Aquestive Therapeutics (NASDAQ:AQST) Q1 2019 Earnings Call

0:00 Good morning, and welcome to the Equestive Therapeutics first quarter 2019 conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. If anyone should require operator assistance, please press star then zero on your touch-tone telephone. As a reminder, this call will be recorded. I would now like to introduce your host for today's conference, Ms. Lauren Walras, Head, Corporate Marketing and Communications. You may begin. Thank you, Operator. Good morning and welcome to today's call to review Equestive Therapeutics results for the first quarter 2019. On today's call, I am joined by Keith Kendall, Chief Executive Officer, Ken Marshall, Chief Commercial Officer, Dan Barber, Chief Strategy and Development Officer, John Maxwell, Chief Financial Officer, and Lori Braender, General Counsel.

0:58 Over the course of this call, we will provide an overview of business developments through Q1 of this year and discuss the progress we continue to make with respect to our 2019 goals and performance targets. Following these remarks, we will open the call to your questions. We expect today's call to last approximately 60 minutes in total. As a reminder, our remarks today correspond with the press release we issued this morning. In addition, the recording and transcript of today's call will be made available on Equestive Therapeutics' website within the Investor Relations section shortly following the conclusion of this call. During the call, the company will be making forward-looking statements. We remind you of the company's safe harbor language as outlined in today's press release, as well as the risks and uncertainties affecting the company as described in the Risk Factors section included in the company's Form 10-Q, to be filed with the FCC on May 8, 2019.

1:58 As with any pharmaceutical product candidate under development, there are significant risks with respect to the development, regulatory approval, and commercialization of new products. Given these uncertainties, you should not place undue reliance on these forward-looking statements, which speak only as of the date made. All subsequent forward-looking statements attributable to requested therapeutics or any person acting on behalf are expressly qualified in their entirety by this cautionary statement. 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. Thank you, Lauren. Thank you, everyone, for joining us this morning.

2:46 We're pleased with the start of the year for Equestive Therapeutics and the early progress we've made toward achieving our 2019 goals. Through the first quarter, the company has continued to enjoy a strong book of business from our licensed products, especially Suboxone. More importantly, we've made significant strides in advancing the next generation of medicines from our pipeline, which will support the future growth and success of Equestive. Looking ahead, we expect 2019 to be a formative year for the company as we work to achieve several commercial, regulatory, and development milestones. The primary focus of our commercial organization is driving the successful launch of Simpazan and establishing our epilepsy franchise.

3:33 We're pleased with the reaction we've gotten to date introducing Simpazan to the LGS community. As Ken Marshall will describe in detail, we have made good progress on three key metrics that are important to the long-term growth and success of the brand. Prescription growth, prescriber-based expansion, and the number of patient lives covered. As we near the six-month mark post-launch, access is expanding. As expected, payers' new-to-market blocks are beginning to expire. and we are in the process of finalizing agreements with both commercial payers and Medicaid agencies. We expect to report several agreements with commercial plans soon. As these events unfold and we continue to educate healthcare providers on Simpazan's value proposition, we expect to see continued sales growth.

4:27 The launch has given our commercial team the opportunity to build and develop important relationships with the LGS and epilepsy communities. Given the 90% overlap between Simpazan and LibriVant physician targets, we believe every interaction we have now forms a strong foundation for LibriVant's future success, establishing more familiarity with Equestive and our farm film technology. On the regulatory side, we're pleased to report that the FDA has agreed to our rolling submission plan for LibriVant, and we plan to submit the first section of the filing this month. Our intention is to complete the filing once the crossover study is complete. Recruitment for that study is going well. As of this week, we have enrolled and administered the first dosing for more than half the subjects necessary.

5:21 Assuming our current pace of recruitment continues, we expect to be able to complete the study in the third quarter and finalize the full adult NDA submission for LibraVant in the second half of 2019. We anticipate this product, once approved, will offer a major contribution to patient care and help to improve outcomes for many patients with refractory epilepsy who remain undertreated and underprepared for the possibility of breakthrough seizures. In addition to LibriVant, the other development program we progressed this quarter is epinephrine sublingual film. This is one of two complex molecule programs we continue to progress based on demonstrated feasibility and long-term market potential.

6:09 Consistent with our plans, the reformulation of epinephrine is now in the clinic and we expect to see top-line data next quarter. Our licensed product business continues to provide us with the revenue we need to advance development work on our proprietary assets. For the first seven months of the year, we have confirmed orders to produce and deliver 168 million doses of Suboxone Brand and Authorized Generic Products. To date, erosion of the brand market share has been significantly slower than expected and better than historical industry analogs. Additionally, the underlying market continues to grow at greater than 10%. This gives us great confidence in our 2019 guidance and projections as Equestiv will continue to be the sole and exclusive manufacturer for Suboxone, and The Authorized Generic.

