Paratek Pharmaceuticals, Inc.
Q2 2018 Earnings Call Transcript

Published: 3 Aug 2018

[Operator:]

Good day, and welcome to the Paratek Pharmaceuticals Second Quarter 2018 Earnings Call. [Operator Instructions]. At this time, I would like to turn the conference over to Ben Strain, Executive Director, Investor Relations and Corporate Communications. Please go ahead, sir.

[Ben Strain:]

Good morning, and welcome to Paratek's Second Quarter 2018 Earnings Conference Call. A press release with the company's second quarter results were issued earlier today and can be found at www.paratekpharma.com. Participants on today's call are [Technical Difficulty] CEO and Chairman of the Board; Adam Woodrow, Chief Commercial Officer; Douglas Pagán, Chief Financial Officer; and Evan Loh, President, Chief Operating Officer and Chief Medical Officer, will be available for Q&A. I would also 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 the risk factors discussed in our SEC filings for additional detail. Before I hand the call over to Michael, I'd like to remind everyone our Advisory Committee for omadacycline is scheduled for next week, August 8. During the Q&A session of today's call, the company will not be addressing questions on the Advisory Committee meeting or the status of the ongoing review. Now I'll turn the call over to Michael.

[Michael Bigham:]

Thank you, Ben. Good afternoon, and thank you all for joining our second quarter earnings call and corporate update. 2018 is shaping up to be a transformative year for Paratek. As previously announced, omadacycline, our investigational broad-spectrum antibiotic, was accepted for priority review by the FDA in April with the once-daily oral and intravenous formulations for the treatment of both community-acquired bacterial pneumonia and acute bacterial skin and skin structure infection. Based on the significant unmet medical need, both indications were accepted for priority review from the FDA and have also benefited from the Qualified Infectious Disease Product, or QIDP, and fast track designations. Importantly, these achievements position us for early October approval with an anticipated U.S. launch in the first quarter of 2019. And for all of us with the prospective approval and launch of omadacycline represents the final step of a long journey to realize our to provide physicians and patients with a new [indiscernible] therapeutic option in the fight against serious community-acquired infection. As Ben just mentioned, the Antimicrobial Drugs Advisory Committee of the FDA has also been scheduled for a half-day meeting next week, August 8, to review our NDA. Our team has broad prior experience with presenting an Advisory Committee meeting and has been diligently preparing for this event. Our ongoing dialogue with the FDA continues to progress, as and we look forward to providing an update after the conclusion The Advisory Committee meeting materialsno later than two business days before the committee meeting. As such, we expect these materials will post on the FDA website on Monday, August 6. From a commercial perspective, Adam and his team continue to make significant progress with our activities, and we continue to make progress with our validation campaigns so that we are able to adequately provide the market upon anticipated launch. In Europe, we remain on track to submit the EU marketing authorization for omadacycline for both CAP and skin in the coming months and look forward to working with the European regulatory agencies through the process. We will keep you apprised of our progress in the months ahead. During this past quarter, we also continued to educate community about the efficacy and the safety profile of omadacycline against important resistant pathogens infection types and across the range of disease severity study. To that end, several presentations based on data from our omadacycline development program were presented at ASM Microbe 2018 and American Thoracic Society 2018 International Conference during the second quarter. Now touching upon our pipeline activities. Our first Phase II in uncomplicated urinary tract infection is current in patients, and we anticipate a second Phase II study in complicated UTI to start enrolling patients in the second half of this year. We look forward to sharing data from these two studies in the second half of 2019. Our collaboration with the U.S. Department of Defense is progressing. Recall that in this program, omadacycline is being studied for the treatment of plague and anthrax. Preliminary pharmacokinetic results from this research as well as results from dose-ranging animal studies, are also expected in the second half of 2019. Now turning briefly to sarecycline, which, as you recall, is our narrow spectrum, once-daily oral tetracycline antibiotic treatment of moderate to severe acne. Sarecycline, or Seysara as branded in the U.S. by our U.S. is currently under review by the FDA with approval in the second half of this year. As a reminder, we are entitled to receive royalties on U.S. revenues as well as select milestone payments in the United States. We retain all ex-U.S. rights. With that, I will now turn the call over to Adam, our Chief Commercial Officer, who will provide a brief overview of our ongoing progress in preparation for the potential commercialization of omadacycline. Adam?

