Good morning, and welcome, everyone, to the Liquidia Corporation First Quarter 2022 Financial Results and Corporate Update Conference Call. My name is Howard, and I will be your conference operator today. 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, Howard. It is my pleasure to welcome everyone to today's conference call. Before we begin, I would like to remind everyone that today's call will contain forward-looking statements based on current expectations. Such statements may involve risks and uncertainties that may cause actual results to differ materially from these stated expectations. For further information on the company's risk factors, please see Liquidia's filings with the Securities and Exchange Commission or on Liquidia's website. Joining the call today are Chief Executive Officer, Roger Jeffs; Chief Financial Officer, Mike Kaseta; General Counsel, Rusty Schundler; and other members of Liquidia's management. I would now like to turn the call over to Roger for our prepared remarks, after which we will open up the call for your questions.

Thank you, Jason, and good morning, everyone. The first quarter of this year reinforced everything that I believe to be true when I moved into the CEO role in January: Our products are needed; our team is dedicated and focused; and our confidence is high. We are focused on things within our control, first and foremost of which is commercializing our products and building a path towards profitability. We remain encouraged by increasing payer support for treprostinil injection along with concurrent increasing demand. Large national and regional payers have been reviewing and now enacting generic mandates for parenteral treprostinil. We are aware that additional payers are expected to implement mandates in the second half of 2022 and into 2023, reflecting acknowledgment that there is no perceived difference in quality, efficacy, safety, or patient support services with our treprostinil injection versus the branded Remodulin. These payers see great potential benefit to reduce costs on a drug that was first introduced nearly 20 years ago. At the end of the first quarter, we argued the merits of our case in district court with respect to Hatch-Waxman litigation that was initiated nearly 2 years ago by United Therapeutics. We've been eager to reach this point in the proceedings if only so that our full positions and evidence pertaining to non-infringement and invalidity of the asserted patents could become publicly known and accessible. We will continue to advance our position to the fullest extent in post-trial proceedings and related patent office actions. Next up is the inter partes review, or IPR, against the '793 patent with oral arguments to be presented tomorrow to the Patent Trial and Appeal Board. Consistent with past earnings calls, we do not intend to summarize our arguments against the patents being litigated. For those who are interested, you can find much more information in the public domain through the court's PACER system now that the trial has concluded or through the PTAB's docket system. What we will say is that Liquidia remains confident. The path to launching YUTREPIA is on the visible horizon. We will update investors when decisions are rendered and continue to ask for your patience as it will likely be September or October before we have definitive information. Regardless, we are not waiting to plan for success. During the first 4 months of this year, we fortified the balance sheet and enabled an operating plan for long-term value. Under Mike Kaseta's leadership, we created a financing plan that allows us to optimize the path towards potential profitability. The combination of restructured debt, targeted equity and financing, and increasing sales of treprostinil injection provides us the flexibility required to navigate some uncertainty without reliance on any one form of capital. We will continue to tightly manage expenses in a disciplined manner while also striving for success, which our more than $100 million in cash allows. More specifically, we will continue preparations to rapidly launch YUTREPIA pending FDA approval and build commercial inventories accordingly. We will build on the 280-plus patient years of exposure with YUTREPIA by initiating new clinical trials in WHO Group 3 patients, among others. We will advance development of our next-generation YUTREPIA pipeline, looking to improve on the product profile and dosing regimen. We will monitor the external landscape for programs that might leverage our expertise and presence in the cardiopulmonary community. I'm personally excited to build on the foundation created by the team who welcomed me in January, and I'm humbled by the drive and determination of the company as a whole to get new treatment options to patients who eagerly need and await them. While our eyes are on the future, it is also important to recognize the great quarter we have had so far this year. With that, Mike, would you please highlight a few points from our financial statements.

