Good morning, and welcome to the Aquestive Therapeutics First Quarter 2019 Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this call will be recorded. I would now like to introduce your host for today's conference, Ms. Lauren Walrath, Head, Corporate Marketing and Communications. You may begin.

Thank you, operator. Good morning, and welcome to today's call to review Aquestive Therapeutics results for the first quarter 2019. On today's call, I am joined by Keith Kendall, Chief Executive Officer; Ken Marshall, Chief Commercial Officer; Dan Barber, Chief Strategy and Development Officer; John Maxwell, Chief Financial Officer, and Lori Braender, General Counsel. Over the course of this call, we will provide an overview of business developments through Q1 of this year and discuss the progress we continue to make with respect to our 2019 goals and performance targets. Following these remarks, we will open the call to your questions. We expect today's call to last approximately 60 minutes in total. As a reminder, our remarks today correspond with the press release we issued this morning. In addition, a recording and transcript of today's call will be made available on Aquestive Therapeutics' website within the Investor Relations section shortly following the conclusion of this call. During the call, the Company will be making forward-looking statements. We remind you of the Company's Safe Harbor language as outlined in today's press release, as well as the risks and uncertainties affecting the Company as described in the Risk Factors section included in the Company's Form 10-Q to be filed with the SEC on May 8, 2019. As with any pharmaceutical product candidate under development, there are significant risks with respect to the development, regulatory approval and commercialization of new products. Given these uncertainties, you should not place undue reliance on these forward-looking statements, which speak only as of the date made. All subsequent forward-looking statements attributable to Aquestive Therapeutics or any person acting on behalf are expressly qualified in their entirety by this cautionary statement. 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 Keith.

Thank you, Lauren. Thank you everyone, for joining us this morning. We are pleased with the start of the year for Aquestive Therapeutics and the early progress we've made toward achieving our 2019 goals. Through the first quarter, the company has continued to enjoy a strong book of business from our licensed products especially Suboxone. More importantly, we have made significant strides in advancing the next generation of medicines from our pipeline, which will support the future growth and success of Aquestive. Looking ahead, we expect 2019 to be a formative year for the company as we work to achieve several commercial, regulatory and development milestones. The primary focus of our commercial organization is driving the successful launch of SYMPAZAN and establishing our epilepsy franchise. We are pleased with the reaction we’ve gotten to date introducing SYMPAZAN to the LGS community. As Ken Marshall will describe in detail, we have made good progress on three key metrics that are important to the long-term growth and success of the brand. Prescription growth, prescriber base expansion and the number of patient lives covered. As we near the six month mark post-launch, access is expanding. As expected, payers new to market blocks are beginning to expire and we are in the process of finalizing agreements with both commercial payers and Medicaid agencies. We expect to report several agreements with commercial plans soon, as these events unfold and we continue to educate healthcare providers on SYMPAZAN's value proposition, we expect to see continued sales growth. The launch has given our commercial team the opportunity to build and develop important relationships with the LGS and epilepsy communities. Given the 90% overlap between SYMPAZAN and Libervant physician targets, we believe every interaction we have now forms a strong foundation for Libervant's future success, establishing more familiarity…

Thank you, Keith, and good morning, everyone. We are excited to share the progress we've made commercializing SYMPAZAN and introducing PharmFilm technology to help care providers and payers. The launch of SYMPAZAN is going well. We've made good headway on three fronts that are critical to the long-term success and health of SYMPAZAN. The number of prescriptions written, the number of prescribers and the number of lives covered. On each of these metrics, we are tracking in line with our internal expectations and the performance of key analogs we benchmark against including Banzel suspension and Fycompa suspension. We view these specialty launches as meaningful benchmarks, because they've each provide as the reference medicine in a different delivery form for a subset of patients with difficult to treat epilepsy. Both launches performed well, systematically growing their prescriptions, prescribers and lives covered over the course of several business quarters and becoming meaningful contributors to their respective franchises. During the first quarter of this year, we saw steady month-over-month growth in SYMPAZAN prescriptions and shipments to pharmacies. As we've noted before, the Symphony audit underreports most specialty medicines due to some of the volume moving through specialty distribution and non-reporting pharmacies. For SYMPAZAN, underreporting has been highly variable and in the range of 15% to 50% week-to-week. For that reason, we closely monitor our shipments from wholesalers to retail pharmacies. These shipments tell us when a new script has been received at a pharmacy making it a good indicator of physician interest in the product. Our shipment numbers are strong and support the steady volume growth we see in adjusted prescriptions. To-date through April, we've shipped 700 units with low-single-digit returns from pharmacy. Again, we see this on track or ahead of Banzel and Fycompa in a comparable time period. Refills are another…

