Good morning, welcome everyone to the Liquidia Corporation corporate update call. My name is Liz, 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 call over to Jason Adair, Senior Vice President, Corporate Development and Strategy.
Thank you, Liz. It's my pleasure to welcome everyone to this morning's call. Joining us today are Chief Executive Officer, Roger Jeffs, Chief Medical Officer, Dr. Rajeev Saggar, Chief Financial Officer, Michael Kaseta, and other members of the management team, who will be available to answer questions at the end of the call. 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 for your questions. Roger?
Thank you, Jason, and thank you everyone for joining the call today. With today's announcement, Liquidia has created the industry-leading portfolio of inhaled treprostinil products as the market rapidly expands into pulmonary hypertension with interstitial lung disease, or PH-ILD, and inevitably shifts away from oral and infused prostacyclins to treat pulmonary arterial hypertension, or PAH. It is a transformational time for patients and for Liquidia. Before jumping into the details of today's announcement, I wanted to take a moment to remind you of what drives our team at Liquidia. Our primary motivation has been to provide novel products and better choices to improve the quality of life of patients. To date, our focus has been launching YUTREPIA, a product that we believe will quickly establish itself as the first choice prostacyclin to treat PAH and PH-ILD.
We expect to resolve the outstanding litigation with United Therapeutics in the near future, in so doing, hope to usher in the next chapter of Liquidia's evolution and a period of rapid growth. We are actively making investments with success in mind. We're expanding the sales force. We are building commercial supply. We're developing a new pump to infuse treprostinil subcutaneously. As announced today, we are seeking partnerships that are synergistic with our disease expertise and growing commercial presence. Our ultimate goal is to ensure that all of Liquidia's products can serve the widest population of patients based on their specific needs, which brings us to today's news. I am very excited to announce our partnership with Pharmosa Biopharm and the future development of L606 in North America. Pharmosa has developed a sustained-release liposomal formulation of treprostinil that is inhaled twice daily through a next-generation nebulizer.
Our confidence in the program was bolstered significantly by the ongoing open label study in the United States that has demonstrated early clinical proof of concept, including the ability to switch Tyvaso patients to L-six oh six. L-six oh six provides several advantages to patients, which include less frequent dose administrations, more consistent drug exposure over 24 hours, improved tolerability via lower peak exposure, and a delivery via a modern next gen nebulizer with DPI-like portability. With the highly portable next gen nebulizers, patients can inhale L-six oh six within the comfort of their own breathing pattern in about 1 minute or less.
L606 also provides the opportunity to demonstrate a PK advantage that could translate to better out, given the more consistent drug exposure during the day, but more importantly, during sleeping hours, which has only been available to date by continuous infusion. I'd like to ask Dr. Saggar to expand on the details of the program and our path forward, followed by Mike to summarize the financial transaction. Rajeev?
Thanks, Roger. When I joined Liquidia last summer, I was excited to be part of the new wave of innovative products for patients that I've personally treated for almost 2 decades. Consistent with current guidelines, prostacyclins remain the gold standard for treatment for pulmonary hypertension. I truly believe that inhaled treprostinil has the highest clinical utility of all prostacyclins and will emerge as the foundational treatment for PAH and PH-ILD. Sustained-release formulations are the next obvious place to consider, and we have been encouraged by the preliminary data from the ongoing study of L-six oh six. Specifically, L-six oh six is a liposomal formulation of treprostinil, which acts as a drug depot when nebulized to the deep lung, where local concentrations of salts control the release of treprostinil. Additionally, the liposomal formulation should help shield the upper airway to treprostinil during inhalation, mitigating irritation seen in current nebulized treprostinil formulations.
During our due diligence, we reviewed data from 2 clinical studies with L606: a phase 1 study in healthy volunteers to assess tolerability and PK, and an ongoing open label phase 3 study in PAH patients. In the phase 1 study of 51 subjects, L606 was well tolerated and extended detectable plasma levels of treprostinil for up to 12 hours with no burst release. Peak plasma drug concentrations, or Cmax, were 8 times lower than those compared to Tyvaso and total drug exposure, or AUC, supported twice-daily dosing. In an ongoing phase 3 study, we are pleased to see that patients transitioning from Tyvaso to L606 have safely administered doses of L606 that are similar in daily drug exposure to that of 18 breaths of Tyvaso 4 times per day.
