Tetraphase Pharmaceuticals, Inc. (NASDAQ:TTPH) Q4 2018 Results Earnings Conference Call March 14, 2019 4:30 PM ET
Jennifer Viera - Executive Director, Corporate Communications and Investor Relations
Guy Macdonald - President and Chief Executive Officer
Larry Edwards - Chief Operating Officer
Larry Tsai - Chief Medical Officer
Christopher Watt - Senior Vice President, Finance
Conference Call Participants
Edward Tenthoff - Piper Jaffray & Co.
Stephen Willey - Stifel Nicholas
Ed Arce - H. C. Wainwright & Co.
Fang-Ke Huang - SunTrust Robinson Humphrey
Kevin Kedra - G.research
Alan Carr - Needham & Co.
Good day, ladies and gentlemen, and welcome to the Tetraphase Pharmaceuticals Fourth Year-End 2018 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.
I would now like to introduce your host for today's conference, Jennifer Viera, Corporate Communications. You may begin.
Thank you. Good afternoon. And thank you, everyone, for joining us on today's call. With me today are Guy MacDonald, President and Chief Executive Officer; Larry Edwards, Chief Operating Officer; Dr. Larry Tsai, Chief Medical Officer; Chris Watt, Senior Vice President of Finance; and Dr. Jacques Dumas, Chief Scientific Officer.
On the call, Guy will make introductory remarks, highlighting recent corporate developments. Larry will provide an update on the XERAVA launch. Dr. Tsai will provide an update on our pipeline and Chris will provide an overview of our fourth quarter and year-end 2018 financial results. Guy will then conclude and we'll open the call to questions.
Before we begin our formal comments, however, 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 necessarily intend to update this specific information in the future.
I would now like to turn the call over to Guy Macdonald. Guy?
Thank you, Jennifer. And good afternoon to everyone. 2018 was an exceptional year for Tetraphase, culminating in the US Food and Drug Administration and the European Medicines Agency's regulatory approval for XERAVA for the treatment of complicated intra-abdominal infections, cIAI, and the subsequent US launch.
These approvals catalyzed our transition from a development stage company to a revenue-generating commercial stage biopharmaceutical company. They were the results of many years of hard work and dedication by our employees to address the growing and urgent need for differentiated new antibiotics to combat serious, often life-threatening, multidrug-resistant infections.
XERAVA fulfills that need, providing physicians with a new, effective and safe medication that they can use for not only confirmed infections, but empirically, an important distinction that enables earlier intervention with a potential to save lives.
With its differentiated clinical profile and broad labeling as well as responsible and acceptable pricing, we believe XERAVA will become an increasingly important component of the antibiotic treatment arsenal, particularly in hospitals and healthcare institutions where pathogen resistance is a very real and ongoing threat.
Launched in mid-October, XERAVA is off to a solid start in the US, making progress with target institutions.
During 2018, and reflecting just nine weeks of commercial availability, XERAVA generated net revenues of $178,000. This is very much where we expected to be when you take into account the timing of launch and the fact that we use a specialty distributor model where you do not see large stock-ins which can inflate initial performance.
Larry Edwards will go into more detail in a moment, but our objectives for XERAVA in 2019 will be to continue to execute our plan set forth last year, expanding pull-through from the tier 1 accounts which comprise the first phase of our targeted launch and expanding our reach to additional tier 2 accounts, which comprise the second phase of our launch and which is now underway.
We're confident we'll see continued and increasing adoption of XERAVA as our field team further educates physicians and formulary decision-makers on XERAVA's safety and efficacy profile and the role it can have in delivering improved outcome for their patients.
To devote the resources necessary to achieve a successful US launch, we have made the decision to delay launching in the EU 5 independently and to carefully consider the best path forward in that region.
We remain confident that we will bring this life-saving treatment to patients in the EU and want to do so in a way the best positions us for success.
Our partnership with Everest Medicine Limited also continues to progress. We entered into this collaboration just over a year ago and already Everest has made rapid progress advancing eravacycline and engaging regulatory authorities in China.
