Nabriva Therapeutics plc (NBRV) CEO Ted Schroeder on Q3 2019 Results - Earnings Call Transcript

Nov. 12, 2019 11:12 PM ETNabriva Therapeutics plc (NBRV)2 Likes
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Nabriva Therapeutics plc (NASDAQ:NBRV) Q3 2019 Earnings Conference Call November 12, 2019 4:30 PM ET

Company Participants

Gary Sender - Chief Financial Officer

Ted Schroeder - Chief Executive Officer

Francesco Maria Lavino - Chief Commercial Officer

Jennifer Schranz - Chief Medical Officer

Steve Gelone - President & Chief Operating Officer

Conference Call Participants

Alan Carr - Needham

Ishmael Asante - Morgan Stanley

Jason Gerberry - Bank of America

Robert Driscoll - Wedbush

Thomas Yip - H.C. Wainwright


Good afternoon, ladies and gentlemen, and welcome to the Nabriva Third Quarter 2019 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 turn the conference over to your host, Mr. Gary Sender, Chief Financial Officer, you may begin.

Gary Sender

Thank you, and good afternoon, everyone. Welcome to the Nabriva's conference call and webcast to discuss the Q3 earnings.

Before we begin, I'd 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 from Forms 10-Q and 8-K filed with the SEC.

Moving to slide 3, I'd like to share the agenda for today. Ted Schroeder, Nabriva's CEO will start with the third quarter overview and business update; Francesco Maria Lavino, Nabriva's Chief Commercial Officer will then provide highlights of the progress with the XENLETA launch. I will provide a financial review and Ted will lead a Q&A session. In addition to Ted and Francesco, joining us on the call for the Q&A session are Jennifer Schranz, our Chief Medical Officer; and Steve Gelone, our President and Chief Operating Officer.

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

Ted Schroeder

Thank you, Gary. And thanks to everyone for joining our call this afternoon. Turning to slide 5, I'm thrilled to discuss the third quarter business update for Nabriva. As I've said before, 2019 is a transformational year for the company, gaining approval from the U.S. Food and Drug Administration and launchings XENLETA for the treatment of community-acquired bacterial pneumonia just three weeks after its approval were truly transformational events for Nabriva in the third quarter.

XENLETA is the first new mechanism of action IV and oral antibiotic to be approved for use in pneumonia in nearly 20 years. We believe that XENLETA offers a highly needed alternative for patients with community-acquired bacterial pneumonia.

It is a new class of antibiotic with a novel mechanism of action with convenient IV and oral formulations for patients who are in the hospital, transitioning care from the hospital to home or initiating treatment in the outpatient community setting.

Moving on to slide 6, I'd like to share key highlights of the XENLETA launch. Later, Francesco will cover some of these elements in more detail. Our 90-day plan is to build a foundation for a successful launch, we've built on our pre-commercialization activities and I'm happy to report that we are meeting or exceeding our key launch objectives after just six weeks on the market. XENLETA generated net sales of $1.4 million in the first three weeks on the U.S. market.

We are extremely happy with the initial stocking, which exceeded our expectations. Current stocking is consistent with our demand expectation for the first few months. We launched XENLETA with 60 highly experienced Territory Business Managers, and today, they have called on all of the 900 target hospitals and engaged with over 2,400 healthcare providers. More than 200 hospitals have scheduled formulary reviews of XENLETA before the end of the year.

One of the key differentiating attributes of XENLETA is the availability of an option to transition patients from IV to short course oral tablets upon discharge; ensuring availability of oral XENLETA is more important key to product adoption.

As a result of our partnerships with Walgreens Community Specialty Pharmacy and Option Care Health coupled with orders by hospital outpatient pharmacies oral XENLETA is now available for patient discharge at more than 50% of our target accounts.

Speaking of product availability, I'm excited to announce that as of last week, oral XENLETA is now on formulary as health plans covering approximately 50% of all covered lives. These plans are among the largest insurers, and include Integrated Delivery Networks or IDNs, commercial and Medicare payers. The majority do not require prior authorization, or step edits for access to XENLETA.

In addition, effective January 1, 2020, XENLETA IV has been granted a C Code for pass-through status that will allow outpatient treatment centers to bill Medicare for XENLETA IV at ASP, plus 6%. These are terrific results for just a few weeks on the market, ensuring early product availability supports physician trial and usage of XENLETA and may indicate the opportunity for product adoption as prescribers consider appropriate antibiotic therapy for their patients with CABP, particularly those with other risk factors. Francesco will talk about our plans to access over 6,000 primary care prescribers with our current hospital sales team.

