Good morning, and welcome, everyone, to the Liquidia Corporation Second Quarter 2024 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 the question-and-answer session. [Operator Instructions] I would now like to remind everyone this conference call is being recorded. I will now turn – hand the call over to Jason Adair, Chief Business Officer. Please go ahead.

Thank you, Lisa. It's my pleasure to welcome everyone to Liquidia Corporation's second 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 will open the call for your questions. Roger?

Thank you, Jason. Good morning, everyone. Thank you for joining us today. While we and patients still anxiously await FDA action on the YUTREPIA NDA seeking approval for both pulmonary arterial hypertension, PAH, and pulmonary hypertension associated with interstitial lung disease, or PH-ILD, we remain hopeful that we are close to achieving this. As a reminder, the FDA has hit no legal impediments since April 1st to take action on the amendment as submitted seeking approval for both PAH and PH-ILD. What I can say today is that we have been in active and constructive communication with the FDA over these past four months, but we will not comment on the specifics of our conversations with the FDA. To be crystal clear, our medical and commercial teams remain on heightened alert, ready to launch YUTREPIA immediately upon approval. Our sales team continues to call on key PAH accounts, strengthening relationships and educating them on Liquidia. And importantly, we are staging commercial product for rapid distribution to specialty pharmacies upon approval. Moving to our clinical programs. The open-label ASCENT study of YUTREPIA in PH-ILD patients continues to ramp up in the number of active clinical sites, with parallel increases in patient screening and patient enrollment. We are pleased with the preliminary feedback from physicians suggesting that patients can readily titrate YUTREPIA to escalating therapeutic levels in these PH-ILD patients. While the ASCENT data needs to mature more, our early patient experience today suggests that the benefits of PRINT-formulated treprostinil delivered via low-effort inhaler parallels a very good experience observed in PAH patients. For example, the median dose of YUTREPIA for patients currently enrolled beyond eight weeks in the ASCENT trial is 185.5 micrograms per treatment session, or approximately 21 breath equivalents of Tyvaso per session, with a top dose of 318…

Thank you, Roger, and good morning, everyone. I will briefly address our second quarter financial results found in today's press release. As you will see, revenue was $3.7 million for the second quarter of 2024, compared with $4.8 million in the same quarter 2023. Revenue was tied to our promotional agreement with Sandoz to commercialize treprostinil injection. The decrease was primarily due to 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 second quarter 2024, compared to $0.7 million in the same quarter for 2023, with the increase being primarily due to our sales force expansion during the fourth quarter of 2023. Research and development expenses were $9.4 million in the second quarter of 2024, compared with $17.7 million in 2Q 2023 which included a $10 million upfront license fee to Pharmosa for the exclusive license to L606 in North America. We saw a $1.4 million decrease in expenses related to our YUTREPIA program driven by expensing prelaunch inventory costs in the prior year. These decreases were offset by a $1.7 million increase in clinical expenses related to our L606 program and a $1.5 million increase in personnel expenses related to increased head count. General and administrative expenses were $20 million in the second quarter of 2024, compared to $9.2 million in the same quarter for 2023. The increase of $10.8 million was primarily due to a $6.3 million increase in personnel expenses, which includes stock-based compensation, a $2.2 million increase in commercial and consulting expenses, and a $0.9 million increase in legal fees related to our ongoing YUTREPIA-related litigation. In summary, we incurred a net loss for the three months ended June 30, 2024 of $27.9 million, or $0.37 per basic and diluted share, compared to a net loss of $23.5 million, or $0.36 per basic and diluted share, for the three months ended March 31, 2023. We ended the second quarter of 2024 with $133 million cash on hand, and remain well positioned financially to achieve our corporate objectives this year. With that, I'd like to now turn the call back over to Roger.

Thank you, Mike. As you've just heard, it's been an active summer on several fronts since our last call. We are fully prepared for the potential launch of YUTREPIA with a team of dedicated professionals who are poised to reshape and grow the market for inhaled treprostinil upon YUTREPIA's approval. The market opportunity for inhaled treprostinil is currently at a $1.5 billion run rate, with the potential to grow in excess of $3 billion in the coming years. This market remains keen for a competitive alternative, especially one with the dosing and tolerability advantages that YUTREPIA can potentially provide once approved. With that, I would now like to open the call to questions. Operator, first question please.

