Good morning, and welcome, everyone to the Liquidia Corporation First Quarter 2024 Financial Results and Corporate Update Conference Call. My name is Michelle, and I'll be your conference operator today. [Operator Instructions] Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] I would like to remind everyone that this call is being recorded. I will now hand the call over to Jason Adair, Chief Business Officer.

Thank you, Michelle. It's my pleasure to welcome everyone to the Liquidia Corporation's First Quarter 2024 Financial Results and Corporate Update Call. Joining the call today are Chief Executive Officer, Dr. Roger Jeffs; Chief Operating Officer and CFO, Michael Kaseta; Chief Medical Officer; Dr. 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'll open the call for your questions.

Thank you, Jason. Good morning, everyone, and thank you for joining us today. In the 9 weeks since our last earnings call, we have continued to advance what we believe will be the industry-leading portfolio of inhaled treprostinil products. YUTREPIA, our dry powder formulation of treprostinil currently awaits final FDA approval to treat both pulmonary arterial hypertension, or PAH, and pulmonary hypertension associated with interstitial lung disease, or PH-ILD. We have continued to optimize our commercial preparations in anticipation of potential FDA final action and launch. In the clinic, we are seeing encouraging initial data from our ASCENT trial of YUTREPIA in PH-ILD. In addition, our sustained release liposomal formulation of treprostinil, L606, also continues to generate encouraging data in our open-label safety study in both PAH and PH-ILD patients. Rajeev and Rusty will provide updates in greater detail on the clinical, regulatory and legal fronts in a moment. But first, I think it is important to reflect on what is happening in the market and why we are so committed to these programs and the patients we seek to treat. We believe the market for inhaled treprostinil in PAH and PH-ILD can eclipse $3 billion at peak sales. And this is validated by TYVASO's total current annual run rate of approximately $1.5 billion, which continues to grow at an appreciable rate. This growth is driven by the expanded PH-ILD market, which is only marginally penetrated at this time, along with the availability of the more affordable dry powder inhaler option. However, what we also see in our competitor sales data is continued unmet need. In our study or YUTREPIA, 100% of patients who transitioned to YUTREPIA from TYVASO preferred YUTREPIA after 4 months of use. Yet, approximately 40% of UTHR sales continue to come from nebulized TYVASO with its…

Thanks, Roger. I'd like to address 3 of the most common questions I have received related to our programs. First, where does the FDA stand in its review of YUTREPIA? Second, what observations are emerging from the ASCENT trial, our open-label study of YUTREPIA in PH-ILD patients to better understand dosing and titration in that patient population. And third, when can we expect to see more data on the L606 program? I will take each in turn. Regarding the first question, while we cannot speak to a specific action date, the FDA's review division has maintained an active dialogue with Liquidia on the development of YUTREPIA since it entered the clinic as the first dry powder formulation of treprostinil. During the course of its review of the NDA for PAH, the FDA has confirmed multiple times over the last 3 years that submitting an amendment to the NDA would be an appropriate way to add PH-ILD indication. Also, throughout this process, the FDA consistently affirmed that no additional clinical data would be required to add the PH-ILD indication. We are disappointed that the FDA did not issue an action letter promptly following the expiration of the March 31 clinical investigation exclusivity granted to TYVASO to treat PH-ILD. Nevertheless, we remain hopeful that the FDA will issue final action very soon, given the lack of any legal barriers to approval. Regarding the second question, we initiated the open-label ASCENT trial in late December to help physicians understand the safety, tolerability and titratability of YUTREPIA patients with PH-ILD. We have enrolled 7 patients to date and have several additional sites initiating the study over the next 30 days. Of the 7 patients, the median dose was 106 micrograms during week 4 and 132.5 micrograms during week 8, which are comparable to nebulized…