[Adam Woodrow:]

Thanks, Mike. Progress continues to be significant across the commercial organization in preparation for our Q1 2019 launch. As a reminder, we plan to initially launch omadacycline in the hospital setting with the potential for broader opportunity in the community market beyond year 2. Our market access plan remains on track with the hiring of our national account management team, our NAMs, and key account management team, our KAMs. These teams have been conducting extensive meetings with P&T members and other formulary decision makers within our targeted geographies and key accounts. This includes several large and national payers as well as select by the end with our NAM and KAM teams, respectively. We have also had several meetings with important federal accounts, such as Veteran Affairs, Indian Health Services and the Department of Defense. These meetings are designed to keep the payers and hospital systems well informed about omadacycline and prepared for early P&T review of omadacycline once approved. We believe these activities have the potential to facilitate earlier adoption. Our pricing research is ongoing, and we plan to have the results of that research closer to approval. We expect our official price will be publicly communicated in the fourth quarter of this year Now during Q3, we anticipate the onboarding of our sales force leadership team. We expect to start hiring our hospital representatives in Q4 and will continue through 2019 toward our target of 80 to 85, which we believe is sufficient to address approximately 800 -- in 850 of the key U.S. hospital accounts. In recent advisory board meetings with health care professionals, the feedback suggests omadacycline has the potential to fulfill an important unmet medical need in the marketplace. Our market continues to highlight the need for safe and effective options, particularly those with a convenient IV that can potentially minimize hospital and/or eliminate hospital admissions altogether. Because resistance represents a critical concern in the infectious disease space, we are excited about the potential for omadacycline to address this ever-growing unmet medical need, especially when one considers the growing list of safety warnings for the fluoroquinolone cost of antibiotics, specifically, recent addition of mental health side effects and serious blood sugar to the existing black box warnings. As with all antibiotic launches, we modest uptake of omadacycline over the first year or two as we gain institutional access. It is customary with new antibiotics for hospitals to pursue a trial and adoption approach. That being said, we see significant long-term commercial potential for our once-daily IV and oral antibiotic, which we believe proven to be efficacious, safe and well-tolerated. We look forward to providing periodic update progress in the months ahead. And with that, I'll turn the call over to Doug.

[Douglas Pagán:]

Thank you, Adam. For the second quarter of 2018, Paratek reported a net loss of $29.8 million compared to a net loss of $18.2 million for the same period in 2017. R&D expenses were $14.8 million for the second quarter of 2018 to $15.1 million for the same period in 2017. The decrease was primarily driven by lower clinical study costs, offset by an increase in manufacturing production costs. G&A expenses were $12.9 million for the second quarter of 2018, compared to $8.7 million for the same period in 2017. The increase was primarily due to additional headcount and to higher marketing, market access and other commercial costs related to launch preparation activities. During the quarter, we raised $159 million in net proceeds from the issuance of convertible senior subordinated note. We ended the quarter with $321.1 million in cash, cash equivalents and marketable securities and $218.5 million in debt. We believe our existing capital resources will fund operations through the first quarter of 2021. And now I'll turn the call back over to Michael to close. Michael?

[Michael Bigham:]

Thank you, Doug. In closing, our primary focus remains the requisite regulatory approvals for omadacycline in preparation for anticipated product launch in the U.S. In the near term, we are actively engaged with the FDA on the NDA and have been preparing for our upcoming Advisory Committee meeting as well as manufacturing and clinical inspection. We remain focused on advancing our programs and with the Department of Defense as well as continuing to advance our pre-commercialization activities towards an anticipated product launch in the first quarter of 2019. Throughout the remainder of this year, we expect several important milestones, including an Committee meeting for omadacycline next week and U.S. approval for omadacycline in skin and expect the U.S. approval of sarecycline of a second Phase II study in UTI, peer-reviewed publications of our Phase III omadacycline data, and the submission of the Marketing Authorization Application for omadacycline in Europe. In summary, we expect the second half of 2018 will be an exciting pivotal time for Paratek. We look forward to keep of our activities and progress. And with that, we'll now open the floor to questions.

[Operator:]

[Operator Instructions]. And we'll go first to Louise Chen with Cantor Fitzgerald.

[Unidentified Analyst:]

Logan Nathan [ph] in for Louise [Technical Difficulty] was a recent Nature article discussed ongoing antibiotic combos that could potentially yield narrow-spectrum therapies and bring back the use of drugs considered unsuitable due to resistance. Is there any thoughts on the viability of this approach?

[Evan Loh:]

Actually, not familiar with that article but happy to have a discussion after we have a chance to actually process the data there.

[Unidentified Analyst:]

Yes, sure. It's -- give you title. It's the Species-specific activity of antibacterial drug combinations. So yes, we can make -- we can discuss that, for sure.

