Nabriva Therapeutics’ (NBRV) CEO Ted Schroeder on Q4 2019 Results – Earnings Call Transcript

Nabriva Therapeutics PLC (NASDAQ:NBRV) Q4 2019 Earnings Conference Call March 12, 2020 4:30 PM ET

Company Participants

Gary Sender – Chief Financial Officer

Ted Schroeder – Chief Executive Officer

Francesco Maria Lavino – Chief Commercial Officer

Steve Gelone – President and Chief Operating Officer

Conference Call Participants

David Lebowitz – Morgan Stanley

Alan Carr – Needham & Co

Kevin Kedra – G.Research


Good morning, ladies and gentlemen, and welcome to the Nabriva Fourth Quarter 2019 Financial Results 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 maybe recorded.

I would now like to turn the conference over to your host, Mr. Gary Sender, Chief Financial Officer.

Gary Sender

Thank you, and good afternoon, everyone. Welcome to Nabriva’s conference call and webcast to discuss the fourth quarter and full year 2019 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 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 2019 overview and current business update. Francesco Maria Lavino, Nabriva’s Chief Commercial Officer, will then provide an update on this XENLETA launch. I will provide the financial review and Ted will wrap up the discussion and 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 joining our call this afternoon. Let me begin with a recap of 2019 and provide a business update. 2019 was a significant year for Nabriva and for patients as XENLETA was approved by the U.S. Food and Drug Administration in August of 2019 for the treatment of community acquired bacterial pneumonia.

Our team is especially proud to have discovered and develop XENLETA. The first antibiotic with the new mechanism of action in two decades and we were excited to bring it to physicians and patients. With both IV and oral formulations, XENLETA is well suited for use in hospitalized patients, those transitioning from the hospital to home and in those initiating treatment in the outpatient setting.

We are pleased to say that our managed care coverage for XENLETA has exceeded our expectations and is better at this point in its life cycle than other recently launched antibiotics. XENLETA has been added to formularies of health plans accounting for greater than 60% of all covered lives in the U.S. and we have contracts in place with large well known plans. Importantly, most of the coverage is unrestricted and does not require prior authorization or a step at it requiring the patient to fail treatment with another antibiotic before receiving XENLETA.

This makes access easier for the prescriber and the patient. We expect that our coverage will continue to grow. And in fact, we recently signed a contract with a very large pharmacy benefit manager that represents over 10 million Medicare Part D covered lives. Our market access team has done an outstanding job and we believe our ability to obtain favorable positioning on formularies speaks to payers’ recognition of the high unmet medical need for a new class of antibiotics with a novel mechanism of action and the short course treatment for the more than 5 million adult patients diagnosed with pneumonia each year.

In addition to the breadth and quality of managed care coverage, we have the Nabriva Rx Connect co-pay savings program where eligible patients have no more than a $50 copayment for oral XENLETA. Based on the market dynamics excellent payer coverage and our commitment to optimize our resources, we are significantly shifting our sales force focus to the community and advanced our sales team to dedicate at least 75% of their time to calling on targeted community prescribers.

To support these efforts, we are enhancing the distribution of oral XENLETA to ensure easier patient access and are providing one day sample packs to ensure patients can initiate XENLETA as soon as the doctor prescribes it.

We believe that given our excellent commercial managed care coverage and expected expanded coverage on Medicare plans, focusing on the community is our best opportunity to drive product adoption in the near term. Having just initiated this approach in January, we expect that once our reps have had the opportunity to pay multiple visits to target doctors and as coverage continues to improve, we will drive new prescription growth.

During our third quarter earnings call, we said that the strong initial customer ordering of $1.4 million reflected the demand we expected for multiple months post launch. As a reminder, we booked sales when the wholesaler orders product and they’re still working down that initial stocking, in line with this expectation, we recorded sales of approximately $100,000 in the fourth quarter.

While we still believe in the transition of care strategy for the hospital, we were having similar results to others in our space and getting IV XENLETA on hospital formularies is taking time. Launching a new cat product in the fall at the beginning of the flu season may have created a timing issue for us as physicians we’re just learning about XENLETA’s profile.

As we’ve consistently said, we expect that we will need to promote XENLETA through two flu seasons to see a significant upward sales trend. We remain committed to increasing awareness of XENLETA in the hospital setting, recognizing that navigating the formulary review process takes time. Importantly, many hospitals are providing access to oral XENLETA for use on discharge, which we believe is a positive sign for the eventual adoption of IV XENLETA as well as for the community opportunity.