Thank you. [Operator Instructions] And our first question today comes from Julian Harrison of BTIG. Your line is open.

Hi, good morning. Thank you for taking my questions and congrats on the recent progress. I'm wondering if we could briefly review why higher inhaled treprostinil exposure should be beneficial both in PAH and PH-ILD.

Yes, Julian. Thanks very much for the question. So I'll start and then I'll ask Rajeev to add some additional color. So what we know historically from the use of prostacyclins is that – and one of the beauties of prostacyclins in particular is the ability to continually titrate to effect over time, because, unfortunately, these patients have an advancing disease that continues without relent. So the only way – the only therapeutic class that can address this progressive disease and remain a sort of an ability to tweak, are prostacyclins. So if you look at treprostinil in its various forms, parenteral, oral, inhaled, you can see that the ability to titrate is a hallmark of the therapy. But what had been limiting prior to YUTREPIA in particular, as you see with Tyvaso, is the inability to titrate above a fairly low therapeutic ceiling. So what YUTREPIA has done, and this is why I say it's paradigm shifting, it's giving you all the benefits of the parenteral and oral products, but giving it directly to the site of action to limit the systemic side effects. So you now have a highly flexible therapeutic with high utility that can really be dosed to effect, also while minimizing the side effect. So I think this is why we're so excited about YUTREPIA. We think it brings a different sort of utility to the marketplace in terms of treprostinil use. And we think this therapeutic profile will lead it to become both best-in-class and first-in-choice when considering starting a prostacyclin, be it parenteral, oral or inhaled. Rajeev, I don't know if you have any additional comments.

Yes, Julian, yes, I think Roger answered most of it correctly. I would just sort of add, is that we learned a lot from the INCREASE study in PH-ILD. I think in that study, the data highlighted that patients that achieve more than at least 9 breaths, and especially as you get to higher doses, those patients – the clinical observations was that they walked farther, and they had also improvements in many of the secondary outcomes. Also, I think this is a very heterogeneous group of patients, both in PAH and PH-ILD, with various degrees of severity. And in many of these patients, the disease, as Roger highlighted, it's progressive. The opportunity to continue to titrate and match disease severity and temper that down, I think, is going to be a clear advantage and a great armamentarium for clinicians as well as for the outcomes for patients.

Great. Thank you for the question.

Okay, great. And I have one more, if I may. I was just curious if you have a good sense for when we might expect a comprehensive data disclosure from the ASCENT trial. And can we maybe review what the key unanswered questions are that you plan to address with that trial?

Yes. Maybe, Rajeev, if you could comment on that.

Yes, Julian. So again, just to remind everyone, ASCENT is a study studying the safety and tolerability, and the secondary outcomes would be exploratory efficacy of YUTREPIA in patients with PH-ILD, who have not been treated. The patients have to enroll with the baseline right heart catheterization. The study is actually for 24 months, and then we follow the patient out to one year. So what is very important here in the study is that what we're looking for is to maintain the patients on a – the optimal dose of YUTREPIA, and also to show durability. Because what we do know is that after 16 weeks in INCREASE study, many of these patients start to have a significant amount of instability. So we wanted to show patients definitely have durability. Our focus really, coming out in the next set of congresses that are approaching here, is really to highlight some of this exploratory clinical efficacy data. We are following clinical variables such as walk distance in terms of six-minute walk. We're also looking at various forms of questionnaires. And finally, we're also looking at effects on the lung parenchyma and the lung vasculature by using CT chest imaging, really to highlight really where the effect is, particularly on the pulmonary vasculature, with the use of YUTREPIA. I just want to highlight, as Roger said, is that at least right now, the median dose for those patients now past the eight-week mark is now 185.5 micrograms of YUTREPIA. This is just to highlight that, if you compare this to our sentinel INSPIRE study in PAH, by two years, patients were on – about a third of the patients were on 159 micrograms. And so what we're seeing here is that providers and patients in particular are able to tolerate YUTREPIA. And there is also, just to go back to our last question, a very clear understanding by providers that dose – the higher the dose, the potential to benefit of the patient. And I think we look forward to highlighting some of these clinical parameters in the very near future.

