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spk05: Good morning and welcome everyone to the Liquidia Corporation's full year 2022 financial results and corporate update conference call. My name is Chris and I'll 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 And I will now hand the call over to Jason Adair, Senior Vice President, Corporate Development and Strategy. Sir, please go ahead.
spk01: Thank you, Chris. It's my pleasure to welcome everyone to Liquidity's full year 2022 financial results and corporate update conference call. Joining the call today are Chief Executive Officer, Roger Jeff, Chief Medical Officer, Dr. Rajiv Sagar, Chief Financial Officer, Michael Cassetta, and General Counsel, Rusty Schundler. Before we begin, please note that today's conference call will contain forward-looking statements, including those statements regarding future results, unaudited and forward-looking financial information, as well as the company's future performance and or achievements. These statements are subject to known and unknown risks and uncertainties, which may cause our actual results or performance to be materially different from any future results or performance expressed or implied on this call. For additional information, including a detailed discussion of our risk factors, please refer to the company's documents filed with the Securities and Exchange Commission, which can be accessed on our website. The company will file its 10-K on Monday, March 20th. I would now like to turn the call over to Roger for our prepared remarks, after which he will open the call up for your questions.
spk08: Thank you, Jason. Good morning, everyone, and thank you for joining us. As I look back on 2022, my first year as CEO at Liquidia, I remain humbled to have joined an organization Organizations have poised to join the company in an operational role which is related to the potential of Utrepia to universally transform the problem of cyclone therapy from a high-burden treatment option to a low-burden option for patients. Specifically, four key attributes resonated loudly with me. Utrepia's tolerability, Utrepia's titratability, Utrepia's durability, and Utrepia's usability and portability. These four attributes continue to resonate with me and support my belief that eutrefia has the potential to be the prostacyclin therapy of first choice and best-in-class inhaled therapy for patients with either pH or pH ILD. The open-label extension data that continues to mature only further complements my belief in the commercial potential of eutrefia to participate significantly in what is now the fastest-growing segment of pH and pH ILD in the prostanil market. The other main excitement for joining us was the event strength of the entire organization and our internal capability to manufacture drug substance in-house. Of course, it also didn't hurt that we already had tentative approval and labeling in hand. In 2022, we made key strategic hires to strengthen our core capabilities, and in concert with our legal success in 2022, Liquidia is now well-positioned to maximize the commercial uptake of eutropia I'd like to now turn the call over to Rajiv Sagar, our CMO, and one of those key 2022 hires to expand on why we are so excited about Dutrevi's unique product profile and why we believe we are ideally positioned to provide a differentiated, best-in-class option for patients. Rajiv?
spk03: Thank you, Roger, and good morning, everyone. In recent months, our team has engaged with the medical community about certain topics related to eutrepia, such as its product profile, the benefits of low-resistance dry powder inhaler device for patients, and our upcoming clinical plans. Today, I thought it would be helpful to briefly touch on these points. Eutrepia was designed with a specific goal in mind, to deliver true proximal to the deepest parts of the lungs, across a wide range of doses, and a broad range of patients with varying lung function. To achieve this objective, we combined novel print technology with the RSOO Plasti-Ape Dry Powder Inhaler, a simple, proven device used successfully by many tens of thousands of adults and children with breathing-related problems, such as COPD and asthma. To the first point of expanding the dose range, Our clinical studies in pulmonary arterial hypertension, or PAH, prove that a 79.5 microgram dose of eutropia is delivered at bioequivalent doses to nine breaths of nebulized tibiasis. But more importantly, eutropia has been safely and conveniently titrated to doses comparable to 27 breaths of tibiasis, a level rarely, if ever, achieved with the nebulizer. To the second point, our low DPI proved easy to use for advanced technology to train patients. And further, demonstrated it is robust enough to be dropping or positioning in a myriad of ways. In fact, given the device's proven track record with obstructive lung diseases, there's considerable interest among medical professionals To use eutropia, particularly for patients with pulmonary hypertension associated with interstitial lung disease, or PH, where lung restriction and impaired respiratory effort are common. Put simply, the uniform print particles are in the ideal respirable range for deep lung delivery, providing consistent and effective delivery with a low-resistance device across a wide range of inspiratory efforts for PAH and PHILD patients. To further inform the use of eutrepia, we intended a clinical trial later this year that will generate data on how eutrepia may be best utilized in PHILD. We think an open-label study would greatly benefit our understanding of tolerability and the ability to titrate in this patient population. I'm excited to move closer to the potential launch of eutrepia I'd like now to turn the call over to Rusty for an update on the legal proceedings. Rusty?
