Q2 2023 Liquidia Corporation Earnings Call

August 10, 2023

Good morning, and welcome everyone to the liquidity as corporations second quarter 2023 financial results and corporate update conference call.

My name is Livia and I'll 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 and instructions will be provided at that time for you to careful questions.

I'd like to remind everyone that this conference call is being recorded.

I'll now hand, the conference call over to Jason Adair Chief Business Officer.

Thank you Vivian it's my pleasure to welcome everyone to the liquidity of the second quarter 2023 financial results and corporate update call.

Joining the call today are Chief Executive Officer, Dr. Roger Jeffs, Chief Financial Officer, Michael can setup General Counsel, Rusty Schundler, and Chief Medical Officer, Dr. Rajiv Saga.

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 Companys future performance <unk> achievements.

These statements are subject to known and unknown risks and uncertainties, which may cause actual results or performance to be materially different from any future results or performance expressed or implied on this call.

For additional information, including a detailed discussion of our risk factors. Please refer to the company's documents filed with the Securities and Exchange Commission.

Which can be accessed on our website.

I'd now like to turn the call over to Roger for our prepared remarks, after which we'll open the call up for your questions.

Good morning, everyone and thank you for joining us.

In our opening remarks today, we're going to take a very focused approach to address the issue that has been top of mind, where our company our employees and our shareholders specifically the path forward as we see it to the successful resolution of the litigation.

And launch of your trip you up for both P. A H N ph ILD.

I will note. However that in addition to the significant legal de risking that rescue will talk about shortly we also achieved other major and important milestones in the quarter, most notably the license at El <unk> six a phase III clinical program for twice daily life <unk> formulation of inhaled your personnel that positions us with the best in class portfolio of inhaled your cross selling products to best address patient needs.

Not only today, but also in the future.

As mentioned the bulk of our prepared remarks remarks will focus on the recent legal and regulatory actions related to the ongoing litigation.

And Thats rescued elaborate on four specific points first the favorable affirmation by the federal circuit that we do not infringe any valid claims.

Pat.

Second our confidence that United.

United to attempt to overturn the <unk> decision on the 793 patents will fail.

Third.

Positive impact and submitted an amendment to add the ph ILD indication to your truck its label and lastly, our competence and why we feel that the recently allowed patent claims to United Therapeutics related to the treatment of ph ILD will not be an impediment to your truck yes.

Rusty.

Thank you Roger.

As a reminder, liquidity has been party into two separate appeal proceedings at the federal circuit that are relevant to the launch of <unk>.

Broadly speaking that sales relates to patents asserted against liquidity at <unk>, six patent, which describes the way of making and starring trip outs.

And the 703 patent which describes the method of use to treat patients with pulmonary hypertension.

Before walking through the recent decisions and activities I would like to point out that our guidance over the last 12 months until the state. We believe the ongoing litigation will be concluded between the end of 2023 in the middle of 2020 for clearing the path to final approval and launch of your trip here.

The only thing that has changed in the last year as our increased confidence in our guidance with each legal decisions.

Now moving to the recent decision on July 24, the Federal Circuit affirmed the district Court's decision from last August and Hatch Waxman litigation.

The outcome of detail was in line with our expectations, meaning five or six claims in the <unk> six patent were firm this obvious on patentable and thus invalid and that European does not infringe the single valid <unk> six patent claim that was asserted against us.

The Federal Circuit also affirms that your trip infringe the asserted claims of the 703 patent and that based solely on the arguments presented in the hatch Waxman litigation with 703 patent is valid.

However, the court also commented in the written decision. The court is aware that the patent trial and appeal board or pizza.

And all of the claims at 703 patent that the impact.

And at the <unk> decision is on appeal, which I will discuss shortly.

As we've noted previously should the pizza hut decision be affirmed on appeal to 703 patent would be completely invalidated and all previous shipment rulings related to the alleged alleged infringement of 703 patent would be resolved.

Liquidity. It would then be free to seek final approval.

From the FDA for your trip yet.

As next steps with respect to this federal circuit ruling it is possible that one or both parties could seek a rehearing by the three judge panel <unk> adhering unbound in front of the full federal circuit.

One or both parties could also file for search with the United States Supreme Court.

However, we see nothing in the federal Circuit's decision regarding the <unk> six patent that we believe is likely to lead to any further rehearing or start being granted.

Even if a rehearing or Sir is granted it is important to remember that all four judges who have rolled on those 66 patents between the district Court and federal circuit have found the <unk> six patent claims to be invalid or not infringed.

Regardless, our ability to seek final approval for your truck is not contingent on the conclusion of rehearing or appeal of the affirmed patch Waxman decision.

The preceding that is currently limiting our ability to seek final approval for you Chuck yes.

<unk> of the <unk> decision, which and validates the seven to nine <unk>, which I mentioned briefly earlier to.

To summarize all of the 703 patent claims have been ruled by the <unk> to be impacted.

The first ruling was in July 2022, the merits of liquidity as arguments were further reinforced in February 2023, when the patents when the P. Tab to 90 United's request for rehearing and reaffirm that all of the claims.

Yes over publicly accessible prior art.

And April United appealed the <unk> decision to the federal circuit and briefing should be completed in the fourth quarter of this year.

