Q2 2021 Nabriva Therapeutics PLC Earnings Call

August 5, 2021

[music].

Good day, and thank you for standing by welcome to the Veeva Therapeutics second quarter kind of 'twenty, 1 financial results call.

At this time all participants are in the listen only mode.

After the speaker's presentation, there will be a question and answer session. The assay question. During the session you will need the press Star then the number 1 on your telephone.

If you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, Mr. Dan Donlan.

Chief Financial Officer. Please go ahead.

Thank you and good afternoon, everyone welcome to the previous conference call and webcast, where we will discuss the second quarter 2021 earnings and also provide a business update.

Slides for today's presentation are posted on the company's website, www dot and Abreva dot com and can be found under the investors tab in the events and presentations section. We recommend that you refer to the presentation as we will be using those slides for today's discussion.

Before we begin on slide 2 I would like to remind everyone that this conference call and webcast will contain forward looking statements about the company.

These statements are subject to risks and uncertainties that could cause actual results to differ.

Please note that these forward looking statements reflect our opinions only as of the date of this call. We will undertake no obligation to revise or publicly release the results of any revisions to these forward looking statements in light of new information or future events factors that could cause actual results for outcomes to differ materially from those expressed in or implied.

By such forward looking statements are discussed in greater detail in our most recent filings on form 10-K, and our other periodic reports on forms 10-Q, and 8-K filed with the SEC.

Ted Schroeder and debris the CEO will start with a business update including our activities in China and will present, an overview of the commercial highlights for the quarter.

Then I will provide a financial review and Ted will come back for some summary comments and lead the Q&A session. In addition to Ted and me joining us on the call for the Q&A session is Dr. Steve The alone our President and Chief operating Officer, I would now like to turn the call over to Debride, The Chief Executive Officer, Ted Schroeder.

Thank you Dan and thanks to everyone joining our call this afternoon.

Let's start on slide 5.

We are advancing our commercial effort to drive awareness as we continue to position both <unk> ends in letter for growth as the access is improving in the U S. We are happy to see increase face to face the visits between our sales team in the field and health care providers through our partnership with ample of the Hell.

In addition, we are seeing some promising trends in the overall antibiotic prescription market, which I'll touch. Upon later in this presentation. We believe that our sales representatives are continuing to gain traction with providers in the field and are on our way to getting some of extra sales back.

To pre pandemic levels.

As we previously stated we anticipate a return of historical peak sales trends force of extra by mid 2022.

As we mentioned last quarter. The breathe of was granted its own national drug code or MDC for <unk>, which allows the company to recognize 100% of net product sales of <unk> as of April 12th sort of extra has been sold under the debris the label and and this.

<unk> of positive impact on our P&L during the quarter, which Dan will discuss in more detail later in the call.

Next and importantly in late May we along with our partner announced positive top line results from a phase III trial of the Fabulous in Chinese adults with community acquired bacterial pneumonia or cap.

We will briefly review the data results and the market in greater China in a few minutes, but I am pleased to say that our new partner of Sumitomo Pharmaceuticals, a wholly owned subsidiary of Sumitomo Dainippon Pharma has deep experience in the region and an established commercial infrastructure in the.

The anti infective field, we think this could provide a considerable revenue opportunity for of an abreva with an ingredient that provides for low double digit royalties and up to $86 million upon the achievement of certain sales and regulatory milestones starting with the approval for greater.

Greater China.

As mentioned previously we are going to complete a phase 1 safety and PK study present letter in CF patients and expect to begin enrolling that study in the second half of this year.

During discussions for zone, let of outside the U S remain active as we continue to look to form strategic business development agreements in Europe and other territories.

<unk> are ongoing with multiple parties, who have expressed interest in of BD partnership.

As we evaluate our options we want to ensure that any transaction that occurs is in the best interest of patients and our shareholders.

Regarding can tipo.

Despite some updated guidance from the FDA, we have not received any additional clarity on our specific situation. At this time, we continue to work with the FDA, our manufacturing partners and consultants to understand the fda's guidance and the implications for Resubmission of the <unk>.

N D a.

We are confident that our contract manufacturers are prepared when the FDA is ready to conduct an on site inspection.

Consistent with our prior comments, we do not intend to file the <unk> NDA and so we have confidence that the FDA can complete any required inspections within the 6 month to do for clock.

Finally, we were able to extend our cash runway substantially through the first quarter of 2022 as a result of successfully negotiating to extend our debt repayment as well as the ATM proceeds received during the quarter.

We also we are also excited about the recent extension of our manufacturing agreement with <unk> limited for Us and let us through 2030. The extension of the agreement reflects confidence in the long term potential of the sent a letter in recognition of the impact the global pandemic has had on <unk>.

The biotic demand the revised terms provide for lower minimum purchase requirements in the near term therefore, giving the breathe some near term for.

