Good morning, ladies and gentlemen. My name is Jane, and I will be your conference operator today. I would like to welcome everyone to the Liquidia Technologies second 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 an answer session. Instructions will be provided at the time for you to queue up for questions. If anyone has any difficulties hearing 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, Business Development and Strategy.
Thank you and good morning. Welcome to Liquidia Technologies second quarter 2019 financial results and corporate update. 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 www.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 to everyone. Thank you for joining us. I'm here with Richard Katz, our Chief Financial Officer, who joined us in May. Rich has already had an immediate and positive impact on the company, and I'm excited to have him join me today. 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 second quarter of 2019, and then I'll wrap up with an update on upcoming key milestones. After our prepared remarks, we'll open the call for your questions. I'll start with some recent important highlights. We shared additional data in May at the American Thoracic Society's international conference from the INSPIRE study on the positive impact of LIQ861 in patients with PAH, as shown in exploratory endpoints.
We continued treatment of the vast majority of INSPIRE patients beyond the primary endpoint at month two. We strengthened our understanding of administration technique and emitted dose in connection with our continued PK work. Lastly, with an eye to the future, we amended our agreement with GSK to provide Liquidia the ability to pursue additional inhaled products using our PRINT technology. With those highlights in mind, I'd like to provide some additional details on our activity in the last quarter, starting with LIQ861. As a reminder, LIQ861 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 LIQ861 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 inhaler. Over the course of this year, we've shared a host of exciting data on LIQ861. I'd like to summarize where we are as we now prepare for NDA submission. We've met the primary endpoint of our pivotal study, demonstrating a favorable safety and tolerability profile of LIQ861. We have encouraging data on both physical and emotional benefits of LIQ861, as shown in exploratory endpoints. We continue to observe a high rate of continuation on therapy and are encouraged that over 90% of patients remained on LIQ861 at the 2-month time point.
We've been very pleased by the positive reaction to data from the pivotal INSPIRE study recently shared at medical conferences and the enthusiasm from the PAH community at large. As our confidence in the therapeutic benefits of LIQ861 continues to increase, so too does our understanding of the PK results we've observed. We reported in June the outcome of a phase I study in healthy volunteers. Post hoc analysis from this study showed that plasma levels of treprostinil were tightly correlated to the LIQ861 dose delivered. However, we also observed some unexpected variation in plasma levels. After further clinical and non-clinical investigation, we believe the variation was related to an administration technique unique to the conduct of the study at the phase I unit. We plan to complete the PK work expeditiously and continue to target NDA submission by the end of the year.
As to the GSK agreement, while the LIQ861 NDA is clearly our top priority, we were excited to announce in June the amendment to our GSK agreement. We now have an opportunity to expand the Liquidia pipeline by leveraging the demonstrated benefits of inhaled PRINT particles. We have acquired rights to pursue PRINT programs based upon three specific molecules and a mechanism to acquire further molecules with GSK's approval. Each of the new inhaled programs provides GSK with milestones and royalties, beginning with the start of a phase III trial, as well as the right of first negotiation should Liquidia choose to seek a partnership for that program. We're excited to have the opportunity to add inhaled programs to our future pipeline. As it pertains to our pipeline, I'm pleased to report that our LIQ865 program is on track.
We are targeting the start of phase II studies in the first half of 2020. As a reminder, LIQ865 is a PRINT formulation of bupivacaine to treat local postoperative pain for three to five days with a single administration. The supporting toxicology studies are in progress, and the organization is making the necessary preparation to have drug product ready for clinical studies. In summary, we've made meaningful progress across our clinical programs and are keenly focused on delivering on the 2019 milestones. I would now like to turn the call over to Rich to review our second quarter financial summary.
Thanks, Neal. Good morning, everyone. Let me briefly summarize our results for the quarter. Revenues were $8.1 million for the second quarter of 2019, and that compared with $1 million for the second quarter of 2018. This increase was due to the recognition of $8.1 million of previously deferred revenue as revenue as a result of our determination that the earnings process with respect to our GSK collaboration had been completed upon completion of the amendment that Neal referred to. Cost of sales were $0.8 million for the second quarter of 2019, and that compared with $0.1 million for the second quarter of 2018. The cost of sales simply represents the sub-licensing fees that are paid to UNC when we recognize licensing revenue, and that was, of course, then in connection with the GSK agreement as well. R&D expenses, as expected, were $10.7 million.
