Nabriva Therapeutics plc (NASDAQ:NBRV) Q4 2021 Results Earnings Conference Call March 29, 2022 4:30 PM ET
Dan Dolan - Chief Financial Officer
Ted Schroeder - Chief Executive Officer
Steve Gelone - President and Chief Operating Officer
Conference Call Participants
Carl Byrnes - Northland Capital
Good day, and welcome to the Nabriva Therapeutics Fourth Quarter 2021 Financial Results and Business Update Call. At this time, all participants are in a listen-only mode. After the speaker's presentation there will be a question-and-answer session. [Operator Instructions] As a reminder, this call may be recorded.
I would like to turn the call over to Dan Dolan, Nabriva's Chief Financial Officer. You may begin.
Thank you. And good afternoon, everyone. Welcome to the Nabriva's conference call and webcast where we will be discussing the fourth quarter 2021 earnings and providing a business update. The slides for today's presentation are posted on the company's website, www.nabriva.com, and can be found under the Investors tab in the Events and Presentations section. We recommend that you refer to the presentation as we'll be using those slides for today's discussion.
Before we begin, on slide 2, I would like to remind everyone that this conference call and webcast will contain forward-looking statements about the company. These statements are subject to risks and uncertainties that could cause actual results to differ. Please note that these forward-looking statements reflect our opinions only as of the date of this call. We will undertake no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. Factors that could cause actual results or outcomes to differ materially from those expressed in or implied by such forward-looking statements are discussed in greater detail in our most recent filings on Form 10-K and our other periodic reports on Forms 10-Q and 8-K filed with the SEC.
Turning to slide 3. Let's briefly run through this afternoon's agenda. Ted Schroeder, Nabriva's CEO, will start with a business update and present an overview of the commercial highlights from the quarter. Dr. Steve Gelone, our President and Chief Operating Officer, will provide an overview of our regulatory strategy related to CONTEPO, and then I will provide a financial review before Ted comes back with some final commentary and leads our Q&A session.
I will now turn the call over to Nabriva's Chief Executive Officer, Ted Schroeder.
Thank you, Dan. And thanks to everyone joining our call this afternoon. Let's start on slide 5. We are pleased with the progress we made in the fourth quarter and how we exited the year. Last year, the team continued to lay the groundwork on key operational drivers focused on creating sustainable long-term value.
Let me start with the launch of our own NDC for SIVEXTRO in April 2021. As you recall, this allowed us to recognize 100% of net product sales for SIVEXTRO, which has provided a positive impact to our P&L. We continue to see ongoing momentum for SIVEXTRO and are happy to report another quarter of sequential prescription growth.
Next, we transitioned development and commercialization rights of lefamulin in Greater China to Sumitomo Pharmaceuticals. Sumitomo opted to pursue lefamulin to complement their existing anti-infective product portfolio in China. Sumitomo is already a dominant player in the anti-infective space in the Greater China region, putting them in a solid position to launch lefamulin once approved.
We announced in November that the NDA for lefamulin in Greater China has been accepted by the regulatory authorities, and we look forward to providing updates when available. As a reminder, we are entitled to low double-digit royalties on net sales, as well as payments of up to $86 million upon the achievement of certain sales and regulatory milestones. The first milestone of which is due upon approval in the region.
As previously mentioned, we'd expect this approval to be within 18 to 24 months from when the regulatory authorities accepted the new drug application in November 2021.
Moving to our second commercial product, XENLETA. We continue to make progress in making the product more accessible and convenient for patients in the US. In November of last year, we launched the 10-count oral pack or X Pack, which allows for improved patient access and the opportunity to further broaden availability in retail channels.
Next, we partnered with Vizient's pharmacy network to expand visibility of the IV formulation of XENLETA in hospitals. This agreement affords XENLETA the support of Vizient network through their hospital systems by increasing awareness of XENLETA as an alternative antibiotic treatment option for community-acquired pneumonia. We believe this could be a good opportunity for XENLETA as a transition of care alternative given its IV and oral formulations.
We continue to explore additional uses of XENLETA and have advanced the Cystic Fibrosis program. We are making good progress with the CF trial and anticipate the first patient dosed within the next month.
The Phase I safety and PK data are expected in 2023. Our optimism for this program is based on the potent anti-staphylococcal activity in XENLETA against strains of staph aureus isolated from CF patients.
In October, we published data in a peer-reviewed journal PLOS One, demonstrating lefamulin has anti-inflammatory properties in vivo and in vitro models. The anti-inflammatory aspects of lefamulin has potential wide-ranging applications to various infections, including CAP and CF. The combination of the potent antimicrobial and potent anti-inflammatory properties of lefamulin is very encouraging for the Cystic Fibrosis patient population in particular.
