Nabriva Therapeutics plc
Q2 2021 Earnings Call Transcript

Published: 6 Aug 2021

[Operator:]

Good day, and thank you for standing by. Welcome to the Nabriva Therapeutics Second Quarter 2021 Financial Results Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. . I would now like to hand the conference over to your speaker today, Mr. Dan Dolan, Chief Financial Officer. Please go ahead.

[Dan Dolan:]

Thank you, and good afternoon, everyone. Welcome to Nabriva's conference call and webcast where we will discuss the second quarter 2021 earnings and also provide a business update. Slides for today's presentation are posted on the company's website, www.nabriva.com, and can be found under the Investors tab in the Events & Presentations section. We recommend that you refer to the presentation as we'll be using those slides for today's discussion. Before we begin on Slide 2, I would like to remind everyone that this conference call and webcast will contain forward-looking statements about the company. These statements are subject to risks and uncertainties that could cause actual results to differ. Please note that these forward-looking statements reflect our opinions only as of the date of this call. We will undertake no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. Factors that could cause actual results or outcomes could differ materially from those expressed in or implied by such forward-looking statements are discussed in greater detail in our most recent filings on Form 10-K and our other periodic reports on Forms 10-Q and 8-K filed with the SEC. Ted Schroeder, Nabriva's CEO, will start with a business update, including our activities in China and will present an overview of the commercial highlights for the quarter. Then, I will provide a financial review, and Ted will come back with some summary comments and lead a Q&A session. In addition to Ted and me, joining us on the call for the Q&A session is Dr. Steve Gelone, our President and Chief Operating Officer. I would now like to turn the call over to Nabriva's Chief Executive Officer, Ted Schroeder.

[Ted Schroeder:]

