Ladies and gentlemen, thank you for standing by, and welcome to the Q3 2020 Aquestive Therapeutics Inc. earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator instructions] Please be advised, that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Stephanie Carrington, Westwood, Investor Relations. Thank you. Please go ahead, ma'am.

Thank you, operator. Good morning and welcome to today's call. I'm joined by Keith Kendall, President and Chief Executive Officer, and John Maxwell, Chief Financial Officer, who will be providing an overview of recent business developments and performance of the company in the third quarter. We expect today's call to last approximately 60 minutes. 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 Aquestive's website within the Investor section shortly following the conclusion of this call. This call will also include a discussion of certain non-GAAP financial measures. A reconciliation to corresponding GAAP measures can be found in yesterday's earnings release. Before we begin, let me remind you that today's call will include forward-looking statements based on the company's current expectations. These statements reflect the company's judgment as of today only and are subject to risks and uncertainties that could cause actual results to differ materially from those described in these statements. The company undertakes no obligation to revise or update these forward-looking statements in light of new information or future events except as required by law. These risks and uncertainties are discussed in greater detail on the company's quarterly report on Form 10-Q filed today in greater detail under the caption Risk factors. With that, I will now turn the line over to Keith.

Thank you, Stephanie. And thank you to everyone on the call for joining us this morning. In our remarks, John and I will provide an update on our business for the third quarter and as always, we'll be joined by additional members of the Aquestive leadership team during the Q&A session afterwards. During the third quarter, Aquestive continued to make progress as it relates to the key drivers of value for the company. First, Sympazan continues to perform against all important metrics despite the ongoing COVID-19 related restrictions on face-to-face interactions with healthcare providers. We're continuing to market Sympazan for the same prescriber base that are potential prescribers of our product candidate Livervant. Sympazan retails shipment volume grew 18%, third quarter over second quarter. Next, as previously announced, the company is taking steps to address the issues raised in the FDA's complete response letter that we received in September regarding our new drug application for Livervant. After submitting a meeting package to the FDA in October, we received confirmation that the FDA agreed to have a Type A meeting with us set for November 12, 2020. A Type A Meeting, as you know, is granted for candidates drugs on hold to discussing pending issues and a path forward for approval. We look forward to meeting with the FDA to discuss the information we submitted and to seek feedback on the resubmission of our NDA for Libervant. We believe that we've provided a strong set of facts supporting our NDA. We will update the market once minutes of the meeting are finalized regarding the FDA's comments, our plans for resubmitting our NDA, and the potential range of PDUFA dates for Libervant. Additionally in the quarter we commenced the Phase 1 pharmacokinetic trial for AQST 108, in August and completed trial enrollment…

Thank you, Keith. Good morning. We filed our 10-Q and issued our earnings release yesterday afternoon. As we typically do, we will tackle most of the discussion related to the third quarter of 2020 results in the Q&A. And in my comments, I will highlight a few points from our results that are important in order to understand our updated full-year 2020 financial guidance and our progress toward it. As we previously reported, we signed a monetization agreement for the royalty rights associated with KYNMOBI providing a potential $125 million of capital over time, including $40 million later this month. Under the terms of the monetization agreement, we are entitled to receive the additional up to $85 million of future non-dilutive capital at various points beginning as early as the fourth quarter, $25 million of which could be received between now and mid 2022, assuming we can achieve the commercial targets associated with the monetization transactions. Shortly after funding of the monetization transaction, we will reduce our debt from $70 million down to $51.5 million. This reduction is due to repaying of $22.5 million of our senior notes and issuing $4 million of new senior notes in lieu of paying a prepayment premium on the early repayment of the senior notes, bringing our net senior debt outstanding down and reducing our principal and interest obligations under the facility substantially in the future. The remaining net proceeds will be used for operations. Upon closing of the KYNMOBI monetization and the related reduction in principal and interest obligations, we will have capital visibility through Q3 of 2021 and potentially beyond. We believe this time horizon will give us the runway we need to get past the anticipated PDUFA date for Libervant in the first half of 2021. In addition, the terms of…

Thank you. [Operator instructions] Our first question comes from the line of Gary Nachman from BMO Capital Markets. Your line is now open.