In October 2018, Everest obtained regulatory approval from the China National Medical Products Administration, formerly referred to as China FDA, to begin a Phase III clinical trial of eravacycline in cIAI. Everest plans to begin enrolling patients in this trial in the first half of 2019.
We also have made progress with our development pipeline in 2018. These candidates represent potential new medicines from our tetracycline total synthesis discovery platform, targeting Acinetobacter baumannii, respiratory infections and now acute myeloid leukemia, a potential new therapeutic area for us.
We look forward to completing the bronco pulmonary disposition studies for TP-6076 later this year and presenting the first preclinical data for TP-2846, our candidate for AML in April.
The progress we made across our business in 2018 has put us in a position for a strong 2019.
To discuss more about XERAVA launch progress, I'd now like to turn the call over to Larry Edwards. Larry?
Thanks, Guy. And good afternoon everyone on the call. Today's call represents our first opportunity to update since launching XERAVA in the US last October. And we're encouraged by the progress that we've made so far.
As outlined previously, our launch, execution strategy comprises two phases. The first targeting tier 1 accounts which are the highest institutional users of antibodies defined by days of therapy and accounting for around 60% of the gram-negative marketplace.
And the second approach is on tier 2 accounts which constitutes approximately 30% of the gram-negative market, and together represent about 90% of the gram-negative market.
Our plan was to hyper targeted the tier 1 accounts during our first quarter launch. And I'm happy to say that by the end of 2018, our sales force had met the goal and engaged with 100% of their tier 1 hospitals an they are on track with the second phase objective to reach 100% of their tier 2 accounts by the end of the first quarter of 2019.
With this breadth of coverage we've seen an impressive 70% reorder rate for XERAVA over the first nine weeks of launch and we continue to see these high reorder rates into the first quarter of 2019.
This is impressive and actually is an anomaly considering that the last several antibiotics that have launched had reorder rates anywhere from 10% to 35% at week nine.
Our goal is now to maintain that high level reordering while bringing on additional accounts.
Securing inclusion on hospital formulary is another significant component of our launch strategy. And we expect to see additional traction with increased use translating into product revenue growth as XERAVA is added to hospital formularies.
During our first quarter of launch, 74% of our sales came from off-formulary or pending formulary review account. Since antibody formulary reviews typically take place first of the year, semiannually or on a quarterly basis, our mid October 2018 launch meant that we had to wait until the first quarter of 2019 for many of these reviews.
I'm pleased to say that we have more than 400 hospital formulary views already completed or scheduled to occur by midyear.
So far, we've had 100% formulary acceptance rate, and that's defined as on-formulary with restrictions or on-formulary with no restriction, and have secured positions on more than 100 formularies during the launch quarter. Some are very large integrated delivery networks.
We believe the clinical benefits of XERAVA and an attractive price point are compelling and help lower the barrier to entry for formulary inclusion for many, if not all the institutions with whom we've been engaging and position us well for additional formulary pull-through in the months ahead.
In the first quarter, we brought on a team of three strategic market access executives to help drive formulary acceptance from the top down as the regional business directors and the regional account managers continue to focus on the bottoms up approach of gaining formulary access.
Further facilitating hospital use of XERAVA, there are now three antimicrobial susceptibility tests, or ASTs, available for eravacycline. And prior to launch, approximately 200 accounts had ordered eravacycline ASTs for research-use only demonstrating their eagerness to assess first-hand XERAVA's activity against pathogens in their institution.
During the first quarter launch, XERAVA's usage has been the strongest in the inpatient setting and is responsible for about 75% of sales, with the remaining 25% of sales coming from the outpatient setting.
Patient days of therapy are a good indicator for usage metrics and our patient days of therapy are 2 to 5 times larger than any recent hospital antibiotic launch at week nine.
Feedback from the sales force tells us XERAVA is being used as a replacement for carbapenems and other beta-lactams in areas where resistance is high. And in multiple other cases, XERAVA is being used as an alternative to tigecycline, minocycline or other drugs to fight multidrug-resistant infections in patients who cannot tolerate the side effects for these drugs.
