NABRIVA THERAPEUTICS PLC 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
On
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, SIVEXTRO, for acute
bacterial skin and skin structure infections, or ABSSSI, and XENLETA, for
community-acquired bacterial pneumonia, or CABP, as well as one development
product candidate, CONTEPO for complicated urinary tract infections, or cUTIs.
In
SIVEXTRO is approved for the treatment of 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 needed to 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
resulted in significant additional expense and our efforts to maintain a sales
force may not be successful. We continue to operate a virtual and in-person
sales effort with community-based expertise with
XENLETA is approved for the treatment of CABP in adults in
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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.
Since inception, we have incurred significant operating losses. As of
Recent Developments
In
As part of our efforts to extend our cash runway and maximize the value of our
assets, in addition to our ongoing commercialization activities, we may also
consider potential strategic transactions, including the sale, license or other
disposition of one or more of our assets, technologies or products, including
XENLETA and CONTEPO. We have retained
Business Update Regarding COVID-19
On
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
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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. 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 hybrid-remote-working 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.
Financial Operations Overview
Revenue
In
Collaboration revenues for the nine months ended
Our revenues for the nine months ended
Cost of Revenues
Cost of revenues represented 20.5% and 14.3% of our total operating expenses for
the nine months ended
Research and Development Expenses
Research and development expenses represented 19.6% and 18.5% of our total
operating expenses for the nine months ended
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) 2022 2021
Direct Costs
XENLETA $ 2,719 $ 2,060
CONTEPO 263 245
Other programs and initiatives 1,038 1,115
Indirect Costs 7,617 6,819
Total research and development expenses
We 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. It is difficult to estimate the duration and completion costs of our research and development programs.
We initiated screening of our Phase 1 clinical trial to assess the safety and
pharmacokinetics of oral and intravenous XENLETA for the treatment of resistant
bacterial infections in adult patients with CF in
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 59.9% and 67.2% of our
total operating expenses for the nine months ended
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
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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 for the fiscal year
ending
Critical Accounting Estimates
Our management's discussion and analysis of our financial condition and results
of operations is based on our consolidated financial statements, which we have
prepared in accordance with generally accepted accounting principles in
Our significant accounting policies and estimates are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this filing. However, we believe that the following accounting policies and estimates are the most critical to aid you in fully understanding and evaluating our financial condition and results of operations.
Revenue Recognition
Under Accounting Standards Codification, or ASC, 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied as services are rendered.
The transaction price that we recognize as revenue reflects the amount we expect with the sale and transfer of control of the product to our customers. Once the customer takes control of the product, our performance obligation under the sale contract is complete and revenue is recorded net of applicable reserves for various types of variable consideration. The types of variable consideration are as follows:
? Fees-for-service; ? Product returns; ? Chargebacks and rebates; ? Government rebates;
? Commercial payer and other rebates;
? Group Purchasing Organizations, or GPO, administration fees; and
? Voluntary patient assistance programs
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In determining the amounts of variable consideration, we must make significant judgments and estimates. In assessing the amount of net revenue to record, we consider both the likelihood and the magnitude of the revenue reversal. Actual amounts of consideration ultimately received may differ significantly from our estimates. Factors that can impact these estimates include business related dynamics such as; the growth of the markets, and uptake of product acceptance within these markets. If actual results in the future vary from our estimates, we adjust our estimates which would affect net product revenue in the period such variances become known.
