Liquidia Corp

NASDAQ:LQDA

Earnings Call Analysis

Liquidia Preps for YUTREPIA Launch Amid Q3 Progress

Liquidia's Q3 has been pivotal, with advances in its pulmonary hypertension (PH) portfolio, particularly inhaled treprostinil products for PAH and PH-ILD. The standout, YUTREPIA, shows promise as a first-choice prostacyclin treatment due to its titratability and durability demonstrated in long-term use up to 5.5 years. Revenues slightly rose by $0.5 million from treprostinil injection sales despite lowered quantity sold, thanks to favorable adjustments. They've maintained financial discipline ending the quarter with $76.2 million and a nine-month net burn of $17.1 million. YUTREPIA awaits FDA approval, hinging on a sole patent '793 litigation outcome due post-December hearings. Liquidia is ready to change the PH landscape drastically, with a field force already informing physicians about their PH treatments.

Strategic Developments in Treatment Offerings

The third quarter showed continued advancement in the company's product portfolio, particularly in the inhaled treprostinil area, crucial for addressing pulmonary arterial hypertension (PAH) and pulmonary hypertension associated with interstitial lung disease (PH-ILD). The company highlighted YUTREPIA, a dry powder formulation of treprostinil that is durable, titratable, and now shown to be safe at higher doses equivalent to 30 breaths of TYVASO four times per day. The potential market for PH-ILD is estimated to be about 60,000 patients, with significant opportunities due to unmet needs.

YUTREPIA: A Promising Future for Inhaled Treprostinil Administration

YUTREPIA's ability to achieve higher dosing without reported severe side effects broadens the therapeutic utility for inhaled treprostinil. Additionally, there's progress in L606, a sustained-release inhaled treprostinil program showing more consistent drug exposure. Open-label study participants transitioning from TYVASO to L606 tolerated higher doses without significant adverse events. Such developments are building toward a strong future cut-out for the company, amidst awaiting further clarity from a Type C meeting with the FDA.

Financial Highlights and Legal Updates

Revenue from treprostinil injection increased modestly by $0.5 million compared to the previous year. R&D expenses rose by $2.9 million due to various strategic initiatives, including building prelaunch commercial supply and advancing clinical programs. General and administrative expenses increased by $3.9 million year over year, totaling $10.6 million for the quarter. A patent battle looms with United Therapeutics, which, if resulting in an injunction, could delay the company's launch plans.

Path Toward Regulatory Approval

The company is discussing the path to regulatory approval with the FDA, focusing on a single Phase III study for PLD using L606. A robust primary endpoint in this study might lead to approval for both PAH and PH-ILD. Also of note, the company has a PDUFA date set for January 24, 2024, to address PH-ILD, with market exclusivity expiring at the end of March 2024, setting a clear timeline for potential market entry.

Market Education and Differentiation of YUTREPIA

Efforts to educate both center and community physicians on the severity and diagnosis of PH-ILD are seen as crucial for expanding patient reach. There's a significant portion of pulmonologists who may be unfamiliar with treating PH-ILD, and education is the key to change that. The company firmly believes YUTREPIA will stand out in the PH-ILD market thanks to improved tolerability, higher titratable doses, and proven durability of usage for up to 5.5 years, striving to make it the prostacyclin treatment of first choice.

Earnings Call Transcript 2023-Q3

[Operator]

Good morning, and welcome, everyone, to the Liquidia Corporation Third Quarter 2023 Financial Results and Corporate Update Conference Call. My name is Therese, and I will be your conference operator today. [Operator Instructions] I would like to remind everyone that this conference call is being recorded.

I will now hand the call over to Jason Adair, Chief Business Officer.

[Jason Adair, executive]

Thank you, Therese. It's my pleasure to welcome everyone to Liquidia's Third Quarter 2023 Financial Results and Corporate Update Call. Joining the call today are Chief Executive Officer, Dr. Roger Jeffs; Chief Financial Officer, Michael Kaseta; Chief Commercial Officer, Scott Moomaw; Chief Medical Officer, Dr. Rajeev Saggar; 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'd now like to turn the call over to Roger for our prepared remarks, after which, he will open up the call for your questions.

[Roger Jeffs, executive]

Thank you, Jason. Good morning, everyone, and thank you for joining us. The third quarter was marked by continued and positive steps to change the future of the company, the PH market and the lives of patients we are committed to serve. We have built a portfolio that we believe includes the most promising products in the fastest-growing area of the PH marketplace: inhaled treprostinil for the treatment of pulmonary arterial hypertension, or PAH; and pulmonary hypertension associated with interstitial lung disease, or PH-ILD.

