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Edited Transcript of LQDA.OQ earnings conference call or presentation 26-Feb-19 1:00pm GMT

Q4 2018 Liquidia Technologies Inc Earnings Call

- Apr 19, 2019 (Thomson StreetEvents) -- Edited Transcript of Liquidia Technologies Inc earnings conference call or presentation Tuesday, February 26, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jenny Kobin

* Kevin K. Gordon

Liquidia Technologies, Inc. - Former Consultant

* Neal F. Fowler

Liquidia Technologies, Inc. - CEO & Director

* Robert F. Roscigno

Liquidia Technologies, Inc. - SVP of Product Development

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Conference Call Participants

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* Christopher Lawrence Howerton

Jefferies LLC, Research Division - Equity Analyst

* Serge D. Belanger

Needham & Company, LLC, Research Division - Senior Analyst

* Vasiliana Vireen Moussatos

Wedbush Securities Inc., Research Division - MD of Equity Research

* William Patrick Maughan

Cowen and Company, LLC, Research Division - Equity Research Associate in Specialty Pharma

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Liquidia Technologies 2018 Financial Results and Corporate Update Conference Call.

(Operator Instructions)

I would like to remind everyone that this conference call is being recorded.

I'll now hand the call over to Jenny Kobin, who is supporting Liquidia's investor relations activities while Jennifer Almond is on maternity leave.

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Jenny Kobin, [2]

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Thank you, and good morning. Welcome to Liquidia Technologies' Fourth Quarter and Full Year 2018 Financial Results and Corporate Update.

Today's call will include forward-looking statements pursuant to the Private Securities Litigation Reform Act of 1995 based on current expectations. Such statements represent management's judgment as of today and may involve significant risks and uncertainties that could cause actual results to differ materially from expected results.

Please refer to Liquidia's filings with the SEC, which are available from the SEC or at liquidia.com, for information concerning risk factors that could cause such differences and otherwise affect the company.

I would now like to turn the call over to Neal Fowler, CEO.

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Neal F. Fowler, Liquidia Technologies, Inc. - CEO & Director [3]

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Good morning, and thank you for joining us as we summarize Liquidia's results for the fourth quarter and year ended December 31, 2018. Joining me today are Kevin Gordon, President and Chief Financial Officer; and Dr. Rob Roscigno, Senior Vice President of Product Development and Program Lead for LIQ861.

This morning I will update you on our pipeline progress, which includes our lead product candidate LIQ861 for pulmonary arterial hypertension, or PAH, currently being evaluated in a Phase 3 study, and LIQ865, our injectable sustained-release formulation of the nonopioid anesthetic bupivacaine to treat local postoperative pain. Kevin will provide highlights of our financial results for the fourth quarter and full year 2018, and then I will wrap up with an update on our upcoming key milestones in 2019. After our prepared remarks, we will open the call for your questions.

We will begin with our lead program, LIQ861, an inhaled dry powder formulation of treprostinil designed using Liquidia's proprietary PRINT technology to enhance deep lung delivery using a convenient, palm-sized, disposable device for the treatment of PAH. Given that PAH is a rare, chronic and progressive disease, we believe 861 has the potential to improve a patient's overall quality of life. As an inhaled product, we believe 861 will minimize the systemic side effects seen with oral and infused prostacyclin-based products, while also overcoming the limitations of current nebulized therapies to safely deliver higher doses into the lungs.

In January of this year, we reported positive interim safety data from our pivotal Phase 3 clinical trial known as INSPIRE. 861 was observed to be well tolerated in 109 PAH patients at the 2-week time point, the period which addresses the FDA's request for data inclusion in our NDA submission. 861 was evaluated at doses up to 125-microgram capsule strength with no study-drug-related serious adverse events or dose-limiting toxicities observed. The treatment-emergent adverse events reported were mostly mild in nature and consistent with inhaled prostacyclin therapy.

Patients have continued to receive treatment beyond 2 weeks, with the first patient dosed in March of 2018. To date, a maximum tolerated dose has not yet been reached, with 861 administered at doses up to 150 micrograms in capsule strength.

