Q4 2021 Liquidia Corp Earnings Call

Good morning, and welcome everyone to the liquidity Corporation full year 2021 financial results and corporate update conference call.

Aim is Josh and I will be your conference operator today currently all participants are in a listen only mode. Following the presentation. We will conduct a question and answer session instructions will be provided at that time for you to queue up for questions.

If anyone has any difficulties hearing the conference. Please press star zero for operator assistance at any time I would like to remind everyone that this conference call is being recorded I will now hand, the call over to Jason Adair Senior Vice President corporate development and strategy.

Thank you Josh it's my pleasure to welcome everyone to today's call to discuss our full year results for 2021 provide a business update before we begin I would like to remind everyone that today's call will contain forward looking statements based on current expectations.

Such statements May involve risks and uncertainties that may cause actual results to differ materially from these stated expectations for.

For further information on the company's risk factors, please see liquidity as filings with the Securities and Exchange Commission at Www Dot.

Gov.

On liquidity as web site <unk> Dot com.

Joining the call today are Chief Executive Officer, Roger Jeffs, Chief Financial Officer, Mike could setup senior.

Senior Vice President and General Counsel rough December and other members of liquidity management.

I would now like to turn the call over to Roger for our prepared remarks, after which he will open the call for your questions.

Sure.

Thank you, Jason and good morning, everyone.

So you could be sticking with you today.

2021 was a banner year for liquidity.

Focus on optimizing the company's core initiatives as we begin to focus our full efforts towards launch of your truck yet at the end of this year.

2021 included multiple major accomplishments.

Some highlights are firstly.

In November we received tentative approval, if you trip yet with labeling.

We view the labeling is highly favorable as it includes description debuts in the patient switching from Taipei set as well as prostacyclin naive patients with no new safety issues identified.

We are excited to bring this portable tradable and durable therapy to patients.

All of whom have been using <unk> for more than three years. It does is approximately three times that.

This therapeutic dose.

This therapeutic profile represents a potential game changer for ph.

Physicians you trap yet on the cost side, our first choice.

Secondly.

In April we expanded the use of <unk> injection into the <unk> market.

As a result, we more than doubled the number of patients on <unk> injection with approximately 500 patients on therapy. The goal based on that specialty pharmacy is important.

Approximately 400 unique prescribers have switched patients from brand to generic including approximately 150 unique prescribers are.

We're set to launch in April of 'twenty one.

We expect to see continued demand growth of new generic generic mandates from payers are increasingly be initiated from large payers to cover tens of millions of lives.

Very good we also have significantly advanced our ongoing litigation with United Therapeutics.

And a final written decision in the IPR with 91 patent that bound.

Seven of the nine claims on patentable. In addition, based on the United Therapeutics stipulation of liquidity as non infringement at the London two claims.

Pat.

Patent will no longer be part of the hatch Waxman trial.

Which is scheduled.

At the end of this month.

An IPR with OSM instituted with the 79, three patents with PDF, stating that liquidity have demonstrated a reasonable likelihood of prevailing assertion that all of the claims of the 79 three patents on patentable obvious over the combination of certain Iraq.

And while last Friday summary judgment decision did not go as we hope.

It is important to note that the issue before the court and summary judgment was not the same issues that will be the fourth quarter truck.

Charles specifically noted that she would not commenting on the validity of the asserted claims and the 901 and those six patents or the likelihood that the Delaware Court and they find the claims and bandwidth based on the same rate but reason.

<unk> previously to invalidate United Therapeutics 293 patent.

Given that Gentiles recommendation recommendation was based solely on technicalities that applies only to our collateral estoppel stoffel arguments.

And not on the substance of arguments regarding the scope of the six 6% to 900 patents. We are we are if anything more confident than before and our positions within the liberty and non infringement that will be presented at trial.

And finally, we strengthened our balance sheet through business optimization initiatives and the re financing of our credit facility with SBB, providing funding through key legal milestones in the early launch stage. If you trip yet it might be I said I will now describe in more detail for you Mike are pretty good.

Thank you Roger and good morning, everyone our.

Our full year 2021 financial results can be found in the press release issued earlier today and on our form K Form 10-K to be filed with the SEC after market close today in those documents, you'll see that first revenue was $12 9 million for the full year of 2021 compared with $700000 for the full year of 2020.

The increase was driven by recording our full year revenue related to the promotion of <unk> injection. Following the acquisition of <unk> in November of 2020.

Revenue recognized under the promotion agreement in 2021 is net of $2 7 million of amortization of the contract acquisition costs associated with the promotion agreement.

