Aquestive Therapeutics, Inc. (AQST) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Aquestive Therapeutics Business Update. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Bennett Watson of ICR Westwicke Investor Relations. Please go ahead.

Thank you, operator. Good morning, and welcome to today's call. I am joined by Dan Barber, Chief Executive Officer, who is going to provide an overview of recent business developments. The company's remarks today correspond with the press release issued before market opened today and the Form 8-K that was filed this morning with the Securities and Exchange Commission concerning the business developments we will be discussing today. Before we begin, let me remind you that today's call will include forward-looking statements based on the company's current expectations. These statements reflect our judgment as of today only and are subject to risks and uncertainties that could cause actual results to differ materially from those described in these statements. We undertake no obligation to revise or update these forward-looking statements in light of new information or future events, except as required by law. For information concerning risk factors that could affect the company, please refer to the Risk Factors section included in the company's 2021 annual report on Form 10-K and in our quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. With that, I will now turn over the line to Dan.

Good morning. Thank you for joining the call this morning. On the call today, I will make a brief statement outlining the latest information we have from the FDA on the approval of Libervant. Once I have concluded my statement, I will open up the call for questions. I am pleased to say that yesterday, we received confirmation from the FDA of the tentative approval of Libervant for the treatment of seizure clusters. This is the culmination of a tremendous effort by the Aquestive product development team. From the formulation of the product to conducting the clinical studies to working through the regulatory filing process, this has truly been a company-wide effort. I am proud of the team and proud of the accomplishment they have achieved. Unfortunately, the FDA has labeled our approval as tentative and indicated that they do not believe that we have sufficiently shown how Libervant is clinically superior to VALTOCO, a competing diazepam nasal spray, which currently holds the orphan drug exclusivity. I will get into this in more detail in a minute. However, I first want to point out that gaining a decision from the FDA provides significant clarity to our business. We now have certainty of Libervant's market entry, and we have further validation of our ability to gain FDA approval of our pipeline programs. This is an important milestone as we look to rapidly bring AQST-109 forward to the FDA. Globally, we will continue to focus our energy and resources on AQST-109. And as all of you know, severe allergic reactions, including anaphylaxis, is too big an indication for orphan drug exclusivity to be an issue. Regarding the FDA's decision, we respectfully but firmly disagree with their determination. Today, I want to walk you through just one element of our story that we believe the FDA failed to see from the patient perspective. As my medical experts tell me, a rescue drug must work quickly and be effective under a wide variety of conditions. For products like Libervant and VALTOCO, where drug plasma concentrations are used to bridge efficacy studies, this means that rapid and extensive absorption must be observed under all conditions, including whether a patient has had a meal recently or hasn't had a meal in hours. In the case of Libervant, we have known about differences in absorption due to food for some time. We have, therefore, been able to develop a dosing regimen that ensures patients get sufficient drug plasma concentrations no matter their fed state. This is why our label approved yesterday includes the statement: can be taken without regard to food. For VALTOCO, we have been very public for some time around our view that the FDA should require characterization of drug plasma concentrations with VALTOCO under fed conditions. We even went so far as to submit a citizen's petition back in 2019. The FDA disagreed with our view at the time and approved VALTOCO without any food effect studies. Simply put, based on the data created by the VALTOCO sponsor and reviewed by the FDA, no one knows what happens when the product is administered after a meal. Last year, in order to solidify our orphan drug case, we sponsored a clinical study that examined the difference in drug plasma concentrations over time when patients are administered VALTOCO in a fed state compared to a fasted state. Based on the FDA's feedback to us, the expectation would be that there was little or no difference. The study results actually show that there is a significant difference between fasted and fed for VALTOCO. In fact, as we outlined in our press release, the peak concentrations, or Cmax, dropped by 42% and the time to peak concentrations, or Tmax, doubled from 2 hours to 4 hours. This means that during the critical early time periods where patients need rapid and extensive absorption, they are not always receiving the expected levels of diazepam after administration of VALTOCO. We believe, especially for a rescue medication where time and speed matter, that this is a significant shortfall that patients deserve to know about and that sets Libervant apart from VALTOCO. When you compare this data to the data we generated for Libervant in a cross-study comparison, there is a significant difference. While the agency's determination letter does not dispute the importance of this factor, it does dispute our cross-study comparison. According to the agency, because we did not include a Libervant film arm in the VALTOCO food study, the data cannot be used to indicate whether there is a food effect for VALTOCO. We find this counterintuitive to patient interest and contradictory to previous FDA practice. We plan on meeting with the FDA as quickly as possible to discuss their views and the data we have generated. If necessary, we will contemplate conducting a comparative study of Libervant and VALTOCO in a fed state. This is too important an issue for patients and for us to ignore. In the meantime, we will continue to bring AQST-109 forward. We are on track to report our EPIPHAST II study before the end of this quarter. We have already scheduled a meeting with the FDA for our end of Phase II review in Q4. We are happy to have obtained a tentative approval for Libervant, which gives certainty to market entry, and we will engage the agency with vigor to accelerate our ability to distribute Libervant in the United States. Operator, please open the line for questions.

[Operator Instructions] Our first question comes from Gary Nachman with BMO Capital Markets.

Dan, if you end up doing a comparative study with VALTOCO on the food effect, how long would that take roughly to conduct? And what would be entailed? How big and how much would it cost? And when do you think you can meet with FDA to discuss that potential plan?

