Aquestive Therapeutics Inc

NASDAQ:AQST

Earnings Call Analysis

Aquestive Refinances Debt, Increases Revenue

Aquestive Therapeutics strengthened its financial position by renegotiating a $45 million debt refinancing deal with a 13.5% interest rate, which reduced near-term cash requirements and eliminated revenue or cash covenants and stock purchase warrants. This was paired with significant revenue growth, as Q4 2023 revenues rose to $13.2 million, a 24% increase compared to Q4 2022. The full-year 2023 revenues climbed 26% to $50.6 million, excluding prior year sales of Sympazan. The net loss decreased to $8.1 million in Q4 2023, improving from $12.4 million in Q4 2022. The guidance for 2024 sets revenue targets between $48 million and $51 million but does not include any sales from Libervant.

Strengthening Financials and Advancing Pipeline

Aquestive Therapeutics has been actively bolstering its financial position through strategic debt refinancing and expense management to support the development of its lead product, Anaphylm—a unique non-device-based orally delivered epinephrine product. The company refinanced its existing 12.5% senior secured notes due in 2025 with a new $45 million financing agreement that will mature in 2028 with a fixed interest rate of 13.5%. This move extends the cash runway and includes royalty agreements for Anaphylm and Libervant, underlining investor confidence even amidst tough market conditions.

Increasing Revenues and Cost Cutting Fuel Turnaround

In Q4 2023, Aquestive saw a 31% increase in total revenues to $13.2 million, driven by milestone payments and higher revenue from out-licensed products. The full year reflected a 26% increase to $50.6 million, excluding the impact of stopped Sympazan sales, which the company out-licensed. Notably, manufacturing and supply revenue and license and royalty revenue propelled the gains, with a significant 129% increase in license and royalty revenues. These positive factors, coupled with decreased selling, general, and administrative expenses, resulted in a reduced net loss to $7.9 million for the year, a substantial improvement from $54.4 million in the previous year. The reduction includes $14.5 million from settlements and agreements, showcasing Aquestive's efforts to monetize assets and streamline operations.

Tighter Losses on an Adjusted Basis

The non-GAAP adjusted EBITDA loss showed a marked improvement, dropping to $2.8 million in Q4 2023 from $9.6 million in Q4 2022. For the full year, the loss stood at $11.6 million, shrinking considerably from $35.3 million in 2022. When excluding adjusted R&D expenses, the numbers further suggest a turnaround, with Aquestive posting a non-GAAP adjusted income of $1 million for the year. This represents a noticeable shift from an $18.7 million loss in the prior year, pointing to underlying operational efficiencies taking root.

Solid Liquidity but Continued Need for Capital

The company closed the year with $23.9 million in cash and cash equivalents, reflecting active capital raising including net proceeds of $9 million from the At-the-Market (ATM) facility in 2023. Warrant exercises also contributed about $8.3 million. Aquestive's capital strategy appears focused on ensuring sufficient liquidity for ongoing operations and the key Anaphylm development, expected to be followed by an NDA submission with the FDA by year end.

Guidance Suggests Revenue Stabilization with Increased R&D Spend

For 2024, Aquestive projects total revenues to range between $48 million to $51 million, indicating a slight potential contraction from 2023, potentially due to the one-time milestone payments in the previous year not recurring. The company anticipates a non-GAAP adjusted EBITDA loss of about $22 million to $26 million, which takes into account enhanced R&D investments for the Anaphylm program. This guidance does not factor in any revenue for Libervant and implies the company will likely continue to invest heavily in product development and operational scale-up.

Earnings Call Transcript 2023-Q4

[Operator]

Good morning, and welcome to Aquestive Therapeutics Fourth Quarter and Full Year 2023 Conference Call. [Operator Instructions] As a reminder, this call will be recorded.

I would now like to introduce your host for today's conference call, Bennett Watson of ICR Westwicke Investor Relations. Please go ahead.

[Bennett Watson]

Thank you, operator. Good morning, and welcome to today's call. On today's call, I'm joined by Dan Barber, Chief Executive Officer; and Ernie Toth, Chief Financial Officer, who are going to provide an overview of recent business developments and performance for the fourth quarter and year-end 2023, followed by a Q&A session.

