What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-02 compared with 2022-11-01 · 229 added, 251 removed, 256 unchanged (65% of the section changed)

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Words such as “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “may,” “will,” or the negative of those terms, and similar expressions are intended to identify forward-looking statements.

These forward-looking statements include, but are not limited to, statements regarding the advancement and related timing of AQST-109 and AQST-108 through the regulatory and development pipeline;

the focus on continuing to manufacture Suboxone ® , Exservan ® , Sympazan® and other licensed products;

These forward-looking statements include, but are not limited to, statements regarding the advancement and related timing of AQST-109 and our other product candidates through the regulatory and development pipeline;

the focus on continuing to manufacture Suboxone ® , Exservan ® , Sympazan ® , Ondif ® and other licensed products;

the likelihood that we can overcome the seven year orphan drug exclusivity granted by the FDA for the approved nasal spray product of a competitor in the U.S.

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market access;

clinical trial timing and plans for AQST-109 and AQST-108;

clinical trial timing and plans for AQST-109 and our other product candidates;

statements regarding the potential benefits our products could bring to patients;

the ability to fund our business operations;

and business strategies, market opportunities, and other statements that are not historical facts.

the 2023 financial outlook;

statements about our growth and future financial and operating results and financial position, regulatory approvals and pathways, clinical trial timing and plans, the achievement of clinical and commercial milestones, product orders and fulfillment, short-term and longer term liquidity and cash requirements, cash funding and cash burn;

and business strategies, market opportunities, financing and other statements that are not historical facts.

These forward-looking statements are also subject to the uncertain impact of the COVID-19 global pandemic on our business including with respect to our clinical trials including site initiation, patient enrollment and timing and adequacy of clinical trials;

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Given these uncertainties, we are unable to provide assurance that operations can be maintained as planned prior to the COVID-19 pandemic.

These forward-looking statements are also based on our current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

Such risks and uncertainties include, but are not limited to, the risk that we may not overcome the seven year orphan drug exclusivity granted by the FDA for the approved nasal spray product of a competitor in the U.S.

These forward-looking statements are based on our current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

Such risks and uncertainties include, but are not limited to, risks associated with our development work, including any delays or changes to the timing, cost and success of our product development activities and clinical trials and plans, including those relating to AQST-109;

risk of delays in regulatory advancement through the FDA of AQST-109 and our other drug candidates or failure to receive approval at all;

the risk that we may not overcome the seven year orphan drug exclusivity granted by the FDA for the approved nasal spray product of a competitor in the U.S.

in order for Libervant to be granted U.S.

market access;

risks associated with our development work, including any delays or changes to the timing, cost and success of our product development activities and clinical trials;

risk of delays in regulatory advancement through the FDA of AQST-109 and our other drug candidates or failure to receive approval;

the risk that a competitor obtains FDA orphan drug exclusivity for a product with the same active moiety as any of our other drug products for which we are seeking FDA approval and that such earlier approved competitor orphan drug blocks such other product candidates in the U.S.

for seven years for the same indication;

risk in obtaining market access for our product candidates for other reasons;

risk in obtaining market access from the FDA for our other product candidates;

risk inherent in commercializing a new product (including technology risks, financial risks, market risks and implementation risks and regulatory limitations);

the risk of the failure to obtain U.S.

market access for Libervant to restrict our ability to access additional funding under the Company's 12.5% Notes;

risks and uncertainties concerning the revenue stream from the monetization of our royalty rights for the product KYNMOBI®, as well as the achievement of royalty targets worldwide or in any jurisdiction and certain other commercial targets required for contingent payments under the KYNMOBI monetization transaction;

risk of development of our sales and marketing capabilities;

risk of development of a sales and marketing capability for future commercialization of our product candidates;

risk of sufficient capital and cash resources, including access to available debt and equity financing, including under the Company's ATM facility and the Lincoln Park Purchase Agreement, and revenues from operations, to satisfy all of our short-term and longer-term cash requirements and other cash needs, at the times and in the amounts needed, including near-term debt amortization schedules;

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short-term and long-term liquidity and cash requirements, cash funding and cash burn;

risk related to government claims against Indivior for which we license, manufacture and sell Suboxone® and which accounts for the substantial part of our current operating revenues;

risks related to the outsourcing of certain marketing and other operational and staff functions to third parties;

risk related to government claims against Indivior Inc.

("Indivior") for which we license, manufacture and sell Suboxone ® and which accounts for the substantial part of our current operating revenues;

risks related to the outsourcing of certain sales, marketing and other operational and staff functions to third parties;

risk of the rate and degree of market acceptance of our product and product candidates;

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risk of unexpected patent developments;

risk of legislation and regulatory actions and changes in laws or regulations affecting our business including relating to our products and products candidates and product pricing, reimbursement or access therefore;

risk of loss of significant customers;

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risk of product recalls and withdrawals;

the COVID-19 pandemic and its impact on our business;

adverse developments affecting the financial services industry;

risks related to inflation and rising interest rates;

uncertainties related to general economic, political, business, industry, regulatory and market conditions and other unusual items;

and other uncertainties affecting us including those described in the "Risk Factors" section and in other sections included in this Annual Report on Form 10-K, in our Quarterly Reports on Form 10-Q, and in our Current Reports on Form 8-K filed with the Securities and Exchange Commission (SEC).

and other uncertainties affecting us including those described in the "Risk Factors" section and in other sections included in this and our other Quarterly Reports on Form 10-Q and in our Current Reports on Form 8-K and our other filings with the Securities and Exchange Commission (SEC).

These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these statements.

These factors include the matters discussed and referenced in the risk factors of the Company's 2022 Annual Report on Form 10-K filed with the SEC.

Given these uncertainties, you should not place undue reliance on these forward-looking statements, which speak only as the date made.

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We assume no obligation to update forward-looking statements, or outlook or guidance after the date of this Quarterly Report on Form 10-Q, whether as a result of new information, future events or otherwise, except as may be required by applicable law.

Readers should not rely on the forward-looking statements included in this Quarterly Report on Form 10-Q as representing our views as of any date after the date of the filing of this Quarterly Report on Form 10-Q whether as a result of new information, future events or otherwise, except as may be required by applicable law.

These factors include the matters discussed and referenced in the risk factors of our 2021 Annual Report on Form 10-K.

We are a pharmaceutical company advancing current standards of care to solve patients’ problems through simplifying complex delivery methods.

The Company is developing pharmaceutical products to deliver complex molecules through alternative administrations to invasive and inconvenient standard of care therapies.

Aquestive has five licensed commercialized products which are marketed by our licensees in the U.S.

Aquestive Therapeutics, Inc.

("we", "Aquestive", or the "Company") is a pharmaceutical company advancing medicines to solve patients' problems with current standards of care and provide transformative products to improve their lives.

We are developing pharmaceutical products to deliver complex molecules through alternative administrations to invasive and inconvenient standard of care therapies.

We have five licensed commercialized products which are marketed by our licensees in the U.S.

and around the world.

The Company is the exclusive manufacturer of these licensed products.

The Company also collaborates with pharmaceutical companies to bring new molecules to market using proprietary, best-in-class technologies, like PharmFilm®, and has proven drug development and commercialization capabilities.

The Company is advancing an early stage product pipeline for the treatment of severe allergic reactions, including anaphylaxis.

The Company has also developed a product pipeline focused on treating diseases of the central nervous system, or CNS.

Our production facilities are located in Portage, Indiana, and our corporate headquarters, sales and commercialization operations and primary research laboratory facilities are based in Warren, New Jersey.

We manufacture licensed products at our FDA, Australian Government Department of Health's Therapeutics Goods Administration, or TGA, and Drug Enforcement Agency, or DEA, inspected facilities and anticipate that our current manufacturing capacity is sufficient for commercial quantities of our products and product candidates currently in development.

We are the exclusive manufacturer of these licensed products.

Aquestive also collaborates with pharmaceutical companies to bring new molecules to market using proprietary, best-in-class technologies, like PharmFilm®, and has proven drug development and commercialization capabilities.

We are advancing a product pipeline for the treatment of severe allergic reactions, including anaphylaxis.

We have also developed a product pipeline focused on treating diseases of the central nervous system, or CNS.

We manufacture licensed products at our facilities and anticipate that our current manufacturing capacity is sufficient for commercial quantities of our products and product candidates currently in development.

Our facilities have been inspected by the Food and Drug Administration (FDA), Australian Government Department of Health's Therapeutics Goods Administration (TGA), and Drug Enforcement Agency (DEA), and are subject to inspection by all applicable health agencies, including the Brazilian Health Regulatory Agency (ANVISA) and European Medicines Agency (EMA).

Not all collaborative or licensed products of the Company that may be commercially launched in the future will necessarily be manufactured by us, such as the case with KYNMOBI®.

Complex Molecule Portfolio

We have also developed a proprietary pipeline of complex molecule-based product candidates as alternatives to invasively administered standard of care injectable therapeutics addressing large market opportunities.

We have developed a proprietary pipeline of complex molecule-based product candidates as alternatives to invasively administered standard of care therapeutics addressing large market opportunities.

The active programs in our complex molecule pipeline portfolio are:

• AQST-109 – the first and only orally delivered epinephrine product candidate that has shown clinical results comparable to autoinjectors (such as EpiPen® and Auvi-Q®) for the emergency treatment of allergic reactions, including anaphylaxis.