Thank you, Rajeev. The first quarter of 2024 saw significant progress on the legal front. This is the first earnings call in which we can say that there are no legal barriers preventing the FDA from issuing a final action on the amended NDA for YUTREPIA. The combination of District Court, PTAB and Federal Circuit rulings have led to the removal of the previous injunction issued in 2022. In addition, United Therapeutics regulatory exclusivity tied to PH-ILD expired on March 31. Thus, since April 1, the FDA has had the legal authority to take final action on our NDA for YUTREPIA. While we cannot comment on when the FDA will take that final action, we can clarify the status of 2 ongoing lawsuits brought by United Therapeutics against Liquidia and the FDA, each with the same intent to lap the launch of YUTREPIA in PH-ILD. Neither of these lawsuits currently impact the FDA's ability to approve YUTREPIA for both indications, and even in the worst case, neither lawsuit will ultimately impact our ability to treat PAH patients. In the first of these lawsuits, United Therapeutics has filed a lawsuit alleging infringement of the 327 patent based on our request for approval of the PH-ILD indication. In this lawsuit, United Therapeutics has filed a motion for preliminary injunction. Judge Andrews in the United States District Court for the District of Delaware heard oral arguments from both parties on April 23 regarding the preliminary injunction and may issue a written ruling at any time. We remain confident in our arguments as briefed and argued and continue to believe there are substantial questions regarding the validity of the 327 patent, which generally covers treatment of PH-ILD patients with TYVASO in accordance with the TYVASO label, something that physicians have been doing for more…

Thank you, Rusty, and good morning, everyone. We ended the first quarter in the strongest financial position in the company's history. Not only do we have the cash on the balance sheet to achieve our objectives, but we are also poised to launch into one of the fastest-growing rare disease markets with what we believe will be a differentiated product for PAH and PH-ILD patients. Our team is fully in place. Our commercial inventories are ready and expanding. Our relationships with all key stakeholders are sound and active, and our sales team is fully engaged and ready to launch. We continue to believe that the approval and launch of YUTREPIA this quarter in both indications will enable a rapid transformation in the company's P&L. Turning to our financial results, which can be found in the press release, you will see that revenue was $3 million for the first quarter of 2024 compared with $4.5 million in the same quarter for 2023. Revenue is tied to our promotion agreement with Sandoz to commercialize treprostinil injection. The decrease was primarily due to favorable gross-to-net rebate adjustments recorded in the prior year and the impact of lower sales quantities in the current year as compared to the same period in the prior year. Cost of revenue increased to $1.5 million for the first quarter of 2024 compared to $0.7 million in the same quarter for 2023. Cost of revenue relates to our promotion agreement with the increase being primarily due to our sales force expansion during the fourth quarter of 2023. Research and development expenses were $10.1 million in the first quarter of 2024 compared with $5.3 million in first quarter '23. The increase of $4.8 million, or 91%, was primarily due to a $2 million increase in personnel expenses, which include stock-based…

Thank you, Mike. Operator, with that, I'd like to now open the call for questions. First question, please.

[Operator Instructions] Our first question comes from Jason Gerberry with Bank of America.

I guess just on last week's filing to dismiss by both UTHR and the FDA. How quickly do you think -- do you have a sense of how quickly Judge Bates may move here? This seems like maybe the one new variable here, if FDA is being asked to give 3days' notice. They don't want to give 3 days' notice. They want this dismissed. I'm just kind of curious how to put this in proper context. And then ultimately, if you're able to secure approval, broad approval, both PAH and PH-ILD, just wondering if there are any specific label variables you might call out that could really impact the commercial opportunity beyond just getting those 2 indications, how we might think about the label looking different than TYVASO?

Jason, thanks for the question. Maybe I'll take the second question first, if I can, and then I'll ask Rusty to speak about his perspective on the timing of the motion to the dismiss case. So great question, Jason. Again, what we talk about with YUTREPIA in terms of being differentiated are around its pillars, which are tolerability, titratability, durability and usability. And all of that is sort of dictated by the print formulation. So again, with the ability to make precise and uniform particles in the lower end of the respirable range, it allows for a highly tolerable therapy, which is readily titratable, and then will be durable and usable through the low resistance device. So friendly for both PAH and PH-ILD patients to use. The differentiation that we will see in the label in that regard will be specifically related to the exposures that we've seen in our clinical work versus what's in their label. So we will have up to 212 micrograms 4 times a day described in our label. So again, we're talking about 24, 25 breath equivalents, so much higher than what's in the TYVASO DPI. And as we know from historical standards across all routes across the cycle of delivery, dose matters. So the higher the dose and the more flexibility in driving those, the more capable of that therapy will be. So that's why we think that YUTREPIA has a -- will have a clear chance to become best-in-class and first in choice prostacyclin, not only to compete with inhaled treprostinil in the TYVASO formats, but also when physicians are seeking to think about starting therapy, we think they should think about using YUTREPIA as the first choice, not -- and do that in sort of in place of oral therapies like Orenitram and UPTRAVI. And then also in terms of subcu where those patients are going to have a pretty burdensome time getting to a therapeutic dose of drug because of the off-target effects for both the oral and the parenteral formulation. So again, tremendous market opportunity looking forward to launch. But I think we'll have a very clear and distinguishable differentiation at the point of launch. And with that, Rusty, maybe if you could speak about the logistics around the legal case.