Lastly, we continue to strengthen our financial position with negotiations on our contracts with Hovione, our third-party manufacturer for XENLETA and our debt agreement with Hercules. These amended agreements, along with the strong performance from SIVEXTRO extended our cash runway well into fourth quarter of 2022.
Moving to slide 7. We are excited with the accomplishments to date, but more importantly, with what we see as the key value drivers that lie ahead for the company. We believe we have multiple significant catalysts over the near term that can benefit patients and enhance shareholder value as we maximize each of our core franchises.
With roughly $48 million of cash on hand as of December 31, 2021, we have now extended our cash runway well into the fourth quarter of 2022. Our strategy is based on the strong SIVEXTRO foundation, which continues to show solid growth in the US.
This progress gives us confidence to reaffirm our guidance that SIVEXTRO sales will reach historical peak sales levels by mid-2022. Fully funding our commercial efforts and a portion of our G&A costs, while helping to further reduce our overall cash burn.
As for XENLETA, we are continually seeking ways to optimize access for patients and health care practitioners. As we have said before, the CAP market is large with approximately 2 million potential adult patients in the outpatient setting.
We recently held a positive interaction with an Advisory Board of pulmonologists who understand and see the value in a product like XENLETA. The Advisory Board provided significant insights as we continue to evaluate and assess the value proposition for XENLETA in the antibiotic market.
It's important to remember that we have an extensive patent runway out until 2033, giving us time to raise awareness and create value with XENLETA for patients and for health care practitioners.
Additional opportunities for XENLETA include potential in Cystic Fibrosis, which we estimated could potentially generate $100 million of incremental sales. The Phase I trial is a small investment to determine if the non-clinical data translate clinically, and if so, we believe this could be a major catalyst for the company.
Lastly, with XENLETA, we continue to explore partnership opportunities outside the United States. This is another resource, which has the potential to provide the company with additional non-dilutive funding. We have existing partnerships in Canada and China and are actively negotiating in other regions, including Europe.
Moving on, we remain committed to bring CONTEPO to the market. We believe there is still a large unmet need in the United States for treating patients with infections caused by multi-drug-resistant or MDR organisms. An estimated 3 million people in the United States are treated for suspected or confirmed MDR.
Turning to slide 8. SIVEXTRO posted another quarter of sequential growth and the second straight quarter where we saw more than 1,000 SIVEXTRO TRx's. In addition to executing commercially with our experienced sales team, we are demonstrating the ability to grow SIVEXTRO back towards historical peak sales. With our commercial infrastructure now well established, the organization has shown the capability to drive patient access and utilization for established brands like SIVEXTRO.
Shifting to XENLETA on slide 9, we continue to see a lot of potential for the product with its novel mechanism and broad coverage. We held an advisory board with pulmonologists earlier this year, which reinforced XENLETA's positive characteristics and differentiated positioning.
One of the main takeaways was the ongoing need for CAP treatment options. The availability of IV and oral formulations allows for the efficient transition of care from hospital to community. More importantly, the availability of an oral option may allow for treatment in the community to help avoid hospitalizations.
The short 5-day course of therapy is another positive attribute. Feedback from the Advisory Board also supports interest in the potent anti-inflammatory properties of XENLETA. We continue to learn more about XENLETA from ongoing interactions with community-based HCPs, gaining insights from providers about how they view the drug and its utility as a first-line empiric agent. This is especially important as we plan a framework to explore expanded usage for XENLETA in areas such as Cystic Fibrosis.
Switching to CONTEPO on slide 10, and our optimism for the prospects of CONTEPO continue to be bolstered by the reality that the silent pandemic of antimicrobial resistance is becoming more prevalent and negative patient outcomes continue to be more common.
Based on a recent publication in Lancet, it was estimated that a staggering 1.27 million deaths were attributed to AMR in 2019 globally. To put that into perspective, deaths attributable to AMR now outnumber the annual deaths from HIV, breast cancer or malaria globally.
Importantly, the six leading pathogens for deaths associated with resistance or E. coli followed by staph aureus, Klebsiella pneumonia, streptococcus pneumonia, Acinetobacter baumannii and pseudomonas aeruginosa. And these pathogens accounted for just under 1 million deaths attributable to AMR.
As you are most likely aware, CONTEPO has a novel mechanism of action that has been shown to be highly active in vitro against several of these commonly resistant pathogens.
