Nabriva Therapeutics plc

Good day and welcome to the Nebreva Therapeutics fourth quarter 2021 financial results and business update call. At this time, all participants are in 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 one on your touchtone telephone. If anyone should require assistance during the call, please press star then zero to reach an operator. As a reminder, this call may be recorded. I would like to turn the call over to Dan Dolan, Nebreva's Chief Financial Officer. You may begin.

Thank you, and good afternoon, everyone. Welcome to Nebreva's conference call and webcast, where we'll be discussing the fourth quarter 2021 earnings and providing a business update. The slides for today's presentation are posted on the company's website, www.nebreva.com, and can be found under the Investors tab in the Events and Presentations sections. 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 SEC. Turning to slide three, let's briefly run through this afternoon's agenda. Ted Schroeder, NEBREVA's CEO, will start with a business update and present an overview of the commercial highlights from the quarter. Dr. Steve Gillone, our President and Chief Operating Officer, will provide an overview of our regulatory strategy related to Contipo, and then I will provide a financial review before Ted comes back with some final commentary and leads our Q&A session. I will now 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 pleased with the progress we made in the fourth quarter and how we exited the year. Last year, the team continued to lay the groundwork on key operational drivers focused on creating sustainable long-term value. Let me start with the launch of our own NDC for Civextro in April 2021. As you recall, this allowed us to recognize 100% of net product sales for Cevextro, which has provided a positive impact to our P&L. We continue to see ongoing momentum for Cevextro and are happy to report another quarter of sequential prescription growth. Next, we transitioned development and commercialization rights of Lathamulin in Greater China to Sumitomo Pharmaceuticals. Sumitomo opted to pursue lefamulin to complement their existing anti-infective product portfolio in China. 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 once approved. We announced in November that the NDA for lefamulin in Greater China has been accepted by the regulatory authorities, and we look forward to providing updates when available. As a reminder, 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 previously mentioned, We'd expect this approval to be within 18 to 24 months from when the regulatory authorities accepted the new drug application in November 2021. Moving to our second commercial product, Zenletta, we continue to make progress in making the product more accessible and convenient for patients in the U.S. In November of last year, we launched the 10-count oral pack, or XPAC, which allows for improved patient access and the opportunity to further broaden availability in retail channels. Next, we partnered with Vizient's pharmacy network to expand visibility of the IV formulation of Zenletta in hospitals. This agreement affords Zenletta the support of the Vizient network through their hospital systems by increasing awareness of Zenletta as an alternative antibiotic treatment option for community-acquired pneumonia. We believe this could be a good opportunity for Zenletta as a transition of care alternative given its IV and oral formulations. We continue to explore additional uses of Zenletta and have advanced the cystic fibrosis program. We are making good progress with the CF trial and anticipate the first patient dose within the next month. The Phase I safety and PK data are expected in 2023. Our optimism for this program is based on the potent anti-staphylococcal activity of Xenleta against strains of Staph aureus isolated from CF patients. In October, we published data in a peer-reviewed journal, PLOS One, demonstrating lefamulin has anti-inflammatory properties in in vivo and in vitro models. The anti-inflammatory aspects of Lathamulin has potential wide-ranging applications to various infections including CAP and CF. The combination of the potent antimicrobial and potent anti-inflammatory properties of Lathamulin is very encouraging for the cystic fibrosis patient population in particular. We continue to strengthen our financial position with negotiations on our contracts with Oveon, our third-party manufacturer for Zenletta, and our debt agreement with Hercules. These amended agreements, along with the strong performance from Civextro, extended our cash runway well into the fourth quarter of 2022. Moving to slide seven, we are excited with the accomplishments to date. but more importantly, with what we see as the key value drivers that lie ahead for the company. We believe we have multiple significant catalysts over the near term that can benefit patients and enhance shareholder value as we maximize each of our core franchises. With roughly $48 million of cash on hand as of December 31, 2021, we have now extended our cash runway well into the fourth quarter of 2022. Our strategy is based on the strong Savextra Foundation, which continues to show solid growth in the U.S. This progress