Nabriva Therapeutics plc
Q1 2022 Earnings Call Transcript

Published: 8 May 2022

[Operator:]

Good afternoon, ladies and gentlemen, and welcome to the Nabriva Therapeutics First Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the call over to Dan Dolan, Nabriva’s Chief Financial Officer. You may begin.

[Dan Dolan:]

Thank you, Goshen , and good afternoon, everyone. Welcome to the Nabriva’s conference call and webcast where we will be discussing the first quarter 2022 earnings and providing a business update. The 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 and 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 two, 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 to 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. Turning to slide three, let’s briefly run through this afternoon’s agenda. Ted Schroeder, Nabriva’s CEO, will start with a business update and present an overview of the commercial highlights from the quarter, I will then provide a financial review before Ted comes back with some final commentary and leads our Q&A session. I will now turn the call over to Nabriva’s Chief Executive Officer, Ted Schroeder.

[Ted Schroeder:]

Thank you, Dan, and thank you to everyone joining our call this afternoon. Let’s begin on slide five. We were happy with the progress we continue to make during the first quarter. As we announced this morning, we successfully extended our SIVEXTRO agreement with Merck for an additional three years. We continued to accelerate commercial growth of SIVEXTRO and we made progress with our XENLETA lifecycle management opportunity in cystic fibrosis. We look to carry this positive momentum into the second quarter and through the rest of the year by focusing on four main priorities to maximize performance. Starting with business development, today we announced a three year extension with Merck securing SIVEXTRO revenues at least through 2026. We were very excited by this development, as it provides the opportunity for continued growth to our top line revenues. As for SIVEXTRO’s current performance, the team continues to make great progress, as we are seeing strong results. We were very pleased to see double-digit year-over-year prescription growth. To further accelerate SIVEXTRO’s growth, we aligned the sales strategy to increase our focus on the top prescribers, as we head into the peak skin infection season. Turning to XENLETA, we were making good progress enrolling patients in our Phase I trial, evaluating the pharmacokinetics and safety of XENLETA in patients with cystic fibrosis. Based on the potent activity of XENLETA against strains of staph aureus, including MRSA, isolated from CF patients, we were optimistic for the prospects of this program. We are still on track for a data readout in 2023. If successful, this could become another important revenue stream for the company. With regards to XENLETA for patients with community acquired bacterial pneumonia or CAP, the team is focusing its efforts on pulmonologist to drive prescribing. Moving to CONTEPO. Let me reiterate what we said last quarter. We remain committed to getting CONTEPO approved for complicated UTIs and it remains a priority for the company. There is a large unmet need in the United States for treating patients with infections caused by multi-drug resistant or MDR organisms with an estimated 3 million people in the United States that are treated for suspected or confirmed MDR each year. We continue to engage with the FDA regarding their plans to complete inspections at our manufacturing partners in Italy and Spain. And lastly, we continue to explore other business development opportunities that we believe will bring additional value to the company. This is SIVEXTRO agreement and subsequent contract extension with Merck is a great example of this, as it secures a consistent future revenue stream for the company. Based on the success with SIVEXTRO, we are also exploring potential in-licensing opportunities that would fit into our commercial infrastructure. We