Flexibility and cash allocation.

Allowing us to allowing us optionality to invest in additional value creating initiatives..1 such example, I will touch on later in the presentation is the deployment of inside sales representatives to expand our reach raise awareness and drive prescriptions for both the then let at Ensign.

Extra now.

Now turning to slide 6 here is a reminder of our broad pipeline across serious and rare and infectious diseases for cystic fibrosis I think it's worth reiterating that if the trials proved to be successful. We think this could provide us with a $100 million incremental net sales opportunity.

In China on the heels of the recently announced positive top line results from the phase III. The Fabulous trial, we would anticipate the next step is is the submission of the NDA, which is targeted in the second half of 'twenty 'twenty 1.

Turning to slide 8 for a commercial update let's first take a look at the progress we continue to make with face to face interactions with health care providers. As you can see from the chart as physician offices continue the reopen we went from 68% in person interactions during our last update.

In may to 72% in person interactions for primary care visits as of July 2021, If you look at healthcare Provider's overall, 85% of our interactions are in person. Our sales representatives have now been in the field for 2 full quarters and we.

Back to see the number of in person interactions further increase in the coming weeks and months, we will continue to adapt our approach is local guidance the COVID-19 restrictions evolve.

Assuming COVID-19 restrictions are not enacted our expectation is for access to doctors' offices to rise.

In addition to the improving conditions for our reps in the field. We are also starting to see more promising trends in the general antibiotic market as you can see on slide 9.

After a sharp drop in total prescriptions in the antibiotic market in 2020 in the beginning of 2021, we are seeing the current trajectory approaching pre pandemic levels of 2019, we believe the continuation of this trend will will rely on an increase in respiratory infections later in.

Of the year.

Combining these factors the improving macro environment getting more face to face time with prescribers and antibiotic prescriptions beginning to trend in the favorable direction. I think you can understand why we are bullish about the opportunity for per prescription growth for both the of extra ends in Atlanta, we.

Continued to engage in discussions with both products with say with Hcp's for <unk>, our focus remains on driving prescribing for appropriate patients for as the letter our efforts are focused on educating providers on the benefits of Zen letter to lay the groundwork to ensure that the <unk>.

<unk> is top of mind heading into the fall.

We are also excited to share that in order to help complement our commercial team of the field. We are deploying new resources to help target the areas in the U S debt. Our representatives currently do not cover if you turn to slide 10, you will see the current coverage of the sales force. It shows the regions of the.

<unk> 7800 currently targeted customers, we now plan to initiate a pilot program to expand our reach to cover white space geographies. We believe that this represents a large untapped market opportunity for the company. We are deploying the strategy to further accelerates of extra.

Scripts and the continued just expands and letter awareness.

If you turn to slide 11, you can see more details about our plan to expand our reach and frequency with virtual promotion tactics. According to an analysis performed by IQ via there are approximately 8000 providers in these uncovered territories, we plan to initiate a pilot program to reach the.

Top 25% of prescribers within these white space geographies with the goal of approximately 40 outbound calls per day per representative this is an opportunity to efficiently expand reach raise awareness and drive prescriptions for both <unk> and <unk>.

The question you may be asking is why now.

Part of our decision is based on the opportunity to reach these high prescribers many of which are already familiar with sort of extra. In addition, we have been getting inbound requests from providers in the uncovered territories for information and samples of both brands. These 2 factors coupled with the.

Focused investment prompted the decision to expand into these white space territories, we look forward to kicking off this program by the end of the third quarter and we will monitor the impact it is having on our business over the coming quarters.

We view this program as especially complementary to Zen later, where we recently launched a new brand campaign in order to highlight the appropriate patient types for Zen letter. In addition, our medical affairs team has been developing additional materials to educate prescribers on current treatment guidelines for cap.

And the threat of rising resistance to pathogens that cause cap.

As we continue to educate physicians on Zen led us benefits slide 12 introduces our new patient focused campaign and shows examples of the non personal promotional initiatives, we are employing to support this and let of message.

As we have previously mentioned, we are targeting patients with a more complicated medical history.

Such as older patients cap patients, who have recently been on antibiotics, which puts them at an increased risk for resistance with traditional antibiotics.

We're expanding our marketing impact by deploying a variety of non personal promotional initiatives such as branded E. Mails paid search point of prescribing messaging rep deliberate materials display advertising and Kols driven content, we believe that coupled with the <unk>.

Increased face to face promotion and the positive prescription trends we are seeing in the overall market. We are building the foundation for Zen let of growth in the fall when we anticipate a greater incidence of cap now let me spend some time on the fabulous in China, and what that could potentially mean for <unk>.

The <unk>.

Turning to slide 14 earlier this quarter, we announced positive top line results from a phase III trial evaluating the famulus in adults with cap in greater China.

