Q2 2022 Paratek Pharmaceuticals Inc Earnings Call
Okay.
Good day and welcome to protect Pharmaceuticals second quarter 2022 earnings conference call all participants will be in a listen only mode.
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After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one touchtone phone to withdraw your question. Please press Star then two please note. This event is being recorded.
Now like to turn the conference over to Sarah Higgins, Vice President Finance and principal accounting Officer. Please go ahead.
Good afternoon, and welcome to parents had second quarter 2022 earnings and corporate update conference call.
The press release with the company's financial results was issued earlier today and we have also posted slides on our website to which we will refer on this call. Both can be found at www Dot <unk> pharma dot com.
Participants on today's call are at M O M D Chief Executive Officer.
Adam Woodrow President and Chief commercial Officer, and Randy Brown, our 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.
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 second quarter 2022 earnings and corporate update call.
The strength and continued growth in <unk> core commercial business in the second quarter of 2022 was driven by our unwavering commitment to disciplined operational execution combined with parroting, what combined with new Xyrem, many clinically important product attributes.
These include <unk>.
Once daily oral and IV formulations proven clinical efficacy against resistant pathogens in two approved indications and a favorable safety and Tolerability profile.
Our U S. Commercial launch performance continues to differentiate us IRA as one of the most successful IV oral antibiotics launched in the last decade.
Having both formulations enables new xyrem have clinical utility in every setting of care.
Strong demand coupled with disciplined execution resulted in a significant year over year second quarter growth and use Iris core commercial business.
This momentum is being driven by our ongoing expansion in the community setting.
Improved access to physicians in both the hospital and community.
A growing number of successful formulary reviews, and a significant increase in use IRA prescription access.
Net sales from our core new Xyrem commercial business increased from approximately $14 $9 million in the second quarter of 2021 to $25 $1 million this past quarter, which represents a 68% year over year growth.
As you'll hear from Adam this growth in net sales continues to be driven by strong demand when your xyrem.
Importantly, as you can see on the right side of this slide use Iris trailing 12 month core commercial revenue performance continues to demonstrate a consistent and significant upward growth trajectory that we expect to continue through the balance of this year.
Yeah.
We continue to prioritize three principal pathways junior Xyrem revenue generation.
First use iris core commercial business.
This continues to be the main driver of our current revenue growth performance.
Second non tuberculosis, mycobacteria disease or N T M represents a promising future growth opportunity in the orphan disease space.
N T M of the M. Obsesses subtype is a rare disease with currently no approved therapies.
In the U S alone parasitic estimates that N T M. Obsesses represents a potential 1 billion dollar addressable market opportunity.
We believe that the ongoing data generation and the results from the phase II B study will provide the potential to support future MTM treatment guideline inclusion and or new Xyrem label changes.
Third U S government opportunities, we believe that use iris broad utility against antimicrobial resistance wound infections, and bioterrorism pathogens should make it an important lifesaving component of the U S government strategy and tactics being formulated to address today's emerging threats.
These opportunities with new Xyrem include procurement deliverables under the BARDA Bioshield contract and other stockpiling initiatives for pandemic preparedness under both H H S and within the department of Defense.
Now I would like to review <unk> second quarter 2022 financial highlights.
Total revenue for the second quarter of 2022 was $29 $6 million compared to $19 $6 million for the same period in the prior year when excluding the first procurement of new Xyrem under the BARDA contract of $37 $9 million.
Revenue in the second quarter of 2022 was comprised of $25 $1 million in net U S sales from the new Xyrem core business, a 68% increase from $14 $9 million for the same period in the prior year.
$4 million in revenue earned under the BARDA contract.
And zero point $6 million in royalty revenue.
Research and development expenses were $7 $6 million for the second quarter of 2022 compared to $6 $5 million for the same period in the prior year.
This increase was primarily due to costs incurred for drug manufacturing and other non clinical studies.
Selling general and administrative expenses were $30 $3 million for the second quarter of 2022 compared to $27 $1 million for the same period in the prior year.
This increase was primarily the result of costs incurred for the new Xyrem community expansion.
<unk> reported a net loss of $17 $6 million or <unk> 33 per share and net income of $9 $7 million or 20 per share for the second quarter of 'twenty to 'twenty, two and 2021 respectively.
<unk> ended the quarter with $69 $4 million in cash cash equivalents and marketable securities.
Based on commercial revenue performance and operational expenditures, we remain confident in reiterating our full year 2022 financial guidance.
I would now like to turn the call over to Adam.