also continue to advance discussions for partnership opportunities for XENLETA in Europe and the rest of the world. Moving to our commercial update, which can be found on slide seven. Announcing the extension of the SIVEXTRO agreement with Merck at least through 2026 is a meaningful milestone for Nabriva. This extension provides the opportunity to benefit from continued revenue generation, while allowing us to maximize our investments to date in SIVEXTRO. As a reminder, the Nabriva has been marketing and distributing SIVEXTRO in the United States and certain of its territories as part of an exclusive agreement signed in July 2020 with Merck. Under the initial term of the agreement, the Nabriva was solely responsible for marketing, sales, and distribution of SIVEXTRO in the United States through December 2023. The amended agreement provides for a three-year extension to at least December of 2026 and importantly, the term can be further extended for additional three-year periods. We think this demonstrates our collaborative relationship with Merck and our ability to successfully commercialize the SIVEXTRO brands. We expect SIVEXTRO to be a significant contributor to the continued long-term growth of Nabriva. To capitalize on SIVEXTRO momentum, heading into the peak ABSSSI months, we have expanded the call universe to drive additional awareness and prescriptions. As a result, as seen on slide eight, we have decided to maximize our sales opportunity to focus on the 7800 highest prescribing ABSSSI targets. This optimization went into effect April 1 and we believe that this decision strengthens the SIVEXTRO opportunity by expanding our scope of coverage to nearly 8000 targets. Both our field based sales team and our inside sales representatives will be focusing on the top prescribers of ABSSSI across various specialties, including podiatrists and dermatologists as well as primary care physicians. We believe the strategy positions SIVEXTRO to maximize the near-term opportunity and more efficiently leverage our investment in the brand. The alignment of territories can be seen on the left hand side of the slide. You can see on slide nine, SIVEXTRO demonstrated a strong 10% year-over-year growth and prescriptions during the first quarter driven by our commercial execution. It is also worth noting that SIVEXTRO does not have an -- that SIVEXTRO has an aspect of seasonality, especially during the first quarter. To further highlight the impact of our commercial efforts, you’ll note that we were able to mute some of the seasonality entering 2022 and now have a higher SIVEXTRO prescription days heading into the historical higher volume quarters. We believe that these results coupled with the more targeted sales force effort gives us increased confidence in SIVEXTRO’s ongoing performance. We think the incremental 3000 HCPs appropriately aligns us to deliver on continued growth for SIVEXTRO as we head into what has historically been the peak season for ABSSSI. We are therefore reaffirming our guidance of SIVEXTRO sales, returning to historical peak run rate sales levels by the third quarter of this year. Now let me talk about XENLETA for cystic fibrosis. Slide 10 lays out our rationale for exploring XENLETA as a treatment option for CF patients with chronic staph aureus MRSA infections. The initiation of our Phase I trial in CF last month marked another significant achievement for the company and we were encouraged with how the trial was enrolling. Staph aureus remains an unmet medical need in patients with cystic fibrosis. Because XENLETA is available in both an oral and intravenous formulation, has demonstrated anti-MRSA activity and is well tolerated. We believe it may provide an attractive treatment option for this difficult to treat population. If successful, the CF opportunity could provide an additional $100 million in peak sales. We look forward to a data readout in 2023. I would now like to turn the presentation back over to our CFO, Dan Dolan, who will provide a financial update. Dan?

