Liquidia Corp (LQDA) 2022 Q2 法說會逐字稿

Good morning, and welcome, everyone, to the Liquidia Corporation Second Quarter 2022 Financial Results and Corporate Update Conference Call. My name is Angela, and I'll be your conference operator today. (Operator Instructions) I would like to remind everyone that the conference call is being recorded.

I will now hand the call over to Jason Adair, Senior Vice President, Corporate Development and Strategy.

Thank you, Angela. It is my pleasure to welcome everyone to Liquidia's Second Quarter 2022 Financial Results and Corporate Update Conference Call.

Joining the call today are Chief Executive Officer, Roger Jeffs; Chief Medical Officer, Dr. Rajeev Saggar; General Counsel, Rusty Schundler, Chief Financial Officer, Mike Kaseta, and other members of Liquidia management.

Before we begin, please note that today's conference call will contain forward-looking statements including those statements regarding future results and forward-looking financial information as well as the company's future performance and/or achievements. These statements are subject to known and unknown risks and uncertainties, which may cause our actual results or performance to be materially different from any future results or performance expressed or implied on this call.

For additional information, including a detailed discussion of our risk factors, please refer to the company's documents filed with the Securities and Exchange Commission, which can be accessed on our website.

I would now like to turn the call over to Roger for our prepared remarks, after which, he will open up the call for your questions.

Thank you, Jason, and good morning, everyone. Over the last 3 months, we've continued to gain momentum across all areas of the company as we build towards our primary objective of preparing for the potential launch of YUTREPIA, an inhaled dry powder formulation of treprostinil.

I'll share just a few examples of our progress. In the marketplace, we continued to build the awareness and reputation of Liquidia amongst key stakeholders involved in delivering treatments for PAH while also increasing utilization of Treprostinil Injection.

In the clinical arena, we published data from the completed INSPIRE trial in the Journal Pulmonary Circulation, which validates the enduring value and therapeutic potential for YUTREPIA to be a game changer for PAH patients.

In the regulatory area, the FDA confirmed that no additional studies will be required to seek label expansion to treat patients with PH-ILD in March 2024.

In legal forums, we advanced down the path towards YUTREPIA's final approval with the PTAB invalidating all claims of the '793 patent.

On the balance sheet, we continued to build for launch while being efficient with our use of capital.

And inside the company, we continued to build a high-performing culture, hiring key people to enable both near- and long-term success of our products and pipeline.

Speaking of hires, I want to introduce you to one of our key new hires, our new Chief Medical Officer, Dr. Rajeev Saggar. Rajeev and I have known each other for years, and he's always impressed me with his determination to make a difference in patients' lives. When I saw the opportunity to include him on our team, I took it immediately. Rajeev brings the strength of knowledge, experience and curiosity that will help take Liquidia to the next level.

Since most of our investors have not had the chance to meet Rajeev, I've asked him to share his impressions so far. Rajeev?

Thank you, Roger. I'm very excited to join Liquidia at a pivotal moment in the company's evolution. We are just steps away from the potential introduction of YUTREPIA as a central and critical treatment modifier of the prostacyclin pathway. With immediate focus on the potential launch of YUTREPIA, we are committed to the continued scientific research and education efforts in pulmonary hypertension for patients, clinicians and the broad community.

YUTREPIA was first introduced to the PH community in 2015, and just 2 years later, started enrollment in the INSPIRE trial, the first program to explore the benefits of an inhaled dry powder formulation of treprostinil for patients who were naive to prostacyclin therapy or transitioning from nebulized TYVASO. During that time, I was a pulmonary specialist and clinical scientist with a focused interest in pulmonary hypertension, and along with many other investigators, was thrilled to participate in the study.

Now as the Chief Medical Officer, I am pouring over the robust clinical data that include longitudinal patient exposures to YUTREPIA exceeding 3 years between the INSPIRE study and ongoing extension trial. In fact, we recently announced a publication of the completed INSPIRE trial, which included patients treated between 8 and 18 months before rolling into the extension trial.

