Paratek Pharmaceuticals, Inc.
Q4 2017 Earnings Call Transcript

Published: 1 Mar 2018

[Operator:]

Greetings and welcome to the Paratek Pharmaceuticals Fourth Quarter Full Year 2017 Earnings Conference. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to your host today, Mr. Paul Arndt, Managing Director for LifeSci Advisors. Please proceed, sir.

[Paul Arndt:]

Thank you, Tonya. Good morning. This is Paul Arndt, Managing Director of LifeSci Advisors, Paratek’s Investor Relations firm. And I’d like to welcome you to Paratek’s fourth quarter and full year 2017 update and earnings conference call. A press release with the Company’s fourth quarter and full year financial results was issued earlier this morning and can be found at www.paratekpharma.com. The agenda for today’s call is as follows

[Michael Bigham:]

Thank you, Paul. Good morning and thank you all for joining our earnings call and corporate update for the fourth quarter. As many of you know, 2017 was a pivotal year for us. We completed the Phase 3 development program for omadacycline in community-acquired bacterial pneumonia, or CABP, and acute skin and skin structure infections or ABSSSI. With a successful Phase 3 program now completed, we began in earnest to expand commercial readiness activities, including initiation of manufacturing validation and commercial supplies, and the build-out of our medical affairs and payer account management teams to prepare us for anticipated launch. Most importantly, on February 2nd of this year, we completed the submission of our NDA for omadacycline with the U.S. Food and Drug Administration. Assuming these submissions are officially accepted as part of the NDA review process, we would expect the PDUFA date in early October of this year. In the EU, we are working to schedule a date by mid-year to meet with our rapporteurs and the EMA as the last regulatory interaction before finalizing the European marketing authorization application. With our NDA submission now complete, we have expanded our efforts to prepare for a potential commercial launch. Our market research continues to demonstrate that there is a well-defined and urgent need, for a novel antibiotic with the characteristics of omadacycline, an efficacious, well-tolerated, once-daily oral and IV, multi-indication antibiotic for the treatment of serious community-acquired bacterial infections. In our view, omadacycline is a truly modernized tetracycline, that retains the trust and safety of the class, while overcoming bacteria resistance and meeting the current needs of treating physicians. We are optimistic about the opportunity for omadacycline, and remain determined to make this drug available for patients, who are facing severe and possibly life-threatening infections. Additionally, in December of 2017, we announced that with Allergan, that the FDA accepted their NDA for sarecycline, which will be known in the U.S. under the brand name Seysara. Sarecycline is a narrow spectrum tetracycline antibiotic for the treatment of moderate to severe acne for which we retain royalty and milestone payments or the U.S. rights. We also retain all ex-U.S. rights. We anticipate FDA’s approval of sarecycline in the second half of this year. I’ll now turn the call over to Evan Loh who will provide an update on our UTI development program and FDA regulatory progress. Evan will also provide some perspectives on why we believe that omadacycline represents a significant and unique opportunity to address unmet medical needs for patients. Evan?

[Evan Loh:]

Thank you, Michael. As you heard from Michael, just last month, we completed our submission to the FDA of two new drug applications for omadacycline, one for the oral formulation and one for the intravenous formulation. Since the start of our rolling submission in December, we’ve been supporting the FDA’s active review of our applications. As you know, the FDA review process includes a 60-day evaluation to determine acceptance of the application for filing. That acceptance will start the final review phase of our application and set the final PDUFA action date. Our expectation based on our experience with the FDA is that the applications will be accepted in early April 2018. With QIDP and Fast Track status, we are anticipating a priority review for these NDAs. Accordingly, our PDUFA date will be set eight months from the completed submission date, which translates to early October of this year. As you can imagine, we are all eagerly looking forward to that date as patients are waiting for omadacycline. As you’ll hear from Adam and also Doug a bit later in the call, we’re planning for a commercial launch by the first quarter of 2019. In order to enable us to bring omadacycline to patients as soon as possible following approval, as you heard from Michael we have begun an earnest with our commercial readiness activities including ongoing manufacturing validation and commercial supply production and the build-out of our medical affairs and payer account management teams. We will have greater clarity on timing of launch later this year. I would now like to provide an update on our Phase 2 program in urinary tract infection or UTI. As a reminder, omadacycline possesses unique attributes that provide confidence in its potential utility in urinary tract infections. The first important attribute is that omadacycline has very low protein binding, uncommon in the tetracycline class, which enables more drug to access tissue where active infections occur such as in the urinary tract system. The second important attribute is that omadacycline has high renal excretion and is excreted unchanged in the urine as active parent compound. These conclusions are based upon the results of our proof-of-principle Phase 1b study in patients with simple cystitis where we confirm the significant level of renal clearance up to 40% coupled to high urinary levels of omadacycline. Finally in the study, we observed that omadacycline was effective microbiologically against the key passages in these UTI patients, most notably E. coli. The results of the Phase 1b proof-of-principle study combined with the totality of the microbiologic and pharmacokinetic have enabled us to progress forward with our Phase 2 UTI program. We have initiated dosing of patients in the first of two Phase 2 UTI clinical studies in January of this year. This first study is in uncomplicated urinary tract infections and will examine the efficacy, safety, tolerability and pharmacokinetics of omadacycline in approximately 200 patients. Later this year, we will begin the second study of similar size that will also examine the efficacy, safety, tolerability and pharmacokinetics of omadacycline in patients with acute pyelonephritis, the most common clinical subset of complicated urinary tract infections. We will keep you informed with the progress of both of these studies, and look forward to sharing top-line results of this program with you in the second half of 2019. As you all know Paratek has continued to deliver on our commitment through data transparency. Our medical affairs team leads our effort in scientific publications of omadacycline’s clinical and microbiologic data in both infectious disease conferences and peer review publications, which will serve to enrich future scientific exchange with treating physicians. To that end, Paratek will have a significant presence at the upcoming European Congress of Microbiology and Infectious Disease or ECCMID in Spain in late April. Our presentations include nine posters and one oral presentation. That oral presentation features the e OASIS-2 study data with oral-only omadacycline and ABSSSI. Our medical affairs team is also working diligently on ensuring that our Phase 3 studies will be published in top-tiered journals, prior to FDA approval. Having all of our pivotal data accessible to doctors will be key to our success in building prelaunch awareness. As we’ve been saying for some time now, we intend to bring omadacycline to market during the next influenza and pneumonia season. Influenza infection can often progress to bacterial pneumonia. Remember, community acquired pneumonia is often responsible for deaths that are associated with influenza infections, and in fact pneumonia is the single largest cause of bacterial infection related mortality. Accordingly, there remains a strong need for new antibiotic treatments to combat increasing bacterial resistant, community-acquired infections such as CABP. It is our firm belief that omadacycline has a well-defined and compelling value proposition, unmatched by other late-stage investigational antibiotic candidates. If approved, it has the potential to be a generally safe and well-tolerated once daily oral and IV monotherapy. Having both an oral and an IV formulation enables our go-home and staying home strategy to minimize hospitalizations, thereby reducing the overall cost of care. The value proposition for omadacycline is defined by three core attributes

