Good morning, ladies and gentlemen. My name is Shannon, and I will be your conference operator today. I would like to welcome everyone to the Liquidia Technologies third quarter 2019 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 your 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 call is being recorded. I will now hand the call over to Jason Adair, Vice President, Corporate Development and Strategy.
Thank you and good morning. Welcome to Liquidia Technologies' third quarter 2019 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.
Good morning, everyone, and thank you 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. This morning, I will summarize our recent accomplishments and provide an update on our two pipeline programs, LIQ861 and LIQ865. Rich will provide a brief summary of financial results for the third quarter of 2019, and then I will wrap up with an update on our upcoming key milestones. After our prepared remarks, we will open the call for your questions. Important highlights include we completed the registrational studies of 861 to support our NDA submission, including the comparable PK program. We initiated clinical studies to evaluate long-term safety, tolerability, and hemodynamic effects of 861.
We are engaged in pre-NDA meetings with FDA in preparation for the NDA submission targeted for the first quarter of 2020. We continue the tox studies for 865 with the goal of supporting a phase II clinical program. With those highlights in mind, I'd like to provide some additional details on our activity in the last quarter, starting with our lead program, 861. As a reminder, 861 is an inhaled dry powder formulation of treprostinil, a prostacyclin analog used to treat PAH by targeting the pulmonary arteries. It combines the demonstrated benefits of inhaled prostacyclin therapy with fewer systemic toxicities than oral or infused options. 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 disposable dry powder inhaler.
To date, we have generated a robust set of information on the safety, tolerability, and clinical benefit that 861 may provide PAH patients transitioning from TYVASO or those naive to prostacyclin therapy. As we evaluate the totality of the data collected, I wanted to point out a few highlights from the program today.
Final enrollment in the pivotal INSPIRE trial to assess safety and tolerability through month two included 121 PAH patients in two groups. 55 patients transitioned from a stable dose of TYVASO, or transition patients, and 66 patients who were prostacyclin naive and stable on less than two approved oral PAH therapies, known as add-on patients. Consistent with preliminary data presented in the second quarter of 2019, 861 was observed to be well-tolerated. Treatment emergent adverse events were mostly mild to moderate in nature, even at the highest dose studied, the 150 microgram capsule strength of 861.
Most patients remained on treatment throughout the study, with 96% of transition patients and 91% of add-on patients receiving treatment to month two. More than 80% of add-on patients titrated to the 75 microgram capsule strength of 861 or higher within the first two months of treatment. More than 90% of all patients who completed two months of treatment maintained or improved their New York Heart Association functional class. Lastly, both patient groups saw improvement in exploratory measures of six-minute walk distance and quality of life as measured by the Minnesota Living with Heart Failure Questionnaire. Though the primary endpoint of INSPIRE was at the month two time point, we continued to treat patients who chose to remain on LIQ861.
We were pleased to see that more than 80% of INSPIRE patients remained on study drug at month four, with no significant changes in safety or tolerability compared to month two. In addition to completing the INSPIRE study, we were also pleased to complete a second supplemental PK study. The results further confirmed the comparative bioavailability of the 75 microgram capsule strength of 861 to 54 micrograms or nine breaths of TYVASO, the reference-listed drug. We expect to present the clinical data from INSPIRE and the PK studies in greater detail at medical conferences and in publications during the course of 2020. With the INSPIRE study closed, we are actively managing two clinical trials with 861. First, we have transitioned INSPIRE patients who wish to continue 861 treatment into an open- label extension study, which we plan to continue until potential FDA approval.
Secondly, we are also enrolling patients in a clinical study in Europe to characterize the hemodynamic dose response relationship to 861. The company is now preparing to submit the NDA for 861. To that end, we have actively engaged the FDA in pre-NDA meetings. During the third quarter, we hosted the FDA at our site as part of their Emerging Technology Program. Their visit helped facilitate the pre-NDA CMC meeting a month later, where we confirmed no new CMC requirements for an NDA submission. Our pre-NDA meeting to discuss clinical and non-clinical matters of the NDA will be conducted later in the fourth quarter. Pending a successful meeting, we continue to target an NDA submission in the first quarter of 2020.