That's up from $5.9 million in the prior year, a comparable period. The increase was largely driven, of course, by the ongoing clinical costs related to 861. G&A, $2.4 million for the second quarter of 2019, compared to $2 million for second quarter of 2018. Expected increases primarily due to employee-related expenses, including stock-based comp, and of course, public company costs. In total net loss, $5.9 million compared to $6.3 million for the second quarter of 2018. The slightly narrower loss was largely driven by the recognition of the $8.1 million of deferred revenue, again, related to the GSK collaboration, and that was partially offset by the increase in the operating costs that I noted. Cash at the end of the quarter was $52.1 million, and we ended the quarter with 18.6 million shares. Let me turn it back to Neal.
Thanks, Rich. I'm proud that our team has continued to execute as planned against our goals for the year. The focus is very clear for the remainder of the year. We want to target submission of our NDA for LIQ861 by the end of 2019, release the additional longitudinal data from the INSPIRE trial during the fourth quarter of 2019, and complete toxicology studies that support LIQ865 and prepare for phase II trials. To recap where we are but also where we're heading, we believe that LIQ861 represents a transformative change in delivering a prostacyclin analog directly to the lung. The positive feedback from physicians has been consistent and frequent. Through the study, we believe Liquidia has clearly helped raise awareness of an unmet need, which we will strive to be the first to meet. We won't stop with one program.
We intend to leverage our PRINT technology to build a robust portfolio of innovative programs. With 865, we're excited about the potential to improve the treatment of postoperative pain, and we have clear ideas for how to build new inhaled programs leveraging the benefits of precise uniform PRINT particles. We look forward to updating you on our progress in the coming months. Our next investor presentation will be at the 2019 Wedbush PacGrow Healthcare Conference next week on August 13th in New York. We look forward to continuing to update you and want to say thanks for your interest and continued support, and I'll now turn the call over to the operator to take your questions.
Ladies and gentlemen, if you have a question at this time, please press star one on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Your first question comes from Stacy Ku from Cowen and Company. Your line is open.
Good morning. Thank you for taking my questions, and congratulations on the progress. First, just to remind us, what has been the evolution of the PAH treatment landscape? Where do you think LIQ861 will fall? Will the initial target be conversions from TYVASO? I have a follow-up.
Sure, Stacy. Thanks. In short, I'll give you just a quick historical context. When we entered the interest in this program years ago, our initial thinking was simply the convenience of a dry powder inhaler would trump a nebulized type of approach just simply out of convenience for the patient. One of the things we wanted to see in the clinic was an improved therapeutic profile thanks to our PRINT particle technology. In fact, that's been the case. We are very optimistic about the potential for LIQ861 in that you have the convenience of a DPI over current nebulized therapies that are out there.
As demonstrated in our phase III study, one of the things that you may recall is that there was a lot more upfront use for patients that were previously naive to inhaled therapies, just because of simply being able to use a dry powder inhaler, and we think that will expand, if you want to think of the disease in an upstream fashion for where nebulized therapies are today. Also importantly, because we're able to dose treprostinil at higher levels thanks to our particle technology. That may potentially prolong the ability to stay on inhaled therapies and thus potentially delay the need for parenteral therapies downstream.
We think, in short, this not only is a replacement for available inhaled therapies that are out there today, but for an expansion, or I call it a re-engineering of the inhaled space as we know it today in the treatment of PAH.
That's really helpful. If I may drill down into the details, could you offer any additional commentary on the PK sub-study? Roughly how long does it take for the healthy volunteer PK study to read out? Are there any other remaining gating factors for NDA submission? For instance, would the FDA want to test the maximum tolerated dose of LIQ861? Thanks.
