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spk00: Good morning, and welcome everyone to the Liquida Corporation first quarter 2023 financial results and corporate update conference call. My name is Lisa, 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 Adair, Senior Vice President, Corporate Development and Strategy. Please go ahead.
spk03: Thank you, Lisa. It's my pleasure to welcome everyone to Liquidia's first quarter 2023 Financial Results and Corporate Update conference call. Joining the call today are Chief Executive Officer Roger Jeffs, Chief Financial Officer Michael Cassetta, Chief Medical Officer Rajiv Sagar, Chief Commercial Officer Scott Mumaw, 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. 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.
spk05: Thank you, Jason. Good morning, everyone, and thank you for joining us. As we said just seven weeks ago, our confidence remains high Our balance sheet is strong. Our legal team continues to have success in the courts and the market opportunity for Utropia. Our dry powder inhaled formulation of tryprosinil continues to expand as physicians gain better exposure to the benefits of inhaled prostacyclines in treating both PAH and PHILD patients. The PHILD opportunity is especially intriguing because it seems that the medical and investor communities at large are quickly catching up to the true value that can be created by finally offering an option to this previously untreated group. It's helpful to see the increasing demand for inhaled tryprosinol and the increased diagnosis and treatment of PHILD. It should accelerate adoption of Eutrefia given the clear benefits of tolerability, titratability, and overall patient experience with a low resistance device. While we wait for the opportunity to launch a product, we look forward to further defining Eutrefia's beneficial product profile in an open-label study in PHILD patients that we intend to initiate later this year. One of the reasons we decided to move up our earnings this quarter is to offer near real-time feedback on the most recent legal events that are gating to the potential approval and launch of Utrepia. I'd like to hand the call over to Rusty, who was just in the Federal Circuit Court yesterday for the oral arguments in the Hedge Waxman Appeals. Rusty.
spk07: Thank you, Roger. As a reminder, the company is an active party to two separate ongoing appeal proceedings at the Court of Appeals for the Federal Circuit, either of which could open the path to final FDA approval of EUTRAPIA if ruled in liquidity's favor. Broadly speaking, the appeals relate to two patents asserted by United Therapeutics, the 066 patent and the 793 patent. The first and most advanced ongoing appeal proceeding relates to the district court's decision last August in the Hatch-Waxman litigations. In this proceeding, UTC is appealing the District Court's ruling related to the 066 patent, which found five of the six asserted claims to the 066 patent are invalid and that the remaining asserted claim is not infringed by liquidity. And liquidity is appealing the District Court's decision with respect to the 793 patent, which found that all the claims were valid and infringed by liquidity based on the arguments that were presented during the Hatch-Watsman litigation. Yesterday, the Federal Circuit conducted oral arguments in this appeal. The majority of the argument time was spent addressing Liquidia's appeal of the district court's decision with respect to the 793 patent, with only a few questions from the judges and a couple minutes spent on UTC's appeal of the district court's decision with respect to the 066 patent. Although it is premature to speculate as the outcome of the appeal, we hope to receive a decision from the court in the next few months. A second ongoing appeal proceeding was initiated by United Therapeutics in April after the PTAB rejected their rehearing request and reaffirmed its previous decision, which found that all of the claims in the 793 patent were unpatentable. We currently anticipate that briefing in this appeal will conclude by the early in the fourth quarter and expect oral arguments to be scheduled either late this year or in the first half of 2024. We will not know the scheduled date for oral arguments until after briefing is complete. Once argued, we would then anticipate that the decision could be rendered by the court as early as a few days after oral argument if the court issues the summary affirmance, or within a few months after oral argument if a full written opinion is issued. When these appeals are taken together, if all of the original decisions are affirmed on appeal, then we will be clear to seek final approval of EUTREPIA. I'll now pass the call on to Mike for an overview of our financial reporting. Mike?