Moving to slide 7, in conjunction with XENLETA launch, during the third quarter, we continued to release important data to the medical and scientific community. In September, XENLETA's second pivotal trial, LEAP 2, was published in the Journal of the American Medical Association just ahead of IDWeek where Nabriva presented 14 posters with new data on both XENLETA and CONTEPO.

Let me now provide you an update on CONTEPO. Following the receipt of the final Type A meeting minutes from FDA in August, we have continued to work with our contract manufacturing partners to address observations made by the FDA in the complete response letter to the CONTEPO New Drug Application, with respect to good manufacturing practices. Based on the work performed to-date, NDA for CONTEPO is expected to be resubmitted in the fourth quarter of 2019

According to the FDA meeting minutes, the resubmission will be designated as Class 2, requiring the FDA to review the resubmission within six months of the receipt date. As a reminder, the FDA has not requested any new clinical or non-clinical data and they did not raise any concerns regarding the safety or efficacy of CONTEPO at the Type A meeting or in the final FDA meeting minutes. Finally, in the third quarter we strengthened our balance sheet and extended our cash runway into the third quarter of 2020.

Turning to slide 8, today is World Pneumonia Day and next Monday kicks off Antibiotic Awareness Week. These events are intended to shine a light on the need for continued development of novel antibiotics to address the rising threat of bacterial resistance. While more needs to be done, XENLETA represents a solid step forward in providing an option for clinicians and patients who could benefit from a short course antibiotic targeted at the pathogens most likely to cause CABP whether patients are treated in or out of the hospital.

Before I turn the presentation over to Francesco, our Chief Commercial Officer, who will share more details about our progress with the XENLETA launch, I turn your attention to the statistics, and remind everyone of the significant problem that pneumonia represents as it is a leading cause of morbidity, mortality and healthcare costs in the US.

With approximately 5 million cases annually, it's the leading cause of infectious death, the third cause of hospital readmissions and the fifth cause of all hospitalizations. Mortality remains very high and direct costs for pneumonia are approximately $17 billion annually. Resistance continues to increase to the most common treatments for CABP. As a result, the new IDSA, ATS CABP guidelines state that macrolide monotherapy is no longer recommended where Strep pneumoniae resistance is above 25%, which is what we presently see across the US and doxycycline is not far behind. Remember that Strep pneumoniae is the most common infecting organism in CABP since the CDC has deemed drug resistant Strep pneumoniae a serious public health threat, there is a significant unmet need for novel CABP treatments. We strongly believe that the launch of XENLETA provides a new, novel targeted option to treat CABP and is not only a significant milestone for the Nabriva team, but a breakthrough solution for the 5 million patients with pneumonia each year and their clinicians who are battling against the growing public health threat of antimicrobial resistance.

Francesco, I'll turn it over to you.

Francesco Maria Lavino

Thanks, Ted, and good afternoon to everyone on the call. It is very exciting for me to share details of the great progress we are making with XENLETA launch in our first weeks on the market. Before going into some launch metric details, building further on Ted's message of pneumonia, slide 10 shows where CABP patients are treated in the United States, and we see three distinct and significant opportunities for XENLETA. Most patients with CABP are diagnosed and treated in the hospital setting, either in hospital or as an outpatient in transition of care, many CABP patient who presented to emergency department get admitted and then treated in the hospital, generating about 3.8 million treatment annually, about 900,000 patients present annually with CABP at an emergency department, but do not get admitted and get treated directly as outpatient with an oral drug, or alternatively, they can be initially treated in the observation unit for a day with an IV and then get discharge on an oral treatment.

All of the patients treated in the hospital about 2.4 million get eventually discharged on an oral drug after an average stay of three to four days. Consistent with our pre-launch view, initial indication confirm that the outpatient transition of care from the emergency department represent a very compelling opportunity for XENLETA, given its profile and the oral and IV availability. Finally, about 2.3 million patients with CABP are treated in the community at the primary care office and these patients represent a very important target given the unmet medical need and XENLETA's value proposition and it's certainly a significant business opportunity. I'll tell you more about our plans to capitalize on our outstanding managed care access by educating more than 6,000 high prescribing community-based physician who are adjacent to our key hospital account.

We have developed an efficient and effective way to immediately enter the community ahead of the upcoming flu season. Turning to slide 11, I'd like to highlight the XENLETA launch priorities for the first 90 days and how leveraging our extensive preparation work we will continue to build a solid foundation for a successful launch. The first foundational priority for a successful launch is ensuring XENLETA availability in the distribution channel, in order to support the transition of care strategy for patients at discharge. The second priority is ensuring our XENLETA sales force connects with the profile prioritize accounts to accelerate formulary placement and transition of care. The third priority is leveraging the incredible work done pre-approval by both the medical affairs and the commercial teams accelerating hospital formulary reviews at key prioritized accounts. And finally, the fourth priority is to ensure that XENLETA is added on formularies with no or limited restriction on key commercial and Medicare plans.

