Liquidia Corporation — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023; filed August 10, 2023. Amounts below are in U.S. dollars. Liquidia is a pulmonary-hypertension-focused biopharmaceutical company. Current revenue is primarily its profit share from Sandoz’s generic treprostinil injection; its lead candidate, YUTREPIA, had FDA tentative approval for PAH but did not have final approval.
Financial results and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $4.8 million | $3.9 million | $9.3 million | $7.4 million |
| Cost of revenue | $0.7 million | $0.7 million | $1.3 million | $1.4 million |
| Research and development | $17.7 million | $5.2 million | $23.0 million | $9.9 million |
| General and administrative | $9.2 million | $6.9 million | $17.0 million | $19.5 million |
| Operating loss | $22.8 million | $9.0 million | $32.1 million | $23.4 million |
| Net loss | $23.5 million | $9.4 million | $35.3 million | $25.4 million |
| Net loss per share, basic and diluted | $0.36 | $0.15 | $0.54 | $0.44 |
- Revenue less cost of revenue was approximately $4.1 million in Q2 and $8.0 million for the first half, roughly 86% of revenue in each period. This is a simple calculation, not a company-reported margin measure.
- At June 30, cash and cash equivalents were $88.2 million, down from $93.3 million at year-end 2022. Current assets were $92.9 million and current liabilities $19.5 million.
- First-half operating cash outflow was $14.0 million, compared with $18.2 million a year earlier; investing outflow was $0.6 million. Financing provided $9.5 million, and cash declined $5.1 million.
- At June 30, the balance sheet reported $33.5 million of revenue-interest financing payable, including $1.7 million current, and no long-term bank debt. Liquidia repaid its SVB loan in January using RIFA proceeds.
- Stockholders’ equity was $60.7 million and accumulated deficit was $385.9 million at June 30.
Material changes and notable items
- Q2 revenue rose 22% year over year; first-half revenue rose 25%. Management attributed the increases mainly to favorable chargeback and rebate adjustments, and, for the first half, higher quantities.
- R&D increased substantially, chiefly because of the $10.0 million upfront L606 license fee payable to Pharmosa, plus higher YUTREPIA manufacturing and supply costs. The fee was expensed in Q2 and paid after quarter-end.
- First-half G&A declined 13%, primarily due to lower YUTREPIA litigation fees and lower stock compensation compared with 2022; increased commercialization-preparation spending partly offset the decline.
- First-half net loss included a $2.3 million loss on extinguishment of debt related to repayment of the SVB loan. RIFA-related noncash interest also contributed to interest expense.
- In June, Liquidia licensed L606 in North America from Pharmosa. Terms include up to $30 million in development milestones, up to $185 million in sales milestones, and low double-digit tiered royalties, in addition to the upfront fee.
Outlook, risks and contingencies
- Going concern: Management reported that recurring losses and funding needs raise substantial doubt about Liquidia’s ability to continue as a going concern within one year after issuance of the financial statements. It said additional capital would be required if the company cannot access contingent RIFA funding or generate meaningful YUTREPIA revenue by Q2 2024. Management cautioned that available resources could be used sooner than expected.
- RIFA: The facility provides for up to $100 million, but later tranches of $35.0 million and $22.5 million require mutual agreement with HCR. The agreement includes minimum-cash covenants—$7.5 million during 2024 and $15.0 million thereafter—along with restrictions and potential acceleration provisions. HCR funded an additional $10.0 million on July 27, 2023, used to pay Pharmosa’s upfront fee.
- YUTREPIA patent and regulatory risk: The Federal Circuit affirmed the district court’s July 2023 decision finding the asserted ’793 patent valid and infringed, with final approval generally barred until the patent expires in 2027 unless the PTAB invalidation decision is affirmed on appeal. The PTAB appeal remained pending. A new patent suit following the July 2023 PH-ILD NDA amendment could also cause delay. The filing does not provide a firm final-approval or launch date.
- Development: Liquidia filed an NDA amendment seeking a PH-ILD indication for YUTREPIA on July 24, 2023. L606 was in an open-label U.S. PAH study, with a pivotal PH-ILD study planned. Management expects near-term R&D spending to increase as manufacturing work expands and new trials begin; no quantified financial guidance was provided.
- Commercial and supply risks: Generic treprostinil revenue depends on Sandoz and device availability. A shortage of critical CADD-MS 3 pump components has constrained new subcutaneous patient starts; Smiths Medical’s support obligation ends January 1, 2025. YUTREPIA also depends on single-source suppliers, including for active ingredient and encapsulation/packaging. The July 2023 Lonza agreement includes approximately $4.3 million in non-cancelable 2023 manufacturing commitments and potential reimbursement obligations of up to $2.5 million in specified termination cases.
- Other litigation: United Therapeutics’ trade-secret litigation against Liquidia and a former employee was ongoing, with discovery underway. A separate RareGen contract-damages case had no trial date set; potential proceeds to Liquidia would be shared and subject to litigation-financing arrangements.
Important facts for investors to verify
- Progress and timing of the PTAB appeal concerning the ’793 patent, any further United Therapeutics litigation, and the resulting YUTREPIA approval and launch timeline.
- Whether HCR agrees to fund additional RIFA tranches, the financing’s effective cost and payment obligations, and compliance with its cash covenants.
- Cash runway and funding needs relative to the company’s stated Q2 2024 threshold for meaningful YUTREPIA revenue or additional financing.
- YUTREPIA manufacturing readiness, regulatory status of the PH-ILD amendment, and exposure to supplier, minimum-purchase, and termination commitments.
- Whether pump shortages are resolved or replacement devices receive FDA clearance, and the impact on Sandoz treprostinil sales and Liquidia’s revenue share.
- L606 trial progress, supply-chain redundancy, and the potential milestone, royalty, and development costs under the Pharmosa license.