Paratek Pharmaceuticals, Inc.

Thank you for standing by. This is the conference operator. Welcome to the Paratech Pharmaceuticals second quarter 2021 earnings call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Paul Arndt with LifeSci Advisors. Please go ahead.

Thank you, Operator, and good afternoon, everyone, and welcome to Paratech's second quarter 2021 earnings and corporate update conference call. A press release with the company's second quarter results was issued earlier today, and we have also posted slides on our website that will be referred to on this call. Both can be found at www.paratechpharma.com. Participants on today's call are Evan Lowe, Chief Executive Officer, Adam Woodrow, President and Chief Commercial Officer, and Randy Brenner, Chief Development and Regulatory Officer. Michael Bigum, Executive Chairman, and Sarah Higgins, Vice President of Finance, Controller, and Principal Accounting Officer will also be available for questions. Before I turn the call over to Evan, I would 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 risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors discussed in the company's SEC filings for additional detail. It is now my pleasure to turn the call over to Evan Lowe, Chief Executive Officer. Evan?

Thank you, Paul. Good afternoon, and thank you all for joining our second quarter earnings and corporate update call. Paratech remains focused on excellence in operational execution and delivery against our stated corporate priorities in order to generate value for patients and our shareholders. Accordingly, we remain confident that our efforts in 2021 will firmly establish the foundation for the continued and long-term commercial growth of New Zyra and demonstrate continued forward progress in all aspects of the BARDA, BioShield, public-private partnership, which is designed to develop New Zyra as a novel, medical countermeasure for the treatment of pulmonary anthrax. As you can see from this next slide, New Zyra's quarter-over-quarter growth continued into the second quarter of this year, generating a total of $52.8 million in net U.S. sales. This revenue includes $14.9 million from the core New Zyra commercial business, a 13% increase over the first quarter of 2021, and an 84% increase over the second quarter of 2020. We believe this quarter-over-quarter growth was not only a significant achievement in this volatile and rapidly evolving healthcare setting, but serves as a reflection of the clinical importance of positive patient outcomes with New Zyra and the overall strength of our commercial business. The balance of the $52.8 million in net U.S. sales was secured from the first BARDA procurement, delivered and accepted by BARDA in June of this year. Accordingly, Paratech recorded revenue of $37.9 million from this procurement, in the second quarter of this year. Our confidence in the long-term commercial success of New Zyra remains unabated based upon the strong foundation of demand for New Zyra that our sales and marketing teams have established in the first two years of the commercial launch, which focused solely on the hospital care setting. In early 2021, based upon performance data from a focused primary care sales pilot program conducted in the second half of last year, we expanded our commercial promotion into the primary care setting. To date, early signals of trial and adoption in the community launch appear promising and augur well for future long-term growth. As seen on this next slide, the monthly commercial revenue curve continues to validate that New Zyra's commercial performance to date represents one of the most successful antibiotics launched in the last five years. The New Zyra commercial launch dynamics continue to materially differentiate from any other IV oral antibiotic launches. We believe that the strength of the commercial business is driven by disciplined operational execution combined with New Zyra's many clinically important product attributes that include, first, broad spectrum efficacy including resistant pathogens across two common indications, second, a favorable safety profile consistent with New Zyra's tetracycline heritage, and third, convenient, once daily, oral and IV formulations that enables New Zyra's utility in multiple settings of care. We anticipate that the positive growth trajectory of the core New Zyra commercial business will continue through the balance of this year, given the encouraging inbound feedback from the primary care-based physicians who have consistently articulated the need for a well-tolerated, once daily, oral, broad-spectrum antibiotic that includes coverage against MRSA for skin infections. Further, we believe that this community expansion will materially benefit from the additional long-term value of the recently FDA-approved oral-only regimen in pneumonia for Neuzira. Adam will provide more details on the community expansion during his prepared remarks. In addition to the continued growth and success of the commercial business, we are focused on three foundational catalysts beyond the community expansion for the New Zyra U.S. launch that we believe will create near and long-term value for Paratech, all of these having occurred in the second quarter of this year. First, as a continued validation of the broad-based commitment of BARDA to this unique BioShield-funded public-private partnership, we