This trial was conducted by our partner and the results were consistent to what we saw in the pivotal leap 1 in leap 2 trials and NDA submission in greater China is expected in the second half of 2021, we also announced that development and commercialization rights of La <unk> in greater China.

Were transferred to Sumitomo of Pharmaceuticals, Sumitomo opted to pursue the fabulous as it is highly complementary to their existing anti infective product portfolio in China.

For those that are not aware sumitomo is already a dominant player in the anti infective space in the greater China region, putting them in the solid position to launch of a fabulous in China once approved.

Taking into account all of these factors positive phase III data partnership with Sumitomo and their established commercial capabilities along with their knowledge of the Chinese regulatory authority, we feel extremely confident in the path forward for expanding global access to the Fabulous and <unk>.

<unk> of how this impacts in the Abreva, we are entitled to low double digit royalties on net sales as well as payments of up to $86 million. Upon the achievement of certain sales and regulatory milestones. The first milestone of which is due upon approval in the region as we.

Turn to slide 15, you see that the data from the phase III trial of <unk> in China produce results consistent with prior pivotal trials the <unk>.

<unk> achieved the primary endpoint of non inferiority versus Moxifloxacin and also demonstrated comparable results on the secondary endpoint of the investigator assessment of clinical response of test of cure based on the clinically evaluable population, 70% of lift famulus treated patients.

Demonstrated success after failing prior antibiotic treatment versus just 44% from oxy flocks of Syn <unk>.

Overall adverse event rates of the family and Moxifloxacin, where similar but serious adverse events were higher in the Moxifloxacin group than the family.

We will continue to work closely with our partner Sumitomo and are looking for to an NDA submission later this year.

Moving on to slide 16, we see that the antibiotic market in China was on a steady growth rate prior to the impact of COVID-19 prior to the COVID-19 pandemic antibiotic sales in China totaled approximately $14.8 billion with Macrolide in quinolone use representing greater than 2.

$2 billion of sales, we believe that the differentiated profile of the Fabulous provides an attractive option to other standards of care for cap. The prescribers can turn to for the benefit of patients in China.

Finally on slide 17, you can see why we're excited to have sumitomo as the commercial partner in China, Sumitomo Hasnt already well established presence with the sales force covering all of mainland China across their 31 regions. They have access to over 3000 hospitals with more.

More than 36000 physicians this established and reputable infrastructure provides an excellent opportunity for the fabulous to gain incredible reach and access from launch putting law Famulus alongside mirror of Panama, The number for anti infective brand in China in 2020 serves.

As an excellent opportunity to accelerate our launch of the family and in China participating in a larger antibiotic market like China partnering with a high performing organization and Sumitomo provides a great opportunity to further de risk the commercial launch and related milestones to create.

Value for <unk>, while bringing new therapeutic options for cap in China.

I would now like to turn the presentation over to Dan for the financial review Dan.

Thanks Ted.

As we turn to slide 19, I'd like to touch on some key highlights for the second quarter of 2021.

As previously mentioned, we began distribution of <unk> of external under the debris. The MDC on April 12, resulting in almost $7 million of <unk> net product sales during the second quarter later I will describe the positive impact of new MDC has on the shape of our P&L.

Total revenue was also included $1.3 million in collaboration revenue and grant funding from the Austrian government for total revenues in the quarter of $8.2 million.

During the second quarter, we continued to focus on prudent balance sheet management as we renegotiated our debt agreement with Hercules capital extending principal payments to at least April of 2022.

Along with activity from our ATM facility and the extension of principal debt payment, we fortified our cash position and exited the quarter with cash and cash equivalents of approximately $61 million, providing us cash runway substantially through the first quarter of 2022.

Going forward, we will continue to assess our capital allocation mix and focus our investment allocation of areas that we believe will provide the best return on investment and help us leverage our existing infrastructure.

Moving on to Slide 20, we look at our P&L for the 3 months ended June 32021 versus the same period for 2020, we experienced significant year on year growth on our top line revenues driven by net product sales of <unk> as well as the recognition of collaboration revenue upon the achievement of milestones from our Chinese partner.

<unk>.

You will see that our cost of sales increased approximately $3 million versus the prior year driven primarily by the launch of our own MDC of <unk> in the current quarter. This was in line with our expectations around how the P&L will evolve with the launch of our own NBC ups of extra.

The increase of approximately $2 million in SG&A reflects a full quarter of 60 sales reps compared to a scaled back run rate and our commercial efforts. During Q2.2020, resulting from the initial impact of COVID-19.

Our net operating loss showed an improvement of greater than 20% year on year, highlighting the impact of <unk> of extra on the shape of our P&L and highlighting the scalability of our commercial infrastructure to drive operating leverage.

