Breaking Down Aquestive Therapeutics, Inc. (AQST) Financial Health: Key Insights for Investors

Understanding Aquestive Therapeutics, Inc. (AQST) Revenue Streams

Understanding Aquestive Therapeutics, Inc. Revenue Streams

The revenue streams for the company primarily consist of the following categories:

• Manufacture and Supply Revenue
• License and Royalty Revenue
• Co-development and Research Fees
• Proprietary Product Revenue

Breakdown of Primary Revenue Sources

Year-over-Year Revenue Growth Rate

For the nine months ended September 30, 2024, total revenues increased by 22%, or $8,317, compared to the same period in the prior year, reaching $45,694 from $37,377 in 2023.

Contribution of Different Business Segments to Overall Revenue

For the nine months ended September 30, 2024, the breakdown is as follows:

Analysis of Significant Changes in Revenue Streams

The most notable change in revenue streams for the nine months ended September 30, 2024, was the substantial increase in license and royalty revenue, which rose by 314%, primarily due to the one-time recognition of deferred revenues totaling $11,544 from the termination of licensing and supply agreements. This increase offset the declines in manufacture and supply revenue, which decreased by 11%, attributable to a 39% decrease in Ondif revenue and a 7% decrease in Suboxone revenue.

A Deep Dive into Aquestive Therapeutics, Inc. (AQST) Profitability

A Deep Dive into Aquestive Therapeutics, Inc. Profitability

Gross Profit Margin: For the three months ended September 30, 2024, the gross profit was $9,105, resulting in a gross profit margin of approximately 67.2%. In comparison, for the same period in 2023, the gross profit was $8,204, leading to a gross profit margin of 63.2%.

Operating Profit Margin: The operating loss for the three months ended September 30, 2024, was ($8,290), which corresponds to an operating profit margin of (61.1%). For the same period in 2023, the operating loss was ($2,377), with an operating profit margin of (18.3%).

Net Profit Margin: The net loss for the three months ended September 30, 2024, was ($11,509), which translates to a net profit margin of (85.0%). In 2023, the net loss was ($2,035), resulting in a net profit margin of (15.7%).

Trends in Profitability: Over the nine months ended September 30, 2024, total revenues increased by 22% to $45,694 compared to $37,377 in the same period of 2023. However, the net loss expanded from $241 in 2023 to ($27,082) in 2024.

Comparison with Industry Averages: The average gross profit margin in the pharmaceutical industry typically ranges between 70% to 80%. The reported gross profit margin of 67.2% indicates that the company is slightly below the industry average.

Operational Efficiency: The selling, general and administrative expenses surged by 64% to $12,126 for Q3 2024 compared to $7,385 in Q3 2023. Research and development expenses also saw a significant increase of 65% to $5,269 from $3,196 in the prior year.

Conclusion on Operational Efficiency: The increase in expenses, particularly in research and development, suggests a commitment to pipeline development, although it has contributed to the widening losses. The operational efficiency metrics indicate a pressing need for enhanced cost management strategies to align with revenue growth.

Debt vs. Equity: How Aquestive Therapeutics, Inc. (AQST) Finances Its Growth

Debt vs. Equity: How Aquestive Therapeutics Finances Its Growth

The financial structure of a company plays a crucial role in determining its growth potential and stability. In this section, we will analyze the debt levels, debt-to-equity ratio, and recent financial activities of Aquestive Therapeutics, Inc.

Overview of the Company's Debt Levels

As of September 30, 2024, the company reported total outstanding notes of $45,000 in long-term debt, specifically the 13.5% Notes due November 1, 2028. The unamortized discount related to these notes stood at $13,900, resulting in net long-term debt of $31,100.

In addition, the company had royalty obligations amounting to $56,926, with an unamortized discount of $38,091, leading to net royalty obligations of $18,835.

Debt-to-Equity Ratio and Comparison to Industry Standards

The debt-to-equity ratio is a vital indicator of financial leverage. As of September 30, 2024, the company's total stockholders' equity was reported at $(45,420), indicating a negative equity position. The debt-to-equity ratio can be calculated as follows:

This ratio is significantly higher than industry averages, which typically range from 0.5 to 1.5 for biopharmaceutical companies, indicating a higher risk profile for the company.