Now let me turn to a brief update on CONTEPO. CONTEPO or fosfomycin for injection is a novel potentially first in class IV antibiotic in the U.S. for the treatment of complicated urinary tract infections. We resubmitted the NDA for CONTEPO in December. In January of this year, Nabriva received FDA acknowledgement of the NDA resubmission and they established a PDUFA action date of June 19, 2020.

Two days ago, FDA announced that they are restricting travel for inspections and we are proactively working with them about the path forward. It’s too soon to speculate about any potential impact to CONTEPO. We look forward to providing more information about CONTEPO’s potential launch later this year.

Importantly, please note that we’re focused on prudently managing our resources. We will continue to closely monitor our performance in all KPIs to ensure that we are optimizing our resources to maximize the near-term opportunity for XENLETA and prepare for the potential launch of CONTEPO. Later in our presentation, Gary will discuss a restructuring of our debt facility, which we believe is in our shareholder’s best interests.

Moving to Slide 6, the challenges of launching new antibiotics is not a secret. Large feature stories, which recently appeared in both the New York Times and The Wall Street Journal highlight some of the headwinds we face. We remain confident that legislative changes will continue to be made to enable physicians to utilize the best available treatments for their patients. And we certainly believe that we have differentiated treatment options in XENLETA and CONTEPO.

The COVID-19 outbreak is the most recent reminder of the impact infectious diseases have on public health. Similar to influenza virus infections, patients infected with COVID-19 are at an increased risk for secondary bacterial pneumonia. Based on the information available from China up to 15% of COVID-19 infected patients have also developed bacterial pneumonia. Given the high mortality in the setting of concomitant bacterial and viral infection, particularly in patients who are older, have diabetes or are immunocompromised, timely and appropriate empiric therapy should be considered and administered promptly to patients with suspected or documented secondary bacterial pneumonia in the setting of COVID-19. Nabriva is working closely with bio in organizing an industry response. We were monitoring efforts by BARDA in their preparation for the potential need for widespread CABP treatment and have proactively submitted a brief via the BARDA medical countermeasures portal. So, offer XENLETA as a potential treatment option in patients infected with the coronavirus was suspected or documented secondary bacterial pneumonia.

In addition, we were supporting Sinovant, our development and commercialization partner in greater China for lefamulin. They were working closely with the country’s National Medical Products Administration to be prepared to offer lefamulin, should it be needed for the treatment of suspected or documented secondary bacterial pneumonia. Resistance rates to macrolides in China exceed 80%, thus the need for novel antibiotics is even more acute than it is in the U.S. or EU. We are closely following these developments and doing what we can to assist consistent with Nabriva’s mission.

I will now turn the call over to Francesco.

Francesco Maria Lavino

Thanks, Ted and good afternoon to everyone on the call. Building on Ted’s opening, I’m going to share more details about the progress we are making with the XENLETA launch in its first few months on the market. Forgoing into some launch measured details, Slide 8 is an important reminder about the wide variety of settings, where CABP patients are treated in the United States and the three overlapping opportunities we see. Many patients with CABP are treated outside of the hospital either as transition of care, inpatient to outpatient or directly from the emergency department as well as outpatient in the community practice.

Consistent with our prelaunch view, this initial month on the market confirmed that XENLETA profile as a first-in-class antibiotic with a novel mechanism of action. The appropriate spectrum of coverage for CABP pathogen in IV and oral short course of monotherapy fits very well in the community and as a transition of care treatment of CABP patients, who are discharged from the hospital. And this continued to be the main target for XENLETA. We continue to believe that the transition of care focus from the hospital is an important opportunity for XENLETA. But as Ted mentioned, we are having similar results to others in our space and getting IV XENLETA on hospital formularies is taking time. We will continue to work with hospital to provide the appropriate medical education about XENLETA’s value proposition.

Despite some of the challenges of getting IV on formulary, many hospitals are providing access to oral XENLETA for use on this charge, which is a positive sign for the eventual adoption of IV XENLETA. In a few minutes, I’ll talk more about our strategy and plans to increase our focus in the community in order to maximize our near-term revenues while we continue to work on gaining access to the hospitals for XENLETA IV.

Turning to Slide 9. A key priority for the launch has been ensuring that XENLETA is available for patient when and where they needed. Immediately, after launch or our specialty distributors or their adequate inventors and Walgreens community specialty pharmacy secured oral XENLETA at many of their locations.

