Q2 2023 Aquestive Therapeutics Inc Earnings Call
Yeah.
Good morning, and welcome to the Quest of Therapeutics second quarter 2023 conference call.
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After the speaker's presentation, there will be a question and answer session.
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As a reminder, this call will be recorded.
I'd now like to introduce your host for today's conference call that Watson of ICR West 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 <unk>, Chief Financial Officer, who are going to provide an overview of recent business developments and performance for the second quarter 2023, followed by a Q&A session.
During the Q&A session. The team will be joined by doctors, you've worked Jackie senior Vice President of R&D, Dr. Karl Kraus.
If medical officer.
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.
To remind you of your quest 15, well be discussing some non-GAAP financial measures. This morning as part of its review of our second quarter 2023 results.
Scripture. 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 the questions website.
During the call the company will be making forward looking statements.
Mind, 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 on Form 10-K.
With the Securities and 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 SEC.
As with any pharmaceutical company with product candidates under development and products being commercialized there are significant risks and uncertainties.
Back 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 your question.
Person acting on its behalf.
Re qualified in their entirety by this cautionary statement.
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.
With each quarter that goes by my excitement grows for the possibilities that lay ahead for our questions.
In the second quarter, we continued to progress the company on multiple fronts and this momentum has carried through into the current quarter.
But before I review the specifics of the past few months, let me remind you of where we're going.
We have a base business that generates revenue is profitable and growing.
We have two pipeline assets and the film Epinephrine Sublingual film and Liberman Diazepam buccal film that have the potential to come to market in the next two to four years and be transformational for patients at the first and only oral rescue medications within their respective.
Indications.
Finally.
We have an epinephrine prodrug platform with a growing intellectual property portfolio that has potential applications across multiple therapeutic areas beyond anaphylaxis.
As the leader of this company I feel truly fortunate to have not only a great team, but also multiple distinct pillars of value.
All of which have the potential to propel our quest This board.
I am pleased to say that we continue to make progress on the financial front as well.
Thanks to this time last year, we have reduced our debt by almost 25%.
Now that we are in the second half of the year and as our debt continues to decline we will actively look to refinance the remaining balance over a longer period of time should market conditions permit.
Our ending cash balance remained above $20 million for the third consecutive quarter and we successfully converted our entire 96 warrant overhang, while minimizing dilution to our shareholders.
These actions continue to allow us to clean up the financial story of the company. So.
So that we can unlock the potential of our strategic pillars.
Ernie will provide more specifics on our financial performance in a few minutes.
Now, let's talk about our programs in greater detail.
As you know, we believe that our lead asset and a film epinephrine Sublingual film has the potential to be transformative for patients caregivers and health care providers for the treatment of severe allergic reactions, including anaphylaxis.
While there are multiple auto injectors in the market and multiple nasal sprays under development. We continue to believe we are developing the only significant oral pipeline product.
That is one of the reasons I'm excited to share that we have submitted our pivotal trial protocol to the FDA. This week.
This protocol includes what we believe will be the final instructions for the administration of NFL.
We have made tremendous progress on this front since the release of our <unk> III study data last year.
We now believe our administration instructions will be simple straightforward and similar to other approved sublingual products.
This is the culmination of the work we have performed over the last six months and is a significant advancement in the program.
As you saw in our recent press release, we believe the data generated using our revised instructions is compelling.
We continue to see a rapid rise of epinephrine to peak plasma concentrations along with overall exposure greater Emmanuel intramuscular injection epinephrine through 45 minutes.
As we have consistently seen in the past the product continues to be safe and well tolerated.
We have now dosed and film and over 200 subjects across six studies.
In this most recent study or 12 milligram dose maintained to time to maximum concentration of 15 minutes, while once again, maintaining a partial area under the curve at 10 minutes that.
That was higher than the manual intramuscular injection.
We expect the FDA to provide their comments to the pivotal trial protocol within a relatively short period of time.
We will immediately start our pivotal trial once we have reached alignment with.
The FDA.
We believe we remain on track to start the pivotal trial this year and to file our new drug application or NDA before the end of 2024.
As we assess the market opportunity for Anatol.
