Paratek Pharmaceuticals, Inc.
Q3 2016 Earnings Call Transcript

Published: 2 Nov 2016

[Operator:]

Greetings and welcome to the Paratek Pharmaceuticals' Third Quarter 2016 Financial Results Conference Call. 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. It is now my pleasure to introduce your host, Mr. Paul Arndt, Managing Director, LifeSci Advisors. Thank you, sir. Please begin.

[Paul Arndt:]

Thank you, Donna. Good morning. My name is Paul Arndt, Managing Director of LifeSci Advisors, Paratek’s Investor Relations firm. And I’d like to welcome you to Paratek’s third quarter 2016 update and earnings conference call. A press release with the company's third quarter financial results and clinical updates was issued earlier this morning and can be found at www.paratekpharma.com. The agenda for today’s call is as follow. Michael Bigham, CEO and Chairman of the Board, will provide an overview of the company’s progress so far this year and near-term plans for the coming quarter. Dr. Evan Loh, President and Chief Medical Officer and Director, will review the company's clinical programs. He will provide an update on the two ongoing Phase 3 registration studies for sleep compound, omadacycline as well as the Phase 1 programs including UTI and BAL. Doug Pagán, Chief Financial Officer, will review the financials for the third quarter. Mike will then make brief closing remarks and then open up the call for Q&A. Adam Woodrow, Chief Commercial Officer, will also be available for questions. Before we begin, I'd like to remind you that today's discussion will include statements about the company's future expectations, plans and prospects that constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. The words anticipate, plan, potential, expect, will and other words denoting future events identify statements as forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of various risk factors, including those disclosed in our press release today and in the risk factors section of our annual report on Form 10-K for the year ended December 31, 2015 and as filed with the SEC on March 9, 2016. In addition, any forward-looking statements represent our views only as of today, Wednesday, November 2, 2016 and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change. I'll now turn the call over to Michael Bigham.

[Michael Bigham:]

