Nabriva Therapeutics plc

Welcome to the Nebreva Therapeutics Third Quarter 2022 Financial Results Call and Corporate Update. All participants will be in listen-only mode. Should you need assistance, please signal a comfort specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Dan Dolan, CFO. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to Nibriva's conference call and webcast, where we'll be discussing the third quarter 2022 earnings and providing a business update. The 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 will 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. I will then provide a brief 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 thank you to everyone joining our call this afternoon. As we turn to slide five, I'd like to take some time to update you on our outlook regarding the current position of the business against the backdrop of the broader macro environment. Like many of our peers, Nebreva has faced headwinds in the macro environment as it relates to investor sentiment for the biotech and more specifically, the anti-infective space. As a result, we believe our portfolio of assets are significantly undervalued by the markets. given that we are currently trading at approximately 40% of cash with revenue-generating assets, it's clear to see that the sum of the parts valuation is worth more than we're currently getting credit for in the market. With access to capital limited in the current market environment, our ability to raise capital efficiently and effectively continues to be a challenge. Given these challenges, we have shifted efforts to focus primarily on Civextro by building upon our commercial success as we believe this is the most efficient and effective way to extend our cash runway and preserve optionality and value for our shareholders. Additionally, and following a broader assessment of potential options, we have engaged Teraya Capital to help advise us on a range of strategic options to maximize the value of the underlying business. Starting with Cevextro, We have a revenue-generating asset which fully funds our commercial infrastructure and has generated net sales of approximately 24 million year-to-date through September 2022. Second, we have an approved product in the U.S. for CAP with Zenletta. It offers both IV and oral monotherapy with a novel mechanism of action and a well-tolerated option for patients with CAP. This is an asset with 11 years of patent life remaining. and has the potential to deliver more value in the future with an increase in investments to drive awareness of the attributes and benefits of Zenletta. With the appropriate resourcing behind the brand, we believe there is significant untapped potential for Zenletta in the U.S. Zenletta also has three separate and distinct royalty opportunities outside the U.S., with income-generating potential in Canada with our partner Synovion, in Eastern Europe with our partner, Erkin, and with the potential approval in China with our partner, Sumitomo. Additionally, we have another potential life cycle management opportunity with Xenleta in the treatment of patients with cystic fibrosis that could generate up to 100 million in incremental peak sales. Given the small concentrated patient population, we remain optimistic about the potential of Xenletta in cystic fibrosis and look forward to having top-line data before the end of this year. Lastly, with Contipo, for the U.S., we have a product with a novel mechanism of action, patent exclusivity now extended through 2038, and a proven track record outside the U.S. for over 40 years, treating multidrug-resistant organisms across various indications. With over 3 million patients in the U.S. with MDRs, Antipo provides an attractive alternative for treatment of this growing issue in the United States. To summarize, we have multiple assets currently generating or on the verge of potentially generating revenue in the near future. With this backdrop, we believe the most efficient path forward is to attempt to maximize value from these assets in the near term. while extending our cash runway and maintaining optionality as we look to realize the full value of our assets for both the patients they treat and our shareholders. Moving to slide six, I'd like to highlight some of the efforts we've made to optimize our cash position. Our strategy includes suspending all non-core R&D projects and implementing a 40% reduction in our global workforce by reorganizing functions and streamlining back office support. As a result, we have reduced operating expenses, created efficiencies within the business, and extended our cash runway into the first quarter of 2023. These efforts will remove approximately 20% of operating expenses from our base operating plan by the end of 2023. Our near-term focus is to optimize our cash position maximize value from individual assets within our portfolio, and efficiently enhance shareholder value while building upon our commercial execution. We believe this provides us time to adequately assess a broader range of value-creating options across the business by controlling what we can control within our existing business. Moving to slide seven, we continue to be encouraged by our operational execution in the business. On the commercial side, we saw continued momentum in the acceleration of Savextro. We had a 16% quarter-on-quarter TRX demand growth and continue to focus on the Salesforce execution with Savextro, capitalizing on the significant acceleration in demand. I'm thrilled that we have achieved our goal of hitting the peak historical sales run rate in the middle of 2022 in line with our previous guidance. As I mentioned, we have implemented a strategic restructuring plan to reduce cash burn and refocus our efforts on near-term value drivers, and we continue to see improvements in our operating cash burn compared to the prior year. We continue to challenge ourselves to be disciplined with spending to further accelerate the operating leverage driven by the continued growth of Civextro. On the clinical side, we now expect top-line data from the Phase I cystic fibrosis study in Q4 2022. This is an acceleration from our previous guidance of Q1 2023. This is a credit to the team as we have demonstrated the ability to execute operationally in the clinical side of the business. We have talked previously about the possibilities that's unleaded in this patient population, and I will reiterate these points later in the presentation. Lastly, the LaFamulian China NDA decision remains on track, with an expected regulatory approval in the second half of 2023. As you will recall, this has the potential to generate low double-digit royalties and up to $86 million in incremental sales and regulatory milestones, another significant value creation opportunity within the portfolio over the next 12 months. As you can see on slide eight, the Vextra posted its third consecutive quarter of double-digit prescription demand growth, with 16% prescription demand growth in Q3 22 versus Q3 21, and 18% year-to-date prescription demand growth compared to the same nine-month period of 2021. During the recent quarter, we saw yet another high in retail prescription demand since we restarted promotion of the brand, generating 1,148 retail prescriptions. On the back of this retail prescription demand, we have achieved our guidance of getting back the peak historical sales run rate of Civextro by the middle of 2022. This is another example of our ability to deliver operationally on our goals and objectives with our commercial footprint. The continued momentum with Savextro's promotion reaffirms our confidence in the realignment efforts that were implemented in April of this year. We remain confident in our ability to continue to grow Savextro and view this as a solid foundational asset in the portfolio. As we move on to slide nine, we are encouraged to see that our target call reach for Savextro has more than doubled in the third quarter of 2022, compared to the first quarter of 2022, following our realignment in April of this year. Additionally, since the realignment, we have converted 225 new Cevextro writers, the podiatrist accounting for 40% of those new prescriptions written. This is encouraging, given the promotionally sensitive nature of the brand and the opportunity to continue to expand Cevextro's use within this key segment of prescribers. We expect to continue to expand. Combining the increased reach and frequency with the established promotionally sensitive nature of Vextro, we believe it sets up for continued momentum as we move forward with this commercial strategy and focus around the brand. Shifting our focus to an update of our Phase I trial of Xenletic in patients with cystic fibrosis. Slide 10 lays out our rationale for exploring Zenletta as a treatment option for CF patients with chronic Staph aureus MRSA infections. The CF Foundation has stated that one of their key areas of focus is to identify effective treatments against methicillin-resistant Staphylococcus aureus and MRSA. This supports our thesis when evaluating Zenletta in CF patients. that Staph aureus remains an unmet medical need in patients with cystic fibrosis. Because Zenletta is available on both an oral and IV formulation, has demonstrated potent anti-MRSA activity, excellent lung penetration, potent anti-inflammatory activity, and is well tolerated, we continue to believe it may provide an attractive treatment option for this difficult to treat population. We have completed enrollment in the Phase I cystic fibrosis study in partnership with the CF Foundation and now expect top-line data in Q4 2022, accelerating our prior guidance of Q1 2023. We look forward to sharing these important data in this patient population with Senletta in the weeks and months ahead. We believe that positive data in this trial could create another potential revenue catalyst with a potential peak incremental market opportunity of $100 million. I'd now like to turn the presentation over to Dan for a brief update on the financials for the third quarter.