Once briefing has completed the federal circuit has ordered oral arguments to be scheduled on the next available date and its calendar, which we expect to be in the late fourth quarter of 2023 early 2024.

I once heard the federal circuit could issue its ruling by one or two procedures first the court could issue a simple somewhat summary, affirming of the <unk> decision within a few days after oral arguments.

Our second core pit issue a full written opinion in which case, we would anticipate likely receiving the decision within a few months after oral arguments similar to the timing of the hatch Waxman the appeal decision.

We will not predict which of these decision paths is unlikely.

However, whenever a favorable decision is issued liquidity will immediately seek final regulatory approval for your traffic.

With these timeframes in mind, we continue to believe that the ongoing litigation will be concluded sometime between late 2023 in early 2024.

I'd like to turn now to the amended NDA that liquidity is submitted to request. The addition of the ph ILD indication to the proposal for your trip yet.

The Amendment was filed on July 24, the same day that we received a decision in the hatch Waxman appeal.

Due to the nature of the amendment, we were required to issue a second paragraph four notice that certified as of the date of the submission that the fixed patents listed for <unk>. So in the Orange book are invalid <unk> not infringed by your trip yet.

Three of those patents the <unk> six <unk> hundred one and 703 patents are the same three patents that have been litigated over the last several years and have been found to be invalid or not infringed by your trip.

The other three patents in the Orange book for <unk> specifically.

Specifically to the Nebulize delivery of possible are completely unrelated to your trip yet and we're not asserted against your liquidity in the original hatch Waxman litigation.

Although it is possible that United can file a new hatch waxman lawsuit based on this amended MBA the existing federal circuit decisions on this six six to 91 patents and the future favorable affirming of the Pea tabs and validation of the 703 patent would be binding once finalized on appeal.

Under well settled legal principles cannot maintain a second lawsuit for infringement of the same old patents against the same your trip via products.

Even if a new lawsuit was filed in a new 30 months stay at the FDA has triggered that lawsuit would effectively and upon completion of the 780 <unk> appeal because all issues in the new lawsuit would've been decided and binding at that time.

Thus, although it is possible that the amended NDA could trigger further litigation from United We do not anticipate any material change to our timeline.

Finally, I want to address the new patent claims labs, United at the end of June which cover the treatment of ph ILD patients with inhaled <unk> Hospital.

We expect the patent will issue in the coming weeks and likely be added to the Orange book for <unk>.

Two main questions. We've received have been hey, how did these claims impact the fda's approval of <unk> for ph ILD.

And B, how can the U S. PTO grant these plans given the unpacking the ability of the 783 claims to treat patients with all forms of pulmonary hypertension.

I'll address each of these in turn.

That's the first question is important to note that because the new patent was not listed in the Orange book at the time, we submitted our NDA Amendment, there will be no 30 months day at the FDA that attaches to this new path.

While we expect that United May file a lawsuit alleging that illiquidity in Princeton. This new patent we would not automatically be employed and our ability to seek final approval for the ph ILD indication.

Instead, the burden would be on United to seek and prevailing obtaining a preliminary injunction.

To do so the burden would be on United to demonstrate among other things that they are substantially likely to prevail on the merits of the case.

Historically, the courts have generally declined to grant preliminary injunction in situations, where there are substantial questions as to the validity of the patent at issue.

This brings us to the second question how could the ESP Grant. These claims given the unpack the ability of the 783 claims to treat all of pulmonary hypertension.

As you know we cannot reveal the details of our legal positions that being said we strongly believe that this new patent will be found to be valid because of substantial prior art that predates the priority priority date of this new patent applications and fully anticipates all of these new patent claims for.

For example, the 703 patent itself, which was filed in 2007 and predates this new patent applications by more than 10 years.

Already covers as close as the same treatment of inhaled <unk> to patients with all groups of pulmonary hypertension, including ph ILD as the United itself has argued in court.

In addition over the last 10 to 15 years. Many physicians have conducted and published studies and analysis regarding the treatment of ph ILD patients with trip hospital, including intelligent hospital.

In fact, our own Chief Medical Officer, Rajeev Sagar explore these are <unk> <unk> ph ILD patients almost 15 years ago measuring the same basic endpoints that are identified in this new set of patent claims.

A great. Many of these publications predate United as the patent application by a number of years and constitute prior art to the new patents.

Ultimately this new patent will likely be litigated, but it is fundamental to patent law that a patent that is not novel and covers methods of treatment that were already widely known will not be about.

Accordingly, we strongly believe this new patent will not affect liquidity <unk> ability to commercialize ctrip yet.

In summary, the merits of liquidity as arguments remain sound and Thats affirmed who will open the door to treating patients in the near future.

And we do not view this new patent is having any impact on that result.

I'll now pass the call onto Mike to briefly address our financial reporting Mike.

Mike.

Yeah.

Thank you Betsy and good morning, everyone. Our second quarter 2023 financial results can be found in the press release and the 10-Q filed this morning broadly speaking the company continues to execute and manage its business activity with financial discipline in mind. We ended the second quarter with $88 2 million in cash equating to a net burn of only $5.

$1 million over the first six months of this year.

During the quarter revenue from <unk> injection increased <unk> 9 million compared to the same quarter last year due to favorable gross to net charge back and rebate adjustment while cost of sales remained flat at <unk> $7 million.

