Liquidia Q3 2026 Earnings Call Transcript

Liquidia (NASDAQ:LQDA) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.

Benzinga APIs provide real-time access to earnings call transcripts and financial data. Visit https://www.benzinga.com/apis/ to learn more.

View the webcast at https://edge.media-server.com/mmc/p/aokfmvtd/

Summary

Liquidia Corporation reported a 31% increase in third-quarter net product sales of YUTREPIA, reaching $222.7 million, with strong growth driven by prescriptions for PAH.

The company has resolved litigation issues, allowing it to focus entirely on business operations, with no requirements for existing PH-ILD patients to switch from YUTREPIA.

Liquidia plans to continue building evidence for YUTREPIA’s efficacy through phase 4 studies and is preparing for new studies in 2027, including a pivotal study for PH-COPD.

The company reported a GAAP net loss of $236.3 million due to a one-time settlement charge but saw its adjusted EBITDA grow to $140.5 million, marking the fifth consecutive quarterly increase.

Management emphasized confidence in YUTREPIA’s growth potential, supported by a differentiated product profile and a strong prescriber base, with plans to provide 2027 guidance in early January.

Full Transcript

Lisa (Operator)

Good morning, and welcome to the Liquidia Corporation third quarter 2026 financial results and corporate update conference call. My name is Lisa, and I will be your operator today. All participants are currently in listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions for joining the queue will be provided at that time. Please note that today’s call is being recorded. I will now turn the call over to Jason Adair, the company’s Chief Business Officer.

Jason Adair (Chief Business Officer)

Thank you, and good morning, everyone. It’s my pleasure to welcome you to our third quarter 2026 financial results and corporate update call. Joining me today are Dr. Roger Jeffs, Chief Executive Officer; Michael Kaseta, Chief Operating Officer and Chief Financial Officer; Dr. Rajeev Saggar, Chief Medical Officer; Scott Moomaw, Chief Commercial Officer; and Russell Schundler, General Counsel. Before we begin, please note that today’s discussion will include forward-looking statements, including statements regarding future results, our revenue outlook, product performance, and ongoing clinical or commercial activities. These statements are subject to risks and uncertainties that may cause actual results to differ materially. For further information, please refer to our filings with the SEC, which are available on our website.

Please also note that our earnings release and our commentary include non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measure can be found in our earnings press release. With that, I’ll turn the call over to Roger.

Roger Jeffs (Chief Executive Officer)

Thank you, Jason, and good morning, everyone. Today’s call comes at an important moment for Liquidia, and I want to be direct about what connects our extraordinary performance since launch to what lies ahead. Very simply, we see continued growth based on a differentiated product profile that provides unmatched advantages. As reported this morning, YUTREPIA has delivered five consecutive quarters of growth in prescriptions, revenue, and adjusted EBITDA.

That trajectory is built on a product profile that delivers on our promise to improve how treprostinil reaches patients. With last month’s settlement, the litigation overhang is behind us. YUTREPIA’s future is secure, and we can focus entirely on the business. And let me be clear, the business is strong. Third quarter net product sales grew 31% to $222.7 million. PAH has been the core of that growth. From launch through the end of September, more than 60% of prescriptions included a PAH diagnosis, and in the month of September, it rose to over 70%. In October, the first full month after the recent ruling, total monthly shipments to patients reached their highest level since launch.

Our settlement agreement does not require existing patients with PH-ILD to switch away from YUTREPIA, and we see no indication that providers, payers, or pharmacies have any desire to move PH-ILD patients benefiting from YUTREPIA to alternative therapies. Despite the disruption from the litigation and the temporary market ambiguity that it created, new referrals have held up well in October, which we believe will be the month of greatest uncertainty. The daily referral rate was more than 75% of the daily rate in Q3. It should be noted that during the period between the court’s ruling and our settlement, our competitor intentionally exacerbated prescriber uncertainty by sending a Dear Health Care Provider letter suggesting that the ruling may require removal of YUTREPIA from the U.S. market entirely until the updated PH-only label is approved by the FDA.

This speculative information created a slight pause in referrals at select centers, but we believe referrals will recover in the near term now that we have provided corrected communication directly to prescribers following the settlement and thus October represents a floor and not a trend. And with no change in formulary status or coverage, conversion rates remain greater than 87%, which we expect to continue. Of note, our prescriber base has continued to broaden and deepen since our last earnings call. With approximately 1,300 total prescribers, we were pleased to see more first-time prescribers in October than in September, while repeat prescribers continued to increase. Roughly 60% of our YUTREPIA prescribers have written for two or more patients, and more than 30% have written for at least five patients. Among our top 100 prescribers, average monthly referrals rose in October.