Sure. So Jason, thank you for the question. So the motion to dismiss and briefs that went in last week is the first round of briefs on the motion to dismiss. Briefing will continue through June 25. And then from there, we don't have visibility to have -- what the judge will do and how long it would take him to rule. It's possible that at that point, he'll schedule a hearing or it's possible he'll just rule in the briefs. But obviously, federal judges -- it's hard to predict exactly how long they would take to issue a ruling. Thank you for the question.

And just to remind that, that decision is not needed for the FDA to take final action, as Rusty said in his comments. Operator, next question, please.

Our next question comes from Julian Harrison with BTIG. Julian Harrison? Our next question comes from Serge Belanger with Needham.

I guess the first one, Roger, you mentioned targeting the oral treprostinil market. Can you just maybe elaborate on that in terms of the market opportunity? And I think this would be another differentiated aspect of YUTREPIA because I don't think your competitor has positioned their DPI product for that segment. And then secondly, can you just talk about payer coverage. In the past, you've highlighted how you're launch-ready, the sales force has been expanded and are in the field. But maybe if you can talk about how quickly you think you can get YUTREPIA on formulary post-approval?

Great question. So I'll take the first one around how we hope to cannibalize the oral market, and then Mike, if you'll talk about the payer landscape, if you will. So in terms of like oral prostacyclins, currently -- and again, these are just sort of generalized estimates -- Orenitram is doing about $400 million per annum and UPTRAVI's doing about $1.2 billion per annum. Both -- they're different -- they're both prostacyclins. Different in their sort of mechanistic approach. But Orenitram, it's difficult to titrate. It takes weeks, if not months, to get to a therapeutic dose causes a lot of off-target GI effects -- and those GI effects are the predominant reason that patients discontinue that therapy and then progress to other therapies, which in the past typically has been parenteral therapy. UPTRAVI has a pretty tight and narrow dose titration curve, pretty much has a dose ceiling, so patients titrate to their top tolerated dose and then inhaled on that dose and then removed from therapy once their disease progresses beyond the capabilities of the dose that they're on. So -- and also comes with the off-target effects. So we think that we could position YUTREPIA, particularly given its titratability. So again, what YUTREPIA has done through the print-enabled formulation has allowed for a titratable inhaled treprostinil formulation for the first time. So it has a lot more flexibility and can become a much more rigorous and durable choice for physicians and their patients. Now you asked that, why has United not pointed this out? Well, again, it might be that they don't quite have the flexibility that we do in terms of dosing, so it has limitations in that regard. I think the other aspect here is because they have an oral prostacyclin, they don't want…

Yes, Serge, thanks so much for the question. I think what's important to know is the overall link feedback we've received from doctors and patients is they're wanting choice and having YUTREPIA available will provide that choice. But we also understand in order to truly have that choice, access is critically important. So we've been engaging with payers. We received tentative approval in PAH back in November of 2021. We've been engaging with payers since that time to discuss the value proposition of YUTREPIA. And I think we are confident that once we are -- we get full approval from the FDA, that we will be able to work through that and make sure patients have that choice and to have that choice to have access. So we are confident that we will achieve that. But until we get approval, obviously, none of that will be formalized, but we've had really good conversations with payers and feel very confident that patients will be afforded that choice to choose YUTREPIA through an insurance platform where YUTREPIA is on formulary.

Our next question comes from Julian Harrison with BTIG.

Can you hear me?

Yes, we can, Julian.

Sorry about that before. Rusty, you highlighted that there are no lawsuits that directly prevent the FDA for making a potential approval decision at this time. I understand you can't comment on when specifically the FDA is expected to make a decision. But are you able to comment on what they could be waiting on at this point? I understand that, that might be too speculative of a question and completely understand if you can't comment on that. And then can you also remind us on where manufacturing stands? Have there been any additional inspections required by the FDA in the current cycle?

