Delaware		82-3827296
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)
30 Technology Drive, Warren, NJ		07059
(Address of Principal Executive Offices)		(Zip Code)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001 per share		AQST		NASDAQ Global Market

Large accelerated filer  ☐	Accelerated filer ☐
Non-accelerated filer  ☒	Smaller reporting company ☒
	Emerging growth company ☒

		Page No.
PART I		3
Item 1.	Business	4
Item 1A.	Risk Factors	22
Item 1B.	Unresolved Staff Comments	58
Item 2.	Properties	58
Item 3.	Legal Proceedings	58
Item 4.	Mine Safety Disclosures	59
PART II		59
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	59
Item 6.	Selected Financial Data	60
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	61
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	72
Item 8.	Financial Statements and Supplementary Data	72
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	72
Item 9A.	Controls and Procedures	72
Item 9B.	Other Information	72
PART III		73
Item 10.	Directors, Executive Officers and Corporate Governance	73
Item 11.	Executive Compensation	80
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	88
Item 13.	Certain Relationships and Related Transactions, and Director Independence	90
Item 14.	Principal Accounting Fees and Services	92
PART IV		93
Item 15.	Exhibits, Financial Statement Schedules	93

Item 1.

Business

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preferred alternative to more invasive drug administration methods such as injection, rectal or nasal applications;

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faster, or at least equivalent, onset of action;

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ease of administration and availability (no device required, no gel to transport);

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direct absorption into the bloodstream reducing or avoiding “first pass” effects in the liver;

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reduced gastrointestinal, or GI, side effects;

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positive dosing outcomes, especially for patients with physical (e.g., dysphagia) or psychological barriers to other methods of drug administration;

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stable, durable, portable and quick dissolving (with or without water);

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customizable delivery routes for tailored pharmacokinetic, or PK, profiles (buccal, sublingual or lingual); and

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customizable taste profiles.

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Sympazan® – an oral soluble film formulation of clobazam used for the treatment of seizures associated with a rare, intractable form of epilepsy known as Lennox-Gastaut syndrome, or LGS, was approved by the FDA on November 1, 2018.  We commercially launched Sympazan in December 2018. Sympazan was launched as a precursor and complement to our product candidate LibervantTM and continues to progress on key performance metrics including prescriber growth, repeat prescribers, quarterly growth in retail shipments and covered lives. We developed Sympazan as an alternative to the Onfi® brand and generic clobazam products, which were previously only available in either tablet form or liquid suspensions. LGS patients often have difficulty swallowing pills and large volume suspensions lead to uncertain and inconsistent dosing. These challenges increase the burden of care, particularly for patients that have difficulty swallowing or who may be combative or resistant during treatment administration. We believe that Sympazan addresses these treatment obstacles because it is mucoadhesive, dissolves rapidly and cannot be easily spit out.

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Libervant™ – a buccally, or inside of the cheek, administered soluble film formulation of diazepam is our most advanced proprietary investigational product candidate, which we intend to self-commercialize, subject to FDA approval for U.S. market access.  Aquestive is developing Libervant as an alternative to device-dependent rescue therapies currently available to patients with refractory epilepsy, which are a rectal gel and newly approved nasal sprays. In late September 2020, we received a complete response letter (“CRL”) from the FDA focusing on dosing issues in certain weight groups. At a Type A meeting with the FDA in November, the FDA confirmed that these issues may be addressed by utilizing modeling and simulations for an updated dosing regimen. The Company resubmitted a revised weight-based dosing regimen with modeling and simulations in December 2020. As recently announced, the FDA provided feedback on the December submission which provided clarity regarding the information that the Agency expected to see in the Company’s population pharmacokinetic model and safety data as it relates specifically to the patient population included in the studies. The Company will be working on the NDA to provide a resubmission in a form that the Company believes will be acceptable to the FDA. Based upon the FDA’s feedback at the Type A meeting as well as further guidance from the Agency, the Company continues to believe that no further clinical studies are necessary. The Company expects to resubmit its NDA at the end of the second quarter of 2021. Once the NDA is resubmitted, the Company anticipates a six month review process.  We are seeking to demonstrate that Libervant will, if approved by the FDA, represent a “major contribution to patient care” within the meaning of FDA regulations and guidance, as compared to available treatment options, as the first, non-device delivered, oral diazepam-based product available to manage seizure clusters in epilepsy patients. However, overcoming the orphan drug marketing exclusivity is difficult to establish, with limited precedent, and there can be no assurance that the FDA will agree with our position seeking to overcome such marketing exclusivity and approve Libervant for U.S. market access. Further, there can be no assurance that a competitor will not obtain other FDA marketing exclusivity that blocks U.S. market access for Libervant. Any failure to obtain FDA approval of and to demonstrate clinical superiority for Libervant would have a material adverse effect on our business, financial condition and results of operations in 2021 and later. More details on this product approval are described in the “Competition” section of this Item I. Business of this Form 10-K.

