Liquidia Corporation (LQDA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. My name is Deborah, and I will be your conference operator today. I would like to welcome everyone to the Liquidia Conference Call to discuss regulatory updates. [Operator Instructions] I would like to remind everyone that this conference call is being recorded. I will now hand the conference over to Jason Adair, Vice President, Corporate Development and Strategy.

Thank you, and good morning, everyone. Before we begin, I'd like to remind you that today's call will include forward-looking statements pursuant to the Private Securities Litigation Reform Act of 1995 relating to, among other things, our expectations concerning next steps in the regulatory review and potential approval of YUTREPIA. Such statements represent management's judgment as of today and may involve significant risks and uncertainties that could cause actual results to differ materially from expected results. Please refer to our press release this morning and the annual filings with the SEC, which are available with the SEC at sec.gov or from Liquidia's website at liquidia.com for information concerning risk factors that could cause such differences and otherwise affect the company. Joining us from Liquidia on today's call our Chief Executive Officer, Damian deGoa, Chief Financial Officer, Mike Kaseta; and Chief Medical Officer, Tushar Shah, as well as other members of senior management, who may be called upon to answer questions at the end of our prepared remarks. With that said, I'd like to hand the call over to Damian.

Thanks, Jason. What an exciting time for the company. The FDA's tentative approval for YUTREPIA, formerly known as the LIQ861 is a major milestone in our company's continuing evolution to positively impact the lives of patients. Before I speak to the product and next steps, I would like to recognize the tremendous effort by the professional, collaborative and dedicated team here at Liquidia and thank all who participated in our clinical trials. We successfully navigated the FDA regulatory process. We regrouped after last year's CRL and submitted a comprehensive, timely response. We resubmitted the NDA a month earlier than originally planned and more importantly, addressed all FDA information requests. We successfully completed our first pre-approval inspection with no observations. This was the first time our facility and our proprietary PRINT technology was formerly accepted and the outcome was exceptional. Not only have we demonstrated that YUTREPIA is ready for commercial production according to FDA's requirement, but we also validated our PRINT technology as an innovative drug formulation and manufacturing platform. To our knowledge, no other company in the world has the ability to engineer and manufacture discrete drug particles with a precise size, shape and chemical composition at a commercial scale. It's humbling to think that technology, which started in the labs at the University of North Carolina in 2004, has evolved to meet the stringent requirements of the FDA to enable effective, safe and convenient medicines at a commercial scale. This is maybe a good time to thank the investors and Liquidia alumni, who contributed or supported us along the way. And lastly, we achieved these results while managing through the constraints and stress created by the global pandemic. At no time was this team deterred and at every turn, they demonstrated a resiliency and resolve to achieving this milestone today. This high-performance culture will serve us well as we prepare to commercialize YUTREPIA in the future. Now turning towards YUTREPIA. YUTREPIA treprostinil inhalation powder is indicated for the treatment of pulmonary arterial hypertension to improve exercisability in adult patients with the New York Heart Association, NYHA functional Class 2 to 3 symptoms. We will not be discussing the approved package insert in detail at this time because it's not yet a marketed drug. However, we can point out some key pieces. The label reads as we expected and is consistent with the program discussed with the agency from the start. So we recognize and intend to pursue additional indications for YUTREPIA. We are pleased to receive the PAH indication. YUTREPIA has a clean label with no black box warning, no contraindication and clear links to Tyvaso's label as the reference lives to drug in our 505(b)(2) regulatory process. The dosing and administration of YUTREPIA will be consistent with what has been studied and published. Our INSPIRE trial demonstrated we can safely administer dry powder treprostinil to patients both naive to treprostinil as well as those transitioning from Tyvaso. We demonstrated in our PK study that a single capsule of 79.5 micrograms of YUTREPIA is comparable to 9 breadth of Tyvaso. Additionally, with no maximum tolerated dose established, we are confident that the safety profile enables titration of dosing to levels higher than the target maintenance dose of Tyvaso. This attribute may become especially important to help address disease progression in PAH and as we consider new indications to pursue where higher levels of inhaled treprostinil may provide the greatest benefit. YUTREPIA offers convenience and ease of use as compared to today's nebulized version. The device used to administer YUTREPIA is very small. It is only palm-sized with a long improved track record of use with other commercially available inhaled products. YUTREPIA provides simple portability, easy setup and administration as well as minimal cleaning lowering the burden of treatment from nebulized therapy. And YUTREPIA can easily be stored without the need of special handling or refrigeration. Single-dose days dose of YUTREPIA can easily be carried in a pocket. And with convenience, we believe that patient compliance to inhaled therapy will increase. Our quality of life data from INSPIRE suggests a strong preference for YUTREPIA over Tyvaso, which is further demonstrated by the fact that Liquidia is still treating patients today more than 3 years after we started our clinical trials. Based on this combination of attributes, we believe that YUTREPIA will quickly become the preferred inhaled