What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-06 compared with 2023-08-07 · 212 added, 178 removed, 352 unchanged (53% 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.

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

statements regarding the clinical trial timing and plans for Anaphylm, including the ability to address the concerns of the FDA provided in the End-of-Phase 2 (EOP2) meeting with the FDA;

the ability to receive FDA approval of Libervant for U.S.

market access and overcoming the orphan drug market exclusivity granted by the FDA to an FDA approved nasal spray product, which extends to January 2027;

the advancement and related timing of the Company’s NDA for Libervant for the treatment of epilepsy patients between two and five years of age;

statements regarding the potential benefits our products, including Anaphylm and Libervant, could bring to patients;

These forward-looking statements include, but are not limited to, statements regarding the advancement and related timing of our product candidate Anaphylm™ (epinephrine) Sublingual Film through clinical development and approval by the U.S.

Food and Drug Administration (FDA), including filing of a pivotal pharmacokinetic (PK) clinical trial and other supporting clinical studies for Anaphylm;

regarding the Company’s ability to provide sufficient data in its New Drug Application (NDA) submission for Anaphylm to address the recent comments of the FDA on the Company’s proposed pivotal PK study protocol and the FDA’s other concerns provided to the Company following the End-of-Phase 2 (EOP2) meeting with the FDA;

regarding the FDA’s approval and related timing of the filing of the NDA for Libervant ™ (diazepam) Buccal Film with 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 between two and five years of age;

regarding the approval for U.S.

market access of Libervant for these epilepsy patients aged 12 years and older, and overcoming the orphan drug market exclusivity of a competing FDA approved nasal spray product extending to January 2027 for this age group of the patient population;

regarding the potential benefits our products, including Anaphylm and Libervant, could bring to patients;

the potential outlicensing of our product pipeline in the U.S.

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the potential benefits our products could bring to patients;

the ability to refinance our debt, the ability to fund our business operations;

the ability to fund our business operations;

the 2023 financial outlook;

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risk of delays in regulatory advancement through the FDA of Anaphylm and Libervant and our other drug candidates, including the risk that the FDA may require additional clinical studies for FDA approval, or failure to receive approval at all, and there can be no assurance that the Company will be successful in obtaining such approval;

the risk of our ability to provide sufficient data in the NDA submission for Anaphylm to address the FDA’s concerns following the End-of-Phase 2 meeting with the FDA;

the risk that we may not overcome the seven year orphan drug exclusivity granted by the FDA for an FDA approved nasal spray product in order for Libervant to be granted U.S.

the risk of the Company’s ability to generate sufficient data in its NDA submission for FDA approval of Anaphylm;

risk of the Company’s failure to address the FDA’s comments on the Company’s pivotal PK study protocol and other FDA concerns following the EOP2 meeting with the FDA;

the risk that we may not overcome the seven year orphan drug exclusivity granted by the FDA for an FDA approved nasal spray product of another company in order for Libervant to be granted U.S.

market access prior to the expiration of such exclusivity in January 2027, and there can be no assurance that the Company will be successful in obtaining such approval;

risk of delays in or the failure to receive FDA approval of the NDA for Libervant for these epilepsy patients between two and five years of age, including the risk that the FDA may require additional clinical studies for approval of Libervant for this age group, and there can be no assurance that the Company will be successful in obtaining such FDA approval, including for U.S.

market access for this age group;

risk that a competing pediatric epilepsy product of Libervant will receive FDA approval prior to the Company’s receipt of FDA approval of the Libervant NDA for these epilepsy patients between two and five years of age;

risk relating to the unpredictability of the FDA’s decisions regarding orphan drug exclusivity;

risk of litigation brought by third parties relating to overcoming their orphan drug exclusivity of an FDA approved product should the FDA approve Libervant for U.S.

market access for any age group of epilepsy patients;

risk in obtaining market access for Libervant for other reasons;

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

risk of our ability to license our proprietary products in the U.S.

and abroad and risks that such product candidates will receive regulatory approval in those licensed territories;;risk that our manufacturing capabilities will be sufficient to support demand for existing and potential future licensed products in the U.S.

and abroad and risks that such product candidates will receive regulatory approval in those licensed territories;

risk of eroding market share for Suboxone® and risk as a sunsetting product, which accounts for the substantial part of our current operating revenue;

risk of the size and growth of our product markets;

risk that our manufacturing capabilities will be sufficient to support demand for existing and potential future licensed products in the U.S.

and other countries;

risk of our ability to enter into other commercial transactions with third parties that will support growth of the business and execution of key initiatives;

risk of our ability to enter

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into other commercial transactions with third parties that will support growth of the business and execution of key initiatives;

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

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

our ability to refinance our current debt on acceptable terms or at all;

our ability to manage our costs and expenses;

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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 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 related to government and civil claims against Indivior Inc.

for which we license, manufacture and sell Suboxone ® ;

risks related to the outsourcing of certain 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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risks from the COVID or other pandemics;

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

uncertainties related to general economic, political (including acts of war and terrorism), business, industry, regulatory, financial 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 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").

