Good afternoon, ladies and gentlemen. My name is Quanisha, and I will be your conference operator today. I would like to welcome everyone to the Liquidia Technologies First Quarter 2020 Financial Results and Corporate Update Conference Call. At this time, 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. If anyone has any difficulties during the conference, please press star zero for operator assistance at any time. I would like to remind everyone that this conference is being recorded. I will now hand the call over to Jason Adair, Vice President, Corporate Development and Strategy.
Thank you. Good afternoon. Welcome to Liquidia's First Quarter 2020 Financial Results and Corporate Update Conference Call. Today's call will include forward-looking statements pursuant to the Private Securities Litigation Reform Act of 1995, based on current expectations. Such statements represent management's judgment as of today, and may involve significant risks and uncertainties that could cause actual results to differ materially from expected results. Please refer to Liquidia's filings with the SEC, which are available from the SEC at www.sec.gov or from Liquidia's website at liquidia.com for information concerning risk factors that could cause such differences and otherwise affect the company. I would now like to turn the call over to Neal Fowler, CEO of Liquidia.
Thanks, Jason, good afternoon, and thank you to everyone for joining us. On the call with me today are Rich Katz, our Chief Financial Officer, and Dr. Rob Roscigno, Senior Vice President of Product Development and Program Lead for LIQ861. I will summarize our progress and recent accomplishments in 2020. Rich will provide a brief summary of financial results for the first quarter. Then I will conclude our prepared remarks and open the call for your questions. Like most of the world, we have endured a new way of living and working during the eight weeks since our last call. I'm happy to report that despite some logistical challenges that the world's been facing and a workforce deployed at home, our team has continued to successfully deliver on its objectives for 2020. First and foremost, we submitted, the FDA has accepted our NDA for LIQ861.
As a reminder, 861 is an inhaled dry powder formulation of treprostinil, a prostacyclin analog used to treat pulmonary arterial hypertension, or PAH, by targeting the pulmonary arteries. We believe that 861 has the potential to maximize the therapeutic benefits of treprostinil by safely delivering higher doses directly into the lungs using a convenient palm-sized dry powder inhaler. In April, the FDA confirmed a PDUFA goal date of November 24, 2020. We feel well prepared to support the agency's review during this period. We feel fortunate to have completed all of the work required to submit the NDA prior to any impact from the COVID pandemic. All U.S. patients enrolled in an open-label extension study continue to receive treatment, and European patients enrolled in a hemodynamic dose response study are being monitored.
However, in light of the pandemic and in interest of patient safety, we have paused enrollment in the European trial until the pandemic has subsided. As a reminder, this study is being conducted to increase the medical information available on the impact of LIQ861 and is not required for NDA approval by the FDA, though we expect to complete it once it's safe to do so. We have also shared the final clinical data included in the NDA with the medical community. In January, we presented the comparable bioavailability data that establishes the pharmacokinetic bridge between LIQ861 and Tyvaso, the reference-listed drug. Last month, we presented the final safety and tolerability data from our INSPIRE trial of LIQ861 at the month two time point, further confirming that LIQ861 had met the primary endpoint and potentially offers a convenient, safe, well-tolerated option for inhaled prostacyclin therapy.
Overall, the study results demonstrated that the Treatment-Emergent Adverse Events, or TEAEs, were similar to inhaled prostacyclin and mostly mild to moderate in nature. We believe that these two studies, INSPIRE and the PK Bridging study, address the FDA's guidance for potential approval under the 505(b)(2) pathway. We will continue to share data from the INSPIRE study at key medical conferences throughout the year, with the next release focusing on the exploratory endpoints from INSPIRE. We have every reason to be excited about our results from INSPIRE and the response from physicians and patients alike regarding the potential opportunity for LIQ861. As you know, treprostinil has been a key component of PAH treatment for nearly 20 years. We have a strong baseline for 861.
