Liquidia Corp - Earnings Call - Q1 2022

Transcript

Speaker 0

Good morning, and welcome everyone to the Liquidia Corporation First Quarter twenty twenty two Financial Results and Corporate Update Conference Call. My name is Howard, and I will be your conference operator today. Currently, all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions.

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

Speaker 1

Thank you, Howard. It is my pleasure to welcome everyone to today's conference call. Before we begin, I would 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.

Joining the call today are Chief Executive Officer, Roger Jeff Chief Financial Officer, Mike Cefetta General Counsel, Rusty Schunzer and other members of Liquidia's management. 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.

Speaker 2

Thank you, Jason, and good morning, everyone. The first quarter of this year reinforced everything that I believe to be true when I moved into the CEO role in January. Our products are needed, our team is dedicated and focused and our confidence is high. We are focused on things in our control, first and foremost, of which is commercializing our products and building a path towards profitability. We remain encouraged by increasing payer support for treprostinil injection along with concurrent increasing demand.

Large national and regional payers have been reviewing and now enacting generic mandates for parenteral treprostinil. We are aware that additional payers are expected to implement mandates in the 2022 and into 2023, reflecting acknowledgment that there is no perceived difference in quality, efficacy, safety or patient support services with our treprostinil injection versus the branded Remodulin. These payers see great potential benefit to reduce costs on a drug that was first introduced nearly twenty years ago. At the end of the first quarter, we argued the merits of our case in District Court with respect to Hatch Waxman litigation that was initiated nearly two years ago by United Therapeutics. We've been eager to reach this point in the proceedings, if only so that our full positions and evidence both as to non infringement and invalidity of the asserted patents could become publicly known and accessible.

We will continue to advance our position to the fullest extent in post trial proceedings and related patent office actions. Next up is the Inter Parties Review or IPR against the seven ninety three patent with oral arguments to be presented tomorrow to the Patent Trials Appeal Board or PTAB. Consistent with past earnings calls, we do not intend to summarize our arguments against the patents being litigated. To those who are interested, you can find much more information in the public domain through the court's PACER system now that the trial has concluded or through the PTAB stock at system. What we will say is that Liquidia remains confident.

The path to launching Neutrebia is on the visible horizon. We will update investors when decisions are rendered and continue to ask for your patience as it will likely be September or October before we have definitive information. Regardless, we are not waiting to plan for success. During the first four months of this year, we fortified the balance sheet and enabled an operating plan for long term value. Under Mike Cassetta's leadership, we have created a financing plan that allows us to optimize the path towards potential profitability.

The combination of restructured debt, targeted equity financing and increasing sales of treprostinil injection provides us the flexibility required to navigate some uncertainty without reliance on any one form of capital. We will continue to tightly manage expenses in a disciplined manner while also playing to win, which more than the $100,000,000 in cash allows. More specifically, we will continue preparations to rapidly launch Eutrebia pending FDA approval and build commercial inventories accordingly. We will build on the two eighty plus patient years of exposure with Eutrebia by initiating new clinical trials in HUGO-three patients among others. We will advance development of our next generation atrefia pipeline looking to improve on the product profile and dosing regimen.

And we will monitor the external landscape for programs that might leverage our expertise and presence in the cardiopulmonary community. I'm personally excited to build on the foundation created by the team who welcomed me in January. And I'm humbled by the drive and determination of the company as a whole to get new treatment options to patients who eagerly need and await them. While our eyes are on the future, it is also important to recognize the great quarter we have had so far this year. With that, Mike, would you please highlight a few points from our financial statements?

Speaker 3

Thank you, Roger, and good morning, everyone. Our first quarter twenty twenty two 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 closes today. In those documents, you will see that revenue was $3,500,000 for the three months ended 03/31/2022, compared to $3,100,000 for the same quarter in the year prior. Revenue related primarily to the promotion agreement with Sandoz. During the 2021, the profit split percentage we received under the promotion agreement was 80%, whereas during the 2022, the profit split percentage was 50%.

This decrease in profit split percentage was offset by a significant increase in the number of units sold for the quarter. Cost of revenue was $700,000 for the quarter, which was the same compared to the 2021. Research and development expenses were $4,700,000 a $1,400,000 decrease from the same quarter last year due to the timing of manufacturing related to the Eutrebia program. General and administrative expenses were $12,500,000 compared with $5,300,000 an increase primarily due to stock based compensation and legal fees related to our ongoing litigation. Other expenses in the quarter totaled $1,500,000 an increase of $1,300,000 over the same quarter last year due to extinguishment of debt and increase in interest expenses on the restated loan with Silicon Valley Bank.