In reviewing the data, I was pleased to confirm that YUTREPIA can be safely titrated across doses comparable to 3 to 24 breaths of TYVASO, indicating that a wide range of therapeutic doses can be easily administered in just a few breaths from 1 or 2 capsules of YUTREPIA as compared to nebulizers.

YUTREPIA treatment is also durable. In fact, of the 121 patients enrolled, more than 90% completed treatment at the primary month 2 endpoint. And when combined with the exposure data from the extension study, we saw that more than 75% of patients completed treatment of at least 12 months.

Lastly, YUTREPIA is attractive to patients. After only 2 weeks, nearly all of the transition patients preferred or strongly prefer the DPI over the nebulizer. Only 1 patient reported no preference after 2 weeks, but at 4 months, 100% of transition patients preferred YUTREPIA. We believe this data demonstrates the patient's unmet need and potential for rapid adoption when available.

All of this data has been enabled by our proprietary PRINT formulation of unified dry powder particles, ideally sized in the respirable range to enhance drug exposure while using an inhaler very familiar to clinicians who have treated tens of thousands of COPD and asthma patients with a similar device.

We believe that YUTREPIA's profile will help build on the body of knowledge in medical literature that higher inhaled doses may lead to better clinical outcomes. Though we are not required to generate new clinical data to seek pulmonary hypertension associated with interstitial lung disease in the YUTREPIA label, we will look for opportunities to fully explore YUTREPIA with the help of the wider community. Roger?

Thank you, Rajeev. Beautifully stated. It's exciting to think where we can guide the company with your help. But first and foremost, we need to get the product approved.

I'd now like to ask Rusty Schundler, our General Counsel, who's been overseeing our legal case to summarize our key legal advances in just this past quarter.

Thanks, Roger. We have recently taken 2 major steps toward resolving the outstanding claims brought by United Therapeutics.

First, we have submitted all post-trial briefings in our Hatch-Waxman litigation in the United States District Court for the District of Delaware. As previously disclosed, trial was completed at the end of March. Thus, with the submission of all post-trial briefings, the Court now has all of the material required to reach a decision on the alleged infringement of the API manufacturing patent, which we refer to as the '066 patent, and the method of use patent, which we refer to as the '793 patent. The trial materials and transcripts are available from the court and we believe demonstrate all claims asserted are invalid and/or not infringed.

We do not know when Judge Andrews will issue his ruling, but do expect that it will come before the end of October when the regulatory stay expires.

Second, we successfully concluded the inter partes review of the '793 patent with the Patent Trial and Appeal Board, or PTAB, ruling in July that all claims are unpatentable. The PTAB's ruling is not binding on the court in the Hatch-Waxman litigation and would not override an order of the court that YUTREPIA may not be approved due to infringement of the '793 patent unless and until the decision of the PTAB is affirmed on appeal.

However, coupled with United Therapeutics' prior stipulation of partial judgment in favor of Liquidia with respect to the '901 patent, another patent that was initially asserted against Liquidia, the PTAB's ruling means that even before the decision in the Hatch-Waxman litigation, Liquidia has now received favorable rulings with respect to 2 of the 3 patents initially asserted by United Therapeutics against Liquidia.

We will continue to keep you updated on any material developments as we approach the court's decision.

Thank you, Rusty. I'd now like to ask Mike Kaseta to highlight a few points from the second quarter.

Thank you, Roger, and good morning, everyone. Our second quarter 2022 financial results can be found in the press release issued earlier today and on our Form 10-Q to be filed with the SEC after market close today.

In those documents, you will see that revenue was $3.9 million for the 3 months ended June 30, 2022, compared to $3.4 million for the same quarter in 2021. Revenue related primarily to the sale of Treprostinil Injection under the profit split agreement with Sandoz. It is important context that despite the decrease in our profit split percentage from 80-20 to 50-50 in Q3 2021, quarterly revenues have increased each quarter since the launch of subcutaneous.

