Q3 2021 Paratek Pharmaceuticals Inc Earnings Call

Thank you for standing by this is the conference operator welcome to the pair attack Pharmaceuticals third quarter 2021 earnings call. As a reminder, all participants are in listen only mode and the conference is being recorded after the presentation there'll be an opportunity to ask questions to join the question.

You May press Star then one on your telephone keypad should you need assistance during the conference call you May signal, an operator by pressing star Zero I would now like to turn the conference over to Sarah Higgins, Vice President Finance controller and principal accounting Officer. Please go ahead.

Good afternoon, and welcome to protect third quarter 2021 earnings and corporate update conference call a press release with the company's third quarter results was issued earlier today and we have also posted slides on our website that will be referred to on this call. Both can be found at www Dot para Tech pharma dotcom.

Participants on today's call are even though chief Executive Officer, Adam Woodrow President and Chief Commercial Officer, Randy Brenner, Chief development and regulatory Officer Michael.

Michael Bigham Executive Chairman and I will also be available for questions.

I turn the call over to Evan I would also like to point out that we will be making forward looking statements, which are based on our current expectations and beliefs.

These statements are subject to certain risks and uncertainties and our actual results may differ materially I encourage you to consult the risk factors discussed in our SEC filings for additional detail.

Yeah.

Thank you Sarah good afternoon, and thank you all for joining our third quarter earnings and corporate update call.

<unk> remains focused on excellence in operational execution and delivery against our stated corporate priorities in order to generate value for patients and our shareholders.

Accordingly, we believe that our performance and deliverables in 2021 and have continued to validate the long term commercial growth potential of new xyrem.

As you can see from this next slide <unk>.

Iris quarter over quarter growth continued through the third quarter of this year generating $19 $4 million in net sales from our core news IRA commercial business alone, which is a 30% increase over the second quarter of 'twenty to 'twenty one.

And a 78% increase over the same period in 2020.

We're extremely proud of the 30% quarter over quarter growth in the core news our commercial business. Despite ongoing challenges from the COVID-19 pandemic.

Yeah.

History tells us that the third quarter tends to be our strongest quarter of growth each year since launch.

Forward based upon the strength of the launch dynamics generated to date, we expect to see continued quarter over quarter growth.

As you know this next slide the comparative monthly commercial revenue curve summarized here continues to validate the new Xyrem commercial performance to date represents one of the most successful antibiotics launched in the last five years.

So the new Xyrem commercial launch dynamics continues to materially differentiate from any other IV oral recent antibiotic launches, we believe that the strength of the commercial business is driven by disciplined operational execution combined with use iras. Many clinically important product attributes that include first.

What spectrum efficacy, including resistant pathogens across two common indications second a favorable safety profile consistent with Xyrem Tetracycline heritage and third convenient once daily oral and IV formulations that enabling use iras utility in multiple settings of care.

Adam will provide more details on the ongoing launch of new Zara in his prepared remarks.

We remain focused on three foundational passed the revenue opportunities driven by the unique attributes of Xyrem.

First our core commercial business in both the hospital and community settings is the main driver of our current revenue performance.

Armed with the oral dosing regimen in pneumonia at the end of the third quarter, we expanded the community launch in anticipation of this year's fall winter pneumonia season.

This is an important catalyst that we believe will expand the commercial growth opportunity for news are in both the hospital outpatient and primary care settings.

We believe there is broad potential for new Zara use across the U S government.

Our BARDA Bioshield public private partnership represents the cornerstone of our initial efforts to address this broader government opportunity.

<unk> commitment to this unique partnership was further validated by the newly awarded option, providing additional funding to expand the development of Xyrem under an F. D. A animal rule development program for anthrax.

This option provides $19 million of incremental funding to the original development program, bringing the total value of the contract up to approximately $304 million.

Third non tuberculosis, mycobacteria disease or N T M represents a promising future growth opportunity in the orphan disease space.

I guess, we announced that FDA granted orphan drug designation for news or for the treatment of MTM broadly.

Tober, we announced the enrollment of the first patient in our phase two B N. T. M study, which is focused on the subset of patients with newly diagnosed pulmonary MTM obsesses, which represents by our internal estimates and addressable market in the U S alone of approximately $1 billion.

