Nabriva Therapeutics PLC (NBRV) 2020 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Nabriva Therapeutics Third Quarter 2020 Financial Results Call. (Operator Instructions)

I would now like to turn the conference over to your host, Mr. Gary Sender, Nabriva's Chief Financial Officer. Please go ahead.

Thank you, Grace, and good afternoon, everyone. Welcome to Nabriva's conference call and webcast, where we will discuss the third quarter 2020 earnings and also provide a business update.

Similar to last quarter's earnings call, 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 for 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 me and Ted, joining us on the call for the Q&A session is Dr. Steve Gelone, our President and Chief Operating Officer. Dr. Jennifer Schranz, our Chief Medical Officer, is under the weather and won't be joining us today.

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

Sorry. Sorry, I was on mute. Let's -- if we can -- if we can start on Slide 5, as you will hear during our call, we were quite productive during the quarter, despite not having promotional activity until the last week of September. During our last investor update call, we told you about the in-licensing of SIVEXTRO from Merck. That transaction created tremendous energy in the company as we planned for the relaunch of both SIVEXTRO and XENLETA in the community.

In the third quarter, we worked closely with Amplity Health, our contract sales partner, on a sales force deployment plan while also continuing to improve patient access by further increasing managed care coverage. We have been very busy since realigning our marketing strategy to be more community based, and the early signs have been encouraging. In a moment, I will walk you through our current activities and some key metrics that are directionally positive. First, let me briefly describe a few of our other near-term priorities.

Global activities for XENLETA remain active with discussions continuing with potential overseas partners, especially following its European approval. We have been engaged with the FDA regarding the next steps to refile the new drug application for CONTEPO and are committed to bringing this important drug to patients.

Last week, we participated in a Type A meeting with the FDA to obtain information related to the agency's current thinking on the conduct of inspections of foreign manufacturers during the COVID-19 pandemic that has negatively impacted a number of FDA product reviews, including the CONTEPO NDA.

The FDA informed us that it has not yet determined how it will conduct international inspections during the COVID-19 pandemic. As a result, next steps and specific timing of the CONTEPO NDA resubmission cannot be finalized until the agency issues industry guidance. We and the entire industry await future communication from the FDA as it continues to assess the options available under existing regulations and laws to address this growing threat to the public health of U.S. citizens.

It is noteworthy that the FDA has not requested any new nonclinical or clinical data and did not raise any other concerns with regard to the safety or efficacy of CONTEPO. We will provide updates when we learn new material information.

Regarding growth-oriented transactions, we are confident that adding SIVEXTRO to our portfolio will help build our community business, and we are evaluating a wide range of business development opportunities that can also strengthen our franchise by leveraging our core capabilities. In parallel with the strategic initiatives just described, we have maintained prudent control of our balance sheet, which Gary will describe in more detail. We adapted our organization and established a flexible commercial infrastructure through our partnership with Amplity, where we can adjust spending in line with the changing environment.

Turning to Slide 6. I'm excited to share the commercial highlights from the quarter and beyond, including the deployment of our first 15 sales professionals in the field in late September.

I will provide more detail later in the presentation. But based on the initial favorable experience, I'm happy to say that we have expanded the number of representatives to 60, and they will be fully trained in the field by the end of November. These 60 sales professionals are expected to be able to reach approximately 7,800 health care providers or HCPs.

We have been pleased with our access to physicians to date, which has been better than expected, particularly in the midst of the COVID-19 pandemic. Those sales calls have included a mix of in-person and remote interactions. Early on, we are finding that physicians knowledge of and experience with SIVEXTRO has helped open the door for discussing XENLETA.

Our strong managed care access for XENLETA continues to expand quarter-over-quarter as new plans are added. As of the end of the third quarter, 92% of commercial lives now have access to XENLETA, up from 87% in the second quarter. What is significant is that about 3/4 of commercial lives covered are unrestricted.

Let me also provide you with a brief international update. As you know, XENLETA has received approvals in Europe and Canada. We are actively engaging with potential partners to bring XENLETA to European patients where the size of the cap market is about the same as the U.S. In China, through our partner, Sinovant, the Phase III study recruitment is underway with an expected NDA filing in 12 to 18 months.