All totaled, we incurred a net loss in the 2022 of $15,900,000 or $0.30 per basic and diluted share compared to a net loss of $9,200,000 or $0.21 per basic and diluted share for the 2021. Turning to our balance sheet. We ended the first quarter in a strong position, which we built upon in April. As of March 31, cash totaled $57,800,000 This balance included the $9,500,000 net increase to our existing credit facility with SVB during the first quarter as previously disclosed. In April, we closed on approximately 53,700,000 of net proceeds from the sale of common stock in an underwritten public offering.

We're very encouraged by the demand for new liquidity of shares despite the recent downturn in the biotech index, the impact of macroeconomic events and the uncertainty of Eutropia litigation. The equity raise included new investors familiar with the PAH space

Speaker 2

as well

Speaker 3

as current investors, of which 19% of the raise was funded by affiliates of two of our Board members. Members. We believe that the company is financially prepared to launch Eutrebia upon final approval by the FDA. Should that occur later this year, we see a path to potential profitability as early as 2023. With that, I'd now like to turn the call back over to Roger.

Speaker 2

Thank you, Mike. As you know, we are steadily building towards a transformative event with the potential launch of Eutrebia. We are grateful that the FDA issued a tentative approval last November and thankful for the patient community who continues to wait for what we believe will be the first choice inhaled prostacyclin when finally available. I would now like to open it up for questions. Howard, first question please.

Speaker 0

Our first question or comment comes from the line of Serge Belanger from Needham and Company. Your line is open.

Speaker 4

Hey, good morning. A couple of questions for me. I guess for Roger, one of the common questions we get from investors is whether you would launch at risk once the thirty month stay expires. And I know in the past you have said that it would depend on the facts at that specific time. But just curious coming out of the Hatch Waxon litigation in late March, what are some if there's any change on that front and what are some potential scenarios you may face in October?

And then secondly, maybe just walk us through some of the R and D projects, you're thinking about and when they may get off the ground? Thank you.

Speaker 2

Yes. Thank you, Serge. Always good to hear from you. So with regard to launching at risk, I think the issue here is that's a highly nuanced question. And the reason is it really depends on what claims survive and if the claim that survives is then infringed.

So really it's difficult to comment on that because there's a lot of different scenarios that could play out. The way we've said and we've tried to say this in our opening is we really won't comment or probabilitize on what may happen. I think we'll just wait to get more informed and then we'll have a definitive decision process that will we think will matriculate by the fall. So, technically even if we win everything and we could launch, we could then get final FDA approval, it would be a launch at risk because things would be appealed by the opposing party. So obviously though in that circumstance we would launch.

And then again, if things are a little bit more nuanced in terms of claim survival, infringement patterns, etcetera, then we'd have to make some more sort of thoughtful decision about what we would then do. So can't really comment on a specific outcome other than to say twenty three, almost twenty four months of the thirty month stay have now expired. There's only six months left. So we're near goal. And I think like you, we'll await the final conclusion, which we remain confident in the merits of our case and are hopeful that we will launch at the end of this year.

So then in terms of R and D projects, I think we're trying to leverage the expertise that we're building. We're building a very experienced and capable team, history of the employees in terms of developing print as a new manufacturing moiety is superb. So we're trying to expand on that. The one obvious thing then is to try to develop a longer acting form of utrebia So that instead of a four times a day inhalation therapy, it could be a one or two times a day inhalation therapy. So where that stands now, we're in the process of doing the requisite preclinical studies.

Some of those are directed towards understanding what a single dose administration provides in a mirroring model in terms of kinetics. That work is underway. I think we'll have data in the near term. So potentially we'll be able to report on some data at the next earnings call, but we don't have data yet. But I think I would say that's kind of teed up as our number one goal start is developing a life cycle management program that would leverage the capabilities we're building

So with that, next question please.

Speaker 0

Thank you. Our next question or comment comes from the line of Julien Harrison from BTIG. Your line is open.

Speaker 5

Hi, good morning. Congrats on the progress and thank you for taking my question. I'm wondering, in this scenario where there are more than one DPI treprostinil products on the market later this year, what do you think are the most important considerations physicians and patients should make in determining what the best option for them is?

Speaker 2

Yes, think that's a great question. So I think let me speak to our product rather than sort of speak against another product, not speak about the attributes that we will bring to the marketplace. So obviously we bring portability. We'll replace the burden of nebulizers with a palm sized disposable simple device, which not only should make the therapy portable but potentially should allow for earlier introduction of inhaled treprostinil to patients in need. I think the thing that we've seen is that we have a highly tolerated a well tolerated therapy.