Our primary goal and near-term focus is to build a solid foundation to continue our successful launch and create the right environment for physician to confidently prescribe XENLETA for the CABP patients both in the hospital and in the transition of care setting. Let's review the progress we have made just six weeks after launch on these foundational priorities. Moving on to slide 12, which focuses on the XENLETA's availability, the supply chain team at Nabriva did an extraordinary job in planning and ensuring the availability of the product. We were able to launch in the United States just three weeks after obtaining regulatory approval, immediately after launch all specialty distributors ASD, Cardinal Specialty and McKesson Plasma and Biologics order adequate inventory and also Walgreens Community Specialty Pharmacy and Option Care Health secured XENLETA at their location.

To date, we have more than 200 orders for XENLETA between hospital and specialty pharmacies, supporting the transition of care strategy. More than 30 hospital, all profiled during pre-commercial activities place an initial order, prior to the formulary review and the majority of these initial orders came from all the leading academic medical centers or priority one account. Consistent with our strategy and expectation, most orders where for XENLETA in outpatient pharmacies. To support the transition of care that is key to a successful launch, we established Nabriva Rx Connect in collaboration with Rx Crossroads by McKesson to initiate HUB Transition services, co-pay assistant, patient assistant program and bridge dosing.

On slide 13, I'd like to briefly tell you about the Nabriva sales force and the key activities they had completed so far. First off, we have been able to attract 60 highly experienced Territory Business Managers or TBMs, all of them had in-depth hospital experience with an average of 14.5 years in hospital sales and the majority 75% have ID experience with an average of 9.5 years selling ID product. Today, the TBMs have access and connected with all the 900 target hospitals. The sales team has made more than 2,000 hospital calls and engaged with over 2,400 healthcare professionals.

Turning to slide 14, as a result of the Territory Business Managers engagement, paired with all the pre-approval profiling work done by the medical affairs and commercial teams, we now have over 200 hospital accounts scheduled to review XENLETA by the end of December, 2019. And by the end of the first quarter of 2020, we expect to exceed a total of 400 hospital formulary reviews. Most of the pending formerly reviews are either large systems or Nabriva Priority 1 account. This trend indicate that we might achieve a higher hospital access within the first six months compared to recently launched hospital antibiotics.

Moving on to slide 15, I'm really thrilled to share with you the progress that our great market access team has made in just a few short weeks. Based on the extensive work done pre-approval, the team has conducted meetings with key payer account representing approximately 270 million lives or approximately 90% of total covered lives since the approval date. As a result of this level of engagement, the majority of clinical reviews for XENLETA have occurred or had expected to occur within the first 90 days of launch.

To date, approximately 50% of 150 million covered lives have access to XENLETA with the majority having no utilization management either Prior Authorization or Step Edits required.

Coverage is primarily driven by Express Scripts and Anthem who had XENLETA to their commercial formularies with no utilization management. This again, is a remarkable accomplishment in such a short period of time. Medicare Part D generally takes a while to established coverage. However, you can see we do have some coverage already primarily driven by Pfizer adding XENLETA to the Part D formulary, again with no prior authorization.

We also have already had some key wins in certain states with Medicaid plans. To date, approximately 45 million commercial and Medicare Part D lives are under contract. About 90% have no utilization management and we are in the process of contracting with all commercial and Medicare Part D plan for coverage with no utilization management.

We expect coverage to further increase over the next few months with more than 80% of total covered lives expected to review XENLETA by the end of the first quarter of 2020. Turning to slide 16, we have an opportunity for increased reimbursement for the transition of care for XENLETA. XENLETA IV has been granted a C Code for pass through status that effective on January 1 will enable outpatient departments to bill Medicare at ASP plus 6% for XENLETA IV. We anticipate that the J Code Application for XENLETA will be submitted by December 31 with an approval expected by October 2020.

With an effective date of January 2021, it will allow for outpatient department to bill Medicare and commercial plan with a permanent code at ASP plus 6% for XENLETA IV. There is a possibility that CMS could award new J codes on a quarterly basis and this would expedite the review and the implementation of the J code for XENLETA.