Thank you, Roger, and good morning, everyone. Our first quarter 2022 financial results can be found in the press release issued earlier today and on our Form 10-Q to be filed with the SEC after the market closes today. In those documents, you will see that revenue was $3.5 million for the 3 months ended March 31, 2022, compared to $3.1 million for the same quarter the year prior. Revenue related primarily to the promotion agreement with Sandoz. During the first quarter of 2021, the profit split percentage we received under the promotion agreement was 80%, whereas during the first quarter of 2022, the profit split percentage was 50%. This decrease in profit split percentage was offset by a significant increase in the number of units sold for the quarter. Cost of revenue was $0.7 million for the quarter, which was the same compared to the first quarter of 2021. Research and development expenses were $4.7 million, a $1.4 million decrease from the same quarter last year due to the timing of manufacturing related to the YUTREPIA program. General and administrative expenses were $12.5 million compared with $5.3 million, an increase primarily due to stock-based compensation and legal fees related to our ongoing litigation. Other expenses in the quarter totaled $1.5 million, an increase of $1.3 million over the same quarter last year due to the extinguishment of debt and an increase in interest expenses on the restated loan with Silicon Valley Bank. All totaled, we incurred a net loss in the first quarter of 2022 of $15.9 million or $0.30 per basic and diluted share, compared to a net loss of $9.2 million or $0.21 per basic and diluted share for the first quarter of 2021. Turning to our balance sheet, we ended the first quarter in a strong position, which we built upon in April. As of March 31, cash totaled $57.8 million. This balance included the $9.5 million net increase to our existing credit facility with SVB during the first quarter, as previously disclosed. In April, we closed on approximately $53.7 million of net proceeds from the sale of common stock in an underwritten public offering. We are very encouraged by the demand for new Liquidia shares despite the recent downturn in the biotech index, the impact of macroeconomic events, and the uncertainty of YUTREPIA litigation. The equity raise included new investors familiar with the PAH space as well as current investors, of which 19% of the raise was funded by affiliates of 2 of our Board members. We believe that the company is financially prepared to launch YUTREPIA upon final approval by the FDA. Should that occur later this year, we see a path to potential profitability as early as 2023.

Thank you, Mike. As you know, we are steadily building towards a transformative event with the potential launch of YUTREPIA. We are grateful that the FDA issued a tentative approval last November and thankful for the patient community that continues to wait for what we believe will be the first choice in inhaled prostacyclin when finally available. I would now like to open it up for questions. Howard, first question, please.

Our first question or comment comes from the line of Serge Belanger from Needham & Company.

I have a couple of questions for Roger. One common inquiry from investors is whether you would launch at risk once the 30-month stay expires. In the past, you mentioned this would depend on the specific circumstances at that time. I'm curious, following the Hatch-Waxman litigation in late March, if there have been any changes regarding that and what potential scenarios you might encounter in October. Additionally, could you provide some insights into the R&D projects you are considering and their expected timelines for launch?

Regarding the potential for launching at risk, the situation is quite complex and heavily dependent on which claims are upheld and if any surviving claims are infringed upon. There are numerous scenarios that could unfold, making it challenging to provide a definitive comment at this time. As mentioned in our initial remarks, we prefer not to speculate on future outcomes until we have more information. We anticipate reaching a clearer decision-making process by the fall. Even in the best-case scenario where we win everything and receive final FDA approval, it would still be considered a 'launch at risk' due to possible appeals from the opposing party. If the situation regarding claim survival and infringement becomes more intricate, we will need to evaluate our next steps carefully. Currently, 23 out of the 30 months of the stay have passed, leaving six months until we reach our target. Like you, we are looking forward to the final outcome, and we remain confident in the merits of our case, hoping for a launch by the end of this year. On the research and development side, we are focused on utilizing the expertise we are cultivating and are building a strong team with a proven track record in developing PRINT as a new manufacturing approach. One of our primary objectives is to create a longer-acting version of YUTREPIA, allowing for an inhalation therapy schedule that reduces from four times a day to one or two times a day. We are currently engaged in essential preclinical studies to understand the kinetics involved in administering a single dose in a mirroring model. This research is ongoing, and we expect to have data soon. There is a possibility that we might share some of this data at the next earnings call, although we do not have any data to report just yet. Initiating a life cycle management program to utilize the capabilities we are developing for YUTREPIA remains our top priority.

