Paratek Pharmaceuticals, Inc.
Q1 2020 Earnings Call Transcript

Published: 11 May 2020

[Operator:]

Greetings, and welcome to the Paratek Pharmaceuticals First Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.It is now my pleasure to introduce your host, Mr. Ben Strain, Vice President, Investor Relations and Corporate Communications. Thank you. You may begin.

[Ben Strain:]

Good morning, and welcome to Paratek's first quarter 2020 Earnings and corporate update conference call. A press release with the Company's first 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.paratekpharma.com.Participants on today's call are, Evan Loh, CEO; Adam Woodrow, President and Chief Commercial Officer; Randy Brenner, Chief Development and Regulatory Officer; Michael Bigham, Executive Chairman.Before I turn the call over to Evan, I would like to point out that we'll 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 our risk factors discussed in our SEC filings for additional detail. Evan?

[Evan Loh:]

Thank you, Ben. Good morning, and thank you all for joining our 2020 first quarter earnings call and corporate update. For those of us at Paratek, the challenges posed by COVID-19 highlight the critical needs of patients with bacterial infections where antimicrobial resistance is an ever growing threat to successful clinical outcomes.We are proud to be providing a much needed new therapeutic alternative for patients in need with NUZYRA, our once-daily oral and intravenous broad spectrum antibiotic that offers an effective lifesaving antibiotic for serious community-acquired infections. We remain as committed as ever to our mission of serving these patients, as well as to the healthcare providers who care for them.We are pursuing this mission from a position of strength and we believe that our strong cash position enables us to remain committed to our stated strategic goals for 2020 and beyond. We would also like to applaud the heroic efforts of medical professionals in the U.S. and around the world who are working to save lives and to come back, the myriad clinical complexities of the COVID-19 pandemicWhether directly treating patients impacted by the virus, or implementing containment measures to constraint its transmission, you are all selflessly putting the needs and safety of your patients first. Thank you for those efforts.During these unprecedented times, I would also like to take this opportunity to thank the entire Paratek team for their dedication and unwavering commitment to ensure that patients, and healthcare providers have access to NUZYRA, our once-daily, oral and intravenous broad spectrum antibiotic approved for both serious skin infections and community-acquired bacterial pneumonia.During the COVID pandemic, we at Paratek have embraced of the health guidance with all of our employees now working from home and utilizing virtual meetings or interactions with each other and the diverse healthcare provider community of thought leaders, clinicians, researchers and payers.While this environment can be challenging at times, we will continue to have success in engaging with the medical community and building awareness to NUZYRA.While still early in the commercial launch phase, we believe our efforts continue to be successful in augmenting awareness of the profile and clinical value of NUZYRA within our targeted institutions resulting in the continued strong demand and uptake for NUZYRA. We are pleased with the results to-date.While today’s environment has presented operational challenges for the NUZYRA launch and Paratek, we believe the current COVID-19 pandemic also presents potentially significant future opportunities that NUZYRA can address.We believe NUZYRA is an ideal therapeutic candidate that can be clinically effective for COVID-19 patients that developed secondary community-acquired bacterial pneumonia and we continue to actively educate and build awareness throughout the clinical care community of the many benefits that NUZYRA offers.In addition, the COVID-19 pandemic further highlights the importance of a novel, once-daily well-tolerated oral and IV antibiotic in the clinical treatment paradigm for pandemic preparedness bit large, as well as for patients with serious skin infections and community-acquired bacterial pneumonia.As you can imagine, there is a major push to discharge patients from hospitals to make every possible hospital bed available for COVID-19 patients. NUZYRA’s once-daily IV to oral discharge dosing flexibility in pneumonia patients serves as the foundation for the GO HOME and STAY HOME value proposition that we have shared with you, a compelling concept that appears to be resonating with the prescribers.Paratek generated $7.9 million in net revenue in the first quarter, primarily driven by the sales of NUZYRA. Net revenue of NUZYRA increased 35% over the previous quarter to $7.3 million. We are pleased by the performance of NUZYRA as we continue to see significant increases in demand, over-quarter, driven predominantly by the oral formulation.Further, in this quarter, we also had continued success in securing access from payers and institutional access within our prioritized and targeted hospitals. Adam will provide more details later in this call.Late last year, we also announced a significant milestone. Specifically, we entered into a broad based Project BioShield contract with the Biomedical Advanced Research and Development Authority or BARDA, which is part of the United States Department of Health and Human Services and the Office of the Assistant Secretary for Preparedness and Response with a total value coming to Paratek of approximately $285 million.We appreciate BARDA’s confidence in Paratek and a significant investment in this innovative, long-term public-private partnership for the development of NUZYRA in the fight against bioterrorism and antimicrobial resistance in order to save lives and protect Americans.One important future achievement from this partnership with BARDA is that we believe that Paratek will be the only biopharmaceutical company with a fully U.S.