Sure. I'd be glad to address that. The PK question first. This has gone really according to plan coming out of the last call that we had with everyone. We wanted to do both non-clinical and a clinical look. Our assumption from the beginning had been that there was simply an administration technique issue at the site based on the positive results we'd seen in the phase III study. We needed to go in and take a look at that and prove that, and in fact, we've done that. Our remaining step in that process now is to go in and simply redo the actual PK work now itself. That will go quite quickly. We're able to get those data, still get our final study report in time to get our NDA in by the end of the year. That is all according to plan.
As it pertains to your second question on the MTD, we're not required to find the MTD for our submission. We are very interested through time in trying to understand where that is, and we'll continue to study that. We have a patient that has been at a 200 microgram dose, for example, with our LIQ861 product. Has continued to do well. We'll continue to follow these patients, as you know, longitudinally through time, and as we continue to learn more about higher doses, we'll certainly share that with the marketplace.
That's great. Thank you.
Sure.
Your next question comes from Liana Moussatos from Wedbush Securities. Your line is open.
Thank you for taking my questions. What additional eight six one INSPIRE trial data are we going to see in Q4? What's the runway for the cash?
Hey, Liana. This is Neal. Maybe I'll take the first question, and I'll let Rich handle the second. As it pertains to longitudinal data, it will be consistent with what we've churned out, for example, with the two-week and two-month data that you've seen so far this year. We will continue even beyond the four-month mark through time to report both adverse event data as well as our secondary endpoints, which include quality-of-life measurements that are consistent with what you saw earlier this year, as well as things like six-minute walk. We want to follow those patients through the long haul, and we'll continue to report those data out as they become available.
On your second question, cash runway, we have cash into the second quarter of next year of 2020. We are obviously looking at a variety of means of continuing the financing of the company well beyond that. We're very excited about the program. We want to drive this forward as aggressively as we possibly can, and so we will look at all alternatives to fund the company appropriately.
Thank you for taking my questions.
Sure.
Sure.
Your next question comes from the line of Serge Belanger from Needham. Your line is open.
Hey, good morning, guys. This is Tan Ong for Serge. I just had a couple. With respect to LIQ861, I think you were planning a pre-NDA meeting with the FDA. Has it completed? Has there been any dialogue there? With respect to the PK study, I think you mentioned about some potential differences in the administration technique of the patients. Do you think there's anything there that you can maybe mitigate the issue? Lastly, in terms of your ex-US strategies, I think you mentioned in the past you're looking for a potential partner. Do you have any update there, and what are your next steps? Thank you.
Sure, Tan. Thanks so much for your questions. I'll try to hit these in order here. Your first question about pre-NDA meeting, we will be scheduling that consistent with what we had mentioned earlier. Typically, I don't want to put words in FDA's mouth here, but typically, we'll ask for a meeting that will occur early part of the fourth quarter, which would then set us up for the NDA filing, which would be at the end of the year. We don't have a specific date set yet on that, which we wouldn't expect, but that will be coming in the not-too-distant future. As it pertains to the dosing, the technique variability was really directed solely to the site. We've had very consistent feedback from both our clinical trial sites throughout the trial design, as well as we constantly are monitoring and checking for that.
The administration's going quite well in the trial site-- I'm sorry, in the trial setting of a phase III study. This phase I work that we had done, the technique was in essence, somewhat overcontrolled in that they followed a certain protocol that led to variability, and we were able to quickly see where that occurred. It was a hunch from the beginning. We just needed to go back and show ourselves that, which we did, and now we want to just repeat that PK work. We feel very confident about our ability to move forward on that. The last question, I'm sorry, was.
Ex U.S. partners.
Oh, yeah, Ex-U.S. partners. Thanks. As it pertains to partnering, as you would imagine in the drug industry, when you get phase III data, it incites a lot of interest from folks. We're taking a look at all alternatives, as Rich said. We want to be very smart about how we do that. From the beginning, as you know, we're very intent on creating a commercial presence and a fully integrated pharma company through time. What an exact structure of a partnership like that remains to be seen, what it would finally look like and ultimately. I don't want to give any guidance that says we're absolutely going to do a partnership, but we're entertaining discussions. We'll continue to do that, all things are on the table for us as we assess the optimal way to go forward.
Great. Thank you for the color.
Sure.
Next question comes from the line of Chris Harrison from Jefferies. Your line is open.
