Liquidia Corporation (LQDA) Earnings Call Transcript & Summary

Good morning, and welcome, everyone to the Liquidia Corporation Corporate Update Call. My name is Liz, 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, our Vice President, Corporate Development and Strategy.

Thank you, Liz. It's my pleasure to welcome everyone to this morning's call. Joining us today are Chief Executive Officer, Roger Jeffs; Chief Medical Officer, Dr. Rajeev Saggar, Chief Financial Officer, Michael Kaseta; and other members of the management team who will be available to answer questions at the end of the call. 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. Roger?

Thank you, Jason, and thank you, everyone, for joining the call today. With today's announcement, Liquidia has created the industry-leading portfolio of inhaled treprostinil products, as the market rapidly expands into pulmonary hypertension with interstitial lung disease or PH-ILD, and inevitably shifts away from oral and infused prostacyclins to treat pulmonary arterial hypertension, or PAH. It is a transformational time for patients and for Liquidia. Before jumping into the details of today's announcement, I wanted to take a moment to remind you of what drives our team at Liquidia. Our primary motivation has been to provide novel products and better choices to improve the quality of life of patients. To date, our focus has been launching YUTREPIA, a product that we believe will quickly establish itself as the first choice prostacyclin to treat PAH and PH-ILD. We expect to resolve the outstanding litigation with United Therapeutics in the near future. And in so doing, hope to usher in the next chapter of Liquidia's evolution and a period of rapid growth. We are actively making investments with success in mind. We're expanding the sales force. We are building commercial supply. We are developing a new pump to infuse treprostinil subcutaneously. And as announced today, we are seeking partnerships that are synergistic with our disease expertise and growing commercial presence. Our ultimate goal is to ensure that all of Liquidia's products can serve the widest population of patients based on their specific needs, which brings us to today's news. I am very excited to announce our partnership with Pharmosa Biopharm biopharma and the future development of L606 in North America. Pharmosa has developed a sustained release liposomal formulation of treprostinil that is inhaled twice daily through a next-generation nebules. Our confidence in the program was bolstered significantly by the ongoing open-label study in the United States that has demonstrated early clinical proof of concept, including the ability to switch TYVASO patients to L606. L606 provides several advantages to patients, which include less frequent dose administrations, more consistent drug exposure over 24 hours, improved tolerability via lower peak exposure and a delivery via a modern next-gen nebulizer with DPI-like affordability. With the highly portable next-gen nebulizers, patients can inhale L606 within the comfort of their own breathing pattern in about a minute or less. L606 also provides the opportunity to demonstrate a PK advantage that could translate to better outcomes given the more consistent drug exposure during the day, but more importantly, during sleeping hours, which has only been available today by continuous infusion. I'd like to ask Dr. Saggar to expand on the details of the program and our path forward, followed by Mike to summarize the financial transaction. Rajeev?

Thanks, Roger. When I joined Liquidia last summer, I was excited to be part of the new wave of innovative products for patients that I've personally treated for almost 2 decades. Consistent with current guidelines, process cyclings remain the gold standard for treatment for pulmonary hypertension. I truly believe that inhaled treprostinil has the highest clinical utility of all prostacyclins and will emerge as the foundational treatment for PAH and PH-ILD. Sustained release formulations are the next obvious place to consider, and we have been encouraged by the preliminary data from the ongoing study of L606. Specifically, L606 is the liposomal formulation of treprostinil, which acts as a drug depot when nebulized to the deep lung were local concentrations of salts control the release of treprostinil. Additionally, the liposomal formulation should help shield topper airway to treprostinil during inhalation, mitigating irritation seen in current nebulized treprostinil formulation. During our due diligence, we reviewed data from 2 clinical studies with L606, a Phase I study in healthy volunteers to assess tolerability and PK and an ongoing open-label Phase III study in PAH patients. In the Phase I study of 51 subjects, L606 was well tolerated and extended detectable plasma levels of treprostinil for up to 12 hours with no burst release. Peak plasma drug concentrations or, Cmax, were 8x lower than those compared to TYVASO, and total drug exposure, or AUC, supported twice daily dosing. In an ongoing Phase III study, we are pleased to see that patients transitioning from TYVASO to L606 has safely administered doses of L606 that are similar in daily drug exposure to that of 18 breadths of TYVASO 4 times per day. No maximum tolerated dose has been observed with some patients being on treatment for more than 48 weeks. Over the next few years, we intend to accelerate the great work that Pharmosa has completed to date. The path to regulatory approval is straightforward and informed by the FDA interactions. We expect that the clinical studies required to support approval for both [indiscernible] run PAH and [indiscernible] III PHLD indications via the 505(b)(2) pathway will be: One, demonstrating comparable PK to TYVASO nebulized in healthy volunteers, which has already been completed; second, demonstrating safety in an open-label patient study, which is currently ongoing in PAH and PH-ILD; and third, in parallel, demonstrating safety and efficacy in a single sentinel placebo-controlled trial currently planned for [indiscernible] III3 PLD. Our clinical team will focus on accelerating enrollment in the open-label trial, which has been restricted to PAH patients transitioning from TYVASO. However, Pharmosa's recent protocol amendment will be implemented in July and will expand enrollment to include PAH and PH-ILD patients transitioning from TYVASO or TYVASO DPI as well as patients naive to inhale treprostinil. Concurrently, we are preparing to initiate the PH-ILD study in the first half of 2024. We look forward to sharing more details about these trials in the very near future. Now I'll turn our call over to Mike. Mike?

