Liquidia Corp (LQDA) 2020 Q4 法說會逐字稿

Good morning, everybody, and welcome -- sorry, good morning, and welcome, everyone, to the Liquidia Corporation Full Year 2020 Financial Results and Corporate Update Conference Call. My name is Victor, and I'll be your conference operator today. (Operator Instructions)

I would now like to remind everyone that this conference call is being recorded. I will now hand the conference over to Jason Adair, Vice President, Corporate Development and Strategy.

Thank you, Victor. It's my pleasure to welcome everyone to today's conference call to discuss our full year financial results for 2020 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 www.liquidia.com.

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

Thank you, Jason, and good morning, everyone. I hope you and your families remain healthy. I'm excited to speak with you today on my first earnings call for Liquidia. I began with Liquidia in mid-December. As you might expect, the last 3 months have been busy as we position Liquidia for the future.

But before we jump into the full corporate update and review of 2020 financials, I would like to take a moment to introduce a few of the new members of the management team. Joining me on the call today are Mike Kaseta, our Chief Financial Officer, who joined in November; Scott Moomaw, our Senior Vice President of Commercial, who joined as part of the RareGen merger, also in November; and Dr. Tushar Shah, our Chief Medical Officer and Head of R&D, who joined in May.

The rest of the management team includes Rob Lippe, our Chief Operations Officer, who has helped scale PRINT technology over the last 6 years; Jason Adair, who you've met and continues to lead Business Development and Investor Relations. And lastly, I'm pleased to announce that effective next week, Rusty Schundler will join Liquidia as Senior Vice President and General Counsel. Rusty has served as General Counsel at PBM Capital Group, where he and I worked together for more than 5 years.

What can you expect from our leadership team? We will operate with a sense of urgency. We will be decisive and results-oriented. We will be financially disciplined and efficient. We will focus on value-creating objectives. We will be entrepreneurial and approach growth as an investor and manager.

As the newly assembled management team, our initial thoughts on the company are as follows: LIQ861, our inhaled dry powder formulation of treprostinil, is a great product, with very good market potential. The patient benefits are clear.

We recognize that we have work to do to achieve final approval, including: one, responding to the Complete Response Letter issued by the FDA last November; two, preparing for a prior approval inspection by the FDA; and three, achieving a successful outcome in Hatch-Waxman litigation brought by United Therapeutics. We know what we have to do and are executing on those plans.

We also have an attractive commercial product, Treprostinil Injection, that we promote in partnership with Sandoz. This AP-rated generic formulation of Remodulin offers the same active and inactive ingredients, with the same patient and physician services but at a lower cost to the health care system. The parenteral delivery of the treprostinil remains a sizable market, and we see opportunity to increase utilization of our product.

We have a unique innovative platform in PRINT technology. There's clear advantage in inhaled therapies, but also applications that have been explored in vaccines, antivirals, implants, topicals and biologics. We are actively considering new internal R&D product candidates that can either leverage our expertise in pulmonary hypertension or the value of PRINT.

We will discuss more about the R&D pipeline as things evolve. We have an asset in 865 to control postoperative pain that we feel is best positioned with a strategic partner, which I will address in a few minutes. And we need to look for value-creating opportunities, both from our R&D and business development.

This team will strive to provide balanced and transparent insights into the actions and decisions of the company. For the time being, Liquidia is a small company, and the impact of many events are magnified. We understand these details can be important to investors, but need to be managed with due sensitivity, such as around active litigation, competitive intel related to Treprostinil Injection and details of regulatory interactions.

So with the future in mind, I'd like to summarize some of the key activities from 2020 and the recent past. First, we have evolved from the company from a clinical stage to one with commercial presence in PAH. Having closed the RareGen merger transaction in November, there have been no interruptions to commercial support of Sandoz' first-to-file generic Treprostinil Injection.

Despite the current limitation to IV administration only, demand for Treprostinil Injection remains consistent and strong even as new generics have entered and commercial activities have been limited due to COVID. We continue to see increasing potential for generic utilization as payers consider adoption and physicians become more familiar. And importantly, we now have a PAH-focused sales force that establishes the initial commercial infrastructure needed to launch 861.

Prior to restructuring as Liquidia Corporation, much of our activity last year was tied to the FDA's review of 861. In January, the company submitted an NDA for the first product enabled by our proprietary PRINT technology and the first dry powder inhaled treprostinil.

Though we were disappointed to receive a CRL, we remain confident in our ability to address the items sufficiently and bring 861 to the market as soon as possible. To that end, we expect to submit our formal response to CRL in the middle of the year. This project time line has been informed by our Type A meeting with the FDA in January.