With regard to LIQ865, significant progress has been made with our lead program, as I mentioned before, and we continue to advance our second program, 865, which is a PRINT formulation of bupivacaine to treat local postoperative pain for three to five days with a single administration. In preparation for phase II studies, we're conducting a toxicology program to assess 865 in multiple non-clinical tissue models. In one study to assess incision tensile strength after healing, results were acceptable and not statistically significant from controls. In a second study to assess bone fracture healing, we observed dose-dependent delayed healing at the two 865 doses studied. However, there were no adverse effects noted on the surrounding soft tissues. We're planning to study lower doses of 865 to determine a no adverse effect level on bone healing.
Lastly, we expect results from an additional soft tissue toxicology study later in the fourth quarter. Results from all of the toxicology studies will be reviewed, and if supported, we intend to initiate phase II program in 2020. I would like to turn the call over now to Rich to review our third- quarter financial summary.
Thanks, Neal. There were no revenues that were recorded during the third quarter of 2019. That compared to $0.2 million for the third quarter of 2018. That decrease, you will recall, was related to the full recognition in the second quarter of 2019 of the $8.1 million previously deferred revenue in connection with our collaboration with GSK. R&D expenses were $10.9 million. That compared with $7.2 million in the prior comparable quarter. The increase was primarily due to the continued development of LIQ861. G&A was $2.4 million compared to $2.3 million, a slight increase, mostly employee-related and professional fees. Interest expense $0.3 million versus $0.6 million in the comparable quarter of 2018. That was driven by a decrease in our debt outstanding. In summary, our net loss for the quarter was $13.4 million. That compared to $9.7 million.
Again, the difference was driven pretty much entirely by the increase in the R&D expenses related to 861. I would also note that we're looking to bolster the balance sheet, of course, as we move into 2020. We are exploring all funding options, including a potential partnership around 861, and we're pleased to be working with Jefferies on that effort. I'll turn the call back to Neal.
Thanks, Rich. 2019 has been an amazing year for Liquidia. We've advanced our pipeline, we've further demonstrated the benefits of our PRINT technology, and in the process, increased the potential for positively impacting patients' lives into the future. With clear and meaningful progress against our goals in 2019, we're very excited for the year ahead. Specifically, we intend to submit the NDA for 861 in the first quarter of 2020. We'll continue to present and publish clinical data from the 861 program and complete our 865 toxicology studies with the goal of initiating our phase II program in 2020. We look forward to updating you on our progress in the coming months. We thank everyone for their interest and continued support. I will now turn the call over to the operator to take your questions.
Ladies and gentlemen, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from Liana Moussatos with Wedbush. Your line is open.
Thank you for taking my questions. Can you tell us what the steps are to submitting the NDA, and if any are rate- limiting? Remind us the FDA has 60 days to respond, and you don't expect an AdCom because it's 505(b)(2)?
Yeah, Liana. Good morning. This is Neal. Really, our final remaining step in the process from here with regard to direct FDA contact will be a meeting that we have later in the quarter that will review our clinical and non-clinical tox program. From that, it's essentially an internal process of finishing up the final documents to submit the NDA in the first quarter.
Okay, the FDA has 60 days to respond after you submit?
Yes. That's the refuse-to-file period. We don't anticipate an advisory board being conducted for our product at this time.
Okay. Then remind us of your pre-launch commercial plans and the current status?
Yeah. You may recall, Liana, we began to assemble a commercial team last year with regard to preparing ourselves for a launch. The program is right on track. We're doing all of the necessary work to be commercial- ready. In particular, we've spent a lot of time this year, everything from name of compound to working with payers, to assessing all of the requisite sales and marketing efforts that'll be needed there, and we feel very good about where we are right now in process on that.
Okay. Are you in talks with potential commercial partners now?
That is correct. To Rich's earlier point, as you would imagine, I've said this before, when you begin to get a much more advanced, further de-risked phase III product, the good news is it brings folks into conversation with you about that. We have begun entertaining conversations around that. I don't want to give guidance that we're definitely going to do a commercial partnership by any means; we're looking at all alternatives here. Part of that, to Rich's point, has to do with our balance sheet; we want to be smart about thinking about the opportunities there, also, as you would imagine, be very attuned to making sure that we optimize 861 for its commercial success with the right partner that together we could optimize what the product does.
Okay, how many patients transitioned to the open- label extension?