[Dan Dolan:]

Thank you, Ted. As we turn to slide 12, I’d like to touch on some key highlights for the quarter. We reported total revenues of $8 million in the first quarter of 2022, consisting primarily of net sales of SIVEXTRO, with double-digit demand growth versus the first quarter of 2021, which Ted highlighted earlier. Our operating expenses remained generally flat in the first quarter of 2022, which when coupled with the top line growth driven by SIVEXTRO continues to unlock operating leverage and provided significant improvement in our operating cash burn in the first quarter of 2022 compared to the prior year. We exited the quarter with approximately $34 million in cash and cash equivalents providing adequate cash runway well into the fourth quarter of 2022. Turning to slide 13, we continue to see a positive trend on the P&L and a corresponding positive trend on cash flows in the quarter compared to the prior year. Total revenues increased by $5.5 million year-over-year, driven by the increased prescription demand of SIVEXTRO and the change in the accounting of the SIVEXTRO agreement from collaboration revenue in the first quarter of 2021, to fully recording net sales in our P&L beginning in the second quarter of 2021. As you’ll recall, the first quarter of 2021 was the last one where Nabriva recognized a percentage of SIVEXTRO’s performance, as a collaboration revenue. With the launch of our NDC in the second quarter of 2021, Nabriva pivoted towards recognizing 100% of SIVEXTRO’s performance as net sales in our P&L. The corresponding increase in gross profit of $2.2 million with total operating expenses remaining stable, increasing just $300,000 continued our trend of improved operating leverage since we launched our SIVEXTRO NDC. We remain committed to a disciplined approach focusing on targeted investments with our resources. This is highlighted by the less than 2% increase in operating expenses year-on-year during a period of high inflation in the macro environment. With the extension of our agreement with Merck to promote and distribute SIVEXTRO for at least an additional three years, we are well positioned to benefit from the investments we have made in SIVEXTRO and continue to drive operating leverage on top of our existing infrastructure. Operating cash burn continued a positive trend since the launch of our SIVEXTRO NDC. As we turn to slide 14, I’d like to highlight how the continued impact of our disciplined approach on resource allocation, coupled with the growth of SIVEXTRO has had a positive impact on our operating cash burn over time. Our first quarter 2022 operating cash burn reflects a 26% decrease versus the same period from the prior year. We have historically had a higher cash burn in the first quarter of the year, driven by one-time payments, such as annual insurance premiums, annual data contract renewals, and other annual payments. It is important to point out that greater than 50% of the operating burn in the first quarter of 2022 was driven by these one-time items. As mentioned earlier, in the second quarter of 2021, we launched our SIVEXTRO NDC, which pivoted us towards recognizing 100% of net sales benefit for SIVEXTRO. This has had a positive impact on operating cash burn since the NDC launch. Additionally, we renegotiated a minimum purchase of XENLETA inventory, with our CMO in the third quarter of 2021 to give us additional flexibility, resulting in less cash tied up in inventory in the near term. As we exited 2021, we were realizing the benefits of the SIVEXTRO NDC, revive inventory minimum purchases, and our more focused operating expense allocation. Net of the one-time items in the first quarter of 2022, we continue to see the benefit of this discipline in our operating cash burn. I will now turn the presentation back over to Ted. For the next part of the call, Ted will make some make some closing remarks, and then we’ll head into a Q&A session. Ted?

[Ted Schroeder:]

Thanks, Dan. Slide 16 summarizes Nabriva’s growth drivers currently and looking ahead to the future. As we outlined on today’s call, the team has worked very diligently to execute on commercializing SIVEXTRO, by dedicating the necessary brand promotion to engage and reengage with healthcare providers to add incremental revenue and operating leverage. The extended agreement with Merck is a result of our ability to grow the SIVEXTRO franchise, which now fully funds our commercial infrastructure. With the agreement extended out until at least 2026 and further extensions possible after that, we feel strongly that SIVEXTRO gives us the solid foundation to leverage the infrastructure we have in place. On top of growing SIVEXTRO this year, we also plan to continue with the enrollment of the XENLETA CF trial, pursue ex-US partnerships for XENLETA, evaluate strategic business development opportunities, and advance CONTEPO towards US approval. We expect 2022 to be another year of growth for Nabriva and we look forward to sharing our progress with you in upcoming quarters. I would now like to turn the call back over to the operator so we can open the line for your questions. Operator?

[Operator:]

And we’ll take our first question from Carl Byrnes from Northland Capital Markets.

[Carl Byrnes:]

Just looking at the balance sheet, it looks like -- our cash flow rather, it looks like you added 2 million from financing. Is it fair to assume that that’s from the Lincoln Park agreement? And do you still have approximately 12 million, 13 million available from that? And then I have a follow up as well. Thanks.

[Dan Dolan:]

Hey, Carl. Thanks for the question. Yeah, in the quarter, we had some activity on the line of credit as well as the ATM, so that’s probably what you’re seeing flowing to that line item.

[Carl Byrnes:]

Got it. Great. And then sorry, going back to the burn, which is a little bit higher, because of the anomalies in the first quarter that you referenced. What again was the sort of adjusted burn in the first quarter ex amount those anomalies, maybe you guys have done a phenomenal job in bringing burn down, I think, in the third quarter it was 13 million and change, in the fourth quarter was 6 million and change. Again, where would that be on an adjusted basis? Thanks.