As previously announced, the items that led to the CRL were related to the need for additional information and clarification of CMC data and device biocompatibility. The CRL did not require any additional studies in areas of toxicology, pharmacology or clinical exposure to patients. We are fully prepared to host the FDA for an on-site inspection at Liquidia and our manufacturing partners after our response has been submitted.

While the 861 team works on the CRL response, the new management team has extended our cash runway by making financially disciplined choices to operate until 861 could be approved. Specifically, over the last 3 months, we have implemented changes that will reduce our net cash expenses in 2021 by more than 40% when compared to spending in 2020. Mike will outline some of the components of those savings.

As a result of these quick decisions, the company is well positioned to drive value through key events in 2021 and 2022 beyond the projected expiration of the regulatory stay in October 2022. To that point, we continue to progress the Hatch-Waxman litigation brought by United Therapeutics and our concurrent IPR effort at the U.S. patent office. We believe the patents being asserted are not infringed nor valid. We are confident in our arguments to be made in court, but we'll not be commenting in detail on these ongoing proceedings.

In anticipating commercial success, Liquidia has strengthened its intellectual property and competitive position with the issuance of the '494 patent, which expires in 2037. Enabled by the PRINT formulation and clinical evidence of 861, the claims of this patent were first allowed last August and relate to methods of treating pulmonary hypertension, not just pulmonary arterial hypertension, with doses between approximately 100 micrograms to approximately 300 micrograms of dry powder treprostinil.

Specifically, more than 75% of patients enrolled in our pivotal and extension studies have received 861 doses of 100 micrograms or more. We believe those dose levels may be translating to a patient benefit over time, having treated more than 75 patients for longer than 2 years.

With regard to 865, as stated in earlier filings, we're advancing conversations with external collaborators about continued development. To ensure we achieve our near-term financial objectives as well as provide 865 with the highest chances of success, we feel it's important to collaborate with partners already working in the field of pain management. We look forward to working you -- to updating you on these efforts in future calls. Though to be clear, investment in 865 has been paused until these business discussions conclude.

At this time, I'll turn the call over to Mike to review our full year financial summaries.

Thank you, Damian, and good morning, everyone. Our full year 2020 financial results can be found in the press release issued earlier today and on our Form 10-K to be filed with the SEC in the coming days, both of which will be available on our website.

In those documents, you'll see that revenue was $0.7 million for the full year of 2020 compared with $8.1 million for the full year of 2019. The decrease was due to the full recognition in the second quarter of 2019 of $8.1 million of deferred revenue from the company's agreement with GSK, for which there was no comparable revenue in 2020. Revenue related to sales of Treprostinil Injection was recognized for the period from closing of the merger transaction, November 18, to year-end.

Research and development expenses were $32.2 million for the full year of 2020 compared to -- compared with $40.5 million for the full year of 2019. The decrease primarily related to lower expenses for the company's 861 clinical program, which was substantially completed prior to filing of the NDA in April 2020, and lower expenses from the company's 865 clinical program.

General and administrative expenses were $27.4 million for the full year of 2020 compared with $13.6 million for the full year of 2019. This increase was due to $4.8 million in expenses related to the merger transaction, $2.4 million in legal and patent expenses from the company's ongoing 861-related litigations, an increase of $5.8 million in outside consulting expenses and personnel costs, including share-based comp, and a onetime charge of $1.4 million associated with the reduction of headcount. In summary, we have incurred a net loss of $59.8 million for the full year of 2020 or $1.76 per basic and diluted share compared to a net loss of $47.6 million or $2.57 per basic and diluted share for the full year of 2019.

Let me now shift and discuss our cash on hand and the actions taken to provide stable financial footing in 2021 and beyond. As of December 31, we had $65.3 million of cash on our balance sheet. As Damian mentioned earlier, our operating plan this year should result in more than a 40% reduction in net annual spending compared to spending in 2020. This reduction is more than twice the anticipated savings projected on the third quarter earnings call.

Some of the changes implemented since Damian and I joined the company include: refinancing the existing credit facility with a new facility providing interest-only payments for the first 24 months, which saves more than $10 million over the next 2 years; reducing internal staff and full-time equivalent consultants by nearly 40%; refinancing equipment leases; and finding other opportunities for increased efficiency across operations. This improvement in cash expenditures will be further amplified by the anticipated positive contribution from the profit split arrangement with Sandoz on the sale of Treprostinil Injection.

As this product is registered under Sandoz, we will not be providing any specific revenue guidance. However, we are confident that the intravenous use of a Treprostinil Injection will contribute revenue to Liquidia in the mid- to high single-digit millions, as discussed at the time of the merger transaction. We will provide updates on future calls should this change in any material way. I'm encouraged to say that the combination of cash-saving measures, plus positive contract revenue, should extend our cash runway to the value-creating events related to the regulatory approval and litigation activity in 2021 and 2022.