Hi, guys. Good morning. First, on Libervant, describe the reanalysis you did in the data you submitted to FDA that you reviewed at the Type A meeting, and why you're confident you won't need additional clinical studies there? And then when will you get the minutes from the FDA, Keith or Dan? Is it 30 days later just so we should have the right expectation on when we'll get an update on next steps.

Sure, Gary. Thanks for joining us this morning, and thanks for your questions. I'll turn it over to Dan and let him walk you through the answer to both of those, okay?

Good morning, Gary. We've done exactly what we said we would do back in September. We have updated our dosing regimen based on the FDA's CRL. We have supported that update in the dosing regimen based on the nine studies that we have completed and the linearity that we find in those nine studies, and we've provided a robust package utilizing population PK modeling to support why the existing studies are sufficient based on the totality of the data we've created to date. In terms of the minutes, the typical turnaround time for the FDA is 30 days but we'll see how - that's completely in their hands and we'll see how long they take.

Okay. And probably sticking with you, Dan, the Phase 1 PK trial for 108, how many different doses did you look at for 108? And what are you looking for when you analyze the data to help determine next steps? And could you potentially go straight to a Phase 3 on this one?

Yes, I don't see - In my - I don't see the need for a Phase 3 - a true Phase 3 for this program. We think PK is absolutely the pathway and we have a broad depth of PK data across healthy volunteers, patients, in a variety of conditions, so I don't see that as a probable outcome. The dosing regimen update we have done in the two weight categories - just to frame everyone, as Gary said. The study in question is Study 180323 and in that study there are two weight groups that the comparison to Diastat in only those two weight groups was not where the FDA wanted it to be. In both of those weight groups, we have updated our dosing table by 2.5 milligrams. In doing that, because of the linearity of our product, we believe we will cure the deficiency noted by the FDA, so that we think we have a very strong position. We're excited for the meeting next week, and we'll advise out of that meeting, what the conversation with the FDA, what the content of the meeting with the FDA looked like.

Okay. Did you - but on 108 specifically the different doses that you're looking at there versus the IM and the sub-Q?

I'm sorry, are you talking about?

He's talking about epinephrine, how you compare them.

Okay. Yes - no, my apologies, Gary. I thought you were still on Libervant. I apparently didn't have enough coffee this morning. Yes, on AQST 108, we're really excited to see the data that comes through in the study that we're just about to complete. Could we go directly into a Phase 3? It is possible. I think we want to understand what the data looks like, understand what the next steps would be in terms of the possibilities of this program. I think the exciting thing in this space is that we have a lot of different pathways to potential different indications, which allows for a very broad platform almost program initiative for us. So, we'll see where the results take us. We'll also seek the FDA's feedback and we'll keep you updated as we know more.

Okay. Thanks for that. And then just last one for Keith, if Sympazan is starting to accelerate, which it sounds like, it begs the question if you should put some more resources behind it maybe before you have the Libervant's approval, especially now that you'll have additional funds from KYNMOBI. So, just what are your thoughts on building out your commercial infrastructure before Libervant? Thanks.

That's a great question, Gary and I think that that's a very insightful question, right. We're - we believe with the current course and speed, we're on track for Sympazan to be profitable next year as a stand-alone product. Obviously, as the penetration in that focused prescriber base continues to grow, the justification for additional resources is a lot easier to make, as is whether they'd be sales or medical affairs type of people. Obviously, you all know that we believe that Sympazan is a very important precursor to Liberant. So, I think you will see some increase in those resources based on its success and growth and based on our ability. While we're trying to resolve visibility on the risk around Libervant, you'll see us judiciously adding resources to help support that product and continue for it to grow.

Okay. Great. Thanks.

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

Hey, guys. It's Edwin on for Randall. Thanks for taking my questions. Just a couple from us. The first on Libervant. I know you're going to request a two-month review. Can you just talk about what needs to happen for this to be two months versus the traditional six-month review? Thanks.

Thanks for joining, Edwin. I'm going to let Dan field that question for you.