Thank you, Ted. Turning to slide 12, you will see a summary of our key financial metrics for the three months ended September 30th, 2022 versus the same period of 2021. Total revenue in the quarter grew 3% versus the third quarter of 2021 to $9.2 million, consisting primarily of Civexta net sales. Net sales of $8.6 million grew 10% year-on-year versus the third quarter of 2021. Other revenue decreased due to recognition of one-time payments in 2021 related to milestones we received for Xenletta in China. R&D expense grew in the quarter as we wrapped up our phase one trial for Xenletta in patients with cystic fibrosis. The balance of our R&D spend consists primarily of regulatory requirements around both Zenletta and Contipo. SG&A expenses decreased 3% versus Q3 of 2021 as we continued to control spending in these areas with a disciplined approach while also absorbing inflation. The growth in net sales and the decrease in SG&A continued to improve our operating leverage and have a positive impact on our operating cash burn. Operating cash burn improved significantly in the quarter, with a 50% reduction compared to the same period from the prior year. We also continued to pay down our debt facility with Hercules, paying down approximately $1 million of debt in the current quarter. We exited the third quarter with cash and cash equivalents of $14.8 million, and as a result of our restructuring efforts, we have extended our runway into the first quarter of 2023. I'd like to turn the presentation back over to Ted for some closing remarks.

Given the pressures in the macro environment impacting our ability to efficiently raise capital and significantly undervaluing our portfolio, we believe our current initiatives to extend our cash runway and focus on maximizing the value of the products in our portfolio is the most efficient way to preserve optionality and value for our shareholders. We have continued to drive growth in Civextro, advanced our lifecycle management opportunities with Venleta and Cystic Fibrosis, and expanded the global presence of Zenletta with our partners to unlock royalty revenue streams in the near future. We have executed operationally throughout 2022 and will continue to pursue options to maintain that progress over time to continue to bring these important antibiotic options to the patients who desperately need them. With that, I would now like to turn the call back over to the operator so that we can open the line for the Q&A session. Operator?

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Your first question comes from Carl Burns from Northland Capital Markets. Please go ahead.

Thanks for the question. With respect to the 40% FTE headcount reduction and the anticipated 20% OpEx savings, how might that hit the third quarter and the fourth quarter, given where you are right now with those initiatives?

