the FDA.
Speaker 4: As always, while we are proud of our achievements, our focus remains on maintaining our momentum and continuing to execute at a high level. In our ultimate mission to help patients, our goals remain straightforward. Build a healthy balance sheet. File Anaphilm for FDA review as soon as we've completed the necessary studies. And obtain U.S. market access for Libervain earlier than 2027.
Speaker 4: Looking ahead to the coming months, there are several important moments for our A quirky,
Speaker 4: First and foremost is learning from next week's FDA Advisory Committee meeting for a competing epinephrine product.
Speaker 4: We believe this meeting will provide important insights on the FDA's thinking regarding alternate delivery of Appeneffron for Annephal access.
Speaker 4: While some of the feedback, good or bad, may only apply to nasal sprays, the overall read-through on the science of the community and FDA's willingness to accept innovation in this area will be important.
Speaker 4: As a prominent allergy advocacy group recently wrote to the FDA, and I quote,
Speaker 4: We are optimistic about the continued advancements in scientific research and development of treatments for anaphylaxis.
Speaker 4: These are smaller size alternatives for those who are reluctant to use or carry an auto injector." We expect to have more to say after this public event occurs. Secondly, it is equally important we continue to work to match the pharmacokinetic bracketing approach recommended by the FDA at our end of phase two meeting in November . We have completed two pilot pharmacokinetic studies since November and believe that we have a good understanding of the differences.
Speaker 4: between approved auto injectors. We also have done work toward progressing our understanding of the appropriate administration instructions for Anaphylm prior to submitting our Pivotal Protocol to the FDA.
Speaker 4: This work is ongoing and once completed, we will immediately send the FDA our pivotal protocol with the recommended dosing instructions and reference-sensitive products.
Speaker 4: We look forward to sharing more on this in the near future.
Speaker 4: Additionally, as we announced a few weeks ago, we have received FDA clearance for the brand name Anifilm.
Speaker 4: And final clearance only occurs upon approval of the product candidate, and there is always the possibility of a required change, we believe it is appropriate to begin referring to the development product as an epinephrine sublingual film. I want to spend one more moment on this topic.
Speaker 4: While on the surface, it may not seem important to announce a brand name, I believe it is actually very important. As we continue the development of Anathom, we understand that health and patients and caregivers is about the entirety of their interaction with the product. The science of any product only works if you have it with you when you need it. In the case of Anatholaxis, over 50% of patients don't carry the rescue medication with them today.
Speaker 4: Yet over 50% of the time, patients and caregivers don't follow the doctor's orders. Now there are many reasons for this and no product can address every potential shortfall. However, we believe NFM could be uniquely positioned to address some of these shortfalls. And the first and most basic way starts with the name of the product. The leading products on the market today include references to needles or injections in the brand name. In my view, this potentially reinforces the barrier to usage for products in a...
Speaker 4: before 2027.
Speaker 4: LibraVent is not currently available because, although the FDA has tentatively approved LibraVent as safe and efficacious.
Speaker 4: The agency has not yet determined that liver vent is different than the nasal spray that has been granted market access exclusivity in the US.
Speaker 4: Based on our review of publicly available documents, we believe that this nasal spray would never test in humans for the impact of food on drug absorption prior to approval or for that matter, sense approval.
Speaker 4: This is important because as a biocompliability program to die-set, data-tam recto-gel, both the nasal spray and liverbone have to rely on absorption levels as a primary way of ensuring efficacy.
Speaker 4: As the FDA has previously written to us, a drop in absorption levels may also result in a drop of that in efficacy.
Speaker 4: We took this guidance seriously at the time, we received it, and we continue to take this seriously now.
Speaker 4: That's why we had a third party clinical research organization conduct a standard crossover study of the nasal spray in both a fasted and fed state.
Speaker 4: Our development program took this into account and, regardless of a patient's fed state, they received significant enough drug absorption, be comparable to die-stat when taking liver vein. That is also why our tentatively approved drug label indicates that liver vein can be taken with or without food. The current drug label of the nasal spray is silent on the effect of food. We believe that patients deserve to know and understand the potential impact of food when taking any medication, especially one in a rescue situation.
