Aquestive Therapeutics (NASDAQ:AQST) Q4 2018 Earnings Call

0:00 Good morning, and welcome to the Equestria Therapeutics Year-End 2018 Conference Call. At this time, all participants are in listen-only mode. Later, there will be a question-and-answer session, and instructions will follow at that time. If anyone should require any assistance during today's call, please press star then zero in your touch-tone telephone. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Ms. Lauren Walrath, Head Corporate Marketing and Communications. You may begin. Thank you, Operator. Good morning and welcome to today's call to review a quest of therapeutics results for the year ended December 31st, 2018. On today's call, I am joined by Keith Kendall, Chief Executive Officer, Ken Marshall, Chief Commercial Officer, Dan Barber, Chief Strategy and Development Officer, and John Maxwell, Chief Financial Officer.

0:54 Keith will begin by providing an overview of business developments and context for what lies ahead, Next, Ken will discuss the progress of our commercial activities and the Simpazan launch. Dan Barber will provide us with a review of clinical and regulatory developments related to Equestive's proprietary pipeline. And finally, John will review the company's financial results for the fourth quarter and full year ended December 31, 2018, and discuss guidance for 2019. Following these remarks, we will open the call to your questions. Additional members of Equestive's management team, inclusive of Dr. Gary Flacco, Chief Medical Officer, and Lori Braender, General Counsel, will be on hand for the Q&A. In total, we expect today's call to last approximately 60 minutes.

1:45 As a reminder, our remarks today correspond with the press release we issued this morning. In addition, a recording and transcript of today's call will be made available on Equestive Therapeutics' website. within the investor relations section shortly following the conclusion of this call. During the call, the company will be making forward-looking statements. We remind you of the company's safe harbor language as outlined in today's press release, as well as the risks and uncertainties affecting the company, as described in the risk factor section included in the company's annual report on Form 10-K to be filed with the SEC on March 14, 2019. As with any pharmaceutical product candidate under development, there are significant risks with respect to the development, regulatory approval, and commercialization of new products. Given these uncertainties, you should not place undue reliance on these forward-looking statements, which speak only as of the date made.

2:49 All subsequent forward-looking statements attributable to Equestria Therapeutics or any person acting on behalf are expressly qualified in their entirety by this cautionary statement. The company assumes no obligation to update its forward-looking statements after the date of this conference call, whether as a result of new information, future events, or otherwise, except as required under applicable law. With that, I will now turn the line over to Keith. Thank you, Lauren. Thank you, everyone, for joining us today for Equestria Therapeutics' first year-end earnings call. Requested Therapeutics is a fully integrated specialty pharmaceutical company committed to developing and commercializing differentiated medicines.

3:35 We are the world leader in developing high-quality medications with oral film technology. We apply our proprietary farm film technology along with our expertise and know-how to solve therapeutic problems and make it possible for patients and caregivers to better interact with the medicines they need. The benefits of medications delivered with farm film technology include consistent and accurate dosing, improvements to absorption and tolerability, and ease of administration. With these advancements, we can provide a positive treatment experience and outcomes for patients and caregivers. This value proposition is the basis for our commercial portfolio and late-stage product pipeline, and it continues to guide our efforts to expand our pipeline with new assets that provide a meaningful value proposition to patients, their caregivers, and healthcare providers.

4:35 2018 was an important year in Equestria's transformation into a commercial-stage specialty pharmaceutical company. Over the course of the year, we built and deployed our commercial capabilities to support the launch of CiproZan. This is the company's first proprietary product to receive FDA approval and the beginning of an epilepsy franchise that offers great promise for patients. We held several productive meetings with the FDA in order to inform plans for advancing our late stage CNS assets, LibraVant and Exravan, into the regulatory review process. We advanced proof of concept studies for two candidates in our early stage pipeline. We also strengthened our management team with the addition of Lori Braender as our general counsel and Dr. Gary Slatko as our chief medical officer.

5:29 We also added Nancy Lurker, CEO of iPoint Pharmaceuticals, to our board of directors and named Sandy Costa as chairman. We executed on our plans for an IPO and are now listed on the NASDAQ exchange. In addition to these events, we continue to operate a licensed product business that generates significant revenue and cash to help fund our proprietary pipeline development and commercial initiatives. While the licensed products will continue to provide a strong financial base for our operations into the future, the advancements we're making across our proprietary portfolio are what will drive our future success and shareholder value. Following the approval and launch of Simpazan as planned in late 2018, the company sees a series of clinical, regulatory, and commercial milestones that will contribute to shareholder growth in 2019 and beyond.

6:27 To realize that value and continue the transformation of the company into an integrated and growing specialty pharmaceutical company, the company will focus in three primary areas in 2019. First, we're working to build and leverage our commercial capabilities to drive success of Simpazan and our epilepsy franchise. The Simpazan launch is off to a good start. We've built a team of over 50 highly experienced professionals in marketing, advocacy, managed markets, medical and sales roles, who are engaging with prescribers, healthcare providers, and health plans across all 50 states. While it's still too early in the launch to provide forward-looking guidance, we're very encouraged by early data on scripts and shipments and see the launch curve following analogs for several recent successful launches of reformulated products in specialty areas.