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AQST-108-Sublingual Film (or SF) – using Aquestive’s proprietary PharmFilm® technologies, is a “first of its kind” oral sublingual film formulation delivering systemic epinephrine that is in development for the treatment of anaphylaxis. The Company submitted an IND for AQST-108-SF to the FDA on June 23, 2020.  The FDA confirmed that the drug candidate will be reviewed under the 505(b)(2) regulatory approval pathway. We expect that this pathway will provide the means to more expedient and less costly development and filing. We recently completed a second pharmacokinetic (PK) trial for AQST-108-SF. The Phase 1 study featured a 4-treatment crossover design that compared the pharmacokinetics, safety and pharmacodynamics of epinephrine administered in a sublingual film to that of epinephrine administered via both subcutaneous and intramuscular injections in 28 healthy adult subjects.  Based on top-line results, AQST-108-SF was generally well-tolerated, with adverse events observed that are consistent with the known adverse events profile for epinephrine. AQST-108-SF also achieved a similar time to maximal concentrations, or Tmax, when compared to both the subcutaneous and intramuscular injections of epinephrine. The first PK trial for AQST-108-SF was a single ascending dose study that compared pharmacokinetics, safety and pharmacodynamics of epinephrine administered in a sublingual film at ascending dose levels in 6-12 healthy adult subjects per dose level. In this study AQST-108-SF was generally well tolerated, with adverse events observed that are consistent with the known adverse events profile for epinephrine. The data from both this Phase 1 PK trial and the previous trials collectively demonstrate that AQST-108-SF can consistently deliver epinephrine sublingually and, after receiving AQST-108-SF, all subjects had measurable plasma concentrations of epinephrine. We have already submitted our dossier to Health Canada for a third Phase 1 PK trial and plan on commencing the study as soon as we receive the necessary documentation.  Epinephrine is the standard of care in the treatment of anaphylaxis and is currently administered via subcutaneous or intramuscular injection. The current market leader is a single-dose, pre-filled automatic injection device. As a result of administration via subcutaneous or intramuscular injection, many patients and their caregivers are reluctant to use currently available products, resulting in increased hospital visits and overall cost of care to treat anaphylactic events. The data from the Company’s previously completed Phase 1 dose escalation study demonstrated that AQST-108-SF achieved similar ranges of mean values of maximum concentration (Cmax) and time to reach maximum concentration (Tmax) to that reported for injectables provided a greater total exposure (AUC0-t; area under the curve) than that reported for the injectables and had less interpatient variability when compared to the degree of variation (CV%) data reported for injectables, and was well tolerated, with no study participants discontinuing participation due to an adverse event. We believe that, as a result of its sublingual administration, AQST-108-SF will improve patient compliance and lower the total cost of care.

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AQST-305-SF – is a sublingual film formulation of octreotide, a small peptide that has a similar pharmacological profile to natural somatostatin, for the treatment of acromegaly, as well as severe diarrhea and flushing associated with carcinoid syndrome.  Acromegaly is a hormone disorder that results in the overproduction of growth hormone in middle-aged adults. Octreotide is the standard of care for the treatment of acromegaly.  The current market leader, Sandostatin®, is administered via deep subcutaneous or intramuscular injections once a month.  This monthly treatment regimen can result in loss of efficacy toward the end of the monthly treatment cycle.  We are developing AQST-305 as a non-invasive, pain-free alternative to Sandostatin to reduce treatment burden, healthcare costs and the potential loss of efficacy in the treatment cycle.  AQST-305 has shown promising preclinical and human proof of concept results.  While we focus our efforts on Libervant and AQST-108-SF in the short-term, we have taken the necessary steps to prepare AQST-305-SF for additional research trials.

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Suboxone® – a sublingual film formulation of buprenorphine and naloxone, respectively an opioid agonist and antagonist, that is marketed in the United States and internationally for the treatment of opioid dependence. Suboxone Sublingual Film was launched by our licensee, Indivior Inc., or Indivior, in 2010. Suboxone Sublingual Film is the most prescribed branded product in its category and was the first sublingual film product for the treatment of opioid dependence. We are the sole and exclusive supplier and manufacturer of Suboxone Sublingual Film and have produced over 2.2 billion doses of Suboxone since its launch in 2010.  As of January 31, 2021, Suboxone branded products retain approximately 40% film market share as generic film-based products have penetrated this market.  We have filed patent infringement lawsuits against certain companies relating to generic film-based products for buprenorphine-naloxone.  More details regarding these lawsuits are described in Part II Item 8. Financial Statements and Supplementary Data, Note 20. Contingencies.