No maximum tolerated dose has been observed, with some patients being on treatment for more than 48 weeks. Over the next few years, we intend to accelerate the great work that Pharmosa has completed to date. The path to regulatory approval is straightforward and informed by the FDA interactions. We expect that the clinical studies required to support approval for both WHO Group 1 PAH and WHO Group 3 PH-ILD indications via the 505(b)(2) pathway will be, 1, demonstrating comparable PK to Tyvaso nebulized in healthy volunteers, which has already been completed. Second, demonstrating safety in an open label patient study, which is currently ongoing in PAH and PH-ILD. And third, in parallel, demonstrating safety and efficacy in a single sentinel placebo-controlled trial currently planned for WHO Group 3 PH-ILD.
Our clinical team will focus on accelerating enrollment in the open label trial, which has been restricted to PAH patients transitioning from Tyvaso. Pharmosa's recent protocol amendment will be implemented in July and will expand enrollment to include PAH and PH-ILD patients transitioning from Tyvaso or Tyvaso DPI, as well as patients naive to inhaled treprostinil. Concurrently, we are preparing to initiate the PH-ILD study in the H1 of 2024. We look forward to sharing more details about these trials in the very near future. I'll turn our call over to Mike. Mike?
Thanks, Rajeev. In order to get to the Q&A session more quickly, I will focus my comments on what was issued in today's release. Our exclusive license with Pharmosa allows Liquidia to develop and commercialize L606 in North America, where we will be responsible for all development costs leading to registration. The deal structure allows each party to apply its core competencies in drug development. Liquidia will accelerate the first approval in the largest market, and Pharmosa can focus on manufacturing and supply. Pharmosa will receive an upfront payment of $10 million and is eligible to receive potential development milestone payments of up to $30 million tied to PAH and PH-ILD indication, sales milestone payments of up to $185 million, and two tiers of low double-digit royalties.
Pharmosa is also eligible for additional $10 million milestones for each additional indication approved after PAH and PH-ILD and each additional product approved under the license. In support of today's announcement, HealthCare Royalty has funded Liquidia $10 million from the revenue interest financing agreement announced in January 2023, of which $7.5 million was previously contemplated in tranche 2 to support business development initiatives. In further support of this deal, HealthCare Royalty has agreed to advance an additional $2.5 million from the $25 million fourth tranche. To date, $42.5 million of a total potential amount of $100 million have now been funded to Liquidia under the agreement. Near-term cash expenses for the L-six-oh-six program are manageable, as the bulk of R&D spending will likely occur after the timeframe for the potential launch of YUTREPIA.
As previously stated, if we're able to launch later this year to early next year, then we feel our current capital resources from cash on hand, future tranches from HealthCare Royalty, and revenue from our products could lead us to profitability. Thanks to the financial discipline established over the last few years, we can be thoughtful and opportunistic in our future capital plans to grow the business. With that, I'd like to hand the back, hand back the call to Roger for closing comments.
Thank you, Mike, and thank you, Rajeev, for your comments. Before turning the call over for questions, let me contextualize how L606 can potentially add to the significant advances that have already been observed with YUTREPIA. To be clear, we believe YUTREPIA sits a very high bar. Upon approval, YUTREPIA has the potential to improve on the therapeutic profile of Tyvaso, including DPI portability and ease of use, improved tolerability and titratability, enabled uniquely by PRINT's formulation capability to produce uniformly small particles, which has enabled inhaled doses in our clinical trials that have not been seen with Tyvaso. Importantly, the PRINT-enabled use of a low-resistance device, which better approximates the nebulizer in terms of ease of inhalation. The only remaining similarity to Tyvaso is that YUTREPIA remains a four-times-a-day therapy, albeit a very attractive four-times-a-day option.
What really excited us about L606 is that it aims to address this final dosing constraint while still retaining the demonstrated benefits of YUTREPIA, including portability, tolerability, and titratability. For these reasons, we believe L606 has the potential to be a highly attractive options for PH and PH-ILD patients, and thus increase the number of patients whose lives may be improved by Liquidia's novel products. Operator, would you please open the call for questions?
If you'd like to ask a question at this time, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Greg Harrison with Bank of America. Greg, your line is now open.
Hey, good morning. Congratulations on the deal, and thanks for taking our question. I guess, how are you planning to position two inhaled products upon approval of L606 and YUTREPIA, as far as which patients would be, you know, best fit for each product? What size of a trial do you think you'll need to run for the PH-ILD indication?
