You should read the following discussion and analysis of our financial condition
and results of operations together with our consolidated financial statements
and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q
and our historical consolidated financial statements and the related notes
thereto appearing in our Annual Report on Form 10-K for the year ended
December 31, 2020, filed with the Securities and Exchange Commission on
March 11, 2021. Some of the information contained in this discussion and
analysis or set forth elsewhere in this Quarterly Report, including information
with respect to our plans and strategy for our business, includes
forward-looking statements that involve risks and uncertainties. These risks and
uncertainties include risks relating to the impact of the COVID-19 pandemic on
our business. As a result of many factors, including those factors set forth in
the "Risk Factors" section of this Quarterly Report, our actual results could
differ materially from the results described in or implied by the
forward-looking statements contained in the following discussion and analysis.
Overview
We are a biopharmaceutical company engaged in the commercialization and research
and development of novel anti-infective agents to treat serious infections. We
have the commercial rights to two approved products, XENLETA and SIVEXTRO, as
well as one development product candidate, CONTEPO. In August 2019, our first
product was approved by the U.S. Food and Drug Administration, or FDA, and we
made it available in the United States in September 2019 under the brand name
XENLETA. XENLETA (lefamulin) is a first-in-class semi-synthetic pleuromutilin
antibiotic for systematic administration in humans discovered and developed by
our team. It inhibits the synthesis of bacterial protein, that is required for
bacteria to grow, by binding with high affinity, high specificity and at
molecular targets that are different than other antibiotic classes. Based on
results from two global, Phase 3 clinical trials, we believe that XENLETA is
well-positioned for use as a first-line monotherapy for the treatment of CABP
due to its novel mechanism of action, targeted spectrum of activity, resistance
profile, achievement of substantial drug concentration in lung tissue and fluid,
availability of oral and intravenous, or IV, formulations and a generally
well-tolerated safety profile. We believe XENLETA represents a potentially
important new treatment option for the five million adults in the United States
diagnosed with CABP each year.
We began to market SIVEXTRO in the United States in September 2020 after
entering into a Sales Promotion and Distribution Agreement with subsidiaries of
Merck in July 2020. SIVEXTRO is approved for treatment of acute bacterial skin
and skin structure infections, or ABSSSI, caused by certain susceptible
Gram-positive microorganisms. SIVEXTRO is an oxazolidinone-class antibacterial
indicated in adults and patients 12 years of age and older for the treatment of
ABSSSI caused by susceptible isolates of the following Gram-positive
microorganisms: Staphylococcus aureus, including methicillin-resistant, or MRSA,
and methicillin-susceptible, or MSSA, isolates, Streptococcus pyogenes,
Streptococcus agalactiae, Streptococcus anginosus group (including Streptococcus
anginosus, Streptococcus intermedius and Streptococcus constellatus), and
Enterococcus faecalis. SIVEXTRO is now listed in the National Drug Code (NDC)
Directory under our label and as of April 12, 2021 we began exclusive
distribution of SIVEXTRO in the United States and certain of its territories. On
and after April 12, 2021, we began to recognize 100% of net product sales of
SIVEXTRO and related cost of product sales in our results of operations. We are
also developing CONTEPO for the treatment of complicated urinary tract
infections, or cUTIs, in the United States.
We may potentially develop XENLETA and CONTEPO for additional indications. In
September 2020, the Centers for Medicare & Medicaid Services, or CMS, granted a
new technology add-on payment, or NTAP, for XENLETA for injection, when
administered in the hospital inpatient setting. Both the intravenous, or IV and
oral formulations of XENLETA were granted Qualified Infectious Disease Product,
or QIDP, and Fast Track designation by the FDA. CONTEPO was granted an NTAP
making it the first QIDP antibiotic to be granted conditional NTAP approval
prior to receiving FDA approval. CONTEPO was granted QIDP and Fast Track
Designation by the FDA for the treatment of complicated urinary tract
infections, or cUTIs, including acute pyelonephritis. Incentives for QIDP status
include an additional five years of exclusivity, in addition to any other
exclusivity periods, as well as fast track and priority review status, for which
both XENLETA formulations and CONTEPO are eligible.
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In September 2021, Sumitomo Pharmaceuticals and we announced the approval
received by Sumitomo to market oral and intravenous formulations of XENLETA for
the treatment of community-acquired pneumonia in adults in Taiwan.
In May 2021, the Company and Sumitomo Pharmaceuticals (Suzhou) announced
positive topline results from Sumitomo Pharmaceuticals (Suzhou)'s Phase 3
clinical trial of lefamulin in Chinese adults with CABP. Sumitomo
Pharmaceuticals (Suzhou)'s multi-center, randomized, double-blind trial was
designed to evaluate the safety and efficacy of intravenous, or IV, to oral
lefamulin compared to IV/oral moxifloxacin in 125 subjects with CABP. Subjects
were randomized 2:1 to lefamulin and moxifloxacin and stratified by prior
antibiotic exposure, pneumonia severity index, or PSI, risk class and renal
impairment. Study drugs were dosed in double-dummy double-blinded fashion
(lefamulin: 150 mg IV every 12 hours, 600 mg oral every 12 hours; moxifloxacin:
400 mg IV once daily, 400 mg oral once daily). Lefamulin met the primary
endpoint of non-inferiority vs. moxifloxacin for Investigator Assessment of
Clinical Response at Test of Cure, or IACR-TOC, in the modified intent to treat,
or mITT, population, with success rates of 76.8% (n = 63/82) for lefamulin and
71.4% (n = 30/42) for moxifloxacin. This finding was consistent across
subgroups. On the key secondary endpoint of IACR-TOC in the clinically evaluable
population, success rates were 86.0% (n = 49/57) and 86.2% (n = 25/29) in the
lefamulin and moxifloxacin arms, respectively. These results are similar to
those observed in the global Phase 3 LEAP 1 and LEAP 2 clinical trials of
lefamulin conducted by the Company. Consistent with previously reported clinical
trial results, lefamulin was observed to be generally well-tolerated, with an
overall rate of treatment-emergent adverse events, or TEAEs, comparable to that
of moxifloxacin. The vast majority of TEAEs in both treatment arms were
mild-to-moderate in severity, with serious adverse events occurring in 4% of
lefamulin-treated patients and 10% of moxifloxacin-treated patients. TEAEs
leading to discontinuation were uncommon and observed in just 5% of subjects in
both treatment arms. In recognition of the rising rates of bacterial resistance
in China and because CABP is commonly associated with acute respiratory viruses
infections, including influenza and coronavirus, and based on XENLETA's robust
safety and efficacy data in the treatment of patients with CABP generated
globally and in China, Sumitomo Pharmaceuticals (Suzhou) is in active
discussions with China's National Medical Products Administration to expedite
development activities and regulatory filings for lefamulin in mainland China.
