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Good morning, and welcome to Aquestive Therapeutics Fourth Quarter and Full Year 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. Please go ahead.

Thank you, operator. Good morning, and welcome to today's call. On today's call, I'm 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 fourth quarter and year-end 2023, followed by a Q&A session. During the Q&A session, the team will be joined by Dr. Carl Kraus, Chief Medical Officer, and Dr. Stephen 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 fourth quarter and year-end 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 5, 2024. 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. We have once again made tremendous progress since our last earnings call. We finished 2023 on a high note with solid revenue growth, improvements in non-GAAP adjusted EBITDA, a healthy cash balance and significant progress in the product development part of our business. While these are significant achievements, our focus is firmly on the future and on building a solid foundation for long-term growth. Our strategy for accomplishing this remains simple and straightforward. Over the next two to three years, we expect to bring not one, but two oral rescue products to patients for conditions for which they are currently dependent on rescue medical devices. In the allergy space, Anaphylm (epinephrine) Sublingual Film is a transformational product for patients and for the company, if approved by the FDA. We believe annual peak sales of Anaphylm on a global basis could surpass $1 billion. In the epilepsy space, Libervant (diazepam) Buccal Film could begin launching in markets around the world, including here in the U.S. as early as this year, if approved by the FDA. We believe worldwide annual peak sales of Libervant could be between $100 million and $200 million. We continue to advance in-house technology to replenish our pipeline once Anaphylm and Libervant graduate to the commercial product phase. We are currently conducting initial human studies using our Adrenaverse technology and expect that our initial indication targets will also represent multi-hundred-million dollar peak sales opportunities. Finally, as you know, we continue to have a profitable base business with partnerships on multiple continents that grew in 2023 and we are focused on continuing this growth in 2024. These four pillars of growth position us well to expand the company in the years to come. Regarding Anaphylm, we have completed dosing in our pivotal study and we should receive data shortly. We expect to publicly announce our top line data within the next two weeks. We are more excited than ever by the opportunity to transform patient care in the treatment of severe allergic reactions including anaphylaxis. As I've talked about in the past, the number one problem in this patient population is having a rescue product with you when you need it. Patients as a whole simply don't carry the product with them. While this has many reasons, we firmly believe that Anaphylm will bend the carrying curve and potentially decrease bad outcomes associated with anaphylaxis. For the past several months, I have been testing how carriable Anaphylm truly is. I've carried Anaphylm in my pocket with my ID and credit cards and I've also carried Anaphylm inside the case on the back of my phone. For me, this means that literally 24/7 without exception, I can access Anaphylm in a matter of seconds. This also means I don't have to remember a carrying case or to bring a rescue product with me or to do anything other than live my life. In the world of psychology, this is referred to as habit stacking. I always carry my phone with me and therefore by putting the film on the back of my phone, I've aligned carrying my rescue product with my existing habits. Habit stacking is a powerful tool and one that potentially aligns well with Anaphylm. Two weeks ago, I attended the American Academy of Allergy, Asthma and Immunology Conference, or AAAAI, in Washington DC. I was able to spend time with some of the most important leaders in the allergy space, both advocacy leaders and clinical leaders who spend their days focused on better serving patients at risk for anaphylaxis. Without exception, they agreed and resonated towards bending the carrying curve by fitting our product within the daily lives of patients. I asked one clinician, "But how do you know that people may carry Anaphylm more than the existing medical devices?" She held up the sample film in front of her and said, "All you need to do is look at this. It's just too obvious." We will continue to share more of our findings from interactions such as this over the months to come. We have also begun planning for a commercial launch for as early as the second half of 2025. Given the analogs in the market, we believe the commercialization path for this indication is well understood. We are currently working on our marketing and market access approach and will continue to share our strategy as it evolves. On a separate note, we are rapidly approaching our FDA action date for Libervant. Every month, thousands of adults fill a prescription for a diazepam rectal gel with the specific intent of using it to rescue their two- to five-year-old child when seizure clusters occur. We believe there is a better way and that is Libervant. As previously disclosed, we have tested Libervant in an epilepsy monitoring unit in children within this age group and found the product to be comparable to the rectal gel. We are hopeful that on our action date of April 28, the FDA will also see the benefits of treatment for this patient population. We continue to believe that distribution of Libervant is better in the hands of a company that is focused on CNS and epilepsy. We are in active discussions with potential distribution collaborators now. As I've said in the past, we will maintain value discipline, and if a reasonable distribution arrangement is not realized, we will launch the product ourselves. Beyond Libervant in the U.S., we remain active with business development discussions. Our focus in 2024 will be on expanding our ex U.S. licensing opportunities for our lead assets and on monetizing any of our non-core assets. Regarding our future pipeline, we continue to move forward with AQST-108, which comes out of our Adrenaverse platform. This is a topical cream formulation that we believe has potential application among dermatology indications. We are currently in the clinic with our first-in-man study, which is focused on characterizing the absorption profile of AQST-108 at different dose levels. We will have more to say on this program later in the year. In conclusion, 2023 was a phenomenal year for the company and we are now focused on building the foundation for long-term growth. Our upcoming milestones remain on track with Anaphylm data expected in the next two weeks and an FDA action date on Libervant in late April. We continue to guide towards an Anaphylm NDA filing in 2024. Our collaboration activities remain robust and ongoing. With that, I will turn the call over to Ernie.