Additional feedback referred most commonly as healthcare practitioners' enthusiasm for XERAVA's efficacy on treating a broad-spectrum of pathogen. Further some physicians have referred to XERAVA as a utility drug as it can be used for many different patients, including those with renal impairment as XERAVA eliminates the need for dose adjustments for these patient populations.
The pool of patients that XERAVA can benefit further differentiates it from other antibodies and extends to other high-risk patients such as those with previous hospitalization, recent ICU stays, elderly with comorbidities or those coming in from long-term care or skilled nursing facilities, as well as those with previous Clostridium difficile infection or at risk of having a C. diff infection.
Overall, the trends we're seeing across several metrics from formulary reviews to patient days of therapy to reordering rates are very encouraging. We're pleased with the progress we're making and anticipate increased traction as additional formularies are secured and our field sales force educates physicians and institutional decision-makers on the important role XERAVA can play in improving outcomes for patients with complicated intra-abdominal infections.
As someone who has launched multiple antibodies, I know this takes time in patients, and we remain focused and confident that our strategy of penetrating the impaired market segment and are seeing consistent early signs of success.
We look forward to continuing to update you as the launch progresses. With that, I'll turn the call over to Dr. Larry Tsai.
Thank you, Larry. We continue to build upon the growing body of scientific research supporting XERAVA and our pipeline candidates.
In October, the company presented data related to XERAVA at the Infectious Disease Society of America's IDWeek. We highlighted results from a post-hoc analysis of XERAVA Phase III data which showed high clinical cure and microbiological eradication rates with XERAVA among patients with cIAI and concurrent bacteraemia.
We also presented data from a Phase I randomized, placebo-controlled, double-blind, multiple ascending dose study, demonstrating positive safety, tolerability and pharmacokinetic results for TP-6076, which is in development for the treatment of infections caused by Acinetobacter baumannii and other multidrug-resistant pathogens.
Also in October, we announced positive data at the American College of Clinical Pharmacy 2018 Global Conference from a post hoc analysis of two Phase III trials of XERAVA in higher risk populations, obese patients and those with altered renal function, providing further evidence of XERAVA's effectiveness as an impaired treatment for cIAI across multiple patient types without dose adjustment.
Regarding TP-6076, a fully synthetic tetracycline antibiotic that has shown potent activity against multidrug-resistant gram-negative pathogens in preclinical studies, a Phase I bronco pulmonary disposition study of the compound is underway to confirm appropriate therapeutic lung levels to treat infections caused by Acinetobacter baumannii and other multidrug-resistant pathogens.
Results of this study, which are expected in the second half of 2019, will inform our future development plan for TP-6076.
Looking ahead, we are excited to have four poster presentations, providing a deeper look at clinical data for XERAVA and earlier stage compounds at the 29th European Congress of Clinical Microbiology and Infectious Diseases, or ECCMID, which will take place in Amsterdam in April.
Two of the posters will highlight XERAVA data, specifically the in vitro activity of XERAVA in comparators against gram-positive and gram-negative bacteria isolated from European patients in 2017.
A third poster will present the results of our multiple ascending dose studies of the intravenous and oral formulations of TP-271, which has demonstrated potent in vitro activity against community and biothreat respiratory pathogens.
And the fourth poster will highlight the in vivo efficacy of TP-6076 against Acinetobacter baumannii in murine thigh and lung infection models. We look forward to presenting these data on XERAVA and our pipeline candidate at ECCMID.
Beyond our antibiotic pipeline candidates, we introduced a new candidate, TP-2846, which we are evaluating for the treatment of acute myeloid leukemia or AML.
Emerging from our tetracycline total synthesis platform discovery efforts, TP-2846 represents an exciting first entry into a potential new therapeutic area for us, but one for which our expertise in tetracycline has meaningful applicability and relevance.
There are decades of research and a large body of literature showing the tetracycline's whole potential anticancer agents.
