Nabriva Therapeutics plc

Good day and thank you for standing by. Welcome to the Navriva Therapeutics second quarter 2021 financial results call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star, then the number one on your telephone. If you require any further assistance, please press star zero. I would now like to hand the conference over to our speaker today, Mr. Dan Nolan, Chief Financial Officer. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to Nibriva's conference call and webcast, where we will discuss the second quarter 2021 earnings and also provide a business update. Slides for today's presentation are posted on the company's website, www.nibriva.com, and can be found under the Investors tab in the Events and Presentations section. We recommend that you refer to the presentation as we'll be using those slides for today's discussion. Before we begin on slide two, I would like to remind everyone that this conference call and webcast will contain forward-looking statements about the company. These statements are subject to risks and uncertainties that could cause actual results to differ. Please note that these forward-looking statements reflect our opinions only as of the date of this call. We will undertake no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. Factors that could cause actual results or outcomes to differ materially from those expressed in or implied by such forward-looking statements are discussed in greater detail in our most recent filings on Form 10-K and our other periodic reports on Forms 10-Q and 8-K filed with the SDC. Ted Schroeder, Nebreva's CEO, will start with a business update, including our activities in China, and will present an overview of the commercial highlights for the quarter. Then, I will provide a financial review, and Ted will come back with some summary comments and lead a Q&A session. In addition to Ted and me, joining us on the call for the Q&A session is Dr. Steve Jalone, our President and Chief Operating Officer. I would now like to turn the call over to Nebreva's Chief Executive Officer, Ted Schroeder.