Despite the serious measures taken to control COVID-19, which significantly
impacted the treatment of bacterial pneumonia patients, enrollment in a pivotal
trial in China was completed in early February 2021. Based on the Company´s
recent discussions with Sumitomo Pharmaceuticals (Suzhou), the Company believes
that a marketing application for lefamulin in China is on track to be filed by
Sumitomo Pharmaceuticals (Suzhou) in the fourth quarter of 2021 and the expected
time for the application review is up to 24 months.
On July 28, 2020, we announced that the European Commission, or EC, issued a
legally binding decision for approval of the marketing authorization application
for XENLETA™ (lefamulin) for the treatment of community-acquired pneumonia, or
CAP, in adults following a review by the European Medicines Agency, or EMA. The
EMA approval of XENLETA in CAP patients when it is considered inappropriate to
use antibacterial agents that are commonly recommended for initial treatment or
when these agents have failed paves the way for the potential launch of XENLETA,
across the European Economic Area, or EEA, and United Kingdom, or U.K. The EC
approved XENLETA for all countries of the EEA and U.K. We intend to work with a
commercial partner to make XENLETA available to patients in the EEA and U.K.
We submitted a new drug application, or NDA, for marketing approval of CONTEPO
for the treatment of cUTI in adults in the United States, utilizing the FDA's
505(b)(2) pathway, in October 2018. The FDA has granted fast track designation
to CONTEPO under the Generating Antibiotics Incentives Now Act, or the GAIN Act.
In April 2019, the FDA issued a Complete Response Letter, or CRL, in connection
with our NDA for CONTEPO for the treatment of cUTI, including AP, stating that
is was unable to approve the application in its current form. Specifically, the
CRL requested that we address issues related to facility inspections and
manufacturing deficiencies at our API contract manufacturer. We held a "Type A"
meeting with the FDA in July 2019 to discuss its findings and resubmitted our
NDA seeking marketing approval for CONTEPO in December 2019. In June 2020, the
FDA issued a second CRL. Although our European contract manufacturing partners
were prepared for regulatory authority inspections, the second CRL cited
observations at our manufacturing partners that could not be resolved due to
FDA's inability to conduct onsite inspections because of travel restrictions. In
general, previously identified product quality and facility inspection related
observations at our contract manufacturing partners are required to be
satisfactorily resolved before the NDA may be approved. The FDA did not request
any new clinical data and did not raise any other concerns with regard to the
safety
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or efficacy of CONTEPO in the second CRL. Our contract manufacturers continue to
interact with FDA to discuss its plans for conducting inspections at their
sites. On October 30, 2020, we participated in a Type A meeting with the FDA to
obtain any new information related to the FDA's pending conduct of inspections
of foreign manufacturers during the COVID-19 pandemic that has negatively
impacted a number of FDA product reviews, including the CONTEPO NDA. On April
14, 2021, the FDA issued industry guidance on remote interactive evaluations of
drug manufacturing and bioresearch monitoring facilities during COVID-19
specifying that when it cannot perform a Pre-Approval Inspection, or PAI, or a
Pre-License Inspection, or PLI, or when the FDA determines that it would be
useful to supplement a planned inspection, the agency will consider using tools
other than a physical inspection and select the most appropriate method to
address the specific risks that justify the need for the PAI or PLI. The FDA has
accepted the Company's request for an extension of the potential CONTEPO NDA
resubmission until June 2022 and as a result, the Company is currently assessing
the impact of the guidance and awaiting further clarity from the FDA before
determining specific timing of the potential resubmission. The FDA released the
Resiliency Roadmap for FDA Inspectional Oversight that describes the systematic
approach that FDA will utilize to manage postponed inspections and other
oversight activities. The prioritization plan considers public health risks
related to conducting an inspection, such as the impact of the product's
availability on public health, as well as investigator safety and travel
restrictions/advisories. In addition, the FDA informed us that, while they
cannot predict when an inspection may occur and when the pandemic may prevent
the FDA from completing inspections, tier 1 mission-critical inspections and
tier 2 higher priority inspections, which includes pre-approval inspections,
will continue to be prioritized going forward. CONTEPO has been granted
Qualified Infectious Disease Product (QIDP) and Fast Track designations by the
FDA for the treatment of serious infections, including cUTI. However, we cannot
predict when the CONTEPO NDA will be resubmitted, or when CONTEPO would receive
marketing approval, if at all.
Since inception, we have incurred significant operating losses. As of September
30, 2021 we had an accumulated deficit of $582.6 million. To date, we have
financed our operations primarily through equity offerings, convertible and term
debt financings and research and development support from governmental grants
and proceeds from our licensing agreements. We have devoted substantially all of
our efforts to research and development, including clinical trials as well as
preparing for the commercial launch of XENLETA. Our ability to generate profits
from operations and remain profitable depends on our ability to successfully
develop and commercialize drugs that generate significant revenue.
We expect to continue to incur significant expenses and have negative cash flows
for at least the next several years. Our expenses will increase if we suffer any
regulatory delays or are required to conduct additional clinical trials to
satisfy regulatory requirements. If we obtain marketing approval for CONTEPO or
any other product candidate that we develop, in-license or acquire, we expect to
incur significant commercialization expenses related to product sales,
marketing, distribution and manufacturing. In light of the COVID-19 pandemic, a
substantial decrease of non-COVID-19 respiratory infections, the associated
disruption to the healthcare delivery and the uncertainty of resuming full
direct physician promotion, the timing and amount of sales of XENLETA, SIVEXTRO
or any product candidates are uncertain. Based on our current forecasts and
plans, we will need to obtain substantial additional funding in connection with
our continuing operations. Adequate additional capital may not be available to
us on acceptable terms, or at all. If we are unable to raise capital when needed
or on attractive terms, we could be forced to delay, reduce or eliminate our
research and development programs and commercialization efforts.
Market conditions for antibiotic companies continue to be challenging. The cost
of capital has risen significantly for others and us. On December 20, 2019, we
issued 1,379,310 ordinary shares and accompanying warrants to purchase up to an
aggregate of 1,379,310 ordinary shares. Each share was issued and sold together
with an accompanying warrant at a combined price of $14.50 per security, that
generated gross proceeds of $20.0 million and $18.3 million net, after deducting
the placement agent's fees and offering expenses. On May 29, 2020, we issued in
a registered direct offering an aggregate of 4,144,537 ordinary shares with
4,144,537 warrants at a combined price of $9.1686 per security. The proceeds to
us from the offering were $38.0 million gross and $35.2 million net, after
deducting the placement agent's fees and offering expenses. Each warrant was
immediately exercisable and will expire on the two-year anniversary of the
exercise date. On December 10, 2020, we completed a registered public offering
in which we sold 6,000,000 ordinary shares. Each share was issued and sold at a
public offering price of $2.50. The proceeds to us from the offering were $15.0
million gross and $13.3 million net, after deducting the placement agent's fees
and offering expenses. On March 1, 2021, we entered into a securities purchase
agreement with certain institutional
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investors pursuant to which we agreed to issue and sell in a registered direct
offering (1) an aggregate of 9,761,010 ordinary shares, $0.01 nominal value per
share, and accompanying warrants to purchase up to an aggregate of 4,880,505
ordinary shares and (2) pre-funded warrants to purchase up to an aggregate of
600,000 ordinary shares and accompanying ordinary share warrants to purchase up
to an aggregate of 300,000 ordinary shares. Each share was issued and sold
together with an accompanying ordinary share warrant at a combined price of
$2.4525, and each pre-funded warrant was issued and sold together with an
accompanying ordinary share warrant at a combined price of $2.4425. The proceeds
to us from the offering were $25.4 million gross and $23.4 million net after
deducting the placement agent's fees and estimated offering expenses. Each
pre-funded warrant had an exercise price per ordinary share equal to $0.01 and
each pre-funded warrant was exercised in full on the issuance date. Each
ordinary share warrant has an exercise price per ordinary share equal to $2.39,
was exercisable on the date of issuance and will expire on the five-year
anniversary of the date of issuance.
