Q3 2022 Paratek Pharmaceuticals Inc Earnings Call

Good day and welcome to the power Tech Pharmaceuticals third quarter 2022 earnings call. Today's conference is being recorded at this time I would like to turn the conference over to Sarah Higgins, Vice President of Finance and principal Accounting Officer. Please go ahead.

Good afternoon, and welcome to <unk> third quarter, 2022 earnings and corporate update conference call a 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. Both can be found at www dot parent pharma dotcom.

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.

I turn the call over to Evan I would also like to point out that we will be making forward looking statements.

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.

Kevin.

Thank you Sarah good afternoon, and thank you all for joining our third quarter 2022 earnings and corporate update call.

The strength and continued growth in <unk> core commercial business in the third quarter of 2022 was driven by our unwavering commitment to disciplined operational execution combined with new Xyrem, many clinically important product attributes.

These include once daily oral and IV formulations, which enables use in every setting of care.

Proven clinical efficacy against resistant pathogens and two FDA approved indications and.

A favorable safety and Tolerability profile.

Our U S. Commercial launch performance continues to materially differentiate <unk> Zara is one of the most successful oral and IV antibiotics launched in the last decade.

Having both once daily oral and IV formulations has enabled new xyrem to have potential clinical utility in multiple settings of care.

Strong demand coupled with disciplined execution continues to generate year over year growth and use Iris core commercial business.

Net sales from our core business increase from approximately $19 4 million in the third quarter of 2021.

The $25 $5 million this past quarter, which represents a 31% year over year growth.

As you'll hear from Adam this growth in net sales <unk> Zara continues to be driven by strong demand, which we believe is the most important predictor of long term product growth.

Importantly use iris trailing 12 month core commercial revenue performance as seen in the figure on the right demonstrates an upward growth trajectory that we expect to continue for the remainder of the year and into 2023.

As the community and institutional sales teams brought in deeper deepen their access points and connections to physicians.

We continue to prioritize three principal pathways to new Xyrem revenue generation.

These iris core commercial business.

This continues to be the main driver of our current revenue growth performance and we remain on track to deliver between $95 million to $105 million in net sales this year.

Operationally, we have completed the second wave of our commercial and medical expansion into the primary care setting.

Adam will tell you a bit more about the impact of these newly deployed resources on our business during his prepared remarks.

The resistance.

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 these are include procurement deliverables under the border Bioshield contract.

In other stockpiling and initiatives for pandemic preparedness under both HHS and within the department of Defense.

As a first step in that journey, we are very proud to have recently announced that U S. Manufactured news hour tablets are now commercially available.

Before I turn the call over to Adam I would like to review Paratek third quarter 2022 financial highlights.

Total revenue for the third quarter of 2022 was $32 million, a 24% increase from $24.4 million for the same period in the prior year Rev.

Revenue earned in the third quarter of 2022 was comprised of.

$25 $5 million in net U S sales from the use our core commercial business, a 31% increase from $19.4 million for the same period in the prior year.

Four $4 million in revenue earned under the barter contract.

And zero point $3 million and royalty revenue.

Research and development expenses were $8.5 million for the third quarter of 2022.

Compared to seven $9 million for the same period in the prior year.

The increase in R&D expenses was primarily the result of costs incurred under our border contracts.

Selling general administrative expenses were $33.8 million for the third quarter of 2022.

Compared to $26 million for the same period in the prior year.

The increase in SG&A expenses would primarily the result of costs incurred for the expansion of desire promotion into the primary care setting.

Fair deck reported a net loss of $29 million or 38 cents per share and $18 $2 million or 37 per share for the third quarter of 2022 and 2021, respectively.

Paratek ended the quarter with $57 million in cash cash equivalents and marketable securities.

Based upon commercial revenue performance and operational expenditures, we remain confident and reiterating our full year 2022 financial guidance.

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

Adam.

Seven.

The commercial launch of user and both the hospital and community settings continues to progress according to plan.

As noted earlier disciplined execution has resulted in impressive year over year growth and use our was cole commercial business as evidenced by the 31% increase in net sales over the same quarter in the prior year.

And use Iris trailing 12 month revenue performance as seen in the graph on the right continues to demonstrate an upward growth trajectory.

As shown on slide 13.

Third quarter gross demand, the leading indicator of future sales growth.

Increased by 52% over the same quarter in the prior year with a trailing 12 month growth 68%.

These data maintain our confidence in the continued long term growth of our call commercial business.

As a brief reminder, gross demand represents all orders from hospitals and associated accounts as well as all prescriptions fulfilled by our specialty pharmacy partners in the community.

This is the key metric, we use to determine progress towards a commercial goals.

The difference between net sales and gross demand is driven by inventory fluctuations throughout the distribution channel.

Climbing issue.

And our gross to net discounts for the current reporting period.

As you can see from slide 14.

He was always growth trajectory is noticeably more successful than other recent all IV antibiotics launches.

In Q3, both segments of our business the hospital and community soul growth in demand.

However, specifically in the third quarter of this year, while the news or a hospital business continued to grow.