gives us confidence to reaffirm our guidance that Savextra sales will reach historical peak sales levels by mid-2022. Fully funding our commercial efforts, and a portion of our G&A costs while helping to further reduce our overall cash burn. As for Zenletta, we are continually seeking ways to optimize access for patients and healthcare practitioners. As we have said before, the cap market is large with approximately 2 million potential adult patients in the outpatient setting. We recently held a positive interaction with an advisory board of pulmonologists, who understand and see the value in a product like Zenletta. The advisory board provided significant insights as we continue to evaluate and assess the value proposition for Zenletta in the antibiotic market. It's important to remember that we have an extensive patent runway out until 2033 to giving us time to raise awareness and create value with Zenletta for patients and for healthcare practitioners. Additional opportunities for Zenletta include potential use in cystic fibrosis, which we estimated could potentially generate $100 million of incremental sales. The phase one trial is a small investment to determine if the non-clinical data translate clinically, and if so, we believe this could be a major catalyst for the company. Lastly, with Zenletta, we continue to explore partnership opportunities outside the United States. This is another resource which has the potential to provide the company with additional non-dilutive funding. We have existing partnerships in Canada and China and are actively negotiating in other regions, including Europe. Moving on, We remain committed to bring Contipo to the market. We believe there is still a large unmet need in the United States for treating patients with infections caused by multidrug-resistant or MDR organisms. An estimated 3 million people in the United States are treated for suspected or confirmed MDR. Turning to slide eight. Civextro posted another quarter of sequential growth and the second straight quarter where we saw more than 1,000 Civextro TRXs. In addition to executing commercially with our experienced sales team, we are demonstrating the ability to grow Civextro back towards historical peak sales. With our commercial infrastructure now well-established, the organization has shown the capability to drive patient access and utilization for established brands like Cevextro. Shifting to Zenletta on slide nine, we continue to see a lot of potential for the product with its novel mechanism and broad coverage. We held an advisory board with pulmonologists earlier this year, which reinforced Zenletta's positive characteristics and differentiated positionings. One of the main takeaways was the ongoing need for CAP treatment options. The availability of IV and oral formulations allows for the efficient transition of care from hospital to community. More importantly, the availability of an oral option may allow for treatment in the community to help avoid hospitalizations. The short five-day course of therapy is another positive attribute. Feedback from the advisory board also supports interest in the potent anti-inflammatory properties of Xenletta. We continue to learn more about Xenletta from ongoing interactions with community-based HCPs, gaining insights from providers about how they view the drug and its utility as a first-line empiric agent. This is especially important as we plan a framework to explore expanded usage for Xenletta in areas such as cystic fibrosis. Switching to Contipo on slide 10, our optimism for the prospects of Contipo continue to be bolstered by the reality that the silent pandemic of antimicrobial resistance is becoming more prevalent and negative patient outcomes continue to be more common. Based on a recent publication in Lancet, it was estimated that a staggering 1.27 million deaths were attributed to AMR in 2019 globally. To put that into perspective, deaths attributable to AMR now outnumber the annual deaths from HIV, breast cancer, or malaria globally. The six leading pathogens for deaths associated with resistance were E. coli, followed by Staph aureus, Klebsiella pneumoniae, Streptococcus pneumoniae, Acinetobacter baumannii, and Pseudomonas aeruginosa. And these pathogens accounted for just under 1 million deaths attributable to AMR. As you are most likely aware, Contipo has a novel mechanism of action and has been shown to be highly active in vitro against several of these commonly resistant pathogens. Contipo has been demonstrated to be well tolerated and effective against E. coli and Klebsiella pneumoniae in our pivotal trial for complicated UTI and pyelonephritis. In addition, IV phosphomycin is approved for multiple indications and used extensively outside the United States for many years now. As a result, many U.S. physicians are already aware of the drug's potential benefits, and we believe there is a unique opportunity for Contipo as a potential treatment option for patients with suspected or confirmed multi-drug resistant infections in the United States. For the next part of the presentation, I'd like to turn it over to Dr. Steve Gillone, our president and chief operating officer, for a brief update on the status of the Contipo NDA. Steve?

