Q1 2023 Paratek Pharmaceuticals Inc Earnings Call

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Greetings and welcome to the Para Tech Pharmaceuticals first quarter 2023 earnings conference call. During the presentation, all participants will be in a listen only mode.

Afterwards, we will conduct a question and answer session at that time. If you have a question. Please press the one followed by the four on your telephone.

At any time during the conference you need to reach an operator, Please press star zero.

As a reminder, this conference is being recorded Tuesday may nine 2023.

It is now my pleasure to turn the conference over to Sarah Higgins, Vice President of Finance and principal Accounting Officer. Please go ahead.

Good afternoon, and welcome to protect first quarter 2023 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.

It can be found at www dot parent tech pharma Dot com.

Participants on today's call are Chief Executive Officer, and Adam Woodrow President and Chief Commercial Officer.

The film will be present will present prepared remarks, Randy Brenner, Chief development, and regulatory officer, Michael Bigham, Executive Chairman and I will 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 2022 Form 10-K, and other SEC filings.

For additional detail oven.

Thank you Sarah good afternoon, and thank you all for joining our first quarter 2023 financial and corporate update call.

Over the first four years of news Iris U S launch its commercial success continues to clearly differentiate its core commercial performance as one of the most successful IV oral antibiotic launches in the last decade.

Strong demand coupled with disciplined execution resulted in consistent year over year growth and use Iris core commercial business.

He has ever generated net U S sales of $26 $2 million in the first quarter of this year.

A 32% increase from $19 $9 million in the same quarter of the prior year.

Consistent with past performance expectations, we saw a modest decrease in net sales in the first quarter of this year compared to the fourth quarter of last year, which is likely due to the annual insurance resets that occurred at the beginning of each year.

Encouragingly, we saw momentum and overall sales growth in the latter half of the first quarter that has continued through April .

In addition, we have seen some early signals of a potential improvement in the overall hospital business environment.

As you can see on the right side of this slide we are pleased to report that our trailing 12 month net revenue has now surpassed the $100 million threshold.

An important milestone in the evolution and consistent upward trajectory of new Xyrem commercial growth.

The hospital and community segments have both contributed significantly to the year over year growth and then use the IRA core commercial business.

These positive trends allow us to have confidence in reiterating our full year 2023 revenue guidance.

Of $143 million to $158 million as captured on this slide.

Aerotech is focused on three pathways to new Xyrem revenue generation.

First use Iris core commercial business. The main driver of our current revenue growth.

Both once daily oral and IV formulations enables new Zara to have clinical utility in every setting of care.

Second non tuberculosis mycobacteria disease oriented yep.

And damn represents a promising future growth opportunity in the orphan disease space.

N T M of the M. Obsesses subtype is an ultra rare disease with currently no approved therapies anywhere in the world.

In the U S. The phase II B study continues to enroll to plan with completion expected by the end of this year.

In the U S alone Parotitic estimates that MTM obsesses represents a potential 1 billion dollar addressable market opportunity.

Outside the U S. We believe that Japan has a total addressable market comparable in magnitude to that seen in the U S.

Given the magnitude of this potential we have prioritized, our regulatory and our licensed out licensing efforts in Japan.

Given the amount of inbound interest in stage of negotiations, we expect to be able to announce a Japanese partnership by the end of this year.

In 2023, we have also initiated regulatory activities in Europe and.

We anticipate a regulatory advice process to be completed this year, which we believe will accelerate potential partnering discussions for this region as well.

Third U S government opportunities, we believe that there is broad potential for news iras use across the U S government.

Not only through our BARDA bioshield public private partnership for 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 to protect our active war fighters.

Now I would like to review <unk> first quarter 'twenty to 'twenty three financial highlights.

Total revenue for the first quarter of 2023 was $31 $2 million compared to $24 $9 million for the same period in the prior year.

Total revenue for the first quarter was comprised of the following.

Use our net U S sales of $26 $2 million, a 32% increase from $19 $9 million for the same period in the prior year.

Government contract service and grant revenue earned from cost reimbursement under the BARDA contract of $3 $8 million, a 12% decrease from $4 $3 million for the same period in the prior year.

Collaboration and royalty revenue of $1 $2 million, a 71% increase from zero point $7 million for the same period in the prior year, which primarily represents royalty revenues earned on sales of news IRA and China and on sales of Sase era in the United States.

R&D expenses were $7 $3 million for the first quarter of 2023 compared to $7 $5 million for the same period in the prior year.