Speaker 4: While we've now acknowledged the benefit that nasal sprays have brought to patients at risk for seizure clusters.
Speaker 4: We continue to believe the impact of food is meaningful and makes liver vent different from the nasal spray. And amongst the com, we will have more to say on our FDA interactions and the actions we are taking so that patients have the ability to benefit from liver vent.
Speaker 4: For now, rest assured that we will continue to advocate for patients and for our product.
Speaker 4: Refinancing our debt remains another important activity, and as I've guided before, we believe that the second half of 2023 may offer opportunities on this front as we continue to reduce our debt and improve our loan to value ratio. This is, of course, based on a variety of factors, including broader market conditions, the company's outlook and our ability to continue to strengthen our balance sheet. On a final note, I would like to recognize the efforts of our legal team. Since October , we have greatly reduced the number of outstanding legal matters in which the company is...
Speaker 4: So, as we move forward, you can expect us to continue to focus on the advancement of Anatone with near-term milestones associated with the upcoming FD Advisory Committee meeting and our outreach to the FDA on our pivotal protocol.
Speaker 4: continues to pursue U.S. market access for Levervin.
Speaker 4: continue to expand our collaborations and strengthen our balance sheet. And we look forward to the day we can pursue additional pipeline or acquisition opportunities.
Speaker 4: With that, I will turn the call over to Ernie.
Speaker 4: Thank you, Dan, and good morning, everyone. By now, you will have seen our financial results in the earnings release that has issued last evening.
Speaker 4: As we typically do, we will address most of the discussion related to the first quarter of 2023 results in the Q&A. During the first quarter, we continued to execute our strategy to strengthen our financial position by reducing our debt.
Speaker 4: Raising non-diode of capital and managing expenses to extend our cash runway to support the continued development of our lead product, Hanna Film, the first and only non-device space orally delivered at the Neffron product.
Speaker 4: We reduced our outstanding debt from $51.5 million on December 31, 2022 to $42.4 million by March 31, 2023. Through a combination of principal prepayments of $5.6 million.
Speaker 4: and scheduled principal amortization of $3.4 million. During the quarter, we executed a number of transactions that brought into the company $22 million of non-dilutive capital, including $11.5 million related to the amendment
Speaker 4: to our existing and divvier commercial exploitation agreement.
Speaker 4: and $2 million from the expanded license and the PI agreement with Pharmanovia for Leverven. As we have previously stated, we will always pursue non-diluted sources of capital first to extend our cash runway when possible. We continue to manage expenses prudently with savings in research and development costs and expenses related to the out licensing of SIPH-ZAN and the elimination of our commercial infrastructure.
Speaker 4: Excluding the impact of prior year proprietary sales of SIPH-AZAN, total revenues increased from $10.1 million in the first quarter of 2022 to $11.1 million in the first quarter of 2023.
Speaker 4: This 10% increase in revenue was primarily driven by higher revenues from licensed products, including the Boston from Indivior, OnD from Hypera, and Siphasnand from Assyrdia.
Speaker 4: Total reported revenues were $11.1 million in the first quarter of 2023 compared to $12.3 million in the first quarter of 2022.
Speaker 4: For the first quarter 2023 compared to the prior year period, the company saw an 82% increase in license and royalty revenue, a 12% increase in code development and research fees, and a 6% increase in manufacturer and supply revenue. Net income for the first quarter 2023.
Speaker 5: basic and then we didn't loss for share.
Speaker 5: The change in that income was primarily driven by 14.5 million dollars of other income, which consisted of 6 million dollars from the amendment to the individual commercial exploitation agreement.
Speaker 5: and eight and a half million dollars from the patent litigation settlement with BDSI. And decreases in selling general and administrative expenses, research and development expenses, and non-cash interest expense related to the kind of mobility monetization transaction.
Speaker 5: These decreases in expenses were partially offset by lower revenue due to the out licensing of simpidment.
Speaker 5: Non-GAP adjusted EBITDA loss was $3.9 million in the first quarter of 2023, compared to a non-GAP adjusted EBITDA loss of $8.1 million in the first quarter of 2022.that??? and C? of Lucas.
Speaker 5: for $26.9 million as of March 31st, 2023.