Thanks, Ted. As you may recall, the FDA communicated the need to conduct on-site inspections at our foreign manufacturing facilities that are located in Italy and Spain before the agency could potentially grant approval for Contipo. Based on external disclosures by the FDA, approximately 50 new drug applications were pending review as of the end of 2021 due to the agency's inability to travel abroad, secondary to the COVID pandemic. Most recently, the agency has communicated that it does plan to resume foreign inspections, but thus far has not signaled how pending applications will be prioritized. As a result, and given the uncertainties of the timing of onsite inspections at our manufacturing partners, NEBREVA requested an extension of the deadline to resubmit the Contipo NDA, which the FDA has granted. This extension of the deadline for resubmission of the NDA provides NEBREVA the flexibility to submit at any time up to and through June of 2023. We believe the resubmission extension enables us to avoid the scenario where Nebreva resubmits to Contipo NDA, but FDA is unable to complete the required inspections within the six-month PDUFA review timeframe, which would most likely prompt a complete response letter. We continue to keep the lines of direct communication with the FDA open, and we are closely monitoring multiple products manufactured by our CMO partners that have near-term action dates, which may provide further insight into FDA's approach to inspecting these facilities, as the observations that the agency made were general GMP observations that apply to all products manufactured at these sites. It's also noteworthy that the NDA resubmission extension has no impact on Contipo's market exclusivity, as the eight-year market exclusivity does not begin until marketing approval is granted. This continues to be a dynamic and fluid situation, and I can't stress enough that we are working diligently with our manufacturing partners and the agency to obtain agreement on timing of the required on-site inspections at our partners' facilities in Italy and Spain, and that we are poised and ready to resubmit the Contipo NDA once we have assuredness that the on-site inspections can be completed during the NDA review cycle. We remain committed to commercializing Contipo in the U.S. and look forward to providing you an update on a future call. I'll now turn the presentation over to Dan Dolan, our Chief Financial Officer, who will provide the financial review. Dan?

Thanks, Steve. As we turn to slide 14, I'd like to touch on some key highlights for the fourth quarter and full year 2021. Total revenues of $9.3 million in the fourth quarter consisted of net product sales of $8.5 million, representing 8% sequential growth compared to the third quarter of 2021. We ended the full year 2021 with approximately $29 million in total revenue, up $24 million compared to the prior year, driven by Civextro net product sales. During the fourth quarter, We saw continued improvements in our operating leverage and slower cash burn driven by Savextra's performance. We also realized the benefit of renegotiating our third-party manufacturing contract with Hovian for Zenleta, which provided near-term cash flow flexibility. This allowed for investment and value-creating opportunities with a focus on driving top-line growth. In 2021, we also strengthened the balance sheet by renegotiating our debt agreement with Hercules, further extending our interest-only payment period. Additionally, we entered into an equity line of credit agreement with Lincoln Park Capital. This partnership provides additional optionality for the company. We exited the quarter with cash and cash equivalents of approximately $48 million, providing us cash runway well into the fourth quarter of 2022. Moving on to slide 15, we look at our quarterly operating burn. And as you can see, our operating cash burn has steadily declined each quarter in 2021, driven by strong Civextro performance and the near-term benefit of our renegotiated agreements with Hovion and Hercules. While the trend in 2021 is reflective of the Civextro NDC launch and improved operational execution within the business, we do anticipate the typical one-time payments in the first quarter of 2022 consistent with prior years, including annual insurance prepayments and other annual subscription renewals. Additionally, we will continue to purchase of extra supply from Merck as needed, which will fluctuate from quarter to quarter. Moving to slide 16, this reflects a quarterly view of our revenue and expenses for 2021. The main focus as we exit 2021 is the fact that net product sales of $8.5 million in the fourth quarter continued a trend of growth since the launch of our Civextro NDC in the second quarter of 2021. As Ted mentioned, Civextro remains on track to achieve our guidance of historical annual run rate growth sales highs by the middle of this year. Civextro continues to provide a solid foundation for the company to drive operating leverage in the near term. The performance of Civextro more than fully funds our commercial investments, slowing our overall cash burn, and further enables investments to raise awareness of Zanletta in their near-term for CAP and invest in medium- to long-term lifecycle management opportunities, such as the investment in our Phase I trial for cystic fibrosis. 2021 was in line with our expectations around how the P&L would evolve following the launch of our own NDC for Civextro in April of 2021. We have demonstrated sequential revenue growth quarter over quarter and continued operating leverage improvements with an infrastructure that will support stable operating spend heading into 2022. Turning to slide 17, in summary, we saw a positive trend on the P&L and a corresponding positive trend on cash flows as we exited 2021. The launch of our Civexo NGC in April resulted in an immediate positive impact on our P&L and cash flows. Looking specifically at the fourth quarter of 2021, we saw an improvement in our operating cash burn of over 50% to just $6.1 million of cash burn versus $13.4 million of cash burn in Q4 of 2020. Given these positive trends on the P&L and cash flow front, combined with our cash and cash equivalents on hand at the end of 2021 and a very manageable amount of debt, we are well positioned as we head into 2022. This will allow us to continue to invest to gross of extra and unlock value in Zendleta. I will now turn the presentation back over 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. In summary, we are excited by the team's efforts in 2021 and the strong momentum heading into 2022. We believe the company is well positioned for growth and that our current results, coupled with our upcoming catalysts, have the ability to create incremental value to shareholders. We already have two commercial drugs that are being marketed, with the revenue fully subsidizing the cost of the commercial sales team. The CF trial affords us an opportunity to add incremental cash flow with little to no additional investment in the commercial infrastructure that's already in place. We continue to negotiate partnerships for Zynleta, which will provide the company with multiple revenue streams from their respective countries and regions. And lastly, we are committed to Contipo and look forward to bringing the product to the market and adding this as a third product in our portfolio. On top of all this, we are well positioned to add on additional assets that would leverage our existing commercial infrastructure. I'd now like to turn the call back over to the operator so that we can open the line for your questions.

