Liquidia Corporation (NASDAQ:LQDA) Q1 2023 Earnings Call Transcript May 6, 2023
Operator: Good morning, and welcome, everyone, to the Liquidia Corporation First Quarter 2023 Financial Results and Corporate Update Conference Call. My name is Lisa, and I will be your conference operator today. Currently, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. I would like to remind everyone that this conference call is being recorded. I will now hand the call over to Jason Adair, Senior Vice President, Corporate Development and Strategy. Please go ahead.
Jason Adair: Thank you, Lisa. It’s my pleasure to welcome everyone to Liquidia’s first quarter 2023 financial results and corporate update conference call. Joining the call today are Chief Executive Officer, Roger Jeffs; Chief Financial Officer, Michael Kaseta; Chief Medical Officer, Rajeev Saggar, Chief Commercial Officer, Scott Moomaw; and General Counsel, Rusty Schundler. Before we begin, please note that today’s conference call will contain forward-looking statements, including those statements regarding future results, unaudited and forward-looking financial information as well as the company’s future performance and/or achievements. These statements are subject to known and unknown risks and uncertainties, which may cause our actual results or performance to be materially different from any future results or performance expressed or implied on this call.
For additional information, including a detailed discussion of our risk factors, please refer to the company’s documents filed with the Securities and Exchange Commission, which can be accessed on our website. I would now like to turn the call over to Roger for our prepared remarks, after which, he will open-up the call for your questions.
Roger Jeffs: Thank you, Jason. Good morning, everyone, and thank you for joining us. As we said just 7 weeks ago, our confidence remains high. Our balance sheet is strong. Our legal team continues to have success in the courts in the market opportunity for YUTREPIA, our dry powder inhaled formulation of treprostinil continues to expand as physicians gain better exposure to the benefits of inhaled prostacyclin in treating both PAH and PH-ILD patients. The PH-ILD opportunity is especially intriguing because it seems that the medical and investor communities at large are quickly catching up to the true value that can be created by finally offering an option to this previously untreated group. It’s helpful to see the increasing demand for inhaled treprostinil and the increased diagnosis and treatment of PH-ILD.
It should accelerate adoption of YUTREPIA given the clear benefits of tolerability, titratability and overall patient experience with a low resistance device. While we wait for the opportunity to launch the product, we look forward to further defining YUTREPIA’s beneficial product profile in an open-label study in PH-ILD patients that we intend to initiate later this year. One of the reasons we decided to move up our earnings this quarter is to offer near real-time feedback on the most recent legal events that are gating to the potential approval and launch of YUTREPIA. I’d like to hand the call over to Rusty, who was just in the Federal Circuit Court yesterday for the oral arguments in the Hatch-Waxman appeals. Rusty?
Rusty Schundler: Thank you, Roger. As a reminder, the company is an active party to two separate ongoing appeal proceedings at the Court of Appeals for the Federal Circuit, either of which could open the path to final FDA approval of YUTREPIA, if ruled in Liquidia’s paper. Broadly speaking, the appeals relate to two patents asserted by United Therapeutics, the 066 patent, and the 793 patent. The first and most advanced ongoing appeal proceeding relates to the District Court’s decision last August in the Hatch-Waxman litigation. In this proceeding, UTC is appealing the district court’s ruling related to the 066 patent, which found 5 of the 6 asserted claims of the 066 patent are invalid and that the remaining asserted claim is not infringed by Liquidia.
And Liquidia is appealing the District Court’s decision with respect to the 793 patent, which found that all the claims were valid and infringed by Liquidia based on the arguments that were presented during the Hatch-Waxman litigation. Yesterday, the Federal Circuit conducted oral arguments in this appeal. The majority of the argument time was spent addressing Liquidia’s appeal of the district’s decision with respect to the 793 patent with only a few questions from the judges in a couple of minutes spent on UTC’s appeal of the District Court’s decision with respect to the 066 patent. Although it’s premature to speculate as to the outcome of the appeal, we hope to receive a decision from the court in the next few months. A second ongoing appeal proceeding was initiated by United Therapeutics in April after the PTAB rejected their rehearing request and reaffirmed its previous decision, which found that all of the claims in the 793 patent were un-patentable.