Many of you know already that YUTREPIA, our dry powder formulation of treprosinil using a low effort, simple-to-use, pocket-sized dry powder inhaler has the potential to be the first and best choice when adding prostacyclin to a patient's treatment regimen. In support of this, a recent summary from our open-label clinical experience shows how durable and titratable YUTREPIA treatment can be, where we've treated patients for as long as 5.5 years and have titrated to doses now equivalent to 30 breaths of TYVASO 4 times per day.

I want to emphasize, dose matters, as it has been demonstrated across all routes of prostacyclin use that higher doses equate with better patient outcomes. YUTREPIA's ability to dose higher has the potential to significantly broaden and improve upon the therapeutic index and utility of inhaled treprostinil administration as it currently exists.

At the same time, we've seen promising early evidence of clear benefits in our sustained-release inhaled treprostinil program called L606. This liposomal formulation delivered in 2 administrations per day offers more consistent drug exposure throughout the day, including during sleeping hours. Each dose is delivered in approximately 1 minute using simple titer breathing with a portable next-generation, breath-activated nebulizer.

We have plans to share data at conferences in 2024, but our preliminary data suggests that patients in the open-label study who have transitioned from TYVASO have been able to safely titrate to higher doses, including daily doses comparable to 25 breaths of TYVASO 4 times per day without any reported throat pain to date and only mild to moderate and expected adverse events in a minority of patients. We very much look forward to sharing more details on the development and registration path for this program during our future earnings calls, which will be informed by our Type C meeting scheduled with the FDA next month.

While we are very excited about our L606 program, we recognize that most of our investors' attention is focused on near-term legal events. The good news is that legal story has now become greatly simplified. There's just a single patent, '793 patent, that currently supports the injunction preventing the FDA from granting full approval of YUTREPIA. All claims of that patent were found to be invalid by the Patent Trial and Appeal Board, or PTAB. The PTAB's favorable decision is currently being appealed by United Therapeutics with oral arguments scheduled for December 4.

We expect the decision could be issued as quickly as a few days after oral argument if some of the affirmance is granted, or within just a few months after oral arguments where the formal written decision is provided. Regardless, if the PTAB's decision is affirmed, we will immediately seek to have the injunction lifted and request final approval from the FDA. In the event of such an approval, we will execute on our plan to change the landscape of the PH market as quickly as possible.

For this reason, I have asked Scott Moomaw, our Chief Commercial Officer, to introduce himself broadly to our investors and to provide an update regarding our commercial preparations. Scott?

[Scott Moomaw, executive]

Thanks, Roger. As a brief introduction for those that I have not yet met, I've had more than 20 years in the pharmaceutical industry building commercial teams and launching products. I spent 13 of those years in the pulmonary hypertension market, including leading the marketing of treprostinil products, Remodulin, TYVASO and ultimately the launches of Orenitram and treprostinil injection.

Two years ago, I joined Liquidia when RareGen, a company I co-founded with Roger and others, merged with Liquidia. Since then, I've been building our commercial strategy and our team for the upcoming potential launch of YUTREPIA. We've really built a strong senior commercial management team across marketing, market access and sales leadership.

On the marketing and market access side, our team is ensuring that patients who are prescribed YUTREPIA will be supported by a full suite of services including high-touch specialty pharmacy services, a patient access program and a co-pay card program.

On the sales side, very exciting. Just last month, we were pleased to complete the onboarding of our field force of about 50 sales reps who share my passion for helping patients suffering from rare diseases. Collectively, our sales team has an average of 9 years selling rare disease products, with the majority of the team having sold PH products previously. The team is now in the community and academic center offices, increasing the awareness of Liquidia and supporting treprostinil injection more widely than ever. We want all physicians to know that Liquidia is here for patients at any stage of their disease progression.

As a result of our preparation to date, I am proud to say that Liquidia is ready and well positioned to launch YUTREPIA in both PAH and PH-ILD upon final FDA approval.

With that, I'll pass it over to Mike to review the last quarter's results. Mike?

[Michael Kaseta, executive]

Thank you, Scott, and good morning, everyone. Our third quarter 2023 financial results can be found in the press release and the 10-Q filed this morning. As you will see, Liquidia continues to operate and spend on value-creating activity in a judicious manner.

We ended the third quarter with $76.2 million in cash, equating to a net burn of $17.1 million over the first 9 months of this year. During the quarter, revenue from treprostinil injection increased $0.5 million compared to the same quarter last year due to favorable gross to net chargebacks and rebate adjustments, which offset lower sales quantity compared to the same period in the prior year.

Cost of sales decreased slightly to $0.6 million as compared to third quarter of 2022, primarily due to lower intangible asset amortization due to the extension of our agreement with Sandoz to commercialize treprostinil injection. R&D expenses in the quarter were $7.4 million, an increase of $2.9 million compared to second quarter 2022 and included increased spending to build prelaunch commercial supply, advance the recently licensed L606 clinical program and support headcount increases.