R&D expenses in the quarter increased $12 5 million compared to the second quarter 2022, primarily due to the $10 million upfront payment tied to licensing North American rights to <unk> six from <unk> Biopharma.

Expense, which has been offset by the.

And Joel for Martin just health care.

G&A increased $2 3 million already 33%.

Fair question.

Bruce consulting and personnel.

Prepare to commercialize.

Okay.

Increased stock based compensation expense overall.

Overall, the company remains well positioned.

Financially due to key value, creating milestones tied to the resolution of the litigation we are preparing to launch <unk> with speed filling our pipeline with new products and remain opportunistic in our ability to create value going forward.

With that I'd like to now turn the call back over to Roger.

Thank you, Mike and thank you Rusty Chris It clearly articulating why the merits of our case gives us great confidence and importantly, while we anticipate our timeline for legal clarity to remain as we have been saying.

Specifically between the end of 2023 and.

2024 with that I would now like to open the call for questions. Operator first question. Please.

Thank you, ladies and gentlemen asked I wanted to ask a question you wanted to bright star one on your telephone and wait for your name to be announced to withdraw your question Press Star One again, please standby, while we compile the Q&A roster.

And our first question coming from the line of Greg Harrison with Bank of America. Your line is open.

Good morning. This is Mary Kay on for Greg. Thank you. So much for taking our question I guess looking at our 606 year, where do you see that fitting into the treatment paradigm for ph in ph ILD and do you think there are certain patients who are likely to prefer a desk to a DPI. Thank you.

Yes. Thank you. Good morning, we appreciate the question Rajeev, if you would please internet.

Yeah, Thank you and good morning.

So a few things about <unk> remember this is a lysosomal formulation of <unk> that has been purposely designed.

You have extended pharmacokinetic sizable levels over a course of 12 hours.

Because of these attributes its also purposely designed to show a lower <unk>.

Max by relatively to eight times lower than <unk>. So we believe this is very important because we believe this negate.

Some of the core side effects that we see with peak plasma exposures with Tobey, so but still maintaining a similar AUC. So essentially what this allows for is a very sort of consistent stable 24 hour exposure with twice a day dosing, which we believe is if you understand the last since 2009 Televisa.

As delivered four times, a day and remember dosing has not provided during usually the sleeping hours. So we provide complete 24 hour coverage, we anticipate that.

As we run through the clinical studies this will be.

Really taken up both in PIH NPH ideas.

Duct and choice.

<unk> because of these clinical attributes Roger.

Roger.

Next question.

Our next question.

And our next question coming from the line of Julian Harrison with <unk>. Your line is open.

Hi, Good morning, Thank you for taking my questions and congrats on all the progress.

First just to confirm some of your prepared remarks United's new ph ILD patent does not preclude your ability to seek final FDA approval for <unk> in ph ILD did I understand that correctly.

Do you want to address that.

Sure. So so I think there are.

Yeah.

Thats correct, unless United was to obtain a preliminary injunction. So I think as I commented on previously there had been a 30 months stay that would attach to this new patent and so we would not be automatically prevented.

From obtaining approval for ph ILD instead, the burden would be on United to obtain a preliminary injunction and for the reasons noted during the prepared remarks.

We think they'll have a hurdle to overcome to obtain that preliminary injunction.

Okay, great. Thanks for clarifying that and then can you just remind us of your clinical development plan in ph ILD, you don't need clinical data for approval here, but but I am curious what data points do you think would be most helpful to characterize for the medical community and generally speaking are you able to comment on the timeline there.

Yes.

That's correct Julien out to answer the first part we do not need any additional data to add <unk> to the label.

And Rajiv do you want to talk about it.

Phase four type like studies that we're doing.

Better informed that can you talk about the use of neutropenia in ph ILD patients sure. Thank you. Thanks for the question, Yeah, just to reiterate Roger's, saying.

The guidance that the FDA has provided us in the past highlight the fact that we do not need any new clinical study.

For many of the application for our ph ILD.

In regards to your trip here.

We believe that one of the biggest unanswered questions is the use of a dry powder formulation of <unk>.

In these patients with ph ILD remember Tobey. So was originally approved using the nebulizer. So we believe studying that in a prospective open label fashion.

We'll definitely provide some of these unanswered questions about the utility of your Trump yet.

Especially given to our low resistance inhaler.

Diesel answer several clinical questions. One we believe these this will highlight our improved tolerability profile, which we saw in our inspire study in ph and we believe we anticipate similar outcomes.

This is also highlights our ability to titrate the drug to higher doses, which we believe is important too to continue to show improved clinical improvements.

In basic endpoints, such as walk distance.

Again, we believe these patients would benefit from a more portable device such as you true up yet. So we believe all those facts are going to be extremely low well perceived by the ph community and.

In regards to the study we still believe that we are we.

We have noted before that the study will initiate near the end of 2023.

Specifically in the United States. Thank you.

Great. Thank you.

Thank you Julian. Thank you next question please operator.

Our next question coming from the line of Sanjay <unk> with Needham Your line is open.

Hi, good morning.

Just a couple of questions I guess the first one on the recently filed NDA amendment for the ph ILD indication.

Just wondering about the next steps.

Kind of the standard FDA acceptance within 60 days.

Do you expect a tentative approval from the FDA.

Talked about a six month review process.

Okay.