Business Update Regarding COVID-19
On March 11, 2020, the World Health Organization declared the outbreak of
COVID-19 as a pandemic. The outbreak had an impact on the global economy,
resulting in rapidly changing market and economic conditions. National and local
governments around the world instituted certain measures, including travel bans,
prohibitions on group events and gatherings, shutdowns of certain non-essential
businesses, curfews, shelter-in-place orders and recommendations to practice
social distancing. The COVID-19 pandemic has presented a substantial public
health and economic challenge around the world and is affecting our employees,
communities and business operations, as well as the U.S. economy and financial
markets.
The extent of the impact of COVID-19 on our business will depend on the length
and severity of the pandemic, including the extent there is any resurgence of
the COVID-19 virus or any variant strains of the virus, the availability and
effectiveness of vaccines and the impact of the foregoing on our business. The
full extent to which the COVID-19 pandemic will continue to directly or
indirectly impact our business, results of operations and financial condition
will depend on future developments that are highly uncertain and cannot be
accurately predicted. The full impact of COVID-19 is unknown and may continue as
the rates of infection have increased in many states in the U.S., thus
additional restrictive measures may be necessary. Federal, state and local
governmental policies and initiatives designed to reduce the transmission of
COVID-19 have resulted in, among other things, a significant reduction in
physician office visits, the cancellation of elective medical procedures, and
the adoption of work-from-home policies, all of which have had, and we believe
will continue to have, an impact on our consolidated results of operations,
financial position and cash flows.
In response to the COVID-19 pandemic, we closed our administrative offices and
shifted to a remote working business model. We have implemented a work-from-home
policy for all of our employees, and we may take further actions that alter our
operations as may be required by federal, state, or local authorities, or which
we determine are in our best interests. The commercial and medical organizations
suspended in-person interactions with physicians and customers and were
restricted to conducting educational and promotional activities virtually. The
impact of the COVID-19 pandemic could continue to have a material adverse effect
on our business, results of operations, financial condition, liquidity and
prospects in the near-term and beyond 2021. While we have used all currently
available information in our forecasts, the ultimate impact of the COVID-19
pandemic and our product sales for XENLETA and SIVEXTRO, on our results of
operations, financial condition and cash flows is highly uncertain, and cannot
currently be accurately predicted. According to the Centers for Disease Control
and Prevention, or CDC, there have been lower incidences of influenza-like
illness cases within the United States from a median of 49,696 per week during
the period of September 2019 through February 2020, to 19,537 during the period
of March through May 2020, which are largely responsible for the seasonality
observed with community-acquired bacterial pneumonia and which lead to the
decrease in bacterial respiratory tract infection rates, indicated by the
decrease in the number of physician office visits, hospitalizations and
antibiotic prescriptions. Data from clinical laboratories in the United States
indicated a 61% decrease in the number of specimens submitted and a 98% decrease
in influenza activity as measured by percentage of submitted specimens testing
positive. Our results of operations, financial condition and cash flows are
dependent on future developments, including the duration of the pandemic and the
related length of its impact on the global economy, such as a lengthy or severe
recession or any other negative trend in the U.S. or global economy and any new
information that may emerge concerning the COVID-19 outbreak and the actions to
contain it or treat its impact, which at the present time are highly uncertain
and cannot be predicted with any accuracy.
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COVID-19 has demonstrated the devastating impact that infectious diseases can
have on public health and the economy. Similar to other acute respiratory virus
infections, including influenza virus, patients infected with SARS-CoV-2 are at
increased risk of developing concomitant bacterial pneumonia. In published
reports, bacterial pneumonia has been shown to affect nearly 50% of hospitalized
patients with COVID-19, with an associated mortality of almost 50%. As a result,
the World Health Organization currently recommends empiric antimicrobials to
treat all likely pathogens causing severe acute respiratory infections and
sepsis as soon as possible in patients with COVID-19.
SIVEXTRO is approved for the treatment of acute bacterial skin and skin
structure infections, or ABSSSIs, caused by certain susceptible Gram-positive
microorganisms. Before we were permitted to sell SIVEXTRO under the Distribution
Agreement, we were required to secure a sales force of a certain size and the
restrictions related to COVID-19 must be eased in a sufficient manner to permit
us to promote and distribute SIVEXTRO. Re-securing a sales force of a certain
size for the promotion and distribution of SIVEXTRO will result in significant
additional expense and our efforts to secure a sales force may not be
successful. We have secured a virtual and in-person sales effort with
community-based expertise with Amplity Health, which is a Contract Sales
Organization, to replace our hospital-based sale force and began a small and
focused sales effort for SIVEXTRO and XENLETA in September 2020. We expanded
this effort to 60 sales representatives and may expand it further. We also
piloted a virtual promotion effort with incremental sales representatives in the
third quarter of 2021.
XENLETA is approved for the treatment of CABP in adults in the United States. In
addition to XENLETA's potential role in treating COVID-19 patients with
superimposed bacterial pneumonia, we are assessing the anti-inflammatory
activity of XENLETA and what role, if any, these characteristics may play in the
management of patients with COVID-19. The National Institute for Allergy and
Infectious Diseases, or NIAID, has identified that secondary bacterial pneumonia
caused by common upper respiratory tract bacteria plays a predominant role in
the cause of death in pandemic influenza. NIAID recommends that the prevention,
diagnosis, prophylaxis, and treatment of secondary bacterial pneumonia, as well
as the stockpiling of antibiotics and bacterial vaccines, be high priorities for
pandemic planning. We believe there is a potential for XENLETA to be considered
for U.S. government stockpiling for pandemic preparedness.
CONTEPO (fosfomycin for injection) is a potentially first-in-class epoxide IV
antibiotic in the United States with a broad spectrum of bactericidal
Gram-negative and Gram-positive activity, including activity against many
contemporary multi-drug resistant, or MDR, strains that threaten hospitalized
patients. IV fosfomycin has an extensive commercial history in markets outside
the United States, where it has been used broadly for over 45 years to treat a
variety of indications, including cUTIs, bacteremia, pneumonia and skin
infections. CONTEPO inhibits the bacteria's ability to form a cell wall, which
is critical for the cell's survival and growth. It works at an earlier and
different stage of cell wall synthesis than other injectable antibiotics,
differentiating its mechanism of action from approved injectable antibiotics.
