Nabriva Therapeutics PLC (NBRV) 2021 Q1 法說會逐字稿

Thank you all for standing by, and welcome to the Nabriva Therapeutics First Quarter 2021 Financial Results Call. (Operator Instructions)

I'll now turn the call over to your host, Dan Dolan. Sir, you may begin.

Thank you, and good afternoon, everyone. Welcome to Nabriva's conference call and webcast where we will discuss the first quarter 2021 earnings and also provide a business update. The slides for today's presentation are posted on the company's website, www.nabriva.com, and can be found under the Investors tab in the Events and Presentations section. We recommend that you refer to the presentation as we will be using those slides for today's discussion.

Before we begin, on Slide 2, I would like to remind everyone that this conference call and webcast will contain forward-looking statements about the company. These statements are subject to risks and uncertainties that could cause actual results to differ. Please note that these forward-looking statements reflect our opinions only as of the date of this call. We will undertake no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events.

Factors that could cause actual results or outcomes to differ materially from those expressed in or implied by such forward-looking statements are discussed in greater detail in our most recent filings on Form 10-K and our other periodic reports on Forms 10-Q and 8-K filed with the SEC.

Ted Schroeder, Nabriva's CEO, will start with a business update and will present an overview of the commercial highlights from the quarter. Then I will provide a financial review, and Ted will come back with some summary comments and lead a Q&A session. In addition to Ted and me, joining us on the call for the Q&A session is Dr. Steve Gelone, our President and Chief Operating Officer.

I would now like to turn the call over to our Chief Executive Officer, Ted Schroeder.

Thank you, Dan, and thanks to everyone joining our call this afternoon. Let's start on Slide 5. The progress we made in 2020 to build our infrastructure and to correctly position our commercial efforts in the community are continuing to advance in 2021. Let me begin by reviewing our key objectives for this year.

Increasing awareness and prescription growth for both XENLETA and SIVEXTRO in the community remains our primary focus, and we are seeing ongoing positive momentum. Through our partnership with Amplity Health, a leading contract sales organization, 60 sales representatives were deployed in the field late last year, targeting almost 8,000 health care providers.

As COVID restrictions are beginning to be lifted and access to doctors' offices is improving, these sales reps are now able to have more in-person visits and are having more face-to-face interactions with HCPs. During the pandemic, according to data from the CDC, influenza-like illnesses showed a dramatic decline versus the prior flu season and widely prescribed antibiotic products such as levofloxacin declined approximately 50%.

The decline in respiratory infections and the associated decrease in antibiotic prescriptions created headwinds in the near term for the broader industry and specifically for Nabriva as respiratory infections declined due to social distancing and other preventative measures. As we see a return to normal activity post pandemic, we are continuing our efforts toward keeping our products front to mind with health care providers for appropriate patients with community-acquired bacterial pneumonia, or CABP; and acute bacterial skin and skin structure infections, or ABSSSI.

According to the U.S. -- acquiring the U.S. rights to SIVEXTRO from Merck was an important milestone for Nabriva given that physicians are already familiar with SIVEXTRO for ABSSSI. It was also a testament to Nabriva's commercial capabilities. Importantly, as of April 12 of this year, SIVEXTRO is now available under Nabriva's National Drug Code, or NDC. And Nabriva has begun exclusive distribution of SIVEXTRO in the United States and certain of its territories as part of an agreement signed in July 2020. We'll discuss the positive financial impact of this later in the presentation, but it means that 100% of SIVEXTRO net sales are now being recorded by Nabriva. One should, therefore, expect our product revenue to significantly increase.

Beyond the successful marketing execution of our 2 products, as we discussed last quarter, we are expanding our pipeline organically, and we are opportunistically looking for complementary business development opportunities. Cystic Fibrosis is an area we have highlighted given XENLETA's therapeutic and safety profile and the significant unmet medical need. We plan to initiate a Phase I trial in the second half of the year for patients with cystic fibrosis who often use antibiotics chronically.