The 30 day clock before they will indicate to us whether it's a.

Type one or type two submission type one would be granted a two month review and a type two submission would be granted a six months review.

We feel that.

It could be a type one.

Resubmission.

But again, we'll just wait to see what the agency said because the 30 days will come up in mid October .

But the good news. There is then we would get potentially tentative approval for ph ILD as early as October .

Or as late as early 2024.

Again, we would be prohibited from launching into that indication until the ethers market exclusivity ends in March of 'twenty four.

The basic timeline I think the other thing to point out surge and the question is.

If the tentative approval for PAA remains and this is just an amendment to that tentative approval for PIH seeking tentative approval at this time for ph ILD.

Okay.

And then just thinking ahead of you trickier launch.

Do you see the opportunity here is kind of.

Switch switching from Taipei, so or it would be more of new patient starts that would be again with you trickier.

Does that differ between ph in ph ILD.

Yeah.

I think it's largely a new patient start paradigm I think what the way we view this as we want doctors to use it a few times get comfortable with it with its use in a patient quote unquote this de novo to prostacyclin.

And then once that comfort base exists then potentially there, but switch, but I think the real opportunity here as we see it as more in the de Novo.

Patient base there is a lot of turnover here as you know a patient this is an unrelenting disease.

Patients come on and come off the drug their drugs a common language.

Tom.

For us it's more going after the de Novo market.

Market, it's already on a process that can be a little bit stickier I think we would acknowledge that so it's less about switches now having said that I think if there is any tolerance as we here in particular with ph ILD for type a seven to 10 days of DPI for example.

Those patients.

I think we'd be ratably accepting of the DPI formulation that perhaps may be more tolerable and more titratable. So it's.

It's not that we wont go after the switches I think that the niche our initial push will be in the de novo patient market.

Okay.

Whats example, I would I would say.

Lots of patients treated I think users reporting number 6000 on therapy at this point.

To be about a 50 50 split between.

The nebulizer and the DPI formulation is roughly speaking.

And I think the other opportunity here I, probably should've mentioned is.

Once we establish the use and efficacy of <unk> for example in ph. We will then go after it.

Prostacyclin, our first choice because we think it's probably a better option because it is a gentler could take and is now readily titratable, you're tripping a format and could displace oral prostacyclin, including around the tramp in up trading.

Okay.

Thanks for the questions. Operator next question please.

Thank you and our next question coming from the line of canvas yesterday with Jefferies. Your line is now open.

Hi team.

How should we think about opex moving forward with the.

<unk> Open label study and then eventually they'll figure out phase III. Thank you yes.

Great question I'll ask our CFO , Mike Microstat of please.

Yes, good morning, <unk>. Thanks for the question so.

As I said earlier.

We entered.

Q2 with about $88 million in cash.

We feel very confident in our ability.

To get from key events.

In 2024, which includes on boarding our expanded sales force in Q4 of 'twenty three.

When we get the Green light to move ahead, we will.

To launch <unk>, we will be ready to do that and hit the ground running on day, one so very confident there as it relates to <unk> hundred six.

As I mentioned, we made a $10 million upfront payment to <unk>.

Foremost, we would expect that the vast majority of development expenses will happen.

2020.

Really specific back end of 2024.

As the phase III progressing so.

And we're very confident with where we are.

Throughout the year when that when given the.

Clarity to do so.

Thank you Mike Thanks for the question comedies operator next question. Please.

Thank you Master mind, ladies and gentlemen to ask a question. Please press star one one and our <unk>.

Next question coming from the line of Matt Kaplan with Ladenburg Thalmann. Your line is now open.

Hi, Good morning, guys. Thanks for taking my question I guess can you can you comment a little bit more on why you're confident in being successful at CA.

<unk> SC in the United P Tap appeal.

Yes, Matt could you repeat the question you broke up a little bit there.

Can you comment a little bit more on why you're confident in being successful.

TASC in the United <unk> appeal.

Sure I think rest of you addressed some of that in his prepared remarks, but rest if you would maybe emphasize some additional points if you could.

Sure.

The standard that has to do with the staff.

The burden or the standard is to win.

The court of Appeals for the Federal Circuit will overturn.

The decision of the Pea tab.

It typically is a situation where theres been clear air, especially where youre dealing mostly with factual findings of the pizza as is the case here.

So again, it's looking at the specifics of the holding.

And sort of our view that the holding is sensible and supported by substantial evidence and then that high bar.

What you would have to show us clear error in order to overturned the lower court's decision or the P type decision in this case.

Okay. Okay. That's helpful. And then just going back to a follow up on <unk> can you talk a little bit about the potential development timeline there.

Is.

Is manufacturing a rate limiting step to potential filing for approval.

Yes, I'll ask Rajiv our Chief Medical officer has ever seen the development to address that question.

Okay.

So first and foremost just to just to highlight the <unk> the <unk>.

<unk> hundred six program has one current ongoing open label study.

Study that's that's.

Activity in the United States with the inclusion of the following patients. These are.

Group, one ph patients that are either naive.

Two prostacyclin or are they can be transitioned.

From inhaled from inhaled <unk>, so either the DPI or nebulizer.

As well as patients that have ph D that can be transitioned from Televisa DPR Tobey so nebulizer.

To open label <unk> that study is already recruiting and we have patients that have already achieved up to one year of exposure.