[Adam Woodrow:]

Thank you, Evan. On the commercial side of things, we have made significant progress in the three months since we last spoke with you at our November investor day. But before I get into those details, I would like to take a step back to talk about our overall commercial strategy. We believe there is tremendous commercial opportunity for omadacycline, both inside and outside of the hospital setting, based on the value proposition as Evan has outlined and the feedback we have been receiving from treating physicians. We know from experience that initially it is critical to establish credibility first, with the more severe patients in the hospital setting with our IV to oral transition allowing for early discharge or as we say at Paratek, our go-home strategy. This will gain trust in the efficacy, safety and value proposition of omadacycline among treating physicians including hospital infectious disease specialists, emergency room doctors, hospitalists and others, and will also generate exposure to oral omadacycline with receiving primary care physicians. This objective -- to generate this exposure, we will achieve this with a field force of between 80 and 85 representatives, targeting approximately 850 hospitals. In conjunction with an inside sales team, we believe we can reach 80% of the branded antibiotic potential in the United States hospital system. It is important to understand that this approach is a very deliberate and necessary first step to gaining access to the community market where it is an even broader opportunity for omadacycline with our ability to provide a once-daily oral-only option to avoid an emergency room visit or a hospitalization entirely or as we say our stay-home strategy. As doctors experience omadacycline’s efficacy in the more severe patients in the hospital, they will begin to prescribe it to their patients in their practices in the community as well. So, while we do not anticipate promoting in the community space in the first couple of years, we do however expect to see some utilization of our oral in the community setting. Full promotion in the community will be considered as we approach the end of year two, either on our own or with a partner. Now with that context in mind, I can share with you more about our recent accomplishments as we get ready to launch omadacycline by the first quarter of next year. Our brand team is now fully on board and is finalizing positioning the promotional messages. We recently completed the hiring of all of our key positions within our prior account management team including our directors of trade, VABOD, managed markets and key accounts. You’ll recall that back in November, we talked about two core activities that will help prepare the market for our launch and ultimately drive utilization. The first being raising awareness of omadacycline among our target prescribers through medical education and scientific exchange, and the second being formulary access. In terms of medical education, we have continued our unbranded Rise Up campaign which raises awareness around the need for new effective antibiotics that have oral formulations. If you want to learn more about Rise Up, you can go to antibioticriseup.com. As you heard from Evan, Paratek will also have a significant presence at the upcoming ECCMID conference in Madrid, Spain in late April. Having all our pivotal data accessible to doctors will be key to our success in building prelaunch awareness and our ability to effectively promote omadacycline from day one. With regard to formulary access, upon acceptance of our NDAs, discussions with the formulary committee members can begin in earnest, and we’re preparing for those right now. Based on what we’ve heard in our research to date, we believe that omadacycline will be viewed favorably when it comes to payer and hospital formulary adoption. Omadacycline has at least five features that formularies will consider as part of their adoption process. First, omadacycline’s a rarity and that it is a new once daily, broad spectrum antibiotic with both an IV and oral formulation, which provides the physicians and pharmacists the confidence to send patients home earlier, a very compelling value proposition. Second, unlike many recently approved antibiotics, omadacycline will have multiple indications at launch, which provides for broader potential utilization. Third is the need to displace existing generic tetracyclines as none of the existing options have a similar efficacy profile in both an IV and oral formulation. So, simply put, there is a clear need for generally safe and well-tolerated, modernized tetracycline with high rates of efficacy with both IV and oral formulations. Fourth, hospitals are telling us, they are looking for alternatives to beta-lactams and quinolones in light of the C diff problem that exists in many hospitals today. And finally, with these two formulations, we do have the benefit of being able to be flexible with our pricing strategy to facilitate this formulary adoption. Given these benefits, omadacycline may well be adopted in the hospital formulary earlier than some of the more recent launches. Overall, we’re extremely encouraged with our progress to date and the feedback from our ongoing research. And we are looking forward to the potential approval of omadacycline, later this year. As Evan mentioned, we’re very much on track to deliver a commercial launch by the first quarter of 2019. And in fact, we’re preparing for best case scenario that could have help us launching perhaps a little bit sooner than that. Now, Doug will take the time to say a few words about our financial performance.

