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

Good day, and welcome to the Libervant FDA Approval Conference Call. [Operator Instructions] As a reminder, this call may be recorded. I would now like to turn the call over to Bennett Watson of ICR Westwicke Investor Relations. Please go ahead.

Thank you, operator. Good morning, and welcome to today's call. On today's call, I am joined by Dan Barber, Chief Executive Officer of Aquestive Therapeutics, who is going to provide an overview of recent business developments, followed by a Q&A session. As a reminder, the company's remarks today correspond with the earnings release that was issued this morning before market open. 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. During the call, the company will be making any 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 the company's annual report on Form 10-K filed with the Securities and Exchange Commission on March. 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 development, regulatory approval and commercialization of its products and other matters related to operations. 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 this press release issued today. The company assumes no obligation to update its forward-looking statements after the date of the 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. Good morning, everyone, and thank you for joining us today. I am delighted to announce that we have received FDA approval to market Libervant (diazepam) buccal film for the treatment of seizure clusters in patients who are 2 to 5 years of age. The 2- to 5-year-old age group currently has only 1 FDA product approved, and this is in a form of a rectal gel. We believe the approval of Libervant will have an immediate impact on this patient population. And excitingly, as of today, these patients have the first on-label, oral medication available for the treatment of seizure clusters. We believe this is truly groundbreaking for the epilepsy community. In fact, we have already received prescriptions from physicians who understand the criticality of improving pediatric rescue medication. We are currently filling prescriptions for non-Medicaid patients in the pediatric age group and will continue to coordinate immediate and ongoing availability of Libervant for these pediatric patients. Currently, between 4,000 and 5,000 rectal gel prescriptions are filled every month for this patient population. This is before taking into account caregivers who are using other options. Over the coming months, we will be focused on ensuring that caregivers for this patient population are made aware of Libervant as an alternative to using a rectal gel. We have a small dedicated team focused on providing Libervant to the caregivers of patients in this age group. We plan to expand our distribution capabilities over the coming weeks and months. This may take a variety of forms, including internal resources and/or collaborating with other sales and distribution organizations. Regardless, you have my commitment today, as long as the FDA continues to allow us to market Libervant, we will ensure Libervant is available to these pediatric patients. We anticipate receiving notification of orphan drug exclusivity for this indication in the coming weeks. Our understanding is that this notification process may take a while. We will also provide the FDA with our latest position on superiority claims by a major contribution to patient care for the adult application of Libervant that was tentatively approved by the FDA in August of 2022. I'd like to take a moment to congratulate and thank our investigators, our countless supporters within the epilepsy community and our fellow Aquestive colleagues who worked so hard to bring Libervant to patients. This truly is a major milestone event. For years, we believed that we had a best-in-class product for rescue use in the epilepsy space. Now we get to provide our oral medication to these pediatric patients we have long sought to help. We look forward to the day when we receive market access to provide Libervant to all patients within the epilepsy community. We believe our track record of working with the FDA, even when we disagree with them, has been key to our success in obtaining 4 FDA approvals over the last few years. We respect the FDA's important role in protecting public health and will do our best to always provide the FDA with the information they need to make good decisions. Before I open the line for questions, I would also like to reiterate to everyone that we remain on track with our other rescue products, Anaphylm (epinephrine) sublingual film. We are currently in the clinic completing the remaining studies required for submission of our new drug application. We will talk more about our Anaphylm program during our upcoming Q1 earnings call on May 8. With that, operator, if we could open up the line for questions.

[Operator Instructions] Our first question comes from David Amsellem with Piper Sandler.

Just got a couple. So first, what are your thoughts on what Neurelis may do regarding its ODE on VALTOCO? I know it has ODE in patients who are older, but do you expect them to initiate litigation against the FDA or ask for a preliminary injunction? Just help us better understand what you think may or may not happen or what you're anticipating. That's number one. And then number two, in terms of commercialization, thinking more broadly, can you talk about boots on the ground? How many reps you need? And how you're thinking about the long-term commercial infrastructure that you may or may not have in place to support Libervant?

