Nabriva Therapeutics plc (NASDAQ:NBRV) Q3 2022 Earnings Conference Call November 10, 2022 4:30 PM ET
Company Participants
Daniel Dolan – CFO
Theodore Schroeder – CEO
Conference Call Participants
Carl Byrnes – Northland Capital Markets
Ed Arce – H.C. Wainwright
Operator
Welcome to the Nabriva Therapeutics Third Quarter 2022 Financial Results Call and Corporate Update. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Dan Dolan, CFO. Please go ahead.
Daniel Dolan
Thank you, and good afternoon, everyone. Welcome to Nabriva’s Conference Call and Webcast where we’ll be discussing the Third Quarter 2022 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 will be using those slides for today’s discussion.
Before we begin on Slide 2, I would like to remind everyone that this conference call and webcast will contain forward-looking statements about the company. These statements are subject to risks and uncertainties that could cause actual results to differ. Please note that these forward-looking statements reflect our opinions only as of the date of this call. We will undertake no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. Factors that could cause actual results or outcomes to differ materially from those expressed in or implied by such forward-looking statements are discussed in greater detail in our most recent filings on Form 10-K and our other periodic reports on Forms 10-Q and 8-K filed with the SEC.
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. I will then provide a brief financial review before we — 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.
Theodore Schroeder
Thank you, Dan, and thank you to everyone joining our call this afternoon. As we turn to Slide 5, I’d like to take some time to update you on our outlook regarding the current position of the business against the backdrop of the broader macro environment. Like many of our peers, Nabriva has faced headwinds in the macro environment as it relates to investor sentiment for the biotech and more specifically the anti-infective space.
As a result, we believe our portfolio of assets are significantly undervalued by the market, given that we are currently trading at approximately 40% of cash with revenue-generating assets, it’s clear to see that the sum of the parts valuation is worth more than we’re currently getting credit for in the market.
With access to capital limited in the current market environment, our ability to raise capital efficiently and effectively continues to be a challenge. Given these challenges, we have shifted efforts to focus primarily on SIVEXTRO by building upon our commercial success as we believe this is the most efficient and effective way to extend our cash runway and preserve optionality and value for our shareholders. Additionally, and following a broader assessment of potential options, we have engaged Torreya Capital to help advise us on a range of strategic options to maximize the value of the underlying business.
Starting with SIVEXTRO. We have a revenue-generating asset, which fully funds our commercial infrastructure and has generated net sales of approximately $24 million year-to-date through September 2022. Second, we have an approved product in the U.S. for CAP with XENLETA that offers both IV and oral monotherapy with a novel mechanism of action, and a well-tolerated option for patients with CAP.
This is an asset with 11 years of patent life remaining, and has the potential to deliver more value in the future with an increase in investments to drive awareness of the attributes and benefits of XENLETA. With the appropriate resourcing behind the brand, we believe there is significant untapped potential for XENLETA in the U.S. XENLETA also has 3 separate and distinct royalty opportunities outside the U.S. with income-generating potential in Canada with our partner, Sunovion, in Eastern Europe with our partner, Er-Kim, and with the potential approval in China with our partner, Sumitomo.
Additionally, we have another potential life cycle management opportunity with XENLETA in the treatment of patients with cystic fibrosis that could generate up to $100 million in incremental peak sales. Given the small concentrated patient population, we remain optimistic about the potential of XENLETA in cystic fibrosis and look forward to having top line data before the end of this year.
Lastly, with CONTEPO, for the U.S., we have a product with a novel mechanism of action, patent exclusivity now extended through 2038, and a proven track record outside the U.S. for over 40 years, treating multidrug-resistant organisms across various indications. With over 3 million patients in the U.S. with MDRs, CONTEPO provides an attractive alternative for treatment of this growing issue in the United States. To summarize, we have multiple assets currently generating or on the verge of potentially generating revenue in the near future. With this backdrop, we believe the most efficient path forward is to attempt to maximize value from these assets in the near term, while extending our cash runway and maintaining optionality as we look to realize the full value of our assets for both the patients they treat and our shareholders.