[Doug Pagán:]

Thank you, Adam. We are in a strong financial position as we continue to prepare for the commercial launch of omadacycline. The Company ended the year with $151.7 million in cash and cash equivalents and investments, and $59.2 million in debt, which included the drawdown of an additional $10 million in principal from Hercules during Q4 2017. For the full year ended December 31, 2017, Paratek reported a net loss of $89.1 million compared to a net loss of $111.6 million for the prior year. Revenue earned during 2017 included a $7.5 million upfront payment received as part of our collaboration with Zai Lab and the $5 million milestone payment earned from Allergan upon FDA acceptance of sarecycline NDA. Research and development expenses were $60.1 million for full-year 2017 compared with $83.5 million for the prior year. The decrease was driven primarily by lower clinical study costs, resulting from the completion of the Phase 3 program of omadacycline. The decrease was partially offset by higher employee compensation costs, NDA preparation and user fees and increased medical affairs activities. General and administrative expenses were $37 million for full-year 2017 compared to $26.4 million for the prior year. The increase was driven primarily by higher employee compensation costs as the company continued to expand its commercial team as well as costs associated with pre-commercial activities and business development efforts. As Evan mentioned, we continue to anticipate a Q1 2019 launch for omadacycline. We are however proactively investing for the possibility of an earlier launch. During 2018, we will build out the functions that support the commercialization efforts including sales and marketing, medical affairs and some important functions throughout the organization. Additionally, we’re investing in omadacycline by building out commercial supply, expanding our commercial capacity, and securing secondary suppliers to ensure a robust supply chain for the years beyond launch. Lastly, we will continue to enhance omadacycline’s commercial potential through our development efforts in the UTI program. Based on these activities, Paratek’s current capital resources together with anticipated regulatory and commercial milestone payments from collaborations with Allergan and Zai Lab, anticipated extension of the interest-only period for the Hercules term loan and estimated omadacycline product sales will enable Paratek to fund operating expenses and capital expenditures into late 2019. And with that, I’ll turn the call back over to Michael to close. Michael?

[Michael Bigham:]

Thank you, Doug. Without question, 2017 was a productive and gratifying year for us. With the completion of our Phase 3 program for omadacycline being the most noteworthy accomplishment for the year and one that set us up on a positive and clear path towards approvability. We are delighted to have our NDA now under review with the FDA and we are particularly proud of this accomplishment as the preparation for our Phase 3 program began just three years ago. 2018 promises to be just as exciting and industrious if not more so. We anticipate in just the next few months alone acceptance of our NDA submissions by the FDA and confirmation of our PDUFA date, which to reiterate with a priority review, we expect to be in early October. With the goal line, now clearly established, we are expanding our efforts to prepare for potential commercial launch. There is no more exciting time to be at a biopharmaceutical company and we are energized daily by the potential of bringing such a novel and much needed antibiotic to the market. We look forward to keeping you apprised of our activities and progress. And with that, we will open the floor to questions.

[Operator:]

Thank you. [Operator instructions] Bert, your line is live.

[Unidentified Analyst:]

Hi this is Jay Colby [ph] on line for Bert. Thanks for the questions. So, to start of this, what are the primary factors in driving the timing of commercial launch, the variance in commercial launch?

[Michael Bigham:]

Well, as you know, our stated goal is to launch basically in January of 2019, early 2019. And unless and until we get clarity around other issues, notably confirmation of our PDUFA date actual approval that we’ll remain focused on the January 2019 launch. But if the timeline and activities go according to the current game plan, we’d like to try to find a way to move that up a month or two to capture more of the influenza season.

[Unidentified Analyst:]

Okay. And then, what’s the most important message in the promotional carrier you’re preparing now, what’s the most important message you think you need to get across for faster formulary adoption?

[Michael Bigham:]

Well, if you’re looking for faster formulary adoption, one of the things that’s very clear today, is that there is a tremendous push to try and get patients out of the hospital quicker. One of the challenges that hospitals are faced with is lack of effective oral options to enable that to happen. In fact, actually, the Wall Street Journal was just talking about out it on Saturday. And clearly with an IV oral option and something we can get a patient out of the hospital a few days earlier, that value proposition is very compelling and that is the number one thing that obviously we will be discussing with hospital formularies as we come to looking at positions on formularies and guidelines.

