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Edited Transcript of NBRV.OQ earnings conference call or presentation 12-Nov-19 9:30pm GMT

Full Year 2019 Nabriva Therapeutics PLC Earnings Call

DUBLIN Nov 27, 2019 (Thomson StreetEvents) -- Edited Transcript of Nabriva Therapeutics PLC earnings conference call or presentation Tuesday, November 12, 2019 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Francesco Maria Lavino

Nabriva Therapeutics plc - Chief Commercial Officer

* Gary L. Sender

Nabriva Therapeutics plc - CFO

* Jennifer Schranz

Nabriva Therapeutics plc - Chief Medical Officer

* Steven P. Gelone

Nabriva Therapeutics plc - President & COO

* Theodore R. Schroeder

Nabriva Therapeutics plc - CEO & Director

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Conference Call Participants

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* Alan Carr

Needham & Company, LLC, Research Division - Senior Analyst

* Ishmael Izakiel Gyimah Asante

Morgan Stanley, Research Division - Research Associate

* Jason Matthew Gerberry

BofA Merrill Lynch, Research Division - MD in US Equity Research

* Robert Driscoll

Wedbush Securities Inc., Research Division - Senior Research Associate

* Wing Cheung Yip

H.C. Wainwright & Co, LLC, Research Division - Research Analyst

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Presentation

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Operator [1]

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Good afternoon, ladies and gentlemen, and welcome to the Nabriva Third Quarter 2019 Financial Results Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

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

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Gary L. Sender, Nabriva Therapeutics plc - CFO [2]

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Thank you, and good afternoon, everyone. Welcome to Nabriva's conference call and webcast to discuss the Q3 earnings. Before we begin, I'd like to remind everyone that this conference call and webcast will contain forward-looking statements about the company. These statements are subject to risks and uncertainties that could cause actual results to differ. Please note that these forward-looking statements reflect our opinions only as of the date of this call. We will undertake no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. Factors that could cause actual results or outcomes to differ materially from those expressed in or implied by such forward-looking statements are discussed in greater detail in our most recent filings on Form 10-K and our other periodic reports from forms 10-Q and 8-K filed with the SEC.

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

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

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Theodore R. Schroeder, Nabriva Therapeutics plc - CEO & Director [3]

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Thank you, Gary, and thanks to everyone for joining our call this afternoon.

Turning to Slide 5, I'm thrilled to discuss the third quarter business update for Nabriva. As I said before, 2019 is a transformational year for the company, gaining approval from the U.S. Food and Drug Administration, and launching XENLETA for the treatment of community-acquired bacterial pneumonia just 3 weeks after its approval were truly transformational events for Nabriva in the third quarter.

XENLETA is the first new mechanism of action IV and oral antibiotic to be approved for use in pneumonia in nearly 20 years. We believe that XENLETA offers a highly needed alternative for patients with community-acquired bacterial pneumonia. It is a new class of antibiotic with a novel mechanism of action with convenient IV and oral formulations for patients who are in the hospital, transitioning care from the hospital to home, or initiating treatment in the outpatient community setting.

Moving on to Slide 6, I'd like to share key highlights of the XENLETA launch. Later, Francesco will cover some of these elements in more detail. Our 90-day plan is to build a foundation for a successful launch. We've built on our precommercialization activities and I'm happy to report that we are meeting or exceeding our key launch objectives after just 6 weeks on the market.

XENLETA generated net sales of $1.4 million in the first 3 weeks on the U.S. market. We are extremely happy with the initial stocking, which exceeded our expectations. Current stocking is consistent with our demand expectation for the first few months.

We've launched XENLETA with 60 highly experienced territory business managers and to date, they have called on all of the 900 target hospitals. And engaged with over 2,400 healthcare providers. More than 200 hospitals have scheduled formulary reviews of XENLETA before the end of the year.

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

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

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

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

Francesco will talk about our plans to access over 6,000 primary care prescribers with our current hospital sales team.