Yes, that's a really - but my response is really basic on that one, the FDA has to agree. So, the nature of the questions they had in the CRL are clinical, and our update is a clinical update because of the dosing regimen, which ties to a six-month review. So as we said before and as Keith framed in his comments, we will request a two month review because we believe, especially if the FDA is supportive of the dosing regimen to be submitted to them, we believe the changes are narrow to the NDA that was previously submitted. So, we will request a two-month review but that is completely at the discretion of the FDA.

Great. Thank you. Then my next one, a second one on Libervant, just one more, obviously so dependents have been meeting, but how are you guys thinking about the different ways this could play out and how this would impact the filing timing? Thanks.

Yes, so we - the package we submitted in our approach to curing the deficiency in the CRL, it's built on the conversations we were having in September. So, the exciting thing for us next week of this will be a continuation, in our view, of where we left off prior to the CRL. So, we think we have a very good case before us. I don't want to overly speculate about the possibilities of any feedback we may get from the FDA because we simply don't have it yet, but we're excited for the meeting. We think we have a very good case and we're looking forward to the conversation.

Thanks. And then my last one on the guidance raised in the revenue implies a range of $3 million to $7 million in 4Q, just wanted to ask about a little bit of details and some of the factors that drove that change and how we should be thinking about that, versus where implied 4Q is with respect to consensus, and that's all from us. Thanks.

Sure, Edwin. Good morning. So, as you know, we don't guide on the pieces of the -- or the components of the revenue, nor do we guide on the quarter. But as you look at the pieces of revenue, what you should see is that Sympazan will continue to be strong and grow certainly on the prescriber and the penetration front, we expect that, and then the revenue we would expect to follow. We'll continue to see the Suboxone product will erode over time, and we will see a little bit of that erosion, possibly because it's just timing of manufacturing activity in the fourth quarter. And then the rest of it, the smaller pieces of revenue there around license and royalty and co-development are going to be relatively small in the quarter.

Thanks. I appreciate it.

Sure.

Thank you. Our next question comes from the line of Andreas Argyrides from Wedbush. Your line is now open.

Good morning.

Good morning, Andreas.

Good morning, guys. Thanks for taking my question. Congrats on the quarter. I guess, I'm going to follow-on some questions already asked and answered. But as far as Libervant's concerned, how is the process with the FDA impacted the pediatric or the timing of the pediatric studies? Are we going to get top-line data anytime soon?

Go ahead, Dan.

Thank you for the question. So, we have the pediatric data now and we're able to submit that when we feel it's appropriate. In our minds, the right time to do that is once we have adjudicated the current submission that we have. So, we will resubmit with the NDA that we have. And when we have approval on that NDA, we will follow on with the pediatric portion of the NDA.

Okay. In regards to - let's look at the other pipeline assets there. The opportunity for Exservan in ALS, how are you guys actively looking for a US partner?

Yeah, we continue to have conversations with potential US partners. We do believe that product will get partnered in the US and we'll continue to work until we get to that point.

What would a potential partnership look like, if you can provide any color on that?

Go ahead, Dan.

Well, there are several parties in the U.S. that we think would be good fits for Exservan. We're in discussions - in fairly advanced discussions on a couple of cases. And what it would look like would be fairly typical, it would be -- we would expect an upfront and we would expect a transfer price in royalties for access and supply of the product.

Okay. That's it from me guys. I appreciate you taking the questions. Congrats again.

Thank you. Our next question comes from the line of Thomas Flaten from Lake Street Capital. Your line is now open.

Good morning. Thanks for taking the questions. Just kind of a strange question, you made reference to the 108 data and the need to assess the validity and quality of that data. Can you - I've not heard that turn of phrase with respect to clinical data before, but what is it about the validity and quality that's up for question or is it just the way you decided to phrase it?

Thomas, I think you're going back to the moment where I thought Gary was talking about study 180323 rather than AQST 108. So, on AQST 108, which is epinephrine, we are excited to see the data that comes out of our pilot study. We will analyze it, so there is nothing we know of right now that would question the validity or quality of the data coming out of our epinephrine study. We're excited to see it. Once we've had a chance to analyze it and absorb it, we will of course come back to all of you and talk about it at the right level of detail.