7:08 Before I close, I want also to take a moment to mention some recent developments in the structure of our leadership team and business operations. As a specialty pharmaceutical organization with a growing commercial portfolio, a developmental pipeline, and a manufacturing operation that manages the delivery of multiple product lines with multiple doses, our business has grown increasingly complex. This evolution has prompted the need for some changes to ensure we stay a highly efficient and productive organization. In line with these goals, we've asked some talented leaders from within our organization to take on new roles within the organization. To begin with, we decided to combine the value creation and value delivery business units under the leadership of Dan Barber. This change will create one organization with end-to-end product responsibility.

8:02 The group will oversee corporate strategy, pipeline development, as well as product engineering, manufacturing, and distribution. Dan will be supported by a strong team, including Cassie Jung, who was recently promoted to the new role of Vice President of Operations. Cassie's been with our organization from its inception. Her deep knowledge of Equestiv will be invaluable as she takes ownership for optimizing the workflows processes and staffing in our manufacturing facilities in Indiana, and to ensure the continued delivery of first rate quality products to the market. Finally, we've appointed Peter Boyd to lead a newly developed function that will focus on business process design and improvement, data analytics, and information technology.

8:51 This is critical work that is necessary to support our growth. We believe these changes enhance our ability to focus on the clinical, Regulatory and Commercial Catalysts Ahead of Us, which, if met, can drive significant value for patients and for shareholders. I'll now turn the line over to Ken Marshall, who will recap the commercialization initiatives that are underway to support the launch of Simpazan. Ken Marshall Thank you, Keith, and good morning, everyone. We're excited to share the progress we've made commercializing Simpazan and introducing farm film technology to healthcare providers and payers. The launch at Simpatham is going well. We've made good headway on three fronts that are critical to the long-term success and health of Simpatham.

9:40 The number of prescriptions written, the number of prescribers, and the number of lives covered. On each of these metrics, we're tracking in line with our internal expectations and the performance of key analogs we benchmark against, including Benzel suspension and Phycompa suspension. We view these specialty launches as meaningful benchmarks because they've each provided the reference medicine in a different delivery form for a subset of patients with difficult-to-treat epilepsy. Both launches performed well, systematically growing their prescriptions, prescribers, and lives covered over the course of several business quarters and becoming meaningful contributors to their respective franchises. During the first quarter of this year, we saw steady month-over-month growth in Simpazan prescriptions and shipments to pharmacies.

10:30 As we've noted before, the Symphony audit underreports most specialty medicines due to some of the volume moving through specialty distribution and non-reporting pharmacies. For Simpazan, underreporting has been highly variable and in the range of 15% to 50% week-to-week. For that reason, we closely monitor our shipments from wholesalers to retail pharmacies These shipments tell us when a new script has been received at a pharmacy, making it a good indicator of physician interest in the product. Our shipment numbers are strong and support the steady volume growth we see in adjusted prescriptions. To date through April, we've shipped 700 units with low single-digit returns from pharmacy. Again, we see this on track or ahead of Banzel and Phycompa in a comparable time period.

11:21 Refills are another key component to any launch product success. Patient-level data suggests that 60 to 65 percent of patients have sought Simpazan refills. Traditionally, new prescription to total prescription, also known as NRX to TRX ratios, under-represent refills of scheduled medicine since refills are highly controlled by state Medicaid programs. For this reason, patient-level data is a better indicator of the true refill rate for Simpazan. To date, Simpazan NRX, TRX mirror what ANFI did in the early months of their launch. Equally encouraging, we continue to grow our prescriber base. As we've shared previously, the sales team is targeting more than 4,000 Clopazan prescribers.

12:07 We've made over 25,000 calls to date to those targets and engaged them through regular office visits, lunch and learns, peer programs, advocacy engagements, and conferences. To date, over 4% have written a script for Simpsons. Over half of those prescribers have written multiple prescriptions, with 25% writing greater than five. Usability and confidence in accurate dose delivery are key underpinnings for our epilepsy franchise and will continue to be important messages for future product launches. These are messages we build into every HCP interaction as well as meetings with payers and caregivers at advocacy events. Simpazan gives us a great platform for educating the market about our technology and establishing more familiarity with Equestiv and FarmFilm.

