Good morning, and welcome, everyone, the Liquidia Corporation First Quarter 2022 Financial Results and Corporate Update Conference Call. My name is Howard, and I will be your conference operator today. [Operator Instructions] 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. .

Thank you, Howard. It is my pleasure to welcome everyone to today's conference call. Before we begin, I would 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 Securities and Exchange Commission at www.sec.gov, or on Liquidia's website at liquidia.com. .

Joining the call today are Chief Executive Officer, Roger Jeffs; Chief Financial Officer, Mike Kaseta; General Counsel, Rusty Schundler; and other members of Liquidia's management. I would now like to turn the call over to Roger for our prepared remarks, after which we will open up the call for your questions. .

Our products are needed; our team is dedicated and focused; and our confidence is high. We are focused on things in our control, first and foremost of which is commercializing our products and building a path towards profitability. We remain encouraged by increasing payer support for treprostinil injection along with concurrent increasing demand.

Large national and regional payers have been reviewing and now enacting generic mandates for parenteral treprostinil..

We are aware that additional payers are expected to implement mandates in the second half of 2022 and into 2023, reflecting acknowledgment that there is no perceived difference in quality, efficacy, safety or patient support services with our treprostinil injection versus the branded Remodulin.

These payers see great potential benefit to reduce cost on a drug that was first introduced nearly 20 years ago. .

At the end of the first quarter, we argued the merits of our case in district court with respect to Hatch-Waxman litigation that was initiated nearly 2 years ago by United Therapeutics.

We've been eager to reach this point in the proceedings if only so that our full positions and evidence both as to non-infringement and invalidity of the asserted patents could become publicly known and accessible. We will continue to advance our position to the fullest extent in post trial proceedings and related patent office actions. .

Next up is the inter partes review, or IPR, against the '793 patent with oral arguments to be presented tomorrow to the Patent Trials Appeal Board (sic) [ Patent Trial and Appeal Board ], or PTAB. Consistent with past earning calls, we do not intend to summarize our arguments against the patents being litigated.

To those who are interested, you can find much more information in the public domain through the court's PACER system now that the trial has concluded or through the PTAB's docket system. .

What we will say is that Liquidia remains confident. The path to launching YUTREPIA is on the visible horizon. We will update investors when decisions are rendered and continue to ask for your patience as it will likely be September or October before we have definitive information. Regardless, we are not waiting to plan for success. .

During the first 4 months of this year, we fortified the balance sheet and enabled an operating plan for long-term value. Under Mike Kaseta's leadership, we have created a financing plan that allows us to optimize the path towards potential profitability.

The combination of restructured debt, targeted equity and financing and increasing sales of treprostinil injection provides us the flexibility required to navigate some uncertainty without reliance on any one form of capital.

We will continue to tightly manage expenses in a disciplined manner while also playing to win, which more than $100 million in cash allows. .

More specifically, we will continue preparations to rapidly launch YUTREPIA pending FDA approval and build commercial inventories accordingly. We will build on the 280-plus patient years of exposure with YUTREPIA by initiating new clinical trials in WHO Group 3 patients, among others.

We will advance development of our next-generation YUTREPIA pipeline, looking to improve on the product profile and dosing regimen. And we will monitor the external landscape for programs that might leverage our expertise and presence in the cardiopulmonary community. .

I'm personally excited to build on the foundation created by the team who welcomed me in January, and I'm humbled by the drive and determination of the company as a whole to get new treatment options to patients who eagerly need and await them.

While our eyes are on the future, it is also important to recognize the great quarter we have had so far this year. With that, Mike, would you please highlight a few points from our financial statements. .

Thank you, Roger, and good morning, everyone. Our first quarter 2022 financial results can be found in the press release issued earlier today and on our Form 10-Q to be filed with the SEC after market closes today. .

In those documents, you will see that revenue was $3.5 million for the 3 months ended March 31, 2022 compared to $3.1 million for the same quarter and the year prior. Revenue related primarily to the promotion agreement with Sandoz.

During the first quarter of 2021, the profit split percentage we received under the promotion agreement was 80%, whereas during the first quarter of 2022, the profit split percentage was 50%. This decrease in profit split percentage was offset by a significant increase in the number of units sold for the quarter. .

Cost of revenue was $0.7 million for the quarter, which was the same compared to the first quarter of 2021. Research and development expenses were $4.7 million, a $1.4 million decrease from the same quarter last year due to the timing of manufacturing related to the YUTREPIA program.