Additionally, business development for XENLETA outside the U.S. remains active with ongoing efforts to partner the drug in Europe and other territories. We continue to have multiple parties interested and are moving forward through the process. We want to ensure that we have a transaction that is in the best interest of patients and Nabriva's shareholders.

Regarding CONTEPO, despite the FDA recently issuing some additional guidance, we don't have a lot more clarity at this point. We continue working with our consultants to understand the agency's guidance and the implications for resubmission of the CONTEPO NDA. We're encouraged that the FDA is thinking beyond just live in-person inspections and that they're looking for alternatives to those inspections. We do not intend to file CONTEPO's NDA until we have confidence that the FDA can complete any required inspections within the 6-month PDUFA clock.

Finally, as we have done in the past, we are carefully deploying our resources to support our existing infrastructure and to drive sustainable growth.

Slide 6 speaks to the depth of our pipeline across serious and rare infectious diseases. Let me talk a little bit more about our work in CF. So what have we done so far? We convened the Scientific Advisory Board, and they were enthusiastic about XENLETA as an option for cystic fibrosis patients and we believe could provide incremental peak sales in the $100 million to $200 million range.

The expert panel encouraged us to complete a Phase I safety and PK study in CF patients. So we are planning to start that study in the second half of this year. We expect to have some nonclinical data in the second half of this year, with clinical data to follow in 2022. It's important to mention that much of this work is being supported through grants.

In addition to the CF trial, I would also like to point out that our partner in China completed their first -- completed their Phase III XENLETA trial and is planning for an NDA submission in the second half of this year for the treatment of community-acquired bacterial pneumonia.

Now turning to Slide 8. I would like to provide a commercial update, starting with SIVEXTRO. Our marketing approach to SIVEXTRO is clear and focused. First, we know the drug is promotionally sensitive and that there is a significant prescriber base of physicians who have experience with SIVEXTRO. Therefore, our sales force has been hard at work reengaging with doctors who are already familiar with SIVEXTRO. We know who these health care providers are, and we are currently focusing on them to reemphasize the key benefits of SIVEXTRO, a once-daily, short-course monotherapy for ABSSSI with potent activity against a broad range of pathogens, including MRSA.

Given that skin infections tend to be seasonal, with the summer season being the high point for physician treatment of patients, we are pushing hard to capitalize on the opportunity in the coming months. In addition to focusing on previous prescribers, we are overcoming patient barriers by offering co-pay assistance, indigent patient assistance and sampling of physicians to offer bridge doses while the patient fills prescriptions at the pharmacy.

On Slide 9, let me walk you through some of the market research findings and discuss in more detail why we are excited about the SIVEXTRO opportunity. Safety and convenience are key attributes that favorably position SIVEXTRO with physicians. The message is about potency, 6-day course of therapy and no drug-to-drug interactions with other classes of drugs such as SSRIs are all benefits important to prescribers. As we increase call frequency and continue to communicate these points, we believe that we will begin to see a rise in prescription growth. Again, our view is that as the summer activity begins to rebound to normal levels, there will be a higher number of infections driving patients back into medical offices.

Slide 10 summarizes the execution strategy that I've laid out for SIVEXTRO by focusing on identifying the patient, delivering impactful message and supporting health care providers by making the product more readily available. SIVEXTRO is indicated for a broad range of ABSSSI infections for both adults and adolescents. The drug has excellent managed care coverage. 269 million or 91% of all insured lives have coverage for SIVEXTRO. A majority of those lives are unrestricted, which means no step edits or prior authorizations, and the market access team continues to work to expand this coverage.

One thing that I think is worth calling out on the right-hand side of the slide is the number of face-to-face visits we are conducting, which is running at 64%. That is up quarter-over-quarter versus 56% at our year-end update and is well above the industry average for primary care visits. It's a metric that we think is important -- is an important component to the strategy and also demonstrates how the experience of the Amplity sales representatives is an advantage to getting into physicians' offices.