Speaker 5: Under the ACM market or ACM facility, we access 915,000 dollars during the first quarter of 2023.
Speaker 5: The ATM facility has approximately $32.4 million available at March 31, 2021-23.
Speaker 5: The box-zone continues to retain a strong presence in both the US commercial and CMS markets and continues to provide an opportunity outside the US. While the box-zone is a legacy product for us, it remains a significant part of our near-term revenue outlook. Our revenue guides for 2023 considers a modest level of market share erosion. In addition, we anticipate additional revenue from our license products during the remainder of 2023. Moreover, we will continue to focus on capital conservation to extend our cash runway as far as possible.
Speaker 5: As outlined in the press release, issues last night after market quarters, based on our first quarter results and positive outlook for the remainder of 2023, we raised our full year 2023 financial guidance as follows. Total revenues of approximately $42 million to $46 million.
Speaker 5: from $37 million to $41 million. And non-GAP adjusted even that loss of approximately $24 million to $28 million from $31 million to $36 million.
Speaker 5: Please note, our revenue guides for 2023 no longer includes proprietary net sales for SiphanNance due to the outlines between agreement with the Sirtio, but does include manufacturing and spy revenue and role for G.
Speaker 5: In addition, our guidance for 2023 includes focused R&D investments related to the continued development of NFL, the first and only non-device space early delivered at the Neffron product.
Speaker 5: With that, I will now turn the line back to the operator to open the line for question.
Speaker 5: With that, I will now turn the line back to the operator to open the line for questions.
As a reminder to ask a question, please press star 11 on your phone and wait for your name to be announced. To withdraw your question, please press star 11 again. Stand by and recompile the Q&A roster.
One moment please for our first question. Our first question will come from the line of Jason Butler of JMP. The line is open.
Hi, thanks for taking the questions and congrats on the progress. I guess I have a two on anifone. First thing you talked about the PK bracketing and the pilot studies you completed. Can you maybe give us an update on what you've learned about the auto injectors and specifically, how you're thinking about variability, inter and inter rotation variability of the auto injectors and how?
questions.
I'm actually going to take your second question first.
because I believe it builds on to the first question you asked. So you asked about the FDA Advisory Committee meeting coming up on May 11th for the competing nasal spray. We do believe that's a really important meeting obviously not just for the nasal spray, but for our program as well because it will allow us to have a great deal of insight into
the FDA's thinking and how the FDA interacts with the advisory committee. Excuse me. We are looking for several things out of that meeting. One, as we have continued to say, we believe speed is really important when it comes to treating antiflexus.
And we're curious to see how the FDA and the Advisory Committee talk about speed and absorption in the front side of the curve, which is a place we think we're very strong. We also are looking to hear more about the FDA's views on pharmacodynamic and pharmacokinetic impacts and how they interact with each other. And that goes to your first question on variability.
We know that with the auto injector and with all products with FNF, there will be lower levels of PK and certain instances.
but PD, pharmacode dynamics appears to still be robust. So we'd like to see how the FDA deals with that issue.
And then third, it is a different route of administration that will be talked about in May 11th, so early. So we'd like to understand how the FDA deals with that change in administration and what they're looking for.
So those are the topics we'll be focused on hearing about on May 11th. When I go back to your first question about our learnings on the work we've done to date, yes, we continue to see the inherent variability of epinephrine, but we think that is reasonably understood and already understood.
out of mind in the literature that exists today. We did test a variety of auto injectors. We do look forward to sharing that data with you, which we will do after the advisory committee.
in the literature that exists today. We did test a variety of auto injectors. We do look forward to sharing that data with you, which we will do after the advisory committee. Meeting in the...
weeks to come after that. And I think we at this time do have a pretty good understanding on how we will approach the auto injector reference listed products over framed from sharing with you the exact ones we want to use today but I think we have a pretty good understanding at this point of how to approach it.
Okay, great. That's helpful. Thanks for taking the questions. Thank you.
One moment please, I'll move on to the next question.
Can we please offer our next question? Next question is coming.
The next question will come from Francois Preboy of Up and Himer. Your line is open.
All right, thanks for taking the questions and congrats on the progress. So clearly the ad column here will be very important and interesting. Can you just remind us maybe like what kind of gap is there between, you know, what was Epipen even approved on just a reminder and, you know, how much of a step is it to start looking at PTPD and...