Epinephrine is the standard of care in the treatment of anaphylaxis and is currently administered via intramuscular injection including auto-injectors, such as EpiPen® and Auvi-Q®, which require patients or caregivers to inject epinephrine into their thighs during an emergency allergic reaction.

• AQST-109 (epinephrine sublingual film, trade name "Anaphylm" conditionally approved by the FDA) – the first and only non-device based, orally delivered epinephrine product candidate that has shown clinical results comparable to autoinjectors (such as EpiPen ® and Auvi-Q ® ) for the emergency treatment of allergic reactions, including anaphylaxis.

Epinephrine is the standard of care in the treatment of anaphylaxis and is currently administered via intramuscular injection (IM) including auto-injectors, such as EpiPen and Auvi-Q, which require patients or caregivers to inject epinephrine into their thighs during an emergency allergic reaction.

As a result of this route of administration, many patients and their caregivers are reluctant to use currently available products.

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This Phase 1 randomized, single-ascending dose study was performed in order to assess the safety, tolerability, and pharmacologic profile of AQST-109.

On February 25, 2022, we reported positive topline data from Part 1 of our crossover study of AQST-109, EPIPHAST, a randomized, open-label, three-part adaptive design, crossover study in healthy adult subjects comparing the pharmacokinetics and pharmacodynamics of epinephrine delivered via AQST-109 oral film compared to intramuscular injection of epinephrine.

On February 25, 2022, we reported positive topline data from Part 1 of our crossover study of AQST-109, EPIPHAST, a randomized, open-label, three-part adaptive design, crossover study in healthy adult subjects comparing the pharmacokinetics (PK) and pharmacodynamics (PD) of epinephrine delivered via AQST-109 oral film compared to epinephrine IM.

The EPIPHAST study was also conducted in Canada.

In Part 1 of the

In Part 1 of the EPIPHAST study, multiple oral film formulations and dosage strengths of AQST-109 were evaluated.

The lead formulation of AQST-109 has shown clinically meaningful blood concentrations when delivered in two different physical configurations, with a

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EPIPHAST study, multiple oral film formulations and dosage strengths of AQST-109 were evaluated.

The lead formulation of AQST-109 has shown clinically meaningful blood concentrations when delivered in two different physical configurations, with a median Tmax of 13.5 minutes and 22.5 minutes, respectively.

median time to maximum concentration (Tmax) of 13.5 minutes and 22.5 minutes, respectively.

Part 1 also showed arithmetic mean maximum concentrations (Cmax) of 771 pg/mL and 580 pg/mL for the two configurations, or geometric mean Cmax values of 258pg/mL and 268pg/mL for the two configurations, respectively.

These geometric mean Cmax and median Tmax values are consistent with those previously reported for approved injectable epinephrine devices such as EpiPen.

Under the EPIPHAST study, the healthy volunteers were also exposed to a 0.5mg intramuscular injection (IM) of epinephrine, allowing for a comparison with the pharmacokinetics, safety, and tolerability of the higher end of the approved dosage range of epinephrine, consistent with guidance received from the FDA in a written response to our Investigational New Drug Application (IND) for AQST-109.

Under the EPIPHAST study, the healthy volunteers were also exposed to a 0.5mg IM of epinephrine, allowing for a comparison with the PK, safety, and tolerability of the higher end of the approved dosage range of epinephrine, consistent with guidance received from the FDA in a written response to our Investigational New Drug Application (IND) for AQST-109.

The findings show that these two configurations of the selected AQST-109 formulation can deliver clinically meaningful blood concentrations of epinephrine sooner than that observed with the higher dose of epinephrine IM injection, and in line with existing epinephrine autoinjectors.

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On February 24, 2022, the FDA cleared our IND, allowing for clinical investigation of AQST-109 in the U.S.

The FDA confirmed that 505(b)(2) approval pathway is acceptable for the development of AQST-109.

The FDA confirmed that the 505(b)(2) approval pathway is acceptable for the development of AQST-109.

The FDA granted Fast Track designation in March 2022 to AQST-109 for the emergency treatment of allergic reactions, including anaphylaxis.

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Part 2 is a randomized, crossover design comparing AQST-109 12mg to epinephrine IM 0.3mg.

Utilizing a replicate crossover design, Part 2 confirmed in a larger population of 24 healthy subjects the key pharmacokinetic (PK) and pharmacodynamic measures observed in Part 1 of the EPIPHAST study and the first-in-human PK study.

The median time to maximum concentration (Tmax) was observed to be 15 minutes for AQST-109, compared to 50 minutes for the epinephrine 0.3mg intra-muscular (IM) injection.

Utilizing a replicate crossover design, Part 2 confirmed in a larger population of 24 healthy subjects the key PK and PD measures observed in Part 1 of the EPIPHAST study and the first-in-human PK study.

The median Tmax was observed to be 15 minutes for AQST-109, compared to 50 minutes for the epinephrine IM 0.3mg.

In July 2022, we reported positive topline results from the final two arms of Part 3 of the EPIPHAST study for AQST-109.

The purpose of Part 3 was to continue to study the administration of the film under a variety of conditions to further characterize its pharmacokinetics, pharmacodynamics, and safety.

The purpose of Part 3 was to continue to study the administration of the film under a variety of conditions to further characterize its PK, PD and safety.

The final two arms were designed to assess the impact of (1) administering the film sublingually two minutes after consuming a peanut butter sandwich and (2) swallowing the film whole immediately with water.

Part 3 study results demonstrated consistent Tmax of 12 minutes with sublingual administration of AQST-109 epinephrine oral film, after consuming a peanut butter sandwich.

Part 3 study results also showed an unexpectedly high level of gastrointestinal absorption after swallowing AQST-109 whole immediately with water.

Part 3 study also showed positive results with an unexpectedly high level of gastrointestinal absorption after swallowing AQST-109 whole immediately with water that was distinct from the sublingually absorbed profile.

In September 2022, we reported positive topline results from the EPIPHAST II trial for AQST-109.

The EPIPHAST II trial was designed to compare single doses of AQST-109 to EpiPen® 0.3mg and epinephrine 0.3mg intramuscular (IM) injection, as well as repeat doses of AQST-109 to repeat doses of epinephrine 0.3mg IM injection.

Results from the single dose administration showed AQST-109 achieved a significantly faster Tmax (12 minutes), compared to both EpiPen® (22.5 minutes) and epinephrine 0.3mg IM injection (45 minutes).

The EPIPHAST II trial was designed to compare single doses of AQST-109 to EpiPen 0.3mg and epinephrine IM 0.3mg, as well as repeat doses of AQST-109 to repeat doses of epinephrine IM 0.3mg.

Results from the single dose administration showed AQST-109 achieved a significantly faster Tmax (12 minutes), compared to both EpiPen (22.5 minutes) and epinephrine IM 0.3mg (45 minutes).

AQST-109 repeat dosing provided significantly higher drug plasma concentrations, with a Tmax of 8 minutes after administration, and extensive absorption was observed.

The mean maximum concentration (Cmax) of AQST-109 was 465 pg/mL after one dose and 2,958 pg/mL after two doses.

In comparison, the epi 0.3mg IM injection Cmax was 489 pg/mL after one dose and 911 pg/mL after two doses.

The mean Cmax of AQST-109 was 465 pg/mL after one dose and 2,958 pg/mL after two doses.

In comparison, the epinephrine IM 0.3mg Cmax was 489 pg/mL after one dose and 911 pg/mL after two doses.

The single dose of EpiPen resulted in a Cmax of 869 pg/mL.

Changes in systolic blood pressure and heart rate were similar after a single dose of AQST-109 when compared to a single dose of EpiPen.

This data, along with the data from the complete EPIPHAST study, will be the basis for our second End-of-Phase 2 (EoP2) meeting with the FDA.

We received a positive written feedback from the FDA after our initial EoP2 meeting request to discuss Chemistry, Manufacturing, and Controls (CMC) for AQST-109, which indicates that our approach to characterizing attributes of AQST-109 appears reasonable in the context of a potential future filing.

We plan to obtain guidance and or concurrence on specific questions relating to the clinical components of a potential AQST-109 filing during the EoP2 meeting.

At this meeting, we also anticipate receiving feedback on our EPIPHAST study data as well as the proposed clinical development plan for AQST-109.

This meeting has been granted by the FDA and is scheduled to occur prior to the end of 2022.

• AQST-108 – is a sublingual film formulation delivering systemic epinephrine that is also in development by Aquestive for the treatment of conditions other than anaphylaxis.

AQST-108 is composed of the prodrug dipivefrin which is enzymatically cleaved systemically into epinephrine after administration.

This data, along with the data from the completed EPIPHAST study, was the basis for our second End-of-Phase 2 (EoP2) meeting with the FDA.

We received a positive written feedback from the FDA after our initial EoP2 meeting request to discuss Chemistry, Manufacturing, and Controls (CMC) for AQST-109, which we believe indicates that our approach to characterizing attributes of AQST-109 appears reasonable in the context of a potential future filing.

In late December 2022, we received the final minutes from the EoP2 meeting with the FDA which provided clarity as to the FDA’s expectations regarding key program areas.

In March 2023, we obtained further clarification from the FDA indicating that the Company should submit its pivotal study protocol for review once it selects its reference listed drugs (RLDs).

We have completed additional studies to identify the appropriate autoinjector RLDs and continue to work on the optimal administration parameters.