Adam.
Thanks, Kevin.
The commercial launch of new Zara in both the hospital and community settings continues to progress according to plan.
As Evan noted earlier strong demand and disciplined execution has resulted in impressive year over year growth and use our core commercial business as evidenced by the 68% year over year increase in net sales.
Gross demand a leading indicator of net sales also increased by 64% during this same period.
During our expectation and confidence and continued commercial growth through the second half of this year.
You saw it was accelerated growth in the second quarter can.
It can be attributed to several factors.
Environmentally we saw a reduction in both the number and severity if I am a chrome cases, which in turn led to an increase in physical access for face to face promotion in both the primary care and <unk>.
Patient office based settings, when compared to the prior quarter.
In addition, we have seen several hospitals opened their doors for sales representatives in terms of physical access.
Further we are seeing a resumption in formulary reviews, and stewardship committee meetings, resulting in additional new Zara access and availability in certain hospitals.
These activities are another important leading indicator the hospitals are starting to resume business as usual.
These meetings were largely put on hold throughout 2020 in 2021.
Notably we expect to see continued improvement in the field forces physical access to hospitals combined with more new xyrem access and availability to increase for marine stewardship reviews as we go through the year.
Our focus in the hospitals continues to be on physicians, who care for patients with known or suspected resistant pathogens and also have a complicated comorbidity.
We know that the oral formulation of news IRA enabling early discharge is valued by both patients and physicians.
In addition to the cost savings realized by the health care system, a shortened length of stay also reduces the risk of patients to pick up a hospital acquired infection with yet another resistant bacterial pathogen.
Recent formulary agreements have also improved news or a prescription access in the community setting which has provided additional momentum for the community sales force.
For example, <unk> was recently added to three National Medicare Formularies, which significantly increased the number of nationwide covered Medicare beneficiaries to nearly 60%.
<unk> is now one of the most accessible branded oral antibiotics on the market with limited or no restrictions across both commercially insured and Medicare patient populations.
This excellent payer access along with our co pay and patient assistance programs enables us to fill almost 95% of all written prescriptions.
<unk> is a once daily oral and IV formulation with two indications excellent payer access and as such is used in every setting of care.
For these reasons, new Zara has set itself apart from other recent Brian did IV overall competitive launches.
Further contributing to the strong year over year growth seen in the second quarter was the strategic decision to focus on my skin first detail in the community market late in the first quarter due to the lack of a traditional flu season.
This strategic shift in combination with refining our targeting approach has driven continued prescription growth in the community setting.
In the community, we concentrate on high decile prescribing Podiatrists primary care physicians in a select number of dermatologists.
Our value is in keeping patients out of the hospital by using oral use IRA in those patients with a known or suspected drug resistant pathogen and a significant comorbidity, such as renal impairment or diabetes.
As you can see from this slide based upon these targeted marketing efforts and ever improving payer access we anticipate that the community prescription based therapy generated by the property cat filled force when St. Those generated from the hospital sales force towards the end of 2023.
Looking at our commercial performance to date combined with our historical trends. We believe the second half of the game will remain strong with significant growth throughout the balance of this year.
And the community as I noted on the last call in the last quarter, we have begun to expand our community sales force by adding a total of 35 to 40 Representatives this year.
This is based on favorable market access some productivity potential.
Most of these are brand new territories.
And a small number we added an additional representatives to an existing geography.
We are pleased to say, we now have approximately half of things expansion representatives already on board with the remainder on schedule to be in the field by Q4.
Our focus remains on gaining new trial and repeat usage by building awareness and establishing trust and credibility with physicians, who are saving lives and tracing seamless community infection acquired infections, each and every day.
And with that I'll now turn the call over to Randy Thanks, Adam consistent with our strategic priority to ensure the success of the community expansion just described by Adam The Medical Affairs team continues to expand its scientific reach into the community.
First we are successfully hired and on board at all of the planned 2022 community based medical science liaison or MSL, who will engage in scientific exchange with community health care providers, focusing on resistance patterns and challenges with today's skin and pneumonia patients, including limitations with the current treatment options.
The new <unk> has seen on this map entered the field in early July and are geographically place to complement the commute commercial community expansion.
Second.
We are expanding education and scientific exchange to reach community practices through community focused scientific meetings journals and medical education.
Notably the supplement to the journal of family practice was published in June and delivered to over 100000 primary care and family Medicine providers to supplement is also available electronically and the link can be found in our press release.
With regards to the BARDA program together with BARDA, we continued to execute on all deliverables under the contract.