We continue to see consistent demand with more than 500 patients on treatment and increasing support from payer mandates for generic use.

Cost of revenue was $0.7 million for the quarter, which was the same compared to second quarter of 2021.

Research and development expenses were $5.2 million compared with $4.6 million, a $0.6 million increase from the same quarter last year split between timing of manufacturing related to the YUTREPIA program and a onetime charge for personnel-related costs.

General and administrative expenses were $6.9 million compared with $4.4 million, a $2.5 million increase of which just over half was due to increases in commercial, marketing and personnel expenses in preparation for the potential commercialization of YUTREPIA.

Other expenses in the quarter totaled $0.5 million, an increase of $0.3 million over the same quarter last year related to a higher interest expense on our debt with Silicon Valley Bank.

All totaled, we incurred a net loss in the second quarter of 2022 of $9.4 million or $0.15 per basic and diluted share, compared to a net loss of $6.5 million or $0.13 per basic and diluted share for the second quarter of 2021.

Turning to our balance sheet. We ended the second quarter well prepared to execute on our plans. As of June 30, cash and cash equivalents totaled $103.8 million as compared to $57.5 million as of December 31, 2021. We believe that the cash on hand, combined with revenue from Treprostinil Injection, will support operations into 2024.

I would now like to turn the call back over to Roger.

Thank you, Mike. At this time, I would now like to open it up for questions. Operator, first question, please.

(Operator Instructions) Your first question comes from the line of Greg Harrison with Bank of America.

First, I wanted to ask how quickly can you launch if the Hatch-Waxman decisions are favorable? And what preparations are underway? I know the press release mentioned new hires in sales. Are those contingent on resolution of the trial and a full approval?

Greg, this is Roger. Thank you for the question. So the launch timing from -- once we have a successful resolution of the Hatch-Waxman trial, we believe will be between weeks to a maximum of, say, 2 months. And really, that's just us resubmitting for final approval. There'll be a small bit of final safety data that we'll submit along with that.

We've already discussed how our labeling will be finalized. So I don't think there's going to be any labeling revisions required. So it's -- we think we'll be on the shorter end of that 2-week to 2-month spectrum.

And then, secondly, in terms of your question of prep. We have hired key leadership positions. So obviously, with bringing Rajeev in with his expertise, which you could hear very eloquently in his summary of the data today, we're bringing in what we call regional business directors, which are the key regional sales heads for the different areas of the country. We are out now interviewing and scaling our sales force through contingent offers as you surmised. So those are going to be contingent on final resolution of the Hatch-Waxman trial because as we have been, and we'll continue to be, we're trying to be efficient with our use of capital.

So we are preparing. I think the other thing that you should notice, we are preparing commercial product and we will have commercial product ready for the market upon the resolution of the Hatch-Waxman trial. Thank you for the question, Greg.

Your next question will come from the line of Serge Belanger with Needham & Company.

A couple of questions on the ongoing legal proceedings. First, on the timing of the District Court decision. Just curious, I think there was a recent post-trial briefing demanded by the District Court judge. Curious if that potentially portends an earlier decision than October?

And then, secondly, maybe just talk about how different the '066 patent that remains an issue in the District Court litigation, how it differs to '901 and '793.

Yes. Thanks for the question, Serge. Rusty, I'll ask you to address those, please.

Thanks, Serge. So on your first question regarding the timing of District Court decision, it's hard to predict when the court is going to rule. You're correct that the court did ask for some supplemental briefing, I think it was in July. But that does not necessarily mean that the decision will come earlier.

Again, we think it will be before the end of the 30-month stay at the end of October. But beyond that, could theoretically be any day. So again, it's just hard to predict because the courts are busy and they have a lot of competing demands on their time.