XENLETA Inventory and Purchase Commitments
Our XENLETA inventory is stated at the lower of cost or net realizable value,
with cost determined on a first-in, first-out basis, and consists primarily of
material costs, third-party manufacturing costs and related transportation costs
in our supply chain. Our inventory is subject to expiration dating, which can be
extended in certain circumstances. We also have non-cancellable purchase
commitments for XENLETA active pharmaceutical ingredient, or API. We continually
evaluate forecasted product sales for XENLETA which is used in estimating the
need to reserve for estimated excess, slow-moving and obsolete inventory on hand
and potential accrued losses on firm purchase commitments. For both the nine
months ended
Results of Operations
Comparison of Three Months Ended
Three Months Ended September 30,
(in thousands) 2022 2021 Change
Consolidated operations data:
Product revenue, net $ 8,643 $ 7,858 $ 785
Collaboration revenue 141 562 (421)
Research premium and grant revenue 369 442 (73)
Total revenues 9,153 8,862 291
Costs and expenses:
Cost of revenues (4,416) (4,199) (217)
Research and development expenses (4,032) (3,221) (811)
Selling, general and administrative
expenses (11,907) (12,256) 349
Total operating expenses (20,355) (19,676) (679)
Loss from operations (11,202) (10,814) (388)
Other income (expense):
Other income, net 354 131 223
Interest expense, net (146) (221) 75
Loss before income taxes (10,994) (10,904) (90)
Income tax benefit (expense) (520) 252 (772)
Net loss $ (11,514) $ (10,652) $ (862)
Revenues
Revenues for the three months ended
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Cost of Revenues
Cost of revenues for the three months ended
Research and Development Expenses
Research and development expenses for the three months ended
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended
Other Income, Net
Other income, net, increased by
Interest Expense, Net
Interest expense, net was
Income Tax Benefit (Expense)
Our income tax expense for the three months ended
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Comparison of Nine months Ended
Nine Months Ended September 30,
(in thousands) 2022 2021 Change
Consolidated operations data:
Product revenue, net $ 24,363 $ 14,928 $ 9,435
Collaboration revenue 866 3,377 (2,511)
Research premium and grant revenue 1,135 1,329 (194)
Total revenue 26,364 19,634 6,730
Costs and expenses:
Cost of revenues (12,232) (7,882) (4,350)
Research and development expenses (11,637) (10,239) (1,398)
Selling, general and administrative
expenses (35,654) (37,157) 1,503
Total operating expenses (59,523) (55,278) (4,245)
Loss from operations (33,159) (35,644) 2,485
Other income (expense):
Other income, net 570 479 91
Interest expense, net (559) (678) 119
Loss before income taxes (33,148) (35,843) 2,695
Income tax expense (1,259) (544) (715)
Net loss $ (34,407) $ (36,387) $ 1,980
Revenues
Revenues for the nine months ended
Cost of Revenues
Cost of revenues for the nine months ended
Research and Development Expenses
Research and development expenses for the nine months ended
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the nine months ended
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Other Income, Net
Other income, net was
Interest Expense, Net
Interest expense, net decreased by
Income Tax Expense
Our income tax expense for the nine months ended
Liquidity and Capital Resources
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 and XENLETA and SIVEXTRO product sales. As of
In
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In
On
In
Cash Flows
The following table summarizes our cash flows for the nine months ended
Nine Months Ended September 30,
(in thousands) 2022 2021
Net cash (used in) provided by:
Operating activities $ (35,086) $ (53,439)
Investing activities (256) (69)
Financing activities 2,510 64,228
Effects of foreign currency translation on cash (234) (136)
Net increase (decrease) in cash, cash equivalents
and restricted cash $ (33,066) $ 10,584
Operating Activities
Cash flow used in operating activities for the nine months ended
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Investing Activities
Cash flow used in investing activities was primarily for the purchase of
property and equipment and was
Financing Activities
Cash flow generated from financing activities for the nine months ended
Material Cash Requirements
We expect to continue to incur significant 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 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 SIVEXTRO, XENLETA 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
? incur additional debt;
? 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
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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
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
? the costs, timing and outcome of regulatory review of lefamulin in
for any other indications and CONTEPO;
the costs of commercialization activities for SIVEXTRO, XENLETA 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;
? the commercial success of SIVEXTRO and XENLETA 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;
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? 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 costs of operating as a public company in
Our commercial revenues, if any, will be derived from sales of SIVEXTRO,
XENLETA, and if approved, CONTEPO or any other products that we successfully
develop, in-license or acquire. In addition, SIVEXTRO, XENLETA 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. We may also
consider potential strategic transactions, including the potential sale, license
or other disposition of one or more of our assets, including XENLETA and CONTEPO
and have retained
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. We may also finance our cash needs by selling, licensing or disposing of one or more of our assets, including XENLETA and CONTEPO. 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 existing 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 asset sales, 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 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. If we are unable to raise capital when needed or consummate a strategic sale, license or other disposition of one or more of our assets (should we choose to pursue such a transaction), then we may be forced to delay, reduce or eliminate our commercialization efforts, conduct additional reductions-in-force or cease our operations and, potentially, wind down the company under the bankrupty laws or otherwise. If we were to cease operations and wind down the company under the bankruptcy laws or otherwise, we cannot assure our shareholders or other stakeholders of any specific level of recovery, or any recovery at all on their specific claims or interest.
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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 purchasing 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 business 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.
We have contractual commitments related primarily to contracts entered into with
contract manufacturing organizations and contract research organizations in
connection with the commercial manufacturing of XENLETA, the purchase of
SIVEXTRO finished product and other research and development activities. The
contractual commitments are further described in Note 15 to our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended
Capital Expenditures
Capital expenditures were
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