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Edited Transcript of AQST.OQ earnings conference call or presentation 7-Aug-19 12:00pm GMT

Q2 2019 Aquestive Therapeutics Inc Earnings Call

Sep 5, 2019 (Thomson StreetEvents) -- Edited Transcript of Aquestive Therapeutics Inc earnings conference call or presentation Wednesday, August 7, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Daniel Barber

Aquestive Therapeutics, Inc. - Senior VP & COO

* Gary H. Slatko

Aquestive Therapeutics, Inc. - Senior VP & Chief Medical Officer

* John T. Maxwell

Aquestive Therapeutics, Inc. - Senior VP & CFO

* Keith J. Kendall

Aquestive Therapeutics, Inc. - CEO, President & Director

* Ken W. Marshall

Aquestive Therapeutics, Inc. - Senior VP & Chief Commercial Officer

* Lauren Walrath

Aquestive Therapeutics, Inc. - Head of Corporate Marketing & Communications

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Conference Call Participants

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* Ashley Ryu

RBC Capital Markets, LLC, Research Division - Senior Associate

* Douglas Royal Buchanan

JMP Securities LLC, Research Division - Associate

* Edward Patrick White

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

* Rafay Sardar

BMO Capital Markets U.S. - Analyst

* Thomas Flaten

Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst

* Vasiliana Vireen Moussatos

Wedbush Securities Inc., Research Division - MD of Equity Research

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Presentation

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Operator [1]

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Good morning, and welcome to the Aquestive Therapeutics Second Quarter Conference Call. (Operator Instructions) As a reminder, this call will be recorded.

I would now like to introduce your host for today's conference, Ms. Lauren Walrath, Head, Corporate Marketing and Communications. You may begin.

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Lauren Walrath, Aquestive Therapeutics, Inc. - Head of Corporate Marketing & Communications [2]

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Thank you, operator. Good morning, and welcome to today's call to review Aquestive Therapeutics results for the second quarter 2019 and business highlights as well as the top line data from the Libervant crossover study.

On today's call, I am joined by Keith Kendall, Chief Executive Officer; and John Maxwell, Chief Financial Officer, who are going to provide an overview of recent business developments and performance in Q2 of this year. Additional members of our leadership team will be available for the Q&A at the end of the call. In total, we expect today's call to last approximately 60 minutes.

As a reminder, our remarks today correspond with the earnings release we issued after market close yesterday. In addition, the recording of today's call will be made available on Aquestive Therapeutics' website within the Investor Relations section shortly following the conclusion of the call.

To remind you, we will be discussing some non-GAAP financial measures this morning as part of our review of second quarter 2019 results. A description of these measures along with a reconciliation to GAAP can be found in the earnings release we issued yesterday.

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 included in the company's annual report on Form 10-K filed with the SEC on March 14, 2019, and in our quarterly reports on Form 10-Q.

As with any pharmaceutical company with product candidates under development, there are significant risks and uncertainties with respect to our business and the development regulatory approval and commercialization of our 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 subsequent forward-looking statements attributable to Aquestive Therapeutics or any person acting on our 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 Keith.

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Keith J. Kendall, Aquestive Therapeutics, Inc. - CEO, President & Director [3]

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Thanks, Lauren, and thanks to everyone on the call for joining us this morning as we discuss a number of important developments in our business during the second quarter and through July. John and I are going to walk through some details in our remarks today and will be joined by additional members of the Aquestive leadership team during the Q&A session afterward.

Yesterday, we announced positive top line results in the single-dose crossover study for Libervant. This is a critical milestone for our lead asset, which is now positioned to drive significant value for shareholders. This puts us on a clear and straightforward path to completing the filing of our NDA for Libervant in the fourth quarter. We believe that we've met the specific requirements for approval communicated to us by the FDA, and our product continues to prove that it has attributes of lacking in all other current formulations of diazepam.

In addition, today, we'll update you on 2 other important developments. We continue to build a leadership position in the epilepsy market with the initial entry of SYMPAZAN. Shipments are up materially to date over Q1 and they continue to trend higher.

Second, we completed a deal to refinance our debt in order to reset the repayment schedule and terms and provide additional capital to the company.