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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.

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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", "Aquestive", or the "Company") is a pharmaceutical company advancing medicines to bring meaningful improvement to patients' lives through innovative science and delivery technologies.

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

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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.

We manufacture licensed products at our facilities and anticipate that our current manufacturing capacity is sufficient for commercial quantities of our licensed 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").

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The active programs in our complex molecule pipeline portfolio are:

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• Anaphylm™ (epinephrine sublingual film) – the first and only non-device based, orally delivered epinephrine product candidate that has shown clinical results comparable to auto-injectors (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.

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 their caregivers to inject epinephrine into the patient's thigh 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.

However, Anaphylm would, if approved by the FDA, allow a patient to simply place a dissolvable strip, approximately the size and weight of a postage stamp, under the tongue, providing an appropriate medication where it is needed, when it is needed and, in a form, preferred by patients.

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

Final approval of the Anaphylm proprietary name is conditioned on FDA approval of Anaphylm, if any.

We completed a first-in-human Phase 1 clinical trial for Anaphylm in Canada.

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

On February 25, 2022, we reported positive topline data from Part 1 of our crossover study of Anaphylm, 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 Anaphylm oral film compared to epinephrine IM.

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

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

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

The EPIPHAST study was also conducted in Canada.

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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 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 Anaphylm.

Under Part I of 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 Anaphylm.

The findings show that these two configurations of the selected Anaphylm 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 auto-injectors.

In addition, dosing with Anaphylm resulted in changes in blood pressure and heart rate that were comparable to epinephrine auto-injectors.

The EPIPHAST trial indicated that treatment was well tolerated, with no serious adverse events, significant medical events, or treatment-related severe adverse events reported.

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

The FDA confirmed that the 505(b)(2) approval pathway is acceptable

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for the development of Anaphylm.

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

The Part I EPIPHAST study indicated that treatment was well tolerated, with no serious adverse events, significant medical events, or treatment-related severe adverse events reported.

In April 2022, we reported positive topline results from Part 2 of the EPIPHAST study for Anaphylm.

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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 Anaphylm when compared to a single dose of EpiPen.

Changes in systolic blood pressure and heart rate were similar after a single dose of Anaphylm when compared to a

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single dose of EpiPen.

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.

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We have completed additional studies to identify the appropriate auto-injector 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 May 2023, we reported positive results from the latest clinical studies evaluating pharmacokinetic and pharmacodynamic performance of Anaphylm.

In May 2023, we reported positive results from the latest clinical studies evaluating PK and PD performance of Anaphylm.

The time to maximum blood concentration (median Tmax) for Anaphylm was 10 minutes with a range of 5-20 minutes.

Early drug exposure at 10 minutes for Anaphylm was similar to epinephrine auto-injector and over 4 times higher than epinephrine manual injector.

Pharmacodynamic (PD) effects were observed as early as 2 minutes for both Anaphylm and the auto-injectors.

The company continues to expect to submit the protocol for the pivotal study to the FDA in third quarter 2023.

Early drug exposure at 10 minutes for Anaphylm was similar to epinephrine manual injection and over 4 times higher than epinephrine manual injector.

PD effects were observed as early as 2 minutes for both Anaphylm and the auto-injectors.

On July 27, 2023 we released topline data from the latest clinical crossover pilot trial, Study AQ109103 (the “103 study”), for Anaphylm.

This crossover clinical trial in healthy human subjects was designed with the finalized dosing instructions expected for use in the Company’s upcoming pivotal clinical trial.

The 103 study demonstrated that Anaphylm, using the expected finalized dosing administration instructions, delivers epinephrine systemically as effectively as either commercially available autoinjectors or the manual intramuscular (IM) injection.

Administration of Anaphylm 12mg resulted in a geometric mean maximum epinephrine concentration (Cmax) of 457 pg/mL and a median time to maximum concentration (Tmax) of 15 minutes after administration.

The partial Area Under the Curve measurement, or pAUC, was bracketed between previously generated manual 0.3mg IM injection and epinephrine 0.3mg autoinjector data at all time points between 10 and 60 minutes, post-dosing.

