Good morning, and welcome to the Aquestive Therapeutics Third Quarter 2021 Conference Call. At this time, all participants are in listen-only mode. As a reminder, this call will be recorded. I would now like to introduce your host for today’s conference call, Bennett Watson from ICR Westwicke.

Thank you, operator. Good morning, and welcome to today's call. On today's call, I am joined by Keith Kendall, Chief Executive Officer; and Ernie Toth, Chief Financial Officer, who are going to provide an overview of recent business developments and performance in the third quarter 2021, followed by a Q&A session. In total, we expect today's call to last approximately 60 minutes. As a reminder, the company's remarks today correspond with the earnings release that was issued after market close yesterday. In addition, a recording of today's call will be made available on Aquestive's website within the Investors section shortly following the conclusion of this call. To remind you, the Aquestive team will be discussing some non-GAAP financial measures this morning as part of its review of third-quarter 2021 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 our annual report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2021, and in our 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. The impact of the ongoing COVID-19 pandemic is highly uncertain and cannot be predicted with certainty or clarity. Given these uncertainties, you should not place undue reliance on these forward-looking statements, which speak only as 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 Keith.

Thank you to everyone on the call for joining us this morning. In our remarks today, Ernie and I will be discussing recent developments in our business during the third quarter of 2021 and through early November. As always, Ernie and I will be joined by additional members of the Aquestive leadership team during the Q&A session afterward. It's been a very exciting few months since we last spoke to you. Through the third quarter, we executed as we committed on our key priorities for the two most important value drivers for the company: Libervant and AQST-109. Libervant continues to progress through the review process with the FDA, and we had very exciting results for AQST-109. We appear to have solved the last remaining hurdle of AQST-109, absorption speed or Tmax compared to auto-injectors like EpiPen and AUVI-Q, the current standard of care for this patient population. Additionally, our ongoing business continues to be strong. As you saw in our release last night, and as Ernie will discuss more fully in a few minutes, we have improved our outlook and guidance for the year. Let's start with Libervant. We are focused on the upcoming PDUFA date of December 23 and the ongoing interactions with the FDA regarding the NDA for Libervant that was resubmitted in June. We continue to have multiple interactions with the FDA as they completed the mid-cycle review of our application in late September. In addition to responding to a number of information requests, the agency has concluded an audit of post-marketing adverse event reporting capabilities. They have requested and have been provided additional information about the patent coverage for the product. The FDA has approved for use the trade name for Libervant, and they have made recommendations for changes in language relating to our packaging. Additionally, we've spoken to the FDA office of orphan products development. We have provided additional information supplementing our original correspondences to the group. We continue to believe that we have provided a strong set of facts supporting a finding that Libervant represents a major contribution to patient care and thereby a decision by the FDA of clinical superiority to prior approved products for this indication. Libervant is an exciting product for the underserved epilepsy community, and we are focused on ensuring patients have the broadest access to this product as quickly as possible. If approved by the FDA for U.S. market access, Libervant would be the first orally delivered diazepam product for the management of seizure clusters. The patient population remains underserved with more patients over the last 12 months across all age groups continuing to utilize the diazepam rectal gel product versus the diazepam nasal products despite good payer coverage. The vast majority of potential patients are still not accessing either of these difficult-to-interact-with alternatives. Providing a preferred method of delivery, an oral product that can be used where it's needed and when it's needed and is the size of a postage stamp has the potential to provide a highly differentiated treatment option for this patient population. Maximizing our footprint, facilitating patient access, and garnering visibility across the epilepsy community are important foundational elements to our success. We believe that every patient should have a seizure action plan with the rescue treatment available. We believe that Libervant represents an attractive non-invasive and innovative product for this population. Preparations are advancing for the commercial launch of Libervant, if approved by the FDA, as soon as possible after that approval. The continued commercial progress of SYMPAZAN has laid the foundation for the launch of Libervant by gaining penetration and payer coverage for our PharmFilm-based CNS products. We continue to believe Libervant is an important choice for epilepsy patients in a form they prefer. We remain excited about and believe Libervant continues to be a meaningful opportunity for the company and will generate material and significant sales revenue at peak. Our next priority is advancing our epinephrine product candidate for severe allergic reactions, including anaphylaxis, AQST-109. As we have discussed previously, we have demonstrated the ability to consistently deliver therapeutic doses of epinephrine, comparable to the standard of care auto-injectors. The remaining challenge was modifying our formulation to achieve the absorption rate necessary to produce a Tmax equally comparable to those auto injectors. Based on the top line data released just last week from our first-in-human Phase-I PK clinical trial for AQST-109, we believe we have met that hurdle. The formulations tested during the trial resulted in Tmax of 15 minutes comparable to the auto-injectors and within a narrower range than the published data for those products. AQST-109, if approved, will be the first orally administered epinephrine-based treatment for anaphylaxis with safety, tolerability, PK and PD measures falling within the target range of the standard of care auto injectors. AQST-109 has the potential to be a transformative treatment for patients in this population, especially those who don't carry their medications regularly because they are resistant to injections or don't find the devices easy to use or carry. This is another example of how our knowledge and technology can create value through a better treatment alternative that can be used where it's needed, when it's needed, and in a form oral that is preferred by most patients. We're very excited by these findings and continue to believe that patients will embrace this needle-free, user-friendly alternative, should it be approved by the FDA and other regulators around the world. We plan to commence a second adaptive design study that will compare the PK and PD of our target formulation against epinephrine IM injection in Canada during the fourth quarter of 2021. This study will be used to determine the final formulation and dosage strength that will be used to manufacture registration batches and conduct pivotal PK studies in 2022. We have submitted our data package for the pre-IND meeting to the FDA and anticipate receiving a written response from the agency before the end of the year. We anticipate that this feedback will provide us with greater insights as we plan for the development of AQST-109 under the 505(b)(2) pathway and begin to enter pivotal trials in the U.S. next year. Next, SYMPAZAN. SYMPAZAN continued to perform well in the third quarter of 2021, which marked its 11th period of quarter-over-quarter growth. SYMPAZAN continues to set the stage for a potential launch of Libervant. We have always thought it valuable to have two complementary products available to a common set of prescribers with SYMPAZAN leading the way prior to a potential launch of Libervant. We feel that our commercial team, with their efforts on SYMPAZAN, has done a good job of establishing our footprint. In conclusion, as we progress through the fourth quarter and head toward 2022, we're focused on advancing our proprietary products. Our team is continuing to engage with the FDA regarding the NDA for Libervant ahead of the December PDUFA date. Launch preparations are advancing. And if approved by the FDA, we plan to launch shortly after market access is granted. AQST-109 reported exciting top line data, and we're moving to a new study to determine final formulation and dose strength before year-end. We also anticipate feedback from the FDA regarding our pre-IND meeting data package before the end of December. Our ongoing business continues to perform well, and we look forward to delivering the strong results we have guided to here today. We look forward to continuing to update all of you as we advance all of these initiatives throughout the fourth quarter and as we head into next year. With that, I'd like to turn the line over to Ernie, who will provide specifics on our financial performance, capital access strategy and outlook.