Let me start by putting our news about the crossover study into context. The progress of Libervant is truly exciting to us. Libervant represents a material contribution to improve patient care for the treatment of breakthrough and cluster seizures, and will potentially contribute up to $200 million to $300 million in peak net revenues within 3 to 4 years postlaunch. Over 1 million patients in the U.S. have active, uncontrolled epilepsy and a need for rescue medication. Less than 10% of these patients are successfully treating their seizures with the current standard of care of rectal gel application. A medicine is only as good as its ability to be used by patients where they need it, when they need it and in a form they accept.

We believe that Libervant will become the preferred rescue medication by patients and providers looking for an alternative, potentially superior and clinically differentiated treatment to manage and interrupt seizure clusters. This is based on strong data that shows the product can be quickly and safely applied, results in consistent therapeutic levels and comes in a form preferred by patients. Libervant is an important late-stage product for our company, and we're excited about where we are in terms of bringing this product to market.

In terms of the progression of Libervant's development and NDA filing, as announced the first section of the NDA was submitted in May in accordance with the rolling submission plan submitted to the FDA earlier this year. We recently completed the single-dose crossover study, which gives us a clear and straightforward path to submission and approval.

Top line results indicate we met our primary objectives for the study. Specifically, the study confirmed our dosing model algorithm is appropriate for patients and will support a lower top dose than the top dose for the rectal gel. The results also show no difference between the film and the gel in patients using concurrent AED medications. In addition, once again, we observed several patients in the study who did not respond to a dose of the rectal gel, but in those same patients, we were able to produce therapeutic blood levels with Libervant. We are still performing quality reviews and statistical analysis on the data. Once that's complete, we look forward to presenting all the data in a KOL pool and will provide more details on the timing of that over the coming weeks.

We remain on track to file the next portion of our NDA for Libervant in September as planned and more importantly, to complete the NDA submission in Q4 as expected. While we are progressing Libervant through the approval process, we continue to make progress introducing our technology to payers, prescribers, patients and caregivers, primarily through our commercialization of SYMPAZAN.

SYMPAZAN was launched as our first proprietary product in order to position us in the epilepsy treatment market and help build-out our capabilities and relationships in anticipation of launching complementary epilepsy-related products, most importantly, Libervant.

In addition to a differentiated value proposition for patients suffering from Lennox-Gastaut syndrome, there was a greater than 90% overlap of target prescribers for both SYMPAZAN and Libervant. All of our commercialization efforts relating to SYMPAZAN provide an opportunity for direct conversations with healthcare practitioners about the value of our PharmFilm technology in preparation for the eventual launch of Libervant.

SYMPAZAN is tracking in line with our expectations. We believe it can generate approximately $65 million in net revenue at peak within 5 years. The latest monthly SYMPAZAN shipment volume has grown over 250% since the end of Q1. The prescribing base also continues to grow over 125% since Q1, with over 80% of those prescribers writing multiple scripts and a refill rate approaching 65%. This continues to track favorably with the analogs we use for uptake and refills Fycompa liquid and ONFI, respectively.

Additional contracts with payers and PBMs were signed since the first quarter, and we continue to expect to achieve our goal of having over 70% of lives covered by the end of the year. We're happy with these trends. SYMPAZAN is strategically accomplishing what we wanted to, and these efforts will not only continue to contribute to our growing cash flow, but more importantly, establish the foundation ahead of a Libervant launch.

The last key deliverable for the quarter was to refinance our existing debt facility. In this regard, we successfully completed our debt refinancing in mid-July with Madryn Asset Managemen and others that provides up to $100 million to our business, including $70 million upfront and up to $30 million in additional capital. This was important for a number of reasons. It allow us to -- it allowed us to pay off our existing line with Perceptive, eliminating near-term principal repayments, including a $38 million bullet payment in 2020. It also provided an immediate injection of $15 million of incremental capital. And the deal provides for additional capital of up to $30 million between now and March of 2021, based on the satisfaction of certain conditions, which were described in our Form 8-K filed on July 15, 2019.

We believe these funds, together with product revenues and the potential monetization of our royalty position in Sunovion's apomorphine product, following its FDA approval, can provide the capital we need ahead of the expected Libervant launch.

Beyond the key goals, Suboxone is performing very well against the generic films that have launched at risk. Suboxone in the authorized generic, which we produce, still hold a very strong position of over 75% share of the film market. Our order book remained strong. As such, we are amending our guidance upward and narrowing the range for Suboxone.