Importantly, Anaphylm 12mg met the standards of bracketing in the 103 study for all the critical parameters that the Company anticipates measuring in the pivotal PK study, including Cmax and pAUC during the critical early time periods, while remaining similar to autoinjectors for Tmax.

The 103 study also included crossover arms of Anaphylm 12mg with alternate dosing instructions as well as Anaphylm 14mg with the finalized dosing instructions.

In all cases in the 103 study, the product was considered safe and well-tolerated with no serious adverse events.

The Company recently received comments from the FDA on its pivotal Phase 3 PK clinical study protocol for Anaphylm submitted by the Company.

In its comments, the FDA indicated that the Company’s proposed endpoints, sample size, and statistical analysis are reasonable.

As anticipated, the FDA also reminded the Company that PK sustainability post-dosing (30 – 60 minutes) is an important factor and recommended using repeat-dose data to support PK sustainability.

The Company has incorporated the FDA’s feedback into its upcoming studies and remains on track to start the pivotal PK study in Q4 2023.

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

Final approval of the Anaphylm proprietary name is conditioned on FDA approval of Anaphylm, if any.

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

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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 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.

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

Additional indications and delivery methods are currently being explored under our AQST-108 epinephrine prodrug platform, which we have branded as Adrenaverse.

The Company has completed an initial formulation of a topical product using the Adrenaverse platform and plans on testing this formulation in humans in the coming months.

Based on preclinical data, the Company has seen rapid absorption of epinephrine across porcine tissue.

Although epinephrine is a vasoconstrictor and does not penetrate well through the skin, the Company believes that the Adrenaverse platform may allow for topical absorption, thereby creating the potential treatment for a variety of dermatological condition.

Upon completion of the preclinical and feasibility work relating to this program, the Company expects to request a pre-IND meeting for Adrenaverse with the FDA and plans to disclose the indication and path forward for development, once we have received feedback from the FDA.

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Proprietary CNS Product Candidate

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

Additionally, our know-how

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

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:

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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.

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.

The FDA has concluded that Libervant has met all required quality, safety, and efficacy standards for approval.

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

Due to an existing FDA regulatory grant of orphan drug market exclusivity for Valtoco®, a diazepam nasal spray product sold by another company for use in patients 12 years of age and older, the FDA has determined that Libervant is not yet eligible for marketing in the United States.

As a result of this 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 continue to engage with the FDA regarding its determination.

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 determination 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 market exclusivity and approve Libervant for U.S.

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

market access earlier than January 2027, the scheduled date for expiration of orphan drug market exclusivity.

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

market access for Libervant.

See “Licensed Commercial Products and Product Candidates – Libervant” for a discussion of the licensing arrangement for this product candidate.

In June 2023, we filed a New Drug Application ("NDA") for Libervant for the acute and intermittent, stereotypic, episodes of frequent seizure activity in patients between two and five years of age.

There is no assurance, that if approved by the FDA, Libervant will overcome the orphan drug exclusivity granted by the FDA for Valtoco for use in patients 12 years of age and older.

Licensed Commercial Products and Product Candidates

In June 2023, we filed a New Drug Application ("NDA") 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 between two and five years of age.

The FDA accepted the filing for review and assigned a PDUFA goal date of April 28, 2024.

Diastat® (diazepam) rectal gel is the only treatment currently available to this age group of patients for this indication.

There is no assurance that, if the pediatric NDA for Libervant is approved by the FDA, it will overcome the orphan drug exclusivity granted by the FDA for Valtoco and be granted U.S.

market access for this patient age group.

See “Licensed Commercial Products and Product Candidates and Other Products – Libervant” for a discussion of the licensing arrangement for this product candidate.

Licensed Commercial Products, Product Candidates and Other Products

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.

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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 June 30, 2023, Suboxone branded products retain approximately 34% film market share as generic film-based products have penetrated this market.

As of September 30, 2023, Suboxone branded products retain approximately 31% 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.

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Zambon is a multinational pharmaceutical company with a focus on the CNS therapeutic area.

Under the terms of the license agreement with Zambon, an upfront payment was paid to Aquestive for the development and commercialization rights of Exservan in the EU, and Aquestive will be paid development and sales milestone payments and low double-digit royalties on net sales of the product in the EU.

Zambon 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.

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payments and low double-digit royalties on net sales of the product in the EU.

Zambon is responsible for the regulatory approval and marketing of Exservan in the countries where Zambon seeks to market the product, and Aquestive is responsible for the development and manufacture of the product.

During the second quarter of 2023, Aquestive received a $0.5 million milestone payment in connection with the first commercial sale in the first country in the licensed territory for Exservan pursuant to the terms of the license agreement with Zambon.

