Liquidia Corp - Earnings Call - Q4 2021

Transcript

Speaker 0

Good morning, and welcome everyone to the Liquidia Corporation Full Year twenty twenty one Financial Results and Corporate Update Conference Call. My name is Josh, and I will be your conference operator today. I would like to remind everyone that this conference call is being recorded. I will now hand the call over to Jason Adair, Senior Vice President, Corporate Development and Strategy.

Speaker 1

Thank you, Josh. It's my pleasure to welcome everyone to today's call to discuss our full year results for 2021 and 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.

Joining the call today are Chief Executive Officer, Roger Jeffs Chief Financial Officer, Mike Caseta Senior Vice President and General Counsel, Rusty Schundler and other members of Liquidity Management. I would now like to turn the call over to Roger for our prepared remarks, after which he will open the call for your questions. Roger?

Speaker 2

Thank you, Jason, and good morning, everyone. It's a pleasure to be speaking with you today. 2021 was a banner year for Liquidia, a year that focused on optimizing the company's core initiatives as we begin to focus our full efforts towards launch of YUTRIPIA at the end of this year. 2021 included multiple major accomplishments. Some highlights are firstly, in November, we received tentative approval of YUTRYPIA with labeling.

We view the labeling as highly favorable as it includes description of use in both patients switching from Tyvaso as well as prostacyclin naive patients with no new safety issues identified. We are excited to bring this portable, titratable and durable therapy to patients, some of whom have been using Eutrebia for more than three years at doses approximately three times that of Tyvaso's therapeutic dose. This therapeutic profile represents a potential game changer for PAH patients and positions Yotrevia to become the prostacyclin of first choice. Secondly, in April, we expanded the use of treprostinil injection into the subcutaneous market. As a result, we more than doubled the number of patients on treprostinil injection with approximately five hundred patients on therapy today based on specialty pharmacy reporting.

Approximately 400 unique prescribers have switched patients from brand to generic, including approximately 150 unique prescribers since our subcu launch in April 2021. We expect to see continued demand growth as new generic mandates from payers are increasingly being issued from large payers to cover tens of millions of lives. Thirdly, we also have significantly advanced our ongoing litigation with United Therapeutics, including a final written decision in the IPR for the nine zero one patent that found seven of the nine claims unpatentable. In addition, based on United Therapeutics' stipulation of Liquidia's non infringement of the remaining two claims of the nine zero one patent, that patent will no longer be part of the Hatch Waxman trial, which is scheduled for the end of this month. An IPR was also instituted for the seven ninety three patent with the PTAF stating that Liquidia demonstrated a reasonable likelihood of prevent renaming its assertion that all of the claims of the seven ninety three patent are unpatentable as obvious over the combination of certain hierarchy.

And while last Friday's summary judgment decision did not go as we hoped, it is important to note that the issue before the court in summary judgment was not the same issue that will be before the court at Trucks. Judge Hall specifically noted that she was not commenting on the validity of the asserted claims in the nine zero one and sixty six patents or the likelihood that the Delaware court may find the claims invalid based on the same reasoning that led the PTAF previously to invalidate United Therapeutics three ninety three patent. In fact, given that Judge Hall's recommendation was based solely on technicalities that applied only to our collateral estoppel arguments and not on the substance of arguments regarding the scope of the sixty six and nine zero one patents, we are if anything more confident than before in our positions of invalidity and non infringement that will be presented at trial. And finally, we strengthened our balance sheet through business optimization initiatives and the refinancing of our credit facility with SVB, providing funding through key legal milestones and the early launch stage of YUTRIPIA, as Mike Cossetta will now describe in more detail for you.

Mike, over to you.

Speaker 3

Thank you, Roger, and good morning, everyone. Our full year 2021 financial results can be found in the press release issued earlier today and on our Form 10 ks to be filed with the SEC after market closes today. In those documents, you will see that first, revenue was $12,900,000 for the full year of 2021 compared with $700,000 for the full year of 2020. The increase is driven by recording a full year of revenue related to the promotion injection following the acquisition of Raregen in November 2020. Revenue recognized under the promotion agreement in 2021 is net of $2,700,000 of amortization of the contract acquisition costs associated with the promotion agreement.

Cost of revenue was $3,000,000 for the full year 2021 compared with $200,000 for the prior year. 2021 included a full year of sales force related costs as well as amortization of the intangible asset associated with the promotion agreement. Research and development costs decreased in 2021 to $20,500,000 for the full year compared with $32,200,000 the prior year. The 36% decrease primarily related to lower expenses from our Eutrebia clinical program, which was substantially completed prior to filing the NDA in 2020 and lower employee and consulting expenses. General and administrative expenses were $23,100,000 for the full year 2021 compared to $27,400,000 for the prior year.