We see trends for market expansion that extend beyond the potential entry of nasal sprays and NFL.
As an example, multiple states across the country are past or introduced legislation aimed at increasing patient access to epinephrine rescue products.
We believe patient access is a real and important issue.
And as practical solutions that put in place, we would expect to see markets expand as patients and caregivers.
Better access.
When you look at the auto injector prescription data there appears to be a significant increase in prescriptions this year when compared to last year.
Between legislative actions.
Increased awareness and new product entrants.
We believe this expansion has the potential to continue for some time to come.
Regarding liberman, we filed a new NDA with the FDA at the end of June .
This NDA is specifically for the two to five year old age group.
The only option currently available to this group is the dice that rectal gel.
By our estimate there are approximately four to 5000 prescriptions per month build for this group.
We recognize the potential risks to approval with this application. However, we will continue to advocate for patient choice, especially when the only alternative for our patient population.
Invasive products.
The risks include the FDA review process.
Orphan drug review process and potential interference from other companies.
We will keep you informed as we learn more and we will also continue our interactions with the FDA regarding our tentatively approved application.
During last year's second quarter earnings.
Informed you that we would focus the vast majority of our resources and energy on NFL.
While this remains true. It is also time for us begin mapping out our strategy for our next pipeline asset behind Liberty and NFL.
I continue to believe HFC, one way is a good candidate for development and now with the addition of our new Chief Medical Officer Karl Kraus.
We will spend the time to truly analyzed the potential opportunities for <unk>.
As a reminder, HFC one way is also an epinephrine prodrug, but has a different pharmacokinetic profile than <unk> 109.
We will hopefully have more to say on this topic before the end of the year.
Our business development efforts remain ongoing as.
As I've mentioned before we believe there are opportunities to secure partnerships for epinephrine in Europe , and China and for Liberty in China.
We have multiple conversations ongoing and we will continue to pursue those opportunities.
We also recognize that here in the U S liberman increases in value as each quarter goes by.
We will continue to engage in U S licensing discussions, but remain disciplined when it comes to distribution capabilities and value.
In summary.
When I compare our company today.
Where we were a year ago I believe that we have made significant progress.
Our debt is down by almost 25%.
Our low priced warrant overhang has been eliminated while our cash balance is higher than a year ago.
Our base business remains robust and is on track to grow this year.
We spent our NFL pivotal trial protocol to the FDA. This week and we plan on starting our pivotal trial as soon as we have alignment with the FDA.
We have filed a new NDA for liberman for the two to five year old age group and believe this is a meaningful opportunity for the company if approved by the FDA with market access.
We continue to pursue business development deals on a variety of fronts and continue to prioritize these activities.
Potentially significant sources of non dilutive capital.
With that I will turn the call over to Ernie.
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 second quarter 2023 results in the Q&A.
During the second quarter, we continued to execute on our strategy to strengthen our financial position.
Reducing our debt and managing expenses to extend our cash runway to support the continued development of our lead product <unk>.
The first and only non device based orally delivered epinephrine product.
As Dan mentioned, we reduced our outstanding debt by approximately 25% from $51 5 million on December 31, 2022 to approximately $39 million.
On June 32023 through a combination of principal prepayments of $5 $6 million as scheduled principal amortization of $6 9 million.
We continued to manage expenses prudently with savings in research and development costs and expenses related to the out licensing of <unk> and the elimination of our commercial infrastructure.
Excluding the impact of prior year proprietary sales as <unk> total revenues increased from $10 7 million.
In the second quarter of 2020 to $13 $2 million in the second quarter of 2023.
This 24% increase in revenue.
Primarily driven by higher revenue from our five out licensed products.
Total reported revenues were $13 2 million in the second quarter 2023, compared to $13 3 million.
In the second quarter 2022.
For the second quarter 2023, compared to the prior year period.
We saw 168% increase in license and royalty revenue.
An 18% increase in manufacturer and supply revenue offset by a 49% decrease in co development and research fees and the absence of proprietary product sales of sympathy.
Total year over year revenues increased 17% after excluding the impact of prior year proprietary sales incentives and from $27 million for the six months ended June 32022 to $24 $4 million for the six.