Thanks, Rajeev. In order to get to the Q&A session more quickly, I will focus my comments on what was issued in today's release. Our exclusive license with Pharmosa allows Liquidia to develop and commercialize L606 in North America where we will be responsible for all development costs leading to registration. The deal structure allows each party to apply its core competencies in drug development. Liquidia will accelerate the first approval in the large market, and Pharmosa can focus on manufacturing and supply. Pharmosa will receive an upfront payment of $10 million and is eligible to receive potential development milestone payments of up to $30 million tied to PAH and PH-ILD indication, sales milestone payments of up to $185 million and 2 tiers of low double-digit royalties. Pharmosa is also eligible for additional $10 million milestones for each additional indication approved after PAH and PH-ILD, and each additional product approved under the license. In support of today's announcement, Healthcare Royalties has funded Liquidia of $10 million from the revenue interest financing agreement announced in January 2023, of which $7.5 million was previously contemplated in tranche 2 to support business development initiatives. In further support of this deal, Healthcare Royalties has agreed to advance an additional $2.5 million from the $25 million fourth tranche. To date, $42.5 million of a total potential amount of $100 million have now been funded to Liquidia under the agreement. Near-term cash expenses for the L606 program are manageable as the bulk of R&D spending will likely occur after the time frame for the potential launch of YUTREPIA. As previously stated, we're able to launch later this year, to early next year, then we feel our current capital resources from cash on hand, future tranches from health care royalty and revenue from our products could lead us to profitability. Thanks to the financial discipline established over the last few years, we can be thoughtful and opportunistic in our future capital plans to grow the business. With that, I'd like to hand back -- hand back the call to Roger for closing comments.

Thank you, Mike, and thank you, Rajeev, for your comments. Before turning the call over for questions, let me contextualize how L606 can potentially add to the significant advances that have already been observed with YUTREPIA. To be clear, we believe YUTREPIA sets a very high bar. [indiscernible] approval, YUTREPIA has the potential to improve on the therapeutic profile of TYVASO, including DPI portability and ease of use, improved tolerability and treatability enabled uniquely by prints formulation capability to produce uniformly small articles, which has enabled inhaled doses in our clinical trials that have not been seen with TYVASO and importantly, the print enabled use of a low-resistance device which better approximates the nebulizer in terms of ease of inhalation. The only remaining similarity to TYVASO is that YUTREPIA remains a 4-time-a-day therapy, albeit a very attractive 4 times-a-day option. What really excited us about L606 is that it aims to adjust this line of dosing constraint, while still retaining the demonstrated benefits of YUTREPIA, including portability, tolerability and titratability. For these reasons, we believe L606 has the potential to be highly attractive options for PAH and PH-ILD patients and thus increase the number of patients whose lives may be improved by Liquidia its novel products. Operator, would you please open the call for questions?

[Operator Instructions] Our first question comes from the line of Greg Harrison with Bank of America.

