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spk07: Good afternoon, and welcome to Paratech Pharmaceuticals' first quarter 2022 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference 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 a question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Sarah Higgins, Vice President of Finance. Please go ahead.
spk00: Good afternoon and welcome to Paratech's first quarter 2022 earnings and corporate update conference call. A press release with the company's financial results was issued earlier today, and we have also posted slides on our website to which we will refer on this call. Both can be found at www.paratechpharma.com. Participants on today's call are Evan Lowe, MD, Chief Executive Officer. Adam Woodrow, President and Chief Commercial Officer, and Randy Brenner, Chief Development and Regulatory Officer. Michael Bigham, 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?
spk02: Thank you, Sarah. Good afternoon, and thank you all for joining our first quarter 2022 earnings and corporate update call. We believe that the strength of Paratech's commercial business is driven by disciplined operational execution combined with New Zyra's many clinically important product attributes. These include once daily oral and IV formulations, proven clinical efficacy against resistant pathogens in two approved indications, and a favorable safety and tolerability profile. As you can see on this next slide, our U.S. commercial launch performance over the first three years continues to differentiate Nuzira as one of the most successful IV oral antibiotics launched in the last decade. Having both formulations enables Nuzira to have clinical utility in every setting of care. Strong demand, coupled with disciplined execution, resulted in a significant year-over-year first quarter growth in Uzaira's core commercial business. We believe this growth would have been even stronger were it not for the Omicron wave in January and February. As the surge receded, Uzaira demand accelerated through the balance of the first quarter and into the second quarter. This momentum is being driven by improved access to physicians in both the hospital and community settings, a resurgence of elective surgeries, and satisfaction of annual insurance deductible resets. On the left panel of this next slide, you can see that net sales from our core New Zyra commercial business increased from $7 million in the first quarter of 2020 to $13 million in the first quarter of 2021, and landed at nearly $20 million this past quarter, which represents a 51% growth over the first quarter of 2021. Importantly, on the right panel, New Zyra's trailing 12-month core commercial revenue performance demonstrates a significant upward trajectory, suggesting strong continued growth to the balance of this year. Based on our performance to date, we are reiterating our full year guidance. We continue to prioritize our three principal pathways to New Zyra revenue generation. First, New Zyra's core commercial business. This continues to be the main driver of our current revenue growth performance. Adam will provide more details in his prepared remarks. Second, non-tuberculous mycobacterial disease. NTM represents a promising future growth opportunity in the orphan disease space. More specifically, NTM of the M-obsessive subtype is a rare disease with currently no FDA-approved therapies. In the U.S. alone, Paratek estimates that NTM-obsessives represents a potential $1 billion addressable market opportunity. Third, U.S. government opportunities. We believe that Neuzira's broad utility against antimicrobial resistance, wound infections, and bioterrorism pathogens should make it an important life-saving component of the U.S. government's strategy and tactics being formulated to address today's emerging threats. These opportunities with New Zyra include performance under our BARDA BioShield contract, other stockpiling initiatives for pandemic preparedness, and contracting within the Department of Defense. Now I would like to review Paratech's first quarter 2022 financial highlights. Total revenue was $24.9 million for the first quarter of 2022, a 51% increase from $16.4 million for the same period in the prior year. Total revenue for the first quarter of 2022 was comprised of the following. New Zyra generated net U.S. sales of $19.9 million, a 51% increase from $13.2 million for the same period in the prior year. Government contract service and grant revenue earned from cost reimbursement under the BARDA contract was $4.3 million, a 65% increase from $2.6 million for the same period in the prior year. Collaboration in royalty revenue of $0.7 million, which primarily represents royalty revenues earned on sales of Cicera in the United States and on the initiation of sales of Nuzaira in China. Research and development expenses were $7.5 million for the first quarter of 2022 compared to $5.5 million for the same period in the prior year. The increase in R&D expenses was primarily due to costs for activities reimbursed under the BARDA contract and costs incurred for the Phase 2b NTM study. Selling, general, and administrative expenses were $27.6 million for the first quarter of 2022 compared to $22.4 million for the same period in the prior year. The increase in SG&A expenses was primarily the result of compensation expense and costs incurred for the New Zyra Community expansion. Fairtech reported a net loss of $17.9 million, or 35 cents per share, and $18.3 million, or 39 cents per share, for the first quarters of 2022 and 2021, respectively. In this last slide for me, We note that Paratech ended the quarter with $79.1 million in cash, cash equivalents, and marketable securities. I would now like to turn the call over to Adam. Adam?