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Exservan® (riluzole) – has been developed, utilizing our proprietary PharmFilm technology, for the treatment of amyotrophic lateral sclerosis (ALS).  We believe that Exservan, via our orally administered dosage form, can bring meaningful assistance to patients who are diagnosed with ALS and face difficulties swallowing traditional forms of medication. Exservan was approved by the FDA on November 22, 2019. During the fourth quarter of 2019, we announced the grant of a license to Zambon S.p.A. for the development and commercialization of Exservan Oral Film in the European Union (EU) for the treatment of ALS. Zambon is a multinational pharmaceutical company with a focus on the CNS therapeutic area. Under the terms of the license agreement, an upfront payment was paid to Aquestive for the development and commercialization rights of Exservan in the EU, and Aquestive will be paid development and sales milestone payments and low double-digit royalties on net sales of the product in the EU.  Zambon is responsible for the regulatory approval and marketing of Exservan in the countries where Zambon seeks to market the product, and Aquestive will be responsible for the development and manufacture of the product.

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KYNMOBI®– a sublingual film formulation of apomorphine, which is a dopamine agonist developed to treat episodic off-periods in Parkinson’s disease. We licensed our intellectual property to Cynapsus Therapeutics, Inc., a company that was acquired by Sunovion Pharmaceuticals Inc., or Sunovion, for the commercialization of KYNMOBI under an Agreement dated April 1, 2016, as amended (the “Sunovion License Agreement”).  KYNMOBI was approved by the FDA on May 21, 2020 and commercially launched by Sunovion in September 2020. On November 3, 2020, we entered into a Purchase and Sale Agreement (the “Monetization Agreement”) with MAM Pangolin Royalty, LLC, an affiliate of Marathon Asset Management (“Marathon”).  Under the terms of the Monetization Agreement, we sold all of our contractual rights to receive royalties and milestone payments due under the Sunovion License Agreement related to Sunovion’s apomorphine product, KYNMOBI®. Through December 31, 2020, the Company received $50.0 million in gross proceeds pursuant to the Monetization Agreement, inclusive of an upfront payment of $40.0 million and the achievement of the first milestone payment of $10.0 million. Under the Monetization Agreement, additional aggregate contingent payments of up to $75.0 million may be due the Company upon the achievement of worldwide royalty and other commercial targets within a specified timeframe, which could result in total potential gross proceeds under the Monetization Agreement of $125.0 million.

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Zuplenz – an oral soluble film formulation of ondansetron, a 5-HT antagonist approved for the treatment of nausea and vomiting associated with chemotherapy and post-operative recovery. Ondansetron is available as branded and generic products as intravenous injections, intramuscular injections, orally dissolving tablets, oral solution tablets, and film. We licensed commercial rights for Zuplenz to Hypera in Brazil. We licensed commercial rights for Zuplenz to Fortovia Therapeutics (previously Midatech Pharma PLC) in the United States, Canada, and China. Fortovia launched Zuplenz in the United States in 2015. We had been the sole and exclusive manufacturer of Zuplenz for Fortovia. On August 31, 2020 Fortovia filed a Chapter 11 bankruptcy proceeding in the Bankruptcy Court for the Eastern District of North Carolina.  On January 29, 2021, the Bankruptcy Court approved an agreement pursuant to which the license and supply agreement between Aquestive and Fortovia was terminated, and all rights to commercialize Zuplenz returned to us, effective January 30, 2021. While not expected to be a material product for the Company, we are seeking a new partner to commercialize Zuplenz in the United States.

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completion of preclinical laboratory and animal testing and formulation studies in compliance with the FDA’s current good laboratory practice, or GLP, regulations;

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submission to the FDA of an Investigational New Drug, or IND, application for human clinical testing which must become effective before human clinical trials may begin in the United States;

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approval by an independent institutional review board, or IRB, at each clinical trial site before each trial may be initiated;

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performance of adequate and well-controlled human clinical trials in accordance with current good clinical practices, or GCP, to establish the safety and efficacy of the proposed drug product for each intended use;

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submission to the FDA of a New Drug Application, or NDA;

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satisfactory completion of an FDA pre-approval inspection of the facility or facilities at which the product is manufactured to assess compliance with the FDA’s current good manufacturing, or cGMP, regulations to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity;

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satisfactory completion of a potential review by an FDA advisory committee, if applicable; and

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FDA review and approval of the NDA.