The decrease of $4,300,000 or approximately 16% was due to $9,100,000 decrease in consulting personnel and commercial expenses and offset by a $5,100,000 increase in legal fees relating to our ongoing UTRAPIA related litigation and a $2,000,000 increase in stock based compensation upon tentative approval of Eutrephia last November. In summary, we've incurred a net loss of $34,600,000 or $0.70 per basic and diluted share compared to a net loss of $59,800,000 or $1.76 per basic and diluted share for the year ended 12/31/2020. Turning to our balance sheet, we ended the year in a strong position. We ended 2021 with $57,500,000 of cash on hand. In early twenty twenty two, we also increased our debt facility with Silicon Valley Bank to provide immediate access to an additional $15,000,000 of cash in 2022 with additional capital available pending certain milestones.

When combined with the continued revenue from the treprostinil injection, the company will be well positioned to launch Eutrebia pending its final FDA approval. With that, I'd now like to turn the call back over to Roger.

Speaker 2

Thank you, Mike. Moving forward, we are extremely excited about the growth prospects for the company. As Jason mentioned, Mike and I are joined by other key members of our leadership team and we will now open it up for questions. Operator, first question please.

Speaker 0

Thank you. Our first question comes from Ken Bisiavy with Jefferies. You may proceed with your question.

Speaker 4

Good morning, everyone. Hey, Roger and team. Combi is on for Chris here. Three questions for me. First of all, why do you think Utopia can expand inhaled PAH market to $1,000,000,000 from where it currently stands today?

Second question, how have payers responded to the availability of generic subcu treprostinil? And then thirdly, was there any United strategy revealed during the summary judgment proceedings? Thank you.

Speaker 2

Thank you, Kanti, for the questions. I'll answer the first one about the market opportunity for eutrophia and why we think it's a growing opportunity. And then, have Mike answer the generic question and Rusty can opine on legal strategy at least what he's able to do so. So in terms of the market opportunity for YUTRAPIA, there's multiple near term value accelerators and they're really driven by four key levers. One lever is portability.

One lever is tolerability. The other lever is titrateability. And the final lever is durability. So let me speak to that a little bit. So if you look at just the WHO Group one PAH market, it's estimated to be around $500,000,000 market, just a rough estimate.

We think the value of a dry powder formulation like Eutrebia is that the portability of the product will greatly transition that market and rapidly from nebulized formulations to dry powder formulations. And I think that's quite simply done because you're taking a nine to twelve breaths per session four times a day to two breaths per session with a small pocket sized device with blister packed, capsules for delivery. Highly portable, small, tried and true. Devices that we use, for example, have been used in asthma and COPD branded drugs for years. These devices are also active in trials in PAH.

Gossamer and Eryavate are two examples of companies using the same device. And there's 6,000,000 to 7,000,000 of these devices or more and obviously we only need a small number of those. So will change the paradigm. More importantly though, it's not simply portability. I think we've also changed the therapeutic profile of inhaled treprostinil using uniquely our print formulation of, treprostinil.

So as you know print, provides uniform size and shape, monodisperse particles in the 1.3 micron range. What that does is allow for better aerodynamic performance so that the particles fly to the lower lung, less deposition in the upper airway. So what we have seen is that there is potential for lower, adverse events related to deposition in the throat. So less throat irritation and pain, less cough. This is borne out to be true in our early studies when we looked at the dosing.

So we have had patients now in open long term extension studies for up to three years. We have patients in excess of three times the therapeutic dose of Tyvasa. So you're talking about what would be an equivalent of twenty seven breaths four times a day, which we're delivering in two to four breaths per session. So massively different there. And really starting to change the profile so that inhaled treprostinil is now behaving more in its capabilities like oral or parenteral treprostinil that can be dosed to effect.

What that will then lead to is a better durability. So physicians will be able to hold their patients longer on inhaled treprostinil. So I think you're going to see expansion of the market two ways. One is durability. It's

Speaker 4

going

Speaker 2

to delay the time to more onerous therapies including oral and parenteral, which both have tolerability issues. And it's going to expand into earlier use as well as probably infringe greatly on the oral use as prostacyclin, our first choice. Really our campaign is driven to drive Eutrechia to be the prostacyclin, our first choice. And we think we can take a $500,000,000 market today and greatly expand it again based on these pharmacologic attributes that I've just described. So, Mike, if you could talk about the generic question.