spk04: Thanks, Evan. Commercialization of New Zyra in both the hospital and community settings continues to progress well, despite an unexpected spike in COVID cases and the lack of a typical flu season. As Evan noted earlier, Strong demand and consistent execution has resulted in impressive growth in New Zyra's core commercial business. Net sales for our core business increased 51% this quarter compared to the same quarter in the prior year, from $13.2 million in Q1 2021 to $19.9 million in Q1 2022. More importantly, with gross demand increasing by 82% during this period, We know that net revenue is being driven by demand, and this leading indicator is predicting future growth. As the Omicron wave receded, we experienced accelerated product demand through the end of the first quarter that has continued into the second quarter. This growing momentum is being driven by improved access to physicians in the hospital and community settings, a resurgence of elective surgeries, and satisfaction of annual insurance deductible resets. Our focus in the hospitals continues to be on ID doctors who care for patients with known or suspected resistant pathogens with comorbidities. We know that the oral formulation of Nuzira, enabling early discharge, is valued by both the patients and physicians. In addition to the cost savings realized by the healthcare system, A shortened length of stay also reduces the risk for patients to pick up a hospital acquired infection with yet another resistant bacterial pathogen. Based on our internal estimates, we believe that there will be approximately 300,000 patients with skin and pneumonia infections in our hospital addressable market by 2028. We also believe six to twelve percent market share is achievable in this same time frame importantly these patient numbers represent on label usage in the hospital only looking ahead we're seeing improved access to hospitals allowing increased face-to-face discussions between physicians and our sales representatives importantly There's also been a return to more frequent and regularly scheduled formulary and stewardship committee reviews, which creates more opportunity for New Zyra adoption in the hospital. For these reasons, we anticipate momentum will grow within this segment throughout the remainder of 2022 and beyond. Now turning to the community. Here, our promotional efforts are directed towards podiatrists, primary care doctors, and a select group of dermatologists. Our focus is on the patients that have a known or suspected drug-resistant pathogen and either organ dysfunction or antibiotic allergy. Current generic oral options have challenges in serving this patient population. We estimate that there will be approximately 750,000 skin and pneumonia patients who fit our target patient profile in the community by 2028. We believe a 9 to 14% market share is achievable in the same timeframe. As mentioned in our prior call, the community expansion efforts are now well underway. We estimate that by the middle of the year, we will have approximately 65 to 70 community care representatives in the field. By the end of the year, we expect there to be closer to 80 to 85 in total. To enhance our community Salesforce productivity, our market access team has actively worked to increase the number of Medicare lives covered with limited to no restrictions. For example, New Zyra was recently added to three major Medicare formeries without restrictions. which now increases the number of Medicare beneficiaries covered to nearly 60% nationwide. As a result, we believe Nuzara is now one of the most accessible branded oral antibiotics across the commercially insured and Medicare patient populations. We are confident that Nuzara's broad market access will continue to be a key driver to our commercial success moving forward. ensuring both patients and clinicians have appropriate access to Nusira across all settings of care. You can see on slide 18, we expect that there will be consistent and continued year-over-year growth of prescription days of therapies generated by both the hospital and community physicians. We expect that oral prescription days of therapy generated by the community-based sales force will surpass that of the hospital sales force by 2023. The proportion of prescription days of therapy from the community continues to grow and is now approximately 30%. Our focus remains 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. With that, I'd now like to turn the call over to Randy.