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

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

According to the FDA meeting minutes, the resubmission will be designated as Class 2, requiring the FDA to review the resubmission within 6 months of the receipt date. As a reminder, the FDA has not requested any new clinical or nonclinical data. And they did not raise any concerns regarding the safety or efficacy of CONTEPO at the Type A meeting or in the final FDA meeting minutes.

Finally, in the third quarter, we strengthened our balance sheet and extended our cash runway into the third quarter of 2020.

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

Before I turn the presentation over to Francesco, our Chief Commercial Officer, who will share more details about our progress with the XENLETA launch, I turn your attention to the statistics. And remind everyone of the significant problem that pneumonia represents as it is a leading cause of morbidity, mortality and health care costs in the U.S. With approximately 5 million cases annually, it's the leading cause of infectious death, the third cause of hospital readmissions and the fifth cause of all hospitalizations.

Mortality remains very high and direct costs for pneumonia are approximately $17 billion annually. Resistance continues to increase to the most common treatments for CABP. As a result, the new IDSA/ATS CABP guidelines state that macrolide monotherapy is no longer recommended where strep pneumoniae resistance is above 25%, which is what we presently see across the U.S. And doxycycline is not far behind. Remember that strep pneumoniae is the most common infecting organism in CABP. Since the CDC has deemed drug resistant strep pneumoniae a serious public health threat, there is a significant unmet need for novel CABP treatments.

We strongly believe that the launch of XENLETA provides a new novel targeted option to treat CABP and is not only a significant milestone for the Nabriva team, but a breakthrough solution for the 5 million patients with pneumonia each year and their clinicians who are battling against the growing public health threat of antimicrobial resistance.

Francesco, I'll turn it over to you.

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Francesco Maria Lavino, Nabriva Therapeutics plc - Chief Commercial Officer [4]

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Thanks, Ted and good afternoon to everyone on the call. It is very exciting for me to share details of the great progress we are making with the XENLETA launch in our first weeks on the market. Before going into some launch measured details, building further on Ted's message of pneumonia, Slide 10 shows where CABP patients are treated in the United States and we see 3 distinct and significant opportunities for XENLETA. Most patients with CABP are diagnosed and treated in the hospital setting, either in hospital or as an outpatient in Transition of Care. Many CABP patients who present to the emergency department get admitted and are treated in the hospital generating about 3.8 million treatment annually.

About 900,000 patients present annually with CABP at an emergency department, but do not get admitted and get treated directly as outpatients with an oral drug or alternatively they can be initially treated in the observation unit for a day with an IV and then get discharged on an oral treatment.

All of the patients treated in the hospital, about 2.4 million get eventually discharged on an oral drug after an average stay of 3 to 4 days.

Consistent with our prelaunch view, initial indication confirm that the outpatient Transition of Care from the emergency department represents a very compelling opportunity for XENLETA given its profile and the order and IV availability.

Finally, about 2.3 million patients with CABP are treated in the community at the primary care office and these patients represent a very important target, given the unmet medical need and XENLETA's value proposition and it's certainly a significant business opportunity. I'll tell you more about our plan to capitalize on our outstanding managed-care access by educating more than 6,000 high prescribing community-based physician who are adjacent to our key hospital accounts. We have developed an efficient and effective way to immediately enter the community ahead of the upcoming flu season.

Turning to Slide 11, I'd like to highlight the XENLETA launch priorities for the first 90 days and how leveraging our extensive preparation work, we will continue to build a solid foundation for a successful launch.

The first foundation of priority for a successful launch is ensuring XENLETA availability in the distribution channel in order to support the Transition of Care strategy for patients at discharge.

The second priority is ensuring our XENLETA sales force connects with the profile prioritized accounts to accelerate formulary placement and Transition of Care.

The third priority is leveraging the incredible work done preapproval by both the medical affairs and the commercial teams accelerating hospital formulary reviews at key prioritized accounts.

And finally, the fourth priority is to ensure that XENLETA is added on formularies with no or limited restriction on key commercial and Medicare plans.

