Good morning, and welcome to the Aquestive Therapeutics First Quarter 2019 Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this call will be recorded.

I would now like to introduce your host for today's conference, Ms. Lauren Walrath, Head, Corporate Marketing and Communications. You may begin..

Thank you, operator. Good morning, and welcome to today's call to review Aquestive Therapeutics results for the first quarter 2019.

On today's call, I am joined by Keith Kendall, Chief Executive Officer; Ken Marshall, Chief Commercial Officer; Dan Barber, Chief Strategy and Development Officer; John Maxwell, Chief Financial Officer, and Lori Braender, General Counsel.

Over the course of this call, we will provide an overview of business developments through Q1 of this year and discuss the progress we continue to make with respect to our 2019 goals and performance targets. Following these remarks, we will open the call to your questions. We expect today's call to last approximately 60 minutes in total.

As a reminder, our remarks today correspond with the press release we issued this morning. In addition, a recording and transcript of today's call will be made available on Aquestive Therapeutics' website within the Investor Relations section shortly following the conclusion of this call.

During the call, the Company will be making forward-looking statements. We remind you of the Company's Safe Harbor language as outlined in today's press release, as well as the risks and uncertainties affecting the Company as described in the Risk Factors section included in the Company's Form 10-Q to be filed with the SEC on May 8, 2019.

As with any pharmaceutical product candidate under development, there are significant risks with respect to the development, regulatory approval and commercialization of new products. Given these uncertainties, you should not place undue reliance on these forward-looking statements, which speak only as of the date made.

All subsequent forward-looking statements attributable to Aquestive Therapeutics or any person acting on behalf are expressly qualified in their entirety by this cautionary statement.

The company assumes no obligation to update its forward-looking statements after the date of this conference call, whether as a result of new information, future events or otherwise, except as required under applicable law. With that, I will now turn the line over to Keith..

Thank you, Lauren. Thank you everyone, for joining us this morning. We are pleased with the start of the year for Aquestive Therapeutics and the early progress we've made toward achieving our 2019 goals. Through the first quarter, the company has continued to enjoy a strong book of business from our licensed products especially Suboxone.

More importantly, we have made significant strides in advancing the next generation of medicines from our pipeline, which will support the future growth and success of Aquestive. Looking ahead, we expect 2019 to be a formative year for the company as we work to achieve several commercial, regulatory and development milestones.

The primary focus of our commercial organization is driving the successful launch of SYMPAZAN and establishing our epilepsy franchise. We are pleased with the reaction we’ve gotten to date introducing SYMPAZAN to the LGS community.

As Ken Marshall will describe in detail, we have made good progress on three key metrics that are important to the long-term growth and success of the brand. Prescription growth, prescriber base expansion and the number of patient lives covered. As we near the six month mark post-launch, access is expanding.

As expected, payers new to market blocks are beginning to expire and we are in the process of finalizing agreements with both commercial payers and Medicaid agencies.

We expect to report several agreements with commercial plans soon, as these events unfold and we continue to educate healthcare providers on SYMPAZAN's value proposition, we expect to see continued sales growth. The launch has given our commercial team the opportunity to build and develop important relationships with the LGS and epilepsy communities.

Given the 90% overlap between SYMPAZAN and Libervant physician targets, we believe every interaction we have now forms a strong foundation for Libervant's future success, establishing more familiarity with Aquestive and our PharmFilm technology.

On the regulatory side, we are pleased to report that the FDA has agreed to our rolling submission plan for Libervant and we plan to submit the first section of the filing this month. Our intention is to complete the filing once the crossover study is complete. Recruitment for that study is going well.

As of this week, we have enrolled and administered the first dosing for more than half to subjects necessary. Assuming our current pace of recruitment continues, we expect to be able to complete the study in the third quarter and finalize the full adult NDA submission for Libervant in the second half of 2019.

We anticipate this product, once approved, will offer a major contribution to patient care and help to improve outcomes for many patients with refractory epilepsy, who remain under-treated and under-prepared for the possibility of breakthrough seizures.

In addition to Libervant, the other development program we progressed this quarter is the epinephrine sublingual film. This is one of two complex molecule programs we continue to progress based on demonstrated feasibility and long-term market potential.

