Liquidia Corp - Earnings Call - Q1 2021

Transcript

Speaker 0

Good morning, and welcome everyone to the LaClea Corporation First Quarter twenty twenty one Financial Results and Corporate Update Conference Call. My name is Anthony, and I'll be your conference operator today. I would like to remind everyone that this conference call is being recorded. I'll now hand the call over to Jason Aderre, Vice President, Corporate Development and Strategy. Please go ahead.

Thank you, Anthony. It's my pleasure to welcome everyone to today's conference call to discuss our first 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 SEC 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.

Speaker 1

Thank you, Jason, and good morning, everyone. I'm joined today by Mike Caseta, our Chief Financial Officer and several other members of our management team who may be helpful in addressing your questions later in the call. In the short time since I provided in March, Liquidia has continued to deliver on its plans and expectations at a rapid pace. In April and May alone, we have delivered on multiple value creating events including the expansion of the commercial opportunity for treprostinil injection, our generic formulation of Remodulin by enabling subcutaneous route of administration. The resubmission of the NDA for LIQ861 putting us back on track for a potential FDA approval approval and strengthening our financial position through an equity capital raise and refinance of our credit facility with Silicon Valley Bank.

These are the results of the hard work from a committed dedicated team is helping to establish the reputation for delivering results. First, the FDA clearance of the RG3ML medication cartridge has removed a major barrier to maximizing the utility and value of treprostinil injection. This achievement by our partner Chengdu Xifeng Medical Technologies demonstrates our commitment to providing valuable products to PAH patients and the community who supports them now. With both the IV and subcu routes enabled, we expect that the market opportunity for our product will more than double, not only as a result of newly addressable subcu Remodulin patients, but also due to payers' motivation to ensure the effective use of resources across this rare and expensive disease. No longer will patients, physicians and payers be limited to a single branded choice for the subcu administration of treprostinil due to the restrictions imposed by other companies.

With this obstacle behind us, we continue to believe that there is significant addressable market. For context, United Therapeutics reported that Remodulin sales in The U. S. Of greater than $450,000,000 in 2020. We have been encouraged by the level of interest and look forward to providing more updates in the future.

Our R and D and operations team have worked steadily towards resubmitting the NDA for LIQ861, our dry powder formulation of treprostinil. Last Friday, we provided the FDA a full response to the items mentioned in the CRL issued last November. We believe the data package submitted will speak directly to the items and questions raised by the FDA related to CMC and device biocompatibility. Given that no new data from the clinical trials or in vivo studies was required, we anticipate that the FDA will classify the resubmitted NDA as a Class II resubmission if accepted. This would establish a six month review cycle from our submission date and potentially enable a tentative approval in the fourth quarter this year.

We look forward to working with the agency over the next few months and are prepared to host them for a prior approval inspection. Eight sixty one is in a good market position with the potential for growth in new indication. Eight sixty one was designed from the start to improve the therapeutic profile of treprostinil by enhancing deep lung delivery and achieving higher dose levels than current inhaled therapies. The convenience alone of DPI versus nebulizer should displace a significant portion of the current nebulized market. In 2020, United Therapeutics reported Tyvaso sales of more than $480,000,000 with a single indication in WHO Group one patients.

In addition, we believe the higher dosing of our DPI versus current nebulized nebulized therapy as demonstrated in our clinical trials could prolong the duration of inhaled treatment before patients transition to more invasive parenteral administration. As the market for inhaled treprostinil delivery expands to new indications, we believe that eight sixty one will be well positioned. The recent approval of nebulized Tyvaso to treat patients diagnosed with pulmonary hypertension associated with interstitial lung disease is meaningful and that it demonstrates inhaled treprostinil's ability to address another pulmonary hypertension patient population with an unmet need. It would be our intent to follow Tyvaso into that expanded indication. We plan to discuss with the agency whether and when we could include PH ILD in the eight sixty one label.

As you know, we are actively involved in the Hatch Waxman litigation brought by United Therapeutics as well as pursuing inter partes reviews or IPR of certain related patents at the U. S. Patent Trial and Appeal Board. We continue to maintain that the three patents asserted against us are not infringed and are invalid. While we will not comment in detail about specific actions along the way, we remain confident in our position.

