Liquidia Corporation Q1 2023 Earnings Call

May 4, 2023

Kambiz Yazdi: YUTREPIA to the other DPI products in terms of the dose ranges and the device. Just how much pricing could be differentiation here, and is that an important component of your approach to competing in this market?

Pricing could be a differentiation here is that a important component of your.

Approach to competing in this market.

Roger Jeffs: Yeah. Appreciate the question, Serge, good morning. We're not going to comment on pricing. I think obviously we want to make all communities, including the payers community, satisfied with our approach to the market. We'll do what we feel is necessary, at least from a positional standpoint, to position YUTREPIA as a preferred product. Let's wait till we get approval, then we'll comment on that when we go to market.

Yeah I appreciate the question Serge and good morning.

Yeah, we're not going to comment on pricing I think obviously, we want to make them all communities, including the Payor community satisfied with our approach to the market.

And we will do what we feel is necessary to at least from a position standpoint.

To positioning <unk> as a.

Preferred product.

But let's wait till we get approval and then we'll comment on that is when we go to market.

Kambiz Yazdi: Thank you.

Okay.

Operator: Thank you. One moment while we prepare for the next question. The next question will be coming from Julian Harrison of BTIG. Your line is open.

Thank you one moment, while we prepare for the next question.

The next question will be coming from Julian Harrison of <unk>. Your line is open.

Julian Harrison: Hi. Good morning. Thank you for taking my questions. I guess first on the low versus high resistance debate, just wondering if you could provide your most recent read on patient prescriber preference. Then regarding ongoing launch preparations, are you able to talk about how much supply you plan to manufacture at risk, and has this changed at all with recent litigation updates?

Hi, Good morning, Thank you for taking my questions I.

I guess first on the low versus high resistance debate I'm. Just wondering if you could provide you know your most recent read on patient prescriber preference and then regarding ongoing launch preparations are you able to talk about how much supply do you plan to manufacture at risk and has this changed at all with recent litigation update.

Roger Jeffs: Yeah. Great questions, Julian, and good to hear from you. Maybe for the first question about the advantages of the low resistance device, I'll ask Rajiv to answer that. In terms of launch preparedness and supply, Mike, if you could answer that. Rajiv first on the low versus high.

Yeah, great great great questions, Julien Julian and good to hear from you. So maybe for the first question about the advantages of the low resistance device I'll ask Rajiv to answer that and then in terms of launches launch preparedness and supply them. Mike If you could answer that Rajiv first on the low versus high.

Rajeev Saggar: Yeah. Thank you, Roger, and Julian, good morning. Thanks for the opportunity to answer this question. Listen, we have repeatedly discussed the advantages of our innovative technology of PRINT. Once again, just to highlight again that PRINT allows for the drug particles to not require any deaggregation, meaning that YUTREPIA can utilize a low-resistance device, and it doesn't have to overcome these barriers. Now remember, because we use PRINT technology, the powder is already designed to work on its own, with the particles already sized to deposit deep in the lung, leaving the low-resistance device as the most suitable technology. We believe that this enables a more ideal dry powder experience across a range of inspiratory flow rates, a range of lung disease types, including patients with PH and ILD. This is why we're quite excited about the market.

Yes, Thank you Roger and Julian Good morning, Thanks for the opportunity to answer his question.

Listen we have we have repeatedly discussed.

Discuss the advantages of our innovative technology print.

Once again just to highlight again.

Print allows for the drug particles did.

Notwithstanding any deglomeration knee that you'd trip, yet and utilize the low resistance device and it can be.

Barriers I remember because we use print technology the powder is already designed to work.

On the zone with the particles are already sized deposit deepen alone.

Leading the low resistance devices, most suitable technology.

We believe that this enables a more ideal dry powder.

<unk> across a range of institute slow rates of range of lung disease types.

Including patients with ph analogy. So this is why we are quite excited about about the market.

Roger Jeffs: Thank you, Rajeev. Nice answer. Mike, if you could comment on commercial stock and inventory build.

Thank you Rajeev <unk>.

Mike If you could comment on commercial stock and inventory build.

Michael Kaseta: Absolutely. Julian, great to talk to you.

Julien here.

Roger Jeffs: Mike, can you hear me? We can hear you now.

Mike can you hear me.

Michael Kaseta: Okay. Sorry. Julian, great to talk to you. In terms of the question about inventory supply, I think it's about overall launch preparation. As you know, last year when there was a possibility of launching at the end of 2022, we had gone through launch preparations, which included building commercial supply. We were ready to launch last year. We've continued those efforts. We're currently building commercial supply. Whenever we are given clearance to launch, we will be ready to supply the market and are very confident in that. I also just want to add to that. We're also doing other ongoing launch preparations, and that's including onboarding a sales force. We're starting that process, building out our medical affairs team. We will be ready for launch.

We can hear you now okay.

Great to talk to you.

In terms of a question about inventory supply I think it's all it's about all overall launch preparation.

We are as you know last year when there is a possibility of launching.

At the end of 2022, we have gone through the launch preparations which included building commercial supply.

So we were ready to launch last year. We've continued those efforts where we're currently building commercial supply. So whenever we are getting clearance to launch and we will be ready to supply the market and are very confident in that I also just wanted to add to that we're also going on doing other ongoing launch preparations and thats, including Onboarding, a salesforce or <unk>.

Starting that process building out our medical affairs team so.

Michael Kaseta: We know how important this launch is, and when we are ultimately given the green light, we will be ready to go in all aspects.

We will be ready for launch and we know how important this launches.

When we when we are giving ultimately given the green light, we will be ready to go in all aspects.

Julian Harrison: Okay, great. Thanks very much.

Okay, great. Thanks, very much thanks, Mike one thing I would add to Mike's comments.