Thank you, Dan, and thanks to everyone joining our call this afternoon. Let's start on Slide 5. We are advancing our commercial effort to drive awareness as we continue to position both SIVEXTRO and XENLETA for growth. As access is improving in the U.S. we are happy to see increased face-to-face visits between our sales team in the field and health care providers through our partnership with Amplity Health. In addition, we are seeing some promising trends in the overall antibiotic prescription market, which I'll touch upon later in this presentation. We believe that our sales representatives are continuing to gain traction with providers in the field and are on our way to getting SIVEXTRO sales back to pre-pandemic levels. As we previously stated, we anticipate a return of historical peak sales trends for SIVEXTRO by mid-2022. As we mentioned last quarter, Nabriva was granted its own National Drug Code or NDC for SIVEXTRO, which allows the company to recognize 100% of net product sales of SIVEXTRO. As of April 12, SIVEXTRO has been sold under the Nabriva label, and this provided a positive impact on our P&L during the quarter, which Dan will discuss in more detail later in the call. Next and importantly, in late May, we, along with our partner, announced positive top line results from a Phase 3 trial of lefamulin in Chinese adults with community-acquired bacterial pneumonia, or CABP. We will briefly review the data results and the market in Greater China in a few minutes. But I am pleased to say that our new partner, Sumitomo Pharmaceuticals, a wholly owned subsidiary of Sumitomo Dainippon Pharma has deep experience in the region and an established commercial infrastructure in the anti-infective field. We think this could provide a considerable revenue opportunity for Nabriva with an agreement that provides for low double-digit royalties and up to $86 million upon the achievement of certain sales and regulatory milestones, starting with the approval for Greater China. As mentioned previously, we are going to complete a Phase 1 safety and PK study for XENLETA in CF patients and expect to begin enrolling that study in the second half of this year. Partnering discussions for XENLETA outside the U.S. remain active as we continue to look to form strategic business development agreements in Europe and other territories. Talks are ongoing with multiple parties who have expressed interest in a BD partnership as we evaluate our options we want to ensure that any transaction that occurs is in the best interest of patients and our shareholders. Regarding CONTEPO, despite some updated guidance from the FDA, we have not received any additional clarity on our specific situation at this time. We continue to work with the FDA, our manufacturing partners and consultants to understand the FDA's guidance in the implications for resubmission of the CONTEPO NDA. We are confident that our contract manufacturers are prepared when the FDA is ready to conduct an on-site inspection. Consistent with our prior comments, we do not intend to file the CONTEPO NDA until we have confidence that the FDA can complete any required inspections within the 6-month PDUFA clock. Finally, we were able to extend our cash runway substantially through the first quarter of 2022 as a result of successfully negotiating to extend our debt repayment as well as the ATM proceeds received during the quarter. We also -- we are also excited about the recent extension of our manufacturing agreement with Hovione Limited for XENLETA through 2030. The extension of the agreement reflects confidence in the long-term potential of XENLETA. In recognition of the impact the global pandemic has had on antibiotic demand, the revised terms provide for lower minimum purchase requirements in the near term, therefore, giving the breath some near-term flexibility and cash allocation allowing us to -- allowing us optionality to invest in additional value-creating initiatives. One such example I will touch on later in the presentation, is the deployment of inside sales representatives to expand our reach, raise awareness and drive prescriptions for both XENLETA and SIVEXTRO. Now turning to Slide 6. Here is a reminder of our broad pipeline across serious and rare infectious diseases. For cystic fibrosis, I think it's worth reiterating that if the trials prove to be successful, we think this could provide us with a $100 million incremental net sales opportunity. In China, on the heels of the recently announced positive top line results from the Phase 3 lefamulin trial, we would anticipate the next step is the submission of the NDA, which is targeted in the second half of 2021. Turning to Slide 8 for a commercial update. Let's first take a look at the progress we continue to make with face-to-face interactions with health care providers. As you can see from the chart, as physician offices continue to reopen, we went from 68% in-person interactions during our last update in May to 72% in-person interactions for primary care visits as of July 2021. If you look at health care providers overall, 85% of our interactions are in person. Our sales representatives have now been in the field for 2 full quarters, and we expect to see the number of in-person interactions further increase in the coming weeks and months. We will continue to adapt our approach as local guidance to COVID restrictions evolve. Assuming COVID restrictions are not enacted, our expectation is for access to doctors' offices to rise. In addition to the improving conditions for our reps in the field, we are also starting to see more promising trends in the general antibiotic market, as you can see on Slide 9. After a sharp drop in total prescriptions in the antibiotic market in 2020 and the beginning of 2021, we are seeing the current trajectory approaching pre-pandemic levels of 2019. We believe the continuation of this trend will rely on an increase in respiratory infections later in the year. Combining these factors, the improving macro environment getting more face-to-face time with prescribers and antibiotic prescriptions beginning to trend in a favorable direction, I think you can understand why we are bullish about the opportunity for prescription growth for both SIVEXTRO and XENLETA. We continue to engage in discussions with both products with HCPs. For SIVEXTRO, our focus remains on driving prescribing for appropriate patients. For XENLETA, our efforts are focused on educating providers on the benefits of XENLETA to lay the groundwork to ensure that XENLETA is top of mind heading into the fall. We are also excited to share that in order to help complement our commercial team in the field we are deploying new resources to help target the areas in the U.S. that