CONTEPO utilizes a dosing approach developed for the United States that is
designed to optimize the product candidate's pharmacokinetics and
pharmacodynamics in order to improve treatment outcomes. The CONTEPO development
program has focused on obtaining marketing approval in the United States for the
treatment of cUTIs, including AP.
Two ongoing pediatric Phase 1 clinical trials for lefamulin and IV fosfomycin
were temporarily closed for enrollment as hospitals suspended access and
non-essential clinical research to focus on health care delivery to COVID-19
patients. As of July 2020, both trials started to re-open, where allowed by the
institution, and initiated screening of potential subjects at sites.
In collaboration with the Global Antibiotic Research & Development Partnership,
we are assessing XENLETA for the treatment of sexually transmitted infections,
including N. gonorrhoeae, C. trachomatis, and M. genitalium. In preclinical
studies, XENLETA has been shown to possess potent in vitro activity against all
three of these organisms, which is maintained in the presence of resistance to
all standard of care treatment options (aminoglycoside, cephalosporin,
fluoroquinolone, macrolide, penicillin, and tetracycline antibiotic classes).
Importantly, XENLETA has been shown to be bactericidal in vitro against both N.
gonorrhoeae and M. genitalium.
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Financial Operations Overview
Revenue
In September 2019 we had our commercial launch of XENLETA and in April 2021 we
began exclusive distribution of SIVEXTRO in the United States and certain of its
territories. For the nine months ended September 30, 2021, we recorded $15.6
million of SIVEXTRO product revenue, net of gross-to-net accruals and
adjustments for returns, and negative $0.7 million of XENLETA product revenue,
net of gross-to-net accruals and adjustments for returns. Our distribution
partners continue to primarily utilize their existing inventory from the initial
launch to satisfy product demand for XENLETA, which in turn impacted sales in
the first nine months of 2021. Given the fact that the launch lot inventory had
36 month dating, and has a near term shelf life expiration, we recorded a $1.2
million returns reserve adjustment in the third quarter of 2021. We are planning
to launch a new 10-count blister pack of XENLETA in the fourth quarter of 2021,
which will have four year dating for expiry. Future product revenues will be
generated by the amount and frequency of reorders from our wholesale customers
based on the ultimate consumption patterns from the end users of XENLETA and
SIVEXTRO.
Collaboration revenues for the nine months ended September 30, 2021 included
$2.2 million related to the restructured China Region License Agreement, a
portion of which is recognized over the estimated period the manufacturing
collaboration and regulatory support will be provided to Sumitomo
Pharmaceuticals (Suzhou), as well as $1.2 million of our share of revenues
through April 11, 2021 associated with the SIVEXTRO distribution agreement with
Merck & Co., Inc. which commenced at the end of September 2020.
Our revenues for the nine months ended September 30, 2021 included governmental
research premiums, non-refundable government grants, collaboration revenues
and the benefit of government loans at below-market interest rates, which are
more fully described below under "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Critical Accounting Policies" in
our Annual Report on Form 10-K for the year ended December 31, 2020.
Cost of Revenues
Cost of revenues represented 14.3% and 0.8% of our total operating expenses for
the nine months ended September 30, 2021 and 2020, respectively. Cost of
revenues primarily represent the cost of the product itself, labor and overhead,
and any reserve for excess or obsolete inventory. Other cost of revenues include
costs associated with the manufacturing collaboration and regulatory support
under our licensing agreements.
Research and Development Expenses
Research and development expenses represented 18.5% and 24.3% of our total
operating expenses for the nine months ended September 30, 2021 and 2020,
respectively.
For each of our research and development programs, we incur both direct and
indirect expenses. Direct expenses include third-party expenses related to these
programs such as expenses for manufacturing services (prior to our products
receiving FDA approval, after which time these costs are capitalized in
inventory until product is sold), non-clinical and clinical studies and other
third party development services. Indirect expenses include salaries and related
costs, including stock-based compensation, for personnel in research and
development functions, infrastructure costs allocated to research and
development operations, costs associated with obtaining and maintaining
intellectual property associated with our research and development operations,
laboratory consumables, consulting fees related to research and development
activities and other overhead costs. We utilize our research and development
staff and infrastructure resources across multiple programs, and many of our
indirect costs historically have not been specifically attributable to a single
program. Accordingly, we cannot state precisely our total indirect costs
incurred on a program-by-program basis.
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The following table summarizes our direct research and development expenses by
program and our indirect costs.
Nine Months Ended September 30,
(in thousands) 2021 2020
Direct Costs
XENLETA $ 2,060 $ 1,715
CONTEPO 245 614
Other programs and initiatives 1,115 774
Indirect Costs 6,819 9,158
Total $ 10,239 $ 12,261We expect to continue to incur research and development expenses in connection
with required regulatory activities, our activities related to our ongoing
pediatric studies of lefamulin for the treatment of CABP and of CONTEPO for the
treatment of cUTI, and may incur costs related to the pursuit of the clinical
development of lefamulin and CONTEPO for additional indications including the
treatment of resistant bacterial infections in patients with cystic fibrosis and
engagement in earlier stage research and development activities. We anticipate
initiating a Phase 1 clinical trial of XENLETA for the treatment of resistant
bacterial infections in patients with cystic fibrosis, or CF, before the end of
the first quarter of 2022. Given the ongoing COVD-19 pandemic and the high risk
it puts CF patients under, it is difficult to estimate recruitment timelines at
this time. It is difficult to estimate the duration and completion costs of our
research and development programs.
The successful development and commercialization of our product candidates is
highly uncertain. This is due to the numerous risks and uncertainties associated
with product development and commercialization, including the uncertainty of:
the efficacy and potential advantages of our product candidates compared to
? alternative treatments, including any standard of care, and our ability to
achieve market acceptance for any of our product candidates that receive
marketing approval;
the costs and timing of commercialization activities, including product sales,
? marketing, distribution and manufacturing, for any of our product candidates
that receive marketing approval;
? the costs, timing and outcome of regulatory review of our product candidates;
? the scope, progress, costs and results of clinical trials and other research
and development activities; and
the costs and timing of preparing, filing and prosecuting patent applications,
? maintaining, enforcing and protecting our intellectual property rights and
defending against any intellectual property-related claims.
A change in the outcome of any of these variables with respect to the
development of our product candidates could result in a significant change in
the costs and timing associated with the development of that product candidate.
For example, if the FDA or another regulatory authority were to require us to
conduct clinical trials or other testing beyond those that we have completed or
currently contemplate will be required for the completion of clinical
development of any product candidate, we could be required to expend significant
additional resources and time on the completion of clinical development of that
product candidate.
Selling, General and Administrative Expenses
Selling, general and administrative expenses represented 67.2% and 74.9% of our
total operating expenses for the nine months ended September 30, 2021 and 2020,
respectively.