TP-2846 has emerged as a lead candidate for treatment of AML, demonstrating potent in vitro and in vivo activity. The evidence is preclinical, but it is very encouraging. And in April 2019, we will present some of these data at the American Association for Cancer Research, or AACR annual meeting.
We are gratified by the progress we have made with our development programs during the past year and look forward to multiple data presentations across our entire product portfolio in the coming months.
Now, I will turn the call over to Chris to go through our financials in more detail.
Thanks, Larry. As of December 31, 2018, Tetraphase had cash and cash equivalents of $107.8 million, which included proceeds from the first tranche from our previously announced loan and security agreement for Solar Capital Ltd for up to $75 million that we entered into in November 2018.
We anticipate that cash and cash equivalents and expected revenue from sales of XERAVA will be sufficient to fund operations into the third quarter of 2020.
Total revenues were $4.3 million in the fourth quarter of 2018, a 72% increase over the $2.5 million recognized in the same period in 2017. Included in the fourth quarter of 2018 were product revenues of $178,000 from the sale of XERAVA, which we commercially launched during the quarter, as well as $3.2 million in collaboration revenue related to progress made by Everest Medicines in the advancement of eravacycline in China.
Also included in revenues was $928,000 in government contract revenue from our agreements with BARDA, NIAID and CARB-X.
Moving forward, we expect some government revenue in 2019, but less than we received in 2018. Further, we're entitled to receive additional milestone payments from Everest when certain regulatory events occur.
Turning to expenses, research and development expenses were $10.7 million for the fourth quarter of 2018 compared to $18.5 million for the fourth quarter of 2017. This decrease in year-over-year R&D expense reflected lower clinical trial costs due to the completion of our IGNITE Phase III clinical trials for XERAVA in the first quarter of 2018, as well as lower chemistry, manufacturing and controls, or CMC, expenses related to XERAVA.
Selling, general and administrative expenses for the fourth quarter of 2018 increased to $14.7 million from $7.9 million for the same period in 2017. This increase in SG&A expenses year-over-year was primarily due to an increase in commercial launch related expenses for XERAVA and related G&A infrastructure investments. Moving forward, we expect 2019 SG&A expenses to remain largely in line with fourth quarter of 2018 results.
For the fourth quarter of 2018, Tetraphase had a net loss of $21.5 million or $0.40 per share compared to a net loss of $23.5 million or $0.46 per share for the same period in 2017.
For the year, we significantly reduced our loss in 2018 compared to the prior year, closing 2018 with a net loss of $72.2 million or $1.37 per share compared to a net loss of $114.8 million or $2.63 per share for 2017.
Additional details on our financial performance for the fourth quarter and for the full year of 2018 may be found in our press release which we issued earlier today.
I'll now turn the call back over to Guy for closing remarks.
Thanks, Chris. In closing, we remain committed to executing a successful commercial launch of XERAVA in the US and are encouraged by early launch trends. We have a solid foundation in place and at the beginning of what we expect to be a continued growth phase for XERAVA.
We know this will be a marathon, not a sprint, and we're well positioned for success and appreciate your support along the way.
With that, we can now turn the call over for questions. Operator?
Thank you. [Operator Instructions]. And our first question comes from the line of Ted Tenthoff with Piper Jaffray. Your line is now open.
Great, thank you very much. A couple of quick questions if I may. Firstly, I saw how you broke out the cost of goods sold and I wanted to try to understand sort of what the components were there and what you see as sort of a go-forward cost of goods sold? Thank you.
Ted, this is Chris. Our COGS is definitely made up of a combination, as you would expect, of both our direct XERAVA manufacturing cost as well as other periodic costs such as shipping, storage and third party logistics costs. And, certainly, as XERAVA revenue grows, these costs will be expected to become a much lower percentage of revenue. We're not providing any specific guidance on revenue or COGS at this point for the year of 2019, but we certainly expect our gross margin to continue to improve over time.