Thank you, Dan, and good morning, everyone. By now, you will 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 fourth quarter and full year 2023 results in the Q&A. We continue to evolve as a company with a solid base business generating revenue, a validated platform having produced over 2.6 billion strips, and two key pipeline assets, Anaphylm and Libervant. During the fourth quarter, we continued to execute on our 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. As a reminder, during the fourth quarter, we refinanced the 12.5% senior secured notes that had a maturity date of June 30, 2025. The new financing of $45 million by a large leading institutional investor was 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 1, 2028. The notes bear interest at a fixed rate of 13.5% per year payable quarterly. Principle will be repaid starting on June 30, 2026. In connection with the financing transaction, the company entered into royalty agreements granting the note holders a tiered royalty between 1% and 2% of annual worldwide net sales of Anaphylm for a period of eight years from the first sale of Anaphylm on a global basis. The note holders are also entitled to a tiered royalty between 1% to 2% of annual worldwide net sales of Libervant until the earlier of the first sale of Anaphylm and eight years from the first sale of Libervant. Importantly, the notes contain no revenue or cash covenants and no warrants for purchase of the company's stock. 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 full year financial results. Excluding the impact of prior year proprietary sales of Sympazan, total revenues increased $10.1 million in the fourth quarter 2022 to $13.2 million in the fourth quarter 2023. This 31% increase was primarily due to a one-time milestone royalty payment of $1 million for Azstarys from

Sure. Good morning, Frank. Well, I'll outline for you what we will be releasing from a package perspective. And then I'll turn it over to Carl who can tell you about what we from our side think success looks like. From a package perspective, as we've shared over the last few months, we'll have all of the data from our pivotal study. So, as you recall, there's a Part A, which is a repeat dose part, and a Part B, which is single dose. We'll have all of that data. And we'll also have our findings from meeting with the FDA under a Type C meeting event. But let me pass it over to Carl, who can tell you about, from our perspective, what we think success looks like.

Thanks, Frank.

One moment for the next question. The next question comes from Jason Butler with Citizens JMP Securities. Your line is open.

Hi, thanks for taking the question. Dan, you talked about the commercial prep work you're going to be doing, getting ready for launch at the back end of '25. Can you maybe just talk about the work you can do between data and throughout the regulatory submission? And obviously, you're going to be gating your spend, but what's the kind of work you can do in terms of physician targeting, building awareness, et cetera to get ready for a launch? Thanks.

Yeah. And Jason, the way you asked the question actually you put in two important elements, right, which is, for us, in 2024 and even the first part of 2025, the commercial spend will not be a large onerous amount that we can't handle. We do believe that given our cash position and the levers that we have in our business that it is a very manageable set of activities. In terms of what those activities are, as you alluded to, awareness is by far an important factor prior to launch. And one of the things that helps us in the dynamics that exist right now is not only is the market already growing, but some of our competitors in the marketplace are also focused on awareness. So, by nature, just making people aware of the alternate products that will be available to them and of the necessity of having a rescue product with them at all times helps as we look to come to the market. In terms of the other activities that we will focus on, we will, of course, make sure we have the base infrastructure in our company. So, think of people who are dealing with payers, people who are on the medical affairs side, and we will, of course, make sure that our messaging is ready and clear as we get closer to launch.

Got it. And then just briefly on 108, can you maybe just give us an idea at a high level what the target PK profile or absorption profile looks like for -- when we look ahead to data later this year?

Sure. So, for that one, I'll pass it over to Carl.

Yeah. The PK profile would be consistent with what we've been targeting all along, which is demonstration of a PK curve that is north of a reference listed drug for the duration of observation and remains within the bracketing that has been discussed at last year's advisory committee where we are north of at least the reference listed drug as well as staying within a reasonable bound on the bracket between ourselves and the autoinjectors.

