Liquidia Corporation (NASDAQ:LQDA) Q4 2023 Earnings Call Transcript

Liquidia Corporation (NASDAQ:LQDA) Q4 2023 Earnings Call Transcript March 13, 2024

Liquidia Corporation misses on earnings expectations. Reported EPS is $-0.42 EPS, expectations were $-0.23. LQDA isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, and welcome everyone to the Liquidia Corporation Full-Year 2023 Financial Results and Corporate Update Conference Call. My name is Michelle, and I will be your conference operator today. [Operator instructions]. I would like to remind everyone that this conference call is being recorded. I would now like to hand the conference call over to Jason Adair, Chief Business Officer.

Jason Adair: Thank you, Michelle. It’s my pleasure to welcome everyone to Liquidia’s full-year quarter 2023 financial results and corporate update call. Joining the call today are Chief Executive Officer, Dr. Roger Jeffs; Chief Operating Officer and CFO, 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 would now like to turn the call over to Roger for our prepared remarks, after which, he’ll open-up the call up for your questions. Roger?

Roger Jeffs: Thank you, Jason. Good morning, everyone, and thank you for joining us today. While today’s call is intended to review the company’s accomplishments in the last year, we know that physicians, patients, and our investors are solely focused on one thing, the potential FDA approval in the coming weeks of YUTREPIA, our novel dry-powder formulation of Treprostinil. I’ll ask Rusty to address the legal and regulatory path to approval in more detail shortly, but to put it simply, with the recent decisions by the federal circuit affirming the invalidity of the sole patent that is blocking our approval, the FDA should be able to grant approval for YUTREPIA after March 31, when regulatory exclusivity to treat PH-ILD with Tyvaso expires.

A precise final approval date is hard to forecast, but we view the remaining steps as largely procedural. Final FDA approval has always been the goal, and we have never been closer or better prepared than today. Our commercial teams are in place and ready for launch. Our expanded field force has been raising the profile of Liquidia in their territories over the last three months. Our manufacturing team is preparing inventory in anticipation of a potential launch in both PAH and PH-ILD. Our R&D team continues to build clinical knowledge by studying YUTREPIA and PH-ILD patients in the open-label ASCENT trial, and our finance team has positioned the company with the resources and discipline required to execute a successful launch. We entered 2024 at a full sprint due to the resolve and execution of our team in 2023.

Last year, everything grew in the right direction. Our confidence grew with legal wins. Our balance sheet grew with key transactions by marquee investors and insiders, and our pipeline grew with the in-license of L606, the most clinically advanced next-generation sustained-release inhaled Treprostinil program. Given the proximity of a potential launch, I’d like to spend a little time framing the potential market opportunity for YUTREPIA as we see it, both in PH-ILD and PAH. With regard to PH-ILD, current (indiscernible) patients. However, these estimates likely undervalue the total addressable population, since those calculations rely on historical publications before the field had affected the tools to treat the disease and therefore reasons to diagnose the disease.

With inhaled Treprostinil as the only approved mechanism to treat PH-ILD, the market penetration is still in its infancy. We believe there is significant growth in this market. Total inhaled Treprostinil revenues currently sit at about a $1.3 billion annual run rate in the US alone. With regard to PAH, we also believe that YUTREPIA has potential for significant uptake. We view YUTREPIA as having the potential to not only be the best-in-class inhaled Treprostinil, given its dosing flexibility and ease of use, but also the first-in-choice prostacyclin. Specifically, patients who previously considered the oral prostacyclin as their starting choice, can now avoid the significant and limiting off target GI toxicities associated with these drugs, while still achieving therapeutic doses.

Thus, combining current sales of oral prostacyclins of approximately $1.6 billion in PAH, with the recently reported sales from inhaled Treprostinil of $1.3 billion, the market opportunity for YUTREPIA could be approaching $3 billion, and growing incrementally as the PH-ILD patients still remain largely untreated. With its unique and different differentiate approach (indiscernible) potential for YUTREPIA, (putting extra) value in both of these markets. At this time, I would like to ask Rusty to summarize the next steps towards final FDA approval.