Yeah, you bring up some really interesting points.
As many of you know or may remember, there has never been an efficacy study for Appinaphrin in the 100 years plus that it's been used for NFLACs as the auto injectors.
The, as many of you know and or may remember, there has never been an efficacy study for more than that friend in the 100 years plus that it's been used for NFL access. The auto injectors were approved.
way back when based on being comparable to the blood levels of the manual injection. Obviously, they moved the...
to curve forward. So no one really knows how much epinephrine you need to stop a severe allergic reaction.
were the progression to anaphylaxis.
In terms of the interaction of PK and PD, I will hand it over to Steve Wargack in a second who can talk a little bit about the...
the literature and what is known. But let me first address the first dose, second dose. We do think that the second dose from what we have seen in practical use and in the literature is very important.
We know that there is a variety of times that the second dose is given with the Abitent. And we think that ensuring that patients have access to not just the first dose, but the second dose of willingness to take both is critical to how we approach our product and bringing it to the market.
Let me hand it over to Steve for a second on the PK PG question. Yeah, thank you. The PK PD is certainly an interesting topic and there's been very little.
controlled human work done with that and there is some some IV related work that has been cited in the epinephrine injection, manual injection.
and published in the literature, but I think both alternative deliveries under development now are really characterizing this, both for the reference products and for their products, in a more thorough way than ever.
and thumb before, and I think that is why it's going to be very interesting to learn. Where the FDA stands on this data certainly is.
The manual IM and the curves we've shown previously you know produce very low levels, but again our Advisory Board and our biologists in the community
I found that it works and it elicits this PD response. That's what they look for, right, to ensure that the epineference working. So.
Yeah, I think that's a reasonable way to think of it. It would be, I think it would be unwise of us, whatever we are, eight days before learning a lot to say anything other than we'd like to hear what the FDA and the advisory committee has to say. But in terms of our work, we've completed the work we wanted to do on the RLDs. We're focused on our administration instructions as you expect us to be. Alright?
We recognize that the pivotal protocol we send to the FDA has to have the administration instructions that we ultimately want to put into the label and then the commercial product. So that's important. And I think we remain focused on those things just like we shared last time we spoke back in March.
Great. Okay. That's it for me. Thank you. One moment please for our next question.
Next question is coming up.
The next question will come from Thomas Flaton of Lake Street Capital Markets. Your line is open. Thank you. I appreciate you taking the question. Dan, just back on the administration instructions, in the press release, you refer to the administration parameters. And I guess intuitively, I'm trying to understand what complicating factors there might be. Could you just dig a little deeper in that for us and help us understand, you know, what challenges you're trying to address or what the stumbling points might be just to give us some more color? Yeah, sure. Good morning, Thomas. And it's always interesting when we put this information out what people hone in on. There is, I want to assure you there's no magic.
between the word parameter and instruction. So our intention is the same with both words. But look, just like the nasal spray, we are doing something different than the products on the marketplace. We're asking people to take several different steps.
that has to be thoroughly understood done the right way in order to ensure an outcome happens the way you want it to happen.
So, we just, especially with the history we have of 20 years with this technology, we know and not just this technology, but working with the FDA, we know that being thorough at this spot is really important.
to getting to the end of job the right way and on the timeline we want to. So that's why we're focused on it. In terms of what parameters or instructions we're talking about, it's pretty straightforward.
carrying the product with you, taking the product out of the foil, placing it in the mouth, how what you should do at that time. There's nothing more mystical around the process than that. Got it. And then assuming that you don't learn anything.
surprising from the adcom. I just wanted to confirm that you would be on track to hit the timelines that you laid out in your fourth quarter earnings release. So protocol submission, second quarter, study initiation, third quarter, or do you see a risk of that slipping? I would put it this way. The adcom...