The priority now based on based on our understanding is that we are going to be seeking a type b.

Discussion with the FDA.

That is our that's first and foremost priority to just confirm that.

The requirement for my understanding is a single placebo controlled study.

Without <unk>.

606.

Specifically in ph ILD, we believe that that study.

In particular, plus our phase one study that.

And that combination will be enough for to seek NDA approval for both indications of PIH in ph ILD.

Roger back to you.

Yeah, Thanks, Rajeev and that at the time line or a little bit silent we wanted to get through the type B meeting.

Again, there is a good proxy for what we need to do just from the <unk> <unk> study that was done so there's precedent in terms of sample size time to get that study enrolled and I think given its ph ILD and it will be sort of unencumbered by background therapies, I think could be potentially faster than what you've seen previously, particularly if somebody was doing at THL and leased.

So again, it'll take us a few years, but I think we have the chance to become the first.

Less than four times, a day option for patients.

Okay. Operator next question please.

Thank you and I see no further questions in the Q&A queue. At this time I will now turn the call back over to you Dr. Jeff <unk> for any closing remarks.

Thank you operator, so with no further questions again I'd like to thank you for joining us today, and we look forward to reporting on our continued progress in the coming quarters Goodbye.

Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.

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Good morning, and welcome everyone to the liquidity Corporation's second quarter 2023 financial results and corporate update conference call.

My name is <unk> and I'll be your conference operator today.

Currently all participants are in a listen only mode.

During the presentation, we will conduct a question and answer session and 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 conference call over to Jason Adair Chief Business Officer.

Thank you Vivian it's my pleasure to welcome everyone to the liquidity second quarter 2023 financial results and corporate update call.

Joining the call today are Chief Executive Officer, Dr. Roger Jeffs, Chief Financial Officer, Michael Goose setup.

Council, roughly schundler and Chief Medical Officer, Dr. Rajiv Saga.

Before we begin please note that today's conference call will contain forward looking statements, including those statements regarding future results are unaudited and forward looking financial information as well as the Companys future performance <unk> achievements.

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 web site.

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

Good morning, everyone and thank you for joining us.

In our opening remarks today, we're going to take a very focused approach to address the issue that has been top of mind for our company our employees and our shareholders specifically the path forward as we see it to the successful resolution of the litigation.

And the launch of your trip you up for both PAA and ph ILD.

I will note. However that in addition to the significant legal de risking that rescue will talk about shortly we also achieved other major and important milestones in the quarter, most notably the license about 606, the phase III clinical program for twice daily life <unk> formulation of inhaled <unk> that positions us with the best in class portfolio of <unk> products to best address patient needs.

Not only today, but also in the future.

As mentioned the bulk of our prepared remarks remarks will focus on the recent legal and regulatory actions related to the ongoing litigation.

I've asked rescue to elaborate on four specific points first the favorable affirmation by the federal circuit that we do not infringe any valid claims of the <unk> six patent.

Second our confidence that United.

Added to attempt to overturn the <unk> decision on the <unk> hundred 93 patent will fail.

Eric.

Positive impacting submitted an amendment to add the ph ILD indication can you directly as label and lastly, our competence and why we feel that the recently allowed patent claims to United Therapeutics related to the treatment of ph ILD will not be an impediment to your truck yet.

Christi.

Thank you Roger.

As a reminder, liquidity has been partly into two separate appeal proceedings at the federal circuit that are relevant to the launch of your cup yet.

Broadly speaking the details related to patents asserted against liquidity at <unk>, six patent, which describes the way of making <unk>.

And the 79 patent which describes the method of use to treat patients with pulmonary hypertension.

The only thing that has changed in the last year as our increased confidence in our guidance with each legal decisions.

Now moving to the recent decision on July 24, the Federal Circuit affirmed the district Court's decision from last August and Hatch Waxman litigation.

The outcome of <unk> was in line with our expectations, meaning five years fixed claims nearly <unk> six patent were firm just obvious on patentable and thus invalid.

And that does not infringe the single valid <unk> six patent claim that was asserted against us.

However, the court also commented in the written decision. The court is aware that the patent trial and appeal board or Pizza App has found all of the claims of the 703 patent at the patent and.

And at the <unk> decision is on appeal, which I will discuss shortly.

As we've noted previously should the piece that decision to be affirmed on appeal to 703 patent would be completely invalidated and all previous rulings related to the legend alleging infringement of 703 patent would be resolved.

Liquidity. It would then be free to seek final approval.

From the FDA for your trip yet.

As next steps with respect to this federal circuit ruling it is possible that one or both parties could seek a rehearing by the three judge panel <unk> a hearing on bank in front of the full federal circuit.

One or both parties could also file for <unk> with the United States Supreme Court.

However, we see nothing in the federal circuit decision regarding the <unk> six patent that we believe is likely to lead to any further rehearing or start being granted.

Regardless, our ability to seek final approval for your truck is not contingent on the conclusion of rehearing or appeal of the affirmed patch Waxman decision.

The preceding that is currently limiting our ability to seek final approval for you Chuck yes.

<unk> of the <unk> decision, which and validates the 79 patent, which I mentioned briefly earlier.

To summarize all of the 703 patent claims have been ruled by the <unk> to be on patents.

