Liquidia Corporation (LQDA) Earnings Call Transcript & Summary

Hello, everyone, and welcome again to the 43rd Annual JPMorgan Healthcare Conference. My name is Ben Davis. I'm an associate with the Healthcare Investment Banking Group out of New York. And I would like to introduce you the Liquidia team. This morning, Dr. Roger Jeffs, CEO, is going to be running through his presentation, and then the floor will open up to Q&A with COO and CFO, Michael Kaseta; and General Counsel, Russell Schundler.

Great. Thank you, [ Dan ]. Really, really pleased to be here at JPMorgan and describe the forthcoming year that's ahead of us, which we're confident will be a transformational year for Liquidia. I also want to introduce Scott Moomaw, our Chief Commercial Officer; Dr. Rajeev Saggar, our Chief Medical Officer; and Jason Adair, our Chief Business Officer who've had the pleasure of being here at JPMorgan with us this week. I'll give you the normal forward-looking statements. We'll make the projections today, but we refer you to our filings for a more descriptive characterization of the risks and uncertainties. So for those of you that are potentially new to the story completely, we are a biopharmaceutical company focused on developing best-in-class therapies for patients with pulmonary hypertension. Our premise is to provide therapeutic options that have improved drug delivery, reduce the burden of administration and help patients breathe and live longer, and it's something that I've been trying to achieve in my career for the past 30 years. The foundational elements of Liquidia that are going to launch us into this success now and in the future are really based on 3 Ps: products, pipeline and platform. In terms of products, we have a dry powder formulation of YUTREPIA that's based on our platform PRINT technology, PRINT. We are regulatory derisked in the sense that we have tentative approval in hand for PAH and PH-ILD indications, and we have labeling for those drugs as well. And as I'll describe, the only holdback for that now is an dry powder formulation exclusivity that the competitive product has that expires in May of '25. The pipeline, we have a pipeline product. We're not satisfied with all the benefits that I'll describe for YUTREPIA, we want to continue to further benefit the ability of these patients to breathe and live longer. We have an L606 inhaled liposomal suspension that we have in partnership with Pharmosa. It's a sustained release formulation of treprostinil only 2 times a day. So it's going to improve the regimen aspect of inhaled delivery of treprostinil. And it's used in a rapid portable next-gen breath-actuated nebulizer, which will retain the portability characteristics that YUTREPIA ports with a dry powder inhaler. And as I said, the platform technology of PRINT, we've mobilized in the formulation development of YUTREPIA, and it has broad capabilities beyond that as well. Maybe I want to spend a little bit of moment setting the stage about what's the market opportunity from just patient numbers and addressable patient populations. And there's 2 groups that we're going to launch into, WHO Group 1 or pulmonary arterial hypertension and WHO Group 3 or pulmonary hypertension associated with ILD, which I'll just call PAH and PH-ILD for the rest of the talk. The PAH market is an established mature market since 1995, it became medicalized. There's 13 available treatment options and the addressable patient base is pretty stable now in a steady state. So 100,000 prevalent. There's 45,000 of those patients that are treated on one form of therapy or another, and that's not really changing too much even with the advent of new therapies. It's a combinatorial approach to addressing these patients with extreme right heart failure and is really not driving increased treatment rates, at least within PAH. Of the 45,000 treated, maybe a little -- just drill down on the prostacyclin usage within that. There's, by our estimates, 18,000 patients that are currently treated with a prostacyclin, but all of those patients that are treated are compromised by those -- by the delivery of the current therapies in one way or another, and I'll describe that. So for oral, there's about 10,000 patients, but the issue with the oral therapy is there's quite a tortuous AE profile, particularly to the GI tract. There's a lot of nausea, emesis and diarrhea associated with those treatments. And it takes weeks to months to get to therapeutic effect. And unfortunately, you have to really drive the dose through the different AEs that I described, and it can become difficult for those patients to maintain that therapy. There's about 4,000 patients on the more severe forms or parenteral forms of prostacyclin, very effective drugs can dose to effect, which is important for this class of drugs, but compromised by the delivery side effects. For subcutaneous, there's site pain and erythema that's intractable and there's also the risk of septicemia when you have the indwelling catheter because parenteral therapy takes a pump and a catheter to administer either by the subcu or IV route. For inhaled, the 2 existing branded modalities are Tyvaso DPI and nebulized