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Good morning and welcome to the Aquestive Therapeutics Third Quarter 2023 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] As a reminder, this call will be recorded. I would now like to introduce your host for today's conference call, Bennett Watson of ICR Westwicke, Investor Relations. You may begin.

Thank you, operator. Good morning and welcome to today's call. On today's call, I am joined by Dan Barber, Chief Executive Officer and Ernie Toth, Chief Financial Officer, who are going to provide an overview of recent business developments and performance for the third quarter 2023, followed by a Q&A session. During the Q&A session, the team will be joined by Dr. Carl Kraus, Chief Medical Officer; Ken Marshall, Chief Commercial Officer and Dr. Steve Wargacki, Senior Vice President Research and Development. 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 third quarter 2023 results. A description 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. 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 and in other sections included in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission on March 31st, 2023 and in our subsequent quarterly reports on Form 10-Q and current reports on Form 8-K filed with the SEC. As with any pharmaceutical company, with product candidates under development and products being commercialized, there are significant risks and uncertainties with respect to the company's business and the development, regulatory approval and commercialization of its products and other matters related to operations. Given these uncertainties you should not place undue reliance on these forward-looking statements which speak only as of the date made. Actual results may differ materially from these statements. All forward-looking statements attributable to 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 Dan.

Thank you, Bennett. I'm pleased to say that we have been able to accelerate the transformation of Aquestive over the last few months. We achieved important milestones across the clinical, regulatory and financial parts of the business since our last earnings call. Let me start with our most recent news. We were excited to refinance our debt last week and pleased with how our new lender, a large leading institutional investor has worked with us to maintain flexibility in our business. The $45 million facility provides for interest-only payments into mid 2026, well past our upcoming important clinical and regulatory milestones. Importantly, this agreement contains no revenue, EBITDA or cash covenants includes zero warrants and allows us the flexibility to launch or partner both Anaphylm and Libervant, as we deem appropriate if approved by the FDA. And despite the Fed funds rate having increased by over 120% since our last financing in 2019, our interest rate remains fixed and increased by only one percentage point from the prior debt deal. We are truly pleased with this outcome. This brings me to another important financial point. This past quarter, marked the second quarter in a row, during which our non-GAAP adjusted EBITDA remained positive after removing our adjusted R&D costs. Simply put, if we weren't investing in the clinical development of Anaphylm Epinephrine Sublingual Film, our business would have a positive non-GAAP adjusted EBITDA through the first nine months of 2023. This, along with our continued strong revenue guidance, positions us well, as we start to focus on 2024. In fact, our revenue guidance for 2023 has increased by over 25% from our original guidance provided earlier in the year. Ernie will talk more about our results in a few minutes. Now, let me turn to our pipeline. Investing in the clinical development of Anaphylm, remains the top priority. We continue to believe Anaphylm has the potential to transform the company and believe this transformation could happen in 2024. As we reported in October, we were pleased with the FDA's feedback on the design for our pivotal Phase three program. We are reaffirming our guidance that we will start the Phase three pivotal study this quarter and expect to provide top-line data in the first quarter of 2024. Completing our Phase three pivotal study will represent a major clinical milestone for the company. We also continue to believe that patient demand for an oral epinephrine product for the treatment of severe allergic reactions including anaphylaxis, remain high. Now with nasal sprays delayed, we believe the benefits of an orally administered epinephrine rescue medication are more apparent than ever. Literature and survey data clearly show that many patients fail to carry their epinephrine rescue medical device. And even when they have it with them, patients fail to use their device. Our survey data suggests that patients often take an oral antihistamine pill such as Benadryl, before using their rescue medical device. We believe Anaphylm has the only oral rescue product under development for anaphylaxis has the potential to replace the incorrect use of antihistamines and thereby speed up time to symptom abatement. One thing allergists universally agree on is that, early use of epinephrine is critical to treating anaphylaxis. Beyond the potentially significant carry-and-use benefits of Anaphylm, the pharmacodynamic clinical data from our recent studies provides the blueprint for a compelling improvement. According to medical experts, during anaphylaxis, the release of histamines causes blood vessels to expand, thereby rapidly dropping an individual's mean arterial pressure or MAP. Maintaining MAP supports the necessary pressure for vital organs, such as the brain and heart to function normally and reduces the risk of anaphylaxis-related outcomes such as loss of consciousness. In our studies, Anaphylm has been shown to preserve MAP in contrast to auto injectors that have not done so. We are excited about the potential implications for patients. And our medical team will spend more time talking about this data, as we move into 2024. To sum up, we believe the projected timeline to FDA approval and market entry compared to the variety of nasal sprays under development is now much tighter than it was. The potential carry-and-use benefits remain significant. And our mean arterial pressure or MAP data continues to be compelling when compared to auto injectors. Now, turning to Libervant. We continue to progress towards our April 2024, FDA target action date for our NDA for patients between two and five years old. At this time, there are no open inquiries with the FDA regarding our NDA for this patient group. And we have no reason to believe the FDA won't meet the action date. Market data shows a 31% increase in prescriptions in the two-to-five-year-old space during the third quarter 2023 when compared to third quarter of 2022. Well, over 90% up of these scripts were for diazepam rectal gel, the only FDA-approved drug for this age group. We continue to believe the need for an oral product in this space is significant and look forward to working with the FDA bring Libervant to these patients as soon as possible. We must remind you that in addition to the usual approval risks, we cannot guarantee that even with approval, the FDA will allow Libervant access to the US market. We also continue to believe that based on past behaviors, competitors may actively seek to block the use of Libervant despite its potential benefits to this critical patient population. Now, let's turn to our epinephrine prodrug platform. I'm pleased today to talk about advancements in our epinephrine prodrug platform, which we have branded as the ADRENAVERSE. We have completed the initial formulation of a topical product using the ADRENAVERSE platform and plan on testing this formulation in humans in the coming months. Based on pre-clinical data we have seen rapid absorption of epinephrine across porcine tissue. As you know epinephrine is a vasoconstrictor and does not penetrate well through the skin. However, our ADRENAVERSE platform may allow for absorption thereby creating the potential use of this product for a variety of dermatological conditions. The unmet need and prevalence in some of these conditions is significant. We look forward to sharing our findings as we progress this initiative. Our business development activities remain ongoing. Our Libervant and Anaphylm discussions continue in regions around the world. We also continue to believe that as we meet our expected clinical and regulatory milestones we will be able to generate significant funding from business development transactions our base business remains strong. We anticipate continued growth and remain focused on expanding our business capabilities in 2024. In summary, the third quarter was yet another crucial quarter for the company. We refinanced our debt we raised our revenue guidance and narrowed non-GAAP adjusted EBITDA guidance for 2023. We progressed our Anaphylm program and continue to plan for a Q4 start to our pivotal study. We progressed our Libervant two-to-five-year-old application and remain on track. We completed our initial topical formulations of our ADRENAVERSE platform, and we continue to see growth in our base business. With that, I will turn the call over to Ernie.

