Paratek Pharmaceuticals, Inc.

Greetings and welcome to the Paratech Pharmaceuticals first quarter 2023 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, this conference is being recorded Tuesday, May 9, 2023. It is now my pleasure to turn the conference over to Sarah Higgins, Vice President of Finance and Principal Accounting Officer. Please go ahead.

Good afternoon, and welcome to Paratech's first quarter 2023 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, Chief Executive Officer, and Adam Woodrow, President and Chief Commercial Officer, both of whom will present prepared remarks. Randy Brenner, Chief Development and Regulatory Officer, Michael Bigum, Executive Chairman, and I will 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 2022 Form 10-K and other SEC filings for additional detail. Evan?

Thank you, Sarah. Good afternoon, and thank you all for joining our first quarter 2023 financial and corporate update call. Over the first four years of New Zyra's U.S. launch, its commercial success continues to clearly differentiate its core commercial performance as one of the most successful IV oral antibiotic launches in the last decade. Strong demand, coupled with disciplined execution, resulted in consistent year-over-year growth in Uzaira's core commercial business. Uzaira generated net US sales of $26.2 million in the first quarter of this year. a 32% increase from $19.9 million in the same quarter of the prior year. Consistent with past performance expectations, we saw a modest decrease in net sales in the first quarter of this year compared to the fourth quarter of last year, which is likely due to the annual insurance resets that occur at the beginning of each year. Encouragingly, we saw momentum in overall sales growth in the latter half of the first quarter that has continued through April. In addition, we have seen some early signals of a potential improvement in the overall hospital business environment. As you can see on the right side of this slide, we are pleased to report that our trailing 12-month net revenue has now surpassed the $100 million threshold, an important milestone in the evolution and consistent upward trajectory of Nusiris commercial growth. Hospital and community segments have both contributed significantly to the year-over-year growth in the New Zyra core commercial business. These positive trends allow us to have confidence in reiterating our full year 2023 revenue guidance of $143 to $158 million as captured on this slide. FairTech is focused on three pathways to New Zyra revenue generation. First, New Zyra's core commercial business, the main driver of our current revenue growth. Having both once daily oral and IV formulations enables New Zyra to have clinical utility in every setting of care. Second, non-tuberculous mycobacterial disease or NTM. NTM represents a promising future growth opportunity in the orphan disease space. NTM of the M-obsessive subtype is an ultra-rare disease. with currently no approved therapies anywhere in the world. In the U.S., the Phase 2b study continues to enroll to plan, with completion expected by the end of this year. In the U.S. alone, Paratech estimates that NTM Obsessus represents a potential $1 billion addressable market opportunity. Outside the U.S., we believe that Japan has a total addressable market comparable in magnitude to that seen in the U.S. Given the magnitude of this potential, we have prioritized our regulatory and out-licensing efforts in Japan. Given the amount of inbound interest and stage of negotiations, we expect to be able to announce a Japanese partnership by the end of this year. In 2023, we have also initiated regulatory activities in Europe and anticipate a regulatory advice process to be completed this year, which we believe will accelerate potential partnering discussions for this region as well. Third, U.S. government opportunities. We believe that there is broad potential for New Zyra's use across the U.S. government, not only through our BARDA-BioShield public-private partnership for anthrax, but across the health and human services sectors that address pandemic preparedness needs, and broadly across the Department of Defense as an important agent to protect our active warfighters. Now, I would like to review Paratech's first quarter 2023 financial highlights. Total revenue for the first quarter of 2023 was $31.2 million compared to $24.9 million for the same period in the prior year. Total revenue for the first quarter was comprised of the following. USARA net U.S. sales of $26.2 million, a 32% increase from $19.9 million for the same period in the prior year. Government contract service and grant revenue earned from cost reimbursement under the BARDA contract of $3.8 million, a 12% decrease from $4.3 million for the same period in the prior year. Collaboration and royalty revenue of $1.2 million, a 71% increase from $0.7 million for the same period in the prior year, which primarily represents royalty revenues earned on sales of New Zyra in China, and on sales of Say Sarah in the United States. R&D expenses were $7.3 million for the first quarter of 2023, compared to $7.5 million for the same period in the prior year. SG&A expenses were $33.5 million for the first quarter of 2023, compared to $27.6 million for the same period in the prior year. The increase in SG&A expenses is primarily the result of costs incurred in connection with the New Zyra community expansion. Consistent with our commitment to accelerate our pathway to profitability, we are targeting a significant reduction to our annualized fourth quarter 2022 spend rate through operational efficiencies and active management of cash and expenses, enabling us to announce 2023 full year expense guidance in the range of $160 million to $170 million. This range includes the following components, core business R&D and SG&A expenses of $145 to $150 million, and reimbursable BARDA R&D and U.S. onshore expenses of $15 to $20 million. As seen in the orange bar on the far left, R&D and SG&A expenses in the fourth quarter of 2022 totaled $68.1 million, which included a contingent non-recurring charge of $21.9 million. Excluding this charge, R&D and SG&A expenses in the fourth quarter of 2022 totaled $46.2 million, which included the full cost burden of the community sales force expansion completed in the second half of last year. As depicted in the orange bar in the graph on the right, annualizing the fourth quarter 2022 R&D and SG&A expenses of $46.2 million would have resulted in a full-year 2023 spend of approximately $185 million. Compared to this annualized expense account, the company projects a 2023 expense guidance in the range of $160 to $170 million, as depicted in the blue bar on the right, which represents a reduction of approximately $20 million in full-year R&D and SG&A expenses for 2023. And finally, Paratech had cash and cash equivalents of $45 million as of March 31st, 2023. I would now like to turn the call over to Adam. Adam?