On the second question on the differences between '066 patent and the '901 and the '793. The '066 and '901 are both methods of manufacturing, the treprostinil API. The '793 patent is a method-of-treatment patent. So the '793 patent is quite a bit different from the '066 and '901 patents. The '066 and '901 patents are very similar as to what they cover, but the language of the claims is different. And so if you look at the claim construction and what that meant as far as what the '901 patent covered versus the '066, there are some differences.

So I'm not sure if that answers your question, but they do cover very similar things. But again, there are some key differences in the way the claims were structured in those 2 patents.

Thank you, Rusty.

Your next question comes from the line of Matt Kaplan with Ladenburg Thalmann.

Just as you kind of enter your -- performing the preparation for commercialization, can you give us some sense in terms of the feedback that you're getting on the profile of YUTREPIA versus TYVASO, and what the response is from the treatment community so far.

Yes. Thanks, Matt. So I'll start and maybe then I'll ask Rajeev also to comment since he's very close, obviously, to a number of the KOLs.

So I think for us, the things that resonate with the physicians and the patient community is the therapeutic -- what I'll call the therapeutic flexibility of YUTREPIA, its ability to titrate its AE profile and its durability of use, which Rajeev mentioned in his opening comments.

And the next thing that really resonates nicely is the ease of use. So the portability, the low-resistance device, just the encapsulated blister pack product, which is just easy to carry as well. It doesn't spill, there's no orientation requirement. So there's a number of what we call preferential aspects that the community is looking forward to.

But Rajeev, maybe if you have any color that you'd like to add to that.

Yes. Thanks, Roger. Thanks, Matt, for the question. I agree, Roger, with everything you said. I think what is exciting to the community is another opportunity to provide this form of inhaled treprostinil through a low-resistance device, specifically YUTREPIA. I think the ability to provide the 4 strengths of different capsules, at least up to the 106-microgram dose, and then to be able to continue to titrate the doses beyond what is typically known as 9 to 12 breaths that we've seen with TYVASO, I think it's going to be well received.

Typically, practitioners have been taught that TYVASO effectively has a ceiling because of its inability to titrate on the TYVASO nebulizer. This is the first time we're going to be able to offer patients the opportunity to continue to match their clinical symptoms and needs by uptitrating TYVASO as deemed -- sorry, uptitrate YUTREPIA as deemed fit by the provider. So we're really excited about that and that's the feedback from the KOLs.

Great. Thanks for the question, Matt. Appreciate it.

Your next question comes from the line of Julian Harrison with BTIG.

Welcome to Liquidia, Dr. Saggar. Most of my questions have already been asked, but I'm just wondering if you could talk now a little more about the key details of the provisional label for YUTREPIA, such as maybe the highest dose indicated and what that corresponds to in nebulized TYVASO breaths equivalent or anything else you're able to share at this time?

Yes. So I'll just say what we've said publicly, which is that the label will include doses up -- describe the exposure during the INSPIRE trial up to 212 micrograms 4 times a day. So that would be an equivalent of 24 breaths or more of TYVASO given 4 times a day. And we're obviously doing it in only 2 to 4 breaths per session with a very quick time to set up. There's very little cleaning, you only clean at the end of the day.

So a bit what I like to call a game changer, really completely changes the delivery profile of inhaled treprostinil, both to be flexible therapeutically in terms of dose and also in terms of ease of administration. And then as Rajeev said, we have 4 capsule strengths that will accommodate these escalating doses. So -- and as I mentioned, those are being prepped now for launch. So we will be ready full force when we launch the product to initiate patients on therapy, to transition TYVASO patients as well as to have hospital supply if needed.

So again, really working hard to focus all our attention on the launch of YUTREPIA and blessed with the product profile that the product ports. Thanks for the question.

There are no further questions at this time. Mr. Jeffs, I'll turn the call back to you.

Thank you, Angela. I'd like to thank everyone for joining us on the call today. We absolutely appreciate your continued interest in Liquidia, and we'll certainly update you on our progress throughout the year. Thank you for calling, and have a nice day. Bye-bye.

This concludes today's conference. You may now disconnect.