Moving to Slide 6. I’d like to highlight some of the efforts we’ve made to optimize our cash position. Our strategy includes suspending all noncore R&D projects and implementing a 40% reduction in our global workforce by reorganizing functions and streamlining back-office support. As a result, we have reduced operating expenses, created efficiencies within the business, and extended our cash runway into the first quarter of 2023. These efforts will remove approximately 20% of operating expenses from our base operating plan by the end of 2023.
Our near-term focus is to optimize our cash position, maximize value from individual assets within our portfolio and efficiently enhance shareholder value, while building upon our commercial execution. We believe this provides us time to adequately assess a broader range of value-creating options across the business by controlling what we can control within our existing business.
Moving to Slide 7. We continue to be encouraged by our operational execution in the business. On the commercial side, we saw continued momentum in the acceleration of SIVEXTRO. We had a 16% quarter-on-quarter TRx demand growth and continue to focus on the sales force execution with SIVEXTRO, capitalizing on the significant acceleration in demand. I’m thrilled that we have achieved our goal of hitting the peak historical sales run rate in the middle of 2022 in line with our previous guidance.
As I mentioned, we have implemented a strategic restructuring plan to reduce cash burn and refocus our efforts on near-term value drivers, and we continue to see improvements in our operating cash burn compared to the prior year. We continue to challenge ourselves to be disciplined with spending to further accelerate the operating leverage driven by the continued growth of SIVEXTRO.
On the clinical side, we now expect top line data from the Phase I cystic fibrosis study in Q4 2022. This is an acceleration from our previous guidance of Q1 2023. This is a credit to the team as we have demonstrated the ability to execute operationally in the clinical side of the business. We have talked previously about the possibilities of XENLETA in this patient population, and I will reiterate these points later in the presentation.
Lastly, the lefamulin China NDA decision remains on track with an expected regulatory approval in the second half of 2023. As you will recall, this has the potential to generate low double-digit royalties and up to $86 million in incremental sales and regulatory milestones. Another significant value creation opportunity within the portfolio over the next 12 months.
As you can see on Slide 8, SIVEXTRO posted its third consecutive quarter of double-digit prescription demand growth with 16% prescription demand growth in Q3 ’22 versus Q3 ’21 and 18% year-to-date prescription demand growth compared to the same 9-month period of 2021. During the recent quarter, we saw yet another high in retail prescription demand since we restarted promotion of the brand, generating 1,148 retail prescriptions.
On the back of this retail prescription demand, we have achieved our guidance of getting back to peak historical sales run rate of SIVEXTRO by the middle of 2022. This is another example of our ability to deliver operationally on our goals and objectives with our commercial footprint. The continued momentum with SIVEXTRO’s promotion reaffirms our confidence in the realignment efforts that were implemented in April of this year. We remain confident in our ability to continue to grow SIVEXTRO and view this as a solid foundational asset in the portfolio.
As we move on to Slide 9, we are encouraged to see that our target call reach for SIVEXTRO has more than doubled in the third quarter of 2022 compared to the first quarter of 2022 following our realignment in April of this year. Additionally, since the realignment, we have converted 225 new SIVEXTRO writers with podiatrists accounting for 40% of those new prescriptions written. This is encouraging given the promotionally sensitive nature of the brand and the opportunity to continue to expand SIVEXTRO’s use within this key segment of prescribers. We expect to reach — we expect to continue to expand combining the increased reach and frequency with the established promotionally sensitive nature of SIVEXTRO, we believe it sets up for continued momentum as we move forward with this commercial strategy and focus around the brand.
Shifting our focus to an update of our Phase I trial of XENLETA in patients with cystic fibrosis, Slide 10 lays out our rationale for exploring XENLETA as a treatment option for CF patients with chronic Staph aureus MRSA infections. The CF Foundation has stated that one of their key areas of focus is to identify effective treatments against methicillin-resistant staphylococcus aureus and MRSA. This supports our thesis when evaluating XENLETA in CF patients that staph aureus remains an unmet medical need in patients with cystic fibrosis. Because XENLETA is available on both an oral and IV formulation, has demonstrated potent anti-MRSA activity, excellent lung penetration, potent anti-inflammatory activity, and is well tolerated. We continue to believe that may provide an attractive treatment option for this difficult-to-treat population. We have completed enrollment in the Phase I cystic fibrosis study in partnership with the CF Foundation and now expect top line data in Q4 2022, accelerating our prior guidance of Q1 2023.