Rusty Schundler: Thank you, Roger. I’d like to group the recent litigation and regulatory activity into two buckets. First, those items on the critical path to YUTREPIA’s approval. Second, the recent attempts by United Therapeutics to assert new legal theories to block approval of YUTREPIA. All told, we see the increased and frantic litigation activity by United Therapeutics as perhaps a sign that even they believe that the legal impediments to final approval of YUTREPIA are nearing an end. In the first bucket I mentioned, as we have publicly stated previously, there are only two items on the critical path for YUTREPIA to be launched. First, Judge Andrews must lift the injunction he ordered in August 2022 based on his finding of infringement of the 793 patent, a patent that has subsequently been invalidated, a finding that was affirmed again yesterday when the Federal Circuit denied United Therapeutics’ request for a rehearing.

And second, the regulatory exclusivity granted to Tyvaso for the PH-ILD indication must expire, which will occur on March 31. Once both of these have occurred, the FDA will have the ability to issue final approval for YUTREPIA for both the PAH and PH-ILD indications. We’ll not speculate on the specific date when Judge Andrews will render his decision, but the matter has been fully briefed and could be decided at any time. In the second bucket, over the last several weeks, United Therapeutics has sought to add new impediments to FDA approval in our launch of YUTREPIA by seeking preliminary injunctions in multiple proceedings. However, as we have stated previously, in order to obtain any preliminary injunctions, the burden will be on United Therapeutics to convince the judge that among other things, they’re likely to succeed on the merits in those actions.

We believe that this burden will be a challenge for them to meet based on the laws and the facts at issue. Their first request for preliminary injunction is directed to the second Hatch-Waxman lawsuit alleging infringement of the 327 patent in the treatment of PH-ILD. Issued after the YUTREPIA NDA was submitted, and after Liquidia amended its NDA to add PH-ILD to the label for YUTREPIA, the 327 patent covers the treatment of PH-ILD patients with Tyvaso in accordance with the dosing regimen in the Tyvaso label. As we have noted previously, there is considerable prior art that teaches the treatment of PH-ILD patients with Tyvaso, including the 793 patent and multiple peer-reviewed publications in the decade prior to the priority date for the 327 patent that described positive results from treating PH-ILD patients with Tyvaso.

The courts have generally refrained from issuing preliminary injunctions in situations where there are substantial questions as to the validity of a patent. And in light of all the prior art here, we believe substantial questions of validity of the 327 patent exist. A second request for preliminary injunction is directed at United Therapeutics’ recently filed suit against the FDA under the Administrative Procedures Act. Filed in the United States District Court for the District of Columbia, this suit alleges that the FDA mistakenly permitted Liquidia to amend the NDA for YUTREPIA to add the PH-ILD indication. We have intervened in the case and are now a party to the case alongside the FDA. First and foremost, the FDA did in fact accept our amendment to the NDA for review, and we believe that the FDA’s acceptance of our amendment for review was proper and in full accordance with current FDA regulations.

United Therapeutics’ argument that an amendment to add a new indication is improper, is based primarily on a non-binding 2004 FDA guidance document ignoring subsequent FDA regulations adopted in 2016 that expressly contemplate the possibility of adding new indications through an amendment. Secondly, even if United Therapeutics was correct that the amendment was improper, that would not mean that United Therapeutics would receive a new 30-month stay as they have argued. For instance, even if the amendment was now rejected by the FDA, Liquidia could simply supplement its NDA after approval to add the PH-ILD indication, the exact same process used by United Therapeutics to add PH-ILD to their label for Tyvaso. Critically, the statute expressly states that amendments and supplements treated the exact same way in determining whether a patent can give rise to a 30-month stay, meaning that only those patents submitted to the Orange Book prior to the filing date of the original NDA, not the filing date of the amendment or supplement, can give rise to a 30-month stay.

Briefing on the motion for preliminary injunction will be completed on March 18, and a hearing will be held on March 29. We look forward to this matter being addressed in short order. In summary, Liquidia sees the path to launching YUTREPIA in two straightforward actions, removal of the injunction, and approval of the product. The rest is a last-ditch attempt by a competitor to make any and every argument they can to maintain their monopoly and deny patients the access to a meaningful treatment option. We have long anticipated the possibility that United Therapeutics could engage in such a flurry of activity as we near clearance of the original Hatch-Waxman litigation, and we are prepared to meet them head on. With that, I will pass to Mike for a review of last year’s financials.