Thank you, Dan, and thanks to everyone joining our call this afternoon. Let's start on slide five. We are advancing our commercial effort to drive awareness as we continue to position both Cevextro and Zenletta for growth. As access is improving in the U.S., we are happy to see increased face-to-face visits between our sales team in the field and healthcare providers through our partnership with AmpliD Health. In addition, we are seeing some promising trends in the overall antibiotic prescription market, which I'll touch upon later in this presentation. We believe that our sales representatives are continuing to gain traction with providers in the field and are on our way to getting Civextro sales back to pre-pandemic levels. As we previously stated, we anticipate a return of historical peak sales trends for Civextro by mid-2022. As we mentioned last quarter, Nebreva was granted its own National Drug Code, or MDC, for Civextro, which allows the company to recognize 100% of net product sales of Civextro. As of April 12th, Civextro has been sold under the Nebreva label, and this provided a positive impact on our P&L during the quarter. which Dan will discuss in more detail later in the call. Next, and importantly, in late May, we, along with our partner, announced positive top-line results from a Phase III trial of lefamilin in Chinese adults with community-acquired bacterial pneumonia, or CAP. We will briefly review the data results and the market in Greater China in a few minutes, but I am pleased to say that that our new partner, Sumitomo Pharmaceuticals, a wholly owned subsidiary of Sumitomo Dinipam Pharma, has deep experience in the region and an established commercial infrastructure in the anti-infective field. We think this could provide a considerable revenue opportunity for Nebreva with an agreement that provides for low double-digit royalties and up to 86 million upon the achievement of certain sales and regulatory milestones, starting with the approval for Greater China. As mentioned previously, we are going to complete a Phase I safety and PK study for Zenletta in CF patients and expect to begin enrolling that study in the second half of this year. Partnering discussions for Zenletta outside the U.S. remain active, as we continue to look to form strategic business development agreements in Europe and other territories. Talks are ongoing with multiple parties who have expressed interest in a BD partnership. As we evaluate our options, we want to ensure that any transaction that occurs is in the best interests of patients and our shareholders. Regarding Contipo, despite some updated guidance from the FDA, We have not received any additional clarity on our specific situation at this time. We continue to work with the FDA, our manufacturing partners, and consultants to understand the FDA's guidance and the implications for resubmission of the Contipo NDA. We are confident that our contract manufacturers are prepared when the FDA is ready to conduct an on-site inspection. Consistent with our prior comments, we do not intend to file the Contipo NDA until we have confidence that the FDA can complete any required inspections within the six-month PDUFA clock. Finally, we were able to extend our cash runway substantially through the first quarter of 2022 as a result of successfully negotiating to extend our debt repayment as well as the ATM proceeds received during the quarter. We are also excited about the recent extension of our manufacturing agreement with Hovion Limited for Zanletta through 2030. The extension of the agreement reflects confidence in the long-term potential of Zanletta. In recognition of the impact the global pandemic has had on antibiotic demand, the revised terms provide for lower minimum purchase requirements in the near term, therefore giving Nebreva some near-term flexibility, and cash allocation, allowing us optionality to invest in additional value-creating initiatives. One such example I will touch on later in the presentation is the deployment of inside sales representatives to expand our reach, raise awareness, and drive prescriptions for both Zenletta and Civextro. Now, turning to slide six, here is a reminder of our broad pipeline across serious and rare infectious diseases. For cystic fibrosis, I think it's worth reiterating that if the trials prove to be successful, we think this could provide us with a $100 million incremental net sales opportunity. In China, on the heels of the recently announced positive top-line results from the Phase III lefamulin trial, We would anticipate the next step is the submission of the NDA, which is targeted in the second half of 2021. Turning to slide 8 for a commercial update, let's first take a look at the progress we continue to make with face-to-face interactions with healthcare providers. As you can see from the chart, as physician offices continue to reopen, we went from 68% in-person interactions during our last update in May to 72 percent in-person interactions for primary care visits as of July 2021. If you look at healthcare providers overall, 85 percent of our interactions are in-person. Our sales representatives have now been in the field for two full quarters, and we expect to see the number of in-person interactions further increase in the coming weeks and months. we will continue to adapt our approach as local guidance to COVID restrictions evolve. Assuming COVID restrictions are not enacted, our expectation is for access to doctors' offices to rise. In addition to the improving conditions for our reps in the field, we are also starting to see more promising trends in the general antibiotic market, as you can see on slide nine. After a sharp drop in total prescriptions in the antibiotic market in 2020 and the beginning of 2021, we are seeing the current trajectory approaching pre-pandemic levels of 2019. We believe the continuation of this trend will rely on an increase in respiratory infections later in the year. Combining these factors, the improving macroenvironment, getting more face-to-face time with prescribers, and antibiotic prescriptions beginning to trend in a favorable direction, I think you can understand why we are bullish about the opportunity for prescription growth for both Cevextro and Zenletta. We continue to engage in discussions with both products with HCPs. For Cevextro, our focus remains on driving prescribing for appropriate patients. For Zenletta, Our efforts are focused on educating providers on the benefits of Zenletta to lay the groundwork to ensure that Zenletta is top of mind heading into the fall. We are also excited to share that in order to help complement our commercial team in the field, we are deploying new resources to help target the areas in the U.S. that our representatives currently do not cover. If you turn to slide 10, you will see the current coverage of the sales force. It shows the regions of the approximately 7,800 currently targeted customers. We now plan to initiate a pilot program to expand our reach to cover white space geographies. We believe that this represents a large, untapped market opportunity for the company. We are deploying this strategy to further accelerate Civextro scripts and to continue to expand Zenletta awareness. If you turn to slide 11... You can see more details about our plan to expand our reach and frequency with virtual promotion tactics. According to an analysis performed by IQVIA, there are approximately 8,000 providers in these uncovered territories. We plan to initiate a pilot program to reach the top 25% of prescribers within these white space geographies, with a goal of approximately 40 outbound calls per day per representative. This is an opportunity to efficiently expand reach, raise awareness, and drive prescriptions for both Zenletta and Civextro. The question you may be asking is, why now? Part of our decision is based on the opportunity to reach these high prescribers, many of which are already familiar with Civextro. In addition, we have been getting inbound requests from providers in the uncovered territories for information and samples of both brands. These two factors, coupled with a focused investment, prompted the decision to expand into these white space territories. We look forward to kicking off this program by the end of the third quarter and will monitor the impact it is having on our business over the coming quarters. We view this program as especially complimentary to Zenletta, where we recently launched a new branded campaign in order to highlight the appropriate patient types for Zenletta. In addition, our medical affairs team has been developing additional materials to educate prescribers on current treatment guidelines for CAP and the threat of rising resistance to pathogens that cause CAP. As we continue to educate physicians on Zenletta's benefits, slide 12 introduces our new patient-focused campaign, and shows examples of the non-personal promotional initiatives we are employing to support this unleaded message. As we have previously mentioned, we are targeting patients with a more complicated medical history, such as older patients, CAP patients who have recently been on antibiotics, which puts them at an increased risk for resistance with traditional antibiotics. We're expanding our marketing impact by deploying a variety of non-personal promotional initiatives such as branded emails, paid search, point of prescribing messaging, rep-delivered materials, display advertising, and KOL-driven content. We believe that, coupled with the increased face-to-face promotion and the positive prescription trends we are seeing in the overall market, we are building the foundation for Zenletic growth in the fall and when we anticipate a greater incidence of CAP. Now, let me spend some time on Lathamulin in China and what that could potentially mean for Nabreva. Turning to slide 14, earlier this quarter, we announced positive top-line results from a Phase III trial evaluating Lathamulin in adults with CAP in Greater China. This trial was conducted by our partner, and the results were consistent to what we saw in the pivotal LEAP-1 trial and Leap 2 trials. An NDA submission in Greater China is expected in the second half of 2021. We also announced that development and commercialization rights of lefamulin in Greater China were transferred to Sumitomo Pharmaceuticals. Sumitomo opted to pursue lefamulin as it is highly complementary to their existing anti-infective product portfolio in China. For those that are not aware, Sumitomo is already a dominant player in the anti-infective space in the greater China region, putting them in a solid position to launch lefamulin in China once approved. Taking into account all these factors, positive Phase III data, partnership with Sumitomo and their established commercial capabilities, along with their knowledge of the Chinese regulatory authority, we feel extremely confident in the path forward for expanding global access to Lefamulin. In terms of how this impacts Nebreva, we are entitled to low double-digit royalties on net sales as well as payments of up to $86 million upon the achievement of certain sales and regulatory milestones, the first milestone of which is due upon approval in the region. As we turn to slide 15, you see that the data from the Phase III trial of lefamulin in China produced results consistent with prior pivotal trials. Lefamulin achieved the primary endpoint of non-inferiority versus moxifloxacin and also demonstrated comparable results on the secondary endpoint of the investigator assessment of clinical response to test a cure based on the clinically evaluable population. 70% of lefamulin-treated patients demonstrated success after failing prior antibiotic treatment versus just 44% for moxifloxacin. Overall adverse event rates of lefamulin and moxifloxacin were similar, but serious adverse events were higher in the moxifloxacin group than lefamulin. We will continue to work closely with our partner, Sumitomo, and are looking forward to an NDA submission later this year. Moving on to slide 16, we see that the antibiotic market in China was on a steady growth rate prior to the impact of COVID-19. Prior to the COVID-19 pandemic, antibiotic sales in China totaled approximately $14.8 billion, with macrolide and quinolone use representing greater than $2 billion of sales. We believe that the differentiated profile of Lathamulin provides an attractive option to other standards of care for CAP that prescribers can turn to for the benefit of patients in China. Finally, on slide 17, you can see why we are excited to have Sumitomo as a commercial partner in China. Sumitomo has an already well-established presence with a sales force covering all of mainland China. Across their 31 regions, they have access to over 3,000 hospitals with more than 36,000 physicians. This established and reputable infrastructure provides an excellent opportunity for lefamulin to gain incredible reach and access from launch. Putting lefamulin alongside meropenem, the number four anti-infective brand in China in 2020, serves as an excellent opportunity to accelerate a launch of lefamulin in China. Participating in a larger antibiotic market like China, Partnering with a high-performing organization in Sumitomo provides a great opportunity to further de-risk the commercial launch and related milestones to create value for Nebreva, while bringing new therapeutic options for CAP in China. I would now like to turn the presentation over to Dan for the financial review. Dan?