Consistent with our plans, the reformulation of epinephrine is now in the clinic and we expect to see top-line data next quarter. Our licensed product business continues to provide us with the revenue we need to advance development work on our proprietary assets.

For the first seven months of the year, we have confirmed orders to produce and deliver 168 million doses of Suboxone brand and authorized generic products. To-date, erosion in the brand market share has been significantly slower than expected and better than historical industry analogs.

Additionally, the underlying market continues to grow at greater than 10%. This gives us great confidence in our 2019 guidance and projections, as Aquestive will continue to be the sole and exclusive manufacturer for Suboxone and the authorized generics.

Before I close, I want also to take a moment to mention some recent developments in the structure of our leadership team and business operations.

As a specialty pharmaceutical organization with a growing commercial portfolio, a developmental pipeline and a manufacturing operation that manages the delivery of multiple product-lines with multiple doses our business has grown increasingly complex.

This evolution has prompted the need for some changes to ensure we stay a highly efficient and productive organization. In line with these goals, we have asked some talented leaders from within our organization to take on new roles within the organization.

To begin with, we've decided to combine the value creation and value delivery business units under the leadership of Dan Barber. This change will create one organization with end-to-end product responsibility. The group will oversee corporate strategy, pipeline development, as well as product engineering manufacturing and distribution.

Dan will be supported by a strong team including Cassie Jung, who was recently promoted to the new role of Vice President of Operations. Cassie has been with our organization from its inception.

Her deep knowledge of Aquestive will be invaluable as she takes ownership for optimizing the work flows, processes and staffing in our manufacturing facilities in Indiana and to ensure the continued delivery of first rate quality products to the market.

Finally, we've appointed Peter Boyd to lead a newly developed function that will focus on business process design and improvement, data analytics and information technology. This is critical work that is necessary to support our growth.

We believe these changes enhance our ability to focus on the clinical, regulatory, and commercial catalysts ahead of us, which, if met, can drive significant value for patients and for shareholders. I'll now turn the line over to Ken Marshall, who will recap the commercialization initiatives that are underway to support the launch of SYMPAZAN..

Thank you, Keith, and good morning, everyone. We are excited to share the progress we've made commercializing SYMPAZAN and introducing PharmFilm technology to help care providers and payers. The launch of SYMPAZAN is going well. We've made good headway on three fronts that are critical to the long-term success and health of SYMPAZAN.

The number of prescriptions written, the number of prescribers and the number of lives covered. On each of these metrics, we are tracking in line with our internal expectations and the performance of key analogs we benchmark against including Banzel suspension and Fycompa suspension.

We view these specialty launches as meaningful benchmarks, because they've each provide as the reference medicine in a different delivery form for a subset of patients with difficult to treat epilepsy.

Both launches performed well, systematically growing their prescriptions, prescribers and lives covered over the course of several business quarters and becoming meaningful contributors to their respective franchises. During the first quarter of this year, we saw steady month-over-month growth in SYMPAZAN prescriptions and shipments to pharmacies.

As we've noted before, the Symphony audit underreports most specialty medicines due to some of the volume moving through specialty distribution and non-reporting pharmacies. For SYMPAZAN, underreporting has been highly variable and in the range of 15% to 50% week-to-week.

For that reason, we closely monitor our shipments from wholesalers to retail pharmacies. These shipments tell us when a new script has been received at a pharmacy making it a good indicator of physician interest in the product. Our shipment numbers are strong and support the steady volume growth we see in adjusted prescriptions.

To-date through April, we've shipped 700 units with low-single-digit returns from pharmacy. Again, we see this on track or ahead of Banzel and Fycompa in a comparable time period. Refills are another key component to any launch product success. Patient-level data suggests that 60% to 65% of patients have sought SYMPAZAN refills.

Traditionally, new prescription to total prescription also known as NRx to TRx ratios underrepresent refills of scheduled medicines since refills are highly controlled by State Medicaid Programs. For this reason, patient-level data is a better indicator of the true refill rate for SYMPAZAN.

To date, SYMPAZAN NRx/TRx mirror what ONFI did in the early months of their launch. Equally encouraging we continue to grow our prescriber base. As we've shared previously, the sales team is targeting more than 4,000 clobazam prescribers.