Thank you, Dan and good morning everyone. By now, you have seen our financial results in our earnings release that was issued last evening. As we typically do, we will address most of the discussion related to the third-quarter 2023 results in the Q&A. During the third quarter, we continued to execute on our financial strategy to strengthen our financial position by refinancing our outstanding debt as well as managing expenses to extend our cash runway to support the continued development of our lead product, Anaphylm, the first and only non-device based orally delivered epinephrine product. We recently announced the refinancing of our outstanding obligations under the 12.5% senior secured notes having a maturity date of June 30th, 2025. The new financing of $45 million by a large leading institutional investor will be used to repay all outstanding obligations under the prior credit facility and for general corporate purposes. The notes are senior secured obligations of Aquestive and will mature on November 1st, 2028. The notes bear interest at a fixed rate of 13.5% per year payable quarterly. Principal will be repaid starting on June 30th, 2026. Importantly, the notes contain no revenue or cash covenants and no warrants for purchase of the company's common stock were issued under the terms of the transaction. The structure of this non-dilutive refinancing transaction maximizes our flexibility in the short-term and reduces our cash requirements by approximately $28 million through June 30, 2025, the due date of the original credit facility. Despite very difficult market conditions, the investors' willingness to invest in our future represents an important step forward in the continued growth of Aquestive. Now let's turn to the recap of our quarterly and year-to-date financial results. Excluding the impact of prior year proprietary sales of Sympazan, total revenues increased from $9.2 million in the third quarter of 2022 to $13 million in the third quarter of 2023. This 42% increase in revenue was primarily driven by higher revenue from the company's five out-licensed products. Total reported revenues were $13 million in the third quarter 2023 compared to $11.5 million in the third quarter 2022. For the third quarter 2023, compared to the prior period, we saw a 193% increase in license and royalty revenue, primarily due to Sympazan and Azstarys, a 36% increase in manufacture and supply revenue from Suboxone and Sympazan and a 24% increase in co-development and research feeds. Excluding the impact of prior year proprietary sales of Sympazan, total revenues increased from $29.9 million for the nine months ended September 30, 2022 to $37.4 million for the nine months ended September 30, 2023, an increase of 25%. Total reported revenues were $37.4 million for the nine months ended September 30, 2023 compared to $37 million for the nine months ended September 30, 2022. The increase was primarily due to increases in manufacture and supply revenue and license and royalty revenue offset by the absence of proprietary product sales subsequent to the out-licensing agreement with Assertio in October 2022. Net loss for the third quarter 2023 was $2 million or $0.03 loss per share. The net loss for the third quarter 2022 was $12.5 million or $0.23 loss per share. The change in net loss was primarily driven by increases in revenues, as previously described, decreases in selling general and administrative expense, including severance costs and lower administrative costs in our commercial organization subsequent to the out-licensing of Sympazan in October 2022, a decrease in non-cash interest expense and a decrease in research and development costs and expenses. Our net income for the nine months ended September 30, 2023 was $0.2 million. The net loss for the nine months ended September 30, 2022 was $42.1 million or $0.90 loss per share. Non-GAAP adjusted EBITDA loss was $1.3 million in the third quarter 2023 compared to a non-GAAP adjusted EBITDA loss of $7.7 million in the third quarter of 2022. Non-GAAP adjusted EBITDA income, excluding our continued investment in research and development, was $1.7 million for the third quarter of 2023 compared to a non-GAAP adjusted EBITDA loss, excluding adjusted R&D expenses of $4.6 million in the third quarter of 2022. Cash and cash equivalents were $24.9 million, as of September 30, 2023. Under the at-the-market or ATM facility, we access $0.2 million during the third quarter of 2023 and $5.3 million during the nine months ended September 30, 2023. The ATM facility has approximately $27.8 million available at September 30, 2023. In addition, during the nine months ended September 30, 2023, approximately 8.7 million common stock warrants were exercised with proceeds of approximately $8.3 million. We continue to be focused in 2023 on the advancement of our epinephrine program and commencing our pivotal PK clinical trial in the fourth quarter. Suboxone currently continues to retain a strong presence in both the US commercial and CMS markets and continues to provide a growth opportunity outside the US. We anticipate additional revenue from our licensed products during the remainder of 2023. And moreover, we will continue to focus on capital conservation to extend our cash runway as far as possible. As outlined in the press release issued last night after market close, based on our third-quarter results and positive outlook for the remainder of 2023, we have revised our full-year 2023 financial guidance as follows. Total revenues increased to approximately $47 million to $50 million from $44 million to $48 million. And non-GAAP adjusted EBITDA loss narrowed to approximately $14 million to $17 million from $19 million to $22 million. Please note our revenue guidance for 2023 no longer includes proprietary net sales for Sympazan, due to the out-licensing agreement with Assertio but does include manufacture and supply revenue and royalty fees. In addition, our guidance for 2023 includes continued focused R&D investments related to the continued development of Anaphylm, the first and only non-device based orally delivered epinephrine product. With that I will now turn the line back to the operator to open the line for questions.

