Good morning and welcome, everyone, to the Liquidia Corporation First Quarter 2021 Financial Results and Corporate Update Conference Call. My name is Anthony, 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.

Instructions will be provided at that time for you to queue up for questions. [Operator Instructions] I will now hand the call over to Jason Adair, Vice President, Corporate Development and Strategy. Please go ahead. .

Thank you, Anthony. It's my pleasure to welcome everyone to today's conference call to discuss our first quarter financial results for 2021 and to provide a business update. Before we begin, I'd like to remind everyone that today's call will contain forward-looking statements based on current expectations.

Such statements may involve risks and uncertainties that may cause actual results to differ materially from these stated expectations. For further information on the company's risk factors, please see Liquidia's filings with the SEC at www.sec.gov or on Liquidia's website at www.liquidia.com.

I would now like to turn the call over to Chief Executive Officer, Damian deGoa for our prepared remarks, after which he will open up the call for your questions..

Thank you, Jason, and good morning, everyone. I am joined today by Mike Kaseta our Chief Financial Officer and several other members of our management and they’ll be helpful in addressing your questions later in the call.

In the short time since I provided an update in March, Liquidia has continued to deliver on its plans and expectations at a rapid pace.

In April and May alone, we have delivered on multiple value-creating events including the expansion of the commercial opportunity for Treprostinil Injection, our generic formulation of Remodulin by enabling subcutaneous route of administration. The resubmission of the NDA for LIQ861 putting us back on track for a potential FDA approval.

And strengthening our financial position through an equity capital raise and refinance of our credit facility with Silicon Valley Bank. These are the results of the hard works from a committed dedicated team that’s helping to establish the reputation for delivering the results.

First, the FDA clearance of the RG 3ml Medication Cartridge has removed a barrier to maximizing the utility and value of Treprostinil Injection. This achievement by our partners Chengdu Shifeng Medical Technologies demonstrates our commitment to providing valuable products to PAH patients and the communities we supported for them.

With both the IV and subcu routes enabled, we expect that the market opportunities for our product will more than double not only as a result of newly addressable subcu Remodulin patients, but also due to payers’ motivation to ensure the effective use of resources across this rare and expensive disease.

No longer will patients, physicians and payers be limited to a single branded choice for the subcu administration of Treprostinil due to the restrictions imposed by other companies. With this obstacle behind us, we continue to believe that there is significant addressable market.

For context, United Therapeutics reported that Remodulin sales in the U.S. of greater than $450 million in 2020. We have been encouraged by the level of interest and look forward providing more updates in the future. Our R&D and operations team have worked steadily towards resubmitting the NDA for LIQ861, our dry powder formulation of Treprostinil.

Last Friday, we provided the FDA’s full response to the items mentioned in the CRL issued last November. We believe the data package submitted will speak directly to the items and questions raised by the FDA related to CMC and device biocompatibility.

Given that no new data from the clinical trials or in vivo studies was required, we anticipate that the FDA will classify the resubmitted NDA as the Class 2 resubmission is accepted. This would establish a six months reduced cycle from our submission date and potentially enable a tentative approval in the fourth quarter this year.

We look forward to working with the agency over the next few months and are prepared to host them for a prior approval inspection. 861 is in a good market position with the potential for growth in new indications.

861 was designed from the start and improved the therapeutic profile of Treprostinil by enhancing deep lung deliver and achieving higher dose levels than current inhale therapies. The convenience alone of DPI versus nebulizers should displace a significant portion of the current nebulizer products in the market.

In 2020, United Therapeutics reported Tyvaso sales of more than $480 million with a single indication in WHO Group 1 patients.

In addition, we believe the higher dosing of our DPI versus current nebulizer therapy has demonstrated in our clinical trials should prolong the duration of inhale treatment before patients transition to more invasive parenteral administration.

As the market for inhaled Treprostinil delivery expands in new indications, we believe that 861 will be well positioned.

The recent approval of nebulized Tyvaso to treat patients diagnosed with pulmonary hypertension associated with interstitial disease is meaningful and that it demonstrates inhaled Treprostinil’s ability to address another pulmonary hypertension patient population with an unmet need.