David, thank you for the questions. So it's -- here in New Jersey, it's a beautiful spring morning. So I'm not going to be -- let's not be cynical for a minute, right? We know that there are real -- on the other side of this call and all of us who are here today, there are real pediatric patients who need a better product today. I'd like to believe that even within our industry and the competition and all the things we do, that it's understood that the greater good for the epilepsy community is allowing them to have our products that help patients. So my hope is that our competitor or competitors will do what we would do, which is see the good in patients having additional products. But having said that, if they do file a lawsuit, as you noted, it's anyone's right at any time to file a lawsuit for almost anything, they wouldn't be suing us. They would be suing the FDA. And if they do so, the FDA, as you know, has been very public in this particular case, about how strongly they feel on this subject, and we would expect them to defend their authority with the full weight of the government. I think it's interesting. We had this exact scenario 2 years ago with our tentative approval. We could have sued the FDA in 2022 but that is an extensive multiyear process that, in our view, didn't have great odds. And they take a lot of resources, people, money, focus to do all of that. So in our case, our equation was let's work with the FDA and make things better for everyone, for our patients, our company, our shareholders. And I think what you're seeing today, in our case, is that has worked out very well; that we now have products that we can provide to patients who need it. So we'll see what happens, but I'll remain positive that even a competitor will see that the patient should come first. In terms of commercialization, in terms of boots on the ground and reps and so on, the first thing I want to make clear is from a financial standpoint, this will not be a significant or even a minor burden on the company. This is a very concentrated call point. We don't have the exact [ selling ] worked out yet, but it looks like -- early days, it looks like the number of call points we're talking about, 1,000, 1,500 physicians, something like that. So right now, we have a small group of dedicated people, including a physician-facing person, so someone that you could call in that sales rep type role. If we were to continue to launch the product on our own, we would add a couple of more resources, but nothing more significant than that, in our view, to reach the 4,000 to 5,000 prescriptions that occur every month. I do want to say that long term, we continue to believe that Anaphylm is the right focus for our company. And so while we'll support Libervant and bring it forward, if we do find the right distribution partner in the long term, that's what you'll see us do.

Okay. And actually, you answered my next question on potential partnerships. So all helpful color.

Our next question comes from Frank Brisebois with Oppenheimer.

Congrats on the approval. Any color here on pricing of the product?

Sure. Frank, yes, we've already -- I'll look to my colleagues if I say it, if I just use the wrong term. So we've already loaded our pricing into things called Compendia. And I believe our WAC price, as they call it, is right in line with the other products that are in the market.

Understood. And then in terms of Neurelis, so what's the scenario here? Is patients are -- they didn't have the 2- to 5-year-olds because they didn't have a trial for them? Or so is it rectal gel is the option here for 2 to 5. And then once they turn that age, they can move on to a nasal option? Or how exactly does this work? And would you expect patients to now be on the buccal tab and then, at 5 years old, have to move on to nasal? Or just help us understand how this works from the patient's point of view.

Yes. Well, all we can do -- obviously, I can't speak to competitors' positioning and how they think. But all I can do is tell you the facts that we know, which is that the nasal spray product, the application to the FDA, was for 6 and up, did not include any clinical data below 6. Whether they have that data or not, that's a question for them. So their approval is for 6 and up. And patients who are 2 to 5 currently only have the rectal gel. So our expectation would be that 2- to 5-year-old space, they will continue to not have other options. And so our product, we believe, is an important pathway for a patient to have a better product. In terms of what happens when a patient turns 6, again, all I can tell you is what the legal position would be for various companies. We can't detail to 6 and up and Neurelis can start detailing at 6. So how that plays out in physicians and practices is anyone's guess.

Understood. And then maybe lastly here, in terms of the market size, you talked about the number of scripts per month for the rectal gel. But for the whole market, you're going after refractory seizures here. What percentage do you see the 2- to 5-year olds of the entire market here? I'm just trying to get a better feel for expectations around this. And yes, I guess I'll leave it at that. And then how many -- on average, how many scripts a year are patients taking?

Yes. So Frank, if you're okay, I'll answer that a little differently than you asked it. What we know is in the data we get, which is we use one of the major suppliers of data, so it's the main retail information that's available to everyone, we have the existing market somewhere around 55,000 scripts a year. We -- in the past, when we had looked at this, we had estimated that based on epidemiology and prevalence, that that 55,000 was a fairly low penetration rate of the existing market that needs a product in that age group. So we estimate that, that 55,000 could be as low as 20% or 25% penetration of what is available for that age group. So our first goal will be, of course, to make sure people who are getting the rectal gel know about the film and hopefully start to use the film. And after that, we would look to expanding the 2- to 5-year-old market.