Okay, great. I wanted to get a sense, Larry, if I may, from the first nine weeks – appreciating very, very early – where is XERAVA being used? Is it more in the confirmed infection side? Is it more on the empiric side? Do you have any granularity at that level yet?
Ted, that's a good question. Really, obviously, this is all qualitatives, in that what we've heard back from the field sales force and the regional directors. It's probably a split. It's a split of being a replacement for carbapenems or an alternative to carbapenems or your beta-lactams in patients at risk for having resistant pathogens. And it's also for some confirmed infections or even patients that have failed other options and it's been thrown in there for those patients.
I think right now it's the mix. As we continue to bring more and more institutions on in 2019, we see more and more formularies pushing more towards a beta-lactam sparing type of alternative.
Okay, cool. And then, for Guy, the decision going into delaying Europe, is this really a resource decision? Tell us a little bit more kind of about that and what your plans might be in Europe. Thank you.
I think as everyone knows, our plan was to start in the second half of this year with a staggered launch beginning in the UK and Germany. I think as we've looked at the resources we really need to focus on the US launch, that's by far the most critical thing that we doing here. And so, it really has been a choice of really using the resources that we would've done for Europe to focus them on the US. It's as simple as that. We'll reevaluate it as we move through the year and look if it makes sense for us to still continue to do that on our own, albeit a little later or whether we'll look for a partner.
Okay, cool. I look forward to an update there. And then, I'll hop back in the queue just in case anyone else wants to ask any questions. Thanks.
Thank you. And our next question comes from the line of Stephen Willey with Stifel. Your line is now open.
Yeah. Good afternoon. Thanks for taking the questions. Just curious, so what proportion of the tier 1, 2 accounts I guess are represented within the 400 formulary reviews that are either already completed or scheduled through midyear?
So, Steve, this is Larry. I think when you look at what percentage of our tier 1s are represented in the overall formulary, so I would say the way that we track them is that we're tracking our tier 1s and 2s and 3s. So, I'd say the vast majority, probably 80% to 85%, are the tier 1 and 2 institution. Those are the ones that we really kind of had the representatives focusing the vast majority of their time on. Some of your smaller institutions, obviously – that's why we've got maybe 15% to 20% that falls in there, it's because it's easier to gain access and then make formulary decisions quicker.
Okay. And for some of those institutions that are granting formulary acceptance, but in the context of restrictions, can you speak to what some of those restrictions might be?
Sure. As expected, I would have said that probably 100% of the formulary wins would be with an ID restriction, and that's typical for most antibiotics. So, what we've seen is kind of a smattering across-the-board of either ID or critical care restricted. In some institutions, if there is not an ID because maybe some of your smaller community-based institutions don't have an ID that's on staff there, so they may have it restricted to pharmacy or even to surgery. We have oddly enough seen some also and even some larger IDNs where it's just been on-formulary with no restriction, which I would have thought that would have been a very small amount. So, we're seeing across the board a mix.
Okay. Maybe just a couple of housekeeping questions, just on R&D, not looking for guidance at all, but should we think of, I guess, a run rate relative to 4Q looking consistent or are there additional costs to kind of come out of that number just given that there's presumably still some CMC and IGNITE trial costs that are embedded within that 4Q?
Steve, this is Chris. Yes, I guess, that's probably the right way to think about it that continuing 4Q for the time being is probably not too far off, but a gradual decrease over time.
Okay, that's helpful. And then, just lastly, on the Solar loan agreement, are there any covenants there just with respect to minimal cash requirements, out of curiosity?
Yes. There is a $10 million minimum liquidity requirement.
Okay, very helpful. Thanks for taking the questions.
Thank you. And our next question comes from the line of Ed Arce with H. C. Wainwright & Co. Your line is now open.
Hi, guys. Congrats on the early progress and thanks for taking my questions. Three for me here. First, just to confirm I heard it correctly earlier, you had so far 100% formulary acceptance which includes over 100 facilities. When exactly? Up until what point would that cutoff be? That's question number one.
