Operator: Good morning, and welcome, everyone, to the Liquidia Corporation's Full Year 2022 Financial Results and Corporate Update Conference Call. My name is Chris, 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. And I will now hand the call over to Jason Adair, Senior Vice President, Corporate Development and Strategy. Sir, please go ahead.
Jason Adair: Thank you, Chris. It's my pleasure to welcome everyone to Liquidia's full year 2022 financial results and corporate update conference call. Joining the call today are Chief Executive Officer, Roger Jeffs; Chief Medical Officer, Dr. Rajeev Saggar; Chief Financial Officer, Michael Kaseta; and General Counsel, Rusty Schundler. 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 actual results or performance to be materially different from any future results or performance expressed or implied on the 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. The company will file its 10-K on Monday, March 20th. I would now like to turn the call over to Roger for our prepared remarks, after which we will open the call up for your questions.
Roger Jeffs: Thank you, Jason. Good morning everyone and thank you for joining us. As I look back on 2022, my first year as CEO at Liquidia, I remain humble to have joined an organization . My to join the company in an operational role, which is related to the potential YUTREPIA to universally transform pharmaceutical therapy from a high-burden treatment option to a low-burden option for patients. Specifically, four key attributes resonated loudly with me; YUTREPIA's tolerability, YUTREPIA's titratability, YUTREPIA's durability, and YUTREPIA's usability and portability. These four attributes continue to resonate with and support my belief that YUTREPIA has the potential to be the prostacyclin therapy of first choice and best-in-class inhaled therapy for patients with either PH or PH-ILD.
The open label extension data that we continue to mature only in the commercial potential of YUTREPIA to participate significantly and what is now the fastest growing segment of our key agent in cross inhaled market. The other for joining the advance strength of the entire organization and our internal capability to manufacture YUTREPIA substance in-house. Of course, it also didn't hurt that we already had tentative approval and labeling in hand. In 2022, we made key strategic hires to strengthen our core capabilities and in concert with our legal success in 2022, Liquidia is now well-positioned to maximize the commercial uptake of YUTREPIA -- of launch. I'd like to now turn the call over to Rajeev Saggar, our CMO and one of those key 2022 hires, expand on why we are so excited about the YUTREPIA's unique product profile and why we believe we are ideally positioned to provide a differentiated best-in-class option for patients.
Rajeev?
Rajeev Saggar: Thank you, Roger and good morning everyone. In recent months, our team has engaged with the medical community about certain topics related to YUTREPIA such as its product profile, the benefits of low-resistance dry powder inhaler device for patients, and our upcoming clinical plan. Today, I thought to briefly touch on this point. YUTREPIA was designed with a specific goal in mind to deliver treprostinil to the deepest parts of the lung, across a wide range of doses and a broad range of patients with varying lung function. To achieve this behind the whole print technology with the RSOO plus dry powder inhaler, a simple proven device used successfully by many tens of thousands of adults and children with three particular problems such as COPD analysis.
To the first point of expanding the dose range, our clinical study in pulmonary arterial hypertension or PAH proved that a 79.5 microgram dose of YUTREPIA is delivered at bioequivalent doses to nine breaths of nebulized TYVASO. But more importantly, YUTREPIA has been safely and conveniently titrated the doses comparable to 27 breaths of TYVASO, a level rarely if ever achieved with this nebulizer. To the second point, DPI proved easy-to-use -- for advanced technology to train patients. And further, demonstrated it is robust enough to keep or positioning in a myriad of ways. In fact, given the device's proven track record with obstructive lung diseases, there is considerable interest among medical professionals to use YUTREPIA, particularly for patients with pulmonary hypertension associated with interstitial lung disease or PAH where lung restriction and impaired respiratory effort are comped.
Put simply, uniform print particles range for deep lung delivery providing consistent and consistent delivery with a low -- device across a wide range of inspiratory efforts for PAH and PH-ILD patients. To further inform the use of YUTREPIA, we intent to clinical trial later this year that will generate data on how YUTREPIA may be best utilized in PH-ILD. We think an open-label study would greatly benefit our understanding of tolerability and the ability to titrate in this patient population. I'm as we move closer to the potential launch of YUTREPIA. I'd like now to turn the call over to Rusty for an update on the legal proceeding. Rusty?
Pharmacy, Medicines, Health
Photo by Myriam Zilles on Unsplash
Rusty Schundler: Thank you, Rajeev. As a reminder, the company has received rulings through proceedings in the court and in parallel inter partes review proceedings before the Patent Trial and Appeal Board that all the claims in the three patent asserted by United Therapeutics against the company are either invalid or not infringed by Liquidia. Over the last several months, we have seen further progress in our litigation to bring YUTREPIA to market. First, we are pleased with the PTAB's decision in February to reject United Therapeutics' request for rehearing of the 793 IPR. In its decision, the PTAB clarified the grounds upon which it found that all the claims in the 793 patent were un-patentable. United Therapeutics now is 63 days from the decision date of February 2nd to file an appeal of the PTAB's decision.