[Operator:]

And we'll go next to Robert Hazlett with BTIG.

[Robert Hazlett:]

So I had a little trouble dialing in to the call, busy time. I don't know why. But just out of curiosity, the Hercules debt agreement, could you talk about why you engaged in that now and what the Hercules people were able to see with regard to the interactions with you and FDA?

[Douglas Pagán:]

Yes. Thanks, Bert. This is Doug speaking. So the effort with Hercules really was in a bit -- was in order to extend the terms of the repayment, [indiscernible] the cash flow, drain an amortization that 2019 and 2020 period. And part of that restructuring effort, we took the opportunity while the balance sheet is strong to increase the available amount to be drawn by Paratek, including the $10 million that we drew yesterday. Hercules had access to some information under confidentiality. I wouldn't be able to really get into the detailed level of what they were able to see and not see though.

[Operator:]

And we'll go next to Ami Fadia with Leerink Partners.

[Ami Fadia:]

Can you walk through any of the recent work you may have done with respect to pricing dynamics in the market and also around sort of physician advantage? You mentioned that you would expect sort of taking the initial 1 or 2 years to be somewhat sort of slow. Could you talk through whether this is related to the need to build physician advantage? Or is it more due to just gaining the bare access?

[Adam Woodrow:]

Thanks for the question. So look, our pricing research is ongoing. And as I mentioned earlier on, we're going to have that to hand a bit closer to the approval time. And actually, we'll make that official prior to our launch in Q4. We appreciate that the prices for an access to treatment is a chief concern to the patients, providers, payers and policymakers. But we know that we provide a great value with an IV, oral that can minimize hospitalization when in fact, in some cases, avoid hospitalization altogether. I mentioned the fact that anti-infectives have a slow uptake. It's actually due -- in large part, due to the fact that again, hospital formulary or availability of institutions before you can actually generate demand. That does take time. It's not something that happens literally overnight. Our plan, obviously, is in between the approval and launch to try and minimize some of that by making sure that the awareness of the drug is in place and that some of that education is done around the basics in advance of the actual representatives hitting the road when the drug is actually available.

[Operator:]

We'll go next to Adnan Butt with Guggenheim Securities.

[Adnan Butt:]

Maybe one on the CAP indication. How important indication overall for Paratek? And then, let's say, the FDA were commencing at this time, is the company capable of another CAP study?

[Adam Woodrow:]

So I'll take the first part of that in terms of the CAP indication. We -- look, we've got two indications that we're submitting, and we believe that we'll be approved for both. The CAP data is strong evidence, presented that at length. And we know that the benefit risk here is compelling. I should point out that seen a new IV, oral broad-spectrum agent in maybe and so the need for new CAP agent is In terms of where it fits from a financial perspective, I think I've been quite consistent in the fact that, as I've said before, whilst the skin market is -- seems to be saturated, it doesn't actually have very good IV, oral broad-spectrum agents in the skin space. Both skin and CAP form a significant chunk of projections in terms of where our revenue is going to come from. [Indiscernible] I'd tell you that they're not too far apart from each other in terms how much the spread is between the two. Both of those indications are significant.

[Evan Loh:]

Adnan, it's Evan [Technical Difficulty] for your question. As said in his comments, we are on the near term really focused on work that we have to do after approval. That includes having a successful launch and ultimately focusing on expanding indication for omadacycline beyond urinary tract infection, potentially [indiscernible]. And so we will be well-prepared whatever the needs are to do what's right by our product.

[Operator:]

And we'll go next to Robert Hazlett with BTIG.

[Robert Hazlett:]

I've got a follow-up. I appreciate it. My -- I'm curious as to the increased commitment with regard to this indication. I know you are -- always had your eye on that indication. What gives you the urgency to continue the expansion of that in the second half and to make that decision now?

[Evan Loh:]

Bert, we want to clarify that we heard the question right. When you said indication, did you say UTI indication?

[Robert Hazlett:]

Yes, I'm sorry if I'm breaking.

[Evan Loh:]

Okay, great. Thank you. The urinary tract infection indication is an important one, and that is the setting in which there has been a very rapid erosion in the options for physicians specifically in regards to ciprofloxacin, which was -- which is a fluoroquinolone but with rising rates of resistance, specifically against ESBL E. coli. And as you know, from our in vitro work, we have robust in vitro potency against ESBL-producing E. coli, and we think that the opportunities can be explored in both the uncomplicated urinary tract infection setting. And as we said in the past, depending upon what that Phase II we will then come back and provide to -- which of those particular indications we will pursue. It could also include both of them.