7:26 Our activity around Simpazan is also important as it provides us with the opportunity to meet with and engage with epileptologists, trade, access, and advocacy partners who will all be key to the success of LiberVant once that product is approved. Given a greater than 90% overlap in prescribing physicians of Simpazan and LiberVant, our focus is on building important relationships now and developing meaningful market insights that will inform our plans for LiberVant. Our second area of focus for 2019 is advancing key pipeline programs toward clinical and regulatory milestones. We are very excited about Libervan. The crossover study requested by the FDA will be dosing shortly and we are preparing to commence our rolling NDA submission with the aim to complete that submission in the second half of 19.

8:26 Our epinephrine program is progressing as well. We had a positive meeting with Health Canada in January. Based on that discussion, we'll be commencing a proof of concept study with an improved formulation of product in the second quarter. Finally, the company will focus on refreshing and expanding our proprietary portfolio of development and commercial products. Our team is searching for and evaluating opportunities that meet certain criteria. First, we're looking for assets that fit within our commercial platform in epilepsy and CNS. We're looking for assets in other therapeutic areas that we have the expertise to advance and for which our technology creates a strong value proposition for patients and caregivers.

9:15 And finally, we're looking for technologies that alone or as a complement to farm film can improve patient interactions with the medicines they take. Through these efforts, we will create new programs that will continue to build on Equestive's previous success. By focusing on all three areas in 2019, we see the potential for several inflection points represented by the achievement of clinical, regulatory, and commercial milestones. I'll now turn the line over to Ken Marshall, who will review the initiatives that are underway to support the launch of Simpazan and our commercial goals. Ken? Thank you, Keith. We're excited to share that the launch of Simpazan, our first proprietary commercial product, is going well. But before getting into the details of our performance, I want to take a moment to reflect on the achievements of 2018.

10:11 As Keith described, 2018 was a year of transformation for Equestria. To realize our vision of evolving into a specialty pharmaceutical company with end-to-end capabilities for developing and commercializing differentiated medicines, we had to execute on three important goals. Develop a commercial function, enter the epilepsy market, and then launch Simpazan. Our team delivered against all three of these goals in 2018. First, with respect to our commercial function, Equestive has established a robust capability to translate marketing plans into Simpazan prescriptions and fulfillment. We translated our market insights into focused plans and tactics. We hired, trained and deployed our prescriber, managed markets and trade facing teams and we built an operations function that aggregates data from multiple primary and secondary sources to inform our decision making and help us run an efficient manufacturing and distribution system.

11:13 These competencies now form a critical commercial capability that's been instrumental in the launch of Simpazan and will also be used to drive future product launches including LibraBand. Our second goal last year was to enter the epilepsy market. Our medical team started several months before launch with outreach to national and regional KOLs. They also presented and published pivotal data at several key meetings. Our managed markets account managers introduced Equestive, FarmFilm, and finally the Simpazan Value Proposition to the top 50 commercial payers in top 20 Medicaid states. Complementing these efforts, Equestive began engaging key patient advocacy groups as well.

11:59 As expected, we received FDA approval for Symptazan on November the 1st and launched the product the first week of December. The field teams immediately engaged our target prescribers and have reached the majority over two times. We're watching the Symphony audits that are now coming in. In the month of December, the audit reported 17 prescriptions. As with most specialty medicines, the audit significantly understates the first months of prescriptions and takes time to tighten. Based on our analysis, this was in the range of 50% for December. In January and February, Symphony reported 62 and 111 prescriptions, respectively. Because the audits don't fully capture the volume moving through specialty pharmacy and long-term care at this stage in the launch, shipments from wholesale to retail provide a more complete view of a product's performance.

12:53 Shipments in virtually all cases indicate a new script has been received at a pharmacy and therefore a good indicator that physicians are interested in the product. We receive shipment data net of returns daily and are comfortable that we are tracking at or above our early expectations as well as other novel formulations of existing products that have launched in the epilepsy market before us. This data, along with feedback from our field teams, has affirmed several important market insights supporting our plan. First, any change in a treatment plan for patients with LGS are done thoughtfully and slowly because of the fragile nature of these patients. A recent example of that is the transition from branded on-feet to generic Clobazan.

13:39 17 weeks after the entrance of generics, a full 30% of the market remains branded. This is an extremely slow erosion curve, but consistent with the conservative way change is introduced into this market. Second, physicians we meet recognize Simpazan's value for the most difficult to treat patients that are not well served by liquid and tablets. These are the patients they tend to switch first. Once a change is made, patients routinely stick with that change for long periods of time. This makes our early base of patients extremely important as we build our brand and our prescriber base. As patients continue to do well and as more clinicians gain experience with the product, we expect adoption to accelerate.

14:25 Moving forward for the balance of 2019, we'll focus on growing our business by expanding access. Our managed markets teams continue to meet with payers and are making progress towards our target of 70% of commercial lives under contract by year's end. We currently have multiple significant contracts in legal review. While new-to-market blocks remain and we work to secure broader access, we have a prior authorization and step-edit support program to help process prescriptions. These programs are working well. Ninety percent of PAs are being processed in under 24 hours. We're also offering co-pay offsets to patient families with commercial insurance. We're working to ensure Medicaid access with a dedicated effort around the top 20 states.

