Good morning, and welcome to the Aquestive Therapeutics Third Quarter 2022 Conference Call. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. Instructions will be given at that time. As a reminder, this call will be recorded. I would now like to introduce your host for today’s conference call, Bennett Watson of Westwicke, Investor Relations. You may begin.

Thank you, operator. Good morning, and welcome to today's call. On today's call, I am joined by Dan Barber, Chief Executive Officer; and Ernie Toth, Chief Financial Officer, who are going to provide an overview of recent business developments and performance for the third quarter 2022, followed by a Q&A session. During the Q&A session, the team will be joined by Dr. Steve Wargacki, Vice President of R&D; and Ken Truitt, Chief Medical Officer; and Ken Marshall, Chief Commercial Officer. As a reminder, the company's remarks today correspond with their 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 2022 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 8, 2022, and in our quarterly reports on Form 10-Q and current reports on Form 8-K 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 of the date made. Actual results may differ materially from these statements. All forward-looking statements attributable to Aquestive or any person acting on its behalf are expressly qualified in their entirety by this cautionary statement and the cautionary statements contained in the earnings release issued yesterday. The company assumes no obligation to update its forward-looking statements after the date of this conference call, whether as a result of new information, future events or otherwise, except as required under applicable law. With that, I will now turn the line over to Dan.

Thank you, Bennett. I am pleased to tell you today that during the third quarter and extending into October, we have made significant progress towards navigating the company through these difficult times. Over the last 60 days, we generated over $25 million in licensing payments through three separate licensing agreements across three continents. This was done in parallel to our ongoing cost savings initiatives and limited use of our ATM. In fact, we ended the third quarter with more cash than we had at the end of the second quarter. Let me repeat, we ended the third quarter with more cash than we had at the end of the second quarter. We are committed to continuing our efforts to generate non-dilutive cash and while there is no guarantee of success or timing, we believe these efforts are critical to the ongoing strengthening of the company's financial position. We believe that some of the company's parts are significantly more valuable than our current enterprise value. In a market such as we faced today, maximizing the value of our different assets is an efficient way of generating the additional cash needed to continue the development of AQST-109, as well as the overall growth of the company. Just as importantly, during the same time period, we continued to simplify and progress the Aquestive story. Our lead asset AQST-109 epinephrine sublingual film progressed rapidly in Q3. We demonstrated positive results from both our EPIPHAST I and EPIPHAST II studies. We continue to believe the results from both studies are compelling. AQST-109 showed rapid absorption and uptake with a median time to maximum concentration, or Tmax, of 12 minutes and maximum changes to both systolic blood pressure and heart rate at under 10 minutes, which are potential indications of therapeutic effect. We also know that in the instances where a second dose must be given, we have an even faster median Tmax for the second dose at only eight minutes. We continue to make regulatory progress on AQST-109. In October, we received an end of Phase 2 written response from the FDA regarding our chemistry and manufacturing components. We were pleased with the FDA's responses and believe we have a clear path forward. We will be meeting with the FDA in an end of Phase 2 clinical meeting later this quarter and should be able to announce the results of this meeting prior to the end of the year. We have presented our full clinical plan to the FDA and at this meeting expect to receive significant agency feedback. The market opportunity for AQST-109 is compelling. Last year, more than 3.5 million scripts were filled for epinephrine autoinjectors, representing an estimated $1 billion in net sales. From the data we have, we estimate that almost a third of these scripts are written by allergists here in the U.S. If you add in pediatricians, we know that around half of all scripts come from these two specialty areas. We also believe that allergists are significant influencers of the remaining 50% of scripts that are written by other physicians such as general practitioners. The allergy call point is smaller in size and scope than the neurology call point that we managed with Sympazan, our recently out-licensed product. Put another way, we know that we can build and maintain the expertise to manage a reasonably sized commercial launch that directly targets a significant portion of the market. As we progress through 2023, we plan to provide more details about our intended strategy to launch AQST-109 in the U.S., as early as 2024, if approved by the FDA. Now that we have out-licensed Sympazan, we are refocusing our commercial leadership onto the launch of AQST-109. Over the last five years, this leadership has built the necessary infrastructure within Aquestive to launch and manage a commercial product. We will maintain certain commercial expertise while we progress AQST-109, thereby enabling us to properly launch AQST-109 if approved by the FDA. We have already begun the early outreach into the allergy community. We established our scientific advisory board last month and have assembled an outstanding group of advisors, who have already been extremely helpful to our development process. We have submitted abstracts to upcoming medical meetings in the allergy field and plan to present three abstracts at the upcoming American College of Allergy, Asthma and Immunology Annual Meeting. We will launch our publication strategy and increase advocacy awareness as we progress into 2023. Turning to Libervant, we continue to actively engage with the FDA to ensure that we have a defined hurdle for listing the orphan drug block. We have provided the FDA with our proposed protocol for a head-to-head study and are awaiting their feedback. Once we hear back from the FDA, we will provide you with more details. In the meantime, we continue to actively explore out-licensing opportunities for Exservan. Our ultimate decision on out-license versus launch will be driven by multiple factors, including the timing of an AQST-109 approval and launch, our findings from our continued interactions with the FDA on Libervant and the capabilities and economics associated with potential out-licensing deals and partners. In parallel, we continue to see strong performance in other areas of our business. Our manufacturing operation continues to see solid orders for the production of Suboxone on a global basis, Ondansetron in Brazil, and Sympazan in the U.S., while also preparing for the launch of Riluzole in Europe. All of these businesses represent valuable components of Aquestive and we continue to drive performance in each area. In conclusion, we recognize the headwinds that we are facing and we are focused on continuing to manage our way through these turbulent times. This means maximizing our opportunities to generate non-dilutive cash with our existing levers. We will continue to rapidly advance AQST-109 and we are looking forward to the upcoming FDA end of Phase 2 clinical meeting. We will also continue to drive business performance across all elements of the company. The Aquestive product portfolio is backed by proven science, solid clinical results and a compelling commercial need. I will now turn the call over to Ernie to touch upon the financial highlights.