Our next question or comment comes from the line of Julian Harrison from BTIG.

Congrats on the progress. I'm wondering in the scenario where there are more than one DPI treprostinil products on the market later this year. What do you think are the most important considerations physicians and patients should make in determining what the best option for them is?

Yes, I think that's a great question. Let me speak to our product rather than compare it against another product and discuss the attributes that we will bring to the marketplace. We bring portability and will replace the burden of nebulizers with a palm-sized disposable simple device, which should not only make the therapy portable but potentially allow for earlier introduction of inhaled treprostinil to patients in need. I think the thing that we've seen is that we have a highly tolerated, well-tolerated therapy. It avoids systemic toxicities associated with both oral and parenteral prostacyclins. What's unique about YUTREPIA, compared to Tyvaso, is that we can escalate the dose significantly beyond what Tyvaso has permitted. This will change the therapeutic index of inhaled treprostinil through our dry powder formulation with PRINT. Importantly, in addition to tolerability and safety, our label has no black box warning; there's no risk from an excipient. I think that's an important factor that could distinguish the product. We've observed in our long-term open label studies that we can administer 3 times the target dose of Tyvaso. We can achieve this in just a few easy-to-administer breaths. I think you're witnessing a real shift in the inhaled treprostinil paradigm concerning treatment ease and use. As reported at ATS, we are experiencing very good durability; we can keep patients longer before they transition to other therapies, which would likely be parenteral therapies. This aspect is crucial because it indicates a different retention curve that would correspond to a different revenue curve. Regarding storage, we can keep our product at room temperature throughout its lifetime, which is significant. Most importantly, about the device is that it utilizes a low-resistance design, making it easy to inhale and deliver the dose. This is even more vital in WHO Group 3 patients who may have compromised lung function. Finally, the device doesn't require a specific positioning. You can hold it in many ways and it will still deliver the drug, and because the drug is encapsulated, there's no spillage. It's designed to be simple and user-friendly. It’s already in use for CF and COPD patients. There are other companies using this device in their own clinical trials. This device is tried and true. Overall, we expect to see a rapid transition for patients, both those on Tyvaso therapy and new to inhaled therapy, towards DPI, and preferentially, we believe, towards YUTREPIA. We predict that 80% to 90% of the Tyvaso market will transition to YUTREPIA. As we see earlier use and longer retention, we estimate the patient base will grow from approximately 3,000 today to about 6,000, reaching a new steady state.

Our next question or comment comes from the line of Andreas Argyrides from Wedbush.

Can you comment on preparations for the launch and how they've been progressing? And then how do you expect operating expenses to change over the next 12 months?

Thanks for the question, Andreas. Mike, if you would answer that question, please.

Thanks for the question, Andreas. Regarding operating expenses and preparations for launch, we are working proactively on several fronts. As Roger mentioned, we will await the outcome of ongoing litigation proceedings, but we are planning to launch in Q4. We are confident in our current strategy. Our pre-commercialization efforts include preparing launch inventories and growing our commercial and medical affairs team. We are determined to play to win and believe that we will be prepared for a successful launch should we proceed in Q4. In terms of expenses over the next 12 months, we won't provide firm guidance, but we are confident, reiterating that if we launch in Q4, we should be on a path to profitability as early as 2023. We expect operating expenses to increase as we approach the launch, which is typical. However, with our recent capital raise, we feel well-positioned for a successful launch and potential profitability in 2023.

I'm showing no additional questions in the queue at this time. I'd like to turn the conference back over to management for any closing remarks.

Thank you, everyone. We greatly appreciate you joining us on the call today. We value your continued interest in Liquidia, and we will update you on progress throughout the year. Have a great day. Goodbye.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.