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.

During the presentation, we will conduct a question and answer session and instructions will be provided at that time for you to kick off for questions.

I would 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.

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 are unaudited and forward looking financial information as well as the Companys future performance and our 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.

It 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 for 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 or else, except six I 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 will focus on the recent legal and regulatory actions related to the ongoing litigation.

And Thats rested 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.

Its attempt to overturn the <unk> decision on the 793 patent will fail.

Third.

Positive impact and submitted an amendment to add the ph ILD indication to you directly 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 trip you.

Christi.

Thank you Roger.

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

Broadly speaking the tails relates to patents asserted against liquidity in the <unk> six patent, which describes the way of making and storing 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 inline with our expectations, meaning five years fixed claims near six 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 of the 783 patents and patents.

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 <unk> 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 patent 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 hatch Waxman decision.

The preceding that is currently limiting our ability to seek final approval for your trip yet.

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

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

The first ruling was in July 2022, the merits of liquidity arguments were further reinforced in February 2023, when the when the <unk> denied 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 summary, affirming of the <unk> decision within a few days after oral arguments.

Our second core 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 decision passed is unlikely.

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

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 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 fixed patents listed for <unk>. So in the Orange book are invalid <unk> not infringed by your trip yet.

Three of those patents <unk> six 901, 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 to Nebulize delivery of TERP hospital 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, United 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.

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.

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 stay 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 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 U S. PTO Grant. These claims given the <unk> ability of the 790 <unk> claims to treat all of pulmonary hypertension.

As you know we cannot reveal the details of our legal position.

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 Arsenal, including intelligent 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 claims.

A great. Many of these publications predate United's new 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 its ability to commercialize ctrip yet.

In summary, the merits of liquidity as arguments remain sound and Thats a firm we 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.

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 second quarter 2022, primarily due to the $10 million upfront payment tied to licensing North American rights to <unk> six from <unk>, Biopharma and expense, which has been offset by the recent triennial logging Joel for Martin just health care.

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

Good 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 with <unk>.

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 will need 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 now open.

Good morning. This is Mary Kay on for Greg. Thank you. So much for taking my question I guess looking at our 606 here, 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 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 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.

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.

That's a 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.

Frank do you want to address that.

Sure. So 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 patents 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.

Alright.

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 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 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 trip.

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 assets are going to be extremely low well perceived by the ph community.

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 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 your trip you launched.

Do you see the opportunity here is kind of.

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

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, who is de novo to prostacyclin.

And then once that comfort base exists then potentially they would 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 common language.

Tom.

For us it's more going after the de novo market that the 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 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 easier for reporting over 6000 on therapy at this point.

Seems 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 that.

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 think about phase III.

Yes, it's a great question I will ask our CFO , Mike Microstat of please.

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

As I said earlier.

And then.

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 23.

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 competent 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 and 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 and the United P Tap appeal.

Sure I think Rusty 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 decision.

Decision of the Pea tab.

It typically is the 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 sort of our 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.

And 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.

To highlight the <unk> the <unk> hundred six program has one current ongoing open label.

<unk>, that's active in the United States with the with the inclusion of the following patients. These are.

PQ group, one ph patients that are either naive.

Two prostacyclin or they can be transitioned.

And hailed 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.

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 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 Thank you, yes, thanks Rajiv.

That's the timeline, we're 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> study that was done so there's precedent in terms of sample size and 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 somebody who's doing a ph only.

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.

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 connect 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 Olivia 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, we'll use a kiosk for questions.

I would 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 <unk> General Counsel, Rusty Schundler, and Chief Medical Officer, Dr. Rajiv Saga.

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

Which can be accessed on our website.

I would now like to turn the call over to Roger for our prepared remarks, after which 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 launch of your trip you up for both PIH and ph ILD.

I'll 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 of <unk> six the phase III clinical program for twice daily lysosomal formulation of inhibitor, perhaps now 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.

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 six patents.

Second our confidence that United United attempt to overturn the <unk> decision on the 793 patents will fail.

Third the.

The positive impact and 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 Christy.

Thank you Roger.

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

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

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

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.

<unk> was in line with our expectations, meaning five years fixed claims nearly <unk> six patent were firm just obvious on patentable and Nelson valid.

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 Hut has found all of the claims at a 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 pizza hut decision to be affirmed on appeal to 703 patent would be completely invalidated and all previous rulings related to the allegiance alleged infringement of 703 patent would be resolved.

Liquidity 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> hearing on bank in front of the full federal circuit.

One or both parties can 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.

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 affirm 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 780 <unk> patent claims have been ruled by the <unk> impact.

The first ruling was in July 2022, the merits of liquidity. Its 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 of our obvious over publicly accessible IRR.

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

Once everything is 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 2020 for.

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 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 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.

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 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.