We look forward to sharing these important data in this patient population with XENLETA in the weeks and months ahead. We believe that positive data in this trial could create another potential revenue catalyst with a potential peak incremental market opportunity of $100 million.
I’d now like to turn the presentation over to Dan for a brief update on the financials for the for the third quarter.
Daniel Dolan
Thank you, Ted. Turning to Slide 12, you will see a summary of our key financial metrics for the 3 months ended September 30, 2022, versus the same period of 2021. Total revenue in the quarter grew 3% versus the third quarter of 2021 to $9.2 million, consisting primarily of SIVEXTRO net sales. Net sales of $8.6 million grew 10% year-on-year versus the third quarter of 2021.
Other revenue decreased due to recognition of onetime payments in 2021 related to milestones we received for XENLETA in China. R&D expense grew in the quarter as we wrapped up our Phase I trial for XENLETA in patients with cystic fibrosis. The balance of our R&D spend consists primarily of regulatory requirements around both XENLETA and CONTEPO.
SG&A expenses decreased 3% versus Q3 of 2021 as we continue to control spending in these areas with a disciplined approach while also absorbing inflation. The growth in net sales and the decrease in SG&A continued to improve our operating leverage, and have a positive impact on our operating cash burn. Operating cash burn improved significantly in the quarter with a 50% reduction compared to the same period from the prior year.
We also continued to pay down our debt facility with Hercules, paying down approximately $1 million of debt in the current quarter. We exited the third quarter with cash and cash equivalents of $14.8 million, and as a result of our restructuring efforts, we have extended our runway into the first quarter of 2023.
I’d like to turn the presentation back over to Ted for some closing remarks.
Theodore Schroeder
Sorry about that. Given the pressures in the macro environment impacting our ability to efficiently raise capital and significantly undervaluing our portfolio, we believe our current initiatives to extend our cash runway and focus on maximizing the value of the products in our portfolio is the most efficient way to preserve optionality and value for our shareholders. We have continued to drive growth in SIVEXTRO, advance our life cycle management opportunities with XENLETA in cystic fibrosis and expanded the global presence of XENLETA with our partners to unlock royalty revenue streams in the near future. We have executed operationally throughout 2022, and we’ll continue to pursue options to maintain that progress over time to continue to bring these important antibiotic options to the patients who desperately need them.
With that, I would now like to turn the call back over to the operator, so that we can open the line for the Q&A session. Operator?
Question-and-Answer Session
Operator
[Operator Instructions] Your first question comes from Carl Byrnes from Northland Capital Markets.
Carl Byrnes
With respect to the 40% FTE headcount reduction in the anticipated 20% OpEx savings, how might that hit the third quarter and the fourth quarter, given where you are right now with those initiatives?
Theodore Schroeder
Dan, you want to take that question?
Daniel Dolan
Sure. Thanks, Carl, for the question. Yes, we weren’t expecting too much of the savings in Q3 and Q4 given some of the separation agreements, we’ll start to realize some of those savings as we turn the calendar year into 2023.
Theodore Schroeder
And just to be clear, most of that reduction about half of the reduction came from Vienna.
Carl Byrnes
Got it. And then turning to XENLETA for cystic fibrosis with the Phase I open-label PK study reading out in the fourth quarter, and given the press release comments on early-stage developments, what would be your next steps there with respect to advancing the CF program with XENLETA?
Theodore Schroeder
Yes. So we do have several other — as we noted on the slide, several other nonclinical data that will be published as well. So penetration in mutant CF patients, there’s a mouse CF model, which is a standard model that prescribers are familiar with and some of the other drug-drug interaction work that’s important for folks. So that there’s a package of data that will be presented. Also because we’ve partnered with the CF Foundation, they will disseminate those data as they’re published to their treating physicians. So it’s really moving forward there. And then we’ll assess down the road, whether a registrational program is appropriate. But for now, I think we’re just publishing the data. And so physicians can make a decision as to what may be best for their patients. that may have resistant staph infections.
