Good morning and welcome to Aquestive Therapeutics First Quarter 2021 Conference Call. [Operator Instructions] I would now like to introduce your host for today's conference call, Ms. Stephanie Carrington, Aquestive Investor Relations. Please begin.

Thank you, operator. Good morning and welcome to today’s call. On today’s call, I am joined by Keith Kendall, President and Chief Executive Officer and Ernie Toth, Interim Chief Financial Officer, who are going to provide an overview of recent business developments and performance in the first quarter 2021, followed by a Q&A session. In total, we expect today’s call to last approximately 60 minutes. As a reminder, the company’s remarks today correspond with the earnings release that was issued after market close yesterday. In addition, a recording of today’s call will be made available on Aquestive’s website within the Investors section shortly following the conclusion of this call. To remind you, the Aquestive team will be discussing some non-GAAP financial measures this morning as part of its review of first quarter 2021 results. Inscription of these measures, along with a reconciliation to GAAP can be found in the earnings release issued yesterday, which is posted on the Investors section of Aquestive’s website. During the call, the company will be making forward-looking statements. A reminder 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 10, 2021. As with any pharmaceutical company with product candidates under development and products being commercialized, there are significant risks and uncertainties with respect to the company’s business and the development, regulatory approval and commercialization of its products and other matters related to operations. The impact of the ongoing COVID-19 pandemic is highly uncertain and cannot be projected with certainty or clarity. 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 attributed to Aquestive or any person acting on its behalf, are expressly qualified in their entirety by this cautionary statement and the cautionary statements contained in the earnings release issued yesterday. 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, Stephanie and thank you everyone on the call for joining us this morning. In our remarks today Ernie and I will be discussing recent developments in our business during the first quarter of 2021 and through April. As always, Ernie and I will be joined by additional members of the quest of leadership team during the Q&A session afterward. Through this period we were able to execute on our key priorities and delivered a number of key milestones that we'll talk about this morning. First and foremost, we continue to focus on building our CNS franchise. Our team is focused on preparing resubmission of our new drug application for Libervant. After receiving guidance from the FDA on its expectations for information and supporting analysis relating to the pharmacokinetic modeling and simulations included in our prior submission to the agency in December 2020 we're completing the necessary analysis the existing clinical data in response to the FDA's feedback. We're developing Libervant as an alternative to more invasive, inconvenient and difficult to administer device driven products, including a rectal gel for patients with refractory epilepsy. As a result of these issues, a large portion of the patient population does not receive adequate treatment or forgoes treatment altogether. We continue to believe that Libervant if approved by the FDA for and for U.S. market access will enable a larger share of these patients to receive more appropriate treatment by providing consistent therapeutic dosing and a non invasive and innovative treatment form. As we previously communicated, we resubmitted to the FDA a revised weight based dosing regimen alone with modeling and simulations data in December 2020 to address the issues raised by the agency in the CRL we received in September of 2020. The FDA confirm that the issues identified in the…

Thank you, Keith. And good morning everyone. By now you will have seen our financial results in our 10-Q and earnings release that were filed last evening. As we typically do, we will address most of the discussion related to the first quarter 2021 results in the Q&A. We have reconfirmed our full year 2021 financial guidance as previously indicated in our fourth quarter release issued during the second week of March 2021. Overarching our 2021 strategy are some key principles that Keith outlined in his remarks including we are focused in 2021 on our two most important value drivers Libervant's resubmission, approval and launch and the continued development of our epinephrine program. While we are targeting a late 2021 PDUFA date, we have included zero revenue from Libervant in our full year 2021 guide until we are certain of our approval and launch time. Our epinephrine program is advancing with our second pro drug AQST-109 currently in a phase 1 PK trial and while we do not specifically guide on SYMPAZAN revenue, as Keith mentioned previously, our trends on wholesale or shipments to retail pharmacies and growth and new and repeat prescribers are very solid quarter-over-quarter and we anticipate continued growth into 2021. And while Suboxone is a legacy product for us, it remains a significant part of our near term revenue outlook. Our total revenues were $11.1 million in the first quarter of 2021 compared to $8.8 million in the first quarter of 2020. This year-over-year increase reflects higher license and royalty revenue and growth in SYMPAZAN revenue. We saw net revenue growth in the first quarter of 2021 compared to the prior year period of 56% for SYMPAZAN the first of our proprietary products to be launched. Our net loss for the first quarter of 2021 was…

Thank you. [Operator Instructions] Our first question comes from Gary Nachman with BMO Capital Markets. Your line is open.