Turning to slide 21, we take a look at our balance sheet as of June 30 of 2021 as mentioned earlier, our cash and cash equivalents of June 32021 were approximately $61 million an increase of $20 million from December 31 of 2020, driven primarily by activity in our ATM. This 1.

The offset by operating cash burn, which included sort of extra supply purchases in the quarter.

This can be seen as part of the increase in our prepaid expenses in the quarter.

The significant increase in accounts receivable can be attributed to timing of cash receipts due from wholesalers on sales of <unk> of extra following our launch in mid April.

Turning our attention to the liabilities section we remain focused on a disciplined approach to managing our balance sheet, while maintaining a minimum amount of debt.

If we can now turn to slide 22, I'd like to take some time to highlight the impact of the breathe as 1 sort of extra of MDC has on the shape of our P&L.

Prior to the launch of our own NBC and the breathe of recognized our percentage of Merck's gross sales of us of external while we have been deploying our full complement of commercial resources for some extra promotion.

Starting on April 12, we launched our own NBC and begin realizing the full benefit of the patient demand and our reported net sales during the second quarter of 2021, we see a significant increase in total revenue and as you can see on the chart with the inflection of our total revenues from Q1.21 to Q2 of 'twenty, 1 while maintaining a.

Consistent level.

The operating expenses compared to Q1 of 'twenty 1 this.

This change in the revenue composition on the P&L for an Abreva provides an immediate increase in our profit margins, reducing our operating losses by 21% versus Q2 of 2020, and 15% versus Q1 of the 'twenty, 1 and unlocks enhanced operating leverage on the P&L with our scalable commercial infrastructure.

I will now turn the presentation back to Ted for the next part of the call Ted will make some closing remarks, and then we will head into a Q&A session Ted.

Thanks, Dan before we move to Q&A, let me summarize our achievements so far this year and our objectives for the remainder of 2021, which can be found on slide 20 for our number 1 goal remains the commercial success of sort of extra ends in letter based on the promising trends I show.

The earlier with regard to increased face to face interactions as well as the positive trends in the antibiotic market. We are optimistic about some extra Zen let of prescription and revenue growth in the coming quarters.

To supplement our sales force in the field, we are introducing a pilot program of inside sales representatives to expand our reach by targeting incremental high decile prescribers in the U S that are not currently covered by our field based sales team.

Completing the transition of <unk> 2 in the brief of brand the product earlier. This year has allowed us to not only realized 100% of net sales for the product. But also provides the company insight to wholesaler distribution data that was not previously available to us in China the <unk>.

Positive phase III <unk> data in addition to having a new partner with Sumitomo of pharmaceuticals to develop and commercialize the family in greater China represents exciting represent exciting advancements on.

Ongoing activities with the pipeline include the planned initiation in the second half of the year of the phase 1 study evaluating <unk> in patients with CF and continuing to work with regulatory authorities toward an NDA submission for <unk> depot.

The partnership discussions for <unk> in Europe, as well as other territories remain active and ongoing as Dan described we've taken several financial initiatives to extend our cash runway into 2022 I hope you can see that the momentum is building at an abreva with multiple products in <unk>.

Grams, we like most of our peers progressed through Covid with an eye on what the company would look like coming out of the pandemic. We told you that we were working hard to create the necessary infrastructure to ensure that in the brief but will be correctly positioned in the community to optimize patient access for Zen ladder ends of extra.

We build upon the excellent managed care coverage, we established early on for both products and we're at a point now of seeing acceptance in the wholesale channels for <unk>, which we believe is indicative of stronger demand. Our expectation is that post the summer months, we will realize the similar increase in pull.

Through of prescriptions for Zen letter.

We remain encouraged by what were seeing and believe the commercial strategy is demonstrating positive results.

Operator, we are now ready to open up the line for questions.

Thank you.

Wanted to ask the question over the phone line. Please press star followed by the number 1 on your telephone keypad again that the spa.

1 of you drill your question press, the pound or the hash key.

Standby, while we compile the Q&A roster.

Your first question comes from the line of Zhejiang Chip.

Jeffrey Your line is open.

Hi, Thanks for taking my question and congratulations on the heap extra sales for acre.

For the second quarter it looks like the gross margin was about 52 per cent.

Wanting to know is that if you expect the gross margin to continue at the level of ore.

Over time, and secondly for the expansion of the sales promotion.

Using virtual platforms.

Done with.

With the 60 sales representatives that you have right now or do you expect the higher margin. Thank you.

Dan why don't you take the first part of that question and I'll handle the second part.

Sure.

Yes.

On gross margin I think it's key to note that the majority of our mix of sales in the quarter were sort of extra <unk> and the way the deal is structured.

The transfer fee for the inventory and some markup across the across the board on the product we receive for that that is probably a good run rate going forward for sort of extra then later, we're still expensing prior R&D inventory. So we're not really seeing cost of goods, yet and given the low volume of sales thats not really fully baked.