Thank you, Dan, and good morning, everyone. By now, you will see in 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 2022 results in the Q&A. During the third quarter, we continued to manage the company for success as we raised additional non-dilutive capital and reduced expenses going forward to extend our cash runway. During the third quarter, we received $10.5 million, including the $7 million upfront cash payment, due under the terms of the licensing and supply agreement with Haisco for Exservan for ALS treatment in China, and a $3.5 million upfront cash payment under the terms of the licensing and supply agreement with Pharmanovia, for the exclusive license of Libervant Buccal Film for the treatment of prolonged or acute convulsive seizures across all ages in certain countries, including the European Union and United Kingdom. Under both agreements, we will receive additional milestone payments, as well as manufacturing fees and royalty fees. On October 26, we entered into a license agreement with Assertio to license Sympazan Oral Film for the adjunctive treatment of seizures associated with Lennox-Gastaut syndrome in patients aged two years of age or older. Under the terms of the license agreement, we granted an exclusive worldwide license of our intellectual property for Sympazan to Assertio for an upfront payment of $9 million. We also entered into a long-term supply agreement with Assertio for Exservan. Under the terms of the license agreement, Aquestive will receive a $6 million milestone payment within 30 days of notice from the U.S. Patent and Trademark Office of allowance for an additional patent application for Sympazan and payment of related allowance fees, both of which were completed on October 27, 2022. In addition, we will receive royalty fees from Assertio on the sale of Sympazan during the term of the license agreement. The licensing of Sympazan will bring in near-term non-dilutive capital of $15 million to support company operations, eliminate the cash burn of Sympazan being a standalone product without the benefit of Libervant U.S. market access, reduce our commercial headcount, while retaining payer and distribution expertise for AQST-109 and allow us to focus on our most important value drivers. Total revenues were $11.5 million in the third quarter of 2022, compared to $13.3 million in the third quarter of 2021. For the third quarter of 2022, compared to the prior year period, we saw a 15% increase in Sympazan net revenue and a 15% increase in license and royalty revenue, offset by a reduction in manufacturing and supply revenue due to ordering patterns, as well as a reduction in co-development and research fees. Total revenues were $37 million for the nine months ended September 30, 2022, compared to $39.8 million for the nine months ended September 30, 2021. Excluding the KemPharm milestone of $2 million, as well as the deferred revenue of $2.1 million from the terminated license and supplier agreement with Fortovia Therapeutics that were recognized in 2021, but did not recur in 2022, total revenue increased by $1.3 million or 4%. Our net loss for the third quarter 2022 was $12.5 million or $0.23 loss per share. The net loss for the third quarter 2021 was $14.6 million or $0.37 loss per share. The change in net loss was driven by lower revenue as mentioned earlier, a decrease in research and development expenses, marginally higher operational expenses, including severance-related expenses, a decrease in interest expense and a decrease in non-cash interest expense related to the KYNMOBI monetization transaction. Our net loss for the nine months ended September 30, 2022 was $42.1 million or $0.90 loss per share. The net loss for the nine months ended September 30, 2021 was $41.6 million or $1.12 loss per share. The change in net loss includes severance-related costs of $2.7 million. Non-GAAP adjusted EBITDA loss was $7.7 million in the third quarter 2022, compared to a loss of $5.3 million in the third quarter of 2021. Non-GAAP adjusted EBITDA loss was $25.7 million for the nine months ended September 30, 2022, compared to a loss of $15.6 million for the nine months ended September 30, 2021. This year-over-year change in EBITDA loss again included severance-related costs of $2.7 million. Cash and cash equivalents were $18.6 million as of September 30, 2022. As outlined in the press release issued last night, after market close, we are reconfirming our full-year 2022 financial outlook. Our full-year financial expectations are total revenues of approximately $46 million to $49 million and non-GAAP adjusted EBITDA loss of approximately $37 million to $43 million. In summary, our 2022 guidance for full-year non-GAAP adjusted EBITDA loss reflects continued strong performance of our manufacturing and supply operations, business development activities and continued focused R&D investments related to the advancement of AQST-109. In addition, we will continue to implement expense reductions to reduce our cash burn, while preserving the continued development of AQST-109. 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. Your line is open.