It did so at a slower pace than we had anticipated.

While they have been material improvements in the hospital environment overall that continues to be residual effects of the pandemic that reduce the overall volume of patients in the hospital system.

Impacting overlaps bosset utilization.

In addition, we are still experiencing some restrictions and physical access for our sales representatives to certain hospital systems.

In the hospitals the resume more normal activities I am pleased to report that we have received numerous recent successful formula reviews.

Our sales team in these hospitals and that works I'll pull through activities and we expect to see the results of these efforts over the coming quarters.

Our focus in the hospital continues to be an ivy positions in critical care pulmonologists, the calf of patients with known or suspected resistant pathogens. We also have a complicating comorbidity.

The value of news R. As oral formulation to expedite discharged from the hospital to home is appreciated by both patients and physicians.

In addition to the cost savings realized by the healthcare system.

A short in length of stay also reduces the risk for patients to pick up a hospital acquired infection with yet another resistant bacterial pathogens.

As promised our second wave of expansion into the primary care setting is now complete.

This included an increase in the number of sales Representatives medical science liaisons and territories covered in primary care.

We now have approximately five powertech specialty representatives working in the community.

Early performance indicators suggest that these new representatives of performing to plan with prescription and activity data consistent with that prior community expansion in 2021.

Our continued investment in the community has resulted in accelerating use or a prescription demand in Q3 as seen on this slide.

As a result these autos revenue performance is clearly outpacing other more recent all Ivy community launches.

The community focused sales team continues to be a key driver of growth and has increased their share of prescription days of therapy to 40% by the end of September averaging 36% for the third quarter.

Prescription days of therapy generated by the community based representatives remain on track to exceed the Rx Dot's generated by the hospital base Representatives by the end of 2023.

We continue to believe that the expansion of the community.

Sales of medical support will Yo Yo longterm performance success and use our commercial revenue growth.

Our focus with the community based team is to concentrate on high desktop prescribing Podiatrists primary care physicians and a select number of dermatologists.

He was always value proposition for both pneumonia and skin infections as in keeping patients out of the hospital, enabling treatment at home by using oral new Zara and targeting those patients with a known or suspected drug resistant pathogen. We also have a significant comorbidity, such as renal impairment or diabetes.

For those of you that track flu numbers.

Also notice the CBC is reporting a major uptick in flu like symptoms for this time of year.

This often serves as a leading indicator of a suspense over substantial pneumonia season.

We are prepared ourselves team to capitalize on this opportunity a face indicated continues to follow these early data trends into something more significant.

This includes identifying and developing relationships with high value pneumonia physicians based on the historical quinolone use as this signifies that the physicians have many of our news new Zara pneumonia patient types.

A patient with a known or suspected resistant pathogen in at least one significant comorbidity.

As always our overall objective remains in gaining new trolleys to repeat usage by building awareness and establishing trust and credibility with physicians, who are saving lives in tracing service community acquired infections, each and every day and with that I'd now like to turn the call over to Randy. Thank you Adam.

Consistent with our strategic priorities are field medical team is engaging healthcare providers in both the hospital and community settings Cookie.

The community MSL team continues to engage in scientific exchange with primary care physicians and podiatrists, focusing on emerging resistant patterns and treatment challenges with today's skin and pneumonia patients while identifying the unmet medical needs of today's older standard of care antibiotics.

The hospital Msce team continues to engage with infectious disease thought leaders.

<unk> pneumonia guideline authors formulary decision makers.

And <unk> referral center position leaders with scientific conversations that highlight the current clinical need and potential future lifecycle development and research opportunities for amount of cycling.

We continue to expand our educational efforts and scientific exchange in order to reach Kols and community practices through focus scientific meetings journals and medical education.

Caretech participated in a number of important in person military and scientific Congresses.

A review data presented at these conferences furthers the understanding of the utility of news IRA for serious community acquired in combat associated infections.

Highlights include real World Health outcomes data for patients treated with oral niv, new Zion for skin infections.

Phone enjoyed infections and pneumonia.

Additionally, in vitro and human data were also presented which further supports desire is an antibiotic with low potential to induce C. Difficile due to its in vitro potency and minimal disruption of the human gut microbiome lastly.

Lastly, it claims analysis strengthen the value proposition for news IRA and that patients treated with news IRA were less likely to seek additional Karen in an emergency room or urgent care or require hospital admission.

With regards to our project Bioshield contract together with BARDA, we continue to execute on all deliverables.

Initiation of the pulmonary anthrax pilot efficacy study and rabbits occurred in October of 2022.

Line data from this study is expected by the end of the year.

Florida's 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.

We are working with BARDA on a plan to execute the second procurement by the end of the year, but revenue recognition tied to borrowing accepting the delivery of the product may drift into early 2023.

Recently, the U S. Onshoring program reach a significant milestone completing the onshoring of the tablet manufacturing and validation process, making U S. Based news are tablets now commercially available.

This milestone represents the first of several steps and creating an end to end use supply chain for news IRA with US produced active pharmaceutical ingredient available in 2023 and vials commercially available in 2024.