12:59 We will continue to exploit this opportunity and expect it to be critical when we are approved to bring LibraVant to the market as over 90% of Simpazan targets will be important LibraVant targets. That said, we are mindful that changes in treatment don't come quickly or easily in this market due to the nature of treating LGS. The symptomatology of LGS makes families less likely to pursue changes if they found balance and a medication routine that they're comfortable following. For that reason, we're working hard to help prescribers and patients' families understand the strong data we produce, demonstrating Simpizan bioequivalence to Onfi. Our data shows a remarkable, consistent, reliable, and comparable PK, which families and providers can trust to provide the same clinical efficacy with a reduced burden of care.

13:53 We believe this distinguishes our product from the competition and will help us keep and grow our patient base over time. In addition to growing prescription and prescriber numbers, we're also focused on expanding access. Today, Simpazan is covered for approximately 80 million commercial lives, representing over 40% of our target goal. This puts us on track to achieve the goal of having 70% of commercial lives covered by the end of 2019. During the first quarter, a leading national pharmacy benefit manager agreed to cover Simpazan across its commercial book of business. Discussions are also continuing with other large national payers and PBMs, with several large contracts in the final stage of legal review.

14:41 Medicaid is also a significant payer in the LGS category, and many state reviews have taken place or are scheduled to be completed soon. As we near six months post-launch and the removal of new-to-market blocks, Simpsons is now being covered or listed in the top five Medicaid states for Clobizam prescriptions. We anticipate access expanding significantly by the end of the second quarter and will be working to pull the demand behind that access through. In the meantime, our support programs are working as intended. We have prior authorization and step-edit support to help process prescriptions. PAs are being processed quickly. Over 80% are processed in under 24 hours, reducing the burden on physician offices. We're also offering co-pay offset to patients with commercial insurance.

15:29 To date, over 60% of scripts filled have used the copay card. A little over half are used for patients with coverage. The balance continues to be used with those without coverage. As we continue to gain access to lives, our ratio will continue to improve. In closing, we're encouraged by the prescriptions, patient data, and shipment trends we've established since launch. Our expectations are that as Q2 progresses, will drive continued growth in total prescription volume and shipments by broadening our prescriber base, securing more coverage, and strengthening our relationship with the LGS community. All of that work will establish Simplizan and FarmFilm as an important tool for HCPs and lay the groundwork for the launch of LibraVant, where we know the market is equally awaiting the arrival of new and improved treatments that demonstrate consistent and predictable drug absorption, shorten the time from package to therapeutic effect in a rescue situation, address patient needs for portability and usability in a real-world situation, and provide a favorable safety and tolerability profile.

16:41 We believe LibraVant will address all these needs and has the potential to be a major contributor to improve patient care. With that, I'll turn it over to Dan for the update on our clinical development programs. Thank you, Ken. Today I will focus on the progress of our Librovent, Exervent, and AQST-108, or sublingual epinephrine development programs. As a reminder, Librovent, or diazepam buccal film, is being developed for the treatment of seizure clusters in patients with refractory seizures who are not well controlled on a stable regimen of anti-epileptic drugs, or AEDs. The reference-listed drug for Librovent is diastat rectal gel. In March, I shared with you that our next step forward was gaining agreement with the FDA on our rolling submission plan. As Keith said, we are pleased to report that we reached agreement with the FDA on our submission plan and the first parts of our filing will be submitted this month. This is yet another important step forward for this program.

17:40 We remain focused on completing the filing process for the adult submission in 2019. The ultimate timing of our filing continues to be driven by the completion of our crossover study. As I've shared with you in the past, following our pre-NDA meeting with the FDA last December, we initiated a crossover study that is designed to compare LibriVent and Diastat in the same patient population and provide the final set of data to validate our dosing model. Our target enrollment in the study is 24 patients in order to obtain a complete pharmacokinetic data set on a minimum of 16 patients. I am pleased to report that we have made significant progress towards full enrollment of this study. We currently have four active sites with two more sites likely to be activated and start enrolling in the next week.

18:32 Today, we've enrolled and dosed over half of the patients necessary to complete the study. Our active sites are fully engaged and we anticipate reaching full enrollment in the coming weeks. Based on our current status, we remain on track for a filing in 2019. Our long-term safety study continues to progress as well. We have over 350 real-world uses of LibriVent with no reported serious adverse events. As we begin to prepare for launch, there are several scenarios we are actively planning for to ensure the needs of patients will be fully met. One of the challenges with Diastat is it is underutilized. There are more than a million patients in the US with refractory seizures. Many of these patients need a rescue medication to prevent more seizures from occurring or developing into high-risk and high-cost emergency situations.