Thanks, Ted. As we turn to slide 19, I'd like to touch on some key highlights for the second quarter of 2021. As previously mentioned, we began distribution of Cevextro under the NEBREVA NDC on April 12th, resulting in almost $7 million of Cevextro net product sales during the second quarter. Later, I will describe the positive impact the new NDC has on the shape of our P&L. Total revenues also included $1.3 million in collaboration revenue and grant funding from the Austrian government for total revenues in the quarter of $8.2 million. During the second quarter, we continued to focus on prudent balance sheet management as we renegotiated our debt agreement with Hercules Capital, extending principal payments to at least April of 2022. Along with activity from our ATM facility and extension of principal debt payment, we fortified our cash position and exited the quarter with cash and cash equivalents of approximately $61 million providing us cash runway substantially through the first quarter of 2022. Going forward, we will continue to assess our capital allocation mix and focus our investment allocation in areas that we believe will provide the best return on investment and help us leverage our existing infrastructure. Moving on to slide 20, we look at our P&L for the three months ended June 30th, 2021 versus the same period for 2020. We experienced significant year-on-year growth on our top-line revenues, driven by net product sales of Civextro, as well as the recognition of collaboration revenue upon the achievement of milestones from our Chinese partner. You will see that our cost of sales increased approximately $3 million versus the prior year, driven primarily by the launch of our own NDC of Civextro in the current quarter. This was in line with our expectations around how the P&L would evolve with the launch of our own NDC of Civextro. The increase of approximately $2 million in SG&A reflects a full quarter of 60 sales reps compared to a scaled-back run rate in our commercial efforts during Q2 2020, resulting from the initial impact of COVID-19. Our net operating loss showed an improvement of greater than 20% year-on-year, highlighting the impact of Civextro on the shape of our P&L and highlighting the scalability of our commercial infrastructure to drive operating leverage. Turning to slide 21, We take a look at our balance sheet as of June 30th, 2021. As mentioned earlier, our cash and cash equivalents of June 30th, 2021 were approximately $61 million, an increase of $20 million from December 31st of 2020, driven primarily by activity in our ATM. This was offset by our operating cash burn, which included some extra supply purchases in the quarter. This can be seen as part of the increase in our prepaid expenses in the quarter. The significant increase in accounts receivable can be attributed to timing of cash receipts due from wholesalers on sales of Civextro following our launch in mid-April. Turning our attention to the liability section, we remain focused on a disciplined approach to managing our balance sheet while maintaining a minimum amount of debt. If we can now turn to slide 22, I'd like to take some time to highlight the impact of Nebreva's own Civextro NDC has on the shape of our P&L. Prior to the launch of our own NDC, Nebreva recognized a percentage of Merck's gross sales of Civextro while we had been deploying our full complement of commercial resources for Civextro promotion. Starting on April 12th, we launched our own NDC and began realizing the full benefit of patient demand in our reported net sales. During the second quarter of 2021, we see a significant increase in total revenue, And as you can see on the chart with the inflection of our total revenues from Q1 21 to Q2 of 21, while maintaining a consistent level of operating expenses compared to Q1 of 21. This change in the revenue composition on the P&L for NEBREVA provides an immediate increase in our profit margins, reducing our operating losses by 21% versus Q2 of 2020 and 15% versus Q1 of 21. and unlocks enhanced operating leverage on the P&L with our scalable commercial infrastructure. I will now turn the presentation back to Ted. For the next part of the call, Ted will make some closing remarks, and then we'll head into a Q&A session. Ted?