On Slide 7, I want to remind you about the synergies of our 2 products and our approach to optimizing traction with prescribers. SIVEXTRO is an oxazolidinone class antibacterial. It's a short course, once-a-day oral treatment that addresses the most common pathogens that cause acute bacterial skin and skin structure infections, commonly referred to as ABSSSI, including methicillin-resistant Staphylococcus aureus, or MRSA. It has also been shown to be a promotionally sensitive product.

There is a highly complementary customer base for SIVEXTRO and XENLETA, including primary care prescribers as well as infectious disease and urgent care physicians. This coincides nicely with the call effort around XENLETA for community-acquired bacterial pneumonia, or CABP. Similar to our analysis of CABP prescribers, about 5% of total prescribers account for more than 50% of total antibiotic prescriptions for ABSSSI.

On Slide 8, let me provide more detail about the expanded opportunity as we are relaunching both XENLETA and SIVEXTRO. This map highlights our plan to expand our commercial footprint from the current 15-person sales force to 60 by the end of November. We expect that our sales force can efficiently and effectively reach a high percentage of our 7,800 targeted customers.

The representatives currently in the field have an average of 10 years of community selling experience, prior antibiotic and specialty pharmacy pull-through expertise and are accustomed to working with not only in-person, but also with virtual engagement tools. This last part is especially critical given the changing dynamics brought on by the current pandemic. In fact, one of the key advantages we have found working with Amplity is their knowledge of which physician offices are accessible.

More details on Nabriva's HCP coverage and reach can be found on Slide 9. Our goal is to target the right share prescribers to optimize the outpatient business opportunity for both products in our portfolio. Given the very high volume of CABP and ABSSSI patients treated by primary care physicians plus nurse practitioners and physicians assistants, these providers are going to be key shared target customer groups.

As we think about the other HCP specialties who most often treat these diseases, you can see that our final targeting list also includes key specialist prescribers for XENLETA like pulmonologists as well as important prescribers for SIVEXTRO, such as podiatrist and dermatologists.

This call plan will increase Nabriva's reach from approximately 2,000 HCPs today to 7,800 once we utilize all 60 representatives, each of whom has 130 customers in their geography. This gives us the ability to reach about 60% of historical SIVEXTRO prescribers and 57% of estimated XENLETA prescribers. We estimate that 3,900 or half of the 7,800 targets are customers for both drugs.

Slide 10 shows some early call activity metrics from our initial highly focused sales deployment. Since commencing our new promotional activity at the end of September, the sales force has certainly been active. And they have delivered approximately 3,300 calls to health care providers. About 70% of these customer interactions had been in person, which is much better than we had anticipated, since according to IQVIA, the national average of in-person calls to primary care physicians is only about 47%. While early, this is promising.

Based on some of the preliminary feedback, one reason for this may be physician's historic knowledge of SIVEXTRO. This is helping to get us in front of doctors. And with just 4 weeks of data, we've seen a nearly 20% increase in SIVEXTRO prescriptions written by the HCPs we've called on, supporting the historical insights that this is a promotionally sensitive product.

In addition, many of our sales interactions with HCP practices have been extended engagements, such as lunch and learns. As we mentioned, we are in the process of training an additional 45 sales representatives who will start the call in HCPs later this month.

Moving to Slide 11. I'll spend a few minutes giving you a managed care update, which continues to be a key strength as we aim to expand patient access. As of September 2020, more than 240 million of all U.S. covered lives have access to XENLETA and 92% of total commercial lives have access to XENLETA. This compares to 226 million and 87% as of the end of June, demonstrating the ongoing progress. Most of the access remains unrestricted with no utilization management such as step edits or prior authorization.

To give you an example of major plans that have been added, we recently signed a contract with Humana, which is nearly 1 million lives, and it will become effective January 2021, again, without restrictions. This really speaks to the quality and size of the managed care plans that are adding XENLETA to their formularies and their focus on giving patients access to modern antibiotics.

We expect this trend to continue in the fourth quarter, driven by our message that XENLETA is a short 5-day monotherapy along with our ability to differentiate XENLETA on the safety profile versus fluoroquinolones. The message is clearly resonating well with payers.

Slide 12 shows additional wins for XENLETA with the Veterans Administration and the HealthTrust purchasing group. These are meaningful since the VA has 9 million enrollees, many of whom are treated in their outpatient clinics. While HealthTrust serves over 1,600 hospitals and health systems. Although our core focus for XENLETA has shifted to the community, it reinforces the value proposition of both IV and oral XENLETA.