spk10: Thank you, Rajiv. As a reminder, the company has received rulings through proceedings in the court and in parallel interpartisan review proceedings before the passing of the Patent Board, or PTAB, that all of the claims in the three patents asserted by United Therapeutics against the company are either invalid or not infringed by liquidity. Over the last several months, we have seen further progress in our litigation to bring Utrepi to market. First, we are pleased with the PTAB's decision in February to reject United Therapeutics' request for a rehearing of the 793 IPR. In its decision, the PTAB clarified the grounds upon which it found that all of the claims in the 793 patent were unpatentable. United Therapeutics now has 63 days from the decision date of February 2nd to file an appeal of the PTAB's decision. Assuming UT files an appeal, which they have publicly stated they will, we would project that oral arguments could occur as early as late fourth quarter 2023 or first quarter 2024. We would then anticipate that a decision could be rendered by the court as early as a few days after oral argument if the court issues a summary of firmments or within a few months after oral argument if a full written opinion is issued. Second, we are pleased with the progress in the appeal of the district court's decision in the Hatch-Watzman trial. Briefing in that appeal has now been completed, and the court is in the process of scheduling oral arguments, which we expect to occur sometime in the second or third quarter of 2023. As with the appeal of the 793 IPR, we would expect to receive a written decision of the court within a few months after oral argument. For all of these appeals, we will not summarize our arguments here, but all briefings are, of course, available to the public through the court's PACER system. Lastly, there may be opportunities to accelerate the timeline in one or both appeal proceedings, and we will seek opportunities to proceed through the appeals process as quickly as possible. Finally, it is notable that United Therapeutics did not appeal the Hatch-Waxman decision related to the 901 patent, so that patent is no longer an impediment to our launch of eTrepia. With the 901 patent having been dropped, we would now be able to seek final approval for eTrepia if the decision of the district court in the Hatch-Waxman litigation is affirmed on appeal with respect to the 066 patent, and either the District Court's decision regarding the 793 patent is reversed on appeal, or the PTAB's decision regarding the 793 patent is affirmed on appeal. In short, if the original decisions are affirmed on appeal, then we can seek final approval of EUTREPIA immediately. I will now pass the call on to Mike for an overview of our financial reporting. Mike?
spk11: Thank you, Rusty, and good morning, everyone. Before I address the results for the full year 2022, I wanted to briefly comment on the security of our funds and relationship to SBB, a bank with whom we've had a relationship for about two years. As previously disclosed, we repaid all debt owed to SBB back in January as part of the financing agreement with healthcare royalty partners. We also had maintained all cash and cash equivalents at SBB, 99% of which was held in a BlackRock mutual fund and the remainder of which was held in an operating account. On Tuesday this week, substantially all of our cash was transferred out of SBB to an accredited financial institution. We will continue to evaluate our cash management and investment policies in an effort to protect our capital from events similar to what occurred in the last week. Turning to our full year 2022 financial results, which can be found in the press release issued today, you will see that revenue increased to $15.9 million for the year ended December 31st, 2022, compared with $12.9 million for the prior year. The profit split percentage we received under our promotion agreement with Sandoz was 50% for the entire year, whereas in 2021, the profit split percentage decreased from 80% to 50% as a result of achievement of predetermined cumulative sales thresholds. Revenue in 2022 is net of $2.7 million in amortization of the contract acquisition costs associated with the promotion agreement. Next, cost of revenue was $2.9 million for the full year 2021 compared with $3 million for the prior year. 2022 included a full year of Salesforce-related costs, as well as amortization of the intangible assets associated with the promotion agreement. Research and development expenses in 2022 of $19.4 million for the full year, compared with $20.5 million the year prior. The decrease of $1.1 million, or 5%, was primarily due to a $0.9 million decrease in personnel, consulting, and stock-based compensation expense. General and administrative expenses were $32.4 million for the full year of 2022, compared to $23.1 million for the prior year. The increase of $9.3 million, or 40%, was primarily due to a $4.2 million increase in commercial, marketing, and personal expenses in preparation for the potential commercialization of EUTREPIA, and a $3.1 million increase in stock-based compensation expense driven by an option modification charge recorded in the first quarter of 2022. In summary, we have incurred a net loss of $41 million, or $0.67 per basic and diluted share, compared to a net loss of $34.6 million, or $0.70 per basic and diluted share, for the year ended December 31, 2021. Turning to our balance sheet, we ended 2022 with $93.3 million of cash on hand. We further strengthened our access to capital in January through the Revenue Interest Financing Agreement with Healthcare Royalty for up to $100 million in four tranches. The first tranche of $32.5 million netted an approximate $10 million increase in cash after paying off the SVB debt facility. The remaining tranches are related to, one, clearance of the legal pathway, two, acquisition of an internal asset, and three, mutual agreement of the parties. I would now like to turn the call back over to Raj.