Thank you, Paul. Good morning, everyone, and thank you for joining our third quarter earnings call and corporate update. The third quarter was a busy one for Paratek, as we’ve continued to make significant progress towards our corporate goals. In August, we does the first patient in our Phase 3 registration study testing an oral-only dosing regimen for omadacycline in acute bacterial skin and skin-structure infections or ABSSSI. As you will recall, this study builds off of our successful IV to once-daily oral skin registration study, the results from which we announced in June. We believe that this once-daily oral-only study with omadacycline offers a number of significant potential value drivers for Paratek, as we move towards regulatory approval and commercialization. An oral-only indication would both allow and guide physicians on how best to prescribe omadacycline in the community setting, potentially avoiding a costly hospital save for patients. This is a key element of our stay home strategy for omadacycline. Importantly, we believe that our recent market research demonstrate that there is a substantial unmet need for a new well-tolerated, once-daily, oral-only empiric antibiotics in this community setting category. Increasing numbers of patients are being admitted to hospital for skin infections, because of resistance to the older oral agent that are commonly used today. Since August this oral-only skin study has been enrolling to plan and we continue to expect to have top line data available as early as the second quarter of 2017. Also I'm pleased to report that our ongoing Phase 3 registration study of IV to once-daily oral omadacycline and community acquired bacterial pneumonia or CABP continues to enroll in line with our expectations and remains on track. We continue to expect to announce top line data from this study as early as the end of the third quarter 2017. In addition, as we announced this morning, during this quarter, we completed a number of important clinical Phase 1 studies to fulfill traditional regulatory requirements for our planned NDA filing for omadacycline. The first study evaluated the ability of omadacycline to penetrate lung epithelial lining fluid as measured by the bronchoalveolar lavage or BAL sampling technique. The second of these studies is test omadacycline in patients with impaired kidney function. The findings from these studies provide further support for our planned NDA filing. Evan will provide more or additional details on these studies later in this call. With a view toward exploring the broader clinical potential of omadacycline in addition to skin and pneumonia, we completed an important Phase 1b study of omadacycline in patients with uncomplicated urinary tract infections or UTI. We are particularly encouraged by the data from this clinical study. And to our knowledge omadacycline is now the only once-daily oral and IV antibiotic in development with clinical proof-of-principle for the treatment of UTI. As you may know, UTI is the largest of the three most common community acquired bacterial infection along with skin infections and pneumonia. And due to the emergence of resistant pathogen, particularly strains of E. coli, there is an urgent need for new efficacious well-tolerated oral agents to treat UTI. Our market research suggests that in UTI there could be as many as 1 million patients in the U.S suffering from multiple drug-resistant E. coli. Evan will provide some additional details from our recent UTI study later in this call. Most importantly, we believe that the data support developing a registration pathway for omadacycline for an indication to treat UTI. Beyond these clinical achievements, we have also completed production of all the registration badges for both the oral and IV formulations of omadacycline that are required to support an NDA filing. With these milestones now completed, we are well-positioned to submit our NDA filing for omadacycline following the successful completion of our two ongoing Phase 3 study, once-daily oral-only skin and an IV to once-daily oral CABP study. As such, we remain on track to file our NDA in the first half of 2018. Finally, last month we announced an exciting and important research agreement with the U.S Department of Defense to explore the utility of omadacycline in treating pathogens that could be potentially be used for biological warfare, including plague and anthrax. We are honored to have the opportunity to work with the scientists at the U.S. Army Medical Research Institute of Infectious Disease or USAMRIID on this important program. And we are pleased to have the Department of Defense recognize the potential for omadacycline to be available for our troops as an effective broad-spectrum and well-tolerated once-daily antibiotics. We will keep you updated as this research progresses. Overall, we’ve had an exciting and productive third quarter. We are pleased with our continued progress to date, which has generated further momentum as we approach with promises to be an important and eventful 2017, as we complete the clinical studies necessary for our NDA filing. In particular, the clinical data we have generated in UTI establish a promising path forward in that indication -- an indication which would significantly expand the potential utility for omadacycline. I’m also excited to share with you that on the afternoon of November 17 from 1 to 3 PM Eastern standard Time, we will be hosting an R&D Day in New York City, during which we will provide more detailed update on our development program. And details on our R&D Day could be found on our Web site www.paratekpharma.com and we encourage each of you to join us at that event. In summary then, we continue to make strong steady progress towards our goal to develop the full clinical potential of omadacycline for the patients and doctors who are in need of a new effective IV and once-daily oral antibiotic to be used in multiple indications, particularly, where resistance is of concern. With that, I will now turn the call over to Evan to discuss our clinical highlights from this quarter. Evan?

[Evan Loh:]

