Liquidia Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 4, 2023

There are 9 speakers on the call.

Operator

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.

Operator

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.

Speaker 1

Thank you, Lisa. It's my pleasure to welcome everyone to Liquidia's Q1 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, Rajeev Sagar Chief Commercial Officer, Scott Mumma and General Counsel, Rusty Schumler. 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.

Speaker 1

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.

Speaker 2

Thank you, Jason. Good morning, everyone, and thank you for joining us. As we said just 7 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 Eutrepia, our dry powder inhaled formulation of treprostinil continues to expand as physicians gain better exposure to the benefits of inhaled prostacyclins 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.

Speaker 2

It's helpful to see the increasing demand for inhaled treprostinil and the increased diagnosis and treatment of PH ILD. It should accelerate adoption of Eudrepia given the clear benefits of tolerability, titratability and overall patient experience with a low resistance device. While we wait for the opportunity to launch the product, we look forward to further defining new TRYCA's beneficial product profile in an open label study in PHIL 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 going that are gating to the potential approval and launch of utrefia. 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 Hatch Wax Inn appeals.

Speaker 2

Rusty?

Speaker 3

Thank you, Roger. As a reminder, the company is an active party to 2 separate ongoing appeal proceedings the Court of Appeals for the Federal Circuit, either of which could open the path to final FDA approval of utrepia if ruled in liquidus favor. Broadly speaking, the appeals relates to patents asserted by United Therapeutics, the 60 6 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 litigation. In this proceeding, UTC is appealing the District Corp's ruling related to the 60 6 patent, which found 5 of the 6 asserted claims to the 60 6 patent are invalid and that the remaining asserted claim is not infringed by Liquidia.

Speaker 3

And Liquidia is appealing the District Court's decision with respect to the 793 patent, which found that all the claims were valid and infringed by Liquidia based on the arguments that were presented during the Hatch Waxman 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 of minutes spent on UTC's appeal of the District Court's decision with respect to the 60 6 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.

Speaker 3

We currently anticipate that briefing this appeal will conclude by the early in Q4 and expect oral arguments to be scheduled either late this year or in the first half of twenty twenty four. 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.

Speaker 3

Mike?

Speaker 4

Thank you, Rusty, and good morning, everyone. From a financial perspective, the company has never been stronger for 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 PAH community. We have recently initiated a hiring effort to support our commercial and medical affairs teams. 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 Atrapia.

Speaker 4

Turning to our Q1 2023 financial results, which can be found in the press release issued today, you will see that Revenue was $4,500,000 for the 3 months ended March 31, 2023 compared to $3,500,000 for the same quarter in 2022. Revenue related primarily to the sales for Prostinil injection under the profit split agreement with Sandoz and the increase of $1,000,000 was primarily due to increased quantities and favorable gross to net rebate adjustments. Cost of revenue was $700,000 for the quarter, which were the same compared to the Q1 2022. Research and development expenses were $5,300,000 for the quarter compared to $4,700,000 for the Q1 2022. The increase of $600,000 or 12% was primarily due to $500,000 increase in consulting and personnel expenses in preparation for the potential commercialization of Utrechtia.

Speaker 4

General and administrative expenses were $7,800,000 in a decrease of $4,700,000 or 38 percent was primarily due to a $4,000,000 decrease in legal fees related to ongoing new neutropia related litigation and a $1,800,000 decrease in stock based compensation expense driven by an option The decrease was offset by $1,100,000 increase in commercial marketing and personnel expenses in preparation for the potential commercialization of utrepia. Other expenses in the quarter totaled $2,500,000 an increase of $1,000,000 over the same quarter last year and included a $2,300,000 loss on extinguishment of debt related to repayment of our loan with SVB in January of 2023. All totaled, we incurred a net loss in the Q1 of 2023 of $11,700,000 or $0.18 per basic and diluted share compared to a net loss of $15,900,000 or $0.30 per basic and diluted share for the Q1 of 2022. On the balance sheet, we ended the Q1 with cash and cash equivalents totaling $94,400,000 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.

Speaker 2

Thank you, Rusty. Thank you, Mike. Finally, I want to briefly address comment that was made by United Therapeutics in its earnings call yesterday in which it compared admitted dose calculations between utrefia and TAVAZO DPI. This is a red herring. Patients and physicians don't care about admitted dose calculations.

Speaker 2

They only care about the actual dose received. As confirmed in our registration studies and validated by the FDA and their granting of tentative approval, utrefia reliably and precisely delivers doses to patients that are comparable to all of the treprostinil doses in the Tyvaso DPI label, as well as doses above and beyond those that are in the type A so DPI 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.