We now expect to produce between 240 million and 260 million strips and generate between $29 million and $32 million of revenue from Suboxone in 2019. While this represents the legacy part of our business, Suboxone continues to be an important source of revenue and cash flow and will contribute at a higher rate than originally expected for the remainder of the year.

Additionally, the epinephrine or Aquestive-108 Phase I Proof of Concept clinical trial continues in Canada, and we're on track to complete it in the third quarter. Based on the data, once available, we would expect to move to a pre-IND meeting with the FDA as quickly as possible.

In the event that data indicates some modifications to our formulation might be needed to reach certain PK performance goals, we'll move immediately to start that work and conduct additional Proof of Concept studies.

Finally, Exservan, our riluzole-based product for ALS, also continues to move toward a November 30 PDUFA date. As we have said previously, we are seeking to license the product outside the United States, and we have begun the process of identifying potential commercial partners in the U.S. as well.

This was an important quarter for us, and we made a lot of progress on key value drivers. The Libervant study has successfully concluded, and we're on track to complete the NDA filing in Q4. SYMPAZAN continues to grow and is establishing strategic relationships for us in the epilepsy market in advance of the Libervant launch.

We've improved the company's capital position and now have potential access to additional capital. And based on the current strong performance of Suboxone, we'll continue to see strong revenues through the end of 2019. We look forward to continuing to deliver on these activities in the third quarter and through the rest of the year.

I'll now turn the line over to John Maxwell, who'll provide additional specifics around the debt refinancing and other aspects of our financial performance.

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John T. Maxwell, Aquestive Therapeutics, Inc. - Senior VP & CFO [4]

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Thank you, Keith. Good morning, everyone. I will start by highlighting a few key items: One, our improved capital position and 2019 revenue outlook; also a gross margin revision that is solely a consequence of a shift in revenue mix and does not reflect any changes to the profitability of our proprietary or licensed products and a higher 2019 spend than previously anticipated.

As Keith noted, we made substantial progress on our capital plans, eliminating debt repayment requirements in the near term and providing access to additional capital. The total facility for up to $100 million provided $15 million of new capital upfront, pushed out repayment of principal until late 2021 and provides up to $30 million of additional capital, subject to the satisfaction of certain conditions, including $10 million at the filing of the Libervant NDA expected in Q4, subject to approval of noteholders and $20 million upon Libervant's FDA approval, which is expected in 2020. As part of the deal, we issued 2 million warrants for our common stock to institutional noteholders. Pursuant to the indenture, we will be registering these warrants as well as affiliate shares in a universal shelf registration in September.

As you know, we do plan to monetize the apomorphine royalty stream once that product is approved, which is currently expected to be in early to mid-2020. As we have noted previously, this royalty stream could provide additional capital of up to $100 million or so. At the time of any apomorphine monetization, noteholders will have the option to buy down debt with up to $50 million of the proceeds, potentially leaving us with substantial new cash and a reduced debt balance.

By now, you will have seen our financial results in our 10-Q and earnings release that were filed yesterday. I want to draw out a few points that are important to an understanding of our updated 2019 financial guidance published in the release. To the extent that there are questions on the Q2 results, we can take those during the Q&A session.

First, Suboxone performance remained strong, and we are changing our Suboxone revenue outlook as a result. In the second quarter of 2019, we produced 72 million doses of Suboxone and the authorized generic product. This production level was comparable to the second quarter of 2018 production of 74 million doses. As Keith mentioned, Suboxone products hold about a 75% share of the film market. As such, we continue to see strong manufacturing purchase orders for Suboxone and the Sandoz authorized generic product. Based on the franchise's market performance in our order book, we are updating our full year guidance for Suboxone manufacturing volume to a range of 240 million to 260 million doses, up from previous guidance of 190 million to 240 million doses. We feel good about our products market performance to date, and we will continue to evaluate the market performance of Indivior and Sandoz, and we'll update the market again in our Q3 call.

The consequences of this is that we are raising our guidance on manufacture and supply revenue to be in the range of $29 million to $32 million, up from $23 million to $30 million. And we are raising the bottom end of our 2019 total revenue guidance, up from $33 million to $38 million. This brings our total revenue guidance range to between $38 million and $45 million. The revision would have been higher except that we removed the $4 million apomorphine approval milestone out of 2019 and into 2020. We are assuming Sunovion resubmits in Q3 2019 as it has publicly stated it will do. And we are taking a conservative view that the PDUFA clock will be 6 months, not 2 months.