During the Q&A session, the team will be joined by Dr. Carl Kraus, Chief Medical Officer; and Dr. Stephen Wargacki, Senior Vice President, Research and Development.

As a reminder, the company's remarks today correspond with the earnings release that was issued after market close yesterday. In addition, a recording of today's call will be made available on Aquestive's website within the Investors section shortly following the conclusion of this call.

To remind you, the Aquestive team will be discussing some non-GAAP financial measures this morning as part of its review of fourth quarter and year-end 2023 results. A description of these measures, along with a reconciliation to GAAP can be found in the earnings release issued yesterday, which is posted on the Investors section of Aquestive's website.

During the call, the company will be making forward-looking statements. We remind you of the company's safe harbor language as outlined in yesterday's earnings release as well as the risks and uncertainties affecting the company as described in the Risk Factors section and in other sections included in the company's annual report on Form 10-K filed with the Securities Exchange Commission on March 5, 2024.

As with any pharmaceutical company with product candidates under development and products being commercialized, there are significant risks and uncertainties with respect to the company's business and the development, regulatory approval and commercialization of its products and other matters related to operations. Given these uncertainties, you should not place undue reliance on these forward-looking statements, which speak only as of the date made. Actual results may differ materially from these statements.

All forward-looking statements attributable to Aquestive, or any person acting on its behalf, are expressly qualified in their entirety by this cautionary statement and the cautionary statements contained in the earnings release issued yesterday. 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 Dan.

[Daniel Barber, executive]

Thank you, Bennett. We have once again made tremendous progress since our last earnings call. We finished 2023 on a high note, with solid revenue growth, improvements in non-GAAP adjusted EBITDA, a healthy cash balance and significant progress in the product development part of our business. While these are significant achievements, our focus is firmly on the future and on building a solid foundation for long-term growth.

Our strategy for accomplishing this remains simple and straightforward. Over the next 2 to 3 years, we expect to bring not 1, but 2 oral rescue products to patients for conditions for which they are currently dependent on rescue medical devices. In the allergy space, Anaphylm/epinephrine sublingual film is a transformational product for patients and for the company if approved by the FDA. We believe annual peak sales of Anaphylm on a global basis could surpass $1 billion.

In the epilepsy space, Libervant/diazepam buccal film could begin launching in markets around the world, including here in the U.S. as early as this year, if approved by the FDA. We believe worldwide annual peak sales of Libervant could be between $1 million and $200 million.

We continue to advance in-house technology to replenish our pipeline once Anaphylm and Libervant graduate to the commercial product phase. We are currently conducting initial human studies using our Adrenaverse technology and expect that our initial indication targets will also represent multi-hundred-million dollar peak sales opportunities.

Finally, as you know, we continue to have a profitable base business with partnerships on multiple continents that grew in 2023, and we are focused on continuing this growth in 2024. These 4 pillars of growth position us well to expand the company in the years to come.

Regarding Anaphylm, we have completed dosing in our pivotal study, and we should receive data shortly. We expect to publicly announce our topline data within the next 2 weeks. We are more excited than ever by the opportunity to transform patient care in the treatment of severe allergic reactions, including anaphylaxis.

As I've talked about in the past, the #1 problem in this patient population is having a rescue product with you when you need it. Patients as a whole simply don't carry the product with them. While this has many reasons, we firmly believe that Anaphylm will bend the carrying curve and potentially decrease bad outcomes associated with anaphylaxis.

For the past several months, I have been testing how carriable Anaphylm truly is. I have carried Anaphylm in my pocket with my ID and credit cards, and I have also carried Anaphylm inside the case on the back of my phone. For me, this means that literally 24/7 without exception, I can access Anaphylm in a matter of seconds.

This also means I don't have to remember a carrying case or to bring a rescue product with me or to do anything other than live my life. In the world of psychology, this is referred to as habit stacking. I always carry my phone with me, and therefore, by putting the film on the back of my phone, I've aligned carrying my rescue product with my existing habits.

Habit stacking is a powerful tool and one that potentially aligns well with Anaphylm. 2 weeks ago, I attended the American Academy of Allergy, Asthma and Immunology Conference, or AAAAI, in Washington, D.C. I was able to spend time with some of the most important leaders in the allergy space, both advocacy leaders and clinical leaders, who spend their days focused on better serving patients at risk for anaphylaxis.

