Good afternoon, ladies and gentlemen. My name is Janisha, 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. 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 and 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 for information concerning risk factors that could cause such differences that otherwise affect the company. I would now like to turn the call over to Neal Fowler, CEO of Liquidia.

Thanks Jason and good afternoon. 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. And 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 has been facing and our workforce deployed at home, our team has continued to successfully deliver on its objectives for 2020. First and foremost, we submitted and 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 continued to receive treatment and European patients enrolled in a hemodynamic dose response study are being monitored. However, in light of the pandemic and in the 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 861 and is not required for NDA approval by the FDA. So 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 861 and Tyvaso, the reference listed drug. Last month, we presented the final safety and tolerability data from our INSPIRE trial of 861 at the Month 2 time point, further confirming that 861 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—addressed 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. This 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 861 immediately. A recent quantitative survey conducted by Liquidia conveyed that nearly 50% of treating physicians say that they intend to prescribe 861 in place of current prostacyclin therapies as soon as it is available. And to that point, we aim 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 manufacture, use or sale of 861. As you likely know, the active ingredient treprostinil is a readily available generic molecule and 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 861 from reaching patients, we have taken proactive steps to bring 861 to patients without undue delay. To this end, we petitioned the U.S. 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 Board (PTAB) section of the USPTO. While we cannot comment on the timeframe for the FDA's review of the NDA or our competitors’ 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 approvals 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 2 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. Our 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 were $1.2 million higher in the first quarter of 2020 versus the first quarter of 2019, and that increase was primarily offset by a decrease of about $0.8 million from a reclassification of costs that were 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. Our interest income was $0.1 million for the first quarter of 2020, and that compared to $0.1 million during the first quarter of 2019, so essentially even. Our interest expense was $0.3 million in the first quarter of 2020, and 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 compared with the first quarter of 2019. So putting it together, the net loss was $14.8 million in the first quarter of 2020, and 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 861. Cash and cash equivalents totaled $40.1 million at the end of March, and 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. As we look back at the last quarter and the unprecedented challenges we faced globally, we're really proud of the fact 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. 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. So 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 1940s during World War II with penicillin, the action that was taken during the HIV crisis, and 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, and regardless of the duration of this pandemic, we will continue to ensure the safety of our team, support the recovery and needs 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.

And we do have a question from the line of Liana Moussatos from Wedbush.

Thank you for taking my question. Can you…

Hi, Liana.

Hey. You mentioned in your prepared remarks the 2016 IPR for the two patents. Can you remind us about that? And how it might reduce your hurdle to launch after the November 24th PDUFA? And then I have two questions about finances. One is, how should we think about Q2 OpEx and the rest of the year OpEx versus Q1? And 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 is our Internal Counsel, and maybe I'll start by having Shawn speak to your IPR questions. Shawn?

Thanks Neal. Liana, the 2016 IPR that we referenced was an IPR brought by that study med 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 application—with claims that are substantially the same as the two patents that we have filed IPR petitions against. We believe that substantially the same prior art will find those patents having the same fate.

And how. Okay, and the processing of that – are you able – 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. So there is a way to launch even if the competitor does initiate some litigation?

Well, as the 505(b)(2) applicant, the reference drug holder has a period of time, a 45-day window after our paragraph IV certification notice to bring on a patent infringement action for patents filed on the Orange Book. If the reference listed drug holder files an action under a Hatch-Waxman Act, that triggers an automatic 30-month stay, which is the shorter of 30 months or dismissal of the patent case. So 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 to the Hatch-Waxman Act.

And what would be the 45-day deadline?

We served our paragraph IV notice in late April, so the 45-day period ends in early June.

Okay. Thank you for that. And then I have financial questions, Rich.

Yes, Rich. If you could…

Yes 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. And 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—and 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—but 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. It’s an $8.5 million minimum cash covenant. And it—certainly if you go beyond that, but that would be a conservative view that we would be comfortably through October.

Okay. And what about Q3 and Q4 for OpEx?

Yes. Similar to Q2, so somewhat stepped down from expectations—from what we just did in Q1. Again, without impacting anything with regard to the 861 development program. 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 or non-dilutive in the form of partnerships or potentially debt work. We're evaluating all those alternatives to make sure that the company remains well-funded.

What kind of partnerships are you considering?

Well, we would—frankly, we would consider a broad range, and so really all the way from licensing type opportunities to opportunities where we're much more involved. Those are the range, but we haven't made any determinations at this point. Discussions have been going on for some time, and we're working with Jefferies as our financial advisor. So we don’t have anything more to say at this point except that is an area that we're certainly working on.

Thank you very much.

Of course.