Thank you, Keith, and good morning, everyone. By now, you will have seen our financial results in our 10-Q and earnings release that were filed last evening. As we typically do, we will address most of the discussion related to the third quarter 2021 results in the Q&A. Complementing our focus on the priorities of Libervant and AQST-109 that Keith just discussed, has been a strong financial focus this year, including extending the time that we have access to an additional $30 million available within our existing debt facility until June 2023 if we choose to fully fund the launch of Libervant, if approved by the FDA for U.S. market access; updating the agreement with our lenders to amend the principal amortization schedule to free up over $10 million of capital between now and year-end 2022 for a $2.7 million fee payable in 4 quarterly installments beginning May 15, 2022; and continued strong performance of our existing business and business development activities as well as prudent expense management and diligently managing our cash position in order to not only improve results as our revised guidance indicates but also extending our capital horizon. Our total revenues were $13.3 million in the third quarter 2021 compared to $8.3 million in the third quarter of 2020. Comparing the third quarter 2021 to the prior period, the company saw an 18% increase in SYMPAZAN net revenue despite the continued market access limitations due to COVID-19 and a 77% increase in manufacturer and supply revenue. Our net loss for the third quarter 2021 was $14.6 million or $0.37 loss per share. The net loss for the third quarter of 2020 was $16.6 million or $0.49 loss per share. This year-over-year change in net loss was driven by higher revenue, lower costs and expenses, offset by an increase in noncash interest expense related to the KYNMOBI monetization transaction, which does not represent a cash output or monetary obligation at any time during the life of the transaction. Non-GAAP adjusted EBITDA loss was $5.3 million in the third quarter 2021 compared to $11.3 million in the third quarter of 2020. The year-over-year change in non-GAAP adjusted EBITDA was driven by higher revenue, lower costs and expenses, offset by an increase in noncash interest expense related to the KYNMOBI monetization agreement, again, which does not represent a cash output or monetary obligation at any time during the life of the transaction. As of September 30, 2021, cash and cash equivalents were $31.2 million. During the third quarter 2021, we received $6.1 million in net proceeds from our at-the-market or ATM facility and a $1.25 million net milestone to co-develop and provide commercial product for the potential to develop an oral film product for the treatment of erectile dysfunction, all of which were partly offset by cash used in operations. We expect that our existing cash and cash equivalents, revenue from our ongoing business, including SYMPAZAN, continuing business development activities, and prudent expense management actions, combined with ATM activity, will provide adequate funds and meet expected cash requirements for the next 12 months. While we have not been accessing the ATM recently, it remains an important tool to support the capital needs of the company. Separately, we expect the potential launch of Libervant, if approved by the FDA for U.S. market access, to be funded by the additional $30 million of contingent funds available as part of the existing 12.5% notes. Looking beyond Libervant, we expect royalty streams from license agreements to contribute to our future revenue. These royalty streams include AZSTARYS, which was recently launched by Corium under license from KemPharm; Suboxone in markets outside of the U.S. with Indivior; Exservan in the U.S. with Mitsubishi Tanabe, and in the EU with Zambon, as well as potential additional payments available under the KYNMOBI monetization agreement. As outlined in the press release issued last night after market close, we are improving our full-year 2021 financial guidance. SYMPAZAN growth, the performance of our manufacturing and supply operations, and our other ongoing business activities generated strong operating results during the first three quarters of 2021. Moreover, we have taken steps tocontinue to strengthen our capital position. As such, we have updated our full financial expectations as follows: total revenues of approximately $47 million to $49 million increased from $46 million to $48 million in the prior guidance. Non-GAAP adjusted gross margin of approximately 70% to 75%, unchanged from prior guidance; and non-GAAP adjusted EBITDA loss of approximately $32 million to $34 million, improved from $39 million to $42 million in the prior guidance. It is worth reiterating that this updated 2021 financial guidance does not include any revenues from Libervant, which has a PDUFA target go date of December 23, 2021. With that, I will now turn the line back to the operator to open the line for questions.

