Earnings Call Transcript - AQST Q2 2022

Operator, Operator

Good morning, and welcome to the Aquestive Therapeutics Second Quarter 2022 Conference Call. As a reminder, this call will be recorded. I would now like to introduce your host for today’s conference call, Bennett Watson of ICR Westwicke, Investor Relations. You may begin.

Bennett Watson, Investor Relations

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 second quarter 2022, followed by a Q&A session. During the Q&A session, the team will be joined by Dr. Steve Wargacki, VP of R&D; 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 second 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 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 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 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.

Dan Barber, CEO

Thank you, Bennett. In many ways, this last quarter was the most challenging in the company's history. We managed through not only a CEO transition but a significant change in market value from the beginning to the end of the quarter. At the same time, macroeconomic conditions around us continued to deteriorate, driven by inflation, recession concerns, and global events. These circumstances have led us to reassess our key priorities in how we are creating value for our various stakeholders, including patients and investors. When I think about how we could help patients, I get more optimistic than I have ever been in my 15 years with the company. We have not one, but two acute rescue medications under development that have the potential to transform the patient experience within their respective therapeutic areas. These two medications are AQST-109, epinephrine sublingual film for the potential treatment of severe allergic reactions, including anaphylaxis, and Libervant, diazepam buccal film for the potential treatment of seizure clusters. This is a great position to be in. When I think about the investment community, we clearly have work to do. Aquestive's story has been overshadowed by a variety of factors, including low proprietary product sales, driven by delays in the FDA review of Libervant, and our cash burn rate. Over the next several months, I will be focused on reinvigorating the Aquestive story and ensuring that the true value of our two major pipeline products is understood by all of our stakeholders. One of the most exciting elements of the Aquestive story is the fact that if approved and launched, both acute rescue medications have patents that extend well into the late 2030s. We must not forget the significant opportunity to create long-term value associated with these two product candidates while we manage the company's near-term changes. Let's talk about two items that we have direct control over: proprietary product sales and our cash burn rate. While I will leave it to Ernie Toth, our CFO, to provide more specificity, I can tell you that we are committed to eliminating the cash burn associated with the commercial support of Sympazan oral film for the treatment of seizures associated with Lennox-Gastaut syndrome, or LGS. This part of our business must be profitable going forward. We have eliminated almost all of the commercial burn through continued growth and rightsizing our non-sales infrastructure. As painful as this has been, rightsizing our organization was an important step forward. This means that our cash burn will be limited to our important product development efforts on AQST-109, supported by our corporate functions. We have a variety of levers that we can use to manage our cash burn. These include: our ongoing U.S. and ex-U.S. licensing activities; continued reductions in expenses; working with our lenders on a potential refinance of our debt; and conducting a basic strategic review of our assets. It is important that we view each asset of the business objectively and in the context of the broader business. From my perspective, I continue to believe that investing in AQST-109 is a great opportunity for Aquestive and the right place to focus our resources, time, energy, and cash. According to experts, over 40 million Americans are at risk of experiencing a severe allergic reaction, including anaphylaxis. Yet each year, only 3 million prescriptions are filled for injectable epinephrine. We believe this is a major gap that needs to be addressed through patient education, improved risk management, and, yes, additional product options. For the 3 million or so Americans who do fill a prescription, it is far from certain as to whether they will carry their autoinjectors with them. I believe introducing a product that is simple, can be carried in a pocket and delivers target levels of epinephrine quickly would be a welcome addition for patients, caregivers, and healthcare providers. In fact, in a survey of over 500 allergists, pediatricians, and primary care physicians, we found that 88% of survey respondents were concerned about patients and/or their caregivers