We were at a pivotal time in the company with the relaunch of XENLETA and SIVEXTRO. In order for the company to be successful, our ongoing commercial strategy and execution needs to be flawless and in lockstep. As the CEO, there is nothing more important for me to focus on than that.

Therefore, in order to flatten our structure and allow me to be closer to the day-to-day commercial business, I recently decided to eliminate the Chief Commercial Officer's role, and I am directly leading all commercial functions. I look forward to working even more closely with the Nabriva commercial team to educate the medical community about our innovative treatments and how they can help their patients in need.

I would now like to hand the call back over to Gary.

Thanks, Ted. On Slide 14, I've listed some key financial highlights. Nabriva generated total revenue of approximately $1.3 million in the third quarter. As Ted mentioned, we had no promotional activity for XENLETA or SIVEXTRO until the last week of the quarter. So as expected, there was minimal prescription or sales activity in the third quarter.

I will discuss a small adjustment made to product sales for a XENLETA return from a mail order pharmacy during the third quarter. Other sales are comprised of collaboration revenue for which we received $500,000 from our Canadian partner due to the approval of XENLETA. It also includes continued grant income from the Austrian government.

Like with all companies, the COVID-19 pandemic has made it difficult to predict future sales. There are a variety of scenarios which could evolve through the rest of the year, depending on demand and our ability to continue promoting both XENLETA and SIVEXTRO. Therefore, sales for the remainder of 2020 are difficult to forecast.

However, we're excited and encouraged by early feedback from the community-based sales reps that are experiencing better-than-expected access to physicians through in-person and virtual interactions.

We actively managed our expenses to optimize resources. We want to ensure that our investments in commercial activities achieve our expected returns. Our SG&A spending increased by $3 million in the third quarter compared to the second quarter of 2020, primarily due to the relaunch efforts in the community. We expect that our commercial investments will continue to increase going forward as we expand our territory footprint to a total of 60 reps in November.

We ended the third quarter with cash of $41 million. We added approximately $5 million to our cash balances in the third quarter through our ATM activity, collaboration revenue and warrant exercises. We expect that our current cash balance will fund operations substantially through the first quarter of 2021.

Let's now look at the details of our P&L and balance sheet. Please advance to Slide 15.

Slide 15 provides details of our P&L, and I ask that you look at the notes on the right side. Our total revenues of $1.3 million were driven primarily by collaboration revenue and government grants. Collaboration revenue included a modest level of contribution from SIVEXTRO sales in the last few days of September. Product sales were minimal. And due to a small return from the mail order specialty pharmacy, we recorded negative net product revenues of $47,000 for the third quarter.

R&D expense was lower year-over-year due to a decrease in development activities. SG&A expense was lower compared to Q3 2019 as XENLETA was launched in the third quarter of last year. We continue to allocate our resources in a thoughtful manner and make investments where the expected return is justified. Interest expense was significantly lower, given the reduction in our debt balances.

Please turn to Slide 16, which has our September 30 balance sheet. We previously discussed our cash balances. Inventory has increased primarily as a result of supply purchases in accordance with our contractual obligations. Prepaid expenses increased primarily due to accrued insurance expenses and due to payments made to our contract manufacturing partners for new XENLETA inventory. Year-over-year debt balances are significantly lower due to the paydown of debt, which occurred in the first quarter of 2020.

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, Gary. Maximizing access for patients who can benefit from XENLETA and SIVEXTRO remains our primary goal. We think we have made the necessary organizational adjustments to meet the ever-changing demands of our business. The early trends indicate that we are moving in a positive direction with our sales force reengagement, access to our target customers and our growing number of quality managed care wins.

Importantly, we have built a flexible organization that can adapt, depending on the current scenario, allowing us to also carefully manage our balance sheet. Business development remains an important area of focus, and we will also pursue opportunities to develop our own pipeline, prioritizing indications for rare and serious diseases.

Adding SIVEXTRO is a demonstration of our ability to bring in complementary assets. We know from past prescription data that SIVEXTRO is promotionally sensitive, and we're seeing some good early data points. As I previously mentioned, the sales force has been able to leverage physicians' experiences with SIVEXTRO to open the door for a discussion about XENLETA. In the coming months, we look forward to reporting on the progress of our sales reps as they educate HCPs on XENLETA and SIVEXTRO.