[Operator Instructions] Our first question comes from the line of Jason Butler with JMP Securities. Your line is open.

Hi, thanks for taking my questions and congrats on all the progress, especially the debt refinancing. A couple on Anaphylm. Can you maybe just outline for us at a high level of differences in design between the two PK pivotal trials? And then do you plan on conducting these sequentially or when will you initiate the second PK pivotal study? Thanks.

Good morning, Jason. Good to hear your voice. So – and thank you for the congrats on the refinancing. Obviously, we're pleased as well. Anaphylm, I think a good place to start, let me give you a couple of my thoughts and then I will pass it over to Carl Kraus our Chief Medical Officer, who can walk you through how he thinks about it from a design perspective. But a lot of how we are approaching the final set of studies we need to do here really comes from what we've learned in the marketplace and from the FDA directly, right? So we heard what the – our competitors the nasal sprays have put in the public domain. We've obviously been interacting with the FDA. And the one common theme that we really have been able to see is the FDA has been very consistent. They're very consistent in what they're looking for and what they want to see in order to allow a product in the market and that gives us a lot of confidence in our approach. And quite frankly what they want to see is enough data to get them comfortable that patients in all settings can use the product and have an effective dose that is rapidly administered, right? So obviously, with the nasal sprays, they're dealing with the congestion issue. For us, we outlined previously in our end of Phase 2 study of the things the FDA is focused on with us. So that's what's led us to on the set of studies that we're about to perform. And I will turn it over to Carl, who can walk you through how he's thinking about the design of the studies.