Thanks, Dan. Before we move to Q&A, let me summarize our achievements so far this year and our objectives for the remainder of 2021, which can be found on slide 24. Our number one goal remains the commercial success of Cevextro and Zenletta. Based on the promising trends I showed earlier with regard to increased face-to-face interactions, as well as the positive trends in the antibiotic market, we are optimistic about Cevextro and Zenletta prescription and revenue growth in the coming quarters. To supplement our sales force in the field, we are introducing a pilot program of inside sales representatives to expand our reach by targeting incremental high-decile prescribers in the U.S. that are not currently covered by our field-based sales team. Completing the transition of Civextro to a Nebreva-branded product earlier this year has allowed us to not only realize 100% of net sales for the product, but also provides the company insight to wholesaler distribution data that was not previously available to us. In China, the positive Phase III lefamilin data, in addition to having a new partner with Sumitomo Pharmaceuticals to develop and commercialize lefamilin in Greater China, represent exciting advancements. Ongoing activities with the pipeline include the planned initiation in the second half of the year of a Phase I study evaluating Zenletta in patients with CF and continuing to work with regulatory authorities toward an NDA submission for Contipo. Partnership discussions for Zenletta in Europe, as well as other territories, remain active and ongoing. As Dan described, we have taken several financial initiatives to extend our cash runway into 2022. I hope you can see that the momentum is building at Nebreva, with multiple products and programs. We, like most of our peers, progressed through COVID with an eye on what the company would look like coming out of the pandemic. We told you that we were working hard to create the necessary infrastructure to ensure that Nebreva will be correctly positioned in the community to optimize patient access for Zenletta and Civextro. We built upon the excellent managed care coverage we established early on for both products, and are at a point now of seeing acceptance in the wholesale channels for Cevextro, which we believe is indicative of stronger demand. Our expectation is that post the summer months, we will realize a similar increase in pull-through of prescriptions for Xenletta. We remain encouraged by what we are seeing and believe the commercial strategy is demonstrating positive results. Operator, we are now ready to open up the line for questions.