15:11 To date, we've seen a very solid response from this market segment. We will continue to increase reach and frequency of our sales efforts. The field's now completed an average of 2.5 calls with 4,600 of our prescribers. To date, they've executed more than 85 speaker programs with an average attendance of nine healthcare practitioners per meeting. We plan to continue at this pace for the balance of the first half. We know that product demonstrations are key to helping physicians understand how easy it is to administer and dose medications on farm films. Demonstrations build interest in Simpazan and future products like LibraBand. For that reason, we're focused on maximizing the number of product demonstrations made through office visits, speaker programs, and conferences.

15:58 Using these channels, we've already shared over 50,000 farm film demonstrations. In addition to positions, we also continue to build relationships with important advocacy groups like the LGS Foundation, the epilepsy alliance, and more than a dozen chapters and affiliates of the Epilepsy Foundation. We're engaged in the Foundation's projects to improve epilepsy education and treatment awareness. And finally, a key platform for success in 2019 is caregiver engagement. We're working to engage caregivers directly through advocacy walks and events and then build product interest and awareness through digital media. In closing, we're encouraged by the reception we've received in early data. As we continue to ramp our efforts and secure more coverage, prescriptions should continue to increase, broaden our prescriber base, and develop deeper relationships with the LGS community.

16:54 With that, I'll turn it over to Dan for an update on our clinical development program. Thank you, Ken. Today, I will focus on recent progress that's been made with respect to the development of four investigational product candidates that use our proprietary farm film technology. I'll begin today by discussing the next proprietary product we anticipate adding to our epilepsy franchise, Libervin. Livervent is being developed using the FDA's 505B2 pathway.

17:45 The reference with the drug is Diastat Rectal Gel, which is approved for use in patients who suffer from episodes of increased seizure activity, commonly known as seizure clusters. Diastam, the drug contained in Diastat, is a long-trusted, important medication that helps interrupt seizure clusters and is shown to help patients avoid more severe or fatal episodes of uncontrolled seizures, known as status epilepticus. Patients, caregivers, school nurses, and even physicians express a great deal of discomfort with using a rectal gel. There are nearly 1 million patients who present to hospitals every year for seizure-related rescue treatment. These visits are expensive to the U.S. healthcare system both in resources and dollars.

18:31 Providing Diazepam as a simple-to-administer, buckle-filled medication that can be easily placed inside the cheek would be considered a major advancement and contribute to improved patient care and management outside the hospital setting. That is the goal with Libervin, to address the needs and preferences of clinicians and patients, especially for the undertreated adult patient population. We are in the last stages of development for Libervin. In mid-December, we completed a pre-NDA meeting with the FDA. As a reminder, the two main discussion points in our pre-NDA meeting with the FDA last December were one, a review of our pharmacokinetic or PK data to date, including our population PK modeling, and two, a review of our safety data.

19:16 We also discussed the potential for beginning the filing process with the FDA. This is commonly referred to as a rolling submission. We were very encouraged by the feedback we received from the FDA and we believe that they recognize the need for making new solutions available for patient use. We received our official meeting minutes from the FDA in mid-January. There were no surprises in the meeting minutes and they were reflective of our understanding of the FDA's views coming out of the pre-NDA meeting. As we communicated in December, the FDA asked us to provide bridging PK data comparing liver vent to diastat in patients who are currently on anti-epileptic medication or AEDs. As we previously communicated, we were prepared for this outcome and submitted a clinical study synopsis to the FDA immediately following our meeting in December.

20:06 We received comments back from the FDA at the end of January and submitted our protocol to our Investigational Review Board, or IRB, within days of receiving the FDA's comments. We have since received IRB approval, initiated two investigational sites, begun recruiting, and we will begin dosing shortly. Thank you for joining us. of taking Libervent in a real-world setting.

20:58 The FDA has specifically asked for us to demonstrate that our dosing regimen will have comparable bioavailability to Diastag under conditions of use, and this is what our study design is intended to show. Our target enrollment in the study is 24 patients. We believe enrollment will be straightforward since seizure activity is not required during the study. We have multiple sites trained and currently recruiting and we look forward to giving you an update on recruitment during our Q1 earnings call in May. Our long-term safety study continues to progress. We have over 300 uses of Libervent in this study with no reported serious adverse events. We also have a 100% rate of administration to date, meaning that every dose of Libervent removed from a pouch for administration was successfully used.

21:46 Recruitment into the study continues to go well. We have successfully enrolled more than 50 adults and we are confident we will have a robust sample of adult data at the time our NDA submission is completed. Now that we have our crossover study underway, we will send our official rolling submission plan to the FDA. If the FDA agrees with that plan, then we are prepared to begin the filing process. This is an exciting step forward for our program and we continue to focus on completing our filing in 2019. Our third proprietary CNS candidate is Exervink. and oral soluble stone formulation of Rilazole for the treatment of ALS, also known as AQST-117. Our filing process with the FDA is underway and we anticipate having more precise information on the review process in the coming months.

22:35 We have also seen strong interest from other companies in bringing AQST-117 to markets outside of the U.S. AQST-117 is an important medication option for patients. and we will seek to provide appropriate access to this product in markets outside of the U.S. In addition, we are glad to provide an update on AQST 108, our sublingual film formulation of epinephrine, which is in development for the treatment of anaphylaxis. As a reminder, AQST 108 has the potential to be the first oral treatment for anaphylaxis, a condition which affects up to 5% of the U.S. population and causes millions of visits to hospital emergency departments each year. Patients living with severe allergies or families trying to care for someone with allergies report higher levels of stress, anxiety, as well as day-to-day challenges trying to avoid triggers. These patients have to keep a supply of EpiPens in close proximity at all times should an attack come on. Given that many patients fear needles, we see strong interest in and demand for new treatment options.