Cost of revenue was $3 million for the full year 2021 compared with $200000.

The prior year 2021 included a full year sales force related to salesforce related costs as well as amortization of the intangible asset associated with the promotion agreement.

Research and development costs decreased in 2021% to $20 5 million for the full year compared with $32 2 million the prior year.

The 36% decrease primarily related to lower expenses from our <unk> clinical program, which was substantially completed prior to filing the NDA in 2020, and lower employee and consulting expenses.

General and administrative expenses were $23 1 million for the full year 2021, compared to 27 4 million for the prior year.

The decrease of $4 3 million or approximately 60% was due to $9 $1 million decrease in consulting personnel and commercial expenses and offset by a $5 $1 million increase in legal fees relating to our ongoing <unk> related litigation and a $2 million increase in stock based compensation upon the tentative approval of <unk> last November .

In summary, we have incurred a net loss of $34 6 million.

Or <unk> 70 per basic and diluted share compared to a net loss of $59 8 million or.

Or $1 76 per cent per basic and diluted share for the year ended December 31 2020.

Turning to our balance sheet, we ended the year in a strong position.

We ended 2021 with $57 $5 million of cash on hand.

In early 2022, we also increased our debt facility with Silicon Valley Bank to provide immediate access to an additional $15 million of cash in 2022 with additional capital available pending certain milestones.

When combined with the continued revenue from the <unk> injection the company will be well positioned to launch new trip, yet pending a final FDA approval with that I'd now like to turn the call back over to Roger.

Thank you Mike moving forward, we are extremely excited about the growth prospects for the company.

As Jason mentioned mechanized joined by other key members of our leadership team and we will now open it up for questions.

First question please.

Yes.

Thank you Sir.

To ask a question you will need to press star one on your telephone.

Draw your question addressed with LNG.

Our first question comes from Kevin <unk>.

Jefferies. You May proceed with your question.

Good morning, everyone, Hey, Roger and team.

<unk> on for Chris here three questions for me.

First of all why do you think you can expand inhaled ph market to $1 billion from where it currently stands today.

Second question, how have payers responded to the availability of generic sub Q2 Pos sale.

And then thirdly was there any of United strategy revealed during these.

During the summary judgment proceedings.

Thank you for the questions I'll answer the first one about the market opportunity for bringing <unk> and while we think it's a growing opportunity.

And then.

I'll have Mike answer the generic question unless you can opine on legal strategy at least what is able to do so.

So in terms of the market opportunity for your trip you Theres multiple near term value accelerators, and they're really driven by four key linked version one.

One lever affordability when libre tolerability, the other leavers titrate ability and final lever is durability.

So let me speak to that a little bit. So if you look at just the who group one ph market.

It's estimated to be around $500 million market, just a rough estimate.

We think the value of a dry powder formulation might be trip yet.

Portability to content.

Greatly transmission that market and rapidly from Nebulize formulations to dry powder formulations, and I think thats quite simply done because youre, taking at a 9% to 12 breaths per session for the day with deep breaths per section.

Okay size debate device with cluster Pak capsules per delivery, so highly portable small tried.

Tried and true devices that we use for example have been used in asthma and COPD COPD brand drugs for years.

These devices are also active in trials NPH got some iron ore. They are two examples of companies using the same device.

And.

$6 million to $7 million of FCC's device or more and obviously, we only need a small number of dose.

Supported portability will change the paradigm.

More importantly, though its not simply portability I think we've also changed the therapeutic profile of inhaled your process now.

<unk> uniquely our print formulation of <unk>.

<unk>.

Print print provides uniform size and shape.

Mono dispersed particles in the one three micron range.

What that does is allow for better ore down dynamic performance.

The article slide because of lower mine less deposition in the upper airway. So what we think what we what we've seen is that there is potential for lower.

Adverse events related to the deposition in the threat, so let's start with irritation and pain, let's call.

This is borne out to be true in our early studies and when we looked at the dosing. So we have had patients now in open long term extension studies for up to three years.

Patients in excess of three times, a therapeutic dose.

So you are talking about what would be an equivalent up 27 brands four times, a day, which we're delivering in two to four breaths per session. So massively different there and really starting to change the profile.

Inhaled <unk> is now behaving more.

And its capabilities like oral or parenteral cross now that can be done to effect.

That will then lead to a better.

And durability.

<unk> will be able to hold their patients longer on inhaled through cross sell so I think youre going to see expansion of the market two ways one is durability.

It's going to delay the time to more onerous their therapies, including oral and Perenco, which both have tolerability issues and its going to expand into earlier use.