As a reminder, the primary objective of the INSPIRE trial is to evaluate the long-term safety and tolerability of 861. The trial is designed to evaluate 2 groups of PAH patients. First, patients who have been under stable treatment with nebulizer-delivered treprostinil for at least 3 months and are transitioned to 861; and second, patients who have been under stable treatment with no more than 2 nonprostacyclin oral PAH therapies for at least 3 months and have their treatment regimen supplemented with 861. Patients who transitioned from nebulizer-delivered treprostinil at a stable dose were initiated at a dose of 861 lower than their current stable treprostinil dose. Patients adding 861 to current nonprostacyclin oral therapies started at a 25-microgram capsule strength. In both cases, 861 was up-titrated in 25-microgram incremental capsule strength doses to symptom relief or the limit of tolerance.

We are encouraged with the trial results to date and believe they support the therapeutic potential and versatility of 861 to treat patients across different functional classes. Specifically, we enrolled the safety portion of the trial faster than expected, driven primarily by the interest from functional class II prostacyclin-naive patients. We have not observed any new adverse events compared to previous studies of inhaled treprostinil, and we have safely increased the dose of treprostinil to levels higher than current approved nebulized therapies. These early observations suggest that 861 may be an attractive alternative to current inhaled and oral delivery of prostacyclin-based therapies.

The INSPIRE trial is nearly fully enrolled. We are focused on completing the PK substudy and remain on track to report results in the second quarter of this year. The substudy is designed to compare bioavailability and PK of treprostinil as patients are transitioned from nebulizer-delivered treprostinil to 861. We also plan to continue treating patients in the INSPIRE trial and to collect data to further support our future marketing and commercial activities with additional medical information.

In addition to the U.S.-based INSPIRE study, we are currently working with selected sites in the start-up phase of the European clinical trial that will explore the hemodynamic effects of 861 in PAH patients. Although the data is not required or expected to be included for U.S. registration, we believe the study will help inform the medical community of 861's impact on right heart function as assessed by acute and chronic hemodynamic measurements. The study is also the first step in our clinical development program in Europe.

Overall, we are pleased with the progress we have made advancing this program, and we are focused on our plans to submit the NDA for 861 in late 2019.

Next I would like to highlight LIQ865, our second product candidate, which has been evaluated in 2 Phase 1 studies. 865 is an injectable, sustained-release formulation of the nonopioid anesthetic bupivacaine to treat local postoperative pain for 3 to 5 days with a single administration. The opportunity for 865 is to increase the options for long-lasting, safe, effective pain relief that can reduce the need for opioids in the early days following surgery.

We recently presented safety, pharmacokinetics and pharmacodynamic results from our first Phase 1 study of 865 at the 17th Annual Pain Medicine Meeting held by ASRA, the American Society of Regional Anesthesia and Pain Medicine. This presentation highlighted data indicating that 865 doses were well tolerated in healthy volunteers, and the pharmacodynamic response was consistent with a local anesthetic effect lasting for 3 or more days. This poster presentation is available on our website on the Publications page.

Our next step for the 865 program is initiating Phase-2-enabling toxicology studies. The first is scheduled to begin in March with a goal of having this asset Phase-2-ready by the end of this year.

Before I wrap up, there's one other recent development that we'd like to highlight today. Liquidia has been accepted by the FDA into their Center for Drug Evaluation and Research, or CDER Emerging Technology Program. This program was created to promote the adoption of innovative approaches to pharmaceutical product design and manufacturing technologies likely to improve product safety, identity, strength, quality and purity. It supports innovation by providing a forum for sponsors such as Liquidia to engage the FDA while in development, and is intended to provide consistency, continuity and predictability in review and inspection. We're thrilled to have been accepted into this program and intend to meet with the Emerging Technology team members in the near future to discuss our novel PRINT technology.

In summary, we have made meaningful progress across our clinical programs and are keenly focused on delivering on the next set of milestones.

With that, I will now turn the call over to Kevin to cover fourth quarter and full year financial highlights.

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Kevin K. Gordon, Liquidia Technologies, Inc. - Former Consultant [4]

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Thank you, Neal. Good morning, everyone. Our fourth quarter and full year 2018 financial results can be found in the press release issued earlier today, which is available on our website. We will also file our annual report on Form 10-K with the SEC later today.