23:40 We have begun to build our therapeutic presence in the allergy space. We have engaged important key opinion leaders in this space at such events as last month's American Academy of Allergy, Asthma, and Immunology, or Quad AI, annual conference. Among the insights we've gathered is that there are a range of patient needs across the entire spectrum of allergic reactions, up to and including anaphylaxis. Patients currently have few options other than diphenhydramine, commonly called by the brand name Benadryl for mild allergic reactions, or EpiPen for anaphylaxis. We believe patients deserve more and better options for the various grades of allergic reactions that can come on. We will explore these potential options as we progress our AQST 108 program.

24:25 We have already demonstrated proof of concept for an early formulation of the epinephrine product, but set a goal to improve this formulation before proceeding with more clinical trials. In January, we held a productive meeting with Health Canada to lay out our plans. Following that meeting, We submitted a clinical trial application, or CTA, for their review. As soon as we have feedback on that CTA, we plan to start the next human proof-of-concept study early in the second quarter. Once we have the top-line results and analysis from that study, we will be able to assess and report on next steps. Our other complex molecule program is for the development of AQST-305 octreotide. Our team has already succeeded in pushing past accepted boundaries of film products, allowing us to deliver higher drug loads than previously believed possible.

25:22 Delivering complex protein and peptide products is an ambitious target with the potential to improve a variety of medications like octreotide, which can be difficult for some patients to tolerate in its current injectable form. Our team is continuing to fine-tune the film formulation for octreotide, and we expect to have more data to share later this year. With that, I will now turn the line over to John. Thank you, Dan. Good morning, everyone. I will start by summarizing the financial results for the fourth quarter and the full year of 2018, and then I will walk you through our outlook for 2019. To remind you, I will be discussing some non-GAAP financial measures this morning. A description of these measures along with a reconciliation to GAAP can be found in the news release we issued this morning. I also wanted to point out that we will be filing our audited results on Form 10-K with the SEC later today.

26:14 We produced revenues of $67.4 million in 2018, mostly from our licensed products, and we used approximately $3.4 million of cash during the fourth quarter of 2018 and ended the year with a cash position of over $60 million. The fourth quarter was our first full quarter after the IPO that included significant pre-launch spending related to Simpazan. Our cash position combined with expected revenues from licensed products and Simpazan puts us in a good funding position for 2019 and gives us the ability to continue to launch Simpazan and advance our proprietary development activities throughout the year. Turning to a quick review of the fourth quarter, we reported total revenue of $16.8 million.

27:03 This included manufacturing revenue of $8.1 million, with 67 million doses shipped, licenses and royalties of $7.3 million, co-development and research fees of $1.2 million, and Simpazan net sales of $228,000 in December 2018, the first full month of the launch. For the fourth quarter 2018, our gross margin was approximately 71%, while the non-GAAP gross margin was approximately 75%. Total costs and expenses were $29.2 million for the fourth quarter 2018. Excluding non-cash items, total expenses were $27 million, including R&D costs of $5.4 million and SG&A costs of $17.4 million.

27:55 SG&A rose in the fourth quarter of 2018 because of the launch of Stemphazan and higher public company costs. Net loss for the fourth quarter of 2018 was $13.9 million, or about $0.56 loss per share. Adjusted EBITDA was a loss of $10.2 million in the fourth quarter compared to an adjusted EBITDA loss of $6.3 million in the fourth quarter of 2017. As I mentioned earlier, total revenue for the full year 2018 was $67.4 million. The full year number included $37.3 million of manufacturing revenue, $24.7 million of licenses and royalties, $5.2 million of co-development and research fees, and Simpazan net sales.

28:43 Our license fees were primarily related to Suboxone and Synovian's apomorphine product. As a reminder, these license fees tend to be chunky and fluctuate from period to period. Full year 2018 manufacturing revenue declined approximately 2% after backing out the early 2017 one-time fee collected related to Suboxone manufacturing exclusivity. Manufacturing and shipped product doses were the drivers of this revenue, with $313 million shipped in the full year 2018 compared to $323 million shipped in 2017. Leading up to the fourth quarter, volume was up 5-6% year-over-year.

29:28 However, during the fourth quarter, in advance of the various legal decisions around the potential at-risk market entrance of generic competitive products, Indivior began to manage its product supply chain, which led to the full-year decline. Our gross margin on total revenue for the full year 2018 was 69%. Non-GAAP gross margin after backing out non-cash equity compensation and depreciation was 73% in 2018 compared to 70% in 2017. Total costs and expenses were $116.4 million for the full year 2018. As a reminder, the 2018 expenses included $27.3 million of one-time charges and related to the termination of a pre-IPO equity compensation program.

30:21 Excluding non-cash items in both periods, 2018 expenses rose to $83.1 million from $63.1 million in 2017. The largest driver of this increase was an increase of approximately $12 million of investments in our commercial platform and the launch of Simplizan. In addition, There was an increase in investment in public company costs such as legal, finance, and insurance. R&D costs were down modestly due to the timing of clinical development programs. Net interest costs were down year over year at $7.2 million despite rising interest rates because of higher interest income as a result of our increased cash position in 2018.