spk08: Thank you, Mike. Reflecting on the previous year, I can say with 100% confidence that we have been prepared to deliver the potential of our project in the future. At this time, I would now like to open to questions. First question.
spk05: Thank you. Before that, as a reminder, to ask a question, please press star 1 1 on your phone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Stand by as we compile the Q&A roster. And one moment, please, for our first question. Our first question will come from Gregory Harrison of Bank of America. Your line is open.
spk06: Hey, good morning. Thanks for taking the question. As you start to get closer to launch, what feedback are you receiving from physicians or patients regarding the differentiation between eutrapia and Taipeso DPI and the demand for eutrapia when you come to market.
spk08: Yes. Hi, Greg. Good morning. I have a wonderful question. We're excited to answer. At this time, I'd like to pass that to Rajiv. Maybe you can give some thoughts on the conversations you've had with various KOLs and then your own reflections on what difference eutrapia potentially from other DPIs in the space. Thanks, Greg. Thanks for the opportunity to answer this question.
spk03: The first thing is that I think it's very important that eutropia has been studied in pulmonary arterial hypertension patients in the SPIRE database. We've been able to tie successfully eutropia to doses equivalent up to 27 breaths four times a day of type 8, which is incredible. I think that showcases, one, our tolerability, and number two, our tetradability. Specifically, where the concern with pulmonary hypertension associated with interstitial lung disease is of importance is because this population has not only pulmonary hypertension, which is a vascular injury, but they also have an interstitial disease, which causes a limitation of force vital capacity. We believe this is where eutrefia has the ability to shine, in part because of its low resistance device that we're using. We believe this will allow the limitations of the patient's lung function to be better tolerable and suitable for our device in particular. To that end, we are hearing that our device, at least in those practitioners who have used it in our INSPIRE registry, feel like it has similarities to the simplicity of a nebulizer, but of course has all the benefits of a dry powder inhaler, such as portability. To this point, we think, Greg, it's very important that we study some of these product profiles in eutrophia, specifically in PHID, where we believe this will have the highest utility and impact in. And that's where we alluded to that we'll move forward with an open label study. to really showcase and highlight, one, the tolerability of eutrefia in this patient population. As you know, there has not been an official study using a dry powder inhaler in PHLD, so we believe this is important for the community and care wells to experience. The second thing showcased our ability not only in the tolerability, but as such, because of that improved tolerability, we should see titratability to higher doses in the patient population. So we look forward to initiating the study by the end of the year.
spk08: Thank you very much, Brigitte. Great answer, and it really sort of solidifies why we're so excited about the product profile of eutropia and our ability to capture a significant share of the market. Operator, next question, please.
spk05: Thank you. One moment, please, for our next question. Our next question will come from Kambiz Yadzi of Jefferies. Your line is open.
spk09: Morning, team. Can you provide any granularity on kind of the gating factors to potentially starting a PHILD study and then in terms of what feedback have you received on DPIs causing coughing in PHILD? Thank you so much.
spk08: Good morning, Conveys. Great to hear from you as well. In terms of gating factors to starting studies, really that's just our ability to get the protocol approved at ethics committees, CROs engaged, and really just CTM for the study supply. So that's fairly simplistic. We're working on that now, and it's our intention to start those studies in the coming quarters. And then in terms of PHILD, a question I'll let Rajiv speak to that.
spk03: Thanks, Kambiz. You know, I think what we're hearing is several things. One, I think patients, without a doubt, like the convenience of a dry powder inhaler. So that's a fact. Number two, you know, these patients that have pulmonary hypertension associated with interstitial lung disease, patients with...
spk01: Hey, Chris. This is Jason Adair. Rajiv, you cut out there as you started to explain the PHILD. I'm not sure if you could read.