Tyvaso. The issue there is effective therapy direct to the site of action in the lung. But unfortunately, because of the way those drugs are formulated, there's some deposition in the upper airway, lots of cough and throat irritation, which limits the ability to titrate those drugs in the manner that has historically been applied with oral and parenteral therapies. And it's viewed as a treprostinil-like formulation, if you will. It's a good bridge, but a short-term bridge to something else. And that's -- so if you take that 18,000 patients and then try to ascertain what's the opportunity value for us, we think, again, with patients newly presenting and patients fatiguing on the other therapies for one reason or another, there's about 6,000 annual new starts per annum. The way to look at that for us is the way we're looking at it is those are jump balls essentially. So as patients are considering a new option, we think YUTREPIA, we can tip those patients into the YUTREPIA court and really have a more significant share than perhaps most people are thinking. I think we get -- I think the view has been just to look at the DPI nebulized 4,000 patients and sort of squeeze this into that compartment, it's much bigger than that, and I wanted to make sure that was clear today. For WHO group 3, it's an emerging and rapidly growing market. It was first -- treprostinil was first approved for that in, I believe, November of -- or Spring of '21. There's about 60,000 prevalent patients by our estimates, and that's doing a lot of -- through different research techniques that we've tried to triangulate to that number. It's plus/minus on that, for sure. If you just apply the 45% that are treated from the prevalent population in PAH and apply it here that would predict that there's 27,000 addressable. Personally, I think the number is higher. I think they're all addressable. But just to be conservative in our estimates here, we'll go ahead and apply the same statistic. There have been about 6,000 patients medicalized by our estimates in the first 3.5 years either using a DPI or using the nebulized formulation of treprostinil. So there's still 21,000 of those patients left untreated. Now if you look at the revenue opportunity that comes from the prostacyclin class on the left-hand panel, the market for prostacyclin and this is end of year 2023 data because we don't yet have the '24 data. But it shows that it was at about a $3.3 billion revenue run rate and growing. Treprostinil in its various formulations accounts for about $2 billion of that $3.3 billion. And then if you look at the right-hand panel, if you look at the revenues, in pre PH-ILD approval in '21 and the approval of the DPI in 2022, and you can see that the darker blue is the growth in the dry powder formulation in terms of percent use versus the nebulized formulation. It was a pretty steady run rate in '19, like $400-odd million was the historic run rate for Tyvaso as a nebulized formulation. Since the indication expansion in the dry powder formulation, and this is at the end of the third quarter, '25, about $1.7 billion in annual revenue run rate, I would predict it's soon going to approach $2 billion in annual revenue run rate as we get data from the fourth quarter and beyond. So very successful. I think one surprise within that, however, is that -- it's only 65% are on it, the portable dry powder formulation whereas 35% remain on the nebulized formulation, I think that's probably due to some shortcomings of the current dry powder formulation that we hope to address with YUTREPIA. So what would be the ideal product profile for this class of patients looking to find the best and most optimized therapy for themselves. So certainly, there's elements that are important, targeted. Lung delivery is the first. You want to go right to the site of action. In this instance, it's the lung vasculature. It reduces the off-target toxicities particularly of IV and subcu and obviously of the orals, and you really minimize the bad outcomes from very good therapies that are given by the other routes. It should be portable. Certainly, the dry powder inhaler is a portable option for patients. And I think if you look at what we're going to offer patients, this is the actual device. I take my breath, 2 breaths, put it away, keep in my pocket and then take it again 4 hours later. So highly portable therapy and very attractive in terms of allowing patients to go out there daily -- their activities of daily living. It must be titratable. So this is a critical aspect that you should leave here today with. The way prostacyclins are best used is that they're dosed to effect and individualized in some respects for each and every patient. And it's -- you have to get beyond a treprostinil lite version for an inhaled therapy because that's a short bridge to something else. And obviously, we want to have a much longer bridge and a much more friendlier and better outcome for these patients. The consequence of having a titratable therapy, which can get to a higher and more effective dose. So doses progress as the disease continues to progress is that you get a durable usage with these patients of your product. So that's