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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.

Under the terms of license agreement with Haisco, as amended, Aquestive received a $7.0 million upfront 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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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.

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The Company received $3.5 million upon agreement execution.

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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.

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• 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.

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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.

Chief Medical Officer Appointment

Aquestive named Carl N.

as Chief Medical Officer effective June 26, 2023.

Kraus joins the Aquestive team from Aceragen, where he served as Chief Medical Officer from October 2021 to April 2023.

Prior to that, Dr.

Kraus founded and served as the Chief Executive Officer of Arrevus from January 2012 until the sale of Arrevus to Aceragen in October 2021.

He previously served as Chief Medical officer of Ology Bioservices (formerly Nanotherapeutics), which was acquired by National Resilience.

Prior to joining the pharmaceutical industry, Dr.

Kraus was a Medical Officer for the Center of Drug and Research (CDER).

Earlier in his career, he held inpatient and outpatient clinical appointments.

Kraus earned his medical degree from Washington School of Medicine in St.

Louis, MO, with post-doctorate training in Internal Medicine (University of Chicago) and Infectious Diseases (National Institutes of Health).

Business Update Regarding COVID-19

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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.

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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.

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.

If some investors find our Common Stock less

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attractive as 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.

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We include these estimated amounts in connection with the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized for such transaction will not occur, or when the uncertainty associated with the variable consideration is resolved.

The calculation of some of these

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items requires management to make estimates based on sales data, historical return data, contracts and other related information that may become known in the future.

The calculation of some of these items requires management to make estimates based on sales data, historical return data, contracts and other related information that may become known in the future.

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.

In October 2022, we entered into a License Agreement (the “Assertio Agreement”) with Otter Pharmaceuticals, LLC, a subsidiary of Assertio

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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.

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Overhead costs principally consist of indirect payroll, facilities rent, utilities and depreciation for leasehold improvements and production machinery and equipment.

These costs can increase, or decrease, based on the costs of materials, purchased at market pricing, and the amount of direct labor required to produce a product, along with the allocation of fixed overhead, which is dependent on production volume.

These costs can increase, or decrease, based on the costs of materials, purchased at market prices, and the amount of direct labor required to produce a product, along with the allocation of fixed overhead, which is dependent on production volume.

Our manufacture and supply costs and expenses are impacted by our customers’ supply requirements.

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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.

If such growth should occur for higher volume product opportunities, 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.

Research and Development Expenses

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

professional fees for patent-related and other legal expenses,

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consulting, tax and accounting services;

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

market research;

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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 our proprietary product, Sympazan prior to its outlicensing under the Assertio Agreement in October 2022.

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A significant portion of selling, general and administrative expenses related 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.

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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 June 30, 2023 under the Monetization Agreement.

We have received an aggregate amount of $50,000 through September 30, 2023 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 potential proceeds of $125,000.

Based on the current public forecast by Sunovion of estimated KYNMOBI sales as of June 30, 2023, the Company likely will not receive any of the additional contingent payments under the Monetization Agreement.

Based on the current public forecast by Sunovion of estimated KYNMOBI sales as of September 30, 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.

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.

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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 Six Months Ended June 30, 2023 and 2022

Comparison of the Three and Nine Months Ended September 30, 2023 and 2022

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

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Three Months Ended

Six Months Ended June 30,

September 30,

Nine Months Ended September 30,

(In thousands, except %) 2023 2022 $ % 2023 2022 $ %

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Total revenues $ 13,002 $ 11,463 $ 1,539 13 % $ 37,377 $ 36,998 $ 379 1 %

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

For the three months ended June 30, 2023, total revenues were consistent with the same period in the prior year.

Increases in manufacturing supply revenue and increases in license and royalty revenue essentially offset the absence of proprietary product sales subsequent to the outlicensing agreement with Assertio in October 2022.

Manufacture and supply revenue increased approximately 18% or $1,762 for the three months ended June 30, 2023 compared to the same period in the prior year.

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

License and royalty revenue increased 168% or $929 for the three months ended June 30, 2023 compared to the same period in the prior year.

This increase was primarily due to higher milestone license revenue for Azstarys and higher royalty and license revenues from Suboxone and Sympazan.

Co-development and research fees decreased 49% or $117 for the three months ended June 30, 2023 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.

There were no proprietary product sales, net for the three months ended June 30, 2023 subsequent to the outlicensing agreement with Assertio in October 2022.

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

For the three months ended September 30, 2023, total revenues increased 13% compared to the same period in the prior year.