By the end of 2019, we had more than 200 orders for XENLETA between hospital and specialty pharmacies supporting the transition of care strategy. Most of the orders were for oral XENLETA in our patient pharmacies. In those areas, who have seen an uptake in prescription, Walgreens has placed repeated orders and has agreed to stock XENLETA at some 24 hours retail side to assist patient, who are looking for a script fulfillment options after hours.

In order to strengthen our distribution channel, supporting both the outpatient use in the community and the transition of care. In addition to Walgreen’s community specialty and option care; at the end of 2019, we established additional partnership with the AcariaHealth, HomeScripts to provide mail order, direct to patient services for script fulfillment.

We have a new collaboration with Publix retail pharmacies in Florida, who are stocking XENLETA in select location, which are in close proximity to high volume community prescribing, and we will continue to look for ways to expand the XENLETA availability for the patient and as demand grows, we expect more retail location will want to make it available. Patients with CABP, who see community-based physician, have an excellent coverage for XENLETA and we had been placed in Nabriva Rx Connect co-pay series program, where eligible patients pay no more than a $50 copayment for oral XENLETA.

In early January, we also provided that the sales force with the XENLETA one-day sample pack for distribution to their community targets. This allows patients to leave the doctor’s office with the first day of XENLETA, while the specialty pharmacy or the only delivery service fulfilled the script and this has been well-received by both our sales reps and the doctors they call.

Moving on to slide 10. let me talk about the hospital update. similar to others in our space, getting XENLETA IV on hospital formulary has been challenging. since the launch in September, the Nabriva sales force has called on all the 900 target hospital. By the end of 2019, we have access to sale of XENLETA in more than 200 hospitals either as on formulary or as non-formulary for patients transition of care with oral XENLETA. However, a lower-than-anticipated number of P&T review occurred in Q4 for XENLETA and about 75% of access is for XENLETA oral only.

We continue to believe that IV XENLETA will be an important tool for using the hospital setting, but it’s going to take additional time to gain broad formulary inclusion. We will continue to educate key decision makers in hospitals and will actively look to add XENLETA on target hospitals formularies. XENLETA has been granted C Code for faster status effective January 1 and we applied for the permanent J Code for XENLETA. Given the new CMS quarterly review cycle, we expected the J Code will be granted by April 1 and if granted will be effective as of July 1. the C Code and eventually, the permanent J Code is critical for the transition of care strategy if it allows the outpatient treatment centers including the emergency department to bill for XENLETA IV at ASP+6%.

Moving on to slide 11. let me talk about the great progress we’ve made with managed care coverage for XENLETA. Our market access team has done a tremendous job before and after the launch in most clinical reviews occurred within the first 90 days from the launch. We are pleased to say that our managed care coverage has exceeded our expectations and it’s better at this point in XENLETA’s life cycle than other recently launched antibiotics. as of February, 2020, more than 180 million or about 60% of all covered life in the United States has access to XENLETA. In most of the accesses unrestricted, we know utilization management such as step edits or prioritization.

coverage is primarily driven by major clients like Express Scripts, Anthem, Aetna, not and Tricare, who have added XENLETA to their commercial formularies, again, with no utilization management. we have contracts in place with major commercial and Medicare Part D plan, accounting for about a 100 million cover life including the recently signed contract with a major PBM for both commercial and Medicare lives, and more than 90% of contracts have no utilization management. Additional significant contract, both commercial and Medicare part D with no utilization management are forthcoming and therefore, XENLETA overage is expected to further increase.

Moving on to slide 12. Based on the market dynamics we see, in order to optimize our resources and leverage the excellent payer coverage for XENLETA, we have been significantly shifting our sales force focus to the community and we have asked them to dedicate 75% of more of their time to calling on targeted community prescribers. We believe this shift will help us driving revenues for XENLETA in the near-term. While we continue to work on gaining access to formularies for IV XENLETA key for long-term success and also on preparing the launch for CONTEPO if approved in the coming months.

Turning to Slide 13. I’d like to share some of the details of our community plan. our highly experienced sales force had been targeting over 6,000 community healthcare professional since late November. These targeted HCPs are all high prescribers of oral antibiotic for CABP. They are in close proximity to our targeted hospital account in Walgreens Specialty location. We are also prioritizing areas with high managed care coverage and call on doctors, who are able to e-prescribe or use our specialty pharmacy channel for their patient prescription.

With the availability of assembled pack in January to breach the patient’s first day of therapy, we expanded the sales force focus and we also activated the XENLETA’s direct shipment to patient service. We are still in the early days and we all know that it takes multiple interaction with physician before the once in change in prescribing behavior. We are pleased to see initial signals of success based on XENLETA prescription for CABP, the number of prescriber and importantly, the number of physician prescribing multiple times. We believe this strategic shift of focus to the community given our excellent managed care coverage and the increased frequency of interaction will allow us to impact the launch trajectory while we continue to work on access to the hospital.