Hi, this is Evan filling in for Gary Nachman. Thanks for update and thanks for taking my question. So I have a few questions. So first, for the additional work that you're doing for Libervant or both for the PK and safety could that potentially be helpful to showing a meaningful improvements in patient care and getting the orphan drug designation? And secondly, how soon can you reengage with FDA on Libervant after you resubmit at the end of the second quarter? Is that immediate or would it take a while to the PDUFA date?

Sure, Dan, you want to take that?

Sure. Good morning. So in terms of the safety and PK work that's going into the roof, the way we think about the refilling or the resubmission, in terms of the benefits of our product is, it's the totality of the package, that is really what drives value. So the safety piece that we're updating, which is a very simple piece, of course, as part of our story, and the PK modeling, which relates to the dosing regimen we're creating also is a component of the value that we will drive. So there is absolutely additional value in the work that we're doing that will go into resubmission that will tie to our market access. In terms of re-engaging with the FDA, we will re-engage immediately upon resubmission. In fact, I would argue we've been in contact with the FDA; we received their feedback back in February. We have engaged back and forth with them from February to now and after we submissions that will continue.

Great. And one more follow up. Would you be able to remind us how you view the size of the market opportunity for Libervant as well as your thoughts on the product for dialysis and how you are differentiated?

Yes. There was some noise in the background that we were not sure where it's coming from. Could you just repeat that question please?

Yes. So would you be able to remind us on how you view the size of the market opportunity for Libervant and as well as your thoughts on the competing productneurolysis for Valtoco and how you differentiate it? Thanks.

Sure. Dan you want to you want to take that?

Yes, sure. Keith. Thanks. The market opportunity is pretty substantial. If you look at the overall epilepsy market of about 3.2 million patients, about 1.2 million of them have some level of refractory disease and as you talk to physicians, those are the types of patients that they would look to have a rescue strategy in place which has created an opportunity, quite frankly, for all the rescue medicines. So it's a pretty substantial market. And if you look at Valtoco and key points of differentiation, I mean, clearly one's a nasal and the others in orally administered medicine. The key points of differentiation, in my mind are the preferred route of administration and in what will likely be are labeled population 12 and older, the need to use two doses of the nasal Valtoco to get an effective level of therapy in those patients will be a pretty significant point of differentiation.

Thank you.

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

Hi, thanks for taking the questions. I had a couple on the epinephrine program. Can you just remind us for AQST-108, how predictive the preclinical data were in translating into the PK profile you saw in the initial human studies? And then following on from that, can you just compare and contrast the profiles you've seen pre-clinically today for 109 versus what you saw for 108? Thanks.

Sure. Jason, I'll let Dan, take that question.

Good morning, Jason. And great question. When you look at the preclinical data for 108, it was very predictive in our minds of what we saw in the clinic. We saw solid absorption with our pro drug platform and then we saw a rapid peak of Dipivefrin and conversion into epinephrine. And as you know, pro drugs are simply a chemical derivative of the molecule and after absorption, enzymatic cleavage turns the pro drug back into the original molecule. With that predictive model, what we saw was, and we talked about this at the R&D day, the Dipivefrin gave a really interesting and compelling curve, but we think we can do better on the conversion rate. So with 109, in pre-clinical models, we have a much faster conversion rate in our second generation pro drug. So pretty clinically, you see, rapid absorption, a nice big peak, and then you see rapid conversion into epinephrine through the enzymatic cleavage. We're currently in the clinic, as you know, with 109 and we're excited to see the data as we go through that study and we expect that study to read out as Keith mentioned in his remarks earlier in the second half of 2021.

Great. And then just one point from the R&D day that the docs brought up was the what seems to be pretty meaningful risks of incorrect use or delayed use of injectable epinephrine. Just wondering if you've got any market research to support how important these factors are, what went to both the physicians and to patients when thinking about the potential for a different delivery method like in oral and epinephrine?

Sure. Thank you Jason Yes, we do have market research that indicates that patients do delay using the current standards of care because of a variety of issues. And in fact, it's not just our market research, there's a whole wealth or body of research outside of our company that indicates the patient's delay using an epipen or other injection type epinephrine product for a variety of reasons. And we do believe that our product lowers those barriers and will be a product that over time, we can show patients are more willing to take at the onset of any allergic reaction. So that is absolutely a key differentiator of our oral product, our oral sublingual product and we will continue to ensure we understand how to use that differentiation as we go forward.

Great, helpful. Thanks for taking questions.

Thanks, Jason.

Thank you. Our next question comes from Dan Busby with RBC. Your line is open.