With this shift in revenue mix, which now reflects a higher proportion of Suboxone products instead of 100% margin from license payments, we are adjusting our guidance on full year non-GAAP gross margin to a range of 67% to 69%.

Second quarter 2019 adjusted gross margin was approximately 57%, reflecting that there were no milestones within the quarter. But the full year, of course, does include some milestone and royalty revenue that drives our gross margin to be higher in total on the year. The other factor in our margins is the SYMPAZAN, which carries a relatively higher margin to other products, will be an increasing portion of our total revenue in the future. Our updated guidance captures these various elements.

As outlined in the earnings release issued yesterday, our full year non-GAAP adjusted EBITDA loss range has been revised to $50 million to $52 million from our previous guidance. The new guidance reflects the revenue mix shift and its impact on gross profit as well as some additional expenditures made related to protecting our IP in the face of the generics in the market at risk, accelerating the Libervant crossover trial and other general business activities in the first half of the year.

At the same time, interest costs will increase in the second half as a result of the higher debt amount outstanding. We are increasing our cash burn guidance to approximately $60 million to $65 million, tracking with our revised revenue, gross margin and EBITDA guidance, additional financing costs based on the timing of our refi, plus some working capital effects.

In summary, our spend reflects investment in a future of high-value proprietary assets, including a dominant position in the epilepsy market. Our capital position has been improved. Our debt payments have been pushed out well beyond the expected Libervant launch, and our revenue continues to be strong from our proprietary and licensed products. And we have visibility on the apomorphine royalty stream, which we expect to provide significant new capital in the first half of 2020.

Operator, we will now open the line for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Gary Nachman with BMO Capital Markets.

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Rafay Sardar, BMO Capital Markets U.S. - Analyst [2]

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It's Rafay on for Gary. For Libervant, how soon could you launch after an approval? And how should we think about the competitive landscape at launch? How much of a potential threat is UCBs NAYZILAM that was recently approved?

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Keith J. Kendall, Aquestive Therapeutics, Inc. - CEO, President & Director [3]

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Sure. So this is Keith responding. We'll be preparing to launch once we have visibility into the PDUFA date as quickly after the PDUFA date as possible. The UCB product has not yet actually hit the market. We don't know what kind of traction they'll have, but we've always anticipated that we would enter the market with a, if not multiple competitors, and we are prepared to deal with that based on what we believe is a very strong value proposition for Libervant.

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Rafay Sardar, BMO Capital Markets U.S. - Analyst [4]

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And then for SYMPAZAN, can you provide some color on the assumptions behind your peak sales forecast of $65 million? What kind of penetration and gross to nets does that assume?

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Keith J. Kendall, Aquestive Therapeutics, Inc. - CEO, President & Director [5]

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Sure. The gross to nets are consistent with what we are seeing now and what we've talked about publicly about the gross to net for that product and we'll continue that out. The penetration is relatively modest. I don't recall the exact number, but it's probably very low double digits overall in that market. And we ramp it to that number over that period of time-based on some of the analogs we've seen in the market and what their performance was at launch.

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Operator [6]

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Our next question comes from Randall Stanicky with RBC Capital Markets.

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Ashley Ryu, RBC Capital Markets, LLC, Research Division - Senior Associate [7]

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This is Ashley Ryu on for Randall. It sounds like there is some good momentum building behind SYMPAZAN. And could you talk a little bit more -- I know you said that the growth curve is going to be kind of analogous to some of the products that have already been on market. But could you kind of talk about the growth curve in terms of should we kind of expect this level of growth to continue? And then more accelerate once you start onboarding more reps for Libervant, given the high prescriber overlap? And are you starting to see, I guess, that acceleration from the removal of new-to-market blocks?

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Keith J. Kendall, Aquestive Therapeutics, Inc. - CEO, President & Director [8]

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

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Ken W. Marshall, Aquestive Therapeutics, Inc. - Senior VP & Chief Commercial Officer [9]

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The new-to-market blocks coming off is when you normally see volume pick up with products. Keep in mind that this isn't a typical pharmaceutical market. These are very fragile patients. They may change very methodically. Once they may change, they tend to stick with it for longer periods of time than normal medicines. But you do see volumes of our shipments picking up in the July time frame, and that's about the time you're seeing these new-to-market blocks come off. So yes, you should see some improvement there. If you're looking at coverage, as you expand on our sales force in anticipation of Libervant, we certainly will cover more physicians. But right now, our footprint covers the physicians that write the vast majority of clobazam. That medicine is very concentrated in those specialists that manage these fragile kits for fragile patients.