Good morning, Jason. Thank you for the question. So the studies that were detailed really were revolving around first the adult Pivotal and then subsequently the pediatric. The adult, pivotal, we've already reviewed with the agency. They have provided us agreement on all the key elements of that study. And we've only included now some additional elements that will of result in some data that will address sustainability. Questions regarding repeat dose, so that will be included. And that will begin as planned in Q4 of this year and data readout in Q1 of next year. And then the subsequent study the pediatric, we'll have to secure alignment on the design, but it should be in accord with a standard pediatric study for the 30 kilogram and above pediatric population. So no real surprises just working on making sure that we have the protocol tidied up and provided to the agency for agreement.

Great. And then just real quick on the prodrug platform, can you just speak to the predictive value of the porcine data? When you think about applications in human clinical studies, is this a model that's been validated in the past?

So Jason in a second I will pass it over to Steve Wargacki, our Head of R&D, who I know you know. But keep in mind we have been working with different animal models especially the mini pig model, for I don't know 15 years. So this is a model we know well, but Steve, if you could give your thoughts.

Yeah. I would be happy too. The mini pig model is a well-known established model for sublingual delivery, particularly in anatomy and physiology of the sublingual mucosa where absorption occurs has the same structure thickness and features or the closest structure and features to the human. And thus, that is the model that we've been using for a very long time. And we find it be very informative.

Great. Thanks for taking the questions.

Thanks Franç. And there's nothing -- I think that the global comment -- and again I will hand it over to Carl to walk through the design. But I think one really important thing to remember for us as we go into this pivotal study, is there's nothing new we're doing here. We have compared ourselves to the autoinjectors and to the manual IM continuously through our outer development. So this is really a larger scale confirmatory approach to what we've already done. But Carl can remind you of how we think about the bracketing process.

So, I'll have Carl talk to you about the difference in the studies and timing, and then Ken, if you could when Carl is done talk -- Ken Marshall, our Chief Commercial Officer. If you could talk about the commercial opportunity.

Yes. So regarding timing, the only study that we are going to move forward with, from an operational perspective this year, would be the pivotal for the adult. As I said earlier, we'll require further dialogue with the agency regarding agreement on trial design for the pediatric. And then, as far as the supportive studies that were previously noted in a prior press release, those are potential studies that would be required for the full NDA submission. That will be completed in 2024. But specific timing has not yet been placed on the calendar nor have we full agreement and dialogue with the agency about the specifics of those study designs. So for -- really the elements that we know are going to happen with a particular place on the calendar. It is just the pivotal and that will happen in Q4 of this year. Ken, [indiscernible]

One moment for our next question. And our next question comes from the line of Andreas Argyrides with Wedbush Securities. Your line is open.

Good morning. This is Caroline on for Andreas, and thank you for taking our questions. We just have a couple. So just curious what the gating factor is to be getting the pivotal PK study in this quarter? And then on the pediatric study when do you plan to start the process of aligning with the FDA on the design? Is it still reasonable to assume that the trial would be complete by the middle of next year? And then I have a follow-up.

Sure, yes. So those are pretty straightforward, Caroline. So Carl, I'll address these for Caroline. There is no gating factor for the pivotal PK study starting in Q4. It's just the process of getting it up and running, right? So we are -- it's all operational pieces that we're focused on. And in terms of the pediatric study, we have been in dialogue with the FDA and continue to be in dialogue with the FDA on the final design of that study. So it's not that we have not approached them and it's going to be a new discussion. So we feel comfortable that, especially as we get data from the adult study that the pediatric study will be in a good place to begin. In terms of the timing, obviously, conducting a pediatric study is always -- had a little more complication than an adult. But given the size that we believe this study will be, and the scope, we do not believe it is an expensive or long study to run. So yes, we do believe that the timing we've laid out is reasonable.

Okay. Great. And then, I have just have one additional question on Libervant. In the 12-year-old and older population, can you just provide any additional insight into the work you're doing to remove the exclusivity block and bring this product to market?

Sure. Yes. I would love to give you and the rest of the community a lot of insight into this area, but it is not an area that at this time we can share a lot. So I would think of Libervant this way in terms of how it fits into our company, I do believe Libervant is a potential important catalyst in 2024, call it kind of the upside wildcard. The two-to-five-year-old application, we feel good about. We think there's a real need in that space and we think it's a sizable enough opportunity to matter. So we are very focused on that at this point, especially with the near-term target action date ahead of us, but we have not lost sight of the 12 and up application as well. And we continue to believe that there are avenues to bringing our application to market ahead of orphan drug exclusivity exploration for the competing products.

