Nabriva Therapeutics plc (NASDAQ:NBRV) Q2 2022 Results Conference Call August 3, 2022 4:30 PM ET
Company Participants
Dan Dolan – CFO
Ted Schroeder – CEO
Conference Call Participants
Carl Byrnes – Northland Capital Markets
Thomas Yip – HCW
Operator
Good morning, and welcome to the Nabriva Therapeutics Second Quarter 2022 Financial Results Conference Call. [Operator Instructions] Please note that this event is being recorded today.
I would now like to turn the conference over to Dan Dolan. Please go ahead, sir.
Dan Dolan
Thank you, and good afternoon, everyone. Welcome to Nabriva’s conference call and webcast, where we’ll be discussing the second 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 today’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 financial review before Ted comes back with some final commentary and leads our Q&A session.
I would now like to turn the call over to Nabriva’s Chief Executive Officer, Ted Schroeder.
Ted Schroeder
Thank you, Dan, and thank you, everyone, for joining our call this afternoon. Our theme of accelerated performance from prior quarters continued in the second quarter. SIVEXTRO’s strong demand growth performance in the quarter continues to position the business well.
We continue to move the business forward across all three key areas: commercial, clinical development and business development. I will get into more detail about each of these areas later in the presentation. In parallel, we also continue to improve our financial position. We saw significant double-digit top line growth versus the prior year, driven by SIVEXTRO’s 28% prescription demand growth. We achieved this growth efficiently with our SG&A expenses declining 14% versus the same quarter in 2021.
This resulted in further improvements in operating burn, which Dan will highlight later in the presentation. It is very encouraging to see all the hard work and focused efforts creating momentum as we move forward.
Turning to Slide 6. I believe it’s important to remind everyone of the changes we’ve made this year and the positive impact they have had on the business. As you recall, we extended our agreement with Merck to distribute and promote SIVEXTRO in the U.S. through at least 2026. This extension provides us with an established revenue stream for at least 3.5 more years.
SIVEXTRO will continue to serve as the foundation of our commercial focus and extend the runway we have built from our commercial execution to date. With this in mind, we realigned our efforts on SIVEXTRO, adding over 3,000 additional targets beginning April 1, bringing our total target universe to nearly 8,000.
We have experienced immediate benefits from this realignment here in the second quarter, and I will expand upon that later. We also brought our district sales managers in-house, which we believe provides enhanced line of sight and a streamlined communication so we can be more nimble in responding to evolving dynamics in the field.
A year ago, we piloted an inside sales representative program. And based upon its success, we have extended the program and expanded the role of the inside sales representatives to help further accelerate SIVEXTRO’s uptake with expanded targets. Our strategy is simple: expand our SIVEXTRO targets with a more focused approach, keep frequency high with the use of the inside sales representatives and generate increased prescribing from both current and new targets.
As you can see on Slide 7, the strategy I outlined has had an immediate impact on performance. SIVEXTRO posted 28% year-over-year prescription demand growth, surpassing the year-on-year growth in the prior 3 quarters. This is even more encouraging as we continue to work through what has historically been peak season for acute bacterial skin and skin structure infections or ABSSSI, and we are poised to continue to take advantage of the momentum with our refocused efforts on the brand.
The realignment that we put in place earlier this year has had significant impact from the very beginning. This reaffirms our confidence in our strategy, commercial execution and promotional sensitivity of the brand demonstrated by the consistent growth of SIVEXTRO demand since we reengaged with promotion. The over 1,100 real — retail prescriptions in Q2 ‘22 were another high for the brand since Nabriva took over promotional efforts.
Turning to Slide 8. First, let me briefly discuss the new alignment we implemented for SIVEXTRO. Specifically, we already are seeing early returns on our SIVEXTRO refocus with our key target, demonstrated by the impressive demand growth in Q2, driven by our increased reach to target prescribers, including podiatrists, dermatologists, nurse practitioners, PAs and primary care physicians.