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

Gary Sender

Thanks, Francesco. On slide 15, we’ve listed some key highlights that are relevant to our financial position. These highlights relate to XENLETA’s revenue profile and the active management of our balance sheet. I will discuss each of these in subsequent slides.

Turning to Slide 16 and our 2019 P&L. XENLETA generated net sales of $1.5 million in the few months post launch. In our third quarter earnings call, we said that wholesalers placed orders which represented multiple months of prescription demand and we didn’t expect meaningful orders post that initial stocking. In the fourth quarter, we had net sales which were in line with those expectations and they were approximately $100,000.

We also recorded meaningful collaboration revenue from our Chinese and Canadian partnerships. We will continue to seek other licensing opportunities for XENLETA outside the U.S. and we look forward to our existing partners’ progress is they work to bring the products to patients in their geographies.

R&D expense significantly fell in 2019 given lower clinical trial investments and a onetime charge in 2018 for in-process R&D related to the Zavante acquisition. The increase in SG&A primarily reflects in the investments we are making on our commercial infrastructure and our customer facing teams. Higher interest expense is connected to our loan facility with Hercules. And as I will discuss, we expect that to be significantly lower starting in the second quarter.

Slide 17 shows the key components of our balance sheet. Cash and cash equivalents were $86 million at the end of the year. We brought in approximately $27 million through our ATM facility in 2019 and netted about $18 million from our December 2019 equity raise. Post XENLETA’s approval, we drew down a $10 million tranche from our debt facility with Hercules.

I now wanted to discuss our Hercules’ debt facility and this decision we made, which we believe is in our shareholders’ best interests. I ask that you turn to Slide 18. We are proactively managing the risk on our balance sheet and if decided to pay down $30 million of the $35 million outstanding debt balance we have with Hercules. This is planned to occur on April 1. When we established the Hercules facility in the fourth quarter of 2018, we provided them with a revenue forecast. In the first quarter of 2020, we did not satisfy a covenant to achieve a certain level of near-term revenue.

Per the terms of our agreement, we would have had to pledge and allocate $40 million of cash specifically to Hercules. That cash would therefore not be accessible to Nabriva to continue to invest in the business. We worked collaboratively with Hercules to create a revised structure that was in both parties’ interests. Post the loan pay down and the resulting $5 million debt balance, we will utilize an updated revenue forecast for performance covenant testing and our minimum liquidity requirements are now only $3 million down from $10 million in the original loan agreement.

This liquidity requirement is eliminated if CONTEPO is approved, and as long as we are in good standing with the other terms of the Hercules agreement. With a $5 million debt balance, our interest expense will fall significantly and there is no change to the interest only period of that facility. Post the pay down, our cash is expected to fund our operations into the third quarter of 2020.

The adjustments are meant to lower our overall risk profile and again we believe that they are in our shareholders’ best interest.

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

Ted Schroeder

Thanks, Gary. In conclusion on Slide 20, I want to focus on our priorities for 2020. We are driven by the needs of patients and those that treat them. Our goal is to ensure the greatest access possible for XENLETA by executing on our community action plan as well as expanding appropriate utilization in hospitals.

How do we plan to do this? By expanding on what has worked over the last several months successfully obtaining managed care coverage, particularly for Medicare Part D patients. We expect to see growing demand as we continue to increase the frequency of interactions with targeted physicians, providing them with the appropriate education about the benefits of having a novel antibiotic like XENLETA as a treatment option for CAP, particularly for high risk patients.

Linked to growing prescription demand, we will work to expand retail availability of oral XENLETA. Leveraging the knowledge and relationships we gained with XENLETA will also strengthen our position to potentially launch CONTEPO. We expect to see the approval of XENLETA in Europe and Canada in the second half of the year to benefit patients and those geographies who have a high unmet medical need.

We’ll continue to look for business development opportunities both out-licensing XENLETA outside of the U.S. as well as in-licensing assets that might fit the Nabriva infrastructure, both in the hospital and the community. In parallel, we look to reduce risks by thoughtfully managing our balance sheet and resources while strategically being opportunistic to create growth for our product offerings.

Finally, please know that everyone at Nabriva is standing by to assist COVID-19 patients who can track secondary bacterial pneumonia. Doing so is consistent with our company mission.

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

Operator, are you on the call?