I'd now like to turn the call back over to Damian.

Thank you, Mike. Having reflected on the major activities of the company in 2020 and my first 3 months on the job, I'd like to make a couple of points for you before taking your questions.

First, we are committed to 861 and doing everything we can to achieve FDA approval. This is a great product with tremendous market potential. Second, we will exercise financial discipline and look for value-creating opportunities in R&D and business development as we look to build value in the near and midterm.

I will now turn the call over to the operator to take your questions.

(Operator Instructions) Our first question will come from the line of Chris Howerton from Jefferies.

I guess the first one for me would be just, kind of, if we can have any more color in terms of what the operational activities would be required to kind of satisfy the deficiencies with respect to the biocompatibility information? I guess I'm just trying to find out what technically or tactically you have to do to kind of accomplish those goals?

And then the second question for me would be just kind of remind us in terms of where we're at in terms of the ongoing litigation from a just procedural perspective. And what news flow we might be able to expect out of that process over the coming months?

Hey, Chris, thanks. I think in terms of the biocompatibility, we've basically taken that over from our partner, Plastiape, and we are basically doing a full biocompatibility testing. And that's all underway and ongoing as we speak.

And so those results should -- are part of the time line and things that we need to resolve prior to being able to respond to the CRL response. However, this device has been used in millions of patients and been on the market for a number of years and in prior versions. So we feel pretty confident, but we just need to do the work.

In relation to the ongoing litigation, I would say the next major event is the claims construction that will occur in May of 2021. And Chris, we're probably going to take a little bit more of a higher-level response on kind of the activities on a day-to-day basis, if you will, of the ongoing litigations. And we'll probably let our litigators do what they do and then provide comments as appropriate.

Sure. Yes, totally understood. So basically, the Markman hearing should be coming up, and that's the next potentially public viewing in terms of new information. Is that kind of the correct perspective?

That's right.

Our next question will come from the line of Andreas Argyrides from Wedbush Securities.

It's Andreas on for Liana Moussatos. I'm going to keep it brief myself. Just regarding 865, you're hoping for a strategic partnership development until you find a strategic partner. What might a partnership look like? What are you expecting? Any color on that?

Yes. I think it's too early to say, Andreas. I think that we do have several interested parties. And I think that there's a lot of factors that will go into who's the right potential partner. In terms of terms or financials related to that, it's too early to have any discussions around that.

Okay. And then just one on the patent litigation. In the press release, you mentioned October, this October, coming up as another potential event. How might a favorable decision by the PTAB to institute the IPR for '793 shift time lines on potential approval and launch?

Thanks. Good question. I don't think it will actually have any impact on the overall timing. The October would be when the PTAB would decide whether or not to accept the petition, and then it would be 12 months resolved thereafter. So that coincides pretty consistently with the Hatch-Waxman litigation resolution in October of 2022.

(Operator Instructions) Our next question will come from the line of Serge Belanger from Needham & Company.

A couple of questions for me. First one, on the generic Remodulin product, can you just talk about your outlook for that product in -- for 2021?

And then secondly, I think when the CRL was issued last fall, the preapproval inspection ended up being completed. Have you got any color on that? Or that's going to be contingent on resubmitting the NDA for that to be scheduled?

Thanks, Serge. In relation to generic Remodulin, the Treprostinil Injection product, we feel pretty good about that. As I kind of mentioned, it's the same product. It's AP-rated, the same actives, same inactives. We've done a lot to make sure that we provide the exact same services that the patients and the physicians have come to expect, and we do it all at a lower cost. So I think all of those positives should lead to continued utilization of our product.

We are in a COVID environment. And right now, the delivery is through intravenous, which means that patients would be getting a central line. And so that certainly is a consideration for physicians as they start new patients, as to whether or not they're going to bring patients in for that procedure. So there is certainly some headwinds from COVID but this is a life-sustaining drug. And so patients are going to continue to be on it even during this COVID pandemic.

So we feel good about the product. I think we're doing it in a smart way in terms of the way that we're approaching it, not just as a generic, but kind of with this branded approach to promoting the brand or the generic. And so we expect positive things there.

From a PA -- from the prior approval inspection perspective, that was not conducted, but we fully expect that the FDA will be doing an inspection. We don't know when or what the timing would be, but we would expect it to be some time after we respond to the CRL.

(Operator Instructions) And I'm not showing any further questions in the queue.

Great. Well, thanks, everyone, for joining us today. And we appreciate your continued interest and investment in Liquidia, and we look forward to providing more progress throughout the year. Have a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.