19:26 In order to improve outcomes for patients with refractory seizures, several factors including underdiagnosis and patient acceptance may need to be addressed. A recent study found that seizure clusters occur in nearly half of adult patients with active epilepsy who were followed prospectively over one year. The same study also found that the use of rescue medication was associated with fewer injuries in emergency department visits. This suggests that the population of patients in need of rescue therapy is significant, and it is important that these patients have a product they are comfortable and willing to use. From a competitive landscape perspective, we continue to believe we are the only oral as well as the only non-divice program in development for this indication.

20:12 In our view, This provides us with a unique value proposition as well as providing a major contribution to patient care. The other mid to late stage programs we are currently aware of utilize nasal spray or injection technologies. Inherently, some of these technologies have not been studied for this indication in patients who have any level of allergies or nasal passage issues of any kind. In our view, this creates population and seasonal challenges that are unique to nasal spray applications while our buccal film is not limited by these factors. With regard to Exervin or Rilazole oral film, we recently announced that the FDA accepted our MDA application and has provided us with the PDUFA goal date of November 30th, 2019.

21:00 We believe that we provided the FDA with a strong package of data, including the data collected from our swallowing study, which underscored the safety profile of our oral film. We continue to assess the market opportunity as well as the competitive and regulatory landscape in the United States. Given current market dynamics, we believe there may be greater opportunities for the product outside of the U.S. We continue to see strong interest for Rilzol in multiple international markets and we are actively pursuing these discussions. Our AQST 108 program also continues to progress. This is a sublingual film formulation of epinephrine which is in development for the treatment of severe allergic reactions as well as anaphylaxis.

21:45 As a reminder, AQST-108 has the potential to be the first oral treatment for anaphylaxis, a condition which affects up to 5% of the US population and causes millions of visits to hospital emergency departments each year. We recently completed a quantitative research study that surveyed over 500 physicians. The survey was split between allergists Pediatricians, and General Practitioners. The survey confirmed our views that the allergic reaction and anaphylaxis space is ripe for innovation. A few key points include 88% of physicians were concerned that their patients and or their caregivers don't consistently have their autoinjectors on hand at all times.

22:30 83% of physicians agreed with the statement that patients with at least some risk for anaphylaxis too often administer oral antihistamines in place of an epinephrine autoinjector, and 94% of physicians showed interest in AQST-108 when shown the target product profile. We are currently in a clinic with AQST-108, and we remain on schedule for a readout in the third quarter. As a reminder, this is a proof-of-concept dose escalating study conducted in Healthy Volunteers. Key findings from the study will include an understanding of our maximal and minimal concentration levels, as well as the level of variability between subjects. With that, I will now turn the line over to John who will recap our financial results.

23:18 Thank you, Dan. Good morning, everyone. To remind you, I will be discussing some non-GAAP financial measures this morning as part of our review of the first quarter. A description of these measures along with a reconciliation to GAAP can be found in the earnings release we issued earlier today. I also wanted to point out that we will be filing our first quarter Form 10-Q with the SEC later this afternoon. We produced revenues of $12.6 million in the first quarter of 2019, mostly from our licensed products and ended the quarter with a cash position of about $40 million. Our cash position combined with expected revenue from licensed products and Simpazan puts us in a good funding position for the remainder of 2019. and gives us the ability to continue to launch Simpazan and advance our proprietary development activities throughout the year.

24:09 Our first quarter 2019 revenue included manufacturing revenue of $6.7 million, license fees and royalties of $4.6 million, co-development and research fees of $700,000 and Simpazan net sales of $600,000. Overall, revenue declined by $10.8 million in the first quarter of 2019 compared to the same period in 2018. The lower year-over-year revenue related first to a $4.9 million decline in manufacturing and supply revenue, which was primarily driven by shifts in the timing of Suboxone and Sandoz authorized generic production, while the order book for 2019 remains very strong. In order to help our licensee with supply chain management, we adjusted the timing of production and delivered 57 million doses of product in the first quarter of 2019 compared to 96 million doses in the first quarter of 2018.

25:10 Additional factors contributing to our year-over-year decline in revenue were a $4.9 million drop in license fees related to the suspended Suboxone license payments that are pending the outcome of patent litigation against the generics at risk in the market, and $1.6 million of lower co-development and research fees due to the timing of licensee co-development efforts, all partially offset by Simplizan net sales of $600,000. As Keith mentioned earlier in his remarks, Suboxone products, including the authorized generic, continue to hold a substantial share of the market despite the at-risk launches of three generic film products in February. As such, we continue to see strong manufacturing purchase orders from Suboxone and the Sandoz authorized generic product from our licensee.