Our first question comes from Gary Nachman with BMO Capital Markets.

This is Evan Hua, filling in for Gary Nachman. Congratulations on all the progress. So regarding Libervant and potential ODE for market access, would you be able to share some more color on what additional information or market data you shared with the orphan drug group? And are you still confident that you'll be able to get potential ODE around the same time as a potential approval? I have a few follow-ups after this as well.

This is Keith. We still do think that the decisions will come at the same time, although we don't control either of them, as you know. But we do believe, based on the way this product has been prosecuted both in our filing and others that the decision will come at the same time. We did augment the data for reasons that are fairly well understood, but I'm not going to talk publicly about what that additional data was until after the agency makes their decision.

Got it. And regarding AQST-109, the Phase-I PK results. How comfortable are you with the medium Tmax of 15 minutes for the target ATSQ-109 formulations compared to Epipen and AUVI-Q medium tenets and any intention on trying to improve that as well?

Evan, that's an easy question. We feel great about our medium Tmax. Our median Tmax is 15 minutes. The two auto-injectors on the market are: Epipen is at 10, and AUVI-Q is at 20. So we're right between the auto injectors. Even more importantly, when you look at our medium Tmax, we're actually at the low end of the range for medium Tmax. So when you look at an auto injector, their range of possible Tmax outcomes goes up to 60 or 90 minutes. Our product — the farthest out Tmax we saw was well below that. So we think we're in a great place for medium Tmax. We do not believe for our FDA filing we need to be any faster than we are. But of course, we'll continue to develop the product as we go forward. And you'll see that medium Tmax continue to be a differentiator for our product.

Great. And one more follow-up for me. Would you be able to provide some more color on which formulations you'll be taking forward from the Phase-I PK trial that's being evaluated in the crossover study? Would you be testing all the formulations from a Phase-I PK study or just the target formulation?

No. Another great question. So we will take the target formulation forward. And we disclosed last week the four formulations simply to show the breadth of data we had created and that no matter which formulation you look at, we had really solid results with a really good medium Tmax. But the target formulation will be the one that we take forward. And the next study will define not only the final commercial formulation for us but also the dosage strength that we think best fits the comparison to the reference product.