The challenge for patients with currently approved inhaled therapy is that when needed, they require their nebulizer, availability of distilled water, and some type of power source to administer their treatment always, whether at work, at home, or at play. It is always a present concern among patients. Our PRINT technology allowed us to take this trusted molecule and engineer it into highly uniform particles with specific aerodynamic properties, including shape, size, and weight to enhance deep lung delivery with unprecedented convenience in the form of a palm-sized dry powder inhaler that can be utilized virtually anywhere. Because of its ability to address unmet needs in the treatment of PAH, there is significant interest among physicians and patients to use LIQ861 immediately.
A recent quantitative survey conducted by Liquidia conveyed that nearly 50% of treating physicians say that they intend to prescribe LIQ861 in place of current prostacyclin therapies as soon as it is available. To that point, we intend to make it available as soon as possible. As required by our 505(b)(2) NDA, we made a Paragraph IV certification against the patents listed in the Orange Book for the reference listed drug. We believe these patents are invalid, unenforceable, or will not be infringed by the commercial manufacturer, use, or sale of LIQ861. As you likely know, the active ingredient, treprostinil, is a readily available generic molecule, our PRINT dry powder particles and delivery device are highly differentiated from the nebulizer-based reference listed drug.
Acknowledging that our competitor may take action under the Hatch-Waxman Act to delay the innovation of LIQ861 from reaching patients, we have taken proactive steps to bring LIQ861 to patients without undue delay. To this end, we petitioned the United States Patent and Trademark Office, or USPTO, for inter partes review, or IPR, of two of the patents listed in the Orange Book and directed toward processes for producing the generic treprostinil molecule. These two patents are continuations of an earlier patent that was found invalid by the USPTO in a 2016 IPR, and we believe these patents are invalid for substantially the same reasons. The details of our IPR petitions can be found online at the Patent Trial and Appeal, PTAB, section of the USPTO.
While we cannot comment on the timeframe for FDA's review of the NDA or our competitor's potential actions, we can confirm that we remain committed to taking all actions available to introduce 861 to PAH patients as soon as possible. Lastly, while much of 2020 has focused on the advancement of 861 to potential FDA approval of our NDA, we have continued to invest in our proprietary pipeline. Non-clinical studies of LIQ865, our formulation of bupivacaine to treat local postoperative pain for three to five days, remain on track to inform and support future phase II studies, while formulation activity in support of new inhaled products is increasing. We look forward to updating you on these programs in the future as data becomes available. I would now like to turn the call over to Rich to review our first quarter financial summary.
Thank you, Neal. Research and development expenses were $10.8 million for the three months ended March 31, 2020, and that approximated the amount of $10.7 million also in the first quarter of 2019. The R&D expenses for consulting costs, primarily related to our NDA work, were $1.2 million higher in first quarter 2020 versus first quarter of 2019. That increase was primarily offset by a decrease of about $0.8 million from a reclassification of costs that were for preparing for potential commercialization and certain insurance costs to G&A from R&D in the first quarter of 2020 versus the first quarter of 2019. G&A expenses were $3.8 million for the first quarter of 2020 compared to $3 million for the first quarter of 2019. That increase of $0.8 million was a result of the reclassification that I just mentioned.
Interest income was $0.1 million for the first quarter of 2020. That compared to $0.1 million during the first quarter of 2019. Essentially even. Interest expense was $0.3 million in the first quarter of 2020. That compared with $0.2 million for the first quarter of 2019, primarily due to higher levels of debt during the first quarter of 2020 as compared with the first quarter of 2019. Putting it together, the net loss was $14.8 million in the first quarter of 2020. That compared with $13.8 million for the first quarter of 2019. The increase of $1 million was primarily due to the increase in consulting costs in relation to our R&D program, particularly the NDA for LIQ861. Cash and cash equivalents totaled $40.1 million at the end of March. There were 28.4 million shares outstanding at that time.
As discussed on previous calls, I'll also mention that we continue to seek to strengthen our balance sheet. We are evaluating multiple funding options to do that, including dilutive and non-dilutive financings, as well as potential partnerships with companies that may offer either strategic or commercial or both synergies with 861. Let me now turn the call back to Neal.