Increases in manufacture and supply revenue, license and royalty revenue, and co-development and research fees more than offset the absence of proprietary product sales during the 2023 period as a consequence of the outlicensing agreement with Assertio in October 2022.

Manufacture and supply revenue increased approximately 36% or $2,998 for the three months ended September 30, 2023 compared to the same period in the prior year.

This increase was due to higher Suboxone and Sympazan manufacturing revenue which was offset by lower Zuplenz (marketed as Ondif) revenues.

License and royalty revenue increased 193% or $727 for the three months ended September 30, 2023 compared to the same period in the prior year.

This increase was primarily due to higher royalty and license revenues from Suboxone and Sympazan.

Co-development and research fees increased 24% or $95 for the three months ended September 30, 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 which are expected to fluctuate from among reporting periods.

There were no proprietary product sales, net for the three months ended September 30, 2023 subsequent to the outlicensing agreement with Assertio in October 2022.

The Company recognized $2,281 of proprietary product sales for the same period in the prior year.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

For the six months ended June 30, 2023, total revenues decreased 5% or $1,160 compared with the 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 increases in manufacturing supply revenue and increases in license and royalty revenue.

Manufacture and supply revenue increased approximately 12% or $2,353 for the six months ended June 30, 2023 compared to the same period in the prior year.

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

License and royalty revenue increased 127% or $1,342 for the six months ended June 30, 2023 compared to the same period in the prior year.

This increase was due to higher milestone license revenue for Azstarys and higher royalty and license revenues from Suboxone and Sympazan.

Co-development and research fees decreased 10% or $67 for the six months ended June 30, 2023 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.

Proprietary product sales, net was not recognized for the six months ended June 30, 2023 subsequent to the outlicensing agreement with Assertio in October 2022.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

For the nine months ended September 30, 2023, total revenues increased 1% or $379 compared to the same period in the prior year.

The increase was primarily due to higher manufacture and supply revenue, license and royalty revenue, offset by the absence of proprietary product sales during the 2023 period as a consequence of the outlicensing agreement with Assertio in October 2022.

Manufacture and supply revenue increased approximately 19% or $5,351 for the nine months ended September 30, 2023 compared to the same period in the prior year.

This increase was mostly due to increased Zuplenz (marketed as Ondif) and Sympazan manufacturing revenue as well as higher Suboxone revenues.

License and royalty revenue increased 144% or $2,069 for the nine months ended September 30, 2023 compared to the same period in the prior year.

This increase was due to higher milestone license revenue for Azstarys and higher royalty and license revenues from Sympazan and Suboxone.

Co-development and research fees increased 3% or $28 for the nine months ended September 30, 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 which are expected to fluctuate among reporting periods.

Proprietary product sales, net was not recognized for the nine months ended September 30, 2023 subsequent to the outlicensing agreement for Sympazan with Assertio in October 2022.

The Company recognized $7,069 of proprietary product sales for the same period in the prior year.

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Expenses and Other:

June 30, Change Six Months

June 30, Change

September 30, Change Nine Months

September 30, Change

(In thousands, except %) 2023 2022 $ % 2023 2022 $ %

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Loss on extinguishment of debt — — — N/A (353) — (353) — %

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Manufacture and supply costs and expenses increased 26% or $1,375 for the three months ended June 30, 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 33% or $1,725 for the three months ended June 30, 2023 compared to the same period in the prior year.

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

Manufacture and supply costs and expenses increased 4% or $173 for the three months ended September 30, 2023 compared to the same period in the prior year.

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

Research and development expenses decreased 1% or $36 for the three months ended September 30, 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 decreased 53% or $8,227 for the three months ended June 30, 2023 as compared with the same period in the prior year.

The decrease primarily reflects lower selling costs of $2,458 related due to the reduction in our commercial organization subsequent to the outlicensing of Sympazan in October 2022, the absence of severance costs of $2,336 due to the departure of our former CEO, lower stock compensation expense of $1,521, lower legal costs and other administrative costs in the three months ended June 30, 2023 as compared with the three months ended June 30, 2022.

Interest expense decreased 16% or $262 for the three months ended June 30, 2023 compared to the same period in the prior year.

The decrease was driven mostly by a lower principal amount of debt outstanding in 2023 subsequent to the cumulative principal payments of $12,543 made in the first and second quarters of 2023.

Interest expense related to the sale of future revenue, net was $55 and $1,937 for the three months ended June 30, 2023 and June 30, 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 June 30, 2023, the Company likely will not receive any of the additional contingent payments under the Monetization Agreement.

Selling, general and administrative expenses decreased 41% or $5,074 for the three months ended September 30, 2023 as compared to the same period in the prior year.