Thank you, Michael. Good morning, everyone. I’m pleased to report that our Phase 3 registration studies with omadacycline are advancing well. As you recall, our community acquired bacterial pneumonia Phase 3 study began enrollment nearly a year-ago in November of last year and is expected to enroll approximately 750 patients at approximately 130 clinical research centers around the world. This particular study designed to compare a regimen of IV to once-daily oral omadacycline to IV-to-oral moxifloxacin, which as you know is a broad-spectrum quinolone antibiotic. We’ve also completed the third prospectively planned data safety monitoring board review for this indication. Following their review, the committee continues to recommend that the protocol carry-on in its original design without modification. To date, the study remains on track to report top line data as early as the third quarter of next year, which is less than one year away. We're delighted to have initiated enrollment in our once-daily oral-only skin study. We are pleased with the activation of sites and with the initial pace of enrollment that we've seen since the study began enrollment in August. As a reminder, the study inclusion, exclusion and primary endpoints for this oral-only Phase 3 skin study design mirror that of our completed IV the once-daily oral skin study. The study will enroll approximately 700 patients randomized to either once-daily oral omadacycline or to twice-daily oral linezolid. The primary endpoint will also be similar to the recently completed IV to once-daily oral ABSSSI safety study, which is the early clinical response accessed 48 to 72 hours following randomization. The key secondary endpoint in this trial will include the post-treatment evaluation of cure or failure, which aligns with the European guidance for the assessment of efficacy i.e. which is the primary endpoint for EMA as assessed in both the modified ITT and clinically evaluable population. As Michael has noted in his opening remarks, we continue to expect to be in a position to share top line data from the study as early as the second quarter of 2017, also less than one-year away. Now I'd like to turn to the collection of important clinical Phase 1 studies that we have recently completed during this quarter. I'll start with the PK lung penetration study, which was designed to assess levels of omadacycline in human lung epithelial lining fluid or ELF, which is considered a surrogate for lung tissue penetration of omadacycline. This study was requested by FDA to provide comparative pharmacokinetic data of omadacycline in plasma and in human lung epithelial lining fluid. We measured omadacycline levels in ELS by the bronchoalveolar lavage or BLA sampling technique. In this study, we observed consistently higher concentrations of omadacycline in human lung epithelial lining fluid than that observed in human plasma over the entire sampling period. Parenthetically, the human plasma levels of omadacycline were exactly as observed and consistent with AUC levels observed in prior human Phase 1 omadacycline PK study. As we stated previously, we've always at a high-level of confidence in the potential utility of omadacycline as a treatment for community acquired bacterial pneumonia. This confidence is supported by the preclinical data, including animal pneumonia efficacy studies, animal lung penetration data, and human PK PD modeling. The findings of the current Phase 1 PK lung penetration study, which has confirmed lung penetration levels of omadacycline that are greater than human plasma levels further support our beliefs and the potential efficacy of omadacycline in the ongoing community acquired pneumonia Phase 3 study. Next, I like to turn to the study that compared exposure levels of omadacycline in patients on hemodialysis with end-stage renal disease or ESRD. As you know, this study is a special population set of data required for any NDA filing. The result of this study demonstrated similar exposures between ESRD and healthy control subjects and continue to support our position that there should not be a need for dose modifications in patients with any degree of renal impairment. As a reminder, a previously reported Phase 1 special population study conducted with omadacycline in subjects with mild, moderate, and severe liver insufficiency also demonstrated no change in PK exposure and omadacycline clearance. Together these liver impaired and renal impaired Phase 1 special population studies support our position that no dosing adjustments for omadacycline will be needed. Now I'd like to discuss our Phase 1b study in subjects with uncomplicated urinary tract infection or Cystitis. As you recall, UTI represents the third of the big three community acquired infection, which include skin infections and pneumonia. This proof-of-principle study focused on the pharmacokinetics of several dosing regimens of omadacycline including once-daily IV and once-daily oral-only regimens over a treatment period of five days. We are extremely pleased to report that we observed high concentrations of omadacycline at steady-state in urine. Based upon these data, we are very excited about the potential for omadacycline in patients with UTI. With these UTI data in hand, we now have what we need to have the confidence to explore a pathway to registrations in a UTI indication. We expect to be able to layout a development strategy for registration in this important indication in the first half of next year. Let me also report that there remain consistency of the observed safety and tolerability profile of omadacycline over the range of the various dosing regimens used across the totality of the Phase 1 studies that I've just described, which are the PK lung penetration study, the renal impaired study, and the UTI study These data continue to document that omadacycline continues to be generally safe, well-tolerated and that these data remain consistent with the other 17 Phase 1 studies that have previously completed and that we've reported on with no new safety signals observed. We look forward to sharing more details from all of these three Phase 1 studies at our R&D Day on November 17. Please note that along with our R&D Day presentations, we will have independent experts on our panel that will discuss the PK lung penetration and UTI data as they relate to the ongoing-CABP Phase 3 registration study and the unmet needs in UTI respectively. As we’ve noted to you all in the past, our early and ongoing commitment to an investment into manufacturing have allowed us to achieve another important milestone this quarter. Specifically, completing the manufacturing of the three registration batches for both the oral and the IV commercial formulations which are required for our FDA regulatory submission and approval. These registration batches were manufactured at commercial scale and placed on room temperature stability testing. This achievement further strengthens our data packets as we continue to plan for our NDA submission in the first half of 2018. Overall, our development program is advancing well. I would also like to take a moment to thank our development team, our investigators, and our patients for their contributions and their efforts to deliver these important data. As we achieve each new value creating milestone, we gain increasing confidence in the efficacy, safety, and tolerability profile of omadacycline across multiple potential indications and the potential significant benefits that it may offer to physicians and patients in need of a new antibiotic to treat serious community-acquired bacterial infection where resistance is of concern. Importantly, the recent UTI Phase 1b data allows us to develop a registration path in UTI, which represent a third significant potential indication for omadacycline. We look forward to seeing you on November 17 in New York City at our R&D Day. With that, now Doug will share an update on our financial results for the quarter. Doug?

