Aquestive Therapeutics, Inc. Common Stock 2026 Q2 Earnings Call

Good morning and welcome to today's call. On today's call, I am joined by Dan Barber, President and Chief Executive Officer, and Ernie Tosz, Chief Financial Officer, who are going to provide an overview of the company's reported financial results for the second quarter ended June 30, 2026, and a progress update on the company's key 2026 objectives, followed by a Q&A session. During the Q&A session, the team will be joined by Dr. Matt Greenhut, Chief Medical Officer, Melina Chaffee, Senior Vice President, Regulatory Affairs, Sherry Korczynski, Chief Commercial Officer, and Dr. Matthew Davis, Chief Development Officer. As a reminder, the company's remarks today correspond with the earnings release that was issued after market close yesterday. In addition, a recording of today's call and related supplemental materials 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 2026 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 in other sections included in the company's annual report on Form 10-K, filed with the U.S. Securities and Exchange Commission on March 4, 2026.

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. 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. Now, I would like to turn the call over to Dan.

Thanks, Faith, and good morning, everyone. I am excited to share today that not only have we completed the necessary studies for Anaphylm resubmission, but that we remain on track to resubmit before the end of this quarter. This is less than 8 months from when we received a complete response letter from the FDA. Our resubmission will include the results from our most recent human factors validation study. As a reminder, this study provides information on how participants interacted with our improved packaging and instructions for use. In the complete response letter received earlier this year, the FDA indicated participants experienced difficulty opening our pouch and incorrectly administered the film too many times. I am pleased to say that after updating our packaging, labeling, and instructions for use, our most recent human factors validation study showed, statistically speaking, a major reduction in both categories.

Under the previous packaging, we had 26 individuals indicate difficulty opening our packaging, and we had 6 individuals tear the film. This time, we had only one participant show difficulty and no one tore the film. In the previous study, 20 participants placed the film incorrectly on top of their tongue or on the roof of their mouth. This time, we had only 2 participants misplace the dose during administration. This data is further supported by our latest pharmacokinetic or PK study. In this study, we saw no statistical difference between clinician-administered and self-administered drug product. Keep in mind, subjects who self-administered were given our revised packaging and instructions for use and had no coaching by clinical staff during the administration. We also had an encouraging result when the film was purposely misplaced by clinicians on top of a subject's tongue.

This data was requested by the FDA to further understand what might happen if the film is misadministered. We saw rapid and meaningful changes in blood pressure and heart rate. The changes from baseline were higher than manual IM during the critical first 15 minutes, and in line with what we have seen from EpiPen in our other studies. This means that in the evaluated misadministration scenario, pharmacodynamic responses compared favorably to manual IM administration. Even on PK, while we saw lower levels as expected compared to on-label sublingual administration, we still reached meaningful Cmax levels. This is a very encouraging outcome for the program. As we approach our planned resubmission for Anaphylm, it is a good time to review the compelling opportunity that exists for Anaphylm here in the U.S.

While the epinephrine rescue market is largely generic, the need for improved clinical and caring offerings in this category is significant, and we believe these needs could support conversion to a branded product over time, if approved. As a large PBM publicly wrote earlier in the year about Anaphylm, this advancement stands out because emergency treatment is a category where ease of use and readiness really matter. That need starts with patients, caregivers, and healthcare providers. Our interactions with the allergy community indicate there is a widespread desire among patients and caregivers for an epinephrine that is oral, works quickly, is easy to use, easy to carry, and durable. Many years of research and data tell us patients still do not carry or use their epinephrine. The data also shows that medical devices such as auto-injectors are often not where you need it, when you need it, when anaphylaxis occurs.

We believe the conversion from auto-injectors starts with the allergists, and we can accomplish this efficiently. Our focus at launch will be on the allergy community, which will allow us to keep our cash burn down as we prepare for a potential launch, if approved. We believe if allergists convert their prescriptions to the first and only non-invasive, orally delivered epinephrine product for the treatment of type 1 allergic reactions, including anaphylaxis, if approved by the FDA, the rest of the market could follow over time. Clearly, the desire for better products in this space is strong among patients, caregivers, and healthcare providers. This brings us to payer coverage. The first point I want to be clear on today is that we believe clinical differentiation matters to payers. Let me repeat that. Clinical differentiation matters. This goes beyond just offering a no-needle solution.

In our case, the benefits from an oral medication are significant. Not only do we believe we are easier to carry than auto-injectors, our product has shown in our studies meaningful clinical differentiation from the auto-injector on time to maximum concentration, or Tmax, and on change from baseline blood pressure following administration. Our data demonstrates this, and we believe payers may find this meaningful. This, along with the ease of carry and use aspects of Anaphylm, are important. We have a great clinical story to share, and we have already heard from multiple counterparts at various payer groups about the difficulties their individual family members face with auto-injectors. Payer coverage is also a function of product pricing. This is the single most important decision any brand will make at launch. We are actively building our pricing strategy, and for now, we will keep this confidential.

What I will say is that based on the ongoing volume in this market, we continue to believe the market opportunity for epinephrine-branded products exceeds $1 billion a year and could potentially reach $2 billion a year over time. This is driven not just by payer dynamics, but also by prescription volumes. The epinephrine rescue market has been growing for years, even without significant promotional activities. Over the last few years, the market has grown annually by around 6%, and this holds true for 2026 year to date. Given the large gap between prescriptions and prevalence, the continued expansion of allergy diagnoses and new product offerings, we believe this growth rate could continue for the foreseeable future. From my perspective, the compelling opportunity in this category remains intact. We have an expanding and growing market dominated by outdated technology.

We believe our product provides meaningful clinical differentiation that could support payer adoption, all while being efficient in our allergist-focused launch strategy, if approved. Now, let's talk about medical affairs and our commercial launch preparations. Our Chief Medical Officer, Dr. Matt Greenhut, and his team continue to interact with allergists on a daily basis and continue to attend all key allergy conferences. In fact, I believe awareness of Anaphylm within the allergy community is now quite high. Matt recently told me that during a major allergy conference, it was difficult to find physicians who were unfamiliar with Anaphylm. That is a testament to the team's consistent engagement with allergists over the last several years. Interaction after interaction, the team continues to share the excitement for Anaphylm to be potentially approved. Our commercial team has launch preparations fully underway. As previously shared, the team has made excellent progress preparing for launch.

Sales leadership has put plans in motion to bring on our regional sales directors and training. Marketing is driving all promotional materials and programs to be launch-ready in a manner consistent with applicable pre-approval requirements. We are building out our commercial analytics capabilities. Simply put, we have the right experienced leadership in place and remain on track to hit the ground running as soon as possible, if approved by the FDA. Now, let's turn to AQST-108. I must admit, I was surprised after our May earnings call by how much interest we received in our atopic dermatitis program. One of the most common reactions was, "I've never thought about epinephrine for atopic dermatitis," along with questions on how we believe the science works. We have included extra slides in our supplemental materials to further elucidate the science.

Simply put, a localized topical epinephrine application may have the potential to provide a meaningful treatment approach in atopic dermatitis and could potentially support a dosing profile that does not require daily administration. This could allow us to position AQST-108 between low-cost, less effective generics and significantly higher priced biologics. We will have more to say on this program after we have completed the resubmission of Anaphylm. Now, let's turn to our partnering and base business activities. We continue to engage in active partnering processes for Libervant in the U.S. and Anaphylm outside of the U.S., and we expect to have more to say as those processes progress. Our base business as well remains cash flowing on a consistent basis. After interacting with Indivior, we also believe that there is no near-term impact to our base business based on the proposed Indivior Supernus merger.