As well as probably infringe greatly on the oral use as prostacyclin.

Prostacyclin their first choice our really our campaign has driven to drive trucking it to be the prostacyclin, a first choice and we can we think we can take a couple hundred million dollar market today and greatly expanded again based on these pharmacologic attributes that I've just described.

So.

Mike If you could talk about the generic com.

Questions.

Yes, absolutely thanks Raj Thanks Tommy.

I think for US <unk> approval was critical from a payer perspective.

It took off the administrative burden of payers, where before they had to differentiate before injectable and sub Q.

As Roger said, we have approximately 500 patients on therapy, which is more than double than what we had in April 2021, which was the first month.

Last one for sub Q approval.

In addition capital players payers have already mandated.

Generic fill and that has contributed to that doubling of patient.

Looking forward for 2022, we're not going to we're not going to give revenue guidance, but just to give you an idea two large national payers covering.

Proximately 50 million lives will require the use of generic suboxone inject and we expect to see.

An uptick coming.

As we move into Q2 and beyond the 2022.

Great. Thank you, Mike and rectal.

What you can't if you could speak to what we talked about the legal strategy.

Sure. Thanks, Thanks, Roger and thanks for the question so.

To answer your question.

Some regions based on collateral estoppel.

Which is really its own sort of separate discrete issue.

That's differentiated.

The general non infringement and invalidity arguments that will be made of trials. So it's hard to read too much into that.

<unk> strategy.

I think what is notable is the core arguments we made in support of summary judgment.

Dress the scope of United Therapeutics is six 6% 91 patents and a comparison of the product's claimed by the $6 91 patents.

The product claim by United Therapeutics, and there were 393 patent that was previously and validated.

Seem to be on patent bill over the prior art.

We think it's notable that in issue incur recommendation the judge Didnt.

Or disagree with.

With our arguments on those.

That's certainly not determinative.

How what the outcome will be a trial, but but we think that is notable so.

I think thats thats informative for us as we move forward to trial, but again because the issue is discrete from the issues that will be presented at trial. It is hard to read too much into into what <unk> strategy will be.

Alright. Thank you so much for your answers.

Great. Thank you.

Operator next question please.

Thank you. Our next question comes from Serge Belanger with Needham <unk> Company. You May proceed with your question.

Hey, good morning.

Couple of questions for me I guess, the first one for Roger.

<unk> outlined some of the key decisions on the.

Patent trial front as well as the IPR process that we should expect and how these will guide or determine your.

Prelaunch commercial activities for Ya trivia.

And then second question I guess for Mike can you just talk about the cash runway and the potential ramp up in Opex for 2022.

And it looks like.

SG&A went up pretty significantly in the fourth quarter.

Were those mostly just onetime items or legal stuff.

Just trying to get some clarification.

Yes.

Yeah. Thanks for the questions. So just just in terms of.

The legal case will drive our prelaunch preparation.

Just start with obviously, we're taking all legal measures we can to ensure that we can remove any warranted.

Barriers.

And as soon as we're free and clear market, we will pull forward our marketing.

And launch so we are preparing now to launch.

Maybe you could talk and questions. Our general counsel you could talk about key decisions in the IPR process that will happen over the course of this year.

Yes, just to give a preview of some key key dates.

The trial at the end of this month. So it's scheduled for the 28 30 on a district court in Wilmington, Delaware closing arguments will be on March 31.

We're expecting a hearing and the 703 IPR sometime in mid May.

We should then get a final written decision from the IPR in these.

703, IPR sometime in mid August .

And then as far as the decision from the hatch Waxman trial.

We are anticipating that will likely receive a decision prior to the end of the 30 months stay but.

Beyond that it's hard to give much guidance because.

We know the courts are are busy.

And really it will be on the judges hands as to how how quickly the decision comes out.

Great. Thank you so Mike maybe you can answer the questions around cash.

Okay.

Yes, absolutely. Thanks for the question Serge So from a cash perspective, we feel really good with where we are from a cash position we are.

As Roger said.

We are.

With the expansion of the SBB facility, which gives us access immediate access to $15 million of additional capital along with additional tranches upon certain milestones.

We feel really good with where we are we are.

No.

Moving forward with pre commercialization activities.

We're playing to win here, we are in the process of ramping up and we feel very comfortable with our capital position that it can get us through the launch of <unk> in Q4 of 2022 and really into Q1 of 2023.

<unk>.

Related to your question on Q4 is really driven by a couple of factors one.

SG&A did increase in Q4, there were some one time costs related to stock compensation.