Okay. Understood. And then are we supposed to see any -- just a little bit speculative, so answer however you please. But are we supposed to see any read-through with your interaction with the FDA here in terms of Anaphylm? Or is it just completely separate here?

Yes. Well, again, from our standpoint, the FDA, just like any organization, they're a bunch of people, right, just like us. So relationship does matter. And when I say relationship matters, I mean knowing that you're going to deal with people on the other side in a transparent way, which is what we've always sought to do. And so when we look at the last few years and we see the 4 approvals that we have been able to obtain, we think a big chunk of that, as it should be, is based on the clinical data. I think the other part of it is communicating that clinical data in a way that was clear to the FDA so they could make good decisions. So we do think relationship matters. We do think that there's a read through in all of our programs, and we'll continue to seek to make sure that our relationship with the FDA remains healthy.

Congrats again.

Thanks, Frank.

Our next question comes from Jason Butler with Citizens JMP.

Congrats on approval. Two from me. Just first one on partnerships. Dan, any more color you can give us on what you'd be looking for out of a partnership? Could a partnership be limited to just this 2- to 5-year-old population? Or would you look to partner the drug for the entire older population as well? And then second question, just in terms of your focus here on reengaging with FDA to talk about the orphan drug exclusivity for the older patients. Any change in that strategy or new data that you plan to reengage FDA with? Or what do you think that having the approval in this younger population does for that conversation?

So in terms of partnership, it's interesting. As you look at the history of our company, we have traditionally been a collaboration company, a company that works with sales and distribution organizations. So we've had a lot of agreements over the years. So our learning is the biggest thing we need to have the right relationship for someone else to distribute the drug is a focus in epilepsy or, at the very least, a focus in CNS. Having that commitment to the space, to the community is really important, ensuring that you can create the right access for health care providers and patients. The good thing is we have been active with the people in the space. And I do believe there are several good options. And if we end up going down that path, I think we can find the right relationship that would be very good for patients and for us. In terms of the adult orphan drug or the adult application and the orphan drug exclusivity block, in our view, the key elements that we have put out in the public domain remain important. I think the -- what may be new, perhaps is the way to put it, is how we talk about those pieces together in a way that we think shows the benefit of the product that we have. And so we'll continue to engage the FDA on that front.

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

Congrats on this approval. Can you hear me?

Yes, Ram. Hear you just fine.

So just a couple of things. Firstly, I was wondering if you could comment on the degree to which whatever promotional or marketing activities you undertake in support of Libervant in the pediatric indication might prepare the ground as it were for any future approval of Libervant that expands the label? If you could just talk us through that with some granularity at this point, to whatever extent you can. And then secondly, if you could comment on the following scenario and any legal risks, if any, for Aquestive. Let's say the product is available and it's being used on label in accordance with whatever commercial activities you undertake, but that there are physicians out there who decide unilaterally to utilize it off-label in adult patients. Are you liable for what those physicians do? And in particular, if they do that, could Neurelis sue you for those physicians' actions?

Thanks, Ram. Well, let me start with the second one since that's a little bit more intricate. So we're already being sued by our competitor. So being sued wouldn't be a change, right? But having said that, let me be really, really clear on what we will do and what we won't do. We have an FDA approval with market access to supply products, distribute products to 2- to 5-year olds and to detail physicians for use in that space, and that's what we will do. We will not, in any way, in any fashion, promote to anyone outside of that group, and we will not support or allow any other distribution group to do that as well. In terms of what physicians do with the product, that is no different than any other product that is out there. Physicians have a broad mandate to manage pain a patient's health, and they can do that in the best way that they see fit. We -- There is no precedence that we're aware of, and we see no reason to assume that we would have any liability for a decision a physician makes to use our product or anyone else's product in a way that is off label. That's just, as you know, Ram, the way the industry works, right? In terms of preparing the ground for the full launch of Libervant, we do think this is important. As you know, we -- and I just said, we wouldn't be able to promote to the 6- to 11-year-old pediatric -- or 6- to 17-year-old pediatric space until 2027. However, we will be able to build relationships with pediatricians who not only service 2- to 5-year olds, but 6-to 17-year-olds. So in a few years, when that 6- to 17-year-old space is available, those relationships will be important, and they'll be in place partially because of the 2- to 5-year-old work we'll be doing today.