Thanks, Rajeev. So Julian, as you can hear very robust study. We're trying to complete it by year-end, to specifically answer your question. And then we'll look to publish that in 2025. Operator, next question.

Excellent, thank you guys.

You're welcome. Thank you.

Thank you. One moment for the next question. And our next question will be coming from Serge Belanger of Needham. Your line is open.

Hi, good morning. Thanks for taking my question. I have a couple of legal ones. First one, on the UT case against FDA, I believe, in the motion for dismissal, both the agency and Liquidia completed their briefs. So just curious if you have any visibility on time lines for the next steps here, whether we'll get a hearing or judge-based rule on the briefs. And related to this case, how closely is FDA following this dismissal motion? And how could that be a gating factor for them rendering a decision on the YUTREPIA NDA? Thanks.

Great, Serge. Thanks for the question. Rusty?

Yes, Serge, thanks for the question. So on the – taking your first question first. On the motion to dismiss, next steps, we don't know yet. The court could have an oral argument or it could rule on the briefs. We don't have an indication either way yet from the court. So really can't provide any guidance there just because we're waiting for the court to decide on that. On the second point, obviously, it's tough for us to comment on what's in the FDA's head. And I think as Roger said in his opening remarks, I think we want to be careful not to comment on our communications with the FDA. So obviously, once the FDA has taken definitive action, obviously, we will announce that. But in the meantime, we're not going to comment on our communications with the FDA.

Thank you.

Thank you for the question, Serge.

Thank you and one moment for the next question. Our next question will be coming from Kambiz Yazdi of Jefferies. Your line is open.

Good morning team. For the registrational study for L606, can you remind us the key features for that study design, and when is that slated to start? And then maybe just a few finer points on the ASCENT study. How many more sites have you onboarded since the last update? And how many patients so far have you treated in the ASCENT study? Thank you.

Good questions. Rajeev, both of those are in your court, please.

Yes. Hi, Kambiz So regarding the global single placebo-controlled efficacy study with L606, specifically in patients with pulmonary hypertension associated with interstitial lung disease, we plan to initiate that study by the end of the year. I think we're working feverishly to do all the necessary steps to make sure that our protocols are appropriately submitted and viewed by agencies. As Roger highlighted, we've had favorable feedback from both the Type C meeting with the FDA and also from the scientific advice from the European Medicines Agency. So I think we remain pretty confident in our plans. We've already highlighted the primary endpoint in this study is going to be 6-minute walk distance, with a whole host of secondary efficacy endpoints that I think would be important to support our target profile. I think we're extremely confident, based on the safety data that's emerging from the open-label study in the United States. Again, just highlighting the liposomal technology on top of the treprostinil, I think really has shown to minimize cost and really supports dosing and titratability of this drug, I think, which is going to be a game changer, along with a reduced frequency to twice a day. So we remain very, very excited about the feedback that KOLs throughout the global market has been showing for support of the study. There's extremely significant amount of unmet need, I think, definitely outside the U.S., in addition to the U.S. in that regard. In terms of ASCENT, we have – we're close to about tripling the number of sites by the end of this month, and we remain quite confident on completing the study by the end of the year. We anticipate to have close to about 15 patients by the end of this month. Just to highlight that the majority of the sites that have been just recently initiated have come on over the past 45 days, and we anticipate the remainder of sites to come on within the next 30 to 60 days as well. Then by that time, I think we'll have – we'll be on full ramp to support the rest of the study.