[Doug Pagan:]

Thank you, Evan. We continue to be in a strong financial position as we advanced the late stage development program for omadacycline. Company ended the quarter with 128 -- I’m sorry, $120.8 million in cash, cash equivalents and marketable securities and $19.7 million in long-term debt. Our third quarter operating expenses were $23.1 million. R&D expenses were $17.3 million for the third quarter. The primary drivers for this expense were our Phase 3 clinical studies in skin and CABP, other Phase 1 studies for omadacycline, personnel related costs and expenses associated with manufacturing activity. Due to the conclusion of several studies early in Q3, the current quarter's R&D expenses experienced a decline compared to the previous quarter. With the commencement of the oral-only skin study, in August, and the initiation of preparation activities for an NDA submission for omadacycline, we expect the next several quarters to return to the R&D expenditure level we experienced in the first half of 2016. G&A expenses were $5.9 million for the third quarter. The bulk of these were related primarily to salaries and other associated costs for personnel, as well as professional. legal and consulting fees. Based on current plans, we continue to expect the Company's cash, cash equivalent, and marketable securities together with our available deadline to fund operations through the omadacycline NDA filing, which we expect to occur in the first half of 2018. And now, I will turn the call back over to Michael to close. Michael?

[Michael Bigham:]

Thank you, Doug. All of us in Paratek remain devoted to the successful development and perspective commercialization of omadacycline, which we continue to believe has the potential to be an effective, broad-spectrum, well-tolerated, once-daily oral and IV antibiotics for multiple syndication. The data we have recently announced only further reinforces our belief. As you’ve heard, our third quarter was a very active and productive one. We are pleased with the progress we've made to date. We remain excited about the eventful year ahead. In addition to the solid progress in our ongoing clinical studies this quarter, we also completed important regulatory requirements that will support our planned NDA filing. Importantly, we also now have the clinical data to support developing a registration pathway for the treatment of UTI, which is the largest of the three most common community-acquired bacterial infection, along with skin infections and pneumonia. To our knowledge, omadacycline is the only once-daily oral and IV antibiotic in development with clinical proof-of-principle for the treatment of UTI and the clinical need for new effective oral antibiotics for UTI is significant. While we’re proud of the progress we've made to date, we recognize that more remains to be done. However, with the positive Phase 3 study we announced in June, the recent positive data from our Phase 1b study in UTI, the successful completion of our other two Phase 1 regulatory studies, the active enrollment of our two ongoing Phase 3 studies and the completion of the registration batches, the goal line is very much within view. In short, 2017 promises to be an exciting and eventful year. As you might imagine, our team remains highly motivated. We are privileged to be the stewards of the exciting drug candidate that we have been entrusted to develop. We believe that omadacycline is a once in a generation development opportunity. Our team recognizes just how much potential good omadacycline can do for patients worldwide to treat terrible infection, and in some cases even save life. That knowledge motivates us daily. It instills in us an appropriate sense of urgency and excitement. We know that you appreciate the importance and potential of the work that we do and we very much appreciate your continued support. With that, operator, we can now open the call for questions.

[Operator:]

Thank you. [Operator Instructions] Our first question is coming from Paul Matteis of Leerink. Please proceed with your question.

[Paul Matteis:]

Hey, guys. Thanks for taking my questions. We’ve a handful, if you don’t mind. On the Phase 1 study, the first is on the BAL ELS study, I’m wondering if you look at both the IV and the oral in this study and if you saw any differences in epithelial lining fluid penetration between the two?

[Evan Loh:]

Hi, Paul. Its Evan.

[Paul Matteis:]

Yes.

[Evan Loh:]

So, what we actually ended up doing was, it was important for us to actually assess our levels at steady-state and with that we specifically looked at IV dosing, which is the traditional way that all of these studies are actually done in order to get the steady-state. So we looked at our levels of omadacycline over that dosing period at steady-state after multiple days of dosing.

[Paul Matteis:]

Would you expect the oral to have different levels of epithelial lining fluid penetration, Evan?

[Evan Loh:]

We believe that if you look at the Phase A plasma levels and the general balance that is achieved between different tissue makers see that we wouldn’t anticipate any difference at all, if you just look at an oral dosing regimen.