Without exception, they agreed and resonated towards bending the carrying curve by fitting our product within the daily lives of patients. I asked 1 clinician, "But how do you know that people may carry Anaphylm more than the existing medical devices?" He held up the sample film in front of her and said, "All you need to do is look at this. It's just too obvious." We will continue to share more of our findings from interactions such as this over the months to come.

We have also begun planning for a commercial launch for as early as the second half of 2025. Given the analogs in the market, we believe the commercialization path for this indication is well understood. We are currently working on our marketing and market access approach, and we'll continue to share our strategy as it evolves.

On a separate note, we are rapidly approaching our FDA action date for Libervant. Every month, thousands of adults fill a prescription for a diazepam rectal gel with the specific intent of using it to rescue their 2- to 5-year-old child when seizure clusters occur. We believe there is a better way, and that is Libervant.

As previously disclosed, we have tested Libervant in an epilepsy monitoring unit in children within this age group and found the product to be comparable to the rectal gel. We are hopeful that on our action date of April 28, the FDA will also see the benefits of treatment for this patient population.

We continue to believe that distribution of Libervant is better in the hands of a company that is focused on CNS and epilepsy. We are in active discussions with potential distribution collaborators now. As I've said in the past, we will maintain value discipline, and if a reasonable distribution arrangement is not realized, we will launch the product ourselves.

Beyond Libervant in the U.S., we remain active with business development discussions. Our focus in 2024 will be on expanding our ex-U.S. licensing opportunities for our lead assets and on monetizing any of our noncore assets.

Regarding our future pipeline, we continue to move forward with AQST-108, which comes out of our Adrenaverse platform. This is a topical cream formulation that we believe has potential application among dermatology indications. We are currently in the clinic with our first-in-man study, which is focused on characterizing the absorption profile of AQST-108 at different dose levels. We will have more to say on this program later in the year.

In conclusion, 2023 was a phenomenal year for the company, and we are now focused on building the foundation for long-term growth. Our upcoming milestones remain on track with Anaphylm data expected in the next 2 weeks and an FDA action date on Libervant in late April. We continue to guide towards an Anaphylm NDA filing in 2024. Our collaboration activities remain robust and ongoing.

With that, I will turn the call over to Ernie.

[Ernie Toth, executive]

Thank you, Dan, and good morning, everyone. By now, you will have seen our financial results in our earnings release that was issued last evening. As we typically do, we will address most of the discussion related to the fourth quarter and full year 2023 results in the Q&A. We continue to evolve as a company with a solid base business generating revenue, a validated platform having produced over 2.6 billion strips and 2 key pipeline assets, Anaphylm and Libervant.

During the fourth quarter, we continued to execute on our strategy to strengthen our financial position by refinancing our expanding debt as well as managing expenses to extend our cash runway to support the continued development of our lead product, Anaphylm, the first and only non-device-based orally delivered epinephrine product.

As a reminder, during the fourth quarter, we refinanced the 12.5% senior secured notes that had a maturity date of June 30, 2025. The new financing of $45 million by a large leading institutional investor was used to repay all outstanding obligations under the prior credit facility and for general corporate purposes. The notes are senior secured obligations of Aquestive and will mature on November 1, 2028. The notes bear interest at a fixed rate of 13.5% per year, payable quarterly. Principal will be repaid starting on June 30, 2026.

In connection with the financing transaction, the company entered into royalty agreements, granting the noteholders a tiered royalty between 1% and 2% of annual worldwide net sales of Anaphylm for a period of 8 years from the first sale of Anaphylm on a global basis. The noteholders are also entitled to a tiered royalty between 1% to 2% of annual worldwide net sales of Libervant until the earlier of the first sale of Anaphylm and 8 years from the first sale of Libervant. Importantly, the notes contain no revenue or cash covenants and no warrants for purchase of the company's stock.

The structure of this non-dilutive refinancing transaction maximizes our flexibility in the short term and reduces our cash requirements by approximately $28 million through June 30, 2025, the due date of the original credit facility. Despite very difficult market conditions, the investors' willingness to invest in our future represents an important step forward in the continued growth of Aquestive.

