Q4 2022 Paratek Pharmaceuticals Inc Earnings Call
Speaker 1: Music Music
Speaker 2: Greetings and welcome to the ParaTECH Pharmaceuticals fourth quarter and fourth year 2020 Joe Army call.
Speaker 2: At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference can be recorded.
Speaker 2: It is now my pleasure to introduce your host, Sarah Higgins, Vice President of Finance and principal accounting officer. Please go ahead. Sarah Higgins, Vice President of Finance and principal accounting officer
Speaker 3: Thank you. Good morning and welcome to ParaTek's year-end 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 to which we will refer on this call. Both can be found at www.paratekfimet.com
Speaker 3: Participants on today's call are Evan Moe, Chief Executive Officer, who will present prepared remarks, as well as Adam Woodrow, President and Chief Commercial Officer, Randy Brenner, Chief Development and Regulatory Officer, Michael Bigham, Executive Chairman, and I will be available for questions.
Speaker 3: 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 2022 Form 10-K and other SEC filings for additional detail. Evan?
Speaker 4: Thank you, Sarah. Good morning and thank you all for joining our year-end 2022 financial and corporate update call.
Speaker 4: 2022 was a very successful year for ParaTek.
Speaker 4: ParaTek generated a total revenue of $160.3 million, primarily as a result of robust NUZARA core commercial sales growth.
Speaker 4: New Zara generated full year 2022 net U.S. sales of $136.8 million, which included $98.7 million from the core commercial business, a 45% increase compared to net U.S. sales of $68.2 million in the prior year.
Speaker 4: and $38.1 million from the second procurement of Muzaira under the BARDA contract.
Speaker 4: Strong demand, coupled with disciplined execution, resulted in consistent year-over-year growth in New Zira's core commercial business with a triple-digit compounded annual growth rate since New Zira's U.S. launch in February of 2019.
Speaker 4: This growth has come from both the hospital and community settings, more recently with a community expansion being the primary driver.
Speaker 4: As seen on this next slide, over the four years of New Zira's U.S. launch, its commercial performance continues to clearly differentiate New Zira as one of the most successful IV oral antibiotic launches in the last decade.
Speaker 4: As you can see illustrated on this next slide, we remain focused on three pathways to New ZIRA revenue opportunities.
Speaker 4: First, usirus core commercial business.
Speaker 4: This continues to be the main driver of our current revenue growth.
Speaker 4: Having both once daily oral and IV formulations enables USIRA to have clinical utility in every setting of care.
Speaker 4: Despite the headwinds in the hospital setting.
Speaker 4: that we observed in the second half of last year. As we enter 2023, we continue to project strong year-over-year commercial growth, especially in the community setting based upon continued positive metrics we are seeing in the majority of existing and new territories that we opened last year.
Speaker 4: as part of our community expansion efforts.
Speaker 4: Second, non-tuberculous mycobacterial disease or NTM.
Speaker 4: NTM represents a promising future growth opportunity in the orphan disease space.
Speaker 4: NTM of the M obsessive subtype is an ultra rare disease with currently no approved therapies anywhere in the world.
Speaker 4: In the US alone, PearTech estimates that
Speaker 4: NTM abscesses represents a potential $1 billion adjustable market opportunity.
Speaker 4: Outside the US, we believe that Japan has a similar degree of unmet need and a total addressable market comparable in magnitude to that seen in the US.
Speaker 4: Given its potential, we have prioritized our out-licing efforts in Japan.
Speaker 4: In fact, in February we held our fifth meeting in the last 12 months with the PMDA and have aligned on a registration program for NTM obsessive in Japan.
Speaker 4: The completion of this regulatory process is an important milestone in creating momentum for our ongoing discussions with potential partners.
Speaker 4: We've also initiated regulatory activities in Europe .
Speaker 4: and anticipate a similar regulatory advice process to be completed this year for NTM.
Speaker 4: This process will garner both orphan drug designation and provide clarity on the development requirements to enable New Zira's approval in Europe for NTM.
Speaker 4: As with the approach in Japan, completion of this regulatory process will be important to generating momentum in our partnering discussions for this region.
Speaker 4: In the US, the Phase IIb study continues to enroll with completion now expected by the end of this year.