[Paul Matteis:]

Okay.

[Evan Loh:]

And you know just to reemphasize that the 300 mg oral dose that we’re using is bioequivalent to the IV dosing and at steady-state we have never ever seen any deviation from that observation.

[Paul Matteis:]

Okay. Thanks. And then on the UTI study, can you expand a little bit on the pharmacodynamic data you’ve generated from that study? I mean, I’m sure it's in a small sample, but did you see a clinical cure rate in that study that you found was compelling? What did you see in terms of the level of activity against various pathogens in that conduct?

[Evan Loh:]

Yes, we will be able to share more of that -- more of those details with you, Paul, at our R&D Day. This was a study in individuals with cystitis as you recall. They were dosed for five days and overall our preliminary bacterial clearance data appears supportive and consistent with our in vitro data. The study was not geared towards looking specifically at cure rates. It was specifically as a primary end point looking at our PK levels and we are very pleased with seeing the high levels of parent compound with omadacycline. And at this point, we are pleased with the overall observations and the direction that we see in terms of how patients did during the conduct of the study.

[Paul Matteis:]

Okay. And what doses did you look at met study? Did you look at any higher doses?

[Evan Loh:]

Yes, we did evaluate higher doses and we will share more of that information at our R&D Day, Paul.

[Paul Matteis:]

Okay. And maybe just one final quick financial question on met for Doug, your cash burn guidance what did that include for any additional development work in UTI and I guess how much do you think a subsequent study could passed [ph]? Thanks again, guys.

[Doug Pagan:]

Yes, good question, Paul. At this point, we're and can differ more to Evan, we're still evaluating what a protocol will look like for the next studies, the timing, and the cost. So we’ve not incorporated yet UTI study into our cash burn runway.

[Paul Matteis:]

Okay. All right. Thanks, guys.

[Evan Loh:]

Thanks, Paul.

[Operator:]

Thank you. Our next question is coming from Louise Chen of Guggenheim. Please proceed with your question.

[Brandon Folkes:]

Hi, guys. It's Brandon Folkes on for Louise. Congratulations on all the progress during the quarter. Firstly, could you just compare and contrast omadacycline to other similar products that have already been approved? And then secondly, do you see your docs in hospital treating infections empirically? And if, did they prefer a broad or narrow spectrum antibiotic? Thank you.

[Michael Bigham:]

Adam, do you want to take that?

[Adam Woodrow:]

Yes, I can take that. We got a pretty unique profile within the molecular entity and the first of in this class [ph], which has been a metal siphons [ph]. We are also the only Company with antibiotic currently that’s targeting the three most common indications in the community setting. And this profile is really dearly needed, because it has been many years since there's been any antibiotics with a profile that would allow them to even approach these indications. We think that if we are approved, omadacycline has got potential to provide patients and physicians with a well-tolerated once-daily oral and IV monotherapy option for community-acquired bacterial infections, particularly when there is resistance that is either confirmed or suspected and in particular when an empiric treatment option is needed. In the hospital side, our IV to once-daily well-tolerated oral transition does enable early patient discharge and facilitates higher rates of patient compliance. This obviously saves money for the payer and reduces the cost allocated to the pharmacy budget. If we were actually to use the oral-only, which obviously we’re developing, and you use the oral-only indication for the community setting, it well help actually the physicians to avoid a hospitalization of some patients altogether. This is a really compelling financial incentive for payers, if no longer be paying for the hospital -- the expensive hospital sites and also beneficial to the patients, because oral therapies are more convenient and actually eliminate some of the potential complications associated with our IV therapy. For patients with known or suspected community acquired resistant pathogens requiring an empiric treatment, these financial benefits to the payer and the convenience and safety benefits for the patient can only be achieved when you have the flexibility of both an IV and oral broad-spectrum well-tolerated option like omadacycline. Now getting to your point about what the physicians do and you heard me talk specifically about the use of empiric treatment. Emergency room physicians and in fact hospitalists invariably use broad-spectrum agents. They don't have the benefit unfortunately of knowing what the culture is, it's almost always treat empirically as they rarely have this positive culture in hand. In these circumstances to ensure they cover the potential pathogens that could be causing the infection, they almost always use broad-spectrum agents. A move to those more targeted therapies are even now spectrum agents, because predominantly after a positive culture comes back from the labs. I should point out, however, that a definitive culture is only achieved in approximately 35% or one-third of those skin patients. And in fact less than 20% in the community-acquired pneumonia space. So you see the need for an agent that actually covers all of the [indiscernible] are likely to need, including those where resistance is concerned. It is pretty compelling and needed right now. I hope that sort of answers your question. If you got a physician where you got patients, you can't tolerate first line generics or expected to have a polymicrobial infection with the obvious choice in empiric setting, especially if antibiotic is well-tolerated with an IV and oral enables early discharge. It's both good for the patient and good for the payer.

