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

Q3 2019 Tetraphase Pharmaceuticals Inc Earnings Call

WATERTOWN Dec 3, 2019 (Thomson StreetEvents) -- Edited Transcript of Tetraphase Pharmaceuticals Inc 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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* Christopher Watt

Tetraphase Pharmaceuticals, Inc. - Senior VP of Finance & Treasurer

* Larry G. Edwards

Tetraphase Pharmaceuticals, Inc. - CEO, President & Director

* Maria D. Stahl

Tetraphase Pharmaceuticals, Inc. - Chief Business Officer, Senior VP, General Counsel & Secretary

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Conference Call Participants

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* Joseph Robert Stringer

Needham & Company, LLC, Research Division - Associate

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Presentation

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Operator [1]

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

I will now turn the call over to Maria Stahl, Chief Business Officer.

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Maria D. Stahl, Tetraphase Pharmaceuticals, Inc. - Chief Business Officer, Senior VP, General Counsel & Secretary [2]

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Thank you. Good afternoon, and thank you for joining us today. With me on the call are Larry Edwards, President and CEO; and Chris Watt, Senior Vice President of Finance. On today's call, Larry will discuss recent developments and will provide an update on the XERAVA launch. Chris will provide an overview of our third quarter 2019 financial results, and Larry will conclude and open the call to questions.

Before we begin our formal comments, let me remind you that during today's conference call, we will be making forward-looking statements that represent the company's intentions, expectations or beliefs concerning future events. These forward-looking statements are qualified by important factors set forth in today's press release and in the company's filings with the SEC, which could cause actual results to differ materially from those in such forward-looking statements. Information discussed on today's call is accurate as of today, and we do not necessarily intend to update this specific information in the future.

I would now like to turn the call over to Larry Edwards.

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Larry G. Edwards, Tetraphase Pharmaceuticals, Inc. - CEO, President & Director [3]

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Thank you, Maria. Good afternoon to everyone, and thank you for joining us on today's call.

In the third quarter, we continued working hard to ensure that XERAVA becomes a commercial success and is reaching more patients in need of antibiotic treatment options for serious, often life-threatening infections.

During the quarter, we made significant progress with a 23% increase in net sales compared to second quarter and continued formulary uptake at a success rate of 99% for all formulary reviews to date. Furthermore, carton growth for XERAVA was over 30% versus the second quarter, demonstrating continued acceptance and support for increased utilization of the drug. XERAVA is a well-differentiated antibiotic that has a broad spectrum of coverage in a very reasonable and appropriate price point. As antibiotic resistant rates continue to increase and inappropriate initial empiric therapy continues to be a problem for patients, we expect XERAVA to become an increasingly important component of the antibiotic treatment arsenal for complicated intra-abdominal infections.

Our team is squarely focused on continued formulary uptake and ensuring pull-through with all health care professionals, and we are confident that sales will continue to increase.

Our launch execution strategy, as we've outlined in previous quarters, has been comprised of 2 phases. The first was targeting Tier 1 accounts, which are the highest institutional users of antibiotics defined by days of therapy and represent approximately 6% of the Gram-negative market. And the second is focusing on Tier 2 accounts, which constitutes approximately 30% of the Gram-negative market. We've now expanded this to target key Tier 3 facilities as well.

And we continue to see impressive reorder rates of 57% for XERAVA in all accounts and reorder rates as high as 70% within our Tier 1 account segment. As seen by these reorder rates, our sales force continues to make significant progress with prescribing physicians across the U.S.

XERAVA is available at more than 1,000 accounts, representing 99% acceptance rate of formulary reviews. And approximately 154 formulary reviews are pending or planned to take place by the end of the fourth quarter. Securing inclusion on hospital formularies has been a significant component of our launch strategy. The proportion of sales is steadily turning more towards accounts that have XERAVA secured on formulary. Our goal is to continue to generate demand for XERAVA, pull-through formulary wins and bring on additional new accounts.

We believe that the scope of coverage and continued frequent engagement with our top-tier accounts will deliver impressive new customer growth, which, combined with high reorder rates, will shift from a steady progress to increased traction. Our goal is now to continue to expand our customer base and to maintain progress with returning customers.

Anecdotal feedback from physicians, pharmacists and decision-makers continue to be very positive. In fact, many HCPs applaud XERAVA's broad label and high clinical cure rates in patients with multi-drug resistant pathogens, including ESBLs, Acinetobacter, methicillin-resistant Staph aureus, vancomycin-resistant enterococcus and resistant polymicrobial infections. Anecdotally, physicians also feel the ability to use XERAVA in patients with penicillin and/or beta-lactam allergies is a critical advantage, while others believe the minimal risk of C. diff developing in patients treated with a broad spectrum agent like XERAVA is a major asset. Most physicians believe that XERAVA is a logical alternative to carbapenems and other beta lactams for patients with complicated intra-abdominal infection.

Physicians also appreciate that XERAVA does not require dose adjustments for patients with renal impairment, which they recognize as a key factor for usage in patients in the ICU and in elderly patients with renal insufficiency.