our representatives currently do not cover. If you turn to Slide 10, you will see the current coverage of the sales force. It shows the regions of the approximately 7,800 currently targeted customers. We now plan to initiate a pilot program to expand our reach to cover white space geographies. We believe that this represents a large untapped market opportunity for the company. We are deploying this strategy to further accelerate SIVEXTRO scripts and to continue to expand XENLETA awareness. If you turn to Slide 11, you can see more details about our plan to expand our reach and frequency with virtual promotion tactics. According to an analysis performed by IQVIA there are approximately 8,000 providers in these uncovered territories. We plan to initiate a pilot program to reach the top 25% of prescribers within these white-space geographies with a goal of approximately 40 outbound calls per day per representative. This is an opportunity to efficiently expand reach, raise awareness and drive prescriptions for both XENLETA and SIVEXTRO. The question you may be asking is, why now? Part of our decision is based on the opportunity to reach these high prescribers, many of which are already familiar with SIVEXTRO. In addition, we have been getting inbound requests from providers in the uncovered territories for information and samples of both brands. These 2 factors, coupled with a focused investment prompted the decision to expand into these white space territories. We look forward to kicking off this program by the end of the third quarter and will monitor the impact it is having on our business over the coming quarters. We view this program as especially complementary to XENLETA, where we recently launched a new brand campaign in order to highlight the appropriate patient types for XENLETA. In addition, our medical affairs team has been developing additional materials to educate prescribers on current treatment guidelines for CAP and the threat of rising resistance to pathogens that cause CAP. As we continue to educate physicians on XENLETA's benefits, Slide 12 introduces our new patient-focused campaign and shows examples of the non-personal promotional initiatives we are employing to support the XENLETA message. As we have previously mentioned, we are targeting patients with a more complicated medical history, such as older patients, CAP patients who have recently been on antibiotics, which puts them at an increased risk for resistance with traditional antibiotics. We're expanding our marketing impact by deploying a variety of non-personal promotional initiatives such as branded e-mails, paid search, point of prescribing messaging, rep deliberate materials, display advertising and KOL-driven content. We believe that coupled with the increased face-to-face promotion and the positive prescription trends we are seeing in the overall market, we are building the foundation for XENLETA growth in the fall when we anticipate a greater incidence of CAP. Now let me spend some time on lefamulin in China and what that could potentially mean for Nabriva. Turning to Slide 14. Earlier this quarter, we announced positive top line results from a Phase 3 trial evaluating lefamulin in adults with CAP in Greater China. This trial was conducted by our partner, and the results were consistent to what we saw in the pivotal LEAP 1 and LEAP 2 trials. An NDA submission in Greater China is expected in the second half of 2021. We also announced that development and commercialization rights of lefamulin in Greater China were transferred to Sumitomo Pharmaceuticals. Sumitomo opted to pursue lefamulin as it is highly complementary to their existing anti-infective product portfolio in China. For those that are not aware, Sumitomo is already a dominant player in the anti-infective space in the Greater China region, putting them in a solid position to launch lefamulin in China once approved. Taking into account all these factors positive Phase 3 data partnership with Sumitomo and their established commercial capabilities along with their knowledge of the Chinese regulatory authority we feel extremely confident in the path forward for expanding global access to lefamulin. In terms of how this impacts Nabriva we are entitled to low double-digit royalties on net sales as well as payments of up to $86 million upon the achievement of certain sales and regulatory milestones. The first milestone of which is due upon approval in the region. As we turn to Slide 15, you see that the data from the Phase 3 trial of lefamulin in China produced results consistent with prior pivotal trials. Lefamulin achieved the primary endpoint of non-inferiority versus moxifloxacin and also demonstrated comparable results on the secondary endpoint of the investigator assessment of clinical response at test to cure based on the clinically evaluable population, 70% of lefamulin-treated patients demonstrated success after failing prior antibiotic treatment versus just 44% from moxifloxacin. Overall adverse event rates of lefamulin and moxifloxacin were similar, but serious adverse events were higher in the moxifloxacin group than lefamulin. We will continue to work closely with our partner, Sumitomo, and are looking forward to an NDA submission later this year. Moving on to Slide 16. We see that the antibiotic market in China was on a steady growth rate prior to the impact of COVID-19. Prior to the COVID-19 pandemic, antibiotic sales in China totaled approximately $14.8 billion with macrolide and quinolone use representing greater than $2 billion of sales. We believe that the differentiated profile of lefamulin provides an attractive option to other standards of care for cap that prescribers can turn to for the benefit of patients in China. Finally, on Slide 17, you can see why we are excited to have Sumitomo as a commercial partner in China. Sumitomo has an already well-established presence with a sales force covering all of Mainland China. Across their 31 regions, they have access to over 3,000 hospitals with more than 36,000 physicians. This established and reputable infrastructure provides an excellent opportunity for lefamulin to gain incredible reach and access from launch. Putting lefamulin alongside meropenem, the #4 anti-infective brand in China in 2020, serves as an excellent opportunity to accelerate a launch of lefamulin in China. Participating in a larger antibiotic market like China, partnering with a high-performing organization in Sumitomo provides a great opportunity to further derisk the commercial launch and related milestones to create value for Nabriva while bringing new therapeutic options for CAP in China. I would now like to turn the presentation over to Dan for the financial review. Dan?