We have taken several actions in the last four months to improve our balance sheet by reducing annual net spending, increasing our cash position and in the process adding a new member to our Board of Directors. As described in March, management has already implemented measures to reduce net annual spending in 2021 by more than 40% compared to 2020. The company refinanced its former credit facility eliminating more than $10,000,000 in required principal repayments over the next two years, while providing access to an additional $10,000,000 upon the achievement of certain regulatory milestones related to August. The refinanced debt complements our most recent financing of $21,700,000 from the sale of common stock to new and existing investors. Not only do we benefit from the approved cash position, but we are very excited to welcome David Johnson, a partner and co founder of Calligan Partners to the Liquidia Board of Directors.

Calligan led the private placement of shares and Mr. Johnson has closely followed Liquidia over the last year. He recently decided to terminate the development of LIQ865, a sustained release formulation of bupivacaine targeting the treatment of local postoperative pain. We attempted to partner the program, but were unable. We have chosen to focus internal resources on maximizing the value of our PAH assets and to build a pipeline synergistic with our expertise in cardiopulmonary and rare diseases.

At this time, I will turn the call over to Mike to review our first quarter financial summaries. Thank you, Damian, and good morning, everyone. Our first quarter twenty twenty one financial results can be found in the press release issued earlier today and our Form 10 Q to be filed with the SEC later today, both of which will be available on our website. To briefly summarize, we recognized revenue of $3,100,000 for the first quarter twenty twenty one as compared to no revenue in the first quarter last year. The revenue recognized in 2021 relates to our promotion agreement with Sandoz in support of treprostinil injection as a result of the acquisition in November 2020 of Rheogen, our wholly owned operating subsidiary now referred to as Liquidia PAH.

Cost of revenue during the first quarter was $700,000 compared to no cost of revenue for the first quarter of last year prior. Cost of revenue recognized during 2021 related to the promotion agreement as previously noted. Research and development expenses decreased to $6,100,000 for the first quarter twenty twenty one compared with $10,800,000 for the 2020. The decrease of $4,700,000 or 44.1% primarily related to lower expenses from our Liquidia eight sixty one clinical program, which was substantially completed prior to filing the NDA last year, lower expenses from our eight sixty five clinical program and lower expenses related to employees consultants. General and administrative expenses increased to $5,300,000 compared to $3,800,000 for the first quarter last year.

The increase of $1,500,000 or 39.6% was primarily due to $2,100,000 higher legal and professional fees associated with our corporate activities as well as our ongoing eight sixty one related litigation offset by lower consulting and personnel expenses as a result of lower headcount year over year. The net loss for the quarter ended 03/31/2021 was $9,200,000 or $0.21 per basic and diluted shares compared to a net loss of $14,800,000 or zero five two dollars per basic and diluted share for the quarter ended 03/31/2020. Cash totaled $53,600,000 and $65,300,000 as of 03/31/2021 and 12/30/2020 respectively. These cash figures do not reflect the $21,700,000 in gross proceeds raised in April from the sale of common shares in a private placement. As we look further into 2021, we expect our net cash burn in future quarters to continue to decrease, a reflection in our reduction in spending.

We believe that cash burn will be further reduced by the anticipated positive contribution from the profit split arrangement with Sandoz on the sale of treprostinil injection. While we expect treprostinil injection unit sales to grow significantly, it is worth noting that our share of profit split with Sandoz has the potential to decrease from 80% to 50% once we exceed a contractual cumulative revenue threshold, which we estimate maybe in the fourth quarter of this year. We will not be providing any specific revenue guidance. However, we are confident that the newly enabled subcutaneous administration of treprostinil injection will help contribute more than our previous estimate of mid to high single digit millions. We will provide updates on future calls should this change in any material way.

