Paratek Pharmaceuticals, Inc.

Q3 2021 Earnings Conference Call

11/8/2021

spk05: Thank you for standing by. This is the conference operator. Welcome to the Paratech Pharmaceuticals third quarter 2021 earnings call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there'll 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 Sarah Higgins, Vice President, Finance, Controller, and Principal Accounting Officer. Please go ahead.
spk04: Good afternoon and welcome to Paratech's third quarter 2021 earnings and corporate update conference call. The press release with the company's third 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 I will also 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 SEC filings for additional detail. Evan?
spk03: Thank you, Sarah. Good afternoon, and thank you all for joining our third 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 believe that our performance and deliverables in 2021 have continued to validate the long-term commercial growth potential of New Zyra. As you can see from this next slide, New Zyra's quarter-over-quarter growth continued through the third quarter of this year, generating $19.4 million in net sales from the core New Zyra commercial business alone, which is a 30% increase over the second quarter of 2021 and a 78% increase over the same period in 2020. We're extremely proud of the 30% quarter-for-quarter growth in the core New Zyra commercial business, despite ongoing challenges from the COVID-19 pandemic. History tells us that the third quarter tends to be our strongest quarter of growth each year since launch. Going forward, based upon the strength of the launch dynamics generated to date, we expect to see continued quarter-over-quarter growth. As seen on this next slide, the comparative monthly commercial revenue curve summarized here continues to validate that New Zyra's commercial performance to date represents one of the most successful antibiotics launched in the last five years. Also, the New Zyra commercial launch dynamics continues to materially differentiate from any other IV oral recent 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 enable New Zyra's utility in multiple settings of care. Adam will provide more details on the ongoing launch of New Zyra in his prepared remarks. We remain focused on three foundational paths to revenue opportunities driven by the unique attributes of New Zyra. First, our core commercial business in both the hospital and community settings is the main driver of our current revenue performance. Armed with the oral dosing regimen in pneumonia, at the end of the third quarter, we expanded the community launch in anticipation of this year's fall winter pneumonia season. This is an important catalyst that we believe will expand the commercial growth opportunity for New Zyra in both the hospital outpatient and primary care settings. Second, we believe there is broad potential for New Zyra use across the U.S. government. Our BARDA BioShield public-private partnership represents the cornerstone of our initial efforts to address this broader government opportunity. BARDA's commitment to this unique partnership was further validated by the newly awarded option providing additional funding to expand the development of New Zyra under an FDA animal rule development program for anthrax. This option provides $19 million of incremental funding to the original development program bringing the total value of the contract up to approximately $304 million. Third, non-tuberculous mycobacterial disease, or NTM, represents a promising future growth opportunity in the orphan disease space. In August, we announced that FDA granted orphan drug designation for Nezira for the treatment of NTM broadly. In October, we announced the enrollment of the first patient in our Phase 2b NTM study, which is focused on the subset of patients with newly diagnosed pulmonary NTM abscesses which represents, by our internal estimates, an addressable market in the U.S. alone of approximately $1 billion. We're excited about the long-term potential role of Neuzira in the treatment of patients with NTM abscesses for which there are no FDA-approved therapies. Randy will provide more details on our NTM program later in his prepared remarks. Our lifecycle expansion into exploring the potential of Neuzira as a therapeutic agent against bioterrorism pathogens and other rare infectious types speaks to the plethora of clinical opportunities for New Zyra to save lives and protect all Americans from life-threatening bacterial infections where resistance is of concern, as well as from a national pandemic preparedness perspective. Before I