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Selling, general and administrative expenses consist primarily of salaries and
related costs, including stock-based compensation not related to research and
development activities for personnel in our finance, information technology,
commercial, medical affairs and administrative functions, as well as costs
related to our contract commercial organization, to provide community-based
commercial and sales services. Selling, general and administrative expenses also
include costs related to professional fees for auditors, lawyers and tax
advisors and consulting fees not related to research and development operations,
as well as functions that are partly or fully outsourced by us, such as
accounting, payroll processing and information technology.
We expect selling, general and administrative expenses to increase in 2021
compared to 2020 primarily due to incurring a full year of expense for a
commercial sales effort for the commercialization of XENLETA and SIVEXTRO.
Critical Accounting Policies
Our consolidated financial statements are prepared in accordance with U.S.
generally accepted accounting principles. The preparation of our financial
statements and related disclosures requires us to make estimates, assumptions
and judgments that affect the reported amount of assets, liabilities, revenue,
costs and expenses, and related disclosures. Our critical accounting policies
are described under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Critical Accounting Policies" in
our Annual Report on Form 10-K for the year ended December 31, 2020. During the
nine months ended September 30, 2021, there were no material changes to our
critical accounting policies.
Results of Operations
Comparison of Three Months Ended September 30, 2021 and 2020
Three Months Ended September 30,
(in thousands) 2021 2020 Change
Consolidated operations data:
Product revenue, net $ 7,858 $ (47) $ 7,905
Collaboration revenue 562 616 (54)
Research premium and grant revenue 442 722 (280)
Total revenue 8,862 1,291 7,571
Costs and expenses:
Cost of revenues (4,199) (25) (4,174)
Research and development expenses (3,221) (3,486) 265
Selling, general and administrative
expenses (12,256) (10,997) (1,259)
Total operating expenses (19,676) (14,508) (5,168)
Loss from operations (10,814) (13,217) 2,403
Other income (expense):
Other income (expense), net 131 450 (319)
Interest income (expense), net (221) (256) 35
Loss before income taxes (10,904) (13,023) 2,119
Income tax benefit 252 72 180
Net loss $ (10,652) $ (12,951) $ 2,299
Revenues
Revenues for the three months ended September 30, 2021 were $8.9 million
compared to $1.3 million for the three months ended September 30, 2020. The $7.6
million increase is primarily due to an increase in product revenue, net of
which $8.7 million was driven by SIVEXTRO revenues.
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Cost of Revenues
Cost of revenues for the three months ended September 30, 2021 was $4.2 million
compared to $25,000 for the three months ended September 30, 2020. The $4.2
million increase was primarily due to the launch of our own SIVEXTRO NDC on
April 12, 2021. Cost of revenues for XENLETA primarily represents direct and
indirect manufacturing costs, while cost of product sales for SIVEXTRO represent
the actual purchase cost for the finished product from Merck. Prior to the FDA
approval of XENLETA on August 19, 2019, the inventory costs for the product were
expensed as research and development expenses since the approval was outside of
our control and therefore not considered probable. As such, the majority of the
expenses incurred for our initial inventories of XENLETA has been previously
expensed. As a result, we anticipate that our cost of revenues for XENLETA will
remain at relatively low levels for a period of time until our initial
pre-launch inventory stock has been distributed by our customers based on end
user consumption demand.
Research and Development Expenses
Research and development expenses for the three months ended September 30, 2021
were $3.2 million compared to $3.5 million for the three months ended September
30, 2020. The $0.3 million decrease was primarily due to a $0.2 million decrease
in stock-based compensation expense, and a $0.3 million decrease in staff costs,
partly offset by a $0.2 million increase in research materials and purchased
services.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended
September 30, 2021 were $12.3 million compared to $11.0 million for the three
months ended September 30, 2020. The $1.3 million increase was primarily due to
a $2.4 million increase in advisory and external consultancy expenses primarily
related to commercialization activities and professional service fees for the
relaunch of XENLETA and SIVEXTRO, partly offset by a $1.0 million decrease in
professional fees.
Other Income (Expense), net
Other income (expense), net, decreased by $0.3 million for the three months
ended September 30, 2021 primarily due to remeasurements of our foreign currency
account balances.
Interest Income (Expense), net
Interest income (expense), net was $0.2 million for the three months ended
September 30, 2021 compared to $0.3 million for the three months ended September
30, 2020.
Income Tax Benefit
Our income tax benefit for the three months ended September 30, 2021 was $0.3
million compared to an income tax benefit of $0.1 million for the three months
ended September 30, 2020.
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Comparison of Nine Months Ended September 30, 2021 and 2020
Nine Months Ended September 30,
(in thousands) 2021 2020 Change
Consolidated operations data:
Product revenue, net $ 14,928 $ 61 $ 14,867
Collaboration revenue 3,377 768 2,609
Research premium and grant revenue 1,329 1,738 (409)
Total revenue 19,634 2,567 17,067
Costs and expenses:
Cost of revenues (7,882) (401) (7,481)
Research and development expenses (10,239) (12,261) 2,022
Selling, general and administrative
expenses (37,157) (37,763) 606
Total operating expenses (55,278) (50,425) (4,853)
Loss from operations (35,644) (47,858) 12,214
Other income (expense):
Other income (expense), net 479 614 (135)
Interest income (expense), net (678) (1,451) 773
Loss on extinguishment of debt - (2,757) 2,757
Loss before income taxes (35,843) (51,452) 15,609
Income tax expense (544) (199) (345)
Net loss $ (36,387) $ (51,651) $ 15,264
Revenues
Revenues for the nine months ended September 30, 2021 were $19.6 million
compared to $2.6 million for the nine months ended September 30, 2020. The $17.1
million increase is primarily due to a $14.9 million increase in product
revenue, net driven by SIVEXTRO, as well as an increase of $2.6 million of
collaboration revenues for the nine months ended September 30, 2021, which
includes $2.2 million related to the restructured China Region License
Agreement, a portion of which is recognized over the estimated period the
manufacturing collaboration and regulatory support will be provided to the
contract counterparty, as well as $1.2 million of our share of revenues
associated with the SIVEXTRO distribution agreement.
Cost of Revenues
Cost of revenues for the nine months ended September 30, 2021 was $7.9 million
compared to $0.4 million for the nine months ended September 30, 2020. The $7.5
million increase was primarily due to the launch of our own SIVEXTRO NDC on
April 12, 2021. Cost of revenues for XENLETA primarily represents direct and
indirect manufacturing costs, while cost of product sales for SIVEXTRO represent
the actual purchase cost for the finished product from Merck. Prior to the FDA
approval of XENLETA on August 19, 2019, the inventory costs for the product were
expensed as research and development expenses since the approval was outside of
our control and therefore not considered probable. As such, the majority of the
expenses incurred for our initial inventories of XENLETA has been previously
expensed. As a result, we anticipate that our cost of revenues for XENLETA will
remain at relatively low levels for a period of time until our initial
pre-launch inventory stock has been distributed by our customers based on end
user consumption demand. For the nine months ended September 30, 2021, changes
to our non-cash reserve for excess and obsolete inventory due to the uncertainty
of commercial activities underlying XENLETA sales were $0.2 million.