[Operator:]

Our next question comes from Louise Chen with Cantor Fitzgerald. Please proceed with your question.

[Brandon Folkes:]

Hi, guys. This is Brandon Folkes on for Louise. Thanks for the color on the quarter, actually answered a lot of our questions. So, perhaps just on a higher level. How are you thinking about potential partners outside the U.S.? Where are you with that just trying to think around what we may see there over the next year? And then, secondly, I’d love to get your thoughts on the consolidation we’re seeing amongst antibiotic companies in the industry. And then, lastly, is there anything in healthcare legislation at the moment that you think may create a tailwind to your update in the launch? Thank you.

[Michael Bigham:]

Thank you for the questions. I’ll start with the first one and then we’ll move on from there. In terms of our ex-U.S. partnering strategy, as you know, we have a collaboration in place with Zai Lab in the Greater China region. The other two areas that we are focusing our efforts on are the what I would call the greater, the Pan Pacific Asia area, and the conversations there are going along well. We’re not putting a specific timeline as to when to expect an outcome, but just to say that those discussions are active and productive. With respect to the EU, as you heard in my introductory remarks, we’re going to meet with the EU EMEA authorities by the middle of this year and have our application on file sometime thereafter. So, from our perspective, that’s around the right time or soon thereafter to have a potential European partner, someone who can work with us to get the application basically as we go through the process, but also to give them the time to prepare for a launch in the EU. And your second question, I did not get. Oh, the consolidation of antibiotics. It’s a very popular topic. And I think from our perspective, over time, there is absolutely a need and an opportunity for the consolidation in the space basically for no other reason than to leverage the commercial infrastructure that companies such as ours will invest in. First thing is first. Our goal is to get omadacycline approved and properly launched and establish that ongoing and over time deepening relationship with the important decision makers within the treatment paradigms in the hospital setting and ultimately partially in the community and that with the passage of time, we become in our view and even more natural home for other antibiotics.

[Evan Loh:]

Hey, Brandon, it’s Evan. In terms of your third question specifically about healthcare legislation, we continue to feel very positive about a couple of different potential bills that we’ve been talking about on the hill. The first one that could potentially provide a tailwind is something called a ready act [ph] and that is a deal where there is a proposal specifically to look at having some portion of your R&D expenses being rolled up into a R&D tax credit that could be monetized, and we think that that’s something that potential has a chance of seeing the light of day this year. I think, a bill with just a little bit more of a longer tail is something called the DISARM Act. And the DISARM Act is specifically one that’s also being discussed on the hill in the health committee as well specifically looking at whether there could be an opportunity for a separate payment schedule for antibiotics outside of the current DRG system. Obviously, the challenge with that particular bill is that they will have to be a pay for established and there is active discussions with both the CDO and other agencies in Washington to see whether we could bring that to life.

[Operator:]

Our next question comes from Paul Matteis with Leerink Partners. Please proceed with your question.

[Jeffrey Lin:]

Yes. This is Jeffrey Lin on for Paul Matteis. Thanks for taking our questions. So, I like a little bit more I guess sort of clarity around I guess the partnership, as you more along the lines of -- you’ve discussed that you have discussions with the Pan Asian area and the potential EU partnership after the EMA discussions and filings. But, you also mentioned that at the end of year two, you would also explore expansion and partnering into the community. Can you please perhaps give a little bit more color on I guess the end of the year two expansion and partnering, and what that entails?

[Michael Bigham:]

I think, to give a little bit of color, I think end of year two, as Adam has indicated, the first two years in our estimation and based upon historical comparators that the first two years roughly are the time when a drug such as omadacycline will establish its reputation in the hospital setting, and during which time that reputation will basically move out into the community setting as patients are sent home with the once daily oral. And over that course of that time of course, patients and physicians will have experienced with the once daily oral and frankly start to experiment with the stay home strategy, which is basically take the oral upfront and avoid hospitalization overall. And that will happen over the course of the two years. During that time period, our goal is to evaluate alternatives as to how we can more aggressively penetrate into the community marketplace as those two years unfold. There are several different ways that might happen. And so, it’s hard for us to predict with the uncertainty what that will look like at the time or it may be a hybrid of couple of approaches. For example, one thing we expect to learn and time will tell is that there are areas around certain hospital settings where because of the connectivity with the hospitals, we would have the ability ourselves to be more aggressive in the promotion of community use. Other areas, perhaps call it more remote, or more extended, are areas where we would like to use other aspects or other avenues to approach that marketplace. It could be with the partner, it could be with the contract sales organization. There are all the different approaches. And we’ll gain data over the course of the first two years that will inform our decision as to tell us as to what the most effective way is from a combination standpoint, to make that happen.

[Jeffrey Lin:]

Okay, great. And then on the separate question, you alluded to that omadacycline has lower rates of C difficile. Can you perhaps talk about how common or how big is the C difficile infection, and can you perhaps potentially talk about -- provide more commentary on the opportunity in the space?

