Shares of Aquestive Therapeutics (NASDAQ:AQST) have fallen by over 90% since their $67.5M IPO was priced at $15 in 2018. Up to now in 2022, the corporate has misplaced two-thirds of its worth after quite a lot of unfavourable developments together with CEO resignation and dilutive secondary providing (with warrant sweetener) at lows in June.
At market capitalization of ~$80M (under my typical $100M threshold for initiating due diligence efforts) and with a dwindling pile of money, Aquestive has actually seen higher days and the massive query is whether or not administration can get this development story again on monitor.
My purpose for revisiting is August thirty first information that the corporate lastly acquired tentative FDA approval for Libervant (diazepam) Buccal Movie for acute remedy of seizures in epilepsy sufferers aged 12 years and older. Prior to now, I’ve identified that Libervant gives an interesting different to rectal and oral formulations of diazepam.
Couple that with the confirmed PharmFilm know-how (validated with 7 FDA approvals), further pictures on aim within the clinic and it is clear why I feel as a minimum we should always revisit the story to find out if there is a close to time period alternative for traders.
When taking a look at charts, readability usually comes from looking at distinct time frames so as to decide necessary technical ranges and get a really feel for what is going on on. Within the weekly chart above, we will see share worth hit a excessive of $9 again in 2020 due partly to gross sales development throughout licensed merchandise (Sympazan, Suboxone, and many others). From there, shares fell under $1 in summer season 2022 in response to delays with medical timelines in addition to regulatory setbacks and generic competitors eroding revenues acquired from partnered merchandise. As for technicals, my preliminary take is that share worth seems buyable on pullback to twenty day shifting common at $1. Nonetheless, the inventory should still be too speculative for me to advocate for readers and I have to dig deeper earlier than I really feel snug suggesting a particular technique right here.
Based in 2004 with headquarters in New Jersey (~150 staff), Aquestive Therapeutics presently sports activities absolutely diluted market capitalization of ~$80M and Q2 money place of $17.7M offering them operational runway of below 2 quarters. Take into accout additionally they have ~$51M in loans on the stability sheet as properly (maturities for senior secured notes staggered out over the subsequent 3 years).
Determine 2: Debt maturity desk (Supply: 10-Okay submitting)
At present, administration is projecting $37M to $43M in non-GAAP adjusted EBITDA loss for full yr 2022 after using cost-cutting measures (earlier vary was $51M to $58M).
In my 2019 replace, I touched on the next keys to bullish thesis:
Pipeline appeared to supply a number of intriguing “pictures on aim,” to not point out spreading danger throughout industrial, late-stage and early-stage belongings. Administration did this deliberately, attempting to assemble a portfolio that is not binary or depending on anyone occasion or readout (maybe making the corporate a greater guess for extra conservative traders). Clearly, I used to be improper on the latter level. Curiously sufficient, the corporate began out initially as a contract developer and producer, however in early 2014 administration modified its route to maneuver towards turning into a proprietary product-driven specialty pharma firm (gameplan is basically to drive income development that enables for investing in bigger, extra helpful and extra advanced targets utilizing their know-how).
Listening to the BIO CEO presentation helped me perceive that a number of of those merchandise are usually not merely “me too” knockoffs, however as an alternative provide important benefits to payers, caregivers and sufferers that ought to drive substantial industrial uptake IF the corporate may get them to regulatory approval and profitable launch out of the gate. As for future potential, the CEO famous that the agency’s know-how permits for delivering drug product sublingually or enterally, dissolving sluggish or quick, flavored in any method relying on geographic or demographic market. An instance of the place a powerful worth proposition is recognized for caregivers, sufferers, and payers within the epilepsy area. There are 3.5 million victims of this situation with a 3rd of them experiencing refractory breakthrough or cluster seizures the place present commonplace of care is diazepam administered rectally. 92% of sufferers will not work together with the drug and folks need Libervant offering the identical efficacy at a decrease dose. There are over 1 million ER visits a yr on this area as a result of sufferers will not work together with the previous model of the drug. My focus within the article was additionally on Libervant, particularly medical outcomes together with from an Grownup Epilepsy Monitoring Unit examine confirmed that diazepam buccal movie (DBF) was efficiently used and had comparable bioavailability whether or not it was administered to sufferers between seizures or shortly after seizures. As the one presently permitted formulations of diazepam have been injected or rectally administered (nasal now permitted as properly), this an thrilling worth driver for the corporate because it gives a much-needed different within the market.