Roger Jeffs: Thanks, Mike. One thing I would add to Mike's comment is I want to recognize our manufacturing team in RTP. We manufacture the bulk drug substance in-house, so it's a highly scalable process that we're in control of. Our ability to scale and meet market demands is quite facile. Operator, next question, please.

And when a recognized our manufacturing team in RTP.

Manufacturer.

Bulk drug substance in house, so it's a highly scalable process that we're in control of it so our ability to scale in the market demand is quite <unk>.

Operator next question please.

Operator: Thank you. One moment while we prepare for the next question. Our next question will be coming from Kambiz Yazdi of Jefferies. Your line is open.

Thank you one moment, while we prepare for the next question.

And our next question will be coming from.

Ken Dave.

Z of Jefferies. Your line is open.

Kambiz Yazdi: Morning, guys. What's the status of the open label PH-ILD study? Kind of what size are you thinking for that? As a second question, what does the restructuring of the GSK agreement allow you to do? Thank you.

Good morning, guys.

What's the status of the open label Ph ILD study.

Kind of what size are you thinking for that.

And then the second question.

What does the restructuring of the GSK agreement.

Allow you to do.

Thank you.

Roger Jeffs: Great. Thanks for the questions, Kambiz. Rajiv, if you'll talk about the status of the open label ILD, and Jason, I'd love it if you could answer the GSK question. Rajiv.

Great. Thanks for the question as companies.

Rajiv if you would talk about the status of the open label ILD and Jason I'd Love, If you could answer the GSK question.

So it really can be thank you and good morning, Q2 as well.

Rajeev Saggar: Kambiz, thank you, and good morning to you, too, as well. Just to give a little bit of understanding, this is an open label study focused on evaluating the utility, tolerability, and looking at exploratory endpoints such as efficacy in patients, specifically with pulmonary hypertension associated with interstitial lung disease. We believe that we will launch this study near the end of the year, and so we look forward to that. In the meantime, we're actively talking with KOLs sites and getting ready for this launch, which once again, I think KOLs are very excited to participate in this study and as I said, we should be launching by the end of this year. Thank you, Roger.

Just to just to give a little bit of understanding. This is an open label study.

Focused on.

Evaluating the utility Tolerability.

And looking at exploratory endpoints, such as efficacy in patients specifically with palmar hypertension associated with interstitial lung disease.

We have we have we believe that we will launch this study.

At the end of the year and so we look forward to that in the meantime, we're actively.

Talking with Kols sites, and getting ready for this launch, which which once again I think as.

Is it.

Kols are very excited to participate in the study and as I said, we should be launching by the end of this year. Thank.

Thank you Roger.

Roger Jeffs: Thank you, Rajeev. Jason, if you talk about the reversion of the GSK rights to us, please.

Thank you Rajiv and Jason if you're talking about the reversion of the GSK rates to us.

Jason Adair: Sure. It's a good question, Kambiz. I think if you look at the actions that the company's taken over the last several years, it's been to address any potential hurdle to creating more value for shareholders. One of those areas is the application of our PRINT technology. We've had a great relationship with GSK. We started that in 2012, and as our respective strategies started to evolve, it became clear that we could help each other. What this new agreement allows is GSK has continued access to do what we have been doing for them in the past, which is a lot of work on kind of preclinical assets as they think about moving them forward.

Sure. So it's a good question <unk> I think if you look at the actions that the company has taken over the last several years.

To address any potential hurdles to creating more value for shareholders.

And one of those areas is the application of our print technology.

We've had a great relationship with GSK.

We started that in 2012.

And as our respective strategies started to evolve it became clear that we could help each other so what this new agreement allows GSK have continued access to do what we have been doing for them in the past, which is a lot of work on kind of preclinical assets as they think about moving them forward.

Jason Adair: Now we are not restricted from using that same technology as we see fit, meaning we can go forward on any development program that we would like, including in partnership with other companies. That's especially important when you look at a very clear competitive advantage that we've established, which is applying PRINT technology to inhaled formulations. I can say over the last few years, we have had inbound interest to figure out how to use our PRINT technology in that area. We're very happy to be in this new part of our licensing relationship with GSK, where both parties can move forward in creating as much value as possible.

Now we are not restricted from using that same technology as we see fit meaning we can go forward on any development program that we would like including in partnership with other companies.

That's especially important when you look at our very clear competitive advantage that we've established which is applying <unk> technology to inhaled formulations and I can say over the last few years, we have had inbound interest to figure out how to use our technology in that area. So we're very happy to be in this new part of our licensing.

Chip with GSK, where both parties can move forward in creating as much value as possible.

Yes.

Roger Jeffs: Very nicely said, Jason.

Very nicely said Jason.

Michael Kaseta: Thank you very much, guys.

Thank you so much guys.

Roger Jeffs: Thank you, Kambiz. Operator, next question.

Thank you Companys operator, thanks, Clay and one moment, while we prepare for the next question.

Operator: Thank you. One moment while we prepare for the next question. Our next question will be coming from Matt Kaplan of Ladenburg. Your line is open.

And our next question will be coming from Matt Kaplan.

Ladenburg Your line is open.

Matt Kaplan: Hi, thanks for taking my questions. Good morning, guys. Just wanted to go back to manufacturing for a minute. One of the things that seems like United might be running into is capacity constraints. Can you talk a little bit about your capacity potential at launch and what your plans are to address the market given the size of the PH-ILD opportunity?

Hi, Thanks for taking my questions. Good morning, guys.

Just wanted to go back to manufacturing for a minute.

One of the things that it seems like United might be running into capacity constraints can you talk about a little about a little bit about your capacity potential at launch and what your plans are to address the market given the size of the ph ILD opportunity.