Thank you, Ken. Today, I will focus on the progress of our Libervant, Exservan and AQST-108 or sublingual epinephrine development programs. As a reminder, Libervant or Diazepam Buccal Film is being developed for the treatment of seizure clusters in patients with refractory seizures who are not well-controlled on a stable regimen of anti-epileptic drugs or AEDs. The reference listed drug for Libervant is Diastat rectal gel. In March, I shared with you that our next step forward was gaining agreement with the FDA on our rolling submission plan. As Keith said, we are pleased to report that we reached agreement with the FDA on our submission plan, and the first parts of our filing will be submitted this month. This is yet another important step forward for this program. We remain focused on completing the filing process for the adult submission in 2019. The ultimate timing of our filing continues to be driven by the completion of our crossover study. As I've shared with you in the past, following our pre-NDA meeting with the FDA last December, we initiated a crossover study that is designed to compare Libervant and Diastat in a same patient population and provide the final set of data to validate our dosing model. Our target enrollment in this study is 24 patients in order to obtain a complete pharmacokinetic dataset on a minimum of 16 patients. I am pleased to report that we have made significant progress towards full enrollment of this study. We currently have four active sites with two more sites likely to be activated and start enrolling in the next week. To-date, we've enrolled and dosed over half of the patients necessary to complete the study. Our active sites are fully engaged and we intend to be reaching full enrollment in the coming…

Thank you, Dan. Good morning, everyone. To remind you I will be discussing some non GAAP financial measures this morning as part of our review of the first quarter. A description of these measures, along with a reconciliation to GAAP can be found in the earnings release we issued earlier today. I also wanted to point out that we will be filing our first quarter Form 10-Q with the SEC later this afternoon. We produced revenues of $12.6 million in the first quarter of 2019, mostly from our licensed products and ended the quarter with a cash position of about $40 million. Our cash position, combined with expected revenue from licensed products and SYMPAZAN, puts us in a good funding position for the remainder of 2019 and gives us the ability to continue to launch SYMPAZAN and advance our proprietary development activities, throughout the year. Our first quarter 2019 revenue included manufacturing revenue of $6.7 million, license fees and royalties of $4.6 million, co-development and research fees of $700,000 and SYMPAZAN net sales of $600,000. Overall, revenue declined by $10.8 million in the first quarter of 2019, compared to the same period in 2018. The lower year-over-year revenue related first to a $4.9 million decline in manufacturing and supply revenue, which was primarily driven by shifts in the timing of Suboxone and Sandoz authorized generic production, while the order book for 2019 remains very strong. In order to help our licensee with supply chain management, we adjusted the timing of production and delivered 57 million doses of product in the first quarter of 2019, compared to 96 million doses in the first quarter of 2018. Additional factors contributing to our year-over-year decline in revenue, were a $4.9 million drop in license fees related to the suspended Suboxone license payments that…

Thank you [Operator Instructions]

Operator, before you connect the first question, this is Keith Kendall, I'd like to make a few comments, if that's okay.

Go ahead.

Yes, good morning, everyone. Before we get started with questions, we just like to spend a minute addressing – you may have seen the late-breaking announcement from our company and a company IntelGenx relating to some licensing of our intellectual property, and the licensing of our Tadalafil product. As we've discussed in the past, we would likely – we were likely to seek a partner for Tadalafil, given that it was non-core to our commercialization strategy. We think this deal announced today does a couple things. First of all, and perhaps most importantly, it recognizes the strength and value of our intellectual property portfolio, the desirability of our knowhow for people to help develop products that they are interested in, in markets that they are interested in. It helps us put focus on an asset that was non-core. So we can extract value for it. We think that the strength of our intellectual property created a fairly healthy royalty exchange for the Rizatriptan-based product RIZAPORT that IntelGenx is developing and it creates another monetizable royalty stream for the opportunity for non-dilutive capital. And at the end of the day, it further extends for us the reach of our company through our intellectual property into areas that we would not be focused on in the near-term. We can't, despite the fact we have a technology that's broadly applicable across a number of disease states and products, we can't focus on all of them. So finding partners like IntelGenx that has a desire in an area that we are not going to be focused on in the near-term and creating a healthy royal stream for products that they develop, we think is beneficial to us. I just wanted to acknowledge that transaction that broke late last night before we got started with questions this morning. So, thank you.

Thank you. And our first question comes from the line of Gary Nachman of BMO Capital Markets. Your line is now open.