Determine 3: Seizure cluster acute rescue market reveals promising development for nasal sprays Valtoco and Nazyilam on the expense of older rectal gel formulation (Supply: company presentation)
To be honest, I additionally identified courtroom drama with rivals, particularly concerning corporations wishing to launch generic variations of buprenorphine/naloxone sublingual movie (and thus difficult patents held by Aquestive and Indivior for Suboxone Sublingual Movie). Nonetheless, I argued that income generated by Suboxone made up a small portion of the corporate’s valuation and Dr. Reddy and Alvogen have been able to carry to market their generic variations within the close to to medium time period.
Let’s transfer on to latest developments and the way they’ve impacted the story right here.
Choose Latest Developments
In December of final yr, one unfavourable growth that crushed the share worth was regulatory delay by the FDA for Aquestive’s New Drug Software for Libervant for the remedy of breakthrough seizures and seizure clusters. Merely put, the company was not able to take motion by the agreed upon date of December twenty third however no additional motion was wanted from Aquestive (they didn’t do something improper, to my eyes). CEO Kendall expressed his shock as properly contemplating that information package deal submitted glad all of CDER’s requests.
Quick ahead to March of this yr, the corporate introduced license and provide settlement with China-based Haisco Pharmaceutical group to develop and commercialize Exservan (riluzole oral movie) for the remedy of ALS in that area. Aquestive serves as sole producer and provider for the product below deal phrases and acquired $7M cost upfront (additionally eligible for milestones and double-digit royalties).
Sadly, in April Aquestive made a transfer displaying simply how starved the corporate is for money. Specifically, it entered into a typical inventory buy settlement for as much as $40M with Lincoln Park Capital Fund. Not less than to my eyes, comparable such agreements in small cap biotech land are an indication that corporations could possibly be on their final legs and are doing every little thing they will simply to maintain the lights on.
Additionally in April, the corporate introduced constructive topline outcomes from Half 2 of the EPIPHAST examine for AQST-109 (epinephrine oral movie). Using a replicate crossover design, Half 2 confirmed key pharmacokinetic and pharmacodynamic measures in a bigger inhabitants of 24 wholesome topics. Drug candidate was properly tolerated with no severe hostile occasions. Speedy absorption was noticed with median time to most focus (Tmax) of quarter-hour in comparison with 50 minutes for the epinephrine 0.3mg intra-muscular (IM) injection. The Space Below the Curve (AUC) throughout the clinically related intervals of 10 minutes, 20 minutes, and half-hour, have been comparable for each AQST-109 and the 0.3mg IM injection. Administration contends that AQST-109 could possibly be a strong different for sufferers who’ve needle phobia in addition to so as to fight the challenges of delayed administration. The plan from right here was to start pivotal PK examine by the tip of 2022.
Determine 4: AQST-109 has comparable PK to present epinephrine auto-injectors (Supply: company presentation)
On Might seventeenth, the corporate introduced that President and CEO Keith Kendall was leaving (potential pink flag). Daniel Barber from the Board of Administrators stepped as much as fill the roll (apparently sufficient, he is been concerned with the corporate since 2007).
On June eighth, the corporate closed a direct providing with a single healthcare-focused institutional investor and sure executives (inexperienced flag to my eyes) consisting of 8.85M shares of widespread inventory together with warrants to buy as much as 8.85M shares at buy worth of $0.96 for institutional investor and $1.09 for Aquestive’s executives. Whole proceeds have been $8.5M, protecting in thoughts that warrants have 5-year time period and are exercisable 6 months from date of issuance. I’ll confess I’ve not heard of the brokers concerned (Alliance International Companions and Brookline Capital Markets).
Additionally in June the corporate reported constructive Half 3 outcomes from the EPIPHAST examine of AQST-109 epinephrine oral movie. Half 3 demonstrated most plasma focus (CMAX) values that have been according to the Half 2 findings, 0.3mg IM Injection, in addition to these beforehand reported for permitted injectable epinephrine units (i.e. EpiPen). CEO Dan Barber notes that they’ve now achieved a Tmax of quarter-hour or quicker in a number of research, whereas medical investigator reminds us that there’s a area of interest alternative and unmet medical want for an epinephrine remedy that sufferers can extra simply carry and extra shortly administer in a life-threatening emergency scenario. The plan from right here is to conduct a repeat dose comparative examine in Q3, which paired with EPIPHAST examine information would be the foundation for end-of-phase 2 assembly with the FDA (to be requested in This autumn).
Determine 5: AQST-109 reveals speedy absorption with favorable PK partly 3 (Supply: company presentation)
In August, the corporate introduced appointment of Timothy Morris to the board of administrators and Kenneth Truitt, M.D., as Chief Medical Officer.