Phase 1	In Phase 1, through the initial introduction of the drug into healthy human subjects or patients, the drug is tested to assess metabolism, pharmacokinetics, pharmacological actions, side effects associated with increasing doses, and, if possible, early evidence on effectiveness.
Phase 2	Phase 2 usually involves trials in a limited patient population to determine the effectiveness of the drug for a particular indication, dosage tolerance and optimum dosage, and to identify common adverse effects and safety risks.
Phase 3	Phase 3 trials are undertaken to obtain the additional information about clinical efficacy and safety in a larger number of patients, typically at geographically dispersed clinical trial sites, to permit the FDA to evaluate the overall benefit-risk relationship of the drug and to provide adequate information for the labeling of the drug. In most cases, the FDA requires two adequate and well controlled Phase 3 clinical trials to demonstrate the efficacy of the drug. A single Phase 3 trial with other confirmatory evidence may be sufficient in rare instances where the study is a large multicenter trial demonstrating internal consistency and a statistically persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or prevention of a disease with a potentially serious outcome and confirmation of the result in a second trial would be practically or ethically impossible.

Item 1A.

Risk Factors

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we have incurred significant operating losses since inception and cannot assure you that we will ever achieve or sustain profitability;

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our business and operations may be adversely affected by the COVID-19 pandemic;

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we may fail to obtain regulatory approvals to market our products in the United States or in other countries;

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we may fail to obtain orphan drug status or other marketing exclusivity approvals for our product candidates;

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we will need to raise substantial funds in the future, and these funds may not be available on acceptable terms or at all. A failure to obtain this necessary capital when needed could force us to delay, limit, scale back or cease some or all operations;

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the development of pharmaceutical products involves a lengthy and expensive process, with an uncertain outcome.  We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of any product;

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if our competitors are better able to develop and market products for the diagnosis and treatment of diseases of the central nervous system that are safer, more effective, less costly, easier to use or otherwise more attractive than our Pharmfilm technology, our business will be adversely impacted;

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even if our products are approved for commercial sale, if we are unable to expand our sales and marketing infrastructure, we may not be successful in commercializing our products in the United States;

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our ability to commercialize our product candidates will depend in part on the extent to which reimbursement will be available from government and health administration authorities, private health maintenance organizations and health insurers, and other healthcare payors;

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we have entered into, and may enter into collaborations, licensing arrangements, joint ventures, strategic alliances or partnerships with third-parties that may not result in the development of commercially viable products or the generation of significant future revenues;

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we are and will be dependent on third-party contract research organizations to conduct all of our clinical trials.  If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, if the third parties need to be replaced or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our preclinical development activities or clinical trials may be extended, delayed, suspended or terminated and we may not be able to obtain regulatory approval for any of our product candidates;

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our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel;

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our ability to protect our intellectual property and proprietary technology is uncertain;

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we may be subject to damages resulting from claims that we, or our employees, have wrongfully used or disclosed alleged trade secrets of our competitors or are in breach of non-competition or non-solicitation agreements with our competitors;

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our products and operations are subject to extensive governmental regulation, and failure to comply with applicable requirements could cause our business to suffer; and

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if we issue more shares of our Common Stock to raise capital, our current stockholders will incur substantial dilution.

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conducting clinical trials of our product candidates;

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seeking regulatory approval for any of our product candidates that successfully complete clinical development;

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commercialization activities, including product sales, marketing, manufacturing and distribution, for our products, if approved;

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maintaining, expanding and protecting our intellectual property portfolio;

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acquiring or in-licensing new technologies or development-stage or approved products;

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adding clinical, scientific, operational, financial, sales, marketing, medical and management information systems personnel, including personnel to support our product development and commercialization efforts and to support our transition to operations as a public company; and

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experiencing incremental costs due to delays or encountering any issues with any of the above, including, but not limited to, failed or not fully successful trials, complex results, safety issues or other regulatory challenges.

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focus on the approval of Libervant for marketing in the U.S. and, subsequently, if approved, which we cannot assure, its commercialization,

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continue to clinically develop AQST-108-SF along the 505(b)(2) approval pathway, having begun PK clinical trials during the third quarter of 2020, subject to any delay from the coronavirus pandemic; and

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continue to grow Sympazan revenues as a precursor and complement to the eventual launch of Libervant, if approved for U.S. market access, which we cannot assure.