Three of those patents the <unk>, 691% and 7% three patents are the same three patents that have been litigated over the last several years and it has been found to be invalid or not infringed by your trip.

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

Typically the nebulize delivery after possible are completely unrelated to your trap, yet and we're not asserted against your liquidity in the original hatch Waxman litigation.

B binding once finalized an appeal underway.

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

Even if any lawsuit was filed in a new 30 months stay at the FDA has triggered that lawsuit would effectively ends upon completion of the 783 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 for 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> Asa.

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

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

I will address each of these in turn.

While we expect the 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 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 U S. PTO Grant. These claims given the unpredictability of the 79 three claims to treat all of pulmonary hypertension.

As you know we cannot reveal the details of our legal system 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.

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

Already covers discloses 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 TERP Arsenal, including an <unk> 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 cliffs.

A great. Many of these publications predate United as New 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 a firm two will open the door to treating patients in the near future.

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

I will now pass the call on to Mike to briefly address our financial reporting.

Mike.

Thank you Rusty 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 the business activity with financial discipline in mind we.

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 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 recent triennial logins for Martin just health care.

Yes.

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

Good question.

Bruce consulting and personnel.

Prepare to commercialize.

Please proceed.

Increased stock based compensation expense overall.

Overall, the company remains well positioned.

Financially.

Key value, creating milestones tied to the resolution of the litigation, we're 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.

Thank you, Mike and thank you Rusty Crystal clearly articulating why the merits of our case give 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 in mid 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 Westar one one on your telephone and wait for your name to be announced to withdraw your question Westar. 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 now open.

Good morning. This is Mary on for Greg. Thank you so much for taking our 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 preferred 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 from.

<unk> kinetic sizable levels over a course of 12 hours.

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

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.

Next question.

Our next question.

And our next question coming from the line of Joe.

Lynn 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.

Frank do you want to address that.

Sure. So I think there are.

That's correct unless United was to obtain a preliminary injunction. So I think as I commented on previously there would be no 30 months day 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 will 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 im 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.

Alright.

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 studies that we're doing today.

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 clinical study.

Steady 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 a more portable device such as you true up yet. So we believe all of those assets 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 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 Julien. Thank you next question please operator.

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

Hi, good morning.

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 month review.

We feel that it.

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 our 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 <unk> and the question is.

The tentative approval for PIH 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 Triple your launch.

Do you see the opportunity here.

Switch switching from <unk> or would it be more of a new patient starts that we'd begin with trickier.

Does that differ between ph in ph ILD.

I think it's largely a new patient start paradigm I think what the way we view this as well.

We want doctors to use it a few times get comfortable with it with its use in a patient quote unquote de novo to prostacyclin.

And then once that comfort base exists then potentially they would 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 a patient this is an unrelenting disease.

Patients come on and come off the drug.

A common language.

Tom.

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

Market, that's already on a process that can can be a little bit stickier I think weighted knowledge 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 seven five Asa DPI for example.

Those patients.

I think would 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 initial our initial push will be in the de novo patient market.

Okay.

What does the ample 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 nebulizer 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.

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's gentler could take and is now readily tradable you trip a format and could displace oral prostacyclin, including around the ramp in <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.

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 will ask our CFO , Mike Microstat of please.

Yes, good morning, Jaime 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 Onboarding, our expanded sales force in Q4 of 'twenty three.

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

We need to launch <unk>, we will be ready to do that and hit the ground running on day, one so very competent there as it relates to all 606.

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

<unk> pharma, we would expect that the vast majority of development expenses will happen.

In 2020.

Specific back end of 2024.

As the phase III progressing so.

And we're very confident with where we are.

Hello.

Throughout the year when that when given the.

We need to do so.

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

Thank you and as a reminder, ladies and gentlemen to ask a question. Please press star one one and our next question coming from the line of Matt Kaplan with Ladenburg Thalmann. Your line is now open.

Hi, Good morning, guys. Thanks for taking the question.

Can you can you comment a little bit more on why you're confident and being successful at that.

Yes, CA FC and the United <unk> appeal.

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

Yes 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 staff.

The burden or the standard is to win.

The court of Appeals for the Federal Circuit will overturn decision.

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 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 <unk> decision on this case.

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

And is.

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

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

Okay.

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

<unk>, that's active in the United States with the with the inclusion of the following patients. These are.

PQ group, one ph patients that are either naive.

Two prostacyclin or are they can be transitioned.

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 Televisa nebulizer.

To open label <unk> 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>.

Without 606.

Specifically in ph ILD, we believe that that study.

In particular, plus our phase one study in that.

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

Roger Thank you, yes, thanks Rajiv.

At the timeline, 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> study that was done. So there is precedent in terms of sample size time to get that study enrolled and I think given its ph ILD and that 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 a ph only.

So again it will 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.

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 conference for today. Thank you for your participation you may now disconnect.

Q2 2023 Liquidia Corporation Earnings Call

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