Great. Thank you. Thank you, Rajeev. Thanks for the questions, Kambiz. As you can see, really positive data flow from both the L606 open-label study and the ASCENT trial, we're obviously very excited to get into the registrational study with L606 in PH-ILD patients, as Rajeev said. And I think the fact now that we're seeing the ability to titrate as easily as we are and as quickly as we are, as well as to see the durability of the 2 times a day format, that's an exciting Phase 3 program with a very positive predictive future. Same for the ASCENT trial, I think when you see this rapid ability to dose these patients, quite differentiating, and I think something that the market will lean on once we get to market. So thanks for the question, Kambiz. Next question please

Thank you and one moment for the next question. Our next question will be coming from the line of Matt Kaplan of Ladenburg Thalmann. Your line is open.

Hi, good morning guys. Thanks for taking my question. I guess since we're past the kind of legal impediments for FDA approval, I guess, with your interaction with the FDA, has the FDA identified any material differences, which would prevents approval and would, I guess, necessitate a CRL?

Hi, Matt. It's Roger. Thanks for the question. As I said in the intro, we're really not going to comment on specific discussions with the FDA. I think one way to look at this is, yes, we are past the time when there was no legal impediment for approval, that being April 1st, four months past that and while that's frustrating, I think if you want to put a positive spin on that, four months is in the rearview mirror, so there's been four months to work to a solution. So we think we're that much closer to a decision and an action. And we won't comment on direct communications with that, but we remain optimistic that we've had constructive discussions with the agency. And we remain highly focused on approval for both indications. So that's – as we submitted it, we feel it was appropriate as amended, and we are seeking approval for both PAH and PH-ILD. We haven't backed away from that position and that remains our focus. So, apologies that I can't give specifics, but hopefully we'll have an action soon and we can talk about that in great detail with you. Operator, next question.

Thank you and one moment for the next question. Our next question will be coming from the line of Jason Gerberry of Bank of America. Your line is open.

Hi, guys. Good morning. Thanks for taking my questions. So two for me. Just on the cash burn language in the 10-Q, about just roughly around a year of cash runway. I assume that that assumes an approval and launch costs. Can you talk about, in the alternative scenario, if there are delays, any flexibility to preserve the cash runway, any flexibility or levers that you could pull? And then my second question is just on United's citizens' petition, is there any plans to submit any correspondence clarifying LGM's role as an importer or – I assume that most of this is going to be handled behind the scenes, if at all. But just curious if there is any plans to submit any response? Thanks.

Yes, great. Thanks, Jason. So Mike, if you'll address the cash burn question, and Rusty, if you could talk to the citizens' petition, please?

Yes. So Jason, thanks for the question. I mean I think where we sit now, we are sitting at $133 million of cash. We're very confident in our cash position. We talked about all of our objectives for the rest of this year and going forward with ASCENT, without getting L606 initiated, and also supporting the launch of YUTREPIA. We've always taken pride of having a strong balance sheet. We feel that we still have that. And we're very confident in our ability to deliver. Now with that being said, we'll always focus on what's at hand, and depending on where things stand, we can make decisions, we will be able to do that. But our focus right now really is to deliver on all three of those objectives: of getting YUTREPIA launched, getting L606 pivotal trial initiated, and continuing the ASCENT trial. So when you look at our cash balance, I think our burn from year-end to Q1 to Q2, we've always been disciplined in how we invest. We will continue to do that and look forward to hopefully a YUTREPIA launch here in the not too distant future.

And Jason, thanks for the question on the citizens' petition. We do not currently anticipate filing a public response to the citizens' petition. Obviously, any issues that – there will be direct communications between us and the FDA, which, as Roger said before, we won't comment on. The other thing I'd point out is, I mean, even United Therapeutics had to file an amended citizens' petition to cure some of the misstatements on the original citizens' petition that is public. But again, we won't have a public response, or at least we're not anticipating one at this time.

Okay, thank you.

Thank you, Jason.

Thank you. And this does conclude today's Q&A session. I would now like to turn the call back over to Roger for closing remarks. Please go ahead.

Great. Well, again, I want to thank everybody for joining us today. As you've clearly heard, we remain confident in the approvability of YUTREPIA in the near term for both PAH and PH-ILD and the competitive profile once launched. We look forward to updating you in the near future. Thank you.

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