Congratulations on the deal, I guess, how are you planning to position 2 inhaled products upon approval of L606 and YUTREPIA as far as which patients would be best fit for each product? And then what size of a trial do you think you'll need to run for the ILD indication?

Yes. Thanks for the question, Greg. So before turning it over to Rajeev to answer the question specifically, I just -- what we're interested in doing as a company is investing in innovation and then parlay that into significant and new treatment choices for patients, which we think will then translate into additional market share. So Rajeev, if you could comment more specifically on sort of how these 2 products would juxtapose each other in the market and how you think you will advance the product.

Sure. Thank you, Greg. Just for a discussion, we believe that YUTREPIA is the first in choice prostacyclin for the present time for patients with both PAH and PH-ILD. The highlights of this, of course, is the ability to use our novel formulation using PRINT technology in concert with a low resistance device, which we believe provides the highest clinical utility for patients currently today. As you know, these clinical trials do take some time. We do anticipate that the trial design would be very similar to the format that was used in [indiscernible] study, and we're happy to provide further context about the [indiscernible] at a later time. Specifically, One of the main attributes of L606 is specifically that we're able to transition the patients from 4 times a day to twice a day with L606 using this next-gen nebulizer. That, of course, we believe, has potential to, not only improve the 24-hour PK profile of treprostinil overall, but also it can enhance the compliance of patients, as you know, just moving to twice-a-day formats. Roger?

Thanks for the question, Greg. next question, please?

Our next question comes from the line of Julian Harrison with BTIG.

Congrats on the collaboration. I'm wondering if you could talk more about the unmet need during the nighttime hours in pulmonary hypertension patients with what's currently available, how L606 could possibly address that? And how would you expect it PK profile to maybe compared to other long-acting options, such as [indiscernible]?

Yes. Great question. Rajeev, given you've treated patients for decades, if you could give some answer to that question it would be great?

Sure. Listen, I think we acknowledge that when we use the current modalities of inhaled treprostinil today, these are done 4 times a day. And of course, these are done during the waking hours. And so what that means is that there is a concern that during the nighttime when the patient is sleeping, we know that the half-life of treprostinil is relatively short, and therefore, when the patient wakes up, it's very typical for the patient to notice that they feel that they need to use in inhaled treprostinil as soon as they get up in the morning. In other words, the drug has likely dissipated over that course of time. And we believe that this is really the key opportunity to provide a totality of coverage over 24 hours. This is very similar to how parenteral treprostinil is currently used, which has that sort of stable PK format profile over 24 hours. So mimicking that format does allow us for a more consistent drug distribution over the course of the entirety of the day, including the sleeping time. So when the patient does awaken, they awaken without any sort of need for rapidly needing to use the medication to revive their ability to sort of advance their exercise for the rest of the day and sort of increase to improve their mobility. Regarding our profile, we believe this 24-hour PK improved coverage is actually critical for patients. We believe that the twice-a-day format is ideal, specifically for L606, and that would sort of emerge as a very high clinical utility option for patients for both PAH and PH-ILD in the near future.

Great. Thank you, Rajeev. Operator, next question, please.

Our next question comes from Kambiz Yazdi with Jefferies.

How may the exposure of L606 improve the patient outcomes. What's kind of the intellectual property around L606? And what's the current status of the Phase III open-label study? How many additional PH-ILD patients would you have to enroll in that.

Okay. Several good questions there. So I think, in terms of the profile, I'll start with that one. So we know from the TYVASO studies, both in pulmonary hypertension and pulmonary hypertension and PH-ILD, that if you measure 6-minute walk outcome, for example, at peak and trough, you see a diminution of effect at trough, upwards of 35% loss of effect. So what's happening is you're getting I think with current therapy, you're getting a peak effect that you then lose over the dosing interval, then the patient's redosed, get a burst release and a peak effect again. So what this does is smooth out that curve, so the peak to trough ratio is minimized, which should then lead to a more stable effect throughout the treatment course. So in a way, as Rajeev said earlier, it's becoming a much better proxy to remodulin or parenteral therapy in the sense that you're getting a more steady state like kinetic profile. So from a therapeutic standard, it's leveling out things more smoothly. So you're not having up and down swings in the exposure, and therefore, the efficacy during the daytime. And as Rajeev said earlier, this will also hold the patient over the course of the night. So obviously, if you took your last post at, say, 8 p.m. and don't get up and taking expose to 8 a.m., you have removed all therapeutic dose from your bloodstream. So that's what this will address, and I think I will address it nicely. Russell, if you could answer the issue around IP. And I think there was 1 final question for [indiscernible].