We expect to submit a revised pivotal trial protocol to the FDA and commence the pivotal trial immediately following alignment with the FDA.

In April 2023, the FDA conditionally accepted the proprietary name Anaphylm™ (pronounced “ana-PHYLM”) as the proposed brand name for AQST-109.

Final approval of the Anaphylm™ proprietary name is conditioned on FDA approval of AQST-109.

• AQST-108 (sublingual film) – AQST-108 is composed of the prodrug dipivefrin which is enzymatically cleaved into epinephrine after administration.

Dipivefrin is currently available outside of the U.S.

for ophthalmic indications.

Based on top-line results of a recent second Phase 1 PK trial in 28 healthy adult volunteers, AQST-108 was generally well-tolerated, with systemic adverse events observed that are consistent with the known adverse events profile for epinephrine.

We are on track to request a pre-IND meeting for AQST-108 with the FDA in 2023 and plan to disclose the indication and path forward for development, once we have received feedback from the FDA.

A sublingual film formulation delivering systemic epinephrine has been developed by Aquestive for the treatment of conditions other than anaphylaxis.

Based on topline results of a recent second Phase 1 PK trial in 28 healthy adult volunteers conducted by Aquestive, AQST-108 was generally well-tolerated, with systemic adverse events observed

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• AQST-305 – is 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 in 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 in the treatment cycle.

AQST-305 has shown promising preclinical and human proof of concept results.

While we focus our efforts on AQST-109, and AQST-108, in the short-term, we have taken the necessary steps to prepare AQST-305 for additional research trials.

We initially focused the Company's proprietary product pipeline on certain difficult to treat CNS diseases, in the area of epilepsy, as follows:

• Sympazan ® – an oral soluble film formulation of clobazam used for the treatment of seizures associated with a rare, intractable form of epilepsy known as Lennox-Gastaut syndrome, or LGS, in patients aged two years of age or older, was approved by the FDA on November 1, 2018.

We commercially launched Sympazan in December 2018.

Sympazan was launched as a precursor and complement to our product candidate Libervant.

On October 26, 2022, the Company entered into a License Agreement with Otter Pharmaceuticals, LLC, a subsidiary of Assertio Holdings, Inc.

ASRT) (“Assertio”), a specialty pharmaceutical company offering differentiated products to patients, pursuant to which the Company granted an exclusive, worldwide license of its intellectual property for Sympazan to Assertio during the term of that agreement.

The Company is the exclusive sole manufacturer and supplier of Sympazan for Assertio.

that are consistent with the known adverse events profile for epinephrine.

Additional indications and delivery methods are currently being explored preclinically.

Upon completion of the preclinical work, we will request a pre-IND meeting for AQST-108 with the FDA and plan to disclose the indication and path forward for development, once we have received feedback from the FDA.

Proprietary CNS Product Candidate

We believe the application of our proprietary PharmFilm ® technology is particularly valuable and relevant to patients suffering from certain CNS disorders to meet patients' unmet medical needs and to solve patients' therapeutic problems.

We believe there remains a significant opportunity to develop additional products in the CNS market.

Additionally, our know-how and proprietary position have broad application beyond CNS, and we plan to explore the applications of PharmFilm in other disease areas.

Our most advanced asset within our proprietary CNS portfolio, focused in epilepsy, is as follows:

• Libervant™ – a buccally, or inside of the cheek, administered soluble film formulation of diazepam is our most advanced proprietary investigational product candidate.

Aquestive is developing Libervant as an alternative to device-dependent rescue therapies currently available to patients with refractory epilepsy, which are a rectal gel and nasal sprays.

Aquestive developed Libervant as an alternative to device-dependent rescue therapies currently available to patients with refractory epilepsy, which are a rectal gel and nasal sprays.

In August 2022, the FDA granted tentative approval for Libervant for the acute treatment of intermittent, stereotypic episodes of frequent seizure activity (i.e., seizure clusters, acute repetitive seizures) that are distinct from a patient’s usual seizure pattern in patients with epilepsy 12 years of age and older.

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Due to an existing FDA regulatory grant of orphan drug market exclusivity for Valtoco®, a diazepam nasal spray product sold by another company, Libervant is not yet eligible for marketing in the United States.

As a result of the FDA determination, the Agency cannot give final approval for Libervant until the expiration or inapplicability of the orphan drug market exclusivity, including, for example, by a reversal of the FDA’s decision and determination that Libervant is “clinically superior” to Valtoco.

As a result of the FDA determination, the FDA cannot give final approval for Libervant until the expiration or inapplicability of the orphan drug market exclusivity, including, for example, by a reversal of the FDA’s decision and determination that Libervant is “clinically superior” to Valtoco.

We are actively engaging the FDA regarding its determination.

We provided the FDA with additional clinical data in September 2022 and were informed that the FDA was reviewing this data.

Furthermore, in October 2022, we provided the FDA with a draft protocol for a head-to-head comparative PK study of Libervant versus the competing product.

We continue to believe that, particularly in the case of our submitted studies on the effect of food on the absorption of diazepam formulations, Libervant has the distinct advantage of being able to be readily administered when needed without regard to food, providing an important benefit to patients.

However, overcoming the orphan drug marketing exclusivity is difficult to establish, with limited precedent, and there can be no assurance that the FDA will agree with our position seeking to overcome such marketing exclusivity and approve Libervant for U.S.

market access.

Further, there can be no assurance that a competitor will not obtain other FDA marketing exclusivity that blocks U.S.

market access earlier than January 2027, the scheduled date for expiration of orphan drug market exclusivity, if this effort is not successful.

Further, there can be no assurance that a competitor will not obtain other FDA market exclusivity that blocks U.S.

market access for Libervant.

More details on this product approval are described in the “Competition” section of Item I.

Business of our 2021 Annual Report on Form 10-K.

In September 2022, we announced the grant of an exclusive license to Atnahs Pharma UK Limited ("Pharmanovia") for Pharmanovia to develop and commercialize Libervant (diazepam) Buccal Film for the treatment of prolonged or acute, convulsive seizures in all ages in certain countries of the European Union, the United Kingdom, Switzerland, Norway and the Middle East and North Africa ("Territory") during the term of the Pharmanovia Agreement.

More details on this product approval are described in the “Competition” section of this Item I.

Business of this Form 10-K.

In September 2022, we announced the grant of an exclusive license to Atnahs Pharma UK Limited ("Pharmanovia") for Pharmanovia to develop and commercialize Libervant for the treatment of prolonged or acute, convulsive seizures in all ages in certain countries of the European Union, the United Kingdom, Switzerland, Norway and the Middle East and North Africa (the "Territory") during the term of the Pharmanovia licensee.

Pharmanovia will lead the regulatory and commercialization activities for Libervant in the Territory and the Company will serve as the exclusive sole manufacturer and supplier of Libervant in the Territory.

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Our portfolio also includes other products and product candidates that we have licensed, or will seek to license, or for which we have licensed our intellectual property for commercialization.

In the years ended December 31, 2021 and 2020, our

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licensed product portfolio generated $42.3 million and $40.2 million in revenue to Aquestive, respectively.

In the years ended December 31, 2022 and 2021, our licensed product portfolio generated $40.0 million and $42.3 million in revenue to Aquestive, respectively.

Those products include:

• Suboxone ® – a sublingual film formulation of buprenorphine and naloxone, respectively an opioid agonist and antagonist, that is marketed in the United States and internationally for the treatment of opioid dependence.

Suboxone Sublingual Film was launched by our licensee, Indivior Inc., or Indivior, in 2010.

Suboxone was launched by our licensee, Indivior Inc., or Indivior, in 2010.

Suboxone is the most prescribed branded product in its category and was 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 have produced over 2.3 billion doses of Suboxone since its launch in 2010.

As of September 30, 2022, Suboxone branded products retain approximately 35% film market share as generic film-based products have penetrated this market.

We are the sole and exclusive supplier and manufacturer of Suboxone and have produced over 2.5 billion doses of Suboxone since its launch in 2010.

As of March 31, 2023, Suboxone branded products retain approximately 34% film market share as generic film-based products have penetrated this market.

We have filed patent infringement lawsuits against certain companies relating to generic film-based products for buprenorphine-naloxone.

More details regarding these lawsuits are described in the unaudited financial statements, Note 19.

Contingencies, contained herein.

• Exservan TM (riluzole) – an oral film formulation of riluzole, has been developed by the Company for the treatment of amyotrophic lateral sclerosis (ALS).

More details regarding these lawsuits are described in the unaudited financial statements, Note 19, Contingencies , contained herein.

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• Exservan ® – an oral film formulation of riluzole, has been developed by the Company for the treatment of amyotrophic lateral sclerosis (ALS).

We believe that Exservan can bring meaningful assistance to patients who are diagnosed with ALS and face difficulties swallowing traditional forms of medication.

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Zambon is 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.

During the fourth quarter of 2022, Aquestive received a $0.5 million milestone payment in connection with the receipt of regulatory approval for Exservan pursuant to the terms of the license agreement with Zambon.

In January 2021, we announced that the Company granted an exclusive license to Mitsubishi Tanabe Pharma Holdings America, Inc.

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Aquestive will serve as the exclusive sole manufacturer and supplier for Exservan in China.

Under the terms of license agreement with Haisco, as amended, Aquestive received a $7.0 million upfront cash payment in September 2022, and will receive regulatory milestone payments, double-digit royalties on net sales of Exservan in China, and earn manufacturing revenue upon the sale of Exservan in China.