Secondly, what sort of early anecdotal feedback have you received from physicians, specifically in terms of the patient profile? I know you've discussed this a little bit, but if you could. And also, with regards to empiric versus the confirmed and how doctors are beginning to use that.
And then lastly, how should we think about the usefulness of script data, understanding the underlying demand growth and given obviously the spotty capture rate that these have across the institutions? Thanks so much.
Hey, Ed. How is it going? It's Larry. Thanks for the questions. So, I think I can probably tackle all three of these. So, the first one is, the question of the 100% formulary acceptance at greater than 100 institutions and what was the time point, I believe, if I captured that correctly.
So, we cut that off – being that this is the quarterly earnings call, we cut that off at 4Q. So, that's not including what's happened so far in the first quarter. Feedback on patients, so similar to what I mentioned a little earlier, it's about a 50-50 of what we've seen so far. So, we're hearing again, this is qualitative from the field is that we're seeing some use as a carbapenem alternative or a beta-lactam alternative. We're also seeing some use in patients where there is penicillin allergies. We may see this as an alternative versus going to a quinolone. And then, we're also seeing use in some confirmed or even in patients that were on multiple drugs not doing well, and this was thrown in because they couldn't tolerate, so they were either refractory or tolerant to the current therapy they are on. So, I think that we've had a mix which we anticipated at launch that you do get a lot of mix where maybe a patient isn't doing well on something, so they put them on this. So, I think as we move into the first quarter of this year, we'll start to see that shift a little more towards the empiric side.
And the third question is a good one and one that I get quite frequently is Rx data. So, if you're looking at Symphony, IQVIA, whatever data that you're looking at, how reliable, I think it's directional at best, if you look at it. And some of the challenges is everybody has a different distribution model. We do not go to wholesalers. So, we go through a 3PL that goes out to specialty distributors. Not every specialty distributor actually reports back to IQVIA or through Symphony. So, you could be missing one, two, maybe even three FDs. Also, you have multiple hospitals, even some large IDNs. You can look at –s some IDNs as large as 50 to 60 hospitals that don't report data through either of those either. And then, if you're look at non-retail data which typically – you have to differentiate between Symphony and IQVIA, you're also missing retail data as well then. So, hopefully, that answers that question.
Yeah. That's about what I had figured. So, appreciate that, Larry. I'll try to squeeze one last one if I could. It strikes me that given the acceptance rate so far and the reorder rates which obviously means that there have been some initial orders launched right before the holiday season, the early trends do look quite good. And I'm wondering, again anecdotally, what feedback you've gotten from some of the facilities. In the mix of their considerations, how much did the pricing affect or factor into all of that? Thanks so much.
Sure. This is Larry again. I'll answer that one. So, it's odd, Ed, in that after launching multiple antibiotics and anti-infective products, this is probably one of the first products that we've ever launched where it's kind of open arms, in that most of the feedback we're getting from hospitals, physicians, HCPs, they appreciate the price point. We listened. We made the drug. Accessible for patients that need therapies that meet unmet medical needs. So, I think the price point has definitely helped a lot and it aligns nicely with our strategy. And then, also the way that the representatives are out there talking about the drug in an appropriate manner. Not saying this drug is for everyone that walks into the ED. It's specifically for patients that are at risk of having resistant pathogens with complicated intra-abdominal infections.
That's very helpful. Thanks again.
Thank you. [Operator Instructions]. And our next question comes from the line of Edward Nash with SunTrust Robinson Humphrey. Your line is now open.
This is Fang-Ke Huang on for Edward Nash. I had a quick question on the reordering rates. You mentioned other companies have a 10% to 35%. You guys have 70%. So, besides the pricing, other factors contributing to the high reordering rates you've seen so far?