Hi, good morning. This is Dennis Resnick on for Gary Nachman. Thank you for taking our questions. Just a couple for us, can you give us some more detail about where you are in process regarding out licensing Libervant in the U.S.? I need to clarify what some of the deal terms might look like? Also regarding Libervant, the licensing deal being completed, can we see that occurring before you receive alignment with the FDA on the head-to-head clinical trial? Or is that something that has to come first? Thank you so much.

Good morning, Dennis. Thank you for the question. From an out licensing standpoint with Libervant, I first want to be really clear on where we stand with Libervant. We have not wavered on our view on the value or the benefits of Libervant for a second. We believe in the products, we believe in the benefits to the patient; we remain surprised that the FDA is not allowing the first oral product in this space into the market based on the existing orphan product that is in place. Having said that, we believe at this time that when you look at where the company is going and the focus on AQST-109, as well as the continued progression of our financial position, it makes sense to look at and explore the opportunities to out-license Libervant. We have had some of those conversations in the past. All we're doing today is saying that is now something that will be front and center for us and we'll be very active on. In terms of what the deal terms look like, we're not providing guidance on that today. What I would say to you though is because we believe in the value and the benefits of the product, we will have deal discipline. We will be focused on ensuring that if we do find an appropriate partner, they are the right partner to bring that to patients and ensure access to the product, and that the Aquestive side of things that the company here has the right upfront component, as well as milestone and royalty components. So we will make sure that this process is running the right way. In terms of timing, whether it's before or after a readout on a head-to-head study, I think you should look at this as a continuum. We are going to pursue our discussions with the FDA as we are right now as fast as we can and we will continue to work diligently to change the FDA's orphan drug block. Whether a deal comes before or after that, will simply be a case of discussions we're having externally and the speed at which our discussions with the FDA move.

Great. Thank you.

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

Hi, thanks for taking the questions and congrats on the progress. Just one on Libervant, the feedback you're expecting from FDA on the protocol. Will this feedback be specifically focused, do you expect just on the trial design or do you think you'll get any feedback from the FDA on whether the strategy could be sufficient to overturn the orphan block?

Sure. Yes, so Jason, we're of course pushing to make sure that we understand the orphan drug block component. In our minds, the FDA's guidance on food effect is very clear and it is agnostic to the delivery method, so one delivery method should not get passed on with respect to, compared to another delivery method. So that's the spot where, of course, focusing on in our discussions, I have to believe that given the mandate of the FDA and the way the review division works, they will understand the importance of that fact. And in our design, we will be looking to where we are in the design we've given them, looking to highlight that difference. So we're hopeful that in the feedback from the FDA, we will not only get the typical guidance on our protocol and things they'd like to see or changes they think are appropriate, but also a confirmation from them on the importance of their own guidance and why that should be followed.

Got it. And then just a quick follow-up there, I think you've said previously that this food effect study could take a few weeks to a couple of months based on the protocol you submitted? Is that still the case?

Yes. The protocol is, as we have put it to the FDA, a relatively straightforward study to run. I actually do have our Chief Medical Officer here with me today, Ken Truitt, and I'll let him comment on the ease or difficulty of actually running the study.

Thanks, Dan. So as Dan alluded to, this is a comparative food effect relative bioavailability study. It's a very simple straightforward design. There is some length involved simply, because diazepam has some long-lived metabolites that need to wash out. So there will probably be a period of several months to complete the study, mostly related to the washout, but it's a simple design.

Got it. Thanks. And then just last one for me on AQST-109, you talked about the fact that you are doing and you will continue to do some work towards commercial preparation. Can you talk about any research you've done with payers so far? Or how you think about reimbursement and patient access for the product?

Sure. So first, I just want to point out and I will hand it over to Ken Marshall, our Chief Commercial Officer in a second here, but I do want to point out one of the benefits of the deal we announced last week where we're out-licensing Sympazan, as I now get to watch Ken Marshall and his management team that the expertise we've kept in-house move their significant experience and bring power from Sympazan onto 109. So you will see us be much more active in thinking about the commercial side going forward. But with that, I'll let Ken comment on your specific question.

Thanks, Dan. Hi, Jason. We've done some early work with payers that we have a little bit more to do, and they'll point towards the generics and their pricing, which is actually a pretty high price. It's around $300 per script at net. And suggest that as long as you're in that range, you should get very good access. And as you may or may not know, this is going to be largely a commercial market. So we won't have to deal with the same types of complexities, we did in CNS where we had about a 50-50 market split between Medicaid and Commercial, our pricing strategies will be able to be simpler and some of the more traditional tactics that you see employed by pharmaceutical companies are going to be very effective across this market, like coupon offsets and copay support.

Great. That's helpful. Thanks for taking the questions.

Our next question comes from Francois Brisebois with Oppenheimer. Your line is open.

Hi, thank you for answering the questions. I have a couple regarding AQST-109 on the commercial side. You mentioned that about a third of the targets may be allergists and pediatricians. Could you clarify who exactly your target audience is? Additionally, why is this market segment smaller and more manageable compared to the neurology side?

Thanks, Franc. And I'll again turn it over to Ken Marshall in a second here. What I'll just preface it with is what we're very focused on is making sure people understand that while epinephrine may be prescribed across a wide base, including a PCP call point, there is a significant market that is concentrated in this particular market with this particular product. But I'll let Ken expand from there.

Sure. Thanks, Dan. Yes, allergists are going to be very important and that is a very small call point; there's about 3,500 allergists in the U.S. We haven't done the physician level test filing yet, but you can always be certain that there will be that 80/20 type of rule that seems to be present. Some of those allergists will be more important than others for sure. So there will be a very efficient allergy call point. And when you say the same thing with pediatricians, and I think Dan referenced that accounts for about a third of prescriptions. To get you to about 50% of that market, you need those high decile pediatricians; there are quite a few more pediatricians, probably around 50,000 in the U.S. Certainly not all of those will be important to us. There will be a very small subset of them that write a significant portion of the balance of those prescriptions to get you to 50%. And then as Dan suggested, you get into a lot of onesie twosies in primary care; they generally are executing a treatment plan outlined by an allergist. So they do a lot of refills; you'll find some high-volume PCPs, but I think those will be few and far between.

Okay, great. And then any thoughts on this might be a little ahead of it, so any thoughts on DTC here just because it's such a known issue?

Sure. I think, look, we would love to have DTC like anyone else watching this product. I think what you'll see us focused on though is making sure that we can launch in the right way for the company that we are. So, I would think DTC is something that is down the line. It's not something we'll be focused on in the short term.

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

Good morning. Thanks for taking the questions. Dan, I was curious if you could maybe provide some more detail on the CMC feedback that you received on 109, if there's anything that you guys need to adjust in your manufacturing process? Anything that you need to overcome prior to submitting hopefully by year-end next year?

Sure. Good morning, Thomas. I'm going to pass that; I actually have Steve Wargacki, our Head of R&D here with me today. So I'll let him walk you through the findings from that interaction.

Sure. Thank you, and thanks for your question. The feedback we got was very much aligned with our plan and allowed us to proceed through with our registration batches with good alignment to ensure that the package that we ultimately produce is going to be aligned with the agency's expectations, and there was nothing that set us back.