Thanks a lot, Rich. We look back at the last quarter and the unprecedented challenges we face globally, we're really proud of the fact that we were able to press forward and hit our milestones. I thought I'd make just a couple of comments, even a little beyond Liquidia, that our accomplishments, though great for us as a company, pale in comparison to the challenge and sacrifice that many of our trial investigators and their staff face every day in the face of this pandemic. COVID-19 is a respiratory disease, and these are the people who unselfishly go into harm's way every day for people in need. I just want to thank them, not just for their commitment to advancing the science behind our new therapy, but mostly for their courage in the face of danger to ensure the health and healing of our communities.
I also want to highlight the fact that we're part of an industry that has really stepped up in a time of need. We've certainly seen many examples of this going back to the '40s during World War II with penicillin, the action that was taken during the HIV crisis. Here we are decades later, doing it again. Through local support, donations of money and supplies, and the rapid development of testing and/or potential treatments and vaccines, our industry is stepping up again, and that is something that we should all be proud to be a part of. The same holds true for Liquidia, regardless of the duration of this pandemic, we will continue to ensure the safety of our team, support the recovery and regrowth of our community, and stay focused on our efforts to improve the lives of patients.
At this point, I'll now turn the call over to the operator to take your questions. Thank you.
It's at this time, if you would like to ask a question, please press star one on your telephone. We do have a question from the line of Liana Moussatos from Wedbush.
Thank you for taking my question.
Hey, Liana.
Hey. You mentioned in your prepared remarks a 2016 IPR for treprostinil for the two patents. Can you remind us about that and how it might reduce your hurdle to launch after the November 24th PDUFA? I have two questions about finances. One is, how should we think about Q2 OpEx and the rest of the year OpEx versus Q1?
What's the cash runway?
Sure. Liana, happy to handle those questions. I'm also pleased to have on the line with us, Shawn Glidden, who's our internal counsel. Maybe I'll start by having Shawn speak to your IPR question. Shawn?
Thanks, Neal. Good afternoon, Liana. The 2016 IPR that we referenced was an IPR brought by SteadyMed in its litigation with United Therapeutics over a treprostinil processing patent. That particular IPR and the particular patent subject to that IPR is a parent patent to the two patents that we have filed IPR petitions against. The claims are substantially the same subject matter. We believe that substantially the same prior art will find those patents having the same fate.
And how-
Great.
Okay. The processing of that, are you confident that you can launch shortly after the November 24th PDUFA date, or do you anticipate some delays because of this litigation?
Well, Liana, at this point in time, we are not subject to a Hatch-Waxman Act, so there is no delay at this moment, but we have taken steps to prepare for any potential activity by our competitor.
Okay. There's a way to launch even if the competitor initiates some litigation.
As a 505(b)(2) applicant, the references to drug holder has a period of time, a 45-day window after our Paragraph IV certification notice, to bring in a patent infringement action for patents filed on the Orange Book. If the reference listed drug holder files an action under Hatch-Waxman Act, that triggers an automatic 30-month stay, which is a 30 months or the shorter of 30 months for dismissal of the patent case. At this point in time, we're not under a Hatch-Waxman Act litigation, but we've taken actions as needed to challenge the patents that might be subject of a Hatch-Waxman Act.
What would be the date that 45 day deadline would be?
We served our Paragraph IV notice in late April, so the 45 day period ends in early June.
Okay. Thank you for that. I have financial questions for Rich.
Yeah, Rich, if you could.
Yeah. Sure, Liana. The cash burn will be a little bit less in Q2 versus Q1. We have some expenses that we incur in Q1, particularly annual pay cycle bonuses that occur at that time. We're also taking some steps to reduce our costs in light of everything that's going on in the world today. I think you can expect some modest decrease in Q2 versus Q1 for operating expenses. In terms of cash runway. Because of the steps that we're taking. I should mention that none of these steps in any way impact our timeline with regard to the NDA, and working with the FDA on all the things we need to work with to get an approval.
Some other areas that we're being more conservative, and that'll bring our cash runway comfortably through October without tripping the covenant that we have on our debt, which is, I think you may remember, it's an $8.5 million minimum cash covenant. It certainly could go beyond that, but that would be a conservative view that we would be comfortably through October.
Okay. What about Q3 and Q4 for OpEx?