We feel like we've made significant progress this quarter, and we're proud of the progress to date, all without having a J code or an APC code, both of which were approved on October 1 of this year. These codes assist with the reimbursement of XERAVA for use by hospital and nonhospital prescribers.

We're encouraged by the steady growth and positive feedback we continue to receive from health care providers and thought leaders who not only value the clinical benefits of XERAVA, but also appreciate our appropriate empiric pricing strategy.

Behind the increased adoption of XERAVA is the dedication and persistence of our tenured field sales and medical teams. They continue to stay focused on key accounts, educating health care professionals and providing tools that show benefits of XERAVA for patients.

As announced back in August, the U.S. government agency, CMS, implemented several significant changes to hospital antibiotic reimbursement, which became effective October 1, 2019. The changes are part of a rule known as the IPPS full year 2020 final rule, which will hopefully help level the playing field so clinicians can choose the most appropriate antibiotic for their hospitalized patients without the fear of hurting the hospitals' finances, and we hope it will be additional incentive for clinicians to consider XERAVA when treating patients.

There's a clear unmet need for nonbeta lactam agents that can cover resistant pathogens to potentially improve patient outcomes. Greater than 80% of antibiotics used to treat complicated intra-abdominal infections are beta lactams, and resistance continues to increase due to selective pressures put on this class. With XERAVA, health care professionals now have an additional option.

Underscoring our progress with XERAVA is the recently strengthened balance sheet, which Chris will go in more detail. Chris?

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Christopher Watt, Tetraphase Pharmaceuticals, Inc. - Senior VP of Finance & Treasurer [4]

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Thanks, Larry. As of September 30, 2019, Tetraphase had cash and cash equivalents of $24.5 million and 2.7 million shares outstanding.

Earlier this month, we completed an $8 million equity financing with a health care-focused institutional investor, bolstering our resources and increasing our cash runway into the third quarter of 2020.

Now turning to the quarterly results. For the third quarter of 2019, Tetraphase reported a net loss of $16.3 million or $6 per share compared to a net loss of $19.6 million or $7.39 per share for the same period in 2018.

Total revenues were $3.3 million for the third quarter of 2019 compared to $1.2 million for the same period in 2018. Total revenues for the third quarter of 2019 consisted of XERAVA product revenue of $1 million as well as government contract revenue of $0.4 million and a territory extension upfront payment from Everest Medicines of $2 million.

Research and development, or R&D, expenses for the third quarter of 2019 were $5.3 million compared to $11.7 million for the same period in 2018. The decrease in R&D expenses for the third quarter compared to the same prior year period was primarily due to a decrease in activity across all of our pipeline programs versus the prior year.

Selling, general and administrative, or SG&A, expenses for the third quarter of 2019 were $11.4 million compared to $9.5 million for the same period in 2018. The increase in SG&A expenses for the third quarter compared to the same prior year period was primarily due to an increase in commercial-related expenses for XERAVA. Additional details on our financial performance for the third quarter may be found in our press release issued earlier today.

I'll now turn the call back over to Larry for closing remarks.

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Larry G. Edwards, Tetraphase Pharmaceuticals, Inc. - CEO, President & Director [5]

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Thanks, Chris. In closing, we're pleased to see the key XERAVA launch metrics continuing to trend in the right direction, and we believe we have the financial resources and dedicated team in place to bring this important new antibiotic to patients in need. We're grateful for your support, and we look forward to providing future updates.

With that, we can now turn the call over 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 & Company.

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Joseph Robert Stringer, Needham & Company, LLC, Research Division - Associate [2]

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This is Joey on for Alan. A couple of them. First, can you give us a breakdown in terms of the prescriptions, a breakdown of inpatient versus home health and long-term care? And I have a follow-up to that.

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Larry G. Edwards, Tetraphase Pharmaceuticals, Inc. - CEO, President & Director [3]

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Yes, sure. So this is Larry. So looking at Q3, our breakdown was roughly about 75% for the hospital, about 5% for the long-term care and about 20% for the home health/infusion centers.

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Joseph Robert Stringer, Needham & Company, LLC, Research Division - Associate [4]

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Okay. And in terms of ex U.S. partnerships and strategy there, maybe you can give us an update on what your current thinking is?

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Larry G. Edwards, Tetraphase Pharmaceuticals, Inc. - CEO, President & Director [5]

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Yes. So I mean, all along, I think we originally thought we were going to go into the EU on our own, so we've shifted and made some changes with reorganization and said that we're divesting our pipeline assets and now also looking to out-license this in the EU and other areas. So we're midway along in some discussions outside of the EU. So looking at ROW minus the Asia Pacific area, which we currently have a collaboration with Everest on. And we're early discussion for the EU. We were trying to find the EU on its totality, but we're finding that we're probably going to have to break that up and be more specific into maybe the big 5 and then look to partner for other regions as well.

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Operator [6]

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(Operator Instructions) There are no further questions at this time. Please continue.

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