General and administrative expenses were $12.5 million compared with $5.3 million, an increase primarily due to stock-based compensation and legal fees related to our ongoing litigation. .

Other expenses in the quarter totaled $1.5 million, an increase of $1.3 million over the same quarter last year due to extinguishment of debt and increase in interest expenses on the restated loan with Silicon Valley Bank.

All totaled, we incurred a net loss in the first quarter of 2022 of $15.9 million or $0.30 per basic and diluted share, compared to a net loss of $9.2 million or $0.21 per basic and diluted share for the first quarter of 2021. .

Turning to our balance sheet. We ended the first quarter in a strong position, which we built upon in April. As of March 31, cash totaled $57.8 million. This balance included the $9.5 million net increase to our existing credit facility with SVB during the first quarter, as previously disclosed. .

In April, we closed on approximately $53.7 million of net proceeds from the sale of common stock in an underwritten public offering. We are very encouraged by the demand for new Liquidia shares despite the recent downturn in the biotech index, the impact of macroeconomic events and the uncertainty of YUTREPIA litigation. .

The equity raise included new investors familiar with the PAH space as well as current investors, of which 19% of the raise was funded by affiliates of 2 of our Board members. We believe that the company is financially prepared to launch YUTREPIA upon final approval by the FDA.

Should that occur later this year, we see a path to potential profitability as early as 2023. .

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

Thank you, Mike. As you know, we are steadily building towards a transformative event with the potential launch of YUTREPIA. We are grateful that the FDA issued a tentative approval last November, and thankful for the patient community who continues to wait for what we believe will be the first choice in inhaled prostacyclin when finally available. .

I would like now like to open it up for questions. Howard, first question, please. .

[Operator Instructions] Our first question or comment comes from the line of Serge Belanger from Needham & Company. .

A couple of questions for me, I guess, for Roger. One of the common questions we get from investors is whether you would launch at risk once the 30-month stay expires. And I know in the past, you have said that it would depend on the facts at that specific time. .

But just curious, coming out of the Hatch-Waxman litigation in late March, what are some of -- if there's any change on that front, and what are some potential scenarios you may face in October? And then secondly, maybe just walk us through some of the R&D projects you're thinking about and when they may get off the ground. .

So with regard to launching at risk, I think the issue here, that's a highly nuanced question. And the reason is it really depends on what claims survive, if any, and if a claim that survives is then infringed. So really, it's difficult to comment on that because there's a lot of different scenarios that could play out. .

So the way we've said and we've tried to say this in our opening is we really won't comment or [ probabilitize ] on what may happen. I think we'll just wait to get more informed. And then we'll have a definitive decision process that will -- we think will matriculate by the fall.

So technically, even if we win everything and we could launch -- we could then get final FDA approval, it would be a "launch at risk" because things would be appealed by the opposing party. .

So obviously, though, in that circumstance, we would launch. And then again, if things are a little bit more nuanced in terms of claim survival and infringement patterns, et cetera, then we'd have to make some more, sort of, thoughtful decision about what we would then do.

So I can't really comment on a specific outcome other than to say, 23, almost 24 months of the 30-month stay have now expired. There's only 6 months left. So we're near goal. And I think like you, we'll await the final conclusion, which we remain confident in the merits of our case and are hopeful that we will launch at the end of this year. .

So then in terms of R&D projects, I think we're trying to leverage the expertise that we're building. We're building a very experienced and capable team, the history of the employees in terms of developing PRINT as a new manufacturing. Moiety is superb, so we're trying to expand on that.

The one obvious thing then is to try to develop a longer-acting form of YUTREPIA, so that instead of a 4 times a day inhalation therapy, it could be 1 or 2x a day inhalation therapy. .

So where that stands now, we're in the process of doing the requisite preclinical studies. Some of those are directed towards understanding what a single dose administration provides in a mirroring model in terms of kinetics. That work is underway. I think we'll have data in the near term. .

So potentially, we'll be able to report on some data at the next earnings call, but we don't have data yet. But I think -- I would say that's kind of teed up as our #1 goal is to start developing a life cycle management program that would leverage the capabilities we're building for YUTREPIA. .

Our next question or comment comes from the line of Julian Harrison from BTIG. .

Congrats on the progress. I'm wondering in the scenario where there are more than one DPI treprostinil products on the market later this year.

What do you think are the most important considerations physicians and patients should make in determining what the best option for them is?.

Yes, I think that's a great question. So I think -- let me speak to our product rather than, sort of, speak against another product, not -- speak about the attributes that we will bring to the marketplace. .