spk01: Thanks, Adam. In support of the community expansion just described by Adam, the medical affairs team is also expanding its scientific reach through several mechanisms. First, in addition to our hospital-focused field medical team, we have begun hiring a targeted group of community-based medical science liaisons, or MSLs, to engage in scientific exchange with community healthcare providers. This expansion comes following a successful pilot with this program. These MSLs focus discussions on resistance patterns, challenges with today's skin and pneumonia patients, as well as current treatment options. These new MSLs will be geographically placed to complement the planned commercial community expansion. Second, we are expanding education and scientific exchange to reach community practices through community-focused scientific meetings journals, and medical education. With regards to the BARDA program, together with BARDA, we continue to execute on all activities under the contract. We are completing the preparatory work required and planning for the execution of two pilot animal efficacy studies, the first of which is in rabbits, with top line data from this study expected in the fourth quarter of 2022. BARDA's receipt of positive top line data from this study will trigger the purchase of our second New Zyra procurement under the amended BARDA contract, which is valued at $38 million. The U.S. Onshoring Program continues to progress with some important milestones in 2022. Mainly, we continue to anticipate completion of the U.S.-based production and commercial availability of New Zyra tablets in the second half of this year. The New Zyra vials and The Imatocycline API are on schedule to be available from our U.S. supply in 2023. Amid rising international turmoil and a global pandemic, a U.S.-based supply chain for a commercially available antibiotic is particularly important. With regards to lifecycle initiatives for Neuzyra, we continue to advance the development program for the orphan indication of NTM pulmonary disease caused by Mycobacterium abscessus, including non-clinical and clinical studies. Enrollment in the U.S.-only Phase IIb randomized study of pulmonary NTM infections caused by M. abscessus began in 2021 and is progressing to plan. As this is a rare disease, enrollment is estimated to take approximately two years. As a reminder, this is the first placebo-controlled study in this chronic and rare disease. As such, it will provide a much-needed clinical data set of efficacy and safety in M. abscessus patients. This study, along with the non-clinical studies, will be the foundation for our next discussions with regulatory authorities and potential label expansion. In Q1, the results of an investigator-initiated study demonstrating the potent activity of Nuzira in a holofiber system model of Mycobacterium avium complex, or MAC, pulmonary infection was published in the Journal of Antimicrobial Chemotherapy. In the study, Nuzira demonstrated considerable efficacy and potency against mycobacterium avium. The highest exposure of imatocycline studied demonstrated comparable potency as that seen with a three-drug standard of care regimen, and imatocycline was bactericidal in this study. Based on these encouraging findings, Paratech plans to initiate additional in vivo studies to evaluate the activity of imatocycline against MAC. There are an estimated 100,000 cases of NTM pulmonary disease caused by MAC in the U.S., which is 10 times more prevalent than mycobacterium abscessus. FDA has granted Nuzira orphan drug designation for the treatment of NTM for all subspecies of NTM, including both mycobacterium abscessus and MAC. This designation from FDA further reinforces and validates the important unmet need in this underserved patient population. We remain excited about the ongoing data generation efforts around NTM and will provide further updates of important data being presented at future scientific meetings in the second quarter call later this year. At this point, we would like to open the line for questions. Operator?
spk07: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Suji Xiong with Jefferies. Please go ahead.
spk03: Hi, good afternoon, and thanks for taking my question. I have a couple questions about your comment about the growth in demand from the first quarter going into second quarter. Could you share a little bit more details about the demand increase that you saw, such as whether the patients are coming from hospitals or a community setting, or whether they are pneumonia-risking patients? And then I have follow-up questions. Thanks.
spk04: Thanks, Suji. It's Adam. The growth is actually being driven through the primary care side of the business, and we are seeing quite clearly an improvement in the number of prescriptions that are coming, or an increase in the number of prescriptions that are being generated by that primary care side of the business. And the sort of differential in that demand is actually a function of the fact that we've got that primary care field force that's starting to drive increased demand, specifically in the community setting.
spk03: Do you see mostly coming from the skin or pneumonia patients?
spk04: It's mainly in skin. The pneumonia season was actually almost non-existent this year. We were expecting to see some improvement in our pneumonia indication as we went into the winter. It started and then very, very quickly dissipated. And so as a consequence, we very quickly pivoted our fill force away from the pneumonia indication back into skin. And that's where we're seeing well over 80% of the prescriptions so far.
spk03: I see. Thank you. Expanding on that, as you guys are expanding the community sales force and we are approaching the warmer month, how do you see the sales growth trajectory for the remainder of the year?
spk04: So we're starting to now see some quite clear seasonality in our business with Q1 being a little bit softer than the remaining quarters. And that's because of the insurance resets. And in this instance, we also got hit with an Omicron wave. And then we see an acceleration as we go through the year with our highest growth in the past three years coming actually the third quarter. And we anticipate seeing exactly the same phenomenon this year.
spk03: That's helpful. Thank you.
spk06: Thank you, Suji. Our next question comes from Bert Haslett with BTIG.
spk07: Please go ahead.
spk08: Yes, thank you for taking the question, and thank you also for the additional comments you just made. That's very, very helpful. With regard to kind of spending that's married to that, and apologies for the granularity here or diving into it, but how should we think about the trajectory for R&D spend throughout the year and SG&A spend throughout the year, kind of given the elements you've just described? And then I have a follow-on as well.
spk02: Hey Bert, it's Evan. Thank you for the call. One of the important facets of the trends that we have seen through the balance of the first quarter with momentum that we see moving into this quarter is that it continues to buttress our confidence in our commercial model and the success of the new cyber product. As we had said in our last call, we continue to be mindful of our capital allocation And our current estimates for 2022 R&D and SG&A expense, as I said, we've reiterated guidance for both the OPEX as well as on the revenue side, and we don't see any changes from what we had guided previously.