Michael Kaseta: Thank you, Rusty, and good morning, everyone. The company has never been in a stronger financial position than it is now, heading towards its first major product launch. The financial discipline we’ve shown to date has not only allowed us to fully engage in defending against the litigation campaign that has been directed against us, but has demonstrated to the savvy investors that we can meet and exceed expectations as we look to build value in the company without overspending or incurring significant dilutions. Turning to our full 2023 financial results, which can be found in the press release, you’ll see that revenue was $17.5 million for the year in 2023, compared with $15.9 million in 2022, tied to our promotion agreement with Sandoz to commercialize Treprostinil injections.

The increase of $1.6 million was primarily due to favorable growth to net chargeback rebate and managed care adjustments, offset by the impact of lower sales quantities as compared to the prior year. Cost of revenue was roughly the same for 2023 and 2022 at $2.9 million. Cost of revenue relates to the promotion agreement. Research and development expenses were $43.2 million in 2023, compared with $19.4 million in 2022. The increase of $23.8 million or 122% was primarily due to the $10 million upfront license fee payment to Pharmosa for the exclusive license to develop and commercialize L606 for North America, plus an additional $2.6 million in support of that program. Expenses related to our YUTREPIA program increased to $13 million from $6.7 million the year prior, primarily due to increased manufacturing of pre-launched commercial supply, and the startup of our ASCENT study.

Personnel and consulting expenses, including stock-based compensation expense, also increased $5.1 million, primarily due to increased headcount to support the potential commercialization of YUTREPIA. General and administrative expenses were $44.7 million in 2023, compared with $32.4 million in 2022. The increase of $12.3 million or 38% was primarily due to a $9.8 million increase in personnel and consulting expenses, including stock-based compensation, partially driven by the expansion of our field force, and also a $1.4 million increase in commercial expenses in preparation for the potential commercialization of YUTREPIA. In summary, we incurred a net loss in 2023 of $78.5 million as compared to a net loss of $41 million in 2022. We ended the year with $83.7 million cash on hand then quickly added another $100 million in the first week of January, with a private placement of equity to a single investor, and a third advance from HealthCare Royalty under our agreement from January 2023.

In summary, we are well positioned to achieve our corporate objectives in 2024. I would now like to turn the call back over to Roger.

Roger Jeffs: Thank you, Mike. 2024 is shaping up to be the transformational gear at Liquidia. We are poised in the starting blocks, and as you and Rusty have both described, have fought earnestly to get where we are today. We look forward to proving ourselves in the market, but more importantly, easing the burden of patients suffering from these debilitating diseases. With that, I would now like to open our call up for questions. Operator, first question please.

Operator: Thank you. [Operator Instructions] And our first question is going to come from the line of Greg Harrison with Bank of America. Your line is open. Please go ahead.

See also 20 Cheap Alternatives to Aveda Shampoo and 25 Most Powerful Passports in the World.

Q&A Session

Mary Kate Davis: Good morning. This is Mary Kate on for Greg. Thanks for taking our question. So, as you guys prepare for your commercial transition, do you see any differences in launch strategy for PAH compared to PH-ILD? Maybe why or why not, and do you anticipate equal interest in both indications? Thanks.

Roger Jeffs: Good morning, Mary Kate. Thanks for the question. So, we’re fortunate to have Scott Moomaw, our Chief Commercial officer on the phone. Scott, maybe if you would like to opine on that.

Scott Moomaw: Yes. So, there’s a little bit of difference in strategy. So, in PAH, as you know, there are many medications already available. So, it’s going to be really demonstrating why our prostacyclin is the best alternative relative to the other prostacyclins for a lot of reasons that we can obviously get into, and we believe that we will be very successful in that space, getting earlier use of our inhaled prostacyclin YUTREPIA, because it is so convenient and because of the titration of dose. And so, in that space, we’ll be targeting the big centers, the physicians that use prostacyclins already. We’ll get some new physicians probably, but we’ll focus on the targets that do use prostacyclins. In PH-ILD, as you know, this is a relatively untapped market.