[Brandon Folkes:]

Great. Thanks very much.

[Adam Woodrow:]

Pleasure.

[Operator:]

Thank you. Our next question is coming from Chiara Russo of Cantor. Please proceed with your question.

[Chiara Russo:]

Yes. Hey, guys. Good morning. Thanks for taking the question. I know that you guys have your R&D Day scheduled on mid-November. I was wondering if you could potentially give us sort of a sneak peak what we should expect coming out of that Day?

[Evan Loh:]

Hi, Chiara. It's Evan. Thanks for the question. We will be giving little bit more detail, typically around the data that we observed and much of the data is still early, we're still diving deep in to it to understand all of it. But we will be presenting a broader overview of the data for the BAL study, as well as for the Phase 1b UTI study. And in addition to that, we will have a panel of experts that we’ve worked with closely. There are individuals that understand the opportunity from an unmet need standpoint and they will also be able to place the BAL data in the context of other previous data, that isn't seen with other antibiotics relative to potential impact and success that will have with regards to our community-acquired bacterial pneumonia study going forward, as well as to understand the potential implications of our UTI data as it relates to the registration passport with FDA.

[Chiara Russo:]

Okay. You actually kind of jump into the -- my next question. I know you said that it is early in the sort of the planning and the concept of it, but is there any way that you can sort of ballpark the UTI pathway for us?

[Evan Loh:]

I think, the data is still early for us, but we continue to remain very excited about the results. And we are going to be talking to our thought leaders as well as to the FDA in terms of developing a registration path forward. And since it’s the [indiscernible] too early, for us to be able to share all of those details, but we'll be -- back you in early 2017 with more of those details.

[Chiara Russo:]

Okay. And sort of lastly, just something that I’ve noted, over the last couple of months the name is kind of taken a little bit of a beating in the market. Do you guys happened to have any insight as to why it's sort of under that pressure?

[Michael Bigham:]

No, actually we didn’t notice that ourselves. In fact, there is no sensible reason why the stocks to be under pressure other than what we hear anecdotally is that there is some aggressive year end the balancing of portfolios. But it is nothing specific to Paratek or omadacycline.

[Chiara Russo:]

Right.

[Evan Loh:]

So, I’m afraid we don’t have any greater insight to that at this point.

[Chiara Russo:]

Okay. Great, guys. Thanks for taking the questions.

[Operator:]

[Operator Instructions] Our next question is coming from Mike Ulz of Baird. Please proceed with your question.

[Mike Ulz:]

Hey, guys. Thanks for taking the question and congrats on all the progress. I just wanted to ask a manufacturing question, since we -- you’ve seen some other companies face some challenges recently. So, maybe you can just comment on your level of confidence around manufacturing and maybe where the facility is located, and if that facility is being audited by the FDA? Thanks.

[Michael Bigham:]

Yes. Hi, Mike. Thanks very much for the question. Look we -- as you all know every time we talk to investors and analysts like yourself, we’ve always said how important our commitment is and how important we believe the manufacturing deliverables are to a successful NDA, as well as to be able to be -- we are planning forward to the launch ready at approval. Paratek has been working with our current suppliers throughout our supply chain for many years. In fact, up to 14 years in the case of one supplier set before we’ve actually done this work at commercial scale. All of our contract suppliers are based in Europe and have had recent FDA inspections and currently have no government restrictions that we are aware of. In addition, we, Paratek have ordered [ph] to our vendors within the last 12 months. So we’ve good visibility on what's going on at each of those sites by sending our own people there. And finally we provide oversight for our production run. So in answering to your question, Mike, we have good confidence in our current supply chain and continue to plan for secondary suppliers to further solidify our supply chain should it be needed in the future. And we have identified potential back up suppliers as part of our ongoing process.