Now let's turn to the recap of our quarterly and full year financial results. Excluding the impact of prior year proprietary sales of Sympazan, total revenues increased $10.1 million in the fourth quarter 2022 to $13.2 million in the fourth quarter of 2023. This 31% increase was primarily due to a onetime milestone royalty payment of $1 million for Azstarys from Zevra Therapeutics and higher revenue from the company's 5 out-licensed products.

Total reported revenues were $13.2 million in the fourth quarter 2023, compared to $10.7 million in the fourth quarter 2022, an increase of 24%. For the fourth quarter 2023, compared to the prior period, we saw a 104% increase in license and royalty revenue, mostly due to the milestone licensing revenue for Azstarys from Zevra, a 23% increase in manufacturing and supply revenue due to increased manufacturing revenues of $3.2 million for Suboxone, offset by decreased revenues of $0.8 million for Sympazan and $0.3 million for Ondif for Hypera in Brazil and a 33% increase in co-development and research fees revenue.

For the full year 2023, excluding the impact of prior year proprietary sales of Sympazan, total revenues increased from $40 million for the year ended December 31, 2022, to $50.6 million for the year ended December 31, 2023, an increase of 26%. Total reported revenues were $50.6 million for the full year 2023, compared to $47.7 million for the full year 2022, an increase of 6%. The change was due to increase in manufacturer and supply revenue and license and royalty revenue, offset by the discontinuance of proprietary product sales of Sympazan subsequent to the out-licensing agreement with Assertio in October 2022.

Manufacture and supply revenue increased 20% or $7.4 million for the year ended December 31, 2023, compared to the same period in 2022. This change was due to increased revenues of $4.4 million for Suboxone, $2.1 million for Ondif and $0.6 million for Sympazan.

License and royalty revenues increased 129%, or $3 million, for the year ended December 31, 2023, compared to the same period in 2022. This change was due to $1.5 million in milestone licensing revenues for Azstarys from Zevra, increased licensing revenue of $0.6 million and royalty revenues of $0.7 million for Sympazan and increased royalty revenue of $0.3 million for Azstarys. Co-development and research fees increased 8%, or $0.1 million, for the year ended December 31, 2023, compared to the same period in 2022.

Proprietary product sales decreased $7.7 million for the year ended December 31, 2023, compared to the same period in 2022. This decrease was due to the discontinuation of Sympazan proprietary product sales revenue in the fourth quarter of 2022.

Our net loss for the fourth quarter of 2023 was $8.1 million or $0.12 loss per share. The net loss for the fourth quarter 2022 was $12.4 million or $0.23 loss per share. This reduction in net loss was driven by increases in revenue described above, decreases in selling, general and administrative expense, including severance costs, lower administrative costs in our commercial organization subsequent to the out-licensing of Sympazan, a decrease in research and development costs and expenses, partially offset by a one-time loss on extinguishment of debt of $1 million and higher noncash interest expense related to the amortization of debt discount on the refinancing of the 12.5% debt.

Our net loss for the full year 2023 was $7.9 million or $0.13 loss per share. The net loss for the full year 2022 was $54.4 million or $1.12 loss per share. The reduction in net loss was driven by other income of $14.5 million, which consisted of $6 million from the amendment to the Indivior Commercial Exploitation Agreement, $8.5 million from the patent litigation settlement with BioDelivery Sciences International; an increase in revenue, as previously described; a decrease in selling, general and administrative expense, including severance costs and significantly lower administrative costs in our commercial organization.

A decrease in research and development costs and expenses and lower noncash interest expense related to the KYNMOBI monetization transaction, partially offset by onetime loss and extinguishment of debt of $1.4 million and higher noncash interest expense related to the amortization of debt discount on the refinancing of the 12.5% debt.

Non-GAAP adjusted EBITDA loss was $2.8 million in the fourth quarter 2023, compared to $9.6 million loss in the fourth quarter 2022. Non-GAAP adjusted EBITDA loss, excluding adjusted R&D expenses, was $0.1 million in the fourth quarter 2023, compared to a non-GAAP adjusted EBITDA loss, excluding adjusted R&D expenses, of $5.6 million in the fourth quarter 2022.

Non-GAAP adjusted EBITDA loss was $11.6 million for the full year 2023, compared to a loss of $35.3 million in the full year 2022. The year-over-year change in non-GAAP adjusted EBITDA loss was driven by the items previously described.