Question-and-Answer Session


I apologize, I was on mute. [Operator Instructions] Our first question comes from David Lebowitz of Morgan Stanley. Your line is open.

David Lebowitz

Given the shift in sales strategy going forward, how should we consider this in our sales projections?

Ted Schroeder

David, I’m not exactly sure what you mean, how should we consider in your sales projections.

David Lebowitz

I mean, I think with respect to the ramp?

Ted Schroeder

For the ramp, so, yes. Okay. So thanks for the question, David. I think as you think about the ramp that the ramp for the community is really driven by the number of interactions we have with physicians. And so unlike the hospital where you’re going through a lengthy formulary and pharmacy and therapeutics review process in the community, we have great managed care coverage. It’s improving particularly on the Medicare Part D side, which is important for older patients who can track community-acquired pneumonia. And so kind of the standard is to start to get a physician’s behavior that change it takes kind of six or seven interactions with that prescriber.

And so giving, we started in January; we’re starting to see that ramp. We expect that that will continue to grow over the year as those interactions ramp up. So we’re right at the front end of it now. But through the first quarter, as we get in the second quarter, I would reiterate our previous guidance that we do think that it takes two flu seasons to see meaningful increases in sales as we get all the bits and pieces together that are necessary to fill a prescription. Is that helpful?

David Lebowitz

Yes, it is. Would you say that that shifting away, I guess in the near term from the transition of, I guess, the IV to a oral in hospital use, will that affect the sale protections in the coming year?

Ted Schroeder

It should actually improve the sales projections because as Francesco explained, the formulary process in hospitals has been as slow as we seen with other hospital antibiotics. And so we made the strategic decision that because we had greater access in the community, given the excellent managed care positioning, that the best way to drive utilization for XENLETA is to focus more effort in the community.

We’re not abandoning the hospital, but we are intentionally slowing down our efforts in the hospital to make sure we have multiple advocates for the product and that we’re working within kind of budget constraints that hospitals have for the timing of approval of XENLETA. That’s – we pivoted to the community because that’s really where the bigger opportunity is and where we’ll have an earlier opportunity to drive prescribing for XENLETA.

David Lebowitz

Thanks for answering my questions.

Ted Schroeder

Hey, you bet. Thanks.


The next question comes from Alan Carr of Needham & Co. Your line is open.

Alan Carr

Hi. Thanks for taking my questions.

Ted Schroeder

Hi, there, Alan.

Alan Carr

So if you’ve missed your, I guess, internal expectations based on your comment that you had a projection in your debt covenant. So what, I guess maybe you could go through what drove the miss in your internal expectations and you mentioned it takes two flu seasons, but you do have financial constraints. So can you talk about what’s your strategy there to and what’s realistic and how can you get a meaningful change in trajectory this year for the sales. Thanks.

Ted Schroeder

Yes. Thanks, Alan. And that’s exactly the reason for the early and quick pivot to the community. It’s really to take advantage of the opportunities in front of us. We could’ve made this – we could’ve stayed with the standard game plan and kept pushing on the hospital. But as you know, that’s a big rock up a steep hill. And that’s primarily responsible for where we found ourselves with our 2018 forecast with Hercules.

And so the – we didn’t expect to have such quick managed care adoption prelaunch. But thanks to the excellent efforts of our managed markets team. We have better than expected formulary, not only formulary adoption, but without restrictions and that’s an important differentiator. We’re not having to – have patients wait to get the prescription filled. As you can imagine for an antibiotic that’s gating to having a patient fill the prescription at the pharmacy.

So it’s a little bit of fishing where the fish are. So we actually think that will allow us to not only catch up, but to accelerate the performance of XENLETA. We’ve always believed that the oral opportunity was the bigger opportunity. The transition of care strategy was really a drive it from the community thought leaders into the community setting. But as we’ve seen managed care access improve, we’ve come to understand that we can do both a push and a pull from the community. So pull through to prescribing at retail and push into the hospitals, those same physicians discharge patients back into the community.

Alan Carr

So I guess language back then, success in the hospital is even slower than what you had expected, but you do have an opportunity to move into the community a bit sooner than you had thought, which may help. But is that fair then, and then the other aspect of this is to what extent do you have coverage of Medicare lives? How much more you have to go on there? Because imagine that a key target patient base there, what percentage of the way through that in terms of coverage are you and when do you expect to get all the way there?

Ted Schroeder

Yes, thanks. So let me start the answer that question Alan about Medicare coverage and I’m going to hand it off to Francesco to provide a bit more detail. As you know, one of the gating items for Medicare Part D is they basically have six months to make a decision in the front end. And so that six months is just basically come up and so we’re in the process now of doing the contracting with the plans. We said earlier on the call that we just signed the contract that covers 10 million lives. And so we’re getting up to kind of a runway. We have a number of other contracts with Medicare Part D that we’re expecting to sign in the relative near future.

