☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 82-3827296 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number) |
30 Technology Drive, Warren, NJ | 07059 | |
(Address of Principal Executive Offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $0.001 per share | AQST | NASDAQ Global Market |
Large accelerated filer ☐ | Accelerated filer ☐ |
Non-accelerated filer ☒ | Smaller reporting company ☒ |
Emerging growth company ☒ |
Page No. | ||
3 | ||
Item 1. | 4 | |
Item 1A. | 28 | |
Item 1B. | 70 | |
Item 2. | 70 | |
Item 3. | 70 | |
Item 4. | 72 | |
72 | ||
Item 5. | 72 | |
Item 6. | 74 | |
Item 7. | 75 | |
Item 7A. | 94 | |
Item 8. | 94 | |
Item 9. | 94 | |
Item 9A. | 94 | |
Item 9B. | 94 | |
PART III | 95 | |
Item 10. | 95 | |
Item 11. | 95 | |
Item 12. | 95 | |
Item 13. | 95 | |
Item 14. | 95 | |
96 | ||
Item 15. | 96 |
• | Sympazan – an oral soluble film formulation of clobazam, a benzodiazepine used as an adjunctive therapy for seizures associated with LGS. We developed Sympazan as an alternative to the Onfi® brand and clobazam generic, which were previously only available in either tablet form or liquid suspensions. LGS patients often have difficulty swallowing pills and large volume suspensions leading to uncertain and inconsistent dosing. These challenges increase the burden of care, particularly for patients that have difficulty swallowing or who may be combative or resistant during treatment administration. We believe that Sympazan addresses these treatment obstacles because it is mucoadhesive, dissolves rapidly and cannot be easily spit out. Following approval by the FDA, we launched Sympazan in December 2018. |
• | Libervant – a buccally, or inside of the cheek, administered soluble film formulation of diazepam. Aquestive is developing Libervant as an alternative to the current standard of care rescue therapy for patients with refractory epilepsy, which as a rectal gel, is invasive, inconvenient, and difficult to administer, as well as a recently approved nasal spray. Libervant was designated an orphan drug by the FDA and has been granted a PDUFA goal date of September 27, 2020. More details on this product approval are described in the “Competition” section of this Item I. Business of this Form 10-K. |
• | Suboxone – a sublingual film formulation of buprenorphine and naloxone that is marketed in the United States and internationally for the treatment of opioid dependence. Suboxone Sublingual Film was launched by licensee, Indivior Inc., or Indivior, in 2010. Suboxone Sublingual Film is the most prescribed branded product in its category and is the first sublingual film product for the treatment of opioid dependence. We are the sole and exclusive supplier and manufacturer of Suboxone Sublingual Film and Indivior’s authorized generic product of the drug. |
• | Exservan (riluzole) Oral Film – utilizing Aquestive’s proprietary PharmFilm® technology, has been developed for the treatment of amyotrophic lateral sclerosis (ALS). Exservan may potentially fulfill a critical need for ALS patients, given it can be administered safely and easily, twice daily, without water. We believe that Exservan, via our orally administered dosage form, can bring meaningful assistance to patients who are diagnosed with ALS and face difficulties swallowing traditional forms of medication. Exservan was approved by the FDA in November 2019. During the 2019 fourth quarter, the Company granted a license to Zambon S.p.A (“Zambon”) for the development and commercialization of Exservan in the European Union (EU) for the treatment of ALS. Zambon is a multinational pharmaceutical company with a focus on the central nervous system (CNS) therapeutics area. Under the terms of the license agreement, an upfront payment was paid to Aquestive for the development and commercialization rights of Exservan in the EU, and Aquestive will be paid development and sales milestone payments and low double-digit royalties on net sales of the product in the EU. Zambon will be responsible for the regulatory approval and marketing of Exservan in the countries where Zambon seeks to market the product, and Aquestive will be responsible for the development and manufacture of the product. The Company seeks to license the commercialization rights for Exservan in the United States. |
• | Zuplenz – an oral soluble film formulation of ondansetron, a 5-HT antagonist approved for the treatment of nausea and vomiting associated with chemotherapy and post-operative recovery. Ondansetron is available as intravenous injections, intramuscular injections, orally dissolving tablets, oral solution tablets, and film. Generic and branded products are available, with the branded product marketed as Zofran® by GlaxoSmithKline. We licensed commercial rights for Zuplenz to Fortovia Therapeutics (previously Midatech Pharma PLC) in the United States, Canada, and China. Fortovia launched Zuplenz in the United States in 2015. We are the sole and exclusive manufacturer of Zuplenz for Fortovia. |
• | APL-130277 – a sublingual film formulation of apomorphine, which is a dopamine agonist in development to treat episodic off-periods in Parkinson’s disease. APL-130277 is being developed by a licensee as a sublingual alternative to an injectable form of apomorphine. We licensed intellectual property for APL-130277 to Cynapsus Therapeutics, Inc., a company that was acquired by Sunovion Pharmaceuticals Inc., or Sunovion. Sunovion received a Complete Response Letter from the FDA on January 29, 2019 and announced that no additional clinical trials were necessary to submit a revised NDA. Sunovion announced in November 2019 that the NDA was re-submitted, and its PDUFA goal date was May 21, 2020. Assuming FDA approval for this product candidate, which we cannot assure, we intend to explore royalty monetization opportunities for the expected royalty and milestone revenue streams from this product which, if successful, could lead to additional non-dilutive capital for the Company. |
• | preferred alternative to more invasive drug administration methods such as injection, rectal or nasal applications; |
• | faster, or at least equivalent, onset of action; |
• | ease of administration and availability (no device required, no gel to transport); |
• | direct absorption into the bloodstream reducing or avoiding “first pass” effects in the liver; |
• | reduced gastrointestinal, or GI, side effects; |
• | positive dosing outcomes, especially for patients with physical (e.g., dysphagia) or psychological barriers to other methods of drug administration; |
• | stable, durable, portable and quick dissolving (with or without water); |
• | customizable delivery routes for tailored pharmacokinetic, or PK, profiles (buccal, sublingual or lingual); and |
• | customizable taste profiles. |
• | Advance our late stage proprietary portfolio of CNS product candidates to solve critical healthcare problems and make a meaningful improvement in the lives of patients and caregivers. We have focused development efforts on three proprietary CNS products, two of which have been approved and one product candidate in development. These products and product candidates address treatment challenges associated with epilepsy and ALS. We have received FDA approval and subsequently began, in December 2018, distribution and sales of Sympazan. We received FDA approval of Exservan in November 2019. We completed the rolling submission for our NDA filing with the FDA for our drug candidate Libervant, with a PDUFA goal date of September 27, 2020. A competitor was approved for a diazepam nasal product in January 2020 and was granted orphan exclusivity. As described in more detail above under “Our Product Portfolio and Pipeline” and below under “Competition”, we believe and intend to seek to demonstrate to the FDA that our product candidate Libervant is clinically superior to the two existing approved products utilizing the same active moiety in that it represents a major contribution to patient care when compared to device driven rectal and nasal applications, although there can be no assurances that we will be successful. See additional information concerning the Libervant FDA approval process in the “Competition” section of Item 1. Business of this Form-10K. |
• | Scale our commercial platform to maximize the value of our proprietary product candidates. In order to maximize the value of our proprietary product candidates, we are continuing our plan to self-commercialize our proprietary product candidates. We will continue to right size our capabilities in marketing, sales, payor and market access management and medical affairs in order to appropriately support the products we commercialize and the revenue opportunity they represent. |
• | Exploit our technology and know-how to develop oral versions of more complex injectable drugs and other drug delivery administrations to address unmet patient needs. Based on promising preclinical and early clinical results, we intend to continue to develop oral transmucosal versions of epinephrine, a product that is currently available in injectable form. We believe the success of these efforts may lead to additional opportunities in developing oral transmucosal versions of some proteins, peptides and other complex molecule drugs, which have historically been administered by means other than oral intake, such as injection or infusion or nasal spray. |
• | Continue to identify product opportunities within CNS and other markets to expand our proprietary product pipeline. We intend to identify additional product candidates that provide clinical differentiation and solve unmet needs. In the CNS space, we will leverage our relationships with key stakeholders including patients, caregivers, key opinion leaders and patient advocacy groups to identify new product opportunities. Additionally, we will continue to evaluate other therapeutic areas, indications and products where we believe that our expertise and know-how can create differentiation and value. |
• | Acquire and market products, or establish licensing relationships to develop and manufacture products, utilizing new chemical entities. We intend to continue to seek and to evaluate strategically expanding our product portfolio by considering the development of products that would incorporate new chemical entities to treat disorders with high unmet need. |
• | Continue to expand and solidify our intellectual property portfolio for our products, product candidates and manufacturing processes. We believe that our global intellectual property portfolio is a significant source of competitive advantage. We have built a two-tier patent estate consisting of composition-of-matter and method of manufacture patents and patent applications. We intend to seek to expand our intellectual property estate, where appropriate, as we advance our PharmFilm® and other technologies and as we develop new and existing product candidates. |
• | completion of preclinical laboratory and animal testing and formulation studies in compliance with the FDA’s current good laboratory practice, or GLP, regulations; |
• | submission to the FDA of an Investigational New Drug, or IND, application for human clinical testing which must become effective before human clinical trials may begin in the United States; |
• | approval by an independent institutional review board, or IRB, at each clinical trial site before each trial may be initiated; |
• | performance of adequate and well-controlled human clinical trials in accordance with current good clinical practices, or GCP, to establish the safety and efficacy of the proposed drug product for each intended use; |
• | submission to the FDA of a New Drug Application, or NDA; |
• | satisfactory completion of an FDA pre-approval inspection of the facility or facilities at which the product is manufactured to assess compliance with the FDA’s current good manufacturing, or cGMP, regulations to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; |
• | satisfactory completion of a potential review by an FDA advisory committee, if applicable; and |
• | FDA review and approval of the NDA. |
Phase 1 | In Phase 1, through the initial introduction of the drug into healthy human subjects or patients, the drug is tested to assess metabolism, pharmacokinetics, pharmacological actions, side effects associated with increasing doses, and, if possible, early evidence on effectiveness. |
Phase 2 | Phase 2 usually involves trials in a limited patient population to determine the effectiveness of the drug for a particular indication, dosage tolerance and optimum dosage, and to identify common adverse effects and safety risks. |
Phase 3 | Phase 3 trials are undertaken to obtain the additional information about clinical efficacy and safety in a larger number of patients, typically at geographically dispersed clinical trial sites, to permit the FDA to evaluate the overall benefit-risk relationship of the drug and to provide adequate information for the labeling of the drug. In most cases, the FDA requires two adequate and well controlled Phase 3 clinical trials to demonstrate the efficacy of the drug. A single Phase 3 trial with other confirmatory evidence may be sufficient in rare instances where the study is a large multicenter trial demonstrating internal consistency and a statistically persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or prevention of a disease with a potentially serious outcome and confirmation of the result in a second trial would be practically or ethically impossible. |
• | Suboxone, the first sublingual film product for the treatment of opiod dependence; |
• | Zuplenz, the first approved prescription oral soluable film for the prevention of chemotherapy-induced, radiotherapy-induced, and post-operative nausea and vomiting; |
• | Sympazan, an oral soluable film formulation of clobazam for the treatment of seizures associated with a form of epilepsy known as Lennox-Gastaut Syndrome, or LGS, which was commercially launched in December 2018, and |
• | Exservan, which has been developed for the treatment of ALS, was approved by the FDA in November 2019 and for which during the 2019 fourth quarter, we granted a license to Zambon S.p.A. for development and commercialization in the EU. |
In December 2019, we completed the rolling submission of our NDA filing with the FDA for our product candidate Libervant. Our NDA filing for Libervant was accepted by the FDA on February 10, 2020 and received PDUFA goal date by the FDA of September 27, 2020. We will be required to demonstrate to the FDA that Libervant is “clinically superior” to the currently FDA-approved drugs as qualifying as a “major contribution to patient care” within the meaning of FDA regulations and guidance, which we cannot assure. See “Our Product Portfolio and Pipeline” and “Competition” in Item 1. Business above.