Got it. And then on Sympazan, the number of physicians who are writing multiple scripts, how has that trended over time? If you can just remind us what that looks like. I'm trying to get how entrenched the product is becoming within the larger and -- larger component of your prescriber base.

I'm sorry, Thomas. Can you repeat the question? I'm not sure I followed it.

Sure. You made mention of I think it was 77% of your prescribers have written multiple prescriptions. The question is how has that trended over time and is that within the quarter, or is that just over -- since launch? I'm trying to understand how entrenched the product is becoming within that prescriber base, how many of them are repeat prescribers versus one and done prescribers?

Sure. Ken, are you on the phone?

Yes, Keith. I am.

Do you want to respond to that question?

Yes, absolutely. Thanks for the question, Thomas. This is Ken Marshall. It's been relatively stable over time. We've been adding anywhere from seven to ten physicians on a weekly basis. Those are the ones that have written once and you have to kind of set them aside. If you look at the bulk of that -- of the physicians, it's now well over 700. Keith quoted a number. That's a couple of weeks old. If you look at our data through the 16th of this month, it's now well over 700. And as Keith stated, I think you said 77% of physicians have written more than one, and that's been a fairly consistent number as our base of prescribers have extended.

Got it. That's helpful. And then just one for John. John, there was a pretty steep drop-off in the SG&A spending for the third quarter, does that reflect a new baseline or was there something specific that happened in the third quarter within SG&A?

We, look - Thomas, as you know, we continue to really carefully manage our spending as part of our overall capital preservation strategy to extend our runway and we'll continue to push that down. You will have fluctuations quarter to quarter, depending upon the activity levels, so I don't think there was anything unusual there other than it may have been -- there was nothing unusual in terms of activity. So it was relatively low baseline. But we will continuously [ph] manage it going forward.

Got it. Thanks for taking the questions, guys.

Sure.

Thank you. Our next question comes from the line of Jason Butler from JMP Securities. Your line is now open. [Operator instructions] Our next question goes to Raghuram Selvaraju from H.C. Wainwright, your line is now open.

Good morning. This is Maz on for Raghuram. I was wondering if you're able to provide any precedent from your previous trial experience in general for dose adjustment being the successful strategy to achieve the drug exposure you're looking for. And could the variable PK profile explained by body physiology, the weight groups in question?

Sure. Dan?

Sure. As you know, we have broad experience in pharmacokinetic studies. I don't have another program I would point to in the correspondence back and forth with the FDA, but I would say that in the PK world, adjusting and coming up with a dosing regimen based on your PK results as well as the linearity or lack of variability in the results you have created is a fairly normal course of business. I think I would imagine you've seen that as well. In terms of the weight groups in the physiology creating differences in results, I would say that that would be -- it would be a little speculative of us to go to that depth. I would say this on the Diastat side in all the weight groups, no matter what dose we gave under what study, we saw high variability. We do know that the reference product, the ROD in this case, Diastat is highly variable. And when you are working with a highly variable drug as your ROD, it can create some difficulties on comparability. So, we think we saw that in 108323 and we're excited to have the conversation with the FDA with our adjusted dosing regimen.

Thank you very much for that clarity.

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

Hi, it's Roy in for Jason. Can you guys hear me?

Yes, Roy.

Sorry about that early. Yes, we had a couple of questions on epinephrine 108. First question is where do you guys think there's going to be the early adopters? Is it going to get used by ENTs, healthcare providers first then expand more broadly or do you think it will be a true EpiPen alternative from the get-go? And then what are we going to see from the top-line data later this year? Are we going to see C-max, T-max, AUC? Are you guys going to give qualitative characterizations?

Go ahead.

