Liquidia Corp - Earnings Call - Q2 2019

Transcript

Speaker 0

Good morning, ladies and gentlemen. My name is Jane, and I will be your conference operator today. I would like to welcome everyone to the Liquidia Technologies Second Quarter twenty nineteen Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen only mode. Following the presentation, we will conduct a question answer session.

Instructions will be provided at the 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 Adir, Vice President, Business Development and Strategy.

Speaker 1

Thank you, and good morning. Welcome to Liquidia Technologies' second quarter twenty nineteen financial results and corporate update. Today's call will include forward looking statements pursuant to the Private Securities Litigation Reform Act of 1995 based on current expectations. Such statements represent management's judgment as of today and may involve significant risks and uncertainties that could cause actual results to differ materially from expected results. Please refer to Liquidia's filings with the SEC, which are available from the SEC at www.sec.gov or from Liquidia's website at ww.liquidia.com for information concerning risk factors that could cause such differences and otherwise affect the company.

I would now like to turn the call over to Neal Fowler, CEO of Liquidia.

Speaker 2

Good morning to everyone and thank you for joining us. I'm here with Rich Katz, our Chief Financial Officer who joined us in May. Rich has already had an immediate and positive impact on the company, and I'm excited to have him join me today. This morning, I will summarize our recent accomplishments and provide an update on our two pipeline programs, LIQ861 and LIQ865. Rich will provide a brief summary of financial results for the 2019.

And then I'll wrap up with an update on upcoming key milestones. After her prepared remarks, we'll open the call for your questions. I'll start with some recent important highlights. We shared additional data in May at the American Thoracic Society's International Conference from the INSPIRE study on the positive impact of LIQ861 in patients with PAH, as shown in exploratory endpoints. We continued treatment of the vast majority of INSPIRE patients beyond the primary endpoint at month two.

We strengthened our understanding of administration technique and admitted dose in connection with our continued PK work. And lastly, with an eye to the future, we amended our agreement with GSK to provide liquidity of the ability to pursue additional inhaled products using our print technology. With those highlights in mind, I'd like to provide some additional details on our activity in the last quarter, starting with LIQ861. As a reminder, eight sixty one is an inhaled dry powder formulation of treprostinil, a prostacyclin analog used to treat PAH by targeting the pulmonary arteries. It combines the demonstrated benefits of inhaled prostacyclin therapy with fewer systemic toxicities than oral or infused options.

We believe that eight sixty one has the potential to maximize the therapeutic benefits of treprostinil by safely delivering higher doses directly into the lungs using a convenient palm sized disposable inhaler. Over the course of this year, we've shared a host of exciting data on eight sixty one. And I'd like to summarize where we are as we now prepare for NDA submission. We've met the primary endpoint of our pivotal study, demonstrating a favorable safety and tolerability profile of LIQ861. We have encouraging data on both physical and emotional benefits of eight sixty one, as shown in exploratory endpoints.

We continue to observe a high rate of continuation on therapy and are encouraged that over ninety percent of patients remained on eight sixty one at the two month time point. And we've been very pleased by the positive reaction to data from the pivotal INSPIRE study recently shared at medical conferences, and the enthusiasm from the PAH community at large. As our confidence in the therapeutic benefits of eight sixty one continues to increase, so too does our understanding of the PK results we've observed. We reported in June the outcome of a phase one study in healthy volunteers. Post hoc analysis from this study showed that plasma levels of treprostinil were tightly correlated to the LIQ861 dose delivered.

However, we also observed some unexpected variation in plasma levels. After further clinical and non clinical investigation, we believe the variation was related to an administration technique unique to the conduct of the study at the phase one unit. We plan to complete the PK work expeditiously and continue to target NDA submission by the end of the year. As to the GSK agreement, while the eight sixty one NDA is clearly our top priority, we were excited to announce in June the amendment to our GSK agreement. We now have an opportunity to expand the liquidity pipeline by leveraging the demonstrated benefits of inhaled print particles.

We have acquired rights to pursue print programs based upon three specific molecules, and a mechanism to acquire further molecules with GSK's approval. Each of the new inhaled programs provides GSK with milestones and royalties, beginning with the start of a phase three trial. As well as the right of first negotiation should Liquidia choose to seek a partnership for that program. We're excited to have the opportunity to add inhaled programs to our future pipeline. And as it pertains to our pipeline, I'm pleased to report that our eight sixty five program is on track.