Four.

I was hitting kind of approval, we did have increase in legal costs as we ramp up for as we ramp up and get ready for the trial.

Here in the next couple of weeks. So that those are really the explanations of why SG&A were increase in.

Most of the increase was a one time costs related to stock compensation.

Great. Thank you.

Thank you Sir.

Operator next question please.

Thank you. Our next question comes from Andreas <unk> with Wedbush You May proceed with your question.

Yes. Good morning, Thanks for taking my questions a couple of months.

Sure.

Can you, let's start with can you provide some details some more details around the launch preparations how many reps do you plan to hire and at what point in time would that happen.

Also if the litigation is resolved by the expiry of the 30 months are you planning to launch at risk.

And then just kind of thinking about the print technology more broadly how are you thinking about expanding the pipeline going forward and the timing around that thanks.

Thanks for the questions guys.

Ill take them in reverse order and I'll answer the question about print.

Have.

Mike answer about launch prep and Leslie can you talk about litigation.

And at risk things, so with print obviously now with.

The trip yet having tentative approval was that with the platform.

Im very proud of the GMP manufacturing facility for the API that we had in house.

Morrisville, North Carolina RTP.

We are looking to expand opportunities.

In particular, we're trying to leverage the expertise that we're building for the launch of <unk>. So we're looking at next generation.

Longer acting forms of fee trachea. These.

These are early we won't really talk about those until we have data that we feel would be of interest to you that we have to get that through the first half of this year potentially.

Excited about what we're doing there and then also having broader business discussions about what other things we could.

Woodprint avail itself to where there's a market opportunity niche orphan areas.

Could penetrate potentially complementary.

What we're doing already pulmonary hypertension, so thats broadly kind of the way we're looking at things I think there is enough on our plate and enough growth and success opportunity ahead. If we successfully launch your trip you. If we then prepare ourselves for the data exclusivity in who group III patients to expire in March of 2024, which is only a two year delay.

There are some unique market opportunities.

<unk> that we can grow into.

And then obviously.

<unk> Therapeutics is successful in there additional studies.

So and broader populations in COPD.

ILD and obviously when we have the chance to penetrate those markets, we certainly well so lots and lots of head just with what we have but certainly more opportunity to further improve the delivery of this important therapy to patients.

With that.

Maybe Mike if you could talk about launch prep.

Yeah, absolutely thanks, Roger and thanks for the question.

A long story, but I think I just wanted to point out that the <unk>.

There is an acquisition.

Side from providing positive cash flow to the company.

The strategic part of that transaction of bringing in an existing commercial infrastructure with a small targeted sales force.

Also have.

A wonderful head of commercial.

Scott <unk>, who came as part of that transaction.

That really Springboards us do to prepare for a launch of your trip yet.

So just to give you an idea of timing. We are we are in full scale up mode.

We hired a head of sales.

We're building out our medical affairs team and we are we are preparing for for success in preparing to launch <unk>.

Here in 2022, now we are not going to get into specifics on the size of the sales force, but we feel confident that.

We will have a nimble.

And professional sales force that will be able to compete and win share for <unk> and for <unk>.

So we are excited for what comes in 2022, and we're prepared to ramp up.

Appropriately as we as we head towards launch.

Thank you great answer Mike.

<unk> adjusted litigation question and lunch.

Sure.

Thanks for the question.

Whether we would launch at risk if we havent gotten that decision by the end of the 30 months day. That's a decision that we will be able to make that until till that time and it will be informed by a number of data points that we just don't have right now it'll be informed by the trial to be informed by the 783 IPR. So.

Certainly at that time, we will take into account all of those different factors to make a mistake, but we can't provide guidance at this point because we just we just don't have that information in hand.

Great.

Thank you for your questions. Operator next question. Please.

Thank you and as a reminder to ask a question you will need to press star one on your telephone.

Question comes from Julian Harrison with BTG you May proceed with your question.

Hi, Good morning. Thank you for taking my question. Just wondering if you can confirm that the FDA has not requested that a risk evaluation mitigation strategy be implemented for <unk>, assuming you gained freedom to operate later this year.

Yes, that's an easy one the answer is no that had not.

And we have draft labelling and hand the permit.

Obviously, therefore been declared safe and effective.

And we don't have any anything related to the API formulations that would cause us concern.

Excellent thanks very much.

Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to Roger Jeffs for any further remarks.

Great. Thank you operator.

We want to thank everyone for joining us on the call today.

We appreciate your continued interest in Korea, and look forward to updating you about our progress throughout the year have a great day.

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

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