CONTEPO has been demonstrated to be well tolerated effective against E. coli and Klebsiella pneumonia in our pivotal trial for complicated UTI and pyelonephritis. In addition, IV fosfomycin is approved for multiple indications and used extensively outside the United States for many years now.
As a result, many US physicians are already aware of the drug's potential benefits, and we believe there is a unique opportunity for CONTEPO as a potential treatment option for patients with suspected or confirmed multi-drug-resistant infections in the United States.
For the next part of the presentation, I'd like to turn it over to Dr. Steve Gelone, our President and Chief Operating Officer, for a brief update on the status of the CONTEPO NDA. Steve?
Thanks, Ted. As you may recall, the FDA communicated the need to conduct on-site inspections at our foreign manufacturing facilities that are located in Italy and Spain before the agency could potentially grant approval for CONTEPO.
Based on external disclosures by the FDA, approximately 50 new drug applications were pending review as of the end of 2021 and due to the agency's inability to travel abroad, secondary to the COVID pandemic.
Most recently, the agency has communicated that it does plan to resume foreign inspections, but thus far has not signaled how pending applications will be prioritized. As a result, and given the uncertainties on the timing of on-site inspections at our manufacturing partners, Nabriva requested an extension of the deadline to resubmit the CONTEPO NDA, which the FDA has granted.
This extension of the deadline for resubmission of the NDA provides Nabriva the flexibility to submit at any time up to and through June of 2023. We believe the resubmission extension enables us to avoid the scenario where Nabriva resubmits the CONTEPO NDA but FDA is unable to complete the required inspections within the 6 month PDUFA review time frame, which would most likely prompt a complete response letter.
We continue to keep the lines of direct communication with the FDA open, and we are closely monitoring multiple products manufactured by our CMO partners that have near term action dates which may provide further insight in the FDA's approach to inspecting these facilities as the observations that the agency made were general GMP observations that apply to all products manufactured at these sites.
It's also noteworthy that the NDA resubmission extension has no impact on CONTEPO's market exclusivity as the 8 year market exclusivity does not begin until marketing approval is granted.
This continues to be a dynamic and fluid situation, and I can't stress enough that we are working diligently with our manufacturing partners and the agency to obtain agreement on timing of the required on-site inspections at our partners facilities in Italy and Spain. And that we are poised and ready to resubmit the CONTEPO NDA once we have assuredness that the on-site inspections can be completed during the NDA review cycle. We remain committed to commercializing CONTEPO in the US and look forward to providing you an update on a future call.
I'll now turn the presentation over to Dan Dolan, our Chief Financial Officer, who will provide the financial review. Dan?
Thanks, Steve. As we turn to slide 14, I'd like to touch on some key highlights for the fourth quarter and full year 2021.
Total revenues of $9.3 million in the fourth quarter consisted of net product sales of $8.5 million, representing 8% sequential growth compared to the third quarter of 2021. We ended the full year 2021 with approximately $29 million in total revenue, up $24 million compared to the prior year, driven by SIVEXTRO net product sales.
During the fourth quarter, we saw continued improvements in our operating leverage and slower cash burn driven by SIVEXTRO's performance. We also realized the benefit of renegotiating our third-party manufacturing contract with Hovione for XENLETA, which provided near term cash flow flexibility. This allowed for investment in value-creating opportunities with a focus on driving top line growth.
In 2021, we also strengthened the balance sheet by renegotiating our debt agreement with Hercules further extending our interest-only payment period. Additionally, we entered into an equity line of credit agreement with Lincoln Park Capital, this partnership provides additional optionality for the company. We exited the quarter with cash and cash equivalents of approximately $48 million, providing us cash runway well into the fourth quarter of 2022.
Moving on to slide 15. We look at our quarterly operating burn. And as you can see, our operating cash burn has steadily declined each quarter in 2021, driven by strong SIVEXTRO performance and the near term benefit of our renegotiated agreements with Hovione and Hercules.
While the trend in 2021 is reflective of the SIVEXTRO NDC launch and improved operational execution within the business, we do anticipate the typical one-time payments in the first quarter of 2022 consistent with prior years, including annual insurance prepayments and other annual subscription renewals. Additionally, we will continue to purchase SIVEXTRO supply from Merck as needed, which will fluctuate from quarter-to-quarter.
Moving to slide 16. This reflects a quarterly view of our revenue and expenses for 2021. The main focus as we exit 2021 is the fact that net product sales of $8.5 million in the fourth quarter continued a trend of growth since the launch of our SIVEXTRO NDC in the second quarter of 2021.