SG&A expenses were $33 $5 million for the first quarter of 2023 compared to $27 $6 million for the same period in the prior year.

The increase in SG&A expenses is primarily the result of costs incurred in connection with the new Xyrem community expansion.

Consistent with our commitment to accelerate our pathway to profitability, we are targeting a significant reduction to our annualized fourth quarter 2022 spend rate through operational efficiencies and active management of cash and expenses, enabling us to announce 2023 full year.

<unk> guidance in the range of $160 million to $170 million. This range includes the following components.

Core business, R&D, and SG&A expenses of $145 million to $150 million and Reimbursable, BARDA, R&D and U S onshore expenses of $15 million to $20 million.

As seen in the Orange bar on the far left R&D and SG&A expenses in the fourth quarter of 'twenty to 'twenty, two totaled $68 $1 million.

Which included a contingent nonrecurring charge of $21 $9 million.

Excluding this charge R&D and SG&A expenses in the fourth quarter of 2022 totaled $46 $2 million, which included the full cost burden of the community sales force expansion completed in the second half of last year.

As depicted in the Orange bar in the graph on the right Andrew.

Annualized the fourth quarter, 2022, R&D and SG&A SG&A expenses of $46 $2 million would have resulted in a full year 2023 spend of approximately $185 million.

Compared to this annualized expense account the company projects, a 2023 expense guidance in the range of $160 million to $170 million as depicted in the Blue bar on the right, which represents a reduction of approximately $20 million in full year, R&D and SG&A expenses for 2023.

Hi.

And finally, <unk> had cash and cash equivalents of $45 million as of March 31, 2023.

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

Adam.

Thanks, Kevin.

The growth of new Sarah in both the hospital and community settings continues to progress. According to plan and our progress represents a material difference in trajectory compared to all other oral broad spectrum branded antibiotics. Most recently launched.

As seen on the left panel of this slide disciplined execution that result has resulted in an impressive year over year growth and use our core commercial business evidenced by the 32% increase in net revenue from Q1 2023 fastest Q1 2022.

On the right panel of this slide first quarter gross demand the leading indicator of future sales growth increased year over year by 50% over the same quarter in the prior year.

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

This is the key metric we use to this having forward looking progress towards our commercial goals.

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

Timing issue.

And gross to net discounts.

As Evan noted earlier, we saw a modest reduction in first quarter net sales compared with the fourth quarter of last year, primarily due to annual insurance resets and.

Importantly, we also saw a modest increase in gross demand compared to the prior quarter.

Both results were in line with our expectations and a similar magnitude compared to the same period in the prior year.

As a result of this quarter's performance combined with the sales momentum we have seen through April we maintain our confidence in achieving the growth required to meet our full year revenue guidance for the core commercial business of $125 million to $135 million.

As seen on this slide we continue to see growth across both the hospital and community sectors of our core commercial business.

With the investment to date in the community expansion, we're seeing an acceleration in the share of prescription days of therapy generated by this team.

Total prescription days of therapy generated by the community based representatives remain on track to exceed the prescription data third therapy generated by the hospital based representatives by the end of 2023.

We continue to believe that the expansion of the community sales team and the associated medical support will maximize long term growth for new Zara.

As you can see on slide 17 in contrast to the headwinds we've seen during the last half of 2022, there appears to be potential early signals of an emerging recovery in the hospital setting which is both encouraging and welcomed.

This shift may be a result of two factors.

First an improving macro environment regards recruitment and staffing within the hospital setting.

And second a subtle but important change in our messaging within the hospital.

While our physician targeting remains IV positions in critical care Pulmonologists.

<unk> is now focused on discharge on oral news are a therapy in patients with a known or suspected resistant pathogen, who also have a complicated comorbidity.

This shift leans into the dominant once daily oral usage pattern, we have seen for news Dara in the setting of care.

In addition to these early and positive trends in the hospital business dynamics. Since February . We're also seeing a steady increase in new hospital prescribers as shown in the dark blue bars on this slide.

This trend is a good signal for new growth in the hospital business. After the headwind in just the last two quarters.

In addition, we continue to see a quarter over quarter increase in new community prescribers as seeing dropped here in the blue bars.

With new prescribers, increasing in both the hospital and community settings, and a strong start to the second quarter. We look forward to sharing details around our continued progress and momentum during our next earnings call.

With that I will.

I'd now like to open up the call for questions.