And Jason, I think Carl gave a really important point that we talk a lot about here in the way he said that, it would be north. The one place you don't want to be, we believe, is lower -- in that first 10 minutes in particular, lower than the manual IM. So that's a spot that everyone can look for in terms of where we're able to be above that mark.

Okay. Great. Thanks for taking the questions.

One moment for the next question. The next question comes from Andreas Argyrides with Wedbush. Your line is open.

Good morning, and thanks for taking our questions. Just a couple from us here. So, looking ahead to the commercial opportunity for Anaphylm, how are you thinking about penetrating the various segments of the market outside of EpiPen and generics, which is currently less than $1 billion? The immediate goal to target patients who should carry and don't, those who are given a script and don't fill it? And what does the market look beyond that those two segments? And then lastly, how are you thinking about positioning Anaphylm against competitors on the market? Thank you.

Sure. Good morning, Andreas. Nice to hear your voice. So, I think the way to think about launching our products, I think is very similar to the way other products have been launched in this space. Of all of the pieces and parts that all of us have to go through to bring a product to market, the launch is actually fairly simple. It's obviously all of the packaging to make sure the FDA is comfortable in getting through that work that we believe is the more difficult task. In terms of penetrating, our launch process will be very straightforward. You first go after the people who are already using or carrying an EpiPen who have a script, and then you work your way into the segments where people have either gotten a script and didn't fill it to your point, or used to carry a product and don't anymore, or should be carrying a product and never have. So, it is a sequence process that I would be surprised if our competitors didn't follow the same process. In terms of positioning, I think we've been clear, but I'll make sure we say it the right way, when we look at our product, we think the single biggest advantage we have in the marketplace is that people -- we believe people are likely to carry it with them where they are not carrying a product today. And that's why in my remarks before I focused on this idea of not having to think about carrying our product, you just have it with you. But clearly, there are other benefits. We do believe there is the potential for people to use the product faster or earlier in the disease state, because it is an oral product. And we also believe that our scientific data, which shows a very rapid uptake of epinephrine, as you know, it has a very rapid median Tmax is an important set of data that particularly for the healthcare providers will be an advantage compared to some of the other or could be an advantage compared to some of the other products that may be in the market.

Okay. Great. And looking forward to the upcoming data. Congrats on all the progress.

Thanks, Andreas.

One moment for the next question. Next question comes from Thomas Flaten with Lake Street Capital Markets. Your line is open.

Hey, good morning, and congrats on all the progress as well. Dan, we talked a lot about Anaphylm commercialization, but you did leave open the possibility of you guys perhaps launching Libervant later this year. Any commentary on what you've done or need to do and what timeframe we might think about if you go it alone with that?

Sure. Good morning, Thomas. And I'm glad you brought Libervant up. There's a lot of excitement around Anaphylm both outside and inside of our company as there should be. But Libervant is an important product. And from a FDA perspective right now, all of the questions the FDA has asked, we've answered and we're awaiting the decision date. I do have to remind people that there is an orphan drug challenge that could occur with this product. So, we obviously want to get past the next couple of months and see how that unfolds. Having said that, I do believe that there are appropriate epilepsy focused companies who not only could do a good job with launching Libervant, but would be interested in launching Libervant. If those were to not unfold or we were not able to get the fair deal that we've talked about, we would launch the product and I would point to the second half of 2024 as where we would look to do that.

Great. Appreciate that. And a quick one for Ernie. Gross margins were kind of all over the place this past year. And I'm guessing fourth quarter was a little bit of an uptick for some one-time royalty payments. Anything you can help us there? Anything you can help us there with respect to gross margins, Ernie?

Hi, Thomas. Good to talk to you. Certainly, the biggest item is the recognition of the milestone payment from

Appreciate it guys. Thank you.

One moment for the next question. The next question comes from Ram Selvaraju with H.C. Wainwright. Your line is open.

Thanks very much for taking my questions, and congrats on all the progress. Can you hear me?

Yes, Ram.

So, just very quickly with respect to Anaphylm. I was just wondering if you had any updated thoughts regarding the regulatory outlook for these kinds of alternative delivery epinephrine products, particularly given recent developments with Neffy. And if you see any additional perspectives there for Anaphylm as you gear up to the submission of the NDA?