Carl Byrnes
Got it. Great. And then just one final question. Can you comment on the funds raised via the ATM, obviously, it looks like there’s some activity with respect to the ATM may be around a couple of hundred thousand shares raising, maybe $4 million or $5 million. Anyway, whatever you can provide there would be great.
Daniel Dolan
Yes. Thanks, Carl. We did have some activity in the quarter on the ATM. It was a few million dollars in the quarter. We still have some capacity, but we haven’t been that active. There’s a couple of days where we leverage it for some funding.
Operator
[Operator Instructions] Your next question comes from Ed Arce from H.C. Wainwright.
Ed Arce
First, I wanted to start by asking you, as you — as you focus primarily on SIVEXTRO and look at strategic options, essentially for the rest of your pipeline, I’m wondering if you could be specific on both XENLETA in both CAP and CF, as well as CONTEPO. And are those both open to those options? What are you looking for in the near term?
Theodore Schroeder
Yes, Ed. So the strategic review process and the mandate with Torreya is really to look at all the strategic options. So I think we’re open-minded about how that — how we would evolve forward into a variety of different options, which could include one or all the brands or some combination.
Ed Arce
Okay. And then the current sales of SIVEXTRO in the quarter of 8.6 fell just shy of the 8.7 last quarter, given that you’re essentially at a flat growth, wondering if you could share with us some more thoughts about how you think about the growth prospects for the brand and what you’re doing to reenergize the growth?
Theodore Schroeder
Dan, you want to talk about the net sales calculation.
Daniel Dolan
Sure. Yes, I will. Thanks, Ed. So net sales, I think the underlying demand has grown. What we saw this quarter versus same quarter prior year was a little bit of inventory movement from the wholesalers. It’s kind of a normal kind of level setting. And if you recall, we launched our own NDC back in April of ’21. So I think last year, there was some buy-in as we kind of reestablished the brand and there was a benefit of some stocking in the third quarter of last year versus kind of more normal level buy-ins in the third quarter of this year. But I think the more important part and Ted can build on that is to look at the underlying TRx retail demand has continued to grow. And going forward, I think that’s what will be the driver.
Theodore Schroeder
Yes. And I totally agree with Dan. We did see some shift last year from wholesale ordering that would sort of lined up into the second quarter, but spilled into the third quarter. And this year, it was kind of the opposite. And so it’s really somewhat of a timing issue. But the important point as Dan highlighted, is that total prescriptions are growing and growing at a nice clip and eventually wholesaler demand over the years period of time will catch up, and we’re well ahead of last year and continuing to grow. And the fourth quarter, I think, will show that, that growth in the — driven by demand is sustained. And so we’re actually very bullish on the upside potential for SIVEXTRO and the trajectory that it’s on.
Ed Arce
Okay. One last follow-up, if I may. Just wondering with the Phase I data from XENLETA in CF expected in the next few weeks. Do you plan to include in that read out any exploratory efficacy endpoints that perhaps could help with any strategic review.
Theodore Schroeder
Yes. This was strictly a PK and safety study. And so there’s not an efficacy read out in that study. So these are — this is strictly PK, but the design of the studies to show and how we — and what we believe it will show is that the PK in CF patients is similar to the PK in non-CF patients. And that’s an important finding because it speaks a lot to dose. That would mean that the current marketed dose would be the appropriate dose and — but given the chronic nature of the infection, you would probably see — potentially see more doses per patient. So it’s not quite an efficacy study, but I think I check some of the boxes for penetration and getting to the organisms and getting to the site of infection that are important in assessing, which antibiotics might be appropriate in this patient population.
Operator
[Operator Instructions] This concludes our question-and-answer session. I would now like to turn the conference back over to Mr. Schroeder for any closing remarks.
Theodore Schroeder
Thank you, and thanks to each of you for joining our call this afternoon. I appreciate your interest, and we look forward to updating you in the weeks ahead, and we especially look forward to reporting the results of the Phase I cystic fibrosis patients before the end of the year. Thanks, everyone. Have a good rest of the day.
Operator
The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
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