• | conducting clinical trials of our product candidates; |
• | seeking regulatory approval for any of our product candidates that successfully complete clinical development; |
• | commercialization activities, including product sales, marketing, manufacturing and distribution, for our products, if approved; |
• | maintaining, expanding and protecting our intellectual property portfolio; |
• | acquiring or in-licensing new technologies or development-stage or approved products; |
• | adding clinical, scientific, operational, financial, sales, marketing, medical and management information systems personnel, including personnel to support our product development and commercialization efforts and to support our transition to operations as a public company; and |
• | experiencing incremental costs due to delays or encountering any issues with any of the above, including, but not limited to, failed or not fully successful trials, complex results, safety issues or other regulatory challenges. |
• | the timing of FDA or any other regulatory authority approval, delay in any FDA or other regulatory approvals, or failure to obtain any such FDA or other regulatory approvals; |
• | competitor’s product candidates obtaining FDA or other regulatory approval, which may include orphan drug market exclusivity for seven years in the U.S., before our product has received any such regulatory approval and/or orphan drug exclusivity; |
• | the timing of process validation for particular product candidates; |
• | the timing of product launches and market acceptance of such products launched; |
• | changes in the timing of and the amount we spend to research, develop, acquire, license or promote new product candidates; |
• | the timing, amount we spend on, and outcome of our research, development, pre-clinical studies and clinical trial programs; |
• | serious or unexpected health or safety concerns related to our products or product candidates; |
• | the introduction of new branded and generic products by others that render our product candidates obsolete, subject to greater competition or noncompetitive; |
• | our ability to maintain selling prices and gross margins on our commercial products; |
• | our ability to comply with complex governmental regulations applicable to many aspects of our business; |
• | changes in coverage and reimbursement policies of health plans and other health insurers, including changes to Medicare, Medicaid and similar government healthcare programs; |
• | increases in the cost of raw materials used to manufacture our commercial products and product candidates; |
• | manufacturing and supply interruptions, including product rejections or recalls due to failure to comply with manufacturing specifications or current Good Manufacturing Practices; |
• | timing of revenue recognition related to our collaboration agreements; |
• | our ability and the significant cost to protect our intellectual property and avoid infringing the intellectual property of others and any adverse developments in any related legal proceeding or in other legal proceeding of any nature; and |
• | the outcome and cost of existing or possible future litigation with third parties. |
• | we may have difficulty satisfying our obligations with respect to our existing indebtedness including the repayment of such indebtedness; |
• | we may have difficulty obtaining financing in the future (and we have substantial restrictions on incurring any additional indebtedness under our current debt instruments) for working capital, capital expenditures, acquisitions or other purposes; |
• | we will need to use a substantial portion of our available cash flow to pay interest and principal on our debt, which will reduce the amount of money available to finance our operations and other business activities; |
• | we may be more vulnerable to general economic downturns and adverse industry conditions; |
• | if cash flows from product sales and revenues from other partnered product or collaborative arrangements are insufficient to satisfy our obligations with respect to our existing indebtedness, we may be forced to seek to sell assets (subject to obtaining consent under the Indenture for our Senior Secured Notes) or seek additional capital, which we may not be able to accomplish on favorable terms, if at all; |
• | we could be limited in our flexibility in planning for, or reacting to, changes in our business and in our industry in general; |
• | we could be placed at a competitive disadvantage compared to our competitors that have less debt, less debt restriction or less restrictive debt covenants; |
• | our failure to comply with the financial and other restrictive covenants in our debt instruments which, among other things, limits our ability to incur additional debt and sell or dispose of assets, could result in an event of default that, if not cured or waived, would have a material adverse effect on our business or prospects; and |
• | our tangible and intangible assets, including our intellectual property, are subject to first priority liens and may be used to satisfy our outstanding debt. |
• | the FDA disagreeing as to the design, protocol or implementation of our clinical studies; |
• | the delay or refusal of regulators or institutional review boards, or IRBs, to authorize us to commence a clinical trial at a prospective trial site; |
• | changes in regulatory requirements, policies and guidelines; |
• | delays or failure to reach agreement on acceptable terms with prospective clinical research organizations, or CROs, and clinical trial sites; |
• | the inability to enroll or delays enrolling a sufficient number of patients in trials, particularly in orphan indications, to observe statistically significant treatment effects in the trial; |
• | having clinical sites deviate from the trial protocol; |
• | negative or inconclusive results from ongoing pre-clinical studies or clinical trials, which may require us to conduct additional pre-clinical studies or clinical trials or to abandon projects that we had expected to be promising; |
• | reports from pre-clinical testing of other similar therapies that raise safety or efficacy concerns; |
• | regulators or IRBs requiring that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or safety concerns, among others; |
• | lower than anticipated retention rates of patients and volunteers in clinical trials; |
• | our CROs or clinical trial sites failing to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all, deviating from the protocol or dropping out of a trial; |
• | delays in establishing the appropriate dosage levels and |
• | exceeding budgeted costs due to difficulty in accurately predicting costs associated with clinical trials. |
• | the timing of market introduction of the product candidate as well as competitive products; |
• | the clinical indications for which the product candidate is approved; |
• | the potential and perceived advantages of such product candidate over alternative treatments; |
• | favorable pricing and the availability of coverage and adequate reimbursement by third-party payors and government authorities; |
• | relative convenience and ease of administration; |
• | any negative publicity related to our or our competitors’ products that include the same active ingredient; |
• | the prevalence and severity of adverse side effects, including limitations or warnings contained in a product’s FDA-approved labeling; and |
• | the effectiveness of sales and marketing efforts. |
• | the efficacy and safety of our products and product candidates, including marketed products and product candidates in development by third parties; |
• | the time it takes for our product candidates to complete preclinical and clinical development and receive marketing approval; |
• | our ability to maintain a good relationship with regulatory authorities; |
• | our ability to commercialize and market any of our product candidates that receive regulatory approval; |
• | the price of our products relative to pricing of branded or generic competitors; |
• | whether coverage and adequate levels of reimbursement are available under private and governmental health insurance plans, including Medicare and Medicaid; |
• | our ability to protect intellectual property rights related to our products and product candidates; |
• | our ability to manufacture on a cost-effective basis and sell commercial quantities of our existing products and product candidates that may receive regulatory approval in the future; and |
• | acceptance by physicians and other healthcare providers of any of our products and product candidates that receive regulatory approval. |
• | a covered benefit under its health plan; |
• | appropriate and medically necessary for the specific condition or disease; |
• | cost effective; and |
• | neither experimental nor investigational. |
• | the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, in return for the purchase, recommendation, leasing or furnishing of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand, and prescribers, purchasers and formulary managers on the other. The Patient Protection and Affordable Care Act, as amended, or the PPACA, amended the intent requirement of the federal Anti-Kickback Statute. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it; |
• | federal civil and criminal false claims laws, including, without limitation, the False Claims Act, and civil monetary penalty laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid or other government payors that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government. The PPACA provides, and recent government cases against pharmaceutical and medical device manufacturers support, the view that federal Anti-Kickback Statute violations and certain marketing practices, including off-label promotion, may implicate the False Claims Act; |
• | the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created federal criminal statutes that prohibit a person from knowingly and willfully executing a scheme or making false or fraudulent statements to defraud any healthcare benefit program, regardless of the payor (e.g., public or private); |
• | HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization on entities subject to the rule, such as health plans, healthcare clearinghouses and certain healthcare providers, and their respective business associates who provide services involving the creation, use or disclosure of HIPAA protected health information; |
• | federal transparency laws, including the federal Physician Payments Sunshine Act, which is part of the PPACA, that require certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services, or CMS, information related to: (i) payments or other “transfers of value” made to physicians and teaching hospitals; and (ii) ownership and investment interests held by physicians and their immediate family members, with such information being made publicly available through a searchable website; |
• | state and foreign law equivalents of each of the above federal laws; state laws that require manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, marketing expenditures, or pricing information; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or to adopt compliance programs as prescribed by state laws and regulations, or that otherwise restrict payments that may be made to healthcare providers; and state and local laws that require the registration of pharmaceutical sales representatives; and |
• | state and foreign laws that govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. |
• | an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs, although this fee does not apply to sales of certain products approved exclusively for orphan indications; |
• | expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability; |
• | expansion of manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate for both branded and generic drugs and revising the definition of “average manufacturer price,” or AMP, for calculating and reporting Medicaid drug rebates on outpatient prescription drug prices and extending rebate liability to prescriptions for individuals enrolled in Medicare Advantage plans; |
• | addition of more entity types eligible for participation in the Public Health Service 340B drug pricing program, or the 340B program; |
• | established the Medicare Part D coverage gap discount program by requiring manufacturers to provide a 50% point-of-sale-discount off the negotiated price of applicable brand drugs to eligible beneficiaries during their coverage gap period as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D; |
• | the Bipartisan Budget Act of 2018, or BBA, that among other things, increased the manufacturer’s subsidy under this program from 50% to 70% of the negotiated price, beginning in 2019; |
• | a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and |
• | established the Center for Medicare and Medicaid Innovation within CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending. |
• | we may be required to undertake the expenditure of substantial operational, financial and management resources; |
• | we may be required to issue equity securities that would dilute our stockholders’ percentage of ownership; |
• | we may be required to assume substantial actual or contingent liabilities; |
• | strategic collaborators could terminate the arrangement or allow it to expire, which would delay the development and commercialization and may substantially increase the cost of developing and commercializing our products and product candidates; |
• | business combinations of a strategic collaborator or significant changes in a strategic collaborator’s business strategy may affect a strategic collaborator’s willingness or ability to complete its obligations under any arrangement; |
• | strategic collaborators could decide to move forward with a competing product or product candidate developed either independently or in collaboration with others, including our competitors; |
• | collaborators may not perform their obligations as expected; |
• | clinical trials conducted as part of any of these collaborations may not be successful; |
• | collaborators may not actively or aggressively pursue development and commercialization of any product candidates that seek to achieve, or that achieves, regulatory approval; |
• | we may not have access to or may be restricted from disclosing, certain information regarding product candidates being developed or commercialized under a collaboration; |
• | a collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of any such product candidate; and |
• | collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability. |
• | reductions in the payment of royalties or other payments we believe are due pursuant to the applicable collaborative arrangement; |
• | actions taken by a third-party collaborator inside or outside our collaboration which could negatively impact our rights or benefits under our collaboration; |
• | unwillingness on the part of a third-party collaborator to keep us informed regarding the progress of its development and commercialization activities or to permit public disclosure of the results of those activities; and |
• | decision by our third-party collaborator to terminate or significantly reduce the relationship. |
• | impairment of our business reputation; |
• | withdrawal of clinical study participants; |
• | substantial costs due to litigation; |
• | distraction of management’s attention from our primary business; |
• | substantial monetary awards to patients or other claimants; |
• | the inability to commercialize our products or product candidates; and |
• | decreased demand for our products or product candidates, if approved for commercial sale. |
• | comply with FDA regulations or the regulations applicable in other jurisdictions; |
• | provide accurate information to the FDA and other regulatory authorities; |
• | comply with healthcare fraud and abuse laws and regulations in the United States and abroad; |
• | report financial information or data accurately; or |
• | disclose unauthorized activities to us. |
• | inability to raise or delays in raising funding necessary to initiate or continue a trial; |
• | delays in obtaining regulatory approval to commence a trial; |
• | delays in reaching agreement with the FDA on final trial design; |
• | imposition of a clinical hold for safety reasons or following an inspection of our clinical trial operations or trial sites by the FDA or other regulatory authorities; |
• | delays in reaching agreement on acceptable terms with prospective CROs and clinical trial sites, or failure by such CROs to carry out the clinical trial at each site in accordance with the terms of our agreements with them; |
• | delays in obtaining required institutional review board, or IRB, approval at each site; |
• | difficulties or delays in having patients complete participation in a trial or return for post-treatment follow-up; |
• | clinical sites electing to terminate their participation in one of our clinical trials, which would likely have a detrimental effect on subject enrollment and on our ability to successfully conduct or complete such clinical trial at alternative sites; or |
• | time required to add new clinical sites. |
• | severity of the disease under investigation; |
• | design of the trial protocol; |
• | size of the patient population; |
• | eligibility criteria for the trial in question; |
• | perceived risks and benefits of the product candidate under trial; |
• | proximity and availability of clinical trial sites for prospective patients; |
• | availability of competing therapies and clinical trials; |
• | efforts to facilitate timely enrollment in clinical trials; |
• | patient referral practices of physicians; and |
• | ability to monitor patients adequately during and after treatment. |
• | regulatory authorities may withdraw their approval of the product or impose restrictions on its distribution; |
• | the FDA may require implementation of a Risk Evaluation and Mitigation Strategy, or REMS; |
• | regulatory authorities may require the addition of labeling statements, such as warnings or contraindications; |
• | we may be required to change the way the product is administered or conduct additional clinical studies; |
• | we could be sued and held liable for substantial damages for harm caused to patients; or |
• | our reputation may suffer. |
• | the FDA or comparable foreign regulatory authorities may disagree that our changes to branded reference drugs meet the criteria for the 505(b)(2) regulatory pathway or foreign regulatory pathways; |
• | we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective or comparable to its branded reference product for its proposed indication; |
• | the results of any clinical trials we conduct may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval; |
• | we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; |
• | a competitor’s drug candidate may receive FDA or other regulatory approval and obtain orphan drug market exclusivity for the U.S. or foreign jurisdictions, and we may not be able to demonstrate to the FDA or other applicable regulatory authority that our drug candidate with the same active moiety for the same indication is “clinically superior” to the approved drug; |
• | we or third-party API or component manufacturers with which we may contract may be unable to maintain a compliance status acceptable to the FDA or comparable foreign regulatory authorities or the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes identified in our marketing application; and |
• | the approval policies or regulations of the FDA or comparable foreign regulatory authorities may change significantly in a manner rendering our clinical data insufficient for approval. |
• | issue warning letters or untitled letters asserting that we are in violation of the law; |
• | impose restrictions on the marketing or manufacturing of the product; |
• | seek an injunction or impose civil, criminal and/or administrative penalties, damages, assess monetary fines, require disgorgement, consider exclusion from participation in Medicare, Medicaid and other federal healthcare programs and require curtailment or restructuring of our operations; |
• | suspend or withdraw regulatory approval; |
• | suspend any ongoing clinical trials; |
• | refuse to approve a pending NDA or supplements to an NDA submitted by us; |