We're excited about the long term potential role of these are in the treatment of patients with MTM obsesses for which there are no FDA approved therapies, Randy will provide more details on our MTM program later in his prepared remarks.

Our lifecycle expansion into exploring the potential of use or as a therapeutic agent against bioterrorism pathogens and other rare infectious types speaks to the plethora of clinical opportunities for news IRA to save lives and protect all Americans from life, threatening bacterial infections, where resistance is of concern as well as from a national pandemic prepared.

This perspective.

Before I hand, the call over to Adam I would now like to provide per tax third quarter 2021 financial highlights.

Third quarter 2021, total revenue was $24 $4 million, which is comprised of the following.

He's ever generated $19 $4 million and net U S sales from our core commercial business alone.

During the third quarter of 'twenty, 'twenty, one representing a 78% growth compared to $10 $9 million in the third quarter of 2020.

Government contract service and grant revenue earned from cost reimbursement under the BARDA contract was $4 $5 million for the third quarter of 2020, one compared to $2 $7 million in the third quarter of 2020.

We continue to anticipate a modest step up in contract service and grant revenue earned under the BARDA contract as we move through the balance of this year driven by activities associated with the U S onshoring abuse IRA manufacturing the.

The continued enrollment of the FDA post marketing required studies use IRA in pneumonia and further progress of the preclinical in vitro and large animal pharmacokinetics studies in the Anthrax program.

Research and development expenses were $7 $9 million for the third quarter of 2020, one of which $4 $9 million was related to cost reimbursed under the BARDA contract compared to R&D expenses of $6 $7 million for the same period in the prior year.

The increase in R&D expenses for the third quarter of 2021 was primarily due to F. D. A post marketing requirements associated with the approval and Zara, which are fully reimbursed under the BARDA contract.

The remaining increase was mainly the result of startup costs incurred for the phase two B N T M study.

Selling general and administrative expenses were $26 million for the third quarter of 2021.

Compared to $29 million for the same period in the prior year the.

The increase in SG&A expenses was primarily the result of costs incurred for the new Xyrem community expansion.

We reported a net loss of $18 $2 million or 37 per share for the third quarter of 2021 compared to a net loss of $29 million or <unk> 46 per share for the same period in the prior year.

We anticipate net revenue in desire will be at the higher end of the previously indicated range of $100 million to $106 million, which includes $38 million new xyrem procurement by BARDA in June of 2021.

Total revenue is expected to be within the previously indicated range of $128 million to $139 million.

Total R&D and SG&A expenses are projected also to be within the original guidance range of $150 million to $155 million.

As of September 30th 'twenty, 'twenty, one <unk> had $111 million in cash and cash equivalents.

Based upon our current operating plan, we anticipate our existing cash and cash equivalents provide for a cash runway through the end of 2023 with a pathway to cash flow breakeven.

I would now like to turn the call over to Ed.

Adam.

Thanks Evan.

Commercialization of new Zara in both the hospital and community setting continues to progress well with month over month growth in the third quarter, resulting in $19 4 million in net sours as can be seen on slide 11.

An impressive 30% increase over the prior quarter.

Equally important gross demand also increased by $4 5 million over the prior quarter and thus growth continues to be driven by demand.

I'd like to provide a little color on this progress.

As a reminder, our initial strategy was to focus solely on the hospital business for the past two years building endorsement with the key influences in the antibiotic sector, while in parallel working with highest to establish profitable market access in the community setting that would also enabled effective fulfillment of prescriptions in the outpatient setting.

Our experience has told US that these two factors needed to be achieved before we expand it into the community.

As we enter 2021, we had over two so its about prescriptions being generated by the infectious disease doctors.

Key clinical influences in antibiotic selection.

In addition, 90% of all prescriptions written by foreigners are being filled.

With both of these key success Successfactors in hand, we expanded our promotional effort into the community setting.

Specifically to primary care physicians the doctors in a select group of dermatologists.

Before I update you on our progress with our primary care expansion I wanted to provide more detail on the business as it relates to the hospitals.

Hospitals and the adjacent sites Cooke care remain an important part of our core commercial business with 75% of net sales related to our hospital promotion.

Our promotional approach with hospital based physicians predominantly infectious disease doctors in critical care Pulmonologists continues to focus on enabling early patient discharge or hospital avoidance through utilization of our oral dosing form in select patient types.

More specifically those with suspected resistant pathogens, and comorbidities, including diabetes or other levels of organ dysfunction or those with allergies.

These factors make antibiotic selection challenging positions as the current IV only generic auctions have efficacy gaps due to bacterial resistance.

Complicated dosing regimens due to organ dysfunction or are frankly, not frankly are not appropriate due to anticipated side effects from allergies or other complications and risks such as C diff until collapses.

The ability to discharge a patient unused always effective and well tolerated oral is an attractive option, especially in today's COVID-19 environment when needs of the patient no physicians wish for the patient to stay in the hospital setting one day more than necessary.

We anticipate that the hospital business will expand and might benefit as COVID-19 related access challenges subside and hospital staff to operate more than endemic environment, rather than a pandemic one.

Now turning to the community of expansion.

Our estimates suggest the total addressable community market in the United States with skin and pneumonia infections is in excess of $3 $7 billion.

Current generic oral auctions in these two markets are challenged with safety and resistance concerns.

Slide 13 nicely illustrates the level of bacterial resistance seen with some of the more commonly used generic oral antibiotics prescribed by primary care physicians for pneumonia.

With these strep pneumoniae resistance rates ever increasing we believe new Zara offers a more effective and well tolerated treatment option.

By the end of September we had over 40 fully trained primary care specialists detailing both our oral only skin and pneumonia indications.

Target audience of community based physicians.

Our promotional messages to provide primary care physicians with an over 11, new treatment option for serious community acquired skin infections and pneumonia that can potentially avoid the need for hospitalization.

Started at home stay at home with news IRA resonates with physicians, especially in today's COVID-19 environment, where hospital avoidance at all costs is a priority for patients.

He was always once daily well tolerated oral and intravenous formulations combined with news hours broad spectrum profile offer a much needed lifesaving antibiotic, which is uniquely positioned to be applicable in every setting of care, including in the hospital with its potential to minimize hospital stays.

And in the community when he was on this efficacy has the potential to avoid hospitalization altogether.

These attributes have enabled news hours uptake to materially differentiate from any recent IV oral antibiotics launched in the United States.

I should remind everyone. This strong performance of our core commercial business does not include any BARDA procurements.

Our promotion of yours are right in the community remains on track and is closely mirroring the small pilot we conducted in 2020.

We continue to see primary care physicians and podiatrist trial use IRA early Oh, yeah, more frequently and after fewer styles Kohl's when compared to hospital based physicians.

We maintain our belief that the foster uptake in the primary care setting is likely the result of the tremendous unmet need in the community for new effective and well tolerated once daily oral antibiotic.

Bind with the absence of stewardship committees and formally restrictions found in the hospital.

Nine months in from the start about expansion, we're now beginning to see an increasing impact on the community promotion with both primary care doctors doctors.

Don't seem to make a meaningful contribution to our overall prescriber base accounting for the remaining 25% of net sales.

In addition, we continue to prioritize access to treatment maintaining a steady write the prescription fulfillment, which has continued to be over 90%.

We expect skin and pneumonia prescriptions from the community setting to increase or to continue to increase as the primary care field force deepen their relationships with their prescribing networks.

In summary, we anticipate that the momentum in both the hospital and community settings will continue with the promotion of the overload any dosing for community acquired pneumonia. During this fall winter influenza season.

We will maintain our focus on gaining new trial is to repeat usage by building awareness and establishing trust and credibility with physicians, who are saving lives and treating serious community acquired infections, each and every day and with that I'd now like to turn the call over to Randy.

Thank you Adam.

As Evan noted earlier in this call and this call. We were excited to recently announce the activation of the additional option and the expansion of our project Bioshield contract the update to the contract exercise an additional option valued at $31 $6 billion to not only continue the development program for the anthrax treatment indication, but now also includes an S N D. A.

Graham for an indication focus on prophylaxis against Anthrax referred to as post exposure prophylaxis or Pep.

The addition of the full cap program increased the overall value of the contract by $19 million.

We also continue to partner with BARDA to advance our FDA post marketing commitments.

As a reminder, this is valued at approximately $77 million and includes reimbursement of our ongoing adult pneumonia post marketing study commitment our pediatric program in its entirety and the ongoing microbiological surveillance program.

To cap EMR has been enrolling since early this year at our first pediatric PK is in the startup study initiation phase right now.

Together with BARDA, we continue to make progress on the animal rule development program as well efforts. This year, we remain focused on the evaluation of the in vitro activity against multi drug resistant facility, that's racist rains as well as the pharmacokinetics of Omadacycline in both Rabat and nonhuman primate animal models for inhalation anthrax. The data from these studies will support.

The upcoming pilot efficacy studies.

We were also pleased to report on the continued progress of our Onshoring program for the manufacturer and desire of the United States.

Powertech in our U S onshore partners have completed the knowledge transfer and initial analytical and process development for the new Xyrem API process and have ordered the necessary equipment have begun construction of the facility to enable commercial production of API.

Work is also ongoing at our partners for the planned U S drug product facilities.

We anticipate having commercially available tablets produced in the United States by the end of next year.

For the new Xyrem IV drug product, we have selected our U S onshore, we partner and nor in the beginning phases of knowledge transfer and the initiation of the process development work.

Consistent with our commitment to build new Xyrem as long term value. We continue to actively pursue lifecycle initiatives for news Arab beyond project Bioshield.

These include label expansions in our approved indications and T M government research and other areas of scientific interest.

In May we received FDA approval of our S. N D. A for the oral loading dose regimen for the community acquired bacterial pneumonia indication. This achievement as noted by both evident Adam has augmented the clinical breath of the community launch and the timing of the approval aligns well with the fall winter pneumonia season approaching.

In order to further support this community expansion Medical affairs has been expanding the scientific exchange needs at the prescribers in the primary care setting.

This includes the expansion of a small number of targeted community based education Medical Science liaisons, who are engaging in scientific exchange with community health care providers.

We are strategically placed them in densely populated metropolitan areas with a large presence of primary care practitioners edgy.

Education is focused on community anti microbial resistant trends the most up to date critical care algorithms and the most pressing unmet needs associated with their treatment options feeds.

Feedback on this team and primary care physician's interest in education has been very positive to date.

And as important an additional lifecycle expansion effort includes our continued commitment to advance our non clinical and clinical data generation and development program for not tuberculosis mycobacteria pulmonary disease caused by Mycobacterium abscesses our MTM.

Pulmonary ITM obsesses is a rare and orphan disease with no FDA approved therapies.

Feedback from the scientific community has continued to highlight the unmet need for an efficacious and well tolerated once daily oral antibiotic to treat infections caused by Mycobacterium abscesses.

In fact, FDA recently granted new Xyrem orphan drug designation for the treatment of N T M. Not only for MTM obsesses buffer all subspecies of N T M, including Mycobacterium Avium complex or Mac. This designation from F. D. A further reinforces and validates the unmet need in this underserved patient population.

In addition, the orphan designation will provide for more frequent interactions with FDA on this program Purdue for fee waivers for future S. NDA submissions additional R&D tax credits associated with the development work for N. P M opportunities to apply for research grants and seven years of market exclusivity for the orphan indication at approval.

The scientific data focused on desire and N. T. M continues to be generated and published by Powertech individuals' scientific leaders in the field as well as through our investigator initiated research or IR programs.

Most recently an important non clinical study conducted in collaboration with Johns Hopkins was recently published that evaluated the activity of Omadacycline against Mycobacterium abscesses using both in vitro and in vivo approaches.

First from an in vivo perspective, Matt is cycling and exhibited potent mic's against the panel of 32, Mycobacterium assesses clinical isolates several of which were resistant to antibiotics that are commonly used to treat mycobacterium assesses disease.

In addition, omadacycline when combined with clearer myosin, azithromycin cefdinir or Rifabutin orland nasal it exhibited synergism against several micro bacterium obsesses trades at a matter of cycling and did not exhibit any antagonism with all antibiotics tested.

We believe these data provide meaningful scientific information that clinicians need in order to choose the best combination antibiotic therapies for such a devastating bacterial pathogen.

Also in this study efficacy of Omadacycline was evaluated and in in vivo mouse model of lung infection against for micro bacterium obsesses strains of dose equivalent to the 300 milligram standard oral dose was used and was demonstrated to be effective in this model with bacterial sidled activity. Another index of antibiotic potency observed.

After the first two weeks of treatment against all four like a bacterium obsesses strains.

In addition to this important preclinical data critical case series continue to be published at I'd week last month. There was a poster presented as seen on the left side of this slide showing data from 31 MTM patients in an ongoing real world study treated for up to 20 months with once daily oral news IRA.

And this real World study Omadacycline continues to be safe and well tolerated with good patient outcomes. The authors continue to conclude that omadacycline, maybe a potential option for therapy of N T M infections and that larger perspective real World studies are essential to further confirm these early clinical findings.

In addition, as a reminder, two MTM experts who are also MTF treatment guideline authors collaborated on a published review article earlier this year that expands on the current treatment guidelines for the treatment of pulmonary micro backed chairman infections. The authors highlighted the need.

Delighted the potential for the oral formulation of Omadacycline given the lack of currently available oral treatments options enlisted at first in order of preference for the new oral options. They considered.

The authors also noted anecdotally that some clinical experience has been seen but clinical trials in this disease are urgently needed. Thus the excitement that we have for the randomized phase II study in MTM Obsesses, which is now enrolling patients. This study will be the foundation for the next step discussions with regulatory authorities and further scientific evaluation.

This study is a three month randomized double blind placebo controlled monotherapy design that will enroll approximately 75 patients with pulmonary MTM infections caused by Mycobacterium abscesses.

This is a rare disease enrollment is estimated to take approximately two years. We believe this is the first placebo controlled study in this chronic and rare disease study will provide a much needed clinical data set of efficacy and safety data and micro bacterium obsesses patients.

In addition to N T M. J data generation will continue to expand throughout 2021 and into 2022 and other important scientific areas through multiple avenues. We remain excited about the level of interest there continues to be with Omadacycline, leading to ongoing research collaborations with several other government and academic laboratories.

Focused on generating data in diseases, such as malaria sexually transmitted infections, including gonorrhea bio threats as well as other difficult to treat pathogens of interest to the military.

In addition, our IR program and collaborative studies continue to support research and publications in many areas of interest which include N. T M anti inflammatory activity C difficile, and osteomyelitis, where a rat model of mrna osteomyelitis was just published last week.

In 2021 alone the IR program and collaborative studies have resulted in the acceptance of 20 manuscripts for publication that address the use of news IRA and special pathogens special populations or disease states that will further define that unique therapeutic profile.

Our peer reviewed publications that provide the foundation.

Foundational scientific content to inform treatment decisions and play a critical role in optimizing patient outcomes.

On the regulatory side the ongoing Omadacycline NDA review in China continues to make progress with the approval expected later this year that will trigger a $6 million milestone payment from <unk> lab to power Tech.

We believe that approval and launch in China as well as the additional data generation opportunities being pursued by power attack will further broaden the potential news IRA to reach into new and clinically important patient populations.

Antibiotics are truly global products in the crisis of antimicrobial resistance continues to progress unabated. We believe based upon the totality of data generated to date that desire is an important clinical option for physicians to save lives and serious community acquired infections, where resistance is of concern.

At this point, we would like to open the line for questions.

Thank you.

We will now begin the question and answer session.

To join the question queue. You May Press Star then one on your telephone keypad, you will hear a tone acknowledging your request. If you are using a speakerphone. Please pick up your handset before pressing any keys to withdraw. Your question. Please press Star then two we will pause for a moment as callers join the queue.

Our first question comes from Tsuji Tang of Jefferies. Please go ahead.

Oh, good afternoon, and thanks for taking my question and also congratulations on the good quarter I have a couple of questions about the news IRA and I mean, you can launch.

Could you comment on what percentage of the net sales came from pneumonia this quarter and what are you seeing an increase in the pneumonia cases, and also you mentioned that 25% up to a nice day all came from the community setting I'm just wondering if that came from pacer.

Patients, who get discharged from hospital or is it just purely community on primary care setting.

And lastly, my third question is do you have any plan to expand the sales force in the community setting and your picture and why don't you like E M before making such decision. Thank you.

Yeah.

Thanks, Sergio I'll take those I'll start with the the question about his thoughts discharged no we take out those that come from hospital based physicians.

Discharge so the 25% is actually generated by the primary care and podiatry specialties.

And so that's the stand alone amount as regards to the pneumonia side, it's just a bit too early to stop that we haven't even started that promotion in in September so it was a bit difficult to.

Predict okay.

Give you the exact numbers right now in terms of how much of that is pneumonia because it's only just started the vast majority in the last quarter was scheme. We were in the peak about skin season, and they said exactly what you'd expect it was also the only thing we were promoting for the vast.

Majority of that quarter.

And then as we got an expansion and.

We'll do what we've done in the past you know we've been pretty judicious without balance sheet, we've not tried to overstretch ourselves, but where we see a success, we will expand and there's clearly an opportunity to expand in that community setting. It is a target rich environment, we bought plenty of positions that were not reaching because we don't have to.

Scale at this present time, but if things continue to progress the way they are which is along the plan and what we've seen from the pilot and then there is plans to continue to add representatives at the appropriate time and that'll be some time in the future probably sometime in the middle of next year.

Great. Thank you.

Our next question comes from Bert Hazlett of B T. I G. Please go ahead.

Yeah I just wanted to follow up on the sales force a congratulations on the progress first and foremost but on the sales force question. What are the some of the metrics that you're using to evaluate that additional potential horsepower in.

In the field just again given the material traction that you have here and I have one or two others.

So, but what we track obviously all prescriptions generated per representative.

We saw in our pilots that the the primary care representatives.

We're reaching.

Cash flow breakeven within about 10 to 12 months are provided in the group that we bought at this present time do the same thing will be good to start looking at other opportunities in other territories and that's what we will do.

Okay.

It's Evan just one other thing that maybe Randy can comment on as well this.

This is a as Adam said I think a target rich environment.

That being said I think that there's an opportunity here for a lot of medical education, and Randy has a very focused group of himself that he's placed in a very strategic way that hopefully will identify also some growth opportunities Randy did you want to speak to that.

Yes, I think what we're what we're seeing early on in this that this program is that primary care physicians are actually really excited about the opportunity for some education around anti microbial resistance.

That it is a they're very.

Information starved set of physicians, who don't really understand antimicrobial resistance in a lot of detail, particularly in the regions that they're in so they've they've actually open their arms to a significant amount of education to date and we expect that to continue in that they become more educated on antimicrobial resistant trends in their region as well as some.

The challenge with <unk> is this the antibiotics should only make atoms team's job a little bit more easier.

Okay. Terrific then kind of two other lines of question. One is are the MTR upsets this effort in the trial.

Realizing it's a rare disease, but you started rolling with it do you think you're being conservative with regard to the two year enrollment period for the 75 patients in that study just in general I'd Love your views.

Yeah, No I mean, we.

We're not being overly conservative I mean is if there's a subset you guys. You know MTM is a subset of the overall at Jan population, we think Theres only eight to 10000 of those are in the U S. We're looking at early diagnosed patients with even limits to the patient size is significantly more so.

We feel pretty good with the estimates that we've given to date.

We've seen you know base based on our.

Screening rates to date as well as the what we're seeing from enrollment how were pretty much exactly on target, where we anticipated as far as percentages of numbers of patients per month per center. So I think at the current time, we we feel pretty pretty comfortable that the two years is the right number.

Okay. Thanks, and then just one other general question with regards to the opportunity in China and your partners XI lab.

Just a little bit more about the the framing of the relationship with.

And then just what your sense is about market opportunity. We you know we frame it in and in various ways and the range is quite considerable love to hear your thoughts on Oh.

You'd think about the market opportunity for Omadacycline in China.

Yeah, So maybe I'll start and then tacos and then have Adam handle what the commercial opportunity may look like.

XI lab has devoted a tremendous amount of resources and our expertise to.

This particular program conducting their trials as well as moving it through the China F D. A.

Process, which we believe continues to be on track for an approval before the end of this year. The hanway. Our relationship is one in which they've chosen I think a top tier commercial organization and from what we understand is that they've designated somewhere in the range of several hundred representatives.

Upon launch that have been trained and are waiting anxiously for the approval with the first deployment to the tier one cities through China and a tier one is not the only place that this will be but I think it's a great place to start and we think that there's a very big opportunity there with that maybe Adam you.

Can speak a little bit more to what the China commercial opportunity may represent.

Yeah. So our understanding is that the targeting the top 400 provinces and areas that they want to go into.

It's difficult to predict how far this can go bust because as you rightly say the commercial potential is enormous I suspect.

That'll do is see how this first.

Initial promotion goes.

It goes well, we will see an expansion of that organization honestly as they move out because they have they even though it's a huge number of representatives by our house of hoops standards, So China, it's quite small.

And when I say small it is literally the talk.

Top cities that targeting they obviously like ourselves with regard to the thought that we could expand in the community setting like you can expand into other areas and that will probably be determined by the success that they see.

Terrific. Thanks, again look forward to more of a growth of the of the product in the U S and overseas. Thanks.

Our next question comes from Ed Arce of.

H C. Wainwright <unk> co. Please go ahead.

Hi, great. Thanks for taking my questions and let me add my congrats on a.

A strong quarter of growth.

Firstly I wanted to ask about.

The key factors that are in your view drove that 30% quarter over quarter growth.

And perhaps thinking about it.

You know from another perspective are there any barriers that remain to be opened up to further accelerate that growth. That's that's first question.

Second is the.

The split between the.

The hospital and the community you you've already mentioned, it's already at 75% to 25%.

Just nine months into.

The promotion most of that and obviously I'm wondering if you have a sense or win.

The community opportunity.

Cross over the 50% threshold.

Do you have a sense for when that timing might be.

And then lastly, a third question around.

The new facility.

All of these that you're building now and and and.

The pills being manufactured entirely in the U S. By the end of next year I was wondering if you can discuss if there's any potential for incremental benefit to the Cogs.

Thank you so much.

So I'll take the first two parts of that and then I'll, let I think Rodney.

The handle the third one.

In terms of the.

The first part of the question which was.

Are there any barriers remain what what drove the growth.

You know third quarter is off from the peak the skin infections.

It's.

Frankly.

It is what drives that third quarter, we were promoting our oral only skin for most of that and we were in this sort of peak of the skin infection season, and we know that new Zara. Since there was a really tremendous unmet medical need in that space for a really effective.

Oral antibiotic that Cabos Emera site, secondly, where you got resistance.

And patients with Comorbidities, such as diabetes organ dysfunction, or allergies and that drove the growth in that third quarter. It was actually seen across the board it was pretty broad based.

And it included both hospitals and the adjacent sites of care and obviously also the community part of the business.

Which leads us nicely into the sort of second part of your question. We actually do believe that we will start to see the pneumonia saw it pick up as we move into the flu season.

One indications around monitoring at this present time, although there could be quite a significant flu season.

And what that normally means is that there's a strong bacterial pneumonia season on the back of it and we'd like to see if we can take advantage of that we'd probably see most of that benefit as we move into next year.

As regards to when do we think that we would sort of see a switch.

Switch to the primary care side being larger than the.

But then the hospital side that that's actually a difficult one to predict the hospital business does have obviously.

Obviously, a two year head start it's still continuing to grow we are seeing some really rapid uptake in the community side of the business, but you know they don't live.

That's what I'm.

Trying to catch up at the same time is a big chunk of the business is also growing relatively quickly.

I think it's fair to say that.

It'll be more of a function of as we add representatives that timeline will shrink.

But you could foresee at some point, where we'd go.

Our primary care field force that significantly larger than the hospital field force because of that.

You've got a chip into the community side of the business being larger than the.

The.

The hospital side I should remind everyone on the call, but actually the two the two parts of the business are actually of equal size.

They both are around about three and a half million of billions of dollars in terms of size.

There's just a higher density of prescribing in the in the hospital side of the business.

At some time.

Sort of restrictions on access to what we're seeing in the hospitals will go away and we will continue to.

It's a focus on that side of the business. So.

I wouldn't want to try and predict what about AIDS, where Romney as you as you know nine months in and I need a little bit more data to predict when we'd see a tipping point.

I think that the just to build on what what Adam said to answer one of your questions are Ed.

Barriers to overcome I think the one that are we're anticipating come next year is that the COVID-19 pandemic will get under better control you've seen a lot of volatility in terms of where that pandemic has led to across the board closures of hospitals in terms of market access and we think that.

Given the fullness of over the fullness of time that that will resolve itself to a point where the.

The current commitment that Adam has will I think yields even.

More more benefit over time.

Maybe we can go now to the.

New facilities, yes, Western Europe, Yeah, So hey, it's Randy.

Thanks for your question about the onshoring.

We're obviously very excited about the opportunity to go through this onshore in process. Our technical operations team has done an amazing job working really closely with BARDA and our CMO partners to to move this forward and a really quick amount of time.

Just wanted to clarify you know we're not building facilities per se, we're using existing existing CMO partners, who are right fitting their facilities for the manufacturing of new Xyrem.

So that being said you know.

We anticipate that with increased scale and increased scope growth will generally come increased in cog, a better decreases in Cogs I should say and so we anticipate sort of a modest decrease over time as the.

Scale and our demand continues to increase for new Xyrem.

Great Fantastic and then perhaps just one quick follow up.

Just to confirm the size of the two sales forces now.

Roughly 45.

For the hospital and just over 40 now in the community.

Correct.

Yeah, that's correct.

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Great. Thank you everyone.

Thank you Ed.

Our next question is a follow up from C. G. T M of Jefferies. Please go ahead.

Thanks for taking my follow up question just.

Quick one on the BARDA contract on the Prophylaxis program.

$19 million to stay on top of existing lines I noticed that there is $13 million associating. The prior one that is tied to supplement and prophylactic any mall development I'm. Just wondering just confirming that $19 million is on top of the existing one and for that.

Funding is that similar to oh, ensuring activity, where U S. We embraced every quarter or do you expect to receive any milestones.

Yeah. So.

Correct in your assumption that the 19 million as additional dollars. The original contract that was signed with what we call. The cleaning the contract line item number three for that $13 million included.

Some of the treatment of prophylaxis studies and.

Two small pet studies, so the expansion of the contract activated that option, but also expanded it to include a full development program for pet, which is why that additional 19 million. So.

And that's where we get to 31 point for a total for.

The option being exercised.

Earlier this quarter last quarter.

With regards to the payment I'm. This is very typical to our carried activities. We have for all of our programs. Both the treatment the onshoring as well as the TMR, Quebec mentioned as a 100 per cent cost reimbursement. So we we get reimbursed on our cost on them actually on a monthly basis and we see that.

That incremental investment for a second S. N D. A program tsuji to be a further validation of our BARDA is commitment to xyrem.

IRA and the importance of this product as it relates to being able to fight a bioterrorism pathogens.

From a protecting our all American civilians and lean leading down the road to what we see as a.

Buster opportunity with regards to future procurements for the S N S.

Great to clarify thank you.

Thank you Susan.

This concludes the question and answer session I would like to turn the conference back over to Mr. Lowe for any closing remarks.

Thank you operator as there are no more questions, we will conclude today's call.

Clothing I'd like to thank you all for your time and attention today. Your continued interest in use iron Powertech are important to us.

You are making a direct commercial success is well underway as the wealth of micro biologic data and clinical outcome studies on user IRA continues to expand we are increasingly confident in the potential and desire to be an effective and a much needed addition to the armamentarium of antibiotics available to physicians to save lives in multiple settings of care.

Virginia is ahead of us to be able to provide a novel life saving antibiotic to patients motivates us all at pair tech we look forward to keeping you apprised of our continued progress goodbye for now.

This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

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