Lastly, launch-to-date, 77% of prescribers have written for at least one PAH patient. Together, these prescribing trends give us confidence in YUTREPIA’s continued growth and broad uptake. That confidence is grounded in the fact that YUTREPIA’s product profile has not changed. Physicians choose YUTREPIA because it allows therapy to be individualized. They can titrate each patient’s dose across a wide range, adjust the pace of titration based on each patient’s experience, and unlike Tyvaso and Tyvaso DPI, YUTREPIA’s label supports tailoring dose frequency to three, four, or five times daily based on the patient’s needs, all of which can be delivered with a low-effort, palm-sized inhaler.

YUTREPIA’s flexibility is why we are growing our share in the PAH market, which continues to account for the majority of prostacyclin use. We estimate that approximately 80% of the roughly $4.9 billion in U.S. branded prostacyclin sales over the last four quarters was used to treat patients who have PAH. In fact, the PAH market is growing faster than many appreciate. That’s partly because more patients are being identified, but more importantly because the standard of care is shifting toward earlier, goal-oriented combination therapy, and the prostacyclin pathway is central to that shift. The World Symposium algorithm recommends an inhaled prostacyclin for patients who remain intermediate–low risk and prostacyclin-containing triple therapy for patients who are higher risk.

New mechanisms are being positioned as add-ons to background therapy, not replacements for it. We see this multimodal approach as additive to the prostacyclin market as patients are living longer on therapy, all of which bodes well for YUTREPIA’s continued growth as the field moves toward inhaled formulations that offer greater tolerability, dosing flexibility, and ease of use, which is the profile YUTREPIA was designed to deliver. To support continued growth, we also intend to keep building the evidence behind YUTREPIA’s product profile. Our phase 4 studies in PAH will continue, focused on dose flexibility, including three-times-daily dosing. We’re actively screening patients into our study to define a transition algorithm from oral selexipag, and in 2027 we plan to launch EZPAH, a registry study that will collect real-world data on the usage of YUTREPIA in PAH. Beyond PAH, we are studying YUTREPIA where patients have no approved option, for example in systemic sclerosis associated with Raynaud’s phenomenon.

We are currently enrolling patients in ReWarm, our dose-finding study, which we expect to complete in the first half of 2027. If successful, this would enable a pivotal study during the following winter seasons. We are also rapidly progressing studies of L606, our extended-release liposomal treprostinil dosed twice daily with the next-generation nebulizer, Respire. Our global pivotal study in PH-ILD continues as planned with enrollment expected to complete in 2028. In parallel, our pivotal study in PAH, called AMPLIFY-PAH, will initiate in 2027 and help strengthen L606’s competitive position in the market. Both studies are expected to advance on a similar timeline with data expected to support a 505 NDA submission in 2029.

Lastly, we continue to actively prep for new studies in 2027 in indications where we believe our inhaled products will be the first or best choice for patients seeking treatment for pulmonary hypertension, like PH-COPD, for which we plan to initiate a pivotal study in the second half of next year. With that, I’ll turn the call over to Mike to share more detail on our financials and operating plan.

Michael Kaseta (Chief Financial Officer)

Thank you, Roger. As stated earlier, the third quarter continued the growth trajectory delivered since launch. Net product sales of YUTREPIA were $222.7 million, up $52 million, or 31%, from last quarter. Of the total $222.7 million in total YUTREPIA sales, $212.2 million were paid patient demand sales, demonstrating strong product pull-through. On the expense side, cost of product sales grew in proportion to sales, and gross margins were similar to last quarter at approximately 94%. R&D expenses increased to $25.3 million, 47% higher than last quarter, as enrollment ramped in Respire and new YUTREPIA studies started, but in line with guidance for the year. SG&A expenses were nearly flat compared to second quarter. As a percentage of revenue, SG&A fell from 33% in the second quarter to 26% in the third quarter, helping to highlight the operating leverage in our business.

Cash and cash equivalents continued to build through the third quarter, ending with $396.1 million prior to the settlement payments, up $111.9 million from second quarter. This is nearly double the increase we saw between first and second quarter and further highlights the efficiency of our business. In total for the quarter, we reported a GAAP net loss of $236.3 million, which reflects a one-time settlement charge of $389.7 million, of which $380.7 million is payable in cash through April of 2027.

Looking at non-GAAP measures, we saw adjusted EBITDA grow again to $140.5 million, our fifth consecutive quarterly increase. The strength of our balance sheet and our business will allow us to fully fund our objectives and payment obligations. We have no need to raise capital, and we are not changing our operating plan. With the final settlement payment in April and no royalty or ongoing payments due to United, the full benefit of YUTREPIA’s growth in PAH will accrue to Liquidia and its shareholders.

With that, I’ll turn it back to Roger.