spk08: So it's just to be, if it's possible to get a little bit more direction throughout the year, is there, I mean, should there be growth in both SETI throughout the year, or can you give any indication with regard to that at all?
spk02: You know, we have expenditures coming that you're well aware of that include, you know, primarily from R&D, from the BARDA side, and we do have investments that we've talked about specifically on the commercial expansion, and that commercial expansion will happen primarily in the second half of this year.
spk08: Okay, great. That's helpful. Thank you. Just two other lines of question, and mostly on the additional pipeline. With regard to the, you mentioned, I think, additional work, in addition, non-clinical work with regard to NTM M. abscessus. Could you talk a little bit about what additional work non-clinically is required for that program? And then I'll just ask the last program, the last question. You also mentioned, Evan, once again in your opening remarks, potential for other stockpiling and other DOD purchases. I'd just love for you to elaborate if there are things percolating there at all that we should be thinking about. Thanks.
spk01: Hey, Bert. It's Randy. So I'll take the first question around non-clinical work for NTM. So we are – these are not so much required activities. I think we've generally on the microbiology side, which is where we're focusing most of this work, have completed all the required activities. uh, studies that we need to conduct. What we're always looking to do is continue to broaden our knowledge base around NTM. Um, so much of the, on the obsessive side, much of the work we've done, uh, with some of our accommodation work has been, uh, in vitro sort of, you know, uh, checkerboard type studies. And we're looking to expand that into some in vivo models to see where some of the synergy looks like, uh, that we've seen, um, in a, in vitro setting, how that translates into an in vivo study setting and a mouse model. And then on the microbacterium avium side, because we just have the hollow fiber model at this point in time, which is essentially an in vitro model that replicates the human PK system, we are now moving that also into some non-clinical efficacy models to show that that in vitro potency translates into animal models of efficacy as well.
spk02: You know, Bert, it's Evan again. If I could build on what Randy said, you know, the design of the MFCS trial is unique. as Randy said, specifically because it is a placebo-controlled trial in patients who have new-onset non-tuberculous mycobacterium abscessus. And given what we anticipate in terms of the level of efficacy that we'll see in terms of improving pulmonary-based symptoms of cough, shortness of breath, sputum production, chest pain, et cetera, and you couple that with the synergism studies and the lack of antagonism data that we've generated with Neuzira, with every other class of antibiotic that is typically used in a non-approved format for these desperately ill patients, we see that Muzira really has, I think, an opportunity here to be foundational and not to be worried about the addition of other agents into that particular regimen. So we're very excited about, you know, the design of the trial, and I think it opens up the entire, you know, I think, spate of opportunities here within NTM Obsessus. So hopefully that helps give you some color as to how we're thinking about the opportunity.
spk08: Thanks. And then just, again, any additional color with regard to government efforts and potential purchases?
spk02: You know, Bert, as you think about why we have a U.S. government, one of the reasons we have a U.S. government is to not only keep all of our civilians safe, but it's also to protect our active warfighters as well as our veterans. And we have made inroads, I think, in all of those segments. First, BARDA with regards to civilian protection from bioterrorism pathogens, specifically anthrax. If you look at the veterans, we have ongoing market access activity to ensure that because we are on the federal supply schedule that veterans who have diseases of interest have access to Nezira. And we believe that the active warfighter area is one that is actually woefully inadequately supported by novel antibiotics that can address not only resistance wound infections, as well as potential bioterrorism attacks. When you put it in the context of the geopolitical instability that we're seeing here today, I think it raises the specter and also, I think, the urgency for the DoD to actually really consider the opportunity with New Zyra. We have calls with various departments of defense agencies nearly weekly. It is part of our job to do the education and also to give them fidelity and visibility on the fact that Paratech, starting this year, will have commercial tablets available from a U.S. supply chain and IV formulation available also next year. There's a lot of interest in our ability to actually provide that on U.S. soil without having to cross borders, and we've had great receptivity. at every one of our meetings, and unfortunately, you know, it is the U.S. government, and, you know, it's hard for us to handicap timing and or when something like this could actually happen. That being said, we are quite energized by the type of and in-depth conversations and the breadth of the people that we've been able to contact with regards to USIRA.
spk06: Okay, thanks. Good luck there. Thank you.
spk07: Again, if you have a question, please press star, then one. Our next question comes from Ed Arce with HC Wainwright. Please go ahead.