We are in the final stages of preparatory activities for the initiation of the pilot efficacy study in rabbits with topline data from this study are expected by the end of the year.
As previously mentioned <unk> received a positive top line data from this study will trigger the process for the purchase of our second news our procurement valued at approximately $38 million.
The U S. Onshoring program continues to progress with some key milestones in 2022, notably the onshoring of the tablet manufacturing and validation are complete with commercially available U S. Based news IRA tablets anticipated in the second half of this year.
Amid rising international turmoil and a global pandemic, our U S based supply chain for a commercially available antibiotic is particularly important.
Finally, the BARDA funded FDA post marketing commitments continued to progress with enrollment in news Iris first pediatric study the pediatric PK study beginning during this quarter.
With regards to lifecycle initiatives for news IRA we continued to advance the development program for the orphan indication of MTM pulmonary disease caused by Mycobacterium abscesses, including both non clinical and clinical studies.
In addition to orphan designation in June .
Granted news our fast track designation for the treatment of N T M for all subspecies of MTM, including both micro bacterium obsesses, and Mycobacterium avium complex or Mac.
Fast track designation opens the door for more frequent dialogue with the FDA and the opportunity to expedite development of new Xyrem has an option to help patients with MTN pulmonary disease as well as health care providers, who struggled to manage these devastating lung infections.
Enrollment in the phase <unk> randomized study of pulmonary MTM infections caused by Mycobacterium abscesses began in 2021 with topline data expected at the end of 2023.
During the second quarter Powertech raised awareness of this trial through our partnership with N. T. M. I R. A patient advocacy group as well as opposed to a presentation at the Colorado Mycobacteria Conference.
Following the encouraging data from our investigator initiated a hollow fiber assistant model of Mac Powertech as initiated additional non clinical studies to evaluate the activity of Omadacycline alone and in combination with commonly used antibiotics against Mac.
These studies include both an in vitro model and in in vivo mouse model.
As a reminder, there are an estimated 100000 cases of MTM pulmonary disease caused by Mac in the U S, which is 10 times more prevalent that mycobacterium abscesses.
There also continues to be a growing body of evidence of real world use of news iron MTM supporting the potential utility in treating these patients in the second quarter poster summarizing real world experience with news Iron NTN were presented at two conferences. In these 90 patients were treated with new Xyrem as part of combination of.
Eric regimens for up to 23 months with authors, concluding desirous generally well tolerated and showed promise as a potential new agent in the treatment of MTM infections.
Finally efforts remain ongoing to formalize the agreements of the MTM development program in Japan.
Series of meetings with P. M D. A the Japanese regulatory agency have already been conducted in 2022 with additional meetings planned for the second half of the year. These efforts will form the basis of licensing and partnership discussions in Japan.
We remain excited about the ongoing data generation efforts around N T M and will provide further updates at future investor event being scheduled for this fall.
At this point, we would like to open the line for questions operator.
Yeah.
Thank you well now begin the question and answer session.
Ask a question you May press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
Is that any time. Your question has been addressed and you would like to withdraw your question. Please press the star.
<unk>.
At this time, we will pause momentarily to assemble our roster.
Okay.
Okay.
Our first question comes from Fuji Jiang with Jefferies. Please go ahead.
Hi, good afternoon, thanks for that.
And congrats on a good quarter I have two questions.
One is I wanted to ask you about your current expectation for the timeline of the second BARDA procurement.
Especially when you expect to see that $38 million from BARDA is sadly equal my mic.
Bill back to your first.
First quarter up next here and my second question.
How do you think that demand and sales contributed by the hospital based skus into Diarra, well like whatever you mean.
Thank you.
Hi, <unk>, it's Evan Thank you very much for the questions for the first question with regards to the procurement.
Hand, this over to Randy.
Great. Thanks, Kevin Hi, Tsuji so.
As you know and as I said in my prepared remarks, the positive topline data delivery to BARDA is the trigger for the process that we'll execute upon the second procurement we continue to.
I believe that we will have data provided to BARDA from that study in the latter part of this year at which point that will start the process around BARDA as acceptance and.
Acceptance of the procurement and the payment as we've said we anticipate it to be a year end event, but what we can't control is the time that BARDA may take towards the end of the year to execute around their process. So while we think it may occur in 2022 towards the end of the year. There was a there is a chance that it will slip into the early part of 2023.
For the second question in terms of how they hospital.
Prescriptions in business will continue to contribute to our growth.
Adam.
Yes. Thanks.