26:02 To date in 2019, we have received film purchase orders of 168 million doses, most of which we will produce before the end of July. We believe this puts us in a very good position with respect to our full year guidance range of 190 to 240 million doses. This strong order book reflects the slow erosion of the brand market share against several at-risk generic competitors, coupled with a strong uptake of the authorized generic and the continued double-digit year-over-year growth in the addiction recovery market, including in Medicaid and government channels. As of last week, our licensees' share of the Suboxone film market stands at just under 80% between both the branded and AG products, and 52% of overall addiction recovery market.

26:56 For the first quarter of 2019, our gross margin was approximately 72%. This compares to 76% in the same period in 2018. The 2019 decline of roughly 400 basis points has to do primarily with the lower mix of high margin license fees and royalties as part of total revenue in the 2019 period compared to 2018. Gross margin is highly sensitive to our mix of business between high margin fees and royalties and the various products that we manufacture. As each of these components change in relation to the others, we will expect to see fluctuations in the overall gross margin. There have been no meaningful changes in the gross margins at a product level.

27:42 Total costs and expenses were $25.7 million for the first quarter of 2019. Excluding non-cash items, total expenses were $23.4 million, including R&D costs of $4 million and SG&A costs of $16 million. SG&A rose in the first quarter of 2019 compared to the same period in 2018 due to increased spending associated with the launch of Simpazan and higher public company costs, as well as higher unabsorbed factory overhead as a result of the lower production of Suboxone in the first quarter of 2019 compared to the first quarter of 2018. Net interest costs were down year over year to $1.7 million in the first quarter of 2019 due to higher interest income as a result of our increased cash position in 2019. Net loss for the first quarter of 2019 was $14.7 million or 59 cents per share.

28:43 This compares to net income in the first quarter of 2018 of $4.1 million, or 27 cents per share. Adjusted EBITDA was a loss of $10.8 million in the first quarter of 2019 compared to an adjusted EBITDA income of $6.3 million in the same period of 2018. We are reaffirming our full-year 2019 guidance provided in March 2019 for revenue, Gross Margin, Adjusted EBITDA, and Cash Burn. As a reminder, Cash Burn is prior to debt repayments or the effect of any non-dilutive transactions that the company will explore as the year progresses. While we are excited about our early progress on the Simplizan launch, we believe it's still too early to provide full-year guidance, but we will continue to keep the market apprised of our progress.

29:35 As mentioned in our year-end call in March, we plan to refinance our senior debt facility later in 2019. Operator, we will now open the line for questions. Thank you. Ladies and gentlemen on the phone lines, if you'd like to ask a question at this time, you may press star and then the number one key on your touchtone telephone. Operator, please. Operator, before you connect the first question, this is Keith Kendall. I'd like to make a few comments, if that's okay. Go ahead. Good morning, everyone.

30:21 Before we get started with questions, we'd just like to spend a minute addressing, you may have seen a late-breaking announcement from our company and a company, Intelligenix. relating to some licensing of our intellectual property and the licensing of our Tadalafil product. As we've discussed in the past, we were likely to seek a partner for Tadalafil given that it was non-core to our commercialization strategy. We think this deal announced today does a couple of things. First of all, and perhaps most importantly, It recognizes the strength and value of our intellectual property portfolio, the desirability of our know-how for people to help develop products that they're interested in in markets that they're interested in. It helps us put focus on an asset that was non-core so we can extract value for it. We think that the strength of our intellectual property created a fairly healthy royalty exchange for The Risotryptin-based product, Risaport, that Intelligenix is developing, and it creates another monetizable royalty stream for the opportunity for non-dilutive capital.

31:46 And at the end of the day, it further extends for us the reach of our company through our intellectual property into areas that we would not be focused on in the near term. We can't, despite the fact we have a technology that's broadly applicable across a number of disease states and products, we can't focus on all of them. So finding partners like Intelligenix that has a desire in an area that we're not going to be focused on in the near term and creating a healthy royal stream for products that they develop we think is beneficial to us. I just wanted to acknowledge that transaction that broke late last night before we got started with questions this morning.