Sure. So thank you for the question, Kambiz. I think your question was around the IP protection for L606. There's currently 1 issued patent in the United States that covers Pharmosa's technology. They have 2 separate patent families. Those patent families are relatively young. And those patent families won't expire until the late 2030s. And as part of our license agreement with Pharmosa, a lot of the terms relate to further prosecution of patents related to the L606 products, and that's something we certainly looking to partner with [indiscernible] as we build out the patent portfolio covering the product. And obviously, as we go forward with clinical trials, we'll certainly be looking there as well to assess if there are further opportunities to file patent applications around what we find in those studies.

And that leave you with 1 more question. Rajeev, could you address Kambiz if you can remind me what the question was, the last part?

Yes, absolutely. What's the status of the Phase III open-label study? And how many additional PH-ILD patients would you look to enroll in that?

Great. Rajeev?

Thanks, Kambiz. A few things I want to highlight just real quickly on the profile of the drug just real quickly. One is that we're also using liposomal technology. And this technology, I think, has been used for quite some time, and it's quite attractive. Remember, these liposomes essentially in trap, basically treprostinil molecules. And then when you inhale it, you can really localize the drug effect over a prolonged duration, which I think is really critical to really enhance the therapeutic benefit of treprostinil. What we do is anticipate with this 24-hour PK profile with twice a day dosing, this should translate to improved exercise capacity in terms of 6-minute walk for patients, especially from a regulatory standpoint. More importantly, remember, liposomal also enhance the tolerability of the drug. So we look -- we look forward to really doing 2 things: one, improving the tolerability of inhaled treprostinil; and #2, using a twice-a-day format to continue to escalate the dose higher, which we believe that dose does matter, specifically in both PAH and PH-ILD. Relative to the studies in the open label, these are currently ongoing, Kambiz. So we look forward to sort of highlighting more details about the open-label study as we already highlighted. We do have patients that have already been out already up to 48 weeks for the study. This open-label study is -- it's currently on clinicaltrials.gov. It does highlight that the primary endpoint for the study is safety and tolerability for the open-label study. Obviously, we plan to initiate the large PH-ILD, the placebo-controlled Phase III study in the first half of 2024, and we look forward to highlighting the details of that study in future calls. Operator, next question?

Our next question comes from Serge Belanger with Needham.

I have a couple on, I guess, the regulatory related First one, I think, Rajeev delineated what the regulatory task could look like towards approval. Just curious if you plan on meeting with the FDA to reconfirm the required studies for that 505(b)(2) filing? And then, secondly, in terms of the next-gen nebulizer, has the development of nebulizer, -- is it complete? Has it been used with other products? And then lastly, just curious if you can give kind of a broad time line on when we could see an NDA filing for this product?

great question. I think, Rajeev, that all fall under your purview.

Sure. Thank you, Roger. Serge, thanks for the questions. In regards to the regulatory pathway, we have -- Pharmosa has been provided pretty clear guidance from the FDA that: one, we're going to be using the 505(b)(2) pathway to support the approval for both [indiscernible] 1 PAH and PH-ILD indications. As we already highlighted, the Phase I study has been completed that demonstrates already the comparable PK to TYVASO nebulize. That allows equivalent breath to breath dosing with L606 relative to TYVASO nebulized. The second thing is there's an open-label ongoing study that we have highlighted that is going to -- that is currently enrolling PAH patients with the recent amendment that we anticipate will be fully implemented in July of this year that will now include patients transitioning from TYVASO or TYVASO DPI in patients with PH-ILD. And we can also enroll patients naive to prostacyclin therapy, both in PAH and PH-ILD. So that study will be ongoing in the U.S. In parallel, we will be launching the placebo study for PH-ILD. And to your point, as a sponsor, we do -- we are going to meet with the FDA just to ensure that the regulatory pathway that's been laid out already to Pharmosa is -- has been appropriately agreed upon, and we plan to do that in the very near future.