[Dan Dolan:]

So kind of said in the call, about half of the burn in the first quarter was related to those one-time items, so half of the 15 million, 16 million.

[Carl Byrnes:]

Got it. Perfect. Thank you.

[Operator:]

Our next question comes from Ed Arce from HC Wainwright.

[Thomas Yip:]

Hello, everyone, this is Thomas, asking questions for Ed. So first, congratulations on the new extended SIVEXTRO agreement with Merck. Can you highlight if there any differences in terms versus the previous agreement, if there’s any major differences?

[Ted Schroeder:]

Thomas, thanks for the question. No, it’s exactly the same agreement where you are fully responsible for the promotion, and under our own NDC. So we book all the net sales, and we purchase the product from Merck and it’s all cost the goods. So there’s no additional royalties or milestones or anything in this agreement. This is really an acceleration. If you’ll recall from the original Merck agreement, it would have come up for renewal at the end of this year with a one year notification period. I think as a result of the outstanding growth of SIVEXTRO since we entered into this partnership, we and Merck got together to extend the agreement to bring more certainty to the business. So that additional three years gets added on the ‘23 and takes us at least through the end of ‘26 under the same terms as we’re operating today.

[Thomas Yip:]

Got it. Thanks for clarifying. And then next question regarding first quarter revenue so as you pointed out SIVEXTRO sales was about 7.2 million in a quarter but net profit revenue overall was only 7 million. So is there some kind of contra-revenue adjustment in the quarter?

[Dan Dolan:]

Hi, Thomas. So yeah, we took an adjustment for some , so the product dating was coming up. So we took a reserve for that in the quarter, which was an offset. The product expiration was coming up on us, so to be conservative, we took the reserve now to get it under our belt.

[Thomas Yip:]

Okay. So I guess there will be about $20,000 in total.

[Dan Dolan:]

That’s -- it’s ballpark. Yeah, it’s about what it was.

[Thomas Yip:]

Okay. Thanks. And then one last question, this one for the Phase I study in cystic fibrosis. And as we approach study data in first half of next year, given that as a safety study out there, is there any other metrics that investors can look forward to?

[Christine Guico-Pabia:]

No such metrics that we’re capturing. Thank you.

[Ted Schroeder:]

Yeah, Thomas, that was Christine, our Chief Medical Officer. And yeah, those are -- it’s PK and safety, that’s really what we’re looking for the and that’s -- so what physicians are looking for, we have the in vitro data, we have several other non-clinical studies, kind of preclinical studies that will be -- those data will be reused as well, such as there’ll be some DVI modeling and some other non-clinical work, but this particular study is just PK -- is focused on PK and safety in CF patients. And keep in mind that it’s at the same dose that’s currently marketed, so we’re not -- it’s not a dose adjustment, there’s not a different dose contemplated and so -- but these patients get treated for longer. So we wouldn’t expect a five day course of treatment, we would expect something much longer than that, which really puts the utilization into more of a rare disease type of category.

[Thomas Yip:]

Right, so fair to say it kind of set the stage for a future study.

[Ted Schroeder:]

Yeah, it’s -- we’ll see what the data look like. I think, at this point, we’ll publish the data and we’ll gauge reaction among the trading community but whether or not we move into a full development program will depend on a lot of different factors. At the moment, there’s not a clear regulatory path forward but there certainly is a data paths forward.

[Thomas Yip:]

Understood. Thank you again for taking the questions and looking forward to your progress in SIVEXTRO this year.

[Ted Schroeder:]

Thanks, appreciate it.

[Operator:]

And it appears we have no further questions at this time, I will turn the program back over to Ted Schroeder.

[Ted Schroeder:]

Okay, well, thanks, everyone. Appreciate your attendance. I know it’s been kind of a wild day in the market and I appreciate your attendance and look forward to exciting results continuing throughout the rest of ‘22. Have a good rest of the evening. Thank you.

[Operator:]

This does conclude today’s program. Thank you for your participation. You may disconnect at this time. Have a great day.