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

(Operator Instructions) Your first question comes from the line of Alan Carr from Needham & Company.

Ted, I'd like to hear more about the BD strategy here in in-licensing. You have cash to end of the first quarter next year. And kind of interested in how you'd implement the business development strategy? Is it more along the lines of what you've done with SIVEXTRO?

Yes, Alan, thanks for the question about how would we execute on a business development strategy. So I think there are a couple of aspects to business development. Of course, one of those aspects is out-licensing opportunities for XENLETA in markets outside of China and Canada and the United States. And so we're moving forward with that and hope to have something to say about that in -- over the next period of time.

But more germane to your question, the -- what about in-licensing? Well, certainly, a SIVEXTRO-like transaction where there are no upfront payments, and we leverage the sales organization is something we're looking at. We're also looking at other opportunities where we could bring products into the company.

And I think we have various -- there are various structures that are available to us. And some of those may include additional financing to finance the opportunity. But we're being very careful about the types of opportunities that we look at and want to be sure that they are value-creating transactions in the short term with enough news flow to continue to build the value proposition for those -- for whatever transactions we do.

Are you considering bringing in development stage assets or commercial assets? Is there a focus one way or the other there?

Yes. I think there are a couple of things that we're looking at. As I mentioned in my comments, we do have early stage assets that we're looking at for -- that would be in more of a rare disease and serious disease space. And that's something that we're interested in moving forward.

All those kind of pre-commercial -- or excuse me, pre-clinical activities now are being funded through grants, and we expect that, that will continue. But maybe I could turn the mic over to Steve Gelone, our Chief Operating Officer, to talk a little bit more about business development priorities.

Sure. Thanks, Ted. Just to add an additional comment or two, Alan, I think, as Ted just alluded to, there -- first and foremost, right, we're trying to leverage our existing portfolio. And I think on previous calls recently, our CMO, Jen Schranz, has talked a little bit about XENLETA, how it's anti -- potent anti-staphylococcal activity lends itself to potential development as an oral treatment option for exacerbations of staph aureus in CF patients as well as the activity against multidrug-resistant sexually transmitted infections like gonorrhea and mycoplasma genitalium. And as Ted said, we're moving ahead on those programs through grant funding.

And then our earlier-stage portfolio, we have a compound called BC-2126, which is the sitter for cephalosporin, which is highly active against Pseudomonas aeruginosa, Acinetobacter and burkholderia, which we're exploring as an inhaled treatment option for bacterial exacerbations of patients with CF. So those are what's inside the walls.

And then, as Ted said, we obviously are exploring a variety of options outside the walls to bring in to complement both the existing portfolio as well as the team's strength. And although we don't talk about it a lot, we do have some deep roots in our team and bench strength in rare disease drug development and commercialization that we're looking to leverage.

Okay. And then over -- with SIVEXTRO, I think the same group was promoting SIVEXTRO when it was Merck. So do you have actually the same sales reps involved again? Or is it different folks in the same contract sales organization?

Yes, Alan, so I'm not really sure how many of the folks have had previous SIVEXTRO experience. The way the CSOs work, they move people around as contracts come and go, and some of those people are actually hired by Merck in the past. So I'm not exactly sure of that. What the count is, I know that from the senior leadership of the organization, they have quite a bit of SIVEXTRO experience.

And I think that's really been evidenced in our conversations as we've planned. They've been able to provide quite a few insights, and it's been very helpful to us deploying a -- the sales organization we have. And I think that in just 4 weeks, to see a 20% change in prescribing of the physicians you're calling on is actually pretty outstanding. So I'm very pleased in the early going of the insights and experience that the Amplity team is bringing to the table.

And the last question I have. What's the co-pay for SIVEXTRO and XENLETA for a patient?

It varies, and -- but I think most of the contracts, the co-pay is around $50. And keep in mind that we do have a co-pay assistance program in place. And so for those patients who may need it, we can buy that co-pay down. So it's -- again, no patient pays more than $50.

All right. I am showing no further question at this time, and I believe that is all that we have for today. This concludes today's conference call. Thank you all for joining. Stay safe, and you may now disconnect.