critical for them, and it's also good for our business metrics, obviously. And then you want to minimize dosing frequency. So it's easy and simple. As you saw, it's very easy to administer with this product device. So maybe spend a little bit of time specifically on what the value is from an outcome standpoint of dose in patients. So this is in PAH patients. It's about a 9-year survey from 2009 to 2018 retrospective look of 5,000 patients with pulmonary atrial hypertension. So a massive sample of patients for a rare disease. And what you see here is you're looking at the numbers of patients in terms of percent that achieved certain levels of dosing in terms of breath equivalent. So inhaled therapies are dose based on 4 times daily based on the number of breadths that you need to administer the therapy versus the nebulized solution. So here, you can see about 72%, 73% of patients were only able to achieve 7 to 9 breaths. 22% could get to 10 to 12 breaths. The targeted indicated therapeutic dose in the indication label is 9 to 12 breaths. And very few patients that then could get beyond the 12 breath equivalents 4 times a day. Why is that important? And that's -- if you look at the right-hand side, if you look at the time to transition from inhaled to a parenteral therapy, so an onerous burdensome route of delivery, 9 breaths are fewer, you had a 9.5 months bridge. If you could get to more than 12 months, 12 breaths, you doubled it. You could get to 18 months being sustained on an inhalation formulation. So that's what you want to achieve. You want to drive those to drive better outcome. In PH-ILD story is very, very similar. So this is from the registrational trial of inhaled nebulized Tyvaso in PH-ILD patients called the INCREASE trial. And again, you're going to see a picture that's very similar and what's been shown for all routes of treprostinil delivery, more is better. So in the left-hand panel, the upper red hand, the red bars are clinical improvement, and that's a percent of patients achieving clinical improvement based on the dose achieved and the lower level is -- blue bars is clinical worsening in that same group of patients by dose achieved. So placebo, you can see if you got less than 9 breaths, you basically were giving the patients no therapeutic benefit. If you got to greater than 9 breaths, you can see now you're starting to see efficacy, 17.3% improved and only 16.4% of patients declined and which is a very different picture than the placebo measures that you see next to it. If you also look at 6-minute walk distance, so that's the primary outcome measure that's always used for approval of these therapies in this class of disease. If you look at max study drug dose 4 to 6 breaths, no effect. 7 to 9 breaths, starting to see movement now, 17-meter change in 6-minute walk distance and the patients that got the higher dose, a near doubling of that effect, 33.7 meters improvement in 6-minute walk distance, dose matters. The more dose you can deliver, the better the outcome for these patients. So having said that, what appeared to be a pretty picture for Tyvaso in PH-ILD, here's some real-world data that speaks to specific challenges of their dry powder formulation which was never studied in PH-ILD patients prior to its launch. So this was the first data set. This is from the National Jewish Health Center, one of the most imminent and august pulmonary hypertension centers in the world, and it reviewed the first 48 patients that they treated on Tyvaso DPI. So this is a specific data that speaks to the use of Tyvaso DPI, so our most analogous competitor in patients with PH-ILD, which is the bigger share of the market as we saw earlier. So two populations here. There were 26 patients that were started naively, so new to prostacyclin therapy. Of those 26, 18 discontinued or 69% of the patients discontinued. In the bottom part of that middle graph, 22 patients were transitioned from nebulized Tyvaso, 11 of those patients discontinued. So 50% discontinuation rates there, blended discontinuation rate up 60%. The reasons that they discontinued are informing. They discontinued either to AEs or to worsening. And the primary AE that led to discontinuation was cough, which is happening because the drug is formulated on an FTKP backbone using a high-resistance device is deposited in the upper airway. So you're getting cough and throat irritation, which is negating the ability to drive dose and then the primary reason that patients fell out of that study was from clinical worsening. So they weren't able to achieve dose because of AEs, such that the patients worsened and withdrew. And it didn't take long for that to happen. If you look here at the time to discontinuation, the bottom one is for the naive patients, a mean discontinuation rate -- a median discontinuation rate of 40 days. So half of those patients -- 18 patients, the discontinuation of the 26 that started were off that therapy in 40 days. Very similar picture in the patient's transition from nebulized, you can see that the median discontinuation time in terms of days is 223 days. So very short bridge and a very poor outcome, frankly, in terms of what you would really