Great. Thanks, Rajeev. So I think we will confirm things we want to make sure that any changes we make to protocol design is well accepted and there's a prospective agreement on the Phase III development plan that really sort of just a confirmation of what we've already seen in riding to the an accepted plan to approval. I think you also asked about the nebulizer. We're not going to -- there're several choices around what nebulizers we could use or use together. We'll talk about that at a later point in time. So really excited about what we can achieve with this program, given its proof of concept as Rajeev stated, and it's clear path to development with a precedent protocol given the TYVASO PH-ILD study is already out there. operator, next question, please.

Our next question comes from Matt Kaplan with Ladenburg Valman.

Can you hear me?

Yes, loud and clear.

Great. Congrats on this agreement. I guess my first question really is, can you tell us a little bit more what is currently known about the safety of delivering the inhaled liposomal formulation of treprostinil?

Yes, again, so now we're not getting to the specifics of an ongoing trial. So what we can say very clearly is that patients were able to tolerate the dose, the starting dose, they were able -- and these were patients with PAH specifically, transition from TYVASO. So patients well managed on TYVASO, transitioned to 2 times a day L606. They were able to tolerate that transition because remember, patients come off TYVASO essentially every night. As I mentioned earlier. Their exposure is eliminated by the time they wake up. So pretty easy to switch them over to the new study. Those patients have then been maintained, as Rajeev has said, up to 48 weeks to date. And obviously, that's building in time as we speak. And they have been able to titrate and this is the important part to significantly higher doses than they were with TYVASO. And again, the reason we believe that to be true is because the liposome and [indiscernible] allows the drug to be protected while it's in the upper airway, it's delivered to the lower airway where it's released when it hits that salt environment. So it has a very controlled rate of release. Once it's released, there's been numbers effect and the management of that patient has been, as 1 would hope, would be in order to advance this to a commercial product. So all signals are very favorable, Matt. Now we just have to go out and prove that it's better than placebo, which I think, for us, it's going to be quite simple to do.

Right. Right. Okay. Sounds good. And then 1 just follow-up question to, I guess, a prior question is, can you give us a little bit more detail on the potential time line to market. You said that, I guess, the trial takes some time, but a potential -- how should we be thinking about this [indiscernible]?

Yes. So again, it's a little bit hard to opine exactly on the time line when we've yet to put the first question in. I think 1 of the things that we'll get -- we want to have that communication with the FDA. We want to just go and have a confirmatory meeting make sure that everything as previously agreed, and still agreed and that the path forward is as we believe it to be. I think from there -- from first patient in, I'll just give you broad time lines just these are generic. So generally, from first patient in to NDA submission is about 3 years. So as we've said, we're going to put first patient in sometime mid-next year. And then you can anticipate to NDA and approval in anywhere from a 3- or more year time frame. Now some of that depends on the rate of enrollment. I think the advantage here is there's a lack of availability in healthcare [indiscernible] in Europe, in particular, so we're going to focus a lot of our effort in Europe. So there will be a hunger to put patients on this therapy because there's no commercial alternative in PH-ILD, specifically, but also, there'll be a number of patients in the U.S. given this 2-times-a-day dosing profile, I think, will be quite attractive to patients considering or in need of an inhalation therapy. So that's a rough estimate. It's very generic. It's not meant to be sort of -- I wouldn't adhere to that yet, but that's just if you said how long does it typically take to get from first patient into NDA or approval -- it's in the 3-plus year time frame. Operator, next question, please?

I'm showing no further questions in queue at this time. So I'll turn the call back to Roger Jeffs for closing remarks.

Thank you, Liz. So let me just conclude. I say that as you can hear, and I hope you hear our enthusiasm today represents a transformational time for Liquidia as we look to build a leading or the leading company in pulmonary hypertension, with rapid and enduring growth potential over many, many years as we continue to build the best-in-class and first-in-choice portfolio of products. We are extremely honored to be partnered now with Pharmosa to bring the full value of L606 forward, which would not have been possible without the knowledge and expertise of their team, led by Dr. [Piken], their President and Co-Founder. For those on the call today, thank you for your time. We always appreciate the chance to speak with you, and we look forward to updating you on our progress in the coming quarters. Thank you, operator.

This concludes today's conference call. Thank you for participating. You may now disconnect.