And 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, the potential litigation if the patents are asserted in June. Can you just talk about timing of—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? And 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 broader litigation if that was either accepted or rejected? And then also can you just talk about the marketing behind a product like this, in terms of kind of what kind of effort you would need; it's more specialty in nature. So 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-à-vis other drug launches? Obviously, it’s in traditional. So 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. So 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 amounts of time, especially during the period of COVID. What impact might that have on different courts' dockets and scheduling? It's just too hard to tell right now. But generally speaking, the IPR process itself is a pretty well-oiled machine within the patent office with an 18 months timeline from filing petitions to written opinion outcome from the patent office. So that timeline is a little more certain, but it's just too early to comment on what the timeline and court proceedings may look like.

And Ken, on your commercial question, which is a good one, yes, this is what we would call 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 is significantly smaller compared to a lot of diseases, it's a much more manageable group of physicians we need to communicate with commercially. If you 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 considering to potentially use 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 given the disease. So it's an active group that we target from a patient perspective, from a physician perspective, and from a payer perspective, since these therapies are not inexpensive. Therefore, a lot of our efforts will be focused on that. It's a much more efficient type of launch than you would typically see across the industry, which is, to be blunt, one of the reasons we were so attracted to this area original as well, as being a smaller company and not wanting to go after a much larger type of launch from the beginning. So we look forward to it; Rob Roscigno and his team have done a fantastic job laying a lot of groundwork in our connectivity with the PAH community. We've been very active on the patient front and really look forward to bringing 861 to the market.

Thanks so much.

Sure.

And your next question comes from the line of Roger Song from Jefferies.

Hey, thank you. Thank you for taking the question. So I have two quick questions. So one is – so we noticed this United Therapeutics, they are about to read out a Phase 3 CAR-T study later this year. Given it's kind of a little bit—about one or two years behind 861 so how would you leverage this first mover advantage if you are able to launch this kind of without the litigation challenges stream?

Yes. And 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?

Yes, that's correct.

Okay, great. Great. Thanks for your question. It's good to speak with you. Yes. 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. But 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 of a DPI versus a nebulizer. That advantage is well-documented and has been highlighted in our clinical data. Certainly, the patients perceive higher quality of life in all of our market research, which points to this significant advantage for the patients. Very importantly, when it comes to our clinical data from the INSPIRE trial, one of the strengths of PRINT is that we have a wide range of dosing options for the patient. Given that PAH is a progressive disease, the ability to offer much higher doses with 861 than is possible with nebulizers is crucial. Our current dosing stands at 200 micrograms, and we still do not know the maximum tolerated dose of 861. This capacity for higher dosing is important for patients, particularly because the next step in their progression might involve injectables, which generally do not provide good quality of life. The 861 enables us to address and impact a broader patient population compared to the limitations of nebulizers. Therefore, our push will emphasize convenience, and critically, dosing flexibility and a broader impact on a greater number of patients compared to what has typically been possible with nebulizers. Hopefully, that clarifies your question.

Very helpful. Thanks! Thanks for all insights here. So my next question is I think we definitely talked about this dedication potential and the IPR outcome. Since the timeframe might take a bit longer than the 30-month stay for the IPR decision, just to get your current thoughts around if you will launch at risk if the 30-month stay passes without an IPR decision.

Hey, Roger, this is Shawn. Just a little clarity there on your question. The IPR process is roughly 18 months, so that process should be well completed before the 30-month timeframe.

Got it. Yes, that’s helpful. Thank you! Yes, that’s all from me. Thank you.

Yes, sure.

And your next question comes from the line of Serge Belanger from Needham & Company.

Hey, thanks. This is Tan on for Serge. I just have two questions. So the first one, I guess for LIQ861, what are your next steps needed from the FDA? And I guess, how do you expect the COVID impact to alter the FDA’s activities for example, pre-approval inspections? I think some of the other companies that we've tracked said that the FDA is able to conduct the inspection virtually. Is that a possibility for you guys too?

Yes. So I'll handle the kind of the first set. So next steps for us really at this point are just really the continued active dialogue with the FDA on the review, which is underway, accompanying the second part of your question. We are actively engaged in the review process and the FDA is doing their part in that. So we know they're very active, and it's essentially handling any clarification types of questions 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 the 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, but they've given us no guidance on that. I will also highlight here; one of the unique things about our process is we were also accepted into the emerging technologies program a couple of years back, which afforded us the chance to go to their facilities in DC, but also have them visit our facilities in Research Triangle Park here in North Carolina. So they've had an ability to be onsite with us, but whether they’re going to need an onsite inspection or whether that's done virtually at this point is unknown. We’ll keep you all apprised as we get clarification.

Got it. Thank you!

Sure.

And 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 in investment in Liquidia and look forward to updating you on our progress throughout the rest of the year. Again, thanks and have a great evening.

Thank you. And this does conclude today's conference call. You may now disconnect your lines.