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the timing of FDA or any other regulatory approval, delay in any FDA or other regulatory approvals, or failure to obtain any such FDA or other regulatory approvals;

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competitor’s product candidates obtaining FDA or other regulatory approval, which may include orphan drug market exclusivity for seven years in the U.S., before our product has received any such regulatory approval and/or orphan drug exclusivity;

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the timing of process validation for particular product candidates;

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the timing of product launches and market acceptance of such launched products;

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changes in the timing of and the amount we spend to research, develop, acquire, license or promote new product candidates;

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the timing, amount we spend on, and outcome of our research, development, preclinical studies and clinical trial programs;

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serious or unexpected health or safety concerns related to our products or product candidates;

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the introduction of new branded and generic products by others that render our product candidates obsolete, subject to greater competition or noncompetitive;

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our ability to maintain selling prices and gross margins on our commercial products;

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our ability to comply with complex governmental regulations applicable to many aspects of our business;

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changes in coverage and reimbursement policies of health plans and other health insurers, including changes to Medicare, Medicaid and similar government healthcare programs;

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increases in the cost of raw materials used to manufacture our commercial products and product candidates;

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manufacturing and supply interruptions, including product rejections or recalls due to failure to comply with manufacturing specifications or current Good Manufacturing Practices;

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timing of revenue recognition related to our collaboration agreements;

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our ability and the significant cost to protect our intellectual property and avoid infringing the intellectual property of others and any adverse developments in any related legal proceeding or in other legal proceeding of any nature; and

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the outcome and cost of existing or possible future litigation with third parties.

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we may have difficulty satisfying our obligations with respect to our existing indebtedness including the repayment of such indebtedness;

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we may have difficulty obtaining financing in the future (and we have substantial restrictions on incurring any additional indebtedness under our current debt instruments) for working capital, capital expenditures, acquisitions or other purposes;

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we will need to use a substantial portion of our available cash flow to pay interest and principal on our debt, which will reduce the amount of money available to finance our operations and other business activities;

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we may be more vulnerable to general economic downturns and adverse industry conditions;

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if cash flows from product sales and revenues from licensed product or collaborative arrangements are insufficient to satisfy our obligations with respect to our existing indebtedness, we may be forced to seek to sell assets (subject to obtaining consent under the Indenture) or seek additional capital, which we may not be able to accomplish on favorable terms, if at all;

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we could be limited in our flexibility in planning for, or reacting to, changes in our business and in our industry in general;

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we could be placed at a competitive disadvantage compared to our competitors that have less debt, less debt restriction or less restrictive debt covenants;

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our failure to comply with the financial and other restrictive covenants in our debt instruments which, among other things, limits our ability to incur additional debt and sell or dispose of assets, could result in an event of default that, if not cured or waived, would have a material adverse effect on our business or prospects; and

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our tangible and intangible assets, including our intellectual property, are subject to first priority liens and may be used to satisfy our outstanding debt.

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the FDA disagreeing as to the design, protocol or implementation of our clinical studies;

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the delay or refusal of regulators or institutional review boards, or IRBs, to authorize us to commence a clinical trial at a prospective trial site;

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changes in regulatory requirements, policies and guidelines;

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delays or failure to reach an agreement on acceptable terms with prospective clinical research organizations, or CROs, and clinical trial sites;

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the inability to enroll or delays enrolling a sufficient number of patients in trials, particularly in orphan indications, to observe statistically significant treatment effects in the trial;

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having clinical sites deviate from the trial protocol;

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negative or inconclusive results from ongoing preclinical studies or clinical trials, which may require us to conduct additional preclinical studies or clinical trials or to abandon projects that we had expected to be promising;

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reports from preclinical testing of other similar therapies that raise safety or efficacy concerns;

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regulators or IRBs requiring that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or safety concerns, among others;

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lower than anticipated retention rates of patients and volunteers in clinical trials;

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our CROs or clinical trial sites failing to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all, deviating from the protocol or dropping out of a trial;

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delays in establishing the appropriate dosage levels; and

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exceeding budgeted costs due to difficulty in accurately predicting costs associated with clinical trials.

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the timing of market introduction of the product candidate as well as competitive products;

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the clinical indications for which the product candidate is approved;

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the potential and perceived advantages of such product candidate over alternative treatments;

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favorable pricing and the availability of coverage and adequate reimbursement by third-party payors and government authorities;

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relative convenience and ease of administration;

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any negative publicity related to our or our competitors’ products that include the same active ingredient;

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the prevalence and severity of adverse side effects, including limitations or warnings contained in a product’s FDA-approved labeling; and

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the effectiveness of sales and marketing efforts.

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the efficacy and safety of our products and product candidates;

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the time it takes for our product candidates to complete preclinical and clinical development and receive marketing approval;

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our ability to maintain a good relationship with regulatory authorities;

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our ability to commercialize and market any of our product candidates that receive regulatory approval;

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the price of our products relative to pricing of branded or generic competitors;

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whether coverage and adequate levels of reimbursement are available under private and governmental health insurance plans, including Medicare and Medicaid;

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our ability to protect intellectual property rights related to our products and product candidates;

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our ability to manufacture on a cost-effective basis and sell commercial quantities of our products and product candidates that receive regulatory approval; and

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acceptance by physicians and other healthcare providers of any of our products and product candidates that receive regulatory approval.