Speaker 4: This modest delay in enrollment was due in part to the constraints on healthcare resources that shifted investigator activities away from clinical study research efforts back to bedside patient care, as well as hesitancy on the part of NTM patients with underlying pulmonary disease who were reluctant to venture into the hospital setting for care.
Speaker 4: Third, US government opportunities.
Speaker 4: We believe that there is broad potential for new use across the U.S. government, not only through our BARDA BioShield public-private partnership that is aimed at protecting all Americans against bioterrorism threats such as anthrax, but across the health and human services sectors that address pandemic preparedness needs and broadly across the Department of Defense as an important agent.
Speaker 4: to protect our active warfighters. Our broader program continued to progress well in 2022 with several on-shoring and animal study milestones.
Speaker 4: A 2022 highlight from our BARDA-supported on-shoring program included the completion of tablet validation and manufacturing. As a result, US manufactured NUZYRA tablets are now commercially available.
Speaker 4: The anthrax animal rule development program continued to progress on plan.
Speaker 4: Data delivered from our pilot efficacy study in rabbits at year end triggered our second barter procurement.
Speaker 4: This study provided unequivocally positive data in all three doses of imatocycline.
Speaker 4: demonstrating 100% efficacy.
Speaker 4: All rabbits infected with anthrax and treated with imadacycline survive to 45 days, which is the primary endpoint in an anthrax treatment model.
Speaker 4: Importantly, all rabbits infected with anthrax who were not treated with the matacycling died within 72 hours.
Speaker 4: These data have been accepted and will be presented at the ASM Microbe Conference in June .
Speaker 4: These clear and unambiguous results support our high level of confidence that the Animal Rule Program will yield a successful label expansion for both the treatment and prophylaxis of pulmonary anthrax along with future government procurements.
Speaker 4: Now, I'd like to review ParaTek's 2022 financial highlights as well as our revenue guidance for 2023.
Speaker 4: Fourth quarter total revenue was $75.6 million compared to $31.8 million for the same period in the prior year.
Speaker 4: Total revenue for the fourth quarter was comprised of the following. USIRA net US sales of $66.4 million, a 22.1% increase from $20.6 million in the prior year, which includes
Speaker 4: $28.3 million in net sales from the core commercial business, a 37% increase year-over-year compared to the same period in the prior year, and $38.1 million in revenue from the second procurement of Musira under the BARDA contract.
Speaker 4: Government contract and grant revenue earned from cost reimbursement under the BARDA contract was $8.4 million dollars, an 83% increase from $4.6 million dollars for the same period in the prior year.
Speaker 4: Collaboration royalty revenue was $0.8 million, which primarily represents royalty revenues earned on sales of Saissara in the U.S.
Speaker 4: Full year 2022 total revenue was $160.3 million compared to $130.2 million for the prior year, an increase of 23% over the prior year.
Speaker 4: Total revenue for 2022 was comprised of the following. First, New ZIRA generated net U.S. sales of $136.8 million, a 29% increase from $106.1 million in the prior year.
Speaker 4: Net U.S. sales was comprised of the following.
Speaker 4: $98.7 million from the core commercial business, which represents a 45% year-over-year increase compared to full-year net U.S. sales of $68.2 million in the prior year, and $38.1 million from the second procurement of New Zara under the BARDA contract.
Speaker 4: Second, government contract service and grant revenue earned from cost reimbursement under the BARDA contract was $21.1 million, a 33% increase from $15.9 million in the prior year.
Speaker 4: Third, collaboration and royalty revenue of $2.4 million, which primarily represents royalty revenues earned on sales of Saesara in the U.S.
Speaker 4: R&D expenses were $14.3 million for the fourth quarter of 2022 compared to $10.4 million for the same period in the prior year. R&D expenses were $37.8 million for the year ended December 31, 2022 compared to $30.4 million in the prior year.
Speaker 4: The increase in R&D expenses in both periods was primarily due to costs for activities reimbursed under the BARDA contract and costs incurred for the Phase IIb NTM study.
Speaker 4: SG&A expenses were $53.8 million for the fourth quarter of 2022, compared to $44 million for the same period in the prior year.
Speaker 4: SG&A expenses were $145.6 million for the year ended December 31, 2022, compared to $119.4 million in the prior year.