[Robert Hazlett:]

Okay. And I'd love to do a follow-up. Just a quick one on the strategic landscape for antibiotics. A number of large pharma have decided that they don't really want to participate. That could create some strategic scenarios. I know you're right on the precipice of important seminal events for omadacycline. That said, assuming success, how do you think about the current strategic landscape? And are -- is broader participation beyond omadacycline something that might be under consideration down the road?

[Michael Bigham:]

Thanks, Bert, Mike Bigham. Yes, noticed obviously that Novartis, after some period of time, elected to leave the space. And obviously, we don't know what their specific reasons were for their decision. And so in general, prefer to have them remain in this space unless, of course, they had competing products, which they did not. The challenges in the antibiotic space are well-understood, but that does not diminish the acute and growing need for new treatment options, as you're well aware. And the level of investment and innovation is falling behind the active pace at which bacteria develop resistance. And obviously, if this process persists, a day of reckoning is inevitable. But even today, effective, safe, generally well-tolerated new antibiotic treatment option, like omadacycline, still represents significant commercial potential. And obviously, we remain excited to be the stewards of this promising new antibiotic, and we still believe that omadacycline has the potential to be a franchise product for Paratek. In terms of looking at other antibiotics in this space, it's part of our overall pipeline development strategy. We're evaluating other antibiotics, which obviously could make an awful lot of sense strategically for us. But if, frankly, you have to look at each product on a case-by-case basis, if we look at what unmet medical need it's addressing, what the profile of other product is from both an efficacy, a safety and tolerability standpoint. And there's no shortcut to doing that homework. So yes, as a class, we're interested. We look. But on a case-by-case basis, we have to get excited about the agent that we're looking and assess its commercial potential. And if it meets our criteria, then we're prepared to add that to our quiver.

[Operator:]

We'll go next to Kevin Kedra with G. Research.

[Kevin Kedra:]

You guys have been pretty aggressive at strengthening your balance sheet the past few months ahead of AdCom. Just wondering how we should [Technical Difficulty] into that? Should we be taking that as a sign of caution heading into an AdCom and eventually [indiscernible] efficient? Or how should we think about that cash beyond just the runway to 2021?

[Michael Bigham:]

Kevin, Mike Bigham. I think you should just read it just for what it is, and that is that the goal has always been to strengthen the balance sheet in anticipation of product That has been our strategy -- it remains our strategy and our focus. And the areas beyond product launch, I think that that's just a very good, healthy rule of thumb. It was also -- candidly, as we did our convertible debt financing recently, that was a request and a strong desire on behalf of the new investors. So that's really with the principal goal and remains the principal goal. That's why we did it.

[Operator:]

[Operator Instructions]. And we'll go next to David Sherman with LifeSci Capital.

[David Sherman:]

I was just wondering if we could get a little bit more color about [indiscernible] going into the AdCom, where do you discussion is going to be and preparation.

[Michael Bigham:]

David, Mike Bigham. Good question. But given the proximity of the briefing documents that are about to be made public, should be publicly available come Monday, as we indicated, like based upon sort of tradition, and also the proximity of the actual AdCom on the 8th, we have elected to refrain from giving detailed comments on our ongoing discussions at this time. But suffice it to say that our ongoing dialogue with the FDA has been open, has been used to progress as expected. The topic must have been consistent with the size and scope of our NDAs. And frankly, the questions today have been one would normally expect at this And the overall focus has been consistent with the general guidance we have given you and others in the recent past. So in terms of preparation, AdComs require a significant amount of preparation. Our team has done many of these in the past. We've been working hard here the last 2 months to get ready. We continue to believe the strength and consistency of our data. We have also brought in, as is appropriate, external experts to help put our data into context. So I think overall, it's been a big effort and obviously requires one to even further master one's data, which is in the long term healthy, though in the short term, an awful lot of work but always worth it. So I think really, at this point, that's really all we can say.

[Operator:]

At this time, I'd like to hand the call back over to Mike Bigham for any additional or closing remarks.

[Michael Bigham:]

Thank you, operator. Sorry for the delay. As there are no more questions, we will conclude today's call with a brief closing comment and specifically to thank all of you for your time and attention today and your questions. Your interest in omadacycline and Paratek are very important to us, and we do very much appreciate your support. This journey [Technical Difficulty] possible without you. We look forward to keeping you apprised of new progress, and we hope that you will either be able to listen in or attend the AdCom meeting next week, an important next step for us. But for now, goodbye, and we look forward to keeping you updated on our activities.

[Operator:]

That does conclude today's conference. We thank you for your participation.