As a reminder, to ask a question, please press star, then 1. If your question has been answered and you'd like to remove yourself from the queue, press the pound key. Our first question comes from Carl Burns with Northland Capital. Your line is open.

Great. Thanks for the question, and congratulations on your progress. I have two questions, and then I'll get back in the queue. So looking at gross profit margin or CODS, either way, It looks like there was a bit of a jump between the fourth quarter and the third quarter, if I'm calculating this correctly. I'm wondering if there was anything that was an anomaly in that and what your expectations are going forward on gross profit margins.

Dan, you want to take that question?

Yeah, sure, Carl. Thanks for the question. Yeah, so this is specific to Zenletta. It was more of an anomaly. We had some one-time true-ups in the fourth quarter related to minimum purchase commitments on the IV side of the business. So it did cause a little bit of a one-time charge in the fourth quarter related to cost of goods impacting margins.

And this was similar to what you saw in the third quarter, but maybe a little bit larger in terms of scale. Would that be correct?

I'm sorry, so the margins from the third quarter going forward, is that your question?

No, I think in the third quarter there was a third adjustment, a similar type of adjustment because of Zinleta values.

Sorry, in the third quarter we took the returns adjustment. We had to show up for the returns adjustment because some of the tablet product was expiring, so we switched out. the bottles for the new blister packs. So that was more of a net sales impact than a cost of goods.

Got it. So then on a going forward basis, what might you expect normalized GPM to look like?

Yeah, we've given guidance on Cevextro in kind of that mid-50% range. And then Venletta, you know, it's kind of hard to get our arms around, but we expect that to have a higher margin. So depending on the mix, you know, somewhere between the mid-50s and call it mid-80s.

Got it. Thanks. That's very helpful. And then it looks like R&D expense is trending down in the fourth quarter. Do you expect that to recur going forward, given that you've got the CSAs one trial and potentially other initiatives in the queue?

Yeah, I think some of that reduction was in non-clinical activities and some other external consulting. So I think going forward, the trial enrolls, it might wax and wane a little bit, but nothing super substantial. It'll be relatively stable with some phasing issues, probably phasing, timing, spend.

That's great. I'll get back in the queue. Thanks.

Again, to ask a question, please press star, then 1. Our next question comes from Ed Ars with HC Wainwright. Your line is open.

Hi, good afternoon, everyone. This is Thomas Yip asking a couple of questions for Ed. First, perhaps, can you go over your expectations for Sebastro in 2022 beyond the goal to reach historical peak sales trend by mid-year?