• | seize product; or |
• | refuse to allow us to enter into government contracts. |
• | others may be able to make products that are similar to our products or product candidates but that are not covered by the claims of the patents that we own or have exclusively licensed; |
• | we or any potential future licensors might not have been the first to file patent applications covering certain of our inventions; |
• | others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; |
• | it is possible that our pending patent applications will not lead to issued patents; |
• | issued patents that we own or have exclusively licensed may be held invalid or unenforceable as a result of legal challenges by our competitors; |
• | issued patents that we own or have exclusively licensed may not provide coverage for all aspects of our products or product candidates in all countries; |
• | our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; |
• | we may not develop additional proprietary technologies that are patentable; and |
• | the patents of others may have an adverse effect on our business. |
• | sales of our approved products; |
• | results of clinical trials of our current and any future product candidates or those of our competitors; |
• | the success or regulatory approval of competitive drugs or therapies; |
• | regulatory or legal developments in the United States and other countries, as to both our products and product candidates and those of our competitors; |
• | developments or disputes concerning patent applications, issued patents or other proprietary rights; |
• | the recruitment or departure of key personnel; |
• | the level of expenses related to our current and any future product candidates or clinical development programs; |
• | the results of our efforts to discover, develop, acquire or in-license additional product candidates; |
• | actual or anticipated changes in estimates as to financial results, development, clinical trials or regulatory approval timelines or recommendations by securities analysts; |
• | our inability to obtain or delays in obtaining adequate drug supply for any approved drug or inability to do so at acceptable prices; |
• | disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; |
• | significant lawsuits, including patent or stockholder litigation; |
• | variations in our financial results or those of companies that are perceived to be similar to us, or our failure to achieve anticipated financial results or funding; |
• | changes in the structure of healthcare payment systems; |
• | market conditions in the pharmaceutical and biotechnology sectors; |
• | general economic, industry and market conditions; and |
• | the other factors described in this “Risk Factors” section. |
• | whether the FDA requires us to complete additional, unanticipated studies, trials or other activities prior to approving any of our current and future product candidates, which would likely delay any such approval; |
• | our execution of other collaborative, licensing or similar arrangements and the timing of payments we may make or receive under these arrangements; |
• | variations in the level of expenses related to our future development programs; |
• | any product liability or intellectual property infringement lawsuit in which we may become involved; |
• | delays in obtaining, failure to obtain, or adverse developments in obtaining, FDA and other regulatory approval of our product candidates; |
• | other regulatory developments affecting any of our other current and future product candidates, or the product candidates of our competitors; and |
• | if any of our current or future product candidates receive regulatory approval, the level of underlying demand for such product candidate and wholesaler buying patterns. |
• | authorizing the issuance of “blank check” preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval; |
• | limiting the removal of directors by the stockholders; |
• | creating a classified board of directors; |
• | establishing a supermajority stockholder vote requirement for amending certain provisions of our amended and restated certificate of incorporation and of our amended and restated bylaws; |
• | prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders; |
• | eliminating the ability of stockholders to call a special meeting of stockholders; and |
• | establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings. |
• | Mylan and Sandoz settled without a trial. Sandoz withdrew all challenges and became the distributor of the authorized generic. |
• | All cases against Par were resolved pursuant to a May 2018 settlement agreement between us, Indivior, and Par and certain of its affiliates. |
• | Actavis was found to infringe the ‘514 patent and cannot enter the market until the expiration of the patent in 2024, and the Federal Circuit affirmed that ruling on July 12, 2019. |
• | DRL and Alvogen were found not to infringe under a different claim construction analysis, and the Federal Circuit affirmed that ruling on July 12, 2019. Teva has agreed to be bound by all DRL adjudications. |
• | The first, a declaratory judgment action brought by BDSI against Indivior and Aquestive, seeks declarations of invalidity and non-infringement of U.S. Patents Nos. 7,897,080, or the ’080 patent, 8,652,378, or the ’378 patent, and 8,475,832, or the ’832 patent. This case is stayed pending final resolution of the above-mentioned appeals on related patents. |
• | The second was filed by us and Indivior related to BDSI’s infringing Bunavail product, and alleges infringement of our patent, U.S. Patent No. 8,765,167, or the ’167 patent, and seeks an injunction and potential monetary damages. Shortly after the case was filed, BDSI filed four (4) IPR’s challenging the asserted ’167 patent. On March 24, 2016, the Patent Trial and Appeal Board, or the PTAB, issued a final written decision finding that all claims of the ’167 patent were valid. The case was stayed in May 2016 pending the final determination of the appeals on those decisions. Following the PTAB’s February 7, 2019 decisions on remand denying institution, we and Indivior submitted a notice to the Court on February 15, 2019 notifying the Court that the stay should be lifted as result of the PTAB’s decisions. We are awaiting further action from the Court. |
• | On January 13, 2017, we also sued BDSI asserting infringement of the ’167 patent by BDSI’s Belbuca product and seeking an injunction and potential monetary damages. On August 7, 2019, the Court granted BDSI’s motion to dismiss the Complaint without prejudice and denied BDSI’s motion to stay as moot. On November 11, 2019, we filed a new Complaint against BDSI in the Eastern District of North Carolina. On November 27, 2019, BDSI filed a motion to stay the case pending BDSI’s appeal of the PTAB’s remand and we opposed the motion. The motion to stay remains pending. BDSI’s appeal of the PTAB’s remand decisions to the Federal Circuit was docketed on March 13, 2019, and on March 20, 2019, we moved to dismiss the appeal for lack of jurisdiction. On August 29, 2019, the Federal Circuit granted the motion to dismiss BDSI’s appeal. On September 30, 2019, BDSI filed a petition for rehearing en banc, which we opposed. The Federal Circuit denied BDSI’s petition on January 13, 2020. After the Federal Court denied BDSI’s petition on January 13, 2020, BDSI filed a motion to dismiss the complaint, and we opposed the motion on February 2, 2020. The parties are awaiting further action from the Court. |
Year Ended December 31, | ||||||||||||||||
(In thousands, except per share data amounts) | 2019 | 2018 | 2017 | 2016 | ||||||||||||
Revenues | $ | 52,609 | $ | 67,430 | $ | 66,918 | $ | 51,785 | ||||||||
Costs and expenses: | ||||||||||||||||
Manufacture and supply | 20,361 | 20,988 | 19,820 | 16,378 | ||||||||||||
Research and development | 20,574 | 23,112 | 22,133 | 15,450 | ||||||||||||
Selling, general and administrative | 64,342 | 72,269 | 25,078 | 20,804 | ||||||||||||
Total costs and expenses | 105,277 | 116,369 | 67,031 | 52,632 | ||||||||||||
Loss from operations | (52,668 | ) | (48,939 | ) | (113 | ) | (847 | ) | ||||||||
Other expenses: | ||||||||||||||||
Interest expense | (9,318 | ) | (7,711 | ) | (7,707 | ) | (6,143 | ) | ||||||||
Interest income | 636 | 552 | — | — | ||||||||||||
Loss on extinguishment of debt | (4,896 | ) | — | — | (757 | ) | ||||||||||
Loss on impairment of investment | — | — | — | (1,006 | ) | |||||||||||
Change in fair value of warrant | — | (5,278 | ) | (1,123 | ) | (750 | ) | |||||||||
Other expense | — | — | — | (99 | ) | |||||||||||
Net loss before income taxes | (66,246 | ) | (61,376 | ) | (8,943 | ) | (9,602 | ) | ||||||||
Income taxes | — | — | — | — | ||||||||||||
Net loss | (66,246 | ) | (61,376 | ) | (8,943 | ) | (9,602 | ) | ||||||||
Dividends on redeemable preferred interests | — | — | (2,480 | ) | (2,342 | ) | ||||||||||
Net loss attributable to common shares/ members’ interests | (66,246 | ) | (61,376 | ) | (11,423 | ) | (11,944 | ) | ||||||||
Comprehensive net loss | $ | (66,246 | ) | $ | (61,376 | ) | $ | (11,423 | ) | $ | (11,944 | ) | ||||
Net loss per share – basic and diluted | $ | (2.61 | ) | $ | (2.96 | ) | ||||||||||
Weighted-average number of common shares outstanding - basic and diluted | 25,356,098 | 20,725,526 |
December 31, | ||||||||||||||||
Selected Balance Sheet Data: | 2019 | 2018 | 2017 | 2016 | ||||||||||||
Cash and cash equivalents | $ | 49,326 | $ | 60,599 | $ | 17,379 | $ | 9,209 | ||||||||
Working capital (current assets minus current liabilities) | 49,759 | 41,249 | 12,813 | 12,526 | ||||||||||||
Total assets | 78,479 | 86,851 | 43,116 | 39,389 | ||||||||||||
Loans Payable, net | 60,338 | 47,203 | 45,507 | 38,650 | ||||||||||||
Total liabilities | 84,601 | 76,771 | 69,611 | 56,965 | ||||||||||||
Accumulated deficit | (130,474 | ) | (61,376 | ) | (120,093 | ) | (108,670 | ) | ||||||||
Total stockholders’ equity/members’ deficit | (6,122 | ) | 10,080 | (68,596 | ) | (57,197 |
