Tetraphase Pharmaceuticals (NASDAQ:TTPH) Q3 2018 Earnings Conference Call November 8, 2017 4:30 PM ET
Jennifer Viera – Investor Relations
Guy MacDonald – President and Chief Executive Officer
Larry Edwards – Chief Operating Officer
Larry Tsai – Chief Medical Officer
Chris Watt – Senior Vice President-Finance
Joseph Stringer – Needham & Company
Mayank Mamtani – B. Riley FBR
Ellen Sands – Stifel
Good day, ladies and gentlemen, and welcome to the Tetraphase Pharmaceuticals Third Quarter Financial Results and Corporate Update. [Operator Instructions] As a reminder, today's conference call is being recorded.
I would now like to turn the call over to Jennifer Viera. Ms. Viera, you may begin.
Good afternoon, and thank you for joining us today. With me on the call today are: President and CEO, Guy MacDonald; Chief Operating Officer, Larry Edwards; Chief Medical Officer, Dr. Larry Tsai; and Senior Vice President of Finance, Chris Watt.
On the call today, Guy will make introductory remarks. Larry will provide an overview of the XERAVA launch, Dr. Tsai will discuss the pipeline in recent data presentations, Chris will provide an overview of our third quarter financial results and then Guy will conclude. We will then open the call for your questions.
Before we begin our formal comments, let me remind you that during today's conference call, we will be making forward-looking statements that represent the Company's intentions, expectations or beliefs concerning future events. These forward-looking statements are qualified by important factors set forth in today's press release and the Company's filings with the SEC, which could cause actual results to differ materially from those in such forward-looking statements. Information discussed on today's call is accurate as of today and we do not intend to necessarily update this specific information in the future.
I would now like to turn the call over to Guy Macdonald.
Thank you, Jennifer, and the good afternoon to everyone. The past quarter has been the most exciting in the history of Tetraphase. Today is the first time we're speaking with you as a commercial company after receiving regulatory approval for XERAVA in two major markets and launching XERAVA in the United States.
Two major approvals within one month is quite an accomplishment for any biotechnology company, especially for one of our size. In October, the company commercially launched XERAVA here in the U.S., and it is now available for use in hospitals for the treatment of patients with empiric and confirmed complicated intra-abdominal infection, or cIAI.
XERAVA's launch came just weeks after the FDA approval of XERAVA in late August for the treatment of cIAI. The approval was based on two Phase 3 clinical studies that show XERAVA was well-tolerated and achieved high clinical cure rates in patients with cIAI, demonstrating statistical non-inferiority to two widely used comparators, ertapenem and meropenem.
In September, the European Medicines Agency or EMA granted marketing authorization for XERAVA for the treatment of cIAI in adults in all EU member states as well as Iceland, Liechtenstein and Norway. I'm pleased to report the commercial launch in the U.S. is off to a productive start. As Larry Edwards will discuss in his remarks, our sales force is engaging with priority accounts and are already making significant inroads.
Our October launch after IDWeek, during which we spoke with many infectious disease doctors and key opinion leaders. We were especially pleased that the benefits of XERAVA resonate well with them. In particular, XERAVA's open label, which is not restricted to patients with limited or no other treatment options, is highly appealing as is the fact that XERAVA has a positive safety and tolerability profile with no black box warning.
We also had a positive response at of IDWeek and at other recent scientific conferences regarding our data presentations on XERAVA, which Dr. Tsai will discuss shortly. Beyond XERAVA, we also advanced our phasal and antibiotic programs, TP-271 and TP-6076, and both have progressed through single and multi-ascending-dose studies.
With proceeds of up to $75 million available from a new loan agreement with Solar Capital, we also further extended our cash runway into the second quarter of 2020, and we're comfortably positioned to devote the appropriate resources necessary to support a strong launch of XERAVA in the U.S. and ensure that XERAVA is available for the patients who need it.
With a newly launched product in the U.S. that has a broad and differentiated label, our planned phase launch to expand its introduction to new territories in the EU and a solid financial position to make the most of the opportunity in front of us, I'm extremely proud of the work we've done this past quarter and equally excited about the future of the company as we begin to make an impact on the lives of patients with serious, often life-threatening infections.
Now I'll turn the call over to Larry Edwards for a more detailed update on our launch efforts. Larry?
It has certainly been an exciting two months. In October, we announced that XERAVA was fully-stocked in hospitals and available for purchase with our specialty distributors, Cardinal Health, McKesson Plasma and Biologics and Triple F. Based our broad label, which allows for empiric therapy, we believe approximately 60% of XERAVA's usage will be in the first-line empiric segment, which includes patients who are at high risk of having resistant pathogen or those deemed to be higher risk patients.
The remaining 40% of the market is divided between secondary empiric and confirmed diagnosis. The first-line empiric market will be the focus for our highly experienced marketing and sales team. We launched with a fully-deployed field force which includes 5 regional business directors and 35 regional account managers to each have, on average, at least 20 years' experience selling hospital-based products, and in most cases, antibiotics. Having tenured experienced sales professionals is a critical part of ensuring our success in breaking the antibiotic launch trend seen recently.
This collective expertise of the team is an invaluable complement to our strategy and targeted approach of focusing on key prescribing institutions. Our sales force is already making inroads connecting with physicians at our top 780 Tier 1 accounts. These academic and large teaching institutions have the highest state of therapies for antibiotic utilization and they represent about 60% of the Gram-negative market volume.
While that is a focus for now, in months to come, the second phase of our lunch will focus an additional 1,300 Tier 2 accounts, which constitute an additional 30% of Gram-negative market. So in total, we'll cover 90% of the Gram-negative market place. In terms of connecting with key institutions, we've had meetings with more than 600 Tier 1 accounts in our first three weeks since launch, reaching 75% of our targeted accounts.
As a result, we've orders placed by multiple hospitals, some of which are a part of larger, integrated delivery networks as well as larger home health and infusion centers. We're pleased with the update that we've seen during the first few weeks and we look forward to providing additional insights as we move into next year. At launch, we announced a wholesale acquisition price of $1.75 per day. This competitive price aligns with our strategy to be used as a first-line empiric treatment.
We believe being able to target the empiric market, first focusing on a niched or last line market will differentiate XERAVA and our launch. We also believe that this is why we've seen such a strong uptake within only a few weeks of launch. We feel this strategy will help us penetrate the growing complicated intra-abdominal market. In the U.S. and the EU 5, the market for complicated intra-abdominals is made up of 40 million patient days of therapy, of which 90% is IV treatment.
Of that 40 million, or 25%, or 10 million patient days of therapy include patients receiving broader spectrum antibiotics or a combination of antibodies that cover Gram-negative, Gram-positive and anaerobic pathogens. If we are able to penetrate up to 20% of the market or 2 million patient days of therapy, we believe this will present an attractive market opportunity.
Beyond having any significant market opportunity, we believe XERAVA addresses an unmet medical need for patients with complicated intra-abdominal infections. This belief has been reinforced by conversations we've had with physicians and thought leaders over the past years, months, few weeks and especially at IDWeek. Not only does our strategy of addressing the empiric market resonate well with physicians, XERAVA's compelling benefits and safety profile continue to generate interest amongst the medical community.
First and foremost, physicians welcome a monotherapy antibiotic indicated for complicated intra-abdominals with a label that's not restricted to patients with limited or no alternative treatment options. They are equally impressed with XERAVA's safety profile and high clinical cure rates in patients with polymicrobial complicated intra-abdominal infections.
Further, because empiric antibodies need to treat, likely pathogens to be effective, including resistant ones such as ESBLs, AmpC producing beta-lactamases, there are currently limited therapeutic options. One common choice is carbapenems. Carbapenems are potent antibiotics that have been in the market for decades and treat many resistant infections. As users of carbapenem increases, however, resistance to carbapenem has increased. With the XERAVA, doctors now have another therapeutic alternative and can reserve carbapenems for use when needed.
Many of the ID physicians, surgeons, critical care intensivists and pharmacists we've spoken with are encouraged that they can use XERAVA instead of a carbapenem or a beta-lactam, beta-lactamase inhibitor. In particular, they feel XERAVA is an ideal option for various patient populations, including patients with renal impairment, since there's no need to dose-adjust XERAVA, which is necessary with all beta-lactams, including carbapenems, and this becomes difficult in the setting of rapid changes of renal function associated with serious infections.