-based antibiotic supply chain from API to final drug product. Given the potential antibiotic shortages announced recently from several large companies, we are especially proud to pursue such an important manufacturing pathway for NUZYRA in partnership with BARDA.Randy will provide an update on progress to-date in this collaboration later on this call. The rapid global spread of the COVID-19 pandemic further highlights not only the importance of pandemic preparedness, but the need for novel therapeutics, including antibiotics that address bacterial resistance.We believe that our recently announced broad based public-private partnership with BARDA will open up opportunities for Paratek to actively pursue other strategic procurement partnerships via government contracts that will further support national pandemic preparedness and provide NUZYRA for patients in need.We believe NUZYRA is uniquely positioned with its once-daily, oral and IV broad spectrum profile and we are pursuing a number of other strategic opportunities to expand our government relationships beyond the current scope of the BARDA collaboration. We continue to remain focused on providing an uninterrupted supply of NUZYRA including building sufficient safety stock to address their ability and demand.Based upon current inventory levels, we have a sufficient supply of NUZYRA to meet our forecasted demand into next year, including the initial BARDA procurement. Our manufacturing partners are continuing to perform to our contractual requirements, which will provide for our anticipated, longer-term inventory needs.To address potential, strategic, government procurement opportunities beyond BARDA, we are also making incremental investments to expand our current supply and manufacturing capacity.Additionally, our partner in the Greater China region, Zai Labs, last week announced its application for NUZYRA in China was granted priority review by the Chinese Regulatory Authority. This important regulatory milestone further highlights the importance of new antibiotics globally, in a time of rapidly developing anti-microbial resistance and reinforces NUZYRA’s role in serious community-acquired infections.Before I hand the call over to Adam, I would like to provide first quarter 2020 financial highlights and review our 2020 guidance. As noted earlier, in the first quarter of 2020, we generated total revenue of $7.9 million, of which $7.9 million were attributable to NUZYRA’s net revenue in the United States.We also earned other revenue of approximately $0.6 million, which consisted principally of government contract service revenue from BARDA of $0.3 million and royalty and collaboration revenue of another $0.3 million.R&D expense was $6.4 million for the quarter of 2020, compared to $11.4 million for the first quarter of 2019. The $5 million decrease was primarily the result of lower clinical study cost associated with our completed Phase 2 UTI program and other operational efficiencies as we continue to strive to optimize the business.SG&A expense was $23.6 million for the first quarter of 2020, compared to $23.3 million for the first quarter of 2019.Now turning to our 2020 financial guidance. In evaluating Paratek’s 2020 financial guidance, we balanced our strong first quarter results against the forecasting challenges related to the COVID-19 pandemic. As a result, we are currently maintaining our full year 2020 guidance.As we highlighted in our last earnings call in February, we estimate 2020 total revenue to be between $75 million and $80 million, compared to the $16.5 million in 2019. This revenue guidance consists of the following elements. NUZYRA net revenue in 2020 is expected to be approximately $66 million with slightly more than half of this revenue coming from the initial BARDA procurement of 2500 anthrax treatment courses.As a reminder, the initial NUZYRA BARDA procurement is anticipated to be secured in the second quarter of 2020. Government contract service revenue earned under the BARDA contract, combined with royalty and collaboration revenue is expected to be between $9 million to $14 million.Of note, government contract service revenue consists of cost reimbursement by BARDA for 2020 spend on our FDA post-marketing requirement activities, the anthrax development program and the onshoring of U.S. NUZYRA manufacturing.Full year 2020 R&D and SG&A expense is expected to be approximately $140 million. Excluding the R&D and onshoring of manufacturing expenses reimbursed by BARDA, our R&D and SG&A expense combined are expected to remain relatively flat, when compared to 2019, highlighting our commitment to remain disciplined from an OpEx perspective.This includes continued investment in our commercial infrastructure, while pursuing potential strategic lifecycle investments in areas that will create long-term shareholder value such as non-tuberculous mycobacteria or NTM program.Based upon our current operating plan, which includes estimating NUZYRA U.S. product revenue and the BARDA cost reimbursement of activities related to the Project BioShield Contract, we anticipate their existing cash, cash equivalents, and marketable securities of $194.8 million as of March 31, 2020 provide for a cash runway through the end of 2023 with a pathway to cash flow breakeven.This anticipated pathway assumes we will be able to fund all company operating expenses, anticipated capital expenditures and debt service that includes repayment in full of the Hercules loan and security agreement under its existing terms.You may have also noticed that we filed a registration statement on Form S-3 this morning. We have six months left on the current and only shelf that we had filed in 2017. This approach, we believe the standard corporate governance and good housekeeping and the amount is consistent with our prior filings. We have no plans in the foreseeable future to utilize this shelf.With that, I will now turn the call over to Adam. Adam?