So put that in perspective, in my experience in dealing with products and other therapeutic classes, we’re actually moving faster with Medicare Part D the most other companies do. And if you look around in other products, there are some products have been on the market for a while, that actually are still in kind of low-double digits for Medicare coverage. We expect that we will be moving past that during the year. So I’d say our – it’s gating, I agree that we need to have a greater managed care coverage, but our early conversations indicate that that Medicare coverage will continue to improve throughout the year. Francesco, if you want to add there…

Francesco Maria Lavino

Yes. I mean Alan, first of all, thanks for the question. I mean just to be what Ted said, so we have signed contract. So again, it took a while because of the six months review, but we signed a couple of contracts with major plans. So, it’s now a matter of the various plan to stop putting XENLETA on formulary, but the contract had been signed. And so we expected over the next couple of months, Medicare Part D coverage will increase a lot.

On the other hand, I also wanted to mention, I mean we all agree, I mean the majority of patients eventually would come from there, but there are also very specific patient population that are actually the commercial patient that we are seeing today. And with the commercial, we have close to 70% of all the commercial covered lives, they have XENLETA on formulary once again, the majority with no prior authorization.

So the Medicare Part D is coming. It’s already good. It will come up, because contracts had been signed. So it’s now just a matter of the different plans to put the drug on formulary. And again, the good thing is that even these Medicare contract, they have told with no prior authorization. And so we expect that coverage will really improve a lot over the next couple of months.

In parallel, to what Ted was saying, especially when it comes to the community, it takes multiple interaction with doctors to really see the change in behavior. And so we really believe that as we get into the second quarter, we will have the frequency of interaction with the physician on one hand and the increased coverage, especially on the Medicare Part D side there. And so we should really see the ramp up of prescription going up.

Ted Schroeder

Yes. Alan, let me just add one other point that I think is important here and that is for the commercial covered lives of which were we have 70% coverage at this point. The five-day indication for treating community acquired pneumonia for that commercial patient is really significant. Giving them two courses of a macrolides that then keeps the patient out of work for two weeks is not ideal. When you can prescribe a single five day course of treatment with XENLETA and get the patient back to work. One of the things that for sure you’ve seen a light shine on recently with some academics looking at the number of patients, who actually have paid time off from their jobs, when they’re sick. It’s actually a sizable portion of the U.S. population covered by health plans that don’t have more than a couple of sick days available to them.

So a short course therapy that gets the patient well and back to work in – within five – within a week is actually a real benefit to those patients. And I believe one of the reasons that physicians will look favorably on adopting XENLETA in that population in addition to the Medicare population.

Alan Carr

Thanks for taking my questions.

Ted Schroeder

With that, Alan, thank you.


Our next question comes from Jason Gerberry of Bank of America. Your line is open.

Unidentified Analyst

Hey, good afternoon. Good evening. This is [indiscernible] on for our Jason Gerberry. Thanks for taking my questions. I guess, going back to the pivot of focus to community prescribers. I guess, maybe Ted, can you talk about maybe there – if there’s an analog that went through a similar route and what would that analog beat by passing the start of the hospital or the hospital to oral transition of care. I just want to see if there’s an analog that we can point to for any sort of trajectory that can follow. I guess, a second question for me would be, when we talk to physicians, it seems like a lot of those prescribers in a community setting, they will follow KOL. They will follow thought leaders in the hospital, what kind of antibiotics they use. And I guess, now that you’ve pivot to more of a community friend, how do you think that communications with the community prescriber can potentially change that behavior. Thank you.

Ted Schroeder

Sure. Thanks. Appreciate the question. So kind of the – kind of summarize the broader question, what do we think will drive prescribing the community and what analogs are there? I think unfortunately, it’s been quite awhile since there’s been an analog that’s both an IV and an oral treatment for community acquired pneumonia. And you’d have to look back to the earlier quinolones, like, levaquin and moxifloxacin to look for analogs. It said that, there’s both a community in a hospital piece.

Short of that, there haven’t been, I mean, there’ve been some skin and soft tissue products that had various iterations of that, but they’re entering – they were entering really crowded markets at the time. So I think really it’s probably all the way back to the introduction of respiratory quinolones are probably the best analogs. Those became really large products driven mainly by the community prescribing.