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a covered benefit under its health plan;

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appropriate and medically necessary for the specific condition or disease;

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cost effective; and

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neither experimental nor investigational.

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the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, in return for the purchase, recommendation, leasing or furnishing of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand, and prescribers, purchasers and formulary managers on the other. The Patient Protection and Affordable Care Act, as amended, or the PPACA, amended the intent requirement of the federal Anti-Kickback Statute. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it;

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federal civil and criminal false claims laws, including, without limitation, the False Claims Act, and civil monetary penalty laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid or other government payors that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government. The PPACA provides, and recent government cases against pharmaceutical and medical device manufacturers support, the view that federal Anti-Kickback Statute violations and certain marketing practices, including off-label promotion, may implicate the False Claims Act;

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the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created  federal criminal statutes that prohibit a person from knowingly and willfully executing a scheme or making false or fraudulent statements to defraud any healthcare benefit program, regardless of the payor (e.g., public or private);

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HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization on entities subject to the rule, such as health plans, healthcare clearinghouses and certain healthcare providers, and their respective business associates who provide services involving the creation, use or disclosure of HIPAA protected health information;

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federal transparency laws, including the federal Physician Payments Sunshine Act, which is part of the PPACA, that require certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services, or CMS, information related to: (i) payments or other “transfers of value” made to physicians and teaching hospitals; and (ii) ownership and investment interests held by physicians and their immediate family members, with such information being made publicly available through a searchable website;

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state and foreign law equivalents of each of the above federal laws; state laws that require manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, marketing expenditures, or pricing information; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or to adopt compliance programs as prescribed by state laws and regulations, or that otherwise restrict payments that may be made to healthcare providers; and state and local laws that require the registration of pharmaceutical sales representatives; and

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state and foreign laws that govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

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an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs, although this fee does not apply to sales of certain products approved exclusively for orphan indications;

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expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;

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expansion of manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate for both branded and generic drugs and revising the definition of “average manufacturer price,” or AMP, for calculating and reporting Medicaid drug rebates on outpatient prescription drug prices and extending rebate liability to prescriptions for individuals enrolled in Medicare Advantage plans;

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addition of more entity types eligible for participation in the Public Health Service 340B drug pricing program, or the 340B program;

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establishment of  the Medicare Part D coverage gap discount program by requiring manufacturers to provide a 50% point-of-sale-discount off the negotiated price of applicable brand drugs to eligible beneficiaries during their coverage gap period as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D;

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the Bipartisan Budget Act of 2018, or BBA, that among other things, increased the manufacturer’s subsidy under this program from 50% to 70% of the negotiated price, beginning in 2019;

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a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and

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establishment of the Center for Medicare and Medicaid Innovation within CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.

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we may be required to undertake the expenditure of substantial operational, financial and management resources;

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we may be required to issue equity securities that would dilute our stockholders’ percentage of ownership;

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we may be required to assume substantial actual or contingent liabilities;

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strategic collaborators could terminate the arrangement or allow it to expire, which would delay the development and commercialization and may substantially increase the cost of developing and commercializing our products and product candidates;

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business combinations of a strategic collaborator or significant changes in a strategic collaborator’s business strategy may affect a strategic collaborator’s willingness or ability to complete its obligations under any arrangement;

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strategic collaborators could decide to move forward with a competing product or product candidate developed either independently or in collaboration with others, including our competitors;

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collaborators may not perform their obligations as expected;

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clinical trials conducted as part of any of these collaborations may not be successful;

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collaborators may not actively or aggressively pursue development and commercialization of any product candidates that seek to achieve, or that achieves, regulatory approval;

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we may not have access to or may be restricted from disclosing, certain information regarding product candidates being developed or commercialized under a collaboration;

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a collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of any such product candidate; and

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collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability.

•

reductions in the payment of royalties or other payments we believe are due pursuant to the applicable collaborative arrangement;

•

actions taken by a third-party collaborator inside or outside our collaboration which could negatively impact our rights or benefits under our collaboration;

•

unwillingness on the part of a third-party collaborator to keep us informed regarding the progress of its development and commercialization activities or to permit public disclosure of the results of those activities; and

•

decision by our third-party collaborator to terminate or significantly reduce the relationship.

•

impairment of our business reputation;

•

withdrawal of clinical study participants;

•

substantial costs due to litigation;

•

distraction of management’s attention from our primary business;

•

substantial monetary awards to patients or other claimants;

•

the inability to commercialize our products or product candidates; and

•

decreased demand for our products or product candidates, if approved for commercial sale.