Great. Good morning. Thanks for taking the questions. I think for the most part, my questions have been asked, but, I guess perhaps just a clarification, Neal, on when you say, we're just going to redo the PK work, does that mean you're going to collect additional samples from healthy volunteers, or it's just biochemical analysis of the samples you already have in hand?
Yeah, Chris. Sure. To clarify that, we will redo in healthy volunteers that work. It is actually very quick for us to do. What we are essentially just going to do is double down on the technique changes that I have alluded to earlier, and we will go back in on additional patients, and be able to show that via blood levels in those particular healthy volunteers.
Okay. Got it.
phase I work, it'll move very quickly.
Right. Essentially, you've identified the kind of problem with the conduct of that phase I trial.
That's correct.
have remedied it and plan to redo it. Got it. Okay.
That's correct.
Okay. I don't know if you're able to give more details or more information around the potential strategy on other programs or maybe even just what features Liquidia might find attractive in additional pipeline programs, as we all expect success with the current ones.
Yeah. Commentary there is PRINT, again, a quick backdrop on PRINT. It offers immense landscape for us in terms of portfolio opportunities. We have not found any limitations to date with where PRINT can be used in terms of actives, or route of delivery, which opens up an immense real estate there for us. That said, we want to stay very smart about how we look at our pipeline, and we try to typically, as we've done in the past, build off of expertise that we already have created through time. That was what drove a lot of our discussion with GSK to do additional inhaled assets, since we now have really good capabilities on the inhaled space.
We have very specific ideas about where we would like to move in the inhaled space, building off of our LIQ861 capabilities, as well as the potential for very differentiated molecules there. Also, again, as demonstrated with our sustained release capabilities that we learned early on, years ago in ophthalmology that then translated to 865, we'll be smart to build off of that. We can't do everything at once, we've got to be smart about how we build that out from the standpoint of focus and expenses. We want to continue to build out over the longer haul, a great arsenal of portfolio opportunities, our goal here is to have a steady stream of pipeline candidates through time.
Great. Okay. That's really helpful. Then maybe for Rich, in terms of thinking about cash resources and appropriate deployment of those to execute on your programs, maybe you could give us some strategies around cost savings or additional capital resources that we can get past the stated runway you said, which I think was either into the second quarter or through the second quarter of next year.
Yeah. Thanks, Chris. We did say into the second quarter. Yeah, no, it's a great question, and we are actively looking at everything. In terms of cost, let me start with cost-cutting. The program has certain fixed costs and our manufacturing infrastructure has certain fixed costs, and we do want to continue to move forward with LIQ865, that we're very excited about as well. The company is pretty lean as it is. Of course, we always are looking for opportunities for cost savings, but that's not going to meaningfully change the runway. We need to extend the runway clearly through additional cash resources. Neal alluded to the interest that we've had in LIQ861, which we've been very pleased by.
I think that, as Neal mentioned, there are not a lot of programs at this stage of development, and with this commercial potential in front of them, and frankly, with this degree of confidence in a strong outcome. We've had lots of what I would call inbound interest, and we are assessing that and having the appropriate discussions. I can't really comment further than that except to say, as Neal mentioned, I'll just reiterate that in anything that we might consider doing, our intent here is to become a commercial organization and to have a significant role in the marketing and sales of our lead program and really use that as a launchpad as we think about bringing other programs through clinical development and ultimately to the market as well. Our intent is to become a fully integrated pharmaceutical company.
That said, partnering opportunities are not the only way to fund a company as you know. There are other alternatives as well, other dilutive and non-dilutive alternatives. We're assessing all of those, and we'll keep you updated as we progress with the discussions. I hope that was able to address your question.
Yeah. No, I really appreciate it. Thank you very much for taking the questions.
Absolutely.
Thanks, Chris.
Again, if you have a question at this time, please press star, then the number one on your telephone keypad. Again, press star, then the number one.
I think we're done. I guess that's it. Ali, again, Neal here just saying thanks to everyone for joining the call today. We, as always, appreciate everyone's interest, and the investment in Liquidia, and we look forward to being in touch, and updating you on our continued progress. Thanks to everyone, and have a great day.
That does conclude our today's conference call. You may now disconnect.