Recent Debt Issuances, Credit Ratings, or Refinancing Activity

On November 1, 2023, the company issued $45,000 in aggregate principal amount of its 13.5% Notes, which are senior secured obligations. The proceeds from this issuance were primarily used to redeem all outstanding 12.5% Notes. The refinancing activity reflects a strategic move to manage debt more effectively, transitioning from higher to slightly lower interest obligations.

The 13.5% Notes bear interest payable quarterly, beginning December 30, 2023, and include an amortization schedule starting June 30, 2026. The company also incurred significant amortization expenses related to debt issuance costs, totaling $7,841 for the nine months ended September 30, 2024.

How the Company Balances Between Debt Financing and Equity Funding

To finance its operations and growth, the company has utilized both debt and equity funding. Notably, during the nine months ended September 30, 2024, the company raised $71,974 through an Underwritten Public Offering of 16,666,667 shares at a price of $4.50 per share. This influx of equity capital is crucial for supporting research and development as well as operational needs.

Moreover, the company has established an At-The-Market (ATM) facility that has generated approximately $60,558 in net cash proceeds since its inception. This facility allows for flexible capital raising, providing liquidity as needed without the pressure of immediate debt repayment.

In summary, the company's strategy appears to lean heavily on debt financing, reflected in a high debt-to-equity ratio, while also seeking equity funding to manage cash flow and finance growth initiatives effectively.

Assessing Aquestive Therapeutics, Inc. (AQST) Liquidity

Assessing Liquidity and Solvency

Current and Quick Ratios

The current ratio for the company as of September 30, 2024, is calculated at 6.4, indicating a strong liquidity position. The quick ratio, which excludes inventory from current assets, stands at 6.3, suggesting that the company can easily cover its short-term liabilities without relying on inventory sales.

Analysis of Working Capital Trends

As of September 30, 2024, the working capital is calculated as follows:

This shows a positive working capital trend, which has improved compared to previous periods. The working capital has increased primarily due to higher cash and cash equivalents, totaling $77,893 as of the same date.

Cash Flow Statements Overview

The cash flow statement for the nine months ended September 30, 2024, highlights the following trends:

The net cash used for operating activities has significantly increased by $27,832, primarily driven by a change in net loss income and deferred revenue. In contrast, financing activities saw a substantial increase in net cash provided, attributable to an underwritten public offering which yielded $72,868 after deducting fees.

Potential Liquidity Concerns or Strengths

The company has demonstrated robust liquidity by maintaining a cash balance of $77,893 as of September 30, 2024. However, the increase in cash used for operating activities raises questions about ongoing operational efficiency and profitability. The accumulated deficit reached $346,159, highlighting long-term financial challenges. Despite these concerns, the access to equity capital markets, including an ATM facility and the recent public offering, provides a buffer against immediate liquidity risks.

Is Aquestive Therapeutics, Inc. (AQST) Overvalued or Undervalued?

Valuation Analysis

As of September 30, 2024, the valuation metrics for the company are as follows:

• Price-to-Earnings (P/E) Ratio: The company reported a net loss, resulting in a P/E ratio that is not applicable.
• Price-to-Book (P/B) Ratio: The book value per share was approximately $3.30, and the stock price was around $4.98, leading to a P/B ratio of approximately 1.51.
• Enterprise Value-to-EBITDA (EV/EBITDA): The EBITDA for the last twelve months was approximately ($17,192,000) resulting in a negative EV/EBITDA ratio, indicating financial distress.

The stock price trends over the last 12 months show the following:

Regarding dividend yield and payout ratios:

• Dividend Yield: The company does not currently pay a dividend.
• Payout Ratio: Not applicable due to the absence of dividends.

Analyst consensus on stock valuation indicates:

• Buy: 2 analysts
• Hold: 3 analysts
• Sell: 1 analyst

The financial health indicators suggest that the company is currently facing challenges, reflected in its negative earnings and fluctuating stock price trends.