As Ted mentioned, SIVEXTRO remains on track to achieve our guidance of historical annual run rate gross sales highs by the middle of this year. SIVEXTRO continues to provide a solid foundation for the company to drive operating leverage in the near term.
The performance of SIVEXTRO more than fully funds our commercial investments, slowing our overall cash burn and further enables investments to raise awareness of XENLETA in their near term for CAP and invest in medium to long-term life cycle management opportunities, such as the investment in our Phase I trial for Cystic Fibrosis.
2021 was in line with our expectations around how the P&L would evolve following the launch of our own NDC for SIVEXTRO in April of 2021. We have demonstrated sequential revenue growth quarter-over-quarter and continued operating leverage improvements with an infrastructure that will support stable operating spend heading into 2022.
Turning to slide 17. In summary, we saw a positive trend on the P&L and a corresponding positive trend on cash flows we exited 2021. But the launch of our SIVEXTRO NDC in April resulted in an immediate positive impact on our P&L and cash flows.
Looking specifically at the fourth quarter of 2021, we saw an improvement in our operating cash burn of over 50% to just $6.1 million of cash burn versus $13.4 million of cash burn in Q4 of 2020.
Given these positive trends on the P&L and cash flow front, combined with our cash and cash equivalents on hand at the end of 2021 and a very manageable amount of debt, we are well positioned as we head into 2022. This will allow us to continue to invest to grow of SIVEXTRO and unlock value in XENLETA.
I will now turn the presentation back over to Ted. For the next part of the call, Ted will make some closing remarks, and then we'll head into a Q&A session. Ted?
Thanks, Dan. In summary, we are excited by the team's efforts in 2021 and the strong momentum heading into '22. We believe the company is well positioned for growth and that our current results, coupled with our upcoming catalysts have the ability to create incremental value to shareholders.
We already have two commercial drugs that are being marketed with the revenue fully subsidized in the cost of the commercial sales team. The CF trial affords us an opportunity to add incremental cash flow with little to no additional investment in the commercial infrastructure that's already in place.
We continue to negotiate partnerships for XENLETA, which will provide the company with multiple revenue streams from their respective countries and regions.
And lastly, we are committed to CONTEPO and look forward to bringing the product to the market and adding this as a third product in our portfolio. On top of all this, we are well positioned to add on additional assets that would leverage our existing commercial infrastructure.
I'd now like to turn the call back over to the operator so that we can open the line for your questions.
[Operator Instructions] Our first question comes from Carl Byrnes with Northland Capital. Your line is open.
Great. Thanks for the question. And congratulations on your progress. I have two questions and then I'll get back in the…
Hi, then I'll get back in the queue. So looking at gross profit margin or COGS either way, it looks like there was a bit of a jump between the fourth quarter and the third quarter, if I'm calculating this correctly.
I'm wondering if there was anything that was an anomaly in that. And what your expectations are going forward on gross profit margins?
Dan, do you want to take that question?
Yeah. Sure, Carl. Thanks for the question. Yeah. So this is specific to XENLETA. It was more of an anomaly. We had some one-time true-ups in the fourth quarter related to minimum purchase commitments on the IV side of the business.
So it did cause a little bit of a one-time charge in the fourth quarter related to the cost of goods impacting margins.
And this was similar to what you saw in the third quarter, but maybe a little bit larger in terms of scale. Is that - would that be correct?
I'm sorry. So the margins from the third quarter going forward, is that your question?
No, I think in the third quarter, it wasn't there an adjustment, a similar type of adjustment because XENLETA - volumes?
Sorry, in the third quarter, we took the return's adjustment. We had a true-up for the returns adjustment because some of the tablet product was expiring. So we switched out the bottles for the new blister packs. So that was more of a net sales impact on a cost of goods.
Got it. So then on a going-forward basis, what might you expect normalized GPM [ph] to look like?
Yes. We've given guidance on SIVEXTRO in kind of a mid-50% range. And then XENLETA, and it's kind of hard to get our arms around, but we expect that to have a higher margin. So depending on the mix, you know, somewhere between the mid-50s, and call it, mid-80s.
Got it. Thanks. That's very helpful. And then it looks like your R&D expense was trending down in the fourth quarter. Do you expect that to recur going forward, given that you've got the CF Phase I trial and potentially other initiatives in the queue?
Yeah. I think some of that reduction was in non-clinical activities and some other external consulting. So I think going forward, the trial enrolls, it might wax and wane a little bit, but nothing super substantial. It will be relatively stable with some phasing issues probably phasing timing spend.
Got it, great. I'll get back in the queue. Thanks.