The first ruling was in July 2022, the merits of liquidity arguments were further reinforced in February 2023, when the when the pizza have denied United's request for rehearing and reaffirm that all of the claims are obvious over publicly accessible IRR.

And April United appealed the <unk> decision to the federal circuit and briefing should be completed in the fourth quarter of this year.

I once heard the federal circuit could issue its ruling by one or two procedures first the court could issue a simple some summary, affirming of the <unk> decision within a few days after oral arguments.

Our second the court could issue a full written opinion in which case, we would anticipate likely receiving the decision within a few months after oral arguments similar to the timing of the hatch Waxman the appeal decision.

We will not predict which of these decisions past is unlikely however.

However, whenever a favorable decision is issued liquidity will immediately seek final regulatory approval for your traffic.

But these timeframes and mines, we continue to believe that the ongoing litigation will be concluded sometime between late 2023 in early 2024.

I'd like to turn now to the amended NDA that liquidity is submitted to request. The addition of the ph ILD indication to the proposed label for your trip yet.

The Amendment was filed on July 24, the same day that we received a decision in the hatch Waxman appeal.

Due to the nature of the amendment, we were required to issue a second paragraph four notice that certified as of the date of the submission that the six patents listed for <unk>. So in the Orange book are invalid <unk> not infringed by your trip yet.

Three of those patents the <unk> six nine to $1 7 million three patents are the same three patents that have been litigated over the last several years and it's been found to be invalid or not infringed by your trip.

The other three patents in the Orange book for <unk>.

Specifically to the Nebulize delivery after possible are completely unrelated to <unk>.

Asserted against your liquidity in the original Hatch Waxman litigation.

Although it is possible that United can file a new hatch waxman lawsuit based on this amended NDA the existing federal circuit decisions on this six six to 91 patents and the future favorable affirming of the Pea tabs and validation of the 703 patent would be binding once finalized on appeal.

Well settled legal principles, United cannot maintain a second lawsuit for infringement of the same old patents against the same your trip to your products.

Even if any of that lawsuit was filed in a new 30 months stay at the FDA has triggered that lawsuit would effectively and upon completion of the 780 <unk> appeal because all issues in the new lawsuit would've been decided and binding at that time.

Thus, although it is possible that the amended NDA could trigger further litigation from United We do not anticipate any material change to our timeline.

Finally, I want to address the new patent claims led to United at the end of June which cover the treatment of ph ILD patients with inhaled <unk>.

We expect the patent will issue in the coming weeks and likely be added to the Orange book for <unk>.

Two main questions. We've received have been hey, how did these claims impact the fda's approval of <unk> for ph ILD.

And B, how can the U S. PTO grant these plans given the unpacking the ability of the 780 <unk> claims to treat patients with all forms of pulmonary hypertension.

I will address each of these in turn.

That's the first question is important to note that because the new patent was not listed in the Orange book at the time, we submitted our NDA Amendment there will be no 30 months stay at the FDA that attaches to this new path.

While we expect the United May file a lawsuit alleging that illiquidity in Princeton. This new patent, we would not automatically being delayed and our ability to seek final approval for the ph ILD indication.

Instead, the burden would be on United to seek and prevail in obtaining a preliminary injunction.

To do so the burden would be on United to demonstrate among other things that they are substantially likely to prevail on the merits of the case here.

Historically, the courts have generally declined to grant preliminary injunctions in situations, where there are substantial questions as to the validity of the patent at issue.

This brings us to the second question how could the PTO Grant. These claims given the unprofitability of 793 claims.

All of pulmonary hypertension.

As you know we cannot reveal the details of our legal decisions that being said, we strongly believe that this new pad will be found to be valid because of substantial prior art that predates the priority priority date of this new patent applications and fully anticipate all of these new patent claims.

For example, the 703 patent itself, which was filed in 2007 and predates this new patent applications by more than 10 years.

I already covered since it closes the same treatment of inhaled <unk> to patients with all groups of pulmonary hypertension, including ph ILD as United itself has argued in court.

In addition over the last 10 to 15 years. Many physicians have conducted and published studies and analysis regarding the treatment of ph ILD patients with trip Arsenal, including an <unk> hospital.

In fact, our own Chief Medical Officer, Rajeev Sagar explore these are <unk> patients almost 15 years ago measuring the same basic endpoints that are identified in this new set of patent cliffs.

A great. Many of these publications predate United as the patent application by a number of years and constitute prior art to the new patents.

Accordingly, we strongly believe this new patent will not affect liquidity its ability to commercialize ctrip yet.

In summary, the merits of liquidity as arguments remains balanced and Thats affirmed who will open the door to treating patients in the near future.

We do not view this new patent is having any impact on that result.

I'll now pass the call onto Mike to briefly address our financial reporting.

Mike.

Yeah.

We ended the second quarter with $88 2 million in cash equating to a net burn of only $5 $1 million over the first six months of this year during the quarter revenue from <unk> injection increased zero point $9 million compared to the same quarter last year due to favorable gross to net charge back and rebate adjustments while cost of.

Sales remained flat at <unk> $7 million.

R&D expenses in the quarter increased $12 5 million compared to second quarter 2022, primarily due to the $10 million upfront payment tied to licensing North American rights to <unk> from <unk>, Biopharma and expense, which has been offset by the recent trends.

And Joel for Martin just health care.