Research and Development Expenses
Research and development expenses for the nine months ended September 30, 2021
were $10.2 million compared to $12.3 million for the nine months ended September
30, 2020. The $2.0 million decrease was primarily due to a $0.6 million decrease
in stock-based compensation expense, a $1.3 million decrease in staff costs and
a $0.2 million decrease in research materials and purchased services.
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Selling, General and Administrative Expenses
Selling, general and administrative expense for the nine months ended September
30, 2021 were $37.2 million compared to $37.8 million for the nine months ended
September 30, 2020. The $0.6 million decrease was primarily due to a $5.8
million decrease in staff costs due to the reduction of headcount, a $1.1
million decrease in stock-based compensation expense, a $0.7 million decrease in
travel costs, and a $2.3 million decrease in professional fees, partly offset by
a $9.3 million increase in advisory and external consultancy expenses primarily
related to commercialization activities and professional service fees for the
relaunch of XENLETA and SIVEXTRO.
Other Income (Expense), net
Other income (expense), net, decreased by $0.1 million for the nine months ended
September 30, 2021 primarily due to remeasurements of our foreign currency
account balances.
Interest Income (Expense), net
Interest income (expense), net decreased by $0.8 million due the repayment of
indebtedness under our Loan Agreement with Hercules in March 2020. See Note 6 to
the unaudited consolidated financial statements included elsewhere in this Form
10-Q for further information.
Loss on Extinguishment of Debt
In connection with the third amendment to our Loan Agreement with Hercules, we
recognized a non-cash $2.8 million loss on the extinguishment of debt during the
nine months ended September 30, 2020, which represents the excess of the
reacquisition price of the $30.0 million debt repaid over the net carrying
amount of the extinguished debt.
Income Tax Expense
Our income tax expense for the nine months ended September 30, 2021 was $0.5
million compared to $0.2 million for the nine months ended September 30, 2020.
The $0.3 million increase was driven by gross profit from SIVEXTRO resulting in
taxable U.S. income.
Liquidity and Capital Resources
Under Irish law, our board of directors may issue new ordinary or preferred
shares up to a maximum amount equal to the authorized but unissued share
capital, without shareholder approval, once authorized to do so by our articles
of association or by an ordinary resolution of our shareholders. Additionally,
subject to specified exceptions, Irish law grants statutory preemption rights to
existing shareholders where shares are being issued for cash consideration but
allows shareholders to disapply such statutory preemption rights either in our
articles of association or by way of special resolution. Such disapplication can
either be generally applicable or be in respect of a particular allotment of
shares. Accordingly, our articles of association contain, as permitted by Irish
company law, provisions authorizing our board of directors to issue new shares,
and to disapply statutory preemption rights. The authorization of our board of
directors to issue shares and the disapplication of statutory preemption rights
must both be renewed by the shareholders at least every five years.
We asked our shareholders to renew the authorization of our board of directors
to issue shares and the disapplication of statutory preemption rights at our
2021 Annual General Meeting of Shareholders, or the 2021 Annual Meeting, and to
extend that authorization to the increase in authorized share capital that was
approved by our shareholders at the 2021 Annual Meeting. Our shareholders
renewed the authorization of our board of directors to issue shares; however,
although we received over 67% support of the votes cast on renewing the
pre-emption rights opt-out authority, we did not receive the affirmative vote of
at least 75% of the votes cast as required under Irish law for the passing of
special resolutions.
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If our shareholders do not approve the dis-application of statutory pre-emption
rights, our board of director's existing authority to opt out of the statutory
pre-emption right up to the amount of our authorized but unissued share capital
(excluding the increase in authorized share capital that was approved at the
2021 Annual Meeting) will continue to apply only until June 23, 2022. This would
limit us to having the ability to issue for cash only 32,508,794 ordinary
shares, based on the amount of authorized ordinary shares unissued or unreserved
and therefore available for issuance as of September 30, 2021 (excluding the
increase in authorized share capital that was approved at the 2021 Annual
Meeting), up to June 23, 2022. Furthermore, absent shareholder approval of the
dis-application of statutory pre-emption rights, the additional authorized but
unissued shares that were approved at the 2021 Annual Meeting that we propose to
issue for cash will also first have to be offered to all of our existing
shareholders on the same or more favorable terms on a pro-rata basis. As a
result of this limitation, we are currently limited in the amount of ordinary
shares we may sell in any capital raising transaction, and where we propose to
issue shares for cash consideration, we may be required to first offer those
shares to all of our existing shareholders in a time-consuming pro-rata rights
offering. In the event we are not able to obtain such shareholder approval of
the disapplication of pre-emption rights, we will continue to be limited in the
amount of ordinary shares we may sell in any capital raising transaction without
first offering those shares to all of our existing shareholders.
Since our inception, we have incurred net losses and generated negative cash
flows from our operations. To date, we have financed our operations through the
sale of equity securities, convertible and term debt financings, research and
development support from governmental grants and loans and proceeds from
licensing agreements. As of September 30, 2021, we had cash and cash
equivalents, restricted cash and short-term investments of $52.2 million. We
will need to obtain substantial additional funding to achieve our business
objectives. If we are unable to raise additional funds when needed, including
through the sale of our ordinary shares for cash, we may be unable to pursue our
business plans and strategy, and we may be required to delay, limit, reduce or
terminate our product development or commercialization efforts or grant rights
to develop and market product candidates that we would otherwise prefer to
develop and market ourselves. Additionally, our inability to raise funds when
needed may cause investors to lose confidence in us and raise substantial doubt
about our ability to continue as a going concern, which may cause our share
price to decline. Therefore, we believe obtaining shareholder approval of the
pre-emption rights dis-application proposal is critical to our ability to
continue to fund our operations and achieve our business objectives.
In September 2021, we entered into a purchase agreement, or Purchase Agreement,
with Lincoln Park Capital Fund, LLC, or Lincoln Park, which, subject to the
terms and conditions, provides that we have the right to sell to Lincoln Park
and Lincoln Park is obligated to purchase up to $23.0 million of our ordinary
shares. In addition, under the Purchase Agreement, we agreed to issue a
commitment fee of 632,474 ordinary shares, or the Commitment Shares, as
consideration for Lincoln Park entering into the Purchase Agreement and for the
payment of $0.01 per Commitment Share. Under the Purchase Agreement, we may from
time to time, at our discretion, direct Lincoln Park to purchase on any single
business day, or a Regular Purchase, up to (i) 400,000 ordinary shares if the
closing sale price of our ordinary shares is not below $0.25 per share on
Nasdaq, (ii) 600,000 ordinary shares if the closing sale price of our ordinary
shares is not below $2.00 per share on Nasdaq or (iii) 800,000 ordinary shares
if the closing sale price of our ordinary shares is not below $3.00 per share on
Nasdaq. In addition to Regular Purchases, we may also direct Lincoln Park to
purchase other amounts as accelerated purchases or as additional accelerated
purchases on the terms and subject to the conditions set forth in the Purchase
Agreement. In any case, Lincoln Park's commitment in any single Regular Purchase
may not exceed $2.5 million absent a mutual agreement to increase such amount.