In those documents, you will see that revenues were $0.6 million in the fourth quarter of 2018, compared to $1.8 million in the year-ago quarter. For the full year 2018, revenues were $2.7 million, compared to $7.3 million for the full year 2017. Our revenue has primarily been derived from collaborating and licensing our proprietary PRINT technology to pharmaceutical companies. The decrease in revenues was as expected given our shift towards prioritizing development of our own pharmaceutical products, notably 861 and 865. Near-term revenues from research and development services performed for others are expected to be minimal, with our strategic focus on our proprietary product pipeline using the PRINT technology platform.

Research and development expenses were $8 million in the fourth quarter of 2018, compared to $6.8 million in the year-ago quarter. For the full year 2018, R&D expenses were $28.7 million, compared to $24.8 million for the full year 2017. The increase in R&D expenses was primarily due to our ongoing Phase 3 clinical trial for 861, which commenced in December of 2017, and the related process development activities.

General and administrative expenses were $2.3 million in the fourth quarter of 2018, compared to $2.1 million in the year-ago quarter. For the full year 2018, G&A expenses were $8.8 million, compared to $10.2 million for the full year 2017. The full year decrease in G&A expenses was primarily due to the costs of an abandoned equity offering that were expensed in 2017.

We reported a net loss of $9.7 million in the fourth quarter of 2018, compared to net income of $8.2 million in the year-ago quarter. The change from a profit to a net loss for the fourth quarter was primarily related to $20.1 million of positive adjustments of fair market value related to convertible instruments and warrants in 2017 that were settled in 2018. For the full year 2018, the net loss was $53.1 million, compared to a net loss of $29.2 million for the full year 2017. The increase in net loss for the full year was primarily due to a decrease in revenues, increases in R&D and interest expenses, as well as the positive adjustments of derivative fair market value in the prior year, partially offset by a decrease in G&A expenses in 2018.

Moving on to the balance sheet. As of December 31, 2018, cash totaled $39.5 million, and there were 15.52 million shares of common stock outstanding.

I will now turn it back to Neal.

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Neal F. Fowler, Liquidia Technologies, Inc. - CEO & Director [5]

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Thanks, Kevin. 2018 was a transformational year for the company. We rapidly advanced 2 clinical programs; we evolved as a company, listing on NASDAQ; and we enrolled the safety portion of our Phase 3 trial for our lead program faster than expected. During this period, our team has demonstrated its ability to develop new products and the versatility of the PRINT technology platform.

In 2019, we will continue our sharp focus on execution. Here are our key milestones for the year. We expect to initiate Phase-2-enabling toxicology studies of 865 beginning in March. We will present data on 861 at key medical conferences ahead. We plan to report 861 bioavailability and PK data in the second quarter. We will begin a European trial to assess the effects of 861 on acute and chronic hemodynamic measurements. And importantly, we intend to submit an NDA for 861 in late 2019. We look forward to updating you on our progress, and we appreciate your interest and continued support.

I will now turn the call over to the operator to take your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

Our first question comes from the line of Liana Moussatos of Wedbush Securities.

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Vasiliana Vireen Moussatos, Wedbush Securities Inc., Research Division - MD of Equity Research [2]

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What are the next steps left to submit the NDA for 861 late -- by late this year? And is the CDER Emerging Technology Program part of the NDA for 861?

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Neal F. Fowler, Liquidia Technologies, Inc. - CEO & Director [3]

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Liana, this is Neal. Good morning. Yes, so the key steps ahead, first, for the NDA, are as we shared in the second quarter. Our PK and bioavailability data will be available, which goes into our submission. As you're aware, we'll have also a robust CMC package that comes together, and we'll be completing the submission for the NDA by the end of the year. The Emerging Technologies Program is not anything required at all for our NDA filing, but what is nice about that, it allows us touchpoints with the agency throughout the process as we prepare for the NDA given that PRINT is a new and very innovative technology, so we're very excited to be included in that program.

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Operator [4]

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Our next question comes from the line of Bill Maughan of Cowen.

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William Patrick Maughan, Cowen and Company, LLC, Research Division - Equity Research Associate in Specialty Pharma [5]

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I was just hoping that you could give a bit more granularity on the hemodynamics study in terms of what an ideal outcome would look like and how that would fit in your go-to-market message. And then on the safety study, for a chronic indication, why did the FDA specifically want a 2-week endpoint, and do you anticipate any postapproval study commitments? Thanks.