Yeah, the majority of the INSPIRE patients transitioned into the extension study. We're not really commenting on enrollment, as right now we're just collecting long-term safety data from that study.
You would view those as low-hanging fruit for commercialization?
Those patients are eligible at the time of 861 approval to transition to commercial patients.
Okay. My last question: What's the manufacturing status and inventory that you anticipate at launch?
Yeah. Liana , I guess what I would just say to that is we are in great shape with regard to commercial readiness on the manufacturing piece. We don't stipulate exactly what type of scale we have on supply on that. Suffice it to say, we're well ahead of where we would need to be with regard to that, and supplying the commercial market's not an issue here.
Thank you very much.
Thank you. Our next question comes from Ken Cacciatore with Cowen and Company. Your line is open.
Hey, good morning, guys. Congrats on all the progress. Just wanted to see if you could put some perspective around the discontinuation rates that you saw at two months and four months. Maybe some of the reasons, if they're standard and what it would look like compared to TYVASO. That would be question one. Then in terms of the potential partnering program, can you just try to frame for us what would be of interest to you? Do you want to retain a little bit of a smaller sales force, or would you like a bit of an upfront to be able to also participate in market? I know you're in the middle of having conversations, but give us a sense of what you'd like to see out of the outcome of some of these types of discussions. Thank you.
Sure, Ken. This is Neal. Thanks a lot. I'll let Rob handle your first question, and I'll come back in on the second. Rob.
Hi, Ken. We were really encouraged by the high rate of continuation, greater than 80% at month four. Really, the adverse events were not really that different that we've seen at month two versus month four, and the reasons for discontinuation come in a number of buckets. Some adverse events, some patient requests or physician decision. These are pretty common in all studies with prostacyclin, all studies with PAH. As you know, these patients do progress in disease. We have not seen too many disease progression at month four, which is important. Also, the primary endpoint of the study was at two months, for various reasons, patients that discontinued after that point. As far as it compares with TYVASO was in a different age. The types of AEs were similar, obviously.
With TYVASO, patients were either on one oral background therapy, and the next stop, if you will, in their treatment regimen was parenteral prostacyclin. In today's world, there's a lot more options for patients, too. It's a difficult comparison to make.
Ken, with regard to your second question, not to be vague, but it somewhat depends. We're fielding an array of opportunities here. What I would say is in general, on deal structure, as you would imagine, the more "control" you give up with that is going to require more of an upfront. It's a little bit of a hydraulics exercise in the amount of the upfront kind of threaded with the downstream that comes with that. We're assessing that. Again, I don't want to give guidance that we're going to take one model or the other because everything's on the table with regard to that. We've got the enviable issue here of a really great opportunity in our pipeline.
We're trying to wade through what the right thing to do for 865 is in terms of involvement and control, as well as the future in terms of all the opportunities that we have. It's going to take us a few weeks to go through that process, but we'll obviously keep you guys posted as we come to conclusions on that.
861.
Oh, I'm sorry. I said 865. Sorry about that. Yeah. Sorry. I meant 861, Ken.
Great. Thank you.
Sure.
Thank you. Our next question comes from Serge Belanger with Needham. Your line is open.
Hi, good morning.
Hi, Serge.
A couple questions on 861. First, can you just, I guess, talk about how you address the comparative PK sub-study? I think during your last update, you had talked about potentially repeating all of it or part of it. Should we expect any additional longitudinal data before year-end here? Last question is, talk a little bit more about the hemodynamic response trial that you're initiating in Europe and how that could play in either with labeling here in the U.S. or maybe European regulatory plans.
Sure, Serge. This is Rob Roscigno. I was just taking some notes on that. With the PK, if you recall, we did previously state that we did repeat the PK study in healthy volunteers, and it confirmed the comparative bioavailability of the 75 microgram capsule strength of 861 when compared to the 54 microgram dose for nine breaths of TYVASO, looking at comparable treprostinil systemic exposures. We believe that this does support the requirements for a PK bridge in our 505(b)(2) submission, and we intend to present this data at upcoming medical conference. That's the PK. With regards to the additional data before year-end, we've actually prepared and plan on presenting this data at upcoming medical conferences. As they are accepted, we will clarify for you guys when they're coming out. Both the 301 data and the PK data, our plan is to present as accepted.