• | AQST-108, a “first of its kind” oral sublingual film formulation delivering systemic epinephrine that is in development for the treatment of anaphylaxis using Aquestive’s proprietary PharmFilm® technologies. Epinephrine is the standard of care in the treatment of anaphylaxis and is currently administered via subcutaneous or intramuscular injection. The current market leader is EpiPen®, a single-dose, pre-filled automatic injection device. As a result of its administration via subcutaneous or intra-muscular injection, many patients and their caregivers are reluctant to use currently available products, resulting in increased hospital visits and overall cost of care to treat anaphylactic events. The data from the previously completed Phase 1 dose escalation study demonstrated that AQST-108 achieved similar ranges of mean values of maximum concentration (Cmax) and time to reach maximum concentration (Tmax) to that reported for injectables EpiPen and Auvi-Q®, provided a greater total exposure (AUC0-t; area under the curve) than that reported for EpiPen and Auvi-Q, had less interpatient variability when compared to degree of variation (CV%) data reported for EpiPen and Auvi-Q, and was well tolerated, with no study participants discontinuing participation due to an adverse event. We believe that, as a result of its sublingual administration, AQST-108 will improve patient compliance and lower the total cost of care. After a constructive pre-IND meeting with the FDA in early February, the Company is in the process of preparing the IND for AQST-108 expected to be submitted to the FDA in the coming months. The Company expects to utilize the 505(b)(2) regulatory approval pathway for AQST-108 and expects to begin clinical trials later in 2020. |
• | AQST-305 – a sublingual film formulation of octreotide, a small peptide that has a similar pharmacological profile to natural somatostatin, for the treatment of acromegaly, as well as severe diarrhea and flushing associated with carcinoid syndrome. Acromegaly is a hormone disorder that results from the overproduction of growth hormone in middle-aged adults. Octreotide is the standard of care for the treatment of acromegaly. The current market leader, Sandostatin, is administered via deep subcutaneous or intramuscular injections once a month. This monthly treatment regimen can result in loss of efficacy toward the end of the monthly treatment cycle. We are developing AQST-305 as a non-invasive, pain-free alternative to Sandostatin to reduce treatment burden, healthcare costs and the potential loss of efficacy of the treatment cycle. ASQST-305 has shown promising preclinical results. We began a human proof of concept study in Canada during the third quarter of 2018. As a result of the early stage proof of concept study, further optimization of this formulation is currently underway. |
• | focus on the approval of Libervant for marketing in the U.S. and, subsequently its commercialization, |
• | continue to clinically develop AQST-108 along the 505(b)(2) pathway with PK clinical trials to begin in 2020; and |
• | continue to grow Sympazan sales as a precursor and complement to the eventual launch of Libervant, if approved. |
• | employee-related expenses, including compensation, benefits, share-based compensation and travel expense; |
• | external research and development expenses incurred under arrangements with third parties, such as contract research organizations, investigational sites and consultants; |
• | the cost of acquiring, developing and manufacturing clinical study materials; and |
• | costs associated with preclinical and clinical activities and regulatory operations. |
• | Seeking to obtain the approval and subsequent launch of Libervant, subject to approval for marketing in the U.S.; |
• | The continued, accelerated development of AQST-108 along the 505(b)(2) pathway with PK clinical trials to begin in 2020; and |
• | Growing the revenue contributions from Sympazan as a first step to position Aquestive in the epilepsy community. |
Change | ||||||||||||||||
2019 | 2018 | $ | % | |||||||||||||
(In thousands, except %) | ||||||||||||||||
Manufacture and supply revenue | $ | 38,739 | $ | 37,319 | $ | 1,420 | 4 | % | ||||||||
License and royalty revenue | 6,959 | 24,699 | (17,740 | ) | (72 | %) | ||||||||||
Co-development and research fees | 4,042 | 5,184 | (1,142 | ) | (22 | %) | ||||||||||
Proprietary product sales, net | 2,869 | 228 | 2,641 | NM | ||||||||||||
Revenues | $ | 52,609 | $ | 67,430 | $ | (14,821 | ) | (22 | %) |
Change | ||||||||||||||||
2019 | 2018 | $ | % | |||||||||||||
(In thousands, except %) | ||||||||||||||||
Manufacturing and supply | $ | 20,361 | $ | 20,988 | $ | (627 | ) | (3 | %) | |||||||
Research and development | 20,574 | 23,112 | (2,538 | ) | (11 | %) | ||||||||||
Selling, general and administrative | 64,342 | 72,269 | (7,927 | ) | (11 | %) | ||||||||||
Interest expense | 9,318 | 7,711 | 1,607 | 21 | % | |||||||||||
Interest income | (636 | ) | (552 | ) | (84 | ) | 15 | % | ||||||||
Loss on extinguishment of debt | 4,896 | - | 4,896 | NM | ||||||||||||
Other | - | 5,278 | (5,278 | ) | NM |
Year Ended December 31, | ||||||||
(In thousands) | 2019 | 2018 | ||||||
Clinical Trials | $ | 8,742 | $ | 8,526 | ||||
Labor - R&D staff | 5,177 | 5,809 | ||||||
Regulatory Submission Costs & Support | 342 | - | ||||||
All Other R&D | 6,313 | 8,777 | ||||||
Total | $ | 20,574 | $ | 23,112 |
• | $63,946 from our IPO including the over-allotment option; |
• | $66,054 from debt facilities further described below; and |
• | $37,295 net proceeds from our equity offering of common stock in December 2019. |
(In thousands) | 2019 | 2018 | ||||||
Net cash used for operating activities | $ | (60,210 | ) | $ | (12,991 | ) | ||
Net cash used for investing activities | (663 | ) | (1,824 | ) | ||||
Net cash provided by financing activities | 49,600 | 58,035 | ||||||
Net (decrease) increase in cash and cash equivalents | $ | (11,273 | ) | $ | 43,220 |
• | continued revenue from our proprietary and licensed products at planned levels; |
• | our ability to monetize royalty streams or other license or proprietary rights for our product candidate Apomorphine at anticipated levels, which cannot be assured (and which is subject to conditions and requirements under the Indenture for our 12.5% Senior Secured Notes including note repurchase obligations at 112.5% of principal amount of such repurchased notes and accrued and unpaid interest thereon, at the option of the holders (see “12.5% Senior Secured Notes” above)) and which monetization would not be expected prior to FDA approval of this drug candidate. |
• | access to the capital markets if and at the time needed for any necessary future funding; |
• | continuing review of our cost structure and cost and expense reductions consistent with our anticipated revenues and funding; |
• | our ability to issue and assuming available purchasers of, additional Senior Secured Notes in an aggregate amount up to $30,000 principal amount under the Indenture for our 12.5% Senior Secured Notes due 2025, based on satisfying certain conditions related to our Libervant product candidate which we cannot assure (see “12.5% Senior Secured Notes” above); |
• | continued funding of appropriate commercialization costs for Sympazan, our first proprietary product launched in December 2018, and continued funding of our development and, subject to FDA approval to market Libervant in the U.S., commercialization of our product candidate Libervant and our other proprietary product candidates; |
• | the infrastructure and administrative costs to support being a public company; |
• | continued compliance with all covenants under our 12.5% Senior Secured Notes; and |
• | absence of significant unforeseen cash requirements. |
• | Our ability to achieve successful commercialization of our proprietary product Sympazan and the cost and timing of our future commercialization activities; |
• | Continued revenues at planned levels from our manufacture and sale of branded Suboxone to Indivior and continued market acceptance of such branded product, without any sales of the authorized generic version of Suboxone; |
• | Sunovion Pharmaceuticals, Inc. achieving in the time period we have anticipated regulatory approval of Apomorphine, which we out-licensed to Sunovion and which, subject to regulatory approval of this drug candidate, which we cannot assure, is expected to provide the opportunity for a significant non-dilutive capital source for us; |
• | Achieving regulatory approval in the time period we have anticipated of our product candidate Libervant which has been part of our business plan and strategy. We completed the filing of our NDA for Libervant with the FDA in the fourth quarter 2019, and the FDA has granted a PDUFA goal date of September 27, 2020. See our “Product Portfolio and Pipeline” and “Competition” sections above contained in Item 1. Business for further discussion of the FDA approval process and market access: |
• | Continuing significant costs in seeking to protect our intellectual property rights, including significant litigation costs in connection with seeking to enforce our rights concerning third parties’ at-risk launch of generic products; |
• | Patient and doctor acceptance of and our ability to obtain adequate reimbursement for our products which we commercialize; |
• | The effect of competing products, including generic products, on our commercialized and licensed products, including Suboxone; and |
• | All other costs of executing our business plan and absence of unforeseen cash requirements. |
Contractual Obligations | Total | Less than one year | One to three years | Four to five years | After five years | |||||||||||||||
(In thousands) | ||||||||||||||||||||
12.5% Senior Secured Notes debt principal and interest | $ | 106,611 | $ | 8,896 | $ | 30,854 | $ | 52,204 | $ | 14,657 | ||||||||||
Operating lease obligations | 4,094 | 1,274 | 2,820 | — | — | |||||||||||||||
Total contractual obligations | $ | 110,705 | $ | 10,170 | $ | 33,674 | $ | 52,204 | $ | 14,657 |
Number | Description | |
Amended and Restated Certificate of Incorporation of Aquestive Therapeutics, Inc., dated as of July 27, 2018 (filed as Exhibit 3.1 to the Current Report on Form 8-K of the Company, as filed on July 27, 2018, and incorporated by reference herein). | ||
Amended and Restated Bylaws of Aquestive Therapeutics, Inc. (filed as Exhibit 3.6 to the Registration Statement on Form S-1 of the Company (File No. 333-225924), as filed on June 27, 2018, and incorporated by reference herein). | ||
Form of Common Stock Certificate of Aquestive Therapeutics, Inc. (filed as Exhibit 4.1 to the Registration Statement on Form S-1 of the Company (File No. 333-225924), as filed on June 27, 2018, and incorporated by reference herein). | ||
Indenture dated July 15, 2019, among Aquestive Therapeutics, Inc., as Issuer, any Guarantor that becomes party thereto and U.S. Bank National Association, as Trustee and Collateral Agent (filed as Exhibit 4.1 to the Current Report on Form 8-K filed on July 16, 2019, and incorporated by reference herein). | ||
Form of Warrant (filed as Exhibit 4.2 to the Current Report on Form 8-K filed on July 16, 2019 and incorporated by reference herein). | ||
Description of Debt Securities Issued under Indenture under Indenture dated as of July 15, 2019 (filed as Item 1.01) to the Current Report on Form 8-K filed on July 16, 2019 and incorporated by reference therein). | ||
Description of Warrant issued under the Indenture dated as of July 15, 2019 (filed as Item 1.01 to the Current Report on Form 8-K filed on July 16, 2019 and incorporated by reference herein). | ||
Registration Rights Agreement, dated as of June 24, 2018, by and between Aquestive Partners, LLC and certain of the holders of its membership interests (filed as Exhibit 4.3 to the Registration Statement on Form S-1 of the Company (File No. 333-225924), as filed on June 27, 2018, and incorporated by reference herein). | ||
Description of Securities Registered under Section 12 of the Exchange Act (filed herewith). | ||
Form of Indemnification Agreement, by and between Aquestive Therapeutics, Inc and its directors and officers (filed as Exhibit 10.1 to the Registration Statement on Form S-1 of the Company (File No. 333-225924), as filed on June 27, 2018, and incorporated by reference herein). | ||
Form of Purchase Agreement in connection with issuance of 12.5% Senior Secured Notes (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on July 16, 2019). | ||
Collateral Agreement in connection with issuance of 12.5% Senior Secured Notes, dated as of July 15, 2019, among Aquestive Therapeutics, Inc., as Issuer, the Other Grantors from time to time party thereto, U.S. Bank National Association, as Trustee, and U.S. Bank National Association, as Collateral Agent (filed as Exhibit 10.2 to the Current Report on Form 8-K filed on July 16, 2019). | ||
Executive Employment Agreement, dated as of June 30, 2018, by and between Aquestive Therapeutics, Inc. and Keith J. Kendall (filed as Exhibit 10.5 to the Pre-Effective Amendment No. 1, as filed on July 16, 2018, to the Registration Statement on Form S-1 of the Company (File No. 333-225924), and incorporated by reference herein). | ||
Executive Employment Agreement, dated as of June 26, 2018, by and between Aquestive Therapeutics, Inc. and Daniel Barber (filed as Exhibit 10.6 to the Registration Statement on Form S-1 of the Company (File No. 333-225924), as filed on June 27, 2018, and incorporated by reference herein). | ||
Executive Employment Agreement, dated as of June 26, 2018, by and between Aquestive Therapeutics, Inc. and John T. Maxwell (filed as Exhibit 10.7 to the Registration Statement on Form S-1 of the Company (File No. 333-225924), as filed on June 27, 2018, and incorporated by reference herein). | ||
Executive Employment Agreement, dated as of July 9, 2018, by and between Aquestive Therapeutics, Inc. and A. Mark Schobel (filed as Exhibit 10.8 to the Pre-Effective Amendment No. 1, as filed on July 16, 2018, to the Registration Statement on Form S-1 of the Company (File No. 333-225924), and incorporated by reference herein). |
Commercial Exploitation Agreement, by and between MonoSol Rx, LLC (now Aquestive Therapeutics, Inc.) and Reckitt Benckiser Pharmaceuticals Inc., dated as of August 15, 2008 (as amended on August 19, 2009, November 13, 2009, March 30, 2010, October 13, 2010, December 15, 2010, December 9, 2011, December 1, 2012, October 14, 2013 (by Addendum A), July 30, 2014 (by Addendum B), and January 12, 2017) (filed as Exhibit 10.9 to the Registration Statement on Form S-1 of the Company (File No. 333-225924), as filed on June 27, 2018, and incorporated by reference herein). | ||
Agreement, by and between MonoSol Rx, LLC (now Aquestive Therapeutics, Inc.) and Indivior UK Limited, dated as of September 24, 2017 (filed as Exhibit 10.10 to the Registration Statement on Form S-1 of the Company (File No. 333-225924), as filed on June 27, 2018, and incorporated by reference herein). | ||
Agreement to Terminate CLA, by and between MonoSol Rx, LLC (now Aquestive Therapeutics, Inc.) and KemPharm, Inc., dated as of March 20, 2012 (filed as Exhibit 10.11 to the Registration Statement on Form S-1 of the Company (File No. 333-225924), as filed on June 27, 2018, and incorporated by reference herein). | ||
License Agreement, by and between MonoSol Rx, LLC (now Aquestive Therapeutics, Inc.) and Cynapsus Therapeutics Inc., dated as of April 1, 2016 (filed as Exhibit 10.12 to the Registration Statement on Form S-1 of the Company (File No. 333-225924), as filed on June 27, 2018, and incorporated by reference herein). | ||
Industrial Lease Agreement, by and between Ashland Northwest Partners, L.P. and MonoSol Rx, LLC (now Aquestive Therapeutics, Inc.), dated as of October 24, 2006 (as amended on October 24, 2011 and February 8, 2018) (filed as Exhibit 10.13 to the Registration Statement on Form S-1 of the Company (File No. 333-225924), as filed on June 27, 2018, and incorporated by reference herein). | ||
Aquestive Therapeutics, Inc. 2018 Equity Incentive Plan (filed as Exhibit 10.14 to the Pre-Effective Amendment No. 1, as filed on July 16, 2018, to the Registration Statement on Form S-1 of the Company (File No. 333-225924) and incorporated by reference herein). | ||
10.14+ | Aquestive Therapeutics, Inc. Employee Stock Purchase Plan as Amended (filed herewith). | |
Form of Stock Option Agreement (filed as Exhibit 10.16 to the Registration Statement on Form S-1 of the Company (File No. 333-225924), as filed on June 27, 2018, and incorporated by reference herein). | ||
Form of Stock Option Agreement under the Aquestive Therapeutics, Inc. 2018 Equity Incentive Plan (filed as Exhibit 10.17 to the Pre-Effective Amendment No. 1, as filed on July 16, 2018, to the Registration Statement on Form S-1 of the Company (File No. 333-225924) and incorporated by reference herein). | ||
Form of Restricted Stock Unit Agreement under the Aquestive Therapeutics, Inc. 2018 Equity Incentive Plan (filed as Exhibit 10.18 to the Pre-Effective Amendment No. 1, as filed on July 16, 2018, to the Registration Statement on Form S-1 of the Company (File No. 333-225924) and incorporated by reference herein). | ||
Executive Employment Agreement, dated as of September 10, 2018, by and between Aquestive Therapeutics, Inc. and Lori J. Braender (filed as Exhibit 10.4 to the Quarterly Report on Form 10-Q of the Company, as filed on November 6, 2018, and incorporated by reference herein). | ||
Equity Distribution Agreement dated as of September 11, 2019 between the Company and Piper Jaffray & Co. (filed as Exhibit 1.2 to Registration Statement on Form S-3 (File No. 333-233716) and incorporated by reference herein). | ||
Consent of KPMG LLP, Independent Registered Public Accounting Firm (filed herewith). | ||
Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). | ||
Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). | ||
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). | ||
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). | ||
101.INS | Inline XBRL Instance Document | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
† | Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment that has been granted by the Securities and Exchange Commission. |
* | Furnished herewith and not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and shall not be deemed to be incorporated by reference to any filing under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing. |
+ | Indicates a management contract or compensatory plan. |
Item 16. | Form 10-K Summary |
AQUESTIVE THERAPEUTICS, INC. | ||
Date: March 11, 2020 | By: | /s/ Keith J. Kendall |
Keith J. Kendall | ||
Chief Executive Officer | ||
(Principal Executive Officer) |
Signature | Title | Date | ||
/s/ Keith J. Kendall | President, Chief Executive Officer and Member of the Board of Directors | March 11, 2020 | ||
Keith J. Kendall | (Principal Executive Officer) | |||
/s/John T. Maxwell | Chief Financial Officer | March 11, 2020 | ||
John T. Maxwell | (Principal Financial Officer and Principal Accounting Officer) | |||
/s/ Douglas K. Bratton | Member of the Board of Directors | March 11, 2020 | ||
Douglas K. Bratton | ||||
/s/ Gregory B. Brown | Member of the Board of Directors | March 11, 2020 | ||
Gregory B. Brown, M.D. | ||||
/s/ John Cochran | Member of the Board of Directors | March 11, 2020 | ||
John Cochran | ||||
/s/ Santo J. Costa | Chairman of the Board of Directors | March 11, 2020 | ||
Santo J. Costa | ||||
/s/ Nancy S. Lurker | Member of the Board of Directors | March 11, 2020 | ||
Nancy S. Lurker | ||||
/s/ James S. Scibetta | Member of the Board of Directors | March 11, 2020 | ||
James S. Scibetta |
Page Number | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Balance Sheets as of December 31, 2019 and 2018 | |
Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2019 and 2018 | |
Consolidated Statements of Changes in Stockholders’ Deficit for the Years Ended December 31, 2019 and 2018 | |
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019 and 2018 | |
Notes to the Consolidated Financial Statements |
Aquestive Therapeutics, Inc.:
March 11, 2020
December 31, | ||||||||
2019 | 2018 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 49,326 | $ | 60,599 | ||||
Trade and other receivables, net | 13,130 | 6,481 | ||||||
Inventories | 2,859 | 5,441 | ||||||
Prepaid expenses and other current assets | 2,999 | 1,680 | ||||||
Total current assets | 68,314 | 74,201 | ||||||
Property and equipment, net | 9,726 | 12,207 | ||||||
Intangible assets, net and other assets | 439 | 443 | ||||||
Total assets | $ | 78,479 | $ | 86,851 | ||||
Liabilities and stockholders’ (deficit)/equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 12,274 | $ | 20,436 | ||||
Accrued expenses | 5,475 | 7,195 | ||||||
Deferred revenue | 806 | 721 | ||||||
Loans payable, current | — | 4,600 | ||||||
Total current liabilities | 18,555 | 32,952 | ||||||
Loans payable, net | 60,338 | 42,603 | ||||||
Deferred revenue, net of current portion | 4,348 | — | ||||||
Asset retirement obligations | 1,360 | 1,216 | ||||||
Total liabilities | 84,601 | 76,771 | ||||||
Commitments and contingencies (note 18) | ||||||||
Stockholders’ (deficit)/equity: | ||||||||
Common stock, $.001 par value. Authorized 250,000,000 shares; 33,562,885 and 24,957,309 shares issued and outstanding at December 31, 2019 and 2018, respectively | 34 | 25 | ||||||
Additional paid-in capital | 124,318 | 71,431 | ||||||
Accumulated deficit | (130,474 | ) | (61,376 | ) | ||||
Total stockholders’ (deficit)/equity | (6,122 | ) | 10,080 | |||||
Total liabilities and stockholders’ (deficit)/equity | $ | 78,479 | $ | 86,851 |
Year Ended December 31, | ||||||||
2019 | 2018 | |||||||
Revenues | $ | 52,609 | $ | 67,430 | ||||
Costs and expenses: | ||||||||
Manufacture and supply | 20,361 | 20,988 | ||||||
Research and development | 20,574 | 23,112 | ||||||
Selling, general and administrative | 64,342 | 72,269 | ||||||
Total costs and expenses | 105,277 | 116,369 | ||||||
Loss from operations | (52,668 | ) | (48,934 | ) | ||||
Other income (expenses): | ||||||||
Interest expense | (9,318 | ) | (7,711 | ) | ||||
Interest income | 636 | 552 | ||||||
Loss on the extinguishment of debt | (4,896 | ) | — | |||||
Change in fair value of warrant | — | (5,278 | ) | |||||
Net loss before income taxes | (66,246 | ) | (61,376 | ) | ||||
Income taxes | — | — | ||||||
Net loss | $ | (66,246 | ) | $ | (61,376 | ) | ||
Comprehensive loss | $ | (66,246 | ) | $ | (61,376 | ) | ||
Net loss per share – basic and diluted | $ | (2.61 | ) | $ | (2.96 | ) | ||
Weighted-average number of common shares outstanding - basic and diluted | 25,356,098 | 20,725,526 |
Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
Shares | Amount | Capital | Deficit | Equity/(Deficit) | ||||||||||||||||
Balance at January 1, 2018* | 5,000 | $ | — | $ | (26,495 | ) | $ | — | $ | (26,495 | ) | |||||||||
Effect of Stock Split | 15,072,647 | 15 | (15 | ) | — | — | ||||||||||||||
Common Stock issued to performance unit plan participants | 4,922,353 | 5 | 19,118 | — | 19,123 | |||||||||||||||
Reclassification of warrant liability to equity | — | — | 12,952 | — | 12,952 | |||||||||||||||
Cash received for warrant exercise | — | — | 116 | — | 116 | |||||||||||||||
Common Stock issued upon initial public offering | 4,925,727 | 5 | 68,709 | — | 68,714 | |||||||||||||||
Issuance costs of initial public offering | — | — | (5,232 | ) | — | (5,232 | ) | |||||||||||||
Share-based compensation | 31,582 | — | 2,278 | — | 2,278 | |||||||||||||||
Net loss | — | — | — | (61,376 | ) | (61,376 | ) | |||||||||||||
Balance at December 31, 2018 | 24,957,309 | $ | 25 | $ | 71,431 | $ | (61,376 | ) | $ | 10,080 | ||||||||||
Adoption of ASU 2014-09, ASU 2018-07 | — | — | 20 | (2,852 | ) | (2,832 | ) | |||||||||||||
Fair value of warrants issued | — | — | 6,800 | — | 6,800 | |||||||||||||||
Common Stock issued upon warrant exercises | 428,571 | 1 | 1,820 | — | 1,821 | |||||||||||||||
Common Stock issued upon public equity offering | 8,050,000 | 8 | 37,827 | — | 37,835 | |||||||||||||||
Costs of public equity offering | — | — | (540 | ) | — | (540 | ) | |||||||||||||
Shares issued under employee stock purchase plan | 56,378 | — | 237 | — | 237 | |||||||||||||||
Share-based compensation | 70,627 | — | 6,723 | 6,723 | ||||||||||||||||
Net loss | — | — | — | (66,246 | ) | (66,246 | ) | |||||||||||||
Balance at December 31, 2019 | 33,562,885 | $ | 34 | $ | 124,318 | $ | (130,474 | ) | $ | (6,122 | ) |
Year Ended December 31, | ||||||||
2019 | 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (66,246 | ) | $ | (61,376 | ) | ||
Adjustments to reconcile net loss to net cash (used for) operating activities: | ||||||||
Depreciation and amortization | 2,905 | 3,236 | ||||||
Change in fair value of warrant | — | 5,278 | ||||||
Share-based compensation | 7,071 | 29,940 | ||||||
Amortization of debt issuance costs and discounts | 1,929 | 1,696 | ||||||
Loss on the extinguishment of debt | 4,896 | — | ||||||
All other non-cash expenses | 359 | 237 | ||||||
Changes in operating assets and liabilities: | ||||||||
Trade receivables and other receivables, net | (6,815 | ) | (409 | ) | ||||
Inventories | 2,582 | (1,427 | ) | |||||
Prepaid expenses and other current assets | (1,366 | ) | (1,140 | ) | ||||
Accounts payable | (7,872 | ) | 11,319 | |||||
Accrued expenses | 746 | 281 | ||||||
Deferred revenue | 1,601 | (626 | ) | |||||
Net cash used for operating activities | (60,210 | ) | (12,991 | ) | ||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (663 | ) | (1,824 | ) | ||||
Net cash (used for) investing activities | (663 | ) | (1,824 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of common stock and warrant exercises | 39,317 | 68,830 | ||||||
Proceeds from issuance of debt | 70,000 | — | ||||||
Debt repayment | (50,000 | ) | — | |||||
Payments for financing costs | (3,946 | ) | (4,768 | ) | ||||
Premium paid to retire debt | (2,944 | ) | — | |||||
Payments for taxes on share-based compensation | (2,827 | ) | (6,027 | ) | ||||
Net cash provided by financing activities | 49,600 | 58,035 | ||||||
Net (decrease)/increase in cash and cash equivalents | (11,273 | ) | 43,220 | |||||
Cash and cash equivalents: | ||||||||
Beginning of period | 60,599 | 17,379 | ||||||
End of period | $ | 49,326 | $ | 60,599 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash payments for interest | $ | 7,340 | $ | 6,049 | ||||
Net increase in capital expenditures included in accounts payable and accrued expenses: | 104 | 104 | ||||||
Net (decrease) increase in offering costs included in accounts payable and accrued expenses | — | (588 | ) | |||||
Accrued withholding tax for share based compensation | — | 2,515 | ||||||
Deferred financing costs charged to additional paid in capital | 540 | 5,232 | ||||||
Warrants issued in connection with long-term debt | 6,800 | — | ||||||
Noncash component of warrants exercised | — | 12,952 |
Note 1. | Corporate Organization and Company Overview |
(i) | increase the authorized number of capital stock from 25,000 to 350,000,000 shares, followed by a reduction of the authorized total to 250,000,000 in July 2018, |
(ii) | authorize Non-Voting Common Stock, and |
(iii) | affect a split of the Company’s common stock, par value $0.001 per share, such that each share be subdivided and reclassified into 37,212 shares of Voting Common Stock, par value $0.001 per share. Subsequently and in consideration of pricing considerations in connection with the Company’s planned initial public stock offering (the IPO), a reverse split was implemented, converting 12.34 outstanding shares into a single share of common stock of the same par value. |
Note 2. | Basis of Presentation and Principles of Consolidation |
Note 3. | Summary of Significant Accounting Policies |
• | the stock price at the grant date, |
• | exercise price, |
• | both the contractual and estimated expected term of the option, |
• | an estimate of stock price volatility based on that of an industry peer group, |
• | expected dividends, |
• | no dividends for the foreseeable future, and |
• | risk-free interest rate. |
• | Level 1 — Quoted prices in active markets for identical assets or liabilities. Cash and cash equivalents consisted of cash in bank checking accounts and money market funds which are all Level 1 assets. |
• | Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. The Company currently has no Level 2 assets or liabilities. |
• | Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. As of December 31, 2019, the Company has no level 3 assets or liabilities. |
Note 4. | Risks and Uncertainties |
Note 5. | Revenues and Trade Receivables, Net |
Year Ended December 31, | ||||||||
2019 | 2018 | |||||||
Manufacture and supply revenue | $ | 38,739 | $ | 37,319 | ||||
License and royalty revenue | 6,959 | 24,699 | ||||||
Co-development and research fees | 4,042 | 5,184 | ||||||
Proprietary product sales, net | 2,869 | 228 | ||||||
Revenues | $ | 52,609 | $ | 67,430 |
Year Ended December 31, | ||||||||
2019 | 2018 | |||||||
United States | $ | 48,293 | $ | 64,565 | ||||
Ex-United States | 4,316 | 2,865 | ||||||
Revenues | $ | 52,609 | $ | 67,430 |
December 31, | ||||||||
2019 | 2018 | |||||||
Accounts receivable | $ | 9,094 | $ | 6,610 | ||||
Contract and other receivables | 4,363 | 33 | ||||||
Less: allowance for bad debt | (124 | ) | (58 | ) | ||||
Less: sales-related allowances | (203 | ) | (104 | ) | ||||
Trade and other receivables, net | $ | 13,130 | $ | 6,481 |
December 31, | ||||||||
2019 | 2018 | |||||||
Allowance for doubtful accounts at beginning of year | $ | 58 | $ | 55 | ||||
Additions charged to bad debt expense | 66 | 53 | ||||||
Write-downs charged against the allowance | (— | ) | (50 | ) | ||||
Recoveries of amounts previously reserved | — | — | ||||||
Allowance for doubtful accounts at end of year | $ | 124 | $ | 58 |
December 31, | ||||||||
2019 | 2018 | |||||||
Balance at December 31, 2018 | $ | 104 | $ | — | ||||
Provision related to sales in 2019 | 244 | 104 | ||||||
Credits and payments | (145 | ) | — | |||||
Balance at December 31, 2019 | $ | 203 | $ | 104 |
Note 6. | Material Agreements |
Note 7. | Inventory |
December 31, | ||||||||
2019 | 2018 | |||||||
Raw material | $ | 1,244 | $ | 1,283 | ||||
Packaging material | 1,096 | 2,975 | ||||||
Finished goods | 519 | 1,183 | ||||||
Total inventory | $ | 2,859 | $ | 5,441 |
Note 8. | Property and Equipment, Net |
December 31, | |||||||||
Useful Lives | 2019 | 2018 | |||||||
Machinery | 3-15 yrs | $ | 21,088 | $ | 20,681 | ||||
Furniture and fixtures | 3-15 yrs | 1,150 | 1,150 | ||||||
Leasehold improvements | (a) | 21,333 | 21,333 | ||||||
Computer, network equipment and software | 3-7 yrs | 2,787 | 2,579 | ||||||
Construction in progress | 1,412 | 1,655 | |||||||
47,770 | 47,398 | ||||||||
Less: accumulated depreciation and amortization | (38,044 | ) | (35,191 | ) | |||||
Total property and equipment, net | $ | 9,726 | $ | 12,207 |
(a) | Leasehold improvements are amortized over the shorter of the lease term or their estimated useful lives. |
Note 9. | Intangible Assets, Net and Other Assets |
December 31, | ||||||||
2019 | 2018 | |||||||
Purchase technology-based intangible | $ | 2,358 | $ | 2,358 | ||||
Purchased patent | 509 | 509 | ||||||
2,867 | 2,867 | |||||||
Less: accumulated amortization | (2,714 | ) | (2,663 | ) | ||||
Intangible assets, net | 153 | 204 | ||||||
Other Assets, Primarily Security Deposits | 286 | 239 | ||||||
Total Intangible Assets, Net and Other Assets | $ | 439 | $ | 443 |
Note 10. | Accrued Expenses |
December 31, | ||||||||
2019 | 2018 | |||||||
Accrued compensation | $ | 3,758 | $ | 3,604 | ||||
Accrued employment tax expenses for share-based compensation | — | 2,515 | ||||||
Real estate and personal property taxes | 300 | 388 | ||||||
Accrued distribution expenses | 1,174 | 481 | ||||||
Other | 243 | 207 | ||||||
Total accrued expenses | $ | 5,475 | $ | 7,195 |
Note 11. | 12.5% Senior Secured Notes and Loans Payable |
2020 | $ | - | ||
2021 | 3,500 | |||
2022 | 10,500 | |||
2023 | 17,500 | |||
2024 and thereafter | 38,500 | |||
Total | $ | 70,000 |
1. | the postponement of the initial loan principal payment to May 2019, |
2. | a delay of the loan maturity date to December 16, 2020, and |
3. | with Perceptive’s consent, an agreement to permit monetization of the royalties and fees that may be derived from sales of certain apomorphine products and a concurrent agreement for the release of the liens related to these royalties and fees. |
Note 12. | Warrants |
Note 13. | Asset Retirement Obligation |
Balance at December 31, 2017 | $ | 1,081 | ||
Additions | 5 | |||
Accretion | 130 | |||
Balance at December 31, 2018 | 1,216 | |||
Additions | — | |||
Accretion | 144 | |||
Balance at December 31, 2019 | $ | 1,360 |
Note 14. | Net Loss Per Share |
Year Ended December 31, 2019 | Year Ended December 31, 2018 | |||||||
Numerator: | ||||||||
Net loss | $ | (66,246 | ) | $ | (61,376 | ) | ||
Denominator: | ||||||||
Weighted-average number of common shares – basic and diluted | 25,356,098 | 20,725,526 | ||||||
Loss per common share – basic and diluted | $ | (2.61 | ) | $ | (2.96 | ) |
Note 15. | Share-Based Compensation |
Expense classification: | Year Ended December31, 2019 | Year Ended December 31, 2018 | ||||||
Manufacturing and supply | $ | 231 | $ | 414 | ||||
Research and development | 720 | 2,583 | ||||||
Selling, general and administrative | 6,120 | 26,943 | ||||||
Total share-based compensation expenses | $ | 7,071 | $ | 29,940 | ||||
Share-based compensation from: | ||||||||
Non-voting common shares (A) | $ | — | $ | 27,298 | ||||
Restricted Stock Units (B) | 1,863 | 1,085 | ||||||
Stock Options (B) | 5,173 | 1,557 | ||||||
Employee Stock Purchase Plan (C) | 35 | — | ||||||
Total share-based compensation expenses | $ | 7,071 | $ | 29,940 |
Valuation assumptions: | ||||
Discount for lack of marketability | 34 | % | ||
Volatility | 90 | % | ||
Weighted average cost of capital | 27.5 | % |
Number of Units | Weighted Average Grant Date Fair Value Per Share | |||||||
(In thousands) | ||||||||
Unvested at Plan adoption | — | $ | — | |||||
Granted | 265 | 14.83 | ||||||
Vested | (60 | ) | 15.03 | |||||
Unvested, December 31, 2018 | 205 | $ | 14.77 | |||||
Granted | — | — | ||||||
Forfeited | (6 | ) | ||||||
Vested | (125 | ) | 14.94 | |||||
Unvested, December 31, 2019 | 74 | $ | 14.64 |
(in 000s, except share price data) | Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term in Years | Aggregate Intrinsic Value | ||||||||||||
Outstanding at January 1, 2018 | — | $ | — | |||||||||||||
Granted | 1,033 | $ | 14.72 | 9.55 | ||||||||||||
Exercised, Forfeited, Expired | — | |||||||||||||||
Outstanding at December 31, 2018 | 1,033 | $ | 14.72 | 9.55 | $ | — | ||||||||||
Granted | 1,258 | 6.66 | 9.29 | |||||||||||||
Forfeited | (60 | ) | $ | 5.78 | 9.40 | |||||||||||
Exercised, Expired | — | $ | — | |||||||||||||
Outstanding at December 31, 2019 | 2,231 | $ | 10.42 | 8.94 | $ | 689 | ||||||||||
Vested or expected to vest at December 31, 2019 | 2,077 | $ | 10.41 | 8.94 | $ | 644 | ||||||||||
Exercisable at December 31, 2019 | 404 | $ | 14.83 | 8.56 | $ | — |
Years Ended December 31, | ||||||||
2019 | 2018 | |||||||
Expected dividend yield | 0 | % | 0 | % | ||||
Expected volatility | 85% - 106 | % | 85% - 90 | % | ||||
Expected term (years) | 5.5 – 6.1 | 5.8 - 6.1 | ||||||
Risk-free interest rate | 1.5% – 2.6 | % | 2.8 - 2.9 | % | ||||
Forfeiture rate | 5 | % | 5 | % | ||||
Exercise prices | $ | 3.36 - $8.05 | $ | 6.54 - $18.67 |
Note 16. | Employee Benefit Plans |
Note 17. | Income Taxes |
December 31, | ||||||||
2019 | 2018 | |||||||
Deferred tax assets: | ||||||||
Accounts receivable | $ | 126 | $ | 16 | ||||
Inventory | 69 | 120 | ||||||
Accrued expenses | 835 | 15 | ||||||
NOL carryforwards | 23,687 | 10,899 | ||||||
Interest limitation imposed by the TJCA | 5,748 | 2,124 | ||||||
Stock Compensation | 2,505 | 1,224 | ||||||
Other | 783 | 260 | ||||||
Property and equipment | 1,741 | 1,380 | ||||||
Orphan Drug and R&D Tax Credits | 4,621 | 3,917 | ||||||
40,115 | 19,955 | |||||||
Deferred tax liabilities: | ||||||||
Intangible assets | (58 | ) | (39 | ) | ||||
Prepaid expenses | - | (407 | ) | |||||
(58 | ) | (446 | ) | |||||
Valuation Allowance | (40,057 | ) | (19,509 | ) | ||||
Net deferred tax asset/(liability) | $ | — | $ | — |
Year Ended December 31, | ||||||||
2019 | 2018 | |||||||
Income taxes at statutory rate | 21.00 | % | 21.00 | % | ||||
Increase (decrease) resulting from: | ||||||||
State income tax | 6.76 | 7.04 | ||||||
Permanent differences | (0.04 | ) | (7.09 | ) | ||||
Research & development credit | 2.32 | 4.40 | ||||||
Return to provision | 0.98 | 1.48 | ||||||
Effect of state rate change | - | 0.41 | ||||||
Valuation allowance | (31.02 | ) | (27.24 | ) | ||||
Effect of the deferred rate change | — | — | ||||||
Effective tax rate | 0.00 | % | 0.00 | % |
Note 18. | Commitments and Contingencies |
Amount | ||||
2020 | $ | 1,274 | ||
2021 | 1,287 | |||
2022 | 1,153 | |||
2023 | 380 | |||
Thereafter | 0 | |||
Total | $ | 4,094 |
• | Mylan and Sandoz settled without a trial. Sandoz withdrew all challenges and became the distributor of the authorized generic. |
• | All cases against Par were resolved pursuant to a May 2018 settlement agreement between us, Indivior, and Par and certain of its affiliates. |
• | Actavis was found to infringe the ‘514 patent and cannot enter the market until the expiration of the patent in 2024, and the Federal Circuit affirmed that ruling on July 12, 2019. |
• | DRL and Alvogen were found not to infringe under a different claim construction analysis, and the Federal Circuit affirmed that ruling on July 12, 2019. Teva has agreed to be bound by all DRL adjudications. |
• | The first, a declaratory judgment action brought by BDSI against Indivior and Aquestive, seeks declarations of invalidity and non-infringement of U.S. Patents Nos. 7,897,080, or the ’080 patent, 8,652,378, or the ’378 patent, and 8,475,832, or the ’832 patent. This case is stayed pending final resolution of the above-mentioned appeals on related patents. |
• | The second was filed by the Company and Indivior alleges infringement of Aquestive’s U.S. Patent No. 8,765,167, or the ’167 patent, by BDSI’s Bunavail product and seeks an injunction and potential monetary damages. BDSI subsequently filed four (4) IPR’s challenging the asserted ’167 patent and on March 24, 2016, the Patent Trial and Appeal Board, or the PTAB, issued a final written decision finding that all claims of the ’167 patent were valid. The case was stayed in May 2016 pending the final determination of the appeals on those decisions. Following the PTAB’s February 7, 2019 decisions on remand denying institution, we and Indivior submitted a notice to the Court on February 15, 2019 notifying the Court that the stay should be lifted as result of the PTAB’s decisions. We are awaiting further action from the Court. |
• | In January 2017, the Company initiated a suit against BDSI asserting infringement of the ’167 patent by BDSI’s Belbuca product and seeking an injunction and potential monetary damages. Subsequently, the Court granted BDSI’s motion to dismiss the Complaint without prejudice. In November 2019, a new Complaint was filed against BDSI in the Eastern District of North Carolina, and BDSI filed a motion to stay the case pending its appeal of the PTAB’s remand. The motion to stay remains pending. In March 2019, the Company moved to dismiss the appeal for lack of jurisdiction, and, in August, the Federal Circuit granted this motion to dismiss BDSI’s appeal. In September 2019, BDSI filed a petition for rehearing en banc, which was denied by the Federal Circuit on January 13, 2020. Subsequently, BDSI filed a motion to dismiss the complaint, which was opposed by the Company on February 2, 2020. The parties are awaiting further action from the Court. |
Note 19. | Quarterly Financial Data (unaudited) |
Three Months Ended | ||||||||||||||||
March 31, 2019 | June 30, 2019 | September 30, 2019 | December 31, 2019 | |||||||||||||
Revenues | $ | 12,643 | $ | 11,129 | $ | 12,418 | $ | 16,419 | ||||||||
Manufacture and supply | 3,506 | 5,420 | 4,643 | 6,792 | ||||||||||||
Total costs and expenses | 25,717 | 29,817 | 23,420 | 26,323 | ||||||||||||
Net (loss) | (14,726 | ) | (20,472 | ) | (18,412 | ) | (12,636 | ) | ||||||||
Basic and diluted net (loss) per common share | $ | (0.59 | ) | $ | (0.82 | ) | $ | (0.74 | ) | $ | (0.48 | ) |
Three Months Ended | ||||||||||||||||
March 31, 2018 | June 30, 2018 | September 30, 2018 | December 31, 2018 | |||||||||||||
Revenues | $ | 23,411 | $ | 13,928 | $ | 13,267 | $ | 16,824 | ||||||||
Manufacture and supply | 5,636 | 4,973 | 5,592 | 4,787 | ||||||||||||
Total costs and expenses | 18,106 | 46,614 | 22,471 | 29,173 | ||||||||||||
Net income (loss) | 4,099 | (36,493 | ) | (15,038 | ) | (13,944 | ) | |||||||||
Basic and diluted net income (loss) per common share | $ | 0.27 | $ | (1.90 | ) | $ | (0.64 | ) | $ | (0.56 | ) |