spk08: Thank you, Rusty, and good morning, everyone. From a financial perspective, the company has never been stronger or its future brighter. The combination of cash on hand and access to future funds through our revenue financing agreement provides a solid foundation from which we can build our presence in the PH community. We have recently initiated a hiring effort to support our commercial and medical affairs team. At the same time, our operations team continues to ramp production of commercial inventory and will be prepared when we get the green light to launch Utrepia. Turning to our first quarter 2023 financial results, which can be found in the press release issued today, you will see that revenue was $4.5 million for the three months ended March 31st, 2023, compared to $3.5 million for the same quarter in 2022. Revenue related primarily to the sales for proximal injection under the profit split agreement with Sandoz, and the increase of $1 million was primarily due to increased quantities and favorable gross to net rebate adjustments. Cost of revenue was $0.7 million for the quarter, which was the same compared to the first quarter of 2022. Research and development expenses were $5.3 million for the quarter compared to $4.7 million for the first quarter of 2022. The increase of $0.6 million where 12% was primarily due to $2.5 million increase in consulting and personnel expenses in preparation for the potential commercialization of Utrepia. General and administrative expenses were $7.8 million in the first quarter of 2023, compared with $12.5 million for the comparable quarter in 2022. A decrease of $4.7 million, or 38%, was primarily due to a $4 million decrease in legal fees related to ongoing EUTREPIA-related litigation and a $1.8 million decrease in stock-based compensation expense driven by an option modification charge recorded in 2022. These decreases were offset by a $1.1 million increase in commercial marketing and personnel expenses in preparation for the potential commercialization of EUTREPIA. Other expenses in the quarter totaled $2.5 million, an increase of $1 million over the same quarter last year, and included a $2.3 million loss on extinguishment of debt related to repayment of our loan with SVB in January of 2023. All totals, we incurred a net loss in the first quarter of 2023 of $11.7 million, or 18 cents per basic and diluted share, compared to a net loss of $15.9 million, or 30 cents per basic and diluted share, for the first quarter of 2022. On the balance sheet, we ended the first quarter with cash and cash equivalents totaling $94.4 million and feel well prepared to execute on our objectives for the year ahead. I'd now like to turn the call back over to Roger.
spk05: Thank you, Rusty. Thank you, Mike. Finally, I want to briefly address a comment that was made by United Therapeutics in its earnings call yesterday in which it compared admitted dose calculations between eutrophia and Taveso DPI. This is a red herring. Patients and physicians don't care about admitted dose calculations. They only care about the actual dose received. As confirmed in our registration studies and validated by the FDA in their granting of tentative approval, eTrepia reliably and precisely delivers doses to patients that are comparable to all of the treprosanil doses in the Typhizodepi label, as well as doses above and beyond those that are in the Typhizodepi label. Patients also care about the comfort and usability of the treatment, and we believe that our low-resistance device, its ease of use and robustness will be strongly favored by patients and their providers. With that, I would now like to turn the call over for questions. Operator, first question, please.
spk00: Thank you. If you would like to ask a question, please press star 11 on your telephone. One moment while we compile the Q&A roster. As well, we ask that you please wait for your name to be announced before you proceed with your question. The first question comes from Greg Harrison of Bank of America. Your line is open.
spk10: Hey, good morning and thanks for taking the question. Maybe if you could give any additional color just on the different scenarios with respect to the appeals of the litigation and and how that would impact the timing of the atropia launch. I know you've said it could be later this year or first half of next year. So, you know, what should we be looking for as these proceedings continue to get our best judgment of when that could happen?
spk05: Great. Thank you for the question, Greg. Rusty, if you wouldn't mind answering that.
spk07: Sure. Sure. Thanks, Greg. As I noted in my remarks, there are two ongoing appeals proceedings, either one of which, if they were decided in our favor, would allow us to proceed to launch. So first, as we said on prior calls, we ultimately need to be successful through appeal in one proceeding or the other on both of the patents that are still at issue. So ultimately, we need to prevail in both the 066 in the Hatch-Waxman appeal and the 793 patent in either the Hatch-Waxman appeal or the PTAB appeal. And so with that, the scenarios, there are really, you know, three potential scenarios. Yeah, three potential scenarios. The first would be that everything at the lower courts or lower tribunals is affirmed. So that would mean the Hatch-Waxman, the 066 decision in our favor is affirmed, the 793 decision against us is affirmed, and the PTAB decision on 793 in our favor is affirmed. If all the decisions are affirmed, then we would be clear to seek final FDA approval. Based on the current timeline, what that would mean is we would be waiting for the 793 PTAB appeal, which as we've guided previously, we think we will get to resolution of that Sometimes as early as late this year or sometime in the first half of next year. Second scenario would be that in the Hatch-Waxman appeal, we prevail on both patents. So we prevail on both the 066 patent where the lower court decision is affirmed and on the 793 patent where the lower court decision is reversed. If that was to happen, we would immediately be cleared to go seek final FDA approval. And so, you know, as I said before, we anticipate that decision within the next one to three months. The final scenario would be a scenario where we ultimately do not prevail on either the 066 patent or 793 patent. And if that happens, you know, as we've guided previously, we would have to wait for those patents to expire. But again, I want to reiterate, if all the decisions of the lower courts are affirmed, that would clear us to come to market, you know, again, we think either late this year or first half of next year. Thank you. Thanks. That's helpful.
spk05: Great. Thank you, Rusty. Thanks for the question, Greg. Operator, next question, please.
spk00: Thank you for your question. One moment while we prepare for the next question. Our next question will be coming from Serge Banglinger of Needham. Your line is open.