The decrease primarily reflects lower selling costs of $2,246 due to the reduction in our commercial organization subsequent to the outlicensing of Sympazan in October 2022, lower legal and other administrative costs in the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.

Interest expense decreased 24% or $393 for the three months ended September 30, 2023 compared to the same period in the prior year.

The decrease was driven mostly by the lower principal amount of debt outstanding in the 2023 period subsequent to the cumulative principal payments of $12,548 made during of 2023.

Interest expense related to the sale of future revenue, net was $56 and $2,039 for the three months ended September 30, 2023 and September 30, 2022, respectively.

These amounts are due to the accounting associated with the sale of future revenue related to KYNMOBI royalties sold to Marathon on November 3, 2020 and do not represent or imply a monetary obligation or cash outflow at any time during the life of the transaction.

Based on the current forecast by Sunovion of estimated KYNMOBI sales as of September 30, 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) expense, net was $(129) for the three months ended June 30, 2023, as compared to interest and other (income) expense, net of $(32) for the three months ended June 30, 2022.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Manufacture and supply costs and expenses increased 20% or $1,898 for the six months ended June 30, 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 30% or $2,951 for the six months ended June 30, 2023 compared to the same period in the prior year.

Interest and other (income) expense, net was $(1,514) for the three months ended September 30, 2023, as compared to interest and other (income) expense, net of $(5) compared to the three months ended September 30, 2022.

The increase was primarily related to the receipt of the Employee Retention Tax Credit (“ERTC”) refund in the three months ended September 30, 2023.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Manufacture and supply costs and expenses increased 15% or $2,071 for the nine months ended September 30, 2023 compared to the same period in the prior year.

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

Research and development expenses decreased 23% or $2,987 for the nine months ended September 30, 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 decreased 48% or $13,793 for the six months ended June 30, 2023 as compared with the same period in the prior year.

The decrease primarily reflects lower selling costs of $4,861 related due to the reduction in our commercial organization subsequent to the outlicensing of Sympazan in October 2022, the absence of severance costs of $2,336 due to the departure of our former CEO, lower stock compensation expense of $1,986, lower legal costs and other administrative costs in the six months ended June 30, 2023 as compared with the six months ended June 30, 2022.

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Interest expense decreased 14% or $445 for the six months ended June 30, 2023 compared to the same period in the prior year.

Selling, general and administrative expenses decreased 46% or $18,867 for the nine months ended September 30, 2023 as compared to the same period in the prior year.

The decrease primarily reflects lower selling costs of $7,107 due to the reduction in our commercial organization subsequent to the outlicensing of Sympazan in October 2022, the absence of

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severance costs of $2,336 due to the departure of our former CEO, lower stock compensation expense of $1,770 and lower legal costs and other administrative costs in the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.

Interest expense decreased 17% or $838 for the nine months ended September 30, 2023 as compared to the same period in the prior year.

The decrease was driven mostly by a lower principal amount of debt outstanding in 2023 subsequent to the $12,548 of principal repayment in the first half of 2023.

Interest expense related to the sale of future revenue, net was $107 and $3,798 for the six months ended June 30, 2023 and June 30, 2022.

Interest expense related to the sale of future revenue, net was $163 and $5,837 for the nine months ended September 30, 2023 and September 30, 2022, respectively.

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) expense, net was $(14,642) for the six months ended June 30, 2023, as compared to interest and other (income) expense, net of $(29) for the six months ended June 30, 2022.

The change primarily 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.

Interest and other (income) expense, net was $(16,156) for the nine months ended September 30, 2023, as compared to interest and other (income) expense, net of $(34) for the nine months ended September 30, 2022.

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

recognized in the first quarter of 2023 in addition to the receipt of the ERTC.

Liquidity and Capital Resources

Sources of Liquidity

We had $22,436 in cash and cash equivalents as of June 30, 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, and potentially refinancing the 12.5% Notes, 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.

We had $24,917 in cash and cash equivalents as of September 30, 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, and refinancing the 12.5% Notes with the issuance of the Company's 13.5% Senior Secured Notes on November 1, 2023, provide near term liquidity for the Company to fund its operating needs, including making the interest payments on the 13.5% Notes, for at least the next twelve months as the Company continues to execute its business strategy.

On November 3, 2020, we entered into the Monetization Agreement with MAM Pangolin Royalty, LLC, an affiliate of 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 June 30, 2023 under the Monetization Agreement.

We have received an aggregate amount of $50,000 through September 30, 2023 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 timeframe, which could result in total potential proceeds of $125,000.