Non-GAAP adjusted EBITDA income, excluding adjusted R&D expenses, was $1 million for the full year 2023, compared to a non-GAAP adjusted EBITDA loss, excluding adjusted R&D expenses, of $18.7 million for the full year 2022.

Cash and cash equivalents were $23.9 million as of December 31, 2023. Under the At-the-Market, or ATM facility, we accessed net proceeds of $3.7 million during the fourth quarter 2023 and $9 million for the full year 2023. The ATM facility has approximately $24 million available at December 31, 2023. In addition, during the year ended December 31, 2023, approximately 8.7 million common stock warrants were exercised with proceeds of approximately $8.3 million.

Our focus in 2024 will continue to be reporting topline data from our pivotal trial, advancement of our Anaphylm program and following our NDA with the FDA by the end of the year. As outlined in the press release issued last night after market close, our full year 2024 financial guidance is as follows: Total revenues of approximately $48 million to $51 million, and non-GAAP adjusted EBITDA loss of approximately $22 million to $26 million.

Please note, revenue guidance does not include any revenue for Libervant. In addition, our guidance for 2024 includes increased R&D investments related to the continued development and planned NDA filing of Anaphylm, the first orally administered epinephrine product.

I will now turn the line back to the operator to open the line for questions.

[Operator]

[Operator Instructions] The first question comes from François Brisebois with Oppenheimer.

[François Brisebois, analyst]

Congrats on the progress here. So just a couple for me here. Can you just help us -- we're 2 weeks away, can you just help us set maybe expectations around data? What should we be waiting for here in terms of PK/PD single and repeat dose here?

[Daniel Barber, executive]

Sure. Frank, well, I'll outline for you what we will be releasing from a package perspective, and then, I'll turn it over to Carl, who can tell you about what we, from our side, think success looks like.

From a package perspective, as we've shared over the last few months, we'll have all of the data from our pivotal study. So if you recall, there's a Part A, which is a repeat dose part, and a Part B, which is a single dose. We'll have all of that data, and we'll also have our findings from meeting with the FDA under a Type C meeting event. But let me pass it over to Carl who can tell you about, from our perspective, what we think success looks like.

[Carl Kraus, executive]

Sure. Thanks, Dan, and thanks for the question, Frank. The data we're expecting related to successful outcomes here would be; one, demonstration of sustainability of our pharmacokinetic and pharmacodynamic curves over the period of observation as well as biocompatibility demonstrating that we are able to achieve levels that are north of our RLP, our reference listed products. So those 2 items in conjunction with characterization of the safety of our product would, in our minds, demonstrate success.

[François Brisebois, analyst]

Okay. And in terms of the commercial potential here of Anaphylm, can you help us understand how big did maybe EpiPen get, and just maybe a breakdown? If you talk about peak sales over $1 billion, I believe that was worldwide. So maybe a breakdown of the market and the market potential, U.S. versus ex-U.S.

[Daniel Barber, executive]

Yes. So in terms of EpiPen peak sales at its height, I don't have that number. But the way we are looking at it is there's a couple of dynamics at play. One, you have a market that is growing, right, not just here in the U.S., but globally as the need for -- as unfortunately, severe allergic reactions and anaphylaxis growth, so does the need and the prevalence.

And two, as you look at the different healthcare systems around the world, there's more and more people who are gaining access to rescue medications for anaphylaxis. So -- and the work we've done, we do think on a global basis that the $1 billion mark is a reasonable one. In terms of how much of that is in the U.S. versus the rest of the world, I think we stay true to most of the industry that the U.S. is typically, by and far the larger part of the opportunity.

[François Brisebois, analyst]

And then when -- you just spent time at AAAAI, and we're talking about just having the product on you and the willingness to use the product versus -- obviously, versus an auto-injector. Is it that patients are just kind of waiting and waiting until kind of last minute to use the auto-injector? Or do a lot of patients not even use it? And I guess what I'm getting to is, would it be fair to say that the market might be bigger? If people take it earlier, they're probably more likely to reload and refill a prescription versus not taking it at all or waiting too long to take it. Is that fair?