Moving on to slide 17, I'd like to share the XENLETA launch priorities, focused on pull through. Our goal is to drive new hospital orders and reorders giving Nabriva a substantial foundation of customers using XENLETA in the inpatient, transitional care and outpatient settings. We will continue to finalize Medicare Part D and commercial contracts to further expand XENLETA access and will continue to work with key hospital accounts to secure P&T review of XENLETA.

We will drive initial purchase and utilization at high priority accounts prior to formulary review and the pull through for the appropriate patient. We will focus on maximizing the utilization of XENLETA in those hospital who have the focus and infrastructure consistent with our transition of care strategy. In early November, we launched a focused commercial effort in the community, an efficient and effective way for Nabriva to take its first step into the community setting with XENLETA.

Moving on to slide 18, the focused community program utilize our 10-year hospital field force experience to take advantage of big pneumonia and flu season, as well as the significant resistant to current oral treatment in the community. It targets more than 6,000 community healthcare professionals that are high prescribers of oral antibiotic for CABP and are within close proximity to our target hospital location.

This helps us close the loop on outpatient living in hospital on XENLETA and opens new opportunity with more physicians. This will also provide a new option for primary care physician, who may be concerned with using existing drugs such as fluoroquinolone and macrolide.

By targeting those primary care physician with high potential who are in close proximity to our target hospital, we believe Nabriva will maximize our field force impact and will allow us to efficiently access the community opportunity for XENLETA.

We are also expanding the Nabriva Rx Connect services to support the community effort by shipping XENLETA directly to the appropriate patient, which should remove additional barriers through the adoption and uptake in the community.

At Nabriva, we are all very excited about the great progress we have made in our early days with the XENLETA launch, and we are convinced that we are moving in the right direction to have a very successful launch. And I look forward to sharing with you additional information at our next earnings call.

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

Gary Sender

Thanks, Francesco. The slide 20 lists out some key financial highlights for the quarter, including the strong initial stocking of XENLETA and the significant cash inflows into Nabriva in the third quarter. We will go into more detail on those in the following two slides.

So, let's turn to the P&L on slide 21. You will see that we recorded product sales, collaboration revenue and the ongoing grants from the Austrian government. Focusing first on product sales, as reported, we recorded net sales of $1.4 million.

We record product sales when XENLETA is shipped from our 3PL and is received by wholesalers and our specialty retail partners. Those customers want to maintain a proper level of inventory to satisfy the demands of hospitals, pharmacies and other medical providers for XENLETA oral and IV.

They will replenish their inventory as customers order product and our future sales will be guided by their inventory needs. We are very pleased with the initial stocking of XENLETA and it exceeded our expectations for 2019.

Gross to nets were a bit under 30%, the IV carries a significantly lower gross to net compared to our oral product. We believe our future sales mix will skew more to our oral product and I, therefore, reiterate my prior guidance, the gross to nets over time will range between 30% and 35%, driven by our mix of sales and market access efforts.

Collaboration revenue in the third quarter was $5 million. This reflects the milestone payment from our Chinese partner Sinovant and was triggered by the FDA approval of XENLETA. We also recorded research premium and grant revenue, which reflects the support we continue to receive from the Austrian government. This amount has decreased over time as our R&D activities have been reduced.

Almost all of the inventory costs associated with products sold in the third quarter were previously expensed since they were used as part of the stability monitoring for our NDA. The cost of goods sold recorded reflects the final preparation for our customers incurred after the FDA approval date.

Future sales will determine how quickly we draw down on our previously expense product, and therefore, we aren't forecasting how long cost of goods sold will be this low. However, it's fair to say that our cost of goods sold will remain at relatively low levels into next year.

R&D expense was significantly lower than prior year due to the 2018 write-off of in-process R&D related to this Zavante acquisition and due to a reduction in our clinical trial expenses. SG&A expense of $18.5 million is higher than prior year, primarily due to increasing investments in our commercial organization.

We welcome new employees to Nabriva in September, who were educating physicians about XENLETA and we are also prudently investing in the tools needed to support and manage a commercial organization. With the investment in head count comes an increase in total compensation.

Please note that, the overall third quarter P&L includes approximately $4 million of non-cash stock-based compensation expense. This amount reflected some one-time charges associated with performance-based restricted stock units, which vested upon XENLETA's approval and an adjustment to prior period items. Interest expense of about $700,000 in the quarter was driven by our $25 million loan with Hercules. We expect interest expense to rise going forward, since we drew down an additional $10 million from that same facility at an interest rate of just under 10% Summing up, we generated a loss of $17.8 million in the quarter.