Yes. So, we've provided the -- I'll start with the study design. We've provided an outline of what the study design looks like. So we, of course, would like the opportunity to see the data and work through it before we know exactly what we'll be providing to you. But our intent would be to provide you with as much clarity as we can on where we are and where we're going and what it means. In terms of the marketing of the product, we see a variety of ways in which the product can be used. We - I would point more to the need in the market than exactly where it will place the product at this stage in development. If you look at the overall allergy market, there are approximately 30 million Americans who have some level of allergy issues that could lead to anaphylaxis while the amount who actually carry EpiPen is a fraction of that. So, we know that there is a big gap between people who are carrying an EpiPen and people who perhaps should be carrying an EpiPen, and we think an oral product could be placed into that particular unmet need in a lot of different ways. And between Keith, myself, and Ken, as time goes on, we will be defining that for all of you.

Yes, we, as we've committed once we get the data from this study and we're able to analyze it and plan a path forward and begin to interact with the FDA around it, we planned a full R&D Day for discussion of the program. We'll talk about some of the market characteristics that we see, where we think it can be placed in the market, as well as talk about the product, its engineering and the test results at a level of detail that people will be comfortable with.

Okay. Great. And then on Sympazan, we've seen pretty good growth there, good represcribing rates continue. Can you characterize a little bit the feedback you're getting from the field? How does it compare to your expectations? And then, what level of in-person interactions you guys are having and how do you see that going forward if COVID resurges as it seems to be? Thanks.

Sure. I mean the -- and I'll turn it over to Ken to give a little bit more color than I can provide. I think a couple of things. First, obviously, a product like this in the market it's in for the patients that it is targeted for, and the caregivers who care for them and prescribe to them, this is very promotion sensitive. So, the ability to have face to fair interactions with the prescribers is important to us, as our growth rates quarter over quarter and year over year have shown. I think we've also demonstrated that even during the worst of the times when there was zero face-to-face contact at the height of the COVID restrictions we were still able to grow the product, which speaks to the level of depth and relationship that our sales group has developed with the prescribers. And we think that's along with the payer performance up to this point are very important, not only contributors to the growth of Sympazan, but precursors to the launch and success of Libervant when and if it's approved, right. Ken, maybe you can provide some more color on the feedback you're getting and precisely how sensitive it is to the face-to-face interactions.

Okay. Thanks, Keith. Yes, we look at that fairly, fairly closely in a lot of detail on a weekly basis, and we seem to be flattening out right about now about 60%, 40% -- 60% live, 40% virtual with caregivers. You're also seeing, as Keith mentioned the success rate and moving prescriptions is increasing because we've become more comfortable in a virtual world, and clearly our healthcare practitioners have. So, both sides are really starting to understand how to more effectively communicate in this manner. We're happy with the way that's moving. If you look at our ability to access their staff, which is key, their MPs and PAs are very important in any transition that's made from a tablet or a crushed tablet protocol or a liquid protocol to our strips. We've got a 70-30 ratio there. That's 70% of those discussions happen live versus 30% virtual. Both are in a good place. It's a good question. It would be a speculative answer on how that might change in a world where you see some level of rebound. Regardless, I think we'll do better -- regardless of how people behave if there is a rebound in COVID, we'll do better than we did back in that late Q1 early Q2 time frame where everybody was trying to figure it out. There is a much clearer path. And qualitatively, what seems to be driving the uptake in Sympazan is just a very clear patient profile that we're now able to paint for physicians. They use a lot of close-end, there is a lot of close end used, and they look for those patients where we might be a more appropriate delivery platform. And those are turning out to be as you would expect, those that have a little bit of difficulty swallowing, those on G tubes that want to take something orally where they can swallow in the normal course of just along their saliva, those on Ketogenic diet. We have virtually zero carbs, which is a very important consideration. There are a lot of carbs in the liquid Sympazan and actually quite a few carbs in the tablets, and the media that you usually end of crushing it in. So, examples, a very clear patient type that physicians can look for in their practice and use Sympazan.

Great. Very helpful. Thank you.

Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to Keith Kendall for closing remarks.

Thank you, operator. Thank you, everyone, as always for your interest in Aquestive and for joining us for the call today. We appreciate your time. We look forward to continuing to move along all of the elements we think drive value for the company and continuing to push those projects and those events forward as we expect and as we commit to all of you in these calls. And we've got some updates that we will make at the appropriate time on Libervant and epinephrine, and we look forward to those as well. So thank you all for joining and we look forward to talking to you all soon. Have a great day.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.