like to see from a data standpoint. So this is why we think we're going to present a product profile that's highly differentiated and has the real potential, very real potential to become the prostacyclin of first choice. So in terms of targeted lung delivery, we can enhance -- we were specifically engineered and designed from day 1 to enhance lower lung deposition and avoid upper airway deposition. So we're going to go more directly to the site of action with less off-target activity in the upper airway, which is an off-target effect of this inhaled therapy. We're portable with a proven device that's been used in COPD and asthma, its unit cost is low. It's available by the tens of thousands. There's no supply chain issue here. It's a low resistance device that takes low effort, which is important because the primary symptom for these patients is shortness of breath, and then when you associate that with patients concomitant interstitial lung disease, in particular, their ability to pull on the device is compromised. You want to use a low resistance device here. We're going to show you data to convince you that we are titratable, both in PAH patients. And now today, we'll show you data that were titratable in PH-ILD patients to orders of magnitude twofold changes higher, at least 3x higher. So if the target breath indication is 9 to 12 breaths, we're already achieving breaths that are 3x that. As I said, dose matters, dose drives efficacy. You've seen that it's clear. We're going to present a durable therapy. So we'll show you data on our discontinuation rates in our ASCENT trial, which is our prospective trial in PH-ILD patients. And it's given with the dosing frequency, albeit while 4 times a day, very easy to administer with a very patient-friendly device. So these are the PRINT particles. And just to remind you of the elegant engineering behind this. And the team at Liquidia has been at this a while. And I think this is our first go-to-market product that's driven by PRINT formulation technology, and there's a lot to applaud here in terms of their efforts scientifically. So we are uniformly can shape these molecules in the lower end of the respiratory range. So these are -- this is YUTREPIA on the left, 1.3 microns in diameter. You can see the uniformity of those particles, they're engineered so that their aerodynamic performance will be exquisite and they'll fly discretely to the lower airway. Here on the right is a preclinical study where you can say, let's take -- let's challenge this like hard. We took particles that were 4.6 microns in diameter, and this is not treprostinil data, but nonetheless is representative versus particles that are 1.3 microns in diameter. And you can see on the left, even though you're in the respirable range, if you're probably dispersed or have particle sizes in the upper range of the respirable range, you're going to get deposition in the upper airway, and you can see that throat there of that animal has a lot of deposition from a larger particle and less preferential deposition in the lower airway. Now compare that to the right-hand 1.3-micron particle, you can see what you want to see, exquisite distribution to the lower airway and complete distribution to the site of injury. So PRINT enables the use not only of that deposition profile, but up this low resistance device because the competitive product is on an FTK backbone. It was principally used first for Afrezza for inhaled insulin delivery, not discretely designed for treprostinil per se. And that comes as an aggregated product. You need the energy of a high resistance device that's hard to pull on to deagglomerate that product and then to get it into the respirable range, so it can have the efficacy that we've seen, in terms of being at least a treprostinil-like bridge. So minimal respiratory effort ideal for patients with PAH and particularly ideal for patients with PH ILD. It's robust in the sense that it has fortitude, if you drop it, mishandle it or whatever, you're not going to break the thing and it's pocket-sized. There's minimum opportunity for patient error or spillage like the competitor product that uses cartridges that if dropped can spill the drug. Here, it's an encapsulated formulation that we just drop a capsule into the device, pierce it, do your 2 breaths with it in less than 10 seconds, clean the device and you're done. And then this is not -- like I'm not just promoting this naively. Other companies are using these same devices or their device is very similar to ours. If you look at what Gossamer or INSMED are using they are using [indiscernible] devices as well. So this is where the field is going, and the reasons should be somewhat obvious. So maybe here first, we'll talk about PAH. So I'm going to talk about each indication in terms of the dosing flexibility separately. So this is from our own open-label extension study. So the way we got the drug approved is we took patients both naive to prostacyclin with PAH or transitioning from Tyvaso and then measured the kinetics and then we follow those patients in the long-term open-label study. What we've seen in that long-term open-label study is that we can achieve