spk03: Yes, so in particular with PHILD, because of their inherent limitations with cough in general, we understand that there's a certain number of patients in this population that tend to have limitations when exposed to a high-resistance inhaler. And so, you know, if this is done improperly, you know, that potentially can cause the patient to have additional cough and limitations when they're exposed to certain types of dry powder inhalers.
spk08: Thank you. So, I think the importance now of our own approach in patients with PHI, it could be possible that the not only the tolerability, but the rate of titration in that patient that would be a little bit different than in arterial hypertension. But we think given the profile of our product, we're well positioned to test that and show the best. Operator, next question, please.
spk05: Thank you. One moment, please, for our next question. Our next question will come from Serge Bellinger of Needham. Your line is open.
spk04: Hi, good morning. It's just one question. Thank you, Roger. You've highlighted over the last few quarters how eutropia inhaler is a low resistance DPI inhaler and highlighted some of the benefits there. Maybe just talk about what are the benefits and how that inhaler differentiates the product from Tybaso DPI.
spk08: Thank you. Yeah, that's a great question. And I'll team up again with Rajiv to answer this question. But I think a lot of our answer is going to be predicated on the fact that it's formulation driven. It's actually the print formula product that allows the use of low resistance device. Rajiv, if you can speak to kind of that. how the formulation leaves the user and what combination that benefit uniquely ports.
spk03: Yes, thanks for the question. You know, I think to highlight what Roger just noted, you know, the innovative technology allows for these drug particles that require almost no deagglomeration. And what that means is that eutropia does not have to overcome such barriers. The print powder is already designed to its own. The particles have already been sized to be deposited deep in the lung, and a low-resistance inhaler device is obviously the most suitable option for our print technology. And by already optimizing the size and shape of these drug particles, the print essentially enables a more ideal dry powder experience across a broad range of inspiratory flow rates. And this is why, you know, effectively the simple theft is probably one of the key reasons that there's growing excitement to bring eTrepia into the market and into PHL.
spk08: Thank you, Rajiv. So I think, again, it's the formulation that is really having the ability to use built with the differentiated delivery platform. without the need to de-agglomerate, which would require a higher resistance device, capacity to do that, and we think that then there's a leading entry into the market. Operator, next question, please.
spk05: Thank you. One moment for the next question. Our next question will come from Julian Harrison of VTIG. Your line is open.
spk02: Hi, good morning. Thank you for taking my question. I'm wondering if Sir Tatterseft has any bearing on the DPI tripostomal market opportunity in your mind?
spk08: Yeah, great question, Julian. And again, once again, I'll tag team with Rajiv. So I think, first, let's just say it's an exciting time in pulmonary hypertension research, new mechanisms, new analyses. new fits on to triple cholera therapy is impressive. And I think there's growing excitement, including our own, around how we interplay with these new modalities. I've been in this field for 30-plus years, and every time I approach a treatment, has come in, there's been a resumption of previous methodologies or treatments. It's never been borne out to be true. Typically, this is part of this therapy. And I see this, you know, the add-on to other therapies, the best benefit is where I can in-process the cyclins. In those patients, the prostacyclin dose was held steady because they were testing, you know, the test patient. And I think it would be exciting now to see what happens with eutrepia and cetatocepin combination, where eutrepia could also be titrated to the patients specifically. So, again, a lot of excitement. I think it really changed our view on the opportunities we see with eutrepia. We still think eutrepia future will be The process is the first choice. We can capture a significant share of a market, which has plenty of opportunity for not just our drugs, but obviously other inhaled osteoporosis as well. That's what we're excited about. Process lichens, in my belief, will remain. They're the only drug that can be titrated to effect. And given that, there's some that will be . Richie, do you have anything you want to add to that?
spk03: Jolene Rogers said it excellently. I'll just add, remember, one of the key issues here is also focused on not only pulmonary hypertension, but also specifically pulmonary hypertension associated with interstitial lung disease, where cetatoceph has yet not just shown a benefit, And so the entirety of both populations will be important, and we're driven to show our effectiveness in both states.
spk08: Thank you. Yeah, great, Ed. Thank you. Operator, next question, please.
spk05: Thank you. One moment, please, for our next question. Our next question will come from Matt Kaplan of Leidenberg-Talman. Your line is open.