Yes. Rusty can answer the first question, and then Mike, if you'll address the supply issue question.

So Julian, thank you for the question. So first, we don't want to speculate on what the FDA -- where they are in their process, nor do we want to comment publicly on our interactions with the FDA to date. So again, as I said before, there is no legal impediment to them taking final action on our NDA. We are awaiting that final action. But again, we can't really speak to any specific timing.

Yes. And Julian, relating to supply, we've been anticipating a launch, obviously, for a long time now. We've been building commercial inventories through that entire time. So once the FDA grants final approval, we will be ready to hit the ground running immediately in all strengths of our product. Related to the inspection as part of our tentative approval in November of 2021, the FDA did a pre-approval inspection in August of 2021, and that was included in our tenant of approval. So all in pre-approval inspections have been completed. And as I said, we've been building up commercial inventory since then and look forward to hopefully an imminent launch here.

Our next question comes from Kambiz Yazdi with Jefferies.

Thank you for sharing some of the ASCENT data to date. So I guess my question on that open-label study is kind of what titration schemes are you looking to assess? And then as a second question, in terms of that overall projected $3 billion inhaled nebulized treprostinil market -- or sorry, inhaled treprostinil market, what do you see the split between the different indications in that market? And is that also kind of including some cannibalization of the oral treprostinil market?

I'll stick to the market question and then Rajeev, if you can talk about what we're trying to achieve and what we feel is the first company-sponsored DPI test in PH-ILD patients? So I think Kambiz, when you look at the market opportunity here, again, we're just going to say eclipses $3 billion and growing. There's -- I think UTHR has said that of their $1.5 billion on their last earnings call, they intimated that PH-ILD represented nearly $1 billion of that, or was approaching $1 billion in terms of indication opportunity. And that's with marginal penetration. So we think that market, again, if you believe it's 60,000, some people say it 100,000, I think UTHR says 30,000, but that number, I think they're taking north now. But let's just split the difference and call it, 60,000, they're probably at high single digits, low double-digit penetration. So just marginally penetrated. So lots and lots of room to grow there alone. So that's a multibillion-dollar opportunity in PH-ILD for sure, within inhaled prostacyclin moity. With the orals, again, that's cannibalization and that may take a little bit more time to move along. But if YUTREPIA behaves the way we think it does -- it can in the real world, then we think we can really infringe on the oral markets. So we also think that's -- for YUTREPIA specifically, that's a $1 billion opportunity as well. So when you aggregate those together, our share of the inhaled, our share of the oral, we think we can have a multibillion-dollar product or more. So I think, again, we need to prove that out. We need to generate the launch dynamics that we hope to do to support that to be true. But the first thing is to get the approval, and we're working hard to do that. So Rajeev, if you'll talk about some of the things we're trying to achieve in terms of dosing, which will help us achieve this multibillion dollar opportunity.

So first of all, I think one thing we're highlighting here is that this is the first open-label prospective study in PH-ILD using a dry powder inhaler with YUTREPIA in this regard. Remember, we've already conducted the INSPIRE study in 121 patients. So we really understand the tolerability profile and the titratability of YUTREPIA, and so we took those learnings and we brought it into patients with PH-ILD that have no -- that have never been treated in the past. In this regard, as I highlighted, we have 7 patients that have enrolled to date. And one thing that you had asked is, what is the dosing recommendation for this patient population? Well, clearly, I think the primary objective is that, one, can the tolerability profile that we saw in the INSPIRE study in PAH patients be replicated in PH-ILD? And I think the early small sample sizes, the answer is yes, it can. Clearly, what needs to happen is dose matters, right? So the INCREASE study used in TYVASO suggested that patients who get to at least 9 breath equivalents of TYVASO nebulizer portend to have a better clinical effect. But actually, patients who can get actually higher to 11 to 12 breaths, looks like the signal actually gets a bit stronger. So the priority of this study is to titrate the patient at least to 9 to 12 breaths, which is the traditional therapeutic goal of inhaled treprostinil, but more importantly, to exceed that in the right patient profile, right? So some patients may need 9 to 12 breaths. Maybe the majority of these actually need somewhere more than that. One thing I think is really intriguing is that -- I highlighted in the call -- is that the median dose at week 8 is now 132 micrograms of YUTREPIA, which is now equivalent to -- greater or equal to 15 breaths of TYVASO. So I think the early findings from the study are quite encouraging, and we look forward to completing enrollment in this study by the end of the year.