doses, and this is 111 patients sample of 33 breadths equivalents as a maximum. And the majority of patients are in the 15 to 18 breath ranges if they are retained on therapy. So we are going to dose levels and breath levels, equivalents never seen before. So 3x higher doses. And this is what we're really excited about, and this is the first time we've showed this data to the public. So this is the early look at the first 20 patients who've completed 8 weeks of our ASCENT study. We're taking, again, inhaled treprostinil to a whole new dosing level. So the patient demographics are in the upper left, very similar to what the Tyvaso nebulized INSPIRE study enrolled. So predominantly patients with idiopathic interstitial pulmonary fibrosis, autoimmune, ILD and patients with chronic pulmonary fibrosis and emphysema. You can look at their baseline characteristics in terms of disease severity, very similar again. with the mean pulmonary artery pressure of about 34 millimeters of mercury and a PVR of about 6.2. So in these patients who have been on the drug for 8 weeks, we have now gotten to upwards of 27 breath equivalents. So again, 3x the 9 to 12 breaths equivalent, that's indicated in the label in which they've struggled to go beyond. And 90% of the patients are above 15 breaths or more. So we are doing exactly what we want to do to provide a differentiated product with YUTREPIA. This is game-changing in my view. We'll provide more of this information at ATS in May, just ahead of our launch. And again, what will then tie to this is also safety data. But here in the lower left-hand corner, here's what's critical. You remember the average discontinuation rate in naive patients was 69%. We've seen no dropouts at week 8, zero. So what's -- that doesn't mean that there won't be dropouts as we continue to study these patients. They're fragile. Some are on lung transplant list. They're going to get sent for transplants. They're going to go through seasonal issues with respiratory infections and other things. But what's critical in the early, what I'll call induction phase of introducing therapeutic patients is that they can tolerate it and you can quickly get to these higher doses to quickly benefit them. The reason they came to the hospital was to feel better. So we're driving those not only to higher levels, but we're also doing it more rapidly, which is critical. We are having AEs that are typical like cough, but it's mild. One thing we're going to measure is a cost score. So we'll look at cough as a continuous indices. So patients will report on their cough frequency and severity, looking back over the previous visit period. So we'll have that data. But what we're seeing so far is really no change, so 0 to 3-point scale. We're seeing no change over this initial 8-week period in cough score. That's what we want to see. And again, it validates that what we think is true about the PRINT and formulated technology for YUTREPIA is true and no drug-related SAEs at this point. So that's the early data, and we're really like it's perfect. Like to date, this is exactly this is a dream presentation of the data. We will have dropouts as we proceed. But nonetheless, it does show there is a difference in the ability to give inhaled treprostinil via YUTREPIA than the other competitive formulations. So that gets in and then you say, what is the competitive profile. Again, we check all the boxes or most of them. So targeted lung delivery, portable, titratable, durable and the dosing frequency, we share it's still 4 times a day. We're not satisfied with that, and that's why we have gone into our next-generation program, sustained drug exposure over a longer interval, which will allow us for twice-daily dosing. So that's the liposomal encapsulated formulation using the next-gen handheld nebulizer that's patient-friendly and portable. You can see the kinetics on the right-hand side. The goal here is to get the same exposure or AUC that you can get with 4 times a day Tyvaso, but do it in a twice-a-day format. The beauty here is we're lowering the Cmax by 7x. So it actually should produce even less adverse events than what we're seeing with YUTREPIA even. So I think very promising therapy. Where we stand in that, we've had -- we've engaged both the FDA and EMA in conversations now for more than a year. And we have agreement with the FDA that the registration path is quite simple. We have to do a PK comparable bioavailability study, that was actually -- that's done. It was actually done when we took license. There's an ongoing open-label safety data that's providing very good outcome data and encourage data for exactly what we want to see from a twice-daily format. And we're planning to begin our final Phase III registrational trial, a randomized placebo-controlled study in patients only with PH-ILD across 20 countries globally. The design is, as you would expect, we're just really trying to repeat what was done with a nebulized Tyvaso in ILD. 350 patients, roughly 120 sites, randomized 1:1 for b.i.d. versus placebo. And the primary outcome measure will be 6-minute walk distance, but we're also powering the study to get time to clinical worsening if it's