Our primarily goal and near-term focus is to build a solid foundation, to continue a successful launch and create the right environment for physicians to confidently prescribe XENLETA for their CABP patient, both in the hospital and in the transitional care setting.

Let's review the progress we have made just 6 weeks after launch on these foundational priorities.

Moving on to Slide 12, which focuses on XENLETA's availability, the supply chain team at Nabriva did an extraordinary job in planning and ensuring the availability of the product. We were able to launch in the United States just 3 weeks after obtaining regulatory approval.

Immediately after launch all specialty distributors ASD, Cardinal Specialty and McKesson Plasma and Biologics ordered adequate inventory and also Walgreens Community Specialty Pharmacy and Option Care Health secured XENLETA at their location. To date, we have more than 200 orders for XENLETA between hospitals and specialty pharmacies supporting the Transition of Care strategy. More than 30 hospitals, all profiled during precommercial activities, placed an initial order prior to the formulary review and the majority of these initial orders came from either leading academic medical centers or Priority 1 accounts.

Consistent with our strategy and expectation, most orders were for oral XENLETA in outpatient pharmacies. To support the Transition of Care that is key to a successful launch, we established Nabriva Rx Connect in collaboration with RxCrossroads by McKesson to initiate HUB Transition services, copay assistance, patient assistance program and bridge dosing.

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

Turning to Slide 14, as a result of the territory business managers' engagement, paired with all the preapproval profiling work done by the medical affairs and commercial teams, we now have over 200 hospital accounts scheduled to review XENLETA by the end of December 2019. And by the end of the first quarter of 2020, we expect to exceed a total of 400 hospital formulary reviews. Most of the pending formulary reviews are at either large systems or a Nabriva Priority 1 account. This trend indicates that we might achieve a higher hospital access within the first 6 months compared to recently launched hospital antibiotics.

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

To date, approximately 50% of 150 million covered lives have access to XENLETA, with the majority having no utilization management, either prior authorization or step edits required.

Coverage is primarily driven by Express Scripts and Anthem who added XENLETA to their commercial formularies with no utilization management. This, again, is a remarkable accomplishment in such a short period of time.

Medicare Part D generally takes a while to establish coverage. However, you can see we do have some coverage already, primarily driven by Kaiser, adding XENLETA to the Part D formulary, again with no prior authorization. We also have already had some key wins in certain states with Medicaid plans.

To date approximately 45 million commercial and Medicare Part D lives are under contract, about 90% have no utilization management. And we are in the process of contracting with all commercial and Medicare Part D plans for coverage with no utilization management. We expect coverage to further increase over the next few months with more than 80% of total covered lives expected to review XENLETA by the end of the first quarter of 2020.

Turning to Slide 16, we have an opportunity for increased reimbursement for the Transition of Care for XENLETA. XENLETA IV has been granted a C Code for pass through status that effective on January 1 will enable outpatient departments to bill Medicare at ASP+6% for XENLETA IV. We anticipate that the J Code application for XENLETA will be submitted by December 31 with an approval expected by October 2020. With an effective date of January 2021, it will allow for outpatient department to bill Medicare and Commercial Plans with a permanent code at ASP+6% for XENLETA IV. There is a possibility that CMS could award new J Codes on a quarterly basis and this would expedite the review and the implementation of the J Code for XENLETA.

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

We'll drive initial purchase and utilization at high priority accounts, prior to formulary review and the pull through for the appropriate patients. We will focus on maximizing the utilization of XENLETA in those hospitals who have the focus and infrastructure consistent with our Transition of Care strategy.

In early November, we launched a focused commercial effort in the community, an efficient and effective way for Nabriva to take its first step into the community setting with XENLETA.