Yeah, thanks for the question, Greg, and good morning. Before turning it over to Rajeev to answer the question specifically, what we're interested in doing as a company is investing in innovation, and then parlay that into significant and new treatment choices for patients, which we think will then translate into additional market share. Rajeev, if you could comment more specifically on sort of how these two products would juxtapose each other in the market and how you think you will advance the products.
Sure. Thank you, Greg. just for discussion, you know, we believe that YUTREPIA is the first in-choice prostacyclin for the present time, for patients with both PAH and PH-ILD. The highlights of this, of course, is the ability to use our novel formulations in PRINT technology in concert with a low resistance device, which we believe provides the highest clinical utility for patients currently today. As you know, these clinical trials do take some time. We do anticipate that the trial design would be very similar to the format that was used in the INCREASE study, and we're happy to provide further context about the trial design at a later time.
Specifically, one of the main attributes of L606 is specifically that we're able to transition the patients from four times a day to twice a day with the L606 using this next gen nebulizer. That, of course, we believe has the potential to not only improve the 24-hour PK profile of treprostinil overall, but also it can enhance the compliance of patients, as you know, just moving to twice-a-day formats. Roger?
Thanks for the question, Greg. Next question, please.
Our next question comes from the line of Julian Harrison with BTIG.
Hi, good morning. Congrats on the collaboration. I'm wondering if you could talk more about the unmet need during the nighttime hours in pulmonary hypertension patients with what's currently available, how L606 could possibly address that. How would you expect its PK profile to maybe compare to other long-acting options such as treprostinil palmitil?
Yeah, great question, Rajeev, given you've treated patients for decades, if you could, give some answer to that question, it'd be great.
Sure. Listen, I think we acknowledge that, when we use the current modalities of inhaled treprostinil today, these are done four times a day, and of course, these are done during the waking hours. What that means is that there is a concern that during the nighttime when the patient is sleeping, we know that the half-life of treprostinil is relatively short, and therefore, when the patient wakes up, it's very typical for the patient to notice that they feel that they need to use inhaled treprostinil as soon as they get up in the morning. In other words, you know, the drug has likely dissipated over that course of time. We believe that this is really the key opportunity to provide a totality of coverage over 24 hours.
This is very similar to how parenteral treprostinil is currently used, which has that sort of stable PK profile over 24 hours. Mimicking that format allows for more consistent drug distribution over the course of the entirety of the day, including the sleeping time. When the patient does awaken, they awaken without any sort of need for rapidly needing to use the medication to revive their ability to sort of advance or exercise for the rest of the day and to improve their mobility. Regarding, you know, our profile, we believe this 24-hour PK improved coverage is actually critical for patients.
We believe that the twice-a-day, format is ideal, specifically for L606, and that would sort of emerge as a very high clinical utility option for patients for both PAH and PH-ILD in the near future.
Great, thank you, Rajeev. Operator, next question, please.
Our next question comes from Kambiz Yazdi with Jefferies.
How may the exposure of L606 improve FVC and patient outcomes? What's kind of the intellectual property around L606, and what's the current status of the phase 3 open label study? How many additional PH-ILD patients would you look to enroll in that? Thank you.
Okay. Several good questions there. I think, in terms of the profile, I'll start with that one. We know from the Tyvaso studies, both in pulmonary hypertension, pulmonary arterial hypertension and PH-ILD, that if you measure six-minute walk outcome, for example, at peak and trough, you see a diminution of effect at trough, upwards of 35% loss of effect. What's happening is you're getting, you know, with current therapy, you're getting a peak effect that you then lose over the dosing interval. Then the patient's redosed, get a burst release and a peak effect again. What this does, it smooths out that curve, so the peak to trough ratio is minimized, which should then lead to a more stable effect throughout the treatment course.
In a way, as Rajeev said earlier, it's becoming a much better proxy to Remodulin or parenteral therapy, in the sense that you're getting a more steady state-like kinetic profile. From a therapeutic standard, it's leveling out things more smoothly, so you're not having up and down swings in the exposure and, therefore, the efficacy during the daytime. As Rajeev said earlier, this will also hold the patient over the course of the night. Obviously, if you took your last dose at, say, 8 P.M., and don't get up and take your next dose to 8 A.M., you've removed all therapeutic dose from your bloodstream. That's what this will address, and I think it will address it nicely.