spk01: Hi, good morning. Just a couple questions for me. First one for Rusty. I think you've been pretty consistent that the most straightforward path to utopia approval was affirming prior court decisions on appeal. So just curious, post the oral arguments from yesterday, if your outlook has changed on the appeals of the DC court, given that most of the time was spent on the liquidity appeal.
spk07: Sir, thanks for the question. So, you know, I think we want to be careful. We don't, you know, we're not guiding as to what the judges are thinking or speculating as to what the decisions will be. You know, I think, as you know, you know, I counted approximately 40 questions from the court yesterday. Only two of those related to the 066 appeal. You know, both sides had 15 minutes of oral arguments yesterday. only a total of two minutes and 15 seconds was spent on their 066 appeal. So, you know, I think certainly, you know, factually, you know, we saw the same thing I think everyone else did. And obviously those oral arguments are available on the course website for anyone to listen to. But as I said, we don't want to speculate as to, you know, what the judges are thinking.
spk01: Okay. And one for Roger. I think in the past you've highlighted the differentiation between of Utopia to the other DTI products in terms of the dose ranges and the device. How much pricing could be a differentiation here? Is that an important component of your approach to competing in this market?
spk05: Yeah, I appreciate the question, Serge, and good morning. You know, we're not going to comment on pricing. I think obviously we want to make all communities including the payer community, satisfied with our approach to the market. And we'll do what we feel is necessary to, at least from a positional standpoint, to position Utrepia as a preferred product. But, you know, let's wait until we get approval and then we'll comment on that when we go to market.
spk01: Thank you.
spk00: Thank you. One moment while we prepare for the next question. The next question will be coming from Julian Harrison of BTIG. Your line is open.
spk02: Hi, good morning. Thank you for taking my questions. I guess first on the low versus high resistance debate, just wondering if you could provide your most recent read on patient prescriber preference. And then regarding ongoing launch preparations, are you able to talk about how much supply you plan to manufacture at risk, and has this changed at all with recent litigation updates?
spk05: Great questions, Julian, and good to hear from you. So maybe for the first question about the advantages of the low-resistance device, I'll ask Rajiv to answer that. And then in terms of launch preparedness and supply, Mike, if you could answer that. So Rajiv first on the low versus high.
spk09: Yeah, thank you, Roger, and Julian, good morning. Thanks for the opportunity to answer this question. You know, listen, we have repeatedly discussed the advantages of our innovative technology of print, and once again, just to highlight again that, you know, print allows for the drug particles to not require any de-agglomeration, meaning that eutropia can utilize a low-resistance device, and it doesn't have to be barriers. And remember, Because we use print technology, the powder is already designed to work on its own, with the particles already sized to deposit deep in the lung, leaving the low-resistance device as the most suitable technology. We believe that this enables a more ideal dry powder experience across a range of inspiratory flow rates, a range of lung disease types, including patients with PH and ILD. So this is why we're quite excited about the market.
spk05: Thank you, Rajeev. Nice answer. Mike, if you could comment on commercial stock and inventory build. Absolutely. Julian, great to talk to you.
spk08: Mike, can you hear me? We can hear you now. Okay, sorry. So, Julian, great to talk to you. You know, in terms of the question about inventory supply, I think it's about overall launch preparations. You know, we are, as you know, last year when there was a possibility of launching at the end of 2022, we had gone through launch preparations, which included building commercial supply. So we were ready to launch last year. We've continued those efforts. We're currently building commercial supply. So whenever we are in clearance to launch, we will be ready to supply the market and are very confident in that. also just want to add to that you know we're also going on doing other ongoing launch preparations and that's including onboarding a sales force or starting that process filling out our medical affairs team so you know we we will be ready for launch we know how important this launch is and and when we are when we are giving ultimately given the green light we will be ready to go in all aspects okay great thanks very much thanks mike one thing i would add to mike's comment is you know
spk05: I want to recognize our manufacturing team in RTP. We manufacture the bulk drug substance in-house, so it's a highly scalable process that we're in control of. So our ability to scale and meet market demands is quite the seal. Operator, next question, please.
spk00: Thank you. One moment while we prepare for the next question. And our next question will be coming from Kambiz Yazi of Jefferies. Your line is open.
spk06: Morning, guys. What's the status of the open label PHILD study? Kind of what size are you thinking for that? And then as a second question, what does the restructuring of the GSK agreement allow you to do? Thank you.
spk05: Great. Thanks for the questions, Kambiz. Rajiv, if you'll talk about the status of the open-label ILD. And Jason, I'd love it if you could answer the GSK question. So, Rajiv. Yes.
