Liquidia Corp (LQDA) 2021 Q2 法說會逐字稿

Good morning, and welcome, everyone to the Liquidia Corporation Second Quarter 2021 Financial Results and Corporate Update Conference Call. My name is Angie, and I will be your conference operator today. (Operator Instructions) I would like to remind everyone that today's conference call is being recorded.

I would now like to hand the conference over to Jason Adair, Vice President, Corporate Development and Strategy. Please go ahead, sir.

Thank you, Angie. It's my pleasure to welcome everyone to today's conference call to discuss our second quarter financial results for 2021 and to provide a business update. Before we begin, I'd like to remind everyone that today's call will contain forward-looking statements based on current expectations. Such statements may involve risks and uncertainties that may cause actual results to differ materially from these stated expectations. For further information on the company's risk factors, please see Liquidia's filings with the Securities and Exchange Commission at www.sec.gov or on Liquidia's website at liquidia.com.

I would now like to turn the call over to Chief Executive Officer, Damian deGoa, for our prepared remarks, after which he will open up the call for your questions.

Thank you, Jason, and good morning, everyone. I'm joined today by Mike Kaseta, our Chief Financial Officer; and several members of our management team who may help address questions later in the call. My comments today will be brief and consistent with the release issued earlier today.

What I can confidently say is that in the 7 months since I assumed this role of CEO, we have delivered on every objective we set forth. We immediately addressed and increased the financial stability of the company, focusing it on value-creating activity. We increased the value of our Treprostinil Injection product by securing the FDA clearance and launch of the RG 3ml Medication Cartridge that enables to deliver Treprostinil Injection by subcutaneous route of administration and more than doubles the addressable market for that product.

We promptly resubmitted the NDA for LIQ861, now with a PDUFA date action in November. And we continue to engage in multiple work streams to defend our legal right to provide choice and options for patients to receive treprostinil therapy in a convenient easy-to-use dry powder inhaler.

Despite some minor setbacks along the way last year, we have shown perseverance. We were not deterred when restrictions imposed by other companies limited access to the cartridges needed by patients using the CADD-MS 3 pump. Instead, working with our manufacturing partner and through our litigation against Smiths Medical and United Therapeutics, we launched the RG 3ml Medication Cartridge earlier this year. We went above and beyond and solved the device problem in order to allow greater patient access to the Treprostinil Injection medication.

It's important to remember that our Treprostinil Injection is AP rated and therapeutically equivalent to Remodulin with the same active and inactive ingredients, same dosage strength, same dosage forms, the same Smiths Medical pumps, with the same services and support for patients and health care providers at a lower cost.

It's also worth noting that we are partners with Sandoz, Novartis, one of the largest pharma companies in the world and all the resources and expertise that they have to bear.

Even though our product is a generic, we treat the commercialization efforts more like a brand. We have a national field sales force of experienced PAH sales reps that are calling on prescribers. And we recently hired a VP of Market Access to work with payers to complement Sandoz efforts.

We have confirmed that the available supply of pumps is more than adequate to serve the subcutaneous patient population. Though it's a bit early to assess the full impact of our launch, we are highly encouraged, and I look forward to updating you during our next earnings call on the response to this new choice.

Concurrent with the launch of the subcutaneous cartridge, our in-house team promptly resubmitted the NDA for 861 ahead of schedule. The FDA has since confirmed that the resubmission was complete and considered a Class II response, setting a PDUFA goal date of November 7, 2021. We feel confident that the data submitted clarifies and directly addresses the CMC-related items identified by the agency last year. We also feel well prepared to support the FDA's pre-approval inspections with one currently ongoing at our North Carolina facility.

Needless to say, it's an exciting time in the company's evolution, and we look forward to a positive outcome with the agency with the goal of receiving tentative approval in the fall.

As we work to support the FDA's ability to grant tentative approval, our ultimate success will be tied to the resolution of Hatch-Waxman litigation brought by United Therapeutics. While we cannot disclose the details of our legal strategies and arguments, we can remind you that the FDA's 30 months regulatory stay, which expires in October 2022, is directly tied to patents covering a process of making treprostinil, a compound that has been manufactured at commercial scale for decades.

We will provide updates in the future as they are deemed material. But for the time being, we remain confident in our arguments of noninfringement and invalidity that we have pursued in the Hatch-Waxman litigation and the corresponding IPR proceedings with the United States Patent and Trademark Office.

Lastly, with a long-term path in mind, we took the additional steps in the second quarter to ensure financial -- stable financial footing. We maintained a sense of discipline in each financial decision, and we built a prioritized operating plan to provide the capital needed to achieve our near-term goals of launching 861. We have taken these steps with the firm belief that Liquidia's products serve the best interest of the patient community who are -- who we are committed to support.

At this time, I will turn the call over to Mike to review our second quarter financial summaries.