Rusty, if you could answer the issue around IP, and I think there was one final question for Rajeev.
Sure. Thank you for the question, Kambiz. I think your question was around the IP protection for L606. There's currently one issued patent in the United States that covers Pharmosa's technology. They have two separate patent families. Those patent families are relatively young. You know, those patent families won't expire until the late 2030s. As part of our license agreement with Pharmosa, you know, a lot of the terms relate to further prosecution of patents related to the L606 products. That's something we certainly, you know, are looking to partner with Pharmosa on as we build out the patent portfolio covering the product.
you know, obviously, as we go forward with clinical trials, we'll certainly be looking there as well to assess, you know, if there are further opportunities to file patent applications around what we find in those studies. Thank you.
I believe we have one more question that Rajeev could address. Kambiz, if you can remind me what the question was, the last part?
Yeah, absolutely. Yeah. What's the status of the phase three open label study, and how many additional PH-ILD patients would you look to enroll in that?
Great. Rajeev?
Yeah, thanks. Yeah, thanks, Kambiz. Just a few things I want to highlight just real quickly on the profile of the drug. Just real quickly, one is that we're also using, you know, liposomal technology. This technology, I think, has been used for quite some time, and it's quite attractive. Remember, these liposomes essentially entrap basically treprostinil molecules, and then when you inhale it, you can really localize the drug effect over a prolonged duration, which I think is really critical to really enhance the therapeutic benefit of treprostinil. What we do is anticipate with this 24-hour PK profile with twice-a-day dosing, this should translate to improved exercise capacity in terms of 6-minute walk for patients, especially from a regulatory standpoint. More importantly, remember, liposomes also enhance the tolerability of the drug.
We look forward to really doing 2 things: 1, improving the tolerability of inhaled treprostinil, and 2, using a twice-a-day format to continue to escalate the dose higher, which we believe that dose does matter, specifically in both PAH and PH-ILD. Relative to the studies in the open label, these are currently ongoing, Kambiz. We look forward to sort of highlighting more details about the open label study. As we already highlighted, we do have patients that have already been out up to 48 weeks for this study. This open label study is, you know, it's currently on ClinicalTrials.gov. It does highlight that the primary endpoint for the study is safety and tolerability for the open label study.
Obviously, we plan to initiate the large PH-ILD study, the placebo-controlled phase III study, in the H1 of 2024, and we'll look forward to highlighting the details of that study in future calls.
Thanks, Rusty. Thank you, Rajeev.
Thank you very much.
Operator, next question?
Our next question comes from Serge Bélanger with Needham.
Hey, good morning. Thanks for taking the question. I have a couple on, I guess, sort of regulatory related. First one, I think Rajeev delineated what the regulatory path could look like towards approval. Just curious if you plan on meeting with the FDA to reconfirm the required studies for that 505(b)(2) filing. Secondly, in terms of the next-gen nebulizer, as the development of this nebulizer, is it complete? Has it been used with other products? Lastly, just curious if you can give kind of a broad timeline on when we could see an NDA filing for this product. Thanks.
Good morning, Serge. Great questions. I think, Rajeev, those all fall under your purview?
Sure. Thank you, Roger. Serge, thanks for the questions. In regards to the regulatory pathway, Pharmosa has been provided pretty clear guidance from the FDA that, 1, we're gonna be using the 505(b)(2) pathway to support the approval for both Group 1 PAH and PH-ILD indications. As we already highlighted, the Phase 1 study has been completed. That demonstrates already the comparable PK to Tyvaso nebulized. That allows a, you know, equivalent breath-to-breath dosing with L606 relative to Tyvaso nebulized. The second thing is, there's an open label ongoing study that we have highlighted that is currently enrolling PAH patients, with a recent amendment that we anticipate will be fully implemented in July of this year.
That will now include patients transitioning from Tyvaso or Tyvaso DPI in patients with PH-ILD. We can also enroll patients naive to prostacyclin therapy, both in PAH and PH-ILD. That study will be ongoing in the US. In parallel, we will be launching a protocol study for PH-ILD. To your point, as a sponsor, we are going to meet with the FDA just to ensure that the regulatory pathway that's been laid out already to Pharmosa, is, has been appropriately agreed upon. We plan to do that in the very near future.