[Adam Woodrow:]

Thanks, Evan. The U.S. launch of NUZYRA continues to progress well and we are encouraged by the continued growth in demand seen in the first quarter. This quarter, we saw increases in pneumonia-related prescriptions driven primarily by the continued strength in prescribing of our oral formulation, which makes up over 80% of our business, along with a modest increase in IV volume.It’s important to that these results were achieved in a challenging environment that included a relatively light flu season and a hospital setting that limited representative access and prioritized COVID-19 patients above all else. Despite this, overall demand seen in the first quarter exceeded our expectations.We believe that these trends all go well for continued growth in demand, and we remain cautiously optimistic for the balance of the year. As we anticipate the hospital setting and associated adjacencies of care will slowly evolve to a more normalized environment as the year progresses.As the first broad spectrum, once-daily oral and IV antibiotic a proof of both pneumonia and skin in maybe 20 years, we believe that NUZYRA is well on its way to addressing important unmet needs in these serious community-acquired infections, while combating antibiotic resistant pathogens that arise from clinical failure and poor outcomes with older generic antibiotics.We believe NUZYRA’s convenient once-daily oral and IV dosing provides flexibility in prescribing resulting in reductions in hospital stays and in some cases, allowing patients to avoid hospital admissions altogether.The ability of NUZYRA to potentially minimize hospital stays has always been an important feature for some of our prescribers and a meaningful benefit for our patients. But in today’s COVID-19 environment, this message is taken on even more significance.In addition, we believe that NUZYRA’s safety and tolerability profile, along with its lack of dosing modifications for hepatical renal impairment provides a much needed alternative to other drugs, such as the quinolones, with their cardiovascular QTC and neurologic serious adverse events codified in the quinolone class black Box label.It’s important to note that COVID-19 is not only associated with secondary bacterial pneumonia, but also is increasingly associated with severe cardiovascular mobility and mortality. Accordingly, it is our belief, it is unwise to use any antibiotic such as a quinolone or even a macrolide that carry potential life-threatening QTC risks or other known cardiovascular events such as aortic dissection in these patients.As discussed in prior calls, it takes a sustained effort accompanied by thorough education and unwavering patients to establish momentum for a new IV antibiotic in the hospital setting, after which adoption in the community setting for a companion once-daily oral like NUZYRA can accelerate.While that sounds a marketing model shifted to a virtual one, we’ve remained laser-focused on building the awareness and profile of NUZYRA in the minds of all healthcare prescribers including ER, ID, pulmonary and hospital physicians.While it’s still early in the process, we believe our efforts continue to be successful in building the profile of NUZYRA within our targeted institutions as we continue to see traction in uptake for NUZYRA, while there are risks to our virtual model, so far, we are pleased with the results, and we'll be closely monitoring in the coming weeks and months.As Evan mentioned, NUZYRA generated $7.3 million in net revenue in the U.S. in the first quarter compared to $5.4 million seen in the fourth quarter of 2019, driven by increased demand. Accounting for inventory, NUZYRA’s gross demand increased from approximately $6.1 million in the fourth quarter of 2019, to approximately $8.3 million in the first quarter of 2020.Our initial outreach continues to be directed towards early adopting hospital specialists including ID doctors, pulmonologists, hospitalists and ER physicians within nearly 600 key U.S. accounts, which are currently being supported by approximately 50 to 60 representatives, which we believe is the appropriate level given our experience in the market to-date.We have taken a measured approach with our hiring process as we balance our return on investment to ensure we have the right sales representatives in place to drive objective value creation. In our key targeted hospitals and integrated delivery networks, we have been focused on gaining institutional access for NUZYRA, while making steady progress in raising awareness.We have achieved institutional access in over 60% of the 600 targeted hospitals. Awareness of NUZYRA now exceeds 90% in the ID community and over 60% in the broader physician target base meeting our expectations. This is important because awareness serves as a gatekeeper for physicians to consider writing a prescription for NUZYRA.From a payer perspective, access and reimbursement, we continue to have success. Over 80% of commercial lives, over one-third of Medicare lives and greater than 50% of Medicare lives in the U.S. now have access to NUZYRA with limited or no restrictions.In fact, earlier this month, we secured a multi-year agreement with both the Humana Medicare Part B and the Humana commercial lines of business to NUZYRA on their formulary with no restrictions. This is a first for a new branded broad spectrum oral in quite a number of years and shows the value that Humana has placed on keeping patients out of the hospital.Securing the agreement with Humana is a great first step and we believe this will help minimize the potential for prescription rejections due to formulary restrictions. We believe, we will be able to continue to expand access to NUZYRA in the Medicare space, thus enabling the most vulnerable patient population with a greatest need to have access to NUZYRA.We are extremely pleased with our performance to-date. We believe we are on the right commercial path with NUZYRA and are well positioned for long-term commercial success and we look forward to reporting on our continued progress in the quarters ahead.With that, I will now turn the call over to Randy.

