Aquestive Therapeutics, Inc. Q4 FY2022 Earnings Call

Good morning, and welcome to the Aquestive Therapeutics Fourth Quarter and Full Year 2022 Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Instructions will be given at that time. As a reminder, this call is being recorded. I would now like to turn the call over to 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 fourth quarter 2022, followed by a Q&A session. During the Q&A session, the team will be joined by Steve Wargacki, Vice President of R&D; and Ken Marshall, Chief Commercial Officer. As a reminder, the company's remarks today correspond with the earnings release that was issued after market close yesterday. In addition, a recording of today's call will be made available on Aquestive's website within the Investors section shortly following the conclusion of this call. To remind you, the Aquestive team will be discussing some non-GAAP financial measures this morning as part of its review of fourth quarter and full year 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 yesterday’s earnings release and in the Risk Factors section and in other sections included in the company’s annual report on Form 10-K to be filed with the Securities and Exchange Commission later this month 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 of the date they are 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. The fourth quarter marked the culmination of a seven-month run of improvements and execution by the management team in 2022. I am incredibly proud of the progress the team made in the fourth quarter and, quite frankly, since the company's leadership transition occurred in May of last year. In the fourth quarter, the Aquestive team advanced its lead pipeline product, AQST-109, Epinephrine Sublingual Film through a CMC-focused end-of-Phase 2 meeting with the FDA and a separate clinical and regulatory-focused end-of-Phase 2 meeting also with the FDA. Moreover, we completed our registration batches on schedule and plan to have the required 12 months of stability before the end of 2023. Our commercial collaborations also continued to perform at a high level. We completed the license of Sympazan to Assertio, surpassed 150 million doses of shipped product to multiple licensees, announced early payments to our debt holders to reduce our debt overhang, and ended the fourth quarter with more cash than we had at the end of any other quarter last year. In 2022, we executed on three significant non-dilutive deals that generated over $25 million in cash, significantly streamlined our business to reduce ongoing costs, and reduced our ongoing litigation through successfully winning a motion to dismiss in the Sympazan trust case, and gained a tentative approval for LIBERVANT, diazepam buccal film. We have also held true to our story. As I said to you during the second quarter earnings call in August, sometimes the simplest stories can be the most compelling. In my view, a pharmaceutical company with existing revenue and two acute rescue medications under development that both have strong clinical results to date, as well as long patent lives, is a simple and compelling story. This remains just as true today as it was last summer. Now, though, it is time to focus on 2023. This is an exciting year for Aquestive and there are several clear milestones that we remain focused on achieving. The first is continuing the rapid progression of AQST-109. We are currently in the clinic and anticipate having additional clinical data in the coming weeks. As we shared in December, this data will help us determine the reference list of products that we will use in our pivotal study. Once we have the results we need, we will send a revised pivotal protocol to the FDA for its comments. Once we have received the agency's comments, we will start our pivotal study. As of today, we continue to guide to a third quarter start to this study with the goal of having a top-line readout before the end of 2023. If achieved, this will keep us on track for a mid-2024 NDA submission through the FDA. You will see us continue to be active in the allergy community in 2023. Last month, we participated in the annual conference for the American Academy of Allergy, Asthma and Immunology, more commonly known as AAAAI. As previously disclosed, our Scientific Advisory Board members presented four posters. This conference gave us the opportunity to interact not only with our Scientific Advisory Board, but also advocacy groups and other allergy thought leaders. We continue to hear the universal message about the significant unmet need for better products for the treatment of anaphylaxis. We also continue to hear that an oral product will likely be well received by the healthcare community and by patients. This year, we will continue to refine and understand the competitive positioning of AQST-109, as the non-injectable product landscape continues to progress. Based on our interactions with the FDA, we continue to believe AQST-109 profile as a distinct competitive advantage among non-injectable products under development. The literature is clear. The guidelines for acute therapy and management of anaphylaxis