Great. Thanks, Rajeev. I think, if we will confirm things, we want to make sure that any changes we make to protocol design is well accepted. There's a prospective agreement on this phase 3 development plan, that really serves as a confirmation of what we've already seen in writing to be an accepted plan to approval. I think you also asked about the nebulizer. We're not gonna, you know, there's several choices around what nebulizers we could use or use together. We'll talk about that at a later point in time. Really excited about what we can achieve with this program, given its proof of concept, as Rajeev stated, and its clear path to development with the precedent protocol, given the YUTREPIA PH-ILD study is already out there.
Operator, next question, please.
Our next question comes from Matt Kaplan with Ladenburg Thalmann.
Hi. Good morning, guys. Can you hear me?
Yes, really good.
Okay, great. congrats on this agreement. I guess my first question really is, can you tell us a little bit more what is currently known about the safety of delivering the inhaled liposomal formulation of treprostinil?
Yeah. Again, now we're getting into the specifics of an ongoing trial. What we can say very clearly is that patients were able to tolerate the dose, the starting dose. They were able to initial patients with PAH, specifically, transitioned from Tyvaso. Patients well managed on Tyvaso, transitioned from, to 2 times a day, L606. They were able to tolerate that transition, because remember, patients come off Tyvaso essentially every night. As I mentioned earlier, their exposure is eliminated by the time they wake up. Pretty easy to switch them over to the, to the new study. Those patients have then been maintained, as Rajeev has said, up to 48 weeks to date. Obviously that's building in time as we speak.
They have been able to titrate, and this is the important part, to significantly higher doses than they were with Tyvaso. Again, the reason we believe that to be true is because the liposomal depot allows the drug to be protected while it's in the upper airway. It's delivered to the lower airway, where it's released when it hits that salt environment. It has a very controlled rate of release. Once it's released, there's been no burst effect, and the management of that patient has been as one would hope it would be in order to advance this to a commercial product. All signals are very favorable, Matt. Now we just have to go out and prove that it's better than placebo, which I think for us, is gonna be quite simple to do.
Right. Right. Okay, sounds good. One just follow-up question to, I guess, a prior question is: Can you give us a little bit more detail on the potential timeline to market? You said that, I guess, that's the trial will take some time. A potential, how should we be thinking about this overall?
Again, it's a little bit hard to opine exactly on timeline when we have to put the first patient in. I think one of the things that we'll get. You know, we wanna have that communication with the FDA. We wanna just go and have a confirmatory meeting, make sure that everything as previously agreed, is still agreed, and that, you know, the path forward is as we believe it to be. I think from there, from first patient in, I'll just give you a broad timeline. Just these are generic. Generally, well, from first patient in to NDA submission is about 3 years.
As we, as we've said, we're gonna put first patients, first patient in sometime mid-next year, and then you can anticipate to NDA and approval in anywhere from a 3 or more year timeframe. Now, some of that depends on the rate of enrollment. I think the advantage here is there's a, there's a lack of availability of in-healthcare personnel in Europe in particular, so we're gonna focus a lot of our effort in Europe. There'll be a hunger to put patients on this therapy because there's no commercial alternative, particular in PH-ILD specifically. Also, there'll be a number of patients in the U.S., given this 2 times a day dosing profile, I think will be quite attractive to patients considering or in need of an in- inhalation therapy.
That's a rough estimate. It's very generic. It's not meant to be sort of... I wouldn't adhere to that yet, but that's just if you said, "Well, how long does it typically take to get from first patient in to NDA or approval?" It's in the 3-plus year timeframe.
Oh, that's really helpful. Thanks, Roger.
Yeah, you're welcome, Matt. Operator, next question, please.
I'm showing no further questions in queue at this time, so I'll turn the call back to Roger Jeffs for closing remarks.
Thank you, Liz. Let me just conclude, as I said, that as you can hear, and I hope you hear in our enthusiasm, today represents a transformational time for Liquidia, as we look to build a leading or the leading company in pulmonary hypertension, with rapid and enduring growth potential over many, many years as we continue to build the best-in-class and first-in-choice portfolio of products. We are extremely honored to be partnered now with Pharmosa, to bring the full value of L606 forward, which would not have been possible without the knowledge and expertise of their team, led by Dr. Pei Kan, their President and Co-founder. For those on the call today, thank you for your time. We always appreciate the chance to speak with you, and we look forward to updating you on our progress in the coming quarters.
Thank you, operator.
This concludes today's conference call. Thank you for participating. You may now disconnect.