[Dan Dolan:]

Thanks, Ted. As we turn to Slide 19, I'd like to touch on some key highlights for the second quarter of 2021. As previously mentioned, we began distribution of SIVEXTRO under the Nabriva NDC on April 12, resulting in almost $7 million of SIVEXTRO net product sales during the second quarter. Later, I will describe the positive impact the new NDC has on the shape of our P&L. Total revenues also included $1.3 million in collaboration revenue and grant funding from the Austrian government for total revenues in the quarter of $8.2 million. During the second quarter, we continued to focus on prudent balance sheet management as we renegotiated our debt agreement with Hercules Capital, extending principal payments to at least April of 2022. Along with activity from our ATM facility and the extension of principal debt payment, we fortified our cash position and exited the quarter with cash and cash equivalents of approximately $61 million, providing us cash runway substantially through the first quarter of 2022. Going forward, we will continue to assess our capital allocation mix and focus our investment allocation in areas that we believe will provide the best return on investment and help us leverage our existing infrastructure. Moving on to Slide 20. We look at our P&L for the 3 months ended June 30, 2021 versus the same period for 2020. We experienced significant year-on-year growth on our top line revenues driven by net product sales of SIVEXTRO as well as the recognition of collaboration revenue upon the achievement of milestones from our Chinese partner. You will see that our cost of sales increased approximately $3 million versus the prior year, driven primarily by the launch of our own NDC of SIVEXTRO in the current quarter. This was in line with our expectations around how the P&L would evolve with the launch of our own NDC of SIVEXTRO. The increase of approximately $2 million in SG&A reflects a full quarter of 60 sales reps compared to a scale back run rate in our commercial efforts during Q2 2020, resulting from the initial impact of COVID-19. Our net operating loss showed an improvement of greater than 20% year-on-year, highlighting the impact of SIVEXTRO in the shape of our P&L and highlighting the scalability of our commercial infrastructure to drive operating leverage. Turning to Slide 21. We take a look at our balance sheet as of June 30, 2021. As mentioned earlier, our cash and cash equivalents at June 30, 2021 were approximately $61 million, an increase of $20 million from December 31, 2020, driven primarily by activity in our ATM. This was offset by our operating cash burn, which included SIVEXTRO supply purchases in the quarter. This can be seen as part of the increase in our prepaid expenses in the quarter. The significant increase in accounts receivable can be attributed to timing of cash receipts due from wholesalers on sales of SIVEXTRO following our launch in mid-April. Turning our attention to the liability section. We remain focused on a disciplined approach to managing our balance sheet while maintaining a minimum amount of debt. If we can now turn to Slide 22. I'd like to take some time to highlight the impact of Nabriva's own SIVEXTRO NDC has on the shape of our P&L. Prior to the launch of our own MDC, Nabriva recognized a percentage of Merck's gross sales of SIVEXTRO while we have been deploying our full complement of commercial resources for SIVEXTRO promotion. Starting on April 12, we launched our own NDC and began realizing the full benefit of patient demand in our reported net sales. During the second quarter of 2021, we see a significant increase in total revenue. And as you can see on the chart with the inflection of our total revenues from Q1 '21 to Q2 of '21, while maintaining a consistent level operating expenses compared to Q1 of '21. This change in the revenue composition on the P&L for Nabriva provides an immediate increase in our profit margins reducing our operating losses by 21% versus Q2 of 2020 and 15% versus Q1 of '21, and unlocks enhanced operating leverage on the P&L with our scalable commercial infrastructure. I will now turn the presentation back to Ted. For the next part of the call, Ted will make some closing remarks, and then we will head into a Q&A session. Ted?

[Ted Schroeder:]

Thanks, Dan. Before we move to Q&A, let me summarize our achievements so far this year and our objectives for the remainder of 2021, which can be found on Slide 24. Our #1 goal remains the commercial success of SIVEXTRO and XENLETA. Based on the promising trends I showed earlier with regard to increased face-to-face interactions as well as the positive trends in the antibiotic market, we are optimistic about SIVEXTRO and XENLETA prescription and revenue growth in the coming quarters. To supplement our sales force in the field, we are introducing a pilot program of inside sales representatives to expand our reach by targeting incremental high-decile prescribers in the U.S. that are not currently covered by our field-based sales team. Completing the transition of SIVEXTRO to a Nabriva branded product earlier this year, has allowed us to not only realize 100% of net sales for the product, but also provides the company insight to wholesaler distribution data that was not previously available to us. In China, the positive Phase 3 lefamulin data in addition to having a new partner with Sumitomo Pharmaceuticals to develop and commercialize lefamulin in Greater China represents exciting -- represent exciting advancements. Ongoing activities with the pipeline include the planned initiation in the second half of the year of a Phase 1 study evaluating XENLETA in patients with CF and continuing to work with regulatory authorities toward an NDA submission for CONTEPO. Partnership discussions for XENLETA in Europe as well as other territories remain active and ongoing. As Dan described, we have taken several financial initiatives to extend our cash runway into 2022. I hope you can see that the momentum is building at Nabriva with multiple products and programs, we, like most of our peers, progress through COVID with an eye on what the company would look like coming out of the pandemic. We told you that we were working hard to create the necessary infrastructure to ensure that Nabriva will be correctly positioned in the community to optimize patient access for XENLETA and SIVEXTRO. We built upon the excellent managed care coverage we established early on for both products and are at a point now of seeing acceptance in the wholesale channels for SIVEXTRO, which we believe is indicative of stronger demand. Our expectation is that post the summer months, we will realize a similar increase in pull-through of prescriptions for XENLETA. We remain encouraged by what we are seeing and believe the commercial strategy is demonstrating positive results. Operator, we are now ready to open up the line for questions.