31:08 Other expense of $5.3 million for the full year 2018 For the full year 2018, the company reported a net loss of $61.4 million, or $2.96 loss per share, compared to around $9 million in 2017. The increase was driven by one-time equity compensation expenses related to the IPO, increased commercialization costs, and increased public company costs. Adjusted EBITDA was a loss of $15.6 million for the full year 2018 compared to positive adjusted EBITDA of $3.8 million for the full year 2017.

31:55 As we worked to set our targets for 2019, we considered the impact of the February 2019 launch at risk by Dr. Reddy's, Alvagen, and Mylan on Suboxone's share of the market. There are two primary impacts. First, the license fees owed under the September 2017 agreement with Indivior will be suspended until the litigation is completed or the parties settle. This suspension of payments results in a direct year-over-year reduction in this revenue category of approximately $16 to $17 million. Second, as a reminder, our manufacturing revenue is volume-dependent. and does not depend on the market price of the product of either Sandoz or Indivior.

32:43 As we look forward, the volume that we manufacture likely will adjust downward as the market settles between branded, authorized generic and at-risk generics. This settling will take time, up to 8 to 12 months. And in the interim, we will produce product to support adjustments to the branded and authorized generic supply chains. Once the market settles, we believe that it is possible that the branded product will hold on to a meaningful share of the Suboxone film market, and the remaining market will be shared among the authorized generic and the other generics who are in the market at risk. Firm purchase orders of about 150 million strips for the first five months of 2019 of branded and authorized generic film compare favorably to the same period in the prior year and are over 20% higher than the previous five sequential months. These orders represent a good starting point for our outlook for 2019, but we are still unsure of the full impact of the at-risk generics in the market and have taken a prudent approach to predicting full-year 2019 volume, meaning we are assuming the full year will be down from 2018 despite the strong start. We have set a volume guidance range of 190 to 240 million strips for the full year, and we will closely watch how the market is split among the various participants and keep you updated.

34:17 The other significant impact on 2019 revenue is the launch of Simpazan. While we are encouraged by the early signals compared to our launch expectations, we also believe it is too early to provide specific guidance on this revenue category. As the launch develops, more data becomes available and aspects like payers are signed. We may be able to guide later in the year. We will certainly keep you abreast of our progress. With this backdrop, as we outlined in today's release, we are guiding to total revenues in the range of $33 to $45 million. This 2019 revenue guidance range includes Suboxone and Sandoz authorized generic manufacturing revenue of $23 to $30 million based on the volume range previously mentioned.

35:07 The remaining components of our revenue include licenses and royalties on our various licensee marketed products, co-development and research fees from licensees, and Simpazan net product sales. We expect full year 2019 non-GAAP gross margins of 70 to 72% on total revenue. This is in sync with the full year 2018 non-GAAP gross margin percentages. For 2019, we are guiding to a range of non-GAAP adjusted EBITDA loss of $40 to $45 million, excluding non-cash equity compensation expenses. This assumes that we continue to invest in research and development to continue our current programs and begin work later in the year on new pipeline opportunities that we might add. and also to continue to launch Simpazan successfully.

36:01 We anticipate full-year 2019 cash burn of approximately $45 to $50 million after considering interest capital spending and working capital effects, but prior to any non-dilutive capital transactions. We also plan to explore refinancing of our senior debt facility later in 2019, and we will update the market on non-dilutive financing opportunities around apomorphine after Synovian announces additional information concerning expected timing of approval of that product. Operator, we will now open the line for questions. Thank you. Ladies and gentlemen, if you wish to ask a question at this time, please press star then 1 or your touch-tone telephone. If your question has any answer, or you wish to move yourself in the queue, please press the pound key.

36:49 We ask that you please place your line on mute once your question has been stated to prevent any background noise. Our first question comes from Gary Nachman with BMO Capital Markets. Your line is open. Hi. Good morning, guys, and appreciate all the detail on how you think of guidance given all the moving parts with Suboxone. But maybe just clarify, what sort of share retention are you assuming for the brand and the AG in order to achieve your guidance? And is the revenue in 2019 likely to be more front-end loaded than back-end loaded? And then also, just how much do you expect the international component to ramp up over the course of the year. Just remind us how those economics compare with the US economics. Hi, good morning, Gary.

37:35 So let me first address your first question. So our 150 million strips that we've got front-loaded in the first five months of purchase orders are certainly going to drive what I would call more normal volume that we've seen in the past. I think as the year unfolds, we'll obviously assess where the market is settling out. For right now, we have projected a decline, which would then imply that we would have a second-half decline in revenue in the manufacturing category. Obviously, at the same time, Simpivan is ramping up. While we haven't given guidance on that yet, there will be an offsetting effect with that, and exactly the extent of that is still a little bit unknown. With respect to the international part of the Suboxone business, the filings for other countries are in process, and so I wouldn't expect a significant impact in 2019 in terms of uptick of international business.