Assuming UT files an appeal, which they have publicly stated they will, we would project that oral arguments could occur as early as late fourth quarter 2023 or first quarter of 2024. We will then anticipate that a decision could be rendered by the court as early as a few days after oral argument if the court issues a summary affirming or within a few months after oral argument of a full written opinion is issued. Second, we are pleased with the progress in the appeal of the District Court's position in the trial. Briefing in that appeal has now been completed and the court is in the process of scheduling oral argument, which we expect to occur sometime in the second or third quarter of 2023. As with the appeal of the 793 IPR, we would expect to receive a written decision of the court within a few months after oral argument.
For all of these appeals, we will not summarize our arguments here. But all briefings are, of course, available to the public through the court's PACER System. Lastly, there may be opportunities to accelerate the timeline in one or both appeal proceedings and we will seek opportunities to proceed through the appeals process as quickly as possible. Finally, it is notable that United Therapeutics did not appeal the Hatch-Waxman decision related to the 901 patent. So, that patent is no longer an impediment to our launch of YUTREPIA. With the 901 patent having been dropped, we would now be able to see final approval for YUTREPIA if the decision of the District Court in the Hatch-Waxman litigation is affirmed on appeal with respect to the 066 patent and either the District Court's decision regarding the 793 patent is reversed on appeal or the PTAB's decision regarding the 793 patent is a firm done appeal.
In short, if the original decisions are affirmed on appeal, then we can seek final approval of YUTREPIA immediately. I will now pass the call on to Mike for an overview of our financial reporting. Mike?
Mike Kaseta: Thank you, Rusty, and good morning, everyone. Before I address the results for the full year 2022, I wanted to briefly comment on the security of our fund and relationship SVB, a bank with whom we've had a relationship for about two years. As previously disclosed, we repaid all debt owed to SVB back in January as of the financing agreement with Healthcare Royalty Partners. We also have maintained all cash and cash equivalents at SVB, 99% of which was held in a BlackRock mutual fund and the remainder of which was held in an operating account. On Tuesday this week, substantially all of our cash was transferred out of SVB to an accredited financial institution. We will continue to evaluate our cash management and investment policies in an effort to protect our capital from events similar to what occurred in the last week.
Turning to our full year 2022 financial results, which can be found in the press release issued today, you will see that revenue increased to $15.9 million for the year ended December 31st, 2022 compared with $12.9 million for the prior year. The profit split percentage we received under our promotion agreement with Sandoz was 50% for the entire year, whereas in 2021, the profits split percentage decrease from 80% to 50% as a result of achievement of predetermined cumulative sales thresholds. Revenue in 2022 is net of $2.7 million and amortization of the contract acquisition costs associated with the purchase promotion agreement. Next, cost of revenue was $2.9 million for the full year 2021 compared with $3 million for the prior year. 2022 included a full year of sales force related costs as well as amortization of the intangible asset associated with the promotion agreement.
Research and development expenses in 2022 of $19.4 million for the full year compared with $20.5 million in the year prior. The decrease of $1.1 million or 5% was primarily due to a $0.9 million decrease in personnel, consulting, and stock-based compensation expenses. General and administrative expenses was $32.4 million for the full year of 2022 compared to $23.1 million for the prior year. The increase of $9.3 million or 40% was primarily due to a $4.2 million increase in commercial, marketing, and personnel expenses in preparation for the potential commercialization of YUTREPIA and a $3.1 million increase in stock-based compensation expense, driven by an option modification charge recorded in the first quarter of 2022. In summary, we have incurred a net loss of $41 million or $0.67 per basic and diluted share compared to a net loss of $34.6 million or $0.70 per basic and diluted share for the year ended December 31st, 2021.
Turning to our balance sheet, we ended 2022 with $93.3 million of cash on hand. We further strengthened our access to capital in January through the revenue interest financing agreement with Healthcare Royalty for up to $100 million in four tranches. The first tranche of $32.5 million netted an approximate $10 million increase in cash after paying off the SVB debt facility. The remaining tranches are related to one, clearance of the legal pathway; two, acquisition of an internal asset; and three, mutual agreement of the parties. I would now like to turn the call back over to Roger.
Roger Jeffs: Thank you, Mike. Reflecting on the previous year, I can say with 100% prepared so it could patients. At this time, I would now like to open to questions. Operator, first question?