We are targeting the start of phase two studies in the 2020. As a reminder, LIQ865 is a print formulation of bupivacaine to treat local post operative pain for three to five days with a single administration. The supporting toxicology studies are in progress, and the organization is making the necessary preparation to have drug product ready for clinical studies. In summary, we've made meaningful progress across our clinical programs and are keenly focused on delivering on the twenty nineteen milestones. I would now like to turn the call over to Rich to review our second quarter financial summary.

Speaker 3

Thanks, Neil, and good morning, everyone. Let me briefly summarize our results for the quarter. Revenues were $8,100,000 for the second quarter of 'nineteen, and that compared with $1,000,000 for the second quarter of 'eighteen. This increase was due to the recognition of $8,100,000 of previously deferred revenue as revenue as a result of our determination that the earnings process with respect to our GSK collaboration had been completed upon completion of the amendment that Neal referred to. Cost of sales were $800,000 for the second quarter of 'nineteen.

And that compared with $100,000 for the second quarter of 'eighteen. The cost of sales simply represents the sublicensing fees that are paid to UNC when we recognize licensing revenue. And that was, of course, then in connection with the GSK agreement as well. R and D expenses, as expected, were $10,700,000 That's up from $5,900,000 in the prior year comparable period. The increase was largely driven, of course, by the ongoing clinical costs related to August.

G and A, 2,400,000.0 for the second quarter of 'nineteen compared to 2,000,000 for the second quarter of 'eighteen. Expected increases primarily due to employee related expenses, including stock based comp and, of course, public company costs. So in total, net loss, dollars 5,900,000.0 compared to $6,300,000 for the second quarter of 'eighteen. The slightly narrower loss was largely driven by the recognition of the $8,100,000 of deferred revenue, again, related to the GSK collaboration. And that was partially offset by the increase in the operating costs that I noted.

Cash at the end of the quarter was $52,100,000 and we ended the quarter with 18,600,000.0 shares. And let me turn it back to Neil.

Speaker 2

Thanks, Rich. I'm proud that our team has continued to execute as planned against our goals for the year. The focus is very clear for the remainder of the year. We want to target submission of our NDA for eight sixty one by the 2019. Release the additional longitudinal data from the INSPIRE trial during the 2019.

And complete toxicology studies that support eight sixty five and prepare for phase two trials. To recap where we are, but also where we're heading. We believe that eight sixty one represents a transformative change in delivering a prostacyclin analog directly to the lung. The positive feedback from physicians has been consistent and frequent. And through the study, we believe Liquidia has clearly helped raise awareness of an unmet need, which we will strive to be the first to meet.

But we won't stop with one program. We intend to leverage our print technology to build a robust portfolio of innovative programs. With eight sixty five, we're excited about the potential to improve the treatment of postoperative pain. We have clear ideas for how to build new inhale programs, leveraging the benefits of precise, uniform print particles. We look forward to updating you on our progress in the coming months.

Our next investor presentation will be at the twenty nineteen Wedbush PACCARO Healthcare Conference next week on August 13 in New York. We look forward to continuing to update you and want to say thanks for your interest and continued support. And I'll now turn the call over to the operator to take your questions.

Speaker 0

Please press the pound key. Your first question comes from Stacy Ku from Cowen and Company. Your line is open.

Speaker 4

Good morning. Thank you for taking my questions and congratulations on the progress. First, just remind us, what is in the evolution of the pH treatment landscape? Where do you think eight sixty one will fall? And will the initial target be conversions from Tyvaso?

And I have a follow-up.

Speaker 2

Sure, Stacy. Thanks. In short, I'll give you just a quick historical context. When we entered the interest in this program years ago, our initial thinking was simply the convenience of a dry powder inhaler would trump a nebulized type of approach just simply out of convenience for the patient. However, one of the things we wanted to see in the clinic was improved therapeutic profile thanks to our print particle technology.

And in fact, that's been the case. So we are very optimistic about the potential for eight sixty one in that you have the convenience of a DPI over current nebulized therapies that are out there. But as demonstrated in our phase three study, one of the things that you may recall is that there was a lot more upfront use for patients that were previously naive to inhaled therapies just because of simply being able to use a dry powder inhaler. And we think that will expand, if you want to think of the disease, in an upstream fashion for where nebulized therapies are today. But also importantly because we're able to dose treprostinil at higher levels, thanks to our particle technology, that may potentially prolong the ability to stay on inhaled therapies and thus potentially delay the need for parenteral therapies downstream.

So we think in short, not only is a replacement for available inhaled therapies that are out there today, but for expansion, or I call it a reengineering of the inhaled space as we know it today in the treatment of PAH.