It's [Indiscernible] on for Gary. Thanks for taking the question. Regarding Suboxone, based on the overall positive trend so far, do you feel that you're tracking towards the high end of guidance for that revenue or is it still too early to say? And do you have a sense for why uptake of competing generics hasn't been faster and do you think this could accelerate?

Well, this is Keith, thank you for the question. I'll take the first – the second part of the question and then John can address the second part of the question. I think, if you do a little bit of research and you go out to the blogs, talk about the – to see about how the patients are reacting to the generics, I think there is some concern about the quality of the generic products and how well patients are tolerating or accepting them. I think, that speaks to the quality of our products. I also think you have a very strong history in our product in the marketplace that makes people comfortable with it, not only prescribing it but taking it. There is probably some other dynamics in that market around pricing that help drive that. But I think that's the dynamic at play.

And Raphael [Ph] on your on your first question about the guidance range, what I would tell you is that we haven't yet adjusted our guidance. So obviously, with 168 million of firm orders in hand. We certainly feel good about the low-end of the range and we think we are well within the range. We feel good about where we are from a generic launch erosion curve perspective. We are at 80% between the Sandoz product and the branded product, 80% retention. We've seen some erosion in the tablets. It's early and our overall view would be, it's still a little bit too early to start to push around the numbers, but, we certainly do feel good about the range that were with them.

Thank you. And just one question on the pipeline. If the proof-of-concept with epinephrine is positive, can you walk us through what the next steps would be in the timeline?

Sure. This is this is Dan Barber. Good morning. So, as you know, we are well on our way in the proof-of-concept study and we expect top-line data to be out in the third quarter. Depending on how that data looks, we will develop our final view of our clinical plan and we will go to the FDA most likely in a pre IND setting and gain agreement or alignment with the FDA on what the full development program would look like for the product and we plan on doing that on the back of good data in 2019.

Thank you.

Thank you. And our next question comes from Randall Stanicky of RBC Capital Markets. Your line is now open.

Good morning everyone. This is Randall.

Good morning.

Few questions. First on Libervant, looking from our understanding around timing, it sounds [Indiscernible] to complete the review. Is it fair to say that final submission some time either in 3Q, 4Q? And based on your feedback with the FDA, how long is review version expected? Will be it standard ten months.

Go ahead why don't you reframe his question.

This is Dan, your question was a little choppy coming through. So the parts that I was able to hear are, you wanted some confirmation on timing of the ultimate filing, as well as our view on the amount of time for the final – the review. We absolutely see – we see our filing in 2019. Whether that timing is late Q3 or in Q4 will be driven by final enrollment, which we expect to conclude in the coming weeks. So that will give us a much better visibility on that front. We are very excited about where we are from an enrolment standpoint. We have enrolled over half of the patients necessary and we are well on our way to getting the rest of them. In terms of the review time period with the FDA, as you know the standard review period is ten months. In our NDA, we will request a priority review. If it's granted, that would make it six months. If it's not granted, we would stay at ten months. If I missed any part of your question just let me know.

No, I think that was it. Can you guys hear me a little bit better now, I was having a headset issue?

Much clear. Yes.

Okay, great. So just a couple more on SYMPAZAN. Data so far from Symphony has shown a pretty steady linear ramp. As we are thinking about the rest of the year and analog experience and recent trends and all that, realizing you are not providing guidance. But, do you expect that to inflect at some point as you hit critical mass with payers? And then, second, now that you've got at least one national PBM agreement behind you and closed on several others, it sounds like is your thinking around gross to net is still consistent with what you've communicated in the past? I think you said you expected it to settle out around 40% to 50%?

Yes, Daniel, I'll take the second question and then Ken can take the first question. On the gross to net, we would say that, yes, we are still – we would reaffirm what we have told before on that. Obviously, in Q1, it was positive. But if you look at the average of Q1 in December of last year, it's about right around in the range of – at the high-end of the range of what we would have said. So, as the year progresses and these agreements come out, we'll know better where we stand. But right now that arrangement is pretty good.

And I can take the front-end of that question Randall. This is Ken Marshall. If you look at those end-market analogs that we refer to routinely, I don't think it's unreasonable to expect the same type of movements in our prescriptions in the second half. We certainly have a good progress with payers. We are getting good receptivity. Your stay in the new to market blogs coming off at both the planned level as well as some key Medicaid states. So you would expect that to make the decision more of a medical decision rather than a medical payer decision as we move into the second half and that generally improves your volume.

Okay, great. Thank you everyone.

You bet.

Thank you. And our next question comes from Liana Moussatos of Wedbush Securities. Your line is now open.