With regards to the hemodynamic study, I'm glad you asked me that question. That study has started. We're enrolling patients in that study. We're excited because this will show us the impact of LIQ861 on right heart function as assessed by both acute and chronic hemodynamic measurements. That data is not required or expected to be in the NDA submission that we're putting in shortly; that data will be very useful to support the therapeutic benefits of LIQ861. There's always opportunity, potentially, for that study to be included in a later label update. We do look at this study as a first study outside the U.S. While we're not focused on pursuing European approval now, that study will lay a good groundwork for future development work.
Okay. Just one quick one on 865. I guess, what are you looking to see in these next toxicology studies? Assuming you initiate a phase II program next year, would that entail a soft tissue procedure study as well as a bone procedure study?
Yes, Serge. Thanks for the question. There are two pieces that are still out there for us on the tox pieces. I indicated one of those; we're still waiting to get the soft tissue tox data in. We need to do a little additional bone work with regard to dosing. We want to look at that. We're going to look at lower doses. We went in at high doses. We want to look at lower doses there and see what that response effect would be. As it pertains to phase II, while we're not giving guidance about which studies exactly and that kind of thing, because I think we're still working through that, too. We want to be informed by the data.
If we just look at a roadmap of what's been out there with regard to the Pacira and Heron development stories, it would indicate that most likely it would be a bone and a soft tissue study at some point in our horizon. Exactly the timing and sequencing of that will all be led by the tox data.
Got it. All right. Thank you.
Sure.
Thank you. Our next question comes from Roger Song with Jefferies. Your line is open.
Hey. Thank you for taking the question. Maybe just a few quick ones from us. First of all, for the open- label extension study, how much do you expect the long-term follow-up needed for the approval?
For approval, Roger. Hi, this is Rob again. FDA, if you recall, only asked for two weeks of safety data, two weeks of exposure. The primary endpoint of INSPIRE, which is the main clinical study in our NDA package, shows a two-month endpoint. The open- label extension was provided for those patients who may be benefiting from LIQ861 that would give them the opportunity to stay on LIQ861 long-term and allow us to collect longitudinal data, not so much for FDA, but more for the clinician, the medical community to understand the long-term safety profile as well as potential benefits of LIQ861. Those patients would be eligible to stay on LIQ861 all the way through potential FDA approval.
Got it. Thank you. Maybe next question related to the competitor. We noticed MannKind and United Therapeutics, they just launched the phase III, phase I study for TreT. They're very interesting. They focus on the TYVASO switcher or transitioner. First of all, what's your view on their program, and how do you think the 861 will have a differentiated label or potential profile compared to TreT?
We don't want to speak any way, shape, or form on behalf of MannKind or United about their program. What we have seen from their data in terms of their pharmacokinetics was limited in their phase I. As you recall, in our earlier study of phase I, we actually dosed to 150 micrograms, which was approximately double of the recommended dose of TYVASO. We can't really say too much about their program. They're focusing on one population. We're focused on both the traditional inhaled population space, where TYVASO is the main drug of choice. Also, because we're looking at add-on patients, we're looking at patients who are upstream and patients who are less sick. If they can start a product such as 861 earlier, we could potentially be an alternative not only to the inhaled therapies, but also some of the oral therapies.
Yep. Got it. Thank you. Maybe just one last question regarding the 865. Are you surprised about the delayed bone healing at all? Is that related to PRINT technology or bupivacaine, the molecule per se?
Yeah. Roger, thanks. We're not surprised per se. There has been some evidence that with bupivacaine is out there, and we want to understand that. That's in essence why we want to go in and look at some of the dosing data on that. I think it's too early to draw any conclusions. That's why we want to do some additional work, and look at that, and obviously, we'll keep you guys informed as that goes forward.
Got it. Thank you. That's all from me.
Sure. Thank you.
Yep.
Thank you. Once again, ladies and gentlemen, if you wish to ask a question at this time, please press star then one on your touchtone telephone. Our next question is a follow-up from Liana Moussatos with Wedbush. Your line is open.
Thank you. My question was just asked and answered.
Oh. Thanks, Liana.
Thank you. I'm currently showing no further questions. I turn the call back over to Neal Fowler for closing remarks.
Thank you very much. I just want to thank everyone again briefly for your time this morning and your interest as always. We look forward to the months ahead, and we'll keep you guys informed as progress continues. Thanks again. Everyone have a good day.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.