Moving on to Slide 18, the focused community program utilized our 10-year hospital field force experience to take advantage of peak pneumonia and flu season as well as the significant resistance to current oral treatment in the community. It targets more than 6,000 community health care professionals that are high prescribers of oral antibiotic for CABP and are within close proximity to our target hospital locations. This helps us close the loop on all patients leaving a hospital on XENLETA opens new opportunity with more physicians. This would also provide a new option for primary care physicians, who may be concerned with using existing drugs such as fluoroquinolones and macrolide. By targeting those primary care physicians with high potential who are in close proximity to our target hospital, we believe Nabriva will maximize our field force impact and will allow us to efficiently assess the community opportunity for XENLETA.

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

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

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

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Gary L. Sender, Nabriva Therapeutics plc - CFO [5]

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Thanks, Francesco. Slide 20 lists out some key financial highlights for the quarter, including the strong initial stocking of XENLETA and the significant cash inflows into Nabriva in the third quarter. We will go into more detail on those in the following 2 slides.

So let's turn to the P&L on Slide 21. You will see that we recorded product sales, collaboration revenue and the ongoing grants from the Austrian government.

Focusing first on product sales. As reported, we recorded net sales of $1.4 million. We record product sales when XENLETA is shipped from our 3PL and is received by wholesalers and our specialty retail partners.

Those customers want to maintain a proper level of inventory to satisfy the demands of hospitals, pharmacies and other medical providers for XENLETA oral and IV. They will replenish their inventory as customers order product and our future sales will be guided by their inventory needs. We are very pleased with the initial stocking of XENLETA and it exceeded our expectations for 2019.

Gross-to-nets were a bit under 30%, the IV carries a significantly lower gross-to-net compared to our oral product. We believe our future sales mix will skew more to our oral product and I therefore, reiterate my prior guidance that gross-to-nets over time will range between 30% and 35% driven by our mix of sales and market access efforts. Collaboration revenue in the third quarter was $5 million. This reflects the milestone payment from our Chinese partner Sinovant and was triggered by the FDA approval of XENLETA. We also recorded research premium and grant revenue, which reflects the support we continue to receive from the Austrian government. This amount has decreased over time as our R&D activities have been reduced.

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

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

R&D expense was significantly lower than prior year due to 2018 write-offs of in-process R&D related to the Zavante acquisition and due to a reduction in our clinical trial expenses.

SG&A expense of $18.5 million is higher than prior year, primarily due to increasing investments in our commercial organization. We welcomed new employees to Nabriva in September, who are educating physicians about XENLETA. And we are also prudently investing in the tools needed to support and manage a commercial organization. With the investment in headcount comes an increase in total compensation.

Please note that the overall third quarter P&L includes approximately $4 million of noncash stock-based compensation expense. This amount reflected some onetime charges associated with performance-based restricted stock units which vested upon XENLETA's approval and an adjustment to prior period items.

Interest expense of about $700,000 in the quarter was driven by our $25 million loan with Hercules. We expect interest expense to rise going forward since we drew down an additional $10 million from that same facility at an interest rate of just under 10%.

Summing up, we generated a loss of $17.8 million in the quarter.

The next slide details our balance sheet versus year-end 2018. Cash, cash equivalents and short-term investments were $78.3 million at the end of the third quarter. This balance is actually about $5 million higher than where we ended the second quarter, driven by the previously discussed milestone payment and loan draw, coupled with activity from our ATM that brought in about $9 million of cash.

These cash inflows combined with careful management of expenses allowed us to increase our cash runway guidance by 1 quarter. We currently expect to be able to fund the business into the third quarter of 2020.

Accounts receivable increased due to our product sales. We did not offer any onetime special payment terms for the initial sales of XENLETA to the wholesalers and specialty distribution partners. Borrowings increased due to the $10 million draw with Hercules; with that draw our interest-only period extended from 18 months to 30 months.

We were pleased to strengthen our balance sheet in the third quarter and our current shares outstanding are 78.4 million.

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

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Theodore R. Schroeder, Nabriva Therapeutics plc - CEO & Director [6]

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

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

And finally, preparation. The extensive early engagement of the scientific community and the profiling of more than 650 top accounts is allowing us to create a solid foundation for a successful launch and a faster uptake, while building for the long term.