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

I was curious, going back to the scripts, what proportion of rectal gel scripts are Medicaid versus any other payer?

Yes. Thanks, Thomas. Yes. No, I don't know the exact number or percentage, but it is a big percentage. My recollection is more than 1/2. So if your question is in terms of coverage and thinking about how scripts come into the market, I would think of it this way. As you know, with any launch, commercial is the first coverage area. And so we will focus on the commercial coverage of patients just because that's what we'll have. We have started the Medicaid coverage process. Depending on the state, and there's 50 states, obviously, we can -- we expect coverage to be from a few months to it could be less than a year, but still many months. So as those Medicaid states come on, we would start to provide products to those Medicaid patients. But I think your underlying point is a good one, which is there is a significant Medicaid population in this indication.

And then is this available through specialty pharmacy? Or is it broadly available to retail or will it be I should probably say?

Yes. Well, again, like most launches for products like this, we will start with specialty pharmacy or we are starting with specialty pharmacy. And then we'll -- as we broaden our distribution capabilities and get broader coverage, we will go through the normal distribution chains.

And then finally, not to parse your words too much, Dan but you said in your prepared comments that as long as FDA allows you to keep marketing and then the sentence continued, is there some expectation that they might not allow you to continue marketing?

It's funny how when we write these prepared comments, you try to think through how people will interpret it, but I hadn't -- there was no purpose in writing it that way that was trying to communicate something like what you were just saying. It's just the mere fact that the authorization from the FDA for any drug is what allows you to sell the drug. Right? So as long as that's in place for this product and any of our other approved products, that's what we'll do.

Our next question comes from Tejas Wein with Raymond James.

This is Tejas Wein on for Gary Nachman. Just want to say congrats on getting Libervant over the finish line. So our first question would just be how much of that Diastat volume in about 2 to 5 years do you think you can capture with your network? And do you really expect to see that ramp up quickly given that Diastat's kind of a poor administration option. And then our second question would be what would be the catalyst to procure a potential partnership? And would any progress with the ODE or any litigation help you just kind of get further value out of a partnership? And would Pharmanovia be the best partner given they're already licensed in other territories?

Sure. Yes. Thanks. So look, we -- I think the right way to look at the ultimate place we'll be in terms of market share in the 2- to 5-year old space would be -- I do think there's a reasonable analog we can use with the nasal spray [ of Anaphylm ] and VALTOCO when they came into the market. And I forget what their exact percentage is right now compared to Diastat, but it's 80% or 90% was -- is my memory, something like that. So ultimately, we would expect to capture most of the scripts that are in this space and also bring an expansion catalyst to this space. I think in the other spaces, the market, I think it doubled over time. So that would be our expectation. Obviously, in the short term, as of right now, we are putting out no expectation on what we believe short-term sales will be given, obviously, the need to get commercial coverage and start all of those processes. But long term, we would expect to have a vast majority of the scripts in the space, and we would -- space, and we would expect the space to expand. In terms of the catalyst for partnership, I think that remains to be seen. We have a variety of conversations, some that are farther along than others. And for us, given the focus on Anaphylm and given the strength of our current balance sheet, we can afford to be a little picky. So that's what we're going to do. We're going to make sure we have the right relationship and the right circumstances, and that would be where we would get into a partnership. Did I hit all of your -- Did I answer all of your questions?

Yes. And I guess just maybe on the Pharmanovia situation, if that's kind of a best partner given they're already a partnership with you?

Got you. Yes, I wouldn't think so. They're not a U.S.-focused organization. They're Europe, South America, Asia. So we're really happy with our partnership with Pharmanovia. They've done a great job so far. They're pursuing applications in a variety of markets and we continue to see that moving forward nicely. But I don't -- sitting here today, I don't see them as a viable option for the U.S.

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

Thank you for joining us this morning. I just want to close by pointing something out from our company here. When you walk into our offices, we actually have our mission statement on the wall. And it includes the phrase, "Advancing medicines to bring meaningful improvement to patients' lives". We believe what we've talked about today and the announcement today actually demonstrates this commitment and also represents another step forward for us along the path of building a sustainable and growing company. The future of Aquestive is brighter than ever, and we look forward to speaking with you again next week during our Q1 earnings call. Have a great day.

Thank you for your participation. This does conclude the program. You may now disconnect.