General and administrative expenses were $10.6 million for the third quarter of 2023 compared to $6.7 million for the same quarter in 2022. The increase of $3.9 million was primarily driven by legal fees related to our ongoing litigation, personnel and commercial expenses in preparation for the potential launch of YUTREPIA and an increase in stock-based compensation expense.

As we look into December and the year beyond, we will continue to apply the same financial discipline to manage through the time line of legal and regulatory events while also being opportunistic as those events unfold. I'd like now to turn the call back over to Roger.

[Roger Jeffs, executive]

Thank you, Mike. I hope investors can hear our enthusiasm and level of excitement. We are now fully prepared to enter the marketplace and, upon approval, promote the full benefits that YUTREPIA can provide to patients in their journey to feel better.

With that, I would now like to open the call for questions.

[Operator]

[Operator Instructions] Our question is from Greg Harrison with Bank of America.

[Greg Harrison, analyst]

Wondering how you're thinking about the opportunity in PH-ILD in terms of size of the addressable market and any segments that would be a focus for your efforts. And are there any learnings you've gained from your competitors' launch in ILD?

[Roger Jeffs, executive]

Yes. Great question, Greg. Thank you for the question. Scott, if you wouldn't mind, if you could give your commercial view of that question?

[Scott Moomaw, executive]

Yes, sure. So we feel like the market for PH-ILD, the prevalent market is about 60,000 patients. As -- and we all know that there's a significant potential here because of the unmet need. We think that actually 2 companies in this space educating center physicians, you probably see these patients already; but also community physicians who may see these patients but not recognize it, should grow that market quickly. So we're excited about it. We think it's all addressable. Rajeev can chime in if he sees that differently, but we think that we have a significant potential here.

[Roger Jeffs, executive]

Yes. Rajeev, any further comments on that?

[Rajeev Saggar, executive]

Yes. Greg, just to highlight regarding the type of patients and the classification of these patients, as you know, there's over 200 different types of interstitial lung diseases. We obviously are still learning which one of those continue to unfortunately develop this condition of pulmonary hypertension.

But I think we remain focused on identifying broad categories, idiopathic interstitial pneumonia, autoimmune diseases, hypersensitivity pneumonia. These are the categories inclusive of combined pulmonary fibrosis and emphysema that portend to develop pulmonary hypertension. So focusing on earlier diagnosis and earlier treatment opportunities, we believe, will be quite impactful for these patients and also the physicians who are treating these cohorts.

[Operator]

Our next question comes from Serge Belanger from Needham.

[Serge Belanger, analyst]

First one on the L606 program. So going into the Type C meeting next month, what are your expectations in terms of what is needed to get to a filing? Does the open -- the ongoing open-label trial, would that support a filing? Or you think you'll need to conduct placebo-controlled studies in both PAH and PH-ILD?

And then second question, maybe for Scott, maybe kind of a follow-up on the previous PH-ILD question. Maybe just talk about how different the prescriber base is for PAH and PH-ILD and how much overlap there is between the two.

[Roger Jeffs, executive]

Yes. Thank you, Serge. Rajeev, if you wouldn't mind talking about our -- at least preliminarily, our L606 registration strategy and kind of what we see as the path forward and what we're discussing with the FDA.

[Rajeev Saggar, executive]

Sure. Thanks, Serge. So as we've discussed on prior calls, the goal of this Type C meeting with the FDA or overall clinical program is to discuss with them what is the path to regulatory approval. We believe that our proposed clinical paradigm of advancing a single Phase III study in PLD that's placebo-controlled using L606, achieving a robust primary endpoint will lead to the ultimate approval of both PAH and PH-ILD in the near future. And that will be inclusive of adding the safety profile of the open-label ongoing study of L606 that's currently enrolling to date. Scott?

[Scott Moomaw, executive]

Yes. So the PH-ILD HCP market, it's as you might expect. The PH centers, the centers of excellence, the Dukes, the Mayos, et cetera, not only treat PAH but they treat PH-ILD as well as the other forms of pulmonary hypertension. And then you have what's usually just labeled the community physicians, mostly pulmonologists, that are treating ILD but may not be diagnosing or treating PH-ILD.

Some of the numbers that we see, if you think about us having 5,000 targets overall, it would be maybe 2,000 of those targets would be doctors who do not prescribe prostacyclins or the more serious PAH meds. So you would infer from that, that they are not treating PH-ILD. So we're sized to cover all of those more than adequately. And so the goal in the 2 different segments is a little bit different, obviously.