Also patients at risk of C. diff, since XERAVA has potent in vitro activity against Clostridium difficile bacteria and it may put the patient at a lesser risk of having C. diff infections. Also patients with penicillin or beta-lactam allergies, where there's limited alternatives and patients with ESBLs or other resistant infections where there is limited therapeutic alternatives. Physicians have also told us that a key factor in addition to these benefits is that there's no need for therapeutic drug monitoring for any patient group.
They considered this to be important from a safety perspective, over and above being a major convenience. In addition to physician feedback, I'm happy to share some other updates with you. Our anti-microbial voluntary evaluation program, or AVEP, has been a helpful tool for hospitals and aligns nicely with stewardship principles. In June, our MSLs were able to share the information with IDs, pharmacists as well as microbiologists so they can receive research-use-only materials to begin testing XERAVA against clinical organisms in their hospitals.
We've got very strong response for ordering and testing materials with over 890 sites in the U.S. being contacted and 670 in the EU. Further, our first two in vitro testing devices have been approved. The Eravacycline Mast HardyDisk was approved in September with an estimated commercial availability sometime this quarter as well as the Liofilchem MIC test trip, which was approved in November and will be available first quarter of 2019.
Last, we've also been able to load XERAVA into all the electronic medical records to allow for user access to XERAVA as well as all the compendia databases. Overall, as someone who has launched multiple antibiotics in my career, I'm extremely encouraged by what our team has done, especially in such a short timeframe. I look forward to providing future updates. With that, I'll now turn the call over to Dr. Larry Tsai.
Thank you, Larry. We continue to build upon the growing body of scientific research supporting XERAVA. At IDWeek, we presented a post-hoc analysis of two Phase 3 trials of XERAVA in patients with cIAI and concurrent bacteremia. The analysis evaluated microbiological response at the test-of-cure visit in patients with baseline bacteremia who received XERAVA versus comparators ertapenem and meropenem.
For patients with concurrent bacteremia caused by Gram-positive bacteria or anaerobes, the microbiological eradication was 100% for those treated with XERAVA as well as for those treated with comparators. Patients with bacteremia due to Gram-negative pathogens, including Escherichia coli achieved 93% microbiological eradication when treated with XERAVA or a comparator.
These data are important as they confirm the efficacy of XERAVA in a subgroup of cIAI patients, who may be at higher risk for poor outcomes, and they demonstrate that XERAVA's efficacy is comparable to carbapenems in these patients. This quarter, we also presented data at the American College of Clinical Pharmacy Conference regarding the efficacy of XERAVA in two other higher-risk populations, patients with obesity and those with altered renal clearance.
Specifically, in one post-hoc sub-analysis of pooled XERAVA Phase III data, we evaluated clinical curate at the test-of-cure visit in patients with varying body mass indices, or BMIs, who receive XERAVA versus comparators ertapenem and meropenem.
Results show that, overall, XERAVA was effective in treating patients with cIAI regardless of BMI, reinforcing XERAVA is an effective empiric treatment option for obese patients with cIAI comparable to carbapenems. In the other post-hoc sub-analysis of pooled Phase 3 data, we examined how baseline creatinine clearance affects the clinical efficacy of XERAVA.
Subjects were classified into renal function categories based on baseline creatinine clearance. Data showed that overall, similar clinical cure rates were observed for XERAVA across all classifications of renal function, which further suggests that XERAVA is an effective empiric therapy for cIAI comparable to other approved antibiotics. We believe these data in particular, combined with the fact that physicians do not have to dose-adjust XERAVA for renally impaired patients, reinforce it as a treatment of choice for patients with renal impairment.
As Guy mentioned, beyond XERAVA, our clinical team remains focused on our earlier stage antibiotic programs, which include TP-271 in development, to target respiratory infections and TP-6076 in development to target Acinetobacter baumannii and other multidrug resistant or MDR pathogens.
At IDWeek, we presented data from a Phase I, randomized, placebo-controlled, double-blind multiple ascending-dose study evaluating the safety, tolerability and pharmacokinetics of a seven-day dosing regimen for intravenous TP-6076. We were encouraged by the results, which showed that TP-6076 was generally well-tolerated with no serious or severe adverse events. The most frequently reported adverse events were gastrointestinal events, including nausea and vomiting, and localized infusion site reactions, similar to what has been observed with other tetracyclines.