Okay great. Thank you, and congrats on all the progress.

Thanks, Caroline.

Yeah. Thanks, Ram. And so I think the best way to approach giving you more information on that front is, there are a variety of indications that we could look at but it really depends on how the absorption process works, as we go through this first study. So I think a good way to educate all our listeners would be Steve, if you could talk a little bit about how you see the absorption process happening and what you think the potential effects of that could be, with our people with our ADRENAVERSE platform.

Sure. Happy to. So with our molecules we believe the project platform allows us to get absorption that straight epinephrine cannot achieve due to the nature of the molecule both in terms of the way it absorbs as well as the ways of construction and the way it interacts with the body. And so we believe we're going to -- we're looking to evaluate how we absorb -- how quickly we absorb and the residence time tolerability et cetera of this Adrenaverse platform through the skin. And from that it's going to really allow us to hone in on how applicable it is to the different indications that we've gotten the signals for non-clinically. And so it is TBD, but moving forward this platform and our initial studies it's going to really inform -- form the path forward there. And we look forward to being able to share more of that with you as the data comes together.

So I think, Ram I know in fairness you are looking to hear about what the indications are and what the opportunities are. I think once we have that data as Steve laid out we can really start being more specific in giving you more detail on that front.

Do you have a sense at this juncture as to whether these might include both acute as well as chronic indications?

Carl, do you want to take that one?

Yeah, you know, just to reiterate what Steve and Dan mentioned that the target indications would be reflective of what we learn from the ADME and the penetration and dermal residents. So I think it will be premature to determine what indications they benefit from this intervention until we have more data on the preclinical front.

Okay. And then just one quick question clarification on the debt financing. It stated in the press release that the note holders are entitled to a tiered royalty of between 1% and 2% of worldwide net sales of Libervant until the earlier of either the first sale of Anaphylm and eight years from the first sale of Libervant. So I'm assuming that if what you expect let's call it a best-case scenario unfolds for both Libervant and Anaphylm this tiered royalty on worldwide net sales of Libervant would not likely persist for very long. Am I thinking about that correctly?

Yeah. No as soon as there is a sale of an Anaphylm product anywhere on the globe the Libervant royalty goes away. You have that exactly right.

Thank you.

Thanks Ram.

[Operator Instructions] One moment for next question. Our next question comes from James Molloy with Alliance Global Partners. Your line is open.

Hey, guys. Thanks for taking my question. Just a quick question on the remaining trials. What's the all-in cost of the remaining trials? And again presuming things go well in the trials put up the data of the anticipated should what's the expectation for being ready for an NDA filing?

Yeah. Well I'll start with the second question first and good morning, Jim. As of right now we continue to guide that we will file by the end of 2024. We have -- from what we shared the last couple of times from our August earnings call and from our October press release nothing has changed on that timing. In terms of the all-in costs of the studies that are left to be run we haven't given that -- we haven't put that number together and put it out publicly. What I would and I'll pass it over to Ernie in a second in case he has more color he wants to provide. But what I would leave you with is that remember these are pharmacokinetic studies in healthy volunteers. So they are very cost-efficient studies that are not expensive to run. But Ernie, did you want to add anything?

No, I think what you said considering that we've not given any public guidance on this number that it's not an expensive study for us to complete and we are well on our way there so.

Great. Maybe two quick follow ups. Thank you for that. Any competitive intelligence on competitor ARS Pharma and Neffy refiling their NDA and I guess you guys are you guys still expecting that you guys will the FDA will ask for an Adcom for you guys?

Yeah. So the only competitive intelligence we have on Neffy is exactly what you or other people in the public domain know. We only hear what's in the public domain. So I'll leave it to ARS and the team there to define what that means for them. In terms of an Adcom, I think, that is an unknown at this point. We will of course be prepared if that is something the FDA does want. You could argue either way on that one. You could say well the FDA has already done that come in this space. Why would they do another one? Or you could say we're a different dosage form. Maybe they want to spend some time with people in an Adcom setting. Either way we will be ready.

Great. Thank you taking the questions.

Thanks, Jim.

And I'm showing no further questions at this time. I would like to turn the conference back to Dan Barber for closing remarks.

Thank you, Amy. And thank you for joining us this morning. As you've heard we're very pleased with the Q3 2023 results that we just discussed and we remain excited for the potential that lies ahead for us and for the company. And we look forward to speaking with all of you again soon. Have a good day.