To our run rate so I think as we as we get more traction within lot of it that mix will improve.

But from a sort of extra perspective, I think thats, a pretty good basis to work from.

And thanks, Dan and Sushi the your second question about the.

Adding additional sales reports sources. So the 60 reps that we have onboard now there.

The more traditional pharmaceutical sales reps that are making calls to physicians.

<unk> of an in person in the physician's offices and doing traditional types of sales activities, including the.

The lunch and learn educational opportunities in the face to face sales calls the additional resources that we talked about are.

Our inside sales representatives. So effectively these are folks who will be making outbound phone calls to a prioritized list of prescribers and ample T has.

The effect of so we are we are ready to to launch that soon and looking forward to having a fully trained.

Team, making those outbound calls and follow up to interest of physicians of before the end of the third quarter.

I think of that.

That Africa by ample key health not by the employees of that for you that where the hell spread of that breed that alright.

Right right because our 60 sales reps are are are Ah contract sales group from ample team now and so we're expanding it but.

A group of sales reps that contact the physicians in a different way, but really designed the cover the uncovered territories.

Great. Thank you.

You're welcome thanks for the questions.

And there are no further questions at this time I would now like to turn the call back to Mister Schroeder.

Thank you operator, and thanks for your participation today, we were excited about the progress we've made during the second quarter, we look forward to providing updates as as the business continues to develop.

And will.

Will be involved in a couple of investor conferences.

Throughout the fall and so we expect to see some of you. There. So thanks again for your interest and support and.

Talk soon as we have further updates thank you.

This concludes today's conference call. Thank you for participating you may now disconnect.

[music].

Okay.

[music].

Good day and thank you for standing by welcome to leave of Therapeutics of second quarter ton of sort of 1 financial results call.

At the size of all participants are in the list of all the mode.

After the speaker's presentation, there will be a question and answer session. So asked a question during the session you will need depressed for the the number 1 on your telephone.

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Oh, no lights out of the conference over to your speed of today with your dad Nolan.

Chief Financial Officer. Please go ahead.

Thank you and good afternoon, everyone welcomed in the breed of this conference call and webcast, where we will discuss the second quarter of 2021 earnings and also provide of business update.

Slides for today's presentation of posted on the company's website www dot and debris of a dot com and can be found under the investors tab in the events and presentations section. We recommend that you refer to the presentation as will be using the slides for today's discussion.

For we begin on slide too I would like to remind everyone that this conference call and webcast will contain forward looking statements about the company.

These statements are subject to risks and uncertainties the could cause actual results to differ.

Please note that these forward looking statements reflect our opinions only as of the date of this call. We will undertake no obligation to revise or publicly released the results of any revisions to these forward looking statements in light of new information or future events factors that could cause the actual results for outcomes to differ materially from those expressed or implied.

By such forward looking statements are discussed in greater detail in our most recent filings on form 10-K, and our other periodic reports on forms 10-Q, and a K filed with the S. D C.

Ted Schroeder and debris of a C E O, we'll start with the business update including our activities in China and will present, an overview of the commercial highlights for the quarter. Then I will provide of financial review and total come back with some summary comments and lead of Q&A session. In addition to Ted and me joining us on the call for the Q&A secession is doctor Steve alone.

Our president and Chief operating Officer, I would now like to turn the call over it and the breathe as Chief Executive Officer, Ted Schroeder.

Thank you Dan and thanks to everyone joining our call this afternoon.

Let's start on slide 5.

We are advancing our commercial effort to drive awareness as we continued to position bouts of extra ends in Atlanta for growth as access is improving in the U S. We are happy to see increased face to face the visits between our sales team in the field and healthcare providers through our partnership with ample the Hell.

Health. In addition, we are seeing some promising trends in the overall antibiotic prescription market, which of touch. Upon later in this presentation. We believe that our sales representatives are continuing to gain traction with providers in the field and are on our way to getting some of extra sales back.

To Prepandemic levels as we previously stated we anticipate every turn of historical peak sales trends force of extra by mid 2022.

As we mentioned last quarter. The Abreva was granted its own national drug code or MDC for <unk>, which allows the company to recognize 100% of net product sales of sort of extra as of April 12th So of extra has been sold under the debris the label and this and this.

Added of positive impact on our P&L during the quarter, which day and we'll discuss in more detail later in the call.

Next and importantly in late May way, along with our partner announced positive top line results from a phase 3 trial of the Fabulous and Chinese adults with community acquired bacterial pneumonia or cap.

We will briefly review of the date of results in the market in greater China in a few minutes, but I am pleased to say that our new partner Sumitomo Pharmaceuticals, a wholly owned subsidiary of Sumitomo Dai Nippon Pharma has deep experience in the region and an established commercial infrastructure in the.