[Daniel Barber, executive]

Yes. No. And Frank, and that kind of ties into your previous question, right? What I didn't say as I outlined the global opportunity is that the prevalence rate by far is larger than the use rate, meaning that as we know and as we talked about, people are simply not carrying rescue devices. So we do think as alternative delivery technologies like ours come into the market that people will be more willing to use and carry the product.

And it's funny you should mention AAAAI. I spent a lot of time at AAAAI talking with physicians and making sure that we truly understood not just their perspective, but the patient perspective. And it was reaffirming to hear back that our beliefs seem to hold true from a physician perspective, and that is by getting rid of the needle, by creating an easier product to carry, physicians do believe -- as I put in my remarks before, they do believe that there is the opportunity for more people to carry the products and have it with them when they need it.

[François Brisebois, analyst]

Okay. Great. Yes, that's -- we're clearly hearing that there's an unmet need, and it seems like a lot of people -- even the ones carrying, it seems like the products expired anyway.

[Operator]

The next question comes from Jason Butler with Citizens JMP Securities.

[Jason Butler, analyst]

Dan, you talked about the commercial prep work you're going to be doing, getting ready for a launch at the back end of '25. Can you maybe just talk about the work you can do between data and throughout the regulatory submission? And obviously, you're going to be gating your spend, but what's the kind of work that you can do in terms of physician-targeting, building awareness, et cetera, to get ready for a launch?

[Daniel Barber, executive]

Yes. No. And Jason, your -- the way you asked the question, actually, you put in 2 important elements, right, which is for us in 2024, and even the first part of 2025, the commercial spend will not be a large onerous amount that we can't handle. We do believe that given our cash position and the levers that we have in our business, that it's a very manageable set of activities.

In terms of what those activities are, as you alluded to, awareness is by far an important factor prior to launch. And one of the things that helps us in the dynamics that exist right now is not only is the market already growing, but some of our competitors in the marketplace are also focused on awareness. So by nature, just making people aware of the alternate -- of products that will be available to them and of the necessity of having a rescue product with them at all times helps as we look to come to the market.

In terms of the other activities that we will focus on, we will, of course, make sure we have the base infrastructure in our company, so think of people who are dealing with the payers, people who are on the medical affairs side, and we will, of course, make sure that our messaging is ready and clear as we get closer to launch.

[Jason Butler, analyst]

Got it. And then just briefly on 108, can you maybe just give us an idea at a high level what the target PK profile or absorption profile looks like for -- when we look ahead to data later this year?

[Daniel Barber, executive]

Sure. So for that one, I'll pass it over to Carl.

[Carl Kraus, executive]

Yes. The PK profile would be consistent with what we've been targeting all along, which is demonstration of a PK curve that is north of a reference listed drug for the duration of observation and it remains within the bracketing that has been discussed at last year's advisory committee, where we are north of at least the reference listed drug as well as staying within a reasonable bound on the bracket between ourselves and the auto-injectors.

[Daniel Barber, executive]

And Jason, I think Carl gave a really important point that we talk a lot about here, in the way he said that it will be north, the one place you don't want to be, we believe, is lower -- in that first 10 minutes in particular, lower than the manual IM. So that's a spot that everyone can look for in terms of where we're able to be above that market.

[Operator]

The next question comes from Andreas Argyrides with Wedbush.

[Andreas Argyrides, analyst]

Just a couple from us here. So looking ahead to the commercial opportunity for Anaphylm, how are you thinking about penetrating the various segments of the market outside of EpiPen and generics, which is currently less than $1 billion? Is the immediate goal to target patients who should carry and don't, those who are given a script and don't fill it? And what does the market look beyond that, those 2 segments? And then lastly, how are you thinking about positioning Anaphylm against competitors on the market?

[Daniel Barber, executive]

Sure. Andreas, nice to hear your voice. So I think the way to think about launching our products, I think, is very similar to the way other products have been launched in this space. Of all of the pieces and parts that all of us have to go through to bring a product to market, the launch is actually fairly simple. It's obviously all of the packaging to make sure the FDA is comfortable in getting through that work that we believe is a more difficult task.

In terms of penetrating, our launch process will be very straightforward. You first go after the people who are already using or carrying an EpiPen, who have a script, and then, you work your way into the segments where people have either gotten a script and didn't fill it, to your point, or used to carry a product and don't anymore or should be carrying a product and never have. So it is a sequence process that I would be surprised if our competitors didn't follow the same process.