Roger Jeffs: Yeah, thanks for the question, Matt. Good to hear from you. Mike, maybe do you could expand on your earlier answer around capacity and how we're looking to build out?

Yes. Thanks for the question magnet for you here from you Mike maybe if you could expand on your earlier answer to ramp capacity.

We're looking to build out.

Michael Kaseta: Yeah, Matt, great to talk to you. We are very excited to serve this market. We have a very efficient process in-house where we do our in-house manufacturing. We have great downstream partners that we've been working with for several years to develop this capacity. We meet constantly to discuss needs and demand and potential for demand and with the larger ILD opportunity. Like I said, we are fully prepared. We will be prepared to launch this product and be prepared to get this product in every patient's hands that wants it or desires it. We do not have any concern about our ability to do that.

Yes, Matt Great to talk to you.

We are very excited a physical card this market we have a very.

Efficient.

Hum.

Process in house, where we do our in house manufacturing, we have great downstream partners that we've been working with for several years to develop this capacity.

We meet constantly to discuss needs and demand and potential for demand and with the larger ILB opportunity like I said, we are fully prepared we will be prepared to launch this product and be prepared to get this product in every patient pan.

That ones that are desires it.

We do not have any concern about our ability to do that though.

Michael Kaseta: Through an efficient manufacturing process, great downstream partners, we are fully confident that when we are able to launch, as early as it may be or whenever the court decision comes, we will be ready, and we do not have that fear and look forward to being able to serve patients, in the short term and into the future.

Through an efficient manufacturing process, great downstream partners.

We are fully confident that when we are able to launch as early as it may be or whatever the court decision come we are we will be ready and we.

We do not have that beer and look forward to being on the third patient.

In the short term and into the future.

Roger Jeffs: Some points I'll add. We have, Matt, the capability to source API well in advance, which we've done, so we have API on hand. Our supply chain is robust with most of the key operations are based in the US. The product has a long shelf life of three years at room temperature. Again, whatever we make now will have usefulness in the commercial supply once launched. As Mike said, we were prepared to launch last fall, so we have a sort of bolus of inventory readily available. From a device standpoint, I think this is also important. The Plastiape device that we use, the low resistance device, is produced in the millions of units for global demand, of which we only order a fraction, but that will not ever be a gating or limiting factor.

One key point is that lag we have the capability to source API and it well in advance, which we've done and so we have API on hand.

Yeah.

Our supply chain is robust with most of the key operations are based in the U S.

The product has a long shelf life of three years at room temperature. So again, we can whenever we make now will have usefulness in the commercial supply once launched.

And as Mike said, we were prepared to launch last fall and so we had a we have a sort of a bolus of inventory.

Roger Jeffs: We feel very comfortable that we've scaled already, and we can scale further with ease. I think we're in a position of strength.

Matt Kaplan: That's very helpful. Just one second question, I guess. Following the completion of the Hatch-Waxman or the PTAB process, assuming you're successful, what would be the timing for full approval and then launch after that?

Roger Jeffs: Yeah, it's a little bit of a moving target, Matt, but our estimate is it will be anywhere from 2 weeks to 2 months.

Roger Jeffs: We're certainly going to communicate with the FDA about the process, and we'll ask for a quick return on turning the tentative approval into a full approval and things that we may need to do to get that done, including safety updates if required. Again, it's a fairly simple process. Historically, when we look at precedents, it's anywhere from 2 weeks to 2 months. It can be even quicker than that, but I think that's a good way to look at it.

Matt Kaplan: Okay, perfect. Thanks for taking the questions.

Thanks for taking the questions.

Roger Jeffs: Yeah. Thank you, Matt.

Operator: Thank you. At this time, I'm not showing any further questions in the queue, and I would like to turn the call over to Roger for closing remarks.

Thank you at this time I'm not showing any further questions in the queue and I would like to turn the call over to Roger for closing remarks.

Roger Jeffs: Well, thank you everyone for joining us this morning. We look forward to continuing to discuss YUTREPIA and its broad potential going forward and hopefully talk about advancements in the legal case. Thank you and have a good day.

Well. Thank you everyone for joining us. This morning, we look forward to continuing to discuss.

<unk> and its broad potential going forward.

Operator: Thank you everyone for joining today's conference call. This concludes today's conference. You may all disconnect. Everyone have a great day. Good morning, welcome everyone to Liquidia Corporation Q1 2023 Financial Results and Corporate Update Conference Call. My name is Lisa, 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. 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. Please go ahead.

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Jason Adair: Thank you, Lisa. It's my pleasure to welcome everyone to Liquidia's Q1 2023 Financial Results and Corporate Update Conference Call. Joining the call today are Chief Executive Officer, Roger Jeffs, Chief Financial Officer, Michael Kaseta, Chief Medical Officer, Rajeev Saggar, Chief Commercial Officer, Scott Moomaw, and General Counsel, Rusty Schundler. Before we begin, please note that today's conference call will contain forward-looking statements, including those statements regarding future results, unaudited, and forward-looking financial information, as well as the company's future performance and/or achievements. These statements are subject to known and unknown risks and uncertainties, which may cause our actual results or performance to be materially different from any future results or performance expressed or implied on this call. For additional information, including a detailed discussion of our risk factors, please refer to the company's documents filed with the Securities and Exchange Commission, which can be accessed on our website.