Great. Hey, guys, this is Steven for Dan. Thanks for taking our questions here. I've got two ask both in front. So the first one is related to SYMPAZAN. I am kind of curious is, as we were looking at the current COVID environment, and how it's impacting patients to getting in front of doctors and now there are people are getting more vaccine restrictions across the U.S. are starting to line up, how you're thinking about those dynamics and how it's going to impact your business, you're going forward and there's any pent up demand for that you guys are thinking about? And then my second question is related to epinephrine. You guys are in the process of their first in human PK data, which looks like you're going to have some data readout later this year, along with having some conversations with the FDA. I guess I'm trying to get a sense as ultimately what you're looking for to help you make a decision as to which asset you will be more comfortable to pursuing one 108 versus 109. Thanks for taking the questions.

Sure, I'll let Ken Marshall, our Chief Commercial Officer answer the first part of your question and then Dan will take the epinephrine part of your question. Okay.

Hi Steve this is Ken. If you look back to the start of the pandemic last March, leading into that about 90% of our interactions with healthcare practitioners were live. It went almost immediately to 10% in that April timeframe. So it was a very radical shift and now over time, as people have figured out how to manage it and set guidelines, we are seeing about a 65:35 ratio of live to virtual visits, and it's ever so slightly trending back up depending on the week we look at it can be 70% - 75% live, and that's for all healthcare practitioners, physicians and their mid levels. We feel like we're definitely more effective in those types of settings. But we've also learned how to very effectively work in a virtual world with our speaker and peer programs and our interactions with physicians. I am speculating, I don't know if it will go back to 90:10. What we're doing as a company is, are encouraging live visits where possible and following the guidelines of the hospitals and clinics. If they allow folks in we go visit them if they don't we set up virtual meetings.

And Dan, I will take the second part of your question and this is Dan. From 108 and 109 perspective, if you look at the data as we laid out for 108 what we were really excited by are a couple of things. One, the rapid peak of Dipivefrin, so under 20 minutes for the pro drug itself. And two, the really interesting PD effect that we saw pharmacodynamic effects that we saw throughout the data that we collected. So what we're doing right now with 108 is modeling all of that PD data and how it relates to the PK work that we have to-date. We will go forward and talk to the FDA about how they think about PD data and how we can use that in our 108 program. So that's the path for 108. On 109 while we anticipate seeing, or we would expect to see a PD effect 109, we're looking to see what the PK looks like at this time. So do we see the same rapid absorption of the pro drug? And do we see the rapid conversion that we anticipate based on our preclinical models. So we'll take both 108 and 109 forward at this time, and then based on our FDA interactions, we'll make a decision on where those two programs go whether they both go in parallel, whether one goes ahead of the other, or whether there are different purposes for the assets and different indications. So we're excited about both and we look forward to talking about them in the second half of the year.

Great, thanks for the color guys.

Thank you. Our next question comes from Shveta Dighe with Wedbush. Your line is open.

Hi, this is Sweta for Liana, thank you for taking our question. For the Libervant NDA resubmission of what are the steps remaining to refile by end of Q2? And is there any new information that you plan to add to the NDA submission?

Dan?

Sure. Good morning Shveta. So the new information that will be in the NDA let me put it this way, the most important thing to remember is there is no new clinical data in this NDA. So this NDA is all of the information from the previous NDA, along with our population PK modeling updates. So what we have focused on is, if you look at the CRL, from September of 2020, as we laid out to all of you, there are a couple of deficiencies that we needed to address. One of those was making sure that we update our safety area in order to talk directly about the patient population. We've done that. The other was to make sure we justified our dosing regimen based on the different weight groups and the performance in our prior our 180-323 study. We've done that. So that's the data that will go into the resubmission. In terms of the steps between here and the submission in June at this point it is a an administrative task. We have many of the parts of the NDA already ready to go. Our safety part in particular is well on its way. The last piece to put into the NDA will be the final report from our modeler. And once we have that the step will simply be sending the NDA into the FDA for resubmission. There's nothing else that we need to do at this point.

Got it. Thank you.

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

Great, thanks. Good morning, guys. A couple of follow ups, I think mostly for Dan. Dan, you mentioned you've continued interacting with the FDA Libervant since the February guidance. Has anything changed or has it been consistent in terms of what you're required to send in? Have they added any color? I'm just curious to get some color on those interactions?

Yes. And Thomas, thank you. That's good clarification. The interactions are simply ensuring that we maintain the relationship specifically with the project manager letting them know that this is that we will be resubmitting, letting them know that we understand the feedback they've given, and making sure that everything is prepared for when that resubmission occurs. So there have been no interactions around the deficiencies or any of the clarifying components that you would, that perhaps you're looking forward to. At this point it's administrative. The substantial conversation will occur after resubmission once they have seen our application.

And then just to follow up on some clarification you guys made on this call with respect to 109. I think in the prepared comments, you said that part one of the 109 study would be completed in the second half. And just reflecting back on the R&D day, there was a part one ascending dose component, but then there was a part two crossover. So what's the implication for timing on part two there? Is it going to be completed this year? Or is that something that will be initiated once you've met with FDA?