Based on the current public forecast by Sunovion of estimated KYNMOBI sales as of June 30, 2023, the Company likely will not receive any of the additional aggregate contingent payments under the Monetization agreement.

Based on the current public forecast by Sunovion of estimated KYNMOBI sales as of September 30, 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.

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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.

These payments have been made by September 30, 2023.

During the first quarter of 2023, the Company redeemed $5,647 of its outstanding 12.5% Notes.

The Company also paid $353 in prepayment premium as result of the early retirement of debt which was reflected as a loss on extinguishment of

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debt in our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) as of September 30, 2023.

The prepayments along with the scheduled principal repayments during 2023 reduced the net balance of the 12.5% Notes outstanding in the aggregate to $38,975 as of September 30, 2023.

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 (net of what has been sold pursuant thereto).

Since inception to June 30, 2023, we sold 13,402,516 shares which generated net cash proceeds of approximately $44,796, net of commissions and other transaction costs of $2,395.

For the six months ended June 30, 2023, we sold 3,060,559 shares which provided net proceeds of approximately $5,090, net of commissions and other transaction costs of $312.

This ATM facility has approximately $28,014 available at June 30, 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

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Lincoln Park Purchase Agreement.

Since inception to September 30, 2023, we sold 13,526,697 shares which generated net cash proceeds of approximately $44,979, net of commissions and other transaction costs of $2,476.

For the nine months ended September 30, 2023, we sold 3,184,740 shares which provided net proceeds of approximately $5,274, net of commissions and other transaction costs of $392.

This ATM facility has approximately $27,750 available at September 30, 2023.

The Lincoln Park Purchase Agreement contains an ownership limitation such that we will not issue, and Lincoln Park will not purchase, shares of Common Stock if it would result in their beneficial ownership exceeding 9.99%.

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In 2022, the Company sold 1,600,000 shares in addition to 236,491 commitment shares, which provided proceeds of approximately $1,987 in connection with the Lincoln Park Purchase Agreement .

The Company did not sell shares in connection with the Lincoln Park Purchase Agreement in the six months ended June 30, 2023.

The Company did not sell shares in connection with the Lincoln Park Purchase Agreement in the nine months ended September 30, 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 in 2022 and 3,689,452 Common Stock warrants issued pursuant to the Securities Purchase Agreements were exercised during the six-months ended June 30, 2023.

Six Months Ended June 30, 2023 and 2022

Six Months Ended

The pre-funded warrants were fully exercised in 2022.

On June 14, 2023, 3,689,452 Common Stock warrants issued pursuant to the Securities Purchase Agreements were exercised with proceeds of approximately $3,542.

On August 1, 2023, the Company entered into the Letter Agreement with the Exercising Holder of 5,000,000 of the remaining Common Stock Warrants.

Pursuant to the Letter Agreement, the Exercising Holder and the Company agreed that the Exercising Holder would exercise all of its Existing Warrants for shares of Common Stock underlying the Existing Warrants at $0.96 per share of Common Stock, the current exercise price of the Existing Warrants.

Under the Letter Agreement, in consideration of the Exercising Holder exercising the Existing Warrants, the Company issued to the Exercising Holder new warrants to purchase up to an aggregate of 2,750,000 shares of Common Stock (the “New Warrants”).

The New Warrants are exercisable after February 2, 2024, expire on February 2, 2029 and are issuance only for cash, subject to exception if the shares of Common Stock underlying the New Warrants are not registered in accordance with the terms of the Letter Agreement, in which case the New Warrants may be may also be exercised, in whole or in part, at such time by means of a "cashless exercise".

The New Warrants have an exercise price of $2.60 per share.

On August 2, 2023, 5,000,000 of the Existing Warrants were exercised pursuant to the Securities Purchase Agreement with the Exercising Holder, with the Company receiving gross proceeds therefrom of $4,800.

In total, 8,689,452 Common Stock warrants issued pursuant to the Securities Purchase Agreements with proceeds of approximately $8,342 were exercised during the nine months ended September 30, 2023.

Nine Months Ended September 30, 2023 and 2022

Nine Months Ended

September 30,

(in thousands) 2023 2022

Net cash provided by (used for) operating activities

Net cash used for by operating activities

$ (1,438) $ (18,235)

Net cash used for investing activities

Net cash (used for) provided by financing activities

(979) (2,498)

Net cash provided by financing activities

Net decrease in cash and cash equivalents (2,356) (9,375)

Net Cash Provided by (Used for) Operating Activities

Net cash provided by operating activities for the six months ended June 30, 2023 increased by $21,953 compared to the same period in the prior year.