The next slide details our balance sheet versus year-end 2018. Cash, cash equivalents and short-term investments were $78.3 million at the end of the third quarter. This balance is actually about $5 million higher than where we ended the second quarter, driven by the previously discussed milestone payment and loan draw coupled with activity from our ATM that brought in about $9 million of cash. These cash inflows combined with careful management of expenses allowed us to increase our cash runway guidance by one quarter, we currently expect to be able to fund the business into the third quarter of 2020.

Accounts receivable increased due to our product sales, we did not offer any one-time special payment terms for the initial sales of XENLETA to the wholesalers and specialty distribution partners. Borrowings increased due to the $10 million draw with Hercules. With that draw, our interest only period extended from 18 months to 30 months. We were pleased to strengthen our balance sheet in the third quarter and our current shares outstanding are $78.4 million.

With that, I will ask Ted to make some closing remarks and then we will head into our Q&A session.

Ted Schroeder

Thanks, Gary. In conclusion, on slide 24, we are very excited about the progress so far with the XENLETA this launch and we're convinced that XENLETA will have a successful launch by leveraging the 3Ps, focusing on the product, XENLETA offers a new differentiated mechanism of action with a complete spectrum of coverage of the main CABP pathogens, including multi-drug resistant strains and a well-tolerated short course of IV and oral monotherapy.

Turning towards our people, we have a highly experienced and talented headquarters and field teams in marketing, market access and medical affairs now supporting 60 Territory Business Managers in the commercial launch of XENLETA.

And finally, preparation, the extensive early engagement of the scientific community and the profiling of more than 650 top accounts is allowing us to create a solid foundation for a successful launch and a faster uptake, while building for the long-term. We will be keenly focused on revenue growth driven by hospital formulary approvals, expansion of outpatient access through contracting with commercial and Medicare Part D plans continued growth of the availability of XENLETA for discharge at targeted hospitals, and finally, gaining traction in the community.

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

Question-and-Answer Session


[Operator Instructions] Your first question comes from the line of Alan Carr from Needham. The line is now open.

Alan Carr

Hi. Thanks for taking my questions and congratulations on the launch.

Ted Schroeder

Thank you, Alan.

Alan Carr

I think –I think the most of the sales, was that entirely stocking? And then, I think, I heard you say that you gave an estimate of how long it will take to go through that inventory, and then also with respect to how the drug is being positioned relative to other drugs, for example, levofloxacin or ceftriaxone, what's your initial feedback in terms of how physicians plan to use this drug? Thanks.

Ted Schroeder

Sure. Thanks, Alan. Multipart questions, so let me address the first part, the $1.4 million is largely a stocking, as we would expect need to have product in the wholesaler channel and at the specialty distribution channels before we can pull it through. But we have seen some early pull through sales, particularly at hospital outpatient pharmacies. So, we are seeing that and as Francesco commented on in his remarks that we're focused on new orders at hospitals, but also re-orders at those same hospitals. So, really focused on pulling through where we have the product available at the hospital and community level.

So, that the forecast that Gary mentioned about the inventory sales that that is -- those were our expectations kind of through this -- through the end of the year and so we think we have solid stocking and as reorders go through we'll see that that inventory rebuilt to come up to a kind of a normalized level. So, we think that's going well.

The second part of your question about how XENLETA compares to other products in the marketplace, I think, the data kind of stand on their own compared to quinolones, we certainly have a more targeted spectrum to the most relevant and important community-acquired pneumonia pathogens, including the multi-drug resistant strains without off target effects on kind of non-target organisms, which only leads to further resistance of those organisms.

And then also a substantially, cleaner safety profile with no boxed warnings in the XENLETA label. As far as ceftriaxone goes, the beta-lactams again, they are somewhere around 10% of patients are allergic to beta lactams and that clearly -- certainly creates an opportunity for a non-beta lactam antibiotic like XENLETA. But you also see the opportunity for IV ceftriaxone, there is no available oral step down and your choices are to use quinolone, which are certainly coming under some question as to appropriateness of that choice.

And since XENLETA offers a really interesting choice to step down from the IV ceftriaxone and get the oral through the outpatient pharmacy and send the patient home. So, we expect to see -- as we talk about the transition of care, we expect to see increase in utilization in that area, in fact, early on, I think that will be one of the prime drivers of sales.

Alan Carr

In the first two months, are you getting any well, anecdotal comments or feedback on how drug is being received and is it being used because of concerns over -- either for quinolones or the -- if they're using ceftriaxone or more active sort of acceptable oral in that case?

Ted Schroeder

Yeah. So, good question about, well, how our physicians viewing the early promotion. I think, I'll ask Francesco to provide a little more color on that, because he has been much closer to the daily activities in the field and he is kind of the keeper of the reports from the field. Francesco?