Roger Jeffs (Chief Executive Officer)

Thanks, Mike. We recognize that for some investors Liquidia is now a show-me story. We welcome that. We have what we believe is the best-in-class product in PAH, physicians who value its profile, and the resources to keep growing the sales line and the value of our pipeline. We look forward to sharing fourth quarter results in early January. Operator, please open the line for questions.

Lisa (Operator)

Thank you. If you would like to ask a question, please press star-1-1 on your telephone. You will then hear an automated message advising your hand is raised. If you would like to remove yourself from the queue, please press star-1-1 again. We also ask that you please wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. First question of the day is going to be coming from the line of Ryan Dressner of Raymond James. Please go ahead.

Ryan Dressner (Analyst at Raymond James)

Good morning. Thanks for the question, and congrats on all the progress at this point in your launch. Can you give us an idea of how you’re thinking about the prevalence of patients in your addressable market that could be considered to have disease characteristics associated with both PAH and PH-ILD? And I have a follow-up question.

Roger Jeffs (Chief Executive Officer)

Good morning, Ryan. Appreciate the question. Maybe this gives us an opportunity for Rajeev—if you don’t mind—if you could just sort of opine on kind of how prescribers, given that you are one, look to diagnose and treat patients with PAH.

Rajeev Saggar (Chief Medical Officer)

Yeah, thanks, Roger. And thanks for the question, Ryan. So, you know, I think a few things we want to emphasize on this call. You know, one thing we were making clear is that Yutrepia continues to be approved for the treatment of Group 1 pulmonary hypertension in both primary and secondary, or otherwise what’s known as associated forms of this condition. When the provider wishes to prescribe Yutrepia, the form that they receive will allow for a standard titration to a goal of at least 159 micrograms four times a day or even higher.

Or they can customize it to a schedule that adapts to the patient’s clinical needs. Our tolerability, I think that’s first and foremost. The second thing is: how do you define pulmonary hypertension? And this will answer part of your question. As we all know, the diagnosis of pulmonary hypertension is defined by right heart catheterization that confirms the presence of precapillary pulmonary hypertension, which is now a hemodynamic threshold that’s been modified to include even a lower threshold: mean pulmonary artery pressure of greater than 20 millimeters of mercury, pulmonary wedge pressure of less than or equal to 15 millimeters of mercury, and a pulmonary vascular resistance greater than two Wood units.

And the reason why this is important is because Yutrepia is geared and approved to directly treat the precapillary pulmonary hypertension. But we know that patients with Group 1 PAH also have coexisting comorbidities. And the most recent guidelines, in fact, suggest that patients should be evaluated for these concomitant risk factors that are typically associated with these Group 1 PAH phenotypes, such as connective tissue disease, specific drug exposures or even prior smoking, or even underlying cardiac morbidities.

And so while Yutrepia is geared to specifically treat the precapillary pulmonary hypertension in its attempt to improve exercise capacity, the management of these comorbidities, I think, are also integral. And so ultimately, when the provider sees a patient, they are the ultimate adjudicator of the type of pulmonary hypertension. And if it’s deemed that the patient’s phenotype, as I described above, is consistent with WHO Group 1 PAH, then they have the ability to prescribe Yutrepia as stated above.

And, you know, they will get all the best-in-class suite of services, the best-in-class prostacyclin offered to their patient and provider. So I think that should answer, you know, our view and what we’re going to be promoting towards, but the ultimate adjudicator of the pulmonary vascular phenotype will rely on the provider itself, based on what I set forth in this explanation. Roger?

Roger Jeffs (Chief Executive Officer)

Yeah, great, thanks Rajeev. I think in terms of prevalence, because I think maybe you want a little more information on opportunity value here. So there’s roughly 50,000 patients treated today. Only half of those patients are on a prostacyclin, and it could be oral, inhaled, or parenteral. So as we said earlier, that’s about a $4 billion market in PAH alone just for prostacyclines. We currently have a significant portion of that, but still fairly small in terms of penetration value.

So what we’re looking to do is go after all of that. So the directed transition studies with UPTRAVI, for example, where we’re looking to show that we can take those patients off, remove the off-target side effects, and benefit them through a titratable inhaled therapy. And then also we’re going after every inhaled patient. I think clearly we’ve got the best-in-class differentiated product. I think the market adoption has proven that to be true. And so we’re going to continue to go after every single patient that’s on an inhaled therapy that’s not Yutrepia.

And then finally, even with the parenteral, we’re seeing that with sotatercept addition that as those patients de-escalate their parenteral therapy, they do need a substitution and Yutrepia is there to substitute for the prostacyclin pathway. So, you know, 25,000 patients available. You know, you’ve seen our past numbers, so we have only a small portion of that. So lots of upside remains in front of us. And lots of growth opportunity. And then you said—I know you said you had one more question, Ryan.