[Randall Brenner:]

Thanks, Adam. Within the clinical development and medical areas, we continue to have several important value drivers which we believe have the potential to add significant value for patients and shareholders.The BARDA partnership is off to a terrific start with great momentum. We were honored and excited to be the sole recipient of the first-ever BARDA’s BioShield contract for antibiotic for the treatment of a biothreat pathogen which includes NUZYRA being added to the strategic national stockpile.This unique public-private partnership with BARDA is a recognition of our shared commitment to study NUZYRA in the fight against antimicrobial resistance and the treatment of bioterrorism pathogens including anthrax.As we had communicated in early April at the close of the first quarter, BARDA initiated the two time-based contract options, which now will provide cost reimbursement for all of our FDA post-marketing requirements associated with the initial approval of NUZYRA, as well as manufacturing security and onshoring activities.With regard to the funding for the FDA post-marketing commitments, this includes the pneumonia and pediatric clinical studies, as well as the five year post-marketing bacterial surveillance study required for all newly approved antibiotics. The cost reimbursement for these post-marketing commitments is projected to total approximately $77 million.The initiation of funding to support the onshoring of Paratek’s manufacturing activities for NUZYRA was initiated approximately three months ahead of schedule. In the setting of the COVID-19 pandemic, we believe this pull-forward and an initiation of this contract option is consistent with the publicly stated importance of a fully U.S.-based antibiotic supply chain as articulated by the current White House Administration.The cost reimbursement for the onshoring and security requirements activities is projected to total approximately $20 million. The onshoring initiative is important to securing NUZYRA’s overall supply chain by adding a comprehensive additional supply chain to our already well-established all-European based manufacturing infrastructure.Over the projected collaboration timeframe, this worksheet will provide for a secure United States-based supply chain. We believe, we were the only biopharmaceutical company in the world currently committed and actively bringing its antibiotic supply chain into the United States.We also remain on track to receive approximately $38 million earmarked for the procurement of 2500 anthrax treatment courses of NUZYRA designated for the strategic national stockpile.As a reminder, each treatment course is mandated to be 60 days per CDC guidelines. The $38 million procurement purchase is expected to occur in the second quarter of this year, following FDA’s review of the pre-EUA application that was submitted at the end of February by BARDA.T our knowledge, NUZYRA will be the first broad spectrum oral and IV antibiotic added to the strategic national stockpile since ciprofloxacin and doxycycline were added nearly two decades ago.Beyond the BARDA work, we also continued to pursue a number of compelling lifecycle opportunities for NUZYRA. The first of these is an oral –only community-acquired bacterial pneumonia PK study that will support an oral-only dosing regimen in CABP.This study agreed upon with FDA is designed to show that an oral-only dosing regimen will have a comparable pharmacokinetic profile to the approved IV to oral dosing regimen in patients with CABP that was established in our optic study. We remain on track for a supplemental NDA submission in the middle of this year, followed by a potential approval for this oral-only dosing regimen during the upcoming 2020, 2021 pneumonia season.As we noted in the last call, we continue to listen to the feedback receive through our field-based medical team as a result of significant inbound interest, we are also continuing to explore non-tuberculous mycobacteria or NTM, another promising lifecycle opportunity for NUZYRA with significant potential to address important unmet clinical needs. As a reminder, non-tuberculous mycobacterium obsesses as an orphan disease with no FDA approved therapies.Inbound feedback from the KOL community has clearly noted that an effective oral option would be a clinically important and welcome addition to the limited list of sub-optimal IV-only therapeutic choices being used today. These IV-only three to four drug antibiotic regimens are often complicated by a lack of long-term tolerability, secondary line infections and multiple adverse events.NUZYRA not only has a safety and tolerability profile that clinicians have appreciated, but it also demonstrated potent in vitro activity against mycobacterium obsesses. Further, as we have published, NUZYRA achieves very high pulmonary penetration levels in humans. For these reasons, additional clinical investigation in this indication is warranted.We continue to have discussions with FDA that have been constructive to-date regarding NTM and look forward to providing clarity on our plans in the coming months. We remain excited about this opportunity for NUZYRA to address a significant unmet medical need and an orphan indication that requires chronic antibiotic therapy that can last months to years.Data generation also continues to be an important component of the medical team. Just last month, we launched a new online portal for interested researchers to present ideas for funding through our Investigator-Initiated Research or IIR program.As part of this program, which was initiated at the time of the FDA approval, Paratek has identified areas of interest for IIR research programs which include in vitro studies against important pathogens of interest such as acinetobacter and enterococcus strains, registry trials generating more real world clinical use experiences, and opportunities to address important unmet health need such as C. difficile or other acute and chronic infections and high risk patient groups.Today, there are seven active non-clinical and clinical studies in IIR program with seven additional in the contracting phase. The data from these programs are ultimately published by the researchers conducting them.Regarding our publications plan, there are currently over 30 publications in process that address these to NUZYRA in special pathogens or populations or further define its unique therapeutic profile. In addition, the 30th Annual European Congress of Clinical Microbiology and Infectious Disease or ECCMID, recently accepted and published four Paratek supported abstracts.This research describes NUZYRA’s in vitro activity on a number of key pathogens, quality of life outcomes for patients from Oasis 2, epidemiology of C. difficile infections in hospitalized patients with CABP and risks and occurrences of C. difficile infections in patients with community-acquired bacterial pneumonia treated with omadacycline or moxifloxacin.These patients continue to highlight the efficacy and safety profile of NUZYRA, adding to the growing body of evidence of NUZYRA’s utility against life-threatening infections.We’ve also been adjusting our 2020 medical strategy plan to adapt to the current environmental challenges we are facing. This includes an increase in virtual discussions between our field teams and KOLs, and utilizing social media for appropriate dissemination of medical information. In addition, we have been planning to support a symposium at an upcoming medical congress, which is since being canceled due to COVID-19. We are now planning to conduct a symposium virtually and develop enduring materials from this symposium which clinicians can utilize.We believe that additional data generation and the oral-only CABP at NTM lifecycle opportunities will further broaden the potential of NUZYRA to reach into new and clinically important patient populations.At this point, we would now like to open the call for questions. Operator?