Operator

Thank The first question comes from Greg Harrison of Bank of America. Your line is open.

Speaker 5

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 how that would impact the timing of the ETROPIA launch. I know you said it could be later this year or first half of next year. So what should we be looking for As these proceedings continue to get our best judgment of when that could happen.

Speaker 2

Thank you for the question, Greg. Rusty, if you wouldn't mind answering that.

Speaker 3

Sure. Thanks, Greg. As I noted in my remarks, there are 2 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 on both the 60 6 in the Hatch Waxman appeal and the 793 patent in either the Hatch Waxman appeal or the PTAB appeal.

Speaker 3

And so with that, the scenarios, there are really 3 potential scenarios. The first would be that everything at the lower courts or lower tribunals is affirmed. So that would mean the Hatch Wax and the 0.66 decision in our favor as affirmed, the 793 decision against us as 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 sometime as early as late this year or sometime in the first half of next year.

Speaker 3

2nd scenario would be that in the Hatch Waxman appeal, we prevail on both patents. So we prevail on both the 60 6 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 As I said before, we anticipate that decision within the next 1 to 3 months. The final scenario would be a scenario where we ultimately do not prevail on either the 60 Patent or 793 patent.

Speaker 3

And if that happens, as we've guided previously, we would have to wait for those patents to expire. But again, Want to reiterate, if all the decisions of the lower courts are affirmed, that would clear us to come to market, again, we think either late this year or first half of next year. Thank you.

Speaker 5

Got it. Thanks. That's helpful.

Speaker 2

Great. Thank you, Rusty. Thanks for the question, Greg. Operator, next question please.

Operator

Thank you for your question. One moment while we prepare for the next question. And our next question will be coming from Serge Belanger of Needham. Your line is open.

Speaker 6

Hi, good morning. Just a couple of questions for me. First one for Rusty. I think you've been pretty consistent that The most straightforward path to EUTRIFIA 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?

Speaker 3

Sure. Thanks for the question. So I think we want to be careful. We don't we're not guiding as to what the judges are thinking or speculating as to what the decisions will be. I think as you know, I counted approximately 40 questions from the court yesterday, only 2 of those related to the 60 6 appeal.

Speaker 3

Both sides had 15 minutes of oral arguments yesterday, only a total of 2 minutes and 15 seconds was spent on their 60 6 appeal. I think certainly, factually, we saw the same thing I think everyone else did. And obviously, those oral arguments are available on the court's website for anyone Listen to, but as I said, we don't want to speculate as to what the judges are thinking.

Speaker 6

Okay. And one for Roger. I think in the past you've highlighted the differentiation of eutropia to the other VTI products in In terms of the dose ranges and the device, curious how much pricing could be a differentiation here? And Is that an important component of your approach to competing in this market?

Speaker 2

Yes, I appreciate the question, Serge, and good morning. We're not going to comment on pricing. I think obviously we want to make All communities, including the payers 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 Eutrepia as a preferred product. But that's what we get approval and then we'll comment on that as we when we go to market.

Speaker 6

Thank you.

Operator

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.

Speaker 5

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 Why you plan to manufacture at risk and has this changed at all with recent litigation updates?

Speaker 2

Yes. Great questions, Julian. Good to hear from you. So maybe for the first question on about the advantages of the low resistance device, I'll ask Rajeev to answer that. And then in terms of launch preparedness and supply.

Speaker 2

Mike, if you could answer that. So Rajiv first on the low versus high.

Speaker 7

Yes. Thank you, Roger. And Julien, good morning. Thanks for the opportunity to answer this question. Listen, we have repeatedly discuss the advantages of our innovative technology of PRINT.

Speaker 7

And once again, just to highlight again that PRINT allows for the drug particles, did not require any vehicle operation, meaning that eutrepia can utilize a low resistance device and it does not go through these 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 devices most suitable technology. We believe that this enables a more ideal dry powder experienced across a range of inspiratory flow rates, a range of lung disease types, including patients with PH and ALD. So this is why we're quite excited about the market.

Speaker 2

Thank you, Rajeev. Nice answer. Mike, if you could comment on commercial stock and inventory build.

Speaker 4

Absolutely. Absolutely.

Speaker 2

Mike, can you hear me? We can hear you now.

Speaker 4

Okay. Sorry. So Julien, it's great to talk to you. In terms of the I think it's about overall launch preparation. 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.