Yeah. Similar to Q2, so somewhat stepped down from what we just did in Q1. Without impacting anything with regard to the 861 development program. I should mention, as was discussed, we're trying to make sure that we extend the cash runway as long as possible. At the same time, we are actively looking at alternatives for raising additional capital, whether it be dilutive, non-dilutive in the form of partnerships or potentially debt. We're evaluating all those alternatives in order to make sure the company remains well-funded.
What kind of partnerships are you considering?
Well, frankly, we would consider a broad range. Really all the way from licensing type opportunities to opportunities where we're much more involved. Those are the range. We haven't made any determinations at this point. I think discussions have been going on for some time. We're working with Jefferies as our financial advisor. We really don't have anything more to say at this point, except that that is an area that we're certainly working on.
Thank you very much.
Of course.
Your next question comes from the line of Ken Cacciatore from Cowen and Company.
Hey, guys. Thanks for taking the question. Just on the litigation or the potential litigation, if the patents are asserted in June, I guess I would imagine you could do a summary judgment motion. Can you just talk about how long it would take to get something like that on file? Typically speaking, how long it takes to get assigned a judge and get something like that ruled upon before you would go into kind of more broader litigation if that was either accepted or rejected? Then also, can you just talk about the marketing behind a product like this, in terms of what kind of effort you would need? It's more specialty in nature.
Just wondering, could this be done more efficiently than many type of launches that we've seen in the past and how folks like us should be viewing it vis-a-vis other drug launches? Obviously, this isn't traditional. Wondering how efficiently could we execute a proper launch for 861. Thanks.
Sure, Ken. Thanks a lot for that. Maybe, Shawn, I'll let you start and I'll handle the commercial question.
Sure. Thanks. Hi, Ken. On your first question regarding potential litigation, it's always difficult to answer, especially when litigation has not been filed. As you know, different jurisdictions and different venues have different dockets and different amount of time, especially during the period of COVID. What impact might that have on different court dockets and schedulings? It's just too hard to tell right now. As far as the general timeline with other actions besides specific court, the IPR process itself is a pretty well-oiled machine within the patent office of an 18 months from filing petitions to written opinion outcome from the patent office. That timeline's a little more certain, but just too early to be able to comment on the timeline on court proceedings.
Ken, on your commercial question, which is a good one. Yeah, this is what we would call kind of more of a specialty launch versus like a primary care launch that a lot of us are so used to seeing in the industry. Given that the patient number here compared to a lot of diseases is on the smaller end, it's a much more manageable group of physicians we need to get to commercially. If you kind of benchmark what is out there with a product like this, typically that would be on the order of about 50 sales representatives for the U.S. I would tell you that we are looking at everything between zero and that as we go forward because there are even more innovative ways we're looking at doing that to potentially even do maybe slightly less than that.
What's nice about this disease from a pure commercial aspect is it's a very engaged patient population as you would expect as well, given the disease. It's an active group that we target both from a patient perspective, a physician perspective, and as these are not inexpensive therapies, a payer perspective. A lot of our effort will be focused on that. It's a much more efficient type of launch
Than you would typically see across the industry, and which is, to be blunt, one of the reasons we were so attracted to this area originally as well, being a small company and not wanting to go after a much larger type of launch from the beginning too. We look forward to it. Rob Roscigno and his team have done a fantastic job laying a lot of groundwork down in our connectivity with the PAH community. We've been very active on the patient front and really look forward to bringing LIQ861 to the market.
Thanks so much.
Sure.
Your next question comes from the line of Roger Song from Jefferies.
Thank you. Thank you for taking the question. I have two quick questions. One is regarding, we noticed this United Therapeutics, they are about to read out the phase III CAR-T kind of study later this year. Given it's about one or two years behind LIQ861, how would you leverage this first mover advantage if you are able to launch this, without the litigation restraint?
Yeah, Roger, this is Neal. Just to make sure I'm clear, are you speaking about their dry powder device coming along behind 861? Is that the specific question?
Yeah, that's correct.