Jason Adair: 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 Jeffs: Thank you, Jason. Good morning, everyone, and thank you for joining us. As we said just seven weeks ago, our confidence remains high, our balance sheet is strong, our legal team continues to have success in the courts, and the market opportunity for YUTREPIA, our dry powder inhaled formulation of treprostinil to expand as physicians gain better exposure to the benefits of inhaled prostacyclins in treating both PAH and PH-ILD patients. The PH-ILD opportunity is especially intriguing because it seems that the medical and investor communities at large are quickly catching up to the true value that can be created by finally offering an option to this previously untreated group. It's helpful to see the increasing demand for inhaled treprostinil and the increased diagnosis and treatment of PH-ILD. It should accelerate adoption of YUTREPIA, given the clear benefits of tolerability, titratability, and overall patient experience with a low resistance device.

Roger Jeffs: While we wait for the opportunity to launch the product, we look forward to further defining YUTREPIA's beneficial product profile in an open label study in PH-ILD patients that we intend to initiate later this year. One of the reasons we decided to move up our earnings this quarter is to offer near real-time feedback on the most recent legal events that are gating to the potential approval and launch of YUTREPIA. I'd like to hand the call over to Rusty, who was just in the Federal Circuit Court yesterday for the oral arguments in the Hatch-Waxman appeals. Rusty?

Rusty Schundler: Thank you, Roger. As a reminder, the company is an active party to two separate ongoing appeal proceedings at the Court of Appeals for the Federal Circuit, either of which could open the path to final FDA approval of YUTREPIA if ruled in Liquidia's favor. Broadly speaking, the appeals relate to two patents asserted by United Therapeutics, the '066 patent and the '793 patent. The first and most advanced ongoing appeal proceeding relates to the district court's decision last August in the Hatch-Waxman litigation. In this proceeding, UTC is appealing the district court's ruling related to the '066 patent, which found five of the six asserted claims of the '066 patent are invalid, and that the remaining asserted claim is not infringed by Liquidia.

Rusty Schundler: Liquidia is appealing the district court's decision with respect to the '793 patent, which found that all the claims were valid and infringed by Liquidia based on the arguments that were presented during the Hatch-Waxman litigation. Yesterday, the Federal Circuit conducted oral arguments in this appeal. The majority of the argument time was spent addressing Liquidia's appeal of the district court's decision with respect to the '793 patent, with only a few questions from the judges and a couple of minutes spent on UTC's appeal of the district court's decision with respect to the '066 patent. Although it is premature to speculate as to the outcome of the appeal, we hope to receive a decision from the court in the next few months.

Rusty Schundler: A second ongoing appeal proceeding was initiated by United Therapeutics in April after the PTAB rejected their rehearing request and reaffirmed its previous decision, which found that all of the claims in the '793 patent were unpatentable. We currently anticipate that briefing in this appeal will conclude by early in Q4 and expect oral arguments to be scheduled either late this year or in H1 2024. We will not know the scheduled date for oral arguments until after briefing is complete. Once argued, we would then anticipate that a decision could be rendered by the court as early as a few days after oral argument if the court issues a summary affirmance, or within a few months after oral argument if a full written opinion is issued.

Rusty Schundler: When these appeals are taken together, if all of the original decisions are affirmed on appeal, then we will be clear to seek final approval of YUTREPIA. I'll now pass the call on to Mike for an overview of our financial reporting. Mike?

Michael Kaseta: Thank you, Rusty, and good morning, everyone. From a financial perspective, the company has never been stronger or its future brighter. The combination of cash on hand and access to future funds through our revenue financing agreement provides a solid foundation from which we can build our presence in the PH community. We have recently initiated a hiring effort to support our commercial and medical affairs team. At the same time, our operations team continues to ramp production of commercial inventory and will be prepared when we get the green light to launch YUTREPIA. Turning to our Q1 2023 financial results, which can be found in the press release issued today, you will see that revenue was $4.5 million for the three months ended 31 March 2023, compared to $3.5 million for the same quarter in 2022.

Michael Kaseta: Revenue related primarily to the sale of treprostinil injection under the profit split agreement with Sandoz, and the increase of $1 million was primarily due to increased quantities and favorable gross to net rebate adjustments. Cost of revenue was $0.7 million for the quarter, which was the same compared to Q1 2022. Research and development expenses were $5.3 million for the quarter, compared to $4.7 million for Q1 2022. The increase of $0.6 million or 12% was primarily due to a $0.5 million increase in consulting and personnel expenses in preparation for the potential commercialization of YUTREPIA. General and administrative expenses were $7.8 million in Q1 2023, compared with $12.5 million for the comparable quarter in 2022.

Michael Kaseta: A decrease of $4.7 million or 38% was primarily due to a $4 million decrease in legal fees related to ongoing YUTREPIA-related litigation and a $1.8 million decrease in stock-based compensation expense driven by an option modification charge recorded in 2022. These decreases were offset by a $1.1 million increase in commercial, marketing, and personnel expenses in preparation for the potential commercialization of YUTREPIA. Other expenses in the quarter totaled $2.5 million, an increase of $1 million over the same quarter last year, and includes a $2.3 million loss on extinguishment of debt related to repayment of our loan with SVB in January of 2023.

Michael Kaseta: All totaled, we incurred a net loss in Q1 2023 of $11.7 million, or $0.18 per basic and diluted share, compared to a net loss of $15.9 million or $0.30 per basic and diluted share for Q1 2022.

Michael Kaseta: On the balance sheet, we ended the Q1 with cash and cash equivalents totaling $94.4 million and feel well prepared to execute on our objectives for the year ahead. I'd now like to turn the call back over to Roger.

Roger Jeffs: Thank you, Rusty. Thank you, Mike. Finally, I want to briefly address a comment that was made by United Therapeutics in its earnings call yesterday, in which it compared emitted dose calculations between YUTREPIA and Tyvaso DPI. This is a red herring. Patients and physicians don't care about emitted dose calculations. They only care about the actual dose received. As confirmed in our registration studies and validated by the FDA in their granting of tentative approval, YUTREPIA reliably and precisely delivers doses to patients that are comparable to all of the treprostinil doses in the Tyvaso DPI label, as well as doses above and beyond those that are in the Tyvaso DPI label. Patients also care about the comfort and usability of the treatment, we believe that our low resistance device, its ease of use, and robustness will be strongly favored by patients and their providers.