It would be our intent to follow Tyvaso into that expanded indication and we plan to discuss with the agency whether and when we could include PHILD in the 861 label. As you know, we are actively involved in Hatch-Waxman Litigation brought by United Therapeutics, as well as pursuing inter partes reviews or IPR of certain related patents at the U.S.

Patent Trial and Appeal Board. We continue to maintain that the three patents asserted against us are not infringed and are invalid. While we will not comment in detail about specific actions along the way, we remain confident in our positions.

We have taken several actions in the last four months to improve our balance sheet by reducing annual net spending, increasing our cash position and in the process adding a new member to our Board of Directors.

As described in March, the management has already implemented measures to reduce net annual spending in 2021 by more than 40% compared to 2020.

The company refinanced its former credit facility, eliminating more than $10 million in required principal repayments over the next two years while providing access to an additional $10 million upon the achievement of certain regulatory milestones related to 861.

The refinance debt complements our most recent financing of $21.7 million from the sale of common stock to new and existing investors. Not only do we benefit from the improved cash position, but we are very excited to welcome David Johnson, a partner and co-founder of Caligan Partners to Liquidia Board of Directors.

Caligan led the private placement of shares and Mr. Johnson has closely followed Liquidia over the last year. We look forward to a support of these discussions.

With this financial discipline and strategic focus in mind, we have recently decided to terminate the development of LIQ865, a sustained-release formulation of bupivacaine targeting the treatment of local postoperative pain. We attempted the partnered program but we’re unable.

We’ve chosen to focus internal resources on maximizing the value of our PAH asset and could build the pipeline synergistic with our expertise in cardio pulmonary and rare diseases. At this time, I will turn the call over to Mike to review of our first quarter financial summaries. .

Thank you, Damian, and good morning, everyone. Our first quarter 2021 financial results can be found in the press release issued earlier today and our Form 10-Q to be filed with the SEC later today, both of which will be available on our website.

To briefly summarize, we recognized revenue of $3.1 million for the first quarter of 2021 as compared to no revenue in the first quarter last year.

The revenue recognized in 2021 related to our promotion agreement with Sandoz in support of Treprostinil Injection as a result of the acquisition in November 2020 of RareGen, our wholly-owned operating subsidiary now referred to as Liquidia PAH.

Cost of revenue during the quarter was $0.7 million, compared to no cost of revenue for the first quarter of last year prior. Cost of revenue recognized during 2021 related to the promotion agreement as previously noted.

Research and development expenses decreased to $6.1 million for the first quarter of 2021, compared with $10.8 million for the first quarter of 2020, the decrease of $4.7 million or 44.1% primarily related to lower expenses from our Liquidia 861 clinical program, which was substantially completed prior to filing the NDA last year, lower expenses from our 865 clinical program, and lower expenses related to employees and consultants.

General and administrative expenses increased to $5.3 million, compared to $3.8 million for the first quarter last year.

The increase of $1.5 million, or 39.6% was primarily due to $2.1 million higher legal and professional fees associated with our corporate activities, as well as our ongoing 861-related litigation, offset by lower consulting and personnel expenses as a result of lower headcount year-over-year.

The net loss for the quarter ended March 31, 2021 was $9.2 million, or $0.21 per basic and diluted share, compared to a net loss of $14.8 million, or $0.52 per basic and diluted share, for the quarter ended March 31, 2020. Cash totaled $53.6 million and $65.3 million as of March 31, 2021 and December 30, 2020, respectively.

These cash figures do not reflect the $21.7 million includes proceeds raised in April from the sale of common shares in a private placement.

As you look further into 2021, we expect our net cash burn in future quarters to continue to decrease, a reflection on our reduction in spending, we believe that cash burn will be further reduced by the anticipated positive contribution from the profit split arrangement with Sandoz on the sale of Treprostinil Injection.

While we expect Treprostinil Injection unit sales to grow significantly, it is worth noting that our share of profits with Sandoz has the potential to decrease from 80% to 50%, once we exceed a contractual cumulative revenue threshold, which we estimate may be in the fourth quarter of this year.

We will not be providing any specific revenue guidance; however, we are confident that the newly enabled subcutaneous administration of Treprostinil Injection will help contribute more than our previous estimate of mid to high-single-digit millions. We will provide updates on future calls should this change in any material way.