spk09: Kambiz, thank you, and good morning to you, too, as well. Just to give a little bit of understanding, you know, this is an open-label study focused on evaluating the utility, tolerability, and, you know, looking at exploratory endpoints such as efficacy in patients specifically with pulmonary hypertension associated with interstitial lung disease. We believe that we will launch this study near the end of the year, and so we look forward to that. In the meantime, we're actively talking with KOL's sites and getting ready for this launch, which once again I think is KOLs are very excited to participate in this study, and as I said, we should be launching by the end of this year. Thank you, Roger.
spk05: Thank you, Rajiv. And Jason, if you could talk about the reversion of the GSK right to us, please.
spk03: Sure. So it's a good question, Kambiz. I think if you look at the actions that the company's taken over the last several years, it's been to address any potential hurdle to creating more value for shareholders. And one of those areas is the application of our print technologies. We've had a great relationship with GSK. We started that in 2012. And as our respective strategies started to evolve, it became clear that we could help each other. So what this new agreement allows is GSK has continued access to do what we have been doing for them in the past, which is a lot of work on kind of preclinical assets as they think about moving them forward. But now we are not restricted from using that same technology as we see fit, meaning we can go forward on any development program that we would like, including in partnership with other companies. That's especially important when you look at a very clear competitive advantage that we've established, which is applying print technology to inhaled formulations. And I can say over the last few years, we have had inbound interest to figure out how to use our print technology in that area. So we're very happy to be in this new part of our licensing relationship with GSK where both parties can move forward in creating as much value as possible.
spk05: Very nicely said, Jason.
spk00: Thank you so much, guys.
spk05: Thank you, Comby. Operator, next question.
spk00: Thank you. And one moment while we prepare for the next question. And our next question will be coming from Matt Kaplan. of Leidenberg. Your line is open.
spk04: Hi, thanks for taking the questions. Good morning, guys. Just wanted to go back to manufacturing for a minute. One of the things that it seems like United might be running into is capacity constraints. Can you talk a little bit about your capacity potential at launch and what your plans are to address the market given the size of the PHILD opportunities?
spk05: Yeah, thanks for the question, Matt. Good to hear from you. Mike, maybe you could expand on your earlier answer around capacity and how we're looking to build out.
spk08: Yeah, Matt, great to talk to you. You know, we are very excited to serve this market. We have a very efficient process in-house where we do our in-house manufacturing. We have great downstream partners that we've been working with for several years to develop this capacity. We meet constantly to discuss needs and demand and potential for demand. And with the larger ILB opportunity, like I said, we are fully prepared. We will be prepared to launch this product and be prepared to get this product in every patient's hands that wants it or desires it. And we do not have any concern about our ability to do that. So, you know, through an efficient manufacturing process, great downstream partners, you know, we are fully confident that when we are able to launch, you know, as early as it may be or whenever the court decision comes, we will be ready and we do not have that fear and, you know, look forward to being able to serve patients, you know, in the short term and into the future.
spk05: Some points I'll add, you know, we have... Matt, the capability to source API and it well in advance, which we've done. So we have API on hand. Our supply chain is robust with most of the key operations are based in the US. The product has a long shelf life of three years at room temperature. So again, whatever we make now will have usefulness in the commercial supply once launched. And as Mike said, we were prepared to launch last fall. So we have a sort of bolus of inventory readily available. And then from a device standpoint, I think this is also important. You know, the Plastiope device that we use, the low resistance device is produced in the millions of units for global demand of which we only order a fraction, but that will not ever be a gating or limiting factor. So we feel very comfortable that we've scaled already and we can scale further with ease. So I think we're positionally in a very, we're in a position of strength.
spk04: That's very helpful. And then just one second question, I guess, following the completion of the HACS Latchman or the PTAB process, assuming you're successful, what would be the timing for full approval and then launch after that?
spk05: Yeah, it's a little bit of a moving target, Matt, but our estimates is it will be anywhere from two weeks to two months. And we're certainly going to communicate with the FDA about the process and the We'll ask for a quick return on turning the tentative of approval into a full approval and things that we may need to do to get that done, including safety updates if required. So, again, it's a fairly simple process. Historically, when we look at precedents, it's anywhere from two weeks to two months. It can be even quicker than that, but I think that's a good way to look at it.
spk04: Okay, perfect. Thanks for taking the questions.
spk05: Yeah, thank you, Matt.
spk00: Thank you. At this time, I'm not showing any further questions in the queue, and I would like to turn the call over to Roger for closing remarks.
spk05: Thank you, everyone, for joining us this morning. We look forward to continuing to discuss EUTREPIA and its broad potential going forward and hopefully talk about advancements in the legal case. Thank you, and have a good day.
spk00: Thank you, everyone, for joining today's conference call. This concludes today's conference. You may all disconnect. Everyone, have a great day.
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