Patients also care about the comfort and usability of the treatment and we believe that our low resistance device its ease of use and robustness will be strongly favored by patients and their providers.

Roger Jeffs: With that, I would now like to turn the call over for questions. Operator, first question, please.

With that I would now like to turn.

On the call for questions. Operator first question. Please.

Operator: Thank you. If you would like to ask a question, please press *11 on your telephone. One moment while we compile the Q&A roster. As well, we ask that you please wait for your name to be announced before you proceed with your question. The first question comes from Greg Harrison of Bank of America. Your line is open.

Thank you if you would like to ask a question. Please press star one on your telephone one moment, while we compile the Q&A roster.

As well we ask that you. Please wait for your name to be announced before you proceed with your question the.

The first question comes from Greg Harrison with Bank of America. Your line is open.

Greg Harrison: Hey, good morning, and thanks for taking the question. Maybe if you could give any additional color just on the different scenarios with respect to the appeals of the litigation and how that would impact the timing of the YUTREPIA launch. I know you've said it could be later this year or H1 of next year. What should we be looking for as these proceedings continue to get our best judgment of when that could happen?

Hey, good morning, and thanks for taking the question.

Maybe.

If you could give any additional color just on the different scenarios with respect to.

To the appeals.

Yeah.

On the litigation.

And how that would impact the timing.

Of the HIV launch I know you said it could be later this year or first half of next year. So.

What should we be looking for.

As these proceedings continue to.

To get our best judgment of when that could happen.

Roger Jeffs: Great. Thank you for the question, Greg. Rusty, if you wouldn't mind answering that.

Alright. Thank you for the question Greg rest, if you wouldn't mind answering it.

Rusty Schundler: Sure. Thanks, Greg. As I noted in my remarks, there are two ongoing appeals proceedings, either one of which, if they were decided in our favor, would allow us to proceed to launch. First, as we've said on prior calls, we ultimately need to be successful through appeal in one proceeding or the other on both of the patents that are still at issue. Ultimately, we need to prevail on both the '066 in the Hatch-Waxman appeal and the '793 patent in either the Hatch-Waxman appeal or the PTAB appeal. With that, there are really three potential scenarios. The first would be that everything at the lower courts or lower tribunals is affirmed. That would mean the Hatch-Waxman, the '066 decision in our favor is affirmed.

Sure sure. Thanks, Craig.

So.

As I noted in my in my remarks, there are two ongoing appeals proceedings, either one of which if they were decided in our favor.

What allow us to proceed to launch so first as we've said on prior calls.

We ultimately need to be successful through appeal in one proceeding or the other on both of the patents that are still at issue. So ultimately we need to prevail in both <unk> six and the hatch Waxman appeal and the 793 patent in either the hatch Waxman appeal or BP tab appeal.

And so with that the scenarios there really.

Three potential scenarios.

The first would be that everything at the lower courts or lower <unk> as a firms. So that would mean that hatch waxman, the asics decision in our favor as a firms.

Rusty Schundler: The '793 decision against us is affirmed, and the PTAB decision on '793 in our favor is affirmed. If all the decisions are affirmed, then we would be clear to seek final FDA approval. Based on the current timeline, what that would mean is we would be waiting for the '793 PTAB appeal, which as we've guided previously, we think we will get to resolution of that sometime as early as late this year or sometime in H1 next year. Second scenario would be that in the Hatch-Waxman appeal, we prevail on both patents. We prevail on both the '066 patent, where the lower court decision is affirmed, and on the '793 patent, where the lower court decision is reversed. If that was to happen, we would immediately be cleared to go seek final FDA approval.

783 decision against us as the firms and the <unk>.

Decision on 700 million or favors firms.

If all the decisions are firms than we would be clear to seek final FDA approval.

Based on the current timeline, what that would mean is we'd be waiting for the $700 repeat have appeal, which as we've guided previously we think we will get to a resolution of that.

Sometimes it's early as late this year or sometime in the first half of next year.

Second scenario.

Would be that in the hatch Waxman appeal, we prevail in both patents. So we prevail on both the <unk> six patent where that a lower court decision is a firms and on the 703 patent where the lower court decision has reversed.

That was to happen we would immediately be cleared to go seek final FDA approval.

Rusty Schundler: As I said before, we anticipate that decision within the next one to three months. The final scenario would be a scenario where we ultimately do not prevail on either the '066 patent or '793 patent. If that happens, as we've guided previously, we would have to wait for those patents to expire. Again, want to reiterate, if all the decisions of the lower courts are affirmed, that would clear us to come to market. Again, we think either late this year or H1 of next year. Thank you.

And so.

I said before we anticipate that decision within the next one to three months.

The final scenario would be a scenario, where we ultimately do not prevail on either of the <unk> six patent or 703 patent.

And if that happens as we've guided previously we would have to wait for those patents to expire.

But again want to reiterate all of the decisions of lower courts are affirmed.

That would clears to come to market again, we think either late this year or first half of next year.

Thank you.

Yes.

Greg Harrison: Got it.

Roger Jeffs: Thanks.

Greg Harrison: That's helpful.

Got it thanks, that's helpful Great.

Roger Jeffs: Great. Thank you, Rusty. Thanks for the question, Greg. Operator, next question, please.

Great. Thanks. Thank you Richard Thanks for the question Greg Operator next question. Thank you for your question.

Operator: Thank you for your question. One moment while we prepare for the next question. Our next question will be coming from Serge Belanger of Needham. Your line is open.