formulation of treprostinil when it can be introduced in the marketplace. We believe that YUTREPIA may broadly benefit PAH patients across the stages of disease, including earlier use of prostacyclin and later use of inhaled prostacyclin. Local delivery helps to minimize the systemic toxicity, especially those caused by oral prostacyclin. Comparable convenience and local delivery will play well as an alternative to oral treatment. YUTREPIA can quickly achieve targeted therapeutic levels in treprostinil naive patients as shown in the INSPIRE and extension studies. By expanding the inhaled dose range of treprostinil in a dosage friendly manner, it is conceivable that patients may remain on inhaled treatment longer, delaying the use of infusion pumps and achieving a big win for quality of life for patients. As we know with the prostacyclin class, exposure drives efficacy, [indiscernible] have shown the greatest benefit. However, they must be dosed 24/7 by an external infusion pump, which presents its own risk, burdens and impacts to quality of life. Not only have we continued to treat patients more than 3 years after starting therapy in our clinical trials, but we've also observed doses in our trial as high as 238.5 micrograms 4 times per day. The same clinical data that supports our label has also enabled an issued patent that protects the use of inhaled dry powder treprostinil at doses between 100 and 300 micrograms. This may become especially important as we consider the current and growing market opportunity and treatment above 100 micrograms of treprostinil. YUTREPIA's preferred product profile was enabled by our proprietary PRINT technology. By controlling the precise size, shape and aerosolization of the dry powder particles, we can enhance the delivery of drugs to the deep lung. We took the Goldilocks approach to the particle size, not too big, not too small, just right. Building on decades of knowledge related to the inhaled dry powders, our formulation was designed to ensure that fewer drug particles are caught in the upper airway and more dispersed efficiently to the deep lung. We are inspired by nature. The shape of each YUTREPIA particle resemble the particle -- a particular type of pollen. We believe that today's positive decision on YUTREPIA also helps validate PRINT technology, demonstrated the ability to create ideal formulations for local delivery to treat local diseases up to lung. And we feel well positioned to pursue the increasing in inhaled treatments in pulmonary hypertension and beyond. While there are clear demonstrated benefits in inhaled therapies using PRINT, PRINT has many other applications that have been previously explored and may be considered in the future. The market opportunity for inhaled treprostinil is significant and growing due to advent of dry powder inhalers and new indication. In 2020, United Therapeutics reported that its inhaled treprostinil achieved sales of more than $480 million in PAH, and projections are being made that this may achieve sales of greater than $1 billion in the coming years. Dry powder inhalers like YUTREPIA are expected to expand the use of inhaled treprostinil as patients seek a quick switch option from oral or nebulized treatment and help to delay transition to more invasive treprostinil administration, increasing the time patients use in health therapy. Dry powder inhalers also represent an approachable option for patients with other forms of pulmonary disease where prostacyclins show promise. We will consider the best path to expand in new indications. Before Liquidia can realize this future market potential, we have to address what is next. Tentative approval is notifications that an NDA meets the requirements for approval under the Federal Food, Drug and Cosmetic Act, but cannot be market authorized because of an outstanding patent issue. As we have reported previously, United Therapeutics is asserting infringement of 3 patents listed in the Orange Book for Tyvaso. The reference listed drug in our 505(b)(2) NDA submission. The FDA initiated a regulatory stay on final approval of YUTREPIA, which expires in October 2022, unless the litigation is resolved earlier. Infringement of these patents is being decided through our Hatch Waxman litigation process with the trial scheduled for late March 2020 -- I'm sorry, March 2022. While we will not comment in detail about the ongoing litigation, we remain confident in our position. We have been encouraged by the recent wins issued by the U.S. patent office through the interparty review proceedings. Last month, PTAB issued a final written decision that 7 of the 9 claims in the 901 patent were unpatentable, with only the narrower dependent claims 6 and 7 remaining. This was a great outcome. In August, the PTAB also instituted an IPR with respect to the 793 patent stating that Liquidia had demonstrated a reasonable likelihood of prevailing in its assertion that all of the claims of the 793 patent are unpatentable as obvious over the combination of certain prior art. We think this is a strong signal. We will continue to vigorously pursue our right to bring the innovation and benefits of YUTREPIA to market as soon as possible. We continue to operate with financial discipline and an emphasis on execution. We ended the third quarter with $64 million in cash. We're in a strong financial position to be able to take this through the end of the regulatory stay while preparing for commercial launch. Our treprostinil injection sales have been good. We more than doubled the number of patients on the treatment in the last 4 months since introducing the subcutaneous cartridge. With the increase in unit sales, we triggered a step down in profit split with Sandoz from 80% to 50% earlier than expected. We know that Treprostinil Injection will continue to grow as more payers mandate generic first programs. It's a great offering. In essence, it is a therapeutically equivalent product provided with the same services at a lower cost. This is a big win for the health care system, patients and health care providers. At this time, we would like to open the call up to your questions related to YUTREPIA or the earnings that we were filed last Wednesday.