We've made over 25,000 calls to-date to those targets and engage them through regular office visits, lunch and learns, peer programs, advocacy engagements and conferences. To-date, over 4% have written a script for SYMPAZAN. Over half of those prescribers have written multiple prescriptions with 25% writing greater than five.

Usability and confidence and accurate dose delivery are key underpinnings for our epilepsy franchise and will continue to be important messages for future product launches. These are messages we build into every HCP interaction as well as meetings with payers and caregivers at advocacy events.

SYMPAZAN gives us a great platform for educating the market about our technology and establishing more familiarity with Aquestive and PharmFilm. We will continue to exploit this opportunity and expect it to be critical when we are approved to bring Libervant to the market, as over 90% of SYMPAZAN targets will be important Libervant targets.

That said, we are mindful that changes in treatment don't come quickly or easily in this market due to the nature of treating LGS. The symptomatology of LGS makes families less likely to pursue changes if they found balance and a medication routine that are comfortable – that they are comfortable following.

For that reason, we are working hard to help prescribers and patients, families understand the strong data we produce, demonstrating SYMPAZAN bioequivalence to ONFI. Our data shows a remarkable, consistent, reliable and comfortable PK which families and providers can trust to provide the same clinical efficacy with a reduced burden of care.

We believe this distinguishes our product from the competition and will help us keep and grow our patient base over time. In addition to growing prescription and prescriber numbers, we are also focused on expanding access. To-date, SYMPAZAN has covered for approximately 80 million commercial lives representing over 40% of our target goal.

This puts us on track to achieve the goal of having 70% of commercial lives covered by the end of 2019. During the first quarter, a leading national pharmacy benefit manager agreed to cover SYMPAZAN across its commercial book of business.

Discussions are also continuing with other large national payers and PBMs with several large contracts in the final stage of legal review. Medicaid is also a significant payer in the LGS category and many state reviews have taken place or are scheduled to be completed soon.

As we near six months post-launch and the removal of new to market blocks, SYMPAZAN is now being covered or listed in the top-five Medicaid states for Clobazam prescriptions. We anticipate access expanding significantly by the end of the second quarter and we will be working to pull the demand behind that access through.

In the meantime, our support programs are working as intended. We have prior authorization and step-added support to help process prescriptions, PAs are being processed quickly, over 80% are processed under 24 hours reducing the burden on physician offices. We are also offering co-pay offset to patients with commercial insurance.

To-date, over 60% of scripts filled have used the co-pay cards. A little over half are used for patients with coverage and the balance continues to be used with those without coverage. As we continue to gain access to lives, our ratio will continue to improve.

In closing, we are encouraged by the prescriptions, patient data and shipment trends we've established since launch. Our expectations are, that as Q2 progresses, we will drive continued growth in total prescription volume and shipments by broadening our prescriber base, securing more coverage and strengthening our relationship with the LGS community.

All of that work will establish SYMPAZAN and PharmFilm as an important tool for HCPs and lay the groundwork for the launch of Libervant, where we know the market is eagerly awaiting the arrival of new and improved treatments that demonstrate consistent and predictable drug absorption, shorten the time from package to therapeutic effect in a rescue situation, address patient needs for portability and usability in a real world situation, and provide a favorable safety and tolerability profile.

We believe Libervant will address all of these needs and has the potential to be a major contributor to improve patient care. With that, I'll turn it over to Dan for the update on our clinical development programs..

Thank you, Ken. Today, I will focus on the progress of our Libervant, Exservan and AQST-108 or sublingual epinephrine development programs.

As a reminder, Libervant or Diazepam Buccal Film is being developed for the treatment of seizure clusters in patients with refractory seizures who are not well-controlled on a stable regimen of anti-epileptic drugs or AEDs. The reference listed drug for Libervant is Diastat rectal gel.

In March, I shared with you that our next step forward was gaining agreement with the FDA on our rolling submission plan. As Keith said, we are pleased to report that we reached agreement with the FDA on our submission plan, and the first parts of our filing will be submitted this month. This is yet another important step forward for this program.

We remain focused on completing the filing process for the adult submission in 2019. The ultimate timing of our filing continues to be driven by the completion of our crossover study.

As I've shared with you in the past, following our pre-NDA meeting with the FDA last December, we initiated a crossover study that is designed to compare Libervant and Diastat in a same patient population and provide the final set of data to validate our dosing model.