consistently having their autoinjectors on hand at all times. Our survey data also suggests that too often, patients and caregivers use off-label drugs such as antihistamines as their first-line treatment for severe allergic reactions. We found that 83% of survey respondents agreed that patients with at least some risk for anaphylaxis too often administer oral antihistamines in place of an epinephrine autoinjector. And unfortunately, many allergists will tell you drugs such as antihistamines do not stop the allergic cascade that marks the beginning of anaphylaxis. We are also excited by the consistently fast time to maximum concentration, or Tmax, we have seen in studies to date. As far as we are aware, no other alternatives to injected epinephrine have achieved a Tmax that is comparable to EpiPen, the standard of care. These are just a couple of the reasons that we feel so strongly about AQST-109. The results from our recent EPIPHAST study provide what we believe are compelling data for the use of sublingual epinephrine as an acute rescue medication. We are currently in the clinic with our EPIPHAST II study, and we'll have direct comparative data to EpiPen before the end of the quarter. As we have previously guided, we expect to meet with the FDA in Q4 to conduct an end of Phase II meeting for this program. Now let's talk about Libervant. All of us, especially our patient stakeholders, have waited far too long for this product to come to market. Sometimes, because of delays like the one we are experiencing, our stakeholders can forget why this drug is so important to the patient population. Imagine being a patient who is at risk for seizure clusters. Every part of your daily life must be viewed through the lens of a potential seizure. Where will you be when it happens? Will you have your medication with you? Will you be able to use your medication? Will those around you be able to correctly administer your medication? Will it work after a single administration and under all conditions? And will you have to worry that more seizures might occur within hours of your first dosing? Libervant was built to fit the lives and activities of the patient. As one caregiver of an LGS patient who currently uses Sympazan recently wrote to the FDA, 'The fact that Sympazan is so easy to administer and that it dissolves quickly gives us the peace of mind that the medication is most effective. We are also able to carry Sympazan effortlessly because there's portability. My husband and I always carry an extra dose in our wallets. Based on our experience with Sympazan, we are writing to advocate for the approval of Libervant. It would be a huge contribution to the epileptic community to have a rescue medicine with portability, ease of use, and precision that we have experienced with Sympazan.' End quote. From my perspective, the most credible voices come from those who have had to live with and manage the potential onset of seizure clusters. We believe our final label for Libervant and our publishable clinical results will provide patients with many compelling answers to the questions I mentioned before. We are anxious to bring this offering to the patient population, and we will continue to work with the FDA to reach a final decision on our application. While we can appreciate that the FDA has faced unprecedented challenges over the last several years between the pandemic and continuous orphan drug litigation, we remain disappointed that the FDA did not meet its commitment on our PDUFA date. Despite the challenges that Libervant has faced, each day that goes by brings us closer to both an FDA decision and the expiration of any exclusivity hurdles facing Libervant. From my perspective, the patient need for additional medical options in this space remains great. And if approved, we will be focused on getting patients access to Libervant as rapidly as possible. It would be unrealistic to think that we can solve all of the problems facing Aquestive immediately. However, we are laser-focused on continuing to carefully manage the elements of the business we control while rapidly progressing our pipeline programs towards significant value inflection milestones. We can also make sure that the Aquestive story is one that is clear, transparent and unobscured by unnecessary noise. Sometimes the simplest stories can be the most compelling. In my view, a pharmaceutical company with the 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. In summary, we anticipate that our revenue-generating divisions will be profitable going forward. We have reduced our expenses and are carefully managing our cash flow through our available levers. We have two exciting acute rescue medications under development, both with the potential to transform the patient experience. We are focused on reinforcing the Aquestive story with our various stakeholders while we execute on our strategy. With that, I will ask Ernie to walk you through the most recent financial results.