While we prepare for the next question.

And our next question will be coming from search.

Baird.

Adam Your line is open.

Serge Belanger: Hi, good morning. Just a couple questions for me. First one for Rusty. I think you've been pretty consistent that the most straightforward path to YUTREPIA approval was affirming prior court decisions on appeal. Just curious, post the oral arguments from yesterday, if your outlook has changed on the appeals of the district court, given that most of the time was spent on the Liquidia appeal.

Hi, good morning.

Just a couple of questions from me.

First one for Rusty.

I think you've been pretty consistent.

The most straightforward path to trickier approval was.

Permian Prior court decisions on appeal.

Just curious.

The oral arguments from yesterday.

Your outlook has changed on the appeals of the D C court given that.

Most of the time was spent on the liquidity.

Rusty Schundler: Serge, thanks for the question. I think we want to be careful. We're not guiding as to what the judges are thinking or speculating as to what the decisions will be. I think as you know, I counted approximately 40 questions from the court yesterday. Only two of those related to the '066 appeal. Both sides had 15 minutes of oral arguments yesterday. Only a total of two minutes and 15 seconds was spent on their '066 appeal.

Sure. Thanks for the question so.

I think we want to be careful we don't we're.

We're not guiding as to what the judges are thinking or speculating as to what the what the decisions will be I think as you note.

Founded approximately 40 questions from the court yesterday only two of those relates to the <unk> appeal.

Both sides had 15 minutes of oral arguments yesterday only a total of two minutes in 15 seconds with spend on <unk> appeal. So.

I think certainly.

Rusty Schundler: Factually, we saw the same thing I think everyone else did, and obviously those oral arguments are available on the court's website for anyone to listen to. As I said, we don't want to speculate as to what the judges are thinking.

Factually, we saw the same thing I think everyone else did and obviously it is oral arguments are available on the <unk> website for anyone to listen to but.

But as I said, we don't want to speculate as to what the what the judges are thinking.

Serge Belanger: Okay. One for Roger. I think in the past, you've highlighted the differentiation of YUTREPIA to the other DPI products in terms of the dose ranges and the device. Curious how much pricing could be a differentiation here, and is that an important component of your approach to competing in this market?

Okay.

One for Roger.

I think in the past you've highlighted the differentiation of your trip to the other DPI product in terms of the dose ranges in the device.

Sure how much pricing could be differentiation here is that are important components of your.

Approach to competing in this market.

Roger Jeffs: Yeah, appreciate the question, Serge. Good morning. We're not going to comment on pricing. I think obviously we want to make all communities, including the payers community, satisfied with our approach to the market. We'll do what we feel is necessary, at least from a positional standpoint, to position YUTREPIA as a preferred product. Let's wait till we get approval, then we'll comment on that when we go to market.

Yes, I appreciate the question Serge and good morning.

We're not going to comment on pricing I think obviously, we want to make.

All communities, including the Payor community satisfied with our approach to the market.

And we will do what we feel is necessary at least from a positioning standpoint.

Positioning <unk>.

Third product.

But when we get approval and then we'll comment on that when we go to market.

Kambiz Yazdi: Thank you.

Thank you.

Operator: Thank you. One moment while we prepare for the next question. The next question will be coming from Julian Harrison of BTIG. Your line is open.

Thank you one moment, while we prepare for the next question.

The next question will be coming from Julian Harrison of BTG. Your line is open.

Julian Harrison: Hi, good morning. Thank you for taking my questions. I guess first on the low versus high resistance debate, just wondering if you could provide your most recent read on patient prescriber preference. Regarding ongoing launch preparations, are you able to talk about how much supply you plan to manufacture at risk, and has this changed at all with recent litigation updates?

Hi, Good morning, Thank you for taking my questions.

I guess first on the low versus high resistance debate just wondering if you could.

Your most recent read on patient prescriber preference.

And then regarding ongoing launch preparations are you able to talk about how much supply you plan to manufacture at risk and has this changed at all with recent litigation update.

Yes, great great great questions, Julien Julian and good to hear from you. So maybe for the first question about the advantages of the low resistance device I'll ask Rajiv to answer that and then in terms of launch launch preparedness and supply Mike If you could answer that Rajiv first on the low versus high.

Rajeev Saggar: Thank you, Roger, and Julian, good morning. Thanks for the opportunity to answer this question. Listen, we have repeatedly discussed the advantages of our innovative technology of PRINT. Once again, just to highlight again that PRINT allows for the drug particles to not require any vehicle operation. Meaning that YUTREPIA can utilize a low resistance device and it doesn't have the barriers. Now remember, because we use PRINT technology, the powder is already designed to work on its own, with the particles already sized to deposit deep in the lung, leaving the low resistance device as the most suitable technology. We believe that this enables a more ideal dry powder experience across a range of inspiratory flow rates, a range of lung disease types, including patients with PH and ILD. This is why we're quite excited about the market.

Yes, Thank you Roger and Julian Good morning, Thank you for the opportunity to answer his question.

Listen we have repeatedly discussed.

Discuss the advantages of our innovative technology of print.

Once again just to highlight again that.

Print allows for the drug particles did.

Did not require any deglomeration knee that you'd trip, yet and utilize the low resistance device.

Barriers I remember because we use print technology the powder is already designed to work.

On its own with the particles are already sized deposit deep lung.

Leading the low resistance devices, most suitable technology.

We believe that this enables a more ideal dry powder.

<unk> across a range of institutes low rates are range of lung disease types.

Including patients with ph and Audi. So this is why we are quite excited about it about the market.

Roger Jeffs: Thank you, Rajeev. Nice answer. Mike, if you could comment on commercial stock and inventory build.