Thank you, Damian, and good morning, everyone. Our second quarter 2021 financial results can be found in the press release issued earlier today and our Form 10-Q filed with the SEC, both of which will be available on our website.

To briefly summarize, we recognized revenue of $3.1 million (sic) [3.4 million] for the second quarter 2021 related to our promotion agreement with Sandoz in support of Treprostinil Injection. The related cost of revenue during this quarter was $0.7 million. This compares to no revenue and no cost in the second quarter of 2020 since the acquisition of RareGen was not completed until November 2020.

Research and development expenses were $4.6 million for the second quarter compared with $8.5 million for the second quarter of 2020, a decrease of $3.9 million or roughly 46%. This decrease primarily related to lower expenses from our 861 clinical program and lower employee and consulting expenses.

We continue to improve on general and administrative expenses, recording $4.4 million for the second quarter of 2021, down from $5.2 million for the same quarter in the prior year. The decrease of $0.8 million or roughly 15% was primarily due to lower professional fees, associated with corporate activities and lower consulting and personnel expenses as a result of decreasing headcount year-over-year. These decreases were partially offset by an increase in legal fees related to our ongoing 861-related litigation.

The net loss for the quarter was $6.5 million or $0.13 per basic and diluted share compared to a net loss of $13.9 million or $0.49 per basic and diluted share for the second quarter of 2020. We ended the second quarter with cash of $67.9 million compared to $65.3 million at the end of the year 2020. The increase in cash was a result of the refinance debt, a small equity raise of $21.7 million in April and focused spending in the quarter. With a strong balance sheet, we are well positioned to deliver on potential value-creating events beyond regulatory approval and litigation.

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

Thanks, Mike. So just as a summary, our near-term corporate goals are clear. One is to optimize Treprostinil Injection sales; two, is to achieve tentative approval for 861; and three, is to successfully resolve the Hatch-Waxman litigation and launch 861 in 2022. At this time, I would like to ask our operator to facilitate any questions that you may have.

(Operator Instructions) Your first question comes from the line of Kambiz Yazdi with Jefferies.

What's your split this quarter between IV and subcutaneous generic treprostinil sales? Could you -- this is a 3 part, sorry. Can you please provide us any additional details on the claims construction? And then my third and final question is you mentioned last call that 861 may be able to be approved in ILD without any additional studies. Can you describe to us what regulatory steps are needed to achieve that? And if there's any kind of data exclusivity there?

Thanks, Kambi. I'll try to parse these out. I don't know if Rusty if you're available to talk about the claims construction, on the second one. In regards to the IV versus subcu sales split, we aren't disclosing that at this time. I do want to say, though, that the launch has gone really well. The uptake in patient conversions and new starts into the generic Treprostinil Injection is going really well. If you -- we basically launched in June of the quarter. So we only had 1 month of the uptick. But there's both lift in subcu and in the IV side of the market as we expect it to be. We're also seeing really good payer engagement and payer interest and moving the utilization of generic to a much higher level. So all those are positive, and we'll be able to give you more insights after next quarter. Rusty, are you on to talk about the claims construction?

Thanks, Damian. With respect to the claim construction hearing, there were 5 terms that were at issue in the hearing. The judge has ruled on 3 of those terms with 2 terms still under consideration by the court. Of the 3 terms that were construed, 2 terms were given their plain and ordinary meaning; and 1 term, the judge ruled in our favor as to the construction of that term.

Thanks, Rusty. And Kambi, for the last question in relation to the ILD indication. It's our intention to go after that indication. United Therapeutics and the Tyvaso nebulized product was granted the 3 years data exclusivity that goes until March of 2024. And so we'll be obviously looking to try to add that indication once that exclusivity is expired.

(Operator Instructions) Your next question comes from the line of Serge Belanger with Needham.

I have a couple on the generic Remodulin product. You mentioned the subcu product kind of doubles the market opportunity. Can you talk about the ongoing work with payers? And whether all patients currently have access to the subcu product? Or it will come with contracting?

Yes, sir. So right now, there's an opportunity for all patients to be able to use the generic treprostinil both on the IV side and the subcu side. There's a lot of payer interest and, frankly, some payer mandates that have been instituted by the payers. But there's no required additional contracting in order for patients to be able to use the generic, if that's what your question was.

Okay. And I think in the past, you've talked about the profit split with Sandoz kind of moving around -- moving downwards as you reach a certain sales threshold. Have you reached that threshold? Or when do you expect to reach it?

Yes. We haven't met it yet, but we anticipate that it will be either in end of Q3 or the beginning of Q4 that we will likely trigger that change.

At this time, there are no further questions. I would now like to turn the floor back to management for any additional or closing remarks.

Thank you. We appreciate everyone listening to our Q2 call. We're in execution mode, and I think we're doing a good job of blocking and tackling and doing what we need to do to continue to advance the company and the programs that we have. So thank everyone for their time, and be well.

Thank you for participating in today's conference call. You may now disconnect your lines at this time.