were excited to announce that BARDA has accepted delivery of the first procurement of New Zyra valued at $37.9 million. Second, In late May of this year, we received FDA approval of our Nuzira SNDA for the oral loading dose regimen in pneumonia. We believe that this will be an important catalyst that will broaden and further expand the commercial growth opportunity for Nuzira in both the hospital outpatient and primary care settings. We plan to launch this second community-based indication as we enter this year's fall-winter pneumonia season. the initiation in June of this year of a Phase IIb study for Nezira in a rare disease, pulmonary non-tuberculous mycobacteria abscessus, for which there are no approved therapies. To further support the need for additional clinical research, two recognized NTM experts, who are also NTM treatment guideline authors, collaborated on a recently published review article that expands on the current guidelines for the treatment of pulmonary mycobacterium abscessus infections. These authors included omatocycline in their recommended NTM-obsessive treatment options and also noted that additional clinical studies in this disease are desperately needed. Randy will provide more details on our NTM program later in his prepared remarks. I would also like to note an important recognition of the clinical utility of Nusira that occurred in July and another potential future milestone anticipated in the second half of this year that we believe will create longer-term value for Paratech. First, Last month in July, CDC's guideline for the treatment and prophylaxis of plague was updated to include Nuzira. The addition of Nuzira to the CDC guidelines provides further validation now across multiple agencies, including beyond CDC, FDA, and BARDA, within the Department of Health and Human Services of the potential utility of Nuzira against pathogens that cause health and bioterrorism security threats, such as anthrax and plague. A second event, or milestone, which we anticipate will occur later this year, is the approval of New Zyra in China. The approval in China will trigger a $6 million milestone payment from Zylab and will make New Zyra available in one of the largest antibiotic markets in the world today. It is important to note that both of these last two catalysts remind us that antibiotics are truly global products. We cannot forget that antimicrobial resistance is an ongoing pandemic that requires innovation, such as that represented by New Zyra, in order to stay ahead of bacteria's ability to create new mechanisms of resistance. Before I hand the call over to Adam, I would now like to provide Paratech's second quarter 2021 financial highlights. Second quarter 2021 total revenue was $57.5 million, which is comprised of the following. Uzaira generated $52.8 million in net U.S. sales during the second quarter of 2021. This revenue is comprised of, first, $14.9 million from the core commercial business, which represents a 13% increase over the first quarter of 2021 and an 84% increase over the second quarter of 2020. And importantly, $37.9 million from the first of our BARDA procurements. Government contract service and grant revenue earned from costs incurred under the BARDA contract was $4.2 million for the second quarter of 2021 compared to $0.9 million in the second quarter of 2020. We anticipate a modest step up in contract service and grant revenue earned under the BARDA contract as we move through the year, driven by activities associated with the U.S. unshoring of New Zyra manufacturing, the continued enrollment of the FDA post-marketing required study in pneumonia, and further progress of the preclinical in vitro studies and large animal pharmacokinetic, or PK, studies in the anthrax program. Research and development expenses were $6.5 million for the second quarter of 2021, compared to $4.6 million for the same period in the prior year. The increase in R&D expenses for the second quarter of 2021 was primarily due to $4.2 million in costs that were reimbursed under the Pardot contract, which included costs for the U.S. onshoring of New Zyra manufacturing and for FDA post-marketing requirements, which includes the preparatory work for the pediatric studies with New Zyra in addition to the ongoing pneumonia study. The remaining increase is mainly the result of startup costs incurred for the Phase 2b NTM Obsessive Study. Selling, general, and administrative expenses were $27.1 million for the second quarter of 2021 compared to $21 million for the same period in the prior year. The increase in SG&A expense is primarily the result of costs incurred for the New Zyra Community Expansion and an increase in stock-based compensation expense due to the probability and timing of the achievement of performance-based vesting milestones. Paratech reported net income of $9.7 million, or 20 cents of earnings per share, for the second quarter of 2021, compared to a net loss of $23.1 million, or a 53-cent loss per share, for the same period in 2020. As of June 30th, 2021, Paratech had $75.3 million in cash and cash equivalents. Based upon our current operating plan, we anticipate our existing cash and cash equivalents plus the $37.9 million received from BARDA in July of this year for the first procurement of Uzaira provide for a cash runway through the end of 2023 with a pathway to cash flow breakeven.