Great. I have a quick question for Ernie regarding the cost reductions from the Sympazan sale. Will the costs be completely removed since the product was close to breakeven, or will some allocated overhead remain in the P&L? I'm trying to adjust SG&A to reflect the sale.

Well, as we had mentioned, especially in my script, the Sympazan P&L did include some expertise for payer and commercial knowledge that we would keep for AQST-109. So the entire Sympazan cost structure is not leaving us, but most of it would be. So we have to be retaining, as we've talked about a couple of different ways here, the payer expertise, distribution expertise that we need for 109.

Great. Appreciate you taking the questions. Thank you.

Our next question comes from Andreas Argyrides with Wedbush. Your line is open.

Good morning. Thanks for taking our question. So for 109, have you considered exploring biological signals aside from PK pressure and pulse? How are you exploring PK profiles across age groups such as in children? Do you think sublingual would be restricted to older age groups, since children have issues with swallowing? Thanks.

So, Andreas, I want to make sure I have that last part clear. Your question was do we think it will be restrictive to older, you're saying would it be restrictive to older pediatric patients, because of the sublingual?

Correct.

Yes. So I'll answer the last part first and then I'm going to turn it over to Ken Truitt to answer the rest of it. In the work we have done, so obviously we've been working on the film for almost 20 years now. The work we've done on other products, as well as this product, we have spent time with pediatric subjects down to the age of three. We have done multiple placebo studies for a variety of different disease states, and we do not see a difference in the data we have in how children, who are three versus children, who are nine, 12 or 15 interact with a sublingual product. So I don't think we see that from the data we have, and also the human factor work we'll do for 109 will prove that out from a filing perspective. But let me pass it over to Ken to talk about the other parts of your question.

Yes. So I think you asked the question on the pharmacodynamics. And you're correct in that we continue to focus primarily on the cardiovascular parameters. So heart rate, systolic blood pressure, diastolic blood pressure, et cetera. So that is what we're focusing on as a proxy for therapeutic benefit. There was also a question about approaching PK in pediatric population, and this would be done by an approach that's fairly typical where one develops a PK model based on adult data, steps down with a spot sampling strategy in children, because that's really what's practical to get the data one needs. And then continue matching as we step down at age, so that's how we would characterize the PK in children relative to what we demonstrated for adults.

Thank you.

Our next question comes from Laura Searle with Alliance. Your line is open.

Hello. This is Laura Searle calling in for Jim Malloy. Thank you for taking our questions. So going back to the potential out-licensing of Libervant and especially with the recent out-licensing of Sympazan. How would you characterize the current out-licensing environment as of now? And any potential indications of interest of possible partners for this candidate that are interested in its rights within the United States?

Thank you. So our findings, our observation in what we have seen talking with a variety of people throughout the marketplace is while the equity markets may seem challenging, or be challenging for a lot of companies, the licensing process at least from our perspective remains strong with our Sympazan process; we saw strength in that process and we felt very good about how that process unfolded. We have, as I mentioned earlier, been in the market; I'll call it or been talking to people about Libervant. So while we won't talk about the process in terms of specific levels of interest or timing, I would say we have seen signs of and we believe there will be strong demand for the process here. The last thing I would say though is we will be disciplined in this process and we will make sure that we either maximize the products by holding on to it if that becomes the right path or if the right partner comes along with the right economics and footprint for the patient population, entering into the out-licensing arrangement.

Understood. I also recognize that most efforts are focused on Libervant and 109. Do you have any updates on your 109 candidate and a potential timeline for an IND submission?

We really believe in the potential of 108 and are continuing to explore it internally to see if it can become our next pipeline product. However, our current focus as a company is on three main priorities: AQST-109, improving our financial position, and addressing the orphan drug block on Libervant. As we concentrate on these three, activities related to 108 will be somewhat limited until we overcome some of the challenges associated with the first three priorities. Once we've made progress there, 108 will take a more central role in our pipeline.

Got it. Thank you for taking my questions.

There are no further questions at this time. I'd like to turn the call back over to Dan Barber for closing remarks.

Thank you. Well, we appreciate everyone's time this morning. As we've discussed today, we remain excited by the opportunity that AQST-109 represents for us and patients. We will continue to focus on progressing 109 while at the same time continuing to focus on reducing our debt and strengthening our financial position. With that, I will turn the call back over to the operator.

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.