In March 2021, we entered into a securities purchase agreement with certain
institutional investors pursuant to which we agreed to issue and sell in a
registered direct offering (1) an aggregate of 9,761,010 ordinary shares, $0.01
nominal value per share, and accompanying warrants to purchase up to an
aggregate of 4,880,505 ordinary shares and (2) pre-funded warrants to purchase
up to an aggregate of 600,000 ordinary shares and accompanying ordinary share
warrants to purchase up to an aggregate of 300,000 ordinary shares. Each share
was issued and sold together with an accompanying ordinary share warrant at a
combined price of $2.4525, and each pre-funded warrant was issued and sold
together with an accompanying ordinary share warrant at a combined price of
$2.4425. The proceeds to us from the offering were $25.4 million gross and $23.4
million net after deducting the placement agent's fees and estimated offering
expenses. Each pre-funded warrant had an exercise price per ordinary share equal
to $0.01 and each pre-funded warrant was exercised in full on the issuance date.
Each ordinary share warrant has an exercise price per ordinary share
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equal to $2.39, was exercisable on the date of issuance and will expire on the
five-year anniversary of the date of issuance.
In December 2020, we completed a registered public offering in which we sold
6,000,000 ordinary shares at a public offering price of $2.50. The proceeds to
us from the offering were $15.0 million gross and $13.3 million net, after
deducting the placement agent's fees and offering expenses.
In June 2019, we entered into an Open Market Sale AgreementSM, or the Jefferies
ATM Agreement, with Jefferies, pursuant to which, from time to time, we may
offer and sell ordinary shares, for aggregate gross sale proceeds of up to $50.0
million through Jefferies by any method permitted that is deemed an "at the
market offering" as defined in Rule 415(a)(4) promulgated under the Securities
Act of 1933, as amended.
In May 2021, we entered into an Open Market Sale AgreementSM, or the New Sale
Agreement, with Jefferies, as agent, pursuant to which we may offer and sell
ordinary shares for aggregate gross sale proceeds of up to $50.0 million, from
time to time through Jefferies, by any method permitted that is deemed an "at
the market offering" as defined in Rule 415(a)(4) promulgated under the
Securities Act of 1933, as amended. Upon entry into the New Sale Agreement, our
existing Jefferies ATM Agreement was terminated. We did not incur any
termination penalties as a result of the replacement of the Jefferies ATM
Agreement. As of the effective date of the termination of the Jefferies ATM
Agreement, we had sold an aggregate of 5,925,699 of our ordinary shares pursuant
to the Jefferies ATM Agreement for aggregate gross proceeds of $33.7 million and
net proceeds to us of $31.9 million, after deducting commissions and offering
expenses payable by us. The $16.3 million of ordinary shares that had been
available for sale pursuant to the Jefferies ATM Agreement remained unsold at
the time of its replacement. The replacement of the Jefferies ATM Agreement
terminated any future sales of ordinary shares through the Jefferies ATM
Agreement.
As of September 30, 2021, we have issued and sold an aggregate of 18,232,689
ordinary shares pursuant to the New Sale Agreement and received gross proceeds
of $30.5 million and net proceeds of $29.3 million, after deducting commissions
to Jefferies and other offering expenses. From October 1, 2021 and through the
date of this filing, we did not sell any shares under the New Sale Agreement. As
of the date of this filing, we may issue and sell ordinary shares for gross
proceeds of up to $19.5 million under the New Sale Agreement.
In December 2018, we announced the closing of up to a $75.0 million term loan
with Hercules, or the Loan Agreement, $25.0 million of which was funded on the
day of closing. Under the terms of the loan, in addition to the $25.0 million
received at closing, we borrowed an additional $10.0 million in connection with
the approval by the FDA of the NDA for XENLETA. In March 2020, we repaid
Hercules $30.0 million of the $35.0 million in aggregate principal amount of
debt outstanding under the Loan Agreement. See Note 6 to the unaudited
consolidated financial statements included elsewhere in this Form 10-Q for
additional information on the terms associated with the remaining term loans
potentially available to us and the costs and other conditions associated with
this funding source.
Cash Flows
The following table summarizes our cash flows for the nine months ended
September 30, 2020 and 2021:
Nine Months Ended September 30,
(in thousands) 2021 2020
Net cash (used in) provided by:
Operating activities $ (53,439) $ (57,967)
Investing activities (69) (257)
Financing activities 64,228 12,903
Effects of foreign currency translation on cash (136) 262
Net increase/(decrease) in cash, cash equivalents
and restricted cash $ 10,584 $ (45,059)
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Operating Activities
Cash flow used in operating activities for the nine months ended September 30,
2021 was $53.4 million compared to $58.0 million for the nine months ended
September 30, 2020. The $4.5 million decrease was primarily due to due to a
$10.9 million decrease in net loss, after adjustments for the impact of non-cash
amounts included in net loss in both periods, offset by higher working capital
of $6.3 million primarily due to increases in inventory and accounts receivable.
Investing Activities
Cash flow used in investing activities for the purchase of property and
equipment was less than $0.1 million for the nine months ended September 30,
2021.
Financing Activities
Cash flow generated from financing activities for the nine months ended
September 30, 2021 was $64.2 million from our March 2021 financing, as well as
our New Sale Agreement. Cash flow generated from financing activities for the
nine months ended September 30, 2020 was $12.9 million, primarily from total net
proceeds of approximately $42.9 million from the securities purchase agreement
entered into in May 2020, as well as our Jefferies ATM Agreement, partly offset
by the repayment of $30.0 million of long-term borrowings on our debt facility
in the nine months ended September 30, 2020.
Operating and Capital Expenditure Requirements
We anticipate that our expenses will increase as we expect to incur significant
additional commercialization expenses related to product sales, marketing,
distribution and manufacturing. In addition, our expenses will increase if we
suffer any regulatory delays or are required to conduct additional clinical
trials to satisfy regulatory requirements.
In addition, our expenses will increase if and as we:
? initiate or continue the research and development of XENLETA and CONTEPO for
additional indications and of our other product candidates;
? seek to develop additional product candidates;
? seek marketing approval for any product candidates that successfully complete
clinical development;
? are required by the FDA, EMA or other regulators to conduct additional clinical
trials prior to or after approval;
continue to build or re-build a medical affairs, sales, marketing and
? distribution infrastructure and scale up manufacturing capabilities to
commercialize XENLETA, SIVEXTRO and any other product candidates for which we
receive marketing approval;
? in-license or acquire other products, product candidates or technologies,
including additional community products;
? maintain, expand and protect our intellectual property portfolio;
? expand our physical presence in the United States and Ireland;
? incur additional debt;
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? establish and expand manufacturing arrangements with third parties; and
add operational, financial and management information systems and personnel,
? including personnel to support our product development and our operations as a
public company in addition to our commercialization efforts.