Lastly, on August thirty first Aquestive introduced the FDA granted “tentative approval” for Libervant Buccal Movie for the acute remedy of intermittent, stereotypic episodes of frequent seizure exercise (i.e., seizure clusters, acute repetitive seizures) which are distinct from a affected person’s regular seizure sample in sufferers with epilepsy 12 years of age and older. “Tentative approval” means the FDA has concluded that Libervant has met all required high quality, security, and efficacy requirements for approval however, resulting from an present FDA regulatory grant of orphan drug market exclusivity for Valtoco diazepam nasal spray (Determine 3 above), a diazepam nasal spray product, Libervant will not be but eligible for advertising and marketing in the USA. Thus, remaining approval for Libervant can’t be granted till expiration or inapplicability of orphan drug market exclusivity for Valtoco. One other doable state of affairs, although I am unsure how doubtless it’s, can be if the FDA reverses its choice and willpower that Libervant is in actual fact “clinically superior” to Valtoco. Administration continues to imagine that Libervant gives the distinct benefit of having the ability to be readily administered when wanted with out regard to meals and hopes to fulfill with the FDA to make clear this and different factors as demonstrated within the information. Needless to say Aquestive’s meals impact examine using Valtoco confirmed that if administered after excessive fats meal, CMAX (most drug focus) is lowered by 48% versus when administered in fasted state.
For the second quarter of 2022, the corporate reported money and equivalents of $17.7M as in comparison with web lack of $16.3M (that quantity turns into $14M when excluding one-time severance prices and $2M KemPharm one-time milestone). Adjusted EBITDA loss got here in at $9.9M, versus $4.1M for Q2 2021. Whole revenues fell barely to $13.3M, protecting in thoughts that the corporate noticed a 36% improve in Sympazan web income offset by reductions in manufacture and provide income in addition to co-development and analysis charges. Collected deficit since inception is $256M (a quantity I contemplate greater than cheap).
For full yr 2022 outlook income expectations have been elevated to vary of $46M to $49M with non-GAAP adjusted gross margins of 70% to 75% (unchanged). Non-GAAP adjusted EBITDA loss narrowed to $37M – $43M from prior vary of $51M -$58M.
I’d think about these warrants might be exercised by yr finish and the corporate will want further funding on high of that, given present money burn and weak stability sheet.
As for the convention name, CEO highlights one neglected facet of the story for its two acute rescue medicines in that their patent safety extends to the late 2030s (lengthy development runway). He acknowledges that decreasing money burn is the important thing space of concern and in that vein, they’ve eradicated virtually all industrial burn by means of continued development and rightsizing their non-sales infrastructure. There are further levers the corporate may pull in coming quarters to enhance their monetary scenario, reminiscent of inking new licensing agreements with companions, expense discount and refinancing the debt.
As for the place they nonetheless want to make investments, the important thing asset is AQST-109 contemplating that 40 million Individuals are prone to experiencing extreme allergic response but solely 3 million prescriptions are stuffed for injectable epinephrine. Maybe this hole exists partly resulting from want for added product choices and one would assume handy skinny movie formulation carried within the affected person’s pocket is a logical different. They confer with a survey of over 500 allergists, pediatricians and first care physicians the place 88% of respondents have been involved about sufferers and/or caregivers persistently having their autoinjectors available always. One other downside is that too usually sufferers with at the least some danger of anaphylaxis administer oral antihistamines instead of epinephrine autoinjector (these usually fail to cease the allergic cascade that marks the start of anaphylaxis). As famous farther above, quick time to Tmax for AQST-109 is a key attribute of this drug candidate contemplating that different options to injected epinephrine have failed to realize ranges corresponding to EpiPen.
As for Libervant, they clearly shift the blame to the FDA who “didn’t meet its dedication on the PDUFA date”. To be honest, administration is reasonable that the issues dealing with Aquestive can’t be solved instantly, and it’ll take time to work their solution to a spot of improved power and stability as an organization.