I think as you saw on the slide which represented the part of our business, which is in the community you can see that.
These thousands of community continue to grow that are that are actually contributed by the hospital doctors. That's the blue bar that was in the in the chart of course, we also have a hospital business that wasn't represented that its also growing and that actually is growing quite nicely at the moment as I mentioned, we're starting to see more formal reviews and stewardship.
NC meetings and he was always being offered in more hospitals now than it was before and we expect that to continue so our hospital contribution will continue throughout this year and probably continue for as long as we keep investing in it.
Okay, great. Thank you.
The next question comes from.
At RSA.
H C. Wainwright. Please go ahead.
Great. Thanks for taking my questions.
Congrats on another strong quarter of.
Our sales growth for.
Few questions for me first I wanted to ask about the.
The phase <unk> study.
Mentioned that.
You believe.
Positive results from this study would be supportive of both guideline inclusion as well as label expansion.
Looking to get a little more detail around what gives you that confidence and kind of set the stage around that.
Hi, Ed. Thanks, It's Evan Thank you for the question I'll hand, this over to Randy.
Factors that avid had so.
Two parts to this question so number one.
As you've heard me say before this study is the first of its kind it's the first.
First really randomized controlled study ever done in Mycobacterium abscesses.
The first randomized placebo controlled study done.
Any of these devastating lung diseases.
Fuel from historical experiences that randomized trials of our generally the gate keeper to absolute inclusion in guidelines and.
Do you see that across many of the ethane effective infectious disease guidelines, so having a randomized trial.
As part of your review of our guideline committees.
Jeff will lend itself to guideline inclusion if it doesn't get into the guidelines before the study has been completed depending on when the guidelines are updated as you know guideline update to take many many years to be done.
Often for many of the indications that we focus mostly on really only updated every five to 10 years. So we watch that closely as well as far as the label expansion part goes I mean, we've been consistently noting that this is a phase II study.
And as designed as such however, because of the ultra rare nature of this disease, the orphan and now fast track designation, we received from FDA on top of the totality of data that just continues to be generated for news IRA whether it's on the non clinical side are either through the real world setting, we think that we will assuming robust data from our phase <unk>.
That will be in a good position to have discussions with FDA looking at the totality of evidence for this product to think about what potential label expansion, maybe maybe it may there may be an opportunity for us. So that's that's where we stand with regards to the two components of the question that you asked.
Great.
And staying with MTM a bit further.
Towards the end of your prepared remarks, you mentioned a future investor event. This fall.
Any details you can share at this point around that.
Thanks, Ed for the question.
We're in the planning stages currently based upon the inbound interest.
With regards to new Xyrem for MTM, both on the obsessed aside but now on the Mac side that we.
We are receiving through our.
Medical Affairs group, we think that this is a timely.
Events that will allow us to actually review more robustly.
The in vitro and in vivo.
The animal data that we are we are currently accruing in addition to that.
We are trying to see whether we can find.
Particular, NTN investigators to participate along with us.
And we look forward to giving you a date when we have a date certain that we can actually pull this off but we do believe it's a fall event.
Fantastic.
Last one for me if I may.
<unk> four for Adam.
I think I heard.
There are 35 to 40 reps added this year or was that by year end and I'm just kind of curious around the numbers.
Sure.
As that progresses, where it is right now and where would you expect that by year end.
Yes.
Well you know at 35 to 40 by the year by the end of the year that will get us to about 80 85 representatives.
And our plan obviously after that is to add another 35 <unk> in the middle of next year.
And then again the following year.
Now that's very helpful.
And I should be clear that at all in the community.
There is an opportunity for us to probably add a few more hospital representatives based on our analysis.
What I want to see is that this sort of return to normality that we're starting to see in a hospital is maintained.
Yeah very helpful. Thanks again.
Thank you Ed.
The next question comes from Bert Hazlett with BT AG. Please go ahead.
Thank you for taking the questions congratulations on a solid performance in the quarter great to see.
A couple of questions for me first is.
As you.
Could you actually general breakdown between the IV and oral in terms of the revenue this quarter.
So.
That's about 90 10, so 90% of our business is in an oral.
Okay great.
And then as you just looking at the operations and the.
The growth of the business. Thank you for the additional clarity with the with the reps.
I think we grew from about $27 6 billion in terms of SG&A to about $30 million roughly $3 million in growth is that the trajectory of increased spend for SG&A that we should expect throughout the remainder of the year.
I think when you take a look at that that delta today.