So obviously, we bring portability. And we'll replace the burden of nebulizers with a palm-sized disposable simple device, which not only should make the therapy portable, but potentially should allow for earlier introduction of inhaled treprostinil to patients in need. .

I think the thing that we've seen is that we have a highly tolerated -- a well-tolerated therapy. So the tolerability is good. It avoids systemic toxicities associated with both oral and parenteral prostacyclins, obviously. But what's unique about YUTREPIA, vis-a-vis Tyvaso, is that we can escalate the dose significantly beyond what Tyvaso has allowed.

So we'll change the therapeutic index of inhaled treprostinil through our dry powder formulation with PRINT. .

Importantly, in addition to tolerability safety, our label has no black box warning. There's no sort of risk from an excipient. So I think that's an important lever that could distinguish the product. .

As I said, it's titratable readily. We've gone to 3x the target dose of Tyvaso in our long-term open label studies, which actually we'll have an abstract at ATS next week. And we can do this in just a few easily administered [ breadth ]. So I think you're seeing a real change in the inhaled treprostinil paradigm in terms of treatment ease and use. .

The -- again, as we reported ATS, we're seeing very good durability. We can keep patients longer before they move along to other therapies, but most likely the next therapy for them would be parenteral. So I think that's an important aspect because you're going to have a different retention curve, which obviously report a different revenue curve. .

In terms of storage, we can store our product at room temperature for its product lifetime, so that's important. And now one thing that's critically important is in regard to the device, 2 things. One is we use a low resistant -- low-resistance device, so it's very easy to inhale and deliver the dose.

And where this becomes even more important perhaps is down the road in WHO Group 3 patients where they're compromised from obstructive or restrictive lung disease in addition to the pulmonary hypertension. .

And then finally, with regards to the device, really, there's no requirement for a -- what I'll call position of dependents. You can hold the device in any number of ways and it will deliver the drug, you can drop the device. And because the drug product is encapsulated, there's no spillage. So it's very simple, easy to use.

It's used in -- already in CF and COPD patients commercially. .

There's other companies using this device, like [indiscernible] and Gossamer in their own clinical trials. So it's what I'd call a tried and true. What this will all mean, in total, is that we expect a very rapid transition from patients, both on Tyvaso therapy and new to inhaled therapy to go to DPI. And preferentially, we think, to go to YUTREPIA. .

And there's a very good comparative to that. If you look back in 2009 when Tyvaso launched, it launched with second to market, Ventavis was already in the marketplace. And that market we rapidly transitioned to Tyvaso over time, particularly in new patient starts.

So -- and that was just a convenience play without this sort of pharmacologic therapeutic index improvement that we're seeing with YUTREPIA. .

So again, I've seen other estimates that are lower than what we would predict. I think we would estimate that 80% to 90% of the Tyvaso market would transition to YUTREPIA.

And then with the essence of earlier use and longer retention, we think the address -- or the capture patient base will grow from 3,000 as it is approximately the day to probably 6,000 and reach a new steady state.

And then -- so that's kind of how we see the market playing out and the opportunity that presents itself for YUTREPIA, which obviously is quite massive. .

[Operator Instructions] Our next question or comment comes from the line of Andreas Argyrides from Wedbush. .

Can you comment on preparations for the launch and how they've been progressing? And then how you expect operating expenses to change over the next 12 months?.

Thanks for the question, Andreas. Mike, if you would answer that question, please. .

Thanks for the question, Andreas. So for -- from -- an operating expenses and preparation for launch, so we are, as Roger said, we will await the outcome of the proceedings, litigation proceedings. We are planning to launch in Q4. As we said, we're very confident.

We are going through the process of pre-commercializing from a combination of preparing launch inventories to building out the commercial and medical affairs team. So we really are playing to -- we really are playing to win and feel confident that we will be able to -- assuming we're able to launch in Q4 that we will be prepared. .

Relating to what our expenses will look like over the next 12 months, what I can say is we're not going to give firm guidance on that. We do feel confident that, as we said in our prepared remarks, that if we're able to launch in Q4, that we will be on the path to profitability as early as 2023. .

So we would expect expenses to increase as we get closer to launch, as everyone would expect. But we feel confident, especially with our recent capital raise, that we will have a successful launch and potentially get to profitability in 2023. .

I'm showing no additional questions in the queue at this time. I'd like to turn the conference back over to management for any closing remarks. .

Well, thank you, everyone. We greatly appreciate you joining us on the call today. We appreciate your continued interest in Liquidia, and we will update you on progress throughout the year. Have a great day. Bye-bye. .

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day..