So the tolerability is good. It avoids systemic toxicities associated with both oral and parenteral prostacyclins obviously. But what's unique about Utopia vis a vis Tyvaso is that we can escalate the dose significantly beyond what Tyvaso has allowed. So we'll change the therapeutic index of inhaled treprostinil through our dry powder formulation with PRINT. Importantly, in addition to tolerability, safety, our label has no black box warning.

There's no sort of risk from an excipient. So I think that's an important lever that could distinguish the product. As I said, it's titratable, readily. We've gone to three times the target dose of Tyvaso in our long term open label studies, which actually will have an abstract at ATS next week. And we can do this in just a few easily administered breaths.

So I think you're seeing a real change in the inhaled treprostinil paradigm in terms of treatment ease and use. Again as we reported ATS we're seeing very good durability. We can keep patients longer before they move along to other therapies. Most likely the next therapy for them would be parenteral. So I think that's an important aspect because, you're going to have a different retention curve which obviously will port a different revenue curve.

In terms of storage, we can store our product at room temperature for its product lifetime. So that's important. And now one thing that's critically important is in regard to the device, two things. One is we use a low resistance device. So it's very easy to inhale and deliver the dose.

And where this becomes even more important perhaps is down the road in WHO Group three patients where they're compromised from obstructive or restrictive lung disease in addition to their pulmonary hypertension. And then finally with regard to the device, really there's no requirement for a what I'll call positional dependence. You can hold the device, in any number of ways and it will deliver the drug. You can drop the device. And because the drug product is encapsulated there's no spillage.

So it's very simple, easy to use. It's used already in CF and COPD patients commercially. There's other companies using this device like Insmed and Gossamer in their own clinical trials. So it's what I'd call a tried and true. What this will all mean, in total is that we expect a very rapid transition from patients both on Tyvaso therapy and new to inhaled therapy to go to DPI and preferentially we think to go to Getrevio.

And there's a very good comparative to that. If you look back in 2009 when Tyvaso launched, it launched was second to market. Ventevis was already in the marketplace. And that market rapidly transitioned to Tyvaso over time, particularly in new patient starts. And that was just a convenience play, without this sort of pharmacologic therapeutic index improvement that we're seeing with Neutrevia.

So again, I've seen other estimates that are lower than what we would predict. I think we would estimate that 80% to 90% of the Tyvaso market would transition to utrephia. And then what the essence of earlier use and longer retention, we think the adjusted or the captured patient base will grow from three thousand as it is approximately today to probably six thousand and reach a new steady state. And then so that's kind of how we see the market playing out and the opportunity that presents itself for Yuktrevian which obviously is quite massive. Excellent.

Thanks very much. Thank you, Julian for the question. Next question please.

Speaker 0

Thank you. Our next question or comment comes from the line of Andreas Argyros from Wedbush. Your line is open. Hey, good morning and thanks for taking our question. Can you comment on preparations for the launch and how they've been progressing?

And then how you expect operating expenses to change over the next twelve months? Thanks.

Speaker 2

Yes. Thanks for the question, Andreas. Mike, if you would answer that question, please.

Speaker 3

Yes. Great. Thanks for the question, Andreas. So for on operating expenses and preparation for launch, so we are as Roger said, we will await the outcome of the proceedings litigation proceedings. We are planning to launch in Q4.

As we said, we're very confident. We are going through the process of pre commercializing from a combination of preparing launch inventories to building out the commercial and medical affairs team. So we really are playing to win and feel confident that we will be able to assuming we're able to launch in Q4 that we will be prepared. Relating to, what our expenses will look like over the next twelve months, what I can say is we're not going to give, firm guidance on that. We do feel confident that as we said in our prepared remarks that if we're able to launch in Q4, that we will be on a path to profitability as early twenty twenty three.

So we would expect expenses to increase as we get closer to launch as everyone would expect. But we feel confident, especially with our recent capital raise, that we will have a successful launch and potentially get to profitability in 2023.

Speaker 2

Great. Thank you, Mike. Thanks.

Speaker 0

You. I'm showing no additional questions in the queue at this time. I'd like to turn the conference back over to management for any closing remarks.

Speaker 2

Well, you, everyone. We greatly appreciate you joining us on the call today. We appreciate your continued interest in Liquidia, and we will update you on progress throughout the year. Have a great day. Bye bye.

Speaker 0

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.