G&A increased $2 3 million or 33%.

Good question.

Yes.

Bruce consulting Unfortunately.

Prepare to commercialize.

Increased stock based compensation expense.

Overall, the company remains well positioned.

Financially.

Key value, creating milestones tied to the resolution of the litigation we are preparing to launch a choppy with speed filling our pipeline with new products and remain opportunistic in our ability to create value going forward.

With that I'd like to now turn the call back over to Roger.

Specifically between the end of 2023 and.

2024 with that I would now like to open the call for questions. Operator first question. Please.

And our first question coming from the line of Greg Harrison with Bank of America. Your line is now open.

Good morning. This is Mary Kay on for Greg. Thank you. So much for taking my question I guess looking at our 660, <unk>, where do you see that fitting into the treatment paradigm for ph in ph ILD and do you think there are certain patients who are likely to prefer thats to a DPI. Thank you.

Yes. Thank you. Good morning, we appreciate the question Rajeev, if you would please internet.

Yeah, Thank you and Mary Kate and good morning.

So a few things about <unk> remember this is a life of Soma formulation of <unk> that has been purposely designed.

To have extended pharmacokinetic sizable levels over a course of 12 hours.

Because of these attributes its also purposely designed to show a lower <unk>.

Max by relatively to eight times lower than <unk>. So we believe this is very important because we believe this negate.

Some of the core side effects that we see repeat plasma exposures with tobey, so but still maintaining a similar AUC. So essentially what this allows for is a very sort of consistent stable 24 hour exposure with twice a day dosing, which we believe is if you understand the last since 2009 Televisa.

As delivered four times, a day and remember dosing has not provided during usually the sleeping hours. So we provide complete 24 hour coverage, we anticipate that.

As we run through the clinical studies this will be.

Really taken up both in PIH NPH ideas.

Duct and choice.

<unk> because of these critical attributes Roger.

Roger.

Next question.

Our next question.

And our next question coming from the line of Julian Harrison with <unk>. Your line is open.

Hi, Good morning, Thank you for taking my questions and congrats on all the progress.

First just to confirm some of your prepared remarks United's new ph ILD patent does not preclude your ability to seek final FDA approval for <unk> in ph ILD did I understand that correctly.

Do you want to address that.

Sure. So so I think there are.

Okay.

From obtaining approval for ph ILD instead, the burden with beyond United to obtain a preliminary injunction and for the reasons noted during the prepared remarks.

We think they'll have a hurdle to overcome to obtain that preliminary injunction.

Okay, great. Thanks for clarifying that and then can you just remind us of your clinical development plan in ph ILD, you don't need clinical data for approval here, but I am curious what data points do you think would be most helpful to characterize for the medical community and generally speaking are you able to comment on the timeline there.

Yes.

That's correct Julien out to answer the first part we do not need any additional data to add <unk> to the label.

And Rajiv do you want to talk about.

Phase four type studies that we're doing.

Better informed but can you talk about the use of neutropenia in ph ILD patients sure. Thank you. Thanks for the question, Yeah, just to reiterate Roger's, saying.

The guidance that the FDA has provided us in the past highlight the fact that we do not need any new critical study.

For many of the application for our ph ILD.

In regards to your trip here.

We believe that one of the biggest unanswered questions is the use of a dry powder formulation of <unk>.

In these patients with ph ILD remember Tobey. So was originally approved using the nebulizer. So we believe studying that in a prospective open label fashion.

We'll definitely provide some of these unanswered questions about the utility of your trip.

Especially given to our low resistance inhaler.

This is also highlights our ability to titrate the drug to higher doses, which we believe is important too to continue to show improved clinical improvements.

In basic endpoints, such as walk distance.

Again, we believe these patients would benefit from more portable device such as you true up yet. So we believe all of those facets are going to be extremely low well perceived by the ph community and in regards to the study we still believe that.

We have noted before that the study will initiate near the end of 2023.

Specifically in the United States. Thank you.

Great. Thank you.

Thank you Julian. Thank you next question please operator.

Our next question coming from the line of Sanjay <unk> with Needham. Your line is now open.

Hi, good morning.

Just a couple of questions I guess the first one on the recently filed NDA amendment for the ph ILD indication.

Just wondering about the next steps.

Kind of the standard FDA acceptance within 60 days.

Do you expect a tentative approval from the FDA.

Talked about a six month review process.

Okay.

The 30 day clock before they will indicate to us whether it's a.

Type one or type two submission type one would be granted a two month review and a type two submission would be granted a six months review.

We feel that.

It could be a type one.

Resubmission.

But again, we'll just wait to see what the agency said because the 30 days will come up in mid October .

But the good news. There is then we would get potentially tentative approval for ph ILD as early as October or as late as early 2024.

Which again, we would be prohibited from launching into that indication until the ethers market exclusivity ends in March of 'twenty four.

But that's the basic timeline I think the other thing to point out surge in your question is.

If the tentative approval for PAA remains and this is just an amendment to that tentative approval for PIH seeking tentative approval at this time for ph ILD.

Okay.

And then just thinking ahead of you trickier launched.

Do you see the opportunity here is kind of.

Switch switching from <unk> or would it be more of new patient starts that would be again with new trickier.

Does that differ between ph in ph ILD.

Yeah.