Slide 11 goes back to what I said at the beginning that a major achievement this quarter was completing the transaction of SIVEXTRO to a Nabriva-branded -- the transition of SIVEXTRO to a Nabriva-branded product, realizing 100% of net sales. In addition to the financial benefit, this is also important because it allows us to have greater information around the product, information such as inventory levels and which wholesalers are buying and when. I can tell you that as of today, the Nabriva brand of SIVEXTRO has been purchased by the 3 largest wholesalers. Nabriva anticipates seeing the return of historical peak sales trends for SIVEXTRO by mid-2022.

Now I would like to turn your attention to XENLETA. We have previously discussed how the brand recognition of SIVEXTRO has actually helped to get out of time with physicians to educate them about XENLETA. We continue to lay the groundwork for XENLETA ahead of the fall season when we typically see an increase in pneumonia. We just exited a winter season of drastically reduced upper respiratory infections. And as people resume normal activities, it's reasonable to expect a future rise in the number of patients seeking treatment.

Moving to Slide 13. The takeaway from this slide is the rising rate of resistance to the leading cause of community-acquired pneumonia, Streptococcus pneumoniae, which is why the CDC has deemed drug-resistant Strep pneumoniae a serious public health threat. In fact, resistance to common macrolides, like the Z-Pak, which are widely prescribed for treating community-acquired pneumonia are becoming increasingly less effective as a treatment option. In fact, the community-acquired pneumonia guidelines published by the Infectious Diseases Society of America and American Thoracic Society stated that in any region of the country where resistance to Strep pneumoniae is greater than 25%, the monotherapy with a macrolide is not appropriate.

As you can see from the map, all regions across the U.S. have resistance to community respiratory Strep isolates, above 25%, validating the need for alternative treatment options. And so macrolides are quickly becoming an inadequate choice for treating pneumonia, particularly in more complicated patients. Physicians are looking for alternatives where they can be sure that the first 5-day course of therapy will cure their patients and potentially avoid hospitalizations. We are confident that XENLETA will be recognized as a promising therapeutic for CABP with its novel mechanism of action, short course of therapy, low propensity to develop bacterial resistance and favorable safety profile.

Slide 14 is an example of our planned marketing campaign, designed to increase awareness of XENLETA and establish it as the optimal choice for the appropriate patient in the community, those with more complicated medical histories such as older CABP patients who have recently been on antibiotics and thus are at an increased risk for resistance with traditional antibiotics.

This patient profile is demonstrated more clearly on Slide 15. The opportunity for XENLETA is the patient that has comorbidities such as diabetes or COPD, which complicates achieving a positive outcome. It's the patient at risk for resistance to other classes of antibiotics like macrolides, tetracyclines and penicillins. Add in the safety concerns with fluoroquinolones, and I think you can understand why we see unique opportunity for XENLETA. With outpatient CABP cases estimated to cost $9.3 billion annually, with the largest driver of costs for outpatient care is subsequent hospital admission, we believe that XENLETA fills a gap in the treatment of CABP.

Slide 16 summarizes XENLETA's value proposition. These are the messages the field force is conveying to physicians about XENLETA that we think differentiate the product. XENLETA can be used as a reliable monotherapy. XENLETA has microbiologic activity against a broad spectrum of pathogens that are most often associated with CABP. XENLETA is a new class of antibiotic with a novel mechanism of action. XENLETA has a low rate of discontinuation due to adverse events, and XENLETA has a short 5-day course of therapy.

Collectively, these attributes differentiate XENLETA and we believe make it a compelling treatment option for physicians. As the sales reps are able to increasingly interact with doctors and lay the groundwork ahead of the fall CABP season, we would anticipate seeing an uptick in XENLETA prescriptions as we move throughout the year.

I would now like to turn the presentation over to Dan for the financial review. Dan?