Speaker 4

So we were ready to launch last year. We've continued those efforts. We're currently building commercial supply. So whenever we are getting clearance to launch, we will be ready to supply the market and are very confident in that. I also just want to add to that.

Speaker 4

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 we will be ready for launch. We know how important this launch is. And when we are given ultimately given the green light, we will be ready to

Speaker 5

Okay, great. Thanks very much.

Speaker 2

Thanks, Mike. One thing I would add to Mike's comment is, 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 facile.

Speaker 2

Operator, next question please.

Operator

Thank you. One moment while we prepare for the next question. And our next question will be coming from Kambez Yazee of Jefferies. Your line is open.

Speaker 5

Good morning,

Speaker 3

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

Speaker 2

Okay. Great. Thanks for the questions, Palmes. Rajiv, if you'll talk about the status of the open label ILD and Jason, I'd love if you could answer the GSK question.

Speaker 7

So, Brady? Yes. Khambish, thank you and good morning to you too as well. Just to give a little bit of understanding, this is an open label study focused on evaluating the utility, tolerability and looking at Endpoints such as efficacy in patients, specifically with palmar hypertension associated with interstitial lung disease. We have we believe that we will launch this study near the end of the year.

Speaker 7

And so we look forward to that. In the meantime, We're actively talking with KOLs, sites and getting ready for this launch, which once again I think is KOLs are very excited to participate in the study and as I said, we should be launching by the end of this year. Thank you, Roger.

Speaker 2

Thank you, Rajeev. And Jason, if you talk about the reversion of the GSK rights to us, please?

Speaker 1

Sure. So it's a good question, Khamby. I think if you look at the actions that the company has 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 technology. We've had a great relationship with GSK.

Speaker 1

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 CRYNT 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.

Speaker 1

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.

Speaker 7

Very nicely said, Jason.

Speaker 2

Thank you so much, guys. Thank you, Kamish. Operator? Thanks, Chris.

Operator

And one moment while we prepare for the next question. And our next question will be coming from Matt Kaplan of Ladenburg. Your line is open.

Speaker 2

Hi, thanks for taking the questions. Good morning, guys.

Speaker 8

Just wanted to go back to manufacturing for a minute. One of the things that seems like United might be running into is capacity constraints.

Speaker 2

Can you talk about a little

Speaker 8

bit about your Can you talk about a little bit about your capacity potential at launch and what your plans are to address the market given the size of the PHILD opportunity?

Speaker 2

Yes. Thanks for the question, Matt. Good to hear from you. Mike, maybe if you could expand on your earlier answer around capacity, and how we're looking to build out?

Speaker 4

Yes. Matt, great to talk to you. 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 demand and with the larger ILV opportunity, like I said, we are fully prepared.

Speaker 4

We will be prepared to launch This product and be prepared to get this product in every patient's hands that one sitter desires it. And we do not have any concern about our ability to do that. So through an efficient manufacturing process, great downstream partners, we are fully confident that when we are able to launch As early as it may be or whenever the court decision comes, we are we will be ready and we do not have that fear and Look forward to being on the CERT patients in the short term and into the future.

Speaker 2

One some points I will add. 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 U. S.

Speaker 2

The product has a long shelf life of 3 years at room temperature. So again, we can whatever we make now, we'll have usefulness in the commercial supply once launched. And as Mike said, we were prepared to launch last fall. So we had a we have a sort of bolus of inventory readily available. And then from a device standpoint, I think this is also important.

Speaker 2

The plasticity of the device that we use, the low resistance devices 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.

Speaker 8

That's very helpful. And then just one second question, I guess, following the completion of the Hackslashman or the PTAB process, assuming you're successful, What would be the timing for full approval and then launch after that?

Speaker 2

Yes, it's a little bit of a moving target, Matt, but our estimates is it will be anywhere from 2 weeks to 2 months. And we're certainly going to communicate with the FDA about the process and We'll ask for a quick return on turning the tentative 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 2 weeks to 2 months. It can be even quicker than that, but I think that's a good way to look at it.

Speaker 8

Okay, perfect. Thanks for taking the questions.

Speaker 2

Yes. Thank you, Matt.

Operator

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.

Speaker 2

Well, thank you everyone for joining us this morning. We look forward to continuing to discuss, utrepia and its broad potential going forward and hopefully talk about advancements in the legal case. Thank you and have a good day.

Operator

Thank you everyone for joining today's conference call. This concludes today's conference. You may all disconnect. Everyone have a

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