[Operator:]

[Operator Instructions]Our first question comes from the line of Bert Hazlett with BTIG. Please proceed with your question.

[Bert Hazlett:]

Yes. Thanks. I have just a couple. First is with regard to the BARDA collaborations and additional collaborations that you are pursuing. Give any sense of timing with regard to those interactions. I know, from our perspective, timing can be difficult. But, do you have a sense of timing in terms of the interactions with the particular agencies within the government?

[Randall Brenner:]

Hey, Bert. It’s Randy. So, yes, I think, your comments are very accurate. I mean, it’s difficult to fully project some of the timing activities going on within the U.S. government. But we remain active in our pursuit for additional discussions within the U.S. government to try and look for opportunities for additional stockpiling and procurement opportunities. Not able to provide a specific at this time.

[Bert Hazlett:]

Okay. Thank you. Then, just two other quick ones. Adam, are you finding on the sales side, are you finding that this novel sales model that you’ve employed actually may have some efficiencies in terms of spend?And then just, very quickly on the clinical side, what might an MPM development study look like, just in terms of numbers of patients and length of therapy? And again, congratulations on the results in the first quarter. Thank you.

[Adam Woodrow:]

Right. Thanks, Bert. Look, from a spend side, we are not spending quite as much as we were before. Everything is now remote. But look, the fact is that, obviously going through March, it became possible to detail in the hospitals and it could be pivoted to a virtual sales model. And right now, it’s still early in the process.And the one thing I can tell you is that the, efforts I think are actually being reasonably successful, certainly within the target institutions. It was a good news that we’ve already started to see really good awareness, because without that awareness you can’t get that utilization. And there are obviously some risks with this model.There are obviously some efficiencies which is why we are not perhaps spending as much. But one thing I can tell you is that, given the recent announcements in the sector, our actual efforts are perhaps a bit more effective than they have been in the past, because we have about a 100% share of voice certainly in the oral, skin in a broad spectrum oral, skin and pneumonia markets.