Thank you if you would like to register a question. Please press the one followed by the four on your telephone you will hear a three town prompt you acknowledge your request. If your question has been answered and you would like to withdraw your registration. Please press the one followed by the three.

And our first question is from the line of Ken.

Cambist USA with Jefferies. Please go ahead.

Hi team.

Couple of questions for me first can you provide some detail on the operational efficiencies that enable here opex reduction.

Second question is what percent of the patients have you enrolled in yard and 10 study.

And then the third question.

How confident are you in securing Japanese partnership by the end of the <unk>.

<unk>.

What stage of negotiations are you at.

Great.

Campus, it's Evan I'll take the first question as stated in our prepared remarks, we continue to pursue a number of operational efficiencies across the organization in an effort to achieve our projected full year 2023, opex savings of approximately $20 million.

These efforts include reducing or eliminating spend on external consultants.

Reducing or eliminating costs associated with certain agencies.

And elimination of any spend associated with non critical activities.

As you can see these efforts began early in the first quarter. This year and will continue through the duration of 2023.

Importantly, all operational efficiencies being pursued and implemented will be balanced to maintain our projected top line revenue growth for full year 2023.

For your second question around the patients enrolled in the <unk> study I'll hand, this over to Randy.

Hey, it's Randy Brenner talking we don't generally give out super specifics around our MTM enrollments I can tell you that we're quite pleased with the progress that's been happening in the first quarter of this year and we remain on target to.

Planned to make our enrollment completion by the end of this year great. Thank you Randy and for your third question canvas. How confident are you in a jet Japan partnership by the end of the year and we're at what stage are you in terms of our negotiations. So thank you for that question.

Look I think importantly, you know there was a very important milestone that that Randy and his regulatory team led over the duration of last year through early February of this year, which is the claim gain clarity on the regulatory pathway for Japan.

With and output from a formal P. M D. A meeting that provided guidance in terms of the design of the trial.

And and.

And which resulted in us or giving us an understanding of this being a relatively small single phase III study of approximately 100 subjects.

Clarity there has I think led to us receiving significant inbound interest and we are in receipt of multiple nonbinding indications of interest.

We look forward to progressing these discussions towards our stated goal of a deal by the end of 2023.

And are you now in terms of us in terms of today I think it's inappropriate for us to be commenting publicly on an on an on the exact timing for this based upon the stage of discussions, but we still.

Youre confident that we'll be able to consummate a transaction by the end of this year.

Excellent. Thank you so much I appreciate you answering the question.

Thank you.

And our next question is from the line of Ed Arce with H C. Wainwright. Please go ahead.

Hi, Good afternoon, everyone. This is Thomas Yip, asking a couple questions for Ed.

So perhaps first.

Zero.

Can you tell us.

Well you can do the expansion.

What are the major impacts that you have observed so far in the U S market.

That's good.

You went over them.

Early traction sounds infection in the hospital setting and the kind of initiatives there.

Market as well.

So maybe I'll have Adam discuss some of the.

Positive.

Factors that are going on within the community expansion Adam.

So.

I mentioned, obviously the.

Early traction was saying with the hospital to the community expansion, that's really a function more of the fact that we now have more representatives on the ground, we've gone into new territories and in some cases, what we've done is we've divided up.

Profitable territories into two because they've got a great deal of potential and as a consequence, that's why you're seeing that acceleration that's going on in the prescriptions and prescription days of therapy with the primary care field force.

So obviously you mentioned the encouraging trends that we've seen in the hospital and I put those obviously in my prepared remarks.

We think that that's actually a function of our staffing conditions in the hospitals, along with improved patient flow.

In addition to the data show and I am pleased to report that we are actually seeing these improving trends continue actually adjusting.

The back end of the last quarter, but they seem to have carried over into the second quarter and while it's too early to comment on whether we think these trends are sustainable through 2023, we are encouraged with the progress that we've seen to date.

Alright, great.

Thank you for that special details.

And then.

That's.

Somewhat of a financial question.

Previously.

Are you reaching.

<unk> points.

This is still.

Still our long term goal and can utilize.

The major factors.

Or are there to achieve that goal.

Yeah look I think that you know when we look at our our business. We continue to remain extremely pleased with our.

Current upward trajectory in terms of our core commercial business, we feel very confident in our full year guidance and we are able today to reiterate that guidance with approximately 25% to 35% year over year growth <unk>.