there. I think we're probably overpowered, frankly, because if we can drive the higher dose, we should drive better outcome. This is just using the Tyvaso as a proxy, and I think as you've seen that seems to be more underwhelming than what we're going to produce. So the other question is, where do we stand with the regulatory and legal aspects of our product, YUTREPIA in terms of how to get to market? And are there any existing legal barriers or blocking? So we'll touch on this, and we can address more of it in more detail with Rusty in the Q&A. So the legal decisions that came forward to this point have all been favorable. We've been found not to infringe any of the valid claims of the 3 patents originally asserted. And the beauty now finally is that the rulings are final and not subject to any further appeal. So those are done and dusted. The exclusivity is finite. It's expiring in May 23, 2025. We've sued the FDA feeling that it was unjust so we're going to try to pull that forward if possible. But I think you should all just assert the base case is that we're going to come to market in May 23, 2025. And hopefully, we can do better than that, but that's the base case that I would encourage you to follow. There are some ongoing things so UTHR was preliminary injunction in its original suit versus the FDA. So they sued the FDA saying that our amendment of PH-ILD to the tentatively approved PAH application violated FDA policy. Obviously, the FDA disagreed with that because they gave us tentative approval for the PH-ILD amendment. UTHR had sought a preliminary injunction for that, and that was denied. UTHR also has what's called the 327 patent that remains specific to PH-ILD also. They ask for a preliminary injunction on that patent as again, they thought we were coming to market last year. That was also denied and Rusty can talk about the specifics of that. There was -- there's a trial set in June of '25 to go through that issue. But both of those are unique to PH-ILD only, none of those would influence in any way PAH. From a financial standard, we're very well capitalized to achieve the objectives that we want to achieve in 2025. We ended the third quarter of 2024 with $204 million in cash and cash equivalents and that was bolstered by $100 million addition to the balance sheet in September of last year. And then on -- upon approval, we're prepared to launch, we're funded through launch and beyond launch. We have our sales force and medical affairs team is in place. Our commercial inventory is on hand. We have package labeling in a tentative format, but it's not going to change, so we can print that at risk. The distribution channel through the specialties that's established, we think we can have -- from go time, we can have product in the marketplace in 2 to 3 weeks. And we are active, active, active in the PAH community, not just with our 50 sales member team, but also with our medical affairs team that's also, as you can see, developing data that's highly interesting to the practitioners that will want to use YUTREPIA. So with that, I thank you for your time and attention today and open it up for Q&A. Rusty and Mike and I are pleased to answer any questions you may have.

Perfect. And any questions, raise your hand, and we'll have a microphone coming around. But to get things started, the observations from the ASCENT trial seem very encouraging. How should investors compare observations from this trial with the real-world data on Tyvaso that from the National Jewish Health organization that you shared?

Yes. Again, I think having developed Tyvaso, I think this is presenting a new or modern paradigm for the use of inhaled treprostinil that not only allows us to replace existing forms of inhaled treprostinil but also to move the use of orals to a second consideration because these are -- these patients that present and in need of a prostacyclin, again, we'll describe them, and we're not trying to be [indiscernible] here, but we describe them as jump balls. I think it's our belief that YUTREPIA will have a very good competitive position against the orals and can begin to displace that market as well. So the data with DPI, there's not -- for Tyvaso DPI is quite limited. The study that I'm showing you was not ours. That was done independently, but I think it speaks to the real and unfortunate issues that Tyvaso DPI have in that -- in the PH-ILD population. And we wanted to test -- like rather than just give you rhetoric, we want to give you empirical data to prove that we are differentiated like the PRINT technology suggests we should be. And so far, highly encouraging data, presenting a very different outcome. No dropouts at 8 weeks. We're getting twofold orders higher levels of dosing, that's going to drive better benefit for patients. That's known with treprostinil. So I think very encouraged, and we'll just look to execute on that study more and continue to bring value as we head to market.

And you had spoken about some of the success that you've had in the courts. I was wondering what should investors know about the path to final approval and the 327 lawsuit back in June.

Yes, that's a great question. Rusty, would you mind?