Anti infect the field, we think this could provide of considerable revenue opportunity for the abreva with an ingredient that provides for low double digit royalties and up to 86 million upon the achievement of certain sales and regulatory milestones starting with the approval for greater.

Greater China.

As mentioned previously we are going to complete a phase 1 safety and pique study for Zen letter and CF patients and expect to begin enrolling that study in the second half of this year.

Partnering discussions for zone letter outside the U S remain active as we continue to look to form strategic business development agreements in Europe and other territories.

Talks are ongoing with multiple parties, who have expressed interest in of beady partnership.

As we evaluate our options we want to ensure that any transaction that occurs is in the best interests of patients and our shareholders.

Regarding can tipo.

Now turning to slide 6 here is a reminder of our broad pipeline across serious and rare infectious diseases for cystic fibrosis I think it's worth reiterating that if the trials proved to be successful. We think this could provide us with a $100 million incremental net sales opportunity.

In may to 72% in person interactions for primary care visits as of July 2021, If you look at healthcare Provider's overall, 85% of our interactions of in person.

Our sales representatives have now been in the field for 2 full quarters, and we expect to see the number of in person interactions further increase in the coming weeks and months. We will continue to adapt our approach is local guidance the COVID-19 restrictions involved <unk>.

Assuming COVID-19 restrictions are not enacted our expectation is for access to doctors' offices to rise.

In addition to the improving conditions for our reps in the field. We are also starting to see more promising trends in the general antibiotic market as you can see on slide 9.

Of the year.

Continued to engage in discussions with both products with say with Hcp's for <unk>, our focus remains on driving prescribing for appropriate patients for the Atlanta. Our efforts are focused on educating providers on the benefits of the Zen letter to lay the groundwork to ensure that the inlet.

<unk> is top of mind heading into the fall.

Scripts and the continued expands and letter awareness.

The top 25% of prescribers within these white space geographies with the goal of approximately 40 outbound calls per day per representative this as an opportunity to efficiently expand reach raise awareness and drive prescriptions for both <unk> and <unk>.

The question you may be asking is why now.

Part of our decision is based on the opportunity to reach these high prescribers many of which are already familiar with <unk>. In addition, we have been getting inbound requests from providers in the uncovered territories for information and samples of both brands. These 2 factors coupled with.

The focus the investment prompted the decision to expand into these white space territories.

We look forward to kicking off this program by the end of the third quarter and we will monitor the impact it is having on our business over the coming quarters.

We view of this program is especially complementary to us in Atlanta, where we recently launched a new brand campaign in order to highlight the appropriate patient types for Zen letter. In addition, our medical affairs team has been developing additional materials to educate prescribers on current treatment guidelines for cap.

And the threat of rising resistance to pathogens that cause cap.

As we continue to educate physicians on Zen led us benefits slide 12 introduces our new patient focused campaign and shows examples of the non personal promotional initiatives. We are employing to support this in light of message as we have previously mentioned, we are targeting patients with a more car.

<unk> medical history, such as the older patients cap patients who have recently been on antibiotics, which puts them at an increased risk for resistance with traditional antibiotics, we're expanding our marketing impact by deploying a variety of non personal promotional initiatives such as <unk>.

<unk> E mails paid search point of prescribing messaging rep deliberate materials display advertising and Kols driven content, we believe that coupled with the increased face to face promotion and the positive prescription trends we are seeing in the overall market. We are building the.

The foundations for Zen let of growth in the fall when we anticipate a greater incidence of cap.

Now, let me spend some time on <unk> in China, and what that could potentially mean for <unk>.

Turning to slide 14 earlier this quarter, we announced positive top line results from a phase III trial evaluating the fabulous in adults with cap in greater China.

Were transferred to Sumitomo of Pharmaceuticals, Sumitomo opted to pursue the families. As it is highly complementary to their existing anti infective product portfolio in China.

For those that are not aware sumitomo is already a dominant player in the anti infective space in the greater China region, putting them in the solid position to launch the Fabulous in China once approved.

<unk> of how this impacts from Abreva, we are entitled to low double digit royalties on net sales as well as payments of up to $86 million. Upon the achievement of certain sales and regulatory milestones. The first milestone of which is due upon approval in the region as we.

Turn to slide 15, you see that the data from the phase III trial of families in China produce results consistent with prior pivotal trials with family line achieved the primary endpoint of non inferiority versus Moxifloxacin and also demonstrated comparable results on the secondary endpoint of the investor.

Data assessment of clinical response of test secure based on the clinically evaluable population, 70% of law Famulus treated patients demonstrated success after failing prior antibiotic treatment versus just 44% from oxy flocks of Syn.

Overall adverse event rates of the family Moxie flocks of similar similar but serious adverse events were higher in the Moxifloxacin group than the family.

We will continue to work closely with our partner Sumitomo and are looking for to an NDA submission later this year.

With Macrolide in quinolone use representing greater than $2 billion of sales, we believe that the differentiated profile of the Fabulous provides an attractive option to other standards of care for cap. The prescribers can turn to for the benefit of patients in China.

Finally on slide 17, you can see why we are excited to have sumitomo as the commercial partner in China, Sumitomo Hasnt already well established presence with the sales force covering all of the mainland China.

Cross the 31 regions they have access to over 3000 hospitals with more than 36000 physicians. This established and reputable infrastructure provides an excellent opportunity for the fabulous to gain incredible reach and access from launch putting law Famulus alongside <unk>.

For Panama, the number for anti infective brand in China in 2020 serves as an excellent opportunity to accelerate our launch of the family and in China for.

Participating in a larger antibiotic market like China partnering with a high performing organization and Sumitomo provides a great opportunity to further de risk the commercial launch and related milestones to create value for <unk>, while bringing new therapeutic options for cap in China.

I would now like to turn the presentation over to Dan for the financial review Dan.

Thanks Ted.

As we turn to slide 19, I'd like to touch on some key highlights for the second quarter of 2021.

As previously mentioned, we began distribution of <unk> of external under the Nebraska MDC on April 12, resulting in almost $7 million of <unk> net product sales during the second quarter later I will describe the positive impact of new MDC has on the shape of our P&L.

Total revenue is also included $1.3 million in collaboration revenue and grant funding from the Austrian government for total revenues in the quarter of $8.2 million.

Providing us cash runway substantially through the first quarter of 2022.

<unk> forward, we will continue to assess our capital allocation mix and focus our investment allocation of areas that we believe will provide the best return on investment and help us leverage our existing infrastructure.

Moving on to Slide 20, we look at our P&L for the 3 months ended June 32021 versus the same period for 2020, we experienced significant year on year growth on our top line revenues driven by net product sales of sort of extra as well as the recognition of collaboration revenue upon the achievement of milestones from our Chinese partner.

<unk>.

You will see that our cost of sales increased approximately $3 million versus the prior year, driven primarily by the launch of our own in Dcs of extra in the current quarter. This was in line with our expectations around how the P&L would evolve with the launch of our own MDC of <unk> the.

The increase of approximately $2 million in SG&A reflects a full quarter of 60 sales reps compared to of scale back run rate and our commercial efforts. During Q2.2020, resulting from the initial impact of COVID-19.

Our net operating loss showed an improvement of greater than 20% year on year, highlighting the impact of <unk> extra on the shape of our P&L and highlighting the scalability of our commercial infrastructure to drive operating leverage.

Turning to slide 21, we take a look at our balance sheet as of June 30 of 2021 as mentioned earlier, our cash and cash equivalents at June 30 of 2021 were approximately $61 million an increase.

<unk> of $20 million from December 31 of 2020, driven primarily by activity in our ATM.

This was offset by operating cash burn, which included sort of extra supply purchases in the quarter. This can be seen as part of the increase in our prepaid expenses in the quarter.

The significant increase in accounts receivable can be attributed to timing of cash receipts due from wholesalers on sales of <unk> of extra following our launch in mid April.

Turning our attention to the liabilities section we remain focused on a disciplined approach to managing our balance sheet, while maintaining a minimum amount of debt.

If we can now turn to slide 22, I'd like to take some time to highlight the impact of the breathe as owns of extra MDC has on the shape of our P&L per.

Prior to the launch of our own MDC and debris the recognized our percentage of Merck's gross sales of us of external while we have been deploying our full complement of commercial resources for some extra promotion.

Starting on April 12, we launched our own MDC and began realizing the full benefit of the patient demand and our reported net sales.

During the second quarter of 2021, we see a significant increase in total revenue and as you can see on the chart with the inflection of our total revenues from Q1.21 to Q2 of 'twenty, 1 while maintaining a consistent level.

The operating expenses compared to Q1 of 'twenty 1.

This change in the revenue composition on the P&L for an Abreva provides an immediate increase in our profit margins, reducing our operating losses by 21% versus Q2 of 2020, and 15% versus Q1 of 'twenty, 1 and unlocks enhanced operating leverage on the P&L with our scalable commercial infrastructure.

I will now turn the presentation back to Ted for the next part of the call Ted will make some closing remarks, and then we will head into a Q&A session Ted.

Thanks, Dan before we move to Q&A, let me summarize our achievements so far this year and our objectives for the remainder of 2021, which can be found on slide 20 for our number 1 goal remains the commercial success of <unk> and then later based on the promising trends I shall.

Good earlier with regard to increased face to face interactions as well as the positive trends in the antibiotic market. We are optimistic about <unk> and xen letter of prescription and revenue growth in the coming quarters.

Completing the transition of <unk>, 2 and the breathe of brand the product earlier. This year has allowed us to not only realized 100% of net sales for the product. But also provides the company insight to wholesaler distribution data that was not previously available to us in China the <unk>.

<unk> activities with the pipeline include the planned initiation in the second half of the year of the phase 1 study evaluating <unk> in patients with CF and continuing to work with regulatory authorities toward an NDA submission for <unk>.

Partnership discussions for <unk> in Europe, as well as other territories remain active and ongoing as Dan described we've taken several financial initiatives to extend our cash runway into 2022 I hope you can see that the momentum is building at an abreva with multiple products and.

We like most of our peers progressed through Covid with an eye on what the company would look like coming out of the pandemic. We told you that we were working hard to create the necessary infrastructure to ensure that when the brief but will be correctly positioned in the community to optimize patient access for <unk> of extra.

We build upon the excellent managed care coverage, we established early on for both products and are at a point now of seeing acceptance in the wholesale channels for <unk>, which we believe is indicative of stronger demand. Our expectation is that post the summer months, we will realize a similar increase in pull through.

Prescriptions for Zen letter, we remain encouraged by what were seeing and believe the commercial strategy is demonstrating positive results of.

Operator, we are now ready to open up the line for questions.

Thank you.

Everybody due to ask the question over the phone line. Please press star followed by the number 1 on your telephone keypad again debt.

1 can we drill your question press the pound or the hash key we standby, while we compile the Q&A roster.

The first question comes from the line of Zhejiang.

Jeffrey Your line is open.

Hi, Thanks for taking my question and congratulations on the heap of extra sales for acre.

For the second quarter it looks like the gross margin was about 52 per day.

Wanting to know is that if you expect the gross margin to continue at the level or improve over time.

And secondly.

For the expansion of the sales promotion.

Using virtual off platform.

Done with.

With the 60 sales representatives that you have right now or do you expect the higher margin. Thank you.

Dan why don't you take the first part of that question and I'll handle the second part.

Sure.

<unk>.

On gross margin I think it's key to note that the majority of our mix of sales in the quarter were sort of extra <unk> and the way the deal was structured.

The transfer fee for the inventory and some markup across the across the board on the product we receive for that that is probably a good run rate going forward for sort of extra than letter, we're still expensing. Prior R&D inventory. So we're not really seeing cost of goods and given the low volume of sales thats not really fully baked.

Our run rate so I think as we as we get more traction within a lot of that mix will improve.

But from a sort of XO perspective, I think that's a pretty good basis to work from.

And thanks, Dan and Sushi the your second question about the.

Adding additional sales reports sources. So the 60 reps that we have onboard now there.

And of more traditional pharmaceutical sales reps that are making calls to physicians live and in person in the physician's offices and doing traditional types of sales activities, including the.

Once and learn educational opportunities in the face to face sales calls.

The additional resources that we talked about are.

Our inside sales representatives. So effectively these are folks who will be making outbound phone calls to a prioritized list the prescribers and ample T has.

Deep experience in this area in fact, many of their current clients use of combination of outside and inside sales reps to great effect. So it's a way to expand the territories to to get to the high value of prescribers and especially those who are either currently pre.

Scribing the product in the case of extra or had been prescribers in the past and have lapsed.

And those who reach out proactively through our other.

Non personal efforts such as the.

Kind of banner ads in the point of <unk>.

Point of prescribing tactics that were utilizing who reach out for the company requesting information or samples.

And we're able to more effectively reach those physicians with an inside sales team.

Because of the geographies it would be very difficult for ascend the alive.

The Rep live in the office that cover those so its really on top of the sales force it's the.

They are able to reach a lot of physicians. So the call lists are much bigger than a than of field based sales rep would be.

But there.

The metrics we've seen from other case studies look like this is an important area for us the pilot and I emphasize the pilot part because we will make sure we get it right that we understand that it's effective. So we are we were ready to launch that soon and looking forward to having a full.

<unk> trained.

The team, making those outbound calls and follow up to interest at physicians of before the end of the third quarter.

Oh, I see so that Africa by ample key health not by the employees.

For the health spread of net right.

Alright.

Right right because of our 60 sales reps are our contract sales group from ample T now and so we're expanding it but.

A group of sales reps that contact the physicians in a different way, but it's really designed to cover the young covered territories.

Great. Thank you.

You're welcome thanks for the questions.

And there are no further questions at this time I would now like to turn the call back to Mr. Ted Schroeder.

Thank you operator, and thanks for your participation today, we're excited about the progress we've made during the second quarter, we look forward to providing updates as as the business continues to develop.

And we will.

We'll be involved in a couple of investor conferences.

Throughout the fall and so we expect to see some of you. There. So thanks again for your interest and support and we'll talk soon as we have further updates. Thank you.

This concludes today's conference call. Thank you for participating you may now disconnect.

Yeah.

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