Francesco Maria Lavino

Sure. Thanks, Ted. And Alan, thanks for the question. So, yes, we are receiving a lot of good feedback from the field. When we think about where physician may want to use XENLETA, really comes back to, I would say, three kind of patient types. First of all, the patient that show up in the emergency department and the physician don't want to admit.

So to answer specifically your question about ceftriaxone. Ceftriaxone, when the patient is admitted to the hospital it could be certainly a good option, but being IV, the patient is to be admitted to the hospital.

So, they really see an opportunity for patient not to be admitted to the hospital and being sent home XENLETA. And this is also showing in, as I mentioned, the first early orders that we are getting from hospital that is mainly coming from the outpatient pharmacies because, as they work through the formulary review, they wanted to add the oral available for patient discharge from the ER mainly.

The second patient is clearly the patient that as Ted also already mentioned a little bit, my -- we admit that we know without initial treatment with XENLETA even admit that and start treated with ceftriaxone, but maybe after three to four days as the patient stabilized, they may want to send home on an oral drug. And that's another place where they really see XENLETA defeat.

And, clearly, the third patient that we are hearing from physician is really those patient with a lot of comorbidities and other risk factors, where they don't feel comfortable any longer, using especially fluoroquinolone or macrolide and where XENLETA actually could replace these drugs. And the kind of last comment that we are hearing consistent with all that is that they -- the feedback we are hearing is that we have priced XENLETA in appropriately for the kind of user they are expecting to do. And so, in the right patient, they see really XENLETA soon replace the existing drugs.

Alan Carr

Thanks for taking my questions.

Francesco Maria Lavino

Thank you.

Ted Schroeder

Thank you, Alan.


Your next question comes from the line of David Lebovitz from Morgan Stanley. The line is now open.

Ishmael Asante

Hi. This is Ishmael on for David. Thank you for taking our question. Considering that 50% of your initial 900 target accounts now have the ability to prescribe XENLETA at patient discharge. Can you review the strategy to obtain the remaining 50 hospital accounts? And I have a follow-up after that.

Ted Schroeder

Sure. So, yeah, the excellent question about the 50% where we're available after just a few weeks on the market, which is a -- which is pretty remarkable statistic, and I'll let Francesco talk about our plans to expand that coverage to the remaining target hospitals.

Francesco Maria Lavino

Yeah. David thanks for the question. So, as we mentioned, we have a collaboration with Walgreens Specialty Pharmacy and Option Care. Walgreens covers more than 300 hospitals with the current location, and by the way, their plan is to expand even further by the end of the year. And Option Care has another 75 to 100 hospital that could be covered within the 12 hours window that we need.

If this -- we had an initial stocking at some of the location for the Walgreens and the Option Care, but not yet at all the location and that's the reason why we currently have a coverage of around 50% of our target account, which was our goal at launch. But as we progress and as we start getting the managed care coverage, and therefore, the pull-through with patient, the Walgreens location will continue to stock and the same will happen with the Option Care Health location. And in parallel, as we gain formulary wins with XENLETA, the drug will be actually available at the hospital. So, over the next few months, we expect to increase coverage to more than 75%, 80% of our targeted accounts in terms of ability for -- or availability of XENLETA for patient discharge.

Ishmael Asante

Great. Thank you for the cover. And you mentioned XENLETA has been granted C Code for pass through, so pertaining to the target accounts; can you talk further about the overall progress made with respect to inpatient IV XENLETA? Thank you.

Ted Schroeder

Sure. Francesco, you want to talk about the outpatient opportunity and the inpatient opportunity of the IV?

Francesco Maria Lavino

Yeah, absolutely. So, they just mentioned, we -- given the first engagement we had with the hospital, we have more than 200 accounts that are scheduling to review XENLETA by the end of the year and more than 400 by the end of first quarter 2020, which means that assuming positive outcome of this review, which we anticipate, we should be able to have XENLETA for in-hospital use at this location over the next few months.

When it comes to the outpatient transition of care, clearly, today, given the managed care access that we already gained, the patient that get immediately discharged from the hospital, they can get access to XENLETA and this is where we are seeing already a few patients treated. But when it comes to the transition of care with the IV in the observation unit as mentioned now that we have obtained a C Code, starting January 1, the hospital will be able to charge Medicare at ASP plus 6%. So, as we get into January, basically the hospital, we anticipate more hospital will have XENLETA on formulary for inpatient use. The outpatient clinics can start using IV in the transition of care and charge Medicare at ASP plus 6% and the patients that are treated in the outpatient setting will be covered as we continue to gain formulary wins with Medicare and commercial plans.