In the second quarter, we sold over 100 new SIVEXTRO writers, with 30% of those prescribers writing for two or more prescriptions in the quarter. In Q2 ‘22, our reach of target more than doubled versus Q1 ‘22. We are encouraged by the early result and expect the increased reach and frequency to drive growth over time. We are confident that we are well positioned for continued growth with SIVEXTRO.
On Slide 9, our SIVEXTRO promotion has been further supported by the work of inside sales representatives, a pilot program we initiated a year ago, which initially focused on potential white space geographies targeting approximately 2,000 additional potential prescribers. We have been encouraged by the activity of the inside sales representatives to date and plan to expand their utility in a number of ways. When you consider the nearly 8,000 potential prescribers of field-based representatives are now calling on, combined with the white space reach of inside sales reps, we were effectively covering close to 10,000 potential SIVEXTRO prescribers.
In addition to driving demand in white space geographies, the insight sales reps will now provide support in assigned districts for vacancy coverage. They will also help to increase the frequency with high-volume writers by making additional calls in between calls made by our field-based representatives. As the field-based reps continue to increase their reach in the expanded universe, the ISRs will provide additional calls to keep frequency high so SIVEXTRO remains top of mind for prescribers.
Moving to Slide 10. 2 weeks ago, we announced we had entered into an exclusive distribution agreement with Er-Kim, a leading partner for biotech companies in international markets for the oral and intravenous formulations of XENLETA. Under the terms of the agreement, Er-Kim gained exclusive rights to distribute XENLETA in 9 countries. Er-Kim also may distribute XENLETA to an additional 5 countries through a named patient usage program. Nabriva will be the exclusive supplier of XENLETA to Er-Kim.
This agreement highlights the execution of just one part of our business development goals for 2022 and expands our geographic presence for XENLETA. This provides yet another opportunity for Nabriva to generate passive income with a significant double-digit royalty on sales in these territories. We’ve taken large steps to unlock value for this asset, and I’m especially pleased with our team for executing a transaction in such a tough macro environment.
I will now hand it over to Dan for a financial update.
Dan Dolan
Thank you, Ted. Turning to Slide 12, you will see a summary of some of our key financial metrics for the 3 months ended June 30, 2022 versus the same period of 2021. Total revenue in the quarter grew double digits versus the second quarter of 2021 to $9.2 million, consisting primarily of SIVEXTRO net sales. Net sales of $8.7 million grew 25% year-on-year versus the second quarter of 2021. Other revenue decreased slightly due to the recognition of onetime milestone payments in 2021 and a small percentage of SIVEXTRO collaboration revenue in early April 2021 prior to the switch to the Nabriva NDA.
$15 million of operating expenses in the current quarter reflects a 5% decrease versus the same period a year ago. Within this reduction, most notably, is a 14% reduction in our SG&A expenses versus the second quarter of 2021. R&D expenses did increase in the current quarter, driven by the enrollment in our Phase I cystic fibrosis trial for XENLETA. The growth in net sales and decrease in SG&A continue to improve our operating leverage and have a positive impact on our operating cash burn, which I’ll touch on more in a moment.
We also began to pay down our debt with Hercules on April 1 of this year, paying down approximately $900,000 of debt in the quarter. We exited the second quarter with cash and cash equivalents of over $20 million, enabling us to maintain our prior cash runway guidance.
Moving ahead to Slide 13. I’d like to continue to focus on the progression of our operating cash burn through the second quarter of 2022. Our operating cash burn was $13 million in the current quarter, continuing a positive trend year-over-year and sequentially quarter-on-quarter. For the 3 months ending June 30, 2022, our operating cash burn came down by 30% compared to the 3 months ended June 30, 2021. For the 6 months ended June 30, 2022, our operating burn came down by 28% compared to the same period in 2021.
Sequentially versus the first quarter of 2022, our second quarter operating burn came down by 18%. The continued growth of SIVEXTRO and the benefit of our tight controls on SG&A spend enhanced our operating leverage and continue a positive trend in our operating burn as we move through 2022.
I’d like to turn the call back over to Ted for some additional remarks.