From a KOL influence standpoint, that’s true in more complicated conditions. But community acquired pneumonia is not really condition that’s treated by infectious disease specialists. It’s – in the hospital, it’s really more pulmonologists and hospitalists who treat the patients in the community, you see a lot of treatment by internal medicine and an emergency department physicians, urgent care physicians. And it’s not typically a KOL driven type of decision. But it’s really an understanding of the patients that are in front of the physician.

The other tool that we have is we’re working closely with surveillance programs. And in some areas, we’re able to actually look at resistance trends for strep pneumonia for example, which is the leading cause of community acquired pneumonia down to the zip code level.

And as we’ve discussed before, generally in the U.S., we see resistance rates between 30% and 60% for strep pneumo. But that’s a national number and that’s hard for physicians to focus on. But when you can bring it down to their local area, where their patients live and they see resistance, it’s 30%, 35%, 40%. That has a meaningful impact on physicians and they’ve shown a willingness to adopt a product that can reliably treat their patients and do it in five days. So we think the strength of oral XENLETA actually are very attractive to busy primary care physicians.

Gary Sender

And if I can add to that, I mean, as we said, clearly we are, heading the same experience as others to really add the IV zone laser for the hospital. But everybody is quite consistently appreciating the value that XENLETA can bring for the treatment outside of the hospital. That’s the reason why, as we said, many hospitals might not yet – might have not yet XENLETA IV on the formulary, but they might want to use it in the discharge or in some kind of situation, where they’re sending the patient outside of the hospital. So in a certain way, as Ted said, I mean there’s very clear patient population that is a very clear problem of resistance in the community that everybody’s aware of, but also hospital people really think that this is a drug that outside of the hospital has a very strong value proposition. So we will still expect some influence from the hospital into the community as well.

Unidentified Analyst

Thanks. Maybe another question if I maybe for Gary. So, can you talk about potential BD development. Just curious with auto volatility it’s seen in today’s market. Can you talk about what kind of levers you can pull for BD development and I’m thinking about cash run rate are beyond 3Q 2020? Thanks.

Francesco Maria Lavino

Yes. So maybe we can talk about cash runway obviously. That’s our revised guidance significantly de-risked our balance sheet. And as in the past we will look for all opportunities to fund the company. I think we have a track record of bringing in non-dilutive funding into the company. We have, as you know, we have an MAA in Europe on file, and we expect to hear back on – decision on that in the second half of the year. There’s a large unmet medical need for pneumonia patients in Europe and we hope to be able to have a business development transaction in Europe that could bring in some non-dilutive financing. And we have other opportunities in other geographies as well. And beyond that, consistent in the past, we will look at all opportunities to fund the company.

Unidentified Analyst

Okay. Thank you.


[Operator Instructions] Our next question comes from Kevin Kedra of G.Research. Your line is open.

Kevin Kedra

Thanks for taking my questions. I know it might be early to answer this question, but I think it’s pretty relevant. You mentioned that you have to get in front of a doctor maybe six to seven times in order to influence prescribing habits. But as we’re kind of approaching a world of social distancing relative to what’s going on with the coronavirus, how do you see that playing out or do you anticipate still being able to engage with doctors in this environment? At least in the – over the next several quarters? Anything you can add there would be helpful?

Ted Schroeder

Yes. So, it’s an excellent question, and you’re right, it’s early days where we’re still trying to understand where that brings us. We’ve certainly seen early examples at the hospital level. They think, they’ve been fairly widely reported on at some major medical centers are trying to restrict access to their campuses, to just kind of employees and really patient facing employees. And so they’re even non-patient interacts, they pay – employees that don’t interact with patients are working remotely. So there’s some impact on the hospital side. We’ve seen less of that on the physician side, but we’re actually preparing for that. And there are a number of non-personal efforts that we can use to support the physicians that have already been introduced to XENLETA oral and continue to work through those through electronic details and other means that we believe will help support the message it’s already been established and in some of those high prescribers. And Francesca if you want add?

Francesco Maria Lavino

Yes. No, I mean, I mean as Ted said, clearly we are getting ready to phase up potentially, hopefully not a too long time of restriction to a face to face access. So, we have already planned in way a multichannel digital campaign, clearly we will be and housing that even further considering that. So we are – we’ll be leveraging any means to get in touch and in front of our customers probably more remotely moving forward. But we have plenty plays and we will definitely continue to deliver the message, especially to those that have already started engaging with.