Speaker 3

Yes, absolutely. Thanks, Roger. And thanks, Panmis. I think for us, subcu approval was critical from a payer perspective. It took off the administrative burden of payers where before they had to differentiate before injectable and subcu.

As Roger said, we have approximately 500 patients on therapy, which is more than double than what we had in April 2021, which was the first month which was the last month before subcu approval. In addition, several payers have already mandated generic fill and that has contributed to that doubling of patients. And just looking forward for 2022, we're going to give revenue guidance. But just to give you an idea, two large national payers covering approximately fifty million lives will require the use of generic treprostinil injection, and we expect to see an uptake coming as we move into Q2 and beyond 2022.

Speaker 2

Great. Thank you, Mike. And Rusty, once we can, if you could speak to what we learned about the legal strategy.

Speaker 5

Sure. Thanks, Roger, and thanks for the question. So, to answer your question, the summary just based on collateral estoppel, which is really its own sort of separate discrete issue, that's differentiated from the general non infringement and invalidity arguments that will be made at trial. So it's hard to read too much into that as UT's strategy. I think what is notable is the core arguments we made in support of summary judgment, address the scope of United Therapeutics sixty six and nine zero one patents and a comparison of the products claimed by the sixty six and nine zero one patents as the product claimed by United Therapeutics and their three ninety three patent that was previously invalidated deemed to be unpatentable over the prior art.

We think it's notable that in issuing her recommendation, the judge didn't reject, or disagree with our arguments on those. So that's certainly not determinative of how what the outcome will be at trial. But we think that is notable. So, I think that's informative for us as we move forward to trial. But again, because the issue is discrete from the issues that will be presented at trial, it's hard to read too much into what E2 strategy will be.

Speaker 2

Thank you

Speaker 4

so much for your answers.

Speaker 2

Great. Thank you, Rusty. Operator, next question please.

Speaker 0

Thank you. Our next question comes from Serge Belanger with Needham and Company. You may proceed with your question.

Speaker 6

Hi, good morning. A couple of questions for me. I guess the first one for Roger. Can you just outline some of the key decisions on the patent trial front as well as the IPR process that we should expect and how these will guide or determine your prelaunch commercial activities for YUTRIPIA? And then second question, I guess for Mike, can you just talk about the cash runway and the potential ramp up in OpEx for 2022?

It looks like SG and A went up pretty significantly in the fourth quarter. Were those mostly just onetime items or legal stuff? Just trying to get some clarification. Thanks.

Speaker 2

Yes. Thanks for the questions, Serge. So just in terms of kind of how the legal case will drive our prelaunch preparation, I'll just start with them. Obviously, we're taking all legal measures we can to ensure that we can remove any unwarranted barriers. And as soon as we're free and clear to market, we will pull forward our marketing and launch.

So we're preparing now to launch. Rusty, maybe you could talk and since Rusty is our General Counsel, you could talk about key decisions in the IPR process that will happen over the course of this year.

Speaker 5

Yes. And then just to give a preview of some key dates. Obviously, the trial is the end of this month. So it's scheduled for the twenty eighth to thirtieth in the District Court in Wilmington, Delaware. Closing arguments will be on March 31.

We're expecting a hearing in the seven ninety three IPR sometime in mid May. We should then get a final written decision from the IPR in the July IPR sometime mid August. And then as far as the decision from the Hatch Waxman trial, we are anticipating that we'll likely receive a decision prior to the end of the thirty month stay. But beyond that, it's hard to give much guidance because we know the courts are busy. And really, it will be in the judge's hands as to how quickly the decision comes out.

Speaker 2

Great. Thank you, Rusty. So Mike, maybe you can answer the questions around cash.

Speaker 3

Yes, absolutely. Thanks for the question, Serge. So from a cash perspective, we feel really good with where we are from a cash position. We are as Roger said, we are with the expansion of the SVB facility, which gives us access immediate access to $15,000,000 of additional capital, along with additional tranches upon certain milestones, we feel really good with where we are. We are moving forward with pre commercialization activities.

We're playing a win here. We are in the process of ramping up, and we feel very comfortable with our capital position, that it can get us through, the launch of YUTRAPIA in 2022 and really into 2023. We related to your question on Q4, it's really driven by a couple of factors. One, SG and A did increase in Q4. There were some onetime costs related to stock compensation for us getting tentative approval.

We did have increase in legal costs as we ramp up for as we ramp up and get ready for the trial in here in the next couple of weeks. So those are really the explanations of why SG and A were increased. Most of the increase was a onetime cost related to stock compensation.