spk05: Hey, everyone. Thanks for taking my questions. Congrats on another quarter of progress. Hi. I wanted to start with just your core business here. Year-over-year net growth of 51%. You highlighted the gross demand was 82%. And so, firstly, I just wanted to understand, you know, what's driving this delta. And, you know, especially this past quarter with the Omicron wave and the lack of a typical flu season, how much of that delta do you think is really transitory? And then I have a couple follow-ups.
spk06: Hi, Ed. It's Adam. Hi, Ed.
spk04: I think the first thing to say is that we see continued growth in gross demand as a really good early indicator of the net sales to come. Just to make sure you understand how we measure these things, our net sales take into account the gross to net, which includes rebates, discounts, co-pays, and inventory holding, whereas our gross demand represents the actual sales that we send and ship to a customer, which in our case is predominantly the hospital or the specialty pharmacy, and that has absolutely no adjustments. They only purchase if they anticipate prescription sales sometime in the very near future. The difference between the two is actually a function of where we are in the year as deductions in terms of rebates and co-pays tend to be a little bit higher in the year earlier on, and also the impact of our expansion into the community, which typically sees a larger impact on net sales due to the co-pays and coverage gap, especially in the first half of the year. And if you recall, this is the first year where we've had this sort of bigger field force in place. So what we're seeing is with our expansion, the effect was a little bit more pronounced than we've seen in prior years, but that will actually wash out as we go further into the year.
spk06: Okay, that's helpful.
spk05: That confirms my... I suspect it as such that there is some portion of that that looked to be somewhat transitory. Yeah, it is. Okay, great. And then I know this was kind of asked before, but I just wanted to get back to the expansion of the MSLs in the community setting. Is there any way for us to have a sense quantitatively or even just qualitatively the impact to the SG&A line throughout the year from that?
spk02: Yeah, so, Ed, it's Evan. Relatively small. It's all within our current guidance, and nothing has changed from our guidance at our last call, Ed. So they are strategically focused and placed to align with the broadening of territories that Adam has on the commercial side, and they are clearly, I think, an important adjunct to the messaging that Adam important to educate physicians on all aspects of not only the basic USPI indications and the use and the dosing, et cetera. We've also seen a tremendous amount of inquiry in terms of alternative use and opportunities that are seen also in the community setting, much less so than what we see in the hospital, but clearly there.
spk05: Okay. That's helpful. Last question for me was just on the access for New Zyra. You mentioned there were three national Medicare formularies that were added without any restrictions, getting you to a level of nearly 60% access nationwide. I'm just wondering what incremental added those three plans In other words, what was the percentage before that?
spk04: So it was nearly, I think it was nearly 20 million lives were added as a result of this increment. You know, we're really pleased with the work that the team are doing in the access group. This is one of the, you know, these were hard fought and they were done well within our current sort of gross to net from a rebating perspective. So we're pretty pleased with how that's worked out.
spk02: Well, importantly, I think I would also add that the success of the market access team has been able to, as we said in the chart, to be able to actually create that pathway with limited to no restrictions.
spk04: Yeah. Right. And one thing I will add is that as a result, obviously, of this type of access, it's helped us in terms of how we sort of target our representatives moving forward. it'll give us an even better opportunity in certain geographies where these patients reside.
spk06: Right. Understood. Great. Thanks so much. Thanks, Ed. Our next question is a follow-up from Suji Jung with Jefferies.
spk07: Please go ahead.
spk03: Thank you. I'm just following up on the point that you made about the gross genetic count. I was wondering what the difference between the difference between the gross to net discount between the hospital and community. If you can elaborate on that. Thank you.
spk04: Yeah, Sushi. As you're probably aware, we've got a very healthy gross to net. If you back into the numbers, obviously we don't disclose specifically what that is. But what I can tell you is that as we move further into the community, our gross to net will creep up over time. And we do tend to give up a little bit more in the community setting than we do in the hospital setting. But it literally is a few percentage points in total.
spk03: I think previously you guys mentioned that the number of days on treatment in the community is much smaller than in the hospital. So I'm just wondering, The slide that you have on the deck, the growth in the community surpassing the one from the hospital, does that take the days on treatment into account?
spk04: Yes, it does. This is prescription days of therapy generated in the community. The average prescription days of therapy for our infectious disease consultants is around about 20. And the average in the community at this present time as we exited the last quarter was actually 11 for the primary care side of the business.
spk03: That's helpful. Thank you.
spk06: Thank you, Suji.
spk07: This concludes our question and answer session. I would like to turn the conference back over to the Chief Executive Officer, Evan Lowe, for any closing remarks.
spk02: Thank you for your time and attention today. We look forward to keeping you apprised of our continued progress. Goodbye for now.
spk07: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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