[Operator:]

. Your first question comes from the line of Suji Jeong with Jeffries.

[Suji Jeong:]

Thanks for taking question and congratulations on the SIVEXTRO sales figure. So for the second quarter, it looks like the gross margin was about 52%. I just wanted to know if that -- if you expect the gross margin to continue at the level or would it improve over time? And secondly, for the expansion of the sales promotion using virtual platform, would that be done with those 60 sales representatives that you have right now? Or do you expect to hire more?

[Ted Schroeder:]

Dan, why don't you take the first part of that question, and I'll handle the second part.

[Dan Dolan:]

Sure. Thanks, Suji. Yes. On gross margin, I think it's key to note that the majority of our mix of sales in the quarter were SIVEXTRO. And the way the deal is structured, we pay the transfer fee for the inventory and some markup across the board on the product to receive. So that is probably a good run rate going forward for SIVEXTRO. XENLETA, we're still expensing prior R&D inventory. So we're not really seeing cost of goods yet. And given the low volume of sales, that's not really fully baked into our run rate. So I think as we get more traction with XENLETA, that mix will improve. But from a SIVEXTRO perspective, I think that's a pretty good basis to work from.

[Ted Schroeder:]

And -- thanks, Dan. And Suji, your second question about the adding additional sales resources. So the 60 reps that we have on board now, they're kind of more traditional pharmaceutical sales reps that are making calls to physicians live and in person in the physician's offices and doing traditional types of sales activities, including unclean educational opportunities in face-to-face sales calls. The additional resources that we talked about are inside sales representatives. So effectively, these are folks who will be making outbound phone calls to a prioritized list of prescribers. And Amplity has a deep experience in this area. In fact, many of their current clients use a combination of outside and inside sales reps to great effect. So it's a way to expand the territories, to get to high-value prescribers and especially those who are either currently prescribing the product in the case of SIVEXTRO or had been prescribers in the past and have lapsed. And those who reach out proactively through our other non-personal efforts such as the -- kind of banner ads in point of prescribing tactics that we're utilizing, who reach out to the company requesting information or samples and we're able to more effectively reach those physicians with an inside sales team because of geographies, it would be very difficult to send a live -- a rep live in the office to cover those. So it's really on top of the sales force. It's -- they're able to reach a lot of physicians. So their call lists are much bigger than a field-based sales rep would be. But there -- the metrics we've seen from other case studies look like this is an important area for us to pilot. And I emphasize the pilot part because we want to make sure we get it right, that we understand and that it's effective. So we're ready to launch that soon and looking forward to having a fully trained team making those outbound calls and follow-up to interested physicians before the end of the third quarter.

[Suji Jeong:]

I see. So that effort is done by Amplity Health, not by the employees of Nabriva or the sales reps of Nabriva. Is that right?

[Ted Schroeder:]

Right, right. Because our 60 sales reps are a contract sales group from Amplity now. And so it's -- we're expanding it, but in a group of sales reps that contact the physicians in a different way. But it's really designed to cover the uncovered territories.

[Operator:]

There are no further questions at this time. I would now like to turn the call back to Mr. Ted Schroeder.

[Ted Schroeder:]

Thank you, operator, and thanks for your participation today. We are excited about the progress we've made during the second quarter. We look forward to providing updates as the business continues to develop. And we'll be involved in a couple of investor conferences throughout the fall, and so we expect to see some of you there. So thanks again for your interest and support, and we'll talk soon as we have further updates. Thank you.

[Operator:]

This concludes today's conference call. Thank you for participating. You may now disconnect.