state, and 'the symptoms of anaphylactic reactions usually begin acutely and may progress very quickly. Thus, symptoms can deteriorate within minutes.' Our well-respected and published scientific advisory board has also made it clear that speed of absorption matters. And just as importantly, the FDA was clear with us, stating that, 'similarity to epinephrine PK via autoinjector is preferred.' As you know, autoinjectors have shown a rapid uptake in plasma concentrations, typically resulting in a median Tmax between 10 and 20 minutes. Based on the data from our two completed pharmacokinetic studies, AQST-109 median Tmax of approximately 12 minutes is within this range. We believe that healthcare providers, caregivers, and patients will also view rapid uptake as important. At the same time, we will continue to focus on growing our commercial collaborations and strengthening our balance sheet. Let's start with our commercial collaborations. We now have seven significant out-licensing collaborations that span six continents. Our collaboration with Hypera in South America has resulted in the launch of Ondif, ondansetron oral film in Brazil for the treatment of nausea. This launch is on track and we continue to see strong order growth. Our collaboration with Zambon in Europe has resulted in the approval of ROF Riluzole Oral film for the treatment of ALS. Zambon plans to launch ROF in the coming months, and we look forward to supporting their efforts. And finally, our collaboration with Pharmanovia in Europe remains on track as well, and we look forward to bringing Libervant to patients and healthcare providers in Europe, if approved. We have also carried over our focus on raising non-dilutive capital from 2022 into 2023 and have already generated an additional $20 million in the first quarter of 2023. We recently reached an agreement with Indivior on several outstanding matters, including reimbursement of costs due under our license and supply agreement and changes to transfer pricing. This agreement resulted in a one-time cash payment of approximately $11.5 million. Indivior is important to the company and I am pleased that we have agreed upon several contractual updates that in my mind strengthen the relationship between the two organizations. I'm also excited to say that we have reached a settlement with BioDelivery Sciences International related to our ongoing patent infringement case regarding Belbuca and Bunavail. A settlement resulted in a one-time cash payment of $8.5 million to Aquestive. It is time to move on from this case and continue to resolve our outstanding litigation cases where appropriate. In addition, we are pursuing potential collaborations in Europe and China for the rights to AQST-109 and for Libervant; we are pursuing potential collaborations in multiple markets, including the U.S. While there's no guarantee of success, we will continue to pursue these opportunities. As a final point on this subject, and as I've stated before, we will remain disciplined on the out-licensing process for Libervant, especially as we learn more from the FDA. We believe Libervant remains an important product for those suffering from seizure clusters, and that patients and the epileptic community will be better off with access to the product now rather than waiting until 2027 when orphan drug exclusivity of a competitive product is scheduled to expire. The healthcare providers, advocacy groups, and patients we have interacted with have given us the same feedback. We believe 2023 is another critical year for Libervant. As we've discussed before, we have provided the FDA with additional clinical data and our proposed protocol for a head-to-head study of Libervant against the products currently blocking our access to the U.S market. The FDA has assured us that, 'the Office of Orphan Products Development and the Review Division are actively working on the review of the newly submitted information and the proposed study. Although, we cannot commit to a precise date for providing a response, we're making all efforts to respond in a reasonable timeframe.' While all of us are frustrated by the lack of speed of the responses, we will continue to diligently pursue U.S. market access. We have taken several steps to continue the financial turnaround story of the company. In the first quarter of 2023, we expect to reduce our outstanding debt by 18% and by the end of 2023 we further expect to reduce our overall debt by over 40%. Depending on market conditions, interest rates, and terms, we may seek to refinance our debt as the debt level becomes right-sized for our business. Ernie will talk more about the financials in a moment. In conclusion, we carry our momentum from 2022 into 2023 and are off to a fast start. Our total non-dilutive capital raise is now over $45 million since May of last year. This year, you can expect us to focus on rapidly progressing AQST-109 into a pivotal study pursuant to the FDA's parameters, expanding our collaborations and out-licensing arrangements, further strengthening our balance sheet, and continuing to work towards U.S. market access for Libervant. With that, I will turn the line over to Ernie.

Thank you, Dan, and good morning, everyone. By now, you have seen our financial results and our earnings release that was issued last evening. As we typically do, we will address most of the discussion related to the fourth quarter and full year 2022 results in the Q&A. During the fourth quarter of 2022 and continuing into 2023, we continue to manage the company for success as we received additional non-dilutive capital and reduced expenses going forward to extend our cash runway to support the continued development of our lead product, AQST-109, the first orally administered epinephrine product. During the fourth quarter, we entered into a license agreement with Otter Pharmaceuticals, a subsidiary of Assertio Holdings, to license Sympazan. 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 and a $6 million milestone payment subsequent to the notice received from the U.S. Patent and Trademark Office of allowance of an additional patent application for Sympazan. In addition, we also entered into a long-term supply agreement with Assertio for Sympazan and will receive royalty payments from Assertio on Sympazan sales during the term of the license agreement. The $15 million received from the Assertio transaction, along with previously announced transactions with Haisco and Pharmanovia, generated over $25 million of non-dilutive financing in 2022. These transactions, along with prudent expense management contributed to our year-end cash balance of $27.3 million. The recently announced amendment to the Indivior license and supply agreement, as well as the legal settlement agreement with BDSI generated $20 million of non-dilutive capital that was received in March 2023. As we have previously stated, we will always pursue non-dilutive sources of capital first to extend our cash runway. As Dan mentioned, we expect to reduce our overall debt by approximately 18% by the end of the first quarter of 2023 and by 40% by the end of 2023 through a combination of principal prepayment and scheduled principal payments. As previously announced, we prepaid approximately $6 million of principal to date during the first quarter of 2023. We would expect to refinance our remaining debt balance depending on market conditions. Total revenues were $10.7 million in the fourth quarter of 2022 compared to $11.1 million in the fourth quarter of 2021, a decrease of 4%. For the fourth quarter of 2022 compared to the prior year period, we saw a 141% increase in license and royalty revenue due to an increase in our licensee sales of products, a 17% increase in co-development and research fees revenue, and a 16% increase in manufacturing and supply revenue due to increased manufacturing volume of Ondif for Hypera in Brazil offset by a 79% decrease in proprietary sales net revenue due to the licensing of Sympazan to Assertio in October 2022. Total revenues were $47.7 million for the full year 2022 compared to $50.8 million for the full year 2021, a decrease of 6%. Excluding non-recurring revenue of $4.1 million that was recognized in 2021, total revenue increased by 2%. Comparing the year ended 2022 to the prior period, we saw a 3% increase in manufacturing and supply revenue and a 10% decrease in proprietary sales due to the out-licensing of Sympazan. Our net loss for the fourth quarter of 2022 was $12.4 million or $0.23 loss per share. Our net loss for the fourth quarter of 2021 was $28.9 million or $0.72 loss per share. The change in net loss was primarily driven by a one-time loss on extinguishment of debt of $13.8 million in 2021, lower non-cash interest expense related to the KYNMOBI monetization transaction of $1.8 million, and a decrease in total operational costs and expenses of $1.4 million, primarily due to a reduction in our sales force subsequent to the out-licensing of Sympazan during the fourth quarter of 2022 and lower share-based compensation expense offset by higher raw material and production costs. Our net loss for the full year 2022 was $54.4 million or $1.12 loss per share. The net loss for the full year 2021 was $70.5 million or $1.85 loss per share. The change in net loss was primarily driven by a one-time loss on extinguishment of debt of $13.8 million in 2021, lower non-cash interest expense related to the KYNMOBI monetization transaction of $6.5 million, and lower interest expense of $3.5 million offset by higher costs and expenses of $4.2 million including one-time severance expenses. Non-GAAP adjusted EBITDA loss was $9.6 million in the fourth quarter of 2022, compared to a $9.2 million loss in the fourth quarter of 2021. Non-GAAP adjusted EBITDA loss was $35.3 million in the full year 2022 compared to $24.9 million in the full year 2021. The year-over-year change in non-GAAP adjusted EBITDA loss was primarily driven by the items described above. As of December 31, 2022, cash and cash equivalents were $27.3 million. Under the At-the-Market or ATM facility, we accessed $860,000 of new proceeds during the fourth quarter of 2022 and $3.9 million during the year ended December 31, 2022. The ATM facility has approximately $33.4 million available at December 31, 2022. We are focused in 2023 on the continued development of our Epinephrine program and commencing our pivotal PK program later in the year. The Buccal Film continues to retain a strong presence in both the U.S. commercial and CMS markets and continues to provide an opportunity outside the U.S. While the Buccal Film is a legacy product for us, it remains a significant part of our near-term revenue outlook. This product continued to perform well in 2022 with Indivior retaining a U.S. market share of approximately 34%. Our revenue guidance for 2023 considers a modest level of market share erosion. Moreover, in 2023, we will continue to focus on capital conservation so that our cash runway is extended as far as possible. As outlined in the press release issued last night after market closed, we provided our full year 2023 financial guidance as follows: total revenues of approximately $37 million to $41 million, and non-GAAP adjusted EBITDA loss of approximately $31 million to $36 million. Please note our revenue guidance for 2023 no longer includes proprietary net sales for Sympazan due to the license agreement with Assertio, but does include manufacturing and supply revenue and royalty fees. In addition, our guidance for 2023 includes focused R&D investments related to the continued development of AQST-109. Again, the first orally administered epinephrine product. 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.

Good morning. This is Dennis on for Gary. Thank you for taking our questions. Regarding 109, can you just talk a little bit more about the March FDA interaction? What information did they provide? Was this proactive on their part? Did they provide any specific suggestions as to what would and would not be a good comparative product? And did they provide any new additional colors to what they would be important to show in the pivotal trial? I've got one follow up after.

Sure. Good morning, Dennis. Thanks for the question on 109. I'm going to pass that over to our SVP of R&D Steve Wargacki to give you an answer.

Thanks, Dan. And thank you, Dennis. The interaction that we had in March was initiated by us and it was designed to gain clarity. A lot of topics were covered at the end of Phase 2 meeting and we sought to gain clarity in exactly what would be required to get the proper feedback on our pivotal protocol, and we got that clarification from them. The RLD selection is our choice but, as Dan mentioned in his comments, will be informed by the study we currently have ongoing.

And Dennis, in terms of the selection of the reference listed products, that is completely up to us as the sponsor to choose. The FDA has given us clear guidance, but it is our choice.

Okay, perfect. And then regarding the recent presentation of the allergy, asthma and immunology meeting last month, could you just maybe talk about the receptivity the posters got and overall, KOL physician feedback? Thank you so much.

Sure. I'm going to pass that over to our Chief Commercial Officer, Ken Marshall.

Hi, Dan. Can you guys hear me okay?

You’re great, Ken.

Yes, it was a good meeting for Aquestive. We had four posters. We had KOLs presenting on our behalf at each one of those, along with Aquestive's support and showed a range of data. I talked about our rapid Tmax. I think that was one of the highlights and one of the most impressive pieces of data to the audience. We've consistently produced a 12-minute Tmax, and that's unlike any other medicine, especially in oral medicine. And that was the other takeaway, how frustrated the medical community is and the patient community that was in attendance with needle devices. They certainly are looking for a better solution and extremely impressed with our ability to put epinephrine on a strip and deliver it orally.

Dennis, just to add to Ken's comments, gives us really excited about AQST-109. It continues to get us excited that we're the only oral product in development. We know there's a variety of nasal sprays coming through, but we're not aware of any significant other oral product that is in development at this time. So we think that's a really important and unique position for our product.

Great. Thanks so much, guys.

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

Hey, it's Roy on for Jason. Thanks for taking our questions. I had a couple follow-ups on 109 and then one for Ernie. So, I guess on 109, again, on the protocol, I know you're going to submit to the agency and you're pending this reference product data. But just any details you can give us about the proposed final design at this time? And then, Dan, you made a comment about better characterizing the market in 2023 as it evolves. Just any details you can give us on the efforts that you're going to make and the key questions you're looking to answer? Thanks.

Sure, good morning, Roy. I'll address the market evolution question first and then I'll pass it to Steve to discuss the protocol design. Ken has mentioned our observations regarding the seizure cluster market, where the introduction of alternative products has led to significant market growth, nearly doubling in size. We expect that as non-injection products emerge for treating severe allergic reactions, the market will continue to grow, and we will monitor these dynamics closely as new products are launched. However, we maintain that patients generally prefer oral treatments for anaphylaxis, and we are excited about bringing that option to market. Now, I'll hand over the question about the protocol design to Steve.

Thank you. Yes. So the pivotal protocol design remains consistent with what we've previously guided. We anticipate this being an 80 to a 100 healthy volunteer subject study looking at the pharmacokinetics and pharmacodynamics of our product against two or more reference products. And that'll allow us to demonstrate how we perform relative to the products that are available in the market.

Okay, great. That’s helpful. And then that one for Ernie, just any details on the expense trajectory for 2023 that seems like we should expect SG&A maybe to continue down this quarter. Just anything you can give us there. Thanks.

Well, as I said in my script, we continue to manage our expenses closely to help with our cash runway. Certainly, the reduction as I announced in my script about the reduction in expenses last year related to the license of Sympazan to Assertio will carry forward into 2023 and is embedded in our projection. I think the important thing about our expenses for 2023 is the continued focus on the advancement of our 109 project.

Okay, great. Thanks. Let me throw in one more on 109, just on the European and Chinese partnership discussions. You can never predict when those are going to happen, but are you waiting for the data or is it possible to finalize one of those before you get the pivotal data? Thanks.

Well, I think, as you know, business development in any company is a constant part of the business. So, at this time, we will continue to look at the potential opportunities that are there. I think as we go, of course, as more data is available on 109, those opportunities will evolve. But I think you'll see us continue to look for the right partnerships to make sure that we can broadly distribute 109, not just in Europe and China, but, quite frankly, all over the globe. So that's one of the themes of our company as we go through 2023, is making sure our products are available in a variety of markets. And 109 is, of course, one of those products that will be focused on, on making sure we place correctly.

Great. Thank you for taking the questions.

Thank you. Our next question comes from Francois Brisebois with Oppenheimer, your line is open.

Hi, thanks for taking the questions. Just a couple here. I was just wondering if you can maybe compare and contrast this bracketed kind of method of showing your PK data to the FDA with reference products. And you seem to say the reference products that you end up using are your choice. Can you just maybe compare and contrast what the process has been for the nasal spray that I think we're expecting to do for mid-year here, so just the bracket approach. Did they have to use two or more or similar products? Did they have a choice on what products to use? I'm just trying to figure out if there's been, if the FDA's been consistent with both companies here.

Yes. Good morning, Frank. Thanks for the question. So obviously we don't know exactly what the FDA is saying to the other applicants. So, we have the same public information that you have. But our view from looking at the public statements of the nasal sprays that are in development is, and also our experience with the FDA in other drug development places, is that they are being consistent with the various products. So, my opinion would be that is something that all products that are seeking this indication will have to achieve. I think the real question for the FDA will be on the speed side. How fast do you have to be in order to be relevant for this particular indication?

Understood. And the meaning that you got it to the FDA in the second half of '23 for the administration part of the label. So is there a chance, I guess, that means that you could start the pivotal in the third quarter, and then potentially have this meeting about administration in the fourth quarter. It wouldn't be a barrier to maybe starting or else with the starting the pivotal?

No, that's a great question. Just to clarify, as we outlined in December, we had a very productive end-of-Phase 2 meeting that Steven and his team led and we have learned, or we feel we have learned a clear set of things that the FDA wants to see in our filing. Obviously, one is the pivotal study. But the other is related to administration as we outlined. And so, Steve and the team have very smartly, in my view, worked with the FDA to clarify that we can separate those two things into two different activities with the FDA that then come together at the filing. So, I think that was a smart development move and it allows us to pursue our pivotal while also having that meeting on the administration items with the FDA.

Understood. Thank you and congrats on the progress.

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

Thanks. Just to follow up on the last question, Dan. So, there is no risk that there would be a learning or a finding from the administration characterization that would in any way impact FDA's thinking around the pivotal, right? I just want to confirm that.

Yes. I think the key point is that we have been in business for nearly 20 years, and our technology has always focused on oral thin film. When it comes to questions about the administration aspects of our technology, we have a substantial amount of data and a thorough understanding. Based on the comments from the FDA so far, we feel we fully comprehend what they are seeking and are ready to provide that information. Currently, we don't believe it's necessary to make this a linear process. Addressing the administration aspects in one segment while the pivotal study is ongoing is perfectly acceptable.

And recognizing that a lot of the market characterization work is upcoming in the current year. I was curious if there are any obvious areas where an oral film would not be the preferable route of administration that you've been able to identify or feedback you have gotten from KOLs or patient groups?

Sure. So, Thomas, that's a tough question to ask a CEO in the earnings call, right? I'm obviously very biased towards our technology. I think our technology works broadly in the patient population, and that's why we are pursuing this product. We think that the fact that a majority of patients don't have any product at all with them during an allergic reaction speaks volumes to the need for something that's easier to carry and simple to use. And we think we fit both of those criteria. So, look, are there instances where other technologies might be preferred? Sure, but we are very focused on where our technology benefits patients, and we think in this area, we have a really strong and compelling value proposition to the patient.

Okay. And then just a final one for Ernie, the drop in gross margin or non-GAAP gross margin, in particular, Ernie, from third quarter to fourth quarter was pretty strong. Anything you could share with us with respect to that in going into 2023?

I believe several factors are influencing this situation. There's a shift in product mix. The removal of high-margin products like Sympazan is significant. When looking at year-over-year comparisons, the gross margin is calculated on total revenue, and the $4 million in incremental, non-recurring revenue from last year affects the margin. Additionally, when we consider the revenue from manufacturing related to Sympazan, which has a different margin structure compared to manufacturing the product itself, and we also factor in the new product launches for Hypera Brazil, which come with a different margin, it all points to a change in product mix, along with some additional higher costs associated with materials and production.

Got it, appreciate. Thanks for taking my question.

Thank you. Our next question comes from Ram Selvaraju with HC Wainwright. Your line is open.

Thanks very much for taking my question. Just a few here. Dan, I was wondering if you could provide us with a little bit more color on the relationship with Indivior as it currently stands, and what additional advances or progress you expect over the course of 2023, and how you expect that to specifically positively impact Aquestive's business. Secondly, thought that you could perhaps offer us some additional detail on your updated thinking regarding AQST-108, and then lastly, with respect to Libervant was wondering if you could give us a sense of how you are thinking about the best possible path forward commercially for the drug in the United States, and how that's being colored by the specific timing with which the product may receive market authorization. Thank you.

Sure. Thanks, Ram, and good morning. To address your first question about our relationship with Indivior, it's very significant to us. We value our partnership and are committed to providing high-quality products for their patients, and we believe they recognize that. Regarding the recent amendment and agreement we announced, it represents a positive development for our company. It reflects the mutual importance we place on this relationship, particularly with the extension of the contract term, which we welcomed. There's a shared understanding of the value we bring to Indivior, and it feels like we have a collaborative partner. Looking ahead, we know there is generic competition for Suboxone, and we acknowledge that market share in the U.S. may gradually decline, as Indivior has indicated. We'll monitor how overall volumes compare to the market decline, even though we don't have control over that. Concerning AQST-108, we are enthusiastic about this product as a great opportunity to leverage our Epinephrine Prodrug platform. However, given the challenging macro environment, we need to maintain a solid balance sheet. As Ernie mentioned, we will exercise discipline in our spending, which means AQST-108 will be on hold until AQST-109 progresses further and our financial position improves significantly. Regarding Libervant, it's important to remember that there are patients in need of this product who are currently waiting for it. Beyond our company's eagerness to launch the product, we feel that patients deserve access to it. So, we will keep advocating, generating data, and staying engaged with the FDA to ensure they recognize the impact of their decisions on patient needs. We are committed to bringing this product to market, and while we cannot predict the exact timeline, we are excited to expand our partnerships beyond the U.S., believing that patients in Europe and other markets will have access to it before 2027.

Okay. And just one more question for Ernie. I was just wondering if you could clarify whether the financial guidance you've given for 2023 includes the impact of additional litigation settlements or not?

Hi Rob. And no, it does not take into account any impact for additional litigation settlements at this point.

Our next question comes from James Malloy with Alliance Global Partners. Your line is open.

Hi, everyone. I appreciate you taking my question. Great job on generating non-dilutive cash at the start of the year. I have a quick follow-up regarding additional settlements. Is there anything we should anticipate for 2023? Also, concerning Libervant, how would you describe any potential partnership discussions? Is there a possibility of progressing on a partnership before claims and FDA approval, or will that always depend on those factors? Thank you for addressing my questions.

Good morning, James. Vent to your voice. Could you repeat the first question? There was a ding that occurred right in the middle of you speaking, and we didn't quite catch that first question.

Just a follow-up on the prior question on any additional settlements. Is there anything that we should potentially anticipate over 2023, even if it's not in the guidance?

Sure. So, look on the legal side. On the litigation side, I'm very pleased with how our company and our general counsel in particular has worked to reduce our legal spend over the last several months. First, we were able to have a motion to dismiss granted in the Suboxone antitrust case. Now we have successfully reached a settlement with BDSI on a long, outstanding litigation case that was costing us money. So, both of those items are positive news for us and reduce our legal spend going forward. Will there be other settlements this year? Look, we don't have much left in terms of litigation inside of this company, so I don't know if I see big things on the horizon for that area, but I suppose you never know. In terms of Libervant potential partnerships, yes, we do believe that there are potential partnerships to be had with Libervant, both outside the U.S. and in the U.S. I think that the critical thing for Ernie, myself, and the team is the discipline around what is the right partnership. And what does the value look like? What does the pathway look like and how do we make sure that patients are maximized in that partnership? So that's where I think you'll see us just be really thoughtful. But yes, if all we wanted to do was find a partner, I don't think that's the difficult part. It's finding the right one that's the difficult part.

Hey, would you be able to characterize sort of how many of the right partners have come in and you're still trying, you're trying to judge it between them? Or is it really, again, lot's going to depend on if you can actually get approval by the FDA? Certainly, that's a big issue for it.

Sure. I think the right way to characterize it is we have a lot of active discussions. So, whether those are the right partners or there's more right partners to come, I think is kind of an amorphous thing for us to know. But I think we have a reasonable set of potential collaborations that could occur.

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

Good morning. This is Caroline on for Andreas. Thanks for taking our questions. So, I just have one question on 109. In the press release, it was mentioned that you continue to characterize the administration of 109 under potential conditions of allergic reactions. Just wondering if you can elaborate on the conditions you are evaluating 109 under and if this was requested specifically by the FDA during the end-of-phase two meeting or in their March correspondence. And then what else might the FDA want to see besides the altered dosing conditions evaluated in part three of the EPIPHAST study?

Sure. Thanks, Caroline. I'll pass that over to Steve.

Yeah. At the phase two meeting, we discussed with the agency a variety of topics. Some of them were in ensuring the ability to administer and deliver our product under the conditions of a severe allergic reaction, which is expected. Certainly, a conversation we look forward to. And we do continue to evaluate all of those conditions, right? And that ultimately, is all tied to your risk-benefit in your NDA. And that's part of the meeting that we talked about having later in the year with the agency to present all of our work on it, line that we've characterized everything in the right way and ensure that we have a robust filing in the future. That is the intention.

Okay. Great, thanks. And then I just have one follow-up, if I may. So, with the PDUFA for ARS Pharmaceuticals nephrine coming up in mid-2023, if approved, do you think it is possible that FDA would eventually want to see 109 PK compared to nephrine?

I don't believe that's how the pathway operates. This isn't a situation where we'd suddenly need a comparison for an orphan drug, and we don't anticipate such a need arising. However, we find our pharmacokinetic curve to be very convincing, and we will keep comparing it to the existing approved products. We believe that should meet the FDA's requirements.

Okay, great. Thank you so much.

Thank you. This concludes our question-and-answer session. I'd like to turn the call back over to Dan for closing remarks.

Thank you and thank you to all of you for joining us today. As I stated earlier in the call, we are going to remain very disciplined this year on ensuring we deliver on things we have laid out and that will continue to be rapidly progressing AQST-109 towards our pivotal site. We will continue to focus on expanding our collaborations, which will allow us to further strengthen our balance sheet. And, of course, we do remain serious about finding the pathway for Libervant both here and abroad, to get it in the hands of patients. With that, we appreciate your joining us today and we will talk to you soon.

Ladies and gentlemen, this does conclude the program. You may now disconnect. Everyone, have a great day.