38:31 I think that's a future opportunity for us, but we do still see that as a significant opportunity as we go forward. Okay. And then maybe a couple for Ken on the Simpazan launch. Talk about your confidence in getting to 70% coverage by the end of the year. I think that's your initial target. And what are the growth to next, and how do you expect those to trend this year? And then from a marketing standpoint, at what point might you add reps to the Simpazan team in order to start preparing for the LiberVant launch potentially next year? Yeah, good questions, Gary. We're on track for that year-end 70% of lives covered. We mentioned in the upfront section that we have three material contracts and legal reviews. We're making good progress with terms with these major payers. Those will kick out hopefully in the next several weeks. We've got term sheets in front of all the major PBMs and the major payers.

39:35 We're engaged with the top 20 Medicaid states, and we've just gotten access in two major states. We've seen prescriptions coming through that already. So we're seeing a lot of positive signs and signals. We have our trade team in Florida with all the PBMs this week, so we're comfortable right now turning towards that. As far as the sales team and our expansion, We certainly will have a bigger footprint as we move towards LibraBand. As we get more clarity on the regulatory pathway, that's going to dictate our timing. But we would substantially increase our footprint in the field as that asset gets closer. Okay. And I just ask also the gross to net for Simpazan, like where those are currently and how you think those might trend. Yes.

40:21 Okay. Yeah, Gary, so obviously the first month, if you look at the December gross to nets, it was high because it's the first month and we made some judgments about some things where we just really didn't have historical data. As we go forward, we will settle out in the 40 to 50% range over the course of the year, so you'll see that settle out to more of a normal level. Okay. And then for Dan, just on LibraVan, so it sounds like Thank you. Yeah, absolutely. Thanks. Thanks, Terry. In terms of starting the rolling submission, we're ready. So all we've done with the rolling submission is time it to the start of our crossover study.

41:29 So all of the things we talked about in December have held true. We stayed on our timeline and the activities we expected to conduct. So we remain right on track for the rolling submission. In terms of the date for full submission, we absolutely see that in 2019. As you know, that is driven by enrollment. Incredible focus is on how do we maximize our ability to enroll quickly. We think we've done that so far with having two sites up and running and two more sites which should come online shortly. So we think we'll progress through the 24 patients quickly.

42:18 In terms of tightening that timing down, I think at this time it would be, I think the best we can give is in 2019. In terms of epinephrine data, yes, you will see epinephrine data as we progress through the year. We anticipate starting the study early in Q2. As you know, this is a fairly quick study to conduct. It's a dose-escalating study where there's a one-week washout period. It's healthy volunteers. The cohort of patients is fairly straightforward. So we anticipate sharing that data definitely later in this year. Okay, great. Thanks, guys.

43:04 Thank you. Our next question comes from Randall Staneky with RBC Capital Markets. Your line is open. Great. Thanks, guys. I only have a couple of questions. Number one on Simplizan, can you just speak to how much stock education you can do around The film delivery that you think can help make it easier to launch LiberVent when that ultimately does launch, which I guess would be next year. That's number one. Two, maybe Keith, can you speak to the competitive dynamics, the landscape here for LiberVent, how you see that playing out given that it's going to come to market a little bit later than you initially thought. And then number three, For John, can you just help us with the OpEx cadence for the year, given that there's clearly some moving parts on the spend side?

43:51 Should we think of that as more equal weighted quarterly, or is there any specific weighting to the front or back end, either with R&D or SG&A? Thanks. You can take those first two. Okay. Yeah, Randall, the demonstration strips are critical. Looking at the list of attendees on today's call, I think a number of folks have experienced our platform. That's a pivotal moment in the experience with our product. It really brings home to roost the value proposition with Sympathetic Nupal Adhesion, with Libervant, the preferred route of administration in an orally administered rescue therapy. We've dialed that up big time in the field. We've got 50,000 demo strips that we've run through already.

44:37 We're producing more. We use those at every conference. Our field sales team puts one of those on the tongue of every person they walk past in a medical office from the front desk to the physician. And it's absolutely critical. And it's resonating with our targets. So A key part, and that translates directly to LibraBand. And that sets the table for that next discussion when we go into the offices. So fundamental for Simplizan, but really sets the table nicely for the company. And then from a competitive standpoint, I mean, certainly there are a lot of people focusing on the rescue space, there's no doubt. And that's a significantly unsatisfied segment in the epilepsy space. If you look at the need, you've got probably a million two patients that continue to experience seizures.

45:30 If you look at the amount of labeled medicine used in that population, it would treat a fraction of them. And then you look at the dysfunction of the other strategies. People devolve to slow-acting medicines, compounded medicines. So there's a significant amount of dysfunction. We feel strongly that a preferred route of administration will be in oral medicine. We think that some of the folks that are targeting coming in with nasal preparations certainly are better than the rectal, but we're comfortable that when all is said and done that an oral route of administration and a rescue setting will prove to be the preferred way to go. I think, Lambert, you had a question also on the cadence of operating expenses in the course of the year.

46:15 Yeah. How do we think about OPEX spend throughout the year? Yeah, so if you look at, a good way to look at it, obviously we're not giving specific guidance on the OpEx categories, but if you look at the Q4 numbers, you know, and you look at research and development, which is one component, it was about $5 million, and, you know, I think that's probably, you know, $4 or $5 million of a cadence is probably reasonable. What you will see is diazepam. Obviously, over the next couple of months is going to have spend around this crossover study. But over the course of the year, diazepam will come down. We think epinephrine still is in a little bit of a less expensive stage of development. But as we go later in the year, we'll add new products, hopefully. And then we'll begin to spend on some of those.