[Randall Brenner:]

I can take the second one, Bert’s question about the NTM. So far, we’ve got ongoing dialogues with FDA. That being said, it’s a little too early to comment on specifics other than to say, the microbacterium obsesses is subset of the NTM population that we are looking for is a very small group, 6,000 to 8,000 estimated in the U.S. So, very typical rare disease type, orphan type studies.So we are anticipating reasonably small numbers of patients. But, right now, those discussions are still ongoing and we’ll be able to provide more in the coming months hopefully.

[Bert Hazlett:]

Thank you. Congrats again on the results.

[Operator:]

Thank you. Our next question comes from the line of Ami Fadia with SVB Leerink. Please proceed with your question.

[Unidentified Analyst:]

Hi, this is [Indiscernible] on for Ami. Thanks for taking our question. First, congrats on the good quarter and we have just a couple questions. First, do you have any color on the rate of secondary CABPs on among the COVID patients?And could you – do you have any visibility on how much NUZYRA used in that patient population contributed to your Q1 results. And second is that, sticking on your comments about being, Paratek being the only antibiotic company with full U.S. supply chain. Does that mean that your manufacturer onshoring activity pretty much done? Thanks.

[Adam Woodrow:]

So, I’ll talk about the CABP part first. We are really pleased with the development we’ve seen from NUZYRA so far this year. But it is actually quite difficult to gauge whether this is definitely seen an uptake of CABP in relation to COVID-19.As you can imagine, there is a major push to trying to discharge patients from the hospital and once-daily IV and oral dosing in pneumonia, our GO HOME STAY HOME message is resonating with the prescribers. As the environment normalizes, we believe we will have the ideal product that can work well for COVID-19 patients that develop secondary bacterial pneumonia and we are actively educating and building awareness to that effect.As regards to how much secondary CABP there is as a result of COVID-19, I think the juries out on that is obviously been a few publications, but I don’t think there is a definitive answer to that question. Randy, did you want to take the onshoring question?

[Randall Brenner:]

Sure. Let me just make sure I understand the question fully. But the – just as a reminder, right now, we have a full EU-based manufacturing supply chain from API through finished product. The efforts around the onshoring are just beginning with BARDA.So we are in the early phases on that. The time it takes to tech transfer and bring on both the API and our two drug product steps will take a fully a couple of years to fully implement. So, still a lot of work to be done on that. But we are really excited about initiating those activities is a little bit ahead of schedule for what we initially planned.

[Unidentified Analyst:]

Got it. Thank you so much.

[Operator:]

Thank you. Our next question comes from the line of Kevin Kedra with G. Research. Please proceed with your question.

[Kevin Kedra:]

Hi, thanks for taking the questions. First, I wanted to ask about kind of the cadence of revenue for the balance of the year. How should we be thinking about growth in NUZYRA? Should it be - should we see consistent revenue growth sequentially? Or should we think about some variability given this shift from pneumonia into skin?And then second, on inventories, just wondering if you could say, how much inventory you have out in the channel? It seems like demand has been outstripping reported sales over the past couple of quarters.

[Evan Loh:]

Hi, Kevin. It’s Evan. Thanks for the question. I think when you look at the cadence of revenue just like with other procurement arrangements you may – that you may be familiar where they can potentially be lumpy – the more that we’d like to use. But, we still remain on track for that initial procurement in the second quarter.That all being said, as well, as we look at the go-forward for the remainder of this year, and maybe also into 2021, as you think about the secondary bacterial pneumonia, that is commonly seen with these type of pneumonic viral infections.We also wonder whether the dialogue really is shifting at least for the near-term away from sort of the episodic seasonal pneumonia season to just pneumonia in general all year long. And a lot of that will depend upon what this COVID pandemic evolves into in terms of a vaccine, as well as a natural herd immunity overall.And then I think the next question is around what is the balance with of course, inventory, is that right, Kevin?

[Kevin Kedra:]

Yes. Just seems like the gross demand numbers that you’ve put up in the last couple of quarters have been ahead of what we see on net sales?

[Evan Loh:]

Yes. Adam, did you want to address that?

[Adam Woodrow:]

Yes, I am more happy to. I mean, at the end of the day, as the product grows, the inventory will build over time. But what I can tell you is, there is certainly not an excess of inventory in there. I think you were alluding to the fact that there seems to be a more sales than you are picking up. We’ve seen a little bit of a working down actually of inventory in the last quarter.I am sure that I will come back up to the sort of standard levels. I think the key thing for everybody on the call is that, our sales are not actually driven by a build-up of inventory in the channel and if they were, we would highlight that on the call.