• KYNMOBI ® – a sublingual film formulation of apomorphine, which is a dopamine agonist, was developed to treat episodic off-periods in Parkinson’s disease.

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Ondansetron is available as branded and generic products as intravenous injections, intramuscular injections, orally dissolving tablets, oral solution tablets, and film.

We licensed commercial rights for Zuplenz to Hypera in Brazil (which Hypera refers as to Ondif).

We licensed commercial rights for Zuplenz to Hypera in Brazil (which Hypera markets as Ondif).

Hypera received approval to market Zuplenz in Brazil from the Brazilian regulatory authority (ANVISA) on February 21, 2022.

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On August 31, 2020 Fortovia filed a Chapter 11 bankruptcy proceeding in the Bankruptcy Court for the Eastern District of North Carolina.

On January 29, 2021, the Bankruptcy Court approved an agreement pursuant to which the license and supply agreement between Aquestive and

On January 29, 2021, the Bankruptcy Court approved an agreement pursuant to which the license and supply agreement between Aquestive and Fortovia was terminated, and all rights to commercialize Zuplenz returned to us, effective January 30, 2021.

• Azstarys ™ – an FDA-approved, once-daily product for the treatment of attention deficit hyperactivity disorder (ADHD) in patients age six years or older.

AZSTARYS consists of serdexmethylphenidate, a prodrug of d-methylphenidate (d-MPH), co-formulated with immediate release d-MPH.

In March 2012, the Company entered into an agreement with Zevra Therapeutics, Inc.

(formerly KemPharm, Inc.) (“Zevra”), to terminate a Collaboration and License Agreement entered into by the Company and Zevra in April 2011.

Under this termination arrangement, the Company has the right to participate in any and all value that Zevra may derive from the commercialization or any other monetization of KP-415 and KP-484 compounds or their derivatives.

Among these monetization transactions are those related to any business combinations involving Zevra and collaborations, royalty arrangements, or other

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Fortovia was terminated, and all rights to commercialize Zuplenz returned to us, effective January 30, 2021.

While not expected to be a material product for us, we are seeking a new partner to commercialize Zuplenz in the United States.

• Azstarys TM – an FDA-approved, once-daily product for the treatment of attention deficit hyperactivity disorder (ADHD) in patients age six years or older.

AZSTARYS consists of serdexmethylphenidate, KemPharm’s prodrug of d-methylphenidate (d-MPH), co-formulated with immediate release d-MPH.

In March 2012, the Company entered into an agreement with KemPharm, Inc.

(“KemPharm”), to terminate a Collaboration and License Agreement entered into by the Company and KemPharm in April 2011.

Under this termination arrangement, the Company has the right to participate in any and all value that KemPharm may derive from the commercialization or any other monetization of KP-415 and KP-484 compounds or their derivatives.

Among these monetization transactions are those related to any business combinations involving KemPharm and collaborations, royalty arrangements, or other transactions from which KemPharm may realize value from these compounds.

During September 2019, the Company received $1,000 from its 10% share of milestone payments paid to KemPharm, under its licensing of KP-415 and KP-484 to a third party.

The Company also received payment of $500 under this arrangement, which was included in License and royalty revenues for the year ended December 31, 2020, in connection with the FDA's acceptance of a New Drug Application ("NDA") filing for KP-415.

On March 2, 2021, KemPharm announced FDA approval of KP 415 (AZTARYSTM) a new once-daily treatment for ADHD.

For the year ended December 31, 2021, the Company received payment of $2,000 under this arrangement, which was included in License and royalty revenues.

transactions from which Zevra may realize value from these compounds, including the product Azstarys.

On March 2, 2021, Zevra announced FDA approval of Azstarys for the treatment of ADHD.

• Libervant™ - a buccal film formulation of diazepam tentatively approved by the FDA for the acute treatment of intermittent, stereotypic episodes of frequent seizure activity ( i.e ., seizure clusters, acute repetitive seizures) that are distinct from a patient’s usual seizure pattern in patients with epilepsy 12 years of age and older.

The Company entered into a License and Supply Agreement with Atnahs Pharma UK Limited, a company registered in England and Wales ("Pharmanovia"), effective as of September 26, 2022 (the "Pharmanovia Agreement"), pursuant to which the Company granted Pharmanovia an exclusive license to certain of the Company's intellectual property to develop and commercialize Libervant for the treatment of prolonged or acute, convulsive seizures in all ages in certain countries of the European Union, the United Kingdom, Switzerland, Norway and the Middle East and North Africa (the "Territory") during the term of the Pharmanovia Agreement.

Under the Pharmanovia Agreement, Pharmanovia will lead the regulatory and commercialization activities for Libervant in the Territory and the Company will serve as the exclusive sole manufacturer and supplier of Libervant in the Territory.

Effective March 27, 2023, the Company amended the Pharmanovia Agreement to expand the scope of territory to cover the rest of the world, excluding the U.S., Canada and China.

Pharmanovia will be responsible for seeking appropriate regulatory approval in the expanded territories.

Pursuant to the terms of the Pharmanovia Amendment, the Company received a non-refundable payment of $2.0 million from Pharmanovia on execution of the Pharmanovia Amendment.

We commercially launched Sympazan in December 2018.

On October 26, 2022, the Company entered into a License Agreement with Otter Pharmaceuticals, LLC, a subsidiary of Assertio Holdings, Inc.

(“Assertio”), a specialty pharmaceutical company offering differentiated products to patients, pursuant to which the Company granted an exclusive, worldwide license of its intellectual property for Sympazan to Assertio during the term of that agreement for an upfront payment of $9.0 million.

Additionally, the Company subsequently received a $6.0 million milestone payment upon its receipt of a notice of allowance from the United States Patent and Trademark Office of its patent application U.S.

16/561,573, and payment of the related allowance fee.

The Company is the exclusive sole manufacturer and supplier of Sympazan for Assertio and will receive manufacturing fees from Assertio for the product through the expiration of such supply agreement.

Business Update Regarding COVID-19

The current COVID-19 pandemic has continued to present substantial health and economic risks, uncertainties and challenges to our business, the U.S.

and global economies and financial markets.

It is not currently possible to predict how long the pandemic will last or the time it will take for the economy to return to prior levels.

The extent to which COVID-19 impacts our business, operations, clinical trials, regulatory approval process, capital, financial and monetization markets, financial results and financial condition, and those of our suppliers, distributors, customers and other third parties necessary to our business including those involved in the regulatory approval process, will depend on future developments, which are highly uncertain and cannot be predicted with certainty or clarity, including the duration and continuing severity of the outbreak, resurgence of the outbreak, continued or additional government actions to contain COVID-19, timing or efficacy of any vaccine, and new information that will emerge concerning the short-term and long-term impact of COVID-19.

The extent to which COVID-19 impacts our business, operations, clinical trials, regulatory approval process, capital, financial and monetization markets, financial results and financial condition, and those of our suppliers, distributors, customers and other third parties necessary to our business including those involved in the regulatory approval process, will depend on future developments, which are highly uncertain and cannot be predicted with certainty or clarity, including the duration and continuing severity of the outbreak, resurgence of the outbreak, continued or additional government actions to contain COVID-19, efficacy of vaccines, and new information that will emerge concerning the short-term and long-term impact of COVID-19.

To date, we have been able to continue to manufacture and supply our products and currently do not anticipate any significant interruption in supply, although we continue to monitor this situation closely and there is no assurance that disruptions or delay will not occur as a result of COVID-19.

We are also monitoring demand for our products, which could be negatively impacted during the COVID-19 pandemic, as well as the financial condition of our customers and licensees, one of whom delayed remittance of certain payments due to us for development services provided but ultimately made such payments.

We are also monitoring demand for our products, which could be negatively impacted during the COVID-19 pandemic, as well as the financial condition of our customers and licensees.

Critical Accounting Policies and Use of Estimates

There have been no material changes to our critical accounting policies and use of estimates as previously disclosed in our 2022 Annual Report on Form 10-K.

On April 5, 2012, the Jumpstart Our Business Startups Act, or the JOBS Act, was enacted.

The JOBS Act provides that, among other things, an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards.

As an emerging growth company, we have elected to take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards and, as a result, we will comply with new or revised accounting standards not later than on the relevant dates on which adoption of such standards is required for emerging growth companies.

In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act, subject to certain conditions contained therein and, as a result, we are not required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, or (iii) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.

These exemptions will apply for a period of five

JOBS Act and Smaller Reporting Company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act ("JOBS Act"), and a “smaller reporting company”, as defined in Rule 405 under the Securities Act of 1933, as amended.

For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including exemption from compliance with the

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years following the consummation of our IPO or until we no longer meet the requirements of being an emerging growth company, whichever is earlier.

We are also a “smaller reporting company,” meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a “smaller reporting company,” and have either:

(i) a public float of less than $250 million or (ii) annual revenues of less than $100 million during the most recently completed fiscal year and (A) no public float or (B) a public float of less than $700 million.

As a “smaller reporting company,” we are subject to reduced disclosure obligations in our SEC filings compared to other issuers, including with respect to disclosure obligations regarding executive compensation in our periodic reports and proxy statements and certain reduced financial disclosures in our periodic reports.

auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation.

We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our IPO (which is December 31, 2023), (b) in which we have total annual gross revenues of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

We also qualify as a “smaller reporting company,” meaning we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a "smaller reporting company" which allows us to take advantage of many of the same exemptions from disclosure requirements including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and certain reduced financial disclosures in our periodic reports.