Based on these data, we plan to advance TP-6076 to a bronchopulmonary disposition study beginning in the first quarter of 2019. This study will be able to confirm appropriate therapeutic levels of TP-6076 in the lungs to treat infections caused by Acinetobacter baumannii and other MDR pathogens. In previously completed in vitro testing, TP-6076 has demonstrated potent in vitro activity against MDR bacteria, including carbapenem-resistant Enterobacteriaceae and carbapenem-resistant Acinetobacter baumannii.
Specifically, in our in vitro studies, the minimum inhibitory concentration values of TP-6076 were as much as 64-fold lower than those for tetracycline and 256 times lower than those for minocycline against MDR gram-negative pathogens. We are enthusiastic about the TP-6076 program. And pending results of the bronchopulmonary disposition study, we will engage the FDA to determine if there can be an expedited regulatory pathway forward.
Regarding our other pipeline candidate, TP-271, we are in the process of completing a multiple ascending dose study of the oral formulation and plan to announce results at a future scientific meeting. TP-271 has potent in vitro activity against community and bio threat respiratory pathogens and has both IV and oral formulations in development.
Now I'll turn the call over to Chris for a review of our financials and to briefly discuss details of our recent term loan and security agreement. Chris?
Thanks, Larry. As of September 30, 2018, we had cash and cash equivalents of $97 million and 53.5 million shares outstanding. We expect that our cash and cash equivalents, including the $30 million funding from a debt facility, as well as expected revenue from U.S. government awards and commercial sales of XERAVA, will be sufficient to fund operations into the second quarter of 2020.
Revenues in Q3 were $1.2 million compared to $4.1 million for the same period in 2017. Revenues for each period consisted of contract and grant revenue under the company's U.S. government awards for the development of Tetraphase compounds. The decrease in revenues was primarily due to the timing of activities funded under these awards.
Research and development expenses for the third quarter of 2018 were $11.3 million compared to $28.8 million for the same period in 2017. The decrease in R&D expenses was primarily due the completion of the IGNITE Phase III clinical studies for XERAVA. Sales, general and administrative expenses for the third quarter of 2018 were $9.5 million compared to $5.6 million for the same period in 2017.
The increase in SG&A expenses was primarily due to the commercialization expenses to support the U.S. launch of XERAVA. For the third quarter of 2018, we reported a net loss of $19.2 million or $0.36 per share compared to a net loss of $30 million or $0.63 per share for the same period in 2017.
Finally, as Guy mentioned earlier, we entered into an agreement with Solar Capital, which provides us with the flexibility to access up to $75 million, of which $30 million was secured at closing. We have always maintained that we would be opportunistic with respect to any potential financing activities, and the agreement we announced with Solar Capital represents a quality debt mechanism that provides us with additional cash runway to enable a strong launch of XERAVA in the U.S.
I'll now turn the call back over to Guy.
Thank you, Chris. This past quarter included the company's most significant milestones to-date with the FDA approval and the launch of XERAVA in the U.S. and the EMA approval in the EU. Based on physician and thought leader feedback, as well as our own prelaunch efforts, we feel we're off to solid start with the U.S. launch. We're pleased that physicians are now able to use XERAVA in cIAI patients with serious, often life-threatening infections and expect that they will do so as first-line empiric treatment.
We're fortunate to have a treatment that is clearly differentiated as the only monotherapy indicated for cIAI that is shown to be as effective as the gold standard, carbapenems. And now with our agreement with Solar Capital, we have the financial resources to ensure a well-supported XERAVA launch, both in the U.S. and EU5. We feel we're in the best possible position to make our launches a success.
With that, we can open the call up to questions. Operator?
Thank you. [Operator Instructions] And our first question comes from Joseph Stringer from Needham & Company. Your line is now open.
Hi, this is Joey on for Alan. Thanks for taking my questions. How about a couple of them? So in terms of XERAVA, I know it's just a few weeks into the launch, have you guys noticed any particular traction in, say, talking to – the sales force talking to ID docs versus surgeons or TI docs? And then I have a follow-up question after that.
So I mean the feedback is – this is Larry. The feedback from the field so far has been very positive, from ID physicians as well as critical care intensivists, your clinical pharmacists as well. We have a lot more say in the U.S. hospital market, as well as surgeons. So kind of the patients we've talked about is, for those patients deemed at high risk of having resistant pathogens or those deemed to be at higher risk. So very positive. We've seen a lot of starts in hospitals for patients that maybe even have penicillin allergies or at risk of C. diff.