[Evan Loh:]

Yes. I think it’s fair to say that, our market demand was strong in the first quarter as you saw in the ordering institutional demand were very closely aligned, Kevin.

[Kevin Kedra:]

Great. And let me just throw one follow-up. With COVID and the emergence of that and the awareness that we all have of that, have you seen the tone of conversations change both with payers about the need for novel antibiotics, as well as in the political arena about the importance of having an anti-infective agent given that a large currently are being dominated by infectious diseases.

[Evan Loh:]

I think it’s a very interesting time as I think you are right. The spotlight has really shifted in the direction of anti-infective type of therapies as well as prophylactic therapies. I think when you think about the commentary that’s been made from HHS, they are in search of clearly end-to-end solutions.And when they think about the end-to-end solutions, it includes, not only anti-virals, vaccines, as well as diagnostics. But I think that there is also an interest in asking the question is our anti-bacterial armamentarium as strong as it can possibly be in this pandemic and I think that the BARDA commitment is a testament to their commitment to be forward thinking at BARDA to bring in the best technology for patients.And I think we’ve also seen and heard that CMS has been moving very quickly in terms of a payment reform and reimbursement in this very difficult time and we believe that there will be continued more evolution and the way that they will be looking at reimbursement for antibiotics in hospital space.And finally, I think our success with our recent Medicare contract on the Part D side with Humana is also another testament to the fact that in patients who are the most vulnerable, specifically over the age of 65 are at the most co-morbidities and potentially the most to lose in this post – in this COVID pandemic, they’ve made a big commitment to ensuring that NUZYRA is available to all prescribers if they want them for their patients with no restrictions.

[Kevin Kedra:]

Good. Thanks.

[Operator:]

Thank you. Our next question comes from the line of Dennis Arce [Ph] with H.C. Wainright. Please proceed with your question.

[UnidentifiedAnalyst:]

Hi, good morning everyone. This is [Indiscernible] asking a couple of questions for Ed. Congratulations on all the progress for NUZYRA and the BARDA contracts in this quarter. So, first question, a little bit about the BARDA contracts. Assuming the EUA is approved in this quarter what are some immediate steps that you will need to take in order to fulfill the first SNS order?

[Randall Brenner:]

Sure. Hey, Tom, it’s Randy.

[Evan Loh:]

Randy?

[Randall Brenner:]

Yes, Randy Brenner. So we’ve been working closely with BARDA. There are a number of – I use the word administrative activities that have to happen in advance of the procurements for occurring, most of which revolve around documentation, quality agreements, those - certificate of analysis, those kinds of things.So, as I said in my initial comments, the Paratek and BARDA teams are working extremely well together, both are busy putting all the documentation in place for t his to happen. So, our expectation is that, the once the pre-EUA review is completed by FDA, all that documentation will be complete and we’ll be ready to progress forward with the procurement.

[Unidentified Analyst:]

Okay. Sounds good. And then, just wondering about the revenue recognition for this first order $38 million. Is this going to be a lump sum payment since it's a contract? Or is it going to spread out the next few quarters as NUZYRA becomes shift to BARDA?

[Evan Loh:]

We have set this up as a single payment.

[Unidentified Analyst:]

Okay. So, single payment. Thank you. And then, just want to switch gears to other developments for NUZYRA. Can you outline some of the final preparations before the sNDA for the oral formulation is submitted?

[Randall Brenner:]

Yes. I missed the beginning of your question. Just say – and you are interested in understanding the preparations of that are going on for the sNDA?

[Unidentified Analyst:]

Yes. That’s right.

[Randall Brenner:]

Yes. So, we are in the late stages of study closedown activities. It’s our only ongoing clinical study at the time of the COVID outbreak. So, we are working remotely with our sites to do all the study activity closeout.So the – it’s very traditional for any study closeout analyses, programming analyses, clinical study report creation and then summary of the data for FDA. So, things are progressing as very typical for any study close out at this point in time.

[Unidentified Analyst:]

Okay. Sounds good. Thank you for taking our questions and congratulations again on a good first quarter.

[Operator:]

Thank you. Our next question is a follow-up from Bert Hazlett with BTIG. Please proceed with your question.

[Bert Hazlett:]

Yes. I would like to just get your views on your partner’s activity in China. Could you just give us some your thoughts on why maybe they received the priority review? And could you just frame the potential opportunity as you see it in China. We obviously have our estimates. But we’d like to better understand that opportunity as it gets closest to reality here? Thank you.