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Ashley Ryu, RBC Capital Markets, LLC, Research Division - Senior Associate [10]

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Got it. And you guys have said that you're expecting 70% to 75% covered lives by year-end. What are you at right now?

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Ken W. Marshall, Aquestive Therapeutics, Inc. - Senior VP & Chief Commercial Officer [11]

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Yes. If you look at the MMIT audit, which is probably the industry standard to assess these types of things, overall 47%. The coverage in our 2 key segments, Commercial and Medicaid are almost equal at that number. So we're well on our way. We've got a couple of contracts in red line right now. If those come through, we actually might get that a little earlier.

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Operator [12]

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Our next question comes from Liana Moussatos with Wedbush Securities.

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Vasiliana Vireen Moussatos, Wedbush Securities Inc., Research Division - MD of Equity Research [13]

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Your guidance of $38 million to $45 million in total revenues, minus $29 million to $32 million for Suboxone in generic. What's the remaining $6 million to $16 million?

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John T. Maxwell, Aquestive Therapeutics, Inc. - Senior VP & CFO [14]

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Sure, Liana. The -- we have 4 components in our revenue. Manufacture and supply, which Suboxone guidance will make up the majority of that number. We have license fees and royalties, which we've made about $5.5 million to date and would expect the second half of the year because we've moved apomorphine out to be a relatively smaller number. We have co-development fees, which continue in a normal course. We have activity with a few different potential licensees. And that number will remain in the range of where it is. And then SYMPAZAN would be the remaining piece of our total revenue picture.

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Operator [15]

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Our next question comes from Jason Butler with JMP Securities.

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Douglas Royal Buchanan, JMP Securities LLC, Research Division - Associate [16]

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It's Roy for Jason. I had a quick one. Keith, you kind of mentioned it I think, but there -- in the crossover trial for Libervant, we had about a 10% failure rate on the rectal gel. Is that consistent with real-world use? And it sounds like it was due to poor bioavailability. There were no other problems with the dosing. The dose was correctly delivered.

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Keith J. Kendall, Aquestive Therapeutics, Inc. - CEO, President & Director [17]

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Sure. I'm going to let Dr. Gary Slatko, our Chief Medical Officer, grab that because the technical nature, that's beyond my pay grade.

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Gary H. Slatko, Aquestive Therapeutics, Inc. - Senior VP & Chief Medical Officer [18]

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So the nonresponders in the dice in the rectal gel group all occurred in the highest weight group, the 20-milligram group, which was the highest dose group in the study. That dose group is -- that dose is higher than the maximum dose of film, which was 17.5 milligrams, which is the maximum dose for the highest weight group for film. This is consistent. This incidence rate is consistent with what we've seen in previous studies. In our experience, it's also generally consistent with what's been reported in the literature. The event rate in literature studies ranges anywhere from 3% to 18%. So the average of that is roughly 12%, which is consistent with what we're seeing here.

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Douglas Royal Buchanan, JMP Securities LLC, Research Division - Associate [19]

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Okay. Great. And then a couple on the SYMPAZAN launch, it's early in the launch obviously, but any plans for adjustments to the selling efforts or new initiatives? And then how many of the target prescribers have written a prescription? And what was the return rate for the quarter?

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Keith J. Kendall, Aquestive Therapeutics, Inc. - CEO, President & Director [20]

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Ken, do you want to take that?

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Ken W. Marshall, Aquestive Therapeutics, Inc. - Senior VP & Chief Commercial Officer [21]

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Yes. So as far as adjustments, I think we're right on target with our messaging. So that's going to stay as it is. We will dial up our presence with caregivers. After you've made a few rounds with physicians, it's very appropriate to start talking more to the caregivers and the higher functioning patients if that's reasonable. It's a nice way to accelerate your business. If you look at the numbers of physicians who've written, and as Keith mentioned, we've had a significant increase quarter-over-quarter, that's approaching nearly 10% of our core physicians and 5% of our overall targets. We'll approach 300 writers by the end of this month.