In terms of this this past quarter, Bert I think thats really a.
A reflection of our expansion and.
<unk> of resources into the.
Community sales force currently we continue to remain confident in terms of our operating expenditures that were very much in line with what we've guided in terms of full year.
Okay, Great and then.
Just thinking kind of.
Looking at flu seasons.
Patterns, and obviously Covid has had a material impact with regard to with regard to flu.
Is there any sense that the flu season might return to normal in the fall of 2022, I know, it's tough to predict but just your sense there.
For a more normal yes.
Yes, I think it's really hard to predict I mean, if you had to look at the current surveillance data in terms of southern hemisphere, both in terms of Australia and other southern hemisphere countries. They are actually.
And having a very robust season that being said again those countries like Australia have been.
Very assiduous with regards to coverage of their population with regards to.
Covid vaccines and <unk>.
I think that.
For us.
We will be ready to take advantage of a more traditional flu slashed pneumonia season, when and if it materializes one thing that I would like to emphasize though.
Unlike pneumonia, which has a fairly large variance in terms of seasonality to it too.
Two its presentation, we know that skin is an.
An infection that in fact is all year round.
As we noted in our last call our early strategic pivot.
Two skin as a first line detail at the end of the first quarter based upon what we're seeing in terms of pneumonia rates.
Augur well for what we actually saw in our second quarter, which was very robust year over year growth in the second quarter, driven primarily by the skin indications. So that's something that is with us all year round and.
I would not minimize it nor do I believe that the pneumonia season in and of itself.
He is absolutely critical for the kind of growth projections that we are continuing to see in terms of our of our demand which continues to remain strong and will continue through the balance of this year, which allows us to have the confidence to reiterate our 2022 financial guidance.
Terrific.
Im going to pass these two together two more for me one is cost of goods is the U S operations come online should we think about cost of goods any differently.
<unk>.
With regard to.
Gross margins.
And.
And then I'll get back to actually the.
Next deliverable beyond this one for BARDA could you just remind us what that next deliverable is again, you've been very clear for the Rabbit study this year, but the one following that what is the deliverable. Thanks so much.
Andy do you want to take the part of the question, Yes sure. So its sure Bert So with regards to the I think when you say deliverable, you're probably referring to the <unk> procurement milestone.
The next procure milestone is a combination of studies for both the Pep and the treatment program.
At the time, where our BARDA and protect we're speaking about providing some more clarity on what their procurement triggers would be it was around the same time, where we are.
We extended the BARDA contract will also include the Pep program. So the next the next trigger will be a combination of studies around both monkey in rabbits for for treatment and then some pilot work for for Pep.
We expect that that program is somewhere in the areas of 18 to 24 months.
From the timing of around the second procurement as we get deeper into the Pep program I'll be able to provide more specificity on what that timing looks like but there's a lot of moving pieces right now because of the.
The fact that this multiple studies included not like this carrier procurement, which is just a single study so hold tight on that and as we get through the early part of next year, we'll be able to provide more specificity on.
Exactly when we think the second the third procurement will come through.
But you can assume 18 to 24 months.
Thank you and then Cogs good shifting at all.
Can you just repeat your question again for me.
As the U S manufacturing operations come online.
Domestic manufacturing is there should we think about any particularly.
Material changes in cost of goods for <unk>.
Yeah look I think that one of the things that we're very proud of is the fact that.
We have now the ability through our private public public partnership with BARDA, who actually have to supply chains.
For commercial manufacturing of <unk>.
Xyrem in addition to the U S supply chain being actually also be utilized for the BARDA BARDA procurements going forward or you are a European supply chain remains intact functions extremely efficiently and again to emphasize is FDA inspected and and.
<unk> as we think about the biggest drivers for reduction in cost of goods is going to be volume and as our demand goes up we will we will see those costs going down, but I think for the near term I think the margins may be slightly reduced but not not materially.
Okay, Thanks, and congratulations again on a great quarter.
Thanks Kurt.
This concludes our question and answer session I would like to turn the conference back over to Stephen Lowe for any closing remarks. Please go ahead.
Thank you operator paradigm continues to be well positioned for long term growth.
A successful launch always begins with the right product with the right attributes that patients need today, we have that product can use IRA a lifesaving once daily broad spectrum oral and IV antibiotic that has clinical residents in every setting of care.
Further to that our team has always been committed to a disciplined focus on execution and delivering on future value creation through lifecycle management. Thank you for your time and attention today, we look forward to keeping you apprised of our continued progress goodbye for now.
Okay.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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