In terms of positioning, I think we've been clear, but I'll make sure we say it the right way. When we look at our products, we think the single biggest advantage we have in the marketplace is that people -- we believe people are likely to carry it with them where they are not carrying a product today. And that's why, in my remarks before, I focused on this idea of not having to think about carrying our product, you just had it with you.

But clearly, there are other benefits of we do believe there is the potential for people to use the product faster or earlier in the disease state because it is an oral product. And we also believe that our scientific data, which shows a very rapid uptake of epinephrine, as you know, it has a very rapid median Tmax, is an important set of data that, particularly for the healthcare providers, will be an advantage compared to some of the other -- or could be an advantage compared to some of the other products that may be in the market.

[Operator]

Okay. Great. And looking forward to the upcoming data. Congrats on all the progress.

[Daniel Barber, executive]

Thanks, Andreas.

[Operator]

Next question comes from Thomas Flaten with Lake Street Capital Markets.

[Thomas Flaten, analyst]

Congrats on all the progress as well. Dan, we talked a lot about Anaphylm commercialization, but you did leave open the possibility of you guys perhaps launching Libervant later this year. Any commentary on what you've done or need to do and what timeframe we might think about if you go it alone with that?

[Daniel Barber, executive]

Sure. Good morning, Thomas, and I'm glad you brought Libervant up. There's a lot of excitement around Anaphylm, both outside and inside of our company, as there should be. But Libervant is an important product. And from an FDA perspective right now, all of the questions the FDA has asked we had answered, and we're awaiting the decision date. I think you have to remind people that there is an orphan drug challenge that could occur with this product. So we obviously want to get past the next couple of months and see how that unfolds.

Having said that, I do believe that there are appropriate epilepsy-focused companies who not only could do a good job with launching Libervant, but would be interested in launching Libervant. If those were to not unfold or we were not able to get the fair deal that we've talked about, we would launch the product, and I would point to the second half of 2024, as where we would look to do that.

[Thomas Flaten, analyst]

Great. Appreciate that. And a quick one for Ernie. Gross margins were kind of all over the place this past year. And I'm guessing fourth quarter was a little bit of an uptick for some one-time royalty payments. Anything you can help us there with respect to gross margins, Ernie?

[Ernie Toth, executive]

Thomas, good to talk to you. Certainly, the biggest item is the recognition of the milestone payment from Zevra for Azstarys. So that $1 million in the fourth quarter, there was no cost associated. So that would have an impact on gross margin.

[Operator]

The next question comes from Ram Selvaraju with H.C. Wainwright.

[Raghuram Selvaraju, analyst]

Congrats on all the progress. Can you hear me?

[Daniel Barber, executive]

Yes, Ram.

[Raghuram Selvaraju, analyst]

So just very quickly, with respect to Anaphylm. I was just wondering if you had any updated thoughts regarding the regulatory outlook for these kinds of alternative delivery epinephrine products, particularly given recent developments with neffy? And if you see any additional perspectives there for Anaphylm as you gear up to the submission of the NDA?

[Daniel Barber, executive]

Yes. Nice to hear your voice, Ram. From our perspective, in our experience with the FDA from the first time we spoke with them about a product for anaphylaxis through to today, we believe the FDA has been very consistent. And we actually think the FDA is doing their job. They want to make sure if we or anyone else are creating a product that is a rescue product, that has the potential to save lives, that we do all the work we're supposed to do to make sure that it works the way it's supposed to work under all conditions of use. So we understand that's a big responsibility for us and our competitors, and we understand that, which is why our package is robust, and we are confident that the FDA will continue to be consistent in how they look at the market and how they think about approval.

In terms of our competitor, obviously, we just see what is public just like you. And our read through is that it appears from a distance like the FDA is being consistent with them as well, at least when we think about the comments given to us, and then what we hear coming through the public domain from competitors.

[Raghuram Selvaraju, analyst]

Okay. Great. Just also with respect to kind of optimizing the value of Anaphylm as a franchise, do you have any sort of broader strategic thoughts regarding that, particularly as this pertains to any potential opportunities for Anaphylm as a product that may exist outside of the United States and how you might be able to access those?