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Douglas Royal Buchanan, JMP Securities LLC, Research Division - Associate [22]

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Okay. Okay. Great. And the return rate for the quarter? Do you know that?

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Ken W. Marshall, Aquestive Therapeutics, Inc. - Senior VP & Chief Commercial Officer [23]

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It's very -- it's virtually nothing and nothing ultimately come back. Sometimes there are returns from a wholesaler -- through the wholesalers but not -- we haven't seen returns...

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Keith J. Kendall, Aquestive Therapeutics, Inc. - CEO, President & Director [24]

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Yes. We have no returns. There is some restocking as there are always with specialty brands when it goes to pharmacy and isn't picked up but we have no returns that would come back, I would say on this. It's a good question.

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Operator [25]

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

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Thomas Flaten, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [26]

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A quick question for John. What was the GTN in second quarter?

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John T. Maxwell, Aquestive Therapeutics, Inc. - Senior VP & CFO [27]

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Second quarter gross to net was in the mid-40s. I'm sorry, I'll get the exact number for you. I don't remember it, but it's in the mid 47%. And I'll give you the exact...

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Thomas Flaten, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [28]

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Just a couple of questions on the Libervant study. I noticed in the press release, the Tmax description didn't have a comp to Diastat? Were they similar? Can we infer that from meeting the endpoints?

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Gary H. Slatko, Aquestive Therapeutics, Inc. - Senior VP & Chief Medical Officer [29]

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Right. So this is Gary. So the Tmax for Diastat's consistent with the Diastat label. So there are no surprises in terms of how Diastat performed. The Tmax for the film was -- despite being in a fed patient population was consistent with what we've seen in healthy subjects who were fasting. So it was actually a little bit faster than what we might have expected.

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Thomas Flaten, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [30]

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Great. And then from a submission and labeling perspective, is this going to be weight-dependent dosing? I'm just curious how the dosing administration section is going to look. Or what you're going to submit to FDA?

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Gary H. Slatko, Aquestive Therapeutics, Inc. - Senior VP & Chief Medical Officer [31]

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Right. So the way the study was designed was based on a weight-based algorithm, which is consistent with kind of how the rectal gel is administered. Our dosing is slightly different, but it is based on a different dose for different categories of weight. And when we administered in this study according to the -- the dose according to those different weight groups, the concentration of diazepam that was achieved across the different weight groups was relatively consistent, which was to us confirmation that the algorithm is doing what it was intended to do.

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Thomas Flaten, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [32]

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Excellent. That's great. And John, one more for you. On the debt facility with the incremental up to $10 million that you can pull down on Libervant submission, just mechanically, is that on acceptance to file? Is there a time lag? And how long it will take you to get that money? Just can you explain the mechanics around that a little bit?

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John T. Maxwell, Aquestive Therapeutics, Inc. - Senior VP & CFO [33]

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Sure. There's a couple of important mechanics. One is it's on filing. It isn't on acceptance. So we would expect to be able to access that in Q4. We do need noteholder approve -- majority noteholder approval, and we would have to be in compliance with the indenture. And Thomas, just to answer your question more precisely, the gross to net in Q2 is -- there is a 40% discount, not 47%. The overall on the year is expected to get to 47% roughly.

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Operator [34]

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(Operator Instructions) Our next question comes from Ram Selvaraju with H.C. Wainwright.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [35]

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This is Edward on for Ram. Just a few leftover for me. You were talking about the -- or there is a mention of that 10% rectal gel treated subjects failing to achieve the adequate exposure. Considering this is what is seen in the real-world environment, I was wondering how important this was for labeling and for approval?

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Keith J. Kendall, Aquestive Therapeutics, Inc. - CEO, President & Director [36]

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Well, it's -- we -- in our discussions with FDA, we designed the protocol in consultation with them and our design and analysis included the plan to include -- design the study as a real-world study, the real-world conditions, which included patients who were getting concurrent meds. Patients -- if patients were getting rectal gel were not pretreated with an enema. So they were under real-world conditions. So we -- and patients who were fed, which is more likely how patients would appear when they are being treated with film or gel. So we believe we've replicated with the study, the real-world conditions that we will be treating patients under, and that should be reflected in how the labeling reads.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [37]

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Okay. That makes sense. And then a couple around the study design and the results. It looks like about 3 out of the 31 patients were excluded from the primary analysis. Just wondering why they were excluded. And then looking at the overall amount of data, I was wondering if the FDA would have any additional remaining questions about the film versus the gel. I just wanted to ask about that as you're going through the remaining filing for the NDA. And whether that's part of what might be in that September submission? Or if you believe that have not only been able to pull the data, as you mentioned in the press release, but you have all the background manufacturing data as well for that NDA.