Speaker 4: The increase in SG&A expenses in both periods was primarily due to costs incurred in connection with the New Zaira community expansion and travel costs as a result of the lifting of COVID restrictions. During the fourth quarter of 2022, as a result of New Zaira's strong sales since launch, the New Zaira community has been able to expand its
Speaker 4: combined with increased confidence in our projected future sales, we accrued a contingent non-recurring compensation charge of $21.9 million payable in 2027. Excluding this charge, combined R&D and SG&A expenses for the full year 2022.
Speaker 4: were $161.5 million.
Speaker 4: Now turning to our full year 2023 revenue guidance, which as you can see in this slide is expected to be in the range of $143 to $158 million.
Speaker 4: Now turning to our full year 2023 revenue guidance, which as you can see in this slide is expected to be in the range of $143 to $158 million. This includes the following.
Speaker 4: Nusira net US sales, which are expected to be between $125 and $135 million.
Speaker 4: part of government contract service and grant revenue between $15 to $20 million, and royalty and collaboration revenue of approximately $3 million.
Speaker 4: We expect to reduce full year 2023 R&D and SG&A expense below that incurred in 2022.
Speaker 4: More detailed operating expense guidance will be provided during the company's first quarter 2023 earnings call.
Speaker 4: ParaTek had cash and cash equivalents of $34.2 million as of December 31, 2022, which combined with the $36.4 million in cash received from BARDA for the second procurement of Muzaira yielded a pro forma balance of $70.3 million as of January 4, 2023.
Speaker 4: This balance alone may not be sufficient to fund operations through 12 months from the filing date of our 2022 Form 10-K .
Speaker 4: We expect to address our future cash needs primarily through a combination of product sales, royalties, public or private equity offerings, debt or other structured financing, strategic partnering opportunities, and financial assistance.
Speaker 4: If these activities are successful, the company expects to be able to fund operations beyond the first quarter of 2024 and to accelerate its pathway to profitability.
Speaker 4: In closing, the New Zara commercial business continues to demonstrate robust year-over-year growth as expected across both the hospital and community sectors, and our development programs continue to progress the plan.
Speaker 4: With that, I would now like to open up the call for questions.
Speaker 2: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the questioning queue.
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Speaker 2: Get On With Jack terminus!
Speaker 3: Hi, good morning. Thanks for taking my question. On the NPN program, you guys said that the interaction with the Japanese regulator has been concluded. Could you give us a little bit more details as to what the regulators are looking for for Phase III programs? Thank you.
Speaker 5: Good morning, Suji. It's Randy Brenner. Yeah, thank you for your question. We've, as we said in the past, we anticipated that a small single phase 3 study would be able to support registration in Japan. And as Evan noted in his...
Speaker 5: We've now completed that regulatory process and really have agreed with PMDA that that is the case in Japan. So we are planning and having discussions with potential partners around a single Phase III study looking at the microbiological endpoint, which the rest of the world continues to focus on.
Speaker 5: a single phase three study for a relatively de-risked asset in a short period of time that allows them to get to market in a relatively quick period.
Speaker 5: If I could ask one more follow-up question, in the U.S. for Phase 2B, when do you expect to have headline data? Yes, so as you saw in the press release and as you heard in Evan's remarks, we did see a modest slowdown at the end of the year with regards to enrollment. We think that's due to a number of factors, which included...
Speaker 5: If you remember the triple-demic that happened with COVID, RSV, and flu, where ID docs in the healthcare system was really shifted away from clinical research and back to treating patients. In addition, we saw what you generally see with NTM patients and other patients with lung challenges is that there is an often graphs done based on deontology of the patient. The public health to this department and it is see the of the patient C Pleaseoya for theater witnesses that are additionalToy Trello the canceled are Outback radiationbulbs in a compare or a I have two I was a say ought or
Speaker 5: They don't like to expose themselves to respiratory viruses, so the patients themselves ultimately shut down. They don't, you know, come into hospitals, they don't go to doctors visits, etc. So those are a couple things that contributing to the factors. As we said, we expect enrollment to be done now by the end of the year. It is a three month primary endpoint, as you know, and then shortly after that we'll be able to...
Speaker 2: Our next question comes from Robert Hazlitt with BTIG.
Speaker 6: Yes, thank you for taking the question. Congratulations on the growth in the prospects moving forward. I have 2 questions. 1 is really on the trajectory of the expense and how we should think about maybe the breakdown between spend on.