So Kambiz, I think when we finish the study, the important data for investors to look at would be what were the -- what's our ability to titrate, which, as Rajeev said, at least in the early data, we're seeing good evidence that we can do that quite aggressively. And then the other question would be, how durable is it? And so far, those patients are remaining on studies. So remember, as I stated in the preamble, it was only a median of 40 days where people who had started TYVASO DPI were then, in the National Jewish Center data, we're unable to continue that drug, and 50% of those patients dropped off within that 40-day median time frame. So we're trying to make a contradictory statement to that to show that YUTREPIA is much more titratable and much more durable. The reasons that patients predominantly came off in the National Jewish Center experience was for clinical worsening, which I would assume is due to a lack of ability to provide a therapeutic dose. Otherwise, they wouldn't it worsened. And we're trying to basically show that YUTREPIA can perform in a very different way. And obviously, that speaks to its differentiated capabilities and market opportunity. So, so far, so good, but more to come there. Operator?

Our next question comes from Matt Kaplan with Ladenburg Thalmann.

Just in terms of your commercial prep and readiness, how soon after approval will you launch the drug?

Thanks. Mike, would you like to answer that question, please?

Yes. So Matt, thanks for the question. Obviously, once we get full approval, it will take a little bit of time to list our price in Compendia. But from a commercial availability, what I can say is our commercial team, our sales force is literally ready to go immediately thereafter. Our commercial inventory will be ready to go within days after of final approval. So I know a lot of companies take 30 to 45 days to launch after they get full approval. We will be ready to go literally within days or a week after final approval regardless of when that time comes.

And I know we're all focused on waiting for YUTREPIA's approval. But thinking out a little bit into the future, can you tell us a little bit more about 606 and -- L606 and what role and position you think that will play in terms of the inhaled treprostinil market.

Yes, I'll answer that. Thanks for the question, Matt. So I think when you look YUTREPIA in terms of what it solves for, it's taken what was a -- if you look at just TYVASO, nebulized TYVASO was a fixed dose or not readily titratable therapy. So we've really transformed the therapeutic index, and we've made it much more titratable so we can get to a higher effective dose while keeping the AUC profile the same. So you have a better therapeutic index for YUTREPIA than you do with, for instance, nebulized TYVASO, as an example. What we didn't do was solve for the 4 times a day treatment regimen, and that's the same -- that's also true for TYVASO DPI. So improved on the therapeutic profile of inhaled treprostinil, but still requires 4 times a day administration. So what L606 will do is address that final point and really pull on that lever to make the market -- instead of just sharing the market with our competitor, we would look to then basically dominate the market. So if we had a formulation that behaved the same as you YUTREPIA but you could do that in a twice-a-day format and essentially solve for the overnight removal of therapy, which happens because you dose before you go to sleep, the half lasts 4 hours. If you sleep 8 hours, by the time you wake up, the therapy is gone. We will solve that, provide a more steady-state exposure, which we think will also be better for patient outcome. And then as Rajeev said, in the open-label trial, we're seeing just that. We're seeing that L606 is extremely well tolerated, and that's because it has a -- as Rajeev said, a 7x lower Cmax and that it's AUC 0 to 24 hours is the same given BID is the same as 4 times a day inhaled treprostinil. So its target profile in open-label work so far is exactly what we wanted this to be. And now we're just going to try to replicate the TYVASO INCREASE study with L606. We'll start that at the end of this year, work hard to get that done and approved sometime in the 28 time frame. But at that point in time, we think that will become the preferred therapeutic because it solves for regimen while still giving all the benefits that YUTREPIA does. Operator, next question, if any?

Thank you. There are no further questions. I'd like to turn the call back over to Roger for closing remarks.

Great. Thank you, operator. And thank you very much for the questions this morning. My hope is that the next time we address you on our earnings call, we will be providing to patients what we feel is a preferred product for inhaled treprostinil, and it will become at a critical time as the market for inhaled treprostinil rapidly expands. Thank you for joining us today, and we look forward to speaking soon. Bye-bye.

Thank you for your participation. This does conclude the program. You may now disconnect. Everyone, have a great day.