Aquestive Therapeutics, Inc.

Good morning, and welcome to the Equestive Therapeutics fourth quarter and full year 2019 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 the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. As a reminder, this call will be recorded. I would now like to introduce your host for today's conference, Ms. Stephanie Carrington, Westwick Investor Relations. You may begin.

Thank you, operator. Good morning and welcome to today's call to review Equestive Therapeutics results for the fourth quarter and full year 2019 and business highlights. On today's call, I am joined by Keith Kendall, Chief Executive Officer, and John Maxwell, Chief Financial Officer, who are going to provide an overview of recent business development and performance in the fourth quarter and full year. Additional members of the company's leadership team will be available for the Q&A. In total, we expect today's call to last approximately 60 minutes. As a reminder, our remarks today correspond with the earnings release we issued after market close yesterday. In addition, a recording of today's call will be made available on the Questive Therapeutics website within the investor relations section shortly following the conclusion of this call. To remind you, we will be discussing some non-GAAP financial measures this morning as part of our review of fourth quarter and full year 2019 results. A description of these measures along with a reconciliation to GAAP can be found in the earnings release we issued yesterday, which is posted on the investor relations section of Equestive Therapeutics' 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 included in the company's annual report on Form 10-K, filed with the SEC on March 11, 2020, and in our quarterly reports on Form 10-Q. As with any pharmaceutical company with product candidates under development and products being commercialized, There are significant risks and uncertainties with respect to our business and the development, regulatory approval, and commercialization of our products and other matters related to operations. Given these uncertainties, you should not place undue reliance on these forward-looking statements, which only speak as of the date made. Actual results may differ materially from these statements. All forward-looking statements attributable to requests of therapeutics or any person acting on behalf are expressly qualified in their entirety by this cautionary statement and the cautionary statements contained in the earnings release issued yesterday. The company assumes no obligation to update its forward-looking statements after the date of this conference call, whether as a result of new information, future events, or otherwise, except as required under applicable law. With that, I'll now turn the line over to Keith.