Months ended June 32023.
Total reported revenues were $24 $4 million for the six months ended June 32023, compared to $25 $5 million for the six months ended June 32022.
The decrease was primarily due to the absence of proprietary product sales of <unk> <unk>.
Offset by increases in manufacturing and supply revenue and increases in license and royalty revenue.
Net loss for the second quarter 2023 was $5 8 million.
Or 10 cents loss per share.
The net loss for the second quarter, 2022 was $16 3 million or 36 cents loss per share the.
The change in net loss was primarily driven by increases in revenue mentioned earlier.
Decreases in selling general and administrative expense, including severance costs and lower administrative costs and our commercial organization.
Kris and noncash interest expense and a decrease in research and development costs and expenses.
Our net income for the six months ended June 32023 was $2 3 million.
For <unk> for both basic and diluted income per share.
The net loss for the six months ended June 32022 was $29 5 million or.
468.
Loss per share.
non-GAAP adjusted EBITDA loss was $3 3 million in the second quarter 2023, compared to a non-GAAP adjusted EBITDA loss of $9 9 million in the second quarter of 2022.
non-GAAP adjusted EBITDA loss was $7 $2 million for the six months ended June 32023.
Third to a non-GAAP adjusted EBITDA loss of $18 million for the six months ended June 32022.
Cash and cash equivalents were $22 4 million.
As of June 32023.
Under the aftermarket or ATM facility, we accessed $4 $2 million during the second quarter of 2023.
The ATM facility has approximately $28 million.
Available at June 32023.
In addition, during the second quarter, approximately $3 7 million common stock warrants were exercised with proceeds of approximately $3 $5 million received by the company.
We continue to be focused in 2023 on the advancement of our epinephrine program and commencing our pivotal PK clinical trial later in the year.
The box zone continues to retain a strong presence in both the U S commercial and CMS markets and continues to provide an opportunity outside the U S.
While suboxone is exactly tse product for us it remains a significant part of our near term revenue outlook.
Our revenue guidance for 2023 considers a modest level of market share erosion.
In addition, we anticipate additional revenue from our licensed products during the remainder of 2023.
Moreover, we will continue to focus on capital conservation to extend our cash runway as far as possible.
As outlined in the press release issued last night after market close.
Based on our second quarter results and positive outlook for the remainder of 2023.
We revised our full year 2023 financial guidance as follows.
Total revenues of approximately $44 million to $48 million.
Increase from prior guidance of $42 million to $46 million.
And non-GAAP adjusted EBITDA loss of approximately 19 million to $22 million.
A decrease from prior guidance of $24 million to $28 million.
Please note our revenue guidance for 2023, no longer includes proprietary net sales for <unk> due to the out licensing agreement with <unk>, but does include manufacturing and supply revenue and royalty fees.
In addition, our guidance for 2023 includes focused R&D investments related to the continued development of NFL, the first and only non device based orally delivered epinephrine product.
With that I will now turn the line back to the operator to open the line for questions.
And I'll just ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again please.
Please standby, while we compile the Q&A roster.
And your first question comes from the line of Jason Butler at JMP. Your line is now open.
Hi, Thanks for taking the questions and congrats on the progress.
Just in terms of the protocol submitted for Ana film for FDA can you just confirm for us what the key elements of the trial design or are you still using that we use instructions that were using last pilot PK study.
Also for example, you still proposing to use both epipen Adobe Q as well as <unk>.
Emmanuel intramuscular injection as the comparator for the Bracketing analysis and then.
I guess extending from that based on your prior interactions with FDA are there.
Specific parts of the protocol that youre looking to gain alignment or feedback on from FDA before starting with study. Thank you.
Thanks, Jason and good morning.
Im going to say I'm very excited to actually have.
Over the answer to your questions to Carl <unk>, our new Chief Medical Officer, and second I just want to reiterate.
How we're looking at the next few months when it comes to Amazon. We think we have some very important moments coming up between our competitors. The <unk> date in September , which we think will be very informative as well as the feedback from the FDA and getting into a pivotal study, but as you pointed out one of the key steps in that is making sure. The FDA is comfortable.