With more than 90% of all antibiotics used in the U S. During 2022 source from China, and India continued disruptions in global supply chains do do international turmoil and the ongoing challenges of the Covid pandemic make a U S based supply chain more important than ever.

With regards to the lifecycle initiatives renews IRA we continued to advance the evidence generation and development program for the orphan indication of NTN pulmonary disease caused by Mycobacterium obsesses.

These data in total span the scientific continuum from in vitro data to clinical studies and real world evidence, resulting in future publications and position papers.

Importantly, enrollment continues in the phase two be randomized study pulmonary MTM infections caused by Mycobacterium obsesses with top line data expected at the end of 2023.

Biotech hosted a successful investor day on October 3rd to update investors on the global market opportunity for MTM for both Microbacteria obsesses, and Mac and to summarize key takeaways from the company's ongoing scientific program and NTN.

This event highlighted the significant unmet need for patients suffering from this chronic rare and life threatening pulmonary disease and lays the foundation for X U S partnering discussions.

Specifically, there are large mark market opportunities in Japan, Korea and Europe .

Average remain ongoing to formalize the agreements of the MTM development program in Japan.

Series of meetings with the Japanese regulatory authority have already been conducted in 2022 with formal feedback expected in the first quarter of 2023. We believe this will be a catalyst to advance our <unk> partnership discussions.

I look forward to providing additional updates in the future meetings and at this point, we would like to open the line for questions.

Operator.

Thank you if you wish to ask a question at this time, please signal by pressing.

The phone keypad.

Ensure the meat function on your telephone is switched off to allow your signal to reach our equipment again.

One to ask a question.

We can now take.

First question from.

Company. Please go ahead.

Great. Thanks for taking our questions. Congrats on continued progress.

I joined a bit late so you may have already.

Gone over this but.

I wanted to.

Ask if you could provide a little more detail.

And what's on the release what's driving.

The current what appears to be some current headwinds commercially.

Noting that the sales number for the third quarter is a 1.5% growth with the previous quarter.

And any helpful.

Right onto what you were doing in particular with the expanded.

Salesforce.

And then I have a follow up.

Thanks, I'll I'll take that look we know from you also have the headwinds or come from is a couple of factors.

We know from the billing and utilization data that was in the hospitals.

There was a pretty big reduction in the number of patients that were flying through the hospital system.

During that specifically joined the third quarter.

So much so that the broader antibiotic market in the in the hospitals actually was in decline now we obviously outperformed the market because we still still did see some growth, but can you add that to the fact that we saw a slide drawdown and our gross to net.

In our in.

In our inventory you actually see I.

Delta there between our.

Net sales in our sort of demand number so the headwinds are really the patient flow and the patient numbers.

And this sort of slow slowdown in terms of the of the inventory that we were expecting an investment timing issue and we walked through the system.

Now we've seen this sort of situation with the hospitals before and they invariably come back.

So we're expecting to see that take back up again in the in the next quarter.

Okay.

And then off of your recent Investor day discussing the MCM opportunity.

I'm wondering if there's any.

Updates I know you just run over this.

But if you could give us some detail around the updates in terms of.

Partnership opportunities globally and.

Any other updates beyond the trial itself with that program.

Randy do you want to take that.

Sure there thanks, Evan so add we are.

As I said, we're actively in discussions with the PM da we feel it's pretty important to complete those discussions and some partners who are actively in discussions with us and and the data room have asked us to do that the PM da process has a series of what they call in formal meetings to assure us some of the smaller.

Questions were aligned on before you go to what's called a formal consultation.

That formal consultation is the only one that gets quote unquote Mitted and then potential partners can get a really good understanding of what the development program might look like in Japan. So that we have that meeting planned.

Plan on the books for early in the first quarter of 2023, but in the meantime, we do have several potential partners, who have been expressing interest who are asking questions that are reviewing data in our data.

We also understand based upon some work that we have done that there is also.

Opportunity. There are also opportunities outside of Japan that includes South Korea as well as Europe .

As a reminder to the folks listening in on the call is that.

We have been able to preserve market exclusivity in in these most important markets to us Japan as well as in Europe , and we believe that there is a total addressable market that is substantial and we think that because of this rare disease.

Unmet need that there is opportunity in a rather typical orphan disease.

Setting.

Four.

For us and I think that based upon recent precedent.

Because of the rare disease situation.

Setting that there is parity pricing the opportunities in Japan as well as in Europe , which supports the way we look at the total addressable market.

Great. Thanks for the insights.

Thank you had.

And once again as a reminder.

Wish to ask a question.

We have no further questions over the phone.

Thank you operator, so just in closing I'd like to say that pair that continues to be well positioned in building momentum for long term growth.

A successful launch always begins with the right product with the right attribute that patients need today.

We have that product and use IRA which is a life saving once daily broad spectrum.

Oral an ivy antibiotic that has clinical value for physicians and every setting of care.

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.

This concludes today's call. Thank you for your participation you may now disconnect.

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