Speaker 4

That's really helpful. And if I may drill down into the details, could you offer any additional commentary on the PK sub study? Roughly how long does it take for the healthy volunteer PK study to read out? And are there any other remaining gating factors for NDA submission? For instance, would the FDA want to test the maximum tolerated dose of eight sixty one?

Thanks.

Speaker 2

Sure, I'd be glad to address that. So the PK question first. This has gone really kind of according to plan coming out of the last call that we had with everyone. We wanted to do both non clinical and a clinical look. Our assumption from the beginning had been that there was simply an administration technique issue at the site based on the positive results we'd seen in the Phase III study.

We needed to go in and take a look at that and prove that. And in fact we've done that. Our remaining step in that process now is to go in and simply redo the actual PK work now itself. That will go quite quickly. We're able to get those data, still get our final study report in time to get our NDA in by the end of the year.

So that is all according to plan. As it pertains to your second question on the MTD, we're not required to find the MTD for our submission. We are very interested through time in trying to understand where that is and we'll continue to study that. We have a patient that has been at a two hundred microgram dose, for example, with our eight sixty one product has continued to do well. We'll continue to follow these patients, as you know, longitudinally through time.

And as we continue to learn more about higher doses, we'll certainly share that with the marketplace.

Speaker 4

That's great. Thank you.

Speaker 3

Sure.

Speaker 0

Your next question comes from Liana Moussatos from Wedbush Securities. Your line is open.

Speaker 5

Thank you for taking my questions.

Speaker 6

What additional 861 INSPIRE trial data are we going to see in Q4? And what's the runway for the cash?

Speaker 2

Hey, Leanna. This is Neil. Maybe I'll take the first question and I'll let Rich handle the second. As it pertains to longitudinal data, it will be consistent with what we've churned out, for example, with the two week and two month data that you've seen so far this year. So we will continue even beyond the four month mark through time to report both adverse event data as well as our secondary endpoints which include quality of life measurements consistent with what you saw earlier this year, as well as things like six minute walk.

So we want to follow those patients through the long haul and we'll continue to report this data out as

Speaker 3

they become available. And on your second question, cash runway, we have cash into the second quarter of next year of twenty twenty. So we are obviously looking at a variety of means of continuing the financing of the company well beyond that. We're very excited about the program. We want to drive this forward as aggressively as we possibly can.

And so we will look at all alternatives to fund the company appropriately.

Speaker 5

Thank you for taking my questions.

Speaker 2

Sure. Sure.

Speaker 0

Your next question comes from the line of Serge Delanger from Needham. Your line is open.

Speaker 7

Hey. Good morning, guys. This is Tian on for Serge. I just had a couple. So with with respect to LIQ eight six one, I think you were planning a pre NDA meeting with the FDA.

Has it completed? Has there been any dialogue there? And then with respect to the PK study, I think you mentioned about some potential differences in the administration technique of the patients. Do you think there's anything there that you can, you know, maybe mitigate the issue? And then lastly, in terms of your ex US strategies, I think you mentioned in the past you're looking for a potential partner.

Do you have any update there? And what are your next steps? Thank you.

Speaker 2

Sure, Tan. Thanks so much for your questions. I'll try to hit these in order here. Your first question about pre NDA meeting, we will be scheduling that consistent with what we had mentioned earlier. So typically, I don't want to put words in FDA's mouth here, but typically we'll ask for a meeting that will occur early part of the fourth quarter, which would then set us up for the NDA filing, which would be at the end of the year.

So we don't have a specific date set yet on that, which we wouldn't expect, but that will be coming in the not too distant future. As it pertains to the dosing, the technique variability was really directed solely to the site. We've seen very, had very consistent feedback from both our clinical trial sites throughout the trial design as well as we constantly are monitoring and checking for that. The administration is going quite well in the trial setting of a phase three study. But this phase one work that we had done, the technique was in essence somewhat over controlled in that they followed a certain protocol that led to variability and we were able to quickly see where that occurred.

It was a hunch from the beginning. We just needed to go back and show ourselves that, which we did. And now we want to just repeat that PK work. So we feel very confident about our ability to move forward on that. And the last question, I'm sorry.

Ex US partners. Yeah, ex US partners, thanks. As it pertains to partnering, as you would imagine in the drug industry when you get phase three data, it incites a lot of interest from folks. So we're taking a look at all alternatives as Rich said. We want to be very smart about how we do that.

From the beginning, as you know, we're very intent on creating a commercial presence and a fully integrated pharma company through time. An exact structure of a partnership like that remains to be seen, what it would finally look like and ultimately. And I don't want to give any guidance that says we're absolutely going to do a partnership, but we're entertaining discussions. We'll continue to do that. And all things are on the table for us as we assess the optimal way to go forward.