Our target enrollment in this study is 24 patients in order to obtain a complete pharmacokinetic dataset on a minimum of 16 patients. I am pleased to report that we have made significant progress towards full enrollment of this study. We currently have four active sites with two more sites likely to be activated and start enrolling in the next week.

To-date, we've enrolled and dosed over half of the patients necessary to complete the study. Our active sites are fully engaged and we intend to be reaching full enrollment in the coming weeks. Based on our current status, we remain on track for a filing in 2019. Our long-term safety study continues to progress, as well.

We have over 350 real world users of Libervant with no reported serious adverse events. As we begin to prepare for launch, there are several scenarios we are actively planning for to ensure the needs of patients will be fully met. One of the challenges with Diastat is it is underutilized. There are more than 1 million patients in the U.S.

with refractory seizures. Many of these patients need a rescue medication to prevent more seizures from occurring or developing into a high risk and high cost emergency situations. In order to improve outcomes for patients with refractory seizures, several factors including underdiagnosis and patient acceptance may need to be addressed.

A recent study found that seizure clusters occur in nearly half of adult patients with active epilepsy who were followed prospectively over one year. The same study also found that the use of rescue medication was associated with fewer injuries and emergency department visits.

This suggests the population of patients in need of rescue therapy is significant and it is important that these patients have a product that they are comfortable and willing to use.

From a competitive landscape perspective, we continue to believe we are the only oral, as well as the only non- [Indiscernible] program in development for this indication. In our view, this provides us with a unique value proposition, as well as providing a major contribution to patient care.

The other mid-to-late stage programs we are currently aware of utilize nasal spray or injection technologies. Inherently, some of these technologies have not been studied for this indication in patients who have any level of allergies or nasal passage issues of any kind.

In our view, this creates population and seasonal challenges that are unique to nasal spray applications, while our buccal film is not limited by these factors. With regard to Exservan or Riluzole Oral Film, we recently announced that the FDA accepted our NDA application and has provided us with PDUFA goal date of November 30, 2019.

We believe that we provided the FDA with a strong package of data, including the data collected from our swallowing study, which underscore the safety profile of our oral film. We continue to assess the market opportunity, as well as the competitive and regulatory landscape in the United States.

Given current market dynamics, we believe there may be greater opportunities for the products outside of the U.S. We continue to see strong interest for Riluzole in multiple international markets and we are actively pursuing these discussions. Our AQST-108 program also continues to progress.

This is a sublingual film formulation of epinephrine, which is in development for the treatment of severe allergic reactions, as well anaphylaxis. As a reminder, AQST-108 has the potential to be the first oral treatment for anaphylaxis, a condition which affects up to 5% of the U.S.

population and causes millions of visits to hospital emergency departments each year. We recently completed a quantitative research study that surveyed over 500 physicians. The survey was split between allergists, pediatricians and general practitioners.

The survey confirmed our views that the allergic reaction in anaphylaxis space is ripe for innovation.

A few key points include, 88% of physicians were concerned that their patients and/or their care givers don't consistently have their autoinjectors on hand at all times, 83% of physicians agreed with the statement that patients with at least some risk for anaphylaxis too often administer oral antihistamines in place of an epinephrine autoinjector, and 94% of physicians showed interest in AQST-108 when shown the target product profile.

We are currently in a clinic with AQST-108 and we remain unscheduled for a readout in the third quarter. As a reminder, this is proof-of-concept dose escalating study conducted in healthy volunteers.

Key findings from this study will include an understanding of our maximal and minimal concentration levels, as well as the level of variability between subjects. With that, I will now turn over the line to John, who will recap our financial results..

Thank you, Dan. Good morning, everyone. To remind you I will be discussing some non GAAP financial measures this morning as part of our review of the first quarter. A description of these measures, along with a reconciliation to GAAP can be found in the earnings release we issued earlier today.

I also wanted to point out that we will be filing our first quarter Form 10-Q with the SEC later this afternoon. We produced revenues of $12.6 million in the first quarter of 2019, mostly from our licensed products and ended the quarter with a cash position of about $40 million.

Our cash position, combined with expected revenue from licensed products and SYMPAZAN, puts us in a good funding position for the remainder of 2019 and gives us the ability to continue to launch SYMPAZAN and advance our proprietary development activities, throughout the year.