[Evan Loh:]

I think, when you look at the C diff, Jeff, it’s Evan, all hospital systems have it we believe in terms of the feedback that we’ve received from our advisory board, as top of mind. It’s a significant problem in these hospital systems and linked to many broad spectrum antibiotics, specifically as we’ve already said, clindamycin, beta-lactams as well as quinolones. And physicians and pharmacists have told us that they’re actively seeking alternatives to these classes of antibiotics, particularly in adverse patients. And the ones that are really at risk in the hospital systems are those that have had prior exposure to broad spectrum antibiotics, also those who have a history of C difficile enterocolitis, and finally the elderly. And as you know, there are continues to be -- the elderly are significant portion of the patients who are hospitalized with community-acquired bacterial pneumonia.

[Jeffrey Lin:]

Okay, great. And the last question is, as also alluded to that you’re while not focusing on I guess -- focusing only on the hospital launch, you expect some community uptake. Can you perhaps describe, I guess, dynamics of how many of these hospital physician also may have community practices?

[Michael Bigham:]

Yes. I can give you an idea about how we’ve looked at it, as we’ve been sort of making our projections. Based on what we’re expecting is more of a spillover, they take the business out into the community. And in the first couple of years, we’re expecting a spillover without any direct community-based promotions of about 5% to 15% of our business in the first couple of years.

[Operator:]

Our next question comes from Mike Ulz with Robert W. Baird. Please proceed with your question.

[Mike Ulz:]

Maybe if I could just ask a follow-up on an earlier question related to launch timing. I guess, how should we think about the timeframe from when you actually get approval to when you’ll be prepared for the launch? Are we talking timeframe of a few days or few weeks?

[Michael Bigham:]

Yes. Good question. I think, really for the sake of perhaps modeling purposes, what we would suggest is just keeping the January 2019 launch as the expectation. That’s our goal. And if we have an -- if we have the opportunity, once we have more clarity on the actual approval date et cetera, if we can bring it up a month or two simply to capture more of the flu season next year, we’ll do that. But I think, let’s consider that the upside or best case and for now let’s just assume it’s a January 2019 launch.

[Evan Loh:]

Mike, it’s Evan. Just to provide just a couple of other components of color. Once you get approval, there’s also components of label negotiations as well as review of promotional materials. And I think those are things that are really out of our hands. And we did the best we can to be prepared to have that upfront. But some of that actually will become clear as we approach our overall PDUFA date.

[Michael Bigham:]

But, our goal as a company is beyond those, what I would call, to some extent, administrative issues of which we only have partial control. The elements on which we have control, will be in place to facilitate a slightly earlier launch, if that’s helpful.

[Mike Ulz:]

Yeah. That’s helpful. Thank you for that. And then, maybe just a last question here, if you guys could comment on your current expectations related to potentially having an AdCom or not, that’d be helpful.

[Evan Loh:]

Mike, as we’ve consistently said, we can’t speak for the FDA. We think that the benefit risk here is very much in favor of this dossier and this compound. But, I think we’ll have more clarity at the day-74 letter, and we see that notification is being upside to our base case.

[Operator:]

Our next question comes from Kevin Kedra with Gabelli. Please proceed with your question.

[Kevin Kedra:]

Thank you for taking the question. First, you mentioned omadacycline; you have some flexibility around pricing there. Are there any products on market that you look at as kind of a proxy for pricing strategy or how you go to market with that? And then, secondly, just want to ask about the timing in UTI, mentioned data from the Phase 2 is coming out the second half of 2019. First, I don’t know if I missed it. Did you mention what dosing you are using in Phase 2? And then secondly, as far as timelines, we’ve seen Phase 3 studies enrolling kind of 9 to 10 months in complicated UTI. It seems like you’re being more on a conservative side with your timing for data and UTI. I just want to know if there’s anything going on there. Thanks.

[Evan Loh:]

Yes. So Kevin, why don’t I take that question first, and then, Adam can talk a little bit about your first question. Look, I think that when you look at historical tetracyclines, we think we have unique tetracycline here, not all tetracyclines are the same, and every molecule is unique. And the attributes that I talked about earlier, allow us we think in the Phase 1b data plus the microbiology, plus the PK allow us to go into Phase 2. We take -- I think you probably know us now that we have committed always to taking on rational drug development. It’s deliberate, you have to move through Phase 2 in populations where you do not have historical presence and nor do you have an animal model that gives you guidance on the PK driver of efficacy. As such, we have two well-designed Phase 3 studies; they are robust in terms of Phase 2 size but they are also adaptive in design. The first study is going to be testing an oral only regimen that can go up to as high as 450 milligrams of dosing, which we believe that based on data you’ve seen as we’ve seen as good tolerability, but the second study, by exploring acute pyelonephritis, we believe that that trial will ultimately be enrolled principally in Europe. And therefore the approval timing to get our CTAs approved will take a little longer, similar to the delay we had in the start of our CABP trial. And for us I think data analytics here are going to be very, very important because what we don’t want to do is move into Phase 3 without knowing exactly what the dose is, exactly what the comparator is and ultimately what the posology is that we will take some Phase 2 into Phase 3. That to us is the best way to minimize chance of actually having it failed in Phase 3. And we want to give omadacycline the best chance of being successful and maximize the probability of success. So, we believe this is a rational drug development and we are going to always be deliberate especially when it comes to such a crown jewel with this franchise product called omadacycline. Adam, second question to you.