•

regulatory authorities may withdraw their approval of the product or impose restrictions on its distribution;

•

the FDA may require implementation of a Risk Evaluation and Mitigation Strategy, or REMS;

•

regulatory authorities may require the addition of labeling statements, such as warnings or contraindications;

•

we may be required to change the way the product is administered or conduct additional clinical studies;

•

we could be sued and held liable for substantial damages for harm caused to patients; and

•

our reputation may suffer.

•

issue warning letters or untitled letters asserting that we are in violation of the law;

•

impose restrictions on the marketing or manufacturing of the product;

•

seek an injunction or impose civil, criminal and/or administrative penalties, damages, assess monetary fines, require disgorgement, consider exclusion from participation in Medicare, Medicaid and other federal healthcare programs and require curtailment or restructuring of our operations;

•

suspend or withdraw regulatory approval;

•

suspend any ongoing clinical trials;

•

refuse to approve a pending NDA or supplements to an NDA submitted by us;

•

seize product; or

•

refuse to allow us to enter into government contracts.

•

others may be able to make products that are similar to our products or product candidates but that are not covered by the claims of the patents that we own or have exclusively licensed;

•

we or any potential future licensors might not have been the first to file patent applications covering certain of our inventions;

•

others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;

•

it is possible that our pending patent applications will not lead to issued patents;

•

issued patents that we own or have exclusively licensed may be held invalid or unenforceable as a result of legal challenges by our competitors;

•

issued patents that we own or have exclusively licensed may not provide coverage for all aspects of our products or product candidates in all countries;

•

our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

•

we may not develop additional proprietary technologies that are patentable; and

•

the patents of others may have an adverse effect on our business.

•

whether the FDA requires us to complete additional, unanticipated studies, trials or other activities prior to approving any of our current and future product candidates, which would likely delay any such approval;

•

our execution of other collaborative, licensing or similar arrangements and the timing of payments we may make or receive under these arrangements;

•

variations in the level of expenses related to our future development programs;

•

any product liability or intellectual property infringement lawsuit in which we may become involved;

•

delays in obtaining, failure to obtain, or adverse developments in obtaining, FDA and other regulatory approval of our product candidates;

•

other regulatory developments affecting any of our other current and future product candidates, or the product candidates of our competitors; and

•

if any of our current or future product candidates receive regulatory approval, the level of underlying demand for such product candidate and wholesaler buying patterns.

•

authorizing the issuance of “blank check” preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;

•

limiting the removal of directors by the stockholders;

•

creating a classified board of directors;

•

establishing a supermajority stockholder vote requirement for amending certain provisions of our amended and restated certificate of incorporation and of our amended and restated bylaws;

•

prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders;

•

eliminating the ability of stockholders to call a special meeting of stockholders; and

•

establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings.

•

Various aspects of our clinical trials, including delays or difficulties in enrolling patients in our clinical trials, in clinical trial site initiation, and in recruiting clinical site investigators and clinical site staff; increased rates of patients withdrawing from clinical trials; diversion of healthcare resources away from the conduct of clinical trials; interruption of key clinical trial activities such as clinical trials site data monitoring due to limitations on travel imposed or recommended by federal or state governments; impact on employees and others or interruption of clinical trial visits or study procedures which may impact the integrity of subject data and clinical study endpoints; and interruption or delays in the operations of the U.S. FDA, and comparable foreign regulatory agencies, which may impact regulatory review and approval timelines.

•

If any third-party in our supply chain for any materials, including active pharmaceutical ingredients and other raw materials supply, which we need for our product candidates for our clinical trials and for the approved products we manufacture and distribute, are adversely impacted by restrictions resulting from the coronavirus pandemic, including staffing shortages, production slowdowns, or disruptions in freight and other transportation services and delivery distribution systems, our supply chain may be disrupted, limiting our ability to manufacture our product candidates for our clinical trials, conduct our research, development and clinical operations, and manufacture, distribute and sell our approved products.

•

We have closed our business office and requested most of our colleagues located there to work from home, restricted full-time on-site staff generally to those colleagues who must perform essential activities on-site and implemented staggered schedules for full-time on-site staff in our research and development laboratory in order to reduce risk of transmission.  Our increased reliance on colleagues and other third parties on whom we rely working from home or having health issues may negatively impact productivity and has limited our in-person commercialization activities for our existing approved proprietary product and would limit commercial launch activities for any new approved product, or disrupt, delay, or otherwise adversely impact our business.  In addition, this could increase our cybersecurity risk, create data accessibility concerns, and make us more susceptible to communication disruptions, any of which could adversely impact our business operations.  Our colleagues conducting research and development activities might not be able to access our laboratory or manufacturing facilities for an extended period of time as a result of any further closure of our facilities as well as the possibility of further governmental restrictions.  As a result, this could delay timely completion of preclinical activities, including completing Investigational New Drug (IND)/Clinical Trial Application (CTA) enabling studies or our ability to select future development candidates, and initiation of clinical or other of our development programs and production and delivery of our products.