Projected for this for this year as we think about our business, we see operational efficiencies and opportunities here to.

Consider places, where we can be more efficient and we do think that that is absolutely core to.

Our ability to.

Create a path to profitability and we are very focused on that currently and as you can see we've already begun those efforts with our projected $20 million in a year over year savings compared to an annualized fourth quarter of 2020 to carry forward.

Expense run rate.

Okay.

Thank you well guess, what they got my questions.

Okay.

Sure.

Thank you.

And our next question is from the line of Julian Harrison with B T. I T. Please proceed with your question.

Hi, Thank you for taking my questions first on the heels of the active conference last one I'm wondering if you could talk a little more about the feedback you've been receiving.

Receiving from the medical community on desirous potential role in treating MTM infections.

And then you've been very clear on your guidance it to a Japan deal for niche I read by the end of this year I guess I'm wondering is south Korea rights would likely be a separate transaction and if so when could we maybe expect that to materialize.

Yeah, So Julian Kevin. Thank you for the question I'll take the second question first and then I'll hand, it over to Randy to talk about a N T M.

Your.

Your your a question around South Korea is an interesting one because when you look at the total addressable market.

In Japan, it's actually fairly comparable to what we actually see in South Korea as well we.

Would prefer to have a partner that could actually oversee and develop and commercialize the product in Japan, and South Korea currently, though our inbound interest has been more for.

Japan being being the focus that being said, we do actually in terms of our non binding.

Indicative interests are.

Have have had.

Some of these.

Potential partners actually express interest in South Korea, as well so it's all on the table for us and I would not.

I think be fulsome without mentioning also Europe as well it is something that has come in frame.

More recently in terms of the discussions that we've been having with potential strategic partners, there and Randy can speak to this also that we will be actually we're in the process of getting off the ground with a similar regulatory process, where we have high confidence that we'll be able to number one achieve orphan disease designation and number two to receive scientific advice by the end of this year.

Of the pathway that we would take.

Going forward, maybe with that I'll leave it over to hear to Randy, Yes, Hey, Julien, It's Randy Brenner, just with regards to your acclimated and N. T. M question with you.

Since the day, we launched two we received a significant amount of inbound interest around the potential for new Zara to treat NTN, particularly micro bacterium obsesses.

Our medical team.

And that interest over the last four years really just continues to grow exponentially.

We obviously don't have the indications adult proactively speak about MTM.

What questions come in to US all the time and I think you've seen our publications that have been put out there since the launch of new Xyrem over the last four years and Theres a significant amount of data that continue that gets generated which and as data gets generated more unsolicited questions coming through our medical team about the potential to use desire for MTM.

Thank you.

Great.

Last a couple of weeks ago did have the NTN poster for news IRA that's part of a real world evidence IR program that we have out there that look at the the short and long term long term durability of efficacy for new Xyrem, which again.

Showed a data that was.

Interesting to potential kols in.

Other publications do generated some inbound interest and questions from the medical community. So we continue to feel good about our MTM program in our phase II study, which is why we're doing it and the publications that are out there continue to.

Further support the hypothesis that we've laid out before starting that program you know Julian I think that the other point that I would make and I really appreciate one of the slides do you actually had in your in your report about pair tech, which is to look at the combatant toria.

Of these IRA.

One of the things that's important in these patients with MTM obsesses or in Mac for that matter is that the standard of care is multiple antibiotics in combination number one to reduce the rate of resistance. But this is this is a bacteria that is very very difficult to eradicate if not impossible to eradicate.

That being said I think that.

With us realizing that Randy and his team undertook checkerboard studies to look at synergism and Orient hanging ism with all of the commonly used either IV or oral antibiotics for N P M obsesses as well as Mac.

Just to remind the listeners we saw zero antagonism with any of these agents and in fact with a couple of these classes, we actually saw synergism, which is actually great data that our doctors have have have to have spoken to and noted in terms of the opportunity. So when you have a once daily oral that's as well tolerated as Randy has said here.

We do believe that there continues to be nearly daily inbound inquiries into the opportunity.

Do I think about the different places that MTM can make a difference in the clinical outcomes of these very desperately ill patients.

Okay, great. Thanks very much.

And there are no further questions in the queue at this time I will now turn it back for closing remarks.

Thank you operator, and we look forward to keeping you apprised of our continued progress goodbye for now.

Yeah.

That does conclude your conference call for today, we thank you for your participation and ask that you. Please disconnect your lines.

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