Our next question comes from Jason Butler with JMP Securities.

Acknowledging you're not going to go into a ton of detail on the FDA interactions on Libervant, just wanted to ask if the interactions with FDA at all focus on the core substance of the CRL and the modeling work you did to address the FDA's questions and whether you still feel comfortable about your strategy to address the FDA's questions?

Yes. Jason, we're very comfortable. They've actually asked us to extend the model to some of the groups that the dosing doesn't cover. So we've had some questions, but none that would cause us to believe that they're questioning the model or that the model isn't the right path to the dosing recommendations that we made.

Great. And then on AQST-109, the data looked really great last week and the target profile looks to be really compelling. So can you talk a little bit about what the goals of the crossover trial are in terms of finding that final formulation? Are there significant improvements in the target profile that you're trying to achieve here? And then can you just talk about the other components, the adaptive components of the trial and how that can benefit you? And if you decided what the comparator arm will be at this point?

Yes. Go ahead, Dan.

So yes, we’re taking the target formulation into the adaptive study design. In terms of formulation work, at this point, while we’re saying we’re dialing in on the final formulation, we basically have the final formulation. So this next study is to really dial in on very, very minor changes in formulation and the final dosage strength. In terms of how the studies are put together, the first stage of the study will compare different dosage strengths, and then we’ll take the final dosage strength that we like the most and compare that to our reference product in the second part of the study. Our reference product at this point is open. So we have opportunities across the variety of injectors available. And I think you’ll see us make that choice once we get to the second part of the study.

Our next question comes from Thomas Flaten with Lake Street Capital.

Dan, just a follow-up on your last response. Could you just give us some thinking behind what would cause you to choose one injector over the other from a comparative perspective?

Sure. I think it comes down to regulatory nuance, right? So from a commercial perspective, we don't think it particularly matters what our reference product is. But when we think about our interactions with the FDA, we'll look at the profiles of EpiPen, AUVI-Q, the manual injectors, and will make our choice based on which one of those we think provides the cleanest and clearest path with the regulators. I don't think there's any more magic to it than that.

Got it. And then there was no mention of AQST-108 in the press release or in the prepared comments. Could you give us a status update on that?

Sure. Thomas, we want to stay focused on the two things right in front of us. AQST-108 has utility beyond anaphylaxis, and we're doing work behind the scenes to flesh that out. When it's appropriate, we'll talk more about it. Right now, our focus is on 109, obviously, with the amount of conversation we've had in the last week and the great results we've had and the continuing work with the agency on Libervant moving toward the December PDUFA date.

Got it. And just one quick final one on guidance. The guidance implies a significant downtick in revenues in the fourth quarter. Is that just conservatism? Or is there something that you're anticipating there that would drive the revenues down over the third quarter?

Thomas, it’s Ernie. I don’t think it’s really revenue going down in the fourth quarter. It’s really truing up the revenue for the full year, as you see in our full-year guidance. Certainly, the increased manufacturing and supply revenue was more skewed towards the increase was more skewed to the second and third quarter of this year. But I think the key point is that we are up in our guidance, expanding the range for the full year, and we feel very confident about that.

Our next question comes from Andreas Argyrides with Wedbush.

Just two quick ones from us. So regarding Libervant, when might you guys provide a bit more detail on the commercial launch, pricing, et cetera? And then maybe a quick update on Exservan and update on the rollout there so far?

Sure. So we're preparing to launch Libervant. We're going through the early conversations with payers. We are going through the search for sales and medical affairs people now so that once we get notice of approval, should that come, that we're ready to move. As you know, we've got a sales force in place that are calling on many of the doctors who will be the prescribers of Libervant, and we intend to use them first and foremost as soon as we do get that approval. So we'll talk more about a launch plan, I suppose, once we have a launch to launch. But we're doing those things now so that we're prepared as soon as we hear from the agency in December, one way or the other. In terms of Exservan, I'll let Dan give you a brief update on where that is with our partners around the world.

Sure. Andreas, as I’m sure you – I’m sure you know, our focus is highly on Libervant and AQST-109. But in our film part of our business, we do continue to have solid growth, as Ernie talked about before. And part of that growth story is the rollout of Exservan. Our partner, Mitsubishi Tanabe, here in the U.S. is detailing Exservan and continues to see that as an important product in their ALS call point. We also continue to focus on the launch of Exservan in Europe, which will happen at some point late next year. So Exservan continues to be a nice program behind the main programs of the company.