hand the call over to Adam, I would now like to provide Paratech's third quarter 2021 financial highlights. Third quarter 2021 total revenue was $24.4 million, which is comprised of the following. USARA generated $19.4 million in net U.S. sales from our core commercial business alone during the third quarter of 2021, representing a 78% growth compared to $10.9 million in the third quarter of 2020. Government contract service and grant revenue earned from cost reimbursement under the BARDA contract was $4.5 million for the third quarter of 2021 compared to $2.7 million in the third quarter of 2020. We continue to anticipate a modest step-up in contract service and grant revenue earned under the BARDA contract as we move through the balance of this year, driven by activities associated with the U.S. unshoring of new Zyra manufacturing, the continued enrollment of the FDA post-marketing required study of new Zyra in pneumonia, and further progress of the preclinical in vitro and large animal pharmacokinetic studies in the anthrax program. Research and development expenses were $7.9 million for the third quarter of 2021, of which $4.9 million was related to costs reimbursed under the BARDA contract, compared to R&D expenses of $6.7 million for the same period in the prior year. The increase in R&D expenses for the third quarter of 2021 was primarily due to FDA post-marketing requirements associated with the approval of USIRA, which are fully reimbursed under the BARDA contract. The remaining increase was mainly the result of startup costs incurred for the Phase 2b NTM study. Selling general administrative expenses were $26 million for the third quarter of 2021, compared to $20.9 million for the same period in the prior year. The increase in SG&A expenses was primarily the result of costs incurred for the New Zyra community expansion. We reported a net loss of $18.2 million, or $0.37 per share, for the third quarter of 2021, compared to a net loss of $20.9 million, or $0.46 per share, for the same period in the prior year. We anticipate net revenue of New Zyra will be at the higher end of the previously indicated range of $100 to $106 million, which includes the $38 million New Zyra procurement by BARDA in June of 2021. Total revenue is expected to be within the previously indicated range of $128 to $139 million. Total R&D and SG&A expenses are projected also to be within the original guidance range of $150 to $155 million. As of September 30, 2021, Paratech had $111 million in cash and cash equivalents. Based upon our current operating plan, we anticipate our existing cash and cash equivalents provide for a cash runway through the end of 2023 with a pathway to cash flow breakeven. I would now like to turn the call over to Adam.
spk08: Adam? Thanks, Evan.
spk06: Commercialization of New Zyra in both the hospital and community setting continues to progress well, with month-over-month growth in the third quarter resulting in 19.4 million in net sales, as can be seen on slide 11, an impressive 30% increase over the prior quarter. Equally important, gross demand also increased by 4.5 million over the prior quarter, and thus growth continues to be driven by demand. I'd like to provide a little color on this progress. As a reminder, our initial strategy was to focus solely on the hospital business for the first two years, building endorsement with the key influences in the antibiotic sector, while in parallel working with payers to establish profitable market access in the community setting that would also enable effective fulfillment of prescriptions in the outpatient setting. Our experience told us that these two factors needed to be achieved before we expanded into the community. As we entered 2021, we had over two-thirds of our prescriptions being generated by the infectious disease doctors, the key clinical influences in antibiotic selection. In addition, 90% of all prescriptions written for Nazira were being filled. With both these key success factors in hand, we expanded our promotional effort into the community setting, specifically to primary care physicians, podiatrists, and a select group of dermatologists. Before I update you on our progress with our primary care expansion, I wanted to provide more detail on the business as it relates to the hospitals. Hospitals and the adjacent sites of care remain an important part of our core commercial business, with 75% of net sales related to our hospital promotion. Our promotional approach with hospital-based physicians, predominantly infectious disease doctors, and critical care pulmonologists, continues to focus on enabling early patient discharge or hospital