Sure, Thomas. We're... So Vextra has been a great addition to the portfolio. And as you recall, when we brought the product over from Merck, the sales had been declining. They had stopped promoting it sometime in advance of doing the transaction with us. And so during last year, we successfully reversed the decline and have it back as a growth product. So we've set our sights on kind of the first step of that, growth target is to get back to where Merck was. And then from there, we do expect that there's upside potential for the product. It's nicely positioned, and it has the advantage of a once-a-day therapy that's only given for six days, which is both convenient for patients and really helps with compliance. So we expect that we'll see growth beyond the return to to peak sales and with continued promotion. The product's highly promotionally sensitive. It does have some seasonality associated with it. You might expect that there are more skin and skin structure infections in the warmer months than in the colder months. But we think it's going to be a solid performer for the right group of patients. So we're looking forward to seeing growth from Sebastro over the next several years.

Got it. That makes sense. And then perhaps more along that line, can you discuss any adjustments or updates in your commercial strategy for Sebastro and also for Sinaloa, especially as COVID restrictions could continue to be lifted in the United States?

Yeah, those are good questions. I will tell you that access to physicians' offices continues to be disrupted. I think that's a general industry-wide trend. But we are seeing some relaxation of access, so that certainly helps. I think the good news about Civextro is there is an existing prescriber base. Some of those are kind of specialists like podiatrists and dermatologists. And so we are increasing our effort on those specialties. I think as you see people return to work, especially in jobs where they're on their feet a lot, we'll see increased activity from podiatry. So putting the effort there as we move into the summer season, as the respiratory season starts to wane, we will increase our effort on Cevextro. And then for Zenletta, as we talked about in the script, we think there's a real opportunity among the pulmonology community. Their patients tend to be somewhat more complicated. Having a highly effective therapy like Zenletta that's not a quinolone that can be dosed for a short period of time, and they have the opportunity to keep those patients out of the hospital is Pulmonologists find that extraordinarily attractive. They're also quite impressed with the anti-inflammatory properties of Zenletta. So an increased focus on pulmonology, especially as we move forward, we think will continue to drive activity around Zenletta.

Got it. Sounds good. And then one last question, perhaps switching gear to Dr. your partnership with Sumitomo in China. Can you remind us what are the upcoming milestones in 2022 after the regulatory submission late in 2021?

So we haven't specifically disclosed the milestone, but what we have disclosed is that the royalty associated with sales in China will be a low double-digit royalty milestone. and that our first milestone payment will be on approval. We expect approval. The standard in China is somewhere between 18 and 24 months post-acceptance of the NDA. That happened in November. So it's possible that we could see an approval in 22, but likely it'll be later than that, given the usual review cycle in China.

Got it. Thank you again for the kind of questions and looking forward to progress in 2022.

Yeah, thanks, Thomas. Appreciate the interest.

Our next question is a follow up from Carl Burns with Northland Capital. Your line is open.

Thanks for the follow up. Just a real quick question on the line of equity that you have with LPC. It looks like you drew a bit of that down in the fourth quarter. Can you quant that out? And then also the share count at the end of the quarter? Thanks.

Sure. Yeah, in the quarter, we were active with Lincoln Park. I think it was to the tune of 3 million shares or so. And we exited the... The year, right around 60 million shares outstanding.

Got it. Thanks. And just on that same sort of topic, how much then remains accessible under the Lincoln Park Equity Agreement? And if I recall, I think that goes out to September 23. Where I'm going here is that's an additional source to fund the cash pathway. Okay.

Yeah, yeah, you're right. We have about 18 months left on the agreement. To this point, we've drawn down a little bit on it, but we have a pretty good amount left on the capacity. It's in the teens, I think, the mid- to high-teens millions left.

Great, thanks. Very helpful.

There are no further questions. I'd like to turn the call back over to Ted Schroeder for new closing remarks.

Thank you, and thank you, everyone, for joining us this afternoon. As you can tell by the tone of today's call, we're excited about 22. We're excited about the progress we're making with our products, particularly with the growth of Civextro, and look forward to updating you as the year progresses and we hit some of the other value-driving milestones that we discussed today. So thanks, everyone, and have a great rest of the evening.

This concludes the program. You may now disconnect.