•

The FDA and comparable foreign regulatory agencies may experience disruptions, have slower response times or be under-resourced to continue to monitor our clinical trials or to conduct required activities and review of our product candidates seeking regulatory review and such disruptions could materially affect the development, timing and approval of our product candidates.

•

The coronavirus pandemic may impact the requirements of our customers and growth of our approved products.  For example, Indivior, our significant customer for Suboxone, had announced that it anticipated coronavirus impact on its product sales.   Further, sales force expansion may not be as productive during a time when a significant number of interactions are virtual and such interactions may not be as effective as face-to-face interactions. Additionally, an increasing number of patient visits to their Healthcare Professionals have been virtual during the coronavirus pandemic which may reduce the likelihood that a change in medicine would occur which could impact Sympazan growth. We cannot accurately predict the adverse impact the coronavirus pandemic will have on orders of our approved products Suboxone and Sympazan. We also have experienced in one instance, and could in the future experience, extended customer payment cycles.

•

As a result of concerns caused by the continuing effects of the coronavirus, we may face issues and investor concerns in raising capital through sales of our common stock or other securities, or in seeking to monetize any of our licensed royalty and milestone rights.  In addition, a recession, depression or other sustained adverse market event could materially and adversely affect the financial markets, our business, the value of our common stock and our ability to obtain on favorable terms, or at all, equity or debt financing or any potential monetization of our royalty streams.

•

comply with FDA regulations or the regulations applicable in other jurisdictions;

•

provide accurate information to the FDA and other regulatory authorities;

•

comply with healthcare fraud and abuse laws and regulations in the United States and abroad;

•

report financial information or data accurately; or

•

disclose unauthorized activities to us.

•

sales of our approved products;

•

results of clinical trials of our current and any future product candidates or those of our competitors;

•

the success or regulatory approval of competitive drugs or therapies;

•

regulatory or legal developments in the United States and other countries, as to both our products and product candidates and those of our competitors;

•

developments or disputes concerning patent applications, issued patents or other proprietary rights;

•

the recruitment or departure of key personnel;

•

the level of expenses related to our current and any future product candidates or clinical development programs;

•

the results of our efforts to discover, develop, acquire or in-license additional product candidates;

•

actual or anticipated changes in estimates as to financial results, development, clinical trials or regulatory approval timelines or recommendations by securities analysts;

•

our inability to obtain or delays in obtaining adequate drug supply for any approved drug or inability to do so at acceptable prices;

•

disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;

•

significant lawsuits, including patent or stockholder litigation;

•

variations in our financial results or those of companies that are perceived to be similar to us, or our failure to achieve anticipated financial results or funding;

•

changes in the structure of healthcare payment systems;

•

market conditions in the pharmaceutical and biotechnology sectors;

•

general economic, industry and market conditions; and

•

the other factors described in this “Risk Factors” section.

Item 1B.

Unresolved Staff Comments

Item 2.

Properties

Item 3.

Legal Proceedings

Item 4.

Mine Safety Disclosures

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Item 6.

Selected Financial Data

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

•

employee-related expenses, including compensation, benefits, share-based compensation and travel expense;

•

external research and development expenses incurred under arrangements with third parties, such as contract research organizations, investigational sites and consultants;

•

the cost of acquiring, developing and manufacturing clinical study materials; and

•

costs associated with preclinical and clinical activities and regulatory operations.

•

Seeking to obtain the approval and subsequent launch of Libervant, subject to approval by the FDA for U.S. market access, which cannot be assured;

•

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

•

Growing the revenue contribution from Sympazan as a first step to position Aquestive in the epilepsy community.

										Change
		2020				2019				$				%
(In thousands, except %)
Manufacture and supply revenue		$	24,881			$	38,739			$	(13,858	)			(36	%)
License and royalty revenue			14,055				6,959				7,096				102	%
Co-development and research fees			1,264				4,042				(2,778	)			(69	%)
Proprietary product sales, net			5,649				2,869				2,780				97	%
Revenues		$	45,849			$	52,609			$	(6,760	)			(13	%)

										Change
		2020				2019				$				%
(In thousands, except %)
Manufacture and supply		$	12,964			$	20,361			$	(7,397	)			(36	%)
Research and development			19,886				20,574				(688	)			(3	%)
Selling, general and administrative			55,892				64,342				(8,450	)			(13	%)
Interest expense			11,064				9,318				1,746				19	%
Interest expense related to the sale of future revenue			1,958				—				1,958				100	%
Interest income and other income (expense), net			(132	)			(636	)			504				(79	%)
Loss on extinguishment of debt			—				4,896				(4,896	)			(100	)%