Liquidia Corporation — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; filed May 13, 2024. Financial amounts below are in U.S. dollars, millions, unless stated otherwise.
Business context
Liquidia is a biopharmaceutical company focused on rare cardiopulmonary diseases. Current revenue primarily comes from its promotion agreement with Sandoz, under which Liquidia shares profits from U.S. sales of generic treprostinil injection. Its lead candidate, inhaled dry-powder treprostinil YUTREPIA, has tentative FDA approval for PAH; the company is awaiting final FDA action and seeks to add PH-ILD. Liquidia is also developing L606, an investigational liposomal treprostinil formulation.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $3.0 | $4.5 |
| Cost of revenue | $1.5 | $0.7 |
| Research and development | $10.1 | $5.3 |
| General and administrative | $20.2 | $7.8 |
| Operating loss | $(28.8) | $(9.2) |
| Net loss | $(40.9) | $(11.7) |
| Operating cash flow | $(24.9) | $(8.5) |
- Gross profit was approximately $1.5 million, or 50.6% of revenue, compared with approximately $3.8 million, or 85.4%, a year earlier. The filing attributes higher cost of revenue mainly to sales-force expansion.
- Cash and cash equivalents were $157.9 million at March 31, versus $83.7 million at December 31, 2023. Working capital was approximately $146.0 million.
- Financing activities provided $99.7 million: $74.9 million net from a January private placement and $25.0 million net from HCR revenue-interest financing, partly offset by payments. The company issued 7.18 million shares in the placement.
- Revenue-interest financing payable was $84.4 million, of which $4.2 million was current. The company also reported $6.7 million of long-term litigation financing payable and $3.2 million of lease liabilities. No conventional bank debt was reported at quarter-end.
- Basic and diluted loss per share was $0.54, versus $0.18. Shares outstanding were 76.29 million at quarter-end; 76.38 million were outstanding May 2.
Material changes and unusual items
- Revenue declined 34%, primarily due to prior-year favorable rebate adjustments and lower current-period sales quantities.
- R&D expense rose 91%, mainly from higher personnel costs, L606 clinical costs, and YUTREPIA clinical and supply costs.
- G&A expense rose 160%, including increased legal fees for YUTREPIA litigation, personnel costs, and pre-commercialization consulting and commercial expenses.
- The January 2024 RIFA amendment generated an $11.5 million non-cash loss on extinguishment of debt. Interest expense also increased with higher financing balances; interest income rose on larger cash balances.
- Liquidia capitalized $3.5 million of YUTREPIA prelaunch inventory, versus none at year-end. If approval or market acceptance is delayed or fails before inventory expires, some or all could be written off.
Outlook, risks and contingencies
- Management expects operating losses to continue and R&D spending to increase in the near term as it advances clinical work and manufacturing. It plans to prepare for a potential YUTREPIA launch, continue promotion of generic treprostinil, and develop L606.
- Excluding future YUTREPIA revenue, management said available cash was expected to fund operations, capital expenditures, RIFA fixed payments, and minimum-cash covenants for at least 12 months from issuance of the statements. However, if the company had not obtained full approval for both PAH and PH-ILD and begun YUTREPIA sales, or secured additional capital, by issuance of its Q2 2024 financial statements, substantial doubt about going concern could arise. Management cautioned that its estimate depends on assumptions and cash could be used sooner than expected.
- The RIFA requires minimum cash of $7.5 million during 2024 and $15.0 million thereafter. Further advances, including remaining tranches, require mutual agreement. Without funding of the third investment amount, fixed payments rise to $1.0 million quarterly beginning Q2 2024 and $5.8 million quarterly beginning Q3 2025 through 2028; a $23.8 million one-time payment would also be due in Q3 2025 if that amount remains unfunded by June 30, 2025.
- YUTREPIA’s regulatory and launch timing remains exposed to litigation with United Therapeutics. The injunction blocking final FDA approval based on the ’793 patent was set aside in March 2024, but United Therapeutics appealed. In the PH-ILD case, a preliminary-injunction motion remained pending after an April hearing. United Therapeutics’ FDA lawsuit sought to block review of the PH-ILD amendment; its request for a temporary restraining order was denied, and Liquidia and FDA moved to dismiss on May 7.
- Other risks include the pending appeal concerning the ’901 patent, trade-secret litigation, reliance on single-source suppliers, and supply constraints for the CADD-MS 3 pump. Smiths Medical planned to end support in November 2024; a replacement pump is under development, with a 510(k) submission anticipated in 2025.
- Liquidia reported no known RIFA covenant breach or default notice. It had approximately $6.5 million in non-cancelable product manufacturing and supply commitments.
Important facts for investors to verify
- Subsequent FDA decisions and the timing and permitted indications for final YUTREPIA approval; confirm whether both PAH and PH-ILD are approved and whether sales have begun.
- Developments in United Therapeutics’ appeals, PH-ILD injunction request, FDA litigation, and trade-secret case, including any effect on approval or launch timing.
- Cash burn, actual runway, access to additional capital, and compliance with RIFA cash covenants and payment terms.
- Whether CADD-MS 3 pump availability and support constrain generic treprostinil sales, and whether replacement-device development and clearance remain on schedule.
- Potential dilution from equity financing and stock-based awards, plus the recoverability of capitalized YUTREPIA inventory if approval or commercialization is delayed.