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Neal F. Fowler, Liquidia Technologies, Inc. - CEO & Director [6]

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Thanks, Bill. Appreciate it. I'll turn it over and let Rob Roscigno handle your question.

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Robert F. Roscigno, Liquidia Technologies, Inc. - SVP of Product Development [7]

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Bill, regarding the hemodynamics study, what we would like to see in the hemodynamics study is, again, a signal that 861 formulation that we've developed here at Liquidia shows similar hemodynamic properties to other forms of treprostinil. As we described, we will be looking at both acute and chronic hemodynamics, and chronic hemodynamic changes over time are very important for PAH patients because they will help define the chronic clinical impact of 861 and be informative to both -- the data will be informative to both dosing and dose titration as well over time. So we look forward to starting that study in Europe. Regarding the 2-week endpoint, I want to remind everyone that basically, FDA asked us to look at the safety and tolerability of the PRINT dry powder formulation of treprostinil, and they felt that 2 weeks would be sufficient to look at -- for both safety signals that would come out of the data and/or tolerability issues. And as we presented the data in January, we had a very clean profile for 861 and showed that it was very well tolerated after 2 weeks, so we feel very confident this will be sufficient for the NDA. As far as postapproval commitments, with all drugs, there's always the possibility FDA may ask for more data, and we look forward to engaging with the agency.

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Operator [8]

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Our next question comes from the line of Serge Belanger of Needham & Company.

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Serge D. Belanger, Needham & Company, LLC, Research Division - Senior Analyst [9]

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A couple questions on the INSPIRE trial. I think you mentioned you've dosed up to 150 micrograms; how high do you expect to go, and do you expect to find an MTD or dose-limiting toxicities? And when you think of the potential product label for 861, what do you envision the various doses you'll be seeking, as well as the label claims?

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Neal F. Fowler, Liquidia Technologies, Inc. - CEO & Director [10]

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Yes. Serge, good morning. This is Neal. Yes, I -- we don't know the MTD, as I had indicated earlier, yet, which is -- we would like to, ideally, find the MTD, but our dosing has allowed us thus far to continue to go up. As I just shared, we're at 150-microgram capsule strength. We have built into the protocol the ability for physicians to titrate upward, and we'll continue to follow that through time. So it's hard for me to conjecture where that top dose will be, but we're encouraged, obviously, by what we've seen, given the fact that we can dose higher than currently available nebulized therapies. The label itself, thus, will include, as you would imagine with a 505(b)(2), as you think about the efficacy claims of Tyvaso, which is our reference listed drug here, the difference will obviously be the 1- to 2-breath dosing regimen that we have. The doses that would look like what we've seen from our schedule with the INSPIRE trial, and obviously the 2-week safety endpoint that we're very encouraged by what we've seen, that will correspond to the various dosing label claims that we'll have at that time. But looking forward, again, it's really hard to know right now what that top dosing is, because again, we're encouraged by the fact that we still have not seen the MTD, and we'll follow that through time.

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Operator [11]

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(Operator Instructions)

Our next question comes from the line of Chris Howerton of Jefferies.

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Christopher Lawrence Howerton, Jefferies LLC, Research Division - Equity Analyst [12]

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I think just a couple from me. First, from -- for the hemodynamics study, what was the reasoning in terms of conducting the study in Europe? And then I have a follow-up question.

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Robert F. Roscigno, Liquidia Technologies, Inc. - SVP of Product Development [13]

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Sure. Good morning, Chris. It's Robert. With the hemodynamics study, we wanted to work with centers of excellence, and also we felt that it was an opportunity to, if you will, engage a program in Europe. And given the centers we're working with, we're really where we want to be with that study, working with 2 of the most prestigious centers in Europe that are expert at collecting this type of data and will also lead to informing us with, if you will, a registration-type study. We're working with the folks that will drive that development program in Europe. So we thought that the opportunity existed for us to both get the important hemodynamic data that would be relevant for publication as well as informing our medical community, and also giving us the opportunity to engage ex-U. S. with this drug. As you know, Tyvaso is not approved ex-U. S., so we felt this was an opportunity to start that process.