The protocol so to answer your specific questions I will hand, the line over to Carl.
Thanks, Dan.
Thank you for the question.
The first part of your question was really around use instructions from the prior experience and whats being included in the current protocol the current protocol.
That include any of the prior concerns regarding the whole time, which is a huge win and Theres, certainly simple and easy to follow up consistent with other sublingual therapeutics.
Other part of your question was around the competitors, yes, we are planning on including two of the prior wells that you had mentioned.
As controllers for the pharmacokinetic and Pharmacodynamic outcomes and regarding our.
The elements that we're waiting for alignment with.
Much of that will depend on the due date for HRS, which will help us gain greater clarity regarding what the fda's thinking is a rounding that bracketing.
Targets as well that's getting feedback from them on the protocol submitted.
We would expect no later than early October .
Right now we expect.
Let me just add one point, what I really like about the way Carl and the team have developed. This protocol is if you think back to how we've talked about the marketplace Theres Epipen Avi Q. There is some use of manual injection in the clinical setting we will have in our pivotal study compared to all three of those so I think.
That's going to be really helpful. When we're actually on the other side of the SBA process.
Great. Thank you and then just one on.
Thank you Ed do you want to.
You said you'd consider applying some allocating some resource here would you guys want to say that you would.
Initiate our first clinical study of a proof of concept study in <unk> and the.
Indication that you decide to move forward in.
Yes so.
The way I would position it I would love to.
As a team here would love to.
Get into the clinic as rapidly as possible on one way what we need to balance is our excitement versus the standard work you need to do with the pipeline asset right. So we need to make sure we've gone through the process of scoping out the market need patient need.
Would be positioned that's the work we're doing right now assuming all of that.
<unk> to show a compelling opportunity, yes, we would rapidly.
Get into the clinic.
And Steve where gas Youre ahead of R&D.
R&D who's sitting here with me has done a great job already preparing the formulation process. So we have we have work that is already ongoing.
Okay. Thanks, again for taking my questions.
Thanks Jay.
One moment for your next question.
And the next question comes from the line of Frank Francois at Oppenheimer. Your line is now open.
Hi, Thanks for taking my questions.
In terms of the protocol submission congrats on that and I was just wondering in terms of next steps.
Here back obviously, the producers important thats coming up on the competitive side, but can you just help us understand how quickly you can go from starting this trial to getting top line results.
Yes so.
Let me just point out a couple of things right.
Morning.
The <unk>.
The review by the FDA, while they have given us some comfort on.
Which I think is pretty standard I just want to point out that's obviously not in our control right how long they take to get back to us so that will be a gating event that will have to wait for.
Once we have their comments under hand, I'll turn it over to Carl can walk you through how we see some progression from there yes, so Brian good.
Good to meet you and thank you for the question.
The target population are healthy volunteers. These are not patients. So one would expect recruitment to be rather expeditiously once the green light.
Line, but yet today's comments.
Regarding.
The complexity of the trial is relatively straight forward, which would include all expected pharmacokinetic endpoint.
I would not expect this to be a lengthy trial I think.
Rather expeditious as it will likely be a single center healthy volunteer trial.
Okay understood and then Dan can you, maybe just talk a little bit more about the Rx that you mentioned increase in this space. This year you talked about an expansion of market do you have any quantitative kind of just more color on the expansion of the market here in terms of scripts.
Yes.
Our quantitative piece would be driven by Mark to you and many other people in our industry to see the standard industry providers of information around the prescriptions. So we.
We do have a platform, we access and what we see is.
And I will turn it over to Ken Marshall in a second here to expound upon it but what we see is I think about 20% or greater year over year growth.
Which is pretty remarkable.
And Ken if you could give some thoughts on why you think thats happening, but that would be helpful.
Yes, absolutely Dan good morning, Frank.
Yeah, it's been it's been very impressive to watch the growth in the market. We would have expected this growth with the entry of better delivery systems, but prior to that entry, it's a bit surprising.
It tells you how hungry the market is for a better solution.
The market has hovered yeah, a few years back hovered around 3 million prescriptions for 345 years after Maryland exited the space.
And last.