Ted Schroeder

And just to be clear, the importance of that C-code for the outpatient use of the IV is that it's outside of the DRG where hospitals are typically reimbursed. So, they get reimbursed separately for the drug plus 6%, so that it provides an additional incentive for use in the emergency department, and as Francesco mentioned in the other outpatient clinic areas, where outpatient antibiotic therapy would be appropriate.

Ishmael Asante

Great. Thank you for taking our questions.

Ted Schroeder

Yeah, thanks.

Ishmael Asante

Thank you.


Your next question comes from the line of Jason Gerberry from Bank of America. The line is now open.

Jason Gerberry

Hey, good evening, and thanks for taking my questions. I just wanted to follow-up, did I hear correctly that from the 50% of covered lives, the expectation would be in a few months that you get to 75% to 80%. Just wanted to make sure I got that number correct.

And then, as you think the 2020, can you talk about any launch metrics that you look at, that you feel like you could come away with and say, we think we can defy probably the historical antibiotic launch curve and point us to any specific concrete metrics that would be helpful. Thanks.

Ted Schroeder

Yeah, sure. So, Jason thanks for the questions. I think, the first question about the 50% coverage. That wasn't exactly covered. I think we talked about -- there’s two 50%. The first 50% was the accessibility of the product for discharge on the outpatient side. So, meaning that it's either available from a specialty pharmacy or it's available in the hospital outpatient pharmacy. We expect that to grow to 75% to 80%. We're already on 45 -- so that's that group.

The second group are generally in the managed care environment and currently we have 45 million lives covered, and we expect that number to grow. But that probably -- that will -- as we work through the contracting process that will be a longer term issue, but we're off to a terrific start with that many lives covered and expect that to expand as we move forward.

Switching to kind of key performance indicators, I'll let Francesco talk about what we're measuring for launch metrics and how we're keeping track of how we're doing compared to other recent launches.

Francesco Maria Lavino

Sure, sure. Yes, Jason. I mean, as Ted said again just one comment. One of the thing that clearly we will be measuring as one of the key performance indicator are actually the two metrics that we were just talking about. So, the one metric, which is the availability for patient discharge at our target hospital, which is currently a little bit about 50% that as mentioned will grow to 70% to 80% over the next few months.

The second one, clearly, critical for a product like XENLETA is the managed care coverage. So, as we mentioned, as of today, we have roughly 50% of all covered life, which are -- we had XENLETA on formulary and we will continue to measure that. We expect that more than 80% of corporate lives will be reviewed by the end of first quarter 2020 and we will keep track of that.

The other measure that we are looking at clearly is the formulary access and for both formulary access as well as managed care access, we are not just tracking on quantity, but also on quality because it's extremely important that once again on formulary, you get on formulary the right way.

So, we will definitely measure the quantity and quality of formulary win for XENLETA at the hospital level as well as the formulary wins on commercial and Medicare plans, especially with no utilization management. Clearly, a key measure is going to be the hospital orders and hospital reorders.

As I mentioned, this is critically important because it really determines the basis of a solid customer foundation for Nabriva, and clearly, as we go into the more broader access clearly prescription a number of patients that are treated with XENLETA, especially as compared to other antibiotics is something that we will be internally measuring. And we will be sharing some of this metric as we make them available with you guys.

Jason Gerberry

Right. Thank you.


Your next question comes from the line of Robert Driscoll from Wedbush. The line is now open.

Robert Driscoll

Hey. Hi, guys. Just congratulations on the strong start.

Ted Schroeder


Robert Driscoll

Just wonder if you could go into a little more detail for the Sinovant clinical study of lefamulin as that's expected to initiate soon. How long that may take? And any thoughts on the commercial -- sorry, the potential commercial opportunity in the Greater China region? Thanks.

Ted Schroeder

Yeah, sure. So, regarding China, our Sinovant collaboration, I think, probably Steve Gelone, our Chief Operating Officer is best suited to give you some detail on that.

Steve Gelone

Thanks, Ted, and thanks for the question, Robert. So, both of the CABP-related clinical trials in China are initiating this quarter. So, both the Phase 1 safety PK study and Phase 2/3 safety efficacy study will initiate this quarter. We anticipate a filing of the NDA sometime in 2021 in China and then an approval about a year after filing.

Robert Driscoll

Got it. Thanks. And maybe a second question, just wonder if you have any comments on the recently updated CABP treatment guidelines from the ATS and IDSA? Thanks.