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Gary H. Slatko, Aquestive Therapeutics, Inc. - Senior VP & Chief Medical Officer [38]

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Sure. So regarding your first question, of the 31 patients to experience adverse events that were considered not related to the medication administration. So those patients were discontinued, and we're not able to complete both arms of the crossover. So we didn't -- we were not able to use them in the primary analysis.

The third patient was excluded because they did not meet a protocol requirement of having a low diazepam level at the time they were to be started on the next arm of the trial. So they were disqualified for that reason.

In terms of the second question, we plan to do secondary analyses. In addition to completing the statistic QA and statistical analysis on the primary data, we were planning to do secondary analyses that we will be sharing at the KOL day to be scheduled in fall. Additional information, we anticipate, sharing at the time would be information around the time course to different diazepam concentrations that we're comparing film to gel. And we will also talk about additional analysis of a meaningful subset of patients who are exposed to a high-fat diet in anticipation of potential questions that we may get from FDA around that population. Those are the questions that we would anticipate getting -- potentially getting from FDA. We believe this study has answered all the other outstanding questions that the FDA would have.

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Keith J. Kendall, Aquestive Therapeutics, Inc. - CEO, President & Director [39]

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And Edward, this is Keith. I'm going to let Dan Barber give you a little more color on the regulatory part of your question, okay?

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Daniel Barber, Aquestive Therapeutics, Inc. - Senior VP & COO [40]

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Just to add on to Gary's clinical analysis from a CMC perspective, we remain on track for putting that portion in on September 30, like we've guided before. We don't see any obstacles to submitting that. And there are no additional clinical studies that we plan on performing prior to our NDA submission. So the -- all of the work to get to filing at this point is in our 4 walls.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [41]

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Excellent. Yes, I just wanted to make sure that everything was still tracking along with your guidance. So I appreciate all that color. Two more quick questions that you might be able to answer really quick. Are you providing any guidance on SYMPAZAN revenues for 2019?

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John T. Maxwell, Aquestive Therapeutics, Inc. - Senior VP & CFO [42]

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No, we are not. I mean we just got out of new-to-market blocks. We've just crossed the threshold with a number of new PBM contracts that are significant. We've got to see how that progresses, and then we'll evaluate later in the year, but we don't plan to provide guidance.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [43]

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Yes. That makes sense. And then just looking at Suboxone really quick, just wondering if there is going to be any resolution on the litigation that you've heard about, at least. And maybe some possible outcomes, can you talk about it. It looks like you're raising your guidance. So things are looking up, but just wondering what you're seeing for the future?

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Keith J. Kendall, Aquestive Therapeutics, Inc. - CEO, President & Director [44]

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This is Keith. I think questions about the litigation are best directed to Indivior. We don't have visibility into their litigation strategy at this point in time. We continue to see a very strong market. We continue to see very strong performance of both the brand and the authorized generic, both of which we are the exclusive providers of. We'll continue to enjoy that strength for as long as we have visibility into it, and we'll react to the different litigation components as they become visible to us. But in terms of strategy and expectations, that's a question best directed to Indivior.

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Operator [45]

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And I'm showing no further questions at this time. I would like to turn the call back over to Keith Kendall for closing remarks.

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Keith J. Kendall, Aquestive Therapeutics, Inc. - CEO, President & Director [46]

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Thank you, operator. Well, thank you, everyone, for joining today's call. Obviously, we are very excited about the significant progress that our team has made over the last couple of months. And we look forward to continuing to deliver in the third quarter and remaining focused on the successful conclusion of the epinephrine trial that is ongoing right now in Canada, continuing to develop SYMPAZAN and Aquestive's position in the epilepsy market and obviously, most importantly, to continue to progress Libervant toward its ultimate filing in Q4. So thank you all for joining, and we'll look forward to talking again soon.

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Operator [47]

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Ladies and gentlemen, this concludes today's conference. Thank you for joining, and everyone, have a wonderful day.