AQST - Aquestive Therapeutics: Developing A Better Solution To A $1 Billion/Year Anaphylaxis Problem

2023-07-25 20:37:04 ET

Summary

• Anaphylm, epinephrine sublingual film is a better solution to existing and in-development epinephrine formulations to treat anaphylaxis, a $1 billion/year market.
• Pharmacokinetic studies have shown faster onset of action and comparable serum levels of epinephrine as existing injectable formulations.
• The company is finalizing the pivotal study protocol and NDA submission is expected next year, with potential approval.
• The company's stock is undervalued on a forward EV/sales basis, just considering the revenue from existing products, excluding future potential revenue from Anaphylm and Libervant.

Aquestive Therapeutics ( AQST ) was founded in 2004 and is based in Warren, NJ. The company is developing oral or sublingual modes of administration for existing drugs, thus providing convenient alternative modes of administration for patients. The company has developed PharmFilm technology for high-performance drug delivery through the sublingual, lingual, or buccal routes.

Existing 5 commercialized products using PharmFilm technology

The company has five commercialized products, which are marketed through its partners in the United States and worldwide. These include Sympazan (clobazam) oral film and Suboxone sublingual film. The company has also received FDA tentative approval for Libervant, diazepam buccal film for acute treatment of seizures in inpatients 12 years of age and more. The company is planning to out-license Libervant in China in the near term. The US launch is planned for 2027.

Anaphylm, a better solution to a $1 billion problem

The company is developing Anaphylm, a sublingual Epinephrine film to treat anaphylactic reactions. The sublingual route has the advantage of rapid onset of action with direct entry into the systemic circulation. This is the first orally administered formulation of epinephrine to treat this potentially fatal condition. The product candidate is competing with epinephrine auto-injectors like Epipen and epinephrine intramuscular injections, which are commonly used for the emergency treatment of anaphylaxis.

Approximately 32 million people in the US are at chronic risk for acute anaphylaxis. The target addressable market is approximately $1 billion per year. Epinephrine auto-injectors are bulky and hard to carry. In a survey, 52% of patients with a history of anaphylaxis had never received an Epinephrine auto-injector prescription. In the same survey, 60% of patients did not have an Epinephrine auto-injector currently available. 25 to 50% of patients refuse treatment with Epinephrine autoinjectors due to reluctance to needles. 25 to 30% of patients and their caregivers fail to properly administer injectable Epinephrine when needed. Recently, FDA has also highlighted the barriers to injectable Epinephrine use in a public document.

The company's solution to this problem is Anaphylm, Epinephrine sublingual film which is developed using Pharmfilm technology. It is the first and only non-device-based Epinephrine formulation and can be conveniently carried in a pocket or wallet. It is also more convenient to carry and administer than existing or newer products in development like Epinephrine nasal spray. The company has patent applications to extend its intellectual property until 2042.

Pharmacokinetic, PK studies showed faster onset of action than existing therapies. The median time to peak concentration or Tmax of Anaphylm was 12 minutes compared to 23 minutes for EpiPen and 50 minutes for 0.3 mg intramuscular injection.

The therapy showed similar exposure to Epinephrine auto-injectors during the first 10 minutes after dosing. That means that the Cmax levels were bracketed by currently approved treatments as recommended by the FDA.

The next steps are to refine administration instructions in the ongoing pilot study, AQ109103, and to finalize the pivotal study protocol, which is expected to be submitted to the FDA this quarter. The company is targeting NDA submission for FDA approval in the second half of next year and a potential commercial launch in 2024.

Experienced Management for effective commercialization:

CEO Dan Barber earlier served as the Chief Operating Officer of the company and held various positions in Quest Diagnostics in the corporate planning and international divisions. SVP of Operations Cassie Jung held various positions in areas like Quality Assurance, Alliance Management, Clinical Operations, and Portfolio Management at the company since 2004. Chief Medical Officer Dr. Kraus was a Medical Officer for the Center of Drug Evaluation and Research, CDER, and was the founder and CEO of Arrevus, which was acquired by Aceragen. Chief Commercial Officer Ken Marshall served in various roles at GSK ( GSK ) for 17 years including the Vice President of Marketing for the Neurology, Urology, Lifecycle, and HIV business units. He also served as the US President and Global Chief Marketing Officer for Aerocrine Inc.

The company is undervalued based on just the existing revenue, excluding Anaphylm

The company had $48 million in revenue in 2022. The net income was $8.1 million in Q1 2023. The management’s forecast for 2023 revenue is $42M-$48M. Cash reserves are $27 million at the end of Q1 this year. Long-term debt was $25.2 million at the end of Q1 and the company is working on reducing it. The long-term debt/equity ratio is acceptable at around 22% (usually less than 50% is acceptable). Cash reserves seem adequate for the next 12 months considering that the net operating cash flow was positive in the last 12 months.

Looking at relative valuation, the forward EV/sales ratio is 2.6, which is lower than the sector average of around 4. The current enterprise value of the company is just $115 million, which is low just considering the existing revenue. The company has a shot at capturing market share in the $1 billion/year Epinephrine for anaphylaxis market, considering the convenience, faster onset of action, comparable maximum serum levels of Anaphylm vs. existing Epinephrine products, and convenience for repeated dosing if needed. Another opportunity for the company is Libervant, which is targeting acute rescue treatment of seizures, a market expected to reach $4.3 billion/year by 2027.

The mean Wall Street analyst price target on the stock is $6 or 270% upside potential (source: Seeking Alpha). The most recent top-ranked Wall Street analyst price target is $3 or 87% upside potential from Wedbush 18 days ago.

The stock has gone up 3x this year since March and has pulled back around 35%, thus offering a good entry point with a time frame of at least 1 to 1.5 hours till Anaphylm approval. Rating Buy.

Risks in the investment

Potential risks in this investment include a delay in the timeline for Anaphylm NDA submission due to additional requests from the FDA which could cause the stock price to fall. Anaphylm is competing with several products including a nasal spray in development and may not be able to gain significant market share after commercialization. Sales of existing products may not show growth while an increase in operating expenses due to factors like commercialization of newer products may cause the net income to be negative. The company is expected to need more capital for the commercialization of Anaphylm after launch resulting in dilution. Investing in developmental-stage biotech/pharma stocks is risky and may not be suitable for all investors. It is possible to lose all the capital invested. This note represents my own opinion and is not professional investment advice. Please conduct your own research before making any investing decisions.

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