Ryan Dressner (Analyst at Raymond James)

Yeah. United mentioned in a press release that they offered Liquidia a settlement prior to the 327 ruling that would have kept Yutrepia available for both PAH and PH-ILD patients and that Liquidia opted to instead let the court proceedings play out. I’m curious if you can give us any color on what specifically was in the settlement offer from United and what drove your decision to reject it. Thanks.

Roger Jeffs (Chief Executive Officer)

Yeah, thanks for the question. So—and that information came from a letter they actually sent to prescribers. But I won’t talk too much about the settlement. They made one settlement offer to us. So while it is technically true that they made a settlement offer, it’s grossly misleading to say that it was reasonable. So the offer itself was they wanted 100% of PH-ILD revenue through 2042—so through the expiry of the patent. That would actually be a loss leader for us because it costs us to make the drug, distribute it to patients, and then they take 100% of the profit.

And they also wanted 50% of the non-infringing PAH revenue. So obviously none of that makes sense. It was nowhere near any sort of a reasonable proxy for what’s considered normal. But that was the only offer they made. So while what they said was technically true, it’s, like I said, grossly misleading and has no credibility. So I think, you know, when you hear things from them, you have to sort of do a double check first before you would like to believe it.

But that’s the truth. That’s the transparency of what happened in that particular conversation. And that’s why, you know, we did not agree to that at all. Thank you, operator.

Ryan Dressner (Analyst at Raymond James)

Appreciate the color, Roger.

Roger Jeffs (Chief Executive Officer)

Yeah, thank you, Ryan. Good talk to you.

OPERATOR

Thank you. One moment for the next question. And our next question is coming from the line of Manoj Aridus of Jefferies. Please go ahead.

Manoj Aridus (Analyst at Jefferies)

Good morning. Thank you for taking our question. So just one from our end. What magnitude of pulmonary vascular resistance improvement in Sprint would be clinically meaningful and further support a best-in-class, first-in-choice claim for Yutrepia? And can EC-PAH establish that a less frequent dosing or higher achieved doses improve the persistence or outcome? And when can we see a kind of earliest data point from that trial?

Roger Jeffs (Chief Executive Officer)

Manoj, I’m gonna confess, I’m not sure I heard all of the questions at all. Well, I think—

Rajeev Saggar (Chief Medical Officer)

I heard it, Roger.

Roger Jeffs (Chief Executive Officer)

Okay, there you go.

Rajeev Saggar (Chief Medical Officer)

Yeah. So, Manoj, maybe I think it’s a three-part question. The first part is, you know, what is a reasonable reduction in pulmonary vascular resistance that can showcase Yutrepia’s potency? And I think you’re specifically referencing—we’re running a study called Sprint. This is in Group 1 PAH. This study will be looking at—it’s an open-label study looking at patients with Group 1 pulmonary arterial hypertension that receive Yutrepia on top of background therapy.

There’ll be two arms to the study. One will be three-times-a-day dosing. The second arm will be four-times-a-day dosing. It’s our belief that, and consistent with our label, these likely will show noninferiority to each other. And that’s specifically because we’re aiming to dose patients up to 212 micrograms four times a day. In the history of inhalatory treprostinil since 2006, when the first hemodynamic—and only hemodynamic—studies were done in a placebo-controlled fashion, that was done at the current recommended dose for Tyvaso, which is around 9 breaths or 54 micrograms, which we believe is a minimally effective therapeutic dose and we believe is actually why that drug has been limited in its utility. I think one of the successes we’ve had with Yutrepia is our high-dose strategy.

And if you actually think about compressing a high-dose version of Yutrepia—so, for example, you can take 212 micrograms three times a day, and that would be still roughly equivalent to a slightly reduced dose at four times a day if you look at the totality of dose received. So the study itself is looking to achieve at least a 20% to 25% change in PVR. That’s consistent with what KOLs would expect to be a robust response. We anticipate that we can do actually better than that, but obviously the study is going to bear out and lead to that.

I think your second question was—

Roger Jeffs (Chief Executive Officer)

EC-PAH, the less frequent dosing one.

Rajeev Saggar (Chief Medical Officer)

Yes. So, I mean, again, I think the Sprint study will address whether, you know, consistent with our label, you can dose—you can customize the dosing to three times a day plus PRN, you could do four times a day plus an additional dose, or you could do five times a day. And I think that that’s what makes the flexibility of Yutrepia so unique and what I think is very attractive to providers in the United States currently. Again, I think that the Sprint study will once again showcase that as you dose higher with Yutrepia, with the three-times-a-day dosing strategy, you can achieve the same robust hemodynamic changes as what would be anticipated with four times a day. So that study is going to be initiating at the end of this year and we look forward to showcasing those results as they come forward.