avoidance through utilization of our oral dosing form in select patient types. More specifically, those with suspected resistant pathogens and comorbidities, including diabetes or other levels of organ dysfunction, or those with allergies. These factors make antibiotic selection challenging for physicians as the current IV only generic options have efficacy gaps due to bacterial resistance, complicated dosing regimens due to organ dysfunction, or frankly are not appropriate due to anticipated side effects from allergies or other complications and risks such as C. diff enterocolitis. The ability to discharge a patient Onusara's effective and well-tolerated oral is an attractive option, especially in today's COVID environment, when neither the patient nor physicians wish for the patient to stay in the hospital setting one day more than necessary. We anticipate that the hospital business will expand and may benefit as COVID-related access challenges subside and hospitals start to operate more in an endemic environment rather than a pandemic one. Now turning to the community expansion. Our estimates suggest the total addressable community market in the United States for skin and pneumonia infections is in excess of $3.7 billion. Current generic oral options in these two markets are challenged with safety and resistance concerns. Slide 13 nicely illustrates the level of bacterial resistance seen with some of the more commonly used generic oral antibiotics prescribed by primary care physicians for pneumonia. With these strep pneumonia resistance rates ever increasing, we believe Nuzara offers a more effective and well-tolerated treatment option. By the end of September, we had over 40 fully trained primary care specialists detailing both our oral-only skin and pneumonia indications to a target audience of community-based physicians. Our promotional message is to provide primary care physicians with an oral-only treatment option for serious community-acquired skin infections and pneumonia that can potentially avoid the need for hospitalization. Start at home, stay at home with New Zyra resonates with physicians, especially in today's COVID-19 environment where hospital avoidance at all costs is a priority for patients. New Zyra's once-daily well-tolerated oral and intravenous formulations combined with Neuzira's broad spectrum profile, offer a much-needed, life-saving antibiotic, which is uniquely positioned to be applicable in every setting of care, including in the hospital, with its potential to minimize hospital stays, and in the community, where Neuzira's efficacy has the potential to avoid hospitalizations altogether. These attributes have enabled Neuzira's uptake to materially differentiate from any recent IV oral antibiotics launched in the United States. I should remind everyone, this strong performance of our core commercial business does not include any barred procurements. Our promotion of Neuzara in the community remains on track and is closely mirroring the small pilot we conducted in 2020. We continue to see primary care physicians and podiatrists trial Neuzara earlier, more frequently, and after fewer sales calls when compared to hospital-based physicians. We maintain our belief that the faster uptake in the primary care setting is likely the result of the tremendous unmet need in the community for a new effective and well-tolerated once daily oral antibiotic, combined with the absence of stewardship committees and formerly restrictions found in the hospital. Nine months in from the start of our expansion, we're now beginning to see an increasing impact on the community promotion with both primary care doctors and podiatrists starting to make a meaningful contribution to our overall prescriber base, accounting for the remaining 25% of net sales. In addition, we continue to prioritize access to treatment, maintaining a steady rate of prescription fulfillment, which has continued to be over 90%. We expect skin and pneumonia prescriptions from the community setting to continue to increase as the primary care field force deepen their relationships with their prescriber networks. In summary, we anticipate that the momentum in both the hospital and community settings will continue with the promotion of the oral-only dosing for community-acquired pneumonia during this full winter influenza season. We will maintain our focus on gaining new trial lists and repeat usage by building awareness and establishing trust and credibility with physicians who are saving lives and treating serious community-acquired infections each and every day. And with that, I'd now like to turn the call over to Randy.