[Adam Woodrow:]

Yes. Unfortunately, there is not really a great analog for this, because as I think I’ve mentioned in some prior calls, there has not actually been a multi-indication broad spectrum IV oral, once-daily drug launched in almost two decades. So, some of this is us going to be setting a new precedent I suspect in terms of how we’re going to price this. And I mean, I will give more clarity on pricing, but it will have to be a bit closer to our PDUFA date.

[Operator:]

Our next question comes from Adnan Butt with Guggenheim Securities. Please proceed with your question.

[Adnan Butt:]

Hey, thanks folks. Evan, did I miss it, is it one dose being tested for UTI?

[Evan Loh:]

No, there are multiple doses. We have multiple dose arms. It’s an adaptive trial design, and we will generate data as it comes along and then the optimizing enrollment towards those doses that we see that will be showing early signs of efficacy. So we really are going to enhance hopefully our ability to have a strong, predictive value around the success if we see the kind of clinical outcomes that we are hoping to see. So, multiple arms and multiple doses. It will be a data-rich story when we finally have the chance to share that data with you in the second half of 2019

[Adnan Butt:]

The adaptive design enabled you to expand the ongoing study, so is it a Phase 2/3 study or is it a prototypical Phase 2 study?

[Evan Loh:]

It is not a Phase 2/3 study, it is a Phase 2 study. And what we are going to do is -- it’s really adaptive, dose response determination. So, the way you typically will take that on is that you have doses that you initially start with. And depending upon what you see in terms of efficacy, then, you can actually flex into other dosing arms, based upon your pretest probability, determinations of where your exposure response needs to be in order to maximize for efficacy. So, what you want to do is we want to sail [ph] efficiently, and then enrich into the dosing arms where you have and starting to see early signs of efficacy. And then, you’ll ultimately get to the final optimal dose, we should be able to share with from next year, what we believe is the final dose, based upon -- the largest cohorts should be in that final dose arm where we see optimal efficacy. Makes sense?

[Adnan Butt:]

Very helpful. Yes. Thanks. And then on omadacycline, skin and CABP, how important is guideline inclusion? And do guideline changes -- do they happen drug specifically or class specifically?

[Evan Loh:]

So, when you look at guidelines, and I’ll have Adam talk about this a little bit. I think we should be deliberate about talking about guidelines and what we mean by guidelines, because there is two levels of guidelines. Adam will walk you through sort of the work that he’s got to do in terms of getting formulary access. But the other piece that we have to do once we have local awareness in the hospitals is to get on local hospital guidelines. And what Michael had talked about earlier is these networks of primary care and smaller hospitals linked to a larger hub hospitals, these hospital systems often times have I call local treatment guidelines, and protocols for how to treat certain diseases. And we think that it’s important for us to get on those local guidelines. Ultimately, if you look at big agent groups such as IDSA, America Psoriasis Society, as well those are refreshed on a cycle through several years. And ultimately we believe that our compound -- it will be a compound specific recommendation in terms of level of evidence and priority of use based upon certain indications.

[Operator:]

[Operator Instructions] Our next question comes from Ed Arce with HC Wainwright. Please proceed with your questions.

[Ed Arce:]

Hi, guys. Thanks for taking my questions. First one is for Michael. I know you said you don’t speak at all for the FDA, and that’s quite wise, I’m sure. But, what are your expectations in terms of the possibility for an AdCom? And specifically what are you doing to prepare for that, what are you focused on? And then, I have a couple of follow-ups. Thanks.

[Michael Bigham:]

Thank you, Ed. I mean, just relate to reiterate what we said before, we obviously do not speak for the FDA. We believe internally of course that the dossier that we have submitted, the robustness of the data from three Phase 3 trials and all of the earlier work done on the drug that we believe the risk benefit for omadacycline is very compelling. And so, we would, on the margin, guess that there would not be an obvious need for an AdCom. But that’s the FDA decision to make. And so, we’re just going to have to wait and be patient and hear their final determination at or around the end of the day-74. So, obviously, we’ll communicate that to the investment community on a timely basis. So, from our standpoint, what we’re working against is again from being prepared, we’re preparing for a PDUFA date sometime in early October. And as we’ve said before, we are obviously managing expectations toward January 2019 launch. But, if things go well, we’d like to be able to move that up a month or two and capture more of the flu season next year. We just have to see how it all plays out.

[Evan Loh:]

Yes. And Ed, I think that there is -- last year there was precedent to build on what Michael said, I think it was precedent with [indiscernible] not having that comp, so that’s nice to know that NCEs in and of themselves are not driven to in AdCom setting. That being said, we are doing preparatory work. And we can’t be caught flat footed, because the time is short in terms of overall priority review requirements.

[Ed Arce:]

Okay, great. Thanks for that. And then, Evan, you mentioned a significant presence you are preparing for acne, nine posters and one oral. Perhaps you could give a little more detail around what you’re expecting to present there.