[Evan Loh:]

So, maybe I can talk a little bit about the – maybe the environment in China and then, maybe Adam, you can talk a little bit about the way we see that is like in China. Bert, I think in terms of taking a step back, I think, we can’t minimize the importance of antimicrobials and the issue with regards to resistance. It’s not just a U.S.-based problem, it’s actually a global problem.And China has some of the highest bacteria resistance rates in the world. And they’ve been through the COVID experience and a lot of the first tranches of data in terms of outcomes, bacteria resistance and the use of adjuvant antibacterials has come out of China. And I do believe – I don’t know for sure, because I am not there at the China FDA.But I think that they want to make sure that Chinese citizens have the best in technologies. And they see – and I believe that they see that NUZYRA is part of that end-to-end solution for the country. So we are very excited about that.And we look forward to then moving the process forward to getting an approval and getting this product into the hands of Chinese physicians and the Chinese patients in the first half of 2021.Adam, what about China as it relates to omadacycline?

[Adam Woodrow:]

Thanks, Evan. Look, I mean, we know that there is a significant unmet medical need for novel antibodies in China. There is clearly a great deal of potential and there still is some work the teams are doing from a preparation perspective to ensure that they’ve got everything set up for their initial push upon approval.Just a reminder, Bert that under the terms of the collaboration agreement, we are entitled to receive a milestone payment of $6 million upon that regulatory approval. We obviously expect that in the first half of 2021 and then we actually received tiered royalties at sort of low double-digit to mid-teen percentages on the net sales that follow.This will significantly expand our global footprint and the endorsement of the products that we’ve developed. And we’ve got great expectations for how things will work with Zai. They’ve proven to be a great partner and they’ve got a good commercial partner in China.So, only time will tell. But I think it’s fair to say that there is a significant opportunity for drug like NUZYRA, especially in the marketplace that's got that type of a resistance.

[Randall Brenner:]

Bert, just to build on that as well. As any company approaches commercial launch, there has to be a full understanding of the opportunity space and what it will take in order to get there. And as Adam mentioned, Zai has announced earlier this year a partnership with Hisun Pharmaceuticals there in order to launch the product in the U.S.

[Evan Loh:]

In China.

[Randall Brenner:]

Yes, in China. And I believe that – thank you – and I believe that they have committed verbally around, what they’ve said is around 600 representatives to be able to actually address the tier-1 cities where they will initially be focused upon their launch.And you can see that the denominator in China in terms of potential unmet need is massive and it is – we are very pleased with the commitment that Zai Labs has made to ensuring that the launch gets off well and generates early momentum similar to the momentum that we have seen in the NUZYRA launch here in the U.S.

[Bert Hazlett:]

Thank you. Thank you for the color. Thank you for taking the follow-up.

[Operator:]

Thank you. We have reached the end of our question and answer session. I would like to turn the call back over to Mr. Loh for any closing remarks.

[Evan Loh:]

As there are no more questions, we will conclude today’s call. In closing, I would like to thank you all for your time and attention today, your continued interest in NUZYRA and Paratek are important to us. The journey of making NUZYRA commercial success is well underway.The unique profile of NUZYRA, specifically are once-daily, well-tolerated oral is positioned well for long-term growth and broad based commercial success in patients with serious community-acquired infections.As the wealth of data on NUZYRA continues to expand, we are increasingly confident in the potential of NUZYRA to be an effective and a much needed addition to the armamentarium of antibiotics available to physicians to save lives, particularly when resistance is a concern. We remain committed to the continued development of NUZYRA to the oral-only pneumonia and NTM lifecycle opportunities.The BARDA partnership is off to a terrific start with great momentum. We signed a contract at the end of last year. Several important activities have taken place including the initiation of the funding to support the onshoring of our manufacturing activities for NUZYRA and support for all of the post-marketing requirements associated with the approval of NUZYRA in addition to progress towards securing the first procurement.The BARDA collaboration positions Paratek as the leader, not only with the potential to provide NUZYRA for bioterrorism pathogens, but as a leader in the innovation for the broader ID sector in the battle against antimicrobial resistance.In addition to NUZYRA being the first broad spectrum oral and IV antibiotic added to the strategic national stockpile since ciprofloxacin and doxycycline were added nearly two decades ago, we fully expect to deliver an important new treatment option for pulmonary anthrax that has the potential to save lives and protect Americans.These opportunities motivate us all at Paratek and we would like to thank the patients who have participated in our clinical studies and our employees who have worked tirelessly in providing NUZYRA for patients in need and for the selfless health care providers who are at their bedside each and every day.We very much appreciate your support and interest. We look forward to keeping you apprised of our continued success. Good-bye for now.

[Operator:]

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful day.