[Daniel Barber, executive]

Yes. No, that's a really good point, Ram. From -- given where we are in our company evolution, and this goes back to the idea of long-term growth, right? We do not have designs at this point in time to launch on our own the product outside of the U.S. at all. So we -- like we have done with Libervant, we will be, and actively are, talking with potential partners in different markets around the world.

For us, the nice thing about where we are right now is we don't have to find a partner tomorrow or this quarter or anything like that. We can make sure we find the right partner to get through the regulatory process in different markets and also support the product once it has been launched. But yes, an important part of the Aquestive story for both Libervant and Anaphylm is the ex-U.S. potential.

[Raghuram Selvaraju, analyst]

Okay. And lastly, and I'm just asking this as a housekeeping item. I'm sure all of you are very well aware of the Change Healthcare cyber attack that occurred last month. Just wanted to ask whether your guidance for 2024 includes any potential impact that you may see? I don't even know whether that's really relevant in your case from the Change Healthcare cyber attack and the disruptions to processing of prescriptions.

[Daniel Barber, executive]

Yes. No, that -- for 2024, I don't see any impact to Aquestive, but the only comment I would give you for our IT is, just even as a company, we do all of the things you would expect a public company to do to protect from cyber attacks that could affect our business.

[Operator]

Next question comes from James Molloy with Alliance Global Partners.

[James Molloy, analyst]

I had a question on the -- a couple of questions, the Anaphylm Human Factors program. Can you walk us through what that encompasses? And then can you talk a little bit about outreach to advocacy or allergy networking groups in advance of launch and how that sort of -- how that has played out?

[Daniel Barber, executive]

Yes. Good morning, James -- or Jim. I'll take the second question first, and then, I'll hand it over to Carl, who can talk to you about the Human Factors program. From an advocacy perspective, as you probably know, in this space, there are roughly 4 advocacy groups that are at a national level, and all of them do great work. I mean, just phenomenal work where they're looking to make sure patients' rights are protected and access to drug is protected and all of the things you would want.

So we do think that having a good relationship and supporting the various advocacy groups in the space is important. We have done that. We actually -- if you look at even last year, we did that even more than most of our competitors. So that shows you how seriously we take it. We met with all of them at AAAAI just a few weeks ago, and we'll continue to support them as best we can as they do the good work that they do.

But with that, I'll turn it over to Carl on the Human Factors.

[Carl Kraus, executive]

Sure. Thanks, Dan, and thanks for the question, Jim. As far as our Human Factors program goes, as you're probably aware, these programs are an iterative process, and ours is no different. We are evaluating how adults, pediatrics and their caregiver patients might engage our technology in a pathway where we better understand interactions between our technology and the patient. So that's a process that goes through a typical formative and then validated protocol, which we have gone through great lengths to support, and we are in the midst of completing and progressing those efforts between ourselves and the FDA with ongoing dialogue, so that's an ongoing iterative process that is on schedule.

[James Molloy, analyst]

All right, great. Maybe 1 quick follow-up. I know that certainly then you get plenty on your plate to keep you busy coming up. But looking beyond the horizon, what do you see as potential? Are you seeing any potential acquisition candidates or things to bring on board to bolster the pipeline?

[Daniel Barber, executive]

Sure. Well, I would first look at where our pipeline is. If you look beyond Anaphylm, we are definitely excited about the opportunity with AQST-108 as a topical cream. I know we haven't spent a lot of time with you or the public on what we see in that space, but we are actively doing work. And in the second half of the year, we'd love to talk about it more. We're actually in the clinic right now with that program, and we're looking forward to having more to say.

In terms of the acquisition world, I think we have a lot on our plate right now to focus on, and we want to deliver Anaphylm on time, on schedule with the right results and the right package. So obviously, we'll be opportunistic, like any public company, but there -- that is not our focus right now.

[Operator]

I show no further questions at this time. I would now like to turn the call back to Dan Barber for closing remarks.

[Daniel Barber, executive]

Thank you, Michelle. Thank you for joining us today. This is an exciting time for Aquestive, and we're looking forward to speaking with you again in the next couple of weeks. And with that, I hope all of you have a good day.

[Operator]

This concludes today's conference call. Thank you for your participation. You may now disconnect.