Our first quarter 2019 revenue included manufacturing revenue of $6.7 million, license fees and royalties of $4.6 million, co-development and research fees of $700,000 and SYMPAZAN net sales of $600,000. Overall, revenue declined by $10.8 million in the first quarter of 2019, compared to the same period in 2018.

The lower year-over-year revenue related first to a $4.9 million decline in manufacturing and supply revenue, which was primarily driven by shifts in the timing of Suboxone and Sandoz authorized generic production, while the order book for 2019 remains very strong.

In order to help our licensee with supply chain management, we adjusted the timing of production and delivered 57 million doses of product in the first quarter of 2019, compared to 96 million doses in the first quarter of 2018.

Additional factors contributing to our year-over-year decline in revenue, were a $4.9 million drop in license fees related to the suspended Suboxone license payments that are pending the outcome of patent litigation against the generics at risk in the market and $1.6 million of lower co-development and research fees due to the timing of licensee co-development efforts, all partially offset by SYMPAZAN net sales of $600,000.

As Keith mentioned earlier in his remarks, Suboxone products including the authorized generic, continue to hold a substantial share of the market despite the at-risk launches of three generic film products in February.

As such, we continue to see strong manufacturing purchase orders from Suboxone and a Sandoz authorized generic product from our licensee. To-date in 2019, we have received film purchase orders of 168 million doses, most of which we will produce before the end of July.

We believe this puts us in a very good position with respect to our full year guidance range of 190 million to 240 million doses.

This strong order book reflects the slow erosion of the brand market share against several at-risk generic competitors, coupled with a strong uptake of the authorized generic and the continued double-digit year-over-year growth in the addiction recovery market including in Medicaid and government channels.

As of last week, our licensee share of the Suboxone film market stands at just under 80% between both the branded and AG products and 52% of overall addiction recovery market. For the first quarter of 2019, our gross margin was approximately 72%, this compares to 76% in the same period in 2018.

The 2019 decline of roughly 400 basis points has to do primarily with the lower mix of high margin license fees and royalties, as part of total revenue in the 2019 period, compared to 2018. Gross margin is highly sensitive to our mix of business between high margin fees and royalties and the various products that we manufacture.

As each of these components change in relation to the others, we will expect to see fluctuations in the overall gross margin. There have been no meaningful changes in the gross margins at a product level. Total costs and expenses were $25.7 million for the first quarter 2019.

Excluding non-cash items, total expenses were $23.4 million including R&D costs of $4 million and SG&A costs of $16 million.

SG&A rose in the first quarter 2019, compared to the same period in 2018, due to increased spending associated with the launch of SYMPAZAN and higher public company costs, as well as higher unabsorbed factory overhead as a result of lower production of Suboxone in the first quarter of 2019, compared to the first quarter of 2018.

Net interest costs were down year-over-year to $1.7 million in the first quarter of 2019 due to higher interest income as a result of our increased cash position in 2019. Net loss for the first quarter of 2019 was $14.7 million or $0.59 per share. This compares to net income in the first quarter of 2018 of $4.1 million or $0.27 per share.

Adjusted EBITDA was a loss of $10.8 million in the first quarter of 2019, compared to an adjusted EBITDA income of $6.3 million in the same period of 2018. We are reaffirming our full year 2019 guidance provided in March 2019 for revenue, gross margin, adjusted EBITDA, and cash burn.

As a reminder, cash burn is prior to debt repayments or the effect of any non-dilutive transactions that the company will explore as the year progresses.

While we are excited about our early progress on the SYMPAZAN launch, we believe that it's still too early to provide full year guidance, but we will continue to keep the market appraised of our progress. As mentioned in our year-end call in March, we plan to refinance our senior debt facility later in 2019.

We will update the market on our refinancing effort, as well as any other non-dilutive financing opportunities such as Sunovian, Apomorphine product as more information becomes available. Operator, we will now open the line for questions..

Thank you [Operator Instructions].

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

Go ahead..

Yes, good morning, everyone. Before we get started with questions, we just like to spend a minute addressing – you may have seen the late-breaking announcement from our company and a company IntelGenx relating to some licensing of our intellectual property, and the licensing of our Tadalafil product.

As we've discussed in the past, we would likely – we were likely to seek a partner for Tadalafil, given that it was non-core to our commercialization strategy. We think this deal announced today does a couple things.

First of all, and perhaps most importantly, it recognizes the strength and value of our intellectual property portfolio, the desirability of our knowhow for people to help develop products that they are interested in, in markets that they are interested in. It helps us put focus on an asset that was non-core. So we can extract value for it.

We think that the strength of our intellectual property created a fairly healthy royalty exchange for the Rizatriptan-based product RIZAPORT that IntelGenx is developing and it creates another monetizable royalty stream for the opportunity for non-dilutive capital.

And at the end of the day, it further extends for us the reach of our company through our intellectual property into areas that we would not be focused on in the near-term. We can't, despite the fact we have a technology that's broadly applicable across a number of disease states and products, we can't focus on all of them.

So finding partners like IntelGenx that has a desire in an area that we are not going to be focused on in the near-term and creating a healthy royal stream for products that they develop, we think is beneficial to us. I just wanted to acknowledge that transaction that broke late last night before we got started with questions this morning.

So, thank you..

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

It's [Indiscernible] on for Gary. Thanks for taking the question.

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

Well, this is Keith, thank you for the question. I'll take the first – the second part of the question and then John can address the second part of the question.

I think, if you do a little bit of research and you go out to the blogs, talk about the – to see about how the patients are reacting to the generics, I think there is some concern about the quality of the generic products and how well patients are tolerating or accepting them. I think, that speaks to the quality of our products.

I also think you have a very strong history in our product in the marketplace that makes people comfortable with it, not only prescribing it but taking it. There is probably some other dynamics in that market around pricing that help drive that. But I think that's the dynamic at play..

And Raphael [Ph] on your on your first question about the guidance range, what I would tell you is that we haven't yet adjusted our guidance. So obviously, with 168 million of firm orders in hand. We certainly feel good about the low-end of the range and we think we are well within the range.

We feel good about where we are from a generic launch erosion curve perspective. We are at 80% between the Sandoz product and the branded product, 80% retention. We've seen some erosion in the tablets.

It's early and our overall view would be, it's still a little bit too early to start to push around the numbers, but, we certainly do feel good about the range that were with them..

Thank you. And just one question on the pipeline.

If the proof-of-concept with epinephrine is positive, can you walk us through what the next steps would be in the timeline?.

Sure. This is this is Dan Barber. Good morning. So, as you know, we are well on our way in the proof-of-concept study and we expect top-line data to be out in the third quarter.

Depending on how that data looks, we will develop our final view of our clinical plan and we will go to the FDA most likely in a pre IND setting and gain agreement or alignment with the FDA on what the full development program would look like for the product and we plan on doing that on the back of good data in 2019..

Thank you..

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

Good morning everyone. This is Randall. .

Good morning..

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

Go ahead why don't you reframe his question..

This is Dan, your question was a little choppy coming through. So the parts that I was able to hear are, you wanted some confirmation on timing of the ultimate filing, as well as our view on the amount of time for the final – the review. We absolutely see – we see our filing in 2019.

Whether that timing is late Q3 or in Q4 will be driven by final enrollment, which we expect to conclude in the coming weeks. So that will give us a much better visibility on that front. We are very excited about where we are from an enrolment standpoint.

We have enrolled over half of the patients necessary and we are well on our way to getting the rest of them. In terms of the review time period with the FDA, as you know the standard review period is ten months. In our NDA, we will request a priority review. If it's granted, that would make it six months.

If it's not granted, we would stay at ten months. If I missed any part of your question just let me know..

No, I think that was it.

Can you guys hear me a little bit better now, I was having a headset issue?.

Much clear. Yes..

Okay, great. So just a couple more on SYMPAZAN. Data so far from Symphony has shown a pretty steady linear ramp. As we are thinking about the rest of the year and analog experience and recent trends and all that, realizing you are not providing guidance.

But, do you expect that to inflect at some point as you hit critical mass with payers? And then, second, now that you've got at least one national PBM agreement behind you and closed on several others, it sounds like is your thinking around gross to net is still consistent with what you've communicated in the past? I think you said you expected it to settle out around 40% to 50%?.

Yes, Daniel, I'll take the second question and then Ken can take the first question. On the gross to net, we would say that, yes, we are still – we would reaffirm what we have told before on that. Obviously, in Q1, it was positive.

But if you look at the average of Q1 in December of last year, it's about right around in the range of – at the high-end of the range of what we would have said. So, as the year progresses and these agreements come out, we'll know better where we stand. But right now that arrangement is pretty good..

And I can take the front-end of that question Randall. This is Ken Marshall. If you look at those end-market analogs that we refer to routinely, I don't think it's unreasonable to expect the same type of movements in our prescriptions in the second half. We certainly have a good progress with payers. We are getting good receptivity.

Your stay in the new to market blogs coming off at both the planned level as well as some key Medicaid states. So you would expect that to make the decision more of a medical decision rather than a medical payer decision as we move into the second half and that generally improves your volume..

Okay, great. Thank you everyone..

You bet..

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

Thank you.

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

Sure Liana, and this is Dan. Good morning. So, I just wanted to stress, as an opener on Tadalafil that this is a non-core asset from our strategy and our focus remains on execution in the epilepsy and CNS space in the late-stage assets.

The Tadalafil CRL, we continue to progress on discussions on re-filing with the FDA and we'll have more clarity on that as we go through the next few months. In terms of the alternate marketing of Tadalafil, the agreement with IntelGenx is a global agreement.

So, we will be looking to put Tadalafil to work not just in the U.S., but in other markets around the world. How we ultimately bring it to market in the U.S., with our partner IntelGenx remains to be determined whether that's directly or through adding a sale commercial arm in the urology space..

Thank you. .

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

Good morning. Jason..

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

Thank you. Good morning guys. Couple questions. John, first for you on cash. So you went through about $20 million in the first quarter and you reaffirmed your guidance of $45 million to $50 million cash use for the year.

Can you give us some thoughts on how we should think about spreading the balance of that over the course of the year?.

Yes, sure that's a good question, Thomas. We had obviously at the end of the year, we do things like pay our bonuses and we had some trailing IPO expenses that we needed to pay out that had to paid early in the year. And the other factor had to do mostly with the timing around our billing.

As I had mentioned I think in the last call, and in this call, we have been working with Indivior on the timing of the production and shipment of their products as they work through the supply chain with the generics and the potential generic at-risk launch.

And so, that was altered in some billing early in the quarter, lower billing levels, which have done – since then picked back up. So, I would expect that our cash - normalized cash runrate, will return to sort of what you would expect it to be versus, you know what, $20 million in a quarter, once we – as we go forward in the future quarters..

Got it. Thank you. And then, just a follow up on the Tadalafil agreement, given the way that, at least my read of the press release, it seems very much to be a joint collaboration.

So, is there a commitment on your part to fund commercial efforts, launch efforts, regulatory submissions globally? And do you have a sense of – I know you don't have plans that firmly worked out.

But do you have a sense of what that might represent from an investment perspective for you?.

Yes. And this is Dan again. That's a great question and thank you. There is – and I wanted to make sure we are really clear here. There is no commitment that we have made to spend money on Tadalafil and we have no plans to create a urology sales force for Tadalafil.

This deal is meant to broaden our ability to monetize Tadalafil through a variety of markets around the world and all of those monetization events would be licensing agreements either led by us or by IntelGenx.

So, this does not change our focus, if anything it allows us to monetize an asset that was out of focus and it also does not change anything around our spending or our plans for immediate future..

Excellent. Thank you guys..

Yes, let me just add a little clarification to that. In the short-term, if anything, it reduces the cost burden for the work that has to be done to re-file and bring this asset to its conclusion with the agency. IntelGenx will pick up half of that cost burden.

So in addition to Dan's statement, I'll reiterate we have no plans of building a urology-focused sales force in any way, shape or form and half of the remaining expenses to bring that product to marketability will be borne by IntelGenx..

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

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

Hi. Thanks very much for taking my questions. Just a couple here.

Firstly, can you give us some updates on or just some additional clarification on the differences between the revenue streams you receive from the brand versus the authorized generic on Suboxone and Suboxone film, as those pertain to the ongoing litigation as well as the Indivior indictment? Just walk us through the differences between those two different revenue streams.

Secondly, I wanted to ask about going forward, the relative positioning of the sublingual epinephrine formulation versus the existing epinephrine formulations currently on the market.

As you see that overall market evolving, how might this potentially affect your strategic thinking around this product candidate and what you will expect to do with it? And then lastly, just a housekeeping item. When specifically do you expect to file the 10-Q? I know, I believe I heard you say, it would be filed today.

But when should we expect it out? Is it already out or would you expect it to be filed after the close today? And in the 10-Q, would you be providing the same breakdown of the revenue line item as you had in the past? Thank you..

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

Ram, this is Dan. We'll continue to go in reverse order. I'll take number two. Yes, as we look at the epinephrine market over the next few years, there is no doubt there will be continued jocking in the autoinjector space over how market share is divvied up.

But for us, we see our product as a key differentiator in advancement in that space and if you've looked at the anaphylaxis or severe allergy space at all, it's yet another spot where there is a high unmet need. There is a lot of non-treaters in that space or people who should be carrying some sort of solution for their issue and are not.

So we believe the market opportunity for us is much bigger than the autoinjector world is today. So that's where we are focused and we think our innovation will drive that as we go forward..

And then back to your Suboxone question, and I'll break it down into the pieces. First, there is actually no difference in the price we charge for product leaving our factory. Whether it's a branded product sold as Suboxone or an authorized generic sold as Sandoz. A dose is a dose to us and we remain volume-sensitive, not final market price-sensitive.

In terms of the various litigations, we'll take the patent litigation first. We continue to be confident in our position in terms of the strength of our patents and the infringement or potential infringement of the products that have entered the market at risk.

In fact, we have had an additional allowance for a new patent that we think will be relevant in that fight. And we would expect to see that patent become a part of that fight and we'll continue to pursue our rights as we have. In terms of the indictment for Indivior, I think we remain very confident in a few things.

First and foremost, we are not involved in the indictment. We have no interaction, whatsoever with the Department of Justice and have not over the five years or so since they have been involved in this effort with Indivior. We feel very, very good about the fact that the market continues to expand.

We feel even better that Suboxone and the branded generic have not eroded nearly at the rate anyone would have expected. We feel equally good that Indivior has announced that, much of their uptake or improved uptake in the market has come from government programs and government payers.

So that there is not – there is no read-through or blowback from the DOJ case to their volume at least at this point.

And we continue to feel equally good about, as we have told everybody all along, that as prices converge, the tablets will start ceding market share to a superior product with a superior profile in the eyes of prescribers and patients. So all of those are great dynamics for us up and down the line.

That business will continue to be a strong contributor of cash flow for us out into the future.

Did that get to all of your questions?.

Yes. Then just a couple of clarification points on Libervant, if I may.

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

Thanks..

Yes. So, let me start with the rolling submission piece. So we've broken it up into three main pieces and the first piece which will go in this month is as you would expect, all of the non-clinical and pre-clinical type components of the filing.

The next piece that would go in will be at the CMC section, which would go in, in Q3 and then the last piece which would complete the filing, the clinical piece, which I'll skip to your last question.

And the timing on when we submit the clinical piece really is driven by enrollment and dosing and at this point, we are focused on the scheduling of individuals for the dosing regimen. So, in terms of likelihood, Q3 versus Q4, I am not sure how to deem, which it will be.

But I would say, we know we see a clear line of sight in 2019 to getting this filing in. The middle part of your question was around clarity on the data that could come out of the dosing, if I captured it correctly. And the data will be very straightforward in terms of what we are capturing. It is all PK-based data.

So all comparison data between our product and Diastat in the patients who have been put into the study. And there is nothing more complex in the study than capturing that data.

Ram, did I answer all the parts of your question?.

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

You bet..

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

Thank you, operator. Well, thank you, everyone for joining today's conference call. We are excited about the progress that our teams made over the past few months. We are even more excited to be focused on things that are in our control and continuing to deliver as we've promised the things that are in our control.

We can't always manage the things that aren't, but we feel that we are making a great deal of progress on the things that are in our control and we look forward to continuing to do that.

Our technology, our knowhow and the fully integrated capabilities of our company will continue to allow us to advance differentiated medicines that aim to make a difference in the treatment for epilepsy, ALS and complex CNS conditions, anaphylaxis and a range of other diseases.

We are focused on bringing these innovations to market and look forward to reporting more on our progress on our next call. So thank you all for joining and have a great day..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day..