Good morning, and welcome everyone to the Liquidia Corporation Second Quarter 2023 Financial Results and Corporate Update Conference Call. My name is Livia, 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 conference call over to Jason Adair, Chief Business Officer.

Thank you, Livia. It's my pleasure to welcome everyone to Liquidia's second quarter 2023 financial results and corporate update conference call. Joining the call today are Chief Executive Officer, Dr. Roger Jeffs; Chief Financial Officer, Michael Kaseta; General Counsel, Rusty Schundler; and Chief Medical Officer, Dr. Rajeev Saggar. 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 up for your questions.

Good morning, everyone and thank you for joining us. In our opening remarks. Today, we're going to take a very focused approach to address the issue that is most top of mind for our company, our employees, and our shareholders, specifically the path forward as we see it, to the successful resolution after litigation and launch of YUTREPIA for both PAH and PH-ILD. I will note, however that in addition to the significant legal derisk and Rusty will talk about shortly, we also achieved other major and important milestones in the quarter, most notably the license of L606 a Phase 3 clinical program for twice-daily liposomal formulation of inhaled treprostinil. That position us with the best-in-class portfolio of inhaled treprostinil products to best address patient needs, not only today, but also in the future. As mentioned, the bulk of our prepared remarks will focus on the recent legal and regulatory actions related to the ongoing litigation. I have asked Rusty to elaborate on four specific points. First, the favorable affirmation by the Federal Circuit that we do not infringe any valid claims of the 066 patent. Second, our confidence that United's attempt to overturn the PTAB decision on the 793 patent will fail. Third, the positive impact in submitting an amendment to add the PH-ILD indication to YUTREPIA label. And lastly, our confidence in why we feel that the recently allowed patent claims to United Therapeutics related to the treatment of PH-ILD will not be an impediment to YUTREPIA. Rusty?

Thank you, Roger. As a reminder, Liquidia has been party to two separate appeal proceedings at the Federal Circuit that are relevant to the launch of YUTREPIA. Broadly speaking, the appeals relates two patents asserted against Liquidia, the 066 patent, which describes a way of making and storing treprostinil and the 793 patent, which describes the method of use to treat patients with pulmonary hypertension. Before walking through the recent decisions and activities, I would like to point out that our guidance over the last 12 months is still the same. We believe the ongoing litigation will be concluded between the end of 2023 and the middle of 2024, clearing the path to final approval and launch of YUTREPIA. The only thing that has changed in the last year is our increased confidence in our guidance with each legal decision. Now moving to the recent decision. On July 24th, the Federal Circuit affirmed the District Court's decision from last August in the Hatch-Waxman litigation. The outcome of the appeal was in line with our expectations, meaning 506 claims, the 066 patent were affirmed as obvious unpatentable and thus invalid, and that YUTREPIA does not infringe the single valid 066 patent claim that was asserted against us. The Federal Circuit also affirmed that YUTREPIA infringes the asserted claims of the 793 patent and that based solely on the arguments presented in the Hatch-Waxman litigation, the 793 patent is valid. However, the court also commented in the written decision that the court is aware that the Patent Trial and Appeal Board, or PTAB, has found all of the claims of the 793 patent to be un patentable and that the PTAB decision is on appeal, which I will discuss shortly. As we've noted previously, should the PTAB decision be affirmed on appeal,…

Thank you, Rusty and good morning, everyone. Our second quarter 2023 financial results can be found in the press release and the 10-Q filed this morning. Broadly speaking, the company continues to execute and manage its business activity with financial discipline in mind. We ended the second quarter with $88.2 million in cash, equating to a net burn of only $5.1 million over the first six months of this year. During the quarter, revenue from treprostinil injection increased $0.9 million compared to the same quarter last year due to favorable gross to net charge back and rebate adjustments, while cost of sales remained flat at $0.7 million. R&D expenses in the quarter increased $12.5 million compared to second quarter 2022, primarily due to the $10 million upfront payment tied to licensing North American rights to L606 from Pharmosa Biopharma and expense which has been offset by the [Technical Difficulty]. Overall, the company remains well-positioned financially through the key value-creating milestones tied to the resolution of the litigation. We are preparing to launch YUTREPIA with speed, building a pipeline with new product and remain opportunistic in our ability to create value going forward. With that, I'd like to now turn the call back over to Roger.

Thank you, Mike and thank you, Rusty, for clearly articulating why the merits of our case give us great confidence. And importantly, while we anticipate our timeline for legal clarity to remain as we have been saying, specifically between the end of 2023 and of 2024. With that, I would now like to open the call for questions. Operator, first question, please.

Thank you. [Operator Instructions] Our first question coming from the line of Greg Harrison with Bank of America. Your line is open.

Good morning. This is Mary Kate on for Greg. Thank you so much for taking our question. I guess, looking at L606 here, where do you see this fitting into the treatment paradigm for PAH and PH-ILD? And do you think there are certain patients who will likely prefer this to a DPI? Thank you.

Yeah. Thank you. Good morning. We appreciate the question. Rajeev, if you would, please answer that.