When you're in the centers, you want to make sure that they're reaching our drug. But when you're in the community, you want to make sure that they are aware of the severity of PH-ILD and the probability of PH-ILD and then that they're diagnosing it. And if they'll treat it, that's great. And if they won't, let's make sure that, that patient gets to a center of excellence that can.

[Operator]

Our next question comes from Kambiz Yazdi from Jefferies.

[Kambiz Yazdi, analyst]

Roger, in the past, you've kind of discussed YUTREPIA potentially being kind of a prostacyclin of first choice. Maybe you could expand on that thought, especially ahead of a potential launch. And then as a second question, can you remind us what is the status of the '061 method of use patent?

[Roger Jeffs, executive]

Yes. Thanks for the question, Kambiz. So maybe Rajeev, maybe if you could talk about the pillars of YUTREPIA that will help position it as the potential prostacyclin of first choice. And then, Rusty, you can talk about the status question, if you will. Rajeev?

[Rajeev Saggar, executive]

Sure. Thanks, Kambiz. So first, yes, just to rehighlight, we remain quite enthusiastic about YUTREPIA using our PRINT formulation as well as a low-resistance device. We believe that this will be quite differentiated in the market, especially in the PH-ILD market. We have always discussed that some of our key pillars that YUTREPIA offers are improved tolerability. As Roger alluded to, dose does matter, and we continue to highlight that YUTREPIA remains quite titratable in our open-label extension study, which is known as the INSPIRE study.

We have now reached doses equivalent of 30 breaths of TYVASO 4 times a day, which is just quite remarkable to see these high doses being used safely in these patients. And we believe all of these will portend to improve clinical outcomes for patients both in PH and PH-ILD. And most importantly, we show durability with the use of YUTREPIA with now patients being exposed for as long as up to 5.5 years, which we believe highlights the durability and compliance with this -- with YUTREPIA itself in this population.

[Roger Jeffs, executive]

Great. Thank you, Rajeev. Rusty, if you'll speak to the status of the patent.

[Russell Schundler, executive]

Sure. And thanks for the question, Kambiz. So the '061, I think you're referring to the patent application that received a noticeable -- a United Therapeutics patent application that received a notice of allowance back in late June that we issued an 8-K about. As of today, that patent still has not issued and they have not yet received a notice of issuance.

That's a little bit atypical for it to take that long for that patent issue. So we're not -- we don't have visibility as to what's going on at the United States Patent and Trademark Office with respect to that patent. However, what I will say is we're anticipating that it will issue, we're preparing for it to issue and we'll be ready to address it.

[Operator]

Our next question comes from Julian Harrison of BTIG.

[Julian Harrison, analyst]

Congrats on the progress. I have some related to the last one just asked on the PH-ILD patent United received a notice of allowance for back in June. I guess, after the FDA-designated PH-ILD exclusivity expires for United end of March next year, could this patent or patent application have any relevance to YUTREPIA's eligibility to receive full approval in PH-ILD, assuming you already have full approval in PAH at that point?

[Roger Jeffs, executive]

Yes. So I'll speak to the regulatory component. So in terms of -- and we have a PDUFA date, Julian of January 24, '24 for PH-ILD, the amendment that we filed in July. There would be no implication in terms of getting a tentative approval, which would be granted at that time because market exclusivity does not expire until end of March '24. So we don't see any gate between whatever may happen with that patent and the regulatory approval process. Rusty, you want to speak about the commercialization post that?

[Russell Schundler, executive]

Sure. So Julian, thank you for the question. So to be clear, there would be no 30-month stay that attaches to this new patent. So the only way it would potentially have an impact would be if United Therapeutics is able to go into court and convince a judge that they should get some sort of an injunction to prevent us from launching.

As I think we said in the last call, looking at this patent, looking at how this patent compares to the '793 patent and the numerous studies that were done by medical professionals between the launch of TYVASO and the date that this new patent was filed, we think there's a lot of prior art. Obviously, if they assert it, which we anticipate they will, we'll have to deal with that in court. But again, the only way it would impact is if they're able to convince a court that, notwithstanding all that prior art, they should be entitled to an injunction.

[Operator]

I am showing no further questions at this time. So I would like to turn it back to Roger Jeffs.

[Roger Jeffs, executive]

Thank you, Therese. So I intentionally let the team answer most of the call today because I wanted the investors to hear the depth and quality of the team that we have that are ready and very excited about launching YUTREPIA in the very near future. The other thing that you can hear is the quality of YUTREPIA's product profile and its potential to quickly differentiate and become the prostacyclin of first choice, as what Kambiz asked about.

We thank you for joining us today, and we look forward to continuing to update you on our progress as we bridge to these important inflecting events. Thank you.

[Operator]

This does conclude the program. You may now disconnect.