Last two years, they jumped up to about 4 million prescriptions in this year appear to be trending towards 5 million prescriptions.
Alright, it's attributed to the noise in the community. If you look at the four large advocacy groups, they're all talking a lot about novel delivery the importance of epinephrine as a medicine.
The importance of having it with you all the right messages set up our entry there is a lot of noise. There is no better solution you still get an F&I or you still get an epipen scripts.
But a lot of interest in the market right now.
Great. Thank you very much.
One moment for your next question.
Yes.
Yes.
And the next question comes from the line of Thomas Flaten Lake Street. Your line is now open.
Thanks, Good morning, guys I appreciate you taking the questions Dan any.
Insight into what we might expect from news flow from your ex U S partnerships, maybe particularly on <unk> in the EU.
Sure Yes.
<unk>.
On that particular business development activity so.
Licensing.
And the film in Europe .
I'm really happy with the work that the team here has done we have multiple firms that are what I believe high quality firms with good capabilities, who are conducting diligence on.
On the potential to license the product in Europe .
So I think youll see us.
As we usually say be disciplined here.
When you have multiple parties the way we do.
You really want to make sure that youre not only maximize value of course, which is our part of our job, but also that you choose the right partner, who is fits within the way we do work in a way they're culture.
We're working through that right now I do think that you will hear us say more as time goes on in that front.
Can I actually do want to Thomas if it's okay, I'll talk a little bit about.
The levers we have as a company because I know over the last few quarters. We have had some activities where it may seem like we have.
Outpaces the lot of the things that we have available to us and I just want to point out that.
Actually not the case we have.
Several levers that remain in front of us not just with epinephrine Europe , but also epinephrine, China Liberman, China, the U S with <unk> and with the work. The team is doing we're expanding those levers as we go so we continue to build our opportunities rather than wind them down.
Great I appreciate it.
Just.
<unk> over to the two to five year old NDA that you submitted in June can you remind us what the orphan drug restrictions are around age grouping, even though the indications might be similar.
Okay.
Sure, Yes, no and I appreciate the question Thomas So.
The.
The guidelines that are in the FDA.
Language.
<unk> it correctly.
Would suggest that the orphan drug exclusivity.
<unk> two indications in each group.
And the FDA has indicated publicly.
That's the way they view.
The marketplace.
Or the access I should say.
I do have to at least.
Mind, everyone that there is a court case.
Catalyst court case that.
<unk> show a.
A decision that was different than that so I think for us as a company who are.
Looking to make sure patients have the benefit of our product have access to our products.
All we can do is continue to develop the opportunities for the SBA to provide access to patients for our product and we will see how it plays out as it goes through all of that.
Motions within the FDA and beyond.
Yes.
Great and then one quick one for Ernie could you help us earn you a little bit on gross margins they've been bouncing around fourth quarter last year first quarter. This year not down again second quarter, how should we think about that for the second half of the year.
Hi, Thomas and good to speak to you. So really you need to think about our margins that is a function.
There are some higher cost, but also related to mix as we.
Progress with our <unk> products.
That some of them, whereas we.
The API supply to us.
And there's other cases, where we actually have to procure the API. So as we continue to.
To manufacturer.
These products going forward.
You may see the margins get.
They may based on production.
A little bit, but it's sort of a reason why you.
<unk> seen the decline in margins.
This quarter.
Got it thanks, so much.
Again to ask a question. Please press star one on your telephone.
As Taiwan, one on your telephone.
And your next question comes from the line of Ron <unk> with H C. Wainwright. Your line is now open.
Probably it might be on mute.
Yeah.
Hello, what we.
We move on to the next.
Person is having.
Having technical difficulties.
Alright.
Again that is Taiwan wanted to ask a question.
Okay.
And Ross Silver Roger Your line is open.
Alright, guys, who don't have any other questions. At this time I will now turn the call back over to you Jan Barbara.
Thanks pellet.
Thank you all for joining us. This morning, we appreciate your time as always we believe we have shown a Q2 that is in line with our continued.
You are growing this business.
And we look forward to interacting with you.
And in the future.
Great day.
This concludes today's conference call. Thank you for your participation you may now disconnect.
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