Manoj Aridus (Analyst at Jefferies)

Thank you.

Roger Jeffs (Chief Executive Officer)

Great. Rajeev, maybe just the bottom line: I think the value in these three-times-a-day studies is, as Rajeev pointed out, that we can compress a four-times-a-day total daily dose into a three-times-a-day regimen, given our high tolerability. So I think we’re going to be unique in the ability to do that and still drive good efficacy. So, operator, next question.

OPERATOR

Thank you. One moment for the next question. Our next question is coming from the line of Julian Harrison of BTIG. Please go ahead.

Julian Harrison (Analyst at BTIG)

Hi, good morning. Thank you for taking the questions. I have three. I’ll just ask them all at once. First, can you clarify, heading into October, what your PAH versus PH-ILD patient mix was for Yutrepia? Then second, I’m curious, at what point do you expect to be in a position to maybe provide a forward guide on PAH revenue? Is there anything you need to see stabilized before providing that? And then finally on L6.06, you know, I noticed you’re still very steadfast on development in PH-ILD.

Can you talk to us about the opportunity you see there, both from a therapeutic index and label standpoint?

Roger Jeffs (Chief Executive Officer)

Great, Jill, and thanks for the question. So maybe Mike, if you’ll answer the first two, and Rusty, if you want to answer the third question on freedom to operate for L606. So, Mike—

Michael Kaseta (Chief Financial Officer)

Great. Thanks, Roger. Good to talk to you, Julian. So first, as Roger said in his prepared remarks, that as you looked in August and September, the amount of patients that were on PAH of our scripts, that patients had PAH, was over 70%. As we look forward through the rest of the year, we told you that our daily referral rate was over 75% in October as it was in Q3. So we are very confident in where we are as we look forward to future revenue projections.

The existing patient base is stable. Even United Therapeutics acknowledged on the call that existing patients are not required to switch therapy. We also shipped to more patients in October than any month since launch. And we’re very encouraged by the fact that referrals in October had come in at over 75% of the referrals for Q3. That this is the new baseline from which we will grow from. With that being said, we’re very much a data-driven company. We’d like to see a little more data before putting any guidance out related to 2027. And I think our expectation is that we would do that in early January. A busy couple of months here as we get to the end of the year. But we’re very confident in our business, very confident in our ability to grow, not only grow on our top line, but also grow profitability quarter on quarter as we continue through our launch period.

But, you know, very excited for what Yutrepia can bring. And like I said, we’ll provide more information about what we expect in 2027, probably in early January.

Roger Jeffs (Chief Executive Officer)

Great. Thanks, Mike. Maybe Rusty, if you can talk about L606.

Russell Schundler (General Counsel)

Sure. Thanks for the question, Julian. As to the legal aspect of moving forward with L606 in PH-ILD. You know, I think the important thing to remember when you’re looking at the ‘327 patent is it’s very much drafted with an eye towards how the Tyvaso nebulizer works. So Tyvaso, the way it’s dosed is that the patients get a consistent 6 micrograms of treprostinil per breath. And that’s the way the claim is written as well. The nebulizer we’re using for L606 works in a fundamentally different manner where the patient is just nebulizing the entire amount that goes into the device.

And so it’s not measured on a per-breath basis, which again fundamentally affects how the claims in the ‘327 patent do or don’t apply to our products. So we don’t view the ‘327 patent as being a roadblock to L606 moving forward in PH-ILD at all.

Roger Jeffs (Chief Executive Officer)

Great. Thank you, Rusty. Operator, our next question please.

OPERATOR

Thank you. Our next question is coming from the line of Serge Belanger of Needham. Please go ahead.

Serge Belanger (Analyst at Needham)

Hi, good morning. Thanks for taking my questions. I guess the first one, Roger, you mentioned there’s the highest total shipments in October. Just curious if that was a continuance of the existing trend or there was some change to that trend after the events in late September. And then secondly, you also mentioned you expected some volatility in the near term here. Just curious how long you expect that volatility to last until things stabilize. Thanks.

Roger Jeffs (Chief Executive Officer)

Yeah. So I’ll give some comments. Mike, I’ll let you talk about shipments. So in terms of the volatility, like we said, there was a bit of a pause at some of the centers, given the ambiguity and the intentional sort of noise that was put into the space between the opinion and the settlement. I think we’ve spent a lot of the time since the settlement speaking to every prescriber, also visiting them. I think, you know, I myself, I’ve talked to hundreds, so I think all we’ve tried to do is sort of just lay the groundwork for what the new reality is in terms of the fact that we’re indicated for PAH only, but that we’ll be there to support those patients fully, both in terms of supply and support services. So I think there’s been a brief period of unsteadiness, and I think that will reverse. And as we said, we did just over 75% in October of what we got referrals for in September.

So there has been a bit of a pause at some centers, but it’s my assumption that those centers will again become active and that we’ll catch back up in the near future. Mike, I don’t know if you want to add to that. And then if you can talk about shipments.

Michael Kaseta (Chief Financial Officer)

Yeah. Related to shipments, Serge, what has happened each quarter is you’ve seen consistent growth each quarter. And we’ve talked about this throughout the launch, that the stacking of patients, where existing patients get refills, we add new patients, and that’s what we’ve seen in October versus September. We’ve continued that trend and that trajectory, and we’d expect that trajectory to continue as we move forward. As Roger said, there was a little bit of volatility here in October.

But like I said, we’re very encouraged with what we’ve seen. And as I said earlier in the call, we expect to continue to grow and continue to stack patients and ultimately get to the goals that we want to achieve here and to grow that profitability quarter on quarter.

Roger Jeffs (Chief Executive Officer)

Yeah, thanks, Mike. And I think, Serge, at the end of the day, nothing’s changed with the product profile, so you can’t litigate that away. You can’t fear monger that away. You know, I think the broad adoption and affinity for the product remains. So I’m confident that we’ll catch right back up to where we were. Operator, next question please.

OPERATOR

Thank you. Our next question will be coming from the line of Gwarev Menny of Lifesci Capital. Please go ahead.

Philip (Analyst at LifeSci Capital)

Hey, good morning, this is Philip jumping in for Gorav. Thanks for taking my question. So I guess I was curious on the PH-COPD pivotal plan for the second half of next year with L606. We know that the inhaled treprostinil was discontinued in PH-COPD after the PERFECT study. So wanted to ask what gives you confidence L606 can succeed there? And then how will patient selection, dosing or endpoints differ?

Roger Jeffs (Chief Executive Officer)

Yeah, thanks for the question, Philip. Maybe Rajeev, if you could opine on why the PERFECT study was perhaps imperfect.

Rajeev Saggar (Chief Medical Officer)

Yeah, Philip, thanks for the question. So, you know, the PERFECT study was run—well, first of all, you know, the PERFECT study for those that don’t know is the use of Tyvaso in the setting of PH-COPD. And the trial was actually stopped by the DSMB for safety reasons. It was complicated for sure by the COVID time period. But I think one thing is for sure is that it remains clear that the use of free treprostinil in a short-acting formulation is likely not to be successful.

It’s for those very reasons why we actually decided to use the L606 product, which is our liposomal formulation, which is a sustained-release formulation which is delivered twice a day. And fundamentally, although both are treprostinil-based products, the formulation is quite different. The liposome itself limits, we believe, the potential upper respiratory irritability that is typically seen, especially by Tyvaso and which was seen significantly during the PERFECT study as a major side effect.

So first of all, I think moving to a different formulation is critical to ensure success of the study from a safety standpoint. The second thing is we’ve spent the past year and a half really studying this market and understanding what is the best trial design for the success of the study. We’ve worked globally with some of the world’s experts, both in COPD and in PH-COPD, to assess that trial design. And I think when we do showcase the final design, I think you would feel very comfortable that this has been well thought out, both in the patient selection, the actual trial design itself and the endpoints.

The endpoints that are typically used are very consistent with those in, you know, WHO Group 1 and WHO Group 3. So those types of endpoints are not really the surprise. It’s actually the uniqueness of our trial design that we feel comfortable moving forward. And as we showed in our prepared remarks and the slides, we anticipate to initiate the study in the second half of next year, and we look forward to providing you more input at that time.

Roger Jeffs (Chief Executive Officer)

Thank you. Thank you, Philip. Operator, next question.

OPERATOR

Thank you. Our next question will be coming from the line of Benjamin Burnett of Wells Fargo. Please go ahead.

Benjamin Burnett (Analyst at Wells Fargo)

Hey, good morning. I wanted to ask about the RE-WARM study, the Raynaud’s phenomenon study. I guess what would define success here in Q1 of next year?

Roger Jeffs (Chief Executive Officer)

Yeah, Rajeev again for you.

Rajeev Saggar (Chief Medical Officer)

Yeah, so for those of you who may not know what RE-WARM really is, we’re here to study the use of Yutrepia in patients with systemic sclerosis who have symptomatic Raynaud’s phenomenon, more on the moderate to severe form of their attacks. And as we know, there is no approved therapy for this rare orphan condition. We’ve received Fast Track designation, and the purpose of the phase 2 study that we’re running is to enroll these very patients, and they will be enrolled into two different treatment arms.

Both will be active. One is a fixed-dose regimen, a fixed low-dose regimen, and the second one is a titratable-dose regimen. The primary outcome of this study is to look at safety and pharmacodynamics in this population. So, for example, once we understand safety and dosing, the other exploratory endpoints would be considerations for looking at frequency of symptomatic Raynaud’s attacks or proportion of days without a symptomatic attack. And there’s a few other key endpoints that we’ll be looking at.

As Roger noted in the prepared remarks, the RE-WARM study will be conducted during winter, and so the results will be learned actually in very short order as the study ends after the first quarter. And we will take those findings as we are already in the process of designing the phase 3 study and incorporate from a statistical methodology and make sure the primary endpoints are well understood before we finalize that protocol. But that’s what gives us confidence that we can move forward, especially given the fact that prostacyclin still remains, although, quote-unquote, off label, the backbone of the treatment of these patients when they have severe disease, as a stabilizer for this condition.

Roger Jeffs (Chief Executive Officer)

Great. Thank you, Rajeev. Operator, next question.

OPERATOR

Thank you. The next question will be coming from the line of Jason Garberry of Bank of America. Please go ahead.

Jason Garberry (Analyst at Bank of America)

Hey, guys, thanks for taking my questions. A couple for me. Just some of the language around the settlement talks about physician attestation around scripts, and I’m just wondering if you can articulate how cumbersome, if at all, that’ll be for the doctor, if that could lead to any issues with fulfillment of the script. And then your comments on payers not looking to drive any switches of the legacy patients who are getting Yutrepia for PH-ILD. I’m just wondering, will most need to go through a reauth process at the start of the calendar year? I know that the reauth stuff was flagged, and so I just wanted to get your sense, your expectation how the reauthorization process will work with grandfathered patients kind of migrating through the start of the year and how we should be kind of thinking about modeling any headwinds to patient volumes going through a reauth process.

Roger Jeffs (Chief Executive Officer)

Yeah, thanks, Jason. So, Scott, if you’ll talk about the attestation that prescribers need to do and then maybe, Mike, if you’ll handle the reauth question with payers.

Scott Moomaw (Chief Commercial Officer)

Yeah, great. Good morning. So with regard to the attestation, it’s actually—the form that it takes is basically a checkbox on what we call the referral form, the prescription, the intake form that physicians and their staff fill out. And it’s fairly common to have that kind of attestation on there, saying that this treatment is medically necessary. Now, we kind of worded it according to the settlement and what was required. But I think in terms of the overall impact, I think physicians and HCPs are pretty used to signing this kind of thing.

Mike. Yeah. And Jason, as it relates to payers, physicians, payers, and pharmacies are able to continue to support active patients that have already been prescribed YUTREPIA regardless of the disease. There’s been no change to formulary position on our payer contracts as a result of the settlement. All of our contracts remain in place. We’ve received no indications—we’ve been in contact with all of the payers—that patients are being proactively moved off of YUTREPIA.

We’re not expecting any changes to reauthorizations. Could there be a limited impact? Theoretically, yes. But we feel very confident in our ability to serve these patients. We believe we provide the best product profile for these patients. And for a doctor to—we would not expect that physicians would look to move these patients off of the product, which we believe would be the driving force of any changes. So we’re very confident in our ability to continue to serve these patients and continue to grow YUTREPIA quarter on quarter.

Jason Garberry (Analyst at Bank of America)

Great. Thanks,

Rajeev Saggar (Chief Medical Officer)

Jason. If I could just give a final impression. As someone who has prescribed pulmonary hypertension drugs for over 15 years, enrollment forms, regardless of the company, always require a provider certification signature. That is standard. This is no different. There seems to be misinformation that the attestation is anything different than any enrollment form for any drug that requires this level of involvement, regardless of PH or other diseases.

And in regards to re-enrollment, again, I think there’s some misinformation. Re-enrollment occurs every year for every drug. And again, usually there’s a standard request for information that is requested to the provider. For example, is the patient still on the drug? What is the dose? Do you agree that the patient should continue the drug? So standardized questions like that. So again, these are things that the provider ultimately has the fundamental adjudication to decide whether to continue the patient on whatever drug they choose, including YUTREPIA.

Jason Garberry (Analyst at Bank of America)

Great. If I could just squeeze in a follow-up: the roughly $11 million gap in the two sales numbers provided. I know in the past you guys had talked about, sort of, what, like maybe 10% free drug. Can you explain that, maybe that delta, a little bit? Just wanted to maybe understand those two sales numbers and channel inventory or timing effects there.

Roger Jeffs (Chief Executive Officer)

Yeah. Mike.

Michael Kaseta (Chief Financial Officer)

Yeah, Jason, thanks for the follow-up. You know, it’s very simply, the amount, the 212 million that I referenced in the prepared remarks related to shipments to patients of paid drug for the quarter. So it has nothing to do with our voucher program, has nothing to do with our PATH program or any type of free drug. The difference between the 222 and the 212 is really just the stocking that you talked about. While our inventory levels have stayed very stable, as you grow, the value of a weeks of inventory does increase as demand goes up.

So that split between the 212 and the 222 is just that phenomenon. I think showing what our true demand sales were for the quarter was important and will clearly be important as we move forward as well, which is why we disclosed it that way.

Jason Garberry (Analyst at Bank of America)

Thank you.

OPERATOR

One moment for the next question. And our next question is coming from the line of Matthew Caulfield of H.C. Wainwright and Company. Please go ahead.

Matthew Caulfield (Analyst at H.C. Wainwright and Company)

Hi, good morning. Thank you. Could you further break down the YUTREPIA growth between the new patient starts, possible switches from Tyvaso DPI or nebulized, and growth from existing patients? And then just separately on L606, is there any risk the 2nd gen nebulizer is any less physically convenient for patients compared to current DPI delivery? Thanks for any thoughts there.

Roger Jeffs (Chief Executive Officer)

Yeah, so I’ll split that up. So Mike, if you don’t mind giving the demographics around growth, and then L606, I think Rajeev, you can talk about the next gen nebulizer that we’re using.

Michael Kaseta (Chief Financial Officer)

Yeah, so thanks, Matthew, for the question. As it relates to our growth, I think we’ve maintained in Q3 a very similar allocation across disease as we’ve seen in prior quarters, even though what we also talked about was that 70% of our prescriptions in September had evidence of PAH. But if you look at existing patients versus new patients, I just want to make sure everyone’s aware we’re still showing, as part of our patient support services, first-time patients are able to have a voucher, and that utilization is still over 50%.

So if you look at revenue in Q3 as an example, the vast, vast majority of that revenue will relate to ongoing patients. The patient stacking that I talked about earlier—as new patients, over 50% of them in the first month are getting a free script—so they’re not getting a paid script until their second month of treatment anyway. So when you look at revenue on a quarterly basis, especially as we move further away from the launch and we add more active patients, existing patients are going to take on an increasing percentage of overall revenue as we get through the launch, and we’d expect that to continue as we go forward.

Roger Jeffs (Chief Executive Officer)

Rajeev, you want to talk about the nebulizer?

Rajeev Saggar (Chief Medical Officer)

Yeah, sure. So in the respire study for PHLD, the L606 is delivered using a next gen nebulizer. This nebulizer is a breath-actuated nebulizer in which the drug is inserted into the chamber and then you obviously have to trigger the breath. Now, we are a titratable drug, but in the end we are really excited because this is not your ordinary nebulizer. I mean, compared to Tyvaso nebulizer, which is a static device, it’s about the size of a Yeti tumbler mug that holds 20 ounces.

It’s quite large and it takes probably up to four minutes to deliver, four times a day. The L606 program using our next generation device should be, on average, delivering the drug in about one minute. And, you know, compared to all the other various nebulizers out there, we believe this is actually one of the most sophisticated and quickest ways to deliver a medication. As a practicing pulmonologist for 20 years, I’ve never seen a nebulizer being able to deliver a drug, regardless of the indication, quickly.

I think in regards to the comparison of DPI, I don’t think this is the goal. The first and foremost goal is to deliver the most tolerable and effective drug to patients. Whether you deliver that once a day or twice a day is not where providers or patients who have a disease that has a mortality at three years greater than 50%—I think the goal is they want the most effective and tolerable drug to be delivered. And we believe twice-a-day formulation with L606 will have the best chance to succeed and allow patients to have the best drug possible for their conditions, whether it’s in PAH or PHLD.

Roger Jeffs (Chief Executive Officer)

Great. Thank you, Rajeev. And I think the other thing to add about the device, you know, it’s because it’s a breath-actuated nebulizer, patients can take a break if they need to and it only delivers the drug when they’re breathing. So, you know, very sophisticated in how it behaves. And as Rajeev said, I think we’re delivering a liposomal formulation that will reduce cough to levels never seen before, which will then result in doses never achieved before, which will result in outcomes never seen before.

So excited about all aspects of what L606 can do, not only in PHLD, but all indications in which we’re pursuing it. So, operator, any more questions?

OPERATOR

No. Thank you. This does conclude today’s Q and A session. I’d like to turn the call back over to Roger for closing remarks.

Roger Jeffs (Chief Executive Officer)

Well, we appreciate everybody’s enthusiasm this morning and the abundance of questions. We look forward to speaking again with many of you next week at Jefferies, where we’ll be presenting the Fireside Chat on Tuesday afternoon. Thank you, everyone.

OPERATOR

This does conclude today’s program and thank you for joining. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.