spk02: Thank you, Adam. As Evan noted earlier in this call, we were excited to recently have announced the activation of the additional option and the expansion of our Project BioShield contract. The update to the contract exercised an additional option valued at $31.6 million to not only continue the development program for the anthrax treatment indication, but now also includes an SNDA program for an indication focused on prophylaxis against anthrax, referred to as post-exposure prophylaxis, or PEP. The addition of the full PEP program increased the overall value of the contract by $19 million. We also continue to partner with BARDA to advance our FDA post-marketing commitments. As a reminder, this is valued at approximately $77 million and includes reimbursement of our ongoing adult pneumonia post-marketing study commitment, our pediatric program in its entirety, and the ongoing microbiologic surveillance program. The CAP PMR has been enrolling since early this year, and our first pediatric PK is in the start-up study initiation phase right now. Together with BARDA, we continue to make progress on the Animal Rule Development Program as well. Efforts this year remain focused on the evaluation of the in vitro activity against multidrug-resistant bacillus anthracis strains, as well as the pharmacokinetics of imatocycline in both rabbit and non-human primate animal models for inhalation anthrax. The data from these studies will support the upcoming pilot efficacy studies. We are also pleased to report on the continued progress of our onshoring program for the manufacture of Nusaira in the United States. Paratech and our U.S. onshoring partners have completed the knowledge transfer and initial analytical and process development for the Nusaira API process and have ordered the necessary equipment, have begun construction of the facilities to enable commercial production of API. Work is also ongoing at our partners for the planned U.S. drug product facilities. We anticipate having commercially available tablets produced in the United States by the end of next year. For the Nuzira IV drug product, we have selected our U.S. on-shoring partner and are in the beginning phases of knowledge transfer and the initiation of the process development work. Consistent with our commitment to build Nuzira's long-term value, we continue to actively pursue lifecycle initiatives for Nuzira beyond Project BioShield. These include label expansions in our approved indications, NTM, government research, and other areas of scientific interest. In May, we received FDA approval of our SNDA for the oral loading dose regimen for the community-acquired bacterial pneumonia indication. This achievement, as noted by both Evan and Adam, has augmented the clinical breadth of the community launch, and the timing of the approval aligns well with the fall winter pneumonia season approaching. In order to further support this community expansion, Medical Affairs has been expanding the scientific exchange needs of the prescribers in the primary care setting. This includes the expansion of a small number of targeted community-based education medical science liaisons who are engaging in scientific exchange with community healthcare providers. We have strategically placed them in densely populated metropolitan areas with a large presence of primary care practitioners. Education is focused on community antimicrobial resistant trends, the most up-to-date clinical care algorithms, and the most pressing unmet needs associated with their treatment options. Feedback on this team and primary care physicians' interest in education has been very positive to date. An important and additional lifecycle expansion effort includes our continued commitment to advance our non-clinical and clinical data generations and development program for non-tuberculous mycobacterium pulmonary disease caused by mycobacterium abscessus, or NTM. Pulmonary NTM abscesses is a rare and orphan disease with no FDA-approved therapies. Feedback from the scientific community has continued to highlight the unmet need for an efficacious and well-tolerated once-daily oral antibiotic to treat infections caused by mycobacterium abscesses. In fact, FDA recently granted Newzira orphan drug designation for the treatment of NTM, not only for NTM abscesses, but for all subspecies of NTM, including mycobacterium avium complex, or MAC. This designation from FDA further reinforces and validates the unmet need in this underserved patient population. In addition, the orphan designation will provide for more frequent interactions with FDA on this program, PDUFA fee waivers for future SNDA submissions, additional R&D tax credits associated with the development work for NTM, opportunities to apply for research grants, and seven years of marketing exclusivity for the orphan indication at approval. The scientific data focused on Neuxira and NTM continues to be generated and published by Paratech, individual scientific leaders in the field, as well as through our investigator-initiated research or IIR programs. Most recently, an important non-clinical study conducted in collaboration with Johns Hopkins was recently published that evaluated the activity of imatocycline against mycobacterium abscessus using both in vitro and in vivo approaches. First, from an in vivo perspective, Imatocycline exhibited potent MICs against a panel of 32 mycobacterium-obsessed clinical isolates, several of which were resistant to antibiotics that are commonly used to treat mycobacterium-obsessed disease. In addition, imatocycline, when combined with clarithromycin, azithromycin, ceftinir, or rifabutin, or linazolid, exhibited synergism against several mycobacterium-obsessed