Aquestive Therapeutics, Inc. — 2021 Form 10-K Summary
Business context and reporting period
Aquestive is a pharmaceutical company developing orally administered film products using its PharmFilm technology. Its portfolio includes commercial licensed products, primarily Suboxone, and the proprietary Sympazan product, with pipeline programs focused on epilepsy, anaphylaxis and other conditions. The filing covers the fiscal year ended December 31, 2021, filed March 8, 2022.
- Commercial products included Suboxone, Sympazan, Exservan, Zuplenz and licensed products associated with Azstarys and KYNMOBI.
- Key pipeline programs were Libervant, AQST-109, AQST-108 and AQST-305.
- Indivior accounted for approximately 73% of 2021 revenue, compared with 57% in 2020.
Financial performance and liquidity
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | $50.8 million | $45.8 million | 11% |
| Loss from operations | $(34.7) million | $(42.9) million | Improved by $8.2 million |
| Net loss | $(70.5) million | $(55.8) million | Loss increased by $14.8 million |
| Basic and diluted loss per share | $(1.85) | $(1.66) | Loss increased |
| Net cash used in operating activities | $(33.0) million | $(45.5) million | Improved by $12.5 million |
| Cash and cash equivalents | $28.0 million | $31.8 million | Decreased by $3.8 million |
| Outstanding 12.5% senior secured notes | $51.5 million | $51.5 million | No change in principal |
- Revenue mix: manufacture and supply revenue was $35.3 million, license and royalty revenue was $5.4 million, co-development and research fees were $1.6 million, and proprietary product sales were $8.5 million.
- Manufacture and supply revenue increased 42%, primarily from higher Suboxone manufacturing volume. Sympazan sales increased 51% to $8.5 million.
- Research and development expense declined 14% to $17.0 million; selling, general and administrative expense declined 4% to $53.5 million.
- Reported gross margin, calculated after manufacture and supply costs, was approximately 70.5%. Operating margin was approximately negative 68.2% and net margin was approximately negative 138.8%.
- Net loss included $13.8 million of loss on debt extinguishment and $12.4 million of non-cash interest expense related to the sale of future KYNMOBI revenue.
- Cash used for investing activities was $0.9 million, primarily capital expenditures. Financing activities provided $30.1 million, including approximately $29.8 million of net ATM equity proceeds.
- Stockholders’ deficit increased to $82.1 million from $48.5 million, and accumulated deficit reached $256.8 million.
- The 12.5% notes mature June 30, 2025, are secured by substantially all company assets and carry quarterly interest payments. The first amortization payment was deferred to March 30, 2023. Scheduled principal maturities are $18.0 million in 2023, $21.9 million in 2024 and $11.6 million in 2025.
Material changes versus the prior comparable period
- Total revenue increased $5.0 million, driven by Suboxone manufacturing and Sympazan growth, partly offset by the absence of 2020 KYNMOBI-related milestone and royalty revenue.
- License and royalty revenue fell 62% because the $4.0 million KYNMOBI approval milestone and $8.0 million of minimum royalty revenue recognized in 2020 did not recur. This was partly offset by a $2.0 million Azstarys-related payment from KemPharm.
- Operating loss improved because of lower research and development and selling, general and administrative expenses, but net loss worsened due primarily to debt-extinguishment charges and increased non-cash interest related to the KYNMOBI monetization.
- The company issued 6.55 million shares through its ATM facility for approximately $29.8 million of net proceeds. Approximately $37.4 million remained available under the facility at year-end.
- Exservan launched in the United States in June 2021 under a license with Mitsubishi Tanabe Pharma Holdings America.
- Zuplenz rights returned to Aquestive in January 2021 after Fortovia’s bankruptcy-related termination of the license and supply agreement.
- In October 2021, the company amended its debt agreement, incurred a $13.8 million extinguishment loss and agreed to pay a $2.7 million consent fee in four quarterly installments beginning May 15, 2022.
Guidance, outlook, management commentary, risks and unusual items
- Management stated that existing cash, ongoing revenue, expense management, the ATM facility and potential debt financing were expected to fund requirements for at least the next 12 months, but emphasized that funding availability and timing were not assured.
- The company expects continued operating losses and negative operating cash flow for the foreseeable future and expects to remain dependent on external financing until profitability is achieved, if ever.
- Libervant remains the principal near-term regulatory and commercial catalyst. The FDA accepted the resubmitted NDA in July 2021 with a December 23, 2021 PDUFA date, but notified the company on December 20 that it was not ready to act and could not provide an expected action date.
- As of the February 15, 2022 FDA correspondence described in the filing, the Agency was evaluating whether orphan-drug exclusivity for another diazepam product affected Libervant’s approvability. There is no stated resolution timeline.
- AQST-109 produced positive topline Part 1 results in February 2022. The company expected Part 2 results in the first half of 2022, planned pivotal studies and registration-batch manufacturing, and stated that the FDA had cleared its U.S. IND and viewed the 505(b)(2) pathway as acceptable.
- The company’s KYNMOBI monetization generated $50.0 million through year-end, but up to $75.0 million of additional contingent payments may not be received based on the company’s sales forecast.
- Key risks include dependence on Indivior and Suboxone, generic competition, high debt service, continued cash burn, potential dilution, regulatory uncertainty surrounding Libervant, clinical and manufacturing risks, COVID-19 effects, intellectual-property disputes and antitrust or securities litigation.
- The filing identifies multiple unresolved legal proceedings and states that the potential outcomes or losses cannot be reasonably estimated, including Suboxone-related patent and antitrust litigation, securities class action litigation and shareholder derivative litigation.
- Subsequent events included approximately $0.9 million of additional ATM proceeds through March 4, 2022 and a Haisco license for Exservan in China, including a $7.0 million upfront payment, milestones, royalties and manufacturing revenue.
Most important facts for investors to verify
- Current FDA status and market-access prospects for Libervant, including the orphan-drug-exclusivity issue and any subsequent FDA action.
- Actual Suboxone volumes, pricing, generic penetration and the durability of the Indivior relationship, which generated approximately 73% of 2021 revenue.
- Cash burn, available ATM capacity, debt covenants, the $51.5 million secured debt balance and the ability to meet 2023–2025 principal maturities.
- Whether Sympazan and Exservan growth can offset expected Suboxone erosion and support a path toward profitability.
- Clinical progress, funding requirements and regulatory timelines for AQST-109 and AQST-108.
- Potential cash exposure and timing related to pending litigation and the uncertainty of KYNMOBI contingent payments.
- Share dilution from ATM sales, outstanding options and warrants, including approximately 4.1 million options and 1.7 million warrants excluded from diluted EPS at year-end because they were antidilutive.