In addition, we are eligible to remain a smaller reporting company, for so long as we have a public float (based on our Common Stock equity) of less than $250 million measured as of the last business day of our most recently completed second fiscal quarter or a public float (based on our Common Stock equity) of less than $700 million as of such date and annual revenues of less than $100 million during the most recently completed fiscal year.

We cannot predict if investors will find our Common Stock less attractive because we may rely on these exemptions.

If some investors find our Common Stock less attractive s a result of these disclosure exemptions, there may be a less active trading market for our Common Stock and our stock price may be more volatile.

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies.

As an emerging growth company, we have elected to take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards and, as a result, we expect to comply with new or revised accounting standards not later than the relevant dates on which adoption of such standards is required for public emerging growth companies.

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Financial Operations Overview

Our revenues to date have been earned from our manufactured products made to order for licensees, as well as revenue from our self-developed, self-commercialized proprietary product, Sympazan®.

Our revenues to date have been earned from our manufactured products made to order for licensees, as well as revenue from our self-developed, recently outlicensed proprietary product, Sympazan.

Revenues are also earned from our product development services provided under contracts with customers, and from the licensing of our intellectual property.

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We manufacture based on receipt of purchase orders from our licensees, and our licensees have an obligation to accept these orders once quality assurance validates the quality of the manufactured product with agreed upon technical specifications.

Our licensees are responsible for all other aspects of commercialization of these products and we have no role, either direct or indirect, in our customers' commercialization activities, including those related to marketing, pricing, sales, payor access and regulatory operations.

With the exception of our license of Exservan, our licensees are responsible for all other aspects of commercialization of these products and we have no role, either direct or indirect, in our customers' commercialization activities, including those related to marketing, pricing, sales, payor access and regulatory operations.

With regard to our license of Exservan to MTHA and Haisco, we continue to hold the NDA for that product and, as such, are responsible for certain regulatory obligations relating to the sale of the product so long as we are the holder of the NDA for the product.

We expect future manufacture and supply revenue from licensed products to be based on volume demand for existing licensed products, and for manufacturing and supply rights under license and supply agreements for existing or new agreements for successful product development collaborations.

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We also earn royalties based on our licensees' sales of products that use our intellectual property that are marketed and sold in the countries where we have patented technology rights.

Royalty revenue related to the sale of future revenue is described further in this section under Critical Accounting Policies and Use of Estimates "Royalty Revenue and Interest Expense related to Sale of Future Revenue".

Royalty revenue related to the sale of future revenue is described further in this section under Critical Accounting Policies and Use of Estimates.

Proprietary Product Sales, Net

We commercialized our first proprietary CNS product, Sympazan, in December 2018.

Prior to our license of the product on October 26, 2022, we sold Sympazan through wholesalers for distribution through retail and specialty pharmacies.

Revenues from sales of proprietary product are recorded net of prompt payment discounts, wholesaler service fees, returns

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allowances, rebates and co-pay support redemptions, each of which are described in more detail below.

Revenues from sales of proprietary product are recorded net of prompt payment discounts, wholesaler service fees, returns allowances, rebates and co-pay support redemptions, each of which are described in more detail below.

These reserves are based on estimates of the amounts earned or to be claimed on the related sales.

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The adequacy of these provisions is reviewed on a quarterly basis.

In October 2022, we entered into a License Agreement (the "Assertio Agreement") with Otter Pharmaceuticals, LLC, a subsidiary of Assertio Holdings, Inc.

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that agreement.

We are the exclusive sole manufacturer and supplier of Sympazan for Assertio and began recognizing Manufacture and Supply Revenue subsequent to the Assertio Agreement.

Costs and Expenses

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development of our pipeline of proprietary product candidates;

and selling, general and administrative expenses, including launch commercialization efforts, intellectual property procurement, protection, prosecution and litigation expenses, corporate management functions, medical and clinical affairs administration;

and selling, general and administrative expenses, including pre-launch and post-launch commercialization efforts, intellectual property procurement, protection, prosecution and litigation expenses, corporate management functions, medical and clinical affairs administration;

public company costs, share-based compensation expenses and interest on our corporate borrowings.

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Manufacture and Supply Costs and Expenses

Manufacture and supply costs and expenses are primarily incurred from the manufacture of our commercialized licensed pharmaceutical products and for our self-developed, self-commercialized, approved proprietary product, including raw materials, direct labor and overhead costs principally in our Portage, Indiana facilities.

Manufacture and supply costs and expenses are primarily incurred from the manufacture of our commercialized licensed pharmaceutical products, including raw materials, direct labor and overhead costs principally in our Portage, Indiana facilities.

Our material costs include the costs of raw materials used in the production of our proprietary dissolving film and primary packaging materials.

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These costs can increase or decrease based on the amount of direct labor and materials required to produce a product and the allocation of fixed overhead, which is dependent on the levels of production.

We expect to continue to seek to rationalize and manage costs to reflect the declining production volumes of Suboxone.

We reduced the cost of manufacturing and supply in late 2019 and continued throughout 2020 and in 2021 in order to recognize the declining volume of Suboxone that will continue declining in 2022.

We expect our manufacture and supply costs and expenses to decrease over the next several years due to the decline in Suboxone volumes as the generics in that market continue to take market share, modestly offset by the commercialization of Sympazan launched in December 2018.

We may add licensee products to our production line which may need additional resources to manufacture.

We expect to continue to seek to rationalize and manage costs to prepare for a potential decline in Suboxone volumes as the generics in that market continue to take market share, offset by anticipated manufacturing revenue of our proprietary and licensed products including Sympazan, subsequent to the Assertio Agreement in October 2022.

In addition to our proprietary products coming online, we may add licensee products which may need additional resources to manufacture.

If such growth should occur for higher volume product opportunities such as Suboxone, we would incur increased costs associated with hiring additional personnel to support the increased manufacturing and supply costs arising from higher manufactured volumes from proprietary and licensed products.

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• costs associated with preclinical and clinical activities and regulatory operations .

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We expect our research and development expenses to continue to be significant over the next several years as we continue to develop existing product candidates such as AQST-109 and AQST-108 and others, and we identify and develop or acquire additional product candidates and technologies.

We expect our research and development expenses to continue to be significant over the next several years as we continue to develop existing product candidates such as AQST-109, AQST-108 and others, and we identify and develop or acquire additional product candidates and technologies.

We may hire or engage additional skilled colleagues or third parties to perform these activities, conduct clinical trials and ultimately seek regulatory approvals for any product candidate that successfully completes those clinical trials.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of salaries, benefits, share-based compensation, commercialization and marketing costs and other related costs for executive, finance, selling and operational personnel.

Other costs include facility and related costs not otherwise included in research and development expenses such as:

Selling, General and Administrative expenses consist primarily of salaries, benefits, share-based compensation, other related costs for executive, finance, and operational personnel.

Other costs include facility and related costs not otherwise

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included in research and development expenses such as:

professional fees for patent-related and other legal expenses, consulting, tax and accounting services;

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and general corporate expenses, inclusive of IT systems related costs.

A significant portion of selling, general and administrative expenses relates to the sale and marketing of Sympazan.

Sympazan was developed as the precursor and complement to the launch of Libervant, while pending approval for U.S.

market access by the FDA, as we believed that there was a very high degree of overlap and correlation between prescribers of Sympazan and the likely prescribers of an approved Libervant.

With the recent exclusive license of Sympazan to Assertio and the tentative approval of Libervant from the FDA withholding U.S.

market access, we expect to significantly reduce the costs of our commercial organization.

A significant portion of selling, general and administrative expenses relates to the sale and marketing of our proprietary product, Sympazan prior to its outlicensing under the Assertio Agreement in October 2022.

Subsequently, we have significantly reduced expenses related to the marketing and sales of Sympazan.

Until Libervant receives FDA approval for U.S.

market access, which cannot be assured, we do not plan to increase the size and resources dedicated to our commercial organization.

Our general and administrative costs include costs related to accounting, audit, legal regulatory, and tax-related services required to maintain compliance with exchange listing and SEC regulations, director and officer insurance costs, and investor and public relations costs.

We continue to incur 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.

We continue to manage business costs to appropriately reflect the declining state of Suboxone revenue, the out-license of Sympazan and other external factors affecting our business, including the continuing impact of the COVID-19 pandemic, as we continue to focus on our core business:

We will continue to manage business costs to prepare for a potential future decline in Suboxone revenue, the manufacturing costs related to Sympazan and other external factors affecting our business, as we continue to focus on our core business:

• Continuing the development of AQST-109 and AQST-108 along the 505(b)(2) pathway;

• Seeking to obtain the approval and subsequent launch of Libervant, subject to approval by the FDA for U.S.

market access, which cannot be assured.

• Continuing the development of AQST-109 and AQST-108 along the 505(b)(2) pathway.

Interest Expense

Interest expense consists of interest costs on our 12.5% Notes at a fixed rate of 12.5%, payable quarterly, as well as amortization of loan costs and the debt discount.

The 12.5% Notes are discussed in Note 13, 12.5 % Senior Secured Notes and Loans Payable, to our consolidated financial statements.

The 12.5% Notes are discussed in Note 13, 12.5% Senior Secured Notes and Loans Payable , to our condensed consolidated financial statements.