Thank you. Can you give us the status of the Tadalafil CRL? And a little more commercial details on the agreement with IntelGenX, number of reps, reimbursement, geographies, anything you can tell us?

Sure Liana, and this is Dan. Good morning. So, I just wanted to stress, as an opener on Tadalafil that this is a non-core asset from our strategy and our focus remains on execution in the epilepsy and CNS space in the late-stage assets. The Tadalafil CRL, we continue to progress on discussions on re-filing with the FDA and we'll have more clarity on that as we go through the next few months. In terms of the alternate marketing of Tadalafil, the agreement with IntelGenx is a global agreement. So, we will be looking to put Tadalafil to work not just in the U.S., but in other markets around the world. How we ultimately bring it to market in the U.S., with our partner IntelGenx remains to be determined whether that's directly or through adding a sale commercial arm in the urology space.

Thank you.

Thank you. And our next question comes from Jason Butler of JMP Securities. Your line is now open.

Good morning. Jason.

Again, Jason. Your line is now open. Please check your mute button. Once again, Jason, your line is open. Please check your mute button. And our next question comes from Thomas Flaten of Lake Street Capital. Your line is now open.

Thank you. Good morning guys. Couple questions. John, first for you on cash. So you went through about $20 million in the first quarter and you reaffirmed your guidance of $45 million to $50 million cash use for the year. Can you give us some thoughts on how we should think about spreading the balance of that over the course of the year?

Yes, sure that's a good question, Thomas. We had obviously at the end of the year, we do things like pay our bonuses and we had some trailing IPO expenses that we needed to pay out that had to paid early in the year. And the other factor had to do mostly with the timing around our billing. As I had mentioned I think in the last call, and in this call, we have been working with Indivior on the timing of the production and shipment of their products as they work through the supply chain with the generics and the potential generic at-risk launch. And so, that was altered in some billing early in the quarter, lower billing levels, which have done – since then picked back up. So, I would expect that our cash - normalized cash runrate, will return to sort of what you would expect it to be versus, you know what, $20 million in a quarter, once we – as we go forward in the future quarters.

Got it. Thank you. And then, just a follow up on the Tadalafil agreement, given the way that, at least my read of the press release, it seems very much to be a joint collaboration. So, is there a commitment on your part to fund commercial efforts, launch efforts, regulatory submissions globally? And do you have a sense of – I know you don't have plans that firmly worked out. But do you have a sense of what that might represent from an investment perspective for you?

Yes. And this is Dan again. That's a great question and thank you. There is – and I wanted to make sure we are really clear here. There is no commitment that we have made to spend money on Tadalafil and we have no plans to create a urology sales force for Tadalafil. This deal is meant to broaden our ability to monetize Tadalafil through a variety of markets around the world and all of those monetization events would be licensing agreements either led by us or by IntelGenx. So, this does not change our focus, if anything it allows us to monetize an asset that was out of focus and it also does not change anything around our spending or our plans for immediate future.

Excellent. Thank you guys.

Yes, let me just add a little clarification to that. In the short-term, if anything, it reduces the cost burden for the work that has to be done to re-file and bring this asset to its conclusion with the agency. IntelGenx will pick up half of that cost burden. So in addition to Dan's statement, I'll reiterate we have no plans of building a urology-focused sales force in any way, shape or form and half of the remaining expenses to bring that product to marketability will be borne by IntelGenx.

Excellent. Thank you guys. Appreciated you for taking my questions.

Thank you. [Operator Instructions] And our next question comes from Ram Selvaraju of H.C. WainWright. Your line is now open.

Hi. Thanks very much for taking my questions. Just a couple here. Firstly, can you give us some updates on or just some additional clarification on the differences between the revenue streams you receive from the brand versus the authorized generic on Suboxone and Suboxone film, as those pertain to the ongoing litigation as well as the Indivior indictment? Just walk us through the differences between those two different revenue streams. Secondly, I wanted to ask about going forward, the relative positioning of the sublingual epinephrine formulation versus the existing epinephrine formulations currently on the market. As you see that overall market evolving, how might this potentially affect your strategic thinking around this product candidate and what you will expect to do with it? And then lastly, just a housekeeping item. When specifically do you expect to file the 10-Q? I know, I believe I heard you say, it would be filed today. But when should we expect it out? Is it already out or would you expect it to be filed after the close today? And in the 10-Q, would you be providing the same breakdown of the revenue line item as you had in the past? Thank you.

Ram, I'll quickly answer the third question for you, and then, we will work through the other questions. The 10-Q will be filed this afternoon and we will provide the same breakdown of revenue and other information that we've provided in past 10-Qs.