The increase was primarily related to the net income increase of $31,798 and lower trade and other receivables of $2,221, partially offset by decreases in interest expense related to the sale of future revenue of $3,722, lower deferred revenue of $3,020 and lower stock compensation expense of $2,157 as compared with the six months ended June 30, 2022.

Net Cash (Used for) Operating Activities

Net cash used for operating activities for the nine months ended September 30, 2023 decreased by $16,797 compared to the same period in the prior year.

The decrease was primarily related to the change in net income of $42,299, partially offset

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by changes in deferred revenue of $8,070, interest expense related to the sale of future revenue of $5,683, trade and other receivables of $4,434, and in accounts payable of $2,710 as compared with the nine months ended September 30, 2022.

Net Cash (Used for) Investing Activities

Net cash used for investing activities for the six months ended June 30, 2023 increased by $47 compared to the same period in the prior year.

The use of cash was related to capital expenditures.

Net Cash (Used for) Provided by Financing Activities

Net cash used for financing activities for the six months ended June 30, 2023 increased by $16,414 compared to the same period in the prior year.

The increase was primarily due to partial debt redemption and premium paid to retire debt, scheduled principal repayments, and lower proceeds from issuance of common stocks and warrants, partially offset by higher ATM proceeds as compared with the six months ended June 30, 2022.

Net cash used for investing activities for the nine months ended September 30, 2023 decreased by $1,519 compared to the same period in the prior year.

The use of cash in 2023 was related to capital expenditures.

Net Cash Provided by Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2023 decreased by $11,297 compared to the same period in the prior year.

The decrease was primarily due to partial debt redemption and premium paid to retire debt, scheduled principal repayments, and lower proceeds from issuance of common stocks and warrants, partially offset by higher ATM proceeds as compared with the nine months ended September 30, 2022.

Funding Requirements

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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 products, including effects of generics and other competitive pressures as currently envisioned;

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• 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;

• access to debt or equity markets if, and at the time, needed for any necessary future funding or to refinancing our 12.5% Notes;

• access to debt or equity markets if, and at the time, needed for any necessary future funding;

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

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• a manageable level of costs for ongoing efforts to protect our intellectual property rights, including litigation costs in connection with seeking to enforce our rights concerning third parties' "at-risk" launch of generic products, and other litigation matters in which we are involved;

• continued compliance with all covenants under our 12.5% Notes, including our ability to comply with our debt service obligations as required thereunder;

• continued compliance with all covenants under our 13.5% Senior Secured Notes, including our ability to comply with our debt service obligations as required thereunder;

• absence of significant unforeseen cash requirements;

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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 market.

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.

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 Anaphylm and AQST-108.

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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 or any other 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, Anaphylm and AQST-108, if approved by the FDA for U.S.

market access, and to meet our other cash requirements, including debt service, specifically our 12.5% Notes.

We plan to conservatively manage our pre-launch spending as to both timing and level relating to Libervant in light of the tentative approval of Libervant by the FDA.

In this regard and in light of our out-license of Sympazan, we expect to significantly reduce our cost on commercialization in 2023 compared to 2022.

market access, and to meet our other cash requirements, including debt service, specifically our outstanding debt.

We plan to conservatively manage our pre-launch spending as to both timing and level relating to our product candidates in light of the current status of the FDA approval process for our product candidates.

In this regard and in light of our out-license of Sympazan, we significantly reduced our cost of commercialization in 2023 compared to 2022.

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, costs of development of our product candidates, 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.

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, costs of development of our product candidates, regulatory approval in the time period planned for our product candidates and our ability to monetize other royalty streams or other licensed rights or assets 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.

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.

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 13.5% Senior Secured Notes due through the debt maturity date, which is further discussed in Note 13, 12.5% Senior Secured Notes and Loans Payable and Note 20, Subsequent Events 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

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Indenture) that would adversely affect our stockholders’ rights.

Our ability to secure additional equity financing is and 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 by the FDA for Libervant for U.S.

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 granted by the FDA to an FDA approved nasal spray, 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.

Our ability to secure additional equity financing is and could be significantly impacted by numerous factors including our operating performance and prospects, positive or negative developments in the regulatory approval process for our products candidates, including for Anaphylm and regulatory approval by the FDA for Libervant for U.S.

market access, and there can be no assurance that we will receive such approvals and/or approval of Libervant for U.S.

market access prior to the expiration in January 2027 of the orphan drug market exclusivity granted by the FDA to an FDA approved nasal spray of another company, our existing level of debt which is secured by substantially all of our assets and associated debt repayment schedule, restriction under the Indenture relating to the 13.5% Senior Secured Notes, 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.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis