Liquidia Corp(LQDA) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed financial statements, management's financial analysis, and disclosures on market risk and internal controls Item 1. Condensed Financial Statements (unaudited) Liquidia Corporation's unaudited condensed financial statements reveal an increased net loss and a 'going concern' uncertainty due to recurring losses and future funding requirements Condensed Consolidated Balance Sheets Liquidia's balance sheet shows a decrease in cash and equity, with total assets slightly down and total liabilities significantly up due to increased long-term debt Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $169,758 | $176,479 | | Total current assets | $177,205 | $185,105 | | Total assets | $227,429 | $230,313 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $60,518 | $41,781 | | Long-term debt, noncurrent | $103,182 | $95,268 | | Total liabilities | $177,716 | $150,935 | | Total stockholders' equity | $49,713 | $79,378 | Condensed Consolidated Statements of Operations and Comprehensive Loss The statements of operations show a widened net loss of $38.4 million for Q1 2025, primarily driven by increased general and administrative expenses despite stable revenue Statement of Operations Summary (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenue | $3,120 | $2,972 | | Cost of Revenue | $1,517 | $1,467 | | Research and development | $6,966 | $10,057 | | General and administrative | $30,062 | $20,249 | | Loss from operations | ($35,425) | ($28,801) | | Net loss | ($38,367) | ($30,083) | | Net loss per share, basic and diluted | ($0.45) | ($0.40) | Condensed Consolidated Statements of Cash Flows Cash flow statements indicate a net decrease in cash of $6.7 million in Q1 2025, with increased cash used in operations and reduced financing activities compared to the prior year Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($30,679) | ($24,866) | | Net cash used in investing activities | ($330) | ($624) | | Net cash provided by financing activities | $24,288 | $99,669 | | Net (decrease) increase in cash | ($6,721) | $74,179 | Notes to Condensed Consolidated Financial Statements These notes provide critical details on Liquidia's product development, 'going concern' uncertainty, significant long-term debt, and ongoing legal disputes with United Therapeutics - The company is focused on developing and commercializing products for rare cardiopulmonary diseases like PAH and PH-ILD. Its lead product candidate, YUTREPIA, has a PDUFA goal date of May 24, 2025, for final FDA approval[24][27] - There is substantial doubt about the company's ability to continue as a going concern for the next year due to recurring operating losses, an accumulated deficit of $595.8 million, and the need for additional capital to fund operations and meet debt covenants[33][36][37] - The company capitalized $16.6 million of prelaunch inventory for YUTREPIA as of March 31, 2025, based on the assessment that regulatory approval and commercialization are probable[51][76] - The company has significant long-term debt under an agreement with HealthCare Royalty Partners (HCR), with $140.8 million outstanding as of March 31, 2025. The agreement includes a covenant to maintain a minimum cash balance of $15.0 million[114][121][126] - Liquidia is involved in multiple legal proceedings with United Therapeutics concerning patent infringement and trade secrets related to YUTREPIA[142][147] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion analyzes the increased net loss, reiterates the 'going concern' warning, and details critical accounting estimates related to YUTREPIA's commercialization and debt financing Results of Operations A comparison of Q1 2025 to Q1 2024 shows a 28% increase in net loss to $38.4 million, primarily due to a 48% rise in General & Administrative expenses for YUTREPIA launch preparations Comparison of Operations (in thousands) | Item | Q1 2025 | Q1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $3,120 | $2,972 | $148 | 5% | | Research and development | $6,966 | $10,057 | ($3,091) | (31)% | | General and administrative | $30,062 | $20,249 | $9,813 | 48% | | Loss from operations | ($35,425) | ($28,801) | ($6,624) | 23% | | Net loss | ($38,367) | ($30,083) | ($8,284) | 28% | - The $3.1 million decrease in R&D expenses was mainly due to a $3.6 million reduction in personnel costs as focus shifted to commercialization preparation for YUTREPIA[186] - The $9.9 million increase in G&A expenses was primarily due to an $8.1 million rise in personnel costs (including stock-based compensation) driven by higher headcount for the potential YUTREPIA launch[187] Liquidity and Capital Resources Liquidity and capital resources highlight $169.8 million in cash, but management expresses substantial doubt about the company's ability to continue as a going concern without additional financing or YUTREPIA revenue - The company had cash and cash equivalents of $169.8 million as of March 31, 2025[189] - In Q1 2025, the company received $25.0 million in net proceeds from its HCR debt agreement. In Q1 2024, it received $74.9 million from a private placement and $25.0 million from the HCR agreement[205] - Management concluded there is substantial doubt about the ability to continue as a going concern, as existing cash is insufficient to fund operations and meet a $15.0 million minimum cash covenant for the next twelve months without YUTREPIA revenue or new financing[198][171] Critical Accounting Estimates Critical accounting estimates include accrued Research and Development expenses, long-term debt under the HCR agreement, and the capitalization of prelaunch inventory for YUTREPIA, which carries a risk of write-off - Key estimates include accrued R&D expenses, which are based on the estimated level of service performed by vendors like CROs and CMOs[220] - The accounting for long-term debt from the HCR Agreement is critical, requiring accretion under the effective interest method based on contractual future payments[224] - Capitalization of prelaunch inventory ($16.6 million as of March 31, 2025) is a critical estimate based on the probability of YUTREPIA's regulatory approval and commercial success. Failure to achieve this could lead to a write-off[225] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is deemed not applicable as the company qualifies as a smaller reporting company - The company has determined that quantitative and qualitative disclosures about market risk are not applicable[230] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[232] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[233] PART II. OTHER INFORMATION This section details the company's significant legal proceedings, comprehensive risk factors, and other required disclosures including exhibits Item 1. Legal Proceedings The company is engaged in significant ongoing legal proceedings, primarily patent infringement and trade secret disputes with United Therapeutics, which could impact YUTREPIA's commercialization - For details on legal proceedings, the report refers to Note 14 of the financial statements[234] - Key litigation includes the 'New Hatch-Waxman Litigation' where United Therapeutics alleges YUTREPIA infringes its '327 Patent. A motion for a preliminary injunction by United Therapeutics was denied, and trial is set for June 2025[144] - United Therapeutics has also filed two trade secret lawsuits, alleging misappropriation of trade secrets and seeking ownership of certain Liquidia intellectual property[147][148] - Liquidia has filed its own patent infringement lawsuit against United Therapeutics concerning its Tyvaso DPI product and Liquidia's '494 Patent[149] Item 1A. Risk Factors The company faces substantial risks including a 'going concern' warning, heavy dependence on YUTREPIA's success amid litigation, supply chain vulnerabilities, and restrictive debt covenants - The company has a history of losses and its financial statements raise substantial doubt about its ability to continue as a going concern without additional funding[241] - The company is heavily dependent on the success of YUTREPIA, which faces multiple lawsuits from United Therapeutics that could delay or block its commercial launch and limit its approved indications[236][273] - The HCR debt facility contains restrictive covenants, including maintaining a $15.0 million minimum cash balance, and is collateralized by all company assets[247] - The company relies on single-source suppliers for critical components of YUTREPIA (active ingredient, device, encapsulation) and L606, posing a significant supply chain risk[425][426] - Sales of Treprostinil Injection are constrained by the limited availability of the CADD-MS 3 infusion pump, which is no longer manufactured or supported[236][269] Item 5. Other Information No Rule 10b5-1 trading arrangements were adopted or terminated by directors or executive officers during the first quarter of 2025 - No new Rule 10b5-1 trading plans were adopted or terminated by directors or executive officers during the three months ended March 31, 2025[517] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL financial data files - The exhibits filed with the report include certifications from the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act[521] - Inline XBRL (eXtensible Business Reporting Language) documents are also included as exhibits, providing interactive data for financial statements[521]