Yeah. So, you're correct. I said that we've got about 70% reorder rate. I think there's multiple things that go into that. One is our focus from an incentive comp perspective was for representatives to get a pull through on reorders. So, one thing we find is, once an institution starts to reorder, it becomes somewhat more of a habit-forming, and maybe even leads to a protocol in place for those appropriate patients. So, that's one reason I think that we've had such strong reorder rates. And I do think that it is some reflection of the price and then continued overutilization of carbapenems or beta-lactams with an increase in the ESBL rates. And I think there's some data that's just popped in a timely manner that's benefitted like the MERINO trial showing that Pip/tazo really isn't a replacement for carbapenems with ESBL bacteremia. So, I think a lot of things have come together for us, and that's what helped us with that 70% reorder rate.
Great. And second one, just to follow-up on the acceptance rate, and you mentioned that, by the year-end 2018, you have 100%. Do you have any data for the first quarter so far? And what has the acceptance rate been for the first quarter?
So, that's a great question and I look forward to answering that on our next earnings call.
Okay, great. And third question, I want to just – so you guys are starting to look at some of the cancer indication. And just in the long-term, if there's some sort of direction that the company kind of go. Like, one part of it is going to be antibiotics. The second part will be focused on cancer. Is that the long-term goal for the company?
Right now, most of our resources, as you'd expect, are focused on the launch of XERAVA in the US, and that's our primary goal. I think we've always spoken before that having opportunities divest into other hospital products makes sense as we move forward. This was a logical output of our discovery platform to move into AML. We're really excited about the preclinical data which we'll talk about more later this month. But our focus right now is really all antibiotics and just a very small amount in AML.
Got it. Thank you so much.
Thank you. And our next question comes from the line of Kevin Kedra with G.research. Your line is now open.
Hi. Thanks for taking the questions. Maybe just to piggyback off that last one, a few of your peers, we've actually seen them kind of moving away from their pipeline assets and their early-stage discovery. You guys seem to be more ramping that up, the AML opportunity. So, given that the focus is on XERAVA and the timeline that these drugs take to ramp up and turn around and be profitable, why does it continue to make sense for you guys to invest in that early-stage pipeline? And then, I just had a couple of follow-ups.
I think there's a good rationale for why we're doing what we're doing, Kevin. Clearly, we have, obviously, three pipeline programs right now. TP-271, we've developed at this stage in partnership with NIAID. So, there's been minimal resources internally and unfunded externally. 6076, we still believe is a very exciting Acinetobacter compound and the amount of time and people focused on that is very small. And to get to the next important stage of seeing what our lung levels are for this product is very, very important to us.
And lastly, at this point, the AML program has really been in our research group with just a couple of people. We're running preclinical studies clearly as we move forward. Obviously, we will reassess the resources we put into that, doing it ourselves and how that compares. But almost, I'd say, 98%, 99% of our funding right now is supporting XERAVA in the US and we think it's important that we continue to have more than one program. I think, as you're seeing with all companies, it's pretty tough to survive with a single asset. So, we're looking for many different ways to try and build out our portfolio.
That's helpful. And then, secondly, I want to ask, given the launch you guys are going to be entering your first full-year, we've gotten a sense of where recent launches have been in their first full year, in kind of the $6 million to $7 million range of revenue. I know you said you don't want to give any sort of guidance, but any reason to believe that you guys shouldn't be able to put XERAVA into a similar revenue trajectory as what some of your peers have been able to do in their first year?
Yeah. So, Kevin, this is Larry. I'll answer that somewhat. I think that when you look at our strategy going after the empiric market, it's definitely different than what a lot of the recent drugs coming to market have went after. Most of them, either because of the label, forcing them to go after a last line therapy or just do the price and their kind of strategy to go after a niche market, they've had a slower uptake. Again, I think that we're seeing consistent signs that show a very positive launch trend. So, without giving guidance, which we're not doing on this call, I think that things look very positive for us in 2019.
Thank you. And our next question comes from the line of Alan Carr with Needham & Co. Your line is now open.
Hi. Thanks for taking my questions. Larry, can you go over the number of accounts you have in tier 1 and tier 2? And then, I was hoping you can come back to oncology in terms of rationale for tetracycline. So, maybe you can go over some of the data that led you to pursue this indication in the first place and how this platform might give you an advantage? Thanks.