Thank you. As a reminder, to ask a question over the phone line, please press star followed by the number one on your telephone keypad. Again, that is star one. To withdraw your question, press the pound or the hash key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Suji Jung with Jefferies. Your line is open.

Hi, thanks for taking my question and then congratulations on the CBEXRO sales figure. So for the second quarter, it looks like the gross margin was about 52%. I just wanted to know if you expect the gross margin to continue at the level or would it improve over time? And secondly, for the expansion of the sales promotion using virtual platform, would that be done with those 60 sales representatives that you have right now, or do you expect to hire more? Thank you.

Dan, why don't you take the first part of that question, and I'll handle the second part.

Sure. Thanks, Suji. On gross margin, I think it's key to note that the majority of our mix of sales in the quarter were sub-extra, and the way the deal is structured, we pay the transfer fee for the inventory and some markup across the board on the product we receive. So that is probably a good run rate going forward for Civextro. Zenletta, we're still expensing prior R&D inventory, so we're not really seeing cost of goods yet, and given the low volume of sales, that's not really fully baked into our run rate. So I think as we get more traction with Zenletta, that mix will improve. But from a Civextro perspective, I think that's a pretty good basis to work from.

Thanks, Dan. And Suji, the your second question about the adding additional sales resources. So the 60 reps that we have on board now, they're, you know, kind of more traditional pharmaceutical sales reps that are making calls to physicians live and in person in the physician's offices and doing traditional types of sales activities, including the, lunch-and-learn educational opportunities and face-to-face sales calls. The additional resources that we talked about are inside sales representatives. So, effectively, these are folks who will be making outbound phone calls to a prioritized list of prescribers. And Ampli-T has a deep experience in this area. In fact, many of their current clients use a combination of outside and inside sales reps to great effect. So it's a way to expand the territories to get to high-value prescribers, and especially those who are either currently prescribing the product in the cases of Extro or had been prescribers in the past and have lapsed. and those who reach out proactively through our other non-personal efforts, such as the kind of banner ads and point-of-prescribing tactics that we're utilizing, who reach out to the company requesting information or samples, and we're able to more effectively reach those physicians with an inside sales team Because of geographies, it would be very difficult to send a rep live in the office to cover those. So it's really on top of the sales force. They're able to reach a lot of physicians, so their call lists are much bigger than a field-based sales rep would be. But the metrics we've seen from other case studies show look like this is an important area for us to pilot. And I emphasize the pilot part because we want to make sure we get it right, that we understand and that it's effective. So we are ready to launch that soon and looking forward to having a fully trained team making those outbound calls and follow-up to interested physicians before the end of the third quarter.

Oh, I see. So that effort is done by AmpliT Health, not by the employees of NAPRIVA or the sales rep of NAPRIVA. Is that right?

Right, right, because our 60 sales reps are a contract sales group from AmpliT now. And so we're expanding it, but in a group of sales reps that contact the physicians in a different way. But it's really designed to cover the uncovered territories.

I see. Great.

Thank you. You're welcome. Thanks for the questions.

And there are no further questions at this time. I would now like to turn the call back to Mr. Ted Schroeder.

Thank you, Operator, and thanks for your participation today. We are excited about the progress we've made during the second quarter. We look forward to providing updates as the business continues to develop. and we'll be involved in a couple of investor conferences throughout the fall, and so we expect to see some of you there. So thanks again for your interest and support, and we'll talk soon as we have further updates. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.