strains, and imatocycline did not exhibit any antagonism with all antibiotics tested. We believe these data provide meaningful scientific information that clinicians need in order to choose the best combination antibiotic therapies for such a devastating bacterial pathogen. Also in this study, efficacy of imatocycline was evaluated in an in vivo mouse model of lung infection against four mycobacterium-obsessive strains. A dose equivalent to the 300 milligram standard oral dose was used and was demonstrated to be effective in this model With bacterial cytolactivity, another index of antibiotic potency observed after the first two weeks of treatment against all four mycobacterium-obsessive strains. In addition to this important preclinical data, clinical case series continue to be published. At ID Week last month, there was a poster presented as seen on the left side of this slide, showing data from 31 NTM patients in an ongoing real-world study treated for up to 20 months with once-daily oral Neuzyra. In this real-world study, imatocycline continues to be safe and well-tolerated with good patient outcomes. The authors continue to conclude that imatocycline may be a potential option for therapy of NTM infections and that larger prospective real-world studies are essential to further confirm these early clinical findings. In addition, as a reminder, two NTM experts who are also NTM treatment guideline authors collaborated on a published review article earlier this year that expands on the current treatment guidelines for the treatment of pulmonary mycobacterium infections. The authors highlighted the need, highlighted the potential for the oral formulation of imatocycline, given the lack of currently available oral treatment options, and listed it first in order of preference for the new oral options they considered. The authors also noted anecdotally that some clinical experience has been seen, but clinical trials in this disease are urgently needed. Thus, the excitement that we have for the randomized Phase IIb study in NTM-obsessus which is now enrolling patients. This study will be the foundation for the next step discussions with regulatory authorities and further scientific evaluation. This study is a three-month randomized double-blind placebo-controlled monotherapy design that will enroll approximately 75 patients with pulmonary NTM infections caused by mycobacterium abscessus. As this is a rare disease, enrollment is estimated to take approximately two years. We believe this is the first placebo-controlled study in this chronic and rare disease. The study will provide a much-needed clinical data set of efficacy and safety data in mycobacterium-obsessed patients. In addition to NTM, data generation will continue to expand throughout 2021 and into 2022 in other important scientific areas through multiple avenues. We remain excited about the level of interest there continues to be with imidacycline, leading to ongoing research collaborations with several other government and academic laboratories focused on generating data in diseases such as malaria, sexually transmitted infections, including gonorrhea, bio threats, as well as other difficult to treat pathogens of interest to the military. In addition, our IIR program and collaborative studies continue to support research and publications in many areas of interest, which include NTM, anti-inflammatory activity, C. difficile, and osteomyelitis, where a rat model of MRSA osteomyelitis was just published last week. In 2021 alone, the IIR program and collaborative studies have resulted in the acceptance of 20 manuscripts for publication that address the use of Nezira in special pathogens, special populations, or disease states that will further define its unique therapeutic profile. Our peer-reviewed publications have provided the foundational scientific content to inform treatment decisions and play a critical role in optimizing patient outcomes. On the regulatory side, the ongoing amatocycline NDA review in China continues to make progress, with the approval expected later this year that will trigger a $6 million milestone payment from Xilab to Paratech. We believe that approval and launch in China, as well as the additional data generation opportunities being pursued by Paratech, will further broaden the potential of new Zyra to reach into new and clinically important patient populations. Antibiotics are truly global products, and the crisis of antimicrobial resistance continues to progress unabated. We believe, based upon the totality of data generated to date, that NuXyra is an important clinical option for physicians to save lives in serious community-acquired infections where resistance is of concern. At this point, we would like to open the line for questions.
spk05: Thank you. We will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. We will pause for a moment as callers join the queue. Our first question comes from Suji Jeong of Jefferies. Please go ahead.
spk01: Good afternoon and thanks for taking my question and also congratulations on the good quarter. I have a couple questions about the new Zyra in community launch. Could you comment on what percentage of the nest sale came from pneumonia this quarter and whether you're seeing an increase in the pneumonia cases? And also you mentioned that 25% of the nest sale came from the community setting. I'm just wondering if that came from the patients who got discharged from hospital, or is it just purely community primary care setting? And lastly, my third question is, do you have any plans to expand the sales force in the community setting in the near future, and what would you like to see before making such a decision? Thank you.