Sure. So Gary, as you can appreciate, we're only a few hours from getting this notice from the FDA. So the planning process will start literally when this call ends. From what we know today perspective, performing a comparative food effect study of Libervant versus VALTOCO is a very simple study to perform. It can be done in a very brief period of time, a matter of weeks or a couple of months. The part that we need to work through is we want to make sure that the FDA understands the protocol and understands what we will generate out of that study. So that's where we'll focus immediately. In terms of the cost of the study, it is also not an overly expensive cost. I don't have a number for you, but it is not a large number. So from our perspective, there is a rapid path forward if we decide to conduct that study.

Okay. That's helpful. And then if you have to end up waiting until VALTOCO's orphan drug exclusivity expires, how long would that be? So what's the earliest you could enter? And remind us of your Libervant patents, how far those go. And any new ones that could be issued in the next few years?

Right. So I want to be really, really clear on this point, and thank you for asking that question, Gary, we're not waiting to pursue full market access for Libervant. There is no scenario right now where we plan on doing nothing. We will pursue vigorously the data that we have, which we believe is very compelling, and we will continue to work with the FDA to accelerate our ability to have market access in the U.S. To give you a date, the current exclusivity on VALTOCO expires in January of 2027. And our patents, I don't have the exact date with me, but go to the late 2030s.

Okay. Great. And then just the last question, I guess, with the launch timing of Libervant unclear, is it more or less likely you would look to partner that out? Do you think you need to have clarity in order for a partner maybe to license that asset? Or would it be better to share some of the development risk that's still associated with a partner?

Right. Well, let's start with the development dollars. Again, the development dollars are done. We have an approval. So there's no more development to be done on this program. The only dollars to be spent would be if we decide to do a comparative study for orphan drug usage, which we talked about before. In terms of how we think about the product, Libervant, I would say there are 2 important elements. One is we are big believers in the benefits of Libervant, and we believe it deserves to be in patients' hands. So we will continue to look across the possibilities we have in front of us on how we get Libervant into patients' hands as quickly as possible. If that involves partnering, we will pursue that, of course. In terms of whether the partnering process is what we would start today, we haven't had that discussion yet. I think right now, we're focused on getting to the full market access and approval.

Our next question comes from the line of Jason Butler with JMP Securities.

Can you guys hear me?

Yes.

Just I guess a quick follow-up to the last question. When you think about the cost of the commercial infrastructure you have in place today, you obviously made some adjustments already there, but any potential changes you would make to the current commercial infrastructure based on the news today?

Right. Well, as I shared in the earnings call earlier this month, we are very focused on making sure our commercial footprint with Sympazan is cash flow positive. So that work was ongoing before today and will continue after today. In terms of what to think about with our commercial footprint, I don't think you'll see us expand it with just Sympazan. But other than that, as of today, we will continue to sell Sympazan with our commercial footprint. I would say that the product, we also believe belongs in the hands of patients. And whether it is us or someone else, we want to make sure the patients have access to the product.

Got it. Okay. And then if you ran a comparative study, can you give us any visibility into what the review process would be to get FDA to change its determination? Is this kind of like an NDA review? Would there be a fixed time line? Or is there any visibility into what that process would be?

Yes. So I think you're going to see us do a lot of things. I think you're going to see us be very vocal about the data that we have in the public domain. We have a variety of data we have not shared because we were waiting for the approval. We will now share that data, including with our competitors so that they can react to it and understand it from their perspective, as they look to put patients at the forefront of how they do business. In terms of the FDA, we would be looking for a rapid response from them. There is no time line for an orphan drug group. However, I don't see how they could take the data we will have, especially with the public element of that data, and not respond.

Great. And then just lastly, the food effect is one piece, but you've mentioned in the past, there are other attributes of the product that you think support an important contribution to patient care. Are there still avenues that you can explore beyond the food effect to support final approval?

There are. There's a variety of pathways we could take and different arguments we could employ, including obviously taking legal action. However, as we sit here today, we believe the food effect data is just too compelling of an issue and an important issue for us to do anything other than prioritize that particular issue. And I just want to be clear that in the response we received from the FDA, nowhere in it did they say that they disagreed about the importance of the issue. They simply took issue with how we presented the data and stated they thought there was a better way for the data to be more meaningful to them. So that's where we'll focus, and that's where we'll create a dialogue with the FDA.

Great. And then just last question for me. You said in the prepared comments that you're going to continue to focus resources on AQST-109. Just wanted to see if the time lines there are still as you've previously given, i.e., EPIPHAST II data this quarter and then an end of Phase II meeting by the end of the year.

Yes, Jason, and I appreciate you asking on 109. 109 is exactly on track. We are excited to release data later in the quarter once the data is ready. We have already reached out to the FDA to set up our end of Phase II meeting. They've granted us that meeting. So we'll have that meeting in Q4. We are, from my perspective, in a good place to continue to rapidly progress AQST-109 over the next few months.

Our next question comes from the line of James Molloy with Alliance Global Partners.

Could you walk me through again what was the time line sort of start to finish for the VALTOCO food effect trial you guys ran previously that you submitted the data on? And then any risk of if you run a Libervant comp arm, a food effect with Libervant as well?

Yes. Jim, you were a little muffled, but I think what you asked was if I could walk through again the time line of doing the comparative study. And then on the second question was, is there any risk for Libervant in that study? Did I get that right?