Yeah. So, Alan, thanks for the question. So, this is the first Larry. I'll take the first question. So, I think that when you look at what we're covering from a tier 1 perspective, so you're looking at close to about 600 hospitals on the tier 1 side. Tier 2 is closer to about 700, 750. So, a little over 1,300 hospitals which equates to about 90% of the gram-negative days of therapy. So, that's where we're focusing the vast majority of our efforts and that's really where we're trying to pull through most of the formulary wins at as well. That answered the question?
Yeah, thanks. I'm just trying to get a reminder on the number. And then, on oncology.
Yeah. So, this is the other Larry. So, if we look at the AML program for TP-2846 as sort of the natural outgrowth of our proprietary chemistry platform that we've used so far to generate differentiating antibiotics. But as you're sort of alluding to, there's decades of research that have shown that tetracyclines hold great potential as anti-cancer agents. But until now, tetracyclines as a class have never been optimized for oncology indications. And that's really because of the limitations of the traditional semi-synthetic methods. But, again, through our proprietary and productive tetracycline discovery platform, we were able to optimize 2846 as a potent tetracycline to address this oncology indication. And the compound is demonstrated in vitro and in vivo activity in preclinical leukemia models. So, we're really excited about presenting the data at the AACR meeting and building further on this encouraging preclinical data set.
So, Guy, you answered a question earlier that antibiotics remain a priority. I'm wondering how far are you going to take this oncology program – internally here, what's the plan? Do you plan to collect a little bit of clinical data and then out-license it? Or do you plan to just develop it internally, but maybe draw it out over a longer period of time? What's the strategy?
I think at this point, we're just finishing the preclinical data. So, still, obviously, very early. We're really leaving our options open at this time. Clearly, as a company, we believe you need to have multiple assets to be successful in the hospital space. This may be something we decide to continue on our own or we may choose to license it out. But, clearly, at this point and haven't made that decision.
Have you decided whether or not to run a Phase I yourself even or no?
We're going to provide an update on that once we get through the preclinical data.
All right. Thanks for taking my questions.
Thank you. And it looks like we have a follow-up question from the line of Ted Tenthoff with Piper Jaffray. Your line is now open.
Thank you very much. So, yes, following up with AML, I think that makes a lot of sense. Kind of following up on Alan's question, is this something that would have potential applicability beyond hematologic cancers or in other hematologic answers beyond AML? And then, secondly, have you taken down or what are provisions to take down additional debt from Solar? Thanks.
I can answer the first part of the question with regard to the AML program. We're going to be presenting data at AACR that establishes sort of preclinical evidence for the potential application 2846 to AML and to other cancer. So, maybe we just kind of defer the discussion until we present that data at AACR.
It's Chris. The question on the debt. We've only drawn the first tranche of $30 million and there are certainly – we have the ability to draw the second tranche based on certain revenue milestones thresholds. But the guidance that I just provided in terms of our cash runway running out into Q3 of 2020 does not assume that that is drawn upon. It's just based on our current cash balance and our expected revenue from XERAVA.
Great. Appreciate it. Thanks, guys.
Thank you. And our next question is a follow-up from the line of Edward Nash from SunTrust Robinson Humphrey. Your line is now open.
Hey, thank you for squeezing another question here. Just want to ask the option in China. You mentioned Everest is going to be initiate Phase III trial in second quarter 2019. Have they given any guidance in terms of when the trial is going to be complete and when the data is going to come out and what are the associated milestone payment to you guys?
No, we haven't given guidance on either of those at this time. We're really pleased with how quick things have gone so far. We clearly are going to start Phase III a lot faster than we thought and we're very excited about the opportunity in China and will provide some answers to that once the study is underway.
Cool, great. Thanks.
Ladies and gentlemen, this concludes today's Q&A session. I would now like to turn the call back over to Jennifer Viera for any closing remarks.
We want to thank everyone for joining us. And if you have any questions, please reach out to Investor Relations at Tetraphase. Have a good evening. Bye-bye.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone, have a wonderful day.