Thank you, Stephanie, and thank you, everyone, for joining us this morning. In our remarks, John and I will be discussing a number of important developments in our business during the fourth quarter and over the first two and a half months of 2020. We will be joined by additional members of the Equestive Leadership Team during the Q&A session afterward. As we committed through 2019, we delivered or achieved a number of important milestones related to the key drivers of value for our business. First, we held a very constructive pre-IND meeting with the FDA related to AQST-108, an oral sublingual film delivering systemic epinephrine that is in development for the treatment of anaphylaxis. Perhaps most importantly in that meeting, we received confirmation that our candidate would be reviewed under the 505 regulatory pathway. Next, we received FDA acceptance of our NDA for LibriVant, a diazepam-based buccal film for the management of seizure clusters. We received a PDUFA Gold date of September 27, 2020 from the FDA. We continue next to GrosSympazan, which now has an 18% penetration of the target prescriber base. and has grown monthly shipments by over 24% between the end of September and the end of 2019. We raised additional capital in December and we were preparing for the monetization of our apomorphine rights if approval is received on its PDUCA date of May 21st. Equally importantly, we are continuing to manage our costs and focusing spend to extend our capital horizon. Let's discuss in a little more detail each of these key areas of focus for the company. First, as I said, we had a very constructive pre-IND meeting with the FDA in early February regarding epinephrine. At this meeting, the FDA confirmed two key points. First, the clinical development for epinephrine will be reviewed under the 505 pathway as proposed by Equestiv. And second, that no additional studies would be necessary prior to opening the proposed IND application. They also gave us clear guidance about what they were looking for from our development program. The outcome of the meeting means that this will be a less complex, less costly, and potentially faster path to filing than originally anticipated. The FDA also confirmed that it understands that there is a significant unmet medical need among patients who resist the standard of care use of subcutaneous and intramuscular injections in the treatment of anaphylaxis and that AQST-108 may potentially address some of those unmet needs. We're now planning to open an IND in the second quarter of 2020. We're on target to initiate PK clinical trials before the end of the year. We anticipate providing additional updates to the market in coming months as we gain greater clarity on the expected clinical development program. Next, as we committed, we filed our NDA for LibraVant in late November. That filing was accepted as we anticipated in January and assigned the PDUFA goal date of September 27, 2020. We believe that LibriVant, if approved by the FDA, will represent a major contribution to patient care as compared to the available treatment options and will further expand patient choice as the first orally administered product available for its proposed indication. The FDA has recently indicated that when evaluating clinical superiority for drugs demonstrating a major contribution to patient care, that it may consider such factors as convenience of treatment location, duration of treatment, patient comfort, reduced treatment burden, advances in ease and comfort of drug administration, longer periods between doses, and the potential for self-administration. We believe that we can demonstrate why Libervanth as an orally delivered product for this indication has one or more of the attributes required by the FDA to be considered a major contribution to patient care relative to the currently approved and device-driven rectal and nasal products. We believe the LibriVamp will potentially contribute up to $300 million in peak net revenues within three to four years post-launch. Over one million patients in the U.S. have active uncontrolled epilepsy and a need for rescue medication. Less than 10% of these patients are successfully treating their seizures with the current standard of care, a rectal gel application of diazepam. A medicine is only as good as its ability to be used by patients where they need it, when they need it and in a form they accept. and we strongly feel that LibriVant represents this type of improvement to patient care as compared to device-driven alternatives. That said, we cannot ignore the potential risk to the timing of a LibriVant launch based on the FDA's actions in January. We have an accepted filing for a product with a very strong value proposition and we believe that we can demonstrate to the FDA that LibraVant is clinically superior to the currently approved alternatives. There are multiple paths to approval and market access for LibraVant, and we do not believe LibraVant will be blocked from the epilepsy market for seven years, and we are working to accomplish that. However, we will be thoughtful and prudent about our choices, recognizing the additional risk and appropriately manage our pre-launch spend on Libravant and Simpazan prior to having greater clarity on the timing of approval. Next, we remain focused on building our CNS franchise. We launched Simpazan at the very end of 2018. Simpazan is a product we believe will ultimately generate $65 million of peak annual net sales. Simpazan has a meaningful value proposition for caregivers of patients suffering from Lennox-Gastaut syndrome or LGS. We launched Simpazan whose prescribers substantially overlap with potential prescribers of Libervan with the aim of raising the profile of our farm film technology. Simpazan was developed and launched as a commercial precursor and eventual complementary product in support of the LibraVant opportunity. Simpazan gave us the opportunity to build out and pressure test our commercialization capabilities and processes prior to the commercial launch of LibraVant. All of our commercialization efforts relating to Simpazan provide an opportunity for direct conversations with healthcare practitioners, patients, caregivers, advocacy groups, and others about the value of our farm film technology that will be the basis for LibraVan. On a sequential quarterly basis, we continue to be focused on the growth and further market penetration of Simpazan. Since the beginning of the year, shipment volume on a monthly basis has grown over five times, and at the end of the year had grown over 24% since the end of the previous quarter. The prescribing base also continues to grow, over 44% since the end of the third quarter, with over 78% of those prescribers writing multiple scripts. We now have a penetration rate of 18% for the core target group of prescribers we're focused on. Additionally, we surpassed our goal of having over 70% of lives covered by the end of the year of 2019. Simpazan is strategically accomplishing what was intended when we developed and launched the product last year. The work we do to continue to build the revenue stream and market penetration of Simpazan will be an important foundation for the successful launch of LibriVan. Finally, with respect to capital, as you know, we raised over $40 million in December, and we began the year with cash of just over $49 million. We have a great opportunity with Libervant and Epinephrine, and we want to focus all of our energy and available resources on ensuring we move as quickly and as decisively as we can on those opportunities. Additionally, we need to recognize and react to the declining revenue from our Suboxone business. As such, we'll continue to manage our costs and target our spending in 2020. Those plans are reflected in our updated guidance. We have the capital required through early 2021. We continue to expect to monetize our rights to Synovium's licensed apomorphine product once approved. That monetization would further extend our capital horizon. To summarize going forward in 2020, we're focused on advancing our proprietary products. First, we're planning to open an IND for a quest of 108 epinephrine during the second quarter of the year and anticipate commencing PK clinical trials by year end. We are preparing for the anticipated launch of Libervant in the fourth quarter of 2020, assuming approval in late September in line with the PDUFA date. We will continue to efficiently grow Simpazan shipments and revenue while establishing strategic relationships for us in the epilepsy market in advance of an anticipated LibriVent launch. Finally, we'll continue to prudently manage expenses and capital and look to efficiently monetize our apomorphine rights on Synovian's product. As I said before, this product has a PDUFA date in May of 2020. We look forward to continuing to update you as we advance all of these initiatives throughout 2020. With that, I'd like to turn the floor over to John Maxwell, who provides specifics on our financial performance and outlook. John?