Ted Schroeder

Yeah. So, after 12 years the IDSA and ATS issued new CABP guidelines and why don't we ask our Chief Medical Officer, Jennifer Schranz to discuss where we think the opportunities for XENLETA OI in the revised CABP guidelines.

Jennifer Schranz

Thank you, Ted, and thank you for the question. I think, as you may know that the updated -- long-awaited updated guidelines coincided nicely with two key events, one was IDV and second was the JAMA publication of our LEAP 2 study data, when you look at the short course of five days of lefamulin versus seven days of moxifloxacin. What I've heard from physicians that treat patients that there really are two important changes that will provide an opportunity for XENLETA based on the profile you heard earlier.

One is the five day treatment course, which certainly is something that's important for antimicrobial stewardship we show non-inferiority to a seven-day course of moxifloxacin. And second, the importance of macrolide resistance in United States with the regional rate between 30% and 60% and the guidelines are currently stating that where you're suspecting Strep pneumoniae and macrolide-resistant over 25%, which is the majority of the country that means macrolides are no longer recommended for monotherapy.

So, I think, that's an important opportunity for XENLETA given its profile and activity against Strep pneumoniae also multi-drug resistant strains. I also would point you to the up-to-date, which is a guideline that physicians use often and you'll see that lefamulin monotherapy is now being adopted into therapy and that's stated in the guidelines for both healthy aged at 65, but no recent antibiotic use as well as those with co-morbidity. So, certainly, from a clinician's perspective who are seeing patients are already starting to adopt XENLETA into their treatment paradigms

Ted Schroeder

Yeah. And the one thing that I would point out the importance of monotherapy in the community setting, combination therapy is kind of a standard of care in the inpatient setting, but any of you who've taken outpatient products you know how hard it is to have multiple products with different dosing regimens and when you're sick and you have pneumonia trying to juggle multiple pills is not the easiest approach.

So, having a short course monotherapy with the appropriate spectrum is really a significant advantage in the marketplace. It was one of the things that have contributed to the adoption of macrolides many years ago, but now with the kind of startling rise of resistance to macrolide an alternative is needed. And we believe that XENLETA offers that opportunity -- that alternative.

Robert Driscoll

Great. Thanks a lot guys.

Ted Schroeder

You bet.

Jennifer Schranz

You're welcome.


[Operator Instructions] Your next question comes from the line of Ed Arce from H.C. Wainwright. The line is now open.

Thomas Yip

Hello, everyone. This is actually Thomas Yip asking a couple of questions for Ed. Congratulations on high gross for XENLETA so far and given the assets in the hospital setting with the team of 60 reps now what is the full size sales force that you envision to be able to fully capitalize in the community setting as well?

Ted Schroeder

Yeah. So, the question about salesforce sizing. The hospital opportunity we currently -- with the current 60 reps, we would expect that to grow over time as sales support that growth to no more than -- no more than 100 reps calling on the -- in the hospital setting.

The primary care setting is clearly the bigger opportunity for XENLETA and is evidenced by our plan to call in 6,000 high prescribing physicians that are adjacent to hospitals. Part of that -- part of the reason to do that is not only to capitalize on the respiratory season in the first launch here and to get to some of the highest prescribing physicians, but it's also to demonstrate the value of the community setting and why that is so different from other antibiotic launches and creates dramatic upside opportunity for XENLETA.

So, we will be looking to size the salesforce, either through collaborations or through our own internal build, as we demonstrate that the size and the significance of the outpatient opportunity that we're able to penetrate as we gain continued managed care access and support the pull-through of the products in those areas.

Thomas Yip

Thank you. Thank you for that information. And then one short question for the financials. $4 million non-cash charge was mentioned in the prepared remarks, is that just in 3Q 2019 or is that expected to be recurring?

Ted Schroeder

Go ahead, Gary.

Gary Sender

Yeah, so there is always compensation expense and stock-based comp, but the $4 million was, as I mentioned, there were some extraordinary items there, so we would expect that to normalize to be in much lower level than $4 million.

Thomas Yip

Got it. Okay. Thank you again for taking my questions and congratulations on a very good launch for XENLETA so far.

Ted Schroeder

Thank you so much. We appreciate it.

Gary Sender

Thank you.


I'm showing no further questions at this time, I would now like to turn the conference back to Mr. Ted Schroeder.

Ted Schroeder

Well, thanks again and I appreciate your time today. We are excited about the progress so far of the XENLETA launch and we look forward to keeping you informed as we continue to strengthen our foundation for continued success. Please reach out to us if you have additional questions. Thank you and have a great rest of your day.


This concludes today's conference call. Thank you and have a great day.

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