32:32 So thank you. Thank you. And our first question comes from the line of Gary Nachman of BMO Capital Markets. Your line is now open. Hi. Good morning. It's on for Gary. Thanks for taking the question. Regarding Suboxone, based on the overall positive trend so far, do you feel that you're tracking towards the high end of guidance for that revenue, or is it still too early to say? And do you have a sense for why uptake of competing generics hasn't been faster, and do you think that could accelerate? Well, this is Keith. Thank you for the question. I'll take the second part of the question, and then John can address the second part of the question. I think if you do a little bit of research and you go out to the blogs to talk about, to see about how the patients are reacting to the generics, I think there's some concern about the quality of the generic products and how well patients are tolerating or accepting them. I think that speaks to the quality of our product.

33:39 I also think you have a very strong There's probably some other dynamics in that market around pricing that help drive that, but I think that's the dynamic at play. And, Rafay, on your first question about the guidance range, what I would tell you is that we haven't yet adjusted our guidance, obviously with 168 million of firm orders in hand. We certainly feel good about the low end of the range, and we think we're well within the range. We feel good about where we are from a generic launch erosion curve perspective. We're at 80% between the Sandoz product and the branded product, 80% retention. We've seen some erosion in the tablets.

34:34 It's early. And our overall view would be it's still a little bit too early to start to push around the numbers. We certainly do feel good about the range that we're with now. Thank you. And then just one question on the pipeline. If the proof of concept with epinephrine is positive, can you walk us through what the next steps would be in the timeline? Sure. This is Dan Barber and good morning. So as you know, we are well on our way in the proof of concept study and we expect top line data to be out in the third quarter. Depending on how that data looks, we will develop our final view of our clinical plan and we will go to the FDA most likely in a pre-IMD setting and gain agreement or alignment with the FDA on what the full development program would look like for the product.

35:32 We plan on doing that on the back of good data in 2019. Thank you. Thank you. And our next question comes from Randall Stanicki of RBC Capital Markets. Your line is now open. Good morning, everyone. This is Randall. A few questions. First, on Suburban, to confirm our understanding around timing, it sounds to me like the process of completing the 3Q. Is it fair to say that final submission of the 3Q, 4Q, Based on your feedback to the FDA, how long of a recovery are you expecting to see a standard 10-month review?

36:21 This is Dan. Your question was a little choppy coming through, so the parts that I was able to hear are you wanted some confirmation on timing of the ultimate filing. as well as our view on the amount of time for the review. We absolutely see our filing in 2019. Whether that timing is late Q3 or in Q4 will be driven by final enrollment, which we expect to conclude in the coming weeks. So that will give us much better visibility on that front. We are very excited about where we are from an enrollment standpoint. We have enrolled over half of the patients necessary, and we're well on our way to getting the rest of them.

37:09 In terms of the review time period with the FDA, as you know, the standard review period is 10 months. In our NDA, we will request a priority review. If it's granted, that would make it six months. If it's not granted, we would stay at 10 months. If I missed any part of your question, just let me know. No, I think that was it. Can you guys hear me a little bit better now? I was having a headset issue. Much clearer. Okay, great. So just a couple more on Simpizen. Data so far from Symphony has shown a pretty steady linear ramp. As we're thinking about the rest of the year and analog experience and recent trends and all that, realizing you're not providing guidance, but do you expect that to inflect at some point as you hit critical mass with payers?

37:59 And then second, Now that you've got at least one national PBM agreement behind you and close on several others, it sounds like, is your thinking around gross-to-nets still consistent with what you've communicated in the past? I think you said you expected it to settle out around 40% to 50%. Daniel, I'll take the second question, and then Ken can take the first question. On the gross-to-net, we would say that, yeah, we would reaffirm what we had told before on that. Obviously in Q1 it was positive, but if you look at the average of Q1 in December of last year, it's about right around in the range of, at the high end of the range of what we would have said. So as the year progresses and these agreements come out, we'll know better where we'll stand, but right now that range looks pretty good.

38:49 And I can take the front end of that question, Randall. This is Ken Marshall. If you look at those in-market analogs that we refer to routinely, I don't think it's unreasonable to expect the same type of movement in our prescriptions in the second half. We're certainly having good progress with payers. We're getting good receptivity. You're seeing the new to market blocks coming off at both the plan level as well as some key Medicaid states. So you would expect that to make the decision more of a medical decision rather than a medical payer decision as we move into the second half, and that generally improves your volume. Okay, great. Thank you, everyone. Thank you. And our next question comes from Liana Masados of Wedbush Securities.

39:34 Your line is now open. Thank you. Can you give us the status of the Tadalafil CRL and a little more commercial details on the agreement with Intelligenix, number of reps, reimbursement, geographies, anything you can tell us? Sure. Sure, Liana. And this is Dan. Good morning. and a partner on Tadalafil that this is a non-core asset from our strategy and our focus remains on execution in the epilepsy and CNS space and the late stage assets. The Tadalafil CRL, we continue to progress on discussions on refiling with the FDA and we'll have more clarity on that as we go through the next few months.