spk06: Thanks, Suji. I'll take those. I'll start with the the question about is that discharge? No, we take out those that come from hospital-based physicians upon discharge. So the 25% is actually generated by the primary care and podiatry specialties. And so that's a standalone amount. As regards to the pneumonia side, it's just a bit too early to start that. We only started that promotion in September. So it's a bit difficult to predict or to give you the exact numbers right now in terms of how much of that is pneumonia because it's only just started the vast majority in the last quarter was skin we were in the peak of our skin season and it's exactly what you'd expect it was also the only thing we were promoting for the vast majority of that quarter and then as regard an expansion we'll do what we've done in the past you know we've been pretty judicious with our balance sheet we've not tried to overstretch ourselves But where we see success, we will expand. And there's clearly an opportunity to expand in that community setting. It is a target-rich environment. We've got plenty of positions that we're not reaching because we don't have the geographic scale at this present time. But if things continue to progress the way they are, which is along the plan and what we've seen from the pilot, then there is plans to continue to add representatives at the appropriate time. And that'll be sometime in the future, probably sometime in the middle of next year.
spk08: Great, thank you.
spk05: Our next question comes from Bert Haslett of BTIG. Please go ahead.
spk09: Yeah, I just want to follow up on the Salesforce. Congratulations on the progress, first and foremost. But on the Salesforce question, what are some of the metrics that you're using to evaluate that additional potential horsepower in the field, just out of, again, given the material traction that you have here? And I have one or two others.
spk06: So what we track, obviously, are prescriptions generated per representative, We saw in our pilot that the primary care representatives were reaching cash flow breakeven within about 10 to 12 months, providing the group that we've got at this present time do the same thing. We'll be good to start looking at other opportunities and other territories, and that's what we'll do. Okay, thank you.
spk03: You know, Bert, it's Evan. Just one other thing that maybe Randy can comment on as well. This is, as Adam said, I think a target-rich environment. That being said, I think that there's an opportunity here for a lot of medical education, and Randy has a very focused group of MSLs that he's placed in a very strategic way that hopefully will identify also some growth opportunities. Randy, did you want to speak to that?
spk02: Yeah, I think what we're seeing early on in this program is is that primary care physicians are actually really excited about the opportunity for some education around antimicrobial resistance and that it is a very information-starved set of physicians who don't really understand antimicrobial resistance in a lot of detail, particularly in the regions that they're in. So they've actually opened their arms to a significant amount of education to date, and we expect that to continue and that they become more educated on antimicrobial-resistant trends in their region, as well as some of the challenges with existing antibiotics, it would only make Adam's team's job a little bit more easier.
spk09: Okay, terrific. Then kind of two other lines of questioning. One is the NTN abscessus effort and the trial. Realizing it's a rare disease, but you've started enrollment, do you think you're being conservative with regard to the two-year enrollment period for the 75 patients in that study? Just in general, I'd love your views.
spk02: Yeah, no, I mean, we're not being overly conservative. I mean, it is a subset. As you know, NTM is a subset of the overall NTM population. We think there's only, you know, 8,000 to 10,000 of those in the U.S. We're looking at early diagnosed patients with even limits to the patient size significantly more. So we feel pretty good with the estimates that we've given to date. We've seen, you know, based on our screening rates to date, as well as what we're seeing from enrollment. We're pretty much exactly on target where we anticipated as far as, you know, percentages of numbers of patients per month per center. So I think at the current time, we feel pretty comfortable that the two years is the right number.
spk09: Okay, thanks. And then just one other general question with regard to the opportunity in China and your partner, Zylab. Just a little bit more about the framing of the relationship with China Hanhui, and then just what your sense is about market opportunity. We frame it in various ways, and the range is quite considerable. I'd love to hear your thoughts on how you think about the market opportunity for Ometa Cycling in China.