And then once that comfort base exists then potentially there, but switch, but I think the real opportunity here as we see it as more in the de Novo.

Patient base, there's a lot of turnover here as you know the patient this is an unrelenting disease.

Patients come on and come off the drug their drugs common language.

Tom.

For us it's more going after the de Novo market.

Market, that's already on a process like <unk> can be a little bit stickier I think we would acknowledge that so it's less about switches now having said that I think if theres intolerance as we here in particular with ph ILD for type a <unk> interface a DPI for example.

Those patients.

I think we'd be readily accepting of the DPI formulation that perhaps may be more tolerable and more titratable. So it's.

It's not that we wont go after the switches I think that the niche our initial push will be in the de novo patient market.

Okay.

Whats example, I would I would say this.

Lots of patients treated I think users reporting over 6000 on therapy at this point.

To be about a 50 50 split between.

The net realized and the DPI formulation is roughly speaking.

And I think the other opportunity here I, probably should have mentioned it.

Once we establish the use and efficacy of <unk> for example in ph. We will then go after it.

Prostacyclin, our first choice because we think it's probably a better option because it is a gentler could take and is now readily titratable, you're trucking it format and could displace oral prostacyclin, including around the <unk> and <unk>.

Okay.

Thanks for the questions. Operator next question please.

Thank you and our next question coming from the line of canvas yesterday with Jefferies. Your line is now open.

Hi team.

How should we think about opex moving forward with the.

<unk> Open label study and then eventually they'll figure out phase III. Thank you yes.

Great question I'll ask our CFO , Mike like I said it please.

Yes, good morning, <unk>. Thanks for the question so.

As I said earlier.

We ended.

Q2 with about $88 million in cash.

We feel very confident in our ability.

To get from key events in.

In 2024, which includes on boarding our expanded sales force in Q4 of 'twenty three.

When we get the Green light to move ahead, we will.

To launch <unk>, we will be ready to do that and hit the ground running on day, one so very confident there as it relates to <unk> hundred six.

As I mentioned, we made a $10 million upfront payment to <unk>.

Foremost, we would expect that the vast majority of development expenses will happen.

2020.

Really market specific back end of 2024.

Even though yours as the.

The phase III progressing so.

And we're very confident with where we are.

Throughout the year when that when given the.

Clarity to do so.

Thank you Mike Thanks for the question Operator next question. Please.

Thank you Matthew mine laser and gentlemen to ask a question. Please press star one one and our <unk>.

Next question coming from the line of Matt Kaplan with Ladenburg Thalmann. Your line is now open.

Hi, Good morning, guys. Thanks for taking my question I guess can you can you comment a little bit more on why you're confident in being successful at CA.

<unk> SC in the United <unk> appeal.

Yes, Matt could you repeat the question you broke up a little bit there.

Can you comment a little bit more on why you're confident in being successful at the CFC and the United <unk> appeal.

Sure I think rest of you addressed some of that in his prepared remarks, but rest if you would maybe emphasize some additional points if you could.

Sure.

The standard that has to do with the stand the burden or the standard is to win.

The court of Appeals for the Federal Circuit will overturn.

A decision of the Pea tab.

It typically is a situation, where there's been clear air, especially where youre dealing mostly with factual findings of the pizza as is the case here.

So again, it's looking at the specifics of the holding and.

And sort of our view that the holding is sensible and supported by substantial evidence and then that high bar.

What you would have to show us clear error in order to overturn the lower court decision or the P type decision on this case.

Okay.

Okay. Okay. That's helpful. And then just going back to a follow up on <unk> can you talk a little bit about the potential development timeline there.

Is.

Is manufacturing a rate limiting step to potential filing for approval.

Yes, I'll ask Rajiv our Chief Medical officer has ever seen the development to address that question.

Okay.

So first and foremost just to just to highlight the <unk>. The <unk> hundred six program has one current ongoing open label.

Study that's active in the United States with the with the inclusion of the following patients. These are.

Group, one ph patients.

That are either naive.

Two prostacyclin or are they can be transitioned.

From inhaled from <unk>, so either the DPI or nebulizer.

As well as patients that have ph aldi that can be transitioned from Televisa DPR Televisa nebulizer to.

To open label <unk>.

He is already recruiting and we have patients that have already achieved up to one year of exposure.

The priority now based on based on our understanding is that we are going to be seeking a type b.

Discussion with the FDA that.

That is our that's first and foremost priority to just confirm that.

The requirement for my understanding is a single placebo controlled study.

Without <unk>.

Without <unk> six.

Specifically in ph ILD, we believe that that study.

In particular, plus our phase one study in.

And that combination will be enough for to seek NDA approval for both indications of PIH in ph ILD.

Roger Thank you, yes. Thanks.

Thanks, Rajiv and that at the time line or a little bit silent we wanted to get through the type B meeting.

That's somebody who's doing a ph only study so again it will take some.

A few years, but I think we have the chance to become the first.

Less than four times, a day option for patients.

Great Operator next question please.

Thank you and I see no further questions in the Q&A queue. At this time I will now turn the call back over to you Dr. Jeff <unk> for any closing remarks. Thank.

Thank you operator, so with no further questions again I'd like to thank you for joining us today, and we look forward to reporting on our continued progress in the coming quarters Goodbye.

Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.

Q2 2023 Liquidia Corporation Earnings Call

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