[Mike Ulz:]

Okay, great. Thanks, guys.

[Michael Bigham:]

Thanks, Mike.

[Operator:]

Thank you. Our next question is coming from Paul Matteis of Leerink Partners. Please proceed with your question.

[Paul Matteis:]

Hey, guys. Thanks. I just want to ask a quick follow-up, if you don’t mind. This morning there is briefing documents out for solithromycin that -- have some discussion on liver enzyme elevations and liver injury etcetera. Can you remind us what you’ve seen in terms of AST, ALT elevations and any instances of Hy's law in your clinical program?

[Evan Loh:]

Yes, thanks for the question, Paul. LFTs are always a adverse event in laboratory deviation of interest in any development program and we look at it very, very closely. As you recall from our [indiscernible] and exposure of our patients to date and more specifically in our Phase 3 data we’ve a very low rate of any changes in ALT or AST. I think we’ve reported about a 2.5% rate of ALT elevation, reported as an adverse event. But we have very low rates of individuals that may have been had rates of LFT abnormalities above 3x, above the upper limit of normal. We had no cases of Hy's law throughout our dose yet. And I think the other contextual piece to remember here is that we are a tetracycline derivative. If you look at the over seven decades of historical use of tetracycline in the community care and hospital care setting to date, liver function abnormalities although reported in and in the product labels as general class adverse event, the instances are very, very low and there's never been reports of fatal liver toxicity with this class of antibiotic.

[Paul Matteis:]

Okay. Thank you, Evan.

[Evan Loh:]

Thanks, Paul.

[Operator:]

Thank you. Our next question is coming from Ed Arce of H.C. Wainwright. Please proceed with your question.

[Ed Arce:]

Hi, guys. Thanks for taking my question. Most of the questions has been asked, but wanted to follow-up on -- just a general question as you begin to approach commercial planning, if you could remind us and I realize this may be part of what you're discussing as well as the R&D Day, but how you think about rolling out your commercial plan initially in the hospital and then using that as the gateway to broader commercial expansion in the community? Thanks.

[Adam Woodrow:]

Thanks, Ed. This is Adam. Because I’ve mentioned before, our plan at least in the first year or two is to focus specifically on the hospital segment of the business, which is in essence gaining hospital formulary adoption. And then from that hospital formulary adoption we want to drive referrals from our IV onto the oral formulation and to the community. That takes about 18 months in tool and up to two years. It's not a very quick process to gain hospital formulary adoption. The plan from a numbers perspective is that we will go somewhere between 50 up to about 125 -- we will probably start with 15 grow to about 80 over time based from the analysis that will be done, that will cover most of the major institutions that are in the United States, and we will build from there.

[Ed Arce:]

Okay, great. Thank you.

[Evan Loh:]

Thanks, Ed.

[Operator:]

Thank you. At this time I would like to -- actually I’m sorry, we do have another question that came into queue. Our next question is coming from Jim Roumell of Roumell Asset Management. Please proceed with your question.

[Jim Roumell:]

Thank you. Hi, Evan.

[Evan Loh:]

Hi, Jim.

[Jim Roumell:]

Quick question in terms of the question that raised earlier about the stock price. And there seems to be a lot of press recently about the potential for regulations or price constraints on drugs in the next administration. And it seems to me that given the need for antibiotics and given the Gain Act, was in fact a policy to increase the profitability of antibiotics to slow the development. Can you comment or discuss your thoughts on the environment, the political environment regarding drugs? And is it a fair characterization to say that the one thing Republicans and Democrats are agreed to in the past two years is to create a policy to increase the profitability of antibiotics and the likelihood that that would suddenly be reversed?