Ted Schroeder
Thank you, Dan. Nabriva had another solid quarter, continuing to execute operationally in a tough macro environment. As we turn to Slide 15, our 2022 priorities for commercial growth remain unchanged. We will continue to focus on business development opportunities to build off the progress to date with the SIVEXTRO agreement extension and the recently announced distribution agreement for XENLETA with Er-Kim.
The strong commercial execution demonstrated by SIVEXTRO’s uptick in prescriptions reflects the capability of our sales organization and marketing efforts. Regarding our Phase I safety and PK cystic fibrosis trial for XENLETA, we are pleased with how enrollment has progressed to date, tracking in line with our previously communicated time lines with data expected in the first half of 2023. And we look forward to generating this important data for this underserved patient population.
Lastly, we remain confident that CONTEPO is an approvable drug and represents an opportunity with its novel mechanism of action. We continue to evaluate the situation as we consider the timing of a potential NDA resubmission for CONTEPO. We know the FDA has initiated some overseas inspections, and we are keeping a close eye on development to inform us how and when we move forward with our CONTEPO package. As a reminder, we were granted an extension on the resubmission of the NDA, which provides Nabriva flexibility to submit at any time through June 2023.
As we look ahead to Slide 16, we have an excellent foundational asset with SIVEXTRO with growth potential that can serve as the core asset for our value story. We continue to take a multipronged approach with XENLETA. We have the CAP indication in the U.S., which presents an opportunity for a 2 million-plus patient population, and we continue to focus on pulmonologists to create a value proposition for the brand.
We are close to finalizing enrollment in the cystic fibrosis Phase I trial, which provides another opportunity to address the medical need with that patient population and create more value for XENLETA. Our recent deal with Er-Kim adds to our existing deals with Dainippon Sumitomo in China and Sunovion in Canada with a goal to continue to unlock value outside the U.S. with more royalty streams to help drive future growth for XENLETA and Nabriva. The NDA submission in China is progressing as expected and an approval is still anticipated in mid- to late 2023.
And finally, with CONTEPO, we have a potential near-term catalyst to add a third commercial asset to our portfolio with an opportunity in approximately 3 million patients being treated for multidrug-resistant complicated urinary tract infections.
We are very excited with the progress we have made during the first half of 2022, and we look forward to continuing that momentum moving forward and sharing our progress with you in the upcoming quarters.
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.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question will come from Carl Byrnes with Northland Capital Markets.
Carl Byrnes
Congratulations on your progress. I’m wondering if you can give us a bit of guidance on the timing of when you think SIVEXTRO will get back to the Merck levels, which I think were kind of in the $50 million, $60 million range? And then I have a couple of follow-ups.
Ted Schroeder
Yes. So as we’ve discussed previously, Carl, we expect to get there this year. So we think we’re on the trend line that will get us to gross sales in the $50 million to $60 million range before the end of the year.
Carl Byrnes
Excellent. And then turning to the Er-Kim agreement. I know it’s a bit unique with respect to other types of licensing agreements. Can you give us maybe a little more detail on that with respect to economics and what revenue contribution and recognition would be in this year next?
Ted Schroeder
Yes. Dan, do you want to take the questions about the revenue — rev rec and all that?
Dan Dolan
Sure. Thanks, Carl. Yes, the agreement for Er-Kim is kind of more traditional of a distribution agreement. So we’ll recognize a royalty on the net sales in those territories when they’re made. And we’ll also be supplying product to do those territories over time, could become a pretty significant revenue stream for us in the short term. We don’t expect too much, but it will be all recognized when they start making sales in those territories.
Ted Schroeder
Yes. Just to emphasize that, Carl. So it’s a distribution agreement. So you can expect distributor-like royalties from them to us.
Carl Byrnes
Exactly. And that’s what I was imagining. Perfect. And then just one question, and I’ll hop back into the queue. With respect to the XENLETA Phase I clinical trial — and again, you expect data first half of next year. Is the CFS involved in this? And would it be safe to assume if there’s progress, they would be involved in the Phase II study as well?