40:26 In terms of the ultimate marketing of Tadalafil, the agreement with Intelligenix is a global agreement. So we will be looking to put Tadalafil to work not just in the U.S., but in other markets around the world. How we ultimately bring it to market in the U.S. with our partner Intelligenix remains to be determined, whether that's directly or through adding a sales and commercial arm in the urology space. Thank you. Thank you. And our next question comes from Jason Butler of JMP Securities.

41:11 Your line is now open. Good morning, Jason. Again, Jason, your line is now open. Please check your mute button. Once again, Jason, your line is open. Please check your mute button. And our next question comes from Thomas Flatton of Lake Street Capital. Your line is now open. Thank you. Good morning, guys. A couple questions. John, first for you on cash. So you went through about $20 million in the first quarter, and you reaffirmed your guidance of $45 to $50 million cash use for the year. Can you give us some thoughts on how we should think about spreading the balance of that over the course of the year?

42:01 Yeah, sure. That's a good question, Thomas. Obviously, at the end of the year, we do things like payout bonuses. We had some trailing IPO expenses that we needed to pay out that had to be paid early in the year. And the other factor had to do mostly with the timing around our billing. As I had mentioned, I think, in the last call, and in this call, we have I've been working with Invivior on the timing of the production and shipment of their product as they work through the supply chain with the generics and the potential generic at-risk launch. And so that resulted in some billing early in the quarter, lower billing levels, which have since then picked back up.

42:46 So I would expect that our normalized cash run rate will return to sort of what you would expect it to be versus $20 million in a quarter. as we go forward into future quarters. Got it. Thank you. And then just to follow up on the Tadalafil agreement, given the way that at least my read of the press release, it seems very much to be a joint collaboration. So is there a commitment on your part to fund commercial efforts, launch efforts, regulatory submissions globally? And do you have a sense of, I know you don't have plans that firmly worked out, but do you have a sense of what that might represent from an investment perspective for you? Yes, and this is Dan again. That's a great question and thank you. There is, and I want to make sure we're really clear here, there is no commitment that we have made to spend money on Tadalafil and we have no plans to create a urology sales force for Tadalafil.

43:44 This deal is meant to broaden our ability to monetize Tadalafil through a variety of markets around the world and all of those All of these monetization events would be licensing agreements either led by us or by Inteligenix. This does not change our focus. If anything, it allows us to monetize an asset that was out of focus and it also does not change anything around our spending or our plans for immediate future. Let me just add a little clarification to that. In the short term, if anything, it reduces the cost burden for the work that has to be done to refile and bring this asset to its conclusion with the agency.

44:37 Intelligenix will pick up half of that cost burden. So in addition to Dan's statement, I'll reiterate, we have no plans of building a urology-focused sales force in any way, shape, or form. And half of the remaining expenses to bring that product to marketability will be borne by Intelligenix. Excellent. Thank you, guys. Appreciate you taking my question. Thank you. And once again, ladies and gentlemen, if you would like to ask a question at this time, you may press star and then the number one key on your touchtone telephone. And our next question comes from Ram Salvaraju of HC Wainwright. Your line is now open. Hi. Thanks very much for taking my questions. Just a couple here.

45:25 Firstly, can you give us an update on or just some additional clarification on the differences between the Revenue streams you receive from the brand versus the authorized generic on Suboxone and Suboxone Film as those pertain to the ongoing litigation as well as the Invivior indictment. Just walk us through the differences between those two different revenue streams. Secondly, I wanted to ask about going forward the relative positioning of the sublingual epinephrine formulation versus the existing epinephrine formulations currently on the market. As you see that overall market evolving, how might this potentially affect your strategic thinking around this product candidate and what you expect to do with it?

46:21 And then lastly, just a housekeeping item. When specifically do you expect to file the 10-Q? I know I believe I heard you say it would be filed today. but when should we expect it out? Is it already out or would you expect it to be filed after the close today? And in the 10-Q, would you be providing the same breakdown of the revenue line item as you have in the past? Thank you. I'll quickly answer the third question for you and then we'll work through the other questions. The 10-Q will be filed this afternoon and we will provide the same breakdown of revenue. and other information that we've provided in past 10Qs. Ron, this is Dan. We'll continue to go in reverse order.