[Michael Bigham:]

Yes. Thank you, Jim. Very good question. There is no question in my mind that for entering a period politically where drug pricing is going to come under increasing scrutiny. And where there have been abuses, at personal, I think there have been many, but unfortunately they tend to be high profile. I think those kind of abuses will get ferreted out and punished going forward. Unfortunately, it creates an environment that the investment -- broader investment community reacts to more broadly and assumes that everybody is going to be under the similar pressure. And that's not accurate. In fact, antibiotics is probably, if not these, certainly amongst the top two or three areas where pricing flexibility is likely to get better. Unfortunately, right now people don't make that distinction. Certainly within Congress and Evan can speak to this, given his activity down on the hill with the antibiotics working group, there seems to be continues to be broad support across the aisle, Republican and Democrat to basically continue to encourage development of antibiotics, part of which is trying to help create an environment where pricing -- where the pricing environment gets better. So, we’ve seen no change in that whatsoever. But again unfortunately in the short-term I think the broader investment community reacts negatively to the notion that pharma industry may be losing some of its pricing power and implies that broadly across the board. But there are still going to be winners and losers, and antibiotics is clearly one of the class that’s going to be a winner in this key change.

[Evan Loh:]

You know, Jim, its Evan. Thank you for the question. Just to build on what Michael has said, there's been a tremendous amount of public attention on the issue of antibiotic development. It remains important for all of us to believe that further support and investment in antibiotics development will allow us to have outcomes that we all expect to date with regards to be able to combat resistance and avoiding us falling into the pre-penicillin era where we didn't have antibiotics as an option. You recently heard and saw some of the comments and decisions that came out of the UN meeting in September that discuss the antibiotics resistance and a threat to public health. That was an important event, recognizing the great importance and great threat the world face in antibiotic resistance. And you may have seen my editorial on this topic that I contributed to the Hill newspaper on September 23rd. I think the steps proposed by the UN that includes supporting reduction and eventual elimination of the use of antibiotics in animal feed, working to ensure the appropriate use of antibiotics in the right infection, setting with the right antibiotic to minimize the development of antibiotic resistance. I think all of these are critical factors, but alone they won't be enough. I think as Michael said, there needs to be action that gets taken on the Hill. And I think that when we at Paratek, we as part of the antibiotics working group have been strident supporters of new incentive [indiscernible] investment in the development of new antibiotic. And I think pricing goes along with this in terms of the ability to think about what I refer to these days as full incentives, to think about how to actually recognize the early few years of an antibiotic launch. I think there is a number of good policy proposals on the Hill today, including the Path Act and the DISARM Act as Michael have mentioned. But I think, as I said to you before, I think it’s the action that we needs to take. And finally I'll be participating in a public workshop on this topic hosted by the Margolis Center for Health Policy at Duke University and led by Mark McClellan. Remember he is the former administrator for CMS to be held in Washington DC on November 9, and you can find out more about the agenda at the healthpolicy.duke.edu and we'll specifically be talking about broad-based incentive that will hopefully continue to spur not only research and development and antibiotics, but also as we were referring to as full incentives to create the economic incentives for companies like ours to be able to continue forward.

[Michael Bigham:]

And I would add one thing. We completed quite a bit of research already with the payers [ph], both hospital formulary promises to do so external commercial payers. And antibiotics is one of those few areas where they’re willing to pay the show cause therapies, the curative and that’s an important point. We underestimate the value of antibiotics and there is increasing realization even amongst the payer landscape that we have -- we are willing to pay for the innovation that goes with new antibiotics. And certainly from our research, I could tell you that as I’m planning the commercial launch, access is not one of those of massive issues that it is probably working in one of the other areas of medicine today.

[Jim Roumell:]

Got it. Thank you.

[Evan Loh:]

Thanks, Jim.

[Operator:]

Thank you. At this time, I’d like to turn the floor back over to management for any additional or closing comments.

[Michael Bigham:]

Thank you. As there are no more questions, we can move to a quick closing comment. As you may know, we were recently invited to ring the closing bell at the NASDAQ in honor of the 20th anniversary of the founding of Paratek. It was an exciting event and an appropriate way to recognize the nearly two decades of work by many talented individuals that have gotten us to where we are today. Drug discovery and development is hard work. 20 years is a long time, but we have omadacycline to show for those considerable efforts. It has been well worth the journey and we believe that the best is yet to come. So thank you again for your time this morning and we hope to see you at our R&D Day on November 17, in New York City. Good bye for now.

[Operator:]

Ladies and gentlemen, thank you for your participation. This concludes today’s teleconference. You may disconnect your lines at this time and have a wonderful day.