Thank you Rajiv and I said there might.

Mike If you could comment on commercial stock and inventory build.

Michael Kaseta: Absolutely. Julian, great to talk to you.

Good morning.

Julien Roch.

Yes.

Roger Jeffs: Mike, can you hear me? We can hear you now.

We can hear you now okay.

Michael Kaseta: Okay, sorry. Julian, great to talk to you. In terms of the question about inventory supply, I think it's about overall launch preparation. As you know, last year when there was a possibility of launching at the end of 2022, we had gone through launch preparations, which included building commercial supply. We were ready to launch last year. We've continued those efforts. We're currently building commercial supply, so whenever we are getting clearance to launch, we will be ready to supply the market and are very confident in that. I also just want to add to that, we're also doing other ongoing launch preparations, and that's including onboarding a sales force. We're starting that process, building out our medical affairs team. We will be ready for launch.

Great to talk to you.

In terms of the question about inventory supply I think it is all it's about all overall launch preparation.

We are as you know last year when there is a possibility of launching.

At the end of 2022, we had gone through launch preparations, which included building commercial supply.

So we were ready to launch last year. We've continued those efforts where we're currently building commercial supply. So whenever we are getting clearance to launch we will be ready to supply the market and are very confident in that I also just wanted to add to that.

So going on doing other ongoing launch preparations and thats, including Onboarding. Our Salesforce, we're starting that process building out our medical affairs team. So we will be ready for launch and we know how important this launches when we are when we are giving ultimately given the green light, we will be ready to go and all that.

Michael Kaseta: We know how important this launch is, and when we are ultimately given the green light, we will be ready to go in all aspects.

Julian Harrison: Okay, great. Thanks very much.

Yeah.

Okay, great. Thanks, very much thanks, Mike one thing I would add to Mike's comments.

Roger Jeffs: Thanks, Mike. One thing I would add to Mike's comment is, I want to recognize our manufacturing team in RTP. We manufacture the bulk drug substance in-house, so it's a highly scalable process that we're in control of. Our ability to scale and meet market demands is quite facile. Operator, next question, please.

I want to recognize our manufacturing team in RTP.

Manufacturer.

Subsequent to in house Silicon highly scalable.

Assess that we're in control of our ability to scale in the market demand is quite Brazil.

Operator next question please.

Operator: Thank you. One moment while we prepare for the next question. Our next question will be coming from Kambiz Yazdi of Jefferies. Your line is open.

Thank you one minute, while we prepare for the next question.

And our next question will be coming from.

Ken.

Z of Jefferies. Your line is open.

Kambiz Yazdi: Morning, guys. What's the status of the open label PH-ILD study? What size are you thinking for that? As a second question, what does the restructuring of the GSK agreement allow you to do? Thank you.

Good morning, guys.

What's the status of the open label Ph ILD study.

Kind of what size are you thinking for that.

Then the second question.

Does the restructuring of the GSK agreement.

Allow you to do.

Thank you.

Roger Jeffs: Great. Thanks for the questions, Kambiz. Rajiv, if you'll talk about the status of the open label ILD, and Jason, I'd love it if you could answer the GSK question. Rajiv.

Great. Thanks for the question as companies.

Rajeev, if you'll talk about the status of the open label ILD and Jason I'd Love, If you could answer the GSK question.

Rajeev Saggar: Yes. Kambiz, thank you, and good morning to you, too, as well. Just to give a little bit of understanding, this is an open label study focused on evaluating the utility, tolerability, and looking at exploratory endpoints such as efficacy in patients specifically with pulmonary hypertension associated with interstitial lung disease. We believe that we will launch this study near the end of the year, and so we look forward to that. In the meantime, we're actively talking with KOLs sites and getting ready for this launch, which once again, I think KOLs are very excited to participate in this study, and as I said, we should be launching by the end of this year. Thank you, Roger.

So it really can.

<unk>, Thank you and good morning, Q2 as well.

Just to give a little bit of understanding. This is an open label study.

Focused on.

Evaluating the utility Tolerability.

And looking at exploratory endpoints, such as efficacy in patients specifically with palmar hypertension associated with interstitial lung disease.

We have we have we believe that we will launch this study.

Near the end of the year and so we look forward to that in the meantime, we're actively talked.

Talking with Kols sites, and getting ready for this launch, which which once again I think as is.

Okay, well I'm very excited to participate in the study and as I said, we should be launching by the end of this year.

Roger Jeffs: Thank you, Rashid. Jason, if you talk about the reversion of the GSK rights to us, please.

Roger.

Thank you Rajiv and Jason if you're talking about the reversion of the GSK right.

Sure.

It's a good question <unk> I think if you look at the actions that the company has taken over the last several years.

Address any potential hurdle to creating more value for shareholders.

And one of those areas is the application of our print technology we've.

We've had a great relationship with GSK.

We started that in 2012.

As our respective strategies started to evolve it became clear that we could help each other so what this new agreement allows GSK has.

<unk> access to do what we have been doing for them in the past, which is a lot of work on kind of preclinical assets as they think about moving them forward.

But now we are not restricted from using that same technology as we see fit meaning we can go forward on any development program that we would like including in partnership with other companies.

That's especially important when you look at a very clear competitive advantage that we've established which is applying <unk> technology to inhaled formulations and I can say over the last few years, we have had inbound interest to figure out how to use our technology in that area. So we're very happy to be in this new part of our licensing relation.

Chip with GSK, where both parties can move forward and creating as much value as possible.

Roger Jeffs: Very nicely said, Jason.

Sure.

Very nicely said Jason.

Kambiz Yazdi: Thank you so much, guys.

Thank you so much guys.

Roger Jeffs: Thank you, Kambiz. Operator, next question.