spk07: Thank you and good morning. Just a couple of questions following up on the PHILD opportunity. Yes. One, could you tell us a little bit about the approval pathway for PHILD? And then secondly, with your planned open-label study, what are some of the endpoints you're going to look at there? And is there an opportunity to showcase potential improvement in efficacy due to the titrate development?
spk08: Yeah, thanks, Max. It was good to meet you. So I'll talk about pathways. So as we've said before, we've confirmed with the FDA in writing that no additional studies are required for approval for PHILD patients. Having said that, Obviously, we can't seek approval until the market exclusivity expires in March of 2004. So, we'll have an opportunity for that market post that date. So, that's the pathway. Some of kind of how we provide approval will depend on the resolution of the legal case and when we get approval for pulmonary TRI protection and move our tentative approval to full approval. But in general, those are the parameters that are gating for PHLD. And maybe, Rajiv, if you could speak a little bit to the points of the study, what are we hoping there? Yeah, maybe I can answer the question.
spk03: So first of all, as we just discussed on this call, this will be an open study specifically in PHLD. So in that regard, one of the main focuses is to really understand the tolerability of eutropia in this population. Remember, this is a broad range of patients with different types, heterogeneous, so really highlighting the experience in that broad range population and see if there's any particular population that stands out as the best response. The second thing is that we're going to be focusing on titratability. We know that if conditions achieve certain breath equivalent to titratability, we're going to have a better response we want to see if, number one, we can absolutely reach those levels and, more importantly, exceed those levels in a tolerable fashion. This will translate into several point data that we can acquire, including typical data points such as improved walk capacity or six-minute walk distance. We can also look at various effects, not only on the right ventricle itself, using non-linear parameters to set parameters, but also changes in scoring of the actual fibrosis itself, again, using non-invasive imaging methods. So more to come as the final protocol gets done. Thank you, Rishi.
spk07: Thank you. That's very helpful. And then just one more.
spk05: And I see there are no further questions. Oh, sorry. I see there are no further questions in the queue. I would now like to turn the conference back to Roger Jeffs for closing remarks.
spk00: And if we can let Matt back in.
spk01: Chris, Matt had one more question. Could you let him back in so we can ask it?
spk05: No problem. One moment, please.
spk00: Can you hear me? Yes.
spk05: Mr. Kaplan, you are now able to ask your next question.
spk07: Great. Just a quick question. In terms of with the moving parts associated with the Hatch Watch litigation and the PTA group decisions, what's your current thoughts on the timing for full approval now?
spk08: Yeah, great question. Maybe I'll ask Rusty to opine on sort of how he sees the timeline for the legal situation playing out?
spk10: Sure. So thanks for the question, Matt. So, you know, we really have two separate, you know, opportunities to get clear of the patents at this point, the appeal of the Hatch-Waxman decision and the appeal of the 793 IPR, and both those are on different timelines. So first is the appeal of the Hatch-Waxman decision. As I noted earlier, briefing's now complete, and we're just waiting on the court to set in oral argument dates. We think that date will be sometime in the second quarter or third quarter of this year. And once oral argument's been held, we expect the decision could come as quickly as a few days after oral argument, or it could take a couple months, depending on whether we get summary affirmance or not. And so if in that decision the 066, the district court's decision regarding the 066 patent is upheld, and if the 793 decision of the district court is overturned, we would be able proceed immediately to seek full approval after that. So that would put it sometime in the second, third, fourth quarter this year. Alternatively, if that appeal results in the 066 patent decision being upheld and the 793 decision of the district court being upheld, then we would have to wait for the IPR appeal to play out. And as we noted, we expect that oral argument in that will likely be held sometime fourth quarter this year or first quarter next year. you know, or first half of next year. And again, same thing after that oral argument is, you know, we could get a decision as quickly as a few days afterwards or as long as a few months afterwards.
spk08: Thank you, Wesley. Very clear. Operator, next question if there are any.
spk05: Thank you. One moment, please. And I see no further questions at this time in the queue. I will turn the call back to Roger Jeffs for closing remarks.
spk08: Great. And firstly, let me say we appreciate everybody calling in and listening. I hope you share the excitement we have around our building momentum. We're really trying to build on the back of some very positive news as it related to the legal situation. And as we continue to go to the market, you can hear our excitement around the product capabilities of Utrepia and how it could be introduced uniquely into the marketplace and benefit patients in a differentiated way. We thank you again for joining us, and we look forward to reporting on our continued progress in the coming quarters. Thank you, everyone. Bye-bye.
spk05: This concludes today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.
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