[Evan Loh:]

We’re very excited about that opportunity to put more data out there. We will be looking at subgroup analyses of our skin studies. There will be enhanced microbiology and Century data there as well. And we will be looking at also what’s most exciting to us is the oral-only Phase 3 OASIS study and that will be an oral presentation. So, I think you’ll continue to feel very good about our commitment to data transparency in a timely fashion but also that the story continues to I think build in a robust fashion in terms of the consistency of the observations in all spheres of microbiology clinical outcomes.

[Ed Arce:]

Okay, great. Thanks, Evan. Just perhaps one last question for Adam. You mentioned that your managed markets and key account personnel are fully engaged now and in discussions as they prepare for committee, and other work upon approval. I was just wondering if you could share with us perhaps any early perspectives that they are hearing from the hospitals or IDM.

[Adam Woodrow:]

So, we are preparing actually for getting out there, we are not actually in the final discussions yet first [indiscernible] do that until we’ve got the acceptance to the file. So, what we’re doing is scheduling all of those events and we’re still having advisory meetings with the payers, in fact actually we’ve got one next week. It will be about the fourth or fifth meeting we’ve had with the -- both the hospital and commercial payers in the last six months. What I can share with you there is that from a payer perspective, they don’t anticipate too much management of this class of drugs, which is actually a very pleasant surprise because you’re probably aware in many classes of medicine today, payers are getting heavily involved in terms of prior authorizations and step edits and not necessarily the case here. So, they don’t have an annuity of care. They also realize that slowing prescriptions down in the acute care setting especially in a field like community-acquired pneumonia where there’s an associated mortality is not necessarily the most logical or best thing for a patient. The payers overall are actually quite positive. They haven’t seen a broad spectrum multi-indication IV, oral antiinfective for a long time. And one of the meetings that I am quite excited to see this. I know we need new oral antiinfective and we anticipate that you’ll get a reasonably good perception. So, that’s where we are this present time. I’m probably aware that gives you a bit more detail after we’ve had the opportunity to start discussing some of the specifics with the players come sometime later on in April, May.

[Operator:]

Our next question comes from Laura Chico with Raymond James. Please proceed with your questions.

[Laura Chico:]

Hey, good morning, guys. Thanks for taking the question. I appreciate it. Just one quick follow-up and apologies that I missed this earlier. Are you using a loading dose in the cystitis trial?

[Evan Loh:]

It’s one of the considerations in terms of how we are looking at the dosing. I think, it is less urgent from a clinical perspective to have a loading dose in cystitis because patients generally are ambulatory and don’t have a near-term risk of developing bacteremia or sepsis. That’s different in the acute pyelonephritis setting where patients are coming with fever, elevated white count as well as costovertebral angle tenderness or CVAT. And so, with that, I think it’s more urgent to treat them quickly. And we will be looking at an IV and oral combination type of dosing regimen, very similar to what you’ve seen before in our skin and pneumonia studies to get our steady state up quickly in the first 24 hours.

[Laura Chico:]

But that would be in the acute pyelonephritis setting that would be starting on an IV and then transitioning to oral, correct?

[Evan Loh:]

That’s exactly right. But, given how ill some of these patients are, there is always a possibility that we have the option there to continue the IV through the duration of therapy.

[Laura Chico:]

Okay. Thank you. And then, I guess I just have one follow-up and this might be for Adam. I know, targeting the community settings that will be a little bit further downstream for you. But, wondering if you could share any commentary you have on utilization trends. So, we caught a study from that was published Blue Cross [ph] actually last year. And it showed outpatient antibiotics fill rates have been declining since 2010 and broad spectrum antibiotics seem to see the greatest decline over that period. So, I guess I’m curious if you can comment on how you see these trends changing in the next couple of years coming ahead. And perhaps how we should think about the impact to omadacycline?

[Adam Woodrow:]

Yes. It’s good question actually. Look, I think, there is a realization that there is a lot of inappropriate use of antiinfectives, and that’s what antibiotic stewardship is all about. The truth is mostly antibiotic stewardship efforts have been focused around hospital where there is actually less inappropriate use than anywhere else because many of these patients clearly are ill in the hospital and a lot of the inappropriate use in fact in the community where people that have got viral infections in receiving Z-pak and various other antibiotics. And what you are seeing is a steady decline in some of that use. And an acceptance of the general population when a physician says, a primary care physician says look, you’ve got a viral infection here, take these remedies so that they have alleviate the symptoms, not necessarily antibiotics. And if you don’t feel better in a couple of days, come back. There is more of an acceptance to do that today than there ever has been. And so, you are seeing a slight decline in the use of certain antiinfectives. We’re also seeing a decline actually, if you look at the data overall in the overall utilization of quinolones, with the recent change in guidelines from the FDA around the black box warning and the withdrawal of the benefit risk for three indications in the quinolone label which included uncomplicated UTI, otitis media and sinusitis. There has been a steady decline in the utilization of the quinolones as well, which clearly would be more in the outpatient setting, and more sort of I suspect homeopathic type of remedies and other types of approaches to manage those conditions before ultimately getting to a point where patients really do require an antibiotic. Given the sheer size of this market however in all our honestly, Laura, it’s not really going to make a big dent. Because as you are probably aware, there is over 240 million prescriptions per year in the United States for antibiotics in the community setting. And it’s going to take quite some time before those numbers get down to something that are significantly lower than that. Having said that, all of that, the facts remains that in terms of our approach when we do eventually go into the community, we will be going for those patients that are somewhat more severe and where generics really are just not the option and the patients and the physicians, I think can have [ph] one more chance to getting it right before this patient needs to hospitalized. Given the price point that we’re going to have, we’ll only be using those patients that are the most severe and where hospitalization will be alternative, and a less expensive oral medication like omadacycline is their best option.