Dan, you want to take that question? Sure. Thanks, Carl, for the question. We weren't expecting too much of the savings in the Q3 and Q4 given some of the separation agreements. We'll start to realize some of those savings as we turn the calendar year into 2023.

Just to be clear, most of that reduction, about half of the reduction came from Vienna. Got it.

And then turning to, you know, Zinleta for cystic fibrosis with the phase one open label, PK study reading out in the fourth quarter and given, you know, the press release comments on early stage development, what would be your next steps there with respect to advancing the CF program with Zinleta?

Yeah, so we do have several other, as we noted on the slide, several other non-clinical data that will be published as well. So penetration in the FUTA and CF patients. There's a mouse CF model, which is a standard model that prescribers are familiar with. And some of the other drug-drug interaction work that's important for folks. So there's a package of data that will be presented. Also, because we've partnered with the CF Foundation, they will disseminate those data as they're published to they're treating physicians. So it's really moving forward there. And then we'll assess down the road whether a registrational program is appropriate. But for now, I think we're just publishing the data so physicians can make a decision as to what may be best for their patients that may have resistant staph infections.

Great. And then just one final question. Can you comment on the funds raised via the ATM? Obviously, it looks like there's some activity with respect to the ATM, maybe around a couple hundred thousand shares raising maybe $4 or $5 million. Anyway, whatever you can provide there would be great.

Or, yeah, thanks, Carl. We did have some activity in the ATM. It was a few million dollars in the quarter. We still have some capacity, but we haven't been that active. There was a couple days where we leveraged it for some funding.

Got it. Thanks.

Thanks, Carl.

Thank you. Again, if you have a question, please press star and 1. Your next question comes from Ed Alston. Please relax.

Hi, Ted and Dan. Thanks for taking my questions. First, I wanted to start by asking you, as you focus primarily on Civextro and look at strategic options, essentially for the rest of your pipeline. I'm wondering if you could be specific on both Senletta in both CAP and CF, as well as Contipo, and are those both open to those options? What are you looking for in the near term?

Yeah, Ed, so the strategic review process and the mandate with TRE is really to look at all the strategic options. So I think we're open-minded about how we would evolve forward into a variety of different options, which could include one of all the brands or some combinations.

Okay. And then the current sales of Civextro in the quarter of 8.6 fell just shy of the 8.7 last quarter, given that you're essentially at a flat growth. Wondering if you could share with us some more thoughts about how you think about the growth prospects for the brand and what you're doing to re-energize the growth.

Dan, you want to talk about the net sales calculation?

Sure, yes, I will. Thanks, Ed. So net sales, I think the underlying demand has grown. What we saw this quarter versus the same quarter prior year was a little bit of inventory movement from the wholesalers. It's kind of a normal kind of level setting. And if you recall, we launched our own NDC back in April of 21. So I think last year there was some buy-in as we kind of reestablished the brand. And there was a benefit of some stocking in the third quarter of last year versus kind of more normal level buy-ins in the third quarter of this year. But I think the more important part, and Ted can build on that, is to look at the underlying TRX retail demand has continued to grow. And going forward, I think that's what will be the driver.

Yeah, and I totally agree with Dan. We did see some shifts last year from wholesale ordering that should have lined up into the second quarter but filled into the third quarter. And this year it was kind of the opposite. And so it's really somewhat of a timing issue. But the important point, as Dan highlighted, is that total prescriptions are growing and growing at a nice clip. And eventually, wholesaler demand over the year's period of time will catch up. And we're well ahead of last year in continuing to grow. And the fourth quarter, I think, will show that that growth driven by demand is sustained. And so we're actually very bullish on the upside potential for Civextro and the trajectory that it's on.

Okay, one last follow-up, if I may. Just wondering, with the phase one data from Zinleta in CF expected in the next few weeks, do you plan to include in that readout any exploratory efficacy endpoints that perhaps could help with any strategic review? Thanks.

Yeah, there are This was strictly a PK and safety study, and so there's not an efficacy readout in that study. So this was strictly PK. But what the design of the study shows and what we believe it will show is that the PK in CF patients is similar to the PK in non-CF patients. And that's an important finding. because it speaks a lot to dose. That would mean that the current marketed dose would be the appropriate dose. But given the chronic nature of the infection, you would probably see, potentially see more doses per patient. So it's not quite an efficacy study, but I think it checks some of the boxes for penetration and getting to the organisms and getting to the site of infection that are important in assessing which antibiotics might be appropriate in this patient population. Thanks so much. You bet.

Thank you. Again, if you have a question, please press star then one. We will pause a moment to allow for any final questions to register. This concludes our question and answer session. I would now like to turn the conference back over to Mr. Schroeder for any closing remarks.

Thank you and thank each of you for joining our call this afternoon appreciate your interest and we look forward to updating you in the weeks weeks ahead and we especially look forward to reporting the results of the phase 1 cystic fibrosis patients before the end of the year thanks everyone have a good rest of the day the conference has now concluded thank you for attending today's presentation you may now disconnect