47:02 And that's why, you know, looking at sort of a $4 or $5 million cadence is probably reasonable. I think on the SG&A side, if you look at Q4, it was on an adjusted basis about $17 million. That included a lot of launch-related expenses, so that's an above-normal trend is the way I would look at that. And as we go into this year, the trend on SG&A on a quarterly basis will be lower than that number. No, that's helpful. If I can squeeze one more in, Keith, you talked about business development in the prepared comments. So a two-parter here. Number one, should we be thinking that you're going to be getting additional deals or focusing on additional deals in 2019? And what type of capacity, given that you're launching one product, pushing another one over the finish line, and pushing a pipeline forward. What type of capacity do you have to execute on additional deals?

48:05 Thanks. Thanks, Randall. So we will always focus on looking for products that complement the CNS platform, whether they're going to be developed from scratch or they're mid-development and potentially even already commercial ready. We'll also look for places where our knowledge and technology can create, excuse me, knowledge and technology can create a significant value proposition for patients and how they interact with their medicines and diazepam, epinephrine are clear examples of how we look at that. We've got an organization that's built to support Up to 12 development projects in our pipeline at a time, depending on what stages of development they are. The earlier a product is in the development stage, it uses one part of our capacity. The later it gets in its development, it uses a different part of our capacity. When they get to be commercial, our manufacturing capacity has a lot of headroom from where we are right now.

49:17 We have the ability to coat and package probably a billion doses a year in our current form, and we're utilizing just a fraction of that at this point in time. Additional capacity is easy enough to bolt on and a short enough horizon so that we don't ever think we're going to get trapped or caught with volume. And I'd say the last factor to think about is any of the targets we're talking about are going to be significantly fewer doses per year, although at a significantly higher price than Suboxone is right now. So you're not going to see products consuming 250 or 300 million doses of our capacity when we bring them on.

50:06 Got it. Okay. Thanks, guys. Thank you. Thank you. Our next question comes from Liana Masatos with Wedwood Security. She'll line us up then. Thank you for taking my question. You mentioned beginning the NDA submission process for Exravan. What has been accomplished in that, and what do you have left, and when do you think it will be complete? Sure. Thanks, Leanna. This is Dan. So, as you know, there are several major modules. of any NDA submission. The first couple of modules around all of the early work, the pre-clinical work, the CMC work, all of that stuff, obviously, we're ready to go. So those we will put into the...

50:54 I think Leanna was asking about Exravent. My apologies, Leanna. I was giving you a Libravent. You can see where my mind is. Yeah, Exravent, we... We have started the process with the FDA. All of the modules are completed. And we should have some clarity on where that discussion is going in the next couple of months. And, you know, since we're talking about exervant, another interesting angle that we're seeing some interest in is outside of the U.S. on this asset. So we'll continue to explore those areas as we go through the year. To be clear, though, we've submitted and we're waiting for acceptance.

51:39 We've submitted and we're waiting for acceptance. Thank you. Thank you. Our next question comes from Jason Butler with JMP Securities. Your line is open. Hi, it's Ryan for Jason. Thanks for taking our questions. A couple quick ones, I guess. For the SympaZen launch, can you give us any more detail on the early physician and caregiver feedback? Does it look like physicians and caregivers that are trying the drug are going to stick with it? Then what proportion of the LGS patients are ideally suited for Simpevin due to difficulty swallowing? Thanks. Yeah, I can take that. Yeah, the early feedback, and this is qualitative from our sales representatives, as a very positive reception from the physicians, very positive reception from the mid-levels, and by that I mean the nurse practitioners and the physician's assistants who are really on the front line and hearing from patients and the challenges they have with swallowing medicines and and managing high-volume liquids.

52:37 So we're very comfortable there. I'll track back to the statement we made in the prepared remarks around shipments. The only reason there's a shipment from our wholesale distribution into a recap setting is because a physician has transmitted an electronic script, and we're seeing volume there that makes us very comfortable that we're on track. So I think that's a very strong surrogate for physician interest, too. If you look at where we're getting used, we certainly are appropriate in that LGS population. We don't have enough patient data at this point to really give you a good answer to that. What I will say is there's about 600,000 prescriptions for Clogazine annually. About half of those go into that LGS population.

53:24 We mentioned the stickiness of this group when they do make a change. They average about eight refills a year. One thing that I'm seeing very early on are prescriptions written for multiple months. That doesn't mean that they're getting filled yet for multiple months. I don't have that. But the qualitative feedback are good experiences. I actually don't have one negative instance that I could think to share from a physician or an office when someone has come in for their second month. Okay, great. And then just a quick one for John on the revenue guidance. Are there any milestone or other payments that are included in that revenue guidance for 2019. Thanks. Yeah, sure. So we have, as I mentioned before, on the Indivior front, the milestones related to that license agreement will be suspended until the at-risk litigation completes or they settle.

54:18 But year-to-date, we've collected a little over $4 million of milestones in that area. Thank you. Thank you. Our next question comes from Thomas Flatton with Lake Street Capital Markets. Your line is open. Good morning. Thanks for taking my question. A couple for Ken. Do you have any rejection reversal data from the pharmacies?