See Liquidity and Capital Resources below for further detail on our 12.5% Notes.

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On November 3, 2020, we entered into a Purchase and Sale Agreement (the "Monetization Agreement") with MAM Pangolin Royalty, LLC, an affiliate of Marathon Asset Management ("Marathon").

Under the terms of the Monetization Agreement, we sold all of our contractual rights to receive royalties and milestone payments due under the Sunovion License Agreement related to Sunovion's apomorphine product, KYNMOBI ® .

KYNMOBI, an apomorphine film therapy for the treatment of off episodes in Parkinson’s disease patients, received approval from the U.S.

FDA on May 21, 2020.

In exchange for the sale of these rights, we received an upfront payment of $40,000 and an additional payment of $10,000 through the achievement of the first milestone, and recorded these payments as a liability related to the sale of future revenue that will be amortized using the effective interest method over the life of the Monetization Agreement..

Although we sold all of our rights to receive royalties and milestones, as a result of our ongoing obligations related to the generation of these royalties, we will account for these royalties as revenue.

We have received an aggregate amount of $50,000 through September 30, 2022 under the Monetization Agreement.

Under the Monetization Agreement, additional aggregate contingent payments of up to $75,000 may be due to us upon the achievement of worldwide royalty and other commercial targets within a specified timeframe, which could result in total

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potential proceeds of $125,000.

Based on the current forecast by Sunovion of estimated KYNMOBI sales as of September 30, 2022, the Company may not receive any of the additional aggregate contingent payments under the Monetization agreement.

Under the terms of the Monetization Agreement, we sold to Marathon all of our contractual rights to receive royalties and milestone payments due under the Sunovion License Agreement related to Sunovion's apomorphine product, KYNMOBI, an apomorphine film therapy for the treatment of off episodes in Parkinson’s disease patients, which received approval from the FDA on May 21, 2020.

In exchange for the sale of these rights, we received an upfront payment from Marathon of $40,000 and an additional payment of $10,000 through the achievement of the first milestone.

We have received an aggregate amount of $50,000 through March 31, 2023 under the Monetization Agreement.

Based on the current public forecast by Sunovion of estimated KYNMOBI sales as of March 31, 2023, the Company likely will not receive any of the additional contingent payments under the Monetization Agreement.

During the second quarter of 2020, under the Sunovion License Agreement, we recognized $8,000 of royalty revenue and corresponding royalty receivable, related to the eight $1,000 annual minimum guaranteed royalty that is due.

In connection with the Monetization Agreement, we performed an assessment under ASC 860, Transfer and Servicing to determine whether the existing receivable was transferred to Marathon and concluded that the receivable was not transferred.

See Note 15 for further detail on the sale of future revenue.

See Note 15, Sale of Future Revenue, to our condensed consolidated financial statements for further detail.

Interest Income and other income (expense), net

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The interest-bearing account has no minimum amount to be maintained in the account nor any fixed length of period for which interest is earned.

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Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2022 and 2021

Comparison of the Three Months Ended March 31, 2023 and 2022

The following table sets forth our revenue data for the periods indicated.

Three Months Ended

September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands, except %) 2023 2022 $ %

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Total revenues $ 11,134 $ 12,270 $ (1,136) (9) %

For the three months ended September 30, 2022, total revenues decreased 14% or $1,824 compared to same period in the prior year.

The decrease was primarily due to lower revenue from co-development and research fees, as well as manufacture and supply, partially offset by an increase in proprietary product sales as well as license and royalty revenue.

For the nine months ended September 30, 2022, total revenues decreased 7% or $2,756 compared to same period in the prior year.

The decrease was primarily due to lower license and royalty revenue as well as co-development and research fees, partially offset by an increase in proprietary product sales revenue.

Manufacture and supply revenue decreased 19% or $2,036 for the three months ended September 30, 2022 compared to the same period in the prior year due to a decline in Suboxone manufacturing volume.

Manufacture and supply revenue remained flat for the nine months ended September 30, 2022 compared to the same period in the prior year.

License and royalty revenue increased 15% or $48 for the three months ended September 30, 2022 compared to the same period in the prior year.

This increase was primarily due to milestone revenue earned from Hypera.

License and royalty revenue decreased 71% or $3,566 for the nine months ended September 30, 2022 compared to the same period in the prior year.

The decrease was primarily due to the remaining deferred revenue of $2,098 from the terminated license and supply agreement with Fortovia Therapeutics Inc., as well as milestone revenue earned from KemPharm, Inc.

of $2,000 that were recognized in 2021 and did not reoccur in 2022.

Co-development and research fees decreased 24% or $128 for the three months ended September 30, 2022 compared to the same period in the prior year.

Co-development and research fees decreased 27% or $378 for the nine months ended September 30, 2022 compared to the same period in the prior year.

The decrease was driven by the timing of the achievement of research and development performance obligations and are expected to fluctuate from one reporting period to the next.

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Proprietary product sales, net increased 15% or $292 for the three months ended September 30, 2022 compared to the same period in the prior year.

Proprietary product sales, net increased 24% or 1,355 for the nine months ended September 30, 2022 compared to the same period in the prior year.

The increase was due to a steady rise in acceptance with the medical and patient communities over time which led to increased prescriptions for Sympazan.

For the three months ended March 31, 2023, total revenues decreased 9% or $1,136 compared to same period in the prior year.

The decrease was primarily due to the absence of proprietary product sales subsequent to the outlicensing agreement with Assertio in October 2022, offset by an increase in manufacturing supply revenue, and increases in license and royalty revenue as well as co-development and research fees.

Manufacture and supply revenue increased approximately 6% or $591 for the three months ended March 31, 2023 compared to the same period in the prior year.

This increase was due to increased Zuplenz manufacturing revenue (marketed as Ondif), Sympazan manufacturing revenue, partially offset by a decline in Suboxone manufacturing revenue.

License and royalty revenue increased 82% or $413 for the three months ended March 31, 2023 compared to the same period in the prior year.

This increase was primarily due to royalty revenue from Sympazan, Azstarys, and Exservan.

Co-development and research fees increased 12% or $50 for the three months ended March 31, 2023 compared to the same period in the prior year.

The increase was driven by the timing of the achievement of research and development performance obligations and are expected to fluctuate from one reporting period to the next.

Proprietary product sales, net was not recognized for the three months ended March 31, 2023 subsequent to the outlicensing agreement with Assertio in October 2022.

The Company recognized $2,190 of Proprietary product sales, for the same period in the prior year.

Expenses and Other:

Three Months Ended

September 30, Change Nine Months Ended September 30, Change

Three Months Ended March 31, Change

(In thousands, except %) 2023 2022 $ %

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Interest and other (income) expense, net (14,513) 3 (14,516) (100) %

Manufacture and supply costs and expenses increased 5% or $225 for the three months ended September 30, 2022 compared to the same period in the prior year.

Manufacture and supply costs and expenses increased 21% or $2,458 for the nine months ended September 30, 2022 compared to the same period in the prior year.

Loss on extinguishment of debt (353) — (353) (100) %

Manufacture and supply costs and expenses increased 12% or $523 for the three months ended March 31, 2023 compared to the same period in the prior year.

The increase was due to higher costs related to raw material and production.

Research and development expenses decreased 32% or $1,494 for the three months ended September 30, 2022 compared to the same period in the prior year.

Research and development expenses increased 4% or $556 for the nine months ended September 30, 2022 compared to the same period in the prior year.

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Research and development expenses decreased 26% or $1,226 for the three months ended March 31, 2023 compared to the same period in the prior year.

Research and development expenses are driven primarily by the timing of clinical trial and other product development activities associated with our pipeline.

Selling, general and administrative expenses increased 3% or $330 for the three months ended September 30, 2022 as compared to the same period in the prior year.

Selling, general and administrative expenses increased 7% or $2,573 for the nine months ended September 30, 2022 as compared to the same period in the prior year.

The increase was related to severance cost and litigation expense that arose through the course of business.

Interest expense decreased 41% or $1,138 for the three months ended September 30, 2022 compared to the same period in the prior year.

Interest expense decreased 41% or $3,403 for the nine months ended September 30, 2022 compared to the same period in the prior year.

The decrease was driven by a loss on the extinguishment of debt that was recognized in connection with the Fourth Supplemental Indenture to the 12.5 % Senior Secured Notes during the fourth quarter of 2021, which resulted in a lower net carrying value of debt in 2022.

Interest expense related to the sale of future revenue, net was $2,039 and 5,837 for the three and nine months ended September 30, 2022.

This amount is due to the accounting associated with the sale of future revenue related to KYNMOBI® sold to Marathon on November 3, 2020 and does not represent a monetary obligation or cash outflow at any time during the life of the transaction.

This current forecast resulted in a decrease to the interest expense related to the sale of future revenue.

See Note 15 for details.

Interest and other expense, net decreased $38 and increased $254 for the three and nine months ended September 30, 2022 compared to the same period in the prior year.

This was due to the fair value adjustment of the put option related to the 12.5% Notes.

See Note 13 for details.

Selling, general and administrative expenses decreased 43% or $5,566 for the three months ended March 31, 2023 as compared to the same period in the prior year.

The decrease reflects lower administrative costs in our commercial organization subsequent to the outlicensing of Sympazan in October 2022.

Interest expense decreased 11% or $183 for the three months ended March 31, 2023 compared to the same period in the prior year.

The decrease was driven by a lower principal amount of debt outstanding in 2023 subsequent to $9,086 of principal repayment in the first quarter of 2023.

Interest expense related to the sale of future revenue, net was $52 and $1,861 for the three months ended March 31, 2023 and March 31, 2022.

This amount is due to the accounting associated with the sale of future revenue related to KYNMOBI royalties sold to Marathon on November 3, 2020 and does not represent or imply a monetary obligation or cash output at any time during the life of the transaction.

Based on the current forecast by Sunovion of estimated KYNMOBI sales as of March 31, 2023, the Company likely will not receive any of the additional contingent payments under the Monetization Agreement.

As a result, the Company discontinued recording interest expense related to the sale of future revenue in the fourth quarter of 2022, which led to a decrease in 2023 .

See Note 15, Sale of Future Revenue for details.

Interest and other income, net was $14,513 for the three months ended March 31, 2023, as compared to interest and other expense, net of $3 for the three months ended March 31, 2022.

The change reflects other income of $6,000 related to the Amendment 11 to the Indivior Commercial Exploitation Agreement, and $8,500 patent litigation settlement from BioDelivery Sciences International, Inc.

recognized in the first quarter of 2023.

Liquidity and Capital Resources

Sources of Liquidity

The Company's on-going business, existing cash and equivalents, expense management activities as well as access to the equity capital markets, including through our ATM facility and under the Lincoln Park Purchase Agreement, potentially provide near term funding opportunities for the Company.

In addition, pursuant to the Fifth Supplemental Indenture, the holders

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of the 12.5% Notes extended to March 31, 2023 from June 30, 2022 our ability to access, at our option, up to $30,000 of 12.5% Notes re-openers under the Indenture, subject to the Company obtaining FDA approval of Libervant for U.S.

market access, and that the holders of 12.5% Notes have the right, but not the obligation, to purchase the $30,000 12.5% Notes re-openers.

We had $18,649 in cash and cash equivalents as of September 30, 2022.

However, the Company’s ability to fund the execution of our business objectives cannot be assured.

We had $26,882 in cash and cash equivalents as of March 31, 2023.

While the Company’s ability to execute its business objectives and achieve profitability over the longer term cannot be assured, the Company's on-going business, existing cash and equivalents, expense management activities, including, but not limited to potentially ceasing nearly all R&D activities, as well as access to the equity capital markets, including through the ATM facility and under the Lincoln Park Purchase Agreement, provide near term liquidity for the Company to fund its operating needs, including making the principal and interest payments on the 12.5% Notes, for at least the next twelve months as the Company continues to execute its business strategy.

On November 3, 2020, we entered into a Purchase and Sale Agreement (the "Monetization Agreement") with MAM Pangolin Royalty, LLC, an affiliate of Marathon Asset Management ("Marathon").

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In exchange for the sale of these rights, we received an upfront payment of $40,000 and an additional payment of $10,000 through the achievement of the first milestone.

We have received an aggregate amount of $50,000 through September 30, 2022 under the Monetization Agreement.

With the upfront proceeds of the monetization, we repaid $22,500 of the 12.5% Notes, and issued $4,000 of new 12.5% Notes in lieu of paying a prepayment premium on the early repayment of the 12.5% Notes, reducing the aggregate principal balance of 12.5% Notes outstanding to $51,500.

We have received an aggregate amount of $50,000 through March 31, 2023 under the Monetization Agreement.

Based on the current public forecast by Sunovion of estimated KYNMOBI sales as of March 31, 2023, the Company likely will not receive any of the additional aggregate contingent payments under the Monetization agreement.

With the upfront proceeds of the Marathon monetization, we repaid $22,500 of the 12.5% Notes, and issued $4,000 of new 12.5% Notes in lieu of paying a prepayment premium on the early repayment of the 12.5% Notes, reducing the aggregate principal balance of 12.5% Notes outstanding to $51,500.

In addition, as of the closing of this transaction, we issued to the holders of the 12.5% Notes warrants to purchase 143,000 shares of our Common Stock.

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The Fourth Supplemental Indenture did not change the maturity date of the Notes or the interest payment obligation due under the Notes.

In connection with the Fourth Supplemental Indenture, the Company entered into a Consent Fee Letter with the holders of the 12.5% Notes, pursuant to which the Company agreed to pay the holders of the 12.5% Notes an additional cash payment of $2,700 in the aggregate, payable in four quarterly payments beginning May 15, 2022.

On May 13, 2022, pursuant to the Fifth Supplemental Indenture, the holders of the 12.5% Notes further extended to March 31, 2023 from June 30, 2022, the Company's ability to access, at the Company's option, $30,000 of 12.5% Notes re-openers under the Indenture.

The Fifth Supplemental Indenture also provided that the Company will only be able to access the re-openers upon FDA approval of Libervant for U.S.

market access, and that the holders of 12.5% Notes have the right, but not the obligation, to purchase the re-openers.

If and to the extent that we access these re-openers, we will grant warrants to the holders of the 12.5% Notes to purchase up to 714,000 shares of the Company's Common Stock, with the strike price calculated based on the 30-day volume weighted average closing price of our Common Stock at the warrant grant date.

In connection with the Fourth Supplemental Indenture, the Company entered into a Consent Fee Letter

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with the holders of the 12.5% Notes, pursuant to which the Company agreed to pay the holders of the 12.5% Notes an additional cash payment of $2,700 in the aggregate, payable in four quarterly payments beginning May 15, 2022.

In 2019, we established an “At-The-Market” (ATM) facility and currently have a prospectus supplement registering the offer and sale of up to $35,000 of shares of Common Stock pursuant under the ATM facility.

Since inception to September 30, 2022, we sold 9,387,769 shares which generated net cash proceeds of approximately $38,850, net of commissions and other transaction costs of $2,001.

For the nine months ended September 30, 2022, we sold 1,906,350 shares which provided net proceeds of approximately $3,017, net of commissions and other transaction costs of $237.

This ATM facility has approximately $34,358 available at September 30, 2022.

Since inception to March 31, 2023, we sold 11,420,579 shares which generated net cash proceeds of approximately $40,656, net of commissions and other transaction costs of $2,130.

For the three months ended March 31, 2023, we sold 1,078,622 shares which provided net proceeds of approximately $916, net of commissions and other transaction costs of $77.

This ATM facility has approximately $32,422 available at March 31, 2023.

On April 12, 2022, we entered into the Lincoln Park Purchase Agreement, which provides that, upon the terms and subject to the conditions and limitations under the Lincoln Park Purchase Agreement, we have the right, but not the obligation, to sell to Lincoln Park up to $40,000 worth of shares of our Common Stock from time to time over the 36-month term of the Lincoln Park Purchase Agreement.

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Lincoln Park has covenanted under the Lincoln Park Purchase Agreement not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of our Common Stock.

For the nine months ended September 30, 2022, the Company sold 1,611,181 shares including commitment shares of Common Stock, which provided proceeds of approximately $1,987 in connection with the Lincoln Park Purchase Agreement.

In 2022, the Company sold 1,611,181 shares including commitment shares of Common Stock, which provided proceeds of approximately $1,987 in connection with the Lincoln Park Purchase Agreement.

On April 13, 2022, the Company filed a prospectus supplement in connection with this offering.

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The Company did not sell shares in connection with the Lincoln Park Purchase Agreement in the first quarter of 2023.

On June 6, 2022, we entered into securities purchase agreements ("Securities Purchase Agreements") with certain purchasers.

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We received net proceeds of approximately $7,796, after deducting placement agent fees and expenses and estimated offering expenses payable by us.

The pre-funded warrants were fully exercised and no Common Stock warrants issued pursuant to the Securities Purchase Agreements were exercised during the nine-months ended September 30, 2022.

Nine Months Ended September 30, 2022 and 2021

The pre-funded warrants were fully exercised in 2022 and no Common Stock warrants issued pursuant to the Securities Purchase Agreements were exercised during the three-months ended March 31, 2023.

As of the filing of the Annual Report on Form 10-K on March 31, 2023, we are subject to the SEC general instructions of Form S-3 known as the "baby shelf rules." Under these instructions, the amount of funds we can raise through primary public offerings of securities in any 12-month period using our registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of our Common Stock held by non-affiliates.

Therefore, we are limited in the amount of proceeds we are able to raise by selling shares of our Common Stock using our Form S-3, including under the ATM facility and the Lincoln Park Purchase Agreement, until such time as our public float exceeds $75 million.

Three Months Ended March 31, 2023 and 2022

(in thousands) 2023 2022

Net cash (used for) operating activities $ (18,235) $ (24,918)

Net cash provided by (used for) operating activities $ 8,816 $ (14,482)

Net cash (used for) investing activities (2) (104)

Net cash provided by financing activities 11,358 24,655

Net cash (used for) provided by financing activities (9,205) 1,298

Net decrease in cash and cash equivalents $ (391) $ (13,288)

Net Cash (Used for) Operating Activities

Net cash used for operating activities for the nine months ended September 30, 2022 decreased by $6,683 compared to the same period in the prior year.

The decrease was related to changes in operating assets and liabilities of $16,764, partially offset by a higher net loss of $464 and lower non-cash operating expenses of $9,617.

The change in operating assets and liabilities was primarily due to lower trade and other receivables and higher accounts payable due to timing, as well as increased deferred revenue related to License and Supply Agreements that we entered into in 2022.

The lower non-cash operating expenses were primarily due to less interest expense related to sale of future revenue ($4,774), less amortization of debt issuance costs ($3,447), and less share-based compensation expense ($1,461).

Net Cash Provided by (Used for) Operating Activities

Net cash provided by operating activities for the three months ended March 31, 2023 increased by $23,298 compared to the same period in the prior year.

The increase was related to a higher net income of $21,288 and a higher trade and other receivables of $5,461, partially offset by a decrease in interest expense related to the sale of future revenue of $1,836.

Net Cash (Used for) Investing Activities

Net cash used for investing activities for the nine months ended September 30, 2022 increased by $2,118 compared to the same period in the prior year.

The use of cash was related to capital expenditures and additions to intangible assets.

Net Cash Provided by Financing Activities

Net cash provided for financing activities for the nine months ended September 30, 2022 decreased by $13,297 compared to the same period in the prior year.

The decrease was primarily due to less share purchase proceeds under the ATM facility and premium paid to retire debt in 2022, partially offset by proceeds from issuance of common stocks and warrants under private equity offerings in 2022.

See Note 1 for detail.

Net cash used for investing activities for the three months ended March 31, 2023 decreased by $102 compared to the same period in the prior year.

The use of cash was related to capital expenditures.

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Net Cash (Used for) Provided by Financing Activities

Net cash used for financing activities for the three months ended March 31, 2023 increased by $10,503 compared to the same period in the prior year.

The decrease was primarily due to partial debt redemption and premium paid to retire debt, offset by ATM proceeds.

Funding Requirements

In addition, there is up to $30,000 available under the existing debt facility upon the full approval of Libervant by the FDA for U.S.

market access.

Due to to the FDA decision in August 2022, discussed above under "-Overview - Proprietary CNS Product Portfolio - Libervant," however, we must overcome the seven year orphan drug exclusivity granted by the FDA for the approved nasal spray product of a competitor in the U.S.

in order for Libervant to be granted U.S.

market access.

We can provide no assurance that any of these sources of funding, either individually or in combination, will be available on reasonable terms, if at all, or sufficient to fund our business objectives.

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• the effects of the COVID-19 pandemic on our operations, operations of our key suppliers and third-party clinical and other service providers, our colleagues and contractors and debt equity and other capital markets;

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• continued ability of our customers to pay, in a timely manner, for presently contracted and future anticipated orders for our manufactured goods, Suboxone, Sympazan and Exservan, including effects of generics and other competitive pressures as currently envisioned;

• continued ability of our customers to pay, in a timely manner, for presently contracted and future anticipated orders for our manufactured products, including effects of generics and other competitive pressures as currently envisioned;

• continued ability of our customers to pay, in a timely manner, for presently contracted and future anticipated orders for provided co-development and feasibility services, as well as regulatory support services for recently licensed products, such as Exservan;

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• continuing review and appropriate adjustment of our cost structure consistent with our anticipated revenues and funding;

• continued growth and market penetration of Sympazan within expected commercialization cost levels for this product, including anticipated patient and physician acceptance and our licensee's ability to obtain adequate price and payment support from government agencies and other private medical insurers;

• continued growth and market penetration of Sympazan, including anticipated patient and physician acceptance and our licensee's ability to obtain adequate price and payment support from government agencies and other private medical insurers;

• effective commercialization within anticipated cost levels and expected ramp-up timeframes of our product candidate Libervant, if approved for U.S.

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• our ability to access funding through the Company's ATM facility and under the Lincoln Park Purchase Agreement.

We expect to continue to manage business costs to appropriately reflect the anticipated general decline in Suboxone revenue, the proceeds from the KYNMOBI Monetization Agreement, and other external resources or factors affecting our business including, if available, any future potential issuances of additional 12.5% Notes under the Indenture, net proceeds or future equity financing, other future access to the capital markets or other potential available sources of liquidity, as well as the uncertainties associated with the coronavirus pandemic.

In doing so, we plan to continue to focus on the core drivers of value for our stockholders, including, more importantly, continued investments in our ongoing product development activities in support AQST-109, AQST-108 and our other pipeline products.

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We expect to continue to manage business costs to appropriately reflect the anticipated general decline in Suboxone revenue, the unlikelihood of any proceeds from the KYNMOBI Monetization Agreement, and other external resources or factors affecting our business including, if available, net proceeds or future equity financing, other future access to the capital markets or other potential available sources of liquidity, as well as the uncertainties associated with the coronavirus pandemic.

Until profitability is achieved, if at all, additional capital and/or other financing or funding will be required, which could be material, to further advance the development and commercialization of Libervant, AQST-109 and AQST-108, if approved by the FDA for U.S.

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Even as such, we expect to incur losses and negative cash flows for the foreseeable future and, therefore, we expect to be dependent upon external financing and funding to achieve our operating plan.

The sufficiency of our short-term and longer-term liquidity is directly impacted by our level of operating revenues and our ability to achieve our operating plan for revenues, regulatory approval in the time period planned for our late-stage proprietary products and our ability to monetize other royalty streams or other licensed rights within planned timeframes.

Although we may also be entitled to further potential milestones, royalty and other payments under our Indivior Supplemental Agreement, which are suspended and may only be reinstated if Indivior successfully adjudicates or settles the related patent infringement litigation, and under the Monetization Agreement, there can be no assurance when, or if, any such payments may be realized.

The sufficiency of our short-term and longer-term liquidity is directly impacted by our level of operating revenues and our ability to achieve our operating plan for revenues, regulatory approval in the time period planned for our product candidates and our ability to monetize other royalty streams or other licensed rights within planned timeframes, and there can be no assurance that we will be successful in any monetization transaction.

Our operating revenues have fluctuated in the past and can be expected to fluctuate in the future.

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12.5% Notes due through the debt maturity date, which is further discussed in Note 13.

A substantial portion of our current and past revenues has been dependent upon our licensing, manufacturing and sales with one customer, Indivior, which is expected to continue while we commercialize our own proprietary products and it could take significantly longer than planned to achieve anticipated levels of cash flows to help fund our operations and cash needs from sales of our proprietary products.

We expect to incur significant operating losses and negative operating cash flows for the foreseeable future, and we have a significant level of debt on which we have substantial ongoing debt repayment and debt service obligations and have principal repayments related to our 12.5% Notes due through the debt maturity date, which is further discussed in Note 13, 12.5% Senior Secured Notes and Loans Payable to our Condensed Consolidated Financial Statements.

A substantial portion of our current and past revenues has been dependent upon our licensing, manufacturing and sales with one customer, Indivior, which is expected to continue, and it could take significantly longer than planned to achieve anticipated levels of cash flows to help fund our operations and cash needs.

To the extent that we raise additional funds by issuance of equity securities, our stockholders would experience further dilution and the terms of these securities could include liquidation or other preferences (if and to the extent permitted under the Indenture) that would adversely affect our stockholders’ rights.

Our ability to secure additional equity financing could be significantly impacted by numerous factors including our operating performance and prospects, positive or negative developments in the regulatory approval process for our proprietary products, timely achievement of regulatory approval of our late-stage proprietary product, our existing level of debt which is secured by substantially all of our assets, restriction under the Indenture, and general financial market conditions, and there can be no assurance that we will continue to be successful in raising capital or that any such needed financing will be available, available on favorable or acceptable terms or at the times, or in the amounts needed, if at all.

market access, and there can be no assurance that we will receive such approval prior to the expiration in January 2027 of the orphan drug market exclusivity of the FDA approved nasal spray of a competitor, our existing level of debt which is secured by substantially all of our assets and associated debt repayment schedule, restriction under the Indenture, and general financial market conditions, and there can be no assurance that we will continue to be successful in raising capital or that any such needed financing will be available on favorable or acceptable terms, if at all.

Additionally, while the potential economic impact brought on by and the duration of the coronavirus pandemic is difficult to assess or predict, the significant impact of the coronavirus pandemic on the global financial markets, and on our own stock trading price, may reduce our ability to access additional capital, which would negatively impact our short-term and longer-term liquidity.

If adequate funds are not available for our short-term or longer-term liquidity needs and cash requirements as and when needed, we would be required to engage in expense management activities such as reducing staff, delaying, significantly scaling back, or even discontinuing some or all of our current or planned research and development programs and clinical and other product development activities, or reducing our planned commercialization efforts and otherwise significantly reducing our other spending and adjusting our operating plan, and we would need to seek to take other steps intended to improve our liquidity.

If adequate funds are not available for our short-term or longer-term liquidity needs and cash requirements as and when needed, we would be required to engage in expense management activities such as reducing staff, delaying, significantly scaling back, or even discontinuing some or all of our current or planned research and development programs and clinical and other product development activities, and otherwise significantly reducing our other spending and adjusting our operating plan, and we would need to seek to take other steps intended to improve our liquidity.

We also may be required to evaluate additional licensing opportunities, if any become available, of our proprietary product candidate programs that we currently plan to self-commercialize or explore other potential liquidity opportunities or other alternatives or options or strategic alternatives, such asset sales, although we cannot assure that any of these actions would be available or available on reasonable terms.

See also the risk factors below concerning the significant risks and uncertainties concerning our business, operations, financial results and capital resources associated with the impact of the global coronavirus pandemic.

Off-Balance Sheet Arrangements

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Quantitative and Qualitative Disclosures about Market Risk

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As a “smaller reporting company” as defined by Item 10 of Regulation S-K promulgated by the SEC under the U.S.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis