Q1 2022 Paratek Pharmaceuticals Inc Earnings Call
Good afternoon, and welcome to Parrot Tech Pharmaceuticals first quarter 2022 earnings call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Sarah Higgins Vice President of Finance. Please go ahead.
Good afternoon, and welcome to <unk> first quarter 2022 earnings and corporate update conference call.
Press release with the company's financial results was issued earlier today and we have also posted slides on our website, which we will refer on this call.
It can be found at www dot per tax pharma dot com participants on today's call are Evan Loh, MD, Chief Executive Officer, Adam Woodrow President and Chief Commercial Officer.
And Randy Brenner, Chief development, and regulatory Officer, Michael Bigham Executive Chairman and I will also be available for questions.
Before 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 Evan.
Thank you Sarah good afternoon, and thank you all for joining our first quarter 2022 earnings and corporate update call.
We believe we believe that the strength of <unk> commercial business is driven by disciplined operational execution.
And behind wouldn't use iris many clinically important product attributes.
These include once daily oral and IV formulations.
Proven clinical efficacy against resistant pathogens in two approved indications.
And a favorable safety and Tolerability profile.
As you can see how this next slide our U S. Commercial launch performance over the first three years continues to differentiate <unk> Zara as one of the most successful IV oral antibiotics launched in the last decade.
Having both formulations enables news IRA to have clinical utility in every setting of care.
Strong demand coupled with disciplined execution resulted in a significant year over year first quarter growth in use Iris core commercial business.
We believe this growth would have been even stronger were it not for the omicron ways in January and February .
As the surge receded xyrem.
IRA demand accelerated through the balance of the first quarter and into the second quarter.
This momentum is being driven by improved access to physicians in both the hospital and community settings.
A resurgence of elective surgeries.
And satisfaction of annual insurance deductible resets.
On the left panel of this next slide you can see that net sales from our core news our commercial business increased from $7 million in the first quarter of 2020.
To $13 million in the first quarter of 2021.
And landed at nearly $20 million this past quarter, which represents a 51% growth over the first quarter of 2021.
Importantly on the right panel.
These iris trailing 12 month core commercial revenue performance demonstrates a significant upward trajectory.
Suggesting strong continued growth through the balance of this year.
Based on our performance to date.
We are reiterating our full year guidance.
We continue to prioritize our three principal pathways junior Zairo revenue generation.
First these iris core commercial business.
It continues to be the main driver of our current revenue growth performance.
Adam will provide more details in his prepared remarks.
Second non tuberculosis mycobacteria lung disease.
NTN represents a promising future growth opportunity in the orphan disease space more.
More specifically MTM of the M. Obsesses subtype is a rare disease with currently no FDA approved therapies.
In the U S alone <unk> estimate that MTM obsesses represents a potential 1 billion dollar addressable market opportunity.
Third U S government opportunities, we believe the new Xyrem broad utility against antimicrobial resistance wound infections, and bioterrorism pathogens should make it important lifesaving component of the U S government strategy and tactics being formulated to address today's emerging threats.
These opportunities with new Zara include.
Performance under our BARDA Bioshield contract.
Other stockpiling initiatives for pandemic preparedness.
And contracting within the department of Defense.
Now I would like to review <unk> first quarter 2022 financial highlights.
Total revenue was $24 9 million for the first quarter of 2022.
A 51% increase from $16 4 million for the same period in the prior year.
Total revenue for the first quarter of 2022 was comprised of the following.
<unk> generated net U S sales of $19 9 million, a 51% increase from $13 2 million for the same period in the prior year.
Government contract service and grant revenue earned from cost reimbursement under the BARDA contract was $4 3 million, a 665% increase from $2 6 million for the same period in the prior year.
Collaborations and royalty revenue of <unk> $7 million, which primarily represents royalty revenues earned on sales of say, Sarah and the United States and on the initiation of sales of new Xyrem in China.
Research and development expenses were $7 5 million for the first quarter of 2022 compared to $5 5 million for the same period in the prior year.
The increase in R&D expenses was primarily due to costs for activities reimbursed under the BARDA contract and cost incurred for the phase <unk> <unk> study.
Selling general and administrative expenses were $27 6 million for the first quarter of 2022.
Compared to $22 4 million for the same period in the prior year.
The increase in SG&A expenses was primarily the result of compensation expense and costs incurred for the new Xyrem community expansion.
<unk> reported a net loss of $17 9 million or <unk> 35 per share and $18 $3 million or <unk> 39 per share for the first quarters of 'twenty to 2022 and 2021, respectively.
In this last slide for me, we note that <unk> ended the quarter with $79 1 million in cash cash equivalents and marketable securities I would now like to turn the call over to Adam.
Adam.
Thanks, Kevin.
Commercialization of new Zara in both the hospital and community settings continues to progress well, despite an unexpected spike in Covid cases, and the lack of a typical flu season.
As Evan noted earlier strong demand and consistent execution has resulted in impressive growth and use our core commercial business.
Net sales from our core business increased 51% this quarter compared to the same quarter in the prior year from $13 2 million in Q1, 'twenty, one to $19 9 million in Q1 'twenty two.
More importantly.
With gross demand increasing by 82% during this period.
We know that net revenue is being driven by demand.
And this leading indicator is <unk>.
<unk> future growth.
<unk> proceeded we experienced accelerated product demand through the end of the first quarter that has continued into the second quarter.
This growing momentum is being driven by improved access to physicians in the hospital and community settings.
<unk> of elective surgeries.
In satisfaction of annual insurance deductible resets.
Our focus in the hospitals continues to be on Ids, IV doctors, who care for patients with known or suspected resistant pathogens with comorbidities.
We know that the oral formulation of <unk> Zara, enabling early discharge is valued by both the patients and physicians.
In addition to the cost savings realized by the health care system, a shortened length of stay also reduces the risk for patients to pick up a hospital acquired infection with yet another resistant bacterial pathogen.
Based on our internal estimates, we believe that there will be approximately 300000 patients with skin and pneumonia infections in our hospital addressable market by 2028.
We also believe a 6% to 12% market share is achievable in this same timeframe.
Importantly, these patient numbers represent on label usage in the hospital only.
Okay.
Looking ahead, we are seeing improved access to hospitals, allowing increased face to face discussions between physicians and our sales representatives.
Importantly, there's also have been a return to more frequent and regularly scheduled formulary and stewardship committee reviews, which creates more opportunity for new user adoption in the hospital.
For these reasons.
We anticipate momentum will grow within this segment throughout the remainder of 2022 and beyond.
Now turning to the community.
Here, our promotional efforts are directed towards Podiatrists primary care doctors in a select group of dermatologists.
Our focus is on the patients that have a known or suspected drug resistant pathogen and even organ dysfunction or antibiotic allergy.
Current generic oral options have challenges in serving this patient population.
We estimate that there will be approximately 750000 skin and pneumonia patients who fit our target patient profile in the community by 2028.
We believe a 9% to 14% market share is achievable in the same timeframe.
As mentioned in.
Our prior call the.
The community expansion efforts are now well underway.
We estimate that by the middle of the year, we will have approximately 65% to 70 community care representatives in the field.
By the end of the year, we expect that to be closer to 80 to 85 in total.
Turning now to enhance our community sales force productivity.
Access team is actively work to increase the number of Medicare lives covered with limited to no restrictions.
For example, <unk> was recently added to three major Medicare formularies without restrictions, which now increases the number of Medicare beneficiaries covered to nearly 60% nationwide.
As a result.
We believe new Zara is now one of the most accessible branded oral antibiotics across the commercially insured and Medicare patient populations.
We are confident that <unk> is broad market access will continue to be a key driver to our commercial success moving forward, ensuring both patients and clinicians have appropriate access to new zara across all settings of care.
You can see on slide 18, we expect that that will be consistent and continued year over year growth of prescription days of therapies generated by both the hospital and community physicians.
We expect that oral prescription days of therapy generated by the community by Salesforce will surpass that of the hospital sales force by 2023.
The proportion of prescription days of therapy from the community continues to grow and is now approximately 30%.
Our focus remains on gaining new trial lists and 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.
With that I'd now like to turn the call over to Randy.
Adam.
In support of the community expansion just described by Adam The Medical Affairs team is also expanding its scientific reach through several mechanisms first in addition to our hospital focused field medical team. We've begun hiring a targeted group of community based medical science liaison or MSL to engage in scientific.
Range with community health care providers.
This expansion comes following a successful pilot with this program.
These msl's focused discussions on resistance patterns challenges with today's skin and pneumonia patients as well as current treatment options.
These new <unk> will be geographically placed to complement the planned commercial community expansion.
Second we are expanding education and scientific exchange to reach community practices through community focused scientific meetings journals and medical education.
With regards to the BARDA program together with BARDA, we continued to execute on all activities under the contract.
We are completing the preparatory work required and planning for the execution of two pilot animal efficacy studies, the first of which is in rabbits with top line data from this study expected in the fourth quarter of 2022.
BARDA has received a positive top line data from this study will trigger the purchase of our second newshour procurement under the amended BARDA contract, which is valued at $38 million.
The U S. Onshoring program continues to progress with some important milestones in 2022, mainly we continue to anticipate completion of the U S based production and commercial availability of new Xyrem tablets.
Second half of this year.
The new Xyrem vials and the Omadacycline API are on scheduled to be available from our U S supply in 2023.
Amid rising international turmoil and a global pandemic, our U S based supply chain for a commercially available antibiotic is particularly important.
With regards to lifecycle initiatives for news IRA we continue to advance the development program for the orphan indication of MTN pulmonary disease caused by Mycobacterium abscesses, including non clinical and clinical studies.
Enrollment in the U S. Only phase <unk> randomized study of pulmonary MTM infections caused by <unk> began in 2021 and is progressing to plan.
As this is a rare disease enrollment is estimated to take approximately two years.
As a reminder, this is the first placebo controlled study in this chronic and rare disease as such it will provide a much needed clinical data set of efficacy and safety in M. Obsesses patients. This study along with the non clinical studies will be the foundation for our next discussion with regulatory authorities and.
Label expansion.
In Q1, the result of an investigator initiated study demonstrating the potent activity of news IRA and our hollow fiber system model of Mycobacterium Avium complex or Mac pulmonary infection was published in the journal of antimicrobial chemotherapy. In this study <unk> demonstrated considerable efficacy and potency.
Against Mycobacterium Avium.
The highest exposure of Omadacycline studied demonstrated comparable potency as that seen with a three drug standard of care regimen and Omadacycline was bacterial sidel in this study.
Based on these encouraging findings <unk> plans to initiate additional in vivo studies to evaluate the activity of Omadacycline against Mac.
And an estimated 100000 cases of MTM pulmonary disease caused by Mac in the U S, which is 10 times more prevalent that micro bacterium obsesses.
FDA has granted <unk> orphan drug designation for the treatment of MTM for all sub species of MTM, including both Mycobacterium abscesses and Mac.
Designation from FDA further reinforces and validates the important unmet need in this underserved patient population.
We remain excited about the ongoing data generation efforts around MTM and we'll provide further updates of important data being presented at future scientific meetings in the second quarter call later this year.
At this point, we would like to open the line for questions operator.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Okay.
Our first question comes from <unk> Yang with Jefferies. Please go ahead.
Good afternoon, and thanks for taking my question I have a couple questions about your comment about growth in demand.
First quarter going into second quarter could.
Could you share a little bit more details about that you may increase in Utah.
It's because the patients are coming from hospitals or a community.
Hey, Darrin on your margin or <unk>, and then I have.
Good question.
Thanks, Adam.
The growth is actually being driven through the primary care side of the business.
And we are seeing quite clearly a improvement in the number of prescriptions that are coming or an increase in the number of prescriptions that are being generated by the primary care side of the business.
On the differential and that demand.
Is actually a function of the fact that we've got a primary care field force that is starting to drive increased demand.
Specifically in the community setting.
Okay.
Do you see coming from this gain on your mind.
It's mainly in skin.
The pneumonia season was actually almost non existent. This year, we are expecting to see some.
Proven in.
Pneumonia indication as we went into the winter is started and then very very quickly dissipated and so as a consequence, we very quickly pivoted our field force away from the from the pneumonia indication back into skin, and Thats, where were seeing well over 80% of the prescriptions so far.
Thank you.
On that.
As you guys are expanding the community sales force.
And we are approaching the warmer in mind.
Have you guys.
The sales growth.
Trajectory look like for the remainder of the year.
So.
We are starting to bounce see some quite clear seasonality in our business.
Q1, being a little bit softer than the remaining quarters and that's because of the insurance resets and in this instance, we also got hit with an omicron wave.
And then we see an acceleration as we go through the year with our highest growth in the past three years coming actually the third quarter and we anticipate seeing exactly the same phenomenon this year.
That's helpful. Thank you.
Thank you Sergey.
Our next question comes from Bert Hazlett with BTG. Please go ahead.
Yes. Thank you for taking the question and thank you also for the additional comments you just made thats very very helpful with.
With regard to.
Well with regard to kind of spending thats married to that and apologies for the granularity here are diving into it but how should we think about the trajectory for R&D spend throughout the year and SG&A spend throughout the year kind of given the.
The elements you've just described and then I have a follow on as well.
Hey, Bert it's Evan Thank you for the.
Call.
One of the important facets of the trends that we have seen through the balance of the first quarter with momentum.
We see moving into into this quarter is that it continues to buttress our competence in.
Our commercial model and the success of <unk>.
Xyrem product as we had said on our last call. We continue to be mindful of our capital allocation and our current estimates for 2022, R&D and SG&A expense as I said, we've reiterated guidance for both the Opex as well as on the on the revenue side and we don't see any changes from what we.
<unk> guided previously.
So just to be.
If it's possible to get a little bit more direction throughout the year.
Or should there be growth in both steady throughout the year or can you give any.
Any indication with regard to that at all.
We have.
We have.
Expenditures.
That you are well aware of that include.
Primarily from R&D from from the BARDA side and.
We do have investments that we've talked about specifically on the commercial expansion in that commercial expansion will happen primarily in the second half of this year.
Okay, Great. That's helpful. Thank you.
Just two other lines of question is mostly on the <unk>.
The additional pipeline one.
With regard to the you mentioned I think additional work. In addition, our non clinical work with regard to the MTM.
Im Obsesses could you talk a little bit about what additional work non clinically is required for that program and then I'll just ask the last program last question. You also mentioned even once again in your opening remarks.
Potential for other stockpiling and other Dod.
Purchases just love for you to elaborate if there are things percolating there at all that we should be thinking about thanks.
Hey, British Randy So I'll take the first question around non clinical work for MTM. So we are these are not so much required activities that I think we've generally on the microbiology side, which is where we're focusing most of this work.
We've completed all of the required.
Studies that we do to conduct we're always looking to do is continue to broaden our knowledge base around MTM.
So much of the on the obsessive side much of the work we've done with some of our combination work has been in vitro with sort of deal checkerboard type studies that we're looking to expand that into some in vivo models to see where some of the synergy looks like that we've seen.
In vitro setting how that translates into in vivo studies setting in a mouse model and then on the Mycobacterium Avium side, because we just have the hollow fiber model at this point in time, which is essentially an in vitro model that replicates. The human PK system. We are now moving that also into some non clinical efficacy models to show that that in vitro potency.
Translates into animal models of efficacy as well.
It's Evan again, if I could if I could build on what Randy said.
The design of the <unk> trial.
Is unique as Randy said, specifically because it is a placebo controlled trial in patients who have new onset non tuberculosis mycobacteria necessity.
And given what we anticipate in terms of the level of efficacy that we'll see in terms of improving pulmonary based symptoms of cough shortness of breath sputum production chest pain et cetera.
And you couple that.
With the Synergism studies and the lack of antagonism data that we've generated with news IRA with every other class of antibiotic that is typically used in a non approved format for these desperately ill patients we see that new Xyrem really has I think an opportunity here to be foundation.
And not to be worried about the addition of other agents into that particular regiment. So we're very excited about the design of the trial and I think it opens up.
The entire.
I think state of opportunity within NTN obsesses.
So hopefully that helps give you some color as to how we're thinking about the opportunity.
Thanks, and then just again any additional color with regard to government efforts and potential purchases.
Bert as you as you think about why we have a U S government one of the reasons, we have a U S. Government is to not only keep all of our civilians safe, but it's also to protect our active war fighters as well as our veterans and we.
We have made inroads I think in all of those segments first BARDA with regards to civilian protection from bioterrorism pathogen specifically anthrax.
If you look at the veterans, we have ongoing market access activity to ensure that because we are on the federal supply schedule that veteran who have diseases of interest have access to junior Zara and we believe that the active warfighter area is one that is actually woefully inadequately supported.
By novel antibiotics that can address not only resistance wound infections as well as potential bioterrorism.
Attacks.
When you put it in the context of the geopolitical instability that we're seeing here today I think it raises the Spectre and also I think the urgency for the Dod to actually really consider the opportunity with xyrem.
We have calls with various departments of defense agencies nearly weekly.
It is it is part of our job to do the education and also to give them fidelity and visibility on the.
The fact that <unk> starting this year, we will have commercial tablets available from our U S supply chain and IV.
<unk> formulation, an IV formulation available also next year.
Theres a lot of interest in our ability to actually provide that on U S soil without having to cross borders and.
We've had great receptivity.
At every one of our meetings and unfortunately, it is the U S government and.
It's hard for us to handicap timing <unk> when something like this could actually happen.
That being said, we are quite energized by the type of and in depth conversations and the breadth of the people that we've been able to contact with regards to the xyrem.
Okay. Thanks, Good luck there thank you.
Yes.
Again, if you have a question. Please press Star then one.
Our next question comes from Ed Arce with H C. Wainwright. Please go ahead.
Okay.
Hey, everyone. Thanks for taking my questions.
Hey, Ed.
Another quarter of progress alright.
Wanted to start with.
With your core business.
Year over year net growth of 51%.
You highlighted the growth demand was 82%.
So firstly I just wanted to understand.
What's driving that Delta.
Okay.
Especially this past quarter with the omicron wave and the lack of a typical flu season.
How much of that Delta do you think it is really transitory.
And then I have a couple of follow ups.
Hi, Adam.
I think I think the first thing to say is that we see continued growth in gross demand is a really good early indicator of the net sales to come.
Just to make sure you understand how we sort of measure these things on that <unk> take into account the gross to net which includes rebates discounts co pays and inventory holding.
Whereas our gross demand represents the actual sales that we send them shipped to our customer which in our case is predominantly the hospital.
For the specialty pharmacy and that has absolutely no adjustments.
Only purchase if I anticipate prescription sales sometime in the very near future.
The difference between the two is actually a function of where we are in the year as just as deductions in terms of rebates and co pays tend to be a little bit higher in the year earlier on and also the impact of our expansion into the community, which typically sees a larger impact on net sales due to the co pays and coverage.
Especially in the first half of the year and if you recall. This is the first year, where we've had this sort of bigger field force in place.
So what we're seeing is with our expansion.
<unk> was a little bit more pronounced than we've seen in prior years, but that will actually wash out as we go further into into the year.
Okay. That's helpful.
That confirms my.
I suspect it is such that there is some portion of that.
Look to be somewhat transitory yes.
It is.
Okay great.
And then.
This was kind of asked before but I just wanted to get back to the expansion of the msos in the community setting.
Is there any way.
For us to have a sense quantitatively or even just qualitatively.
The impact to the SG&A line throughout the year.
From that.
Yes, so Ed it's Evan.
Relatively small it is.
All within our current <unk>.
<unk> and nothing has changed from our guidance.
At our last call it so.
They are strategically focused in place to align with the broadening of territories that Adam has on the commercial side and they are clearly.
I think an important adjunct.
To the messaging that.
Yes.
Important.
To educate physicians on all aspects of not only the the basic USPI indications and the use and the dosing et cetera.
We've also seen a tremendous amount of inquiry in terms of alternative use and opportunities that are seeing also in the community setting much lesser than what we see in a hospital, but clearly there.
Okay.
Okay.
That's helpful.
Last question for me was just on.
The access for new Zara U.
Mentioned, there were three national Medicare Formularies that were added.
And the restrictions.
Getting you to a level of nearly 60%.
Excess nationwide I'm just wondering.
What incremental did those three plans.
In other words what was the.
What was the percentage before that.
So it was it was Neely I think it was the 20 million lives were added as a result of this this increment.
We are really pleased with the work that the team are doing in the <unk>.
Access group. This is one of the.
These were hard fought and they were done.
Within our current sort of gross to net from a rebating perspective, So we're pretty pleased with how thats, how thats worked out well importantly, I think I would also add that the success of the market access team has been able to as we said in the in the chart to.
To be able to actually create that pathway with limited to no restrictions.
Alright.
Hey, guys, sorry, one thing I will have used that as a result, obviously of this type of access has helped us in terms of how we sort of talk I'll representatives moving forward.
It will give us an even better opportunity in certain geographies, where these patients reside.
Alright understood.
Great. Thanks, so much.
Thanks, Ed.
Our next question is a follow up from <unk> Yang with Jefferies. Please go ahead.
Alright. Thank you I'm just following up on the point you made about the gross to net with Cowen.
What's the difference between.
The difference between that cross connect discount between the hospital and community can you elaborate on that.
Yes sushi.
The.
As you're probably aware, we've got a very healthy gross to net if you if you back into the numbers. Obviously, we don't disclose specifically what that is but what I can tell you is that.
As we move further into the community our gross to net will creep up over over time, and we do tend to give up a little bit more in the community setting than we do in the hospital setting, but it literally is a few percentage points in total.
I think previously you guys mentioned that the number of days.
In the community.
A much smaller than the hospital.
So I'm just wondering the slide that you have on the debt.
Hey, Nick.
E passenger lines from the hospital setting.
Okay.
Tom.
Yes, yes, it does.
This is prescription days of therapy generated in the community.
The average prescription days of therapy for our infectious disease consultants is around about 20 and the average.
And the community at this present time as we exited the last quarter was actually 11 for the primary care.
<unk> side of the business.
Okay. That's helpful. Thank you.
Thank you <unk>.
This concludes our question and answer session I would like to turn the conference back over to the Chief Executive Officer, Evan Loh for any closing remarks.
Thank you for your time and attention today.
Look forward to keeping you apprised of our continued progress.
Bye for now.
Okay.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.