Excellent. Appreciate you guys taking the questions. Thank you. Thank you. And one moment, please, for our next question. Our next question will come from Andreas Agarice of Wedbush Securities. Your line is open. Good morning. This is Caroline for Andreas. Just one from us. So in our discussions with some experts and heading into the ad com, we have heard some questions around PK when compared to IM epinephrine. Just curious what have the FDA's communications
with you in regard to using IMF and FNF as an RLD. Good morning, Caroline. When you say IMF and FNF are you referring to the manual? Injection. Yes. Yeah, I think that's the, I mean, you hit the, probably the biggest topic in this area of the world.
You hit the nail on the head really.
the pharmacokinetic curves have to be compared to the space between the pharmacokinetic curves for the EpiPen and the manual injection. It is unclear how close a product needs to come to the auto-injector in order to get approved. So I think that's one of the really, if you think about the comments we said before around what we're really curious to hear about, we'd like to hear more around not only what the FDA thinks but also what the advisory committee thinks. Now let's take that to our product. We believe one of the strongest points on our product.
is that we have a very fast front end of the curve and fast absorption. So the front end of our curve, we believe, looks very similar, much more similar to the auto injector than it does to the manual IAM. So we think it's an area of strength for us, but we are anxious to hear and learn what the FDA thinks and how they're viewing.
Okay, great. Thank you. Thank you. Again, to ask a question, please press star 11 on your phone and wait for your name to be announced. To withdraw your question, please press star 11 again.
One moment please for our next question. Our next question will come from Ram Seleraju of HC Wainwright and Company. Your line is open. Thanks very much for taking my questions. With respect to Anafilm, can you comment on what you see as the potential size of the ex-US market opportunity for the product?
And in particular, which territories you expect to be most significant, as well as whether you have seen any indication from XUS regulatory authorities regarding their own views with respect to the reference listed drugs and whether you expect
the FDA to sort of lead the line with respect to establishing the approval requirements for anaphylm globally. Thank you.
a lot of regulatory interaction where we have a good understanding of how they would do it. So that remains to be seen in Europe . Well we have not had interaction as of yet. One of our competitors, one of the nasal sprays, did submit an application and there are public documents that do show us some of the concerns and problems that that nasal spray are in particular faced. So we have been able to learn from those issues that were brought up. We do believe at this time those issues were more about the nasal spray than they were about what our product would bring to the market. But it would appear from those documents.
that Europe is going to be very similar to the US in standard and wanting the product to look like the auto injector.
But so having said that, let me pass it over to Ken who can talk a little bit about the market opportunities in Europe and China. Yeah, thanks Dan. Good morning Ram. Those are the two markets that are of most interest. We've got good interest globally. But if you look at the ones that are most important to us, it will be the EU and China.
The standard of care, as Dan mentioned, is very similar. The difference there is price. There's a lot, it's much more challenging for our partners to price in those European markets than it is in the US. So that's where you see the separation between the two.
And then China, while there are a lot of people, the literature suggests the prevalence is maybe a little bit lower.
I don't fully understand why that is, but the literature suggests it's a little bit lower, but there's still there are enormous number of people, so it's an enormous opportunity from a patient perspective. Their standard of care is a little bit different. They don't have a lot of field-based rescue. It appears there. They tend to shut you into the hospital.
That could be a function of not having good rescue tools to be used in the field or it could just be the way their help help system works. As Dan mentioned, we don't have a lot of visibility into the details there. We usually leave that to our partner.
And the same thing with price. There'll be a little bit of price pressure there. So the price will be different than you'll see in the US. And then just one, thank you. And then just one other quick follow-up is with respect to Sympathane in the hands of the Sergio. Do you have any indication that a Sergio might start to utilize?
Thanks, Rob. So I think you bring up some interesting points. We will be respectful of our partner and allow them to talk about when they – what they're going to do and how they're going to approach expanding the market. What we have been pleased to see is that the scripts have continued to move in the right direction since the collaboration started. And I believe – and just can correct me if I'm wrong – but I believe March had the highest number of scripts to date for since launch.
Which was nice to see. We look forward to seeing more of that. Thank you. Thank you. I'm seeing no further questions in the queue. I would now like to turn the conference back to Dan Barber for closing remarks.
Thank you, Chris. Thank you for joining us today. We always, as always, appreciate your time. We'll continue to focus on the key initiatives as we lay them out today for Q2 and the rest of the year. And we look forward to speaking with you very soon in the months to come. Have a great day.
This concludes today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.