[Operator Instructions] And your first question comes from the line of Chris Howerton with Jefferies.

Obviously, congratulations on the tentative approval. So for -- maybe for me, the couple of questions would be, as you move towards eventual commercialization, hopefully, next year, what would be kind of the CMC scale that may or may not be required? And what kind of unit volume you'd be looking to have at launch, would be one question? The second question I would have would be now that you have a product that has been approved using the PRINT technology, have you considered additional expansion of that technology to inhaled products or other potential therapeutic areas? Or I guess, any evolved thinking you have around there? And then third, if I may, is I don't know that you'll be able to, but to the extent that you can, help us understand what the expectations might be for the existing business with the injectable treprostinil either by volume or revenue moving forward?

Thanks, Chris. Let me try to address each of those. In relation to the CMC scale and unit volume, we have plenty of capacity within our infrastructure to meet the demands of the commercial launch. It would be our expectation to build, obviously above our forecasted level, probably somewhere in the 25% to 50% above our expectations just to have safety stock, and we're prepared to do that starting in probably around Q2 of next year. In regards to the expansion of PRINT, we continue to look at opportunities. I think because we've demonstrated that there's clear benefits in the inhaled side, that's kind of where we start. That's kind of the center of the bull's eye. And -- but as you probably have known as you follow our stock for a long time or the company, I should say, there's been a lot of things that have been experimented with in the past, including biologics and topicals and implants, et cetera. And so I think there's a lot of opportunity of things that we could look out that are -- look at that have been experimented with in PRINT, but we'll definitely be kind of focused on the inhaled side of things to start. And then in relation to expectations of Treprostinil Injection. I think we're excited, like I said, it's been on target with what we -- what our expectations were. We think, again, as more payers move towards generic mandates because they see the clear benefits and the fact that there's no trade down in benefits to the patients, we just think that that's going to continue to climb. We'll talk internally about what our -- what we plan to do for next year, but I don't think that we're going to release guidance on Treprostinil Injection itself. We're going to continue to execute and demonstrate how our commercial efforts will fare in the field. And then we can talk to the market about that as we kind of get more time under our belt.

And your next question comes from the line of Serge Belanger with Needham Company.