With a strong balance sheet and access to the credit facility at SVB, we feel well positioned to deliver on potential value creating events related to regulatory approval and litigation activity in 2021 and 2022. I would now like to turn the call back over to Damian. Thank you, Mike. Before ending our prepared remarks, I thought it would be helpful reinforce our corporate priorities that we see very clearly in 2021. They are maximize the revenue from treprostinil injection with the launch of the subcutaneous route of administration advance LIQ861 successfully through the FDA and the ongoing litigation, reinforce the financial discipline established by the management team and remain opportunistic in our pipeline to drive near term and long term value Thank you for listening and I would be pleased to take any of your questions now.

Speaker 0

And your first question comes from the line of Siyazade from Jefferies. Your line is now open.

Speaker 2

Good morning, Damian. This is Kambi Zahn for Chris. I guess three questions for me. Could you tell us a little bit more about your expectations for the subcu opportunity and how it impact your revenues? If you have any second question, if you have any expectations out of the claims construction this month?

And then the third question is, would you develop or would you potentially develop PH ILD label expansion on a parallel timeline with the litigation or pursue that opportunity after some sort of litigation resolution? Thank you so much.

Speaker 1

Thanks, Kami. Let me try to address those one by one if I can. First of all, terms of the subcu opportunity, I think as Mike said, we are confident.

Speaker 2

We do think it's going

Speaker 1

to expand. Obviously, the universe of the addressable market is at least double if not more. I think that in the past we haven't been able to get as much payer support as you would expect for a very high priced rare orphan disease drug where there's generic option that's available at a significant discount. And I think now that we've been able to address both routes of administration, I think that that's going to provide some additional payer support. But as Mike also noted, we do have a little bit of a headwind in the context of our profit split will decrease theoretically depending on when we reach the threshold from 80% to 50%, which is significant.

So even though we're going to increase volume and do all that from a P and L perspective revenue, we'll obviously have the adjustment from the profit split that we'll have to we'll be overcoming. In terms of claims construction, I don't think that we have anything in particular to comment on at this point. I think it's we believe that we're prepared for it and expect a good resolution there. I would just note that it has been delayed due to core scheduling. I think it's now June 4.

So I think you mentioned this month and it was originally scheduled for this month, but is now postponed until next month. And then in terms of PH ILD, we're already we've already reached out to the FDA, our reviewer to ask and start having discussions with them about what does it mean now that Tyvaso has the additional expanded label. As we've heard at least from the United Therapeutics releases their Tyvaso DPI that's gone in was for both indications. And so I think they have every intention of trying to get it approved at this first pass for both indications. And so I guess I would say recommends, but we've already initiated that dialogue.

Speaker 2

All right. Thank you so much, Damian. Thanks.

Speaker 0

And your next question comes from the line of Shweta Dikai from Wedbush. Your line is now open.

Speaker 3

Hi. This is Shweta on for Liana Moussatos. Thank you for taking my question. Can you go over the additional information that was submitted to the FDA for August NDA resubmission?

Speaker 1

Yes. So this was in relation to the CRL as we've kind of commented in the past. Majority of that was in the CMC area and the device biocompatibility sections. And so in terms of the device biocompatibility, I mean, this is the typical device information or studies that you would need to do. We've chosen to redo all those and we did that and provided a complete robust package related to that.

And in relation to CMC, as you do know, is a new technology from a manufacturing perspective. And so there's certainly some questions around that that we were addressing. And I think, as you know, we didn't have the benefit of a PAI during the original submission review and which maybe would have offered an opportunity for us to address some of those during kind of an interactive discussion. But nonetheless, it was centered around CMC and device biocompatibility.

Speaker 3

Got it. Thank you.

Speaker 0

And there are no further questions at this time. Please continue.

Speaker 1

Okay. Well, I would like to thank everyone for joining. And please stay tuned in the future as we continue to provide hopefully positive updates of our execution and delivering eight sixty one and treprostinil injection in the market and then looking for other opportunities that will leverage our print technology and or add opportunities or assets into the pulmonary hypertension area. So thanks for joining.

Speaker 0

And this concludes today's conference call. You may now disconnect. Presenters, please stay

Speaker 1

on

Speaker 0

the line for the press conference.