55:04 And then in conjunction with that, what are the limitations around the copay card in terms of max savings or number of refills? And then my last question for John, you had mentioned earlier that you would probably have cash to get you cash flow positive following LiberBank launch. Is that still the case, do you think? Thank you. Yes, I can speak to the step-edit prior authorization program. I think that's what you're asking. We're getting good traction with that. We have that set up and trained in all the offices through a company called Cover My Med that's available at all the pharmacies. It's being widely used with our prescriptions, as you would imagine, in this early stage while we're negotiating access.

55:50 Many of the standard edits and new-to-market blocks sit in place with all these payers, so you really need a lot of good support on this front. We watch that pretty closely. If you look at our turnaround, we're getting about 90% of those that are submitted turned around in 24 hours. Our average is about seven hours. That actually is up to an industry norm. We're at the industry average right now, which is pretty quick. I spend a lot of time with our strategic partner looking at blinded examples of how other CNS companies have done. So that's a very good metric that I just gave. We're getting about 50% of those appeals through. And to give people perspective, that, again, is an industry norm. That's what you would expect to get at some point.

56:35 If you looked at some of the medicines that have come into the CNS space recently from large companies that are in the migraine space, you probably can figure out who those are. As easy as I can, their first couple months, they had a 20% approval rating going through these same processes. So we're very comfortable that we have a program that's being actively used. It's generating industry average pull-through, and we're optimistic that we can push it higher than that. And then your second question was on... Could you repeat your second question? I took a note and it says maximum refills. Yeah, no, it was just about the copay card, whether you have a max savings amount or a number of refills and how that looks.

57:20 Yeah, no, we have a program that offsets everything up to $10. So you worded that you pay as little as $10, but we offset that. – those programs. As I mentioned, the goal of those types – well, I didn't mention it. As you probably know, the goal of those programs is to support the copay offset while you get the prior authorizations through. So we put in a three-month window to do that. So we'll cover it for the first three months. At that point, if a plan hasn't felt compelled to cover that, we would stop buying that now. Okay, Thomas. On the cash flow question, obviously we're going to end the year with $10 to $15 million of cash or somewhere in that range. What that means to us is that we will be looking, as we've said before, at our different capital options.

58:15 Given the apomorphine delay, and we still don't know the timing on that yet, we made the decision to focus first on the refinancing of our debt. That comes due in 2020, but we can move in 2019 to refinance. We will explore the options. We think there's potentially additional non-valuative capital that we can get out of that. In addition to that, we think that it will be a savings in terms of principal repayment as well. So, That's a cash positive. Then when we think about other options in front of us before we get to equity, you've got the apomorphine deal that we could do. The cost of capital is too high to do it before approval, so we would prefer to wait until after approval, but we certainly do have that as an option in front of us. So we'll be looking, to be clear, at different non-dilutive options between now and the end of 2019, which we think will then put us in a good position as we go into the launch of LiberVant, which is likely to be in 2020.

59:18 Great. Thank you. Thank you. Our next question comes from Ram Savardu with HC Wainwright. Your line is open. Good morning, guys. This is Edward on it for ROM. Just a couple questions at the end here. You were just talking about the debt, and I was wondering how that's going to be amortized over the years and what the probabilities are of extension past that 2020 maturity date. Yeah, good morning. The first repayment on the debt is a monthly repayment that starts in May. It's about $500,000 a month. and then we get down to $37 million at the end of 2020. We will be looking at our options sort of hopefully by mid-year.

1:00:06 We think our options are actually really good in terms of some kind of new debt facility and we'll announce more once we have more information but right now we think the market looks good for that. Okay, thank you. And then just a final one on seasonality. I know for For the epinephrine market, it can be fairly seasonal, especially in the pediatric market as kids go back to school. And I was wondering if that sort of seasonality would affect any of the other pipeline products or Simpazan in particular. Well, this is Dan on epinephrine. Yeah, the seasonality is something we're aware of, and we're not concerned about that from a launch perspective. And I'll pass it over to Ken to talk about that from a Simpazan perspective.

1:00:56 From a LibraVan standpoint, you have that same phenomenon school. There would be seizure action plans, so you could theoretically see a little bump there. I wouldn't expect a big bump. And these breakthroughs are idiopathic. They're not going to be triggered by any certain weather pattern or anything really. And if you look at Simpazam, for some reason you see some bumps sometimes in some monthly buying, but I think it has nothing to do with patient consumption. I think, again, that's idiopathic. I think when a patient goes on, they take their medicine, it's not seasonal. All right. Thank you, guys. I appreciate the questions. Thank you. I'm currently showing no further questions at this time. I'll turn the call back over to Keith Kendall for closing remarks. Sure. Thank you, Operator. Thank you, everyone, for joining today's call.

1:01:43 We appreciate your time and the questions. We look forward to catching up with some of you in the coming weeks at the Oppenheimer Healthcare Conference and at the H.C. Wainwright Global Life Sciences Conference. We're very excited about the significant progress that our team has made over the past few months, and we look forward to reporting to you and talking to you more on our progress, CIPAVAN, LiberVent, and the rest of our activities on our next call in May. Thank you all very much. Ladies and gentlemen, this concludes today's conference. Thank you for your participation. Have a wonderful day.