Ernie Toth, CFO

Thank you, Dan, 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 second quarter 2022 results in the Q&A. During the second quarter, we continued to manage the company for success as we've raised additional capital and reduced expenses going forward to extend our cash runway. On June 8, we closed on a registered direct offering with a single healthcare-focused institutional investor, and certain of the company's executives, generating net proceeds of approximately $7.8 million after deducting fees and expenses. We intend to use these net proceeds from the offering for general corporate purposes. On April 12, we entered into a purchase agreement with Lincoln Park Capital Fund, which provides that upon the terms and subject to the conditions and limitations under the purchase agreement, the company has the right but not the obligation to sell to Lincoln Park up to $40 million of its common stock from time to time over the 36-month term of the purchase agreement. The Lincoln Park facility, along with our existing ATM facility, should we decide to utilize them, are available tools for Aquestive. However, we will always look first at options that are non-dilutive and available to us to extend our cash runway. During the second quarter, we implemented expense reductions to reduce the cash burn of our commercial operations and rightsize the company while preserving the continued development of AQST-109. These expense reductions contributed to our improved 2022 EBITDA guidance, which I will discuss later. Our strong ongoing commercial and manufacturing and supply businesses are already implemented expense management and business development activities, as well as the additional funds available under our existing debt facility should Libervant be approved and gain market access, provides the tools and flexibility as we fund our ongoing business activities. Total revenues were $13.3 million in the second quarter of 2022 compared to $15.3 million in the second quarter of 2021. Excluding a one-time milestone earned from KemPharm of $2.0 million that was recognized in the second quarter of 2021, total revenue remained flat. Total revenues were $25.5 million for the six months ended June 30, 2022 compared to $26.5 million for the six months ended June 30, 2021. Excluding the KemPharm milestone of $2 million, as well as the deferred revenue of $2.1 million from the terminated license and supply agreement with Fortovia Therapeutics that was recognized in the first quarter of 2021 but did not reoccur in 2022, total revenue increased by $3.2 million, or 14%. This increase was primarily driven by increases in proprietary product sales of 29% as well as manufacturing and supply revenue of 11%. Our net loss for the second quarter 2022 was $16.3 million, or $0.36 loss per share. The net loss for the second quarter of 2021 was $12.4 million, or $0.33 loss per share. The year-over-year change in net loss was driven by lower revenue, as mentioned earlier, and higher costs and expenses, including severance costs of $2.3 million in the second quarter of 2022. This was offset by a decrease in interest expense and a decrease in non-cash interest expense related to the KYNMOBI monetization transaction. Our net loss for the six months ended June 30, 2022, was $29.5 million, or $0.68 loss per share. The net loss for the six months ended June 30, 2021, was $27 million, or $0.74 loss per share. Non-GAAP adjusted EBITDA loss was $9.9 million for the second quarter 2022 compared to a loss of $4.1 million in the second quarter of 2021. The year-over-year change in adjusted EBITDA was driven by higher net loss, including severance costs. Non-GAAP adjusted EBITDA loss was $18 million for the six months ended June 30, 2022, compared to a loss of $10.3 million for the six months ended June 30, 2021. Cash and cash equivalents were $17.7 million as of June 30, 2022. As outlined in the press release issued last night after market close, we are revising our full-year 2022 financial outlook. Our updated financial year expectations are: total revenues of approximately $46 million to $49 million, increased from $42 million to $47 million in prior guidance; non-GAAP adjusted gross margin of approximately 70% to 75%; and non-GAAP adjusted EBITDA loss of approximately $37 million to $43 million, improved from $51 million to $58 million in prior guidance. It is worth reiterating that this 2022 financial guidance does not include any revenues from Libervant and will not until we receive FDA approval of Libervant for the U.S. market access and the launch is underway. In summary, our 2022 guidance for full-year non-GAAP adjusted EBITDA loss reflects continued strong performance by both our commercial operations and manufacturing and supply operations and continued focused R&D investments related to the advancement of AQST-109. At the same time, our implemented expense management across our business will allow us to be as capitally efficient as possible. With that, I will now turn the line back to the operator to open the line for questions.

Operator, Operator

Our first question comes from Gary Nachman with BMO Securities.

Evan Hua, Analyst

This is Evan Hua on for Gary Nachman. For Libervant, is there any more visibility on that timeline? And if you can add any additional color regarding the discussions with the different groups at FDA, including the orphan drug group. And I have a few follow-ups after that.

Dan Barber, CEO

Sure. Nice to hear your voice. So look, we're all frustrated with the delay at the FDA regarding Libervant. But I think it is important to remember, first, our patent on this program goes well into the 2030s. We know the unmet need remains high. We're the only oral product that is under review at the FDA for this disease state. And so from our perspective, while we're frustrated at an 8-month delay, we have to remember the tremendous potential value associated with this program as we go through the years to come. When it comes to the FDA, at this point, we're having what I would describe as just about weekly interaction. My last interaction with the FDA was in the last two weeks, and it was with the head of the orphan drug group. I can tell you, they are acknowledging our patience. They've indicated that they are making progress, and they've reiterated that they will get us a response in a reasonable time frame. I do believe them. I do believe they're working on it. I do believe they're making progress. And I do expect we will get an answer in the future. So with that, I would, Evan, ask what other questions that we can answer for you today.

Evan Hua, Analyst

Great. And then for AQST-109, what are you planning for in terms of the pivotal PK, especially with the final formulation size and dose? And secondly, would the study be sufficient for filing?

Dan Barber, CEO

Yes. So to be clear, we're already using the final formulation and dose. The EPIPHAST study that we just completed, in all three parts of that study, we used the dose and the strength that we will be using in our pivotal PK study. In terms of the design, I'll pass it over to my colleague, Steve, to give you a brief overview of that.

Dr. Steve Wargacki, VP of R&D

Yes. So we continue to prepare for the pivotal study. However, we are approaching our end of Phase II meeting in Q4 of this year where we'll get full alignment with the FDA on all the critical statistical endpoints that we need to have a successful pivotal study.

Dan Barber, CEO

And Evan, was there a last part to your question, or did we cover your question?

Evan Hua, Analyst

Yes. Last part, is the study going to be sufficient for filing, or would you need another study?

Dan Barber, CEO

Yes. Well, as Steve mentioned, the end of Phase II meeting we do see as a critical milestone for this program, where as you know in that meeting, we’ll lay out with the FDA our remaining work to filing and make sure that they are aligned with our view. Right now, the two studies that we are planning prior to filing would be the pivotal PK study that Steve just mentioned as well as a small pediatric study in healthy volunteers. Other than that, we will do a human factor study that's already ongoing. We don't plan at this point on doing any additional studies prior to filing.

Operator, Operator

And our next question coming from the line of Jason Butler with JMP Securities.

Jason Butler, Analyst

I just had a couple about the most recent data you announced from the EPIPHAST I study. For the arm where you looked at the swallowing data, I guess, can you talk about the tolerability profile that you saw in that arm? And then just from the fact that you saw actually pretty meaningful absorption and good PK there, are you thinking about using this information in the pivotal planning, and what, if any, regulatory implications it might have?

Dan Barber, CEO

So, when we think about the EPIPHAST study, I think it’s important to remember this was a 6-month study, so a big body of work. There were three parts to it with multiple arms in each part. And as you talked about, in this latest or last part, we included characterization work where we looked at the performance of our product when a subject doesn’t follow the instructions for use appropriately and also after having eaten something, in this case a peanut butter sandwich. As you noted, we were surprised by the robustness under all conditions of our results. And we do believe that the profile – and when I say profile, I mean the pharmacokinetic results as well as the PD results – are all favorable to our application and what we’ll put forward to the FDA. So we’re very happy and pleased with what we saw in that characterization work. In terms of the tolerability profile, we have no serious AEs in our study. And when we look at the AE profile, it is aligned with what’s known with the EpiPen and other injectable products that are in the market.

Operator, Operator

Our next question coming from the line of Thomas Flaten with Lake Street Capital.

Thomas Flaten, Analyst

I was wondering if you could provide some additional color on some of the rightsizing that you've done in the commercial organization, particularly with respect to field force.

Dan Barber, CEO

Sure. So from a rightsizing perspective, we took action across the organization, across functions. We did not just right size within the commercial group. But specifically on the commercial side, the focus was on the non-sales bearing part of the organization. So we have worked hard to maintain the footprint that we have. And as you see, we grew our Sympazan scripts again this last quarter, and we continue to grow our scripts each quarter. I think it's critical with that important asset that we work towards being cash flow positive. And that is where the focus of that group will remain as we go forward.

Thomas Flaten, Analyst

And then with respect to Libervant, when and if a decision comes from FDA, will there be any heads up on your part? I know we don't have a PDUFA date out there, so you don't really have anything to aim for. I was thinking about field force expansion and how you're going to support that commercially. Will all those decisions be made post-decision since you don't have a heads up? Or how are you thinking about that sequencing?

Dan Barber, CEO

Right. So we expect there would be some back and forth with the FDA prior to receiving a decision. Whether that's a matter of a couple of days or a week really depends on how they reach out to us. But in terms of launching Libervant, we remain ready to launch Libervant immediately upon approval. And I'll pass it over to my colleague Ken in a second. But what I would say is we are focused on launching Libervant within our means, is the way I would put it. You will not see us hire 40 reps the next day or bring on a large new portion of debt to the company. We will launch within the means that we have, and we think we can do that very efficiently. Ken, if you could just elaborate a little bit on the launch plans for Libervant.

Ken Marshall, Chief Commercial Officer

Sure. Happy to, Dan. Probably the key step here is stocking the trade. That usually takes you about 30 days. So there would be a little bit of room in that period to train and maybe expand targets for our current footprint. The current footprint that Dan alluded to covers nearly two-thirds of the rescue opportunity. As you imagine, it's pretty concentrated. And Sympazan's put us in the right place to get to know these folks. And so I think we're set for a very rapid launch, even if we didn't get much notice from the FDA.

Thomas Flaten, Analyst

Got it. And then just one final question from me. As part of these cost-cutting measures, and I know we haven't talked about anything else in the pipeline besides 109, is it fair to assume that most other things that you might have had in the pipeline are on hold at this point until Libervant and 109 make some forward progress?

Dan Barber, CEO

I think on hold might be too strong a word. AQST-108, in particular, we do continue to see a place in our pipeline for that program, and we remain excited about the profile that Steve and his team have created with that product. I would describe the work that we’re doing on that as CMC-focused work at this point. So I don’t want to say it’s on hold. What I would say is we will concentrate our resources, as I said earlier in this call, on 109 to make sure that we have progress on that program as rapidly as possible.

Operator, Operator

And our next question coming from the line of Andreas from Wedbush.

Andreas Argyrides, Analyst

Could you just elaborate a little bit more on the plans for non-dilutive cash to extend the cash runway? And then thinking about Libervant, how are these kind of larger political dynamics at play, the Catalyst Pharm decision fairness and Orphan Drug Act, et cetera? How are these impacting the OPD decision, ODD for Libervant?

Dan Barber, CEO

Sure. From a non-dilutive cash perspective, as Ernie laid out in his comments, we do have multiple levers that we’re very focused on right now. One is expense management, and you heard us talk about the rightsizing we did. And we’ll continue to make sure that we are very focused on maintaining a lean expense structure. We also have a variety of levers when it comes to the assets we have in our company. So out licensing some of the assets we have, whether it be ex-U.S. or even within the U.S., is something that we will continue to look at. And the final piece, which does also tie to expenses, but also ties to the top line, is focusing on profitability. We have two parts of our business that are cash-generating with our commercial sales and our manufacturing sales. And in both places, we will continue to make sure that we operate as efficiently as possible to maximize the cash that comes out of those components. I think the second part of your question, Andreas, was on the political environment. And I think you were referring to the RARE act and the PDUFA reauthorization bill going through Congress. We, like everyone, are watching that carefully. There are implications for the entire industry on when and how that bill gets passed. I would say it’s a little early to tell if the FDA will be impacted by that reauthorization bill. We’re hopeful like everyone else in this industry that Califf doesn’t have to do any layoffs within his organization. In terms of orphan drug specifically, we do believe the FDA is widely trying to fix some of the problems that have occurred in the orphan drug space, and we’re supportive of what their efforts are. And we’re hopeful for them that the legislation meets their needs.

Operator, Operator

And our next question coming from the line of Ram Selvaraju with H.C. Wainwright.

Ram Selvaraju, Analyst

Firstly, with respect to Sympazan, can you talk a little bit about how gross to nets have been evolving lately, and where you expect that direction to go over the course of the coming months and quarters?

Dan Barber, CEO

Sure. I'll hand it over to Ken. And I just want to reiterate that we continue to grow every quarter. And this asset is valuable to the organization, and we want to make sure it continues to expand and that patients continue to have access to it. Ken, could you walk through your growth strategy a little bit?

Ken Marshall, Chief Commercial Officer

And Ram, was the question growth strategy or gross to net? I'm sorry, it broke up a little bit.

Ram Selvaraju, Analyst

Gross to net. Gross to net.

Ken Marshall, Chief Commercial Officer

Yes. I'll give you some high-level information, and then Ernie, if you want to be more specific, jump in. I mean, when you look at our gross to net, it's fairly predictable. If you look at our history and then anticipate some level of price increase, about half of our business is Medicaid, Medicare. And so you're going to give some of that back with the CPI penalty. Now having said that, with inflation, we'll probably get a little bit of a break. So generally, you might expect a point or two gain year-over-year would be not a bad estimate.

Ram Selvaraju, Analyst

Okay. That's helpful. Secondly, I wanted to ask about 109 relative to 108 and how you folks are thinking about this from a strategic as well as a clinical development perspective. Should we look at 109 and 108 as being directly complementary things that can be commercialized using exactly the same infrastructure? Or how distinct are they, really? And from a business development perspective, as you look to optimize the value of these assets, are you looking at treating them as a package deal? Or would you look to potentially, for example, execute something from a business development perspective on 108 independent of 109?