Yeah. Thank you, Mary Kate. Good morning. So, a few things about L606. Remember, this is a liposomal formulation of treprostinil that has been purposely designed to have extended pharmacokinetic plasma levels over a course of 12 hours. Because of these attributes, it's also purposely designed to show a lower Cmax by relative to 8 times lower than Tyvaso. So, we believe this is very important because we believe this negates some of the core side effects that we see with peak plasma exposures with Tyvaso, but still maintaining a similar AUC. So, essentially, what this allows for is a very sort of consistent, stable 24-hour exposure with twice a day dosing, which we believe is -- if you understand the last since 2009, Tyvaso is delivered 4 times a day. And remember, dosing is not provided during usually the sleeping hours. So, we provide a complete 24-hour coverage. We anticipate that as we run through the clinical studies, this will be really taken up both in PAH and PH-ILD as a best in choice process. I think because of these clinical attributes. Roger?

Next question?

One moment for our next question. And our next question coming from the line of Julian Harrison with BTIG. Your line is open.

Hi. Good morning. Thank you for taking my questions and congrats on all the progress. First, just to confirm some of your prepared remarks, United's new PH-ILD patent does not preclude your ability to seek final FDA approval for YUTREPIA and PH-ILD. Did I understand that correctly?

Russ, do you want to address that?

Sure. So, I think there are -- that's correct, unless United was to obtain a preliminary injunction. So, I think, as I commented on previously, there would be no 30-month stay that would attach to the sleep patent. And so, we would not be automatically prevented from obtaining approval for PHLV. Instead, the burden would be on United to obtain a preliminary injunction. And for the reasons noted during the prepared remarks, we think they'll have a hurdle to overcome to obtain that preliminary injunction.

Okay. Great. Thanks for clarifying that. And then, can you just remind us of your clinical development plan in PH-ILD? You don't need clinical data for approval here, but I'm curious what data points you think would be most helpful to characterize for the medical community and generally speaking, are you able to comment on the timeline there?

Yeah. So, it's correct, Julian. I'll answer the first part. We do not need any additional data to add PH-ILD to the label. And Rajeev, if you want talk about the Phase 4 type like studies that we're doing, if you will, to better inform the community about the use of YUTREPIA and PH-ILD patients.

Sure. Thank you. Thanks for the question. Yeah. Just to reiterate what Roger is saying, we -- the guidance that the FDA has provided us in the past highlight the fact that we do not need any new clinical study for amending the application for PH-ILD. In regards to YUTREPIA, we believe that one of the biggest unanswered questions is the use of a dry powder formulation of treprostinil. In these patients with PH-ILD, remember Tyvaso was originally approved, using the nebulizer. So, we believe studying that in a prospective, open-label fashion, will definitely provide some of these unanswered questions about the utility of YUTREPIA, especially given through our low resistance inhaler. These will answer several clinical questions. One, we believe these -- this will highlight our improved tolerability profile, which we saw in our INSPIRE study in PAH, and we believe we anticipate similar outcomes. With this is also highlight our ability to titrate the drug to higher doses, which we believe is important to continue to show improved clinical improvements in basic endpoints such as walk distance. Again, we believe these patients would benefit from a more portable device, such as YUTREPIA. So, we believe all those facets are going to be extremely well, well perceived by the PAH community. And in regards to the study, we still believe that this -- we are -- we have noted before that the study will initiate near the end of 2023, specifically in the United States. Thank you.

Great. Thank you.

Thank you, Julian. Thank you, Rajeev. Next question, please operator.

Our next question coming from the line of Serge Belanger with Needham. Your line is open.

Hi, good morning. Just a couple questions. I guess, the first one on the recently filed MDA amendment for the PH-ILD indication. Just wondering about the next steps, is it kind of the standard FDA acceptance within 60 days? And do you expect a tentative approval from the FDA? I think you've talked about a six month review process.

The 30-day clock before they will indicate to us whether it's a type one or type two submission. Type one would be granted a two-month review and a type two submission would be granted a six-month review. We feel that it could be a type one resubmission. But again, we'll just wait to see what the agency says because the 30 days will come up in mid-October. But the good news there is then we would get potentially tentative approval for PH-ILD as early as October, or as late as early 2024, which again, we would be prohibited from launching into that indication until the [indiscernible] market exclusivity ends in March of 2024. But that's the basic timeline. I think the other thing to point out, Serge, the question is that the tentative approval for PAH remains, and this is just an amendment to that tentative approval for PAH seeking tentative approval at this time for PH-ILD.

Okay. And just thinking ahead of YUTREPIA launch, do you see the opportunity here as a kind of a switch -- switching from Tyvaso or it would be more of new patient starts that would begin with YUTREPIA, and does that differ between PAH and PH-ILD?