Speaker 2

It. Great. Thank you. Thank you, Serge. Operator, next question.

Speaker 0

Thank you. Our next question comes from Andreas Targoides with Wedbush. You may proceed with your question.

Speaker 7

Yes, good morning and thanks for taking our questions. A couple of them from us here. Can you well, let's start with can you provide some details some more details around the launch preparations? How many reps do you plan to hire? And at what point in time would that happen?

Also, if the litigation isn't resolved by the expiry of the thirty month stay, are you planning to launch at risk? And then just kind of thinking about the PRINT technology more broadly, how are you thinking about expanding the pipeline going forward and the timing around that? Thanks.

Speaker 2

Thanks for the questions. So, Andres, maybe we'll take them in reverse order. I'll answer the question about PRINT, have Mike answer about launch prep and Rusty can talk about litigation and launching at risk things. So with PRINT, obviously now with, Mutrephia having tentative approval, we've validated the platform. Very proud of the GMP manufacturing facility for the API that we have in house in Mooresville, North Carolina, RTT.

We are looking to expand opportunities up front. In particular we're trying to leverage the expertise that we're building for the launch of Eutrechia. So we're looking at next generation, longer acting forms of Eutrechia. These are early. We won't really talk about those until we have data that we feel would be of interest to you, but we hope to get that through the first half of this year potentially.

Excited about what we're doing there. And then also having broader business discussions about what other things we could would print avail itself to, whether it's a market opportunity, niche orphan areas that we could penetrate potentially complementary to what we're doing already in pulmonary hypertension. So that's broadly kind of the way we're looking at things. I think there's enough on our plate and enough growth and success opportunity ahead. If we successfully launch Eutrebia, if we then prepare ourselves for the data exclusivity in HUGO-three patients to expire in March 2024, which is only two years away, there's another huge market opportunity that we can grow into.

And then obviously, United Therapeutics is successful in their additional studies of Tyvaso in broader populations in COPD and ILD, then obviously when we have the chance to penetrate those markets, we certainly will. So lots ahead just with what we have, but certainly more opportunity to further improve the delivery of this important therapy to patients. So with that, maybe Mike, if you could talk about LaunchPrep.

Speaker 3

Yes, absolutely. Thanks, Roger, and thanks for the question. LaunchPrep, I think I just want to point out that the RareGen acquisition, aside from providing positive cash flow to the company, the strategic part of that transaction of bringing in an existing commercial infrastructure with a small targeted sales force. We also have a wonderful Head of Commercial, Scott Mumma, who came as part of that transaction. So that really springboards us to prepare for a launch of Eutrebia.

And to just give you an idea of timing, we are in full scale up mode. We've recently hired a Head of Sales. We're building out our medical affairs team. Success and preparing to launch Eutrebia here in 2022. Now we're not going to get into specifics on the size of the sales force, but we feel confident that we will have a nimble and professional sales force that will be able to compete and win share for Eutrebia and for LOQUIDIA.

So we are excited for what comes in 2022, we're prepared to ramp up appropriately as we head towards launch.

Speaker 2

Thank you. Great answer, Mike. So, Rusty, maybe you can address the litigation question and launch.

Speaker 5

Sure. So thanks for the question. As to whether we have launch at risk, if we haven't gotten a decision by the end of the thirty month stay, that's a decision that won't be able to make that until that time. And it will be informed by a number of data points that we just don't have right now. It will be informed by the trial.

It will be informed by the seven ninety three IPR. So certainly at that time we'll take into account all those different factors. But we can't provide guidance at this point because we just don't have that information in hand.

Speaker 2

Great. Thank you for your questions. Operator, next question please.

Speaker 0

Thank you. Next question comes from Julien Harrison with BTIG. You may proceed with your question.

Speaker 2

Hi, good morning. Thank you for taking my question. Just wondering if you can confirm that the FDA has not requested that a risk evaluation mitigation strategy be implemented for Eutropia assuming you gain freedom to operate later this year? Yes, that's an easy one. The answer is no, they have not.

Again, we have draft labeling in hand. The product's obviously therefore been declared safe and effective. And we don't have anything related to the API formulation that would cause any concern. Excellent. Thanks very much.

Speaker 0

Thank you. And I'm not showing any further questions at this time. I would now like to turn the call back over to Roger Jess for any further remarks.

Speaker 2

Great. Thank you, operator. We want to thank everyone for joining us on the call today. We greatly appreciate your continued interest in Liquidia and look forward to updating you about our progress throughout the year. Have a great day.

Bye bye.

Speaker 0

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.