Speaker 6: and TM and other efforts versus maybe that that's reimbursed relative to BARDA. I think we had 14 in the quarter and you know certainly a 37.8 for the year. How do we think about that line going forward specifically and then again the breakdown between what is required for BARDA.
Speaker 6: versus NTM and how to think about that waning over time. I would imagine that would drop fairly significantly in 2024. Is that the right way of thinking about it? Thanks.
Speaker 4: Hi Bert, it's Evan. Thank you for the question. I think your estimates here are actually very consistent with how we're looking at it. We think that the R&D programs in BARDA will continue forward with our animal studies, continue to progress, and the expansion of our animal studies into the non-human primate sector as we've already...
Speaker 4: will start to decline in the early part of 2024.
Speaker 6: Okay, great. Thank you. And then 1 other quick question on the. Kind of the size structure and emphasis of the sales force. Um, any, any evolution in terms of thinking is, um, you know, with, with, uh, commercial sales.
Speaker 6: Now expected to be above 100 million in 23. And just how are you thinking about how that is comprised in terms of size or structure? Any additional evolution there? Thank you.
Speaker 4: Yeah, you know, one of the things that we've been very excited about is the community expansion. We continue to see, I think, very, very positive metrics that have reinforced our confidence in our long-term forecast and growth as we continue to invest in the community expansion.
Speaker 4: As we look at 2023, we currently do not have plans for community expansion, but that continues to be within our revenue guidance of 125 to 135. And as we evaluate progress over time, we will evaluate the right time for future expansion in the context of...
Speaker 6: Great, thanks for taking my questions and congrats on the continued progress and growth in New Zara.
Speaker 6: I wanted to ask about the NTN program, as you just mentioned now and before in your prepared remarks. Why do you appreciate your time and attention? What do you think?
Speaker 6: That program now looks to read out Phase IIB data sometime in the first half of next year. I'm just wondering.
Speaker 6: As you look towards the longer term for that program, once you get the data, what would be sort of the next steps? I would imagine you'd want to meet with the agency, but in terms of timelines and structure of the eventual pivotal program, assuming it's positive.
Speaker 6: would you expect to have one or two trials? And just general thoughts about
Speaker 5: the timelines going forward out to eventually market of the drug. Yep, hey Ed, it's Randy. So I'll take your question. There are a couple of components and pieces to it.
Speaker 5: Just to reiterate, ultimately what our goal of our Phase IIB study, it's continued to be is really what I refer to as a three-tiered approach. The first tier is to generate and publish important data on the potential of new Xyra to affect symptom response in patients with NTM.
Speaker 5: That's, as you and I have spoken in the past, as the FDA continues to focus much stronger on symptom response than they do microbiological response for the broader NTM population.
Speaker 5: So that sort of publication in scientific exchanges continues to be an important component of our study planning. The second piece of that is really the guideline inclusion. We expect as being the only randomized controlled study ever done in Mycobacterium abscessis.
Speaker 5: we think that this study will be instrumental to shoring up New Zira's inclusion in the NTM Obsessus treatment guidelines as well. The third component of our strategy is where you were getting towards is what can we do with this study from a regulatory perspective, particularly in the US. And we will, as you suggested, once we have the data from this study, go back and speak to FDA and we will be able to do that.
Speaker 5: to talk to FDA about its potential to be included in labeling. That being said, they still obviously have the ability to request another Phase III study. We have not contemplated that to date as a company, and I think as we get further into these regulatory discussions, we could consider what that might look like. That being said, now that we have a clarity from Japan on what a Phase III study in Japan and the rest of the world may look like.
Speaker 5: I think, although not being a primary endpoint of symptom response, that study, as well, will certainly provide additive support for any discussions we have with the FDA.
Speaker 2: Thanks, Randy. I appreciate it. If there are no further questions at this time, I would like to turn the floor back over to the CEO , Ivan Lo, for closing comments. Please go ahead. We apologize when the mute call has started, but please pay attention to add your name and Guitar hand or hear the song before recording.
Speaker 4: Thank you operator and thank you all for listening in today. We look forward to keeping you apprised of our continued progress. Goodbye for now.
Speaker 2: This concludes today's ParaTek Pharmaceuticals Conference Call. You may disconnect your line at this time. Thank you for your participation and have a great day.
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