spk03: Yeah, so maybe I'll start and then have Adam handle what the commercial opportunity may look like. Xilab has devoted a tremendous amount of resources and expertise to this particular program, conducting their trials as well as moving it through the China FDA process, which we believe continues to be on track for an approval before the end of this year. The Hanwei relationship is one in which they've chosen, I think, a top-tier commercial organization, and from what we understand is that they've designated somewhere in the range of several hundred representatives upon launch that have been trained and are waiting anxiously for the approval with the first deployment to the Tier 1 cities through China. And Tier 1 is not the only place that this will be. But I think it's a great place to start, and we think that there's a very big opportunity there. With that, maybe, Adam, you can speak a little bit more to what the China commercial opportunity may represent.
spk06: Yeah, so our understanding is that they're targeting the sort of top sort of 400 provinces and areas that they want to go into. It's difficult to predict how far this can go, Bert, because as you rightly say, the commercial potential is enormous. I suspect that what they'll do is see how this first initial promotion goes. And if it goes well, we'll see an expansion of that organization as they move out. Because even though it's a huge number of representatives by our standards, for China, it's quite small. And when I say small, it's literally the top cities that they're targeting They obviously, like ourselves, with regard to the fact that we could expand in the community setting, they can expand into other areas. And that will probably be determined by the success that they see.
spk09: Terrific. Thanks again.
spk08: Look forward to more growth of the product in the U.S. and overseas. Thanks.
spk05: Our next question comes from Ed Arce of H.C. Wainwright & Co. Please go ahead.
spk07: Hi, great. Thanks for taking my questions. And let me add my congrats on a strong quarter of growth. Firstly, I wanted to ask about the key factors that, in your view, drove that 30% quarter over quarter growth. And perhaps thinking about it from another perspective, are there any barriers that remain to be opened up to further accelerate that growth? That's first question. Second is the split between the hospital and the community. You've already mentioned it's already at 75% to 25% just nine months into the promotion, most of that in APSE. I'm wondering if you have a sense for when the community opportunity crests over the 50% threshold. Do you have a sense for when that timing might be? And then lastly, third question around the new facilities that you're building now and the pills being manufactured entirely in the U.S. by the end of next year. I'm wondering if you can discuss if there's any potential for incremental benefit to the COGS. Thank you so much.
spk06: So, I'll take the first two parts of that, and then I'll let, I think, Randy handle the third one. In terms of the first part of the question, which was, are there any barriers that remain? What drove the growth? You know, third quarter is often the peak of the skin infections, and frankly, it is what drives that third quarter. We were promoting oral-only skin for most of that, and we were in the sort of peak of the skin infection season. And we know that Nuzara fulfills a really tremendous unmet medical need in that space for a really effective oral antibiotic that covers MRSA, particularly where you've got resistance and patients that have got other comorbidities such as diabetes, organ dysfunction, or allergies, and that drove the growth in that third quarter. It was actually seen across the board. It was pretty broad-based, and it included both hospitals and the adjacent sites of care, and obviously also the community part of the business, which leads us nicely into the sort of second part of your question. You know, we actually do believe that we will start to see the pneumonia side pick up as we move into the flu season, all indications from our monitoring at this present time are that there could be quite a significant flu season. And what that normally means is that there's a strong bacterial pneumonia season on the back of it. And we'd like to see if we can take advantage of that. We'll probably see most of that benefit as we move into next year. As regards to when do we think that we would sort of see a switch to the primary care side being larger than the uh than the hospital side that that's actually a difficult one to predict um the the hospital business has had obviously a two-year head start it's still continuing to grow um we are seeing some really rapid uptake in the community side of the business but you know they're they're they're sort of trying to catch up at the same time as a big chunk of the business is also growing relatively quickly but i think it's fair to say that um It'll be more a function of as we add representatives, that timeline will shrink. But you could foresee at some point where we've got a primary care fill force that's significantly larger than the hospital fill force, that at that point you're going to tip into the community side of the business being larger than the hospital side. I should remind everyone on the call that actually the two parts of the business are actually of equal size. They're both around about $3.5 billion in terms of size. There's just a high identity of prescribing in the hospital side of the business, and at some time, the sort of restrictions on access that we're seeing in the hospitals will go away, and we will continue to focus on that side of the business, Ed. So, you know, I wouldn't like to try and predict what that is. We're only, as you know, nine months in, and I'd need a little bit more data to predict when we'd see a tipping point.