Thank you operator, thanks, Chris and one moment, while we prepare for the next question.

Operator: Thank you. One moment while we prepare for the next question. Our next question will be coming from Matt Kaplan of Ladenburg. Your line is open.

And our next question will be coming from Matt Kaplan.

Ladenburg Your line is open.

Matt Kaplan: Hi, thanks for taking the questions. Good morning, guys. Just wanted to go back to manufacturing for a minute. One of the things that seems like United might be running into is capacity constraints. Can you talk a little bit about your capacity potential at launch and what your plans are to address the market given the size of the PH-ILD opportunity?

Hi, Thanks for taking my questions. Good morning, guys.

Just wanted to go back to manufacturing for a minute.

One of the things that it seems like United might be running into capacity constraints can you talk about a little about a little bit about your capacity potential.

At launch and what your plans are to address the market given the size of the ph ILD opportunity.

Roger Jeffs: Yeah, thanks for the question, Matt. Good to hear from you. Mike, maybe do you get to expand on your earlier answer around capacity and how we're looking to build out?

Yes. Thanks for the question, Matt Good to hear from you Mike maybe if you could expand on your earlier answer to ramp capacity.

We're looking to build out.

Michael Kaseta: Yeah. Matt, great to talk to you. We are very excited to serve this market. We have a very efficient process in-house where we do our in-house manufacturing. We have great downstream partners that we've been working with for several years to develop this capacity. We meet constantly to discuss needs and demand and potential for demand. With the larger ILD opportunity, like I said, we are fully prepared. We will be prepared to launch this product and be prepared to get this product in every patient's hands that wants it or desires it. We do not have any concern about our ability to do that through an efficient manufacturing process, great downstream partners.

Yes, Matt Great to talk to you.

We are very excited with regard to this market we have a very.

Efficient.

<unk>.

Process in house, where we do our in house manufacturing, we have great downstream partners that we've been working with for several years to develop this capacity.

We meet constantly to discuss needs and demand and potential for demand and with the larger ILB opportunity like I said, we are fully prepared we will be prepared to launch that product and be prepared to get this product in every patient pan.

That one theater desires it.

We do not have any concern about our ability to do that though.

Through an efficient manufacturing profit great downstream partners.

Michael Kaseta: We are fully confident that when we are able to launch, as early as it may be or whenever the court decision comes, we will be ready, and we do not have that fear and look forward to being able to serve patients, in the short term and into the future.

We are fully confident that when we are able to launch as early as it may be or whatever the court decision comment we are we will be ready.

We do not have that beer and look forward to being on the third patient.

In the short term and into the future.

Roger Jeffs: Some points I'll add. We have, Matt, the capability to source API well in advance, which we've done. We have API on hand. Our supply chain is robust with most of the key operations are based in the US. The product has a long shelf life of three years at room temperature. Again, whatever we make now will have usefulness in the commercial supply once launched. As Mike said, we were prepared to launch last fall. We have a sort of bolus of inventory readily available. From a device standpoint, I think this is also important. The Plastiape device that we use, the low resistance device, is produced in the millions of units for global demand, of which we only order a fraction. That will not ever be a gating or limiting factor.

Two points I'll add we have Matt the capability to source API and it well in advance, which we've done so we have API on hand.

Our supply chain is robust with most of the key operations are based in the U S.

The product has a long shelf life of three years at room temperature.

Then we can whenever we make now will have the usefulness in the commercial supply once launched.

And as Mike said, we were prepared to launch last fall. So we had a we have a sort of a bolus of inventory readily available and then from a device standpoint I think this is also important.

Plus the IP device that we use the low resistance devices produced in the billions of units for global demand of which we only order traction, but that will not ever be a gating or limiting factors.

Roger Jeffs: We feel very comfortable that we've scaled already, and we can scale further with ease. I think we're in a position of strength.

We feel very comfortable with it.

We've scaled already and we can scale further.

So I think.

Additionally.

We're in a position of strength.

That's very helpful. And then just one second question I guess following the completion of the <unk> process, assuming you're successful.

What would be the timing for full approval and then launch offline.

Roger Jeffs: Yeah, it's a little bit of a moving target, Matt, but our estimate is it will be anywhere from 2 weeks to 2 months.

Yes, it's a little bit of a moving target net but our estimate is it will be anywhere from two weeks to two months.

And we're certainly going to communicate with the FDA about the process.

We will ask for it.

Return on <unk>.

Turning the tentative approval into a full approval.

Things that we may need to get that done including safety updates if required.

Again, it's a fairly simple process historically, when we look at precedents, it's anywhere from two weeks to two months it can be even quicker than that but I think thats a good way to look at it.

Matt Kaplan: Okay, perfect. Thanks for taking the questions.

Okay. Okay. Thanks for taking my questions. Thank.

Roger Jeffs: Yeah. Thank you, Matt.

Thank you Matt.

Operator: Thank you. At this time, I'm not showing any further questions in the queue, and I would like to turn the call over to Roger for closing remarks.

Thank you at this time im not showing any further questions in the queue and I would like to turn the call over to Roger for closing remarks.

Roger Jeffs: Well, thank you, everyone, for joining us this morning. We look forward to continuing to discuss YUTREPIA and its broad potential going forward and hopefully talk about advancements in the legal case. Thank you and have a good day.

Well. Thank you everyone for joining us. This morning, we look forward to continuing to discuss.

<unk> and its broad potential going forward.

Talk about advancements in the medical space.

And have a good day.

Operator: Thank you everyone for joining today's conference call. This concludes today's conference. You may all disconnect. Everyone have a great day.

Thank you everyone for joining today's conference call. This concludes today's conference you may all disconnect everyone have a great day.

Liquidia Corporation Q1 2023 Earnings Call

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