Ram, this is Dan. We'll continue to go in reverse order. I'll take number two. Yes, as we look at the epinephrine market over the next few years, there is no doubt there will be continued jocking in the autoinjector space over how market share is divvied up. But for us, we see our product as a key differentiator in advancement in that space and if you've looked at the anaphylaxis or severe allergy space at all, it's yet another spot where there is a high unmet need. There is a lot of non-treaters in that space or people who should be carrying some sort of solution for their issue and are not. So we believe the market opportunity for us is much bigger than the autoinjector world is today. So that's where we are focused and we think our innovation will drive that as we go forward.

And then back to your Suboxone question, and I'll break it down into the pieces. First, there is actually no difference in the price we charge for product leaving our factory. Whether it's a branded product sold as Suboxone or an authorized generic sold as Sandoz. A dose is a dose to us and we remain volume-sensitive, not final market price-sensitive. In terms of the various litigations, we'll take the patent litigation first. We continue to be confident in our position in terms of the strength of our patents and the infringement or potential infringement of the products that have entered the market at risk. In fact, we have had an additional allowance for a new patent that we think will be relevant in that fight. And we would expect to see that patent become a part of that fight and we'll continue to pursue our rights as we have. In terms of the indictment for Indivior, I think we remain very confident in a few things. First and foremost, we are not involved in the indictment. We have no interaction, whatsoever with the Department of Justice and have not over the five years or so since they have been involved in this effort with Indivior. We feel very, very good about the fact that the market continues to expand. We feel even better that Suboxone and the branded generic have not eroded nearly at the rate anyone would have expected. We feel equally good that Indivior has announced that, much of their uptake or improved uptake in the market has come from government programs and government payers. So that there is not – there is no read-through or blowback from the DOJ case to their volume at least at this point. And we continue to feel equally good about, as we have told everybody all along, that as prices converge, the tablets will start ceding market share to a superior product with a superior profile in the eyes of prescribers and patients. So all of those are great dynamics for us up and down the line. That business will continue to be a strong contributor of cash flow for us out into the future. Did that get to all of your questions?

Yes. Then just a couple of clarification points on Libervant, if I may. So, I wanted to better understand how many potential pieces there are under the scope of the rolling NDA submission and what you expect to submit first this quarter? Also, I was hoping you could maybe walk us through some scenario analysis regarding the single dose crossover study? And assuming based on the statement made in the press release this morning that this study is slated to be completed in the third quarter, should we be understanding then, that there is a higher likelihood that the new drug application for Libervant would be complete in the fourth quarter versus the third quarter of this year or would there still be a possibility that it would be complete in the third quarter itself, because your guidance says the second half of this year? So, I just wanted some clarity on those two points. Thanks.

Yes. So, let me start with the rolling submission piece. So we've broken it up into three main pieces and the first piece which will go in this month is as you would expect, all of the non-clinical and pre-clinical type components of the filing. The next piece that would go in will be at the CMC section, which would go in, in Q3 and then the last piece which would complete the filing, the clinical piece, which I'll skip to your last question. And the timing on when we submit the clinical piece really is driven by enrollment and dosing and at this point, we are focused on the scheduling of individuals for the dosing regimen. So, in terms of likelihood, Q3 versus Q4, I am not sure how to deem, which it will be. But I would say, we know we see a clear line of sight in 2019 to getting this filing in. The middle part of your question was around clarity on the data that could come out of the dosing, if I captured it correctly. And the data will be very straightforward in terms of what we are capturing. It is all PK-based data. So all comparison data between our product and Diastat in the patients who have been put into the study. And there is nothing more complex in the study than capturing that data. Ram, did I answer all the parts of your question?

Yes. Thank you. That’s very helpful. Thank you very much.

You bet.

Thank you. And that concludes our question and answer session for today. I'd like to turn the conference back over to Keith Kendall for closing comments.

Thank you, operator. Well, thank you, everyone for joining today's conference call. We are excited about the progress that our teams made over the past few months. We are even more excited to be focused on things that are in our control and continuing to deliver as we've promised the things that are in our control. We can't always manage the things that aren't, but we feel that we are making a great deal of progress on the things that are in our control and we look forward to continuing to do that. Our technology, our knowhow and the fully integrated capabilities of our company will continue to allow us to advance differentiated medicines that aim to make a difference in the treatment for epilepsy, ALS and complex CNS conditions, anaphylaxis and a range of other diseases. We are focused on bringing these innovations to market and look forward to reporting more on our progress on our next call. So thank you all for joining and have a great day.

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.