With a strong balance sheet, and access to the credit facility at SVB, we feel well positioned to deliver on potential value creating events related to regulatory approval and litigation activity in 2021 and 2022. I would now like to turn the call back over to Damian. .

they are, maximize the revenue from Treprostinil Injection with the launch of the subcutaneous route of administration; advance LIQ861succesfully through the FDA and the ongoing litigation; reinforce the financial discipline and diverse our management team; and remain opportunistic in our pipeline to drive near-term and long-term value to shareholders.

Thank you for listening and I would be pleased to take any of your questions now. .

[Operator Instructions] And your first question comes from the line of [Indiscernible] from Jefferies. Your line is now open. .

Good morning, Damian. This is [Indiscernible] on for Chris. I guess, three questions from me.

Could you tell us a little bit more about your expectations for the subcu opportunity? And how it impact your revenues? If you have any expectation – I think the question, if you have any expectations out of the claims construction is none? And then, the third question is, would you develop – or would you potentially develop PH ILD label expansion on a parallel timeline with the litigation or pursue that opportunity after some sort of litigation resolution? Thank you very much.

.

Hey, [Indiscernible] let me try to address those one-by-one, if I can. First of in terms of the subcu opportunity, I think as Mike said, we are confident. We do think it’s going to expand. Obviously, the universe of the addressable market is at least double if not more.

I think that, in the past, we haven’t been able to get as much payer support as you would expect for a very high price rare orphan disease drug where there is a generic option that’s available at a significant discount.

And I think now that we’ve been able to address both routes of administration, I think that that’s going to provide some additional payer support. But as Mike also noted, we do have a little bit of a headwind in the context of our process will decrease theoretically depending on when we reach the threshold from 80% to 50%, which is significant.

So, even though, we are going to increase volume and do all that from a P&L perspective revenue, we’ll obviously have the adjustment from the process what that will have to – will be overcoming. In terms of claims construction, I don’t think that we have anything in particular to comment on at this point.

I think it’s – we believe that we are prepared for it and expect to get a resolution there. I would just note that, it has been delayed due to court scheduling. I think it’s now June 4th. So, I think you mentioned it’s not than it was originally scheduled for this month. But it’s now postponed to next month.

And then in terms of PH ILD, we’ve already reached out to the FDA, our reviewer to ask and start having discussions with them about what does that mean now that Tyvaso has the additional expanded label. And we’ve heard at least from the United Therapeutics releases advert Tyvaso DPI that’s gone in with proposed indications.

And so, I think they have every intention of trying to get it approved at this first half for both indications. And so, I guess, I would say that, we are focused on whatever the FDA recommends, but we’ve already initiated that dialogue. .

Alright. Thank you very much, Damian. .

Thanks..

And your next question comes from the line of Shveta Dighe from Wedbush. Your line is now open. .

Hi, this is Shveta on for Liana Moussatos. Thank you for taking my question.

Can you go over the additional information that was submitted to the FDA for 861 and the early submission?.

Yes. So, this was in relation to CRL as you kind of commented in the past, the majority of that was in the CMC area and the device biocompatibility sections. And so, in terms of the device biocompatibility, I mean, this is the typical device information or studies that you would need to do.

We’ve chosen to redo all those and we did that and provided a complete robust package related to that. And then, in relation to the CMC, as you do know, this is a new technology from a manufacturing perspective.

And so, there is certainly some questions around that that we were addressing and I think as you know, we didn’t have the benefit of a PAI during the original submission review and which maybe would have offered an opportunity for us to address some of those during kind of an interactive discussion.

But nonetheless, it was centered around CMC and device biocompatibility. .

Got it. Thank you. .

[Operator Instructions] And there are no further questions at this time. Please continue..

Okay.

Well, we’d like to thank everyone for joining and please stay tuned in the future as we continue to provide hopefully positive updates of our execution and delivering 861 and Treprostinil Injection in the market, and then, looking for other opportunities that will leverage our print technology and/or add opportunities or assets into the pulmonary hypertension area.

So, thanks for joining..

And this concludes today's conference call. You may now disconnect. Presenters, please stay on the line for the next conference. `.