Speaker 7

Great. Thank you for the color.

Speaker 3

Sure.

Speaker 0

Next question comes from the line of Chris Harrison from Jefferies. Your line is open.

Speaker 8

Great. Good morning. Thanks for taking the questions. I think for the most part, my questions have been asked, but, I guess perhaps just a clarification, Neil, on the when you say, we're just gonna redo the PK work, does that mean you're going to collect additional samples from healthy volunteers? Or it's just biochemical analysis of the samples you already have on hand?

Speaker 2

Yeah, Chris. Sure. To clarify that, we will redo in healthy volunteers that work. It's actually very quick for us to do. What we're essentially just going to do is double down the technique changes that I alluded to earlier.

And we will go back in on additional patients and be able to show that via blood levels in those particular healthy volunteers. Phase I work and it'll move very quickly.

Speaker 8

Right. So, essentially, you've identified the kinda, problem with the conduct of that phase one trial That's correct. Of Remedy's and plan to redo it. Got it. Okay.

Speaker 2

That's correct. That's correct.

Speaker 8

Okay. And then I don't know if you're able to kind of give more details or more information around, you know, the potential strategy on other programs or maybe even just what features Liquidia might find attractive in additional pipeline programs as, you know, we all expect success with the current ones?

Speaker 2

Yeah. So, you know, a commentary there is print, you know, again a quick backdrop on print, it offers immense landscape for us in terms of portfolio opportunities. We have not found any limitations to date with where print can be used in terms of actives or route of delivery, which opens up an immense real estate there for us. That said, we want to stay very smart about how we look at our pipeline. And we try to typically, as we've done in the past, build off of expertise that we already have created through time.

So that was what drove a lot of our discussion with GSK to do additional inhaled assets since we now have really good capabilities on the space. We have very specific ideas about where we would like to move in the inhaled space building off of our eight sixty one capabilities, as well as the potential for very differentiated molecules there. And also, know, again as demonstrated with our sustained release capabilities that we learned early on years ago in ophthalmology that then translated to eight sixty five, we'll be smart to build off of that. And we can't do everything at once, so we've got to be smart about how we build that out from the standpoint of focus and expenses. But we want to continue to build out over the longer haul a great arsenal of portfolio opportunities.

And our goal here is to have a steady stream of pipeline candidates through time.

Speaker 8

Great. Okay. That's really helpful. And then maybe for Rich, in terms of thinking about cash resources and appropriate deployment of those to execute on your programs, you know, what is like, maybe you could give us some strategies around, like, cost savings or, you know, additional capital resources that we can get, you know, past the stated runway you said, which I think was either into the second quarter or through the second quarter of next year?

Speaker 3

Yes. Thanks, Chris. We did say into the second quarter. So yes, no, it's a great question. And we are actively looking at everything.

In terms of cost let me start with cost cutting. The program has certain fixed costs, and our manufacturing infrastructure has certain fixed costs. And we do want to continue to move forward with August that we're very excited about as well. So the company is pretty lean as it is. Of course, we always are looking for opportunities for cost savings.

But that's not going to meaningfully change the runway. So we need to extend the runway clearly through additional cash resources. And Neil alluded to the interest that we've had in August, which we've been very pleased by. I think that, as Neil mentioned, there are not a lot of programs at this stage of development and with this commercial potential in front of them, and frankly with this degree of confidence and a strong outcome. So we've had lots of what I would call inbound interest.

And we are assessing that and having the appropriate discussions. I can't really comment further than that except to say, as Neil mentioned, I'll just reiterate that in anything that we might consider doing, our intent here is to become a commercial organization and to have a significant role in the marketing and sales of our lead program. And really use that as a launch pad as we think about bringing other programs through clinical development and ultimately to the market as well. So our intent is to become a fully integrated pharmaceutical company. That said, partnering opportunities are not the only way to fund a company, as you know.

There are other alternatives as well, other dilutive and non dilutive alternatives. And so we're assessing all of those, and we'll keep you updated as we progress with the discussions. But I hope that was able to address your question.

Speaker 8

Yeah, no, I really appreciate it. Thank you very much for taking the questions.

Speaker 3

Absolutely. Thanks, Christian.

Speaker 0

Press star then the number one.

Speaker 2

So I I guess that's it. Ali, again, Neal here, just saying thanks to everyone for joining the call today. We, as always, appreciate everyone's interest and the investment in Liquidia. We look forward to being in touch and updating you on our continued progress. Thanks to everyone, and have a great day.

Speaker 0

That does conclude our today's conference call. You may now disconnect.