Thank you, Ted. As we turn to Slide 18, I'd like to touch on some key highlights for the first quarter of 2021. We recognized $2 million of revenue in the quarter, including $1 million of collaboration revenue from our agreement to promote SIVEXTRO with Merck as well as the achievement of milestones with our partner in China for lefamulin.

We exited the quarter with cash and cash equivalents of approximately $55 million, providing us cash runway into the fourth quarter of this year. Our first quarter cash requirements included the purchase of initial SIVEXTRO supply under Nabriva's own NDC. This inventory was used to fulfill the orders that started to go out to the 3 largest wholesalers after April 12. Later, I will describe the positive impact the new NDC has on our P&L.

We are excited to launch our own NDC as it provides a meaningful increase to profitability and enhances the operating leverage of our existing infrastructure. Going forward, we will continue to focus our investment allocation in areas that we believe will provide the best return on investment and help us leverage our existing infrastructure.

Moving on to Slide 19. We look at our P&L for the 3 months ended March 31, 2021, versus the same period for 2020. We experienced a significant year-on-year growth on our top line revenues driven by the recognition of collaboration revenue on SIVEXTRO with the Merck agreement as well as the achievement of milestones from our Chinese partner. We are encouraged by our partner's progress and its potential impact for Chinese patients and the positive impact on Nabriva's cash inflows.

Operating expenses decreased $5 million year-on-year, with R&D decreasing by $1 million and SG&A by $4 million. The decrease in R&D was primarily driven by a decrease in personnel costs, while the SG&A decrease reflects lower commercial investments as we reallocated our marketing and selling mix toward a more efficient model. As a reminder, in Q1 '20, we paid down our debt with Hercules, which resulted in a loss on the extinguishment of the debt in Q1 of '20. This helped strengthen our balance sheet by reducing our debt, as we will see on the next slide.

Turning to Slide 20. We take a look at our balance sheet for Q1 '21. As mentioned earlier, our cash and cash equivalents at March 31, 2021, were approximately $55 million, an increase of $14 million in December 31, 2020, driven by activity in our ATM program and the net proceeds from our March 1, 2021 financing. This was offset by our operating cash burn, which included the initial payment for SIVEXTRO inventory for our new NDC. This can be seen as part of the increase in our prepaid expenses in the quarter.

Turning our attention to the liability section, you'll see we continue to maintain a minimal amount of debt.

If we can now turn to Slide 21. I'd like to take some time to highlight the impact of Nabriva's own SIVEXTRO NDC on the shape of our P&L. Prior to the launch of our own NDC, Nabriva recognized the percentage of Merck's gross sales of SIVEXTRO, while we have been deploying our full complement of commercial resources for SIVEXTRO promotion. Starting on April 12, we launched our own NDC of SIVEXTRO and realizing the full benefit of the patient demand in our reported net sales.

We had given prior guidance that the shift to our NDC will increase our gross sales to a mid- to high single-digit multiple of what had been reported as collaboration revenue in prior quarters. This number will then need to be adjusted by the typical gross to net sales adjustments in order to arrive at our reported net sales number.

This change in the revenue composition on the P&L for Nabriva provides an immediate increase to our profit margins as well as unlocks enhanced operating leverage on the P&L. This increase in revenue is expected to generate higher profits.

With that, I will now turn the presentation back over to Ted. For the next part of the call, Ted will make some closing remarks, and then we will head into a Q&A session. Ted?

Thanks, Dan. Finishing up on Slide 23, which takes us back to the 2021 key objective slide. As we went through today's presentation, I hope you can see that our near-term focus is all about execution of the commercial growth of SIVEXTRO and XENLETA, the most critical goal this year. Completing the transition of SIVEXTRO to being a Nabriva-branded product is a major step in successfully marketing this product. As Dan discussed, it not only allows for a positive financial impact, but additionally, it provides us visibility on material new data to help inform a more strategic approach. Information such as which payers are covering the drug and what the co-pays are by payer, which wholesalers are purchasing and which pharmacy stocks SIVEXTRO.