[Operator:]

Our next question comes from Robert Driscoll with Wedbush Securities. Please proceed with your questions.

[Robert Driscoll:]

Hey. Good morning, guys. Thanks for taking the question. So, just regarding the second Phase 2, the IV to oral study. And I know you’ve already talked about the adaptive dosing. I just wanted if there are any other design elements to that study that you could share such as the comparator arm and the importance of that. And if there was anything -- any insights we gain from the recent eravacycline study failure in cUTI?

[Evan Loh:]

Robert, thanks for the question. I think we first start with our view that as I said earlier today, all tetracyclines are not the same and every molecule is unique. And we think we have unique attributes that allow us to actually move forward in the UTI setting, regardless of any other prior observations from any other setting. So, we feel very good and very confident about what we’re doing. Second of all, and when you look at the design of pyelonephritis study, I think, it [indiscernible] us in both the uncomplicated as well as the complicated setting to actually have a comparator. Those are still part of our deliberations in terms of what that comparator looks for acute pyelonephritis. But, having that comparator will be very important, but it has to be we believe an option that has an IV with an oral comparator, I think that’s only fair in terms of understanding like-for-like and being able to interpret the data. And I think that overall, I think the design will be robust, and as I said earlier via data-rich study outcome when we are completed. And just to close, I think, it will be up to us to have regulatory discussions with FDA, which are planned later this spring. We want to ensure that the designs are extrapolatabel into a Phase 3 dosing posology that we design. We will not deviate from those commitments in terms of Phase 2 into Phase 3 because I think that sets up way too much risk in terms of having a fail in Phase 3, and we just can’t have that.

[Operator:]

Our next question comes from Bert Hazlett with BTIG. Please proceed with your questions.

[Bert Hazlett:]

Hi. Thanks for taking a follow-up. With regard to -- you have the all oral study in skin clearly. Is there possibility as you interact with the FDA for an all oral approval in CABP, is that something that you are considering? And then, if you could also comment, there’s been a recent FDA safety warning with regard to Biaxin. How does that affect, if at all, your thoughts with regard to the appeal of omadacycline? Thanks.

[Evan Loh:]

Thanks, Bert, for the question. We have said before and we continue to say that because of the precedent set with Melinta’s oral only posology from their dossier where they only conducted two trials with both IV-oral, without an oral only study that there’s precedent for the FDA to consider an oral only dosing regimen based upon pharmacokinetics and consistent pharmacokinetics, and it’s good and predictive. We have it and the other enhancement of our dossier that is different is that we actually have completed an oral-only skin study, using exactly the same posologies that we believe would be relevant for community-required bacterial pneumonia, based upon consistent PK. So, we will have those discussions with FDA, and during label negotiations that’s when we will have more clarity on this as well. So, thank you for the notation about Biaxin. I think it’s important to note that whenever you look at classes of antibiotics such as macrolides and clarithromycin is one of them, they all carry in attendance, potential risks for prolongation of QTc. Now, this Biaxin warning I think is a relatively old warning. It’s not really new. It’s been around for a while. But, as you look at classes of antibiotics that may carry QTc as a liability, I think that is one consideration that when you are thinking about running into the community setting all community based internists get really kind of nervous about prescribing an antibiotic that has QTc liability, especially given the fact that in the elderly they have concomitant medications that can exacerbate that particular risk and then lead them to be found dead at home. But that’s typically the outcome.

[Adam Woodrow:]

One thing I would add to that is that in particular obviously Biaxin is used obviously in the community-acquired bacterial pneumonia setting and the patients that have problems with heart issues tend to be the elderly. And over 60% of people that get community-acquired pneumonia are the elderly. So it’s an opportunity for us, clearly. We don’t have that issue. We know that this is not something that’s been seen with tetracycline class antibiotic either, over the last sort of seven decades of utilization. So, when you’re taking anti-infectives, as we’ve said before, it’s not only resistant pathogens that gives a reason why you would take a new branded antibiotic, it’s also for safety reasons or tolerability reasons for other drugs. And fundamentally, it’s just going to come down to trust with the class. And we feel very confident that issues like this specifically can provide us with an opportunity to commercialize successfully.

[Operator:]

Thank you. At this time, I would like to turn the call back over to Mr. Michael Bigham for closing comments.

[Michael Bigham:]

Thank you. As there are no more questions, we will wrap up today’s call with just a brief closing comment, specifically to thank all of you for your time and attention today and for your questions, your continued interest in omadacycline and Paratek remain important to us. We very much appreciate your support. This journey would not be possible without you. So, we look forward to keeping you apprised of our continued progress, particularly in the exciting few months ahead. Good bye for now.

[Operator:]

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. And thank you for your participation.