Okay, great. Thanks for your question. It's good to speak with you. First off, it's hard for us to opine too much about where they are in terms of their development other than the same things we're all hearing from their corporate updates. It does appear to your point that we have a lead which we want to take advantage of here, obviously, in terms of getting to the market. For us it's about establishing the convenience, first and foremost of a DPI versus a nebulizer. That's pretty well documented as we've talked about the experience for the patient. We've seen this in our clinical data, certainly also in the patient's perceived quality of life. All of our market research has pointed to what a big advantage that is for the patient.
I also think very importantly, and I go to our clinical data here out of the INSPIRE trial, one of the things that PRINT has brought to bear, is the fact that we have a wide range of dosing options for the patient. Given that it is a progressive disease, obviously one of the things that we're very encouraged by is you can give much higher doses with LIQ861 than you're able to give with a nebulizer. You'll recall our dosing now is currently at 200 micrograms and we still do not know the MTD of LIQ861. This is important for patients because typically the next stop in their disease progression would be with some type of injectable type of medication, which is obviously not a good quality of life kind of play.
The ability for LIQ861 to play much longer in the disease is certainly a breakthrough for the patient and something that we will continue to push. Also, as was mentioned in my earlier comments, the fact that physicians are so willing to use this even in first line therapy now, tells us that there's an ability also to move upstream in the disease earlier because now the nebulizer you kind of held off on until the orals had done everything they could. The simplicity and elegance of an LIQ861 allows you to use it earlier in the disease process. Our push will obviously be convenience, but I think very importantly, the dosing flexibility and ability to impact a larger group of patients than traditionally has been able to be carried out with just a nebulizer. Hopefully that handles your question there.
Very helpful. Thanks for all the thoughts here. My next question is, I think we definitely talk about this litigation potential and the IPR outcome and since the time kind of may just take a little bit longer than the 30 months stay for the IPR decision. Just get your current thoughts around if you will launch at risk if the 30 months stay passed, but without the IPR decision.
Hey, Roger.
Yeah, Shawn. Yeah, go ahead.
Hey, Roger. This is Shawn. Just a little clarity there on the question. The IPR process is roughly 18 months, so that process should be well completed before a 30-month stay timeframe would be completed. It sounded in your question like the timelines might have been a little backwards on that one. Just wanted to offer that clarity.
Oh, got it. Yeah, that's helpful. Thank you. Yeah, that's all on me. Thank you.
Yeah, sure.
I'm sorry. Your next question comes from the line of Serge Belanger from Needham & Company.
Hey, thanks. This is Tian on for Serge. I just have two questions. The first one, for LIQ861, what are your next steps that's needed from the FDA? How do you expect the COVID-19 impact to alter the FDA's activities, for example, preapproval inspections? I think some of the other companies that we've tracked stated that the FDA are able to conduct the inspection virtually. Is that a possibility for you guys, too?
Yeah. I'll handle kind of the first set first. Next steps for us really at this point are just really the continued active dialogue with FDA on the review, which is underway. It kind of goes hand in glove with the back part of your question. We're actively engaged in the review process, and FDA is doing their part in that. We know they're very active, and it's essentially at this point handling any clarification types of questions that are underway there. Which lends itself to the second part. Yes, the inspection piece is out there. We're very well prepared and look forward to that. It's not clear yet to us, we've received no guidance from FDA yet about the inspection process, about whether that will be done virtually or in person.
Obviously, they are under a lot of the same travel restrictions we're all under, and they're looking for alternative ways to do that, and they've given us no guidance on that. I will also just kind of highlight here, one of the unique things about our process here is we were, you may recall, we were also accepted into the Emerging Technology Program a couple of years back, which afforded us the chance to go to their facilities in D.C., but also have them visit our facilities in Research Triangle Park here in North Carolina. They've had an ability to be on-site with us. Whether they're going to need an on-site inspection or whether that's done virtually at this point is unknown, and we'll keep you guys abreast of that as we get clarification.
Got it. Thank you.
Sure. Sure.
We have no further questions. I'll now turn the call back over to Neal Fowler for closing remarks.
Yes. I want to thank everyone for joining us on the call today, and we appreciate all the questions as always. We appreciate everyone's continued interest and investment in Liquidia and look forward to updating you on our progress throughout the rest of the year. Again, thanks at the end of the day, and have a great evening.
Thank you. This does conclude today's conference call. You may now disconnect your lines.