Key Risks Facing Aquestive Therapeutics, Inc. (AQST)

Key Risks Facing Aquestive Therapeutics, Inc.

Overview of Internal and External Risks

Aquestive Therapeutics, Inc. faces a variety of risks that could impact its financial health, including industry competition, regulatory changes, and market conditions. As of September 30, 2024, the company reported a net loss of $27,082 thousand, reflecting significant operational challenges and increased expenses across various segments.

Industry Competition

The pharmaceutical industry is highly competitive, with numerous companies vying for market share in the therapeutic areas that Aquestive operates. The company's products, particularly Libervant and Anaphylm, face competition from established players and potential generics, which could negatively affect pricing and market penetration.

Regulatory Risks

Regulatory changes pose a significant risk. The approval processes for new drugs are rigorous and can be unpredictable. Delays in obtaining regulatory approvals can hinder the company’s ability to bring products to market, impacting revenue generation. Moreover, the company's existing product, KYNMOBI, was withdrawn from the U.S. and Canadian markets, which may affect future revenues and strategic plans.

Operational Risks

The operational risks include supply chain disruptions, which could arise from global economic conditions or logistical challenges. As of September 30, 2024, the company reported that its total liabilities amounted to $155,378 thousand, indicating a high level of financial obligation that may limit operational flexibility.

Financial Risks

Financially, the company has seen an increase in interest expenses, which rose by 105% to $8,343 thousand for the nine months ended September 30, 2024, compared to the same period in the prior year. This increase is due to higher amortization of debt issuance costs related to the refinancing of 13.5% Notes.

Strategic Risks

Strategically, the reliance on a few key products exposes the company to risks associated with market acceptance and sales performance. The company’s total revenues for the nine months ended September 30, 2024, were $45,694 thousand, up from $37,377 thousand in the previous year, indicating growth but also highlighting the need for diversified product offerings.

Mitigation Strategies

Aquestive has implemented strategies to mitigate these risks, including diversifying its product pipeline and enhancing its operational efficiencies. The company raised approximately $72,868 thousand from a public offering in March 2024, which can be utilized for funding ongoing projects and operational improvements.

Future Growth Prospects for Aquestive Therapeutics, Inc. (AQST)

Future Growth Prospects for Aquestive Therapeutics, Inc.

Analysis of Key Growth Drivers

The company has identified several growth drivers, including product innovations, market expansions, and strategic partnerships. The launch of Libervant for patients aged two to five years marks a significant product innovation that is anticipated to enhance revenue streams. In the nine months ended September 30, 2024, proprietary product revenue, net was $217,000, attributed to this launch.

Future Revenue Growth Projections and Earnings Estimates

For the nine months ended September 30, 2024, total revenues increased by 22%, or $8.3 million, compared to the same period in 2023, reaching $45.7 million. This growth was primarily driven by license and royalty revenue, which surged 314%, or $11 million, due to one-time recognition from terminated licensing agreements.

Strategic Initiatives or Partnerships That May Drive Future Growth

The company has engaged in strategic partnerships, such as the licensing agreement with Zambon for Exservan, which is expected to yield developmental and sales milestone payments. The partnership with Indivior for Suboxone continues to be a key revenue driver, with the product maintaining a 28% market share in the film category despite increased competition from generics.

Competitive Advantages That Position the Company for Growth

Aquestive Therapeutics possesses several competitive advantages, including its exclusive manufacturing rights for Suboxone and a robust pipeline of innovative products. The company has produced over 2.7 billion doses of Suboxone since its 2010 launch, reinforcing its market position.

In conclusion, the focus on strategic partnerships, innovative product launches, and the increase in revenue from licensing agreements positions the company well for future growth and profitability.

Updated on 16 Nov 2024

Resources:

1. Aquestive Therapeutics, Inc. (AQST) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Aquestive Therapeutics, Inc. (AQST)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Aquestive Therapeutics, Inc. (AQST)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.