Dan Barber, CEO

Sure. I'll start by addressing your questions in reverse order, if that's alright. From a business development standpoint, it feels a bit premature to discuss that. Our current focus is on maximizing the value of 109, not on out licensing it or having it handled by another party. So, I don't anticipate any activity in that area. Regarding infrastructure, it seems quite likely that 109 and 108 will complement each other. We consider our epinephrine prodrug research to be a foundational platform. While it has potential uses beyond the allergy sector, it also has various applications within it. Therefore, we strategically see them as interconnected. When comparing the two, while they do complement one another, they will be aimed at different indications. Specifically, 109 is intended as a product for anaphylaxis, and although we haven't fully outlined all the indications yet, it will operate in distinct areas within the allergy treatment landscape.

Operator, Operator

Our next question is from James Molloy with Alliance Global.

James Molloy, Analyst

I have a quick question about the sales force. Could you provide some details about the size of the sales team? I understand you've mentioned the need for rightsizing and the intention to minimize the front-facing sales force. Can you share which channels are currently proving to be the most effective? Additionally, how does the sales overlap look between Sympazan and the new product 109, assuming it reaches the market? Will it be handled by the same team, or is there a need for a new group?

Dan Barber, CEO

Sure. And Ken, could you walk through that for James?

Ken Marshall, Chief Commercial Officer

Yes. Happy to, James. Our current footprint consists of 16 territories and a layer of first-line management above that. In the CNS space, especially with Sympazan as an adjunctive medicine, it's a very efficient call point. When people get on a second and a third medicine, they're certainly being seen by an epileptologist or an epilepsy specialist, and you would count those in the numbers of thousands. So a 16-territory footprint is not a bad size. If you look at Libervant, there'll be slightly more physicians that use that rescue medicine, so you'll probably expand it slightly. But as I mentioned earlier, that 16-territory footprint covers two-thirds of the rescue opportunity. Are there other pieces that you'd like me to comment on, or does that answer your question?

James Molloy, Analyst

I think that answers it. I mean, what was the impact of the rightsizing? What did you cut away? Also, do you have any thoughts on possible add backs if Libervant receives approval or if there are changes down the road?

Ken Marshall, Chief Commercial Officer

Yes. The cutbacks in the commercial ops, as Dan mentioned, were really the back office folks. We focused on preserving the customer-facing team and maintaining those relationships. You probably would want to go a little deeper than two-thirds of the target volume out there. But as you would imagine, it's like most markets; it's concentrated. So you don't have to go from 16 to 80 to materially penetrate the rest of this market. You could add single-digit, maybe low-double-digit representatives and get closer to that 80%, 85% coverage. And then it's just all a matter of how far down the deciles we want to chase in terms of volume when you go past that.

James Molloy, Analyst

Great. Last question. You mentioned the possibility of out-licensing or partnering products. How would you describe the current environment for that? Is it more favorable for sellers or buyers? What can you tell us about the level of interest from external parties?

Dan Barber, CEO

Sure, James. So first, I would just say at a global level, with a CEO transition, it’s normal to obviously take a look at everything, the pieces and parts and priorities and how we think about those things. So that work is still going on. It’s early days. So I don’t think we have a specific view on what exactly the pieces and parts would be that we’re working on right now. But what I would give you is my interactions with how the market is in terms of licensing opportunities, I think it’s still robust. I think, obviously in Q1 and early Q2 with how the markets performed, people seem to be nervous. But the environment that I see right now and we’re experiencing is much more positive.

Operator, Operator

I'm showing no further questions at this time. I would now like to turn the call back over to Dan Barber for any closing remarks.

Dan Barber, CEO

Thank you, Olivia. Thank you for everyone for joining today’s conference call. I would just leave you with a reminder of where our focus will be. We are focused on progressing 109 rapidly. We’re focused on interacting with the FDA to ensure we get Libervant to the market as soon as possible. At the same time, we will be very diligent on our cash management and making sure we tell the Aquestive story to you and our other stakeholders as clearly and transparently as we can. We will now conclude today’s call.

Operator, Operator

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.