Ted Schroeder
Yes. So they absolutely have been involved, and we’re using some of their centers for the study. And I think based on the strength of the data and what the situation would be like at the FDA, we would certainly have the opportunity to engage with them as we look at the potential for further research in this area. But for now, we’re just focused on the Phase I study and then a grouping of nonclinical studies looking at DDIs, looking at some mouse models and looking at microbiologic effects in CF sputa, et cetera. So when we bring the data forward next year, we expect to have a relatively complete package of how XENLETA performs in a CF population.
Operator
Our next question will come from Ed Arce with HCW.
Thomas Yip
This is Thomas here asking the questions for Ed. Very happy to a strong quarter [indiscernible] [indiscernible]. Perhaps first question, regarding XENLETA U.S. sales, what are your expectations for the remainder of 2022 and perhaps what are your preparations for the rest of the year?
Ted Schroeder
Yes. So we’re — certainly, we’re out of the respiratory season at this point. And given the kind of the uptake of SIVEXTRO, we’ve heavily switched our efforts to support SIVEXTRO. And we expect that promotional level to remain high through the rest of the year. However, for XENLETA, where you are focusing on pulmonology, specifically, they tend to have patients that are more appropriate for XENLETA, patients that have been exposed to prior antibiotic therapy often, in patients that have a bit more compromised and this patient group really allows us to get there.
The other thing that pulmonologists actually find quite attractive about the product is the opportunity to treat the patient in or out of the hospital. And you can imagine in a an era of COVID, there’s a lot of reluctance on the part of many of the patients that pulmonologists treat to enter the hospital. So having the flexibility to treat them in the outpatient setting, where appropriate, is attractive to clinicians.
So we expect that, that will be our effort for the rest of the year that will focus on pulmonology. And as we move into the first quarter and the — and we’ll evaluate how our efforts are going with pulmonology. But it’s a — our current strategy is to drive SIVEXTRO revenues as high as possible to give us the resources that we need to — and for future investments behind XENLETA.
Thomas Yip
Got it. That makes sense. Perhaps just another question from me regarding the Er-Kim distribution agreement. How should we expect the net sales royalty to contribute [indiscernible] to the top line? And also, can you discuss major steps are there for Er-Kim to take before XENLETA can be launched in those countries?
Ted Schroeder
Yes. So Dan, maybe you can talk about the financial pieces of that.
Dan Dolan
Sure. Thanks, Thomas. So I mean we don’t really have enough data to give guidance on what we expect. We’re — it’s still early as we just signed the agreement. But as we’ve touched on, we can expect a significant double-digit royalty on the net sales. You can model it kind of like a distributor agreement with other pharma companies in Europe that maybe Er-Kim supports in those regions. But we don’t have all the data, and we wouldn’t really give specific guidance on the level of sales to expect at this time.
Ted Schroeder
Yes. And as far as in some of these countries, we’re already approved. Some countries will be — they’ll limit the approval and it will be kind of recognized because it’s approved broadly in the EU. And in some countries like Turkey will require a separate submission. And so they’ll kind of come online at different times depending on what the situation. So you have some immediate countries, some that might be lagged by a few quarters and others like Turkey that will take a bit longer than that to work through their regulatory process.
Operator
Our next question is a follow-up from Carl Byrnes with Northland Capital Markets.
Carl Byrnes
It looks like you had about $37,000 adjustment with respect to XENLETA inventory obsolescence. Do you believe that the obsolescence going forward is kind of complete, and we won’t see that in the COGS line anymore?
Dan Dolan
I can take that. Yes, yes. So that’s more of an inventory adjustment before the product hits the channel. We’ve got 4-year dating the majority and then that which we have can be retested. So I think the adjustments you’re seeing are more immaterial minor ones. I wouldn’t expect material adjustments moving forward to flow through the COGS line either. It’s just a little bit of cleanup in the quarter on some inventory. But moving forward, it should be insignificant as it was this quarter.
Operator
This concludes our question-and-answer session. I’d like to turn the conference back over to Ted Schroeder for any closing remarks.
Ted Schroeder
Great. Thank you. Thanks for the questions. Thanks for your attendance, and we look forward to updating you not only in future quarters, but in some of the upcoming conferences throughout the fall. Thanks, everyone. Have a good evening.
Operator
The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines.
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