We currently anticipate that briefing in this appeal will conclude by the early in the fourth quarter and expect oral arguments to be scheduled either late this year or in the first half of 2024. We will not know the scheduled date for oral arguments until after briefing is complete. Once argued, we would then anticipate that the decision could be rendered by the court as early as a few days after oral argument if the court issues the summary affirmants or within a few months after oral argument of a full written opinion is issued. When these appeals are taken together, if all of the original decisions are affirmed on appeal, then we will be clear to seek final approval of YUTREPIA. I’ll now pass the call on to Mike for an overview of our financial reporting.
Mike?
Michael Kaseta: Thank you, Rusty, and good morning, everyone. From a financial perspective, the company has never been stronger or [indiscernible]. The combination of cash on hand and access to future funds through our revenue financing agreement provides a solid foundation from which we can build our presence in the PAH community. We have recently initiated a hiring effort to support our commercial and medical affairs teams. At the same time, our operations team continues to ramp production of commercial inventory and will be prepared when we get the green light to launch YUTREPIA. Turning to our first quarter 2023 financial results, which can be found in the press release issued today, you will see that revenue was $4.5 million for the three months ended March 31, 2023, compared to $3.5 million for the same quarter in 2022.
Revenue related primarily to the sale of treprostinil injection under the profit split agreement with Sandoz, and increase of $1 million was primarily due to increased quantities and favorable gross to net rebate adjustments. Cost of revenue was $0.7 million for the quarter, which was the same compared to the first quarter of 2022. Research and development expenses were $5.3 million for the quarter compared to $4.7 million for the first quarter of 2022. The increase of $0.6 million or 12% was primarily due to $0.5 million increase in consulting and personnel expenses in preparation for the potential commercialization of YUTREPIA. General and administrative expenses were $7.8 million in the first quarter of 2023 compared with $12.5 million for the comparable quarter in 2022, a decrease of $4.7 million or 38% was primarily due to a $4 million decrease in legal fees related to ongoing YUTREPIA-related litigation and a $1.8 million decrease in stock-based compensation expense driven by an option modification charge recorded in 2022.
These decreases were offset by a $1.1 million increase in commercial, marketing and personnel expenses in preparation for the potential commercialization of YUTREPIA. Other expenses in the quarter totaled $2.5 million, an increase of $1 million over the same quarter last year and included a $2.3 million loss on extinguishment of debt related to repayment of our loan with SVB in January of 2023. All total, we incurred a net loss in the first quarter of 2023 of $11.7 million or $0.18 per basic and diluted share compared to a net loss of $15.9 million or $0.30 per basic and diluted share for the first quarter of 2022. On the balance sheet, we ended the first quarter with cash and cash equivalents totaling $94.4 million and feel well prepared to execute on our objectives for the year ahead.
I’d now like to turn the call back over to Roger.
Roger Jeffs: Thank you, Rusty. Thank you, Mike. Finally, I want to briefly address a comment that was made by United Therapeutics in its earnings call yesterday in which they compared admitted dose calculations between YUTREPIA and Tyvaso DPI. This is a red hearing. Patients and physicians don’t care about admitted dose calculations. They only care about the actual dose received. As confirmed in our registration studies and validated by the FDA and their granting of tentative approval, YUTREPIA reliably and precisely delivers doses to patients that are comparable to all of the treprostinil doses in the Tyvaso DPI level as well as doses above and beyond those that are in the Tyvaso DPI label. Patients also care about the comfort and usability of the treatment, and we believe that our low resistance device, its ease of use and robustness will be strongly favored by patients and their providers.
With that, I would now like to turn the call over for questions. Operator, first question, please.
Q&A Session
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Operator: Thank you. [Operator Instructions] The first question comes from Greg Harrison of Bank of America.
Operator: Our next question will be coming from Serge Belanger of Needham.
Operator: The next question will be coming from Julian Harrison of BTIG.
Operator: And our next question will be coming from Kambiz Yazdi of Jefferies.
Operator: And our next question will be coming from Matt Kaplan of Ladenburg.
Operator: Thank you. At this time, I’m not showing any further questions in the queue. And I would like to turn the call over to Roger for closing remarks.
Roger Jeffs: Well, thank you, everyone, for joining us this morning. We look forward to continuing to discuss YUTREPIA and its broad potential going forward and hopefully talk about advancements in the legal case. Thank you, and have a good day.
Operator: Thank you everyone for joining today’s conference call. This concludes today’s conference. You may all disconnect. Everyone, have a great day.
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