[Operator Instructions] Our next question comes from Ed Arce with H.C. Wainwright. Your line is open.
Hi, good afternoon, everyone. Thomas here asking a couple of questions for Ed. First, perhaps, can you go over your expectations for SIVEXTRO in 2022 beyond the goal to reach historical peak sales trend by mid-year?
Sure, Thomas. We're - so SIVEXTRO has been a great addition to the portfolio. And as you recall, when we brought the product over from Merck, the sales have been declining. They had stopped promoting at some time in advance of doing the transaction with us. And so during last year, we successfully reversed the decline and have it back as a growth product.
So we've set our sights on kind of the first step of that growth target is to get back to where Merck was. And then from there, we do expect that there's upside potential for the product. It's nicely positioned, and it has the advantage of a once a day therapy that's only given for six days, which is both convenient for patients and really helps with compliance.
So we expect that we'll see growth beyond the return to peak sales, and with continued promotion that the product is highly promotionally sensitive. It does have some seasonality associated with it. You might expect that there are more skin and skin structure infections in the warmer months than in the colder months.
But it's - we think it's going to be a solid performer for the right group of patients. So we're looking forward to seeing growth from SIVEXTRO over the next several years.
Got it. That makes sense. And then perhaps more along that line, can you discuss any adjustments or updates on your commercial strategy for SIVEXTRO and also for XENLETA, especially as COVID restrictions could continue to be lifted in the United States?
Yeah. It's - those are good questions. I will tell you that access to physician’s offices continues to be disrupted. I think that's a general industry-wide trend. But we are seeing some relaxation of access, so that certainly helps.
I think the good news about SIVEXTRO is there was an existing prescriber base. Some of those are kind of specialists like podiatrists and dermatologists. And so we are increasing our effort on those specialties.
I think as you see people return to work, especially in jobs where they're on their feet a lot, we'll see increased activity from podiatry. So putting the effort there and as we move into the summer season as the respiratory season starts to wane, we will increase our effort on SIVEXTRO.
And then for XENLETA, as we talked about in the script, there's - we think there's a real opportunity among the pulmonology community. The patients tend to be somewhat more complicated, having a highly effective therapy like XENLETA that's not a quinolone that can be dosed for a short period of time, and they have the opportunity to keep those patients out of the hospital. Pulmonologists find that extraordinarily attractive.
There are also quite impressed with the anti-inflammatory properties of XENLETA. So an increased focus on pulmonology, especially as we move forward, we think we'll continue to drive activity around XENLETA.
Got it. Sounds good. And then one last question, perhaps switching gear to your partnership with Sumitomo in China. Can you remind us what are the upcoming milestones in 2022 after the regulatory submission late in 2021?
So we haven't specifically disclosed the milestone, but the - what we have disclosed is that the royalty associated with sales in China will be a low double-digit royalty, and that our first milestone payment will be on approval.
We expect approval that standard in China is somewhere between 18 and 24 months post-acceptance of the NDA that happened in November. So it's possible that we could see an approval in '22, but likely it will be later than that, given the usual review cycle in China.
Got it. Thank you again for taking our questions and looking forward to progress in 2022.
Yeah, thanks, Thomas. Appreciate the interest.
Our next question is the follow-up from Carl Byrnes with Northland Capital. Your line is open.
Thanks for the time. Just a real quick question on the line of equity that you have with LPC. It looks like you drew a bit of that down in the fourth quarter. Can you comp that out. And then also the share count at the end of the quarter? Thanks.
Sure. Yeah. In the quarter, we were active with Lincoln Park. I think it was to the tune of 3 million shares or so. And we exited the year right around 60 million shares outstanding.
Got it. Thanks. And just on that same sort of topic. How much that remains accessible under the Lincoln Park equity agreement. And if I recall, if it goes out to September '23, where I'm going here is that's an additional source to fund the cash pathway?
Yeah, yeah. You're right. We have about 18 months left on the agreement. To this point, we've drawn down a little bit on it. We have a pretty good amount left on the capacity. It's in the teens, I think, the mid to high teens millions left.
Great, thanks. Very helpful.
There are no further questions. I'd like to turn the call back over to Ted Schroeder for any closing remarks.
Thank you. And thank you, everyone, for joining us this afternoon. As you can tell by the tone of today's call, we're excited about the path to '22. We're excited about the progress we're making with our products, particularly with the growth of SIVEXTRO and look forward to updating you as the year progresses, and we hit some of the other value driving milestones that we discussed today. So thanks, everyone, and have a great rest of the evening.
This concludes the program. You may now disconnect.