We see access to physicians' offices improving, with more patients returning to see their doctors. We believe that the incidence of skin infections will be on the rise as we return to normal activity and into the summer months when there are higher rates of ABSSSI.

All the work our sales representatives are doing now should also solidly position us for the fall with XENLETA when pneumonia becomes more prevalent. Our field force has now been into the doctors' offices for several sales cycles and are beginning to conduct more face-to-face interactions with health care providers. They are reestablishing personal dialogues and medical education, which should lead to a greater pull-through of prescriptions.

In parallel, we are continuing to evaluate our pipeline for longer-term potential upside opportunities. We think CF is an interesting area that we have decided to initially pursue internally through grant funding. We are committed to get through at least a Phase I program in cystic fibrosis for XENLETA.

Discussions are ongoing as we aggressively seek partners in Europe and other unpartnered territories outside of those that are already partnered, which are China and Canada. We plan to resubmit the NDA for CONTEPO when we have clarity that the FDA will be able to meet their PDUFA obligations.

And finally, we will do all of this while closely monitoring and managing our expenses as we move through the rest of the year.

I would now like to ask the operator to open up the line for questions. Jesse?

(Operator Instructions) Our first question is from the line of Ed Arce of H.C. Wainwright.

Great. And congrats on getting the NDC for SIVEXTRO a few weeks ago. Also appreciate the slide on the impact of that on your P&L and sort of the line items and how that flows through. That's helpful.

I'm just wondering now, it's been just a few weeks, I realize it's quite early still, and the summer months will definitely help to kick in more interest. But If you could, since the transition, what kind of commentary are you hearing on the ground with the new branding? What kind of feedback are you getting that perhaps can help you feel more confident about your guidance of reaching that run rate -- previous run rate by the middle of next year?

Yes. No, thanks, Ed. Good questions. I always appreciate those. So we're hearing a lot on the ground. Certainly, earlier in the year, we were hearing that, I'm just not seeing as many patients, I'm not seeing, even in the winter months, as many skin infections that I used to. I don't think that, that's really surprising. People weren't out and about doing the sorts of things where they get bumps and scrapes and inevitably infections follow. People not working and on their feet all day and those sorts of things.

So as we see -- what we're hearing from physicians now is that we're seeing more people in the office. One of the other things that came with the switch to the Nabriva NDC is we are also now hand-carrying samples into the physician's office. And that actually makes the close of the sale much closer to the communication that the rep has with the physicians.

So the sample act is a good reminder. We're able to deliver it when a product -- educational messages delivered, and we're hearing from physicians that that's important and makes a big difference in their prescribing decision. So we're looking forward to that.

And then the other thing I would say is that we've seen good orders from wholesalers. We'll talk about what those orders are in our next quarterly call. But we've been pleased with the initial orders from wholesalers. And so -- and it doesn't look like they're necessarily stocking in, but that they're stocking more or less to meet their anticipated demand, which is good news.

So I think all the factors are moving together for an increase in -- kind of a natural increase for the summer but also a return of patients to the office, and that will continue to drive sales upward.

Okay. Great. And then just continuing to think about how this new structure will impact the P&L going forward as you continue to see prescription growth and utilization, what kind of level of gross to net would you expect, at least as a steady state perhaps, later in the year?

Dan, why don't you go ahead and answer that?

Yes, sure. Thanks, Ed, and -- thanks for the question, Ed. I think, I mean, in terms of SIVEXTRO, we haven't really provided any guidance. We're still kind of getting our arms around the gross to nets in the contract. So I think you give us a quarter or 2 to kind of wrap our head around that. I think on XENLETA in the past, we've given a mid-30% range as a guidance. So you might want to use that for a landmark right now, but give us a few more quarters and we can tighten up the SIVEXTRO side.

No further questions on queue. And that concludes today's conference. Thank you all for participating. You may now disconnect.