And so, the strategy there is going to be much more about educating on the prevalence of PH-ILD and then getting physicians to look for it and then getting them to treat it. And we’ll be out in the community with community pulmonologists, help educating them that this condition exists and that it’s deadly. And then we’ll be educating them on YUTREPIA. And if they would be willing to use YUTREPIA, that’s great. We will aid them in doing that. If they won’t, then of course we would like them to refer that patient to a PAH center of excellence where it would be treated. So, I think that’s a brief summary of how we’ll approach the two markets.

Mary Kate Davis: Great. Thank you.

Roger Jeffs: And maybe I’ll just add a few comments. So, I think in the – it’s kind of what I said in my opening statement, Mary Kate, that in PAH, we would like to be the first-in-choice prostacyclin. And the reason I think we can do that is because really with YUTREPIA and its ability to titrate to doses that are on order of threefold more than what was originally possible with Tyvaso, we’ve changed therapeutic index of that molecule, and that’s all enabled by our PRINT technology. Why that’s important is now we can deliver the drug for PAH patients to the site of action through the lung and avoid the significant off-target effects, which are really hampering for the oral therapies in particular. So, if you look at the op Uptravi, it starts at a 200 microgram dose and it’s titratable up to a ceiling of 1,600 micrograms, but it has a ceiling.

And that maintenance dose is determined by tolerability. It’s indicated to delay disease progression and decrease the risk of hospitalization, but it’s improvement on six-minute walk distance is modest, only 12 meters, and I believe that was not significant. The consequence of that therapy is 42% of those patients have diarrhea, 33% have nausea, and 18% have vomiting. So, significant off-target effects. And Orenitram is a very similar story. It’s a used TID. It’s titrated to effect. It’s indicated to delay disease progression and improved six-minute walk distance. But in the largest study of that therapy in 690 patients, 69% of those patients had diarrhea, 40% had nausea, and 36% had vomiting, which clearly limits dosing. So, and in fact, UTHR has said lately that because it’s so difficult to titrate, they’re actually promoting titration via the parental route and then transition to oral.

So, you can see this is burdensome and onerous. What YUTREPIA will then do is negate completely these off target effects to the GI tract and allow dose titration. So, again, we’re going to look at the oral prostacyclin market as a significant market where we can gain share, and we’ll do that sort of tactically after we position ourselves as the best-in-class inhaled prostacyclin, as Scott mentioned, for both PAH and PH-ILD. Operator, next question, please.

Operator: One moment for our next question. And our next question is going to come from the line of Julian Harrison with BTIG. Your line is open. Please go ahead.

Julian Harrison: Hi, good morning. Thank you for taking my question. Just to be clear, based on some of your prepared remarks, if you are forced to seek approval in PH-ILD via supplement instead of the current arrangement, your view is that filing a supplement with 327 patent now in the Orange Book should not trigger an automatic stay. Am I understanding that correctly?

Roger Jeffs: Yes. thanks for the question, Julian. Good morning. I’ll ask Rusty to answer that, please.

Rusty Schundler: Yes. So, let me clarify maybe a couple of things. So, first, I think our view is that the amendment being rejected and us having to file this by supplement is sort of the worst-case scenario. We think what the FDA did was absolutely right accepting our amendment. So, we don’t think this will even come into play. But if we were required to come into a supplement, then that’s exactly right. So, if you look at the statute and again, it’s 21 USC 355 C3C, what it – it specifically defines those patents that can give rise to a 30-month stay. And critically, it says only those patents, and I’ll quote it, before the date on which the application and then (excluding an amendment or supplement to the application was submitted).

So, again, supplements are treated the exact same way as amendments for purposes of determining which patents can give rise to a 30-month stay. And so, even if we were required to file a supplement, the result would be no new 30-month stay.

Julian Harrison: Very helpful. Thank you.

Roger Jeffs: Thank you, Jolene. Operator, next question please.

Operator: One moment. And our next question is going to come from the line of Serge Belanger with Needham. Your line is open. Please go ahead.