Aquestive Therapeutics, Inc. — Q1 2021 Form 10-Q Summary
Business context and reporting period
Aquestive is a pharmaceutical company developing and commercializing products using its PharmFilm technology. Its portfolio includes licensed products, proprietary Sympazan, and development-stage candidates including Libervant, AQST-108-SF, AQST-109-SF and AQST-305-SF. This report covers the unaudited three months ended March 31, 2021, compared with the three months ended March 31, 2020.
Key financial metrics
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $11.122 million | $8.765 million | Up 27% |
| Manufacture and supply revenue | $6.511 million | $6.916 million | Down 6% |
| License and royalty revenue | $2.361 million | $0.426 million | Up 454% |
| Co-development and research fees | $0.438 million | $0.263 million | Up 67% |
| Proprietary product sales, net | $1.812 million | $1.160 million | Up 56% |
| Manufacture and supply costs | $2.757 million | $3.659 million | Down 25% |
| Research and development | $3.659 million | $4.354 million | Down 16% |
| SG&A | $13.231 million | $14.613 million | Down 9% |
| Loss from operations | $(8.525) million | $(13.861) million | Improved $5.336 million |
| Net loss | $(14.672) million | $(16.530) million | Improved $1.858 million |
| Basic and diluted loss per share | $(0.41) | $(0.49) | Improved |
| Net cash used in operating activities | $(14.097) million | $(13.637) million | Higher use of $0.460 million |
Calculated gross margin, based on revenue less manufacture and supply costs, was approximately 75.2% in Q1 2021 versus 58.3% in Q1 2020. Operating margin was approximately negative 76.7% versus negative 158.2%. The filing does not present these margins as reported metrics.
- Cash and cash equivalents were $27.498 million at March 31, 2021, down from $31.807 million at December 31, 2020.
- Total assets were $61.923 million; total liabilities were $113.721 million; stockholders’ deficit was $51.798 million.
- Loans payable had a carrying value of $38.056 million, including $3.863 million classified as current. The principal balance of the 12.5% Senior Secured Notes was $51.500 million, with $2.575 million scheduled for repayment in the remainder of 2021.
- The liability related to the sale of future KYNMOBI revenue was $52.288 million. Q1 interest expense related to that transaction was $3.334 million, including $3.302 million of non-cash interest expense.
- Net proceeds from the ATM equity offering were $9.891 million in Q1 2021. Approximately $57.111 million remained available under the amended ATM facility at March 31, 2021.
- Revenue concentration remained significant: Indivior represented approximately 64% of Q1 revenue. Three customers represented at least 10% of outstanding receivables.
Material changes versus the prior comparable period
- Total revenue increased primarily because of higher license and royalty revenue, higher Sympazan sales and higher co-development fees. License and royalty revenue included recognition of remaining deferred revenue after the Fortovia license and supply agreement terminated in January 2021.
- Manufacture and supply revenue and related costs declined because of lower Suboxone volumes and generic competition.
- Sympazan net sales increased 56%, reflecting improved prescriptions and payer approval rates.
- R&D and SG&A declined, reflecting the timing of development activities and lower Sympazan sales and marketing costs.
- Operating loss improved, but net loss remained substantial because of interest expense, including the new non-cash interest expense associated with the KYNMOBI revenue monetization.
- The Company issued 1.672 million shares under its ATM facility for net proceeds of approximately $9.891 million, increasing shares outstanding to 36.241 million at March 31, 2021 from 34.569 million at December 31, 2020.
Guidance, outlook, risks and unusual items
- Management expected existing cash, anticipated product revenue, ATM activity and expense-management initiatives to fund expected cash requirements for the next 12 months, but stated that additional financing may be required and that funding may not be available on acceptable terms.
- The Company expected continued operating losses and negative cash flows for the foreseeable future and remained dependent on external financing until profitability, if ever, is achieved.
- Management expected to resubmit the Libervant NDA at the end of Q2 2021 following the FDA’s September 2020 Complete Response Letter and anticipated a six-month FDA review after resubmission. Approval, market access and the ability to overcome competing orphan-drug exclusivity were not assured.
- The holders of the senior notes extended the Company’s access, through December 31, 2021, to up to $30 million of potential note reopeners. Access is contingent on FDA approval and U.S. market access for Libervant.
- Management planned to meet with the FDA in the second half of 2021 regarding AQST-108-SF and expected an AQST-109-SF pharmacokinetic study in the second half of 2021.
- Key risks include dependence on Indivior and Suboxone-related revenue, generic competition, significant secured debt and debt service, dilution from equity financing, regulatory uncertainty for Libervant and pipeline products, COVID-19 effects, reliance on a single manufacturing site, and ongoing patent, antitrust and securities litigation.
- The filing disclosed a securities class action filed in March 2021 concerning public statements related to Libervant approval. The Company stated that it could not estimate the outcome or potential loss of this and other legal proceedings.
- Subsequent to quarter-end, the Company sold 367,886 additional ATM shares for approximately $1.679 million of net proceeds from April 1 through April 30, 2021.
Most important facts for investors to verify
- Whether Libervant is successfully resubmitted, receives FDA approval and obtains U.S. market access.
- Whether cash generation, cost controls and available financing are sufficient to cover operating losses and scheduled debt repayments.
- The pace of Suboxone volume declines and the resulting effect on Indivior-related revenue and manufacturing utilization.
- Whether Sympazan and the expected Exservan launch can offset declining licensed-product revenue.
- The availability and dilution impact of the ATM facility and any additional debt or equity financing.
- The performance of KYNMOBI and the likelihood and timing of contingent payments under the monetization agreement.
- Developments and potential financial exposure in the disclosed patent, antitrust, securities and other litigation.