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Christopher Lawrence Howerton, Jefferies LLC, Research Division - Equity Analyst [14]

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Okay, that makes sense. And were these centers disclosed?

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Robert F. Roscigno, Liquidia Technologies, Inc. - SVP of Product Development [15]

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Not at this time. As we get closer, the study will be on [clintrials] and such, and we'll have all that data out there.

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Christopher Lawrence Howerton, Jefferies LLC, Research Division - Equity Analyst [16]

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Okay, okay. And then I guess the other question that I had was, for the Emerging Technology Program, could you give us some more information in terms of what the criteria is to become a part of that program? And specifically, what benefits do you see that for your 2 current pipeline programs?

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Neal F. Fowler, Liquidia Technologies, Inc. - CEO & Director [17]

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Yes, Chris, this is Neal. Good to speak with you. Yes, the Emerging Technology Program, there is a guidance document listed from September 2017, for those of you that are interested in kind of seeing more about that. But it was created to promote the adoption of innovative approaches to pharmaceutical product design and manufacturing. It's specific in this case for 861, and it really allows for us to meet with the Emerging Technology team to discuss PRINT prior to filing our regulatory submission. So it's added touchpoints, I'll call it. We believe the program will provide a benefit for us in having active dialogue with the agency prior to filing, and we're very encouraged by that. You had mentioned both products. Obviously that would be a separate discussion we would have to have as it pertains to 865.

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Christopher Lawrence Howerton, Jefferies LLC, Research Division - Equity Analyst [18]

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Got it, okay. And I guess one just quick follow-up, if I may: When you have these additional engagements with the FDA, do you expect those interactions to be limited to CMC experts, or will you have an opportunity to discuss any -- with any of the other internal groups?

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Neal F. Fowler, Liquidia Technologies, Inc. - CEO & Director [19]

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No, this is purely a CMC touchpoint, if you will, in this particular case. Everything else would be standard procedure as you think about filing an NDA.

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Operator [20]

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And our next question comes from a follow-up from the line of Liana Moussatos of Wedbush Securities.

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Vasiliana Vireen Moussatos, Wedbush Securities Inc., Research Division - MD of Equity Research [21]

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For 865, what are the steps to get it Phase-2-ready by year-end, and what are you thinking of for the Phase 2 design? And then second question, any new PRINT clinical candidates this year?

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Neal F. Fowler, Liquidia Technologies, Inc. - CEO & Director [22]

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Liana, I'll take that. It's Neal again. The -- let me start, maybe, with your second question and bring it back to the first. Our thinking right now, we don't know the exact protocol or anything like that as we think about Phase 2, but what very much appears to us as the path forward here is a soft tissue and a hard tissue Phase 2 surgical model design here. So our tox studies for this year, which are about to commence, will prepare us for those 2 routes. We'll do a series of small- and large-animal studies to get us ready for Phase 2 over the course of this year and be ready to go as we get into 2020. As it pertains to beyond 865, we have the great opportunity here to decide that kind of sooner than later, we would like to think, as we think that through. As you'll recall, one of the great things about PRINT is it's not limited in any way to route of delivery, to molecule and thus therapeutic area, and we have a host of opportunities with PRINT. We are active in our discussions around what would be that third product, and as soon as we're locked and loaded on that, we'll be back around to share that with you guys.

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Vasiliana Vireen Moussatos, Wedbush Securities Inc., Research Division - MD of Equity Research [23]

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Would that be this year or next year?

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Neal F. Fowler, Liquidia Technologies, Inc. - CEO & Director [24]

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Yes, hard to say. That's obviously dependent on a lot of things, including financing and our focus on the NDA right now, which is paramount. So we'll keep you posted on that in terms of our pacing and when that will commence.

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Operator [25]

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Thank you. And I'm showing no further questions at this time. I would now like to turn the call over to Mr. Neal Fowler, CEO, for closing remarks.

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Neal F. Fowler, Liquidia Technologies, Inc. - CEO & Director [26]

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Well, once again, we'd like to thank everyone for taking the time to participate in our call today. We greatly appreciate your interest and investment in Liquidia and we look forward to being in touch and updating you on our continued progress. So thanks to everyone here, and have a great day.

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Operator [27]

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Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.