spk03: I think that just to build on what Adam said to answer one of your questions, Ed, the barriers to overcome, I think the one that we're anticipating come next year is that the COVID pandemic will get under better control. We've seen a lot of volatility in terms of where that pandemic has led to across-the-board closures of hospitals in terms of market access. And we think that given the fullness of – over the fullness of time, that that will resolve itself to a point where the current commitment that Adam has will, I think, yield even more benefit over time. Maybe we can go now to the new facilities in the U.S., Randy.
spk02: Sure. Yep. So, hey, it's Randy. Thanks for your question about the onshoring. We're obviously very excited about the opportunity to go through this onshoring process. Our technical operations team has done an amazing job working really closely with BARDA and our CMO partners to move this forward in a really quick amount of time. Just wanted to clarify, you know, we're not building facilities per se. We're using existing CMO partners who are right-fitting their facilities for the manufacturing of New Zyra. That being said, You know, we anticipate that with increased scale and increased growth will generally come increased in COG, better decreases in COGs, I should say. So we anticipate sort of a modest decrease over time as the scale and demand continues to increase for New Zyra.
spk08: Great. Fantastic.
spk07: And then perhaps just one quick follow-up. Just to confirm the size of the two sales forces now, you have roughly 45 for the hospital and just over 40 now in the community. Is that correct?
spk08: Yeah, that's correct. Great. Thank you, everyone. Thank you, Ed.
spk05: Our next question is a follow-up from Suji Jung of Jefferies. Please go ahead.
spk01: Thanks for taking my follow-up questions. Just quick ones on the BARDA contract on the prophylaxis program. It's $19 million. Is that on top of the existing one? Because I noticed that there is $13 million associated in the prior one that is tied to supplement and prophylaxis animal development. I'm just wondering, just confirming that $19 million is on top of the existing one. And for that... funding, is that similar to on-shoring activity where it gets reimbursed every quarter, or do you expect to receive that in lump sum?
spk02: Yeah, so you're correct in your assumption that the $19 million is additional dollars. The original contract that was signed with what we call the CLIN, the contract line item number three, for that $13 million included Some of the treatment of prophylaxis studies and two small PEP studies. So the expansion of the contract activated that option, but also expanded it to include a full development program for PEP, which is why that additional $19 million. So that's where we get the $31.4 million total for the option being exercised earlier this quarter, last quarter. With regards to the payment, this is very typical to our current activities we have for all of our programs, both the treatment, the onshoring, as well as the PMR commitment to the 100% cost reimbursement. So we get reimbursed on our costs actually on a monthly basis.
spk03: And we see that incremental investment for a second SNDA program, Suji, to be a further validation of BARDA's commitment to New Zyra and the importance of this product as it relates to being able to fight bioterrorism pathogens from protecting all American civilians and leading down the road to what we see as a robust opportunity with regards to future procurements for the SNS.
spk08: Great. That clarifies. Thank you. Thank you, Suu Kyi.
spk05: This concludes the question and answer session. I would like to turn the conference back over to Mr. Lowe for any closing remarks.
spk03: Thank you, operator. As there are no more questions, we will conclude today's call. In closing, I'd like to thank you all for your time and attention today. Your continued interest in Uzaira and Paratech are important to us. The journey of making Uzaira a commercial success is well underway. As the wealth of microbiologic data and clinical outcome studies on Uzaira continues to expand, We are increasingly confident in the potential of Nezira to be an effective and a much-needed addition to the armamentarium of antibiotics available to physicians to save lives in multiple settings of care. The opportunities ahead of us to be able to provide a novel, life-saving antibiotic to patients motivates us all at Paratech. We look forward to keeping you apprised of our continued progress. Goodbye for now.
spk05: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
spk01: The conference is no longer being recorded.
Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

-

-