Congratulations on the YUTREPIA approval. A couple of questions. First on the actual approval. Is the label finalized with a tentative approval? And is -- are there any post-approval commitments that you can talk about? Secondly, have you had a chance to interact with the FDA about additional data that would be required to expand the label beyond PAH? And then lastly, just -- there's been a few positive developments with the IPR process and the CRL from United. Just curious how that changes your outlook for YUTREPIA and your level of precommercial launch activities?

Thanks, Serge. So in terms of the label, yes, I mean it is for PAH as we kind of mentioned. We have not had a type A meeting, if you will, with the FDA in regards to future expansions as an example, PH-ILD. We've not had that, although we have had informal discussions with them of what it would have taken in order for us to consider that during this review cycle. And it was our -- we came to the conclusion that it was best if we prioritized and focused on getting PAH done at this time. And as you know, Tyvaso was also granted an exclusivity that I believe started in March or April of this year and last for 3 years. So we certainly have time to make sure that we do it right and efficiently to try to continue to bring -- expand YUTREPIA in the new product offerings. So we'll have to check on that. And then in relation to the IPR and CRL and how that changes our outlook for YUTREPIA, I think that, obviously, from our perspective, we're excited that we've now cleared this regulatory hurdle. I think this is -- especially given the fact that it's a new technology and new manufacturing and formulation that's never been done before, it's really exciting to again bring it to the stringent FDA requirements that are on the market. With that said, as you noted, our competitor has a product that did receive a CRL. I guess what we've seen is that their expectations are sometime by summer of next year or earlier. And I think, as you can imagine, my thoughts on that is that just compressed the amount of time that they would have a head start if they're able to successfully get to approval and by a significant amount of reduction. And therefore, I think probably one of the biggest impacts is that I believe that there will be a lot more Tyvaso transition patients that will be available to be for both parties to compete against rather than if they had, say, a year of head start. And so I think that gives us a significant opportunity for the Tyvaso transition patients, again, and assuming that they're successful in getting to a regulatory position like we are.

And your next question comes from the line of Andreas Argyrides with Wedbush.

Congrats on the approval -- for the tentative approval rather. Just a quick one on, I guess, while you're waiting for full marketing approval, what are your thoughts on seeking a partner? Do you believe that the resolution of the ongoing litigation is a gating factor? And maybe what are you looking for in a partner? And then how are you thinking about the sales force that you started to put in one in place? And how are you kind of -- what are their early work that you're doing on the strategic plan for the launch -- potential launch?

Thanks, Andre. I think that in regards to seeking a partner, it's not our -- it's not our focus. It's not what we're aiming to do. I think as you rightly alluded to, we have a sales force that's in the field that's already calling on PAH doctors and ramping up for YUTREPIA launch. Should we get to full approval, we would be adding more people into the field. We feel very confident in our ability to commercialize this asset. This is kind of an area that we've got expertise. Our current sales force, everyone on the field has PAH experience of at least, I think, on average, around 7 years. Also led by Scott Moomaw, who is our Head of Commercial, who's got a tremendous amount of experience in this therapeutic area category. And we also have expertise and guidance that's being -- that's involved at the Board level in Roger Jeffs, who is a Director for us and also has a tremendous amount of experience in the PAH market. And so we feel very confident in our ability to commercialize this and scale it. And so we're continuing to take a financially disciplined and efficient means of getting there. And so we'll continue to use the current sales force to drive Treprostinil injection sales. And when or if we add more sales reps, we would expect that they would be able to carry both products in the bag, the Treprostinil injection as well as YUTREPIA.

[Operator Instructions] We have no questions in queue.

Thank you. We're obviously very excited about achieving tentative approvals for the first dry powder inhaled treprostinil. We are proud of how we executed as a company this year. We're in a really good spot. We're in a strong financial position. We have a great team. We have a strong legal position and feel confident about knocking down that last hurdle. And we have the committed resolve to accomplish what we set out to do, addressing the unmet needs of PAH patients. So we'd like to thank everyone that supported us along the way, and we'll continue to drive and execute. Thank you.

This does conclude today's conference call. You may now disconnect your lines.