I think, it's largely a new patient start paradigm. I think, what -- the way we view this is we want doctors to use it a few times, get comfortable with its use in a patient, quote unquote, who's de novo to prostacyclins. And then once that comfort base exists, then potentially they would switch. But I think the real opportunity here as we see it as more in the de novo patient base. There's a lot of turnover here. As you know, patient -- this is an unrelenting disease. Patients come on and come off the drug, their drugs commonly over time. So, for us, it's more going after the de novo market. The market that's already on a process like and can be a little bit stickier. I think we've acknowledged that. So, it's less about switches. Now, having said that, I think if there's intolerance and as we hear in particular with PH-ILD for Tyvaso and Tyvaso DPI, for example, those patients I think would be readily accepting of a DPI formulation that perhaps may be more tolerable and more titratable. So, it's not that we won't go after the switches. I think that our initial push will be in the de novo patient market, which is an -- which example -- I would say look, there's lots of patients treated. I think users reporting over 6,000 on therapy at this point seems to be about a 50-50 split between the nebulized and the DPI formulations roughly speaking. And I think the other opportunity here I probably should have mentioned is, once we establish the use and efficacy of YUTREPIA, for example in PAH, we will then go after its prostacyclin our first choice because we think it's probably a better option because it's gentler to take and is now readily titratable in the YUTREPIA format and could displace oral prostacyclins including Orenitram and UPTRAVI. Thanks for the question, Serge. Operator, next question please.

Thank you. And our next question coming from the line of Kambiz Yazdi with Jefferies. Your line is open.

Hi, team. How should we think about OpEx moving forward with the YUTREPIA open-label study and then eventually the L606 Phase 3? Thank you.

Yeah. That's a great question. I'll ask our CFO, Mike Kaseta, please.

Yeah. Good morning, Kambiz. Thanks for the question. So, as I said earlier, we ended Q2 with about $88 million in cash. We feel very confident in our ability to get through key events in 2024, which includes onboarding our extended Salesforce in Q4 of 2023. When we get the green light to move ahead, we will -- to launch YUTREPIA, we will be ready to do that and hit the ground running on day one. So, very confident there. As it relates to L606, as I mentioned, we made a $10 million upfront payment to Pharmosa. We would expect that the vast majority of development expenses will happen as we move 2024, really specific backend of 2024. And then, after those years as the Phase 3 progresses. So, in the end, we're very confident with where we are [Technical Difficulty] when given the clarity to do so.

Thank you, Mike. Thanks for the question, Kambiz. Operator, next question please.

Thank you. [Operator Instructions] And our next question coming from the line of Matt Kaplan with Ladenburg Thalmann. Your line is open.

Hi. Good morning, guys. Thanks for taking the question. I guess, can you comment a little bit more on why you're confident in being successful at the CAFC in the United PTAB appeal?

Yeah. Matt, could you repeat the question? You broke up a little bit there.

Yeah. Can you comment a little bit more on why you're confident in being successful at the CAFC and the United PTAB appeal?

Sure. I think Rusty addressed some of that in his prepared remarks. But Rusty, if you would maybe emphasize some additional points if you could.

Sure. The standard, Matt, has to do with the burden or the standard as to when the Court of Appeals for the Federal Circuit will overturn decision of the PTAB. It typically is the situation where there's been clear error, especially where you're dealing mostly with factual findings of the PTAB, as is the case here. So, again, it's looking at the specifics of the holding, and sort of our view that the holding is sensible and supported by substantial evidence. And then that high bar of what United would have to show as clear error in order to overturn the lower court decision or the PTAB decision in this case.

Okay. Okay. That's helpful. And then, just going back to a follow-up on L606. Can you talk a little bit about the potential development timeline there? And is manufacturing a rate living step to potential filing for approval?

Yeah. I'll ask Rajeev, our Chief Medical officer, who's overseeing the development to address that question.

So, first and foremost, just to highlight the L606 program has one current ongoing open-label study that's active in the United States, with the inclusion of the following patients. These are WHO Group 1 PAH patients that are either naive to prostacyclins or they could be transitioned from inhaled Tyvaso, either the DPI or nebulized, as well as patients that have PH-ILD that can be transitioned from Tyvaso DPI or Tyvaso nebulizer to open-label L606. That study is already recruiting. And we have patients that have already achieved up to one year of exposure. The priority now based on our understanding is, is that we are going to be seeking a type B discussion with the FDA, that is our -- that's first and foremost priority to just confirm that the requirement from my understanding is a single placebo controlled study with L606, specifically in PH-ILD. We believe that that study in particular plus our Phase 1 study, that combination will be enough for to seek NDA approval for both indications of PAH and PH-ILD. Roger, back to you.

Yeah. Thanks Rajeev. And Matt, that's the timeline. We're a little bit silent. We want to get through the type B meeting. Again, there's a good proxy for what we need to do just from the Tyvaso ILD study that was done. So, there's precedent in terms of sample size time to get that study enrolled. And I think given its PH-ILD and it will be sort of unencumbered by background therapies, I think it'd be potentially faster than what you've seen previously, particularly if somebody was doing a PAH only study. So, again, it'll take us a few years, but I think we have the chance to become the first -- less than four times a day option for patients. Operator, next question please.

Thank you. And I see no further questions in the Q&A queue at this time. I'll now turn the call back over to you, Dr. Jeffs, for any closing remarks. End of Q&A:

Thank you, operator. So, with no further questions, again, I'd like to thank you for joining us today. We look forward to reporting on our continued progress in the coming quarters. Goodbye.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.