47:06 I'll take number two. As we look at the epinephrine market over the next few years, there's no doubt there'll be continued jockeying in the auto-injector space over how market share is divvied up. But for us, we see our product as a key differentiator and advancement in that space. and if you've looked at the anaphylaxis or severe allergy space at all, it's yet another spot where there's a high unmet need. There's a lot of non-treaters in that space or people who should be carrying some sort of solution for their issue and are not. So we believe the market opportunity for us is much bigger than the auto-injector world is today. So that's where we're focused, and we think our innovation will drive that as we go forward.

48:02 And then back to your Suboxone question, and I'll break it down into the pieces. First, there's actually no difference in the price we charge for a product leaving our factory, whether it's a branded product sold as Suboxone for an authorized generic sold as Sandoz. A dose is a dose to us, and we remain volume sensitive, not final market price sensitive. In terms of the various litigations, we'll take the patent litigation first. We continue to be confident in our are all in a position in terms of the strength of our patents and the infringement or potential infringement of the products that have entered the market at risk.

48:57 In fact, we have had an additional allowance for a new patent that we think will be relevant in that fight and we would expect to see that patent become a part of that fight and we'll continue to pursue our rights as we have. In terms of the indictment for Indivior, I think we remain very confident in a few things. First and foremost, we're not involved in the indictment. We have no interaction whatsoever with the Department of Justice and have not over the five years or so since they've been involved in this effort with Indivior. We feel very, very good about the fact that the market continues to expand.

49:46 We feel even better that Suboxone and the branded generic have not eroded nearly at the rate anyone would have expected. We feel equally good that Indivior has announced that much of their uptake or improved uptake in the market has come from government programs and government payers. So that there's no read-through or blowback from the DOJ case to their volume, at least at this point. And we continue to feel equally good about, as we have told everybody all along, that as the prices converge, the tablets will start seeding market share to a superior product level.

50:31 with a superior profile in the eyes of prescribers and patients. So all of those are great dynamics for us up and down the line. That business will continue to be a strong contributor of cash flow for us out into the future. Did that get to all of your questions? Yes, and just a couple of clarification points on Libervant, if I may. I wanted to better understand how many potential pieces there are under the scope of the rolling NDA submission and what you expect to submit first this quarter. Also, I was hoping you could maybe walk us through some scenario analysis regarding the single-dose crossover study.

51:19 Assuming, based on the statement made in the press release this morning, that This study is slated to be completed in the third quarter. Should we be understanding then that there's a higher likelihood that the new drug application for LibriVent would be complete in the fourth quarter versus the third quarter of this year? Or would there still be a possibility that it would be complete in the third quarter itself? Because your guidance says the second half of this year. So I just wanted some clarity on those two points. Yeah, so let me start with the rolling submission piece. So we've broken it up into three main pieces, and the first piece which will go in this month is, as you would expect, all of the non-clinical and pre-clinical type components of the filing.

52:19 The next piece that would go in will be at the CMC section, which would go in in Q3. And then the last piece, which would complete the filing, is the clinical piece, which I'll skip to your last question. And the timing on when we submit the clinical piece really is driven by enrollment and dosing. And at this point, we are focused on the scheduling of individuals for the dosing regimen. In terms of likelihood, Q3 versus Q4, I'm not sure how to game which it will be, but I would say we see a clear line of sight in 2019 to getting this filing in.

53:08 The middle part of your question was around clarity on the data that could come out of the dosing, if I captured it correctly, and the data will be Very straightforward in terms of what we're capturing. It is all PK-based data, so all comparison data between our product and dye set in the patients who've been put into the study. And there's nothing more complex in the study than capturing that data. Ram, did I answer all the parts of your question? Yes, thank you. That's very helpful. Thank you very much. Thank you. And that concludes our question and answer session for today.

53:56 I'd like to turn the conference back over to Keith Kendall for closing comments. Keith Kendall Thank you, operator. Well, thank you everyone for joining today's conference call. We're excited about the progress that our teams made over the past few months. We're even more excited to be focused on things that are in our control and continuing to to deliver as we've promised the things that are in our control. We can't always manage the things that aren't, but we feel that we're making a great deal of progress on the things that are in our control, and we look forward to continuing to do that. Our technology, our know-how, and the fully integrated capabilities of our company will continue to allow us to advance differentiated medicines.

54:45 that aim to make a difference in the treatment for epilepsy, ALS, and complex CNS conditions, anaphylaxis, and a range of other diseases. We're focused on bringing these innovations to market and look forward to reporting more on our progress on our next call. So thank you all for joining and have a great day. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and we all disconnect. Everyone have a great day.