Our next question comes from Ram Selvaraju with H.C. Wainwright.

Can you hear me?

Yes.

Okay. First of all, I just wanted some additional clarity, if you can provide it on whether you have started labeling discussions with the FDA on Libervant? And if indeed that sort of contiguously picked up where you had left off at the time of the receipt of the CRL? And if there's any other color you can provide regarding the nature of those labeling discussions at this time? Also, if they haven't resumed, when might you expect them to resume? And as a follow-on from that, from a commercial perspective, assuming that Libervant receives timely regulatory approval, when you look at the current state of the target market, how entrenched is the nasal spray? And to what extent do you think it could constitute a hurdle to commercial uptake of Libervant? Or do you think that it's not really likely to be an obstacle?

So let's take those one at a time. We have had interactions with the agency where they have recommended language changes to our packaging. In terms of the main label, it's probably too early for us to expect to engage in those. I think we would start looking for those conversations to be three to four weeks out from the PDUFA date, but they are paying attention. They did give us language changes on our packaging, both on each individual strip and on the box that it will be — that they'll come in. In terms of the market, look, for the last 12 months, more patients have chosen to continue to use the rectal gel than they have the nasal spray. About 90% of the potential patient population is still not accessing an appropriate rescue medication, either nasal or rectal. That doesn't change the fact it will be the third product to the market. However, we believe that the product we're bringing to the market in an oral form that can be carried and used the way the film can is going to give people a much better opportunity to have what they need, where they need it, and when they need it and in a form they like interacting with. So we feel good about the competitive value proposition our product brings to these patients. But we are third to market and we'll have to deal with that.

Okay. And with respect to AQST-109 and 108, for 109, I was just wondering if you could walk us through the registration batch manufacturing timeline? And for 108, I understand that you are looking to position this in markets that are effectively complementary to the 109 target market and target facing population. But I was wondering if you could elaborate a little bit on what those target markets are likely to be for 108?

Sure. Dan, you want to go ahead?

Sure. Ram, in terms of the registration batches, right now we see those occurring in the middle of 2022. So with the adaptive study design that we talked about before, we will want to get to our final dose strength, obviously, before we do the manufacturing scale-up process and get to those batches. Having said that, the process we're using for making the film, while the film itself has a very unique technology in it that is very strongly protected, the actual manufacturing process is straightforward. So we don't see that being anything other than getting through to the final dose that we will make our registration batches on. In terms of 108, as Keith has pointed out before in public comments, we do see alternate indications, complementary as you put it, in the allergy space for that product. We're pursuing, working on understanding those indications and understanding the FDA's requirements around those indications right now. And when we get to the right place, we'll be talking more about them. But we do see utility in 108, and we're excited to continue to work on that product, albeit in a different indication other than anaphylaxis.

So just as a clarificatory point, those indications for 108 are actually not indications for which either AUVI-Q or the EpiPen are currently approved. Is that correct?

That's correct.

Great. And just one other question with respect to future financial guidance. I was just wondering if you could give us a sense of when you might be in a position to provide financial guidance for 2022? And if you anticipate qualitatively doing the same thing in 2022 that you've done historically, which is to provide sort of a wider guidance range at the beginning of the year and narrow in as you go forward?

Go ahead.

Ram, it's Ernie. Certainly, the guidance for 2022 is going to depend on what happens on December 23. So we would hope that, because as we reiterated in my statements, none of our guidance for this year has anything — any revenue in or contemplated any revenue for Libervant on approval. So we would expect that based on the events at the end of the year, we get approval that we would offer guidance in the same manner that we've done in the past with a wider range.

There are no further questions. I'd like to turn the call back over to Keith Kendall for any closing remarks.

Well, thank you, everyone. It's certainly been a very exciting quarter. We’ve got a lot of hard work coming to a place that we feel good about. We’re going to continue, obviously, to work with the FDA on Libervant as that progresses through its process. We’ve got some near-term events in epinephrine that we’ll look forward to talking about as we go through those as well. And we look forward to finishing out the year and meeting the guidance that we’ve given everyone. We appreciate you taking the time to talk with us today. We appreciate your questions, and we look forward to speaking again shortly. Thank you all, and have a great day.

This does conclude the program. You may now disconnect.