Yeah. Nice to hear your voice, Ram. From our perspective, in our experience with the FDA from the first time we spoke with them about products for anaphylaxis through to today, we believe the FDA has been very consistent. And we actually think the FDA is doing their job. They want to make sure if we or anyone else are creating a product that is a rescue product that has the potential to save lives that we do all the work we're supposed to do to make sure that it works the way it's supposed to work under all conditions of use. So, we understand that's a big responsibility for us and our competitors, and we understand that, which is why our package is robust and we are confident that the FDA will continue to be consistent in how they look at the market and how they think about approval. In terms of our competitor, obviously, we just see what is public just like you. And our read through is that it appears from a distance like the FDA is being consistent with them as well at least when we think about the comments given to us and then what we hear coming through the public domain from competitors.

Okay. Great. Just also with respect to kind of optimizing the value of Anaphylm as a franchise, do you have any sort of broader strategic thoughts regarding that, particularly if this pertains to any potential opportunities for Anaphylm as a product that may exist outside of the United States, and how you might be able to access those?

Yeah. No, that's a really good point, Ram. From -- given where we are in our company evolution, and this goes back to the idea of long-term growth, right, we do not have designs at this point in time to launch on our own the product outside of the U.S. at all. So, we -- like we have done with Libervant, we will be and actively are talking with potential partners in different markets around the world. For us, the nice thing about where we are right now is we don't have to find a partner tomorrow or this quarter or anything like that. We can make sure we find the right partner to get through the regulatory process in different markets and also support the product once it has been launched. But yes, an important part of the Aquestive story for both Libervant and Anaphylm is the ex U.S. potential.

Okay. And lastly, and I'm just asking this as a housekeeping item. I'm sure all of you are very well aware of the Change Healthcare cyberattack that occurred last month. Just wanted to ask whether your guidance for 2024 includes any potential impact that you may see, I don't even know whether that's really relevant in your case, from the Change Healthcare cyberattack and the disruptions to processing of prescriptions?

Yeah. No that -- for 2024, I don't see any impact to Aquestive. The only comment I would give you for our IT is just even as a company, we do all of the things you would expect a public company to do to protect from cyberattacks that could affect our business.

Thank you.

One moment for the next question. Next question comes from James Molloy with Alliance Global Partners. Your line is open.

Hey, good morning, guys. Thank you for taking my questions. I had a question on the -- couple of questions. The Anaphylm Human Factors program, can you walk us through what that encompasses? And then, can you talk a little bit about outreach to advocacy or allergy networking groups in advance of launch and how that sort of -- how that has played out?

Yes. Good morning, James. I'll -- or Jim. I'll take the second question first and then I'll hand it over to Carl who can talk to you about the Human Factors program. From an advocacy perspective, as you probably know, in this space, there are roughly four advocacy groups that are at a national level and all of them do great work. I mean just phenomenal work where they're looking to make sure patients' rights are protected and access to drug is protected and all of the things you would want. So, we do think that having a good relationship and supporting the various advocacy groups in this space is important. We have done that. We actually, if you look at even last year, we did that even more than most of our competitors. So that shows you how seriously we take it. We met with all of them at AAAAI just a few weeks ago and we'll continue to support them as best we can as they do the good work that they do. But with that, I'll turn it over to Carl on the Human Factors.

Sure. Thanks, Dan, and thanks for the question, Jim. As far as our Human Factors program goes, as you're probably aware, these programs are an iterative process and ours is no different. We are evaluating how adults, pediatrics and their caregiver patients might engage our technology in a pathway where we better understand interactions between our technology and the patients. So that's a process that goes through a typical formative and then validated protocol, which we have gone through great lengths to support and we are in the midst of completing and progressing those efforts between ourselves and the FDA with ongoing dialogue. So, that's an ongoing iterative process that is on schedule.

All right. Great. Maybe one quick follow-up. I know that certainly, Dan, you got plenty on your plate to keep you busy coming up. But looking beyond the horizon, what do you see as potential -- are you seeing any potential acquisition candidates or things to bring on board to bolster the pipeline?

Sure. Well, I would first look at where our pipeline is. If you look beyond Anaphylm, we are definitely excited about the opportunity with AQST-108 as a topical cream. I know we haven't spent a lot of time with you or the public on what we see in that space, but we are actively doing work, and in the second half of the year, we'd love to talk about it more. We're actually in the clinic right now with that program and we're looking forward to having more to say. In terms of the acquisition world, I think we have a lot on our plate right now to focus on and we want to deliver Anaphylm on time, on schedule, with the right results and the right package. So obviously, we'll be opportunistic like any public company, but that is not our focus right now.

Great. Thank you for taking the questions.

I show no further questions at this time. I would now like to turn the call back to Dan Barber for closing remarks.

Thank you, Michelle. Thank you for joining us today. This is an exciting time for Aquestive and we're looking forward to speaking with you again in the next couple of weeks. And with that, I hope all of you have a good day.