Sure. The meeting with the FDA will occur between part one and part two but it is not a gating event. So part two will continue onward, the preparation, the dosing, and all of the results are on its own track. So I would think about it this way. Part one will read out. We will take that data, we will go talk to the FDA, and while we're talking to the FDA, the plans for part two will be underway. We do anticipate at this time that part two of our program will begin dosing in 2021 in the final date of when that completes remains to be seen.

Right. And then just a quick one for Ernie if I may. On the fourth quarter call you guys mentioned that you would do a $3 million payment. I think it was for Mitsubishi yet in the license and royalty number it was less than 3 million. Could you just clarify if that payment didn't come in or how we should understand that?

Hi. So there is two components to the Mitsubishi Tanabe amount. There is an amount that was based on signing and there is the amount that is based on shipments, and we did receive the cash of $3 million for Mitsubishi Tanabe.

But that was not reflected in its entirety in the first quarter number.

That's right. It's not all considered revenue in the first quarter.

Got it. Thanks much. Thanks for taking the questions guys.

Thank you. Our next question comes from Ram Selvaraju with H.C. Wainwright. Your line is open.

Thanks so much for taking my questions. Can you hear me?

Yes, Ram, how you doing this morning?

Pretty good. Pretty good. So just to start off with present kind of learnings as we approach the potential Libervant commercialization. I was wondering if you could comment specifically on what looks like an impressively high retention rate when it comes to repeat prescribers. I think you quoted an 80% rate on that metric for SYMPAZAN scriptwriters. So I was wondering if you could give us some color on whether you expect that repeat prescriber rate to be similar for Libervant to as and when Libervant gets to the market. If you can give us some perspectives on what the experience with SYMPAZAN so far, might portend for Libervant specifically with respective repeats prescriber rates?

Dan?

Sure. Yes. I think what drives the repeat prescriber rate for SYMPAZAN is just the clear patient type or patient profile that benefits from getting their clobazam on a strip rather than tablets or liquids. That's a nice way to position your brand. It creates a clear patient type and that's usually what drives multiple uses in those types of patients. And I would expect the same type of thing with Libervant. It'll be the only orally delivered rescue medicine. So it's going to own that space. There's no doubt that orals are preferred over other routes of administration especially as they get more invasive and more challenging from a drug device standpoint. So I would expect this physicians would adopt and I would expect that the majority, the vast majority would write from multiple patients multiple scripts for those patients.

Great. Very helpful. So secondly, again on Sympazan. I understand that you're not giving specific Sympazan product revenue guidance. But if you could just qualitatively comment on what you expect the kinetics of the Sympazan revenue growth curve to look like over the course of 2021. Are you anticipating first and foremost sequential quarter-over-quarter growth going forward as we look towards the remainder of 2021 and then secondly, do you expect that quarter-over-quarter growth, if indeed, you're expecting quarter-over-quarter growth to accelerate over the course of the remaining quarters of 2021? And to what extent might that be driven by “normalization” of the overall market conditions relative to the pandemic?

So Ram can you hear me?

Yes.

Ron can you hear me?

Yes. I can hear you.

We lost the last part of your question. You asked whether we, what we viewed or how we were feeling about the sequential growth quarter-over-quarter and before I let Ernie answer that we lost the last part of your question. We'd like to make sure we respond to you. Could you repeat it please? We may have lost Ram. Ernie, do you want to at least take a crack at the part of the question you can hear?

Sure. Ram so again, we don't provide any specific guidance on product. We don't break it out on a full year basis. But I as we look at SYMPAZAN going through the rest of the year that we would expect quarter-over-quarter growth as we continue to have the, as Ken mentioned the in person and face to face meetings with the physicians and that also is part of our strategy as we prepare for the launch of Libervant that this way, as we've talked about previously, that this dovetails with the Libervant launch, because the overlap in the prescribers. So we would continue to expect to see quarter-over-quarter growth at this point.

Great, thanks, Ernie.

There are no other questions in the queue. I'd like to turn the call back to Keith for any closing remarks.

Great. Thank you, operator. And thank you, everyone for joining us this morning. We appreciate your time and your continued interest in Aquestive. Obviously, we're going to be focused on the things that are most important to driving the value of our company. We're going to continue to focus on delivering the results out of epinephrine and the trial on 109 as we've described, and then setting up our discussion with the regulators later in the year. We remain laser focused on finishing out the pieces of work that we need to do to prepare our refilling for the end of the second quarter. We will continue to grow SYMPAZAN as Ernie talked about, and we look forward to updating you all on the progress we make on those key items throughout the year. So thank you very much for coming this morning and we look forward to talking to you all again soon.

Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.