Kevin Kedra

Great. I appreciate that. Mentioned that there’s a role for XENLETA and for you guys to play in the COVID-19 outbreak as supportive care with people with secondary pneumonia. I guess, what can you guys do to kind of make your voice heard there in an area that is – there’s a lot of voices, young a lot of different things. How can you kind of ensure that you’re in front of the right people and playing an active role in providing that level of supportive care?

Ted Schroeder

Yes. So it’s a multilayered question, right? There’s – I think there’s questions that a larger policy side that can be driven through places like BARDA and others and I’ll actually ask Steve Gelone Jalon that the comment on that and then there’s just kind of the general knowledge of the disease. I think one of the things that’s in our favor is that the fact that there are secondary bacterial infections are not novel to COVID-19. The regular seasonal influenza also has a high degree of secondary bacterial infections. One of the reasons why we see antibiotics for CABP up during flu season is because more patients, particularly older, sicker patients are at risk for outcomes when they have a secondary bacterial infection. That doesn’t, – that isn’t new news. I think the policymakers, sometimes it’s new news, but it’s not new news to the treating physician. And so the advantages of being treated with XENLETA first and foremost is the short course therapy and its activity broadly against multidrug resistant organisms including strep pneumonia and multidrug resistant Staph. And so in an era, where you see more opportunistic infections in a sicker population, XENLETA has a really remarkable profile in that group so as to continue the education efforts. And I think if you – if we see more and more infections, which will come with more, in China, the rate’s about 15%. If we see anything close to that, you’re going to see a broad group of antibiotics used to treat pneumonia. And I think having more attention around XENLETA will grow organically from recognizing its antimicrobial profile to actual experience and in our own promotional efforts. Steve, do you want to comment on kind of the more policy related opportunities?

Steve Gelone

Sure, yes and thanks for the question. Yes, I think it’s a multipronged approach to kind of get to what you were asking around how we ensure our voices in front of the dialogue. as was mentioned during the prepared remarks, we’ve obviously been proactively interacting with BARDA and have provided them some information on our side about the lefamulin and where it may play a role. We’re working with bio as well on a broader industry wide effort to try and coordinate things related to COVID-19. And then I guess the last piece of that is that part of the lobbying effort that we’ve been involved in now for a long time around antibiotic resistance and the need for antibiotic development with the antibiotic working group and others is also kind of the third leg of the stool if you will, trying to influence BARDA’s activities in this space. It’s early days, so BARDA has just in the last three or four days, released their broad agency announcement around what they’re doing with COVID-19.

And so I think, we’ll continue to be proactively engaged with that as appropriations are outlaid from the eight point whatever billion dollars was allocated to COVID-19. Recognizing that some of that will obviously be directed towards direct acting antivirals and vaccines and diagnostics, which are needed, but that they – I think there is a recognition that there is an unmet medical need, in particular as it relates to the fact that most of the treatments that have been used for a long time for bacterial ammonia are older generic products and their supply chains are rooted in places like China and India, where people are spending a lot of time and energy trying to ensure that we don’t wind up in a situation, where we have no therapies available, because APIs are not able to get into the country, because they’re made in areas that are highly effected, even more so than the U.S. So, I think, that’s the approach we’ve taken and will continue to be proactive in it.

Kevin Kedra

Great. Thanks. A very good one. Last one in – for Gary, you mentioned cash into Q3 2020, doesn’t quite get you to the next cold and flu season, and given time to the market environment we’re in now, a cash would seem to be a very valuable to have. How do you, is it – do you think it is still possible to get that financing? I know you’re paying down the Hercules loan, given some of the conditions there, but do you still see opportunities for an antibiotic company to tap into the debt markets or should we be thinking more about some of the actions that some of your peers have taken that at least in – seem to be on the surface sort of highly dilutive actions that have been taken to kind of buy an extra quarter or two of cash flow?

Ted Schroeder

Yes, Kevin. I mean, it’s – we really can’t speculate. As we’ve mentioned before, we’ll look at all opportunities to bring cash into the company. And I think we’ve shown that in the past that we’ve done that. And we will take actions that we think on our shareholders’ best interests. But beyond that, I’m sure you can appreciate, we can’t really speculate about what we’re going to do.

Kevin Kedra

All right. Thanks.

Ted Schroeder

Operator, any more questions on the line?


I am showing no further questions at this time. Presenters, you may continue.

Ted Schroeder

Okay. Well, thanks everyone for your questions, your interest, and we look forward to updating you as we continue to make progress on our community focus for the treatment of XENLETA for community-acquired pneumonia. Thank you and we’ll talk soon.


Ladies and gentlemen, this concludes today’s conference. Thank you for your participation and have a wonderful day. You may all disconnect.

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