We will be keenly focused on revenue growth driven by hospital formulary approvals, expansion of outpatient access through contracting with Commercial and Medicare Part D plans, continued growth of the availability of XENLETA for discharge at targeted hospitals. And finally, gaining traction in the community.

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

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Alan Carr from Needham.

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Alan Carr, Needham & Company, LLC, Research Division - Senior Analyst [2]

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Congratulations on the launch. I take it most of the sales, was that internal restocking? And then I think I heard you say that you gave an estimate of how long it would take to go through that inventory.

And then also with respect to how the drug is being positioned relative to other drugs for example, levofloxacin or ceftriaxone, what's your initial feedback in terms of how physicians plan to use this drug?

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Theodore R. Schroeder, Nabriva Therapeutics plc - CEO & Director [3]

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Sure. Thanks, Alan. A multipart question. So let me address the first part. The $1.4 million is largely a stocking as we would expect, need to have product in the wholesaler channel and at the specialty distribution channels before we can pull it through. But we have seen some early pull-through sales particularly at hospital outpatient pharmacies.

So we're seeing that, and as Francesco commented on in his remarks that we are focused on new orders at hospitals but also reorders at those same hospitals. So really focused on pulling through where we have the product available at the hospital and community level.

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

The second part of your question about how XENLETA compares to other products in the marketplace. I think the data kind of stand on their own compared to quinolones we certainly have a more targeted spectrum to the most relevant and important community-acquired pneumonia pathogens, including the multidrug-resistant strains without off-target effects on kind of nontarget organisms which only leads to further resistance of those organisms. And then also a substantially cleaner safety profile with no boxed warnings in the XENLETA label.

And as far as ceftriaxone goes, the beta-lactam's, again, they're somewhere around 10% of patients are allergic to beta-lactams and that clearly certainly creates an opportunity for a nonbeta-lactam antibiotic like XENLETA.

But you also see the opportunity for IV ceftriaxone, there is no available oral step down and your choices are to use a quinolone, which are certainly coming under some question as to appropriateness of that -- that choice. And so XENLETA offers a really interesting choice to step down from the IV ceftriaxone and get the oral through the outpatient pharmacy and send the patient home.

So we expect to see, as we talk about the Transition of Care, we expect to see increasing utilization in that area and in fact early on I think that will be one of the prime drivers of sales.

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Alan Carr, Needham & Company, LLC, Research Division - Senior Analyst [4]

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In the first 2 months are you getting anecdotal comments or feedback on how the drug is being received and is it being used because of concerns over -- either for quinolones or that -- or if they're using ceftriaxone, the lack of an acceptable oral in that case?

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Theodore R. Schroeder, Nabriva Therapeutics plc - CEO & Director [5]

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

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Francesco Maria Lavino, Nabriva Therapeutics plc - Chief Commercial Officer [6]

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Sure. And Alan, thanks for the question. So yes, we are receiving a lot of good feedback from the field. When we think about where physicians may want to use XENLETA it really comes back to, I would say, 3 kind of patient types. First of all, the patient that show up in the emergency department and the physician don't want to admit. So to answer specifically your question about ceftriaxone, ceftriaxone when the patient is admitted to be hospital could be certainly a good option, but being IV the patient needs to be admitted to the hospital. So they really see an opportunity for patient not to be admitted to the hospital and being sent home on XENLETA.

And this is also showing in, as I mentioned, the first early orders that we're getting from hospital that is mainly coming from the outpatient pharmacies because as they work through the formulary review, they wanted to have the oral available for patient discharge from the ER mainly. The second patient is clearly the patient that, as Ted also already mentioned, that might be admitted with or without initial treatment with XENLETA, even admitted and start treated with ceftriaxone, but mainly after 3 to 4 days, as the patient stabilized, they may want to send home on an oral drug. And that's another place where they really see XENLETA to fit.