As described above, on March 11, 2020, we entered into an Amendment to our Loan
Agreement with Hercules. Pursuant to the Third Amendment, we repaid to Hercules
in March 2020, $30.0 million of the $35.0 million in aggregate principal amount
of debt outstanding under the Loan Agreement, which we refer to as the
Prepayment. Under the Third Amendment, we and Hercules agreed to defer the end
of term loan charge payment in the amount of approximately $2.3 million that
would have otherwise become payable on the date of the Prepayment and to reduce
the prepayment charge with respect to the Prepayment from $600,000 to $300,000
and to defer its payment, in each case, until June 1, 2023 or such earlier date
on which all loans under the Loan Agreement are repaid or become due and
payable. The Third Amendment also reset the revenue performance covenant to 70%
of targeted revenue based on a revised net product revenue forecast and lowered
our minimum liquidity requirement to $3.0 million in cash and cash equivalents,
in each case, following the Prepayment. The new minimum liquidity requirement
will not apply if CONTEPO receives regulatory approval from the U.S. Food and
Drug Administration and we achieve at least 70% of our revised net product
revenue targets under the Loan Agreement. On June 2, 2021, we entered into a
further amendment, or the Fourth Amendment, to our Loan Agreement with Hercules.
Pursuant to the Fourth Amendment, the date on which we must commence repaying
principal under the Loan Agreement was extended to April 1, 2022, which date may
be extended until July 1, 2022, subject to our receipt of a specified amount of
additional net financing proceeds and the achievement of a specified product
revenue milestone. Additionally, the time during which the Tranche Advance may
be requested by us under the Loan Agreement was extended until the Amortization
Date. In addition, pursuant to the Fourth Amendment, the minimum liquidity
requirement of $3.0 million in cash and cash equivalents will be waived at any
time we have recognized $15.0 million of net product revenue during the
applicable trailing three months. Based on our current operating plans, we
expect that our existing cash resources as of the date of this Quarterly Report
on Form 10-Q will be sufficient to enable us to fund our operations, debt
service obligations and capital expenditure requirements substantially through
the second quarter of 2022. We have based this estimate on assumptions that may
prove to be wrong, and we could use our capital resources sooner than we
currently expect. This estimate assumes, among other things, that we do not
obtain any additional funding through grants and clinical trial support,
collaboration agreements, or equity or debt financings. This estimate also
assumes that we remain in compliance with the covenants and no event of default
occurs under the Loan Agreement.
We expect to continue to invest in critical commercial promotion and
distribution, medical affairs and other commercialization activities, as well as
investing in our supply chain for the commercialization of XENLETA, SIVEXTRO and
CONTEPO, if approved. We expect to seek additional funding in future periods to
support these activities.
Our future capital requirements will depend on many factors, including:
? the costs and timing of process development and manufacturing scale-up
activities associated with XENLETA and CONTEPO;
? the costs to secure supply of SIVEXTRO and costs to sell and market the product
in the U.S.;
? the costs, timing and outcome of regulatory review of lefamulin in Europe and
for any other indications and CONTEPO;
the costs of commercialization activities for XENLETA, SIVEXTRO and potentially
CONTEPO if we receive marketing approval, including the costs and timing of
? establishing product sales, marketing, distribution and outsourced
manufacturing capabilities, including the costs of building finished product
inventory and its components in preparation of initial marketing of CONTEPO, if
approved;
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? the commercial success of XENLETA and SIVEXTRO and the amount and frequency of
reorders or product returns by our wholesale customers;
? subject to the resubmission of the CONTEPO NDA and potential receipt of
marketing approval, revenue received from commercial sales of CONTEPO;
? the costs of developing XENLETA and CONTEPO for the treatment of additional
indications;
? the impact of the COVID-19 pandemic;
? our ability to establish collaborations on favorable terms, if at all;
? the scope, progress, results and costs of product development of any other
product candidates that we may develop;
? the extent to which we in-license or acquire rights to other products, product
candidates or technologies, including additional community products;
? the costs related to the promotion, sale and distribution of the products under
our distribution agreement with Merck & Co., Inc.;
the costs of preparing, filing and prosecuting patent applications, maintaining
? and protecting our intellectual property rights and defending against
intellectual property-related claims;
? the continued availability of Austrian governmental grants;
? the need to satisfy interest and principal obligations under our Loan Agreement
with Hercules as well as the covenants contained in our Loan Agreement;
? the rate of the expansion of our physical presence in the United States and
Ireland; and
? the costs of operating as a public company in the United States.
Our commercial revenues, if any, will be derived from sales of XENLETA,
SIVEXTRO, and if approved, CONTEPO or any other products that we successfully
develop, in-license or acquire. In addition, XENLETA, SIVEXTRO and, if approved,
CONTEPO or any other product candidate that we develop, in-license or acquire
may not achieve commercial success. Accordingly, we will need to obtain
substantial additional financing to achieve our business objectives. Adequate
additional financing may not be available to us on acceptable terms, or at all.
In addition, we may seek additional capital due to favorable market conditions
or strategic considerations, even if we believe that we have sufficient funds
for our current or future operating plans.
Until such time, if ever, as we can generate substantial product revenues, we
expect to finance our cash needs through a combination of equity offerings, debt
financings, collaborations, and funding from local and international government
entities and non-government organizations in the disease areas addressed by our
product candidates and marketing, distribution or licensing arrangements. To the
extent that we raise additional capital through the sale of equity, warrants or
convertible debt securities, the ownership interest of our shareholders will be
diluted, and the terms of these securities may include liquidation or other
preferences that adversely affect the rights of our shareholders. Additional
debt financing, if available, may involve agreements that include covenants
limiting or restricting our ability to take specific actions, such as incurring
additional debt, making capital expenditures or declaring dividends.
If we raise additional funds through collaborations, strategic alliances or
marketing, distribution or licensing arrangements with third parties, we may
have to relinquish valuable rights to our technologies, future revenue streams,
research programs or product candidates or to grant licenses on terms that may
not be favorable to us. If we are unable to
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raise additional funds through equity or debt financings when needed, we may be
required to delay, limit, reduce or terminate our product development or future
commercialization efforts or grant rights to develop and market product
candidates that we would otherwise prefer to develop and market ourselves.
In addition, as part of our corporate strategy, we continue to evaluate business
development opportunities and potential collaborations. We may further expand
our product pipeline through opportunistically in licensing or acquiring the
rights to complementary products, product candidates and technologies for the
treatment of a range of infectious diseases or other products that we would
market with our commercial infrastructure, including additional community
products, which could involve an acquisition of or combination or other
strategic transaction with another operating business. To the extent any
additional business development opportunity is consummated, our capital
expenditures may increase significantly.
Capital Expenditures
Capital expenditures were $20,000 and $0.1 million for the nine months ended
September 30, 2021 and 2020, respectively.
Currently, there are no material capital projects planned in 2021.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any
off-balance sheet arrangements, as defined under SEC rules.
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