So we think the nice thing about XERAVA is there is multiple different value propositions that the drug brings to addressing unmet medical need, and we've heard a lot of different things from physicians that lead us to believe that it should be very successful.
Okay, great. And then just a quick follow-up. The Phase 3 trial in China with a collaborator, Everest, will that start in 2019? And what are the timelines around that trial completion and potential approval in China?
Yes, I mean, as you know, we're partnering with Everest on all our China activities. And I'm sure you're probably aware there's lot of changes in the regulatory environment going on over there. So at this point, we haven't provided guidance on when the Phase III study will start or finish. As soon as we get closer to – as soon as Everest gets closer to starting it, then we'll be able to do that.
Okay, great. Thanks for taking my questions.
And our next question comes from Madhu Kumar from B. Riley FBR. Your line is now open.
Hello, this is Mayank calling in for Madhu. Thanks for taking my question and congrats on the progress. Just a couple for me. The region frequency information that you shared looks really intriguing and fairly good. What I was wondering was, within these Tier 1 accounts that you talked about, could you maybe talk a little more about the reimbursement, the DND committee reviews, if there are any with this product? And then from the differentiation standpoint, what is really resonating? What are some of the two or three attributes that are resonating? That would be really helpful. And then follow up, within this Tier 1 very quickly, what fraction of patients those institutions represent? That will be helpful information. Thank you.
Yes, so I mean from a reach of those, I mentioned we've hit about 75% of our Tier 1 institutions and those are hospitals that are typically writing about 40:1 compared to like a Tier 3 institution. So they're really driving the gram-negative days of therapy. Some of the feedback that we've heard from the field as well as being out there in the field, the price point is definitely a big plus for a lot of these physicians. I mean that one thing that we hear from the physicians and pharmacists are look, this is a great alternative to carbapenems or to Pip-Tazo with vancomycin.
We feel that we have a drug that address an unmet medical need. Hospitals, unfortunately, aren't making tons of money, so pricing it the way you did makes it accessible to the hospitals and patients. So far it's been received very positively, and we continue to hear additional stories on a daily basis. So the Tier 1 side, really kind of wrapped our arms around it. We've seen a pretty rapid uptake.
Great. And then, if I may as a follow up, any particular metrics you could and guide us to, as you think about how some of this would translate into sales? Maybe for the further quarters? Any hard metrics you could guide us to? That would be helpful. Thanks.
Yes, I think that when we go into, probably first quarter next year, we'll provide some harder metrics. Those to be determined. And three weeks in the launch, I think, really what we're saying is, just very positive uptake and we've been pleasantly surprised and happy with how things are going. So I think again, the price point as well as just the multiple value propositions that eravacycline has to offer has resonated well in our Tier 1, as well as outside of that. So obviously the reps are calling on a lot of different areas but the main focus is on the Tier 1s.
Excellent. Thank you for taking my questions.
You’re welcome. Thank you.
And our next question comes from Stephen Willey from Stifel. Your line is now open.
Hi guys, this is Ellen on for Steve. Thanks for taking my question. I just have two. So could you remind us to what the patient mix is expected to be in this setting in terms of government versus commercial? I know you've kind of touched on reimbursement a little bit, but could you provide a little more color on that?
So it’s about 80/20. So this is, I mean, it's not a huge CMS population when you look at the patients. I'm looking over at Dr. Tsai, I believe our average age in our IAI studies is around 50?
So it’s about an 80/20 mix. It changes obviously if you see off label utilization, but that's not something that we speak to our market towards.
Okay. Thanks. And my second question, does your current cash guidance contemplate any additional R&D activity beyond the Phase 1 trials? So you've already declared for 271 and 6076? Thanks.
This is Chris speaking. So we, for now, we've got a, all the activities that Dr. Tsai was describing, are certainly in that cash guidance and we'll continue to evaluate those programs as they reach each of those milestones. But for now, we're not – we have not included a full development plan for those assets beyond those milestones. And we'll assess that based on resource availability and results.
Great, thank you.
And I am not showing any further questions at this time. I would now like to turn the call back over to Guy MacDonald for any closing remarks.
Thank you. Thank you, everyone, for joining the call, and we're obviously very pleased with the work we've done in the last month, getting the launch under way. And we look forward to providing further updates early next year. Thank you.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.