And clearly the third patient type that we are hearing from physician is -- are really those patients with a lot of comorbidities and other risk factors where they don't feel comfortable any longer using especially fluoroquinolones or Macrolides and where XENLETA actually could replace these drugs.

And the kind of last comment that we're hearing consistent with all that is that they -- the feedback we are hearing is that we have priced XENLETA in -- appropriately for the kind of user they are expecting to do, and so in the right patient, they see really XENLETA soon replace the existing drugs.

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Operator [7]

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Your next question comes from the line of David Lebowitz from Morgan Stanley.

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Ishmael Izakiel Gyimah Asante, Morgan Stanley, Research Division - Research Associate [8]

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

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Theodore R. Schroeder, Nabriva Therapeutics plc - CEO & Director [9]

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

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Francesco Maria Lavino, Nabriva Therapeutics plc - Chief Commercial Officer [10]

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

If this is -- we had an initial stocking at some of the locations for the Walgreens and the Option Care, but not yet at all the locations and that's the reason why we currently have a coverage of around 50% of our target accounts, which was our goal at launch. But as we progress, and as we start getting the managed care coverage and therefore, the pull through with patient, the Walgreens location will continue to stock and the same will happen with the option care health location and in parallel as we gain formulary wins with XENLETA, the drug will be actually available at the hospital.

So over the next few months we expect to increase coverage to more than 75%, 80% of our target account in terms of ability for -- or availability of a XENLETA for patient discharge.

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Ishmael Izakiel Gyimah Asante, Morgan Stanley, Research Division - Research Associate [11]

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

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Theodore R. Schroeder, Nabriva Therapeutics plc - CEO & Director [12]

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

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Francesco Maria Lavino, Nabriva Therapeutics plc - Chief Commercial Officer [13]

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

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

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Theodore R. Schroeder, Nabriva Therapeutics plc - CEO & Director [14]

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

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Operator [15]

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Your next question comes from the line of Jason Gerberry from Bank of America.

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Jason Matthew Gerberry, BofA Merrill Lynch, Research Division - MD in US Equity Research [16]

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Just wanted to follow up. Did I hear correctly that from the 50% of covered lives, the expectation would be in a few months if you get to 75% to 80%? I just wanted to make sure I got that number correct.

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

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Theodore R. Schroeder, Nabriva Therapeutics plc - CEO & Director [17]

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Yes, sure. So Jason, thanks for the questions. I think the first question about the 50% coverage, that wasn't exactly covered, I think we talked of it as 2 50-percents. The first 50% was the accessibility of the product for discharge in the outpatient side, so meaning that it's either available from a specialty pharmacy or it is available in the hospital outpatient pharmacy. We expect that to grow to 75% to 80%. We are already on 45. So that's that group.

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

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

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Francesco Maria Lavino, Nabriva Therapeutics plc - Chief Commercial Officer [18]

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Sure. Yes, Jason, I mean, as Ted said, again just one comment. One of the things that clearly we will be measuring as one of the key performance indicators are actually the 2 metrics that we were just talking about. So the 1 metric which is the availability for patient discharge at our target hospital, which is currently a little bit above 50% that as mentioned will grow to 70% to 80% over the next few months.

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

The other measure that we are looking at, so clearly the formulary access. And for both formulary access as well as managed care access, we are not just tracking on quantity, but also on quality because it is extremely important that once you get on formulary, you get on formulary in the right way. So we will definitely measure the quantity and quality of formulary wins for XENLETA at the hospital level as well as at the formulary wins on commercial and Medicare plans especially with no utilization management.

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

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Operator [19]

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Your next question comes from the line of Robert Driscoll from Wedbush.

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Robert Driscoll, Wedbush Securities Inc., Research Division - Senior Research Associate [20]

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Congratulations on the strong start. Just wanted to get on to a little more detailed study for the Sinovant clinical study of lefamulin that's expected to initiate soon. How long it might take? And any thoughts on the potential commercial opportunity in the Greater China region?

