Liquidia Corporation

Good morning and welcome everyone to the Liquia Corporation first quarter 2021 financial results and corporate update conference call. My name is Anthony and I'll be your conference operator today. Currently, all participants are in a listen-only mode. Following the presentation, we'll conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press star zero for operator assistance at any time. I'd like to remind everyone that this conference call is being recorded. I'll now hand the call over to Jason Adair, 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. They may cause actual results that 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 Dagoa for our prepared remarks, after which he will open up the call for your questions.

Thank you, Jason, and good morning, everyone. I'm joined today by Mike Cassetta, 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 an update in March, Liquidity 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 proximal injection, our generic formulation of our modulant, by enabling subcutaneous route of administration, the resubmission of the NDA for LIQ 861, putting us back on track for a potential FDA 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 that's helping to establish the reputation for delivering our results. The FDA clearance of the RG3ML medication cartridge has removed a major barrier to maximizing the utility and value of tryprosin injection. This achievement by our partner, Chengdu Shifang Medical Technologies, demonstrates our commitment to providing valuable products to PAH patients and the community who supports them now. With both the IV and sub-Q routes enabled, we expect that the market opportunity for our product will more than double not only as a result of newly addressable sub-Q remodeling 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 sub-Q administration of Tricrosanil due to the restrictions imposed by other companies. With this obstacle behind us, we continue to believe that there is significant addressable market for contacts United Therapeutics reported that remodeling sales in the U.S. of greater than $450 million in 2020. We have been encouraged by the level of interest and look forward to providing more updates in the future. Our R&D and operations team have worked steadily towards resubmitting the NDA for LIQ861, our dry powder formulation of Teprosynol. Last Friday, we provided the FDA 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. 861 is in a good market position with a potential for growth and new indications. 861 was designed from the start to improve the therapeutic profile of teprosinol 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 across the market. In 2020, United Therapeutics reported Tyveso sales of more than $480 million with a single indication in WHO Group 1 patients. In addition, we believe the higher dosing of our DPI versus current 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 proprostanol delivery expands to new indications, we believe that 861 will be well-positioned. The recent approval of nebulized tibetanol to treat patients diagnosed with pulmonary hypertension associated with interstitial lung disease is meaningful in that it demonstrates inhaled tryprosin's ability to address another pulmonary hypertension patient population with an unmet need. It would be our intent to follow Tyveso into that expanded indication. We plan to discuss with the agency whether and when we could include PHILD in the 861 label. As you know, we are actively involved in the hash wax and 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 million in required principal repayments over the next two years, while providing access to an additional $10 million upon the achievement of certain regulatory milestones related to 861. The refinanced debt complements our most recent financing of $21.7 million from the sale of common stock to new and existing investors. Not only do we benefit from the improved cash position, but we are very excited to welcome David Johnson, a partner and co-founder of Callaghan Partners, to the Liquidia Board of Directors. Callaghan led the private placement of shares, and Mr. Johnson has closely followed Liquidia over the last year. We look forward to his support in future discussions. With this financial discipline and strategic focus in mind, we have recently decided to terminate the development of LIQ865, a sustained release formulation of upivacaine, targeting the treatment of local postoperative pain. We attempted to partner with 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 2021 financial results can be found in the press release issued earlier today and our Form 10Q to be filed with the SEC later today, both of which will be available at our website. To briefly summarize, we recognize revenue of $3.1 million for the first quarter 2021 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 tripartite injection as a result of the acquisition in November 2020 of Rojan, our wholly owned operating subsidiary, now referred to as Liquidia PAH. Cost of revenue during the first quarter was $0.7 million compared to no cost of revenue for the first quarter of last year prior. Cost of revenue recognized during 2021 relates to the promotion agreement as previously noted. Research and development expenses decreased to $6.1 million for the first quarter of 2021, compared with $10.8 million for the first quarter of 2020. The decrease of $4.7 million, or 44.1%, primarily related to lower expenses from our Liquidia 861 clinical program, which was substantially completed prior to filing the NDA last year, lower expenses from our 865 clinical program, and lower expenses related to employees and consultants. General administrative expenses increased to $5.3 million compared to $3.8 million for the first quarter last year. The increase of $1.5 million, or 39.6%, was primarily due to $2.1 million higher legal and professional fees associated with our corporate activities, as well as our ongoing 861-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 March 31, 2021, with $9.2 million, or $0.21 per basic and diluted shares, compared to a net loss of $14.8 million, or $0.52 per basic and diluted share, for the quarter ended March 31, 2020. Cash totaled $53.6 million and $65.3 million as of March 31, 2021 and December 30, 2020, respectively. These cash figures do not reflect the $21.7 million 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 tropocinol injection. While we expect tropocinol injection unit sales to grow significantly, it is worth noting that our share of profit split with Sandoz has the potential to decrease significantly from 80% to 50% once we exceed a contractual cumulative revenue threshold, which we estimate may be 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 tropostinol 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.