Listed below are a number of notes from the presentation at Wedbush PacGrow Healthcare Convention:
Speedy Tmax for AQST-109 of 12 to fifteen minutes versus 50 minutes for guide injector is a key differentiator. Knowledge additionally demonstrates equal to or increased publicity (AUC) relative to injection (important to cease development of anaphylaxis). These two medical options have been confirmed over quite a lot of administration situations. Mix these with portability, ease of administration and extremely favorable security profile make this product doubtlessly transformative within the area. Injection might provide you with a Tmax of 10 minutes or as much as an hour or longer (not the case with AQST-109). Sure subset of sufferers will endure recurring anaphylaxis (secondary to preliminary allergic occasion or refractory to preliminary dose) and that was characterised in Half 2 of EPIPHAST trial. Finish of Section 2 Assembly in This autumn with FDA ought to assist them align and proceed with pivotal grownup examine in addition to start with pediatric packages. They’ve all of the infrastructure to launch the asset in the event that they select (sounds to me like partnership continues to be an possibility). Going after specialists appears possible for an organization of this measurement, however going after main care market would necessitate a bigger salesforce. AQST-108 takes an extended time (20 minutes, creating a unique profile). This might permit them to make use of it somewhere else (indications haven’t been disclosed but). Within the allergy area, urticaria would make sense. As for Libervant, usually talking the way in which to point out superiority or differentiation versus competing product (Valtoco) is through higher security, higher efficacy or distinctive contribution from affected person care perspective. Administration believes Libervant may be very essential and helpful to sufferers, however they take a step again from really claiming superiority. They acknowledge the potential for having to run a head-to-head trial. It is clear administration is annoyed, as they’ve been able to launch for fairly a while with industrial product prepared, commerce distributions in place, gross sales infrastructure, and many others. Sympazan has grown quarter over quarter since launch, set to go income constructive in Q3. It is established their platform out there to get it prepared for Libervant. Sympazan has carried out very properly in subset of sufferers who’ve hassle swallowing. As for long run development alternatives for PharmFilm know-how, I admire that administration acknowledges the corporate has been punished “for apparent” causes. Nonetheless, they’re at an fascinating level within the story as two acute rescue medicines are shifting ahead and are indicative of the place they greatest can add worth (areas with excessive want of differentiated resolution). So, acute rescue area is the logical space to proceed discovering further alternatives in. Prodrug platform has a number of utility and thus optionality. As for money runway, they ended the quarter with slightly below $18M in money. They’re continually reviewing the best way to prolong runway (not offering steering although). First, they take a look at non-dilutive choices (partnerships, licensing, different construction transactions). ATM facility is in place with $35M of availability ought to they select to make use of it.
Aside from Wedbush presentation, the decision following FDA tentative approval for Libervant additionally had a number of nuggets price highlighting:
Sadly, approval was labeled as tentative and FDA deemed that firm has not sufficiently proven how Libervant is clinically superior to Valtoco (diazepam nasal spray presently holding orphan drug exclusivity). Administration respectfully but firmly disagrees with the FDA’s willpower. Rescue medicine should work shortly and be efficient throughout all kinds of situations. Merchandise like Libervant and Valtoco should present speedy and intensive absorption below all situations together with whether or not a affected person had a meal just lately or hasn’t had a meal in hours. Libervant dosing routine ensures sufferers get enough drug plasma concentrations regardless of their fed state (why the label contains “may be taken with out regard to meals”). For Valtoco, administration has been vocal about their view that the FDA ought to require drug plasma concentrations below fed situations. In 2019, they even submitted a citizen’s petition to this finish and FDA disagree with their view on the time (permitted Valtoco with none meals impact research). Nobody is aware of what occurs when the product is run after a meal per prior information. Aquestive’s information regarding Valtoco, however, confirmed that peak concentrations (CMAX) dropped by 42% and Tmax doubled from 2 hours to 4 hours when sufferers have been fed versus fasted. Sufferers are usually not at all times receiving anticipated ranges of diazepam after administration of Valtoco (important shortfall for a rescue remedy the place pace issues). Cross examine comparability reveals important distinction for Libervant, however FDA suggestions was that Aquestive failed to incorporate a Libervant movie arm within the Valtoco meals examine and thus the information can’t be used to point whether or not there’s a meals impact within the Valtoco arm. Administration felt this stance was counter-intuitive to sufferers’ curiosity and contradictory to earlier FDA observe. They hope to fulfill with FDA shortly to debate and are prepared to run a meals impact comparability examine if essential. Per Q&A, performing a comparative meals impact examine of Libervant versus Valtoco is an easy examine to conduct and would take weeks to a few months. There’s a speedy path ahead IF they resolve to conduct the examine. If they’ve to attend for Valtoco’s orphan drug exclusivity to run out, that will be January 2027 and Libervant’s patents go to the late 2030s. It appears like partnering is actually an possibility, however once more present focus is on attending to full market entry approval. Authorized motion can also be a possible possibility, however meals impact situation must be prioritized (FDA didn’t disagree, however they thought there was a greater method for the information to be extra significant to them).
As for institutional traders of be aware, I am not seeing a lot in the way in which of well-known biotech specialist funds we observe proudly owning positions right here. However, there was a flurry of insider purchases that happened in June (potential inexperienced flag).
Chief Innovation and Know-how Officer Mark Schobel owns over 880,000 shares and CEO Daniel Barber owns ~193,000 shares (good to see some pores and skin within the recreation). Schobel served prior as International Head of New Know-how and Product Innovation for the Shopper Well being Enterprise Unit at Novartis the place he pioneered skinny movie supply of systemic medicine (extremely related expertise).
As for government compensation, I see money parts of wage as being too excessive contemplating the dire straits the corporate is in. If administration is severe about main by instance, they need to decrease this considerably as we have seen different shareholder-conscious administration groups like HOOKIPA Pharma (HOOK). However, inventory and choices awards are at ranges I contemplate greater than cheap.
Determine 6: Government compensation desk (Supply: proxy submitting)
The necessary factor is to keep away from corporations the place the administration staff is clearly in it for self-enrichment as an alternative of making worth for shareholders, and whereas I can not say that is the case right here, I do want they’d take extra cost-cutting measures in that regard.
Transferring onto helpful nuggets from members of the ROTY group, veteran TDMInvest (recognized for his monitor file to find out of favor corporations) said the next after Libervant approval choice:
AQST- The FDA continues its monitor file of bureaucratic entrenchment- who advantages from this nonsense? The worst half is that it took 10-months to achieve this conclusion, because the PDUFA was final November. Such a waste. AQST is presently buying and selling down on the information. I’d not be stunned to see it reverse. Clearly this isn’t the information that traders needed, however total, it represents progress. AQST is undervalued simply based mostly on its present industrial product. Present market capitalization at $66M with annualized gross sales simply north of $50M, and good margins. It is unclear to me as as to if this FDA willpower opens the door for Libervant gross sales outdoors of the U.S. In that case, that will be a significant interim plus for the corporate. One other potential “large deal” utility is below growth within the pipeline (AQST-109) and I proceed to carry a considerable lengthy place. As for the stability sheet, have in mind they’ve recognized assorted money sources (industrial income, plus different automobiles) that look like enough for the foreseeable future. There may be the potential for dilution, however it’s on the backside of the checklist of choices, and administration states they might achieve this solely “below favorable situations”.
To conclude, I proceed to understand the various functions of Aquestive’s PharmFilm know-how and agree they’re greatest served by specializing in the acute rescue market versus dabbling in therapeutics as they’ve prior to now. The Libervant tentative approval choice by the FDA was clearly disappointing and whereas I hope the corporate is ready to persuade them of the drug’s differentiation with present information, I’d not be stunned in the event that they must run a head-to-head examine. Additionally, the FDA will not be recognized for its pace, so whereas the corporate might reply to them shortly, I’ve seen again and again how these appeal-type processes can prolong far longer than initially projected.
Administration language signifies they intend to pivot focus to AQST-109 and fortunately anaphylaxis is just too large of a sign for orphan drug exclusivity to be a problem. If all goes properly, they hope to file for approval by the tip of 2023.
Within the meantime, the stability sheet is weak and whereas commendable value cuts have been made, there’s a lot work left to be executed (I’d like to see one other licensing deal inked or comparable such different to tapping the ATM facility). The corporate’s debt load additionally makes it appear as if they’re marching uphill, although fortunately maturities are staggered out over the subsequent few years.
For readers who’re within the story and have executed their due diligence, I can not in good conscience advocate a purchase order of AQST shares right now. Whereas upside may be very excessive ought to they enhance the stability sheet and execute on key strategic aims, the present scenario will not be one that will permit me to sleep properly at evening as an investor.
From a Core Biotech perspective (emphasis on subsequent 3 to five years), I’ll use this text as a placeholder and total very a lot loved revisiting this story. I’d contemplate revisiting by mid to late 2023 IF I see the stability sheet enhance and administration make progress on the regulatory entrance for Libervant (and for AQST-109 in pivotal examine).
Key dangers embody weak stability sheet resulting in additional dilution at lows and firm doubtlessly not having the ability to service its debt load, in addition to unfavourable regulatory developments with the FDA if they don’t seem to be in a position to come to phrases on a path ahead for Libervant. Disappointing medical information for drug candidates together with AQST-109 is at all times doable, although to this point that isn’t space the place the corporate has had any hassle.
Thanks once more to ROTY veteran member TDMInvest for bringing this one again on my radar and spurring me to dig deeper. Let’s hope that later in 2023 this one is again on monitor and thus deserves a possible revisit from my finish.
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