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Theodore R. Schroeder, Nabriva Therapeutics plc - CEO & Director [21]

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

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Steven P. Gelone, Nabriva Therapeutics plc - President & COO [22]

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

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Robert Driscoll, Wedbush Securities Inc., Research Division - Senior Research Associate [23]

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Got it. And maybe a second question. Just wondered if you had any comments on the recently updated CABP treatment guidelines from the ATS and IDSA?

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Theodore R. Schroeder, Nabriva Therapeutics plc - CEO & Director [24]

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

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Jennifer Schranz, Nabriva Therapeutics plc - Chief Medical Officer [25]

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Thank you, Ted, and thank you for the question. I think as you may know that the updated -- long-awaited updated guidelines coincided nicely with 2 key events: one was IDWeek and second was the JAMA publication of our LEAP 2 study data which looked at a short course of 5 days of lefamulin versus 7 days of moxifloxacin. What I've heard from physicians that treat patients that there really are 2 important changes that will provide an opportunity for XENLETA, based on the profile you heard earlier, 1 is the 5-day treatment course which certainly is something that's important for any microbial stewardship which showed noninferiority to a 7-day course of moxifloxacin.

And second the early importance of macrolide resistance in United States with the regional rate between 30% and 60% and the guidelines are currently stating that where you're suspecting Strep pneumoniae and macrolide resistance over 25%, which is the majority of the country, that means macrolides are no longer recommended for monotherapy.

So I really think that's an important opportunity for XENLETA given its profile and activity against strep pneumoniae, also multidrug-resistant strains.

And I also would point you to the UpToDate, which is a guideline that physicians use often, and you will see that lefamulin monotherapy is now being adopted into therapy and that's stated in the guidelines for both healthy age up to 65 with no recent antibiotic use as well as those with comorbidities. So certainly from a clinician's perspective who are seeing patients are already starting to adopt XENLETA into their treatment paradigms.

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Theodore R. Schroeder, Nabriva Therapeutics plc - CEO & Director [26]

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Yes. And the one thing that I would point out the importance of monotherapy in the community setting. Combination therapy is kind of the standard of care in the in-patient setting. But any of you have taken outpatient products, you know how hard it is to have multiple products with different dosing regimens and when you're sick and you have pneumonia, trying to juggle multiple pills is not the easiest approach. So having a short course monotherapy with the appropriate spectrum is really a significant advantage in the marketplace. And was one of the things that had contributed to the adoption of macrolides many years ago. But now with the kind of startling rise of resistance to macrolides, an alternative is needed and we believe that XENLETA offers that opportunity -- that alternative.

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Operator [27]

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Ladies and gentlemen, (Operator Instructions) Your next question comes from the line of Ed Arce with H.C. Wainwright.

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Wing Cheung Yip, H.C. Wainwright & Co, LLC, Research Division - Research Analyst [28]

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This is actually Thomas here asking a couple of questions for Ed. Congratulations on progress with XENLETA so far. And given the access in the hospital setting with the team of 60 reps now, what is the full-size sales force that you envision to be able to fully capitalize in the community setting as well?

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Theodore R. Schroeder, Nabriva Therapeutics plc - CEO & Director [29]

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

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

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

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Wing Cheung Yip, H.C. Wainwright & Co, LLC, Research Division - Research Analyst [30]

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One short question on the financials. The $4 million noncash charge was mentioned in the prepared remarks, is that just in 3Q '19 or is that expected to be recurring?

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Gary L. Sender, Nabriva Therapeutics plc - CFO [31]

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

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Wing Cheung Yip, H.C. Wainwright & Co, LLC, Research Division - Research Analyst [32]

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Congratulations on a very good launch for XENLETA so far.

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Operator [33]

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

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Theodore R. Schroeder, Nabriva Therapeutics plc - CEO & Director [34]

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Well, thanks, again, and